Document:

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Exhibit 4.4

QAD INC.

2006 STOCK INCENTIVE PROGRAM

INTRODUCTION

     The Company’s Board of Directors have adopted the QAD Inc. 2006 Stock Incentive Program
effective as of June 7, 2006, subject to approval by the Company’s stockholders.

     1. Purpose. This 2006 Stock Incentive Program (the “Program”) is intended to secure
for QAD Inc. (the “Company”), its subsidiaries, and its stockholders the benefits arising from
ownership of the Company’s common stock (the “Common Stock”) by those selected individuals of the
Company and its subsidiaries, who will be responsible for the future growth of such corporations.
The Program is designed to help attract and retain superior personnel for positions of substantial
responsibility with the Company and its subsidiaries, and to provide individuals with an additional
incentive to contribute to the success of the corporations. Nothing contained herein shall be
construed to amend or terminate any existing options, whether pursuant to any existing plans or
otherwise granted by the Company.

     2. Elements of the Program. In order to maintain flexibility in the award of stock
benefits, the Program is composed of six parts. The first part is the Incentive Stock Option Plan
(the “Incentive Plan”) under which are granted incentive stock options (the “Incentive Options”).
The second part is the Nonqualified Stock Option Plan (the “Nonqualified Plan”) under which are
granted nonqualified stock options (the “Nonqualified Options”). The third part is the Restricted
Share Plan (the “Restricted Plan”) under which are granted restricted shares of Common Stock. The
fourth part is the Employee Stock Purchase Plan (the “Stock Purchase Plan”). The fifth part is the
Stock Appreciation Rights Plan (the “SAR Plan”) under which stock appreciation rights (as defined
therein) are granted. The sixth part is the Other Stock Rights Plan (the “Other Stock Rights
Plan”) under which (i) units representing the equivalent of shares of Common Stock (the
“Performance Shares”) are granted; (ii) units representing the equivalent of restricted shares of
Common Stock (the “Restricted Stock Units”) are granted; (iii) payments of compensation in the form
of shares of Common Stock (the “Stock Payments”) are granted; and (iv) rights to receive cash or
shares of Common Stock based on the value of dividends paid with respect to a share of Common Stock
(the “Dividend Equivalent Rights”) are granted. The Incentive Plan, the Nonqualified Plan, the
Restricted Plan, the Stock Purchase Plan, the SAR Plan and the Other Stock Rights Plan are included
herein as Part I, Part II, Part III, Part IV, Part V, and Part VI, respectively, and are
collectively referred to herein as the “Plans.” The grant of an option, stock appreciation right
or restricted share or rights to purchase shares under one of the Plans shall not be construed to
prohibit the grant of an option, stock appreciation right or restricted share or rights to purchase
shares under any of the other Plans.

     3. Applicability of General Provisions. Unless any Plan specifically indicates to
the contrary, all Plans shall be subject to the General Provisions of the QAD Inc. 2006 Stock
Incentive Program set forth below.

     4. Administration of the Plans. The Plans shall be administered, construed,
governed, and amended in accordance with their respective terms.

     5. General Provisions of Stock Incentive Program.

     Article 1. Administration. The Program shall be administered by the Company’s Board
of Directors (the “Board”). If an award is to be made to an “Executive Officer” as defined in the
Exchange Act as hereinafter defined, it must be approved by Program Administrators composed solely
of two or more directors who are “Non-Employee Directors” within the meaning of Rule 16b-3
promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), who
will also be “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”). To the extent permitted under the Exchange Act, the Code or any
other applicable law, the Board or the Program Administrators shall have the authority to delegate
any and all power and authority to administer and operate the Program hereunder to such person or
persons as the Board or the Program Administrators deems appropriate. Subject to the foregoing
limitations, as applicable, the Board may from time to time remove members as Program
Administrators, fill all vacancies, however caused, and may select one of the members as the
Chairman of the Program Administrators. The members of the Board, the Program Administrators or such other persons appointed to administer the Program, when acting to
administer the Program, are herein collectively referred to as the “Program Administrators.”

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     The Program Administrators shall hold meetings at such times and places as they may determine
and as necessary to approve all grants and other transactions under the Program as required under
Rule 16b-3(d) of the Exchange Act, shall keep minutes of their meetings, and shall adopt, amend,
and revoke such rules and procedures as they may deem proper with respect to the Program. Any
action of the Program Administrators shall be taken by majority vote or the unanimous written
consent of the Program Administrators.

     Article 2. Authority of the Program Administrators. Subject to the other provisions
of this Program, and with a view to effecting its purpose, the Program Administrators shall have
sole authority, in their absolute discretion: (a) to construe and interpret the Program; (b) to
define the terms used herein; (c) to determine the individuals to whom options, stock appreciation
rights, restricted shares, rights to purchase shares and other stock rights (collectively referred
to as “Awards”) shall be granted under the Program and to specify the form of payment, which may
include cash, voting Common Stock (which includes Common Stock with voting rights of one vote per
share and Common Stock with any specified fractional vote per share), non-voting Common Stock, or
combination thereof (d) to determine the time or times at which Awards shall be granted under the
Program; (e) to determine the number of shares subject to each Award, the duration of each Award
granted under the Program, and the purchase price for any shares issued under the Program;
provided, however, that such purchase price is not less than the fair market value of the
underlying shares on the date of grant of such Awards; (f) to determine all of the other terms and
conditions of Awards granted under the Program; (g) to issue from the shares available and
authorized for issuance under the Program, non-voting Common Stock or fractional voting Common
Stock in exchange for voting Common Stock of one vote per share; (h) to establish the forms to
implement the Program; (i) to settle options that are exercised by way of the “cashless-exercise”
method of payment through an issuance of “net shares,” where the term “net shares” is the number of
shares that is equivalent in value to the difference between the fair market value of the
underlying stock on the exercise date, less the exercise price and minimum tax withholding; (j) to
grant Awards to selected individuals of the Company and its subsidiaries who are subject to the
laws of nations other than the United States, which may have terms and conditions as determined by
the Program Administrators as necessary to comply with applicable foreign laws; (k) to take any
action it deems advisable to obtain approval from the appropriate governmental entity, which
includes the establishment of a “sub-plan” to the Program; and (l) to make all other determinations
necessary or advisable for the administration of the Program and to do everything necessary or
appropriate to administer the Program. All decisions, determinations, and interpretations made by
the Program Administrators shall be binding and conclusive on all participants in the Program (the
“Plan Participants”) and on their legal representatives, heirs, and beneficiaries.

     Article 3. Maximum Number of Shares Subject to the Program. The maximum aggregate
number of shares of Common Stock subject to the Program is 4,000,000 shares, plus 1,300,000 shares
available for grant under the QAD 1997 Stock Incentive Program (the “1997 Program”), for an
aggregate of 5,300,000 shares. Upon shareholder approval of the Program, no further shares will be
issued under the 1997 Program. The shares of Common Stock to be issued pursuant to the Awards may
be either in the form of voting or non-voting shares of Common Stock (collectively referred to as
“Common Stock”), and may be authorized but unissued shares, shares issued and reacquired by the
Company or shares purchased by the Company on the open market. If any of the Awards granted under
the Program are forfeited, expire or terminate for any reason, the forfeited, unpurchased or
unissued shares subject to those Awards shall revert back to the Program and credit the number of
shares subject to all Plans. Upon exercise of a stock appreciation right, the unissued shares that
were previously subject to such stock appreciation right shall revert back to the Program and
credit the number of shares subject to all Plans. No employee may receive in any calendar year a
combined total of more than (i) 400,000 shares of Common Stock subject to grants of Incentive
Options, Nonqualified Options or stock appreciation rights in such calendar year, or (ii) 200,000
shares of Common Stock in restricted shares, performance shares or Restricted Stock Units in such
calendar year. The proceeds received by the Company from the sale of its Common Stock pursuant to
the Awards, if in the form of cash, shall be added to the Company’s general funds and used for
general corporate purposes.

     Article 4. Eligibility and Participation. Officers, employees, directors (whether
employee directors or non-employee directors), and independent contractors or agents of the Company
or its subsidiaries who are responsible for or contribute to the management, growth, or
profitability of the business of the Company or its subsidiaries shall be eligible for selection by
the Program Administrators to participate in the Program. However, Incentive Options may be
granted under the Incentive Plan only to a person who is an employee of the Company or its
subsidiaries, and only employees of the Company or its subsidiaries are eligible to participate in
the Employee Stock Purchase
Plan. An employee may be granted Nonqualified Options under the Program; provided, however,
that the grant of Nonqualified Options and Incentive Options to an employee shall be the grant of
separate options and each
Nonqualified Option and each Incentive Option shall be specifically
designated as such in accordance with applicable provisions of the Treasury Regulations.

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     The term “subsidiary” as used herein means any entity or association that, directly or
indirectly through one or more intermediaries, controls or is controlled by or is under common
control with the Company. For purposes of this definition, the term “control” shall mean the
ownership of more than fifty (50) percent of the voting rights in any entity or association.

     Article 5. Effective Date and Term of Program. The Plans will be effective upon
their approval by the stockholders of the Company. The Program shall continue in effect until July
1, 2016 unless sooner terminated under Article 7 of these General Provisions.

     Article 6. Adjustments. If the outstanding shares of Common Stock are increased,
decreased, changed into, or exchanged for a different number or kind of shares or securities
through merger, consolidation, combination, exchange of shares, other reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made in the maximum number and kind of shares as
to which Awards may be granted under this Program. A corresponding adjustment changing the number
and kind of shares allocated to unexercised Awards or portions thereof, which shall have been
granted prior to any such change, shall likewise be made. Any such adjustment in outstanding
Awards shall be made without change in the aggregate purchase price, if any, applicable to the
unexercised portion of the Award, but with a corresponding adjustment in the price for each share
or other unit of any security covered by the Award.

     Article 7. Termination and Amendment of Program. The Program shall terminate on July
1, 2016, or shall terminate at such earlier time as the Board of Directors may so determine. No
Awards shall be granted under the Program after that date. Subject to the limitation contained in
Article 8 of these General Provisions, the Program Administrators may at any time amend or revise
the terms of the Program, including the form and substance of the Award agreements to be used
hereunder; provided, however, that without approval by the stockholders of the Company representing
a majority of the voting power (as contained in Article 5 of these General Provisions) no amendment
or revision shall (a) increase the maximum aggregate number of shares that may be sold or
distributed pursuant to Awards granted or stock sold and purchased under this Program, except as
permitted under Article 6 of these General Provisions; (b) change the minimum purchase price for
shares under Section 4 of Parts I and II, the Purchase Price for shares under Part IV or the
exercise price of a stock appreciation right under Section 3 of Part V; (c) increase the maximum
term established under the Plans for any Award; (d) permit the granting of an Award to anyone other
than as provided in Article 4 of the General Provisions; or (e) change the term of the Program
described in Article 5 of these General Provisions.

     Article 8. Prior Rights and Obligations. No amendment, suspension, or termination of
the Program shall, without the consent of the individual who has received an Award or who has
purchased a specified share or shares under Plan IV, impair any of that person’s rights or
obligations under any Award granted or shares sold and purchased under the Program prior to that
amendment, suspension, or termination.

     Article 9. Privileges of Stock Ownership. Notwithstanding the exercise of any option
granted pursuant to the terms of this Program, the achievement of any conditions specified in any
restricted share granted pursuant to the terms of this Program or the election to purchase any
shares pursuant to the terms of this Program, no individual shall have any of the rights or
privileges of a stockholder of the Company in respect of any shares of stock issuable upon the
exercise of his or her option, the satisfaction of his or her restricted share conditions or the
sale, purchase and issuance of such purchased shares until certificates representing the shares
have been issued and delivered. No shares shall be required to be issued and delivered upon
exercise of any option, satisfaction of any conditions with respect to a restricted share or a
purchaser under Plan IV unless and until all of the requirements of law and of all regulatory
agencies having jurisdiction over the issuance and delivery of the securities shall have been fully
complied with.

     Article 10. Reservations of Shares of Common Stock. The Company, during the term of
this Program, will at all times reserve and keep available such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of the Program. In addition, the Company
will from time to time, as is necessary to accomplish the purposes of this Program, seek or obtain
from any regulatory agency having jurisdiction any requisite authority in order to issue and sell
shares of Common Stock hereunder. The inability of the Company to obtain from any
regulatory agency having jurisdiction the authority deemed by the Company’s counsel to be
necessary to the lawful
issuance and sale of any shares of its stock hereunder shall relieve the
Company of any liability in respect of the nonissuance or sale of the stock as to which the
requisite authority shall not have been obtained.

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     Article 11. Tax Withholding. All Awards are subject to the condition that if at any
time the Company shall determine, in its discretion, that the satisfaction of withholding tax or
other withholding liabilities under any state, federal or foreign law is necessary or desirable as
a condition of, or in connection with, the grant, vesting or exercise of an Award or the delivery
or purchase of shares pursuant thereto, then such action shall not be effective unless such
withholding shall have been effected or obtained in a manner acceptable to the Company. At the
Company’s sole and complete discretion, the Company may, from time to time, accept shares of the
Company’s stock subject to one of the Plans as the source of payment for such liabilities.

     Article 12. Rule 16b-3 Compliance. It is the express intent of the Company that this
Program complies in all respects with applicable provisions of the Rule 16b-3 or Rule 16a-1(c)(3)
under the Exchange Act in connection with any grant of awards to, or other transaction by, a Plan
Participant who is subject to Section 16 of the Exchange Act (except for transactions exempted
under alternative Exchange Act Rules). Accordingly, if any provision of the Program or any
agreement relating to any award thereunder does not comply with Rule 16b-3 or Rule 16a-1(c)(3) as
then applicable to any such transaction, such provision will be construed or deemed amended to the
extent necessary to conform to the applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so
that such Plan Participant shall avoid liability under Section 16(b).

     Article 13. Performance-Based Awards.

     (a) Each agreement for the grant of Performance Shares shall specify the number
of Performance Shares subject to such agreement, the Performance Period and the
Performance Objective (each as defined below), and each agreement for the grant of
any other award that the Program Administrators determine to make subject to a
Performance Objective similarly shall specify the applicable number of shares of
Common Stock, the period for measuring performance and the Performance Objective.
As used herein, “Performance Objective” means a performance objective specified in
the agreement for a Performance Share, or for any other award which the Program
Administrators determine to make subject to a Performance Objective, upon which the
vesting or settlement of such award is conditioned and “Performance Period” means
the period of time specified in an agreement over which Performance Shares, or
another award which the Program Administrators determine to make subject to a
Performance Objective, are to be earned. Each agreement for a performance-based
award shall specify in respect of a Performance Objective the minimum level of
performance below which no payment will be made, shall describe the method of
determining the amount of any payment to be made if performance is at or above the
minimum acceptable level, but falls short of full achievement of the Performance
Objective, and shall specify the maximum percentage payout under the agreement.
Such maximum percentage in no event shall exceed one hundred percent (100%) in the
case of performance-based restricted shares and two hundred percent (200%) in the
case of Performance Shares or performance-based Dividend Equivalent Rights.

     (b) The Program Administrators shall determine and specify, in their
discretion, the Performance Objective in the agreement for a Performance Share or
for any other performance-based award, which Performance Objective shall consist of:
(i) one or more business criteria, including (except as limited under subparagraph
(c) below for awards to Covered Employees (as defined below)) financial, service
level and individual performance criteria; and (ii) a targeted level or levels of
performance with respect to such criteria. Performance Objectives may differ
between Plan Participants and between types of awards from year to year.

     (c) The Performance Objective for Performance Shares and any other
performance-based award granted to a Covered Employee, if deemed appropriate by the
Program Administrators, shall be objective and shall otherwise meet the requirements
of Section 162(m)(4)(C) of the Code, and shall be based upon one or more of the
following performance-based business criteria, either on a business unit or
Company-specific basis or in comparison with peer group performance: net sales;
gross sales; return on net assets; return on assets; return on equity; return on
capital; return on revenues; asset turnover; economic value added; total stockholder
return; net income; pre-tax income; operating profit margin; net income margin;
sales margin; market share; inventory turnover; days sales outstanding; sales growth;
capacity

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utilization; increase in customer base; cash flow; book value; share price
performance (including options and stock appreciation rights tied solely to
appreciation in the fair market value of the shares); earnings per share; stock
price earnings ratio; earnings before interest, taxes, depreciation and amortization
expenses (“EBITDA”); earnings before interest and taxes (“EBIT”); or EBITDA, EBIT or
earnings before taxes and unusual or nonrecurring items as measured either against
the annual budget or as a ratio to revenue. Achievement of any such Performance
Objective shall be measured over a period of years not to exceed ten (10) as
specified by the Program Administrators in the agreement for the performance-based
award. No business criterion other than those named above in this Article 13(c) may
be used in establishing the Performance Objective for an award to a Covered Employee
under this Article 13. For each such award relating to a Covered Employee, the
Program Administrators shall establish the targeted level or levels of performance
for each such business criterion. The Program Administrators may, in their
discretion, reduce the amount of a payout otherwise to be made in connection with an
award under this Article 13(c), but may not exercise discretion to increase such
amount, and the Program Administrators may consider other performance criteria in
exercising such discretion. All determinations by the Program Administrators as to
the achievement of Performance Objectives under this Article 13(c) shall be made in
writing. The Program Administrators may not delegate any responsibility under this
Article 13(c). As used herein, “Covered Employee” shall mean, with respect to any
grant of an award, an executive of the Company or any subsidiary who is a member of
the executive compensation group under the Company’s compensation practices (not
necessarily an executive officer) whom the Program Administrators deem may be or
become a covered employee as defined in Section 162(m)(3) of the Code for any year
that such award may result in remuneration over $1 million which would not be
deductible under Section 162(m) of the Code but for the provisions of the Program
and any other “qualified performance-based compensation” plan (as defined under
Section 162(m) of the Code) of the Company; provided, however, that the Program
Administrators may determine that a Plan Participant has ceased to be a Covered
Employee prior to the settlement of any award.

     (d) The Program Administrators, in their sole discretion, may require that one
or more award agreements contain provisions which provide that, in the event Section
162(m) of the Code, or any successor provision relating to excessive employee
remuneration, would operate to disallow a deduction by the Company with respect to
all or part of any award under the Program, a Plan Participant’s receipt of the
benefit relating to such award that would not be deductible by the Company shall be
deferred until the next succeeding year or years in which the Plan Participant’s
remuneration does not exceed the limit set forth in such provisions of the Code.

     Article 14. Death Beneficiaries. In the event of a Plan Participant’s death, all of
such person’s outstanding Awards, including his or her rights to receive any accrued but unpaid
Stock Payments, will transfer to the maximum extent permitted by law to such person’s beneficiary
(except to the extent a permitted transfer of a Nonqualified Option or stock appreciation right was
previously made pursuant hereto). Each Plan Participant may name, from time to time, any
beneficiary or beneficiaries (which may be named contingently or successively) as his or her
beneficiary for purposes of this Program. Each designation shall be on a form prescribed by the
Program Administrators, will be effective only when delivered to the Company, and when effective
will revoke all prior designations by the Plan Participant. If a Plan Participant dies with no
such beneficiary designation in effect, such person’s beneficiary shall be his or her estate and
such person’s Awards will be transferable by will or pursuant to laws of descent and distribution
applicable to such person.

     Article 15. Unfunded Program. The Program shall be unfunded and the Company shall
not be required to segregate any assets that may at any time be represented by Awards under the
Program. Neither the Company, its affiliates, the Program Administrators, nor the Board shall be
deemed to be a trustee of any amounts to be paid under the Program nor shall anything contained in
the Program or any action taken pursuant to its provisions create or be construed to create a
fiduciary relationship between any such party and a Plan Participant or anyone claiming on his or
her behalf. To the extent a Plan Participant or any other person acquires a right to receive
payment pursuant to an Award under the Program, such right shall be no greater than the right of an
unsecured general creditor of the Company.

     Article 16. Choice of Law and Venue. The Program and all related documents shall be
governed by, and construed in accordance with, the laws of the State of Delaware.

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     Article 17. Arbitration. Any disputes involving the Program will be resolved by
arbitration in Santa Barbara, California before one (1) arbitrator in accordance with the rules of
the American Arbitration Association.

     Article 18. Program Administrator’s Right. Except as may be provided in an Award
agreement, the Program Administrators may, in their discretion, waive any restrictions or
conditions applicable to, or accelerate the vesting of, any Award (other than the right to purchase
shares pursuant to the Stock Purchase Plan). The Program Administrators may also modify or revise
any form of Award agreement or other form required to implement the Program.

     Article 19. Termination of Benefits Under Certain Conditions. The Program
Administrators, in their sole discretion, may cancel any unexpired, unpaid or deferred Award (other
than a right to purchase shares pursuant to the Stock Purchase Plan) at any time if the Plan
Participant is not in compliance with all applicable provisions of the Program or any Award
agreement or if the Plan Participant, whether or not he or she is currently employed by the Company
or one of its subsidiaries, acts in a manner contrary to the best interests of the Company and its
subsidiaries.

     Article 20. Conflicts in Program. In case of any conflict in the terms of the
Program, or between the Program and an Award agreement, the provisions in the Program which
specifically grant such Award shall control, and the provisions in the Program shall control over
the provisions in any Award agreement.

     Article 21. Optional Deferral. The right to receive any Award under the Program
(other than the right to purchase shares pursuant to the Stock Purchase Plan) may, at the request
of the Plan Participant, be deferred to such period and upon such terms and conditions as the
Program Administrators shall, in their discretion, determine, which may include crediting of
interest on deferrals of cash and crediting of dividends on deferrals denominated in shares of
Common Stock.

     Article 22. Restrictions on Common Stock. Each Plan Participant who acquires Common
Stock or rights to acquire Common Stock will be subject to all restrictions applicable to the
Common Stock as set forth in the Company’s Certificate of Incorporation.

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PART I

QAD INC.

INCENTIVE STOCK OPTION PLAN

     Section 1. Purpose. The purpose of this QAD Inc. Incentive Stock Option Plan (the
“Incentive Plan”) is to promote the growth and general prosperity of the Company by permitting the
Company to grant options to purchase shares of its Common Stock. The Incentive Plan is designed to
help attract and retain superior personnel for positions of substantial responsibility with the
Company and its subsidiaries, and to provide individuals with an additional incentive to contribute
to the success of the Company. The Company intends that options granted pursuant to the provisions
of the Incentive Plan will qualify as “incentive stock options” within the meaning of Section 422
of the Code. This Incentive Plan is Part I of the Program. Unless any provision herein indicates
to the contrary, this Incentive Plan shall be subject to the General Provisions of the Program.

     Section 2. Option of Terms and Conditions. The terms and conditions of options
granted under the Incentive Plan may differ from one another as the Program Administrators shall,
in its discretion, determine as long as all options granted under the Incentive Plan satisfy the
requirements of the Incentive Plan.

     Section 3. Duration of Options. Each option and all rights thereunder granted
pursuant to the terms of the Incentive Plan shall expire on the date determined by the Program
Administrators, but in no event shall any option granted under the Incentive Plan expire later than
ten (10) years from the date on which the option is granted. However, notwithstanding the above
portion of this Section 3, if at the time the option is granted the grantee (the “Optionee”) owns
or would be considered to own by reason of Code Section 424(d) more than 10% of the total combined
voting power of all classes of stock of the Company or its subsidiaries, such option shall expire
not more than 5 years from the date the option is granted. In addition, each option shall be
subject to early termination as provided in the Incentive Plan.

     Section 4. Purchase Price. The purchase price for shares acquired pursuant to the
exercise, in whole or in part, of any option shall not be less than the fair market value of the
shares at the time of the grant of the option. Fair market value (the “Fair Market Value”) shall be
determined by the Board of Directors on the basis of such factors as they deem appropriate;
provided, however, that Fair Market Value on any day shall be deemed to be, if the Common Stock is
traded on a national securities exchange, the closing price (or, if no reported sale takes place on
such day, the mean of the reported bid and asked prices) of the Common Stock on such day on the
principal such exchange, or, if the stock is included on the composite tape, the composite tape.
In each case, the Program Administrators’ determination of Fair Market Value shall be conclusive.

     Notwithstanding the above portion of this Section 4, if at the time an option is granted the
Optionee owns or would be considered to own by reason of Code Section 424(d) more than 10% of the
total combined voting power of all classes of stock of the Company or its subsidiaries, the
purchase price of the shares covered by such option shall not be less than 110% of the Fair Market
Value of a share of Common Stock on the date the option is granted.

     Section 5. Maximum Amount of Options Exercisable in Any Calendar Year.
Notwithstanding any other provision of this Incentive Plan, the aggregate Fair Market Value
(determined at the time any Incentive Stock Option is granted) of the Common Stock with respect to
which Incentive Stock Options become exercisable for the first time by any employee during any
calendar year under all stock option plans of the Company and its subsidiaries shall not exceed
$100,000.

     Section 6. Exercise of Options. Each option shall be exercisable in one or more
installments during its term as determined by the Program Administrators, and the right to exercise
may be cumulative as determined by the Program Administrators. No option may be exercised for a
fraction of a share of Common Stock. The purchase price of any shares purchased shall be paid in
full in cash or by certified or cashier’s check payable to the order of the Company or by shares of
Common Stock, if permitted by the Program Administrators, or by a combination of cash, check, or
shares of Common Stock, at the time of exercise of the option. If any portion of the purchase
price is paid in shares of Common Stock, those shares shall be tendered at their then Fair Market
Value as determined by the Program Administrators in accordance with Section 4 of this Incentive
Plan. Payment of the exercise price and or tax withholding may also be made by the delivery of an
irrevocable direction to a securities broker approved by the Company to sell shares of Common Stock
that have been acquired upon exercise of an option and deliver all or part of the sales proceeds to
the Company in payment of all or part of the purchase price and any tax withholding (“cashless
exercise”).

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     Section 7. Reorganization. In the event of the dissolution or liquidation of the
Company, any option granted under the Incentive Plan shall terminate as of a date to be fixed by
the Program Administrators; provided that not less than 30 days’ written notice of the date so
fixed shall be given to each Optionee and each such Optionee shall have the right during such
period (unless such option shall have previously expired) to exercise any option, including any
option that would not otherwise be exercisable by reason of an insufficient lapse of time.

     In the event of a Reorganization (as defined below) in which the Company is not the surviving
or acquiring company, or in which the Company is or becomes a subsidiary of another company after
the effective date of the Reorganization, then:

     (a) if there is no plan or agreement respecting the Reorganization (the “Reorganization
Agreement”) or if the Reorganization Agreement does not specifically provide for the change,
conversion or exchange of the outstanding options for options of another corporation, then
exercise and termination provisions equivalent to those described in this Section 7 shall
apply; or

     (b) if there is a Reorganization Agreement and if the Reorganization Agreement
specifically provides for the change, conversion, or exchange of the outstanding options for
options of another corporation, then the Program Administrators shall adjust the outstanding
unexercised options (and shall adjust the options remaining under the Incentive Plan which
have not yet been granted if the Reorganization Agreement makes specific provision for such
an adjustment) in a manner consistent with the applicable provisions of the Reorganization
Agreement.

     The term “Reorganization” as used in this Section 7 shall mean any statutory merger, statutory
consolidation, sale of all or substantially all of the assets of the Company or a sale of the
Common Stock pursuant to which the Company is or becomes a subsidiary of another company after the
effective date of the Reorganization.

     Adjustments and determinations under this Section 7 shall be made by the Program
Administrators, whose decisions as to such adjustments or determinations shall be final, binding,
and conclusive.

     Section 8. Written Notice Required. Any option granted pursuant to the terms of the
Incentive Plan shall be exercised when written notice of that exercise has been given to the
Company or its designee at its principal office by the person entitled to exercise the option and
full payment for the shares with respect to which the option is exercised, together with payment of
applicable income taxes, has been received by the Company.

     Section 9. Compliance with Securities Laws. Shares shall not be issued with respect
to any option granted under the Incentive Plan, unless the exercise of that option and the issuance
and delivery of the shares pursuant to that exercise shall comply with all applicable provisions of
foreign, state and federal law including, without limitation, the Securities Act of 1933, as
amended, and the Exchange Act, and the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such compliance. The Program
Administrators may also require an Optionee to furnish evidence satisfactory to the Company,
including a written and signed representation letter and consent to be bound by any transfer
restriction imposed by law, legend, condition, or otherwise, that the shares are being purchased
only for investment purposes and without any present intention to sell or distribute the shares in
violation of any state or federal law, rule, or regulation. Further, each Optionee shall consent
to the imposition of a legend on the shares of Common Stock subject to his or her option and the
imposition of stop-transfer instructions restricting their transferability as required by law or by
this Section 9.

     Section 10. Employment of Optionee. Each Optionee, if requested by the Program
Administrators, must agree in writing as a condition of receiving his or her option, that he or she
will remain in the employment of the Company or its subsidiary corporations following the date of
the granting of that option for a period specified by the Program Administrators. Nothing in the
Incentive Plan or in any option granted hereunder shall confer upon any Optionee any right to
continued employment by the Company or its subsidiary corporations or limit in any way the right of
the Company or its subsidiary corporations at any time to terminate or alter the terms of that
employment.

     Section 11. Option Rights Upon Termination of Employment. If an Optionee ceases to
be employed by the Company or any subsidiary corporation for any reason other than death or
disability, his or her option shall immediately terminate; provided, however, the Program
Administrators, in their discretion, may allow the option to be exercised, to the extent
exercisable on the date of termination of employment, at any time within sixty (60) days after the
date of termination of employment.

8

 

     Section 12. Option Rights Upon Disability of Optionee. If an Optionee becomes
disabled within the meaning of Code Section 22(e)(3) while employed by the Company or any
subsidiary corporation, the Program Administrators, in their discretion, may allow the option to
(i) be exercised, to the extent exercisable on the date of termination of employment, at any time
within one year after the date of termination of employment due to disability and (ii) become
immediately vested in full as of the date of termination of employment due to disability.

     Section 13. Option Rights Upon Death of Optionee. If an Optionee dies while employed
by the Company or any subsidiary corporation, the Program Administrators, in their discretion, may
allow the option to (i) be exercised, to the extent exercisable on the date of termination of
employment, at any time within one year after the date of termination of employment due to death
and (ii) become immediately vested in full as of the date of termination of employment due to
death. During this one-year or shorter period, the option may be exercised by the person or
persons to whom the Optionee’s rights under the option shall pass by will or by the laws of descent
and distribution.

     Section 14. Options Not Transferable. Options granted pursuant to the terms of the
Incentive Plan may not be sold, pledged, assigned, or transferred in any manner otherwise than by
will or the laws of descent or distribution and may be exercised during the lifetime of an Optionee
only by that Optionee. No such options shall be pledged or hypothecated in any way nor shall they
be subject to execution, attachment, or similar process.

     Section 15. Adjustments to Number and Purchase Price of Optioned Shares. All options
granted pursuant to the terms of this Incentive Plan shall be adjusted in the manner prescribed by
Article 6 of the General Provisions of this Program.

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PART II

QAD INC.

NONQUALIFIED STOCK OPTION PLAN

     Section 1. Purpose. The purpose of this QAD Inc. Nonqualified Stock Option Plan (the
“Nonqualified Plan”) is to permit the Company to grant options to purchase shares of its Common
Stock. The Nonqualified Plan is designed to help attract and retain superior personnel for
positions of substantial responsibility with the Company and its subsidiaries, and to provide
individuals with an additional incentive to contribute to the success of the Company. Any option
granted pursuant to the Nonqualified Plan shall be clearly and specifically designated as not being
an incentive stock option, as defined in Section 422 of the Code. This Nonqualified Plan is Part
II of the Program. Unless any provision herein indicates to the contrary, the Nonqualified Plan
shall be subject to the General Provisions of the Program.

     Section 2. Option Term and Conditions. The terms and conditions of options granted
under the Nonqualified Plan may differ from one another as the Program Administrators shall in
their discretion determine as long as all options granted under the Nonqualified Plan satisfy the
requirements of the Nonqualified Plan.

     Section 3. Duration of Options. Each option and all rights thereunder granted
pursuant to the terms of the Nonqualified Plan shall expire on the date determined by the Program
Administrators, but in no event shall any option granted under the Nonqualified Plan expire later
than ten (10) years from the date on which the option is granted. In addition, each option shall
be subject to early termination as provided in the Nonqualified Plan.

     Section 4. Purchase Price. The purchase price for shares acquired pursuant to the
exercise, in whole or in part, of any option may be equal to or greater than the fair market value
of the shares at the time of the grant of the option. Fair market value (the “Fair Market Value”)
shall be determined by the Program Administrators on the basis of such factors as they deem
appropriate; provided, however, that Fair Market Value on any day shall be deemed to be, if the
Common Stock is traded on a national securities exchange, the closing price (or, if no reported
sale takes place on such day, the mean of the reported bid and asked prices) of the Common Stock on
such day on the principal such exchange, or, if the stock is included on the composite tape, the
composite tape. In each case, the Program Administrators’ determination of Fair Market Value shall
be conclusive.

     Section 5. Exercise of Options. Each option shall be exercisable in one or more
installments during its term and the right to exercise may be cumulative as determined by the
Program Administrators. No option may be exercised for a fraction of a share of Common Stock. The
purchase price of any shares purchased shall be paid in full in cash or by certified or cashier’s
check payable to the order of the Company or by shares of Common Stock, if permitted by the Program
Administrators, or by a combination of cash, check, or shares of Common Stock, at the time of
exercise of the option. If any portion of the purchase price is paid in shares of Common Stock,
those shares shall be tendered at their then Fair Market Value as determined by the Program
Administrators in accordance with Section 4 of the Nonqualified Plan. Payment of the exercise
price and or tax withholding may also be made by the delivery of an irrevocable direction to a
securities broker approved by the Company to sell shares of Common Stock that have been acquired
upon exercise of an option and deliver all or part of the sales proceeds to the Company in payment
of all or part of the purchase price and any tax withholding (“cashless exercise”).

     Section 6. Reorganization. In the event of the dissolution or liquidation of the
Company, any option granted under the Nonqualified Plan shall terminate as of a date to be fixed by
the Program Administrators; provided that not less than 30 days’ written notice of the date so
fixed shall be given to each Optionee and each such Optionee shall have the right during such
period (unless such option shall have previously expired) to exercise any option to the extent such
option is vested.

     In the event of a Reorganization (as defined below) in which the Company is not the surviving
or acquiring company, or in which the Company is or becomes a subsidiary of another company after
the effective date of the Reorganization, then:

     (a) if there is no plan or agreement respecting the Reorganization (“Reorganization
Agreement”) or if the Reorganization Agreement does not specifically provide for the
change, conversion or exchange of the outstanding options for options of another
corporation, then exercise and termination provisions equivalent to those described in this
Section 6 shall apply; or

10

 

     (b) if there is a Reorganization Agreement and if the Reorganization Agreement
specifically provides for the change, conversion, or exchange of the outstanding options
for options of another corporation, then the Program Administrators shall adjust the
outstanding unexercised options (and shall adjust the options remaining under the
Nonqualified Plan which have not yet been granted if the Reorganization Agreement makes
specific provision for such an adjustment) in a manner consistent with the applicable
provisions of the Reorganization Agreement.

     The term “Reorganization” as used in this Section 6 shall mean any statutory merger, statutory
consolidation, sale of all or substantially all of the assets of the Company or a sale of the
Common Stock pursuant to which the Company is or becomes a subsidiary of another company after the
effective date of the Reorganization.

     Adjustments and determinations under this Section 6 shall be made by the Program
Administrators, whose decisions as to such adjustments or determinations shall be final, binding,
and conclusive.

     Section 7. Written Notice Required. Any option granted pursuant to the terms of this
Nonqualified Plan shall be exercised when written notice of that exercise has been given to the
Company at its principal office by the person entitled to exercise the option and full payment for
the shares with respect to which the option is exercised has been received by the Company.

     Section 8. Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any option granted under the Nonqualified Plan, unless the exercise of that
option and the issuance and delivery of the shares pursuant thereto shall comply with all
applicable provisions of foreign, state and federal law, including, without limitation, the
Securities Act of 1933, as amended, and the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with respect to such
compliance. The Program Administrators may also require an Optionee to furnish evidence
satisfactory to the Company, including a written and signed representation letter and consent to be
bound by any transfer restrictions imposed by law, legend, condition, or otherwise, that the shares
are being purchased only for investment purposes and without any present intention to sell or
distribute the shares in violation of any state or federal law, rule, or regulation. Further, each
Optionee shall consent to the imposition of a legend on the shares of Common Stock subject to his
or her option and the imposition of stop-transfer instructions restricting their transferability as
required by law or by this Section 8.

     Section 9. Continued Employment or Service. Each Optionee, if requested by the
Program Administrators, must agree in writing as a condition of receiving his or her option, to
remain in the employment of, or service to, the Company or any of its subsidiaries following the
date of the granting of that option for a period specified by the Program Administrators. Nothing
in this Nonqualified Plan or in any option granted hereunder shall confer upon any Optionee any
right to continued employment by, or service to, the Company or any of its subsidiaries, or limit
in any way the right of the Company or any subsidiary at any time to terminate or alter the terms
of that employment or service arrangement.

     Section 10. Option Rights Upon Termination of Employment or Service. If an Optionee
under this Nonqualified Plan ceases to be employed by, or provide services to, the Company or any
of its subsidiaries for any reason other than death or disability, his or her option shall
immediately terminate; provided, however, the Program Administrators, in their discretion, may
allow the option to be exercised, to the extent exercisable on the date of termination of
employment or service, at any time within sixty (60) days after the date of termination of
employment or service.

     Section 11. Option Rights Upon Disability of Optionee. If an Optionee becomes
disabled within the meaning of Code Section 22(e)(3) while employed by the Company or any
subsidiary corporation, the Program Administrators, in their discretion, may allow the option to
(i) be exercised, to the extent exercisable on the date of termination of employment, at any time
within one year after the date of termination of employment due to disability and (ii) become
immediately vested in full as of the date of termination of employment due to disability.

     Section 12. Option Rights Upon Death of Optionee. If an Optionee dies while employed
by the Company or any subsidiary corporation, the Program Administrators, in their discretion, may
allow the option to (i) be exercised, to the extent exercisable on the date of termination of
employment, at any time within one year after the date of termination of employment due to death
and (ii) become immediately vested in full as of the date of termination of employment due to
death. During this one-year or shorter period, the option may be exercised by the person or
persons to whom the Optionee’s rights under the option shall pass by will or by the laws of descent
and distribution.

11

 

     Section 13. Options Not Transferable. Options granted pursuant to the terms of this
Nonqualified Plan may not be sold, pledged, assigned, or transferred in any manner otherwise than
by will or the laws of descent or distribution and may be exercised during the lifetime of an
Optionee only by that Optionee. No such options shall be pledged or hypothecated in any way nor
shall they be subject to execution, attachment, or similar process.

     Section 14. Adjustments to Number and Purchase Price of Optioned Shares. All options
granted pursuant to the terms of this Nonqualified Plan shall be adjusted in a manner prescribed by
Article 6 of the General Provisions of the Program.

12

 

PART III

QAD INC.

RESTRICTED SHARE PLAN

     Section 1. Purpose. The purpose of this QAD Inc. Restricted Share Plan (the
“Restricted Plan”) is to promote the growth and general prosperity of the Company by permitting the
Company to grant restricted shares to help attract and retain superior personnel for positions of
substantial responsibility with the Company and its subsidiaries and to provide individuals with an
additional incentive to contribute to the success of the Company. The Restricted Plan is Part III
of the Program. Unless any provision herein indicates to the contrary, the Restricted Plan shall
be subject to the General Provisions of the Program.

     Section 2. Terms and Conditions. The terms and conditions of restricted shares
granted under the Restricted Plan may differ from one another as the Program Administrators shall,
in their discretion, determine as long as all restricted shares granted under the Restricted Plan
satisfy the requirements of the Restricted Plan.

     Each restricted share grant shall provide to the recipient (the “Holder”) the transfer of a
specified number of shares of Common Stock of the Company that shall become nonforfeitable upon the
achievement of specified service or performance conditions within a specified period or periods
(the “Restricted Period”) as determined by the Program Administrators. At the time that the
restricted share is granted, the Program Administrators shall specify the service or performance
conditions and the period of duration over which the conditions apply.

     The Holder of restricted shares shall not have any rights with respect to such award, unless
and until such Holder has executed an agreement evidencing the terms and conditions of the award
(the “Restricted Share Award Agreement”). Each individual who is awarded restricted shares shall be
issued a stock certificate in respect of such shares. Such certificate shall be registered in the
name of the Holder and shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:

The transferability of this certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of the QAD Inc. Restricted Share
Plan and Restricted Share Award Agreement entered into between the registered owner and QAD
Inc. Copies of such Plan and Agreement are on file in the offices of QAD Inc.

     The Program Administrators shall require that the stock certificates evidencing such shares be
held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a
condition of any restricted share award, the Holder shall have delivered a stock power, endorsed in
blank, relating to the stock covered by such award. At the expiration of each Restriction Period,
the Company shall redeliver to the Holder certificates held by the Company representing the shares
with respect to which the applicable conditions have been satisfied.

     Section 3. Nontransferable. Subject to the provisions of the Restricted Plan and the
Restricted Share Award Agreements, during the Restriction Period as may be set by the Program
Administrators commencing on the grant date, the Holder shall not be permitted to sell, transfer,
pledge, or assign shares of restricted shares awarded under the Restricted Plan.

     Section 4. Restricted Share Rights Upon Termination of Employment or Service. If a
Holder ceases to be employed by, or provide services to, the Company or any of its subsidiaries
prior to the expiration of the Restriction Period, any restricted shares granted to him or her
subject to such Restriction Period shall be forfeited by the Holder and shall be transferred to the
Company. The Program Administrators may, in their sole discretion, accelerate the lapsing of or
waive such restrictions in whole or in part based upon such factors and such circumstances as the
Program Administrators may determine, in its sole discretion, including, but not limited to, the
Plan Participant’s retirement, death, or disability.

     Section 5. Restricted Share Rights Upon Disability of Holder. If a Holder becomes
disabled within the meaning of Code Section 22(e)(3) while employed by the Company or any
subsidiary corporation, the Program Administrators, in their discretion, may allow the restricted
shares to become immediately vested in full and all restrictions that apply to such shares shall
lapse immediately as of the date of termination of employment due to disability.

13

 

     Section 6. Restricted Share Rights Upon Death of Holder. If a Holder dies while
employed by the Company or any subsidiary corporation, the Program Administrators, in their
discretion, may allow the restricted
shares to become immediately vested in full and all restrictions that apply to such shares
shall lapse immediately as of the date of termination of employment due to death.

     Section 7. Stockholder Rights. The Holder shall have, with respect to the restricted
shares granted, all of the rights of a stockholder of the Company, including the right to vote the
shares, and the right to receive any dividends thereon. Certificates for shares of unrestricted
stock shall be delivered to the grantee promptly after, and only after, the Restriction Period
shall expire without forfeiture in respect of such restricted shares.

     Section 8. Compliance with Securities Laws. Shares shall not be issued under the
Restricted Plan unless the issuance and delivery of the shares pursuant thereto shall comply with
all relevant provisions of foreign, state and federal law, including, without limitation, the
Securities Act of 1933, as amended, and the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with respect to such
compliance. The Program Administrators may also require a Holder to furnish evidence satisfactory
to the Company, including a written and signed representation letter and consent to be bound by any
transfer restrictions imposed by law, legend, condition, or otherwise, that the shares are being
purchased only for investment purposes and without any present intention to sell or distribute the
shares in violation of any state or federal law, rule, or regulation. Further, each Holder shall
consent to the imposition of a legend on the shares of Common Stock issued pursuant to the
Restricted Share Plan and the imposition of stop-transfer instructions restricting their
transferability as required by law or by this Section 6.

     Section 9. Continued Employment or Service. Each Holder, if requested by the Program
Administrators, must agree in writing as a condition of the granting of his or her restricted
shares, to remain in the employment of, or service to, the Company or any of its subsidiaries
following the date of the granting of that restricted share for a period specified by the Program
Administrators. Nothing in the Restricted Plan or in any restricted share granted hereunder shall
confer upon any Holder any right to continued employment by, or service to, the Company or any of
its subsidiaries, or limit in any way the right of the Company or any subsidiary at any time to
terminate or alter the terms of that employment or service arrangement.

14

 

PART IV

QAD INC.

EMPLOYEE STOCK PURCHASE PLAN

     Section 1. Purpose. The purpose of the QAD Inc. Employee Stock Purchase Plan (the
“Stock Purchase Plan”) is to promote the growth and general prosperity of the Company by permitting
the Company to sell to employees of the Company and its subsidiaries shares of the Company’s stock
in accordance with Section 423 of the Code (“Section 423”), and it is the intention of the Company
to have the Stock Purchase Plan qualify as an Employee Stock Purchase Plan in accordance with
Section 423, and the Stock Purchase Plan shall be construed to administer stock purchases and to
extend and limit participation consistent with the requirements of Section 423. The Stock Purchase
Plan will be administered by the Program Administrators. Unless any provision herein indicates to
the contrary, this Stock Purchase Plan shall be subject to the General Provisions of the Program.

     Section 2. Terms and Conditions. The terms and conditions of shares to be offered to
be sold to employees of the Company and its subsidiaries under the Stock Purchase Plan shall comply
with Section 423.

     Section 3. Offering Periods and Participation. The Stock Purchase Plan shall be
implemented through a series of periods established by Program Administrators (the “Offering
Periods”). A full-time employee may participate in the Stock Purchase Plan and may enroll in an
Offering Period by delivering to the Company’s payroll office an agreement evidencing the terms and
conditions of the stock subscription in a form prescribed by the Program Administrators (the
“Purchase Agreement”) at least thirty (30) business days prior to the Enrollment Date for that
Offering Period (or such lesser number of business days as the Program Administrators, in their
sole discretion, may permit). Purchases will be made through payroll deductions, unless direct
purchases have been approved by the Program Administrators. The first day of each Offering Period
will be the “Enrollment Date” and the last day of each period will be the “Exercise Date.”

     Section 4. Purchase Price. The Purchase Price means an amount as determined by the
Program Administrators that is the lesser of: (a) the Purchase Price Discount from the Fair Market
Value of a share of Common Stock on the Enrollment Date, or (b) the Purchase Price Discount from
the Fair Market Value of a share of Common Stock on the Exercise Date. Notwithstanding the
foregoing, the Program Administrators may determine the Purchase Price by applying the Purchase
Price Discount to Fair Market Value of a share of Common Stock on the Exercise Date; provided,
however, that the employees of the Company are provided written notice not less than forty-five
(45) days prior to the Enrollment Date of the Offering Period that such method for determining the
Purchase Price is applied. The “Purchase Price Discount” shall mean the amount of the discount
from the Fair Market Value granted to Plan Participants not to exceed fifteen percent (15%) of the
Fair Market Value as established by the Board from time to time. “Fair Market Value” of a share of
stock shall be determined by the Board. However, if the Stock is publicly traded, fair market
value of a share of Stock shall be based upon the closing or other appropriate trading price per
share of Stock on a national securities exchange.

     Section 5. Grants.

     (a) Grants. On the Enrollment Date for each Offering Period, each Eligible Employee
participating in such Offering Period shall be granted the right to purchase on each
Exercise Date during such Offering Period (at the Purchase Price) shares of Common Stock in
an amount from time to time specified by the Program Administrators as set forth in Section
5(b) below. The Program Administrators will also establish the Purchase Price Discount and
the Periodic Exercise Limit. The right to purchase shall expire immediately after the last
Exercise Date of the Offering Period.

     (b) Grant Limitations. Any provisions of the Stock Purchase Plan to the contrary
notwithstanding, no Plan Participant shall be granted a right to purchase under the Stock
Purchase Plan:

     (i) if, immediately after the grant, such Plan Participant would own stock
possessing five percent (5%) or more of the total combined voting power or value of
all classes of stock of the Company or of any subsidiary (applying the constructive
ownership rules of Section 424(d) of the Code and treating stock that a Plan
Participant may acquire under outstanding options as stock owned by the Plan
Participant);

     (ii) that permits such Plan Participant’s rights to purchase stock, under all
employee stock purchase plans of the Company and its subsidiaries to accrue at a
rate that exceeds Twenty- Five Thousand Dollars ($25,000) worth of stock (determined at the Fair Market
Value of the shares at the time such purchase) in any calendar year (computed
utilizing the rules of Section 423(b)(8) of the Code); or

15

 

     (iii) that permits a Plan Participant to purchase Stock in excess of twenty
percent (20%) of his or her compensation, which shall include the gross base salary
or hourly compensation paid to a Plan Participant and the gross amount of any
targeted bonus, without reduction for contributions to any 401(k) plan sponsored by
the Company.

     (c) No Rights in Respect of Underlying Stock. The Plan Participant will have no
interest or voting right in shares covered by a right to purchase until such purchase has
been completed.

     (d) Plan Account. The Company shall maintain a plan account for the Plan Participants
in the Stock Purchase Plan, to which are credited the payroll deductions made for such Plan
Participant pursuant to Section 6 and from which are debited amounts paid for the purchase
of shares.

     (e) Common Stock Account. As a condition of participation in the Stock Purchase Plan,
each Plan Participant shall be required to receive shares purchased under the Stock Purchase
Plan in a common stock account (the “Common Stock Account”) maintained by the Company to
hold the Common Stock purchased under the Stock Purchase Plan. The shares may be released
at such times and under such conditions as designated by the Program Administrators.

     (f) Dividends on Shares. Subject to the limitations of Section 5(a) hereof and Section
423(b)(8) of the Code, all cash dividends, if any, paid with respect to shares of Common
Stock purchased under the Stock Purchase Plan and held in a Plan Participant’s Common Stock
Account shall be automatically invested in shares of Common Stock purchased at 100% of Fair
Market Value on the next Exercise Date. All non-cash distributions on Common Stock
purchased under the Stock Purchase Plan and held in a Plan Participant’s Common Stock
Account shall be paid to the Plan Participant as soon as practicable.

     Section 6. Payroll Deductions/Direct Purchases.

     (a) Plan Participant Designations. The Purchase Agreement applicable to an Offering
Period shall designate payroll deductions to be made on each payday during the Offering
Period as a whole number percentage specified by the Program Administrators of such Eligible
Employee’s compensation for the pay period preceding such payday. Direct purchases may be
permitted on such terms specified by the Program Administrators.

     (b) Plan Account Balances. The Company shall make payroll deductions as specified in
each Plan Participant’s Subscription Agreement on each payday during the Offering Period and
credit such payroll deductions to such Plan Participant’s Plan Account. A Plan Participant
may not make any additional payments into such Plan Account. No interest will accrue on any
payroll deductions. All payroll deductions received or held by the Company under the Stock
Purchase Plan may be used by the Company for any corporate purpose, and the Company shall
not be obligated to segregate such payroll deductions.

     (c) Plan Participation Changes. A Plan Participant may only discontinue his or her
participation in the Stock Purchase Plan as provided in Section 9. A Plan Participant may
only increase or decrease (subject to such limits as the Program Administrator may impose)
the rate of his or her payroll deductions at the start of any Offering Period by filing with
the Company a new Subscription Agreement authorizing such a change in the payroll deduction
rate. The change in rate shall be effective with the first Offering Period following the
Company’s receipt of the new Subscription Agreement.

     (d) Decreases. Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 4(b) herein, a Plan Participant’s payroll
deductions shall be decreased to zero percent at such time during any Purchase Period that
is scheduled to end during a calendar year (the “Current Purchase Period”) when the
aggregate of all payroll deductions previously used to purchase stock under the Stock
Purchase Plan in a prior Purchase Period which ended during that calendar year plus all
payroll deductions accumulated with respect to the Current Purchase Period equal the maximum
permitted by Section 423(b)(8) of the Code. Payroll deductions shall recommence at the rate
provided in such Plan Participant’s Subscription Agreement at the beginning of the first
Purchase Period that is scheduled to end in the following calendar year, unless terminated by the Plan
Participant as provided in Section 9.

16

 

     (e) Tax Obligations. At the time of the purchase of shares, and at the time any Common
Stock issued under the Stock Purchase Plan to a Plan Participant is disposed of, the Plan
Participant must adequately provide for the Company’s federal, state or other tax
withholding obligations, if any, that arise upon the purchase of shares or the disposition
of the Common Stock. At any time, the Company may, but will not be obligated to, withhold
from the Plan Participant’s compensation the amount necessary for the Company to meet
applicable withholding obligations, including, but not limited to, any withholding required
to make available to the Company any tax deductions or benefit attributable to sale or early
disposition of Common Stock by the eligible employee.

     (f) Statements of Accounts. The Company shall maintain each Plan Participant’s Plan
Account and shall give each Plan Participant a statement of account at least annually. Such
statements will set forth the amounts of payroll deductions, the Purchase Price applicable
to the Common Stock purchased, the number of shares purchased, the remaining cash balance
and the dividends received, if any, for the period covered.

     Section 7. Purchase of Shares.

     (a) Automatic Exercise on Exercise Dates. Unless a Plan Participant withdraws as
provided in Section 9 below, his or her right to purchase of shares will be exercised
automatically on each Exercise Date within the Offering Period in which such Plan
Participant is enrolled for the maximum whole number of shares of Common Stock as can then
be purchased at the applicable Purchase Price with the payroll deductions accumulated in
such Plan Participant’s Plan Account and not yet applied to the purchase of shares under the
Stock Purchase Plan, subject to the Periodic Exercise Limit. All such shares purchased
under the Stock Purchase Plan shall be credited to the Plan Participant’s Common Stock
Account. During a Plan Participant’s lifetime, a Plan
Participant’s options to purchase shares under the Stock Purchase Plan shall be exercisable only by the Plan Participant.

     (b) Excess Plan Account Balances. If, due to application of the Periodic Exercise
Limit or otherwise, there remains in a Plan Participant’s Plan Account immediately following
exercise of such Plan Participant’s election to purchase shares on an Exercise Date any cash
accumulated immediately preceding such Exercise Date and not applied to the purchase of
shares under the Stock Purchase Plan, such cash shall promptly be returned to the Plan
Participant; provided, however, that if the Plan Participant shall be enrolled in the
Offering Period (including, without limitation, by not withdrawing pursuant to Section 9),
such cash shall be contributed to the Plan Participant’s Plan Account for such next Purchase
Period.

     Section 8. Holding Period. The Program Administrators may establish, as a condition
to participation, a holding period of up to one (1) year following the Exercise Date during which a
Plan Participant may not sell, transfer or encumber the shares purchased under the Stock Purchase
Plan.

     Section 9. Withdrawal; Termination of Employment.

     (a) Voluntary Withdrawal. A Plan Participant may withdraw from an Offering Period by
giving written notice to the Company’s payroll office at least thirty (30) business days
prior to the next Exercise Date. Such withdrawal shall be effective no later than thirty
(30) business days after receipt by the Company’s payroll office of notice thereof. On or
promptly following the effective date of any withdrawal, all (but not less than all) of the
withdrawing Plan Participant’s payroll deductions credited to his or her Plan Account and
not yet applied to the purchase of shares under the Stock Purchase Plan will be paid to such
Plan Participant, and on the effective date of such withdrawal such Plan Participant’s
option to purchase shares for the Offering Period will be automatically terminated and no
further payroll deductions for the purchase of shares will be made during the Offering
Period. If a Plan Participant withdraws from an Offering Period, payroll deductions will
not resume at the beginning of any succeeding Offering Period, unless the Plan Participant
delivers to the Company a new Subscription Agreement with respect thereto.

     (b) Termination of Employment. Promptly after a Plan Participant’s ceasing to be an
employee for any reason all shares of Common Stock held in a Plan Participant’s Common Stock
Account and the payroll deductions credited to such Plan Participant’s Plan Account and not
yet applied to the purchase of shares under the Stock Purchase Plan will be returned to such
Plan Participant or, in the case of

17

 

his or her death, to the person or persons entitled thereto, and such Plan
Participant’s option to purchase shares will be automatically terminated, provided that, if
the Company does not learn of such death more than five (5) business days prior to an
Exercise Date, payroll deductions credited to such Plan Participant’s Plan Account may be
applied to the purchase of shares under the Stock Purchase Plan on such Exercise Date.

     Section 10. Non-transferability. Neither payroll deductions credited to a Plan
Participant’s Plan Account nor any rights with regard to the exercise of a purchase of shares or to
receive shares under the Stock Purchase Plan may be assigned, transferred, pledged or otherwise
disposed of by the Plan Participant in any way other than by will or the laws of descent and
distribution, and any purchase of shares by a Plan Participant shall, during such Plan
Participant’s lifetime, be exercisable only by such Plan Participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect, except that the Program
Administrator may treat such act as an election to withdraw from an Offering Period in accordance
with Section 9.

     Section 11. Compliance with Securities Laws. Shares shall not be issued with respect
to the Stock Purchase Plan, unless the issuance and delivery of the shares pursuant thereto shall
comply with all applicable provisions of foreign, state and federal law, including, without
limitation, the Securities Act of 1933, as amended, and the Exchange Act, and the rules and
regulations promulgated thereunder, and the requirements of any stock exchange upon which the
shares may then be listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance. The Program Administrators may also require a Plan Participant to
furnish evidence satisfactory to the Company, including a written and signed representation letter
and consent to be bound by any transfer restrictions imposed by law, legend, condition, or
otherwise, that the shares are being purchased only for investment purposes and without any present
intention to sell or distribute the shares in violation of any state or federal law, rule, or
regulation. Further, each Plan Participant shall consent to the imposition of a legend on the
shares of Common Stock subject to his or her Option and the imposition of stop-transfer
instructions restricting their transferability as required by law or by this Section 11.

     Section 12. Continued Employment or Service. Each Plan Participant, if requested by
the Program Administrators, must agree in writing, to remain in the employment of, or service to,
the Company or any of its subsidiaries following the date of the granting of that option to
purchase shares for a period specified by the Program Administrators. Nothing in this Stock
Purchase Plan shall confer upon any Plan Participant any right to continued employment by, or
service to, the Company or any of its subsidiaries, or limit in any way the right of the Company or
any subsidiary at any time to terminate or alter the terms of that employment or service
arrangement.

18

 

PART V

QAD INC.

STOCK APPRECIATION RIGHTS PLAN

     Section 1. SAR Terms and Conditions. The purpose of this QAD Inc. Stock Appreciation
Rights Plan (the “SAR Plan”) is to promote the growth and general prosperity of the Company by
permitting the Company to grant stock appreciation rights (“SAR(s)”) to help attract and retain
superior personnel for positions of substantial responsibility with the Company and its
subsidiaries and to provide individuals with an additional incentive to contribute to the success
of the Company. The terms and conditions of SARs granted under the SAR Plan may differ from one
another as the Program Administrators shall, in their discretion, determine in each SAR agreement
(the “SAR Agreement”). Unless any provision herein indicates to the contrary, this SAR Plan shall
be subject to the General Provisions of the Program.

     Section 2. Duration of SAR. Each SAR and all rights thereunder granted pursuant to
the terms of the SAR Plan shall expire on the date determined by the Program Administrators as
evidenced by the SAR Agreement, but in no event shall any SAR expire later than ten (10) years from
the date on which the SAR is granted. In addition, each SAR shall be subject to early termination
as provided in the SAR Plan.

     Section 3. Grant. Subject to the terms and conditions of the SAR Agreement, the
Program Administrators may grant a SAR, with an exercise price that is not less than the fair
market value of the Common Stock subject to the SAR on the date of grant, to receive a payment upon
the exercise of a SAR which reflects the appreciation over the exercise price in the fair market
value of the number of shares of Common Stock for which such SAR was granted to any person who is
eligible to receive awards either: (i) in tandem with the grant of an incentive option; (ii) in
tandem with the grant of a nonqualified option; or (iii) independent of the grant of an incentive
option or nonqualified option. Each grant of a SAR which is in tandem with the grant of an
incentive option or nonqualified option shall be evidenced by the same agreement as the incentive
option or nonqualified option which is granted in tandem with such SAR and such SAR shall relate to
the same number of shares of Common Stock to which such option shall relate and such other terms
and conditions as the Program Administrators, in their sole discretion, deem are not inconsistent
with the terms of the SAR Plan, including conditions on the exercise of such SAR which relate to
the employment of the Plan Participant or any requirement that the Plan Participant exchange a
prior outstanding option and/or SAR.

     Section 4. Payment at Exercise. Upon the settlement of a SAR in accordance with the
terms of the SAR Agreement, the Plan Participant shall (subject to the terms and conditions of the
SAR Plan and SAR Agreement) receive a payment equal to the excess, if any, of the SAR Exercise
Price (as defined below) for the number of shares of the SAR being exercised at that time over the
SAR Grant Price (as defined below) for such shares. Such payment may be paid in cash or in shares
of the Company’s Common Stock; provided, however, the method of payment shall be specified by the
Program Administrators in the SAR Agreement at the date of grant. If the method of payment is in
shares of the Company’s Common Stock, such shares shall be valued for this purpose at the SAR
Exercise Price on the date the SAR is exercised and any payment in shares which calls for a payment
in fractional share shall automatically be paid in cash based on such valuation. As used herein,
“SAR Exercise Date” shall mean the date on which the exercise of a SAR occurs under the SAR
Agreement, “SAR Exercise Price” shall mean the fair market value (as determined by the Program
Administrators) of a share of Common Stock on a SAR Exercise Date and “SAR Grant Price” shall mean
the price which would have been the option exercise price for one share of Common Stock if the SAR
had been granted as an option, or if the SAR was granted in tandem with an option, the option
exercise price per share for the related option.

     Section 5. Special Terms and Conditions. Each SAR Agreement which evidences the
grant of a SAR shall incorporate such terms and conditions as the Program Administrators in their
absolute discretion deem are not inconsistent with the terms of the SAR Plan and the agreement for
the incentive option or nonqualified option, if any, granted in tandem with such SAR, except that
if a SAR is granted in tandem with an incentive option or nonqualified option, the SAR shall be
exercisable only when the related incentive option or nonqualified option is exercisable. The
Program Administrator may provide in the SAR Agreement that (i) the Plan Participant’s right to
exercise a SAR granted in tandem with an incentive option or nonqualified option shall be forfeited
to the extent that the Plan Participant exercises the related incentive option or nonqualified
option and (ii) the Plan Participant’s right to exercise the incentive option or nonqualified
option shall be forfeited to the extent the Plan Participant exercises the related SAR.

19

 

     Section 6. Compliance with Securities Laws. Shares shall not be issued with respect
to any SAR granted under the SAR Plan, unless the exercise of that SAR and the issuance and
delivery of the shares pursuant thereto shall comply with all applicable provisions of foreign,
state and federal law, including, without limitation, the Securities Act of 1933, as amended, and
the Exchange Act, and the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. The Program Administrators
may also require a SAR holder to furnish evidence satisfactory to the Company, including a written
and signed representation letter and consent to be bound by any transfer restrictions imposed by
law, legend, condition, or otherwise, that the shares are being purchased only for investment
purposes and without any present intention to sell or distribute the shares in violation of any
state or federal law, rule, or regulation.

     Section 7. Continued Employment or Service. Each SAR holder, if requested by the
Program Administrators, must agree in writing as a condition of receiving his or her SAR, to remain
in the employment of, or service to, the Company or any of its subsidiaries following the date of
the granting of that SAR for a period specified by the Program Administrators. Nothing in this SAR
Plan or in any SAR granted hereunder shall confer upon any SAR holder any right to continued
employment by, or service to, the Company or any of its subsidiaries, or limit in any way the right
of the Company or any subsidiary at any time to terminate or alter the terms of that employment or
service arrangement.

     Section 8. Rights Upon Termination of Employment or Service. If a SAR holder under
this SAR Plan ceases to be employed by, or provide services to, the Company or any of its
subsidiaries for any reason other than death or disability, his or her SAR shall immediately
terminate; provided, however, the Program Administrators, in their discretion, may allow the SAR to
be exercised, to the extent exercisable on the date of termination of employment or service, at any
time within sixty (60) days after the date of termination of employment or service.

     Section 9. Rights Upon Disability of SAR Holder. If a SAR holder becomes disabled
within the meaning of Code Section 22(e)(3) while employed by the Company or any subsidiary
corporation, the Program Administrators, in their discretion, may allow the SAR to (i) be
exercised, to the extent exercisable on the date of termination of employment, at any time within
one year after the date of termination of employment due to disability and (ii) become immediately
vested in full as of the date of termination of employment due to disability.

     Section 10. Rights Upon Death of SAR Holder. If a SAR holder dies while employed by
the Company or any subsidiary corporation, the Program Administrators, in their discretion, may
allow the SAR to (i) be exercised, to the extent exercisable on the date of termination of
employment, at any time within one year after the date of termination of employment due to death
and (ii) become immediately vested in full as of the date of termination of employment due to
death. During this one-year or shorter period, the SAR may be exercised by the person or persons
to whom the SAR holder’s rights under the SAR shall pass by will or by the laws of descent and
distribution.

     Section 11. SAR Not Transferable. A SAR granted pursuant to the terms of this SAR
Plan may not be sold, pledged, assigned, or transferred in any manner otherwise than by will or the
laws of descent or distribution and may be exercised during the lifetime of a SAR holder only by
that SAR holder. No such SAR shall be pledged or hypothecated in any way nor shall they be subject
to execution, attachment, or similar process.

20

 

PART VI

OTHER STOCK RIGHTS PLAN

     Section 1. Terms and Conditions. The purpose of the Other Stock Rights Plan (the
“Stock Rights Plan”) is to promote the growth and general prosperity of the Company by permitting
the Company to grant stock rights to help attract and retain superior personnel for positions of
substantial responsibility with the Company and its subsidiaries to provide individuals with an
additional incentive to the success of the Company. The terms and conditions of Performance
Shares, Restricted Stock Units, Stock Payments or Dividend Equivalent Rights granted under the
Stock Rights Plan may differ from one another as the Program Administrators shall, in their
discretion, determine in each stock rights agreement (the “Stock Rights Agreement”). Unless any
provision herein indicates to the contrary, this Stock Rights Plan shall be subject to the General
Provisions of the Program.

     Section 2. Duration. Each Performance Share, Restricted Stock Unit, Stock Payment or
Dividend Equivalent Right and all rights thereunder granted pursuant to the terms of the Stock
Rights Plan shall expire on the date determined by the Program Administrators as evidenced by the
Stock Rights Agreement, but in no event shall any Performance Shares, Restricted Stock Units, Stock
Payments or Dividend Equivalent Rights expire later than ten (10) years from the date on which the
Performance Shares, Restricted Stock Units, Stock Payments or Dividend Equivalent Rights are
granted. In addition, each Performance Share, Restricted Stock Unit, Stock Payment or Dividend
Equivalent Right shall be subject to early termination as provided in the Stock Rights Plan.

     Section 3. Grant. Subject to the terms and conditions of the Stock Rights Agreement,
the Program Administrators may grant Performance Shares, Stock Payments. Restricted Stock Units or
Dividend Equivalent Rights as provided under the Stock Rights Plan. Each grant of Performance
Shares, Restricted Stock Units, Dividend Equivalent Rights and Stock Payments shall be evidenced by
a Stock Rights Agreement, which shall state the terms and conditions of each as the Program
Administrators, in their sole discretion, deem are not inconsistent with the terms of the Stock
Rights Plan.

     Section 4. Performance Shares. Performance Shares shall become payable to a Plan
Participant based upon the achievement of specified Performance Objectives and upon such other
terms and conditions as the Program Administrators may determine and specify in the Stock Rights
Agreement evidencing such Performance Shares. Performance Shares may be paid in cash or in shares
of Common Stock, or partly in cash and partly in shares of Common Stock, with or without the
election of the Plan Participant, as the Program Administrators may determine and specify in the
Stock Rights Agreement evidencing such Performance Shares. Each payment of Performance Shares in
shares of Common Stock shall be considered a Stock Payment pursuant to Section 5 below. Each grant
shall satisfy the conditions for performance-based awards hereunder and under the General
Provisions. A grant may provide for the forfeiture of Performance Shares in the event of
termination of employment or other events, subject to exceptions for death, disability, retirement
or other events, all as the Program Administrators may determine and specify in the Stock Rights
Agreement for such grant. Payment may be made for the Performance Shares at such time and in such
form as the Program Administrators shall determine and specify in the Stock Rights Agreement and
payment for any Performance Shares may be made in full in cash or by certified cashier’s check
payable to the order of the Company or, if permitted by the Program Administrators, by shares of
the Company’s Common Stock or by the surrender of all or part of an award, or in other property,
rights or credits deemed acceptable by the Program Administrators or, if permitted by the Program
Administrators, by a combination of the foregoing. If any portion of the purchase price is paid in
shares of the Company’s Common Stock, those shares shall be tendered at their then fair market
value as determined by the Program Administrators. Payment in shares of Common Stock includes the
automatic application of shares of Common Stock received upon the exercise or settlement of
Performance Shares or other options or awards to satisfy the exercise or settlement price.

     Section 4A. Restricted Stock Units. Restricted Stock Units shall represent the right
of a Plan Participant to receive the value of a specified number of shares of Common Stock of the
Company after the Restricted Stock Units become nonforfeitable upon the achievement of specified
service or performance conditions within a specified period or periods as determined by the Program
Administrators. Each agreement for the grant of Restricted Stock Units shall specify the number of
Restricted Stock Units subject to such agreement, the service or performance conditions, the period
or periods over which the conditions apply, the time or times at which the Plan Participant may
receive payment, and such other terms and conditions as the Program Administrators may determine.
Restricted Stock Units may be paid in cash or in shares of Common Stock, or partly in cash and
partly in shares of Common Stock, with or without the election of the Plan Participant, as the
Program Administrators may determine
and specify in the agreement evidencing such Restricted Stock Units. Each payment of
Restricted Stock Units in shares of Common Stock shall be considered a Stock Payment pursuant to
Section 5 below.

21

 

     Section 5. Stock Payments. The Program Administrators may grant Stock Payments to a
person eligible to receive the same as a bonus or additional compensation or in lieu of the
obligation of the Company or a subsidiary to pay cash compensation under other compensatory
arrangements, with or without the election of the eligible person (except in the case of stock in
lieu of normal salary or compensation), provided that the Plan Participant will be required to pay
an amount equal to the aggregate par value of any newly issued Stock Payments. A Plan Participant
shall have all the voting, dividend, liquidation and other rights with respect to shares of Common
Stock issued to the Plan Participant as a Stock Payment upon the Plan Participant becoming holder
of record of such shares of Common Stock; provided, however, the Program Administrators may impose
such restrictions on the assignment or transfer of such shares of Common Stock as they deem
appropriate and as are evidenced in the Stock Rights Agreement for such Stock Payment.

     Section 6. Dividend Equivalent Rights. The Program Administrators may grant Dividend
Equivalent Rights in tandem with the grant of incentive options or nonqualified options, stock
appreciation rights, Restricted Shares or Performance Shares that otherwise do not provide for the
payment of dividends on the shares of Common Stock subject to such awards for the period of time to
which such Dividend Equivalent Rights apply, or may grant Dividend Equivalent Rights that are
independent of any other such award. A Dividend Equivalent Right granted in tandem with another
award may be evidenced by the agreement for such other award; otherwise, a Dividend Equivalent
Right shall be evidenced by a separate Stock Rights Agreement. Payment may be made by the Company
in cash or by shares of the Company’s Common Stock or by a combination of the foregoing, may be
immediate or deferred and may be subject to such employment, performance objectives or other
conditions as the Program Administrators may determine and specify in the Stock Rights Agreement
for such Dividend Equivalent Rights. The total payment attributable to a share of Common Stock
subject to a Dividend Equivalent Right shall not exceed one hundred percent (100%) of the
equivalent dividends payable with respect to an outstanding share of Common Stock during the term
of such Dividend Equivalent Right, taking into account any assumed investment (including assumed
reinvestment in shares of Common Stock) or interest earnings on the equivalent dividends as
determined under the Stock Rights Agreement in the case of a deferred payment, provided that such
percentage may increase to a maximum of two hundred percent (200%) if a Dividend Equivalent Right
is subject to a Performance Objective.

     Section 7. Compliance with Securities Laws. Shares shall not be issued with respect
to any award granted under the Stock Rights Plan, unless the award and the issuance and delivery of
the shares pursuant thereto shall comply with all applicable provisions of foreign, state and
federal law, including, without limitation, the Securities Act of 1933, as amended, and the
Exchange Act, and the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. The Program Administrators
may also require a Participant to furnish evidence satisfactory to the Company, including a written
and signed representation letter and consent to be bound by any transfer restrictions imposed by
law, legend, condition, or otherwise, that the shares are being purchased only for investment
purposes and without any present intention to sell or distribute the shares in violation of any
state or federal law, rule, or regulation. Further, each Participant shall consent to the
imposition of a legend on the shares of Common Stock subject to his or her award and the imposition
of stop-transfer instructions restricting their transferability as required by law or by this
Section 7.

     Section 8. Continued Employment or Service. Each Participant, if requested by the
Program Administrators, must agree in writing as a condition of receiving his or her award, to
remain in the employment of, or service to, the Company or any of its subsidiaries following the
date of the granting of that award for a period specified by the Program Administrators. Nothing
in this Stock Rights Plan in any award granted hereunder shall confer upon any Participant any
right to continued employment by, or service to, the Company or any of its subsidiaries, or limit
in any way the right of the Company or any subsidiary at any time to terminate or alter the terms
of that employment or service arrangement.

     Section 9. Rights Upon Termination of Employment or Service. If a Participant under
this Stock Rights Plan ceases to be employed by, or provide services to, the Company or any of its
subsidiaries for any reason other than death or disability, his or her award shall immediately
terminate; provided, however, that the Program Administrators may, in their sole and absolute
discretion, allow the award to be exercised, to the extent exercisable on the date of termination
of employment or service, at any time within sixty (60) days after the date of termination of
employment or service.

22

 

     Section 10. Rights Upon Disability of Participant. If a Participant becomes disabled
within the meaning of Code Section 22(e)(3) while employed by the Company or any subsidiary
corporation, the Program Administrators, in their discretion, may allow all awards held by
Participant to become immediately vested in full and any restrictions applicable to such awards to
lapse immediately as of the date of termination of employment due to disability.

     Section 11. Rights Upon Death of Participant. If a Participant dies while employed
by the Company or any subsidiary corporation, the Program Administrators, in their discretion, may
allow all awards held by Participant to become immediately vested in full and any restrictions
applicable to such awards shall lapse immediately as of the date of termination of employment due
to death. During this one-year or shorter period, the award may be exercised by the person or
persons to whom the Participant’s rights under the award shall pass by will or by the laws of
descent and distribution.

23exv10w31

 

EXECUTION COPY

MIP BLOOMINGTON, LLC, MIP IOWA CITY, LLC, MIPS SAN DIEGO, LLC,

MIP TRUMBULL, LLC, MIP ANCHORAGE, LLC, MIP WALNUT CREEK,

LLC, and MIP PHILADELPHIA, LP, as Seller,

MIP LESSEE, LP, as Operating Lessee,

and

ASHFORD HOSPITALITY LIMITED PARTNERSHIP, as Purchaser

 

CONTRACT OF SALE

 

September 15, 2006

Properties: Seven Hotel Properties listed in Exhibit A

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	1.	 	Definitions
	 	 	1	 
	 	 	 
	 	 	 	 
	2.	 	Agreement to Sell and Purchase the Properties
	 	 	9	 
	 	 	 
	 	 	 	 
	3.	 	Purchase Price
	 	 	12	 
	 	 	 
	 	 	 	 
	4.	 	Permitted Exceptions
	 	 	13	 
	 	 	 
	 	 	 	 
	5.	 	Closing
	 	 	15	 
	 	 	 
	 	 	 	 
	6.	 	Apportionments
	 	 	16	 
	 	 	 
	 	 	 	 
	7.	 	Documents to be Delivered at the Closing
	 	 	25	 
	 	 	 
	 	 	 	 
	8.	 	Property Conveyed “As Is”; Other Representations and Warranties of Seller
	 	 	28	 
	 	 	 
	 	 	 	 
	9.	 	Representations and Warranties of Purchaser
	 	 	36	 
	 	 	 
	 	 	 	 
	10.	 	Conditions to the Sellers’ Obligation to Close Title
	 	 	37	 
	 	 	 
	 	 	 	 
	11.	 	Conditions to Purchaser’s Obligation to Close Title
	 	 	38	 
	 	 	 
	 	 	 	 
	12.	 	Casualty and Condemnation
	 	 	38	 
	 	 	 
	 	 	 	 
	13.	 	Operation of the Properties until Closing; Operating Lessee Covenants
	 	 	41	 
	 	 	 
	 	 	 	 
	14.	 	Title to the Properties
	 	 	49	 
	 	 	 
	 	 	 	 
	15.	 	Brokers, etc.
	 	 	51	 
	 	 	 
	 	 	 	 
	16.	 	Termination of Agreement; Default
	 	 	52	 
	 	 	 
	 	 	 	 
	17.	 	Expenses of the Transaction
	 	 	53	 
	 	 	 
	 	 	 	 
	18.	 	Notices
	 	 	54	 
	 	 	 
	 	 	 	 
	19.	 	Further Assurances
	 	 	55	 
	 	 	 
	 	 	 	 
	20.	 	Governing Law
	 	 	55	 
	 	 	 
	 	 	 	 
	21.	 	Entire Agreement; No Third Party Beneficiary, etc.
	 	 	56	 
	 	 	 
	 	 	 	 
	22.	 	Waivers; Extensions
	 	 	56	 
	 	 	 
	 	 	 	 
	23.	 	Construction
	 	 	56	 
	 	 	 
	 	 	 	 
	24.	 	Assignment
	 	 	57	 
	 	 	 
	 	 	 	 
	25.	 	Facsimile; Counterparts
	 	 	57	 
	 	 	 
	 	 	 	 
	26.	 	No Recording
	 	 	57	 
	 	 	 
	 	 	 	 
	27.	 	Escrow
	 	 	57	 
	 	 	 
	 	 	 	 
	28.	 	Confidentiality
	 	 	59	 
	 	 	 
	 	 	 	 
	29.	 	1031 Exchange
	 	 	60	 
	 	 	 
	 	 	 	 
	30.	 	Bulk Transfers
	 	 	60	 

(i)

 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	31.	 	Saturdays, Sundays, Legal Holidays
	 	 	60	 
	 	 	 
	 	 	 	 
	32.	 	Attorneys’ Fees
	 	 	61	 
	 	 	 
	 	 	 	 
	33.	 	Staff
	 	 	61	 
	 	 	 
	 	 	 	 
	34.	 	Indemnification
	 	 	63	 
	 	 	 
	 	 	 	 
	35.	 	USA Patriot Act
	 	 	64	 
	 	 	 
	 	 	 	 
	36.	 	Tort Indemnity
	 	 	64	 
	 	 	 
	 	 	 	 
	37.	 	Highway Access
	 	 	65	 
	 	 	 
	 	 	 	 
	38.	 	Successors and Assigns
	 	 	65	 
	 	 	 
	 	 	 	 
	39.	 	Real Estate Reporting Person
	 	 	65	 

(ii)

 

 

Schedule of Exhibits

Exhibit A Hotels and Legal Descriptions; Vetro Leases

Exhibit B Franchise Agreements

Exhibit C Hotel Contracts

Exhibit D Management Agreements

Exhibit E Permitted Exceptions

Exhibit F Allocated Purchase Price

Exhibit G Surveys

Exhibit H Intentionally Omitted

Exhibit I Form of Bill of Sale and General Assignment

Exhibit J Form of Seller’s Representation Certificate

Exhibit K Form of Title Affidavit

Exhibit L Form of Purchaser’s Representation Certificate

Exhibit M Space Leases

Exhibit N Permits

Exhibit O Violations

Exhibit P Litigation

Exhibit Q Collective Bargaining Agreements

Exhibit R Certification Statement

(i)

 

 

CONTRACT OF SALE

     THIS AGREEMENT (this “Agreement”) is made as of the 15th day of September, 2006 by and
among MIP BLOOMINGTON, LLC, MIP IOWA CITY, LLC, MIPS SAN DIEGO, LLC, MIP TRUMBULL, LLC, MIP
ANCHORAGE, LLC, MIP WALNUT CREEK, LLC, each a Delaware limited liability company, and MIP
PHILADELPHIA, LP, a Pennsylvania limited partnership, each with an office c/o Interstate Hotels &
Resorts, Inc., 4501 N. Fairfax Drive, Suite 800, Arlington, Virginia 22203 (each, a
“Seller” and collectively, the “Sellers”), MIP LESSEE, LP, a Delaware limited
partnership with an office c/o Interstate Hotels & Resorts, Inc., 4501 N. Fairfax Drive, Suite 800,
Arlington, Virginia 22203 (“Operating Lessee”), and ASHFORD HOSPITALITY LIMITED
PARTNERSHIP, a Delaware limited partnership, with an office at 14185 Dallas Parkway, Suite 1100,
Dallas, Texas 75254 (“Purchaser”).

W I T N E S S E T H :

     Each Seller is the owner of the hotel listed opposite such Seller’s name and described in
Exhibit A of this Agreement (each, a “Hotel” and collectively, the
“Hotels”).

     The Sellers desire to sell and convey the Hotels to Purchaser, and Purchaser desires to
purchase the Hotels from the Sellers, subject to and upon all of the terms and provisions of this
Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual undertakings in this
Agreement, the parties hereto agree as follows:

     1. Definitions.

          1.1 Defined Terms. Wherever used in this Agreement, the following terms shall have
the meanings set forth in this Section 1 unless the context of this Agreement clearly requires
another interpretation:

          “Adjustment Point” shall have the meaning set forth in Section 6.

          “Anchorage Hotel” shall mean the Hotel known as the Sheraton Anchorage Hotel, which
Hotel is located in Anchorage, Alaska.

          “Anchorage Joint Venture Agreement” shall mean that certain Joint Venture Agreement,
dated November 23, 1994, by and between Captain Cook and MeriStar Laundry (as successor-in-interest
to InterAlaskaHotel, Inc.).

          “Bill of Sale” shall mean each bill of sale to the Personal Property to be delivered
at the Closing as provided in subsection 7.1.2.

          “Blackout Period” shall mean the period from November 10, 2006 to and including
November 12, 2006.

 

2

          “Bloomington Hotel” shall mean the Hotel known as the Hilton Minneapolis/St. Paul
Airport, which Hotel is located in Bloomington, Minnesota.

          “Bookings” shall mean contracts or reservations for the use or occupancy of guest
rooms, meeting rooms and/or the banquet facilities of a Hotel, including without limitation volume
transient agreements, if any, in effect with respect to a Hotel.

          “Books and Records” shall mean all books, records, room rates, customer lists and
banquet and function room records with respect to a Hotel (whether in electronic format or reduced
to paper, but with respect to items in electronic format (i) excluding software which is
proprietary to the Operating Lessee, the Manager, their respective affiliates or any third party,
or is licensed by the applicable Seller, the Operating Lessee, the Manager or any of their
respective affiliates from third parties, (ii) only in such form as they exist on the Closing Date,
(iii) only to the extent the same are not consolidated with items from other hotels owned, leased
or managed by a Seller, the Operating Lessee, the Manager or any of their respective affiliates and
not being conveyed to Purchaser and (iv) without any representation or warranty that the same are
compatible with Purchaser’s software) to the extent the same (x) are owned by a Seller, the
Operating Lessee or the Manager, (y) reflect operations at a Hotel and not at other properties
owned, leased or managed by a Seller, the Operating Lessee, the Manager or any of their respective
affiliates, and (z) are in a Seller’s, the Operating Lessee’s or the Manager’s possession.

          “Brand” shall mean any of Embassy Suites®, Hilton®, Marriott®, Sheraton®, Vetro,
MeriStar® or Interstate Hotels®.

          “Business Day” shall mean any day other than a Saturday, Sunday or a day on which
national banking institutions in New York City and/or the District of Columbia are authorized or
required to close.

          “Captain Cook” shall mean Hickel Investment Company, d/b/a The Hotel Captain Cook.

          “Closing” shall mean the closing of the sale of the Properties by the Sellers to
Purchaser provided for in Section 5.

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

          “Consumables” means all engineering, maintenance and housekeeping consumable supplies
including, without limitation, soap, cleaning materials, matches, stationery, paper supplies,
pencils, paint and painters’ supplies, engineers’ supplies, fuel oil, gasoline and other supplies
of all kinds, whether used, unused or held in reserve storage for future use in connection with the
maintenance and operation of any Property, whether in opened or unopened packages, owned by any
Seller or the Operating Lessee and which are on hand on the date hereof, subject to such depletion
and including such resupplies as shall occur and be made in the normal course

 

3

of business, excluding, however, (i) Food and Beverage, (ii) Operating Supplies and Equipment,
(iii) Miscellaneous Personal Property, (iv) Furnishings and (v) Excluded Items.

          “Costs of Collection” shall mean and include reasonable attorneys’ fees and other
costs incurred by the Sellers, the Operating Lessee, the Manager or Purchaser, as the case may be,
in collecting Rents, but shall not include the regular fees payable to any manager of the Hotels,
the payroll costs of any employees or any other internal costs or overhead of any Seller, the
Operating Lessee, the Manager or Purchaser.

          “Effective Date” shall mean the date of this Agreement.

          “Environmental Laws” shall mean any and all federal, state and local laws, statutes,
ordinances, rules, regulations, judgments, orders, decrees, permits, licenses or other governmental
restrictions or requirements now or hereafter in effect with respect to the Hotels and relating to
the environment and/or Hazardous Substances, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1986, as amended (42 U.S.C. §9601 et
seq.), the Resource Conservation Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984, as now or hereafter amended (42 U.S.C. §6901 et seq.), the Hazardous Materials
Transportation Act, 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 the Toxic Substances
and Control Act, as amended (15 U.S.C. §2601 et seq.).

          “Escrow Agent” shall mean Chicago Title Insurance Company, through its National
Accounts Office in New York, New York, in its capacity as holder of the Deposit.

          “Exhibits” shall mean the exhibits attached to this Agreement (or such other documents
which are referred to in this Agreement as Exhibits and are initialed for identification by the
parties), each of which shall be deemed to form part of this Agreement whether or not so stated in
this Agreement.

          “Food and Beverage” means all food and beverages which are on hand at a Hotel whether
issued to the food and beverage department of such Hotel or held in reserve storage, in unopened
packages and (in the case of certain beverages) bottles (including, without limitation, all food
and beverage located in any guest room mini-bar), subject to such depletion and including such
resupplies as shall occur and be made in the normal course of business.

          “Franchise Agreement” shall mean the hotel franchise agreement or license agreement
and related documents pursuant to which a Hotel is being operated under a brand name, together with
all modifications and amendments thereto, all of which Franchise Agreements are more particularly
described in Exhibit B.

          “Franchisor” shall mean the entity licensing to a Seller the hotel brand name and
systems under which the applicable Hotel is being operated pursuant to a Franchise Agreement.

 

4

          “Furnishings” shall mean all fixtures, furniture, furnishings, fittings, equipment,
machinery, apparatus, appliances, computer hardware and equipment, software (to the extent such
software is neither subject to a licensing agreement nor proprietary to the Operating Lessee or
Manager or their respective affiliates), reservations terminals (to the extent not licensed to any
Seller, the Operating Lessee or Manager by the Franchisor under a Franchise Agreement or other
applicable documentation), vehicles, building materials, telephones and other communication
equipment, copiers, facsimile machines, postal machines, televisions, signs, vacuum cleaners, video
equipment and other similar articles of personal property (to the extent any Seller or the
Operating Lessee has title to such items and such items are not subject to any equipment leases or
similar arrangements), located on or at the applicable Property and used or usable in connection
with the operation of a Hotel, subject to such depletions, substitutions and replacements as shall
occur and be made in the ordinary course of business prior to the Closing Date and in accordance
with the terms of this Agreement, excluding therefrom any such personal property owned by Manager
and all (i) Consumables, (ii) Food and Beverage, (iii) Operating Supplies and Equipment, (iv)
Miscellaneous Personal Property and (v) Excluded Items.

          “Governmental Authorities” shall mean all agencies, bureaus, departments, and
officials of federal, state, county, municipal and local governments and public authorities having
jurisdiction over the Properties or any part thereof.

          “Hazardous Substance” shall mean any substance, material or waste which is regulated,
or governed by any Environmental Law including without limitation (a) any substance, material or
waste defined, used or listed as “hazardous waste”, “extremely hazardous waste”, “restricted
hazardous waste”, “hazardous substance”, “hazardous material”, “toxic substance” or similar or
related term as defined, used or listed in any Environmental Law, (b) any asbestos or asbestos
containing materials, (c) any underground storage tanks or similar facilities, (d) petroleum,
petroleum-based substances or polychlorinated biphenyl, (e) toxic mold, and (f) any additional
substances or materials which are hazardous or toxic substances under any Environmental Law.

          “Hotel Contracts” shall mean, with respect to each Hotel, all service and maintenance
contracts, employment agreements, union contracts, purchase orders and other contracts or
agreements, including without limitation equipment leases, relating to the maintenance, operation,
provisioning or equipping of such Hotel, together with all related written warranties and
guaranties, as the same may be modified in accordance with this Agreement. Hotel Contracts shall
not include (i) the Franchise Agreements, (ii) the Management Agreements, or (iii) any contracts,
equipment leases or purchase orders (except to the extent of Consumables, Food and Beverage,
Operating Supplies and Equipment and/or Furnishings or other Personal Property ordered prior to the
Closing in the ordinary course of business and not yet delivered to the applicable Hotel) under
which, or which are subject to master agreements under which, goods and/or services are supplied or
leased to more than one hospitality property owned, leased or managed by the Operating Lessee, the
Manager or any of their respective affiliates, unless the same are set forth on Exhibit C
attached hereto.

 

5

          “Hotel Employees” shall mean, with respect to each Hotel, the persons employed at such
Hotel, whether by the Seller owning such Hotel, the Operating Lessee or the Manager, to operate
such Hotel.

          “Impositions” shall mean all real estate and personal property taxes, general and
special assessments, water and sewer charges, license fees and other fees and charges assessed or
imposed by Governmental Authorities upon all or any portion of the Properties (including any
Personal Property).

          “Improvements” shall mean the buildings, structures (surface and sub-surface),
installations and other improvements, including such fixtures and appurtenances as shall constitute
real property, located on the Land.

          “Iowa City Hotel” shall mean the Hotel known as the Sheraton Iowa City, which Hotel is
located in Iowa City, Iowa.

          “Legal Requirements” shall mean all statutes, laws, ordinances, rules, regulations,
executive orders and requirements of all Governmental Authorities which are applicable to the
Properties or any part thereof or the use or manner of use thereof, or to the owners, Tenants or
occupants thereof in connection with such ownership, occupancy or use.

          “Management Agreement” shall mean, with respect to each Hotel, that certain management
agreement by and between the Operating Lessee and the Manager and all amendments, modifications,
supplements or restatements thereto and thereof, as listed and described in Exhibit D
annexed hereto and made a part hereof.

          “Manager” shall mean Interstate Management Company, L.L.C., the current manager of the
Hotels.

          “MeriStar Laundry” shall mean MeriStar Laundry, LLC, a Delaware limited liability
company.

          “Miscellaneous Personal Property” shall mean, with respect to each Hotel, and only to
the extent, if any, the applicable Seller and/or Operating Lessee has any right, title or interest
therein, such Hotel’s domain name, URL, website (including access to the FTP files of such website)
and web address (if any, and only any such domain name, URL, website and/or web address, as relate
solely to such Hotel), the Hotel’s telephone numbers, printed marketing materials, if any, relating
solely to the Hotel, and any slides, proofs or drawings used by the Seller owning such Hotel or the
Operating Lessee to produce such materials, to the extent such slides, proofs or drawings are in
such Seller’s or the Operating Lessee’s possession and without any express or implied
representation or warranty of any kind by such Seller or the Operating Lessee in connection
therewith. In no event shall Miscellaneous Personal Property include any property licensed for use
under the Franchise Agreements, unless Purchaser continues to operate the applicable Hotel under
the Franchise Agreement or pursuant to a new franchise agreement with the Franchisor duly entered
into by Purchaser and such Franchisor. Miscellaneous Personal Property shall also exclude (i)
Consumables, (ii)

 

6

Food and Beverage, (iii) Operating Supplies and Equipment, (iv) Furnishings and (v) Excluded
Items.

          “Operating Lease” shall mean, with respect to each Hotel, that certain operating lease
demising the applicable Property between the Seller owning such Property, as owner, and the
Operating Lessee, as tenant, which operating lease shall be terminated on or prior to Closing at
Seller’s sole cost and expense.

          “Operating Supplies and Equipment” shall mean, with respect to any Hotel, all china,
glassware, stemware, silverware, linens, sheets, pillow cases, towels, face cloths, bathmats, bath
rugs, shower curtains, blankets, tools, employees’ uniforms, and any other equipment, goods,
utensils, supplies or reserve stock, whether in use or held in storage for future use in connection
with the operation of such Hotel, which are on hand on the date hereof, whether in opened or
unopened packages, subject to such depletion and including such resupplies as shall occur and be
made in the normal course of business, excluding, however, (i) Food and Beverage, (ii) Consumables,
(iii) Miscellaneous Personal Property, (iv) Furnishings, and (v) Excluded Items.

          “Permits” shall mean, with respect to each Hotel, all governmental licenses, permits,
certificates, authorizations and approvals used in or relating to the ownership, occupancy or
operation of any part of such Hotel, including, without limitation, those necessary for the sale
and on-premises consumption of liquor and other alcoholic beverages.

          “Permitted Exceptions” shall mean those items specified in Section 4 and Exhibit
E, and all other matters affecting title to any of the Properties which are hereafter accepted
by Purchaser, treated as a Permitted Exception in accordance with the terms of this Agreement, or
waived by Purchaser in writing.

          “Personal Property” shall mean, collectively, the Furnishings, Consumables, Food and
Beverage, Operating Supplies and Equipment, Miscellaneous Personal Property, Books and Records and
Warranties owned by the Operating Lessee, Sellers or any of them.

          “Philadelphia Hotel” shall mean the Hotel known as the Embassy Suites Philadelphia
Airport, which Hotel is located in Philadelphia, Pennsylvania.

          “Rents” shall mean all fixed, minimum, additional, percentage, overage and escalation
rents, porter’s wage or operating expense charges, real estate tax charges, overtime expense
charges, parking charges, insurance charges, electricity charges, cleaning charges, sprinkler
charges, water charges, utility charges, HVAC charges and any other amounts payable under the Space
Leases.

          “San Diego Hotel” shall mean the Hotel known as the Sheraton San Diego Hotel, Mission
Valley, which Hotel is located in San Diego, California.

          “San Diego Seller” shall mean MIPS San Diego, LLC.

 

7

          “Seller” shall have the meaning set forth in the preamble, provided, that in the event
the Partial Termination Procedure is applied to any Property, then the term “Seller” shall be
deemed to exclude any party that is the owner of such Property.

          “Seller’s Copy” or “Seller’s Copies” shall mean an executed counterpart or, if
an executed counterpart is not in any Seller’s possession, at least one conformed photocopy.

          “Space Leases” shall mean all leases, tenancies, licenses, concessions and other
agreements (written or oral) for the occupancy and use of space at the Properties, including but
not limited to, agreements for the occupancy and use of rooftop space on a Hotel for the
installation of cellular telephone antennas (but, with respect to such cellular antenna leases, net
of brokerage commissions to third parties), and all renewals, modifications, amendments, guaranties
and other agreements affecting the same. Space Leases shall not include the Operating Leases or
the Bookings.

          “Substantial Portion” shall mean, in the case of damage or destruction to any Property
by casualty, such portion of such Property as would cause the cost to repair or replace the same to
equal or exceed twelve and one-half percent
(121/2 %) of the Allocated Purchase Price of said Property.

          “Tenants” shall mean the tenants, licensees, concessionaires or other users or
occupants under Space Leases.

          “Title Company” shall mean Chicago Title Insurance Company, through its National
Accounts Office in New York, New York, in its capacity as title insurer.

          “Trademarks” shall mean the trademarks, trade names, service marks and copyrights,
marks, logos, symbols, know-how, trade dress, slogans and all similar proprietary rights associated
with the Brands and any other marks used by any Seller, the Operating Lessee or the Manager in the
marketing, operations and systems programs in connection with the Hotels and any and all goodwill
related specifically thereto, including all derivations of any of the foregoing.

          “Trumbull Hotel” shall mean the Hotel known as the Marriott Trumbull, which Hotel is
located in Trumbull, Connecticut.

          “USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 (Pub. L.
No. 107-56).

          “Vetro Leases” shall mean those certain leases, as amended, pursuant to which the
Operating Lessee is a tenant, listed and described on Exhibit A.

          “Walnut Creek Seller” shall mean MIP Walnut Creek, LLC.

 

8

          “Walnut Creek Hotel” shall mean the Hotel known as the Embassy Suites Walnut Creek,
which Hotel is located in Walnut Creek, California.

          “Walnut Creek Litigation” shall mean that certain litigation arising out of the
lawsuit filed by Gypsie Jones against Interstate in the United States District Court, Northern
District of California, on July 28, 2006.

          “Warranties” shall mean any assignable warranties benefiting any Seller or the
Operating Lessee with respect to the Furnishings, Miscellaneous Personal Property and Improvements.

          1.2 Additional Defined Terms. The following additional terms, wherever used in this
Agreement, shall have the respective meanings specified in the Sections of this Agreement set forth
below after such terms:

	 	 	 
	Term	 	Section
	ADA Remedial Work
	 	13.13
	Adjustment Point
	 	6.1
	Agreement
	 	Preamble
	Allocated Purchase Price
	 	3.2
	Anchorage Joint Venture
	 	7.1.21
	Applicable Period
	 	33.4
	Appurtenances
	 	2.1.2
	Asset Allocations
	 	3.2
	Balance
	 	3.1.3
	Bankruptcy Code
	 	3.1.2
	Basket
	 	8.9.2
	Broker
	 	15.1
	Cash
	 	2.2.2
	Casualty Loss
	 	12.1.1
	Closing Date
	 	5.1
	Closing Deposit
	 	5.1
	Collective Bargaining Agreements
	 	8.3.13
	Deed
	 	7.1.1
	Deposit
	 	3.1.1
	ERISA
	 	33.4
	Excluded Items
	 	2.2
	Fund
	 	33.4
	Guest Property
	 	6.3
	Hotel
	 	Recitals
	Hotels
	 	Recitals
	Incremental ADA Costs
	 	13.13
	Indemnifying Party
	 	34
	Initial Closing Date
	 	5.1
	Interstate
	 	8.3.13
	Land
	 	2.1.1

 

9

	 	 	 
	Term	 	Section
	Leasing Costs
	 	6.4.1
	Ledger
	 	6.1.12
	MHOP
	 	10.5
	MHOP ROFO
	 	10.5
	Monetary Liens
	 	14.1
	Multiemployer Plan
	 	33.4
	OFAC
	 	35
	Operating Lessee
	 	Preamble
	Other Franchisor
	 	13.7.1
	Partial Termination Procedure
	 	12.1.2
	PBGC
	 	33.4
	Permitted Exceptions
	 	4
	PIP Default Risk
	 	6.5.2
	Properties
	 	2.1
	Property
	 	2.1
	Proprietary Materials
	 	2.2.6
	Protected Party
	 	34
	Purchase Price
	 	3.1
	Purchaser
	 	Preamble
	Purchaser’s Leasing Costs
	 	6.4.2
	Purchaser’s Representation Certificate
	 	7.2.4
	Release
	 	10.4
	Repair Contract
	 	6.5.3
	Repair Contractor
	 	6.5.3
	Repair Proposal
	 	6.5.3
	Seller
	 	Preamble
	Seller’s knowledge
	 	8.4
	Seller’s possession
	 	8.4
	Seller’s Representation Certificate
	 	7.1.12
	Sellers
	 	Preamble
	Title Affidavit
	 	7.1.13
	Trademark Materials
	 	2.2.1
	Transfer Taxes
	 	17.1
	Transferred Employees
	 	33.1
	WARN Act
	 	33.2

          1.3
Construction. Except as otherwise specifically indicated, all references in this
Agreement to Sections refer to Sections of this Agreement, and all references to Exhibits refer to
Exhibits attached hereto. The words “herein,” “hereof,” “hereinafter,” and words and phrases of
similar import refer to this Agreement as a whole and not to any
particular Section. Agreement to Sell and Purchase the Properties.

          2.1 Sale and Purchase. Upon and subject to the terms and conditions of this
Agreement, the Sellers agree to sell and convey to Purchaser and

 

10

Purchaser agrees to purchase from
the Sellers, the following hotel properties (each a “Property” and collectively, the
“Properties”), comprising the following interests owned by the applicable Seller or
Operating Lessee:

               2.1.1 all those certain lots, pieces or parcels of land more particularly described in
Exhibit A annexed hereto and made a part hereof, together with, all and singular, the
tenements, hereditaments, easements, appurtenances and rights belonging or in any way appertaining
thereto, and the reversions and the remainders thereof (the “Land”);

               2.1.2 all right, title and interest, if any, of the applicable Seller in and to all of the
following (collectively, “Appurtenances”).

        (a) land lying in the bed of any street, highway, road or avenue, open or
proposed, public or private, in front of or adjoining the Land, to the center line
thereof;

        (b) rights of way, highways, public places, easements, appendages,
appurtenances, sidewalks, alleys, strips and gores of land adjoining or appurtenant
to the Land which are now or hereafter used in connection with the Land; and

        (c) awards made after the Closing or to be made after the Closing in lieu of
any of the foregoing, and all unpaid awards or other proceeds for damages to the
Land by reason of the change of grade of any street, highway, road or avenue;

               2.1.3 all right, title and interest of each Seller in and to all Improvements now located or
hereafter erected on such Land, and all fixtures constituting a part thereof;

               2.1.4 all right, title and interest of any Seller or the Operating Lessee as lessor or
sublessor, as the case may be, under the Space Leases;

               2.1.5 the Sellers’ and Operating Lessee’s respective interests under the Hotel Contracts, to
the extent assignable;

               2.1.6 all Personal Property owned by the applicable Seller or the Operating Lessee and used in
connection with the operation of the Property owned by such Seller;

               2.1.7 subject to the provisions of Section 13.10, all of the Operating Lessee’s right, title
and interest as tenant under the Vetro Leases; and

               2.1.8 subject to the provisions of Section 13.11, all of MeriStar Laundry’s right, title and
interest in the Anchorage Joint Venture Agreement.

 

11

          2.2 Excluded Items. Notwithstanding anything to the contrary set forth in this
Agreement, none of the Sellers shall be obligated to sell to Purchaser, and Purchaser shall not be
entitled or obligated to purchase, any of the following (collectively, the “Excluded
Items”):

               2.2.1 Any right, title, or interest in (a) the Trademarks and (b) except to the extent, if
any, that Purchaser shall, pursuant to Section 13.7, either assume the applicable Franchise
Agreement or obtain a new franchise agreement from the applicable Franchisor, all printed
materials, signs, operating supplies, equipment and other items of personal property containing the
Trademarks (the “Trademark Materials”) located on the Properties.

               2.2.2 Subject to the provisions of Section 6.1, any cash and all balances on deposit in the
name of or to the credit of any Seller, the Operating Lessee or the Manager, and all cash
equivalent investments (collectively, “Cash”) (it being agreed that, notwithstanding
anything to the contrary contained in this Agreement, the Sellers shall have the right to withdraw
all Cash in the bank accounts of (or relating to) any Property, other than cash on hand in house
banks as provided in Section 6.1.11, on the Closing Date).

               2.2.3 Non-transferable deposits such as utility deposits.

               2.2.4 Insurance policies covering any of the Hotels which are carried by any Seller or the
Operating Lessee or any of their respective affiliates (it being agreed that, notwithstanding
anything to the contrary contained in this Agreement, the Sellers shall have the right to cause the
termination of such policies on the Closing Date).

               2.2.5 Except as otherwise provided in Section 12, proceeds from insurance policies covering
any of the Properties which are carried by any Seller, the Operating Lessee or any of their
respective affiliates. Except as otherwise provided in Section 12, the Sellers and/or their
respective affiliates are and shall remain entitled to all of such insurance proceeds related to
claims arising prior to the Closing Date. Except as otherwise provided in Section 12, Purchaser
shall have no claim or right to any such insurance proceeds related to Claims arising prior to the
Closing Date. For purposes of this Section 2.2.5, a “Claim” shall be deemed to have arisen at the
time when the matter giving rise to an insurance claim first occurs.

               2.2.6 All of the following materials of any Seller, the Operating Lessee, the Manager or any
of their respective affiliates relating to the Hotels (collectively, “Proprietary
Materials”): all income tax returns, property valuations and appraisals, financial budgets and
forecasts, market studies and all materials which are subject to a confidentiality agreement with a
third party.

               2.2.7 Any item excluded from the definition of “Personal Property” (or any component thereof)
contained in this Agreement.

 

12

          2.3 Operating Lessee Interests. A portion of the interests and property constituting
the Properties are or may be owned or held by the Operating Lessee rather than any Seller. The
Operating Lessee shall, at or prior to Closing, cause any and all portions of the interests and
property constituting the Properties owned or held by the Operating Lessee to be transferred to
Purchaser on the terms and conditions of this Agreement.

     3. Purchase Price.

          3.1 Purchase Price. The aggregate purchase price (the “Purchase Price”)
payable by Purchaser to the Sellers for the Properties shall be TWO HUNDRED SIXTY-SEVEN MILLION ONE
HUNDRED FIFTY THOUSAND and 00/100 DOLLARS ($267,150,000.00), which shall be payable as set forth
below.

               3.1.1 On the Effective Date, and as condition to the effectiveness of this Agreement,
Purchaser shall deliver to the Escrow Agent the sum of TWENTY MILLION and 00/100 DOLLARS
($20,000,000.00) (the “Deposit”) by wire transfer of immediately available federal funds to
an account designated by the Escrow Agent.

               3.1.2 The Deposit shall be held by Escrow Agent and disbursed in accordance with the terms and
conditions of this Agreement. Purchaser hereby acknowledges and agrees that the Deposit held by
Escrow Agent does not and shall not constitute property of the estate of Purchaser within the
meaning of section 541 of title 11 of the United States Code, or substantially similar provisions
of state law (the “Bankruptcy Code”), and Purchaser’s interest in such Deposit is limited to the
right to have the Deposit returned if and when the conditions for the return of the Deposit to
Purchaser are satisfied as set forth herein. Purchaser hereby acknowledges and agrees that (i) the
proper giving of notice by the Sellers to release any portion of the Deposit as provided hereunder
and/or (ii) the proper release of any portion of the Deposit to the Sellers as provided hereunder
shall not be a violation of any provision of the Bankruptcy Code, including, without limitation,
section 362 of the Bankruptcy Code, or require the approval of any court with jurisdiction over any
case in which Purchaser or any affiliate of Purchaser is a debtor. Purchaser hereby waives any
provision of the Bankruptcy Code necessary to invoke the foregoing, including, without limitation,
sections 105 and 362, and waives any right to defend against any motion for relief from the
automatic stay that may be filed by the Sellers.

               3.1.3 At the Closing, Purchaser shall pay to the Sellers the balance of the Purchase Price, to
wit, TWO HUNDRED FORTY-SEVEN MILLION ONE HUNDRED FIFTY THOUSAND and 00/100 DOLLARS
($247,150,000.00), as such amount shall be adjusted pursuant to any Closing adjustments pursuant to
Section 6 and any other adjustment expressly provided for in this Agreement (including, without
limitation, Section 5.1) and less the consideration payable for the transfer of the liquor
license and the alcoholic beverage inventory at the San Diego Hotel and the Walnut Creek Hotel
as provided in Section 6.1.16 (the “Balance”), by wire transfer of immediately available
federal funds to an account or accounts designated by the Sellers

 

13

to Purchaser in writing at least
one (1) Business Day prior to Closing. Such funds shall be received by the Sellers by 10:30 A.M.
(New York City time) on the Closing Date.

               3.1.4 Notwithstanding anything to the contrary in this Agreement (including, without
limitation, Purchaser’s right to adjourn the Closing pursuant to Section 5.1), Purchaser expressly
acknowledges and agrees that to the extent Purchaser will seek or require financing to close on
this transaction, this Agreement is not subject to or conditioned upon Purchaser’s ability to
obtain such financing.

          3.2 Allocation. The Purchase Price attributable to each Property for purposes of
filing transfer tax, sales tax and other similar tax returns and reports and for determining the
value of a Hotel in connection with the Partial Termination Procedure (the “Allocated Purchase
Price” of such Property) is set forth on Exhibit F. Prior to the Closing, the Sellers
and Purchaser shall cooperate in good faith to further allocate each Property’s Allocated Purchase
Price among such Property’s (a) Land, (b) Improvements, (c) Personal Property, and (d) other asset
categories, as applicable (the “Asset Allocations”), provided that in the event that
Sellers and Purchaser are unable to agree on such Asset Allocations within twenty (20) days from
the Effective Date, the Sellers and Purchaser shall engage a mutually acceptable nationally
recognized accounting firm to determine the Asset Allocations, which determination shall be binding
on the Sellers and Purchaser for the purposes of this Agreement. In the event the Purchase Price
is increased pursuant to Section 5.1, such increase shall be allocated among the Properties and the
asset components of the Properties on a pro rata basis in accordance with the allocations set forth
on Exhibit F and the Asset Allocations. The Sellers and Purchaser agree to file all real
property transfer tax, sales tax and other similar tax returns and reports necessary in connection
with the Closing consistent with the Allocated Purchase Price and the Asset Allocations.
Notwithstanding anything in this Agreement to the contrary, the parties do not intend that the
Allocated Purchase Price and Asset Allocations will represent an indication of value for generally
accepted accounting principles (including, without limitation, for federal income tax purposes),
and each party expressly reserves the right make its own determination of such value.

          3.3 Elimination of Property. In the event that this Agreement is terminated with
respect to any Property pursuant to the Partial Termination Procedure, none of the provisions of
this Agreement shall have any further force or effect as to such Property (except for those
provisions that expressly survive termination of this Agreement), and the Purchase Price shall be
reduced by the amount allocated to all such Properties as shown on Exhibit F.

     4. Permitted
Exceptions. Subject to the provisions of Section 14, at Closing, the
Properties are sold and are to be conveyed subject to the following matters (“Permitted
Exceptions”):

          4.1 the matters set forth in Exhibit E annexed hereto and made a part hereof;

 

14

          4.2 liens for Impositions which are not due and payable as of the Closing Date or which are
apportioned in accordance with Section 6;

          4.3 liens for Impositions which are paid directly by Tenants in occupancy on the Closing Date
to the entity imposing same;

          4.4 the state of facts shown on the surveys listed and described on Exhibit G, and any
state of facts a physical inspection of the Properties would show;

          4.5 zoning, subdivision, environmental, building and all other Legal Requirements applicable
to the ownership, use or development of, or the right to maintain or operate the Properties, or
have space therein used and occupied by Tenants, presently existing or enacted prior to the
Closing;

          4.6 consents by any former owner of any Property for the erection of any structure or
structures on, under or above any streets, highways, roads or avenues which the Property may abut;

          4.7 the terms and conditions of the Vetro Leases;

          4.8 all Space Leases in effect on the date of this Agreement, as well as any extensions or
renewals of Space Leases pursuant to options contained therein, or extensions, renewals or
amendments of Space Leases or additional or substituted Space Leases made between the date hereof
and the Closing Date in accordance with the provisions of Section 13 hereof;

          4.9 rights of Tenants in occupancy of any Property on the Closing Date as tenants only;

          4.10 financing statements and security agreements made by any Tenant;

          4.11 the standard pre-printed exceptions from coverage contained in the form of title policy
employed by the Title Company, as revised due to delivery by the Sellers of the Title Affidavit;

          4.12 without derogating from the representation set forth in Section 8.3.9, any lien which
arises out of a violation of building, fire, sanitary, housing, sidewalk and other similar laws and
regulations;

          4.13 mechanics’ liens, lis pendens and notices of commencement of action against any Seller
(or which affect any Seller’s interest in the Properties), provided that the same do not exceed
$1,000,000 with respect to any single Property and that the Title Company shall provide affirmative
insurance reasonably
satisfactory to Purchaser insuring against the collection of such items out of the Properties;
and

 

15

          4.14 all matters created by or on behalf of, or with the consent of, Purchaser, including,
without limitation, any documents or instruments to be recorded as part of any financing for the
acquisition of the Properties by the Purchaser, and any matter that Purchaser shall have accepted
or be deemed to have accepted pursuant to Section 14.

     5. Closing.

          5.1 Closing Date. The Closing shall be held at 10:00 a.m. local time on November 8,
2006 (the “Initial Closing Date”, as the same may be adjourned or advanced pursuant to the
terms of this Agreement, the “Closing Date”), at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019 or on such other
date, or at such other time and place, which may be agreed upon by the parties. TIME SHALL BE OF
THE ESSENCE with respect to the Closing Date set forth above or any adjourned Closing Date pursuant
to the following proviso; provided, that the Closing may be adjourned as follows: (a) by the
Sellers, one or more times, to a Business Day not later than December 7, 2006 in order to cure
exceptions to title, cure breaches of representations and warranties, obtain any required consents,
permit the elapsing of any period during which a right of first refusal may be exercised with
respect to any Hotel or satisfy any other conditions to Purchaser’s obligations to consummate the
Closing (unless the same are waived in writing by the Purchaser) or (b) by Purchaser not more than
one (1) time to a Business Day not later than December 7, 2006 in order to satisfy the condition to
the Sellers’ obligations to consummate the Closing set forth in Section 10.4 (unless the same are
waived in writing by the Sellers) and/or to arrange and close interim financing (provided that the
satisfaction of such conditions and/or arrangement and closing of such financing shall not be a
condition to Purchaser’s obligation to consummate the Closing), provided further that (A) prior to
or simultaneously with the exercise of Purchaser’s right to adjourn the Closing pursuant to this
clause (b) Purchaser shall deliver the sum of FIVE MILLION AND 00/100 dollars ($5,000,000.00) to
Escrow Agent (the “Closing Deposit”) in immediately available federal funds to an account
designated by the Escrow Agent, which Closing Deposit shall be deemed to be part of the Deposit for
purposes of this Agreement (it being agreed by Purchaser that Purchaser’s right to adjourn the
Closing Date as provided in this clause (A) shall be ineffective and of no force or effect unless
and until Purchaser delivers the Closing Deposit to the Escrow Agent as provided in this clause
(A)) and (B) in the event the Closing occurs during the period from and after November 9, 2006 to
and including December 6, 2006 by reason of the exercise of Purchaser’s adjournment right
hereunder, the Purchase Price shall be increased by One Million Dollars ($1,000,000.00).
Notwithstanding anything to the contrary in this Agreement, in the event the Initial Closing Date
is adjourned by Purchaser or the Sellers to a date that falls within a Blackout Period or a date
that is not a Business Day, such extension shall be automatically extended to the first Business
Day following the expiration of such Blackout Period or such date that is not a Business Day. Any
right of adjournment provided for herein shall be exercised by Notice to the non-adjourning party
or parties, and, in the case of the exercise of such right by the Purchaser, shall be
exercised by facsimile sent to the Sellers on or prior to October 30, 2006. Purchaser and the
Sellers hereby authorize their respective counsel to execute and deliver in the names

 

16

of Purchaser
and the Sellers any agreement(s) confirming an accelerated or deferred Closing Date or changed
place of Closing agreed to by the parties.

          5.2 Actions at Closing. At the Closing, the parties shall deliver and accept all
executed documents and instruments and take all other action required of them pursuant to this
Agreement, unless otherwise provided in this Agreement.

     6. Apportionments.

          6.1 Closing Adjustments. At the Closing (except where a later date is specifically
provided for in this Section), the parties shall adjust the items set forth below as of 11:59 P.M.
on the day preceding the Closing Date (the “Adjustment Point”), and the net amount thereof
shall be paid by Purchaser to the Sellers, or credited by the Sellers to Purchaser, as the case may
be, at the Closing, or to the extent provided herein or otherwise appropriate in light of the
provisions hereof, after Closing (references to any Seller or the Sellers in this Section 6 shall
be deemed to include the Operating Lessee, to the extent applicable):

               6.1.1 Impositions. All Impositions, whether payable in installments or not, payable
on account of the fiscal year in which the Closing Date occurs, provided that with respect to the
Bloomington Hotel, (i) general real estate taxes and installments of special assessments payable
therewith payable in the year prior to the year of Closing and all prior years shall be paid by the
Sellers, (ii) general real estate taxes and installments of special assessments payable therewith
payable in the year of Closing shall be prorated on a daily basis by the Sellers and the Purchaser
as of the Adjustment Point based upon a calendar year; and (iii) special assessments levied or
which become pending after the Effective Date shall be the responsibility of Purchaser. Subject to
the proviso in the immediately preceding sentence, if at the Closing the amount of any Impositions
is not known, such Impositions shall be apportioned on the basis of the rate and assessment for the
preceding year, with the same to be reapportioned as soon as the new rate and assessment can be
ascertained. In the event that any Impositions which are apportioned shall thereafter be reduced
by abatement, the amount of such abatement, net of any amount due to any Tenant in respect thereof
under the terms of any Space Lease and the reasonable cost of obtaining such abatement, shall be
apportioned between the parties as of the Adjustment Point, provided that neither party shall be
obligated to institute or prosecute proceedings for an abatement. If any tax certiorari
proceedings are pending at the time of Closing, Sellers shall retain full control over all such
proceedings. Any refunds or savings in the payment of taxes resulting from any real estate or
similar tax certiorari proceedings applicable to taxes payable in respect of the period prior to
the Closing Date shall, subject to any obligation to reimburse Tenants under Space Leases, belong
to and be the property of Sellers, and any refunds or savings in the payment of taxes applicable to
taxes payable in respect of the period from and after the date of the Closing shall belong to and
be the property of Purchaser.

               6.1.2 Room Rentals. One-half (50%) of the room rentals and related taxes attributable
to the night prior to the Closing Date shall be the property of the Sellers and the remaining
one-half (50%) shall be the property of

 

 

17

Purchaser. Subject to Section 6.1.12, room rentals attributable to any night prior to the
night before the Closing Date shall be the property of the Sellers.

               6.1.3 Reservation Deposits. Prepaid and unearned reservation deposits and other items
prepaid by guests of the Hotels and unearned shall be credited or transferred (without additional
credit to the Sellers pursuant to Section 6.1.11) to Purchaser at the Closing.

               6.1.4 Utility Charges. Utility charges for telephone, gas, electricity, sewer, water
and other services shall not be prorated to the extent that the Sellers can make arrangements for
the rendering of final bills based on meter readings as of a date not more than two days prior to
or after the Adjustment Point. The Sellers shall be responsible for the payment at the Closing of
all bills for utility charges up to and including the Adjustment Point. To the extent that utility
bills cannot be rendered as of the Closing Date, such charges for the period through the Adjustment
Point shall be prorated as of the Adjustment Point based upon the most recent available bills and
(subject to the provisions of Section 6.2) readjusted on the basis of the actual bills as and when
received. If Purchaser elects, any transferable utility deposits shall be transferred to Purchaser
and credited to the Sellers.

               6.1.5 Operating Expenses and Trade Accounts. The Sellers shall be responsible for all
operating expenses and trade accounts of the Properties (including charges and fees payable under
the Hotel Contracts) up to and including the Adjustment Point. To the extent the amounts of such
items are then known, the Sellers shall pay such items at Closing and shall pay the balance of such
amounts in the ordinary course of business but in no event later than thirty (30) days after
receipt of an invoice therefor. Purchaser shall assume responsibility for purchase orders made by
the Sellers in the ordinary course of business for Food and Beverage, Operating Supplies and
Equipment and Consumables not delivered to the applicable Hotel as of the Closing Date. Purchaser
shall be deemed to have assumed any and all operating expenses and trade accounts to the extent
Purchaser shall have received a credit therefor under this Section 6.1.

               6.1.6 Food, Beverage and Other Income. Revenues from food, beverage and banquet
services, room service, public room revenues, health club revenues and vending machine revenues
belonging to any Seller or the Operating Lessee, and revenues from other services rendered to
guests of the Hotel, shall be prorated as of the Adjustment Point, if, as and when collected,
provided that with respect to food, beverage and banquet services, such revenues shall be prorated
as of the end of the employee shift on the night preceding the Closing.

               6.1.7 Food and Beverage Supplies. On the day immediately prior to the Closing Date,
Purchaser and the Sellers shall take an inventory of the Food and Beverage in unopened containers
and retail items sold by the Hotels (to the extent in unopened packages) located on the Properties
for the sole purpose of determining the amount of such items as of the Closing Date. The net cost
of such items shall be added to the Purchase Price. Any such items purchased in the ordinary
course of

 

18

business prior to the time of such inventory but delivered to the Hotels thereafter shall be
deemed to have been purchased for the account of the Purchaser, which shall make payment therefor
to the supplier thereof. Notwithstanding anything to the contrary contained herein, nothing in
this Agreement shall require that any alcoholic beverages be sold or transferred in violation of
any Legal Requirements (it being understood that if any alcoholic beverages are owned by a Seller,
such beverages shall be deemed “Excluded Items” if the transactions contemplated hereby would be
deemed to constitute a sale or transfer of alcoholic beverages in violation of any Legal
Requirements).

               6.1.8 Rents. All Rents shall be prorated as of the Adjustment Point if, as and when
collected (net, in the case of leases of antenna space, of leasing commissions or similar amounts
payable in respect of such leases). Payments from Tenants for electricity, operating expenses and
taxes which are billed to Tenants in arrears or on an estimated basis shall be prorated on such
basis and readjusted if, as and when such amounts are finally determined and collected. All
amounts collected by or on behalf of Purchaser from Tenants after the Closing, net of Costs of
Collection, if any, shall first be deemed to be in payment of Rents (or the specific components of
Rents) then due for the month in which the Closing occurs (and apportioned in accordance with this
subsection), next in payment of Rents (or the specific components of Rents) then due on account of
any month after the month in which the Closing occurs and finally in payment of any delinquent
Rents (or the specific components of Rents) which are in arrears as of the first day of the month
in which the Closing occurs. From and after the Closing, any amounts collected by Purchaser from
each delinquent Tenant under a Space Lease which, in accordance with the preceding provisions, are
allocable to the period prior to Closing, net of Costs of Collection properly allocable thereto, if
any, shall be paid promptly by Purchaser to the applicable Seller. In no event are the Sellers or
the Operating Lessee assigning to Purchaser any claims for past due Rents under the Space Leases.

               6.1.9 Employees. With respect to liabilities relating to any Hotel Employee (whether
current or former), such liabilities shall be apportioned as provided under Section 33.1 of this
Agreement.

               6.1.10 Security Deposits. Any security deposits under the Space Leases shall be
transferred to Purchaser at the Closing or credited against the Purchase Price (in each case
without additional credit to Seller pursuant to Section 6.1.11).

               6.1.11 Cash. All cash on hand in house banks (i.e., petty cash held at the
Properties) on the morning of the Closing Date shall become the property of Purchaser and the
amount thereof shall be credited to the Sellers.

               6.1.12 Ledger and Other Receivables. All accounts receivable attributable to guests
in occupancy at any Hotel on the night preceding the Closing (the “Ledger”) shall be
prorated as provided in this Agreement, the Sellers’ share shall be credited to the Sellers and the
Ledger shall become the property of Purchaser. Purchaser shall, at the Closing, purchase all other
accounts receivable that are ninety (90)

 

19

or fewer days past due from the Sellers at a price (which shall be treated as an increase to
the Purchase Price) equal to one hundred percent (100%) of the value of any such account receivable
that is thirty (30) or fewer days past due, ninety percent (90%) of the value of any account that
is thirty-one (31) to and including sixty (60) days past due, seventy-five percent (75%) of the
value of any such account receivable that is sixty-one (61) to and including ninety (90) days past
due. All accounts receivable greater than ninety (90) days past due shall remain the property of
the Sellers and the Sellers may take such actions as they deem necessary to collect the same.
Purchaser shall cooperate with the Sellers, at the Sellers’ cost, in all reasonable respects in
connection with any collection efforts by the Sellers. If any receivables which are the property
of the Sellers under this Agreement shall be collected by Purchaser, Purchaser shall remit the same
to the Sellers within ten (10) days after receipt.

               6.1.13 Franchise Agreements. All monetary charges, expenses and fees (including, but
not limited to, any reservation fees) incurred under or in connection with any Franchise Agreement
that remains in effect after the Closing shall be prorated as of the Adjustment Point. The Sellers
shall be responsible for all such charges, expenses and fees incurred or relating to the period
prior to the Adjustment Point, and Purchaser shall be responsible for all such charges, expenses
and fees incurred, and relating to the period, after the Adjustment Point, provided that the
Sellers shall not be obligated to complete or perform or to provide funds for the performance or
completion of any property improvement plan or other work requirements under the Franchise
Agreements or to satisfy requirements set forth in any Franchisor’s property inspection or quality
standard reports.

               6.1.14 Vetro Leases. In the event that the Operating Lessee assigns, and Purchaser
assumes, the Vetro Leases, all rents, charges, expenses and fees incurred under or in connection
with the Vetro Leases shall be prorated as of the Adjustment Point. The Operating Lessee shall be
responsible for all such charges, expenses and fees incurred or relating to the period prior to the
Adjustment Point, and Purchaser shall be responsible for all such charges, expenses and fees
incurred, and relating to the period, after the Adjustment Point; provided that with respect to the
first payment of “percentage rent” due, if any, under each Vetro Lease following the Closing,
Operating Lessee shall reimburse Purchaser Operating Lessee’s allocated share of such payment
within ten (10) Business Days after such payment is made, which allocated share shall be calculated
by multiplying the amount of such payment by a fraction, the numerator of which is the number of
days in the relevant rental period prior to the Closing Date and the denominator of which is the
total number of days in such rental period; provided, further, that, subject to Section 6.2, with
respect to the first annual reconciliation of such percentage rent under each Vetro Lease following
the Closing, (i) in the event that additional percentage rent is due and owing to the landlord, the
Operating Lessee shall reimburse Purchaser for Operating Lessee’s share of any additional
percentage rent paid by Purchaser under such Vetro Lease and (ii) in the event that percentage rent
is refunded by the landlord, Purchaser shall promptly reimburse the Operating Lessee for the
Operating Lessee’s share of any percentage rent refunded by the landlord under such Vetro Lease,
which reimbursement or refund, as applicable, shall be calculated by multiplying the total payment
to or refund from the landlord under such

 

20

Vetro Lease, as applicable, by a fraction, the numerator of which is the number of days of the
applicable reconciliation period prior to the Closing Date and the denominator of which is the
total number of days in such reconciliation period.

               6.1.15 Anchorage Joint Venture Agreement. In the event that MeriStar Laundry assigns its
interests under the Anchorage Joint Venture Agreement, all amounts payable or receivable by
MeriStar Laundry shall be prorated as of the Adjustment Point. MeriStar Laundry shall be
responsible for or entitled to all such payables and receivables relating to the period prior to
the Adjustment Point, and Purchaser shall be responsible for or entitled to all such payables and
receivables relating to the period after the Adjustment Point.

               6.1.16 Liquor Licenses. Notwithstanding anything to the contrary in this Agreement,
prior to the Closing, the Sellers and Purchaser, each acting reasonably, shall agree upon the
consideration to be paid for the liquor licenses for and the alcoholic beverage inventory at the
San Diego Hotel and the Walnut Creek Hotel. Such consideration shall be paid at Closing by wire
transfer of immediately available funds to the liquor assets escrow provided for in Section 13.6
and shall be deducted from the Balance paid by Purchaser to the Escrow Agent at the Closing.

               6.1.17 Miscellaneous. Any other items of income or expense of the Hotels which, in
accordance with generally accepted accounting principles and business practices, should be
apportioned between the Sellers and Purchaser shall be so apportioned in a commercially reasonable
manner.

          6.2 Delayed Adjustments. If at any time following the Closing Date the amount of an
item listed in Section 6.1 shall prove to be incorrect, or if any such amount which was unavailable
or unknown on the Closing Date becomes available or known, the applicable party shall pay to the
other party within fifteen (15) days after request the sum necessary to correct such error, or
which is payable pursuant to Section 6.1 with respect to such previously unavailable or unknown
item, upon receipt of proof of such error or of such previously unavailable or unknown amount,
provided that except with respect to the reapportionment contemplated in Section 6.1.1, such proof
is delivered to the party from whom payment is requested on or before one hundred twenty (120) days
after the Closing Date. The acceptance of the closing statement by either party shall not prevent
later readjustment pursuant to this Section. After the Closing Date, each party shall have
reasonable access to the books and records of the other party with respect to all matters set forth
in this Section 6 for the purposes of determining the accuracy of all adjustments and the
performance of the obligations of the parties under this Section 6.

          6.3 Guest Property in any Seller’s Possession on Closing Date. Property of guests of
any Hotel in the applicable Seller’s (or the Operating Lessee’s or
Manager’s) care, possession or control (excluding that in guest rooms) (“Guest
Property”) on the Closing Date shall be handled in the following manner:

 

21

               6.3.1 Safe Deposit Boxes. At least three days prior to the scheduled Closing Date,
the applicable Seller shall cause notice to be sent to all guests of any Hotel who have safe
deposit boxes advising them of the pending sale of the Hotel and requesting the removal and
verification of the contents of such safe deposit boxes and entry into a new safety deposit box
agreement with Purchaser on the Closing Date. Purchaser may have a representative present at the
Hotel for the purpose of viewing such removal and verification. Boxes of guests not responding to
the written notice shall be listed at the end of such three (3) day period. Such boxes shall be
opened on the Closing Date in the presence of representatives of the Sellers and Purchaser to be
agreed upon between the Sellers and Purchaser and the contents thereof shall be recorded. Any
property contained in the safe deposit boxes and so recorded and thereafter remaining in the hands
of Purchaser shall be the responsibility of Purchaser, and Purchaser hereby agrees to indemnify and
save and hold the Sellers and the Operating Lessee harmless from and against any claim or
obligation arising out of or with respect to such property.

               6.3.2 Baggage Inventory. All guest baggage checked and left in the possession, care
and control of any Seller shall be listed in an inventory to be prepared in duplicate and signed by
such Seller’s and Purchaser’s representatives on the Closing Date. Purchaser shall be responsible
from and after the Closing Date for all baggage listed in such inventory, and Purchaser hereby
agrees to indemnify and save and hold the Sellers and the Operating Lessee harmless from and
against any claim arising out of or with respect to the baggage listed in the inventory.

               6.3.3 Other Property. All other Guest Property left in the possession, care or
control of any Seller, the Operating Lessee or Manager prior to the Closing Date shall be returned
by such Seller, the Operating Lessee or Manager to guests prior to the Closing Date.

               6.3.4 Indemnity. Notwithstanding the foregoing, the Sellers shall indemnify and save
and hold the Purchaser and its operating lessee harmless from and against claims relating to Guest
Property arising prior to the Closing Date, provided that Purchaser delivers written notice to the
Sellers of any such claim promptly after receiving same. Each such notice shall set forth in
reasonable detail the nature of the claim.

          6.4 Leasing Costs.

               6.4.1 The Sellers shall pay and indemnify Purchaser in respect of all leasing costs payable by
the landlord under the Space Leases, including leasing commissions (other than commissions with
respect to leases of antenna space, payment of which is addressed in Section 6.1.8), costs of
tenant alterations and improvements performed or to be performed for Tenants at the expense of the
landlord thereof (or allowances payable by the landlord in lieu thereof) and moving and other
allowances, if any (collectively, the “Leasing Costs”), in respect of (i) the existing
term of each Space Lease executed by or on behalf of all parties thereto before the Effective Date,
(ii) the renewal term of any Space Lease which resulted from the exercise by the

 

22

Tenant thereunder of an option, or from an agreement executed by all parties thereto, before
the Effective Date, (iii) the portion of the term of any Space Lease as to which the Tenant had a
cancellation option which it did not exercise and the right to exercise which expired before the
Effective Date, and (iv) additional space leased by any Tenant pursuant to an option exercised by
such Tenant, or an agreement executed by all parties thereto, before the Effective Date.

               6.4.2 In respect of each Space Lease existing on the date hereof or executed after the date
hereof and prior to the Closing Date in accordance with Section 13.4 (or executed on or after the
Closing Date), Purchaser shall and hereby does assume and agree to pay and indemnify the Sellers in
respect of all Leasing Costs not payable by the Sellers pursuant to Section 6.4.1 (“Purchaser’s
Leasing Costs”), including, without limitation, Leasing Costs in respect of the renewal term of
any Space Lease where such renewal term results from the exercise by the Tenant thereunder of an
option, or from an agreement executed by all parties thereto, on or after the Effective Date,
additional space leased by any Tenant pursuant to an option exercised by such Tenant, or an
agreement executed by all parties thereto, on or after the Effective Date, the portion of the term
of any Space Lease as to which the Tenant had a cancellation option which it did not exercise and
the right to exercise which expired on or after the Effective Date and Space Leases executed by all
parties thereto on or after the Effective Date.

               6.4.3 The provisions of this Section 6.4 shall survive the Closing.

          6.5 Capital Improvements.

               6.5.1 Without limiting the provisions of Section 8.1, the Operating Lessee and the Sellers
shall have no obligation to perform or complete any capital improvements at the Properties prior to
Closing and it shall not be a condition to Purchaser’s obligation to close title under this
Agreement that all or any portion of any capital improvements have been commenced or completed.

               6.5.2 Notwithstanding the provisions of Section 6.5.1, the Seller owning the Trumbull Hotel
may commence work relating to the property improvement plan for the Trumbull Hotel, provided that
the parties agree that it is the intention of the parties that such Seller shall not perform any
such work except to the extent that in such Seller’s good faith judgment the failure to perform
such work would result in a material risk of an event of default under the Franchise Agreement for
the Trumbull Hotel (a “PIP Default Risk”). In the event that such Seller so determines
that a PIP Default Risk exists, such Seller may undertake or cause the Operating Lessee to
undertake such capital improvements as may be necessary or, in such Seller’s good faith judgment,
desirable, to mitigate such PIP Default Risk and such Seller shall be entitled to a credit at
Closing for any amounts expended by the Operating Lessee or such Seller prior to Closing in
connection with the performance of such capital improvements,
provided that such Seller shall regularly consult with Purchaser during the undertaking of
such capital improvements and shall obtain Purchaser’s approval of the contract and budget for such
capital improvements, such approval not to be unreasonably withheld or

 

23

delayed, provided further, that Purchaser shall at Closing assume any contracts for
performance of such work pursuant to an agreement of assignment and assumption substantially in the
form of Exhibit I (as it relates to the Hotel Contracts) and without warranty and
representation.

               6.5.3 Notwithstanding the provisions of Section 6.5.1, the San Diego Seller shall diligently
endeavor to promptly enter into an agreement (the “Repair Contract”) with Landmark
Hospitality Contracting, Inc. (the “Repair Contractor”), which Repair Contract shall
incorporate the material terms set forth in that certain proposal dated June 29, 2006 (the
“Repair Proposal”) from the Repair Contractor to the Manager (a copy of which has been
provided to Purchaser prior to the date hereof), for repairs of work that was performed in
connection with the renovation of certain of the guest bathrooms at the San Diego Hotel (as further
described in Exhibit C). The Repair Proposal was intended to include the correction of all
material defects in the original renovations of which the Sellers had knowledge. The terms and
conditions of the Repair Contract (not including the compensation payable thereunder) shall be
subject to Purchaser’s prior written consent, which consent shall not be unreasonably withheld or
delayed, provided that Purchaser hereby approves the scope of work set forth in the Repair
Proposal, and provided further that if Purchaser fails to disapprove any other aspect of the Repair
Contract within three (3) Business Days from the receipt thereof, Purchaser shall be deemed to have
approved the Repair Contract. In the event the San Diego Seller, despite the use of diligent
efforts, is unable to enter into the Repair Contract with the Repair Contractor or the terms and
conditions of such Repair Contract are not reasonably approved (or deemed approved) by Purchaser,
the San Diego Seller shall diligently endeavor to promptly enter into an agreement with another
contractor or contractors for such repair work which shall incorporate the material terms set forth
in the Repair Proposal, such other agreement (not including the compensation payable thereunder)
and contractor(s) to be subject to Purchaser’s prior written consent, which consent shall not be
unreasonably withheld or delayed (such agreement, if applicable, also referred to herein as the
“Repair Contract” and such approved contractor, also referred to herein as the “Repair
Contractor”). In no event shall the specifications for the repair work under the Repair
Contract be of lesser quality in any material respect than the specifications that were set forth
in the contract for the original renovations. During the period from and after the execution of
the Repair Contract to and including the Closing Date (but subject to the eighth sentence of this
Section 6.5.3), the San Diego Seller shall comply in all material respects with the terms of the
Repair Contract and shall not waive any material provision of or materially amend the Repair
Contract without Purchaser’s prior written consent (not including for this purpose changes to the
compensation payable thereunder), such consent not to be unreasonably withheld or delayed;
provided, that upon the prior written approval of Purchaser, not to be unreasonably withheld or
delayed, the San Diego Seller shall be permitted to delete any work from the Repair Contract that
the San Diego Seller determines in good faith is unnecessary because the original work was properly
performed and does not require repair. In connection with providing or withholding any such
approval, Purchaser shall have the right to first inspect any such
work proposed to be deleted by San Diego Seller. Notwithstanding anything to the contrary
contained in this Section 6.5.3, Purchaser acknowledges and agrees that the Sellers are not making
(nor shall they make as of the Closing Date) any representation or

 

24

warranty with respect to the quality, sufficiency or any other aspect of the work performed by
the Repair Contractor, that Purchaser shall look solely to the Repair Contractor with respect to
any claims arising with respect to the work performed under the Repair Contract and that the
Sellers shall be under no obligation to have completed such repair work prior to the Closing Date
or in accordance with a schedule and lead times comparable to those set forth in the Repair
Proposal or any other particular timetable. Pursuant to Section 8.1, Purchaser shall accept such
Property on the Closing Date “as-is” and, except for the work contemplated in the Repair Contract,
neither the Operating Lessee nor the San Diego Seller shall be obligated to perform any work at the
San Diego Hotel. In the event such repair work has not been completed as of the Closing Date, (i)
the San Diego Seller shall assign and Purchaser shall assume the Repair Contract pursuant to an
assignment and assumption agreement substantially in the form of Exhibit I (as it relates
to the Hotel Contracts) and without warranty or representation, (ii) Purchaser shall receive a
credit against the Purchase Price at Closing equal to the unpaid amount remaining under the Repair
Contract (as same may have been amended by San Diego Seller from time to time pursuant to this
Section 6.5.3), (iii) the San Diego Seller shall, promptly after the completion of such repair
work, receive a refund of any portion of the credit described in clause (ii) of this sentence that
Purchaser is not obligated or required to pay to the Repair Contractor (excluding the effect of any
amendment by Purchaser after the Closing Date that would result in an increase in the amount
payable to the Repair Contractor for work in excess of that referred to in the Repair Proposal),
and (iv) Purchaser shall provide such information as the Sellers reasonably request from time to
time regarding the progress and cost of such work. Upon reasonable prior notice, Purchaser shall
have the right from time to time to inspect the work performed by the Repair Contractor under the
Repair Contract to satisfy itself that the work is being performed in accordance with Repair
Contract, provided that Purchaser shall not interfere in any material respect with the operation of
the San Diego Hotel or the repair work being undertaken. The Sellers shall retain all claims
against the contractor that performed the original bathroom renovations and its insurance carrier,
which claims shall be an Excluded Item, and Purchaser shall cooperate with the Sellers in all
reasonable respects in Sellers’ assertion and prosecution of such claims so long as the Sellers do
not interfere in any material respect with the ownership or operation of the San Diego Hotel.
Notwithstanding anything to the contrary in Section 6.7, none of Sellers’ obligations under this
Section 6.5.3 shall survive the Closing nor shall Sellers have any liability under this Section
6.5.3 from and after the Closing.

          6.6 Adjustment Statement. The Sellers shall deliver to Purchaser prior to the Closing
a copy of a proposed adjustment statement, showing all adjustments to be made at the Closing. If
Purchaser agrees with the figures set forth in such proposed adjustment statement, Purchaser shall
notify the Sellers that Purchaser will execute and return counterparts of such adjustment statement
at the Closing; otherwise the parties shall seek promptly to reconcile any difference, provided
that no failure to reconcile such differences shall have the effect of delaying the Closing,
provided, further, that nothing in this Section 6.6 shall derogate from the provisions of Section
6.2.

          6.7 Survival. The provisions of this Section 6 shall survive the Closing.

 

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     7. Documents to be Delivered at the Closing.

          7.1 Seller’s Deliveries. At or prior to the Closing, each Seller and/or the Operating
Lessee, as applicable, will deliver or cause to be delivered to Purchaser each of the instruments
and documents listed in this Section 7.1 applicable to such Seller or the relevant Property,
executed and acknowledged where appropriate by such Seller (and/or the Operating Lessee) or other
applicable party, but none of the documents shall be deemed delivered or any other action taken
until all Closing deliveries and actions are complete (it being agreed that the Sellers shall be
deemed to have delivered the items set forth in Sections 7.1.5, 7.1.7, 7.1.14, 7.1.15 and 7.1.16 if
the same are delivered to Purchaser’s representatives at the applicable Property):

               7.1.1 A special or limited warranty deed (each, a “Deed”), in proper statutory form
for recording, executed by each Seller, conveying the fee simple title to the applicable Land,
related Appurtenances and Improvements constituting a portion of each Property from such Seller to
Purchaser, subject only to Permitted Exceptions.

               7.1.2 A bill of sale and general assignment, substantially in the form of Exhibit I,
(i) conveying the Personal Property and the Permits to Purchaser, (ii) assigning all of the
Sellers’ right, title and interest in, to and under (x) the Space Leases set forth on Exhibit
M, and in and to all security deposits (including all accrued interest thereon, if any) held by
the Sellers pursuant to the Space Leases (to the extent such security deposits are being assigned
to Purchaser), (y) the Bookings and (z) all Hotel Contracts set forth on Exhibit C, and
(iii) subject to Section 13.10, assigning all of the Operating Lessee’s right, title and interest
in, to and under the Vetro Leases. Notwithstanding the foregoing, Purchaser shall have the right
not to assume any Hotel Contract (excluding for this purpose the Collective Bargaining Agreements)
designated by written notice given by Purchaser to the Sellers (and the applicable Seller or the
Operating Lessee shall terminate such Hotel Contract at or prior to Closing), provided that (i)
such Hotel Contract is by its terms terminable by the applicable Seller or the Operating Lessee
prior to Closing and (ii) Purchaser shall pay to the Sellers or the Operating Lessee at or prior to
the time of termination any liquidated damages, termination penalties or other amounts payable to
the contractor in connection with such termination and shall indemnify the Sellers and the
Operating Lessee for any cost, loss, damage or expense arising out of such termination. If
Purchaser elects to assume any Hotel Contract that is not assignable without the consent of the
other party thereto, the failure to obtain such consent shall not entitle Purchaser to reject such
assignment (and the Sellers and the Operating Lessee shall have no obligation to request or obtain
such consent) and Purchaser shall indemnify and hold harmless the Sellers and the Operating Lessee
from any cost, loss, damage or expense arising out of any failure to obtain such consent. The
indemnification obligations in this Section 6.1.2 shall survive the Closing or termination of this
Agreement.

               7.1.3 Evidence reasonably acceptable to Purchaser of the termination of each Management
Agreement, which terminations shall be at the Sellers’ or Operating Lessee’s sole cost and expense.

 

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               7.1.4 Evidence reasonably acceptable to Purchaser and the Title Company of the termination of
each Operating Lease, which terminations shall be at the Sellers’ or Operating Lessee’s sole cost
and expense.

               7.1.5 Seller’s Copies of the Space Leases, assignable Hotel Contracts, assignable Permits and
Books and Records for the Properties; provided, that the Sellers shall have the right to retain
copies of the same and after Closing shall have reasonable access to same.

               7.1.6 Such notices of the transactions contemplated by this Agreement to third parties as may
be reasonably requested by the Sellers or Purchaser.

               7.1.7 Receipted property tax bills for personal property taxes on the Hotels, the Furnishings
and the Operating Supplies and Equipment for the latest period for which any such taxes, if the
same were not paid prior to the Closing Date, would be delinquent.

               7.1.8 An affidavit from each Seller that such Seller is not a “foreign person” within the
meaning of § 1445 of the Code, which affidavit shall set forth all information required by, and
otherwise be executed in accordance with, Treasury Regulation § 1.1445.2(b)(2).

               7.1.9 Counterparts of the adjustment statement showing all adjustments in respect of the
Purchase Price to be made at the Closing.

               7.1.10 All Transfer Tax and other tax returns, if any, which any Seller is required by law to
execute and acknowledge and to deliver, either individually or together with Purchaser, to any
Governmental Authority as a result of the transactions contemplated by this Agreement.

               7.1.11 A direction to Escrow Agent notifying it of the Closing and directing that the Deposit,
with interest thereon, is to be delivered to the Sellers.

               7.1.12 A certificate of each Seller substantially in the form of Exhibit J (a
“Seller’s Representation Certificate”) that the representations and warranties of such
Seller set forth in Section 8.3 hereof are true, correct and complete in all material respects as
of the Closing Date (except where such representations or warranties are made as of a specific
date), subject to changes occurring in accordance with this Agreement disclosed in such
certificate.

               7.1.13 One or more title affidavits executed by each Seller substantially in the form of
Exhibit K (collectively, “Title Affidavit”).

               7.1.14 All of the plans (including “as built” plans), drawings, blueprints and specifications
relating to the Properties which are in any Seller’s, the Operating Lessee’s or the Manager’s
possession.

 

27

               7.1.15 All Warranties in possession of any Seller, the Operating Lessee or the Manager, if
any, of manufacturers, suppliers and contractors in effect at the date of Closing Date.

               7.1.16 All keys, security codes and access codes to the Properties which are in the possession
of any Seller, the Operating Lessee or the Manager.

               7.1.17 Endorsements in favor of Purchaser of the titles for all vehicles owned by the Sellers
and/or Operating Lessee and exclusively used on the Properties.

               7.1.18 A copy of the resolutions, consents or other documentation of each Seller (or its
respective general partner, managing member or members), which authorize (i) the transactions
contemplated by this Agreement, and (ii) the execution of the documents, instruments and agreements
to be executed and delivered by such Seller.

               7.1.19 To the extent any portion of any property constituting the Properties, the Hotel
Contracts, Space Leases, Permits, Bookings or the Personal Property is or are owned by the
Operating Lessee or Manager, assignment documents in the applicable form described above.

               7.1.20 A good standing certificate for each Seller from the Secretary of State of the state of
formation of such Seller, dated within thirty (30) days of the Initially Scheduled Closing Date.

               7.1.21 Subject to Section 13.11, an assignment of MeriStar Laundry’s right, title and interest
in the Anchorage Joint Venture Agreement in form reasonably acceptable to the parties and without
representation or warranty other than (i) that MeriStar Laundry owns its interests in the joint
venture formed by the Anchorage Joint Venture Agreement (the “Anchorage Joint Venture”)
free and clear of all liens and encumbrances and (ii) that MeriStar Laundry has delivered to
Purchaser a true, complete and correct copy of the Anchorage Joint Venture Agreement.

               7.1.22 An assignment of Interstate’s and Manager’s right, title and interest in the Collective
Bargaining Agreements generally in the form of the general assignment set forth in Exhibit
I and without representation or warranty.

               7.1.23 All other instruments and documents, if any, to be executed, acknowledged and delivered
by any Seller, the Operating Lessee or the Manager pursuant to any of the other provisions of this
Agreement or as required in connection with the recording of the Deeds.

          7.2 Purchaser’s Deliveries. At or prior to the Closing, Purchaser will deliver or
cause to be delivered to the Sellers or such other parties indicated below each of the payments,
documents and instruments listed in this Section

 

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7.2, such instruments and documents to be executed and acknowledged where appropriate:

               7.2.1 The Balance as set forth in subsection 3.1.3 hereof, together with any other sums which
are payable to the Sellers at the Closing.

               7.2.2 Counterparts of each of the instruments and documents listed in subsections 7.1.2,
7.1.6, 7.1.9, 7.1.10, 7.1.19, 7.1.21, and 7.1.22.

               7.2.3 A copy of the resolutions of the Board of Directors of Purchaser or its direct or
indirect controlling parent company, certified to by the Secretary of such company, which authorize
(i) the transactions contemplated by this Agreement, and (ii) the execution of the documents,
instruments and agreements to be executed and delivered by Purchaser.

               7.2.4 A certificate of Purchaser, substantially in the form of Exhibit L (the
“Purchaser’s Representation Certificate”) that the representations and warranties of
Purchaser set forth in Sections 8.1 and 8.2 and Section 9 hereof are true, correct and complete as
of the Closing Date in all material respects.

               7.2.5 Written instructions to the Escrow Agent to deliver the sum of the Deposit (including
any interest thereon) to the Sellers upon Closing.

               7.2.6 A good standing certificate for Purchaser from the Secretary of State of the state of
formation of Purchaser, dated within thirty (30) days of the Initially Scheduled Closing Date.

               7.2.7 All other instruments and documents, if any, to be executed, acknowledged and delivered
by Purchaser pursuant to any of the other provisions of this Agreement. or as required in
connection with the recording of the Deeds.

     8. Property Conveyed “As Is”; Other Representations and Warranties of Seller.

          8.1 Condition of Properties. Purchaser acknowledges (i) that Purchaser has had a
reasonable opportunity to inspect and investigate the Properties, and all matters relating thereto,
including, without limitation, all of the physical, environmental and operational aspects of the
Properties, and any zoning or land use entitlements thereto, either independently or through agents
and experts of Purchaser’s choosing and (ii) that Purchaser will acquire the Properties based upon
Purchaser’s own investigation and inspection. THE SELLERS, THE OPERATING LESSEE AND PURCHASER
AGREE THAT, EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, THE PROPERTIES SHALL BE SOLD, AND
PURCHASER SHALL ACCEPT THE PROPERTIES, ON THE CLOSING DATE AS IS, WHERE IS, WITH ALL FAULTS AND WITH NO RIGHT
OF SET-OFF OR REDUCTION IN THE PURCHASE PRICE, AND THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS

 

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AGREEMENT, 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, AVAILABILITY OF DEVELOPMENT RIGHTS, ZONING, MERCHANTABILITY, PHYSICAL
CONDITION THEREOF OR FITNESS FOR A PARTICULAR PURPOSE AND EACH SELLER AND THE OPERATING LESSEE
HEREBY DISCLAIM AND RENOUNCE ANY SUCH REPRESENTATION OR WARRANTY, EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT. PURCHASER SPECIFICALLY ACKNOWLEDGES THAT, EXCEPT AS PROVIDED FOR IN THIS
AGREEMENT, PURCHASER IS NOT RELYING AND SHALL NOT RELY ON ANY REPRESENTATIONS OR WARRANTIES OF ANY
KIND WHATSOEVER, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, FROM THE OPERATING LESSEE, ANY
SELLER OR ANY OTHER PERSON AS TO ANY MATTERS CONCERNING THE PROPERTIES, INCLUDING, WITHOUT
LIMITATION: (A) THE CONDITION OR SAFETY OF THE PROPERTIES, 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) WHETHER THE APPLIANCES, IF ANY, PLUMBING OR UTILITIES AND ANY ASSOCIATED METERS ARE IN WORKING
ORDER; (C) THE LIVABILITY OR SUITABILITY FOR OCCUPANCY OF ANY STRUCTURE AND THE QUALITY OF ITS
CONSTRUCTION; (D) THE FITNESS OF ANY PERSONAL PROPERTY; OR (E) THE PHYSICAL CONDITION OF THE
PROPERTIES, INCLUDING, WITHOUT LIMITATION, WHETHER THE IMPROVEMENTS ARE STRUCTURALLY SOUND, IN GOOD
CONDITION, OR IN COMPLIANCE WITH APPLICABLE CITY, COUNTY, STATE OR FEDERAL STATUTES, CODES OR
ORDINANCES. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER THE OPERATING LESSEE NOR ANY SELLER SHALL BE UNDER ANY DUTY TO MAKE ANY
AFFIRMATIVE DISCLOSURE REGARDING ANY MATTER WHICH MAY BE KNOWN TO SUCH PARTY, ITS OFFICERS,
DIRECTORS, CONTRACTORS, AGENTS OR EMPLOYEES, AND THAT PURCHASER IS RELYING SOLELY UPON ITS OWN
INSPECTION OF THE PROPERTY AND ITS OTHER DILIGENCE AND NOT UPON ANY REPRESENTATIONS MADE TO IT BY
ANY PERSON WHOMSOEVER. ANY REPORTS, REPAIRS OR WORK REQUIRED BY PURCHASER ARE TO BE THE SOLE
RESPONSIBILITY OF PURCHASER AND PURCHASER AGREES THAT THERE IS NO OBLIGATION ON THE PART OF THE
OPERATING LESSEE OR ANY SELLER TO MAKE ANY CHANGES, ALTERATIONS, OR REPAIRS TO ANY PROPERTY,
PROVIDED THAT NOTHING HEREIN SHALL BE DEEMED TO DEROGATE FROM THE SELLERS’ OBLIGATIONS SET FORTH IN
THE FIRST SENTENCE OF SECTION 13.1.
PURCHASER AGREES AND ACKNOWLEDGES THAT PURCHASER’S OBLIGATIONS HEREUNDER SHALL REMAIN IN FULL
FORCE AND EFFECT WITH PURCHASER HAVING NO RIGHT TO DELAY THE CLOSING OR

 

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TERMINATE THIS AGREEMENT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, REGARDLESS OF ANY
FACTS OR INFORMATION LEARNED BY PURCHASER BEFORE OR AFTER THE EFFECTIVE DATE.

          8.2 CERCLA Release. Except as may be expressly provided in this Agreement, Purchaser,
for itself and its successors in interest, hereby releases the Operating Lessee, each Seller and
their respective affiliates from, and waives all claims and liability against the Operating Lessee,
each Seller and their respective affiliates for or attributable to, any structural, physical and/or
environmental condition at any Property, including without limitation the presence, discovery or
removal of any Hazardous Substances in, at, about or under such Property, or connected with or
arising out of any and all claims or causes of action based upon CERCLA (Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by SARA Superfund
Amendment and Reauthorization Act of 1986 and as may be further amended from time to time) or any
related claims or causes of action or any other federal or state based statutory or regulatory or
other causes of action for environmental contamination at, in or under any Property. The
provisions of this Section 8.2 shall survive the Closing.

          8.3 Representations and Warranties. Each Seller hereby represents and warrants to
Purchaser, with respect to itself and the Property owned by such Seller, as follows (except as set
forth in the applicable Exhibits hereinafter referred to):

               8.3.1 Such Seller has been incorporated, organized or otherwise formed as specified with
respect to such Seller on Exhibit A, is duly organized, validly existing and in good
standing under the laws of the State of its incorporation, organization or formation; it has the
power, right, authority and legal capacity to execute and deliver this Agreement and the other
documents, instruments, certificates and agreements required to be executed and delivered by it
hereunder and to enter into and perform the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of the Sellers party hereto and is enforceable
against each such Seller in accordance with its terms, except as such enforceability may be limited
by (i) bankruptcy, insolvency and other similar laws affecting creditor’s rights generally, and
(ii) general principles of equity.

               8.3.2 All resolutions, authorizations and other actions required to be taken by or on the part
of such Seller which are necessary to approve or authorize the execution of this Agreement by such
Seller and the consummation of the transactions contemplated herein have been obtained and taken.

               8.3.3 Neither the entry into nor the performance of this Agreement by such Seller will (i)
violate, conflict with, result in a breach under, or constitute a default under, any corporate
charter, certificate of incorporation, by-law, partnership agreement, indenture, contract, permit,
judgment, decree or order to which
such Seller is a party or by which such Seller is bound, or (ii) except with respect to the
Vetro Leases and the Anchorage Joint Venture Agreement, require the consent of any third party
other than as has already been obtained or is otherwise specifically set forth

 

31

herein, and other than such consents or approvals as may be required pursuant to the
applicable Franchise Agreement, any Permitted Exceptions or any Hotel Contracts (Purchaser
acknowledging and agreeing that such Seller is not undertaking to obtain any such consents or
approvals, except as set forth in Section 13.10 and Section 13.11).

               8.3.4 Such Seller is not a “foreign person” within the meaning of § 1445 of the Code.

               8.3.5 There are no Space Leases affecting all or any portion of the Property except as set
forth on Exhibit M. To such Seller’s knowledge, (i) all of the Space Leases are in full
force and effect, (ii) true and complete copies of the Space Leases, to the extent in such Seller’s
or the Operating Lessee’s possession, have been provided to Purchaser (or will be provided to
Purchaser within five (5) Business Days after the Effective Date), and (iii) except as set forth on
Exhibit M, there are no material defaults (or written notice of any default which is still
outstanding received) by such Seller or the Operating Lessee or, to such Seller’s actual knowledge,
any other party thereunder.

               8.3.6 There are no material Hotel Contracts affecting all or any portion of the Property
except as set forth in Exhibit C, other than certain multi-property agreements not set
forth on Exhibit C pursuant to which goods and/or services are supplied to more than one
property owned, leased or managed by the Operating Lessee or the Manager or their respective
affiliates, which multi-property agreements Purchaser and such Seller acknowledge and agree shall
be Excluded Items unless the same are set forth on Exhibit C. To such Seller’s knowledge,
(i) all of the material Hotel Contracts are in full force and effect, (ii) true and complete copies
of the Hotel Contracts listed on Exhibit C to which such Seller or the Operating Lessee or
Manager is a party have been delivered to Purchaser (or will be delivered to Purchaser within five
(5) Business Days after the Effective Date) and (iii) except as set forth on Exhibit C,
there are no material defaults by such Seller or the Operating Lessee or, to such Seller’s actual
knowledge, any other party thereunder.

               8.3.7 The Franchise Agreement to which such Seller is a party is described on Exhibit
B. To such Seller’s knowledge, (i) such Franchise Agreement is in full force and effect, (ii)
true and complete copies of such Franchise Agreement have been delivered to Purchaser (or will be
delivered to Purchaser within five (5) Business Days after the Effective Date) and (iii) except as
set forth on Exhibit B or as disclosed by any Franchisor to Purchaser, there are no
material defaults (or written notice of any default which is still outstanding received) by any
party thereunder except for such defaults as may be set forth in the Franchisor’s property
inspection or quality standards reports, and any defaults arising from a failure to timely perform
any property improvement plan or other work requirements.

               8.3.8 To such Seller’s knowledge, all material Permits required for and relating to the
operation of the Hotel owned by such Seller are listed on Exhibit N. To such Seller’s
knowledge, (i) such Permits are in full force and effect, (ii) except as set forth on Exhibit
N, none of such Seller, the Operating Lessee, the Manager

 

32

or any of their respective affiliates has received written notice of any material violation
thereof which remains outstanding, and (iii) true and complete copies of all such Permits which are
in such Seller’s possession have been delivered to Purchaser (or will be delivered to Purchaser
within five (5) Business Days after the Effective Date).

               8.3.9 Except as set forth on Exhibit O, neither such Seller nor the Operating Lessee
has received written notice from any Governmental Authority of any material violations of any Legal
Requirements relating to the Property owned by such Seller or the ownership, use, maintenance or
operation of the Hotel owned by such Seller, which have not been corrected in all material
respects.

               8.3.10 Except as set forth on Exhibit P, there is no litigation, action, investigation
or proceeding (including, but not limited to, proceedings in respect to a condemnation) pending or,
to such Seller’s knowledge, threatened in writing against such Seller, Operating Lessee or Manager,
an adverse determination of which would likely materially and adversely affect the applicable
Property or the results of its operations or such Seller’s ability and right to enter into this
Agreement or to consummate the transactions contemplated hereby, other than employment claims and
claims for personal injury or property damage which are covered by liability insurance and for
which the insurer is providing a defense.

               8.3.11 Such Seller and/or the Operating Lessee owns title to the Furnishings, Consumables and
Operating Supplies and Equipment relating to the Hotel owned by such Seller, subject only to the
Permitted Exceptions (and liens related to the Sellers’ and Operating Lessee’s existing or previous
financings, which liens shall be satisfied or paid on or prior to the Closing), the Hotel Contracts
(including without limitation any equipment leases for certain Furnishings set forth on Exhibit
C) and the rights, if any, of the Franchisor under the Franchise Agreement therein or thereto.

               8.3.12 Neither such Seller nor the Operating Lessee employs any personnel at the Hotel owned
by such Seller in connection with the operation thereof, and all employees of such Hotel are
employees of the Manager.

               8.3.13 To Seller’s knowledge, there are no labor disputes or organizing activities pending or
threatened as to the operation or maintenance of any of the Properties or any part thereof.
Neither Seller nor the Operating Lessee is a party to any union or other collective bargaining
agreement with employees employed in connection with the ownership, operation or maintenance of any
of the Hotels. Neither the Manager nor Interstate Hotels and Resorts, Inc. (“Interstate”),
an affiliate of Manager, is a party to any Collective Bargaining Agreement, except for those
described in Exhibit Q (the “Collective Bargaining Agreements”).

               8.3.14 Sales, Use and Occupancy Taxes. All sales, use and occupancy taxes due and
owing with respect to the Hotels have been paid or will be paid by Closing. All ad valorem personal
property taxes due and owing with respect to the Properties have been paid or will be paid by
Closing.

 

33

               8.3.15 No Commitments. No commitments have been made to any Governmental Authorities,
utility company, school board, church or other religious body, or any homeowners’ association or
any other organization, group or individual, relating to the Property which would impose an
obligation upon Purchaser to make any contribution or dedication of money or land or to construct,
install or maintain any improvements of a public or private nature on or off the Properties.

               8.3.16 Financial Statements. To Sellers’ knowledge, the monthly statements of income
for each Hotel for the period from January 1, 2006 through June 30, 2006, copies of which have been
delivered to Purchaser, present accurately in all material respects the results of operations of
the Properties (other than the premises covered by the Vetro Leases) for the periods indicated.

               8.3.17 Zoning of Philadelphia Hotel. To Sellers’ knowledge, the zoning classification
for the Philadelphia Hotel Land is C-3 Commercial, and, except as may be set forth in Certification
Statement attached hereto as Exhibit R, there exists no notice of an uncorrected violation
of housing, building, fire or safety ordinances.

               8.3.18 Wells. To Sellers’ knowledge, there are no “Wells” located on the Minnesota
Property within the meaning of Minn. Stat. §1031. This representation is intended to satisfy the
requirements of that statute.

               8.3.19 Individual Sewage Treatment Systems. Solely for purposes of satisfying the
requirements of Minn. Stat. §115.55, to Sellers’ knowledge, there is no “individual sewage
treatment system” (within the meaning of that statute) on or serving the Minnesota Property.

               8.3.20 Anchorage Laundry Facility. To Seller’s knowledge, no capital calls against
MeriStar Laundry have been made or are pending under the Anchorage Joint Venture Agreement which
have not been satisfied, other than a capital call against MeriStar Laundry in an amount not
expected to exceed $50,000 for new laundry equipment that has been made or may be made in the
future. The Seller of the Anchorage Hotel shall pay or cause to be paid such capital call and the
Purchase Price shall be increased by an amount equal to one-half of such capital call. To Seller’s
knowledge, neither MeriStar Laundry nor Interstate has received written notice of any actual or
alleged violation of any Environmental Law with respect to the real property owned by the Anchorage
Joint Venture.

          8.4 Knowledge. Wherever the phrase “to Seller’s knowledge” or any similar phrase
stating or implying a limitation on the basis of knowledge appears in this Agreement, unless
specifically otherwise qualified, such phrase shall mean the
present actual knowledge of Bruce Riggins and Edward Dardani, without any duty of inquiry or
independent investigation of the relevant matter by any of such individuals, provided that the
Sellers have made inquiries (and requested written responses) as to the accuracy of the
representations and warranties set forth in Section 8.3 to the general managers of the Hotels (to
the best of the knowledge of the general managers) and that

 

34

Messrs. Riggins and Dardani shall be deemed to have knowledge of any matter set forth in the
written responses of the general managers of the Hotels to such inquiries. Wherever the phrase “in
Seller’s possession”, “in the possession of Sellers” or any similar phrase appears in this
Agreement, such phrase shall be deemed to mean to the extent the material or other item referred to
by such phrase is located at a Hotel or in the Sellers’ corporate offices in Arlington, Virginia.

          8.5 Delivery. Whenever in this Section 8 a representation has been made that any document
has been delivered to Purchaser, such document shall be deemed to have been delivered if such
document has been made available to Purchaser on the due diligence website operated by the Broker.

          8.6 Disclaimer Regarding Estimates and Projections. In connection with Purchaser’s
inspection of the Properties and other diligence, Purchaser has (or may have) received certain
projections, estimates and forecasts, including the projected statements of operating revenues and
income from operation of the Properties. Purchaser acknowledges that there are uncertainties
inherent in attempting to make such estimates, projections and forecasts, that Purchaser is
familiar with such uncertainties and that Purchaser is taking full responsibility for making its
own evaluation of the adequacy and accuracy of all estimates, projections and forecasts so
furnished to it (including the reasonableness of the assumptions underlying such estimates,
projections and forecasts). Accordingly, and without limiting the provisions of Sections 8.1 or
8.4, neither the Sellers nor the Operating Lessee make any representation or warranties with
respect to such estimates, projections and forecasts (including the reasonableness of the
assumptions underlying such estimates, projections and forecasts).

          8.7 Survival. The representations and warranties of the Sellers and Purchaser set forth
in Sections 8.1, 8.2 and 8.6 hereof shall survive the Closing without limitation as to time. The
representations and warranties of the Sellers set forth in Section 8.3 shall survive the Closing
for a period of six (6) months, provided that the representations and warranties of Seller in
Sections 8.3.1 and 8.3.2 shall survive the Closing without limitation as to time. All other
representations, warranties, covenants and indemnities set forth in this Agreement shall not
survive the Closing unless otherwise expressly provided in this Agreement. The provisions of this
Section 8.7 shall survive the Closing.

          8.8 Claims. Claims by Purchaser following the Closing based on a breach of a warranty or representation
shall be made by written notice to the Sellers within the applicable time period set forth in
Section 8.7 above. Each such notice shall set forth in reasonable detail the nature of the claim
or claims and the provision of this Agreement claimed to be breached thereby. If Purchaser fails
in any case to give written notice to the Sellers of any such claim within the time period as aforesaid or to institute legal
proceedings in respect of any such unresolved claim within six (6) months thereafter, then such
claim or claims shall be deemed waived and shall lapse. The provisions of this Section 8.8 shall
survive the Closing.

 

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          8.9 Joint and Several Liability; Limitations.

               8.9.1 The Sellers shall be jointly and severally liable to Purchaser in respect of the breach
of any warranty or representation set forth in this Section 8.

               8.9.2 Notwithstanding anything to the contrary set forth in this Section 8, (i) the Sellers
shall have no liability to Purchaser for breach of any warranty or representation set forth in this
Section 8 or elsewhere in this Agreement unless and except to the extent that the aggregate damages
suffered by Purchaser by reason of all such breaches exceed Five Hundred Thousand Dollars
($500,000.00) (the “Basket”) provided that, notwithstanding Section 8.9.4, for the purposes
of this clause (i), in the event that Purchaser obtains knowledge on or prior to the Closing Date
of the failure of a representation or warranty of the Sellers set forth in Section 8.3 to be true
and correct in all material respects (other than as a result of changes in the ordinary course of
business between the date hereof and the Closing Date and changes resulting from the operation of
the Properties between the date hereof and the Closing Date in accordance with the provisions of
Section 13 and any other applicable provisions of this Agreement) and such failure does not result
in a failure of the closing condition set forth in Section 11.2 because the inaccuracy in
question together with all other such inaccuracies would not reasonably be expected to have a
material adverse effect on the business, value or prospects of all of the Hotels, taken as a whole,
then the aggregate damages suffered by Purchaser by reason of such failure shall count toward the
Basket (but, as provided in Section 8.9.4, shall not result in any liability on the part of the
Sellers), (ii) in no event shall the Sellers be liable to Purchaser for consequential or punitive
damages in respect of any such breach and (iii) except in the case of a breach of the
representations of Seller contained in Section 8.3.1 and Section 8.3.2, in no event shall the
Sellers’ aggregate liability to Purchaser for all such breaches exceed Ten Million Dollars
($10,000,000.00) (which amount shall, in connection with the application of the Partial Termination
Procedure to one or more Hotels, be reduced on a ratable basis equal to an amount determined by
applying a fraction, the numerator of which is the aggregate amount of the Purchase Price allocated
on Exhibit F to the affected Hotel or Hotels to which the Partial Termination Procedure is
applied and the denominator of which is the Purchase Price).

               8.9.3 Notwithstanding each Seller’s obligation to deliver a Seller Representation Certificate
at the Closing pursuant to Section 7.1.13 or anything else set forth in this Agreement, if any
matter or event shall have occurred
between the date hereof and the date of the Closing or the Sellers shall otherwise become
aware of any fact which makes any such warranty or representation untrue in any material respect,
the Sellers shall have the right to disclose such fact in the Sellers’ Representation Certificate,
and if the Sellers do so, the Sellers shall not be liable to Purchaser following the Closing for
the breach of the warranty or representation in
question which results from the occurrence or existence of such fact, but in no event shall
Purchaser be obligated to close hereunder unless the conditions precedent to Purchaser’s obligation
to close set forth in this Agreement shall have been fulfilled.

 

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               8.9.4 Notwithstanding anything to the contrary set forth in this Section 8 or elsewhere in
this Agreement but subject to the proviso of clause (i) of Section 8.9.2, if prior to the Closing
Purchaser has or obtains knowledge that any of Seller’s warranties or representations set forth in
this Section 8 is untrue in any respect, and Purchaser nevertheless proceeds with the Closing, then
the breach by the Sellers of the warranties or representations as to which Purchaser shall have or
obtained such knowledge shall be waived by Purchaser and the Sellers shall have no liability to
Purchaser or its successors or assigns in respect thereof. For purposes of this Section 8.9.4,
Purchaser shall not have or be deemed to have obtained “knowledge” of any untruth, change or
inaccuracy of any of the Seller’s warranties or representations set forth in Section 8 unless the
relevant matters were contained in written material delivered to Purchaser or its agents or
advisors, made available to Purchaser on the due diligence website operated by the Broker or were
disclosed to Purchaser or its employees or agents by Hotel personnel or employees of the Manager.

               8.9.5 Notwithstanding anything to the contrary set forth in Sections 8.3.5, 8.3.6 or 8.3.7,
the representations and warranties contained therein to the effect that the Sellers and the
Operating Lessee have complied with or are not in default under any of the terms of any agreement
described therein do not apply to any obligation on the part of any Seller or the Operating Lessee,
or any default or alleged default based on such Seller’s or Operating Lessee’s failure, to maintain
the Properties, or any of them, in good repair and condition or to make any replacements or
improvements thereto, it being understood that Purchaser has agreed to accept the Properties in
their “as-is” physical condition.

               8.9.6 The provisions of this Section 8.9 shall survive the Closing.

     9. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants
to the Sellers as follows:

          9.1 Organization. Purchaser is a limited partnership duly organized and validly
existing under the laws of the State of Delaware; it has the power, right, authority and legal
capacity to execute and deliver this Agreement and the other documents, instruments, certificates
and agreements required to be executed and delivered by it hereunder and to enter into and perform
the transactions contemplated hereby.

          9.2 Consents. All resolutions, consents, authorizations and other actions required to
be taken by or on the part of Purchaser which are necessary to approve or authorize the execution
of this Agreement by Purchaser and consummation of the transactions contemplated herein have been
obtained and taken.

          9.3 Non-Contravention. Neither the entry into nor the performance of this Agreement
by Purchaser will (i) violate, conflict with, result in a breach under, or constitute a default
under, any corporate charter, certificate of incorporation, by-law, partnership agreement,
indenture, contract, permit, judgment,

 

 

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decree or order to which Purchaser is a party or by which
Purchaser is bound, or (ii) require the consent of any third party other than as has already been
obtained or is otherwise specifically set forth herein.

          9.4 Closing of Hotels. Purchaser does not intend to close any of the Hotels for at
least ninety (90) days after the Closing, except for temporary or partial closings reasonably
deemed necessary by Purchaser in connection with the performance of work required under a franchise
agreement for a Property following Closing provided that nothing herein shall derogate from
Purchaser’s obligations under Section 33.2.

          9.5 Survival. The representations and warranties of Purchaser set forth in this
Section 9 shall survive the Closing for a period of six (6) months, provided that the
representations and warranties of Purchaser set forth in Sections 9.1 and 9.2 shall survive the
Closing without limitation of time. All of Purchaser’s representations and warranties set forth in
Sections 8.1, 8.2 and 8.6 and this Section 9 shall be remade on and as of the Closing Date in the
Purchaser’s Representation Certificate, which shall be delivered to the Sellers at Closing. The
provisions of this Section 9.5 shall survive the Closing.

     10. Conditions
to the Sellers’ Obligation to Close Title. The obligation of the Sellers
to close title under this Agreement is expressly conditioned upon the fulfillment by and as of the
Closing Date of each of the conditions listed below; provided that the Sellers, at their election,
may waive all or any of such conditions:

          10.1 Purchaser shall have paid to the Sellers the Purchase Price as provided in Section 3
hereof.

          10.2 Purchaser shall have delivered or caused to be delivered at Closing all documents and
executed counterparts of documents and instruments required by this Agreement to be delivered by
Purchaser and shall have taken all other action and fulfilled all other conditions required of
Purchaser under this Agreement.

          10.3 All representations and warranties of Purchaser set forth in Sections 8.1 and 8.2 and
Section 9 shall be true and correct in all material respects on and as of the Closing Date as if
made on and as of such date.

          10.4 Each Franchisor shall have (i) either (A) approved Purchaser’s change of ownership
application with respect to the applicable Hotel, and agreed to Purchaser’s assumption of, and
Purchaser shall have assumed, the applicable Franchise Agreement, or such Franchisor shall have
entered into a new franchise agreement with Purchaser with respect to the applicable Hotel, as
required by Franchisor, or (B) terminated the Franchise Agreement in accordance with Section 13.7,
and (ii) in the case of an assumption of the applicable Franchise Agreement, delivered to the
applicable Seller, the Operating Lessee and any guarantor of the Franchise Agreement a release (a
“Release”) of their respective obligations under the Franchise Agreement (to the extent the
same arise from and after the Closing), executed by such Franchisor in such

 

38

Franchisor’s customary
form, with such changes as may be reasonably requested by the applicable Seller.

          10.5 MeriStar Hospitality Operating Partnership, L.P. (“MHOP”) shall have waived in writing
its right of first offer with respect to the Properties (the “MHOP ROFO”) as set forth in that
certain Amended and Restated Agreement of Limited Partnership of MeriStar Investment Partners,
L.P., dated as of February 9, 2005, by and among the Operating Lessee and MHOP.

     11. Conditions
to Purchaser’s Obligation to Close Title. The obligation of Purchaser to
close title under this Agreement is expressly conditioned upon the fulfillment by and as of the
Closing Date of each of the conditions listed below; provided that Purchaser, at its election, may
waive all or any of such conditions:

          11.1 The Sellers shall have delivered or caused to be delivered at Closing all of the
documents and instruments required by this Agreement to be delivered by the Sellers and shall have
otherwise complied in all material respects with all of their covenants and obligations under this
Agreement.

          11.2 The representations and warranties of the Sellers set forth in Section 8.3 shall be true
and correct in all material respects on and as of the Closing Date as if made on and as of such
date (unless the failure of such representations or warranties to be true and correct, in all
material respects, would not reasonably be expected to have a material adverse effect on the
business, value or prospects of all of the Hotels, taken as a whole), subject, however, to changes
in the ordinary course of business between the date hereof and the Closing Date and changes
resulting from the operation of the Properties between the date hereof and the Closing Date in
accordance with the provisions of Section 13 and any other applicable provisions of this Agreement.

          11.3 MHOP shall have waived in writing the MHOP ROFO.

          11.4 Purchaser acknowledges that the Sellers do not guarantee the satisfaction of the
conditions precedent listed in Sections 11.2 and 11.3 and the failure to satisfy such conditions
for any reason (other than Sellers’ breach of this Agreement) shall not be deemed to be a default
hereunder but rather, the same shall merely be a
failure of a condition to Closing, in which event Purchaser’s sole remedy shall be to
terminate this Agreement and receive a refund of the Deposit and upon termination neither party
shall have any further obligations or liabilities hereunder except as otherwise expressly provided
in this Agreement.

     12. Casualty and Condemnation.

          12.1 Casualty.

               12.1.1 Risk of loss as a result of fire or other casualty to each Hotel shall be on the
Sellers to and including the Closing Date and shall be on Purchaser thereafter. If, at any time on
or before the Closing Date, any Hotel has

 

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suffered damage, destruction or casualty (each, a
“Casualty Loss”), the Sellers shall promptly notify Purchaser.

               12.1.2 In the event a Casualty Loss affects a Substantial Portion of a Hotel, Purchaser shall
have the right, by notice to Sellers given within ten (10) Business Days after the date of the
Sellers’ notice to Purchaser setting forth the estimated cost to repair or replace the same (to the
extent then available) to terminate this Agreement with respect to such affected Hotel. Upon such
termination, (i) the parties hereto shall have no further rights or obligations hereunder with
respect to such Hotel (except for any obligations that expressly survive termination), and (ii) the
parties shall remain obligated to purchase and sell the remaining Hotels in accordance with, but
subject to, the terms of this Agreement, except that the Purchase Price shall be reduced by the
amount allocated to the affected Hotel on Exhibit F hereto (the above described notice of
termination, release from obligations hereunder with respect to the affected Hotel, and remaining
obligation to purchase the unaffected Hotels on the terms described above being hereinafter
referred to as the “Partial Termination Procedure”). In the event that Purchaser does not
elect to invoke the Partial Termination Procedure as to the affected Hotel within such 10-Business
Day period, TIME BEING OF THE ESSENCE, such Casualty Loss shall be treated in the manner described
in Section 12.1.3 below with respect to a Casualty Loss which does not relate to a Substantial
Portion. If the Closing Date shall be due to occur prior to the expiration of such 10-Business Day
period, the parties hereto agree to adjourn the Closing Date with respect to the affected Hotel to
the date that is five (5) Business Days after the expiration of such 10-Business Day period,
provided that if such fifth (5th) Business Day falls within a Blackout Period, the
Closing Date shall be adjourned to the first (1st) Business Day following the Blackout
Period.

               12.1.3 In the event of a Casualty Loss which does not relate to a Substantial Portion of a
Hotel, the Closing shall occur notwithstanding such Casualty Loss, and at the Closing the
applicable Seller shall assign to Purchaser the proceeds of any insurance applicable to such
Casualty Loss, less any costs of adjustment and collection and less any amounts expended on
restoration in accordance with subsection 12.1.4, and such Seller shall pay to Purchaser the amount
of any deductible applicable thereto.

               12.1.4 In any case in which Purchaser shall purchase a Hotel affected by a Casualty Loss, (i)
the applicable Seller shall assign or, in the case of insurance carried by the Manager or Operating
Lessee, shall cause the Manager or Operating Lessee to assign to Purchaser at the Closing all of
its rights to the proceeds of any business interruption insurance payable with respect to the
period from and after the day immediately following the Closing Date and Purchaser shall control
the adjustment and settlement of all claims with respect to such insurance for such period and, if
necessary to ensure that Purchaser shall receive such business interruption insurance for such
period, the Sellers shall obtain an endorsement to such policy providing that Purchaser shall
receive such proceeds and (ii) the applicable Seller shall have the right to commence to repair
such damage to the extent necessary to operate the affected Hotel, and such Seller shall have the
right to deduct the cost of such repairs performed and paid for prior on or to the Closing Date
from any amount of insurance proceeds (other than

 

40

proceeds of business interruption insurance)
hereinabove referred to; provided, however, that prior to the commencement of any such repairs, the
applicable Seller shall consult with Purchaser with respect to the work which it intends to perform
and shall make any modifications thereto reasonably requested by Purchaser provided that Purchaser
agrees to pay any extra expense incurred in connection with such modifications.

          12.2 Condemnation. If, prior to the Closing Date, part or all of any Hotel is
condemned or threatened with condemnation to such an extent as would materially impair such Hotel’s
fair market value or economic or functional use as a full service hotel, or causes damage to such
Hotel which affects a Substantial Portion of such Hotel, Purchaser may at its option, exercised by
notice given to the Sellers within ten (10) Business Days of the receipt from the Sellers of a
notice setting forth all information within the Sellers’ possession relating to such condemnation,
elect (a) to proceed with the Closing in accordance with the terms hereof, in which event Purchaser
shall purchase the Hotel which is the subject of the condemnation in its then current condition
without any reduction in the Purchase Price, but subject to the further provisions of this Section
12.2, or (b) terminate this Agreement with respect to the affected Hotel, whereupon the Partial
Termination Procedure shall occur with respect to the affected Hotel. If the Closing Date is due
to occur prior to the expiration of such 10-Business Day period, the parties hereto agree to
adjourn the Closing Date with respect to the affected Hotel to the date which is five (5) Business
Days after the expiration of such 10-Business Day period provided that if such fifth
(5th) Business Day falls within a Blackout Period, the Closing Date shall be adjourned
to the first (1st) Business Day following the Blackout Period. If, in the event of such
condemnation or threatened condemnation, Purchaser does not elect to terminate its obligation to
purchase the affected Hotel or in the event of a condemnation which would not entitle it to
exercise such right, Purchaser shall control the adjustment and settlement of any award with
respect to such condemnation and the applicable Seller shall assign to Purchaser at the Closing the
proceeds of such award, after the use thereof by such Seller, prior to Closing, to pay the cost of
any work performed and paid for by such Seller or to repair any damage caused by an actual
condemnation and net of any reasonable expenses incurred by such Seller in such condemnation
proceeding. The obligation of the Sellers to turn over to Purchaser such proceeds shall survive
the Closing. Prior to the commencement of any such repairs, the applicable Seller shall consult
with Purchaser with respect to the work which it intends to perform and shall make any
modifications thereto reasonably requested by Purchaser provided that Purchaser agrees to pay any extra
expense incurred in connection with such modifications. For the purposes of the foregoing, a
“threat” of condemnation shall not be deemed to have arisen unless and until the applicable Seller
either (i) shall have received an official notice to such effect from a public authority or (ii)
shall have actual knowledge of same.

          12.3 Notwithstanding anything to the contrary contained in this Agreement, (i) Purchaser
acknowledges that the Iowa City Hotel has suffered tornado damage and that the Seller which owns
the Iowa City Hotel is in the process of repairing such damage and (ii) if such repair is not
completed on or prior to the Closing Date, then Purchaser shall be responsible for completing such
repairs (and shall assume all contracts relating thereto), such Seller shall have no responsibility
therefore, and upon request made by Purchaser from time to time together with all necessary
supporting information,

 

41

such Seller shall (or shall cause Manager to) apply to such Seller’s
insurer for disbursements of insurance proceeds on account of the cost of such repair, use
commercially reasonable efforts to collect the same and, promptly after receipt of such proceeds,
pay the same over to Purchaser.

     13. Operation of the Properties until Closing; Operating Lessee Covenants.

          13.1 Operation. Subject to Section 6.5, the Sellers agree to continue, and shall
cause Operating Lessee and Manager to continue, to operate and maintain the Properties from and
after the Effective Date to and including the Closing Date in the ordinary course of business in
accordance with the current practices of the Sellers, Operating Lessee and Manager, except as
otherwise specifically provided in this Agreement. In addition, the Sellers and Operating Lessee
agree as follows:

          (a) The Sellers and Operating Lessee shall not before or after Closing release
or modify any Warranties, except with the prior written consent of Purchaser.

          (b) The Sellers and Operating Lessee shall maintain in full force and effect
through their respective expiration dates, and shall not cancel or voluntarily
allow to expire prior to such dates, all insurance policies covering the Properties
or the operations thereof.

          (c) The Sellers and Operating Lessee shall cause to be paid prior to
delinquency all ad valorem, occupancy and sales taxes due and payable with respect
to the Properties or the operation of the Hotel (except to the extent the same are
being contested in good faith).

          13.2 Dispositions. No Seller nor the Operating Lessee shall sell, exchange, assign,
transfer, convey, lease or otherwise dispose of all or any part of such Seller’s or the Operating
Lessee’s Property or any interest therein except for any Personal Property sold, replaced or
consumed in the ordinary course of business and each Seller and the Operating Lessee shall maintain
Personal Property at the Property in a manner substantially consistent with such Seller’s and/or the Operating Lessee’s customary operating
practices and historical practice at the Property.

          13.3 Termination of Contracts and Permits. Each Seller and the Operating Lessee shall
keep the material Hotel Contracts, Space Leases and Permits (including any such items entered into
after the Effective Date in accordance with Section 13.4, but excluding those which may be
terminated in the ordinary course of the operations of the Hotel (in the case of Hotel Contracts
only) or as a result of a default by the other party or which may expire by their terms or pursuant
to Section 7.1.2) in full force and effect, will pay all charges when due under such agreements and
will perform all of its material obligations under such Hotel Contracts, Space Leases and Permits.
Such Seller will pay all charges when due under the applicable Franchise Agreement, but, such
Seller shall have no obligation to Purchaser to perform any work required by the

 

42

Franchisor with
respect to the Hotel or to achieve any quality standards, customer satisfaction scores or other
operational standards under such Franchise Agreement.

          13.4 New Contracts. Between the Effective Date and the Closing Date, each Seller and
the Operating Lessee shall not modify in any material respect or enter into any new contracts,
leases, licenses, easements, encumbrances (but including for this purpose involuntary encumbrances)
or other agreements relating to the Properties (including, but not limited to, Hotel Contracts,
collective bargaining agreements, and Space Leases) without the prior consent of Purchaser in each
instance between the Effective Date and the Closing Date, which consent shall not be unreasonably
withheld, conditioned or delayed, other than (i) contracts which may be terminated in the ordinary
course of operations of the applicable Hotel on not more than 60 days notice without penalty or
which provide for payments thereunder of $25,000 or less, (ii) contracts for room reservations,
Bookings or other advance commitments for room rentals at the Properties in the ordinary course of
business and consistent with past practice or (iii) the Repair Contract or any contract referred to
Section 6.5.2. The Sellers shall consult with Purchaser and keep Purchaser informed with respect
to any such modified or new contracts entered into or proposed after the Effective Date and shall
make copies of the same available to Purchaser promptly after the receipt thereof by the Sellers or
the Operating Lessee. Purchaser shall advise the applicable Seller of its approval or rejection of
any such proposed contract, lease, license, easement or other agreement within three (3) Business
Days after such Seller has delivered the same to Purchaser. Failure to provide such approval or
rejection within the stated time period shall be deemed approval of the submission.

          13.5 Access. Each Seller shall permit Purchaser and its representatives, contractors,
agents, personnel, lenders, employees, investors and partners to enter upon and inspect the
Property and perform such investigations of the Property and all Books and Records as Purchaser may
from time to time deem desirable, at Purchaser’s sole cost and expense, all on the terms and
conditions hereinafter set forth. Provided that Purchaser gives such Seller reasonable prior
notice, such Seller shall arrange for Purchaser and Purchaser’s agents to have reasonable access to
the Property during regular business hours until the Closing Date to conduct additional due
diligence (provided that in no event shall such additional due diligence give rise to a right of
Purchaser to terminate this Agreement or to an adjustment of the Purchase Price), prepare for
Closing and to verify any change in the condition of the Property since the Effective Date.
Purchaser does hereby acknowledge and agree, regardless of whether such entry and/or activities
occurred before or after the Effective Date, that (i) the costs and expenses of Purchaser’s access,
whenever incurred, shall be borne solely by Purchaser, (ii) Purchaser has been obligated during all
entries made prior to the Effective Date and shall be obligated with respect to all entries made
from and after the Effective Date not to unreasonably disturb or interfere with the operation,
management or use of the Property by such Seller, such Seller’s agents, any tenant or any tenant’s
customers, invitees or guests, (iii) Purchaser has been obligated during all entries made prior to
the Effective Date, and shall be obligated with respect to all entries made from and after the
Effective Date, not to damage or adversely affect the physical structure or any of the mechanical,
electrical, plumbing or HVAC systems of the Property and/or the Furnishings and (iv)

 

43

Purchaser shall be obligated with respect to all entries made from and after the Effective Date to give prior
notice to such Seller of any such entry and such Seller shall have the right to require that
Purchaser’s representative be accompanied by a representative of such Seller during any such visit
to the Property. Purchaser hereby agrees to indemnify, defend, and hold each Seller, the Operating
Lessee and the Manager and their respective affiliates harmless from any and all actual costs,
losses, damages (excluding consequential and punitive damages) and expenses (including reasonable
attorneys’ fees) arising out of any personal injury or property damage resulting from such entry
and/or activities upon the Property by Purchaser, its agents, contractors and/or subcontractors,
regardless of whether such entry and/or activities occurred before or after the Effective Date,
which indemnity shall survive the Closing or any termination of this Agreement. At all times that
Purchaser is given access to the Property in connection with its investigations under this Section
13.5, Purchaser shall carry, and Purchaser shall cause all of its agents and contractors to carry,
reasonably adequate liability insurance covering their respective activities at the Property and
Purchaser shall deliver evidence of such insurance to such Seller upon such Seller’s request.
Unless this Agreement is terminated, Purchaser shall have the right to communicate with Hotel
Employees, provided the same is coordinated through such Seller and, if so requested by the
Sellers, in the presence of a representative of the Sellers and provided that Purchaser minimizes
any disruption to the operation of the Property and/or to the scheduling and staffing needs of the
Property. In no event shall Purchaser or its agents undertake any invasive testing at the
Property, other than a standard Phase I environmental test, without the prior consent of such
Seller, which consent shall not be unreasonably conditioned, withheld or delayed.

          13.6 Liquor Licenses.

               13.6.1 Each Seller shall cooperate with Purchaser in all reasonable respects in connection
with the transfer of liquor licenses used in connection with the operation of the Hotel to
Purchaser or Purchaser’s application for new liquor licenses. If Purchaser is (despite the use of
commercially reasonable efforts) unable to obtain approval to assume the existing licenses, or new
licenses or temporary permits to operate, issued by the applicable liquor authority prior to the
Closing Date, then, on the Closing Date, the applicable Seller shall, to the extent permitted under applicable Legal
Requirements, cause the existing liquor licensee to enter into an agreement with Purchaser, in form
and content reasonably acceptable to Purchaser and such Seller, providing for an interim
arrangement of up to one hundred twenty (120) days whereby such licensee shall operate (or if
legally permissible allow Purchaser to operate) the liquor concessions at the applicable Hotel
under the existing liquor licenses on behalf of Purchaser pending the transfer or issuance of such
approval, new license or temporary permit to operate, provided that such interim arrangement shall
be extended on a Hotel by Hotel basis by an additional thirty (30) days in the event that
Purchaser, despite the use of continuous diligent efforts, has not received such approval to assume
an existing license, or new license or temporary permit to operate. Purchaser shall indemnify,
defend and hold such licensee harmless against any liabilities incurred in such operation (unless
caused by such licensee’s willful or negligent conduct or omission or breach of its agreement with
Purchaser) and provide adequate dram-shop insurance naming such Seller, the Operating Licensee and
the licensee as additional insureds.

 

44

               13.6.2 At the Closing, the Sellers shall cause the liquor licensee for the San Diego Hotel and
the Walnut Creek Hotel to enter into a liquor assets escrow agreement with Purchaser or Purchaser’s
designee(s), as required by California Business and Professions Code Section 24074, in a form
reasonably acceptable to the parties, with an escrow agent reasonably acceptable to the parties
(and Purchaser shall, or shall cause its designee(s) to, execute and deliver the required number of
counterparts of such agreement). The amount described in Section 6.1.16 shall be deposited into
the escrow created under such escrow agreement as provided in Section 6.1.16, and shall (together
with the liquor licenses for such Hotels) be disposed of as provided in such escrow agreement.

               13.6.3 In no event shall the transfer of the existing liquor license, the issuance of a
temporary permit or a new license or the consent of any liquor authority to the transactions
contemplated hereby be a condition precedent to Purchaser’s obligations under this Agreement. The
provisions of this Section 13.6 shall survive the Closing.

          13.7 Franchise Agreements.

               13.7.1 The Sellers shall proceed promptly and in good faith to give the notices required under
the Franchise Agreements with respect to the transactions contemplated hereby. Purchaser shall
promptly and in good faith (a) seek, with respect to each Property, either (i) to obtain a new
franchise agreement from Franchisor or from another hotel franchisor (“Other Franchisor”),
or (ii) to assume the existing Franchise Agreement from the Franchisor, in accordance with all
applicable provisions of the Franchise Agreement, including without limitation providing such
financial and other information regarding Purchaser as may be reasonably required by the Franchisor
or by the Other Franchisor, as appropriate, and submitting promptly after the date hereof all
application materials required by the Franchisor (b) endeavor to obtain a Release for each Seller
with respect to the applicable Franchise Agreement for obligations arising or accruing from and
after the Closing Date (it being agreed that if
Purchaser is unable to obtain a Release with respect to a particular Franchise Agreement,
Purchaser shall be required either to enter into a new franchise agreement with the Franchisor as
hereinabove provided or obtain such Franchisor’s consent to the termination of such Franchise
Agreement as provided in Section 13.7.2), and (c) use commercially reasonable efforts to obtain a
release for each Seller with respect to the applicable Franchise Agreement for obligations arising
or accruing prior to the Closing Date, provided that in no event shall Purchaser be obligated to
assume any such obligation in order to obtain such release. In connection therewith, the Sellers
shall at no cost to the Sellers cooperate in all reasonable respects with Purchaser in connection
with such application for a new franchise agreement or for the assumption of any existing Franchise
Agreement. In the event a Franchisor or Other Franchisor requires an inspection for a product
improvement plan or otherwise at the Hotel in connection with such application, Purchaser shall
upon demand therefor by the Sellers forward to the Sellers, in immediately available funds, an
amount equal to the fee for such inspection as determined by the Franchisor or Other Franchisor, as
applicable, and, in the event Purchaser fails to do so the applicable Sellers shall have no
obligation to apply for or

 

45

otherwise obtain such inspection, but Purchaser shall not be relieved of
any of its obligations under this Section 13.7.1. Purchaser acknowledges and agrees that
Purchaser’s obtaining (x) a transfer of a Franchise Agreement or a new franchise agreement for the
Hotel from the Franchisor or from an Other Franchisor, (y) the Franchisor’s consent to the
termination of the Franchise Agreement as provided in Section 13.7.2 or (z) the agreement of any
Franchisor not to terminate its Franchise Agreement in connection with the sale of the applicable
Hotel shall not be a condition precedent to Purchaser’s obligation to close the transaction set
forth in this Agreement. Purchaser shall pay all application fees as may be required by any
Franchisor in connection with the assumption of an existing Franchise Agreement by Purchaser, and
the Sellers shall work closely with Purchaser to avoid or minimize any such application fees. In
addition, Purchaser shall pay (i) all other amounts as may be required by any Franchisor in
connection with the assumption of an existing Franchise Agreement by Purchaser and (ii) all
application fees and other amounts as may be required by any Other Franchisor, as appropriate, in
connection with the issuance of a new franchise agreement to Purchaser. Purchaser acknowledges
that as a condition to approving the transfer or assignment of the existing Franchise Agreements,
or entering into a new franchise agreement, the Franchisor or other franchisor, as applicable, may
require the institution of property improvement plans or the imposition of work requirements. The
Sellers shall have no obligation with respect to any such property improvement plan or other work
requirement agreed to by Purchaser.

               13.7.2 Notwithstanding anything to the contrary set forth in Section 13.7.1, Purchaser shall
have the right with respect to any Property not to assume the existing Franchise Agreement or not
to obtain a new franchise agreement from the Franchisor, as applicable, only if:

                    13.7.2.1 Purchaser shall notify the Sellers in writing prior to the fifth
(5th) Business Day prior to the Closing Date that Purchaser intends to exercise
said right; and

                    13.7.2.2 The Franchisor shall consent in writing to the termination of the
Franchise Agreement without payment of a termination fee or damages (liquidated or
otherwise) or Purchaser shall pay in full, at the Closing, and indemnify, defend
and hold harmless the Sellers and their affiliates from and against, any and all
such termination fees or damages (liquidated or otherwise). In connection with
such termination, Purchaser shall use commercially reasonable efforts to obtain
from such Franchisor a release for the applicable Seller for obligations arising or
accruing prior to such termination, provided that in no event shall Purchaser be
required to assume any such obligation to obtain such release.

               13.7.3 Purchaser shall indemnify, defend and hold the Sellers harmless from and against any
and all costs, loss, damages or expenses (including without limitation, reasonable attorneys fees)
incurred by any Seller under any Franchise Agreement as a result of Purchaser’s failure at or prior
to the Closing either (i) to obtain

 

46

the Franchisor’s approval of Purchaser’s change of ownership
application with respect to the Hotel, and to either (A) assume the Franchise Agreement or (B) to
enter into a new franchise agreement with Franchisor, as required by Franchisor, with respect to
the Hotel, or (ii) to obtain Franchisor’s termination of the Franchise Agreement as set forth in
Section 13.7.2, including without any limitation any termination fees or damages (liquidated or
otherwise) incurred by the applicable Seller under the Franchise Agreement and/or the Franchisor
letter in connection therewith. In the event Purchaser assumes the Franchise Agreement with
respect to a Hotel, Purchaser shall only assume all obligations and liabilities under such
Franchise Agreement which accrue to the period from and after the Closing Date. In the event
Purchaser enters into a new franchise agreement with a Franchisor with respect to a Hotel,
Purchaser shall not assume any obligations or liabilities under the Franchise Agreement being
replaced for such Hotel. The provisions of this Section 13.7.3 and Section 13.7.2 shall survive
the Closing or any earlier termination of this Agreement.

          13.8 If Purchaser shall neither assume the Franchise Agreement nor obtain a new franchise
agreement from Franchisor with respect to any Property in accordance with this Section 13.8, then
at the Closing, the applicable Sellers shall be entitled to remove from the applicable Property and
return to the Franchisor in accordance with the Franchise Agreement or transfer to other hotels
owned by affiliates of the Sellers all Trademark Materials, such items shall be Excluded Items and
Purchaser shall receive no credit against the Purchase Price as a result of the removal of such
Excluded Items from the Property.

          13.9 Reporting. The Sellers shall or shall cause the Manager to deliver to Purchaser
as soon as the same shall become available monthly operating statements for each of the Properties,
together with copies of any financial statements or forecasts produced by the Sellers or the
Manager in the ordinary course relating to any or all of the Properties.

          13.10 Vetro Leases. The Operating Lessee shall promptly and in good faith seek the consent of the lessors under
the Vetro Leases to assign the Vetro Leases to Purchaser upon the Closing, provided that, the
Operating Lessee shall not be obligated to incur any cost or other liability in connection
therewith, provided, further, that the failure of the Operating Lessee to obtain such consents or
to extend the period during which any extension option under the Vetro Leases may be exercised
shall not (i) be deemed a default or breach of the Operating Lessee’s or the Seller’s respective
obligations under this Agreement or a breach of any condition hereunder to Purchaser’s obligation
to proceed with the Closing, (ii) give rise to Purchaser of any right to terminate this Agreement
in whole or as to the applicable Hotel pursuant to the Partial Termination Procedure or (iii)
result in any reduction of the Purchase Price. In the event that such consents are not obtained or
in the event that Purchaser notifies the Sellers at least three (3) Business Days prior to the
Initial Closing Date that Purchaser does not intend to assume the Vetro Leases, the Vetro Leases
shall be deemed Excluded Items and shall not be included in the transactions contemplated herein.

 

47

          13.11
Anchorage Joint Venture Agreement. The Sellers shall cause MeriStar Laundry to
promptly and in good faith seek the consent of Captain Cook to permit MeriStar Laundry to assign
its interest in the Anchorage Joint Venture Agreement to Purchaser upon the Closing, provided that,
neither the Sellers nor MeriStar Laundry shall be obligated to incur any cost or other liability in
connection therewith, provided, further, that the failure of the Sellers to obtain such consent
shall not (i) be deemed a default or breach of the Sellers’ respective obligations under this
Agreement or a breach of any condition hereunder to Purchaser’s obligation to proceed with the
Closing, (ii) give rise to Purchaser of any right to terminate this Agreement in whole or as to the
Anchorage Hotel pursuant to the Partial Termination Procedure or (iii) result in any reduction of
the Purchase Price. In the event that such consents are not obtained or in the event that
Purchaser notifies the Sellers at least three (3) Business Days prior to the Initial Closing Date
that Purchaser does not intend to assume the Anchorage Joint Venture Agreement, the Anchorage Joint
Venture Agreement shall be deemed an Excluded Item and shall not be included in the transactions
contemplated herein.

          13.12 Independent Audit. Promptly following the Effective Date, the Sellers shall and
shall cause Manager to reasonably cooperate with Purchaser’s representatives and independent
accounting firm to provide access to financial information relating to the Properties in the
possession of or otherwise available to the Sellers, its affiliates or Manager which would be
sufficient to enable Purchaser’s representatives and independent accounting firm to prepare audited
financial statements for the three (3) calendar years prior to the Closing and during the year in
which the Closing occurs in conformity with generally accepted accounting principles and to enable
such representatives to prepare such statements, reports or disclosures as Purchaser may reasonably
deem necessary or advisable (provided that in no event shall the results of such activities by or
on behalf of Purchaser give rise to a right of Purchaser to terminate this Agreement or to an adjustment of the
Purchase Price, or expand the scope of any representation contained herein or create any liability
to Purchaser or any other person that would not otherwise exist under this Agreement absent this
Section 13.12). The Sellers shall also provide and shall cause Manager to provide to Purchaser’s
independent accounting firm a signed representation letter in a form reasonably acceptable to
Manager which would be sufficient to enable an independent public accountant to render an opinion
on the financial statements related to the Properties. The Sellers shall authorize and shall cause
Manager to authorize any attorneys who have represented the Sellers or Manager in material
litigation pertaining to or affecting the Properties to respond, at Purchaser’s expense, to
customary inquiries from Purchaser’s representatives and independent accounting firm. If and to the
extent the Sellers’ financial statements pertaining to the Property for any periods during the
three (3) calendar years prior to the Closing and during the year in which the Closing occurs have
been audited, promptly after the execution of this Agreement the Sellers shall provide Purchaser
with copies of such audited financial statements and shall reasonably cooperate with Purchaser’s
representatives and independent public accountants to enable them to contact the auditors who
prepared such audited financial statements and to obtain, at Purchaser’s expense, a reissuance of
such audited financial statements. Purchaser shall reimburse the Sellers and

 

48

Manager for all
out-of-pocket costs incurred by the Sellers and/or Manager in connection with the foregoing.

          13.13 Walnut Creek Litigation Without limiting the provisions of Section 6.5.1 and
Section 8.1, the Sellers shall have no obligation to perform or complete any remedial work or other
capital improvements required in connection with the Walnut Creek Litigation (the “ADA Remedial
Work”) (or incur any liability in connection therewith except as expressly set forth in this
Section 13.13) and Purchaser shall accept the Walnut Creek Hotel on the Closing Date “as-is” and
without any adjustment to or credit against the Purchase Price on account of the Walnut Creek
Litigation, and shall be solely responsible for performing the ADA Remedial Work at its sole cost
as required pursuant to (and promptly after) the final resolution of the Walnut Creek Litigation;
provided that the Sellers shall, promptly after request by Purchaser (together with the submission
of appropriate supporting documentation), reimburse Purchaser for (i) one hundred percent (100%) of
the direct costs of the ADA Remedial Work that are incremental to Purchaser’s capital improvement
or project improvement plans for the Walnut Creek Hotel (the “Incremental ADA Costs”)
expended by Purchaser to the extent the same exceed $100,000 and are less than or equal to $150,000
and (ii) fifty percent (50%) of the Incremental ADA Costs expended by Purchaser to the extent the
same exceed $150,000; provided, further, that the Sellers shall be responsible for any monetary
damages arising from the Walnut Creek Litigation (including any attorneys’ fees and expenses
awarded or otherwise paid to the plaintiff thereto, but excluding damages arising from any failure
of Purchaser to perform the ADA Remedial Work in compliance with such final resolution, which shall
be the responsibility of Purchaser). Notwithstanding the foregoing, the
Walnut Creek Seller may, in its sole discretion, commence the ADA Remedial Work prior to the
Closing Date in which event (x) Purchaser shall at the Closing (subject to the submission of
appropriate documentation) reimburse the Walnut Creek Seller for one hundred percent (100%) of any
Incremental ADA Costs expended by the Walnut Creek Seller to the extent the same do not exceed
$100,000 and fifty percent (50%) of any Incremental ADA Costs expended by the Walnut Creek Seller
in excess of $150,000 and (y) Purchaser shall assume the contract for the ADA Remedial Work on the
Closing Date pursuant to an agreement of assignment and assumption substantially in the form of
Error! Reference source not found. (as it relates to Hotel Contracts) and without warranty or
representation, provided that any additional Incremental ADA Costs incurred by Purchaser pursuant
to such assumed contract shall be allocated among Purchaser and the Walnut Creek Seller as set
forth in the immediately preceding sentence, taking into account the amounts previously paid
pursuant to clause (x) of this sentence. In the event that the final resolution of the Walnut
Creek Litigation has not occurred as of the Closing Date, the Sellers and Purchaser shall negotiate
in good faith a supplement to this Agreement providing for a hold back of a portion of the Purchase
Price (the “ADA Holdback”) in an amount equal to the Walnut Creek Seller’s share of the
reasonably anticipated costs of the ADA Remedial Work, as computed pursuant hereto (but which
amount shall not in any event exceed $100,000). Such supplement shall provide that the Escrow
Agent shall continue to hold the ADA Holdback and shall make the ADA Holdback available for payment
of amounts owing by the Sellers pursuant to clauses (i) and (ii) of the first sentence of this

 

49

Section 13.13 (with any excess being paid to, and any shortfall being paid by, the Walnut Creek
Seller). The budget and scope of work in the contract for the ADA Remedial Work shall specify the
ADA Remedial Work separately from any other work to be performed under such contract, and such
contract shall (together with any amendments thereto that would result in a direct or indirect
increase in the compensation payable to the contractor thereunder) be subject to the Walnut Creek
Seller’s prior written consent, such consent not to be unreasonably withheld or delayed (provided
that in the event the Walnut Creek Seller commences the ADA Remedial Work prior to the Closing
Date, such contract (together with any amendments thereto that would result in a direct or indirect
increase in the compensation payable to the contractor thereunder) shall be subject to Purchaser’s
prior written consent, such consent not to be unreasonably withheld or delayed). From and after
the Closing Date, Purchaser shall join as a party to the Walnut Creek Litigation, and the Walnut
Creek Seller and Purchaser shall jointly and diligently conduct the defense of the Walnut Creek
Litigation and shall cooperate with each other and keep each other informed with respect thereto;
provided that neither party shall have the right to settle (either before or after the Closing
Date) the Walnut Creek Litigation or take any other material action with respect thereto without
the consent of the other party, such consent not to be unreasonably withheld or delayed (provided,
further, that the Walnut Creek Seller shall have the right, in its sole discretion and without
consent of Purchaser, to settle, or take other actions with respect to, any matters related solely
to monetary damages). The Sellers shall be responsible for attorneys’ fees and expenses related to
the defense of the Walnut Creek Litigation incurred prior to the Effective Date. From and after
the Effective Date, the Sellers shall be responsible for one-half of the attorneys’ fees and
expenses incurred by the Sellers and/or Purchaser in defense of the Walnut Creek Litigation and
Purchaser shall be
responsible for one-half of such attorneys’ fees and expenses. The Sellers shall indemnify
and hold harmless Purchaser for any costs for which the Sellers are responsible under this Section
13.13. Purchaser shall indemnify and hold harmless the Sellers for any costs for which Purchaser
is responsible under this Section 13.13 and for the failure to perform the ADA Remedial Work in
compliance with the requirements set forth in the final resolution of the Walnut Creek Litigation.
The provisions of this Section 13.13 shall survive the Closing.

     14. Title to the Properties.

          14.1 Condition of Title. If, at the Closing Date, title to any Property shall not be
in the condition prescribed by Section 4, the Sellers shall be entitled to (a) adjourn the Closing
pursuant to Section 5.1 for the purpose of causing title to be conveyed in the condition required
by the provisions of this Agreement (including curing Purchaser’s title objections to the extent
required to do so under this Section 14) or (b) terminate this Agreement as to the affected Hotel
by notice to Purchaser delivered at or prior to the Closing Date, in which event the Partial
Termination Procedure shall occur with respect to the affected Hotel. If the Sellers shall adjourn
the Closing pursuant to subdivision (a) above and at the end of such extension period any Seller
shall be unable to cause title to any Property to be in the condition prescribed by Section 4,
either party may terminate this Agreement as to the affected Hotel by notice to the other party

 

50

delivered at or prior to the Closing Date as so extended, in which event the Partial Termination
Procedure shall occur with respect to the affected Hotel. Purchaser shall have the right to object
by delivery of written notice to the Sellers, on or prior to the date that is five (5) Business
Days after receipt of any update to the title reports previously delivered to Purchaser (and after
receipt of an updated survey for the applicable Property), to any lien or encumbrance that is not a
Permitted Exception and is shown on such or update. If Purchaser shall fail to give such notice as
to any lien or encumbrance within said five (5) Business Day period, then each such lien or
encumbrance shall be deemed to be a Permitted Encumbrance. Any lien or encumbrance to which
Purchaser timely objects or any Monetary Lien shall not be a Permitted Exception unless and until
such lien or encumbrance or Monetary Lien is cured and/or the Title Company agrees to affirmatively
insure over such lien or encumbrance as hereinafter provided or such lien or encumbrance is waived
by Purchaser. The Sellers shall be under no obligation to take any steps or to institute or
prosecute any action or proceedings, or expend any sums of money or effort to remove from title to
the Properties any defect, encumbrance or objection to title whether or not the remedying of the
defect, encumbrance or objection to title is within the Sellers’ control; provided, however that
each Seller shall be responsible to discharge or cause the Title Company affirmatively to insure
over any liens or encumbrances on such Sellers’ Property which do not constitute Permitted
Exceptions, which can be discharged solely by the payment of a liquidated sum of money and which
liens or encumbrances arise on account of obligations undertaken or actions performed by such
Seller (“Monetary Liens”); provided, that the Sellers shall not be required to expend more
than $3,000,000 in the aggregate to cure any such Monetary Liens (other than mortgages and deeds of
trust which the Sellers shall be obligated to discharge at or prior to Closing in full). The
Sellers may use any part of the Purchase Price to discharge the same, provided that the Sellers
shall deliver to Purchaser or the Title Company at the
Closing instruments in recordable form sufficient for the Title Company to discharge such
Monetary Liens. Except for any Seller’s failure to discharge or cause the Title Company
affirmatively to insure over such Monetary Liens as aforesaid, the Sellers shall not be deemed in
default of this Agreement, and Purchaser shall not be entitled to damages of any kind by reason of
the failure of any Seller, for any reason whatsoever, to convey title to the Properties in
accordance with the provisions of this Agreement, nor shall Purchaser in such circumstances be
entitled to specific performance of this Agreement.

          14.2 Waiver. Purchaser, at its election, evidenced by notice to the Sellers either
before or within five (5) Business Days following notice from the Sellers to invoke the Partial
Termination Procedure pursuant to Section 14.1, (and the Closing Date shall be adjourned if
necessary for such five (5) Business Day period) may in writing accept such title to the affected
Property or Properties as the Sellers can convey, without reduction of the Purchase Price or any
credit or allowance on account thereof or any claim against the Sellers by reason thereof, in which
event the Partial Termination Procedure shall not apply.

          14.3 Affirmative Insurance. If at the Closing any Property is subject to any matter
encumbering title thereto other than matters treated under Section 14.1 or Permitted Exceptions,
such matter shall not be deemed grounds for termination of

 

51

this Agreement or any other remedy if the Title Company will affirmatively insure against enforcement of such matter against the Property
by endorsement reasonably satisfactory to Purchaser. Except as set forth in Section 14.1, nothing
in this Section 14.3 shall be deemed to create any obligation on the part of any Seller to satisfy
or to cause the Title Company to issue affirmative insurance over any such liens, encumbrances or
matters affecting title which are not Permitted Exceptions.

          14.4 Full Performance. The acceptance of the Deeds by Purchaser from each Seller
shall be deemed full performance on the part of such Seller of all of its respective obligations
under this Agreement (including all promises, agreements, conditions, representations and
warranties), except as to any such obligation which is specifically stated in this Agreement to
survive the Closing or is expressly contained in the documents delivered at Closing.

          14.5 Rights of First Refusal. Purchaser acknowledges that, as set forth in
Exhibit B and in addition to the MHOP ROFO, certain of the Properties are subject to a
right of first refusal or right of first offer in favor of an unaffiliated third party. In the
event that a Franchisor exercises such right of first refusal or right of first offer with respect
to a single Hotel, the Sellers shall not be deemed to be in default under this Agreement, and the
Partial Termination Procedure shall apply with respect to the applicable Property. In the event
that one or more Franchisors exercise such rights of first refusal or rights of first offer with
respect to two or more Hotels, Purchaser may elect in its sole determination (x) to apply the
Partial Termination Procedure to the applicable Properties or (y) to terminate this Agreement and
have the Deposit returned to it by the Escrow Agent.

     15. Brokers, etc.

          15.1 Sellers’ Representation. The Sellers warrant and represent to Purchaser that the
Sellers dealt with no broker, finder or like agent who might claim a commission or fee in
connection with the transactions contemplated in this Agreement or on account of introducing the
parties, the preparation or submission of brochures, the negotiation or execution of this Agreement
or the Closing of the transactions contemplated herein, other than Jones Lang LaSalle Americas,
Inc. (“Broker”). The fees of the Broker shall be paid by the Sellers or their affiliates
pursuant to separate agreements between the Sellers or their affiliates and the Broker. The
Sellers agree jointly and severally to indemnify and hold harmless Purchaser and its successors and
assigns from and against any and all claims, losses, liabilities and expenses, including without
limitation reasonable attorneys’ fees, disbursements and charges, arising out of any claim or
demand for commissions or other compensation for bringing about this transaction by any broker,
finder or similar agent or party, including, without limitation, the Broker, who claim to have
dealt with the Sellers or any affiliate thereof in connection with this transaction.

          15.2 Purchaser’s Representation. Purchaser warrants and represents to the Sellers
that neither Purchaser, nor any affiliate thereof, has dealt with any broker, finder or like agent
who might claim a commission or fee in connection with

 

52

the transactions contemplated in this
Agreement or on account of introducing the parties, the preparation or submission of brochures, the
negotiation or execution of this Agreement or the closing of the transactions contemplated herein,
other than the Broker. Purchaser agrees to indemnify and hold harmless the Sellers and their
respective successors and assigns from and against any and all claims, losses, liabilities and
expenses, including without limitation reasonable attorneys’ fees, disbursements and charges,
arising out of any claim or demand for commissions or other compensation for bringing about this
transaction by any broker, finder or similar agent or party, other than the Broker, who claims to
have dealt with Purchaser or any affiliate thereof in connection with this transaction.

          15.3 A Real Estate Recovery Fund exists to reimburse any person who has obtained a final civil
judgment against a Pennsylvania real estate licensee owing to fraud, misrepresentation, or deceit
in a real estate transaction and who has been unable to collect the judgment after exhausting all
legal and equitable remedies. For complete details about the fund, call (7l7) 783-3658 or (800)
822-2113 (within Pennsylvania) and (717) 783-4854 (outside Pennsylvania).

          15.4 Survival. The provisions of this Section 15 shall survive the Closing or
termination of this Agreement.

     16. Termination of Agreement; Default.

          16.1 Non-Default Termination. If this Agreement shall terminate or be terminated
(excluding any partial termination pursuant to the application of the Partial Termination
Procedure) for any reason other than the default of Purchaser
or the Sellers hereunder, then upon such termination Escrow Agent shall return to Purchaser
the Deposit, together with any interest thereon. Except for the foregoing, and for those
obligations hereunder that are specifically stated to survive termination hereof, following the
termination of this Agreement neither party shall have any obligations of any nature to the other
hereunder or by reason hereof.

          16.2 Purchaser’s Default. If at the Closing Date the conditions to the obligations of
the Sellers to consummate the Closing as set forth in Section 10 hereof have not been fulfilled on
account of the default of Purchaser hereunder, and such conditions have not been waived by Sellers,
and the Closing shall not occur as a result thereof, then the Sellers shall be entitled as their
sole remedy to receive and retain the Deposit together with all interest, if any, earned thereon,
as liquidated damages for loss of a bargain and not as a penalty. Purchaser and the Sellers agree
that such liquidated damages are based in part upon the following damages which the Sellers shall
suffer on account of a default by Purchaser and the failure of the Closing to occur, which damages
Purchaser and the Sellers agree are incapable of an exact determination of amount: the removal of
the Properties from the real estate market during the period of this Agreement and the loss of the
possibility of obtaining a new purchaser during such time at a higher amount; the possibility of
being unable to find a new purchaser for the amount of the Purchase Price after Purchaser’s
default; various restrictions related to the management and maintenance of the Properties during
the period of this Agreement; and the

 

53

inconvenience of relisting the Properties for sale.
Purchaser acknowledges and agrees that such liquidated damages shall not be deemed to include or
incorporate any liability of Purchaser in respect of any indemnification obligation under this
Agreement that survives the termination of this Agreement, and Purchaser shall remain liable for
any such indemnification obligations notwithstanding the receipt by the Sellers of such liquidated
damages.

          16.3 Seller’s Default. If at the Closing Date, after any application of the Partial
Termination Procedure the conditions to the obligation of Purchaser to consummate the Closing as
set forth in Section 11 hereof have not been fulfilled on account of the default of the Sellers
hereunder, nor have such conditions been waived by Purchaser, and the Closing shall not occur as a
result thereof, then Purchaser shall be entitled to pursue, at its election, either of the
following as its sole and exclusive remedy: (i) terminate this Agreement and have the Deposit
returned to it by the Escrow Agent (and in such circumstances the Sellers shall join with Purchaser
in a written instruction to Escrow Agent to pay the Deposit to Purchaser) or (ii) seek specific
performance of the Sellers’ obligations under this Agreement to consummate the Closing, provided,
however, that Purchaser shall only be entitled to the remedy of specific performance if (A)
Purchaser first gives written notice to the Sellers of the Sellers’ default and Purchaser’s
intention to file an action for specific performance within ten (10) Business Days after Purchaser
first becomes aware of the default by the Sellers, (B) any suit for specific performance is filed
within sixty (60) days after the scheduled Closing Date, and (C) Purchaser is not in default under
this Agreement. Purchaser hereby waives any right to sue the Sellers, the Operating Lessee or any
of their respective affiliates for damages (including consequential and punitive damages) for any
default hereunder, but if the Closing occurs, subject to the provisions of Section 8 such waiver
shall not apply to damages to which Purchaser may be entitled hereunder (other than consequential and punitive
damages) by reason of any breach by the Sellers of any of their covenants, warranties or
representations hereunder which expressly survive the Closing.

          16.4 Survival. The provisions of this Section 16 shall survive the termination of
this Agreement.

     17. Expenses of the Transaction.

          17.1 Purchaser’s Expenses. Purchaser shall pay the cost of (i) title insurance
premiums, (ii) Survey costs of updates ordered by Purchaser, (iii) the sum of one-half of all deed
stamps, deed taxes, recording taxes and transfer taxes imposed in connection with the conveyance of
the Properties (collectively, the “Transfer Taxes”), (iv) sales taxes imposed in connection
with any items of Personal Property, (v) the costs of its due diligence investigation of the
Properties, (vi) all amounts incurred in connection with the assumption or termination of the
Franchise Agreement or the issuance of a new franchise agreement including, but not limited to,
application fees, transfer fees, termination fees, liquidated damages and costs of implementing a
property improvement plan, (vii) mortgage recording taxes, (viii) all fees and recording charges,
including without limitation the costs of recording any Deeds, except for those fees and recording
charges for which the Sellers are obligated to pay pursuant to clause (iii) of

 

54

Section 17.2 and (ix) the fees and disbursements of Purchaser’s attorneys. Purchaser shall pay one-half of the
escrow fees of Escrow Agent.

          17.2 Sellers’ Expenses. The Sellers shall pay (i) the cost of the fees and
disbursements of the Sellers’ attorneys in connection with this transaction, (ii) one-half of all
Transfer Taxes, (iii) all fees and recording charges for releasing title objections which Seller
has an obligation to remove pursuant to this Agreement and (iv) one-half of the escrow fees of
Escrow Agent.

          17.3 Other Costs. Any other closing cost not specifically allocated by this Agreement
shall be allocated in accordance with closing customs for similar properties in the metropolitan
area of the applicable Property.

          17.4 Indemnification. Purchaser shall indemnify the Sellers, Operating Lessee,
Manager and their respective affiliates, successors and assigns and the Sellers shall jointly and
severally indemnify Purchaser and its affiliates, successors and assigns from and against any and
all loss, damage, cost, charge, liability or expense (including court costs and reasonable
attorneys’ fees) which such indemnified party or parties may sustain or incur as a result of the
failure of the indemnifying party or parties to timely pay any of the aforementioned taxes, fees or
other charges for which it has assumed responsibility under this Section 17.

          17.6 Survival. The provisions of this Section 17 shall survive the Closing or any
termination of this Agreement.

     18. Notices.
Except as otherwise provided in this Agreement, all notices, demands,
requests, consents, approvals or other communications which are required or permitted to be given
under this Agreement or which either party desires to give with respect to this Agreement shall be
in writing and shall be deemed to have been properly given or served if (i) delivered by hand, (ii)
sent by registered or certified mail, postage prepaid, return receipt requested, (iii) sent by
reputable overnight courier service or (iv) transmitted by facsimile transmission, in each case
addressed to the party to be notified as follows (or to such other address as such party shall have
specified at least ten (10) days prior thereto by like notice):

if to the Sellers, to:

MeriStar Investment Partners, L.P.

c/o Oak Hill Capital Partners

65 East 55th Street, 36th Floor

New York, New York 10022

Attention: Edward V. Dardani

Facsimile No.: 212-754-5685

with a copy at the same time to:

 

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Interstate Hotels & Resorts, Inc.

4501 N. Fairfax Drive, Suite 800

Arlington, Virginia 22203

Attention: Christopher Bennett

Facsimile No. 703-387-3944

and a copy at the same time to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Attn: Mitchell L. Berg, Esq.

Facsimile No.: 212-492-0048

if to Purchaser, to:

Ashford Hospitality Limited Partnership

14185 Dallas Parkway, Suite 1100

Dallas, Texas 75254

Attn: David A. Brooks

Facsimile No.: 972-490-9605

with a copy at the same time to:

Akin Gump Strauss Hauer & Feld LLP

1700 Pacific Avenue, Suite 4100

Dallas, Texas 75201

Attn: Carl B. Lee, P.C.

Facsimile No.: 214-969-4343

     Notices shall be deemed given when delivered by hand or overnight courier or telecopied, or if
mailed only three (3) Business Days after mailing, with failure to accept delivery to constitute
delivery for purposes hereof.

     19. Further
Assurances. Each Seller and Purchaser agrees, at any time and from time to
time after the Closing, to execute, acknowledge, where appropriate, and deliver such further
instruments and documents and to take such other action as the other party may reasonably request
in order to carry out the intents and purposes of this Agreement, provided that such request is
made by notice given within one (1) year of the Closing Date. If required by the party receiving
the request, the party making the request will bear the reasonable cost involved. The provisions
of this Section 19 shall survive the Closing.

     20. Governing
Law. This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of New York applicable to contracts negotiated, executed and
to be performed wholly within such State, except to the extent that the law of the state where an
applicable Property is located mandatorily

 

56

applies. The Sellers and Purchaser consent to the
jurisdiction and venue of the Courts of the State of New York and the United States District Court
for the Southern District of New York in connection with any claim or controversy arising out of or
relating to this Agreement on condition that, with respect to any federal litigation, the amount in
controversy exceeds the requirement in force as of the date hereof. The agreements and
appointments of the parties pursuant to this Section shall be applicable to all agreements executed
and delivered by the parties in connection with this Agreement and all such agreements shall so
provide.

          20.1 WAIVER OF JURY TRIAL. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH,
OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT.

          20.2 Acknowledgement; Survival. Each party hereto acknowledges that it was
represented by counsel in connection with this Agreement and the transactions contemplated herein,
that it and its counsel reviewed and participated in the preparation and negotiation of this
Agreement and the documents and instruments to be delivered hereunder, and that any rule of
construction to the effect that ambiguities are
to be resolved against the drafting party shall not be employed in the interpretation of this
Agreement or the documents and instruments to be delivered hereunder. The obligations of
provisions of this Section 20 shall survive the Closing or termination of this Agreement.

     21. Entire
Agreement; No Third Party Beneficiary, etc. This Agreement, including all
Exhibits, contains the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior understandings, if any, with respect thereto. The parties have
made no representations with respect to the subject matter of this Agreement and have given no
warranties with respect to the subject matter hereof except as expressly provided herein and/or
expressly provided in the documents delivered at Closing. This Agreement may not be modified,
changed, supplemented or terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in writing or as
otherwise expressly permitted herein. The parties do not intend to confer any benefit hereunder on
any person, firm or corporation other than the parties hereto. The provisions of this Section 21
shall survive the Closing or termination of this Agreement.

     22. Waivers;
Extensions. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach thereof or of any other
agreement or provision herein contained. No extension of time for performance of any obligation or
act shall be deemed an extension of the time for performance of any other obligations or acts. The
provisions of this Section 22 shall survive the Closing or termination of this Agreement.

     23. Construction. Headings at the beginning of each Section are not a part of this
Agreement. Whenever required by the context of this Agreement, the

 

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singular shall include the
plural and the masculine shall include the feminine and vice versa. This Agreement shall not be
construed as if it had been prepared by one of the parties, but rather as if both parties had
prepared the same. All Exhibits referred to in this Agreement are attached and incorporated herein
by reference, and any capitalized term used in any Exhibit which is not defined in such Exhibit
shall have the meaning attributed to such term in the body of this Agreement. In the event the
date on which Purchaser or any Seller is required to take any action under the terms of this
Agreement is not a Business Day, the action shall be taken on the next succeeding Business Day.

     24. Assignment.
Purchaser shall not have the right, without the prior written consent
of the Sellers, to assign this Agreement or its rights hereunder, in whole or in part, to any other
person. Notwithstanding the foregoing, Purchaser shall have the right to designate one or more
wholly-owned subsidiaries of Purchaser to take title to one or more Properties at the Closing;
provided, however, that any such designation by Purchaser shall not release Purchaser of its
obligations under this Agreement unless and until (x) the Closing shall occur and (y) such
designated subsidiary or subsidiaries shall assume all obligations of Purchaser under this
Agreement jointly and severally pursuant to an assumption agreement reasonably acceptable to the
Sellers; provided further, that in no event shall Purchaser be released of its obligations under
Section 33.4 of this Agreement. The provisions of this Section 24 shall survive the Closing.

     25. Facsimile;
Counterparts. This Agreement may be executed in counterparts, each of
which (or any combination of which, signed by all of the parties) shall be deemed an original, but
all of which, taken together, shall constitute one and the same instrument. Executed counterparts
of this Agreement exchanged by facsimile transmission shall be fully enforceable.

     26. No
Recording. The parties agree that neither this Agreement nor any memorandum or
notice thereof shall be recorded provided that in the event Purchaser is pursuing the remedy of
specific performance under this Agreement, the foregoing shall not prohibit the filing of a lis
pendens.

     27. Escrow.

          27.1 Deposit. The Deposit shall be held in escrow by the Escrow Agent until the
earliest of (a) the Closing, at which time the Deposit shall be released to the Sellers; (b) ten
(10) days after the Escrow Agent shall have delivered to the non-sending party a copy of a notice
sent by one or more Sellers or Purchaser stating that this Agreement has been terminated and that
the party so notifying the Escrow Agent is entitled to the Deposit, following which period the
Deposit shall be (i) delivered to the Sellers, in the case of a notice from the Sellers stating
that the Sellers are entitled to the Deposit, or (ii) delivered to Purchaser, in the case of a
notice from Purchaser stating that Purchaser is entitled to the Deposit; provided, in each case,
however, that within such ten (10) day period the Escrow Agent does not receive either a notice
containing contrary instructions from the other party hereto or a court order restraining the
release of all or any portion of the Deposit; or (c) a joint notice executed by the Sellers and
Purchaser is received by the Escrow Agent, in which event the Escrow Agent shall release the
Deposit

 

58

in accordance with the instructions therein contained. The Escrow Agent shall reasonably
promptly deliver a duplicate copy of any notice received by it in its capacity as Escrow Agent to
the Sellers and Purchaser.

          27.2 Deposit Account; Payment of Deposit. The Deposit shall be held by the Escrow
Agent in an interest-bearing money market or bank account (not separately maintained for this
transaction), but the Escrow Agent shall not be liable for any loss incurred by reason of any such
investments. If the Closing occurs, any interest
earned or accrued on the proceeds of the Deposit shall be paid to the Sellers and credited
against the Purchase Price. In the event that there is no Closing hereunder and the Deposit and
interest thereon are to be paid to the Sellers pursuant to the terms of this Agreement, such
payment shall be made to the Sellers; otherwise, the Deposit and all interest on the proceeds of
the Deposit shall be paid to Purchaser.

          27.3 Disputes. In the event that (i) the Escrow Agent shall have received a notice
containing contrary instructions or a court order as provided for in Section 27.1 hereof and within
the time therein prescribed, or (ii) any other disagreement or dispute shall arise between the
parties hereto resulting in adverse claims or demands being made for the Deposit and/or interest
thereon, if any, whether or not litigation has been instituted, then and in any such event the
Escrow Agent shall refuse to comply with any claims or demands on it and continue to hold the
Deposit and the interest thereon, if any, as applicable, until the Escrow Agent receives either (a)
a written notice signed by the Sellers and Purchaser directing the disposition of the Deposit and
the interest thereon, if any, as applicable, or (b) a final order of a court of competent
jurisdiction, entered in a proceeding in which the Sellers, Purchaser and the Escrow Agent are
named as parties, directing the disposition of the Deposit and the interest thereon, if any, as
applicable, in either of which events the Escrow Agent shall then dispose of the Deposit and the
interest thereon, if any, as applicable, in accordance with said direction. The Escrow Agent shall
not be or become liable in any way to any person or entity for its refusal to comply with any such
claims or demands until and unless it has received a direction of the nature described in (a) or
(b) above. Upon the taking by the Escrow Agent of any of the actions described in (a) and (b)
above, the Escrow Agent shall be released of and from all liability hereunder. Notwithstanding the
foregoing provisions of this Section 27.3, the Escrow Agent shall have the following right in the
circumstances described in subdivision (i) or (ii) above: (y) if the Escrow Agent shall have
received a written notice signed by either the Sellers or Purchaser advising that litigation
between the Sellers and Purchaser over entitlement to the Deposit or any portion thereof and/or the
interest thereon, if any, has been commenced, the Escrow Agent may, on written notice to the
Sellers and Purchaser, deposit the Deposit, and the interest thereon, if any, as applicable, with
the clerk of the court in which such litigation is pending, or (z) the Escrow Agent may, on written
notice to the Sellers and Purchaser, take such affirmative steps as it may, at its option, elect in
order to terminate its duties as escrow agent hereunder, including, but not limited to, the deposit
of the Deposit and interest thereon, if any, as applicable, with a court of competent jurisdiction
and the commencement of an action in interpleader, the costs thereof to be borne by whichever of
the Sellers or Purchaser is the losing party. Upon the taking by Escrow Agent of either of the
actions described in (y) or

 

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(z) above, the Escrow Agent shall be released of and from all liability
hereunder except for any previous willful misconduct or gross negligence.

          27.4 Miscellaneous. The Escrow Agent shall not be liable for any error in judgment or
for any act done or omitted by it in good faith, or for any mistake of fact or law and shall not
incur any liability in acting upon any signature, notice, request, waiver, consent, receipt or
other paper or document in good faith believed by the Escrow Agent to be genuine and is released
and exculpated from all liability hereunder except as aforesaid or for willful misconduct or gross
negligence. The sole
responsibility of the Escrow Agent hereunder shall be to hold and release the Deposit and the
interest thereon, if any, in accordance with the provisions of this Agreement. The Escrow Agent
shall be entitled to consult with counsel in connection with its duties hereunder. Purchaser and
the Sellers jointly and severally agree to reimburse the Escrow Agent for its reasonable costs and
expenses, including attorneys’ fees (either paid to retained attorneys or representing the fair
value of legal services rendered by the Escrow Agent to itself), incurred as a result of any
dispute or litigation concerning the right to the monies held in escrow as provided herein. The
Escrow Agent has executed this Agreement solely to confirm that it is holding and will hold the
Deposit in escrow pursuant to the provisions of this Section 27 and for no other purpose.

     28. Confidentiality.

          28.1 Due Diligence Material. Purchaser agrees that, until the Closing has occurred,
all documentation or other information delivered to Purchaser or its representatives or agents by
the Sellers or their representatives or agents pertaining to the Properties and the other assets
referred to herein shall be kept strictly confidential and will not be used by Purchaser or its
representatives or agents, directly or indirectly, for any purpose other than the acquisition of
the Properties and the other transactions contemplated hereby. Purchaser may however make
appropriate disclosures on a confidential basis to its investors and lenders and to its and their
respective attorneys, advisors, accountants and consultants engaged in connection with this
transaction or to such other persons or entities to which disclosure is legally required. The
provisions of this Section 28.1 shall be deemed to supersede and replace any confidentiality
agreement executed between the parties or their respective affiliates in connection with this
transaction.

          28.2 Failure to Close. If the Closing fails to occur for any reason whatsoever,
Purchaser shall deliver to the Sellers promptly upon demand at no cost to the Sellers, all
materials and documents previously obtained by Purchaser from the Sellers (with no retention by
Purchaser of copies of any such materials and documents), and copies of all third-party engineering
work, soils reports, environmental/biological studies, appraisals, and other materials pertaining
to any Property (other than information generated by its counsel) as Purchaser has prepared or
caused to be prepared. Such delivery shall be made without representation or warranty by Purchaser
as to the contents of such items and the Sellers shall not be entitled to rely on such items.

 

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          28.3 Press Releases and other Public Statements. Prior to the Closing, neither party
shall, without the prior written consent of the other party(ies) (which consent shall not be
unreasonably withheld), issue any press release or other public statement (except such statements
as may be required by applicable law, rule or regulation, including, without limitation, the rules
of the New York Stock Exchange) in connection with the transactions contemplated hereby. From and
after the Closing, the parties may issue such a press release or other public statement provided
that the same does not describe the economic terms of this transaction except to the extent
required by law or as approved in writing by the other party. Notwithstanding anything to the
contrary contained in this Agreement, Purchaser and/or the Sellers or any of their respective
direct or indirect equity owners shall be permitted to file with the Securities and Exchange
Commission one or more current reports on Form 8-K to disclose (i) the execution of this Agreement
as a material agreement under Item 1.01 thereof (and to file a copy of this Agreement with the
Securities and Exchange Commission in connection therewith), and (ii) the Closing of the
transactions contemplated hereunder.

          28.4 Survival. This Section 28 shall survive the Closing or any termination of this
Agreement.

     29. 1031
Exchange. Purchaser acknowledges that the Sellers have advised Purchaser that
the Sellers are reserving their right to exchange any Property for other property of like kind and
qualifying use within the meaning of Section 1031 of the Code, and the regulations promulgated
thereunder. The Sellers expressly reserve the right to assign rights, but not obligations, under
this Agreement to a “Qualified Intermediary” as provided in such regulations on or before the
Closing Date. Purchaser agrees to cooperate with the Sellers to effectuate such exchange but
Purchaser shall assume no liability or incur any expense in connection therewith. The Sellers
shall pay all costs and advance all funds required in connection with such exchange and shall
jointly and severally indemnify, defend, and hold Purchaser harmless from all claims, damages,
liabilities, costs and expenses (including, but not limited to reasonable legal fees) in connection
with such exchange. Purchaser shall in no event be required to take title to the exchanged
property.

     30. Bulk
Transfers. The Sellers and Purchaser specifically waive compliance with any
bulk sales provisions of the Uniform Commercial Code as in effect on the Closing Date in each of
the states in which any Property is located. In the event such waiver is ineffective, the Sellers
shall indemnify Purchaser for any claims made by creditors under the applicable bulk sales laws
relating solely to any pre-Closing payment obligations to such creditors and only in the amount of
the payments due such creditors. The provisions of this Section 30 shall survive the Closing.

     31. Saturdays,
Sundays, Legal Holidays. If the time period by which any right, option,
or election provided under this Agreement must be exercised or by which any acts or payments
required hereunder must be performed or paid, or by which the Closing must be held, expires on a
Saturday, Sunday, or legal or bank holiday, then such time period shall be automatically extended
to the next regularly scheduled Business Day.

 

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     32. Attorneys’
Fees. If any litigation between any Seller and Purchaser shall arise in
connection with this Agreement, then the substantially prevailing party shall be entitled to the
payment by
the other party of the substantially prevailing party’s actual reasonable attorneys’ fees and
costs related to such litigation.

     33. Staff.

          33.1 Hotel Employees. The Sellers shall cause the Manager to pay all wages, payroll
taxes and fringe benefits (including vacation pay and sick pay) to the extent actually earned or
accrued as well as social security, unemployment compensation, health, life and disability
insurance as well as welfare and pension fund contributions, if any, through the time immediately
prior to the beginning of the “day shift” on the Closing Date and Purchaser shall pay all such
amounts which are earned or accrue for services rendered thereafter. Except as set forth in
Section 33.2, the Sellers shall jointly and severally indemnify, defend and hold Purchaser harmless
from and against any loss, damage, liability, claim, cost or expense (including, without
limitation, reasonable attorneys’ fees) that may be incurred by, or asserted against, Purchaser
after Closing which involves any matter relating to a past or present Hotel Employee concerning
acts or omissions occurring up to the Adjustment Point, including, but not limited to, the payments
required under the prior sentence. Those Hotel Employees who are offered employment by Purchaser
and who accept such offer of employment shall hereafter be referred to as “Transferred
Employees.” The Purchaser shall pay all wages, salaries, payroll taxes and contributions due
in respect of pension and welfare plans, if any, and other fringe benefits, if any, implemented by
Purchaser or its management company for all Transferred Employees which are first earned or first
accrue for services rendered by such Employees to the applicable Hotel from and after the Closing
Date. Purchaser shall indemnify, defend and hold the Sellers harmless from and against any loss,
damage, liability, claim, cost or expense (including, without limitation, reasonable attorney’s
fees) that may be incurred by, or asserted against, any such party after Closing which involves any
matter relating to a Hotel Employee concerning acts or omissions occurring from and after the
Adjustment Point, including, without limitation, any severance obligations and any payment required
to be made by Purchaser under this Section 33. For purposes of this Section 33.1 and Section 33.2,
a loss, damage, liability, claim, cost or expense shall be deemed incurred when the matter giving
rise to the claim occurs (e.g., in the case of life insurance, when the death occurs, in the case
of long-term disability benefits, when the disability first arises and, in the case of a hospital
stay, when the employee first enters the hospital).

          33.2 WARN Act. Purchaser acknowledges that neither the Manager, the Sellers nor the
Operating Lessee is giving any notice under, or otherwise complying with, the Worker Adjustment and
Retraining Notification Act (together with all rules and regulations promulgated thereunder, the
“WARN Act”) or any similar state or local Legal Requirements (including without limitation
the California WARN Act). Purchaser agrees to indemnify and defend the Sellers, the Operating
Lessee and the Manager and their respective affiliates, and hold each of them harmless, from and
against any and all loss, damage, liability, claim, cost or expense (including, without limitation,
reasonable attorneys’ fees) incurred by any of such parties as a result of (i) the failure to

 

62

give
the notices referred to in this Section 33.2 or otherwise comply with the WARN Act or any similar
state or local Legal Requirements (including without limitation the
California WARN Act), including, but not limited to, the closing of any Hotel by Purchaser or
any of its affiliates within a period of ninety (90) days after the Closing Date which would result
in either (a) a “plant closing” as defined in the WARN Act or (b) a violation under other
applicable Legal Requirements (including, without limitation, the California WARN Act) or (ii) the
failure of Purchaser to comply with the provisions of this Section 33.2.

          33.3
Collective Bargaining Agreements. The Purchaser shall assume each Collective
Bargaining Agreement and agree to perform the obligations thereunder arising from and after the
Closing Date.

          33.4
ERISA Section 4204 Compliance. The Collective Bargaining Agreements provide that
the Manager or Interstate, as the case may be, must make contributions to the “multiemployer plan”
(within the meaning of Section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”) (each, a “Multiemployer Plan”) pension funds described in the
Collective Bargaining Agreements (each such fund, a “Fund”). At the Closing, the Purchaser
shall assume the Manager’s or Interstate’s, as the case may be, responsibility for, and shall pay
when due, all contributions required to be made to each Fund with respect to the operations of each
Hotel covered by a Collective Bargaining Agreement for all periods on and after the Closing Date,
and the Purchaser further agrees that it shall make or cause to be made contributions to each Fund
with respect to the operations of the Hotel covered by such Collective Bargaining Agreement for
substantially the same number of contribution base units for which the Manager or Interstate had an
obligation to contribute with respect to such Fund. In addition, with respect to each Fund, the
Purchaser shall take or cause to be taken all actions necessary to comply with Section 4204 of
ERISA, including, without limitation, (i) the posting, prior to the Closing, of a bond or escrow in
an amount, for the period of time and in a form which complies with Section 4204(a)(1)(B) of ERISA,
or (ii) prior to the Closing, the obtaining of a variance from such bonding or escrow requirement
from the Fund or from the Pension Benefit Guaranty Corporation (the “PBGC”), such that the
transfer of contribution obligations to the Purchaser as described above, and the other
transactions contemplated by this Agreement, do not result in a complete or partial withdrawal from
any Fund under ERISA. The Purchaser shall not be obligated to provide any bond or escrow described
above in the event and to the extent that the Purchaser obtains from the PBGC or the applicable
Fund a proper variance or exemption under Section 4204(c) of ERISA and the applicable regulations
thereunder, provided any and all requirements of said variance or exemption are met. The Manager
and Interstate agree to reasonably cooperate with and assist the Purchaser in connection with any
application for such a variance or exemption made by the Purchaser to the PBGC or the Funds. The
Manager, Interstate, MIP Philadelphia, LP, MIP Anchorage, LLC and the Operating Lessee acknowledge
and agree that if (i) the Purchaser completely or partially withdraws from any Fund with respect to
the applicable Hotel within five (5) plan years of such Fund commencing with the first (1st) plan
year of such Fund beginning after the Closing (the “Applicable Period”) and
(ii) the Purchaser fails to

 

63

make any withdrawal liability payment in respect thereof when due,
the Manager, Interstate, MIP Philadelphia, LP (solely with respect to the transactions contemplated
by this Agreement with respect to the Hotel in Philadelphia, Pennsylvania), MIP Anchorage, LLC
(solely with respect to the transactions contemplated by this Agreement with respect to the Hotel
in Anchorage, Alaska) and the Operating Lessee (and, to the extent required by Section 4204 of
ERISA, each other member of their respective “controlled groups,” as determined under Section
4001(a)(14)(A) of ERISA, as in effect at the Closing) shall be secondarily liable to such Fund in
an amount equal to the withdrawal liability that the Manager, Interstate or any of them would have
had to such Fund under Part 1 of Subtitle E of ERISA as of the Closing with respect to the
applicable Hotel (but for the application of Section 4204 of ERISA to the transactions contemplated
by this Agreement). If the Purchaser (or any successor) shall withdraw (whether in a complete or
partial withdrawal) from a Fund during the Applicable Period with respect to such Fund, the
Manager, Interstate, the Operating Lessee, the Sellers and their respective affiliates shall each
have the right, but not the obligation, to pay the Purchaser’s (or the successor’s, as the case may
be) withdrawal liability with respect to such Fund, in which event, and in addition to any and all
other remedies available hereunder, the Purchaser shall indemnify the party making such payment for
(i) the cost of such payment and (ii) all related claims, damages, losses, liabilities, costs and
expenses (including reasonable attorneys’ fees). The Purchaser shall in all events indemnify,
defend and hold harmless the Manager, Interstate, the Operating Lessee, the Sellers, their
affiliates and the members of their respective “controlled groups,” as determined under Section
4001(a)(14)(A) of ERISA from and against any and all claims, damages, losses, liabilities, costs
and expenses (including reasonable attorneys’ fees) which any of them may incur as a result of the
complete or partial withdrawal by the Purchaser (or any successor) from such Fund with respect to
the applicable Hotel or the failure by the Purchaser (or any successor) to make contributions or
withdrawal liability payment to such Fund when due with respect to all periods on and after the
Closing Date. The parties to this Agreement shall cooperate to effectuate the application of the
provisions of Section 4204 of ERISA to the transactions contemplated by this Agreement.

          33.5 Survival. The provisions of this Section 33 shall survive the Closing.

     34. Indemnification.
Any party entitled to indemnification by the other party pursuant
to any provision of this Agreement or under any instrument or document executed and delivered
pursuant hereto (the “Protected Party”) shall give prompt notice to the other party (the
“Indemnifying Party”) of any claim, demand or action asserted, made or instituted against
the Protected Party which is covered by such indemnification; provided, however, that the Protected
Party’s failure to do so shall not relieve the Indemnifying Party of its indemnification
obligations except to the extent that the Indemnifying Party has been materially prejudiced by such
failure. The Indemnifying Party shall have the right, by notice to the Protected Party, to assume
the defense of any claim, demand or action with
respect to which the Protected Party is entitled to indemnification hereunder, but only if, in
such notice, the Indemnifying Party acknowledges that such claim, demand or action is covered by
the indemnity in question.

 

64

If the Indemnifying Party gives such notice, (i) such defense shall be
conducted by counsel selected by the Indemnifying Party and approved by the Protected Party, such
approval not to be unreasonably withheld or delayed (provided, however, that the Protected Party’s
approval shall not be required with respect to counsel designated by the Indemnifying Party’s
insurer), (ii) so long as the Indemnifying Party is conducting such defense with reasonable
diligence, the Indemnifying Party shall have the right to control said defense and shall not be
required to pay the fees or disbursements of any counsel engaged by the Protected Party for
services rendered after the Indemnifying Party has given the notice provided for above to the
Protected Party or prior to the time that the Protected Party has given to the Indemnifying Party
the notice required by the first sentence of this Section 34, and (iii) the Indemnifying Party
shall have the right, without the consent of the Protected Party, to settle such claim, demand or
action, but only provided that the Indemnifying Party pays all amounts due in connection with or by
reason of such settlement and, as part thereof, the Protected Party is unconditionally released
from all liability in respect of such claim, demand or action. The Protected Party shall have the
right to participate in the defense of any claim, demand or action being defended by the
Indemnifying Party at the expense of the Protected Party, but the Indemnifying Party shall have the
right to control such defense. In no event shall the Protected Party (a) settle any such claim,
demand or action without the consent of the Indemnifying Party or (b) if any such claim, demand or
action is covered by the Indemnifying Party’s liability insurance, take or omit to take any action
which would cause the insurer not to defend such claim, demand or action or to disclaim liability
in respect thereof. The provisions of this Section 34, shall survive the Closing or any
termination of this Agreement.

     35. USA
Patriot Act. None of the funds to be used for payment of the Purchase Price
will be subject to 18 U.S.C. §§ 1956-1957 (Laundering of Money Instruments), 18 U.S.C. §§ 981-986
(Federal Asset Forfeiture), 18 U.S.C. §§ 881 (Drug Property Seizure), Executive Order Number 13224
on Terrorism Financing, effective September 24, 2001, or the USA PATRIOT Act. Neither the
Purchaser nor any of the Sellers is, and at Closing neither Purchase nor any of the Sellers nor any
persons or entities owning direct or indirect controlling equity interests of any of the foregoing
entities shall be, persons or entities with whom U.S. persons are restricted from doing business
with under the regulations of the Office of Foreign Asset Control (“OFAC”) of the
Department of Treasury (including those named on OFAC’s Specially Designated and Blocked Persons
list) or under any statute, executive order (including the September 24, 2001 Executive Order
Blocking Property and Prohibiting Transaction With Persons Who Commit, Threaten to Commit, or
Support Terrorism), the USA PATRIOT Act, or other governmental action.

     36. Tort Indemnity. The Seller’s and the Operating Lessee shall indemnify, defend and hold harmless Purchaser and
its permitted assignees from and against any reasonable third party out-of-pocket cost or expense
incurred by Purchaser or its permitted assignees (including reasonable attorney’s fees) arising
from third-party personal injury claims commenced after the Closing (or prior to the Closing to
which the Purchaser is joined after the Closing Date) but only to the extent (x) the alleged injury

 

65

occurred prior to the Closing, (y) such claim(s) is filed within one year from and after the
Closing Date and (z) Purchaser notifies the Sellers of such claim(s) within one year and thirty
(30) days from the Closing Date. In no event shall the foregoing indemnity apply to injuries which
occur after the Closing even if the conditions which allegedly gave rise to, or contributed to,
such injury existed prior to the Closing. The provisions of this Section 36 shall survive the
Closing.

     37. Highway
Access. Access to a public road in Pennsylvania may require issuance of a
highway occupancy permit from the Pennsylvania Department of Transportation and/or from the Streets
Department of the City of Philadelphia.

     38. Successors and Assigns This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns, provided, however, that none of the representations or
warranties made by the Sellers or Operating Lessee hereunder shall inure to the benefit of any
person or entity that may succeed to Purchaser’s (or its designee’s) interest in any Property after
the Closing Date (other than to designees permitted under Section 24). The provisions of this
Section 38 shall survive the Closing.

     39. Real Estate Reporting Person The Title Company is hereby designated the “real
estate reporting person” for purposes of Section 6045 of Title 26 of the United States Code and
Treasury Regulation 1.6045-4 and any instructions or settlement statement prepared by Title Company
shall so provide. Upon the consummation of the transactions contemplated by this Agreement, Title
Company shall file Form 1099 information return and send the statement to the Sellers as required
under the aforementioned statute and regulation. The Sellers and Purchaser shall promptly furnish
their federal tax identification numbers to Title Company and shall otherwise reasonably cooperate
with Title Company in connection with Title Company’s duties as real estate reporting person.

 

66

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first
above written.

	 	 	 	 	 
	 	SELLERS:

MIP BLOOMINGTON, LLC,

a Delaware limited liability company

 	 
	 	By:  	/S/ CHRISTOPHER BENNETT
 	 
	 	 	Name:  	Christopher Bennett 	 
	 	 	Title:  	Secretary 	 
	 
	 	MIP IOWA CITY, LLC

a Delaware limited liability company

 	 
	 	By:  	/S/ CHRISTOPHER BENNETT
 	 
	 	 	Name:  	Christopher Bennett 	 
	 	 	Title:  	Secretary 	 
	 
	 	MIPS SAN DIEGO, LLC

a Delaware limited liability company

 	 
	 	By:  	/S/ CHRISTOPHER BENNETT
 	 
	 	 	Name:  	Christopher Bennett 	 
	 	 	Title:  	Secretary 	 
	 
	 	MIP TRUMBULL, LLC

a Delaware limited liability company

 	 
	 	By:  	/S/ CHRISTOPHER BENNETT
 	 
	 	 	Name:  	Christopher Bennett 	 
	 	 	Title:  	Secretary 	 

R-66

 

67

	 	 	 	 	 

	 	 	 	 	 
	 	MIP ANCHORAGE, LLC,

a Delaware limited liability company

 	 
	 	By:  	/S/ CHRISTOPHER BENNETT
 	 
	 	 	Name:  	Christopher Bennett 	 
	 	 	Title:  	Secretary 	 
	 
	 	MIP WALNUT CREEK, LLC

a Delaware limited liability company

 	 
	 	By:  	/S/ CHRISTOPHER BENNETT
 	 
	 	 	Name:  	Christopher Bennett 	 
	 	 	Title:  	Secretary 	 
	 
	 	MIP PHILADELPHIA, LP,

a Pennsylvania limited partnership

 	 
	 	By:  	MIP Philadelphia GP, Inc.,
 	 
	 	 	a Delaware corporation, 	 
	 	 	its general partner 	 
	 
	 	 	 
	 	By:  	                                                  /S/ CHRISTOPHER BENNETT
 	 
	 	 	Name:  	Christopher Bennett 	 
	 	 	Title:  	Secretary 	 
	 
	 	PURCHASER:

ASHFORD HOSPITALITY LIMITED PARTNERSHIP, 
a
Delaware limited partnership

 	 
	 	By:  	Ashford OP General Partner LLC,
 	 
	 	 	a Delaware limited liability company,  	 
	 	 	its general partner 	 
	 

	 	 	 	 	 
	 	 	 
	 	   By:  	 /S/ DAVID BROOKS
 	 
	 	 	Name:  	David Brooks 	 
	 	 	Title:  	Vice President 	 

R-67

 

68

	 	 	 	 	 

     The undersigned is executing this Agreement solely to acknowledge its obligations under this
Agreement:

	 	 	 	 	 	 	 	 	 	 	 
	MIP LESSEE, LP	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	MIP GP, LLC,	 	 	 	 
	 	 	a Delaware limited liability company,	 	 	 	 
	 	 	a general partner	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	/S/ CHRISTOPHER BENNETT	 	 	 	 
	 

	 	 	 	Name:
	 	Christopher Bennett	 	 	 	 
	 

	 	 	 	Title:
	 	Secretary	 	 	 	 

R-68

 

69

     Each of the undersigned is executing this Agreement solely (i) to acknowledge their respective
obligations under Section 33.4 of this Agreement and (ii) in the case of Manager, to agree to
perform any actions which under the provisions of this Agreement are to be performed by the
Manager:

	 	 	 	 	 	 	 	 	 
	INTERSTATE HOTELS & RESORTS, INC.	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:	 	/S/ CHRISTOPHER BENNETT	 	 	 	 
	 

	 	Name:
	 	Christopher Bennett	 	 	 	 
	 

	 	Title:
	 	EVP and General Counsel	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	INTERSTATE MANAGEMENT COMPANY, L.L.C	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	INTERSTATE OPERATING COMPANY, L.P.,	 	 	 	 
	 	 	its member	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	INTERSTATE HOTELS & RESORTS, INC.,	 	 	 	 
	 	 	 	 	a general partner	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/S/ CHRISTOPHER BENNETT	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Christopher Bennett	 	 	 	 
	 

	 	 	 	 	 	Title:
	 	EVP and General Counsel	 	 	 	 

R-69

 

70

     The undersigned is executing this Agreement solely to acknowledge its receipt of the Deposit
and to evidence its agreement to be bound by the provisions of Section 27 hereof:

CHICAGO TITLE INSURANCE COMPANY

	 	 	 	 	 	 	 
	By:

	 	 	 	 
	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}]]