Exhibit 10.2

 

FORM

AMENDED AND RESTATED

MANAGEMENT AGREEMENT

 

by and between

 

 

as “MANAGER”

 

HPT TRS MRP, INC.

 

as “TENANT”

 

Dated as of

 

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ARTICLE I APPOINTMENT OF MANAGER

2

 

 

1.01   Appointment

2

1.02   Management of the Hotels

2

1.03   Services Provided by Manager

5

1.04   Employees

6

1.05   Right to Inspect

7

1.06   Right of Offset

7

 

 

ARTICLE II TERM

8

 

 

2.01   Term

8

 

 

ARTICLE III COMPENSATION OF MANAGER

9

 

 

3.01   Management Fees

9

3.02   Operating Profit

9

 

 

ARTICLE IV ACCOUNTING, BOOKKEEPING AND BANK ACCOUNTS

11

 

 

4.01   Accounting, Interim Payment and Annual Reconciliation

11

4.02   Books and Records

15

4.03   Accounts, Expenditures

16

4.04   Annual Operating Projection

18

4.05   Working Capital

18

4.06   Fixed Asset Supplies

19

 

 

ARTICLE V REPAIRS, MAINTENANCE AND REPLACEMENTS

19

 

 

5.01   Manager’s Maintenance Obligation

19

5.02   Repairs and Maintenance to be Paid from Gross Revenues

20

5.03   Items to be Paid from Reserves

20

5.04   Reserve Estimates

21

5.05   Additional Requirements for Reserve

22

5.06   Ownership of Replacements

22

5.07   Obligation To Provide Additional Reserve Funds

22

5.08   Additional Requirements Relating to Certain Capital Improvements

24

 

 

ARTICLE VI INSURANCE, DAMAGE, CONDEMNATION, AND FORCE MAJEURE

25

 

 

6.01   Insurance

25

6.02   Damage and Repair

29

 

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6.03   Damage Near End of Term

31

6.04   Tenant’s Option to Obtain Insurance

31

6.05   Condemnation

32

6.06   Partial Condemnation

33

6.07   Disbursement of Award

33

6.08   Temporary Condemnation

34

6.09   Allocation of Award

34

6.10   Effect of Condemnation

34

 

 

ARTICLE VII TAXES; OTHER CHARGES

34

 

 

7.01   Real Estate and Personal Property Taxes

34

 

 

ARTICLE VIII OWNERSHIP OF THE HOTELS

36

 

 

8.01   Ownership of the Hotels

36

8.02   No Covenants, Conditions or Restrictions

36

8.03   Liens; Credit

37

 

 

ARTICLE IX DEFAULTS

38

 

 

9.01   Manager Events of Default

38

9.02   Remedies for Manager Defaults

39

9.03   Additional Remedies for Manager Recourse Defaults

41

9.04   Non-Recourse Provision

41

9.05   Good Faith Dispute By Manager

42

9.06   Tenant Events of Default

42

9.07   Remedies for Tenant Defaults

44

9.08   Good Faith Dispute By Tenant

44

9.09   Landlord Defaults

45

 

 

ARTICLE X ASSIGNMENT AND SALE

45

 

 

10.01   Assignment

45

10.02   Sale of the Hotel

47

 

 

ARTICLE XI MISCELLANEOUS

48

 

 

11.01   Right to Make Agreement

48

11.02   Actions By Manager

48

11.03   Relationship

48

11.04   Applicable Law

49

11.05   Recordation

49

11.06   Headings; Section References

49

11.07   Notices

49

11.08   Environmental Matters

50

 

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11.09   Confidentiality

51

11.10   Projections

52

11.11   Actions to be Taken Upon Termination

52

11.12   Trademarks, Trade Names and Service Marks

54

11.13   Waiver

55

11.14   Partial Invalidity

55

11.15   Survival

55

11.16   Negotiation of Agreement

55

11.17   Intentionally Deleted

55

11.18   Entire Agreement

56

11.19   Affiliates

56

11.20   Competing Facilities

56

11.21   Trade Area Restriction

57

11.22   Dispute Resolution; Arbitration and Expert Resolution

57

11.23   Permitted Contests

59

11.24   Estoppel Certificates

60

11.25   Indemnification

60

11.26   Prohibited Transactions

61

11.27   Remedies Cumulative

61

11.28   Amendments and Modifications

61

11.29   Construction; Nonrecourse

61

11.30   Counterparts; Headings

62

11.31   No Political Contributions

62

11.32   Single Agreement

62

11.33   REIT Qualification

62

11.34   Further Compliance With Section 856(d) of the Code

62

11.35   Adverse Regulatory Event

63

11.36   Commercial Leases

64

11.37   Waiver of Jury Trial

64

 

 

ARTICLE XII DEFINITION OF TERMS

64

 

 

12.01   Definition of Terms

64

 

Exhibit A

The Sites

Exhibit B

Trade Area

Addendum

Property Information

 

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THIS AMENDED AND RESTATED MANAGEMENT AGREEMENT (this “Agreement”) is executed as
of the        day of                       (the “Effective Date”), by HPT TRS
MRP, INC., a Maryland corporation (“Tenant”); and
                                        , a                        (“Manager”).

 

R E C I T A L S:

 

A.            HPTMI Properties Trust, a Maryland real estate investment
trust (“Landlord”) is the owner of fee title to the parcels of real property
(the “Sites”) described on Exhibit A attached to this Agreement and incorporated
herein on which certain improvements have been constructed consisting of a
building or buildings containing in each instance the number of Guest Rooms as
specified on the Addenda hereto (as the same shall be amended and revised from
time to time), and certain other amenities and related facilities (the
“Buildings”).  Each Site and the Buildings on each such Site, in addition to
certain other rights, improvements, and personal property, are individually
referred to as a “Hotel” and are collectively referred to as the “Hotels” and
more particularly described in the definition in Section 12.01.  Pursuant to the
Lease, Landlord has leased the Hotels (except for certain assets of Tenant or
Manager included within the definition of Hotels) which are subject to this
Agreement, to Tenant.

 

B.            With respect to each Hotel, Tenant (either directly or by an
assignment and assumption agreement between Tenant and Tenant’s
predecessor-in-interest) and Manager have heretofore entered into a Management
Agreement specified on the Addenda hereto (collectively, the “Prior Management
Agreement”), pursuant to which Manager has managed and operated the Hotels for
the account of Tenant, and Manager has accepted such engagement.  As of the
Effective Date, Tenant and Manager desire to amend and restate the terms and
conditions of the Prior Management Agreement in its entirety, upon the terms and
conditions set forth in this Agreement.

 

C.            Pursuant to the Lease, Tenant has leased other hotels from
Landlord or an Affiliate of Landlord managed by Affiliates of Manager (all
properties subject to the Lease at any given time are collectively, the
“Portfolio Properties”).  Manager and Tenant have agreed that revenues, working
capital, reserves and other items from the Portfolio Properties will be pooled,
disbursed and distributed in accordance with the terms and conditions of the
Pooling Agreement.

 

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

 

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ARTICLE I

 

APPOINTMENT OF MANAGER

 

1.01  Appointment.  Subject to the provisions of this Agreement, Tenant hereby
engages Manager to supervise, direct and control the management, promotion and
operation of the Hotels throughout the Term.  Manager accepts said engagement
and agrees to manage the Hotels during the Term in accordance with the terms and
conditions of this Agreement.  The Hotels shall each be known as a
                                            with such additional identification
as may be necessary to provide local identification.  If the name of the
                               is changed, Manager will change the name of the
Hotels to conform thereto.  All capitalized terms shall have the meaning
ascribed to them in Article XII hereof.

 

1.02  Management of the Hotels.

 

A.                    Manager shall manage and operate the Hotels in an
efficient and economical manner consistent with standards prevailing in other
hotels in the System, including all activities in connection therewith which are
customary and usual to such an operation (all of the foregoing, the “Operating
Standards”).  Manager shall, in connection with the Hotels and in accordance
with the System Standards, the Operating Standards and the terms of this
Agreement, perform each of the following functions (provided that in all cases,
except as otherwise set forth in this Agreement, the costs and expenses of
performing such functions shall be Deductions):

 

1.                     Recruit, employ, supervise, direct and (when appropriate)
discharge all of the employees at the Hotels.

 

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

 

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

 

4.                     Manage expenditures to replenish Inventories and Fixed
Asset Supplies, make payments on accounts payable and collect accounts
receivable.

 

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

 

6.                     Procure all Inventories and replacement Fixed Asset
Supplies.

 

7.                     Prepare and deliver interim accountings, annual
accountings, Annual Operating Projections, Reserve Estimates, and such other
information as is required by this Agreement.

 

8.                     Plan, execute and supervise repairs, maintenance
alterations and improvements at the Hotels.

 

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9.                     Provide, or cause to be provided, risk management
services relating to the types of insurance required to be obtained or provided
by Manager under this Agreement and provide such information related to risk
management by Tenant as Tenant may from time to time reasonably request.

 

10.                   Obtain and keep in full force and effect, either in its
own name or in Tenant’s name, as may be required by applicable law, any and all
licenses and permits to the extent same is within the control of Manager (or, if
same is not within the control of Manager, Manager shall use all due diligence
and reasonable efforts to obtain and keep same in full force and effect).

 

11.                   Reasonably cooperate (provided that Manager shall not be
obligated to enter into any amendments of this Agreement) in any attempt(s):

 

(a)                   to effectuate a Sale of a Hotel under the terms of this
Agreement (provided that nothing herein shall affect the provisions of
Section 10.02); or

 

(b)                   to effectuate a direct or indirect sale or other
disposition of the Landlord’s interest in a Hotel as permitted under the Owner
Agreement; or

 

(c)                   to obtain any Qualified Mortgage.

 

12.                   Subject to the requirements of Section 10.01 hereof,
negotiate and administer, on behalf of Tenant, leases, subleases, licenses and
concession agreements for all public space at the Hotels, including all stores,
office space and lobby space.

 

13.                   On behalf of Tenant, negotiate, enter into and administer
service contracts and licenses for the operation of the Hotels, including
contracts and licenses for health and safety systems maintenance, electricity,
gas, telephone, cleaning, elevator and boiler maintenance, air conditioning
maintenance, laundry and dry cleaning, master television service, use of
copyrighted materials (such as music and videos), entertainment and other
services as Manager deems advisable.

 

14.                   Negotiate, enter into and administer contracts for the use
of banquet and meeting facilities and guest rooms by groups and individuals.

 

15.                   Take reasonable action to collect and institute in its own
name or in the name of Tenant or a Hotel, in each instance as Manager in its
reasonable discretion deems appropriate, legal actions or proceedings to collect
charges, rent or other income derived from the operation of the Hotels or to
oust or dispossess guests, tenants, members or other persons in possession
therefrom, or to cancel or terminate any lease, license or concession agreement
for the breach thereof or default thereunder by the tenant, licensee or
concessionaire.

 

16.                   Make representatives available to consult with and advise
Tenant or Tenant’s designee at Tenant’s reasonable request concerning policies
and procedures affecting the conduct of the business of the Hotels.

 

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17.                   Collect on behalf of Tenant and account for and remit to
governmental authorities all applicable excise, sales, occupancy and use taxes
or similar governmental charges collected by or at the Hotels directly from
guests, members or other patrons, or as part of the sales price of any goods,
services or displays, such as gross receipts, admission or similar or equivalent
taxes, duties, levies or charges.

 

18.                   Keep Tenant advised of significant events which occur with
respect to the Hotels which might reasonably be expected to have a material
adverse effect on the financial performance or value of the Hotels.

 

19.                   Perform such other tasks with respect to the Hotels as are
customary and consistent with the Operating Standards and the System Standards.

 

B.                    The operation of the Hotels shall be under the exclusive
supervision and control of Manager which, except as otherwise specifically
provided in this Agreement, shall be responsible for the proper and efficient
operation of the Hotels.  Subject to the terms of this Agreement, Manager shall
have discretion and control, free from interference, interruption or
disturbance, in all matters relating to management and operation of the Hotels,
including, without limitation, the following:  charges for Guest Rooms and
commercial space; credit policies; food and beverage services; employment
policies; granting of leases, subleases, licenses and concessions for shops and
agencies within the Hotels consistent with the provisions of Section 10.01
hereof; receipt, holding and disbursement of funds; maintenance of bank
accounts; procurement of Inventories (including initial inventories), supplies
and services; promotion and publicity; payment of costs and expenses as are
specifically provided for in this Agreement or are otherwise reasonably
necessary for the proper and efficient operation of the Hotels; and, generally,
all activities necessary for operation of the Hotels.

 

C.                    Manager shall use reasonable efforts to comply with and
abide by all Legal Requirements and Insurance Requirements pertaining to its
operation of the Hotels, provided that Manager shall have the right, but not the
obligation, in its reasonable discretion, to contest or oppose, by appropriate
proceedings, any such laws and regulations in accordance with Section 11.23
hereof.  Except as expressly provided to the contrary in this Agreement, all
costs and expenses of such compliance with respect to each Hotel shall be paid
from Gross Revenues as Deductions in the computation of Operating Profit of such
Hotel or from the Reserve of such Hotel, whichever is applicable, and the
reasonable expenses of any such contest shall be paid from Gross Revenues as
Deductions with respect to such Hotel.

 

D.                    Manager shall use due diligence and exercise commercially
reasonable efforts to obtain and maintain all approvals necessary to use and
operate the Hotels in accordance with the System Standards, Operating Standards
and Legal Requirements.  Tenant shall cooperate with Manager in this regard and,
in connection therewith, shall execute all applications and consents required to
be executed by Tenant in order for Manager to obtain and maintain such
approvals.  All costs incurred by Tenant in this regard shall be included in
Deductions for the applicable Hotel.

 

E.                     Manager shall not use, and shall exercise commercially
reasonable efforts to prevent the use of, the Hotels and Manager’s personal
property used in connection with the

 

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Hotels, if any, for any unlawful purpose.  Manager shall not commit, and shall
use commercially reasonable efforts to prevent the commission, of any waste at
the Hotels.  Manager shall not use, and shall use commercially reasonable
efforts to prevent the use of, the Hotels in such a manner as will constitute an
unlawful nuisance thereon or therein.  Manager shall use commercially reasonable
efforts to prevent the use of the Hotels in such a manner as might reasonably be
expected to impair Tenant’s or Landlord’s title thereto or any portion thereof
or might reasonably be expected to give rise for a claim or claims for adverse
use or adverse possession by the public, as such, or of implied dedication of
the Hotels or any portion thereof.

 

F.                     Manager shall, to the extent within Manager’s control,
use commercially reasonable efforts to cause Tenant to be in compliance with the
Lease, and the costs of the same shall be paid as Deductions for the applicable
Hotel hereunder except as otherwise specifically provided for in this Agreement.

 

1.03  Services Provided by Manager.  Commencing on the Effective Date with
respect to each Hotel and thereafter during the Term, Manager shall cause to be
furnished the following services:

 

A.                    System divisional executive management, divisional
financial planning, divisional contracting, divisional product planning and
development, divisional human resources planning and development, divisional
marketing planning, and services of Manager’s technical and operational experts
making periodic inspection and consultation visits to the Hotels (but
specifically excluding “line management” personnel such as area managers and
services of Manager’s architecture and construction personnel who provide
design, procurement, construction or related services) (collectively, “System
Services”) [each agreement to conform to relevant system services];

 

B.                    Marriott corporate planning and policy services, Marriott
financial planning and corporate financial services, Marriott corporate
executive management, in-house legal services, and protection of the “Marriott”
trade name, logos, trademarks and service marks (“Central Office Services”)
[each agreement to conform to relevant central office services]; and

 

C.                    Certain services which are furnished generally on a
central or regional basis to other hotels in the System which are managed by
Manager, Marriott, or any Affiliate, and which benefit each Hotel as a
participant in the System as follows:  (i) national sales office services;
central operational support for rooms, food and beverage and engineering;
central training services; career development; management personnel relocation;
central safety and loss prevention services; central advertising and promotion
(including direct and image media and advertising administration); consumer
affairs to the extent not charged or allocated directly to a Hotel as a
Deduction; the national and regional reservations system service and inventory
and revenue management services; centralized payroll and accounting services;
computer system development, support and operating costs; central monitoring and
management support from “line management” personnel such as area managers; and
(ii) such additional central or regional services as are or may be, from time to
time, furnished for the benefit of hotels in the System or in substitution for
services now performed at individual hotels which may be more efficiently
performed on a group basis (the items set forth in (i) and (ii) of this
sentence, collectively, “Chain Services”).  Other than the charges for the
national and regional reservation system services, the charges for the Chain
Services which are listed in clause (i) above shall be included

 

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in each Hotel’s First Incentive Management Fee; the charges for the national and
regional reservation system services shall be paid from each Hotel’s Gross
Revenues as Deductions.  Such charges shall be allocated to the Hotels in a
manner consistent with other hotels in the System. [each agreement to conform to
relevant chain services]

 

D.                    Manager shall have the option, at its sole discretion, to
furnish the services described in this Section 1.03 at Marriott headquarters,
Marriott’s regional offices or at other locations.

 

1.04  Employees.

 

A.                    All personnel employed at the Hotels shall at all times be
the employees of Manager.  Subject to the terms of this Agreement, Manager shall
have absolute discretion with respect to all personnel employed at the Hotels,
including, without limitation, decisions regarding hiring (subject to
Section 1.04.B), promoting, transferring, compensating, supervising,
terminating, directing and training all employees at the Hotels, and, generally,
establishing and maintaining all policies relating to employment; provided
however that Manager shall use commercially reasonable efforts to comply with
all Legal Requirements pertaining thereto and not enter into any written
employment agreements with any person which purport to bind the Tenant and/or
purport to be effective regardless of a Termination, without obtaining Tenant’s
consent, which consent may be withheld in Tenant’s sole and absolute
discretion.  Manager shall comply with all Legal Requirements regarding labor
relations; if either Manager or Tenant shall be required, pursuant to any such
Legal Requirement, to recognize a labor union or to enter into a collective
bargaining with a labor union, the party so required shall promptly notify the
other party pursuant to this Section 1.04.  Manager shall indemnify Landlord and
Tenant for all costs and expenses (including reasonable attorneys’ fees)
incurred by either of them if either of them are joined in or made party to any
suit or cause of action alleging that Manager has failed to comply with all
Legal Requirements pertaining to the employment of Manager’s employees at one or
more of the Hotels, the costs of which shall not be a Deduction.

 

B.                    Manager shall have the authority to hire, dismiss or
transfer each Hotel’s general manager; provided, however, that Manager shall
keep Tenant reasonably informed with respect to such actions, including prior
notification to Tenant of Manager’s desire to transfer the general manager, and
shall give Tenant the opportunity to participate in the hiring process with
respect to the general managers as follows:

 

1.                     Manager shall provide Tenant at least thirty (30) days’
prior notice of any proposed hiring of a general manager.  Manager shall consult
with Tenant to obtain any suggestions by Tenant as to the preferred background
and specific expertise of candidates for such Hotel position, which suggestions,
if any, Manager shall utilize in arriving at a preferred profile for candidates
for such position.

 

2.                     Manager shall submit to Tenant for its approval a
reasonably qualified candidate for such position.  Tenant shall have a period of
ten (10) Business Days from its receipt of the applicable candidate’s resume
within which to interview and evaluate such candidate (provided that such
candidate and the necessary representatives of Tenant are reasonably available
during such period of time for such interview or evaluation, and such

 

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candidate shall not be required to provide additional information or undertake
testing of any sort as part of such process).  Tenant shall be deemed to have
approved such candidate unless Manager receives Tenant’s written disapproval of
such candidate within such ten (10) Business Day period.  If Tenant disapproves
the first (1st) candidate (based on the process described above), Manager shall
submit a second (2nd) candidate, using the same process described above.  If
such second (2nd) candidate is disapproved by Tenant (based on the same process
described above), Manager shall submit a third (3rd) candidate, using the same
process as described above.  If Tenant disapproves three (3) candidates for the
position submitted by Manager pursuant to the provisions of this Section 1.04.B,
Manager shall have the right to select the person to be offered the position of
general manager, in Manager’s sole discretion, from the three (3) candidates
proposed to Tenant.

 

C.                    Manager shall decide which, if any, of the employees of
the Hotels shall reside at the Hotels (provided that Tenant’s prior approval
shall be obtained if more than two (2) such employees and their immediate
families reside at any Hotel), and shall be permitted to provide free
accommodations and amenities to its employees and representatives living at or
visiting the Hotels in connection with its management or operation consistent
with the Marriott Companies usual practices for Marriott-managed hotels in the
System.  No person shall otherwise be given gratuitous accommodations or
services without prior joint approval of Tenant and Manager except in accordance
with usual practices of the hotel and travel industry.

 

D.                    Manager shall identify, appoint, assign, instruct and
supervise employees in connection with the operation of the Hotels which Manager
deems necessary or advisable for the operation of the Hotels.

 

1.05  Right to Inspect.  Manager shall permit Landlord and Tenant and their
respective authorized representatives to inspect or show the Hotels during usual
business hours upon not less than twenty-four (24) hours’ notice and to make
such repairs as Landlord is permitted or required to make pursuant to the terms
of the Lease, provided that any inspection or repair by Landlord or its
representatives shall not unreasonably interfere with the use and operation of
the Hotels and further provided that in the event of an emergency as determined
by Landlord in its reasonable discretion, prior notice shall not be required.

 

1.06  Right of Offset.  Manager acknowledges that it shall not have, in any
instance, a right of offset against Tenant’s Priority with respect to any Hotel
under any circumstances (or against Aggregate Tenant’s Priority with respect to
Hotels for which the Pooling Agreement is in effect).  Manager shall have the
right to offset against amounts due to Tenant with respect to any Hotel pursuant
to Section 3.02.B hereof (and against amounts due to Tenant pursuant to
Section 2.02.A of the Pooling Agreement with respect to Hotels for which the
Pooling Agreement is in effect) (but in all events excluding amounts due to
Tenant as Tenant’s Priority or Aggregate Tenant’s Priority), including amounts
(i) which Landlord or Tenant fail to advance to the Reserve for such Hotel which
either of them is required to make as provided for herein or in the Lease or
Owner Agreement (in each instance as determined by the Expert pursuant to
Section 11.22.B, if applicable), or (ii) due under a final judgment against
Tenant obtained by Manager with respect to such Hotel, or (iii) which Tenant
fails to pay to Manager in violation of Section 4.01.D(2) of this Agreement with
respect to such Hotel.  Except as expressly provided herein,

 

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Manager shall not offset against the amounts owed to Tenant hereunder or under
the Pooling Agreement.

 

ARTICLE II

 

TERM

 

2.01  Term.

 

A.                    The Term of this Agreement shall be, for each Hotel, from
the Effective Date hereof to the expiration or earlier termination of the
“Initial Term” and, if exercised in accordance with the terms hereof, the
“Renewal Term(s).”  The Initial Term for each Hotel shall begin on the Effective
Date for such Hotel as set forth in the preceding sentence, and, unless sooner
terminated as provided in this Agreement, shall continue until the last day of
the Fiscal Year ending closest to December 31, 2025.  Provided that (1) Manager
and its Affiliates have renewed all of the Other Management Agreements for the
first Renewal Term or second Renewal Term, as applicable in accordance with
their terms, (2) all of the Franchise Agreements shall have been extended for
the First Renewal Term or the Second Renewal Term, as applicable, and (3) there
exists at the time of renewal no Manager Event of Default under this Agreement
or any of the Other Management Agreements beyond the expiration of any
applicable notice and cure period and for which Tenant has, at such time, the
right to terminate this Agreement, the Term shall thereafter automatically be
extended for each of two (2) successive periods of ten (10) Fiscal Years (each,
a Renewal Term), unless Manager gives Tenant and Landlord written notice of
Manager’s decision not to extend on or before the date which is twelve (12)
months prior to the date of the expiration of the Initial Term or first Renewal
Term (as the case may be), time being of the essence.  If Manager does not
extend the Initial Term or first Renewal Term (as the case may be), then during
such twelve (12) month period prior to the date of the expiration of the Initial
Term or first Renewal Term (as the case may be), Tenant shall have the right to
effect an earlier Termination of this Agreement with respect to such Hotel by
written notice to Manager, which Termination shall be effective as of the
effective date which is set forth in said notice, provided that said effective
date shall be at least one hundred twenty (120) days after the date of said
notice, and in no event earlier than July 1 of the year of such Termination, and
such Termination shall be in accordance with the provisions of Section 11.11 of
this Agreement.  Notwithstanding the foregoing, the parties acknowledge and
agree that Tenant’s termination right pursuant to this Section 2.01A shall only
be exercised with respect to all or none of the Hotels which are subject to this
Agreement.

 

B.                    Each Renewal Term shall commence on the day succeeding the
expiration of the Initial Term or the preceding Renewal Term, as the case may
be.  All of the terms, covenants and provisions of this Agreement shall apply to
each such Renewal Term, except that the Term shall not be extended beyond the
last day of the Fiscal Year ending closest to December 31, 2045.  If Manager
shall give notice that it elects not to extend the term in accordance with this
Section 2.01, this Agreement shall automatically terminate at the end of the
Term then in effect, or such earlier date as provided above, and Manager shall
have no further option to extend the Term of this Agreement.  Otherwise, the
extension of this Agreement shall be automatically effected without the
execution of any additional documents; it being understood and agreed,

 

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however, that Manager and Tenant shall execute such documents and agreements as
either party shall reasonably require to evidence the same.

 

ARTICLE III

 

COMPENSATION OF MANAGER

 

3.01  Management Fees.  In consideration of the services provided to Tenant so
that the Hotels become members of the System and in consideration of the
management services to be performed during the Term, Manager shall be paid, with
respect to each Hotel, the sum of the following as its management fees:

 

A.                    The System Fee;

 

B.                    The First Incentive Management Fee; plus

 

C.                    The Second Incentive Management Fee.

 

So long as the Pooling Agreement has not been terminated in accordance with its
terms with respect to the Hotels, payments of the First Incentive Management Fee
and the Second Incentive Management Fee with respect to periods for which the
Pooling Agreement was in effect shall be made at the time, and in the amounts,
provided for under the Pooling Agreement.  Notwithstanding anything herein to
the contrary, if, in any Fiscal Year or portion thereof prior to the termination
of the Pooling Agreement in accordance with its terms with respect to one or
more of the Hotels, the First Incentive Management Fee or the Second Incentive
Management Fee with respect to such Hotels are not payable in full under the
Pooling Agreement, the Manager shall not be entitled to the payment of the
portion of the First Incentive Management Fee or the Second Incentive Management
Fee not payable under the terms of the Pooling Agreement for such Fiscal Year or
partial Fiscal Year with respect to such Hotels, and in no event shall Tenant be
liable for the payment of any such unpaid portion to Manager.  Notwithstanding
anything herein to the contrary, if, in any Fiscal Year after the termination of
the Pooling Agreement in accordance with its terms or with respect to a Hotel,
the First Incentive Management Fee or the Second Incentive Management Fee with
respect to such Hotel is not payable under Section 3.02.B hereof with respect to
such Hotel, Manager shall not be entitled to the payment of the portion of the
First Incentive Management Fee or the Second Incentive Management Fee not
payable under Section 3.02.B hereof with respect to such Hotel, and in no event
shall Tenant be liable for the payment of such portion of the First Incentive
Management Fee or the Second Incentive Management Fee to Manager with respect to
such Hotel.

 

3.02  Operating Profit.

 

A.                    So long as the Pooling Agreement has not been terminated
in accordance with its terms with respect to one or more of the Hotels,
Operating Profit for such Hotels with respect to periods for which the Pooling
Agreement was in effect shall be distributed, to the extent available, as
provided in the Pooling Agreement and the provisions of Section 3.02.B shall not
apply.

 

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B.                    For any period during the Term after the termination of
the Pooling Agreement in accordance with its terms with respect to one or more
of the Hotels, Operating Profit for each such Hotel shall be distributed in the
following order of priority:

 

1.                     First, to Tenant, in an amount equal to Tenant’s Priority
for such Hotel.

 

2.                     Second, pari passu, to (i) Tenant, in an amount necessary
to reimburse Tenant for all Tenant Working Capital Advances and Tenant Operating
Loss Advances made by Tenant, from time to time (collectively, “Tenant
Advances”) with respect to such Hotel which have not yet been repaid by
distributions pursuant to this Section 3.02.B(2), and (ii) to Marriott, in an
amount necessary to reimburse Marriott or any Affiliate for all Additional
Marriott Advances made by Marriott or any Affiliate (including Manager)
allocable to such Hotel and all Additional Manager Advances from time to time
which have not yet been repaid by distributions pursuant to this
Section 3.02.B(2).  If at any time the amounts available for distribution to
Tenant and Marriott with respect to a Hotel pursuant to this
Section 3.02.B(2) (“Available Funds”) are insufficient (a) to repay to Tenant
all outstanding Tenant Advances with respect to a Hotel (the “Sum Due Tenant”),
and (b) to repay to Marriott all outstanding Additional Marriott Advances and
Additional Manager Advances with respect to a Hotel (the “Sum Due Marriott”),
then (x) Tenant shall be paid from the Available Funds for such Hotel the amount
obtained by multiplying a number equal to the amount of the Available Funds by a
fraction, the numerator of which is the Sum Due Tenant and the denominator of
which is the sum of the Sum Due Tenant plus the Sum Due Marriott, and
(y) Marriott shall be paid from the Available Funds the amount obtained by
multiplying a number equal to the amount of the Available Funds for such Hotel
by a fraction, the numerator of which is the Sum Due Marriott and the
denominator of which is the sum of the Sum Due Tenant plus the Sum Due Marriott.

 

3.                     Third, to Manager, in an amount equal to the First
Incentive Management Fee.

 

4.                     Fourth, to Tenant, in an amount necessary for the
Security Deposit Replenishment with respect to such Hotel.

 

5.                     Fifth, to Manager, in an amount equal to the Second
Incentive Management Fee.

 

6.                     Finally, to Tenant, the balance, if any.

 

C.            For any period during which a Hotel is no longer subject to the
terms of the Pooling Agreement pursuant to the terms thereof, pursuant to
Section 4.03.B below, Tenant shall receive Tenant’s Priority on or before the
first day of each Accounting Period subject, however, to the following terms of
this Section 3.02.C.  If the projected Operating Profit for the applicable
Accounting Period, as determined by Manager, is less than Tenant’s Priority with
respect to such Accounting Period (a “Tenant’s Priority Shortfall”), such
Tenant’s Priority Shortfall shall first be funded by Security Deposit Advances,
and if the Security Deposit is depleted or otherwise insufficient to fund such
Tenant’s Priority Shortfall, then the amount of the Tenant’s Priority Shortfall
required to satisfy the Tenant’s Termination Threshold shall be

 

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funded by Marriott Guaranty Advances for so long as the Marriott Guaranty
Agreement is in effect, or at Manager’s sole election as Additional Manager
Advances.  Any amount of the Tenant’s Priority Shortfall not funded by Marriott
or Manager shall accrue and be paid as provided in Section 4.01 hereof.  If
Manager or Marriott elects not to fund up to the Tenant’s Termination Threshold
as provided herein within ten (10) days of receiving written request from
Tenant, Tenant shall have the right to effect a Termination of this Agreement
with respect to such Hotel by written notice to Manager, which Termination shall
be effective as of the effective date which is set forth in said notice,
provided that said effective date shall be at least thirty (30) days after the
date of said notice.  Such Termination (i) shall be in accordance with the
provisions of Section 11.11 of this Agreement, (ii) shall constitute a Manager
Default, and (iii) shall entitle Tenant to all rights and remedies available to
it with respect to a Manager Default as provided for in Article IX hereof. 
Notwithstanding the foregoing, the parties acknowledge and agree that Tenant’s
termination right pursuant to this Section 3.02.C shall only be exercised with
respect to all or none of the Hotels which are subject to this Agreement.

 

ARTICLE IV

 

ACCOUNTING, BOOKKEEPING AND BANK ACCOUNTS

 

4.01  Accounting, Interim Payment and Annual Reconciliation.

 

A.                    Within twenty (20) days after the close of each Accounting
Period, Manager shall deliver an interim accounting (the “Accounting Period
Statement”) to Tenant and Landlord showing for each Hotel, Gross Revenues, Gross
Room Revenues, occupancy percentage and average daily rate, Deductions,
Operating Profit, and applications and distributions thereof for the preceding
Accounting Period.

 

Only if the Pooling Agreement has been terminated in accordance with its terms
with respect to one or more Hotels, the following provisions for interim
distributions shall apply with respect to such Hotels for periods subsequent to
the termination date.  Notwithstanding the order of distribution of Operating
Profit set forth in Section 3.02.B, for each Accounting Period, Manager shall,
with each interim accounting, transfer to Tenant any interim amounts due Tenant,
transfer to Marriott any interim amounts due to Marriott, and retain any interim
amounts due to Manager under Section 3.02.B, including, without limitation, the
First Incentive Management Fee calculated on a year-to-date basis for such
Fiscal Year.  If the portion of Operating Profit to be distributed to Tenant
pursuant to Sections 3.02.B(1), (2) or (4) is insufficient to pay each of such
interim amounts then due in full following the end of any Accounting Period, any
such interim amounts left unpaid shall be paid from and to the extent of
Operating Profit available therefor at the time distributions are made following
successive Accounting Periods until such interim amounts are paid in full, and
such payments shall be made from such available Operating Profit in the same
order of priority as other payments made on account of such items following such
Accounting Periods.  If the portion of Operating Profit to be distributed to
Marriott or Manager pursuant to Sections 3.02.B(2), (3) or (5) is insufficient
to pay each of such interim amounts then due in full following the end of any
Accounting Period, any such interim amounts left unpaid shall be paid from and
to the extent of Operating Profit available therefor at the time distributions
are made following successive Accounting Periods until such interim amounts are
paid in full, and such payments shall be made from such available Operating
Profit in the same

 

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order of priority as other payments made on account of such items following such
Accounting Periods.  The portion of Operating Profit to be distributed as
interim distributions to Tenant as Tenant’s Priority and as a Security Deposit
Replenishment pursuant to Section 3.02.B for the then current Fiscal Year for
each Hotel, as well as the portion of Operating Profit to be retained by Manager
as the First Incentive Management Fee and Second Incentive Management Fee
pursuant to Section 3.02B for each Hotel, shall be determined by applying in
each instance a cumulative prorated amount to such Tenant’s Priority, Security
Deposit Replenishment, First Incentive Management Fee and Second Incentive
Management Fee (calculated on a year-to-date basis, with the prorated amount
being one-thirteenth (1/13) of the total amount for each of such items for each
Accounting Period of each Fiscal Year) to the year-to-date cumulative Operating
Profit of such Hotel (all such portions being hereinafter collectively referred
to as the “Prorated Portions”).  In each Accounting Period after the first
Accounting Period of a Fiscal Year, inclusive, the Prorated Portions shall be
adjusted to reflect distributions to Tenant, and retention by Manager, of
Operating Profit with respect to such Prorated Portions for prior Accounting
Periods during the then current Fiscal Year.  All the distributions shall be
made in the order of priority as set forth in Section 3.02 hereof.

 

B.                    Intentionally Deleted.

 

C.                    1.     Calculations and payments of the First Incentive
Management Fee, the Second Incentive Management Fee, and Tenant’s Priority for
each Hotel and distributions of Operating Profit made with respect to each
Accounting Period within a Fiscal Year for each Hotel shall be accounted for
cumulatively within a Fiscal Year, but shall not be cumulative from one Fiscal
Year to the next.  Calculations and payments of Reimbursable Advances and the
Security Deposit Replenishment shall be accounted for cumulatively within a
Fiscal Year, and shall be cumulative from one Fiscal Year to the next.

 

2.                     Within sixty (60) days after the end of each Fiscal Year,
Manager shall deliver to Tenant and Landlord a statement (the “Annual Operating
Statement”) in reasonable detail summarizing the operations of the Hotels with
respect to which this Agreement was in effect for the immediately preceding
Fiscal Year and an Officer’s Certificate certifying that such Annual Operating
Statement is true and correct.  The parties shall, within ten (10) Business Days
after Tenant’s receipt of such statement, make any adjustments, by cash payment,
in the amounts paid or retained for such Fiscal Year as are needed because of
the final figures set forth in such Annual Operating Statement; provided,
however, that for any period prior to the termination of the Pooling Agreement
in accordance with its terms with respect to any of the Hotels, the year-end
adjustments for such Hotel shall be made pursuant to the Pooling Agreement. 
Such final accounting shall be controlling over the interim accountings and
shall be final subject to adjustments required as a result of an audit requested
by Landlord or Tenant below.  No adjustment shall be made for any Operating Loss
or Operating Profit for any Hotel in a preceding or subsequent Fiscal Year.

 

D.                    1.     In addition, on or before April 30 of each Fiscal
Year, commencing on April 30, 2012, Manager shall deliver to Tenant and Landlord
an Officer’s Certificate setting forth the totals of Gross Revenues, Deductions,
and the calculation of the First Incentive Management Fee, the Security Deposit
Replenishment and the Second Incentive Management Fee for each Hotel with
respect to which this Agreement was in effect for the preceding Fiscal

 

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Year.  If Tenant desires, at its own expense, that an audit be delivered with
the delivery of an Officer’s Certificate, Tenant shall notify Manager in writing
no later than February 1 of the Fiscal Year in which such Officer’s Certificate
will be delivered.  Such audit shall be completed by a firm of independent
certified public accountants proposed by Manager and approved by Tenant and
Landlord (which approval shall not be unreasonably withheld or delayed).  Any
dispute concerning the correctness of an audit shall be settled by an Expert in
accordance with Section 11.22.B.  Manager shall pay the cost of any such audit
revealing an understatement of Operating Profit by more than five percent (5%),
and such amount shall not be a Deduction.

 

2.             If the Security Deposit Replenishment or any other amounts due to
Tenant as shown in the Officer’s Certificate provided in Section 4.01.D(1) above
for any Hotel exceed the amounts previously paid with respect thereto to Tenant,
Manager shall promptly pay such excess to Tenant at such time as the Officer’s
Certificate is delivered, together with interest at the Disbursement Rate, which
interest shall accrue from the close of such preceding Fiscal Year until the
date that such certificate is required to be delivered and, thereafter, such
interest shall accrue at the Overdue Rate, until the amount of such difference
shall be paid or otherwise discharged.  Manager shall notify Tenant of such
payment and the amount thereof and Manager shall promptly render a statement to
Tenant setting forth the adjustments required to be made to the distributions
under Section 3.02.B for such Fiscal Year and the parties shall promptly make,
and cause their respective Affiliates to make, any adjustments or additional
payments or reimbursements required to comply with such revised statement.  If
the Security Deposit Replenishment due as shown in the Officer’s Certificate for
any Hotel is less than the amount previously paid with respect thereto to
Tenant, Tenant shall within ten (10) Business Days of receipt of written request
from Manager, pay such excess to Manager, together with interest at the
Disbursement Rate, which interest shall accrue from the date of such overpayment
until it is repaid.  Manager shall notify Tenant of the requirement of such
payment and the amount thereof and Manager shall promptly render a statement to
Tenant setting forth the adjustments required to be made to the distributions
under Section 3.02.B for such Fiscal Year and the parties shall promptly make,
and cause their respective Affiliates to make promptly, any adjustments or
additional payments or reimbursements required to comply with such revised
statement.

 

E.                     To the extent there is an Operating Loss for any
Accounting Period for any Hotel, Tenant shall have the right, without any
obligation and in its sole and absolute discretion, to advance funds required to
fund such deficiency within twenty (20) days after Manager has delivered written
notice thereof to Tenant; provided, however, during any period in which any
Hotel is subject to the Pooling Agreement the determination of any Operating
Loss for such Hotel shall be made based on the aggregate of the Operating Profit
and Operating Losses of all Portfolio Properties and Tenant’s rights shall be
governed by the terms and provisions of the Pooling Agreement.  Any Operating
Loss so funded by Tenant shall constitute a “Tenant Operating Loss Advance.”  If
Tenant does not fund such Operating Loss, Manager shall also have the right,
within twenty (20) days after such initial twenty (20) day period, without any
obligation and in its sole and absolute discretion, to advance funds required to
fund such Operating Loss, and any such advance shall constitute an Additional
Manager Advance with respect to such Hotel.  Tenant Operating Loss Advances
shall be repaid in accordance with Section 3.02.B(2) hereof, and Additional
Manager Advances shall be repaid in accordance with Section 3.02.B(2) hereof. 
If neither party elects to advance funds required to fund such deficiency
pursuant to this Section 4.01.E, either party may elect by written notice to the
other to

 

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terminate this Agreement with respect to such Hotel, which termination shall be
effective thirty (30) days after the date such notice is given (such notice to
be given no later than thirty (30) days after the last date by which Manager may
elect to fund such Operating Loss) and otherwise in accordance with the
provisions of Section 11.11 hereof.  Such Termination (i) shall be in accordance
with the provisions of Section 11.11 of this Agreement, (ii) shall constitute a
Manager Default, and (iii) shall entitle Tenant to all rights and remedies
available to it with respect to a Manager Default as provided for in Article IX
hereof; provided, however, as a condition to Manager so electing to terminate
this Agreement with respect to such Hotel, Marriott shall make a binding written
offer to Tenant and Landlord to terminate the Franchise Agreement for such Hotel
and the Owner’s Agreement to the extent the same relates to the Hotel without
cost or penalty to Tenant or Landlord, which offer shall be irrevocable for a
period of one hundred twenty (120) days after such termination.

 

F.                     Intentionally Deleted.

 

G.                    1.     In addition, Manager shall provide Landlord and
Tenant with information relating to the Hotels and public information relating
to Manager and its Affiliates that (a) may be required in order for Landlord or
Tenant as the case may be to prepare financial statements in accordance with
GAAP or to comply with applicable securities laws and regulations and the SEC’s
interpretation thereof, (b) may be required for Tenant or Landlord to prepare
federal, state or local tax returns, or (c) is of the type that Manager
customarily prepares for other hotel owners; provided, however, that (i) Manager
reserves the right, in good faith, at Manager’s expense, to challenge and
require Landlord and Tenant to use commercially reasonable efforts to challenge
any assertion by the SEC, any other applicable regulatory authority, or
Landlord’s or Tenant’s independent public accountants that applicable law,
regulations or GAAP require the provision or publication of Proprietary
Information, (ii) Landlord and Tenant shall not, without Manager’s consent
(which consent shall not be unreasonably withheld, delayed or conditioned),
acquiesce to any such challenged assertion until Landlord and Tenant have
exhausted all reasonable available avenues of administrative review, and
(iii) Landlord and Tenant shall consult with Manager in pursuing any such
challenge and will allow Manager to participate therein, at Manager’s expense,
if and to the extent that Manager so elects.  Landlord and Tenant acknowledge
that the foregoing does not constitute an agreement by Manager either to join in
Landlord and Tenant filing with or appearance before the SEC or any other
regulatory authority or to take or consent to any other action which would cause
Manager to be liable to any third party for any statement or information other
than those statements incorporated by reference pursuant to clause (a) above.

 

2.                     Subject to such Person entering into a confidentiality
agreement with Manager as Manager may reasonably require, Tenant may at any
time, and from time to time, provide copies of any of the statements furnished
under this Section 4.01 to any Person which has made or is contemplating making
a Qualified Mortgage, or another lender, or a prospective lender with respect to
one or more of the Hotels.

 

3.                     In addition, Landlord and Tenant shall have the right,
from time to time at Landlord’s or Tenant’s (as the case may be) sole cost and
expense, upon reasonable written notice, during Manager’s customary business
hours, to cause Manager’s books and records with respect to the Hotels to be
audited by auditors selected by Landlord or Tenant (as

 

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the case may be) at the place or places where such books and records are
customarily kept, provided that, prior to conducting such audit, Landlord or
Tenant, as the case may be, shall enter into a confidentiality agreement with
Manager, such agreement to be in form and substance reasonably satisfactory to
Landlord or Tenant (as the case may be) and Manager.

 

4.02  Books and Records.

 

A.                    Books of control and account pertaining to operations at
the Hotels shall be kept on the accrual basis and in all material respects in
accordance with the Uniform System of Accounts and with GAAP (provided that, to
the extent of a conflict between the two, GAAP shall control over the Uniform
System of Accounts), or in accordance with such industry standards or such other
standards with which Manager and its Affiliates are required to comply from time
to time, with the exceptions, if any, provided in this Agreement and the Pooling
Agreement, to the extent applicable which will accurately record the Gross
Revenues of the Hotels and applications thereof.  Manager shall retain, for at
least three (3) years after the expiration of each Fiscal Year, reasonably
adequate records showing Gross Revenues and applications thereof for the Hotels
for such Fiscal Year (which obligation shall survive termination hereof).

 

B.                    Tenant may at reasonable intervals during Manager’s normal
business hours examine such books and records including, without limitation,
supporting data and sales and excise tax returns.  If Tenant desires, at its own
expense, to audit, examine, or review the annual operating statement which is
described in Section 4.01.C(2), Tenant shall notify Manager in writing within
one (1) year after receipt of such statement of its intention to audit and begin
such audit within such one (1) year after Manager’s receipt of such notice. 
Tenant shall use commercially reasonable efforts to complete such audit as soon
as practicable after the commencement thereof, subject to reasonable extension
if Tenant’s or its accountant’s inability to complete the audit within such time
is caused by Manager.  If Tenant does not make such an audit, then such
statement shall be deemed to be conclusively accepted by Tenant as being
correct, and Tenant shall have no right thereafter, except for adjustments made
pursuant to an audit requested by Landlord under the Owner Agreement or in the
event of fraud by Manager, to question or examine the same.  If any audit by
Tenant or Landlord as aforesaid (1) discloses an understatement of any net
amounts due Tenant and its Affiliates, in the aggregate, hereunder (and, prior
to the termination of the Pooling Agreement in accordance with its terms with
respect to the Hotels and the Other Management Agreements for the Fiscal Year in
question) Manager shall, and shall cause its Affiliates, to promptly pay Tenant
such net amounts found to be due, plus interest thereon at the Overdue Rate from
the date such amounts should originally have been paid, or (2) discloses that
Manager and its Affiliates have not received, in the aggregate, any net amounts
due them hereunder (and, prior to the termination of the Pooling Agreement in
accordance with its terms with respect to the Hotels and the Other Management
Agreements for the Fiscal Year in question), Tenant shall, and shall cause its
Affiliates, to promptly pay Manager such net amounts, plus interest thereon (at
the Prime Rate plus one percent (1%) per annum) from the date such amounts
should originally have been paid.  Manager shall promptly after completion of
the adjustments required as a result of any such audit, render a statement to
Tenant setting for that adjustments required to be made to the distributions
under Section 3.02.B for such Fiscal Year which reflect all adjustments made to
the amounts due Tenant, Marriott and/or Manager as a result of such audit and
the parties shall make and cause their respective Affiliates

 

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to make any adjustments or additional payments or reimbursements required to
comply with such revised statement.  Any dispute concerning the correctness of
an audit shall be settled by the Expert in accordance with Section 11.22.B. 
Manager shall pay the cost of any audit revealing understatement of Operating
Profit by more than three percent (3%), and such amount shall not be a Deduction
from Gross Revenues.

 

C.                    Manager shall have the right, at its option, to provide
Tenant with automated delivery, in electronic format, of the data required under
Sections 4.01.A, 4.01.C(2), 4.01.D(1), 4.02.A and 4.04 (consistent with the
then-current standard operating procedures generally employed by Manager with
respect to other hotels in the System), which delivery may be by means of a link
to an intranet website of Manager or an Affiliate provided contemporaneous
notice of the posting of data is provided to Tenant via electronic mail to a
person designated in writing by Tenant to Manager.  The parties shall cooperate
reasonably with each other in order to adapt to new technologies that may be
available with respect to the transmission of such data.

 

4.03  Accounts, Expenditures.

 

A.                    Tenant irrevocably authorizes and directs Manager to pay
and Manager agrees to pay (or repay, as applicable), without notice, demand or
request therefor, but in each instance subject to the provisions of the Pooling
Agreement, if applicable, and the Marriott Guaranty Agreement, if applicable,
with respect to each of the Hotels:  (1) Tenant’s Priority (which shall be due
on the first Business Day of each Accounting Period) to Tenant when due and
payable hereunder, to the extent of the sufficiency of Operating Profit
therefor, and (2) distributions to Tenant, Marriott and/or Manager with respect
to the Tenant Advances, Additional Marriott Advances and Additional Manager
Advances, (3) the First Incentive Management Fee to itself, (4) the Security
Deposit Replenishment to Landlord, (5) the Second Incentive Management Fee to
itself, and (6) the remaining balance, if any, following such payments to
Tenant, in each of the foregoing instances set forth in this
Section 4.03.A(1) through (6), at the time interim distributions are made
pursuant to Section 4.01 hereof (except as otherwise set forth in
Section 4.03.B(1) below), and to the extent of the sufficiency of, and in the
order of, distribution of Operating Profit under Section 3.02.B.  Subject to
Section 4.03.D, Manager is authorized to, and shall, make all expenditures
required to be made hereunder with respect to the operation of the Hotels, but
only from funds available for such payments under the terms of this Agreement or
under the terms of the Pooling Agreement, if applicable, or under the Marriott
Guaranty Agreement, if applicable.

 

B.                    1.     The parties acknowledge that Tenant, to ensure that
Tenant has sufficient funds timely to pay Minimum Rent due pursuant to the
Lease, must receive, and Manager agrees to pay to Tenant subject to the
sufficiency of funds available therefor pursuant to this Agreement, the Security
Deposit Agreement, and the Marriott Guaranty Agreement (in each case subject to
the terms and provisions of such agreements) and in accordance with
Section 3.02.C hereinabove, Tenant’s Priority on the first day of each
Accounting Period.  As a result, it is possible that Manager will pay Tenant’s
Priority prior to determining whether Operating Profit for such Accounting
Period was adequate to cover such Tenant’s Priority.  If for any given
Accounting Period it is determined that Operating Profit was inadequate to cover
any such

 

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payments of Tenant’s Priority made by Manager with respect to such Accounting
Period, then one of the following shall be applicable:

 

(a)                   if the Guaranty Term had not expired before the first day
of such Accounting Period and Marriott’s obligation to advance funds had not
terminated for any reason pursuant to the terms of the Marriott Guaranty
Agreement (an expiration or termination as aforesaid, hereinafter, a “Guaranty
Termination Event”), then (i) that portion of Tenant’s Priority paid with
respect to such Accounting Period up to the amount of Tenant’s Termination
Threshold with respect to such Accounting Period, not otherwise funded or
required to be funded by a Security Deposit Advance, shall be deemed to be a
Marriott Guaranty Advance made pursuant to the Marriott Guaranty Agreement, and
(ii) the remaining portion of Tenant’s Priority paid with respect to such
Accounting Period in excess of Tenant’s Termination Threshold may be deducted by
Marriott and Manager from any payment of Tenant’s Priority to be made with
respect to any successive Accounting Period until reimbursed to Marriott and
Manager; or

 

(b)                   if a Guaranty Termination Event had occurred prior to the
first day of such Accounting Period, then that portion of Tenant’s Priority paid
with respect to such Accounting Period in excess of the amount of Operating
Profit for such Accounting Period, not otherwise funded or required to be funded
by a Security Deposit Advance, shall be, at Marriott’s option, (i) deemed to
have been funded by Marriott as an Additional Marriott Advance or by Manager as
an Additional Manager Advance, up to the amount of Tenant’s Termination
Threshold, with any amount paid in excess of Tenant’s Termination Threshold to
be deducted by Marriott and Manager from any payment of Tenant’s Priority to be
made with respect to any successive Accounting Period until reimbursed to
Marriott and Manager, or (ii) deducted by Marriott from any payment of Tenant’s
Priority to be made with respect to any successive Accounting Period until
reimbursed to Marriott.

 

2.                     Notwithstanding anything herein to the contrary, within
twenty (20) days after the end of each Accounting Period, Manager or Marriott
shall determine whether either of an Additional Manager Advance, an Additional
Marriott Advance or a Marriott Guaranty Advance (pursuant to the terms of the
Marriott Guaranty Agreement) was made with respect to such Accounting Period,
and if Marriott or Manager has made such an advance with respect to such
Accounting Period, Marriott or Manager shall advise Tenant in writing of the
type and amount of such advance (each such notice, an “Advance Notice”).  Tenant
may, in its sole discretion, elect immediately to repay any Additional Manager
Advance.  This paragraph shall only be applicable with respect to advances made
or deemed made to fund the payment of Tenant’s Priority.

 

C.                    Subject to the terms of the Pooling Agreement, as
appropriate, all escrow reserve accounts and funds derived from the operation of
the Hotels shall be deposited by Manager in a bank account(s) in a bank
designated by Manager.  Withdrawals from said accounts shall be made solely by
representatives of Manager whose signatures have been authorized.  Reasonable
petty cash funds shall be maintained at the Hotels.

 

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D.                    Manager shall not be required to make any advance or
payment hereunder or to or for the account of Tenant except out of funds
available therefor pursuant to the terms of this Agreement except as otherwise
set forth herein or in any of the Incidental Documents, and Manager shall not be
obligated to incur any liability or obligation for Tenant’s account without
assurances satisfactory to Manager that necessary funds for the discharge
thereof will be provided by Tenant.  In any event, if any such liability or
obligation is incurred by Manager for Tenant’s account and Marriott does not
have funds available under the Pooling Agreement or Manager does not have funds
hereunder if the Pooling Agreement is not in effect with respect to the
applicable Hotel to pay such amount on or before twenty (20) days after the end
of the Accounting Period in which such liability or obligation was paid, the
amount advanced to pay such obligation shall be an Additional Manager Advance
which shall be repaid as provided in Section 3.02.B hereof.

 

4.04  Annual Operating Projection.  Manager shall furnish to Tenant for its
review, at least thirty (30) days prior to the beginning of each Fiscal Year (or
such earlier date if that becomes the prevailing practice within the System), a
statement of the estimated financial results of the operation of each such Hotel
for the forthcoming Fiscal Year (“Annual Operating Projection”).  Such
projection shall project the estimated Gross Revenues, departmental profits,
Deductions, and Operating Profit for the ensuing Fiscal Year for each such
Hotel.  Manager agrees to take reasonable steps to ensure that, at Tenant’s
request, qualified personnel from Manager’s staff are available to explain such
Annual Operating Projections to Tenant.  A meeting (or meetings) for such
purpose shall be held, at Tenant’s request, within a reasonable period of time
after the submission to Tenant of the Annual Operating Projection.  Manager will
at all times give good faith consideration to Tenant’s suggestions regarding any
Annual Operating Projection.  Manager shall thereafter submit to Tenant, by no
later than seventy-five (75) days after the beginning of such Fiscal Year, a
modified Annual Operating Projection if any changes are made following receipt
of comments from Tenant.  Manager shall endeavor to adhere to the Annual
Operating Projection.  It is understood, however, that the Annual Operating
Projection is an estimate only and that unforeseen circumstances such as, but
not limited to, the costs of labor, material, services and supplies, casualty,
operation of law, or economic and market conditions may make adherence to the
Annual Operating Projection impracticable, and Manager shall be entitled to
depart therefrom due to causes of the foregoing nature; provided, however, that
nothing herein shall be deemed to authorize Manager to take any action
prohibited by this Agreement or to reduce Manager’s other rights or obligations
hereunder.

 

4.05  Working Capital.

 

A.                    Subject to the terms of the Pooling Agreement, upon
written notice from Manager, Tenant shall have the right, without any obligation
and in its sole and absolute discretion, to advance funds necessary to maintain
Working Capital at levels determined by Manager to be reasonably necessary to
satisfy the needs of the Hotels as their operation may from time to time require
within ten (10) Business Days of such request.  Any such request by Manager
shall be accompanied by a reasonably detailed explanation of the reasons for the
request.  All funds so advanced for Working Capital shall be utilized by Manager
on behalf of Tenant for the purposes of this Agreement pursuant to
cash-management policies established for the System provided, however, that so
long as any of the Hotels are subject to the Pooling Agreement, the Working
Capital for such Hotels will be pooled with working capital provided

 

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under the Other Management Agreements and may be used to fund working capital
needs for all Portfolio Properties.  If Tenant does not advance such additional
Working Capital within ten (10) days after notice, Manager shall have the right,
without any obligation and in its sole and absolute discretion to advance such
additional Working Capital within ten (10) Business Days after such initial ten
(10) day period, and all such advances shall constitute Tenant Working Capital
Advances or Additional Manager Advances, as applicable, and shall be repaid as
provided in Section 3.02.B.2 hereof.  If neither party elects to advance funds
required to fund such deficiency pursuant to this Section 4.05.A, either party
may elect by written notice to the other to terminate this Agreement with
respect to the affected Hotel, which termination shall be effective thirty (30)
days after the date such notice is given and otherwise in accordance with the
provisions of Section 11.11 hereof.  Such Termination (i) shall be in accordance
with the provisions of Section 11.11 of this Agreement, (ii) shall constitute a
Manager Default, and (iii) shall entitle Tenant to all rights and remedies
available to it with respect to a Manager Default as provided for in Article IX
hereof; provided, however, as a condition to Manager so electing to terminate
this Agreement with respect to such Hotel, Marriott shall make a binding written
offer to Tenant and Landlord to terminate the Franchise Agreement for such Hotel
and the Owner’s Agreement to the extent the same relates to the Hotel without
cost or penalty to Tenant or Landlord, which offer shall be irrevocable for a
period of one hundred twenty (120) days after such termination.

 

B.                    Subject to the Pooling Agreement, upon a Termination,
Manager shall disburse to Tenant all Working Capital remaining after payment of
all Deductions and all amounts owed to Manager hereunder and amounts payable by
Tenant hereunder (including funds to be held in escrow under Sections 6.01.F and
11.11.I).

 

4.06  Fixed Asset Supplies.  Any Fixed Asset Supplies that are necessary to
maintain Fixed Asset Supplies at levels determined by Manager to be necessary to
satisfy the needs of each Hotel, as their operation may from time to time
require, shall be paid from Gross Revenues of such Hotel as Deductions.  Such
additional Fixed Asset Supplies shall remain the property of Tenant throughout
the Term of this Agreement and upon Termination, except for Fixed Asset Supplies
purchased by Manager pursuant to Section 11.11.E.

 

ARTICLE V

 

REPAIRS, MAINTENANCE AND REPLACEMENTS

 

5.01  Manager’s Maintenance Obligation.  Except as provided in Section 5.02
hereof, and subject to the availability of sufficient funds in the applicable
Reserves, Manager shall maintain the Hotels including all private roadways,
sidewalks and curbs located thereon in good order and repair, reasonable wear
and tear excepted (whether or not the need for such repairs occurs as a result
of Tenant’s or Manager’s use, any prior use, the elements or the age of the
Hotels, or any portion thereof), and in conformity with Legal Requirements,
System Standards, Operating Standards and any Existing CC&R’s or Future CC&R’s
(which Future CC&R’s must be approved in writing by Manager if the same may be
reasonably expected to interfere in any material way with the operation of or
financial performance of a Hotel).  Except as provided in Section 5.02 hereof,
and subject to the availability of sufficient funds in the applicable Reserve
for each Hotel with respect to capital items, and the sufficiency of Gross
Revenue and Working

 

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Capital for each Hotel otherwise, in each instance, as applicable, Manager shall
promptly make or cause to be made all necessary and appropriate repairs,
replacements, renewals, and additions thereto of every kind and nature, whether
interior or exterior, structural or nonstructural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition existing prior to the
commencement of the Term (concealed or otherwise).  All repairs, renovations,
alterations, improvements, renewals, replacements or additions shall be made in
a good, workmanlike manner, consistent with Manager’s and industry standards for
like hotels in like locales, in accordance with all applicable federal, state
and local statutes, ordinances, by-laws, codes, rules and regulations relating
to any such work.  Subject to the availability of sufficient funds in the
applicable Reserve for each Hotel or otherwise available pursuant to this
Agreement, Manager shall not take or omit to take any action, with respect to
the Hotel (and not the System as a whole) the taking or omission of which would
materially and adversely impair the value of any Hotel or any part thereof for
its use as a hotel.  The cost and expense incurred in connection with Manager’s
obligations hereunder shall be paid either from funds provided by Tenant or
Landlord as provided for herein, Gross Revenues, Working Capital or from the
Reserves, pursuant to Sections 5.02 and 5.03 below.

 

5.02  Repairs and Maintenance to be Paid from Gross Revenues.  Manager shall
promptly make or cause to be made, such routine maintenance, repairs and minor
alterations as it determines are necessary to comply with Manager’s obligations
under Section 5.01.  The phrase “routine maintenance, repairs, and minor
alterations” as used in this Section 5.02 shall include only those which are
normally expensed under GAAP.  The cost of such maintenance, repairs and
alterations shall be paid from Gross Revenue for such Hotel (and not from such
Hotel’s Reserve) and shall be treated as a Deduction in determining Operating
Profit for such Hotel.

 

5.03  Items to be Paid from Reserves.

 

A.                    To the extent funds are in the applicable Reserves for
each Hotel or such funds are provided by Tenant or Landlord under Section 5.07
hereof, Manager shall promptly make or cause to be made, all of the items listed
in Section 5.03.B below as are necessary to comply with Manager’s obligations
under Section 5.01 hereof.  The cost of such items shall be paid from the
applicable Reserve and not from Gross Revenues of a Hotel.

 

B.                    Manager has established for each Hotel, and currently
holds funds in, an interest bearing escrow reserve account (each a “Reserve” and
collectively the “Reserves”), which Reserves shall not be comingled with any
other funds except for the Reserves of other Portfolio Properties, in a bank or
similar institution designated by Manager and reasonably acceptable to Tenant
and Landlord, to cover the cost of:

 

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

 

2.                     Subject to Section 5.02 hereof, routine or non-major
repairs, renovations, renewals, additions, alterations, improvements or
replacements and maintenance to each Hotel which are normally capitalized (as
opposed to expensed) under GAAP, such as exterior and interior repainting;
resurfacing building walls, floors, roofs and parking areas; and replacing
folding walls and the like (but which are not major repairs, alterations,
improvements,

 

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renewals, replacements, or additions to each Hotel’s structure, roof, or
exterior façade, or to its mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems); and

 

3.                     Major repairs, renovations, additions, alterations,
improvements, renewals or replacements to each Hotel including, without
limitation, with respect to its structure, roof, or exterior façade, and to its
mechanical, electrical, heating, ventilating, air conditioning, plumbing or
vertical transportation systems; and

 

4.                     All lease payments for equipment and other personal
property reasonably necessary for the operation of each Hotel; and

 

5.                     Repairs, renewals or replacements, and other expenditures
having a cost, in the aggregate, in excess of $25,000 per Fiscal Year at each
Hotel that are, in each case, not otherwise covered under 1 through 3 above but
are required to comply with Legal Requirements and Insurance Requirements.

 

C.                    After the Effective Date, Manager shall transfer into the
Reserve for each Hotel amounts as provided on the applicable Addendum. 
Transfers into each Reserve shall be made at the time of each interim accounting
described in Section 4.01.A hereof.  All amounts transferred to each Reserve
shall be deducted from Gross Revenues in determining Operating Profit for the
applicable Hotel and shall be deposited in the special Reserve account described
in Section 5.03.B.

 

D.                    Manager shall from time to time, with respect to each
Hotel, make expenditures for the items described in Sections 5.03.B(1), B(2),
B(3), B(4) and B(5), as it deems necessary without the approval of Landlord or
Tenant.  At the end of each Fiscal Year, any amounts remaining in the Reserve
for a Hotel shall be carried forward to the next Fiscal Year.  Proceeds from the
sale of FF&E no longer necessary to the operation of a Hotel shall be added to
the Reserve for such Hotel, and shall not be included in Gross Revenue for such
Hotel.  The Reserves will be kept in interest-bearing accounts, and any interest
which accrues thereon shall be retained in such Reserve.  Neither (1) proceeds
from the disposition of FF&E, nor (2) interest which accrues on amounts held in
the Reserves, shall (a) result in any reduction in the required contributions to
the Reserves set forth in Section 5.03.C above, nor (b) be included in Gross
Revenues.

 

5.04  Reserve Estimates.

 

Manager shall prepare and deliver to Tenant and Landlord for their review, at
the same time the Annual Operating Projection is submitted, an estimate for each
Hotel (each, a “Reserve Estimate”) of the Reserve expenditures necessary during
the forthcoming Fiscal Year for (1) replacements, renewals, and additions to the
FF&E of such Hotel and (2) repairs, renovations, additions, alterations,
improvements, renewals or replacements to such Hotel of the nature described in
Section 5.03.B, for the forthcoming Fiscal Year.  Manager agrees to take
reasonable steps to ensure that, at Tenant’s or Landlord’s request, qualified
personnel from Manager’s staff are available to explain each proposed Reserve
Estimate with respect to expenditures described in Section 5.03.B(3).  A meeting
(or meetings) for such purpose shall be held, at Tenant’s or

 

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Landlord’s request, within a reasonable period of time after the submission to
Tenant or Landlord described in each Reserve Estimate. Any disputes as to items
in each Reserve Estimate for expenditures described in Section 5.03.B(3) shall
be resolved as set forth in Sections 5.07.C and 5.07.D hereof.  Such
expenditures shall be funded from the applicable Reserve to the extent funds are
available therefor or from funds provided under Section 5.07 hereof.

 

5.05  Additional Requirements for Reserve.

 

A.                    All expenditures from the Reserves shall be (as to both
the amount of each such expenditure and the timing thereof) both reasonable and
necessary given the objective that the Hotels will be maintained and operated to
a standard comparable to competitive properties and in accordance with the
Operating Standards and the System Standards.

 

B.                    Manager shall provide to Tenant and Landlord within forty
(40) Business Days after the end of each Accounting Period, a statement setting
forth, on a line item basis, Reserve expenditures made to date and any variances
or anticipated variances and/or amendments from the applicable Reserve Estimate.

 

C.                    Notwithstanding anything contained herein to the contrary,
it is understood and agreed that so long as the Pooling Agreement is applicable
to the Hotels, the Reserves pursuant to this Agreement and the Other Management
Agreements to which the Pooling Agreement is then applicable shall be maintained
and used on a pooled basis such that all Reserve funds shall be deposited in a
single account and Manager and the managers under the Other Management
Agreements may apply any funds therein to any of the Portfolio Properties in
accordance with the terms of this Agreement, the Other Management Agreements,
and the Pooling Agreement.

 

D.                    Other than Tenant’s or Manager’s personal property, all
materials which are scrapped or removed in connection with the making of any
major or non-major repairs, renovation, additions, alterations, improvements,
removals or replacements as described in Section 5.03.B above, or Section 5.08
below should be disposed of by Manager and the net proceeds thereof shall be
deposited in the applicable Reserve and not included in Gross Revenue.

 

5.06  Ownership of Replacements.  All repairs, renovations, additions,
alterations, improvements, renewals or replacements made pursuant to this
Article V, and all amounts kept in the Reserves, shall, except as otherwise
provided in this Agreement, be the property of Tenant or Landlord, as
applicable, as provided under the Lease.

 

5.07  Obligation To Provide Additional Reserve Funds.

 

A.                    Notwithstanding anything contained herein to the contrary,
no expenditures in excess of the applicable Reserves shall be made without the
approval of the Tenant during the last two (2) years of a Lease Term (unless
Tenant has exercised its rights for a renewal term under the Lease) except those
required by reason of or under any Insurance Requirement or Legal Requirement,
or otherwise required for the continued safe and orderly operation of each
Hotel.

 

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B.                    If, at any time, the funds in any Reserve shall be
insufficient or are reasonably projected to be insufficient for necessary and
permitted expenditures thereof, Manager shall give Landlord and Tenant written
notice thereof, which notice shall set forth, in reasonable detail, the nature
of the required or permitted action, the estimated cost thereof (including the
amount which is in excess of the amount of funds in such Reserve) and such other
information with respect thereto as Landlord or Tenant may reasonably require,
and the following shall apply:  Provided that (1) there then exists no Manager
Default which arises from acts or failure to act by Manager with respect to such
Hotel, and (2) Manager shall otherwise comply with the provisions of
Section 5.08 hereof, if applicable, Tenant shall, within thirty (30) Business
Days after such notice, or such later date as Manager may direct by reasonable
prior notice, disburse (or cause Landlord to disburse) such required funds to
Manager for deposit into the Reserves as one or more lump sum contributions, in
which event Tenant’s Priority with respect to such Hotel shall be adjusted as
provided for herein in the definition of Tenant’s Priority and the Addendum for
such Hotel shall be revised in accordance therewith.

 

C.                    If Landlord or Tenant disputes Manager’s request for a
lump sum contribution to a Reserve, Manager shall attempt to resolve such
dispute through negotiation.  If after one meeting (or conference call) of
direct negotiations between Manager and Landlord or Tenant, as applicable, any
party determines that open issues cannot be resolved within sixty (60) days,
such matters shall be settled by the Expert in accordance with Section 11.22.B. 
Tenant and Landlord shall, to the extent possible, identify items in dispute on
a line by line basis.

 

D.                    A failure or refusal by Landlord or Tenant to provide the
additional funds required in accordance with Section 5.07.B above within the
time period set forth in Section 5.07.B (including after any Expert resolution
pursuant to Section 11.22.B, if applicable) shall entitle Manager, at its
option, to notify Landlord and Tenant in writing that Manager may terminate this
Agreement with respect to the applicable Hotel.  Tenant shall promptly
thereafter fund the amounts required to be contributed to such Reserve.  If
Tenant does not deposit in such Reserve the additional funds required in
accordance with Section 5.07.B within thirty (30) days after receipt of such
notice of intent to terminate, Manager may, in its sole and absolute discretion,
(i) provided Landlord’s interest in the Hotel is not then subject to a Qualified
Mortgage or owned by a Person who acquired such interest pursuant to a Qualified
Mortgage (or a deed-in-lieu in connection therewith), elect to terminate this
Agreement with respect to the applicable Hotel by written notice to Tenant and
this Agreement shall terminate with respect to the applicable Hotel as of the
date that is one hundred eighty (180) days after the date of Tenant’s receipt of
Manager’s notice, and which termination shall otherwise be in accordance with
the provisions of Section 11.11 hereof, or (ii) exercise any remedy available at
law or in equity (except as specifically limited herein), or (iii) without
obligation, fund all or a portion of the amounts required to be contributed to
such Reserve (a “Manager Reserve Advance”).  Tenant agrees and authorizes
Manager to make payments to reimburse Manager for such advances, by deducting
such amounts from Operating Profit immediately after distributions of Tenant’s
Priority and prior to any other deduction or other distribution therefrom. 
Notwithstanding the foregoing, the parties acknowledge and agree that while the
Pooling Agreement is in effect with respect to two or more Hotels, Manager’s
termination right pursuant to this Section 5.07.D shall only be exercised with
respect to all or none of the Hotels which are subject to the Pooling Agreement.

 

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5.08  Additional Requirements Relating to Certain Capital Improvements.

 

A.                    Prior to commencing construction of any additions or
modifications to any structural elements of any Hotel, the cost of which is
reasonably estimated to exceed $200,000 (as adjusted as provided below) (a
“Capital Addition”) (other than any Capital Addition which is reasonably
required to be made immediately in order to prevent imminent damage or danger to
person or property or to subject Manager, Tenant or Landlord to criminal
liability), Manager shall submit, to Tenant and Landlord in writing, a proposal
setting forth, in reasonable detail, any such proposed improvement and cost
estimate therefor and shall provide to Tenant and to Landlord such plans and
specifications, and such permits, licenses, contracts and such other information
concerning the same as Landlord or Tenant may reasonably request.  Landlord and
Tenant shall have twenty (20) Business Days to approve or disapprove all
materials submitted to Landlord or Tenant, as the case may be, in connection
with any such proposal.  Failure of Landlord or Tenant to respond to the
Manager’s proposal within twenty (20) Business Days after receipt of all
information and materials requested by Landlord or Tenant (if applicable) in
connection with the proposed improvement shall be deemed to constitute approval
of the same by the failing party.

 

B.                    In the event any dispute shall arise with respect to the
withholding of any approval by either Landlord or Tenant, Manager shall meet
with Landlord and Tenant to discuss the objections of Landlord or Tenant, and
Manager, Landlord and Tenant shall attempt in good faith to resolve any
disagreement relating to the proposal submitted by Manager.  If after sixty (60)
days such disagreement has not been resolved, any party may submit the issue to
the Expert in accordance with Section 11.22.B.  No Capital Addition shall be
made which would tie-in or connect a Hotel with any other improvements on
property adjacent to such Hotel (and not part of the Site) including, without
limitation, tie-ins of buildings or other structures or utilities (other than
connections to public utilities).  Manager shall not finance the cost of any
construction of such improvements by the granting of a lien on, or security
interest in, such Hotel or Manager’s interest therein without the prior written
consent of Landlord, which consent may be in Landlord’s sole discretion.

 

C.                    The $200,000 limit referred to above shall be increased
from time to time to an amount equal to $200,000 multiplied by a fraction, the
denominator of which shall be the Index for the nearest month prior to the
Effective Date and the numerator of which shall be the Index for the nearest
month for which the Index is available prior to the first day of the Accounting
Period in which such determination is being made.

 

D.                    Landlord and Tenant may not withhold their approval of
Capital Addition described in this Section 5.08 with respect to such items as
are (1) required in order for the Hotels to comply with System Standards or
Operating Standards; or (2) required by reason of or under any Insurance
Requirement or Legal Requirement, or otherwise required for the continued safe
and orderly operation of each Hotel.

 

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ARTICLE VI

 

INSURANCE, DAMAGE, CONDEMNATION, AND FORCE MAJEURE

 

6.01  Insurance.

 

A.                    Manager shall at all times during the Term and at any
other times Manager shall be in possession of the Hotels, keep the Hotels and
all property located therein or thereon, insured on behalf of Tenant and
Landlord pursuant to the terms of this Agreement.  Manager shall obtain and
maintain, either with insurance companies of recognized responsibility or by
legally qualifying itself as a self insurer, a minimum of the following
insurance:

 

1.

 

(a)                   “All-risk” property insurance, including insurance against
loss or damage by fire, vandalism and malicious mischief, earthquake, explosion
of steam boilers, pressure vessels or other similar apparatus, now or hereafter
installed in the Hotels, with equivalent coverage as that provided by the usual
extended coverage endorsements, in an amount equal to                         
percent (      %) of the then full Replacement Cost thereof excluding
foundations and excavation (as defined in Section 6.01.C).

 

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(b)                   Notwithstanding the foregoing, (i) if Manager or, if
applicable, Tenant (if pursuant to Section 6.04 hereof, Tenant has exercised its
option to procure and maintain the insurance) cannot procure and maintain
earthquake insurance on commercially reasonable terms and rates, then Manager or
Tenant, as applicable, shall notify the other party in writing and such other
party shall have the right (but not the obligation) to procure and maintain
earthquake insurance on commercially reasonable terms and rates, provided,
however, that the foregoing shall not be construed to require either party to
maintain earthquake insurance if the same is unavailable on commercially
reasonable terms and rates, (ii) the amount of earthquake insurance shall be
procured and maintained with limits adequate to protect the probable maximum
loss, which may not necessarily be 100% of the then full Replacement Cost, and
(iii) such earthquake insurance can be provided through a blanket earthquake
insurance program with limits adequate to protect the regional aggregate
probable maximum loss for all properties under the blanket program;

 

2.                     Business interruption and blanket earnings plus extra
expense under a rental value insurance policy or endorsement covering risk of
loss during the lesser of the first twelve (12) months of reconstruction or the
actual reconstruction period necessitated by the occurrence of any of the
hazards described in Section 6.01(A) above, in such amounts as may be customary
for comparable properties managed or leased by Manager or its Affiliates in the
surrounding area and in an amount sufficient to prevent Landlord or Tenant from
becoming a co-insurer;

 

3.                     Commercial general liability insurance, including bodily
injury and property damage occurring in conjunction with the operations of the
Hotels, and automobile liability insurance on vehicles operated in conjunction
with the Hotels with a combined single limit for each occurrence of not less
than Fifty Million Dollars ($50,000,000);

 

4.                     Flood (if a Hotel is located in whole or in part within
an area identified as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968, as amended, or the Flood Disaster Protection Act of 1973, as amended (or
any successor acts thereto)) and such other hazards and in such amounts as may
be available under the National Flood Insurance Program and customary for
comparable properties in the area;

 

5.                     Worker’s compensation insurance coverage for all persons
employed by Manager at the Hotels with statutory limits and otherwise with
limits of and provisions in accordance with the requirements of applicable
local, state and federal law, and employer’s liability insurance as is
customarily carried by similar employers; and

 

6.                     Such additional insurance as may be required, from time
to time by (A) the Existing CC&R’s in effect on the date hereof and Future
CC&R’s approved in writing by Manager to the extent such approval is required
pursuant to Section 8.02 hereof, or (B) Landlord, or (C) any Mortgagee under a
Qualified Mortgage, and which, with respect to (B) and (C) above, is reasonably
required and customarily carried by comparable lodging properties in the area.

 

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B.                    The insurance herein required may be brought within the
coverage of a so-called blanket policy or policies of insurance carried and
maintained by Tenant (to the extent permitted hereby) or Manager, provided, that
such blanket policies fulfill the requirements contained herein.

 

C.                    “Replacement Cost” as used herein, shall mean the actual
replacement cost of the property requiring replacement from time to time,
including an increased cost of construction endorsement, less exclusions
provided in the standard form of fire insurance policy.  In the event Landlord,
Tenant or Manager believes that the then full Replacement Cost has increased or
decreased at any time during the Term, such party, at its own cost, shall have
the right to have such full Replacement Cost redetermined by an independent
accredited appraiser approved by the other parties, which approval shall not be
unreasonably withheld or delayed.  The party desiring to have the full
Replacement Cost so redetermined shall forthwith, on receipt of such
determination by such appraiser, give written notice thereof to the other
parties.  The determination of such appraiser shall be final and binding on the
parties hereto until any subsequent determination under this Section 6.01.C and
Manager shall forthwith conform the amount of the insurance carried to the
amount so determined by the appraiser.  Such replacement value determination
will not be necessary so long as a Hotel is insured through a blanket
replacement value policy.

 

D.                    All policies of insurance required under Section 6.01.A
shall be carried in the name of Manager.  The property policies required under
Section 6.01.A.1, Section 6.01.A(2), Section 6.01A(4) and
Section 6.01.A(6) shall include Tenant and Landlord as additional insureds as
their interests may appear.  The liability policies required under
Section 6.01.A(3) shall include Tenant and Landlord as additional insureds. 
Upon notice by Tenant or Landlord, as applicable, Manager shall also have the
policies required under Section 6.01.A(1), Section 6.01.A(2),
Section 6.01.A(3) and Section 6.01.A(6) include any Mortgagee as an additional
insured (or as Mortgagee/Loss Payee, as applicable).  Any property losses
thereunder shall be payable to the respective parties as their interests may
appear.  All insurance policies and endorsements required pursuant to this
Section 6.01.A(1) through 6.01.A(4) shall be fully paid for, nonassessable and,
except for umbrella, worker’s compensation, flood and earthquake coverage, shall
be issued by insurance carriers authorized to do business in the State, having a
general policy holder’s rating of no less than B++ in Best’s latest rating
guide.  With respect to the coverages described in Sections 6.01.A(1) through
6.01.A(4), no deductible allocated to a Hotel shall exceed Two Hundred Fifty
Thousand Dollars ($250,000) (excluding the insurance in Section 6.01.A(4) and
other high hazard risks, including, but not limited to, earthquake, flood and
windstorm with respect to which such deductibles shall be in an amount as is
customarily carried by operators of similar facilities).  All loss adjustments
shall be payable as provided in Section 6.01.G. hereof.  All such policies shall
provide Tenant, Landlord and any Mortgagee under a Qualified Mortgage if
required by the same thirty (30) days’ prior written notice of any material
change or cancellation of such policy and the property insurance policies shall
provide for a waiver of subrogation, to the extent available.

 

E.                     Manager shall deliver to Tenant and Landlord certificates
of insurance with respect to all policies so procured and, in the case of
insurance policies about to expire, shall deliver certificates with respect to
the renewal thereof.  All certificates of insurance provided for under this
Section 6.01 shall, to the extent obtainable, state that the insurance shall not
be

 

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canceled or materially changed without at least thirty (30) days’ prior written
notice to the certificate holder per the terms of the policy.  In the event
Manager shall fail to effect such insurance as herein required, to pay the
premiums therefor, or to deliver, within fifteen (15) days of a request
therefor, such certificates to Tenant or any Qualified Mortgage, Tenant shall
have the right, but not the obligation, to acquire such insurance and pay the
premiums therefor, which amounts shall be payable to Tenant, upon demand, as a
Deduction, together with interest accrued thereon at the Overdue Rate (which
interest  shall not be a Deduction, but shall be paid by Manager) from the date
such payment is made until (but excluding) the date repaid.

 

F.                     Insurance premiums and any other costs or expenses with
respect to the insurance or self-insurance required under Section 6.01.A.,
including any Insurance Retention (as defined below), shall be Deductions.  Such
premiums and costs shall be allocated on an equitable basis to the hotels
participating under Manager’s blanket insurance or self-insurance programs. 
Upon Termination, an escrow fund in an amount acceptable to Manager based on
actuarial loss projections for Hotels in the System shall be established from
Gross Revenues and used by Manager to cover the amount of any Insurance
Retention and all other costs which will eventually have to be paid by either
Tenant or Manager with respect to pending or contingent claims, including those
which arise after Termination for causes arising during the Term.  If Gross
Revenues are insufficient to meet the requirements of such escrow fund, then
Tenant shall deliver to Manager, within ten (10) Business Days after receipt of
Manager’s written request therefor, the sums necessary to establish such escrow
fund; and if Tenant fails to timely deliver such sums to Manager, Manager shall
have the right (without affecting Manager’s other remedies under this Agreement)
to withdraw the amount of such expenses from Working Capital provided by Tenant
or any other funds of Tenant held by or under the control of Manager or held by
Marriott under the Pooling Agreement and available to pay Aggregate Deductions
(as defined in the Pooling Agreement).  For purposes of this Section 6.01.F,
“Insurance Retention” shall mean the amount of any loss or reserve under
Manager’s blanket insurance or self-insurance programs which is allocated to the
Hotel, not to exceed the higher of (A) the maximum per occurrence limit
established for similar hotels participating in such programs, or (B) the
insurance policy deductible on any loss which may fall within high hazard
classifications as mandated by the insurer (e.g., earthquake, flood, windstorm
on coastal properties, etc.).  If the Hotel is not a participant under Manager’s
blanket insurance or self-insurance programs, “Insurance Retention” shall mean
the amount of any loss or reserve allocated to the Hotel, not to exceed the
insurance policy deductible.

 

G.                    Except as provided in the last clause of this sentence,
all proceeds payable by reason of any loss or damage to a Hotel, or any portion
thereof, and insured under any policy of property insurance required by
Section 6.01.A(1) and Section 6.01.A(4), inclusive, (other than the proceeds of
any business interruption insurance under Section 6.01.A(2) and liability
insurance under Section 6.01.A(3)) shall be paid directly to Landlord as its
interest may appear (subject to the provisions of Section 6.02) and all loss
adjustments with respect to losses payable to Tenant shall require the prior
written consent of Landlord; provided, however, that so long as no event of
default under the Lease or under this Agreement shall have occurred or be
continuing, all such proceeds less than or equal to Five Hundred Thousand
Dollars ($500,000) shall be paid directly to Manager and such losses may be
adjusted without Landlord’s consent. If Tenant is required to reconstruct or
repair a Hotel as provided herein, such proceeds shall be paid out by Landlord
from time to time for the reasonable costs of reconstruction or repair of the

 

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Hotel necessitated by such damage or destruction, subject to and in accordance
with the provisions of Section 6.02.  Any excess proceeds of insurance shall be
contributed to the Reserve, provided that any such contribution shall not be a
Deduction or otherwise result in any adjustment to Tenant’s Priority hereunder. 
In the event that the provisions of Section 6.02.A are applicable, the insurance
proceeds shall be retained by the party entitled thereto pursuant to
Section 6.02.A.  All salvage resulting from any risk covered by insurance shall
belong to Landlord, provided any rights to the same have been waived by the
insurer.

 

H.                    Insofar as and to the extent that such agreement may be
effective without invalidating or making it impossible to secure insurance
coverage from responsible insurance companies doing business in the State with
respect to any insurance then being carried by Manager, Tenant or Landlord, the
party carrying such insurance or suffering said loss releases Manager, Tenant
and Landlord of and from any and all claims with respect to such loss and such
party further agrees that any insurance companies shall have no right of
subrogation against Tenant, Landlord or Manager on account thereof, even though
extra premium may result therefrom.  In the event that any extra premium is
payable by Tenant as a result of this provision, the same shall be paid from
Gross Revenues or Working Capital as a Deduction.

 

I.                      Manager shall not take out separate insurance,
concurrent in form or contributing in the event of loss with that required by
this Article VI, or increase the amount of any existing insurance by securing an
additional policy or additional policies, which may diminish the proceeds which
will be paid pursuant to the policies required by this Article VI, unless all
parties having an insurable interest in the subject matter of such insurance,
including Tenant, Landlord and all Mortgagees, are included therein as
additional insureds and the loss is payable under such insurance in the same
manner as losses are payable under this policies required by this Article VI. 
In the event Manager shall take out any such separate insurance or increase any
of the amounts of the then existing insurance as described in the preceding
sentence, Manager shall give prompt notice to Tenant thereof.

 

6.02  Damage and Repair.

 

A.                    If, during the Term with respect to any Hotel, such Hotel
shall be totally or partially destroyed and the Hotel is thereby rendered
Unsuitable for Its Permitted Use, (1) Manager may terminate this Agreement with
respect to such Hotel by sixty (60) days written notice to Tenant and Landlord
(which Termination shall not be deemed due to a Manager Default), or (2) if the
Lease has been terminated as a result of such casualty, the Tenant may terminate
this Agreement with respect to such Hotel by written notice to Manager and
Landlord, whereupon, this Agreement and the Lease, with respect to such Hotel,
shall terminate and Landlord shall be entitled to retain the insurance proceeds
payable on account of such damage.

 

B.                    If, during the Term with respect to any Hotel, such Hotel
is damaged or destroyed by fire, casualty or other cause but is not rendered
Unsuitable for Its Permitted Use and the Lease is not terminated in accordance
with its terms with respect to such Hotel, subject to Sections 6.02.C and 6.02.D
below, and provided there then exists no Manager Default which arises from acts
or failure to act by Manager with respect to such Hotel, then Tenant shall
forward to Manager the funds necessary to repair or replace the damaged or
destroyed portion of the Hotel to the same condition as existed previously and
Manager shall have the right to

 

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discontinue operating the Hotel to the extent it deems necessary to comply with
applicable law, ordinance, regulation or order or as necessary for the safe and
orderly operation of the Hotel.

 

C.                    (1)       If the cost of the repair or restoration of a
Hotel is less than the sum of the deductible plus the amount of insurance
proceeds received by Landlord or Tenant, Tenant shall be required to make
available the funds necessary (minus the amount of such deductible) to cause
such Hotel to be repaired and restored to the extent of such insurance
proceeds.  The amount of such deductible shall be funded first from the Reserve
for the applicable hotel, and to the extent such Reserve is insufficient
therefor, the balance shall be funded by Tenant, and any such funding by Tenant
shall result in an adjustment to Tenant’s Priority with respect to such Hotel as
if Tenant had made a lump sum deposit into the Reserve for such Hotel, in the
manner set forth in the definition of Tenant’s Priority, and the Addendum
applicable to such Hotel shall be revised in accordance therewith.

 

(2)           If the cost of the repair or restoration of such Hotel exceeds the
amount of insurance proceeds received by Landlord, plus the deductible amount,
Manager shall give notice to Tenant and Landlord setting forth in reasonable
detail the nature of such deficiency, and Tenant shall promptly thereafter
advise Manager in writing whether Tenant shall pay and assume the amount of such
deficiency (Tenant having no obligation to do so, except that, if Tenant shall
elect to make such funds available, the same shall become an irrevocable
obligation of Tenant).  In the event Tenant shall elect not to pay and assume
the amount of such deficiency, Landlord shall have the right (but not the
obligation), exercisable at Landlord’s sole election by written notice to Tenant
and Manager, given within sixty (60) days after Manager’s notice of the
deficiency, to elect to make available for application to the cost of repair or
restoration the amount of such deficiency.  In the event that neither Landlord
nor Tenant shall elect to make such deficiency available for restoration,
(a) Manager may effect Termination of this Agreement with respect to such Hotel
by written notice to Tenant and Landlord (which Termination shall not be deemed
due to a Manager Default), or (b) if the Lease has been terminated with respect
to such Hotel as a result of such casualty, Tenant may effect a Termination of
this Agreement with respect to such Hotel by written notice to Manager and
Landlord, whereupon, this Agreement shall terminate with respect to such Hotel
as provided in Section 6.02.A.

 

D.                    In the event Tenant is required to make available the
funds necessary to restore a Hotel, Tenant shall promptly do so and such funds
shall be used to perform the repair and restoration of such Hotel (hereinafter
called the “Work”), so as to restore such Hotel in compliance with all Legal
Requirements and so that such Hotel shall be, to the extent practicable,
substantially equivalent in value and general utility to its general utility and
value immediately prior to such damage or destruction and in compliance with
System Standards and Operating Standards. Manager shall, at Tenant’s request,
provide general supervisory services with respect to completion of such work as
part of the services provided hereunder in consideration of the management fees
paid to Manager, however, Manager shall not be obligated to provide additional
secure services unless Tenant and Manager enter into separate arrangements to
provide such services and for stated additional consideration. Subject to the
terms of the Lease, Landlord shall advance the insurance proceeds and any
additional amounts payable by Landlord pursuant to this Section 6.02.D to Tenant
regularly during the repair and restoration period so as to permit payment for
the cost of any such restoration and repair.  Any such advances shall be made
not more than monthly within ten (10) Business Days after Tenant

 

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submits to Landlord a written requisition and substantiation therefor on AIA
Forms G702 and G703 (or on such other form or forms as may be reasonably
acceptable to Landlord).  Landlord may, at its option, condition advancement of
said insurance proceeds and other amounts on (i) the absence of an “Event of
Default” under the Lease, (ii) its approval of plans and specifications of an
architect satisfactory to Landlord (which approval shall not be unreasonably
withheld or delayed), (iii) general contractors’ estimates, (iv) architect’s
certificates, (v) unconditional lien waivers of general contractors, if
available, (vi) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required and (vii) such other certificates
as Landlord may, from time to time, reasonably require.

 

E.                     If this Agreement is not otherwise terminated with
respect to a totally or partially destroyed Hotel as permitted herein, and
Landlord and/or Tenant makes funds available to repair and restore any such
Hotel, then, except for deductibles which are addressed in Section 6.02.C above,
any reserves, losses, costs or expenses which are uninsured or are not otherwise
self-insured because the same are not required to be insured or self-insured
hereunder (as applicable, the “Uninsured Costs”), shall be accounted for in
accordance with the following sentence.  Effective as of the first day of the
Accounting Period immediately following the completion of the repair or
restoration of the Hotel (or, if the Hotel, or any portion thereof, was closed
as a result of the damage or destruction, then as of the first day of the
Accounting Period immediately following the date the Hotel, or such portion
thereof, is reopened), the Tenant’s Priority with respect to such Hotel shall be
the greater of (i) the Tenant’s Priority for such Hotel as of the day
immediately preceding any such damage or destruction, or (ii)        percent
(   %) multiplied by the total cost (including any Uninsured Costs) to repair
and restore the Hotel in accordance with the terms of this Agreement.

 

F.                     All business interruption insurance proceeds shall be
paid to Manager and included in Gross Revenues.  Any casualty which does not
result in a Termination of this Agreement with respect to the applicable Hotel
shall not excuse the payment of sums due to Tenant hereunder with respect to
such Hotel.

 

G.                    Manager hereby waives any statutory rights of termination
which may arise by reason of any damage to or destruction of any Hotel.

 

6.03  Damage Near End of Term.  Notwithstanding any provisions of Section 6.01
or 6.02 hereof to the contrary, if damage to or destruction of any Hotel occurs
during the last twelve (12) months of the then Term (including any exercised
Renewal Term) and if such damage or destruction cannot reasonably be expected to
be fully repaired and restored prior to the date that is nine (9) months prior
to the end of such Term (including any exercised Renewal Term), the provisions
of Section 6.02.A shall apply as if such Hotel had been totally or partially
destroyed and such Hotel operated thereon rendered Unsuitable for its Permitted
Use.

 

6.04  Tenant’s Option to Obtain Certain Insurance.  In addition to its rights
under Section 6.01.E, Tenant may, at its option, from time to time by written
notice to Manager which shall be delivered no later than sixty (60) days prior
to the natural expiration of the insurance policies which Manager has obtained
pursuant to Sections 6.01.A(1), (2) and (4), procure and maintain the insurance
specified in Sections 6.01.A(1), (2) and (4) for one or more Hotels with terms
and coverages consistent with this Article VI (in which case Manager shall allow
such policies

 

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obtained by it under Sections 6.01.A(1), (2) and (4) to expire), subject to the
following terms and conditions:

 

A.                    All policies of insurance shall be carried in the name of
Tenant, with Manager as an additional insured.  Any property losses thereunder
shall be payable to the respective parties as their interests may appear.

 

B.                    Tenant shall deliver to Manager and Landlord certificates
of insurance with respect to all policies so procured and, in the case of
insurance policies about to expire, shall deliver certificates with respect to
the renewal thereof.

 

C.                    All such certificates of insurance shall, to the extent
obtainable, state that the insurance shall not be canceled or materially changed
without at least thirty (30) days’ prior written notice to the certificate
holder per the terms of the policy.

 

D.                    Premiums for such insurance coverage shall be treated as
Deductions, provided that if the cost of such insurance procured by Tenant
exceeds the cost of Manager’s comparable coverage by more than ten percent
(10%), all such excess costs shall be the sole responsibility of Tenant and
shall not be a Deduction.

 

E.                     Should Tenant exercise its option to procure any of the
insurance described in this Section 6.04, Tenant hereby waives its rights of
recovery from Manager or any of its Affiliates (and their respective directors,
officers, shareholders, agents and employees) for loss or damage to any Hotel,
and any resultant interruption of business, resulting from an occurrence or
event covered by the insurance so procured by Tenant.

 

F.                     Should Tenant exercise its rights to obtain the insurance
described in this Section 6.04, Tenant acknowledges that until Tenant gives
Manager not less than sixty (60) days advance notice that Tenant is rescinding
such exercise Manager is under no obligation to thereafter include such Hotels
in its blanket insurance program (with respect to the coverage described in
Sections 6.01.A(1), (2) and (4) for the balance of the Term of this Agreement. 
However, upon a Sale of a Hotel, a successor Tenant shall have the right to
elect to have such Hotel included in Manager’s blanket insurance program by
written request to Manager for such inclusion not later than thirty (30) days
after the date of which such party becomes the Tenant provided that any such
Hotel, as of that point in time, satisfies the applicable criteria for admission
to Manager’s blanket insurance program (as established by the program’s
insurance carriers).

 

G.                    All insurance procured by Tenant hereunder shall be
obtained from reputable insurance companies reasonably acceptable to Manager and
shall otherwise comply with the provisions of this Article VI.

 

6.05  Condemnation.  If either (i) the whole of a Hotel shall be taken by
Condemnation, or (ii) a Condemnation of less than the whole of a Hotel renders
such Hotel Unsuitable for Its Permitted Use, this Agreement shall terminate and
Tenant and Landlord shall seek the Award for their interests in such Hotel as
provided in the Lease.  In addition, Manager shall have the right to initiate
such proceedings as it deems advisable to recover any damages to which Manager
may be entitled; provided, however, that Manager shall be entitled to retain the
award or

 

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compensation it may obtain through such proceedings which are conducted
separately from those of Tenant and Landlord only if such award or compensation
does not reduce the award or compensation otherwise available to Tenant and
Landlord.  For this purpose, any award or compensation received by any holder of
a Mortgage on a Hotel shall be deemed to be an award of compensation received by
Landlord.

 

6.06  Partial Condemnation.  In the event of a Condemnation of less than the
whole of a Hotel such that such Hotel is not rendered Unsuitable for Its
Permitted Use, Manager shall, to the extent of the Award and any additional
amounts disbursed by Tenant or Landlord as hereinafter provided, commence
promptly and continue diligently to restore the untaken portion of such Hotel so
that such Hotel shall constitute a complete architectural unit of the same
general character and condition (as nearly as may be possible under the
circumstances) as the Hotel located thereon existing immediately prior to such
Condemnation, in full compliance with all Legal Requirements, subject to the
provisions of this Section 6.06. Manager shall, at Tenant’s request, provide
general supervisory services with respect to completion of such work as part of
the services provided hereunder in consideration of the management fees paid to
Manager, however, Manager shall not be obligated to provide additional services
unless Tenant and Manager enter into separate arrangements to provide such
services and for stated additional consideration. If the cost of the repair or
restoration of the Hotel exceeds the amount of the Award, Manager shall give
Landlord and Tenant written notice thereof, which notice shall set forth in
reasonable detail the nature of such deficiency, and Tenant shall promptly
thereafter advise Manager in writing whether Tenant will pay and assume the
amount of such deficiency (Tenant having no obligation to do so, except that if
Tenant shall elect to make such funds available, the same shall become an
irrevocable obligation of Tenant pursuant to this Agreement).  In the event
Tenant shall elect not to pay and assume the amount of such deficiency, Landlord
shall have the right (but not the obligation), exercisable at Landlord’s sole
election by Notice to Tenant and Manager given within sixty (60) days after
Tenant’s notice of the deficiency, to elect to make available for application to
the cost of repair or restoration the amount of such deficiency.  In the event
neither Landlord nor Tenant shall elect to make such deficiency available for
restoration, either Manager or Tenant may terminate this Agreement with respect
to such Hotel.

 

6.07  Disbursement of Award.  Subject to the terms hereof, Tenant or Landlord,
as applicable, shall contribute to the cost of restoration that part of the
Award necessary to complete such repair or restoration, together with severance
and other damages awarded for such Hotel and any deficiency Tenant or Landlord,
as applicable, has agreed to disburse, to Manager regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration.  Landlord may, at its option, condition advancement of such Award
and other amounts on (i) the absence of any Event of Default, (ii) its approval
of plans and specifications of an architect satisfactory to Landlord (which
approval shall not be unreasonably withheld or delayed), (iii) general
contractors’ estimates, (iv) architect’s certificates, (v) unconditional lien
waivers of general contractors, if available, (vi) evidence of approval by all
governmental authorities and other regulatory bodies whose approval is required,
and (vii) such other certificates as Landlord may, from time to time, reasonably
require.  Landlord’s and Tenant’s obligation under this Section 6.07 to disburse
the Award and such other amounts shall be subject to (x) the collection thereof
by Landlord and (y) the satisfaction of any applicable requirements of any
Qualified Mortgage, and the release of such Award by the applicable Mortgagee.

 

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Tenant’s obligation to restore the applicable Hotel shall be subject to the
release of the Award to Landlord by the applicable Mortgagee under a Qualified
Mortgage.

 

6.08  Temporary Condemnation.  In the event of any temporary Condemnation of a
Hotel or Tenant’s interest therein, this Agreement shall continue in full force
and effect. The entire amount of any Award made for such temporary Condemnation
allocable to the Term, whether paid by way of damages, rent or otherwise, shall
be paid to Manager and shall constitute Gross Revenues.  Tenant shall, promptly
upon the termination of any such period of temporary Condemnation, at its sole
cost and expense, restore such Hotel to the condition that existed immediately
prior to such Condemnation, in full compliance with all Legal Requirements,
unless such period of temporary Condemnation shall extend beyond the expiration
of the Term, in which event Tenant shall not be required to make such
restoration.  For purposes of this Section 6.08, a Condemnation shall be deemed
to be temporary if the period of such Condemnation is not expected to, and does
not, exceed twelve (12) months.

 

6.09  Allocation of Award.  Except as provided in Section 6.07 and Section 6.08
and the second and third sentences of this Section 6.09, the total Award shall
be solely the property of and payable to Landlord.  Any portion of the Award
made for the taking of Tenant’s leasehold interest in a Hotel, loss of business,
the taking of Tenant’s Personal Property, or Tenant’s removal and relocation
expenses shall be the sole property of, and payable to, Tenant.  Any portion of
the Award made for the taking of Manager’s interest in a Hotel or Manager’s loss
of business during the remainder of the Term hereof shall be the sole property
of, and payable to, Manager, subject to the provisions of Section 6.05 hereof. 
In any Condemnation proceedings, Landlord, Tenant, and Manager shall each seek
its own Award in conformity herewith, at its own expense.

 

6.10  Effect of Condemnation.  Any condemnation which does not result in a
Termination of this Agreement in accordance with its terms with respect to the
applicable Hotel shall not excuse the payment of sums due to Tenant hereunder
with respect to such Hotel and this Agreement shall remain in full force and
effect.

 

ARTICLE VII

 

TAXES; OTHER CHARGES

 

7.01  Real Estate and Personal Property Taxes.

 

A.                    Subject to Section 11.23 relating to permitted contests,
Manager shall pay, from Gross Revenues for each Hotel, all Impositions with
respect to such Hotel, before any fine, penalty, interest or cost (other than
any opportunity cost as a result of a failure to take advantage of any discount
for early payment) may be added for non-payment, such payments to be made
directly to the taxing authorities where feasible, and shall promptly, upon
request, furnish to Landlord and Tenant copies of official receipts or other
reasonably satisfactory proof evidencing such payments.  Any such payments shall
be a Deduction in determining Operating Profit for such Hotel.  If any such
Imposition may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Imposition),
Manager may exercise the option to pay the same (and any accrued interest on the
unpaid

 

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balance of such Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any fine,
penalty, premium, further interest or cost may be added thereto.  Manager shall,
upon request, provide such data as is maintained by Manager with respect to any
Hotel as may be necessary to prepare any required returns and reports by
Landlord or Tenant.

 

Tenant shall give, and will use reasonable efforts to cause Landlord to give,
copies of official tax bills and assessments which it may receive with respect
to any Hotel and prompt notice to Tenant and Manager of all Impositions payable
by Tenant under the Lease of which Tenant or Landlord, as the case may be, at
any time has knowledge; provided, however, that Landlord’s or Tenant’s failure
to give any such notice shall in no way diminish Manager’s obligation hereunder
to pay such Impositions (except that Landlord or Tenant, as applicable, shall be
responsible for any interest or penalties incurred as a result of Landlord’s or
Tenant’s, as applicable, failure promptly to forward the same).

 

B.                    The word “Impositions” as used in this Agreement shall
include, but not be limited to, franchise taxes under the laws of the State of
Tennessee and gross receipt or general excise taxes or sales taxes payable on
(i) Rent payable to Landlord, (ii) all sums payable to Tenant pursuant to this
Agreement (or the Pooling Agreement with respect to Hotels to which the Pooling
Agreement is applicable), and (iii) all sums payable to Manager pursuant to this
Agreement as System Fees or management fees (or pursuant to the Pooling
Agreement with respect to Hotels to which the Pooling Agreement is applicable),
if any, but shall not include the following, all of which shall be paid from the
applicable Reserve, and not from Gross Revenues:

 

1.                     Special assessments (regardless of when due or whether
they are paid as a lump sum or in installments over time) imposed because of
facilities which are constructed by or on behalf of the assessing jurisdiction
(for example, roads, sidewalks, sewers, culverts, etc.) which directly benefit a
Hotel (regardless of whether or not they also benefit other buildings), which
assessments shall be treated as capital costs of construction and not as
Deductions; and

 

2.                     “Impact Fees” (regardless of when due or whether they are
paid as a lump sum or in installments over time) which are required as a
condition to the issuance of site plan approval, zoning variances or building
permits, which impact fees shall be treated as capital costs of construction and
not as Deductions.

 

C.                    Notwithstanding anything herein to the contrary, each of
Tenant and Manager shall pay from its own funds (and not from Gross Revenues of
any Hotel or any Reserve) any franchise, corporate, estate, inheritance,
succession, capital levy or transfer tax imposed on Tenant or Manager, as
applicable, or any income tax imposed (but not gross receipt or general excise
taxes) on any income of Tenant or Manager (including distributions to Tenant
pursuant to Article III hereof).

 

D.                    Manager shall cause to be paid, with respect to each
Hotel, when due, from Gross Revenues, as Deductions, for such Hotel, to the
extent of the sufficiency of funds available therefore:

 

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1.                     Utility Charges — all charges for electricity, power,
gas, oil, water and other utilities used in connection with each Hotel.

 

2.                     Insurance Premiums — all premiums for the insurance
coverage required to be maintained pursuant to Section 6.01 hereof.

 

3.                     Other Charges — all other amounts, liabilities and
obligations arising in connection with the operation of each Hotel except those
obligations expressly assumed by Landlord or Tenant pursuant to the provisions
of this Agreement or any of the Incidental Documents or expressly stated not to
be paid from Gross Revenues of a Hotel pursuant to this Agreement.

 

ARTICLE VIII

 

OWNERSHIP OF THE HOTELS

 

8.01  Ownership of the Hotels.

 

A.                    Tenant hereby covenants that it will not hereafter impose
or consent to the imposition of any liens, encumbrances or other charges, except
as follows:

 

1.                     easements or other encumbrances that do not adversely
affect the operation of a Hotel by Manager and that are not prohibited pursuant
to Section 8.02 of this Agreement;

 

2.                     mortgages which constitute Qualified Mortgages and
related security instruments;

 

3.                     liens for taxes, assessments, levies or other public
charges not yet due or due but not yet payable; or

 

4.                     equipment leases for office equipment, telephone, motor
vehicles and other property approved by Manager.

 

B.                    Subject to liens permitted by Section 8.01.A hereof and
further subject to liens permitted to be placed by Landlord pursuant to the
Owner Agreement, Tenant covenants that, so long as there then exists no Manager
Default which arises from acts or failure to act by Manager with respect to such
Hotel, Manager shall quietly hold, occupy and enjoy the Hotels throughout the
Term hereof free from hindrance, ejection or molestation by Tenant or Landlord
or other party claiming under, through or by right of Tenant or Landlord. 
Tenant agrees to pay and discharge any payments and charges and, at its expense,
to prosecute all appropriate actions, judicial or otherwise, necessary to assure
such free and quiet occupation as set forth in the preceding sentence.

 

8.02  No Covenants, Conditions or Restrictions.

 

A.                    Tenant covenants that, as of the Effective Date and during
the Term of this Agreement with respect to each Hotel, Tenant will not enter
into (unless Manager has given its

 

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prior written consent thereto, which consent shall not be unreasonably withheld,
conditioned or delayed) any covenants, conditions or restrictions, including
reciprocal easement agreements or cost-sharing arrangements (collectively
referred to as “Future CC&R’s”) affecting any Site or Hotel which would
(i) prohibit or limit Manager from operating such Hotel in accordance with
System Standards, including related amenities of such Hotel; (ii) allow such
Hotel facilities (for example, parking spaces) to be used by persons other than
guests, invitees or employees of such Hotel; (iii) allow the Hotel facilities to
be used for specified charges or rates that have not been approved by Manager;
or (iv) subject the Hotel to exclusive arrangements regarding food and beverage
operation or retail merchandise. With respect to each Hotel, Manager hereby
consents to (a) any easements, covenants, conditions or restrictions, including
without limitation any reciprocal easement agreements or cost-sharing
agreements, existing as of the date Landlord acquired title to such Hotel, and
(b) any of the foregoing items with respect to such Hotel existing as of the
date hereof and of which Manager has knowledge (all of the foregoing,
collectively, the “Existing CC&R’s”).

 

B.                    All financial obligations imposed on Tenant or on a Hotel
pursuant to any Future CC&R’s for which Manager’s consent is required under
Section 8.02.A above shall be paid by Tenant from its own funds, and not from
Gross Revenues of a Hotel or from the Reserve of a Hotel, unless Manager has
given its prior written consent to such Future CC&R’s as required under
Section 8.02.A.

 

C.                    Manager shall manage, operate, maintain and repair each
Hotel in compliance with all obligations imposed on Tenant, Landlord or such
Hotel pursuant to any Existing CC&R’s or Future CC&R’s (unless the Manager’s
consent is required for such Future CC&R’s and Manager does not consent to such
Future CC&R’s) to the extent such Existing CC&R’s and Future CC&R’s relate to
the management, operation, maintenance and repair of such Hotel.

 

8.03  Liens; Credit.  Manager and Tenant shall use commercially reasonable
efforts to prevent any liens from being filed against any Hotel which arise from
any maintenance, repairs, alterations, improvements, renewals or replacements in
or to such Hotels.  Manager and Tenant shall cooperate, and Tenant shall cause
the Landlord to cooperate, fully in obtaining the release of any such liens, and
the cost thereof, if the lien was not occasioned by the fault of a party, shall
be treated the same as the cost of the matter to which it relates.  If the lien
arises as a result of the fault of a party, then the party at fault shall bear
the cost of obtaining the lien release.  In no event shall any party borrow
money in the name of, or pledge the credit of, any other party.  Manager shall
not allow any lien to exist with respect to its interest in this Agreement.

 

Subject to the right to contest matters set forth in Section 11.23 hereof and
for encumbrances permitted under Section 8.01 hereof, Manager shall not, to the
extent funds to pay the same are provided on a timely basis as required
hereunder, directly or indirectly, create or allow to remain and shall promptly
discharge any lien, encumbrance, attachment, title retention agreement or claim
upon any Hotel, except (a) existing liens for those taxes of Landlord which
Manager is not required to pay hereunder, (b) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (i) the same are
not yet due and payable, or (ii) are being contested in accordance with
Section 11.23, (c) liens of mechanics, laborers, materialmen, suppliers or
vendors incurred in the ordinary course of  business that are not yet

 

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due and payable or are for sums that are being contested in accordance with
Section 11.23 and (d) any Mortgages or other liens which are the responsibility
of Landlord.

 

ARTICLE IX

 

DEFAULTS

 

9.01  Manager Events of Default.  Each of the following shall constitute a
“Manager Event of Default” to the extent permitted by applicable law:

 

A.                    The filing by Manager or Marriott of a voluntary petition
in bankruptcy or insolvency or a petition for reorganization under any
bankruptcy law, or the admission by Manager that it is unable to pay its debts
as they become due, or the institution of any proceeding by Manager for its
dissolution or termination.  Upon the occurrence of any Manager Event of Default
as described under this Section 9.01.A, said Manager Event of Default shall be
deemed a “Manager Default” under this Agreement.

 

B.                    The consent by Manager or Marriott to an involuntary
petition in bankruptcy or the failure to vacate, within ninety (90) days from
the date of entry thereof, any order approving an involuntary petition by
Manager.  Upon the occurrence of any Manager Event of Default as described under
this Section 9.01.B, said Manager Event of Default shall be deemed a “Manager
Default” under this Agreement.

 

C.                    The entering of an order, judgment or decree by any court
of competent jurisdiction, on the application of a creditor, adjudicating
Manager or Marriott as bankrupt or insolvent or approving a petition seeking
reorganization or appointing a receiver, trustee, or liquidator of all or a
substantial part of Manager’s or Marriott’s assets, and such order, judgment or
decree’s continuing unstayed and in effect for an aggregate of sixty (60) days
(whether or not consecutive).  Upon the occurrence of any Manager Event of
Default as described under this Section 9.01.C, said Manager Event of Default
shall be deemed a “Manager Default” under this Agreement.

 

D.                    The failure of Marriott or Manager or any Affiliate of
either of them to make any payment required to be made in accordance with the
terms of this Agreement, or any Incidental Document on or before the date due. 
Upon the occurrence of any Manager Event of Default as described under this
Section 9.01.D, said Manager Event of Default shall be deemed a “Manager
Default” under this Agreement if Marriott or Manager or such Affiliate fails to
cure such Manager Event of Default (1) within any applicable notice and cure
period, if any, provided in the document pursuant to which such payment is to be
made, or (2) otherwise, eight (8) days after receipt of written notice from the
other party to such document demanding such cure.

 

E.                     The failure of Marriott or Manager or any Affiliate of
either of them to perform, keep or fulfill any of the other covenants,
undertakings, obligations or conditions set forth in this Agreement, or the
occurrence of an “Event of Default” under any Incidental Document as a result of
a material breach by the Manager thereunder, on or before the date required for
the same.  Upon the occurrence of any Manager Event of Default as described
under this Section 9.01.E, said Manager Event of Default shall be deemed a
“Manager Default” under

 

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this Agreement if Marriott or Manager or such Affiliate fails to cure such
Manager Event of Default within thirty (30) days after receipt of written notice
from Tenant demanding such cure, or, if the Manager Event of Default is
susceptible of cure, but such cure cannot be accomplished within said thirty
(30) day period of time, if Marriott or Manager or such Affiliate fails to
commence the cure of such Manager Event of Default within fifteen (15) days of
such notice or thereafter fails to diligently pursue such efforts to completion.

 

F.                     The failure of Manager to maintain insurance coverages
required to be maintained by Manager under Article VI hereof (excluding
insurance maintained by Tenant pursuant to Section 6.04 hereof), and such
failure shall constitute a Manager Default hereunder if it continues for eight
(8) days after written notice thereof from Tenant (except that no notice shall
be required if any such insurance coverage shall have lapsed).

 

G.                    Any material representation or warranty made by Manager or
any Affiliate in this Agreement or in any Incidental Document proves to have
been false in any material respect on the date when made or deemed made, and the
same shall constitute a Manager Default if Manager fails to cure or change the
fact or event which caused such representation or warranty to have been false
when made within fifteen (15) Business Days of receiving notice of such
falseness from Tenant, provided, however, that if such default is susceptible of
cure but such cure can not reasonably be accomplished with the use of due
diligence within such period of time and if, in addition, Manager commences to
cure or cause to be cured such default within fifteen (15) Business Days after
receiving notice thereof from Tenant and thereafter prosecutes the cure of such
default with due diligence, such period of time shall be extended to such period
of time as may be reasonably necessary to cure such default with due diligence.

 

H.                    The occurrence of any other event described in this
Agreement as a Manager Default, including without limitation, the events
described in Section 3.02.C, or the occurrence of a Manager Default as described
in the Pooling Agreement.

 

9.02  Remedies for Manager Defaults.

 

A.                    In the event of a Manager Default, but subject in all
events to Section 9.02.B below, Tenant shall have the right to:  (1) terminate
this Agreement with respect to the applicable Hotel under which such Manager
Default arose by written notice to Manager, which termination shall be effective
as of the effective date which is set forth in said notice, provided that said
effective date shall be at least thirty (30) days after the date of said notice;
(2) institute forthwith any and all proceedings permitted by law or equity
(provided they are not specifically barred under the terms of this Agreement),
including, without limitation, actions for specific performance and/or damages;
or (3) avail itself of the remedies described in Section 9.03.

 

B.                    Notwithstanding anything herein to the contrary, in the
event of a Manager Default for which Tenant intends or desires to terminate this
Agreement, Tenant shall have the right to do so provided that Tenant must
simultaneously terminate this Agreement as to all Hotels which are at such time
subject to this Agreement.

 

C.                    None of (i) the termination of this Agreement in
connection with a Manager Default, (ii) the repossession of any Hotel or any
portion thereof, (iii) the failure of Tenant to

 

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engage a replacement manager for any Hotel or any portion thereof, nor (iv) the
engagement of any replacement manager for all or any portion of a Hotel, shall
relieve Manager of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or engagement.  In the event of any
termination of this Agreement with respect to a Hotel as a result of a Manager
Default, Manager shall forthwith pay to Tenant all amounts due and payable with
respect to such Hotel through and including the date of such termination. 
Thereafter, Manager, until the end of what would have been the Term of this
Agreement in the absence of such termination, and whether or not a replacement
manager shall have been engaged for such Hotel or any portion thereof, shall be
liable to Tenant for, and shall pay to Tenant, as current damages, the amounts
which Tenant would have received hereunder for the remainder of the Term had
such termination not occurred, less the net amounts, if any, received from a
replacement manager, after deducting all reasonable expenses in connection with
such engaging such replacement, including, without limitation, all repossession
costs, brokerage commissions, legal expenses, attorneys’ fees, advertising,
expenses of employees, alteration costs and expenses of preparation for such
engagement.  Manager shall pay such current damages to Tenant as soon after the
end of each Accounting Period as practicable to determine the amount of the
same.

 

D.                    At any time after such termination, whether or not Tenant
shall have collected any amounts owing and due up to and including the date of
termination of this Agreement, as liquidated final damages beyond the date of
such termination and in lieu of Tenant’s right to receive any other damages due
to the termination of this Agreement, at Tenant’s election, Manager shall pay to
Tenant an amount equal to the present value (discounted at a rate equal to the
interest rate published in The Wall Street Journal for U.S. Treasury Obligations
having a maturity, closest in time to the last day of the Term) of the excess,
if any, of the amounts which Tenant would have been entitle to receive hereunder
from the date of such termination based on the then market conditions; provided,
however, that Manager shall be entitled to a credit from Tenant in the amount of
any unapplied balance of the Security Deposit, provided that thereupon Tenant
and its Affiliates shall have no further obligation to pay the portion of the
Security Deposit so credited to Manager or any of its Affiliates.  Nothing
contained in this Agreement shall, however, limit or prejudice the right of
Tenant to prove and obtain in proceedings for bankruptcy or insolvency an amount
equal to the maximum allowed by any statute or rule of law in effect at the time
when, and governing the proceedings in which, the damages are to be proved,
whether or not the amount be greater than, equal to, or less than the amount of
the loss or damages referred to above.

 

E.                     In case of any Manager Default resulting in Manager being
obligated to vacate a Hotel, Tenant may (i) engage a replacement manager for
such Hotel or any part or parts thereof, either in the name of Tenant or
otherwise, for a term or terms which may at Tenant’s option, be equal to, less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant concessions or other accommodations to the extent that
Tenant reasonably considers advisable and necessary to engage such replacement
manager(s), and (ii) may make such reasonable alterations, repairs and
decorations in a Hotel or any portion thereof as Tenant, in its sole and
absolute discretion, considers advisable and necessary for the purpose of
engaging a replacement manager for such Hotel; and the making of such
alterations, repairs and decorations shall not operate or be construed to
release Manager from liability hereunder as aforesaid.  Subject to the last
sentence of this paragraph, Tenant shall in no event be liable in any way
whatsoever for any failure to engage a replacement manager for such Hotel, or,

 

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in the event a replacement manager is engaged, for failure to collect amounts
due Tenant in connection therewith.  To the maximum extent permitted by law,
Manager hereby expressly waives any and all rights of redemption granted under
any present or future laws in the event of Manager being evicted or
dispossessed, or in the event of Tenant obtaining possession of a Hotel, by
reason of the occurrence and continuation of a Manager Default hereunder. 
Tenant covenants and agrees, in the event of any termination of this Agreement
as a result of a Manager Default, to use reasonable efforts to mitigate its
damages.

 

F.                     Any payments received by Tenant under any of the
provisions of this Agreement during the existence or continuance of a Manager
Default (and any payment made to Tenant from others rather than Manager due to
the existence of any Manager Default) shall be applied to Manager’s current and
past due obligations under this Agreement in such order as Tenant may determine
or as may be prescribed by applicable law.

 

G.                    If a Manager Default shall have occurred and be
continuing, Tenant, after notice to Manager (which notice shall not be required
if Tenant shall reasonably determine immediate action is necessary to protect
person or property), without waiving or releasing any obligation of Manager and
without waiving or releasing any Manager Default, may (but shall not be
obligated to), at any time thereafter, make such payment or perform such act for
the account and at the expense of Manager, and may, to the maximum extent
permitted by law, enter upon a Hotel or any portion thereof for such purpose and
take all such action thereon as, in Tenant’s sole and absolute discretion, may
be necessary or appropriate therefor.  No such entry shall be deemed an eviction
of Manager or result in the termination hereof.  All reasonable costs and
expenses (including, without limitation, reasonable attorneys’ fees) incurred by
Tenant in connection therewith, together with interest thereon (to the extent
permitted by law) at the Overdue Rate from the date such sums are paid by Tenant
until repaid, shall be paid by Manager to Tenant, on demand.

 

9.03  Additional Remedies for Manager Recourse Defaults.

 

A.                    Upon the occurrence of a Manager Default under the
provisions of Section 9.01.D, the amount owed to Tenant or any Affiliate of
Tenant pursuant thereto shall accrue interest, at an annual rate equal to the
Overdue Rate, from and after the date on which such payment was originally due.

 

B.                    The rights granted under this Article IX shall not be in
substitution for, but shall be in addition, to, any and all rights and remedies
available to Tenant (including, without limitation, injunctive relief and
damages) by reason of applicable provisions of law or equity.

 

C.                    Upon the occurrence of a Manager Default with respect to a
Hotel, Manager shall permit Landlord and/or Tenant to enter upon the applicable
Hotel for the purposes of effecting a cure for such Manager Default, provided
(i) Landlord and/or Tenant, as applicable, act strictly in accordance with the
terms of the Lease, and (ii) Landlord and/or Tenant, as applicable, do not
unreasonably interfere with the operation of such Hotel.

 

9.04  Non-Recourse Provision.  Notwithstanding anything herein to the contrary,
but subject to the balance of this Section 9.04 and further subject to Manager’s
obligations in Section

 

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5.09 hereof, Manager’s obligations pursuant to this Agreement and the Pooling
Agreement are in all instances non-recourse to Manager, and in the event of any
claim, suit or cause of action by Tenant against Manager pursuant to or in
connection with this Agreement or the Pooling Agreement or the transactions
contemplated by either of them, Tenant’s sole recourse against Manager shall be
with respect to amounts held by Marriott or Manager for the account of Tenant
pursuant to this Agreement or the Pooling Agreement, and to amounts available
pursuant to the Marriott Guaranty and to amounts available pursuant to the
Security Deposit Agreement, and Manager shall have no other liability beyond the
extent thereof with respect to any such claim, suit or cause of action. 
Notwithstanding the foregoing, this Section 9.04 shall not be applicable with
respect to (a) fraud committed by Manager, (b) misapplication or
misappropriation of funds committed by Manager, (c) the willful misconduct of
Manager, (d) the gross negligence of Manager, or (e) losses against which
Manager has elected to self insure pursuant to Section 6.01 hereof.  This
Section 9.04 shall not be construed to limit any right of set-off to which
Tenant may be entitled with respect to any amount to which Manager or any
Affiliate may be entitled pursuant to this Agreement, any Other Management
Agreement or the Pooling Agreement, and Tenant shall be entitled to set-off
against amounts owed by Tenant to Manager hereunder amounts owed to Tenant under
this Agreement or any Incidental Document, but excluding in any event Systems
Fees due to Manager hereunder or under any Other Management Agreement and any
fees due to Marriott pursuant to any Franchise Agreement.

 

9.05  Good Faith Dispute By Manager.  If Manager shall in good faith dispute the
occurrence of any Manager Default and Manager, before the expiration of the
applicable cure period, shall give notice thereof to Tenant, setting forth, in
reasonable detail, the basis therefor, no Manager Default shall be deemed to
have occurred provided Manager shall escrow disputed amounts, if any, pursuant
to an escrow arrangement reasonably acceptable to Tenant and Manager; provided,
however, that in the event that any dispute is ultimately determined against
Manager, then Manager shall pay to Tenant interest on any disputed funds at the
Overdue Rate, from the date demand for such funds was made by Tenant until
paid.  If Tenant and Manager shall fail, in good faith, to resolve any such
dispute within ten (10) Business Days after Manager’s notice of dispute, either
may submit the matter for resolution by Arbitration.  In the event that the
determination in such Arbitration is that a Manager Default, in fact, exists,
Manager shall have the applicable cure period from the date of such final
determination to cure such Manager Default.

 

9.06  Tenant Events of Default.  Each of the following shall constitute a
“Tenant Event of Default” to the extent permitted by applicable law:

 

A.                    The filing by Tenant or HPT of a voluntary petition in
bankruptcy or insolvency or a petition for reorganization under any bankruptcy
law, or the admission by Tenant that it is unable to pay its debts as they
become due, or the institution of any proceeding by Tenant for its dissolution
or termination.  Upon the occurrence of any Tenant Event of Default as described
under this Section 9.06.A, said Tenant Event of Default shall be deemed a
“Tenant Default” under this Agreement.

 

B.                    The consent by Tenant or HPT to an involuntary petition in
bankruptcy or the failure to vacate, within ninety (90) days from the date of
entry thereof, any order approving an involuntary petition by Tenant.  Upon the
occurrence of any Tenant Event of Default as

 

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described under this Section 9.06.B, said Tenant Event of Default shall be
deemed a “Tenant Default” under this Agreement.

 

C.                    The entering of an order, judgment or decree by any court
of competent jurisdiction, on the application of a creditor, adjudicating Tenant
or HPT as bankrupt or insolvent or approving a petition seeking reorganization
or appointing a receiver, trustee, or liquidator of all or a substantial part of
Tenant’s or HPT’s assets, and such order, judgment or decree’s continuing
unstayed and in effect for an aggregate of sixty (60) days (whether or not
consecutive).  Upon the occurrence of any Tenant Event of Default as described
under this Section 9.06.C, said Tenant Event of Default shall be deemed a
“Tenant Default” under this Agreement.

 

D.                    The failure of Tenant to make any payment (or cause to be
made any payment by any Affiliate of Tenant which is a party thereto) required
to be made in accordance with the terms of this Agreement or any Incidental
Document on or before the date due.  Upon the occurrence of any Tenant Event of
Default as described under this Section 9.06.D, said Tenant Event of Default
shall be deemed a “Tenant Default” under this Agreement if Tenant fails to cure
such Tenant Event of Default (1) within any applicable notice and cure period,
if any, provided in the document pursuant to which such payment is to be made,
or (2) otherwise, eight (8) days after receipt of written notice from the other
party to such document demanding such cure.

 

E.                     The failure of Tenant to perform, keep or fulfill any of
the other covenants, undertakings, obligations or conditions set forth in this
Agreement or any Incidental Document.  Upon the occurrence of any Tenant Event
of Default as described under this Section 9.06.E, said Tenant Event of Default
shall be deemed a “Tenant Default” under this Agreement if Tenant fails to cure
the Tenant Event of Default within thirty (30) days after receipt of written
notice from Tenant demanding such cure, or, if the Tenant Event of Default is
susceptible of cure, but such cure cannot be accomplished within said
thirty (30) day period of time, if Manager fails to commence the cure of such
Tenant Event of Default within fifteen (15) days of such notice or thereafter
fails to diligently pursue such efforts to completion.

 

F.                     The failure of Tenant to maintain insurance coverages
elected to be maintained by Tenant under Article VI hereof (excluding insurance
maintained by Manager pursuant thereto), and such failure shall constitute a
Tenant Default hereunder if it continues for eight (8) days after written notice
thereof from Manager (except that no notice shall be required if any such
insurance coverage shall have lapsed).

 

G.                    Any material representation or warranty made by Tenant or
any Affiliate in this Agreement or in any Incidental Document proves to have
been false in any material respect on the date when made or deemed made, and the
same shall constitute a Tenant Default if Tenant fails to cure or change the
fact or event which caused such representation or warranty to have been false
when made within fifteen (15) Business Days of receiving notice of such
falseness from Manager, provided, however, that if such default is susceptible
of cure but such cure can not reasonably be accomplished with the use of due
diligence within such period of time and if, in addition, Tenant commences to
cure or cause to be cured such default within fifteen (15) Business Days after
receiving notice thereof from Manager and thereafter prosecutes the cure of

 

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such default with due diligence, such period of time shall be extended to such
period of time as may be reasonably necessary to cure such default with due
diligence.

 

H.                    The occurrence of an event of default beyond any
applicable notice and cure period under any obligation, agreement, instrument or
document which is secured in whole or in part by Tenant’s or Landlord’s interest
in any Hotel or should the holder of such security accelerate the indebtedness
secured thereby or commence a foreclosure thereof.  Upon the occurrence of any
Tenant Event of Default as described under this Section 9.06.G, said Tenant
Event of Default shall be deemed a “Tenant Default” under this Agreement.

 

9.07  Remedies for Tenant Defaults.

 

A.                    In the event of a Tenant Default, Manager shall have the
right to institute forthwith any and all proceedings permitted by law or equity
(provided they are not specifically barred under the terms of this Agreement),
including, without limitation, actions for specific performance and/or damages. 
Except as expressly provided in this Agreement, Manager shall have no right to
terminate this Agreement by reason of a Tenant Event of Default or a Tenant
Default.  In the event of a termination as described in this Section 9.07 with
respect to any Hotel, Manager shall retain all of its rights under the Owner
Agreement with respect to such Hotel.

 

B.                    Upon the occurrence of a Tenant Default pursuant to any of
Sections 9.06.A, 9.06.B or 9.06.C hereof, or which arises with respect to a
violation by Tenant of Section 10.02 hereof with respect to a Sale of a Hotel in
violation of such provision or by Landlord with respect to a violation of
Article 6 of the Owner Agreement or Section 8.01.A(2) with respect to the
encumbering of a Hotel by Tenant by a Mortgage which is not a Qualified
Mortgage, or by Landlord with respect to a violation of Article 5 of the Owner
Agreement, Manager shall have, in addition to all other rights and remedies
provided for herein, the right to effect a Termination of this Agreement. 
Notwithstanding the foregoing sentence, so long as a Hotel is subject to a
Qualified Mortgage or owned by a Person who acquired such interest pursuant to a
Qualified Mortgage (or a deed-in-lieu in connection therewith), Manager shall
not exercise the termination right provided for in this Section 9.07.B if the
Tenant Default described herein is also a default pursuant to the terms of such
Qualified Mortgage so long as the mortgagee thereunder is diligently pursuing
its remedies to cure the event or circumstance which created such Tenant Default
as described in this Section 9.07.B.

 

C.                    Manager and/or any Affiliate shall be entitled, in case of
any breach of the covenants of Section 11.11.E by Tenant or others claiming
through it, to injunctive relief and to any other right or remedy available at
law.  The provisions of this Section 9.07.C shall survive Termination.

 

9.08  Good Faith Dispute By Tenant.  If Tenant shall in good faith dispute the
occurrence of any Tenant Default and Tenant, before the expiration of the
applicable cure period, shall give notice thereof to Manager, setting forth, in
reasonable detail, the basis therefor, no Tenant Default shall be deemed to have
occurred and Tenant shall have no obligation with respect thereto until final
adverse determination thereof; provided, however, that in the event that such
dispute is ultimately determined against Tenant, then Tenant shall pay to
Manager interest of any disputed funds at the Overdue Rate from the date demand
for such funds was made by Manager

 

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until paid.  If Manager and Tenant shall fail, in good faith, to resolve any
such dispute within ten (10) days after Tenant’s notice of dispute, either may
submit the matter for resolution by Arbitration.  In the event that the
determination in such Arbitration is that a Tenant Default, in fact, exists,
Tenant shall have the applicable cure period from the date of such final
determination to cure such Default.

 

9.09  Landlord Defaults.  Each of the following shall constitute a “Landlord
Default”:  (1) the failure of Landlord to provide funds to any Reserve on or
before the date such funds are required to be paid under Section 5.07.B hereof
or under the Owner Agreement (after any Expert resolution pursuant to
Section 11.22.B, if applicable), (2) the failure of Landlord to make insurance
or condemnation proceeds available for repair, restoration or replacement
required under the Owner Agreement, (3) the imposition by Landlord of a Mortgage
against any Hotel which is not a Qualified Mortgage, (4) the permitting by
Landlord of a lien on Landlord’s interest in any Hotel in violation of the terms
hereof or of the Owner Agreement, or (5) a Landlord Sale of any Hotel occurs in
violation of the Owner Agreement.

 

If a Landlord Default occurs, Tenant shall have no remedies under this Agreement
with respect to such Landlord Default, but reserves its rights and remedies
under the Lease. Notwithstanding anything herein to the contrary, Manager shall
be entitled to exercise any and all of the remedies of Manager with respect to a
Landlord Default under the Owner Agreement.

 

ARTICLE X

 

ASSIGNMENT AND SALE

 

10.01  Assignment.

 

A.                    Except as provided in Section 10.01.D, Manager shall not
assign mortgage, pledge, hypothecate or otherwise transfer its interest in all
or any portion of this Agreement or any rights arising under this Agreement or
suffer or permit such interests or rights to be assigned, transferred,
mortgaged, pledged, hypothecated or encumbered, in whole or in part, whether
voluntarily, involuntarily or by operation of law, or permit the use or
operation of the Hotels by anyone other than Manager or Tenant.  For purposes of
this Section 10.01.A, an assignment of this Agreement shall be deemed to include
the following (for purposes of this Section 10.01.A, a “Corporate Transfer”):
any direct or indirect transfer of any interest in Manager such that Manager
shall cease to be an Affiliate of Marriott or any transaction pursuant to which
Manager is merged or consolidated with another entity which is not Marriott or
an Affiliate of Marriott or pursuant to which all or substantially all of
Manager’s assets are transferred to any other entity, as if such change in
control or transaction were an assignment of this Agreement but shall not
include any involuntary liens or attachments contested by Manager in good faith
in accordance with Section 11.23 of this Agreement.

 

B.                    Notwithstanding the foregoing, if, after giving effect to
a Corporate Transfer, Manager, or all or substantially all of Manager’s assets,
would be owned or controlled by a Person who would, in connection therewith,
acquire all or substantially all of the Courtyard business of Marriott, provided
that (1) such Person ratifies in writing the obligations of Manager pursuant to
this Agreement, and (2) in Tenant’s reasonable determination, such Person and
its

 

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controlling parties (a) shall have sufficient expertise and financial resources
to carry on the such business consistent with historical practices, (b) shall
not be known in the community as being of bad moral character, or have been
convicted of a felony in any state or federal court, or be in control of or
controlled by Persons who have been convicted of felonies in any state or
federal court, (c) shall qualify as an “eligible independent contractor” under
Section 856(d)(9) of the Code and (d) shall otherwise satisfy the requirements
of Section 10.01.C hereunder, Tenant shall at Manager’s request, waive the
restrictions set forth in this Section 10.01 with respect to such Corporate
Transfer and no consent by Tenant shall be required with respect thereto.  If
Tenant fails to give notice of such waiver (or the withholding thereof) within
twenty (20) Business Days after Manger’s written request therefor, such waiver
shall be deemed given.

 

C.                    Notwithstanding the terms of Section 10.01.A, Manager
shall have the right, without Tenant’s consent, to (1) assign its interest in
all or part of this Agreement to Marriott or any Affiliate of Marriott,
(2) sublease or grant concessions or licenses to shops or any other space at a
Hotel so long as the terms of any such subleases or concessions do not exceed
the Term of this Agreement, provided that (a) such subleases or concessions are
for newsstand, gift shop, parking garage, health club, restaurant, bar or
commissary purposes or similar concessions, (b) such subleases do not have a
term in excess of the lesser of five (5) years or the remaining Term under this
Agreement and (c) do not demise, (i) in the aggregate, in excess of three
thousand (3,000) square feet of any Hotel, or (ii) for any single sublease, in
excess of 1,000 square feet of any Hotel, (d) any such sublease, license or
concession to an Affiliate of a Manager shall be on terms consistent with those
that would be reached through arms-length negotiation, (e) for so long as
Landlord or any Affiliate of Landlord shall seek to qualify as a real estate
investment trust, anything contained in this Agreement to the contrary
notwithstanding, Manager shall not sublet or otherwise enter into any agreement
with respect to a Hotel on any basis such that the rental or other fees to be
paid by any sublessee thereunder would be based, in whole or in part, on either
(i) the income or profits derived by the business activities of such sublessee,
or (ii) any other formula such that any portion of such sublease rental would
fail to qualify as “rents from real property” within the meaning of
Section 856(d) of the Internal Revenue Code of 1986, as amended, or any similar
or successor provision thereto, and (f) such subleases or concessions will not
violate or affect any Legal Requirement or Insurance Requirement, and Manager
shall obtain or cause the subtenant to obtain such additional insurance coverage
applicable to the activities to be conducted in such subleased space as Landlord
and any Mortgagee under a Qualified Mortgage may reasonably require, (3) assign
its interest in this Agreement in connection with a merger or consolidation or a
sale of all or substantially all of the assets of Manager or Marriott, and
(4) assign its interest in this Agreement in connection with a merger or
consolidation or a sale of all or substantially all of the System assets
(including associated management agreements) owned by Manager, Marriott or any
Affiliate of Manager or Marriott.

 

D.                    Tenant shall not assign or transfer its interest in this
Agreement without the prior written consent of Manager; provided, however, that
Tenant shall have the right, without such consent to (1) assign its interest in
this Agreement in connection with a Sale of a Hotel which complies with the
provisions of Section 10.02 of this Agreement, (2) assign its interest hereunder
to Landlord or an Affiliate of Landlord under the terms of the Lease or the
Owner Agreement, (3) assign its interest hereunder to Manager or an Affiliate of
Manager, and (4) assign its interest hereunder to an Affiliate of Tenant in a
corporate restructuring of Tenant or

 

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any of its Affiliates, provided such assignment complies with the provisions of
Section 10.02 of this Agreement.

 

E.                     In the event either party consents to an assignment of
this Agreement by the other, no further assignment shall be made without the
express consent in writing of such party, unless such assignment may otherwise
be made without such consent pursuant to the terms of this Agreement.  An
assignment by Tenant of its interest in this Agreement approved or permitted
pursuant to the terms hereof shall relieve Tenant from its obligations under
this Agreement with respect to the Hotel to which such assignment pertains
arising from and after the effective date of such assignment.  An assignment by
Manager of its interest in this Agreement shall not relieve Manager from its
obligations under this Agreement with respect to the Hotel to which such
assignment pertains unless such assignment occurs in the context of a sale of
all or substantially all of the Courtyard business of Marriott and its
Affiliates and which is otherwise permitted or approved, if required, pursuant
to this Agreement, in which event Manager shall be so relieved from such
obligations arising from and after the effective date of such assignment.

 

10.02  Sale of the Hotel.

 

A.                    Tenant may enter into a Sale of a Hotel to any Person
which (1) is an Affiliate of Tenant, and (2) who assumes Tenant’s obligations
with respect to such Hotel under this Agreement, the Owner Agreement (to the
extent applicable to the Hotel being sold), the corresponding Franchise
Agreement and, to the extent applicable with respect to the “deconsolidation”
provisions thereof, the Pooling Agreement (or ratifies each of such obligations
if such Sale of a Hotel is pursuant to a transfer of a Controlling Interest in
Tenant).  Tenant shall not enter into any Sale of a Hotel to any Person (or any
Affiliate of any Person) who (a) does not have sufficient financial resources
and liquidity to fulfill Tenant’s obligations with respect to such Hotel under
this Agreement, the Owner Agreement (to the extent applicable to the Hotel), the
Franchise Agreement, and, to the extent applicable as set forth in the preceding
sentence, the Pooling Agreement; (b) is known in the community as being of bad
moral character, or has been convicted of a felony in any state or federal
court, or is in control of or controlled by Persons who have been convicted of
felonies in any state or federal court; (c) is engaged in the business of
operating (as distinguished from owning) at least five (5) hotels or other
lodging facilities in competition with Manager, Marriott or any Affiliate of
either; (d) fails to expressly assume in writing the obligations of Tenant
hereunder and under the Owner Agreement (to the extent applicable to the Hotel),
the Franchise Agreement; or (e) is, or has an Affiliate that is, a Specially
Designated National or Blocked Person.

 

B.                    Tenant shall provide written notice of any proposed Sale
of a Hotel and shall provide to Manager such information concerning the proposed
transferee’s financial condition, ownership and business interests and as may be
reasonably necessary or appropriate in order for Manager to determine if such
transfer is consistent with the above provisions.

 

C.                    In connection with any Sale of a Hotel, Manager and the
purchaser or its tenant shall enter into a new management agreement with
Manager, which new management agreement will be on all of the terms and
conditions of this Agreement (with revisions as reasonably required to account
for the fact that such management agreement may be applicable to less than all
of the Hotels subject to this Agreement) except that the Initial Term and
Renewal

 

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Term(s) of any such new management agreement shall consist only of the balance
of the Initial Term and Renewal Term(s) remaining under this Agreement at the
time of execution of such new management agreement.  Such new management
agreement shall be executed by Manager and such new tenant at the time of
closing of a Sale of the Hotel, and a memorandum of such new management
agreement shall be executed by the parties and recorded immediately following
recording of the deed or memorandum of lease or assignment and prior to
recordation of any other documents.

 

D.                    Notwithstanding anything herein to the contrary, and in
addition to the foregoing, a sale (or deemed sale) of an Exit Hotel may be
consummated, in accordance with the terms and conditions of the Exit Hotel
Agreement.

 

E.                     Notwithstanding anything herein to the contrary,
including the foregoing provisions of this Article X, other than in connection
with the sale (or deemed sale) of an Exit Hotel pursuant to Section 10.02.D
above, (a) no Sale of a Hotel by Tenant shall or can occur prior to the
completion of the Renovations pursuant to the Renovation-Related Agreements, and
(b) following the completion of the Renovations pursuant to the
Renovation-Related Agreements, Tenant may consummate a Sale of a Hotel, at no
cost to Manager or Marriott, provided that (i) the applicable Landlord or an
Affiliate thereof or HPT shall continue to own such Hotel, (ii) the permitted
purchaser must meet and comply with the requirements of this Section 10.02 and
those set forth in the Lease, (iii) the applicable Landlord, Tenant and the
permitted purchaser shall execute and deliver such documents as Manager may
reasonably require to reflect such assignment.

 

ARTICLE XI

 

MISCELLANEOUS

 

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

 

11.02  Actions By Manager.  Manager covenants and agrees that it shall not take
any action which would be binding upon Tenant or Landlord except to the extent
it is permitted to do so pursuant to the terms of this Agreement.

 

11.03  Relationship.  In the performance of this Agreement, Manager shall act
solely as an independent contractor.  Neither this Agreement nor any agreements,
instruments, documents or transactions contemplated hereby shall in any respect
be interpreted, deemed or construed as making Manager a partner, joint venturer
with, or agent of, Tenant.  Tenant and Manager agree that neither party will
make any contrary assertion, claim or counterclaim in any action, suit,

 

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Expert resolution pursuant to Section 11.22.B, arbitration or other legal
proceedings involving Tenant and Manager.  Nothing contained herein is intended
to, nor shall be construed as, creating any landlord-tenant relationship between
Manager and Tenant or between Manager and Landlord.  Each of Manager and Tenant
shall prepare and shall cause their Affiliates to prepare their financial
statements and tax returns consistent with the foregoing characterization.

 

11.04  Applicable Law.  The Agreement shall be construed under and shall be
governed by the laws of the State of Maryland, without regard to its “choice of
law” rules.

 

11.05  Recordation.  The terms and provisions of this Agreement shall run with
the parcels of land designated as the Sites, and with Tenant’s interest therein,
and shall be binding upon all successors to such interest.  The parties shall
execute simultaneously with this Agreement sufficient copies of a “Memorandum of
Management Agreement” in recordable form satisfactory to both parties, which
Memorandum of Management Agreement shall, if legally permitted, be recorded or
registered (or such other steps shall be taken by the parties as are necessary,
to the extent legally permitted, to give official notice to all third parties
that this Agreement binds the Hotels) promptly following the Effective Date of
this Agreement in each jurisdiction in which a Hotel is located.  Any cost of
such recordation shall be paid by Manager.

 

11.06  Headings; Section References.  The headings of Sections herein are
inserted for convenience only and are in no way intended to describe, interpret,
define or limit the scope or content of this Agreement or any provision hereto. 
All references to Articles, Sections, paragraphs, clauses, exhibits, or addenda
shall refer to the corresponding Article, Section, paragraph, clause of, or
exhibit or addendum attached to, this Agreement unless otherwise specified.

 

11.07  Notices.  Notices, statements and other communications to be given under
the terms of the Agreement shall be in writing and delivered by hand against
receipt or sent by certified or registered mail or Express Mail service, postage
prepaid, return receipt requested or by nationally recognized overnight delivery
service, addressed to the parties as follows:

 

To Tenant:

HPT TRS MRP, INC.

 

c/o Hospitality Properties Trust

 

Two Newton Place

 

255 Washington Street

 

Newton, Massachusetts 02458

 

Attn: President

 

Phone: (617) 964-8389

 

Fax: (617) 969-5730

 

 

To Manager:

 

 

c/o

 

 

 

 

 

Attn:

 

Phone:

 

Fax:

 

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with copy to:

 

 

c/o

 

 

 

 

 

Attn:

 

Phone:

 

Fax:

 

or at such other address as is from time to time designated by the party
receiving the notice.  Any such notice that is mailed in accordance herewith
shall be deemed received when delivery is received or refused, as the case may
be.  Additionally, notices may be given by facsimile transmission, provided that
a hard copy of said transmission shall be delivered to the addressee by
nationally recognized overnight delivery service by no later than the second
(2nd) business day following such transmission.  Facsimiles shall be deemed
delivered on the date of such transmission, if received during the receiving
party’s normal business hours or, if not received during the receiving party’s
normal business hours, then on the next succeeding date on which the receiving
party is open for normal business.

 

11.08  Environmental Matters.

 

A.                    Subject to Section 11.08.D hereof and the sufficiency of
funds in each applicable Reserve, during the Term or at any other time while
Manager is in possession of the Hotel, (1) Manager shall not store, spill upon,
dispose of or transfer to or from any Hotel any Hazardous Substance, except in
compliance with all Legal Requirements, (2) Manager shall maintain the Hotels at
all times free of any Hazardous Substance (except in compliance with all Legal
Requirements), and (3) Manager (a) upon receipt of notice or knowledge shall
promptly notify Landlord and Tenant in writing of any material change in the
nature or extent of Hazardous Substances at any Hotel, (b) shall file and
transmit to Landlord and Tenant a copy of any Community Right to Know report
which is required to be filed by the Manager with respect to any Hotel pursuant
to SARA Title III or any other Legal Requirements, (c) shall transmit to
Landlord and Tenant copies of any citations, orders, notices or other
governmental communications received by Manager with respect thereto
(collectively, “Environmental Notice”), which Environmental Notice requires a
written response or any action to be taken and/or if such Environmental Notice
gives notice of and/or presents a material risk of any material violation of any
Legal Requirement and/or presents a material risk of any material cost, expense,
loss or damage (an “Environmental Obligation”), (d) shall observe and comply
with all Legal Requirements relating to the use, maintenance and disposal of
Hazardous Substances and all orders or directives from any official, court or
agency of competent jurisdiction relating to the use or maintenance or requiring
the removal, treatment, containment or other disposition thereof, and (e) shall
pay or otherwise dispose of any fine, charge or Imposition related thereto,
unless Tenant or the Manager shall contest the same in good faith and by
appropriate proceedings and the right to use and the value of any Hotel is not
materially and adversely affected thereby.

 

B.                    Subject to Sections 11.08.C and 11.08.D below and the
sufficiency of funds in each applicable Reserve, in the event of the discovery
of Hazardous Substances other than those maintained in accordance with Legal
Requirements on any portion of any Site or in any Hotel

 

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during the Term of this Agreement, Manager shall promptly (i) clean up and
remove from and about such Hotel all Hazardous Substances thereon, (ii) contain
and prevent any further release or threat of release of Hazardous Substances on
or about such Hotel, and (iii) use good faith efforts to eliminate any further
release or threat of release of Hazardous Substances on or about such Hotel, and
(iv) otherwise effect a remediation of the problem in accordance with (1) the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended; (2) the regulations promulgated thereunder,
from time to time; (3) all federal, state and local laws, rules and regulations
(now or hereafter in effect) dealing with the use, generation, treatment,
storage, disposal or abatement of Hazardous Substances; and (4) the regulations
promulgated thereunder, from time to time (collectively referred to as
“Environmental Laws”).

 

C.                    The actual costs incurred or the estimated costs to be
incurred with respect to any costs that have been or are to be incurred under
Section 11.08.B above are herein collectively referred to as, the “Environmental
Costs”.  Any costs incurred by Tenant with respect to any judgment or settlement
approved by Manager (such approval shall not be unreasonably withheld,
conditioned or delayed with respect to any third party claims including, without
limitation, claims by Landlord arising under the Lease), including reasonable
attorney fees incurred with respect to such claims, as a result of release or
threat of release of Hazardous Substances on or about any of the Hotels are
herein referred to as the “Other Environmental Costs”.  The Environmental Costs
and the Other Environmental Costs are collectively referred to herein as the
“Section 11.08 Costs”.

 

D.                    All Environmental Costs, Other Environmental Costs and
Section 11.08 Costs with respect to each Hotel shall be paid from the applicable
Reserve for such Hotel; provided, however, that if any of the foregoing costs
arise as a result of the gross negligence or willful misconduct of Manager or
any employee of Manager, such costs shall be paid by Manager at its sole cost
and expense and not as a Deduction, and Manager shall indemnify Tenant for any
loss, cost, claim or expense (including reasonable attorneys’ fees) incurred by
Tenant in connection therewith.

 

11.09  Confidentiality.

 

A.                    The parties hereto agree that the matters set forth in
this Agreement are strictly confidential and each party will make every effort
to ensure that the information is not disclosed to any outside person or
entities (including the press) without the prior written consent of the other
party except may be required by law, including the rules and regulations the SEC
or any stock exchange applicable to Tenant or its Affiliates, in any report,
prospects or other filing made by Tenant or its affiliates with the SEC or any
such stock exchange,  and as may be reasonably necessary to obtain licenses,
permits, and other public approvals necessary for the refurbishment or operation
of the Hotels, or in connection with financing or proposed financing of the
Hotels, a Sale of a Hotel, or a sale of a Controlling Interest in Tenant,
Manager, or Marriott.

 

B.                    No reference to Manager or to any Affiliate will be made
in any prospectus, private placement memorandum, offering circular or offering
documentation related thereto (collectively referred to as the “Prospectus”),
issued by Tenant or an Affiliate, which is

 

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designated to interest potential investors in a Hotel, unless Manager has
previously received a copy of all such references.  However, regardless of
whether Manager does or does not so receive a copy of all such references,
neither Manager nor any Affiliate will be deemed a sponsor of the offering
described in the Prospectus, nor will it have any responsibility for the
Prospectus, and the Prospectus will so state.  Unless Manager agrees in advance,
the Prospectus will not include any trademark, symbols, logos or designs of
Manager or any Affiliates.  Tenant shall indemnify, defend and hold Manager
harmless from and against all loss, costs, liability and damage (including
attorneys’ fees and expenses, and the cost of litigation) arising out of any
Prospectus or the offering described therein, and this obligation of Tenant
shall survive any Termination of this Agreement.

 

11.10  Projections.  Tenant acknowledges that any written or oral projections,
pro formas, or other similar information that has been, prior to execution of
this Agreement, or will, during the Term of this Agreement, be provided by
Manager, Marriott, or any Affiliate to Tenant is for information purposes only
and that Manager, Marriott, and any such Affiliate do not guarantee that the
Hotels will achieve the results set forth in any such projections, pro formas,
or other similar information.  Any such projections, pro formas, or other
similar information are based on assumptions and estimates, and unanticipated
events may occur subsequent to the date of preparation of such projections,
pro formas, and other similar information.  Therefore, the actual results
achieved by the Hotels are likely to vary from the estimates contained in any
such projections, pro formas, or other similar information and such variations
might be material.

 

11.11  Actions to be Taken Upon Termination.  Upon a Termination of this
Agreement with respect to any Hotel, the following shall be applicable:

 

A.                    Manager shall, within ninety (90) days after Termination
of this Agreement with respect to one or more Hotels, prepare and deliver to
Tenant a final accounting statement with respect to the applicable Hotels, as
more particularly described in Section 4.01 hereof, along with a statement of
any sums due from Tenant to Manager pursuant hereto, dated as of the date of
Termination.  Within thirty (30) days of the receipt by Tenant of such final
accounting statement, the parties will make whatever cash adjustments are
necessary pursuant to such final statement.  If any dispute shall arise with
respect to the final accounting statement which cannot be resolved by the
parties within the thirty (30) day period provided for making any cash
adjustments, it shall be settled by the Expert in accordance with
Section 11.22.B, provided however, that any cash adjustments relating to items
which are not in dispute shall be made within the original thirty (30) day
period.  The cost of preparing such final accounting statement shall be a
Deduction, unless the Termination occurs as a result of a Default by either
party, in which case the defaulting party shall pay such cost.  Manager and
Tenant acknowledge that there may be certain adjustments for which the
information will not be available at the time of the final accounting and the
parties agree to readjust such amounts and make the necessary cash adjustments
when such information becomes available, provided, however, that all accounts
shall be deemed final as of the second (2nd) anniversary of the effective date
of Termination.

 

B.                    Manager shall release and transfer to Tenant, or cause
Marriott under the Pooling Agreement to release and transfer to Tenant, any of
Tenant’s funds which are held or controlled by Manager or Marriott with respect
to the applicable Hotels, with the exception of funds of Tenant to be held in
escrow pursuant to Section 6.01.F and Section 11.11.I and

 

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otherwise in accordance herewith.  All amounts in the applicable Reserves shall
be applied to any amounts payable from such Reserves hereunder or under the
Owner Agreement and the balance shall be paid to Landlord.

 

C.                    Manager shall make available to Tenant such books and
records respecting the applicable Hotels (including those from prior years,
subject to Manager’s reasonable records retention policies) as will be needed by
Tenant to prepare the accounting statements, in accordance with the Uniform
System of Accounts, for the applicable Hotels for the year in which the
Termination occurs and for any subsequent year.

 

D.                    Manager shall (to the extent permitted by law) assign to
Tenant or to the new manager all operating licenses and permits for the
applicable Hotels which have been issued in Manager’s name (including liquor and
restaurant licenses, if any).

 

E.                     If any applicable Franchise Agreements have been
terminated, Manager shall have the option, to be exercised within thirty (30)
days after Termination, to purchase, at their then book value, any items of the
applicable Hotels’ Inventories and Fixed Asset Supplies as may be marked with
any Trade Name, or any Marriott or Courtyard by Marriott trademark, other trade
name, symbol, logo or design.  In the event Manager does not exercise such
option, Tenant agrees that it will use any such items not so purchased
exclusively in connection with the applicable Hotels until they are consumed.

 

F.                     Manager shall, at Tenant’s sole cost and expense, use
good faith commercially reasonable efforts to transfer to and cooperate with
Tenant or Tenant’s designee in connection with the processing of all
applications for licenses, operating permits and other governmental
authorizations and all contracts entered into by Manager, including contracts
with governmental or quasi-governmental entities which Manager has entered into
with respect to the use and operation of the applicable Hotels as then operated
(and Tenant will assume responsibility for all of the same), but excluding
(i) all insurance contracts and multi-property contracts not limited in scope to
the applicable Hotels or other Portfolio Properties (if applicable), (ii) all
contracts and leases with Affiliates of Manager, (iii) utility deposits, and
(iv) telephone numbers for the applicable Hotels (which telephone numbers
Manager shall be required to convey to Tenant only if this Agreement is
terminated as the result of an Event of Default by Manager).  Tenant shall
indemnify and hold Manager harmless for all claims, costs and expenses
(including reasonable attorneys’ fees) arising from acts or omissions by Tenant
or Tenant’s designee under such contracts subsequent to the earlier of the date
of Termination or the date of transfer thereof to Tenant or Tenant’s designee.

 

G.                    Tenant shall have the right to operate the improvements on
the applicable Sites without modifying the architectural design of same,
notwithstanding the fact that such design or certain features thereof may be
proprietary to Manager and/or protected by trademarks or service marks held by
Manager or an Affiliate, provided that such use shall be confined to the
applicable Sites.

 

H.                    Any computer software (including upgrades and
replacements) at the applicable Hotels owned by Manager, Marriott, an Affiliate,
or the licensor of any of them is proprietary to Manager, Marriott, such
Affiliate, or the licensor of any of them and shall in all

 

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events remain the exclusive property of Manager, Marriott, the Affiliate or the
licensor of any of them, as the case may be, and nothing contained in this
Agreement shall confer on Tenant the right to use any of such software.  Subject
to the terms and conditions of the Franchise Agreement, Manager shall have the
right to remove from the applicable Hotels without compensation to Tenant any
computer software (including upgrades and replacements), including, without
limitation, the System software, owned by Manager, Marriott, any Affiliate or
the licensor of any of them.  Furthermore, upon Termination, Manager shall be
entitled to remove from the applicable Hotels without compensation to Tenant any
computer equipment utilized as part of a centralized reservation system or owned
by a party other than Tenant, unless a Franchise Agreement is in place and such
equipment is to be provided pursuant to the Franchise Agreement.

 

I.                      If this Agreement with respect to one or more Hotels is
terminated for any reason, other than a Termination by reason of a Manager
Default hereunder, and in any event excluding a termination which occurs as a
result of the expiration of the Term hereof, an escrow fund for each Hotel shall
be established from Gross Revenues of such Hotel to reimburse Manager for all
reasonable costs and expenses incurred by Manager in terminating its employees
at such Hotel, such as severance pay, unemployment compensation, employment
relocation, and other employee liability costs arising out of the termination of
employment of Manager’s employees at such Hotel.  If Gross Revenues of each of
such Hotels are insufficient to meet the requirements of such escrow fund for
such Hotel, then Manager shall have the right to withdraw the amount of such
expenses from Working Capital or any other funds of Tenant (specifically
excluding any interest Tenant may have in the Reserve for such Hotel) with
respect to such Hotel held by or under the control of Manager or Marriott
hereunder or under the Pooling Agreement, if applicable.  Tenant shall have the
right to offer employment to any employee whom Manager proposes to terminate and
Manager shall cooperate with Tenant in connection therewith.

 

J.                     Various other actions shall be taken, as described in
this Agreement, including, but not limited to, the actions described in
Section 4.05 and Section 6.01.F.

 

K.                    Manager shall peacefully vacate and surrender the
applicable Hotels to Tenant.

 

L.                     Upon expiration of the entire Term of this Agreement and
expiration of the Lease in accordance with their respective terms (and not as a
result of a Default or Event of Default), Tenant shall have no further liability
for repayment of Additional Manager Advances, Additional Marriott Advances, and
any other advances made by Marriott or Manager pursuant to this Agreement or the
Pooling Agreement.

 

The provisions of this Section 11.11 shall survive Termination.

 

11.12  Trademarks, Trade Names and Service Marks.  The names “Marriott,”
“                  ,” “                               ” and
“                           ” (each of the foregoing names, together with any
combination thereof, are collectively referred to as the “Trade Names”) when
used alone or in connection with another word or words, and the Marriott or
                                     trademarks, service marks, other trade
names, symbols, logos and designs shall in all events remain the exclusive
property of the Franchisor under the Franchise Agreements and

 

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nothing contained in this Agreement shall confer on Tenant the right to use any
of the Trade Names, or the Marriott or                                     
trademarks, service marks, other trade names, symbols, logos or designs
affiliated or used therewith otherwise than in strict accordance with the terms
of this Agreement.  Except as provided in Section 11.11.E and the Franchise
Agreement, upon termination of this Agreement with respect to any Hotel, any use
of or right to use any of the Trade Names, or any of the Marriott or
                                      trademarks, service marks, other trade
names, symbols, logos or designs by Tenant shall cease forthwith and Tenant
shall promptly remove from such Hotel any signs or similar items which contain
any of said Trade Names, trademarks, service marks, other trade names, symbols,
logos or designs in accordance with the Franchise Agreement and this Agreement. 
If Tenant has not removed such signs or similar items within ten (10) Business
Days, Manager shall have the right to do so.  The cost of such removal shall be
a Deduction for such Hotel attributable to the Accounting Period in which such
Termination occurs.  Included under the terms of this Section are all
trademarks, service marks, trade names, symbols, logos or designs used in
conjunction with such Hotel, including but not limited to restaurant names,
lounge names, etc., whether or not the marks contain the “Marriott” name or the
                                            name.  The right to use such
trademarks, service marks, trade names, symbols, logos or designs belongs
exclusively to Marriott, and the use thereof inures to the benefit of Marriott
whether or not the same are registered and regardless of the source of the
same.  The provisions of this Section 11.12 shall survive Termination.

 

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

 

11.14  Partial Invalidity.  If any portion of this Agreement shall be declared
invalid by order, decree or judgment of a court, or otherwise, this Agreement
shall be construed as if such portion had not been so inserted except when such
construction would operate as an undue hardship on Manager or Tenant or
constitute a substantial deviation from the general intent and purpose of said
parties as reflected in this Agreement.

 

11.15  Survival.  Except as otherwise specifically provided herein, the rights
and obligations of the parties herein shall not survive any Termination.

 

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

 

11.17  Intentionally Deleted.

 

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11.18  Entire Agreement.  This Agreement and the Incidental Documents, together
with any other writings signed by the parties expressly stated to be
supplemental hereto and together with any instruments to be executed and
delivered pursuant to this Agreement, constitutes the entire agreement between
the parties and supersedes all prior understandings and writings, and may be
changed only by a writing signed by the parties hereto.

 

11.19  Affiliates.  Manager shall be entitled to contract with companies that
are Affiliates (or companies in which Manager has an ownership interest if such
interest is not sufficient to make such a company an Affiliate) to provide goods
and/or services to the Hotels; provided that the prices and/or terms for such
goods and/or services are competitive.  Additionally, Manager may contract for
the purchase of goods and services for the Hotels with third parties that have
other contractual relationships with Manager, Marriott and their Affiliates, so
long as the prices and terms are competitive.  In determining, pursuant to the
foregoing, whether such prices and/or terms are competitive, they will be
compared to the prices and/or terms which would be available from reputable and
qualified parties for goods and/or services of similar quality, and the goods
and/or services which are being purchased shall be grouped in reasonable
categories, rather than being compared item by item.  Any dispute as to whether
prices and/or terms are competitive shall be referred to the Expert as provided
in Section 11.22.B.  The prices paid may include overhead and the allowance of a
reasonable return to Manager’s Affiliates (or companies in which Manager has an
ownership interest if such interest is not sufficient to make such a company an
Affiliate), provided that such prices are competitive as provided for herein. 
Tenant acknowledges and agrees that, with respect to any purchases of goods or
services pursuant to this Section 11.19, and subject to the foregoing
qualification that prices and/or terms are competitive, Manager’s Affiliates may
retain for their own benefit any allowances, credits, rebates, commissions and
discounts received with respect to any such purchases.

 

11.20  Competing Facilities.  Subject to Section 11.21, neither this Agreement
nor anything implied by the relationship between Manager and Tenant shall
prohibit any of the Marriott Companies from constructing, operating, promoting,
and/or authorizing others to construct, operate, or promote one or more Marriott
hotels, JW Marriott hotels, Marriott Resorts, Marriott Suites hotels,
RITZ-CARLTON hotels, Bvlgari hotels, EDITION hotels, Autograph Collection
hotels, Renaissance hotels, Renaissance ClubSport hotels, Conference Centers by
Marriott, Nickelodeon Resorts by Marriott, Residence Inn by Marriott hotels,
Courtyard by Marriott hotels, Fairfield Inns, Fairfield Suites, TownePlace
Suites by Marriott, SpringHill Suites by Marriott, Marriott Vacation Club, Grand
Residences, RITZ-CARLTON Club, Horizons, or any other lodging concepts, Vacation
Club Products, residential units, restaurants, or other business operations of
any type, at any location, including a location proximate to the Sites.  Tenant
acknowledges, accepts and agrees further that the Marriott Companies retain the
right, from time to time, to construct or operate, or both, or promote or
acquire, or authorize or otherwise license others to construct or operate, or
both, or promote or acquire any hotels, lodging concepts or products, Vacation
Club Products, restaurants or other business operations of any type whatsoever,
including, but not by way of limitation, those listed above, at any location
including one or more sites that may be adjacent, adjoining or proximate to the
Sites, which business operations may be in direct competition with the Hotels
and that any such exercise may adversely affect the operation of the Hotels.

 

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11.21  Trade Area Restriction.

 

A.                    From and after the Effective Date of this Agreement,
Marriott and its Affiliates shall be free to open or operate, and authorize a
third party to open and operate any hotel as a
                                   hotel in any location, including without
limitation within the areas designated on Exhibit B with respect to those
certain hotels identified thereon (the “Restricted Trade Areas”), except that if
Marriott or its Affiliates shall determine to obtain, either through development
or purchase, any hotel to be operated as a                                   
hotel within any applicable Restricted Trade Area, Manager shall or shall cause
such Affiliates to give HPT notice thereof and to negotiate, in good faith, at
the election of HPT, for the acquisition thereof by HPT and the lease thereof to
an Affiliate of HPT on the terms and conditions of the Lease and the management
of such property by Manager in accordance with the terms of this Agreement,
except with respect to the amount of the purchase price, initial working
capital, tenant’s priority, and the minimum rent payable with respect thereto. 
Manager or its Affiliates, however, shall not be obligated to provide notice
until the development or purchase of the                                   
hotel has been fully approved by the Board of Directors of Marriott or its
Affiliates.  Moreover, the foregoing requirement of good faith negotiation shall
not bind Tenant, HPT, Marriott or any of their Affiliates to proceed with a
transaction with respect to the identified hotel unless the purchase price
thereof and minimum rent payable with respect thereto and tenant’s priority is
agreed upon within thirty (30) business days after the commencement of
negotiations with respect thereto.

 

B.                    The right to notice and negotiation afforded HPT in the
foregoing Section 11.21.A above shall not apply to any hotel (1) that is
developed, acquired, or owned by parties other than Marriott and its Affiliates,
(2) that is part of an acquisition by Marriott or its Affiliates of an interest
in a chain or group of at least five (5) hotels (in a single transaction or
series of related transactions), (3) with respect to which HPT was notified
prior to the Effective Date that Marriott or its Affiliates planned to develop,
acquire, operate, manage or franchise, or (4) that is a replacement of any hotel
identified in (1) through (3) above.

 

11.22  Dispute Resolution; Arbitration and Expert Resolution.

 

A.                    Arbitration.  Except with respect to those disputes,
claims or controversies which pursuant to the terms of this Agreement are to be
settled by an Expert pursuant to Section 11.22.B, all other disputes, claims or
controversies between or among the parties hereto arising out of or relating to
this Agreement or the transactions contemplated hereby, including disputes,
claims or controversies relating to the meaning, interpretation, effect,
validity, performance or enforcement of this Agreement (each, a “Dispute” and
collectively, the “Disputes”), or relating in any way to such a Dispute or
Disputes, shall on demand of any party to such Dispute be resolved through
binding and final Arbitration administered by the American Arbitration
Association (“AAA”) under its Commercial Arbitration Rules then in effect (the
“Rules”), except as modified herein.  For the avoidance of doubt, a Dispute
shall include a Dispute made derivatively on behalf of one party against
another.

 

1.                     Notwithstanding any provision of the Rules to the
contrary, there shall be three arbitrators, who shall be appointed as provided
in this Section 11.22.A.  Each party shall appoint one arbitrator within fifteen
(15) days after receipt by respondent of a copy of the demand for arbitration. 
Affiliate claimants on the one hand, or Affiliate respondents on the other hand,
shall be treated as one party, respectively, for purposes of determining the
number of

 

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arbitrators and the means by which they are selected.  Pursuant to the Rules,
the party-appointed arbitrators need not be impartial or independent and shall
not be subject to disqualification for partiality or lack of independence.  If
the claimants or respondents, as the case may be, fail to appoint their
respective party-appointed arbitrator within fifteen (15) days, the party which
has selected an arbitrator shall request the AAA to provide a list of three
(3) arbitrators from the National Roster (as defined in the Rules) (or from the
Large, Complex Commercial Case Panel thereof, if the Procedures for Large,
Complex Commercial Disputes apply to the dispute), each of whom shall be
neutral, impartial and unaffiliated with any party and the party that failed to
timely appoint an arbitrator shall have ten (10) days to select one of the three
as the second arbitrator; if such party shall gain fail to timely select an
arbitrator, the AAA shall make the appointment.  The two arbitrators so
appointed shall attempt to agree upon a third arbitrator, who shall chair the
arbitration.  Such chairperson as may be agreed to by the party-appointed
arbitrators need not be selected from the National Roster, but must meet the
standards of the Rules and shall be neutral, impartial and unaffiliated with any
party. If the party-appointed arbitrators fail to agree upon a chairperson
within fifteen (15) days of the appointment of the second arbitrator, the
chairperson shall be selected from the National Roster (or, if the Procedures
for Large, Complex Commercial Disputes apply to the dispute, from the Large,
Complex Commercial Case Panel thereof) in the manner provided in the Rules and
who shall be neutral, impartial and unaffiliated with any party.

 

2.                     The place of Arbitration shall be Washington, D.C.,
unless otherwise agreed by the parties.

 

3.                     Any document discovery otherwise permissible within the
Rules shall be limited to the documents bearing directly on the parties’ claims
and defenses or otherwise necessary to the determination of the matter. Unless
the parties otherwise agree, no more than three depositions of individuals
affiliated with the claimaint(s) or respondent(s), respectively, may be
undertaken at the discretion of the chairperson in accordance with the Rules. 
The discretion and/or authority committed by the Rules to the “arbitrator” or
“arbitrator(s)” shall be vested in the chairperson, who may act individually or
in consultation with the party-appointed arbitrators at the chairperson’s
discretion.

 

4.                     Any question regarding the enforceability of this
Section 11.22.A or the demand for arbitration shall be determined in accordance
with the Federal Arbitration Act, 9 U.S.C. §1 et seq. and the body of law
interpreting such Act.  The Arbitration Award shall be in writing and may, but
shall not be required to, briefly state the findings of fact and conclusions of
law on which it is based.

 

5.                     Unless, and then only to the extent the arbitrators in
the award assess costs and expenses or any part thereof against any specified
party or parties (a) each party involved in a Dispute shall bear its own costs
and expenses (including attorneys’ fees); and (b) each party (or, if there are
more than two parties to the Dispute, all claimants, on the one hand, and all
respondents, on the other hand, respectively) shall bear the costs and expenses
of its (or their) selected arbitrator and the parties (or, if there are more
than two parties to the Dispute, all claimants, on the one hand, and all
respondents, on the other hand) shall equally bear the costs and expenses of the
third appointed arbitrator.

 

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6.                     The Arbitration Award shall be final and binding upon the
parties thereto and shall be the sole and exclusive remedy between such parties
relating to the Dispute, including any claims, counterclaims, issues or
accounting presented to the arbitrators.  Judgment upon the Arbitration Award
may be entered in any court having jurisdiction.  To the fullest extent
permitted by law, no application or appeal to any court of competent
jurisdiction may be made in connection with any question of law arising in the
course of Arbitration or with respect to any award made except for actions
relating to enforcement of this Section 11.22.A to arbitrate or any arbitral
award issued hereunder and except for actions seeking interim or other
provisional relief in aid of arbitration proceedings in any court of competent
jurisdiction.

 

7.                     Any monetary award shall be made and payable in U.S.
dollars free of any tax, deduction or offset.  The party against which the
Arbitration Award assesses a monetary obligation shall pay that obligation on or
before the 30th day following the date of the Arbitration Award or such other
date as the Arbitration Award may provide.

 

B.                    Expert Resolution.  Notwithstanding the terms and
provisions of Section 11.22.A above, where this Agreement expressly calls for a
matter or dispute to be referred to an Expert for determination, the following
provisions shall apply:

 

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

 

2.                     Each party shall be entitled to make written submissions
to the Expert, and if a party makes any submission it shall also provide a copy
to the other party and the other party shall have the right to comment on such
submission.  The parties shall make available to the Expert all books and
records relating to the issue in dispute and shall render to the Expert any
assistance requested of the parties.  The costs of the Expert and the
proceedings shall be borne as provided in Section 11.22.A hereof;

 

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

 

4.                     The terms of engagement of the Expert shall include an
obligation on the part of the Expert to:  (i) notify the parties in writing of
the Expert’s decision within forty-five (45) days from the date on which the
Expert has been selected (or such other period as the parties may agree or as
set forth herein); and (ii) establish a timetable for the making of submissions
and replies.

 

11.23  Permitted Contests.  Manager shall have the right to contest the amount
or validity of any Imposition, Legal Requirement, Insurance Requirement, lien,
attachment, levy, encumbrance, charge or claim (collectively, “Claims”) as to
any Hotel, by appropriate legal proceedings, conducted in good faith and with
due diligence, provided that (a) such contest shall

 

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not cause Landlord or Tenant to be in default under any Qualified Mortgage or
reasonably be expected to result in a lien attaching to such Hotel, unless such
lien is fully bonded or otherwise secured to the reasonable satisfaction of
Landlord, (b) no part of a Hotel nor any Gross Revenues therefrom shall be in
any immediate danger of sale, forfeiture, attachment or loss, and (c) Manager
shall indemnify and hold harmless Tenant and Landlord from and against any cost,
claim, damage, penalty or reasonable expense, including reasonable attorneys’
fees, incurred by Tenant or Landlord in connection therewith or as a result
thereof.  Tenant agrees to sign all required applications and otherwise
cooperate with Manager in expediting the matter, provided that Tenant shall not
thereby be subjected to any liability therefor (including, without limitation,
for the payment of any costs or expenses in connection therewith), and any such
costs or expenses incurred in connection therewith shall be paid as a Deduction
with respect to the applicable Hotel. Landlord shall, in the Owner Agreement,
agree to join in any such proceedings if required legally to prosecute such
contest, provided that Landlord shall not thereby be subjected to any liability
therefor (including, without limitation, for the payment of any costs or
expenses in connection therewith) and Manager agrees by agreement in form and
substance reasonably satisfactory to Landlord, to assume and indemnify Landlord
with respect to the same.  Any amounts paid under any such indemnity of Manager
to Tenant or Landlord shall be a Deduction with respect to such Hotel.  Any
refund of any Claims and such charges and penalties or interest thereon which
amount shall be paid to Manager and included in Gross Revenues of such Hotel.

 

11.24  Estoppel Certificates.  Each party to this Agreement shall at any time
and from time to time, upon not less than thirty (30) days’ prior notice from
the other party, execute, acknowledge and deliver to such other party, or to any
third party specified by such other party, a statement in writing: 
(a) certifying that this Agreement is unmodified and in full force and effect
(or if there have been modifications, that the same, as modified, is in full
force and effect and stating the modifications); (b) stating whether or not to
the best knowledge of the certifying party (i) there is a continuing default by
the non-certifying party in the performance or observance of any covenant,
agreement or condition contained in this Agreement, or (ii) there shall have
occurred any event which, with the giving of notice or passage of time or both,
would become such a default, and, if so, specifying each such default or
occurrence of which the certifying party may have knowledge; (c) stating the
date to which distributions of Operating Profit have been made; and (d) stating
such other information as the non-certifying party may reasonably request.  Such
statement shall be binding upon the certifying party and may be relied upon by
the non-certifying party and/or such third party specified by the non-certifying
party as aforesaid, including, without limitation its lenders and any
prospective purchaser or mortgagee of any Hotel or the leasehold estate created
by the Lease.  The obligations set forth in this Section 11.24 shall survive
Termination (that is, each party shall, on request, within the time period
described above, execute and deliver to the non-certifying party and to any such
third party a statement certifying that this Agreement has been terminated).

 

11.25  Indemnification.  Subject to the provisions of Section 9.04 hereof, and
notwithstanding the existence of any insurance provided for herein and without
regard to the policy limits of any such insurance, Manager shall protect,
indemnify and hold harmless Tenant and Landlord for, from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and reasonable expenses (including, without limitation, reasonable attorneys’
fees), to the maximum extent permitted by law, imposed upon or incurred by or
asserted against

 

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Tenant or Landlord by reason of: (a) any accident, injury to or death of persons
or loss of or damage to property occurring on or about the Hotels or adjoining
sidewalks or rights of way under Manager’s control, (b) any use, misuse,
non-use, condition, management, maintenance or repair by Manager or anyone
claiming under Manager of the Hotels or Tenant’s Personal Property or any
litigation, proceeding or claim by governmental entities or other third parties
to which Tenant is made a party or participant relating to the Hotel’s or
Tenant’s Personal Property or such use, misuse, non-use, condition, management,
maintenance, or repair thereof including, failure to perform obligations (other
than Condemnation proceedings) to which Tenant is made a party, (c) any
Impositions that are the obligations of Manager to pay pursuant to the
applicable provisions of this Agreement, and (d) infringement and other claims
relating to the propriety marks of Marriott or Manager with respect to any
Hotel; provided, however, that Manager’s obligations hereunder shall not apply
to any liability, obligation, claim, damage, penalty, cause of action, cost or
expense to the extent the same arises from any negligence or willful misconduct
of Tenant, its employees, agents or invitees.  Manager, at its expense, shall
contest, resist and defend any such claim, action or proceeding asserted or
instituted against Tenant (and shall not be responsible for any duplicative
attorneys’ fees incurred by Tenant) or may compromise or otherwise dispose of
the same, with Tenant’s prior written consent (which consent may not be
unreasonably withheld or delayed).  In the event Tenant shall unreasonably
withhold or delay its consent, Manager shall not be liable pursuant to this
Section 11.25 for any incremental increase in costs or expenses resulting
therefrom.  The obligations of Manager under this Section 11.25 are in addition
to the obligations set forth in Section 11.08.D and shall survive a Termination
of this Agreement.  The indemnification provided for in this Section 11.25 shall
not be applicable to Environmental Costs, Other Environmental Costs or
Section 11.08 Costs, with respect to which a specific indemnity is provided in
Section 11.08 hereof, to the extent addressed therein.

 

11.26  Prohibited Transactions.  At any time during which an Event of Default
shall have occurred and be continuing, Manager shall not permit to exist or
enter into any agreement or arrangement (other than the Franchise Agreement)
whereby it engages in a transaction of any kind with an Affiliate of Manager,
except on terms and conditions which are commercially reasonable and have been
negotiated at arm’s length.

 

11.27  Remedies Cumulative.  To the maximum extent permitted by law, each legal,
equitable or contractual right, power and remedy of Tenant or Manager, now or
hereafter provided either in this Agreement or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Tenant or Manager
(as applicable) of any one or more of such rights, powers and remedies shall not
preclude the simultaneous or subsequent exercise by Tenant of any or all of such
rights, powers and remedies.

 

11.28  Amendments and Modifications.  This Agreement shall not be modified or
amended except in writing signed by both parties.

 

11.29  Construction; Nonrecourse.  Anything contained in this Agreement to the
contrary notwithstanding, all claims against, and liabilities of, Manager or
Tenant arising prior to any date of termination or expiration of this Agreement
with respect to any Hotel shall survive such termination or expiration.  In no
event shall Tenant be liable for any consequential damages

 

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suffered by Manager as the result of a breach of this Agreement by Tenant. 
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by all the
parties thereto.  All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.  Each term or provision of this Agreement to
be performed by Manager shall be construed as an independent covenant and
condition.  Time is of the essence with respect to the exercise of any rights of
Manager or Tenant under this Agreement.  Except as otherwise set forth in this
Agreement, any obligations arising prior to the expiration or sooner termination
of this Agreement of Manager (including without limitation, any monetary, repair
and indemnification obligations) and Tenant shall survive the expiration or
sooner termination of this Agreement.  Nothing contained in this Agreement shall
be construed to create or impose any liabilities or obligations and no such
liabilities or obligations shall be imposed on any of the shareholders,
beneficial owners, direct or indirect, officers, directors, trustees, employees
or agents of Tenant or its Affiliates or Manager or its Affiliates for the
payment or performance of the obligations or liabilities of Tenant or Manager,
as applicable, hereunder.

 

11.30  Counterparts; Headings.  This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but which, when taken
together, shall constitute but one instrument and shall become effective as of
the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed.  Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.

 

11.31  No Political Contributions.  Notwithstanding any provision in this
Agreement to the contrary, no money or property of the Hotels shall be paid or
used or offered, nor shall Tenant or Manager directly or indirectly use or
offer, consent or agree to use or offer, any money or property of the Hotels
(i) in aid of any political party, committee or organization, (ii) in aid of any
corporation, joint stock or other association organized or maintained for
political purposes, (iii) in aid of any candidate for political office or
nomination for such office, (iv) in connection with any election, (v) for any
political purpose whatever, or (vi) for the reimbursement or indemnification of
any person for any money or property so used.

 

11.32  Single Agreement.  The parties hereto acknowledge and agree that this
Agreement and the Other Management Agreements are intended to constitute, and
shall constitute, a single transaction.

 

11.33  REIT Qualification.  Manager shall not take any action which would cause
Landlord’s rental income from Tenant under the Lease for the Hotels to fail to
qualify as “rents from real property” pursuant to Sections 856(d)(8)(B) and
856(d)(9) of the Code.

 

11.34  Further Compliance With Section 856(d) of the Code.  Manager represents
that, as of the date hereof, it is an “eligible independent contractor” as
defined under Section 856(d)(9)(A) of the Code, and further agrees that it shall
maintain such status except to the extent events outside of Manager’s control
may affect Manager’s independent contractor status.  Landlord, Manager and
Tenant agree to cooperate in good faith to the purpose and effect that Manager
retain such status.  This covenant shall apply for so long as one or more of the
Hotels

 

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are owned by Landlord (or a successor or permitted assignee) and leased to
Tenant (or a successor or a permitted assignee) as part of an ownership
structure that is subject to REIT tax requirements.  Without limiting the
foregoing, Manager shall do each of the foregoing:

 

A.                    Manager shall exercise its powers, privileges,
responsibilities and obligations under this Agreement (and related documents) so
as to cause each Hotel to qualify as a “qualified lodging facility” pursuant to
Section 856(d)(9)(D) of the Code.  In furtherance of the foregoing, Manager
shall comply with any regulations or other administrative guidance now or
hereafter existing with respect to qualification as an “eligible independent
contractor” under said Section 856(d)(9)(A).  Without limiting any of the
foregoing, Manager shall not authorize any wagering activities to be conducted
at or in connection with any Hotel and Manager shall ensure that at least
one-half of the guest rooms in each such Hotel are used on a transient basis and
that no Hotel will include amenities and facilities which are not customary for
similarly situated properties.

 

B.                    None of Manager or any of its Affiliates (either
individually or collectively) shall own, within the meaning of
Section 856(d)(5) of the Code, either directly or indirectly, more than
thirty-five percent (35%) of the shares of HPT (whether by vote, value or number
of shares).

 

C.                    To the extent within the reasonable control of Manager and
each Affiliate, neither Manager nor any Affiliate shall permit more than
thirty-five percent (35%) of the total combined voting power of Manager’s or
such Affiliates outstanding stock (or thirty-five percent (35%) of the total
shares of all classes of its outstanding stock) to be owned, within the meaning
of Section 856(d)(5) of the Code, directly or indirectly, by one or more persons
owning thirty-five percent (35%) or more of the outstanding stock of HPT and
Manager and its Affiliates shall otherwise comply with any regulations or other
administrative guidance now or hereafter existing under said
Section 856(d)(5) of the Code with respect to such ownership limits.

 

D.                    Manager, or a person who is a “related person” within the
meaning of Section 856(d)(9)(F) of the Code (a “Related Person”), shall be
actively engaged in the trade or business of operating or managing “qualified
lodging facilities” for one or more persons who are not Related Persons with
respect to HPT or Tenant (“Unrelated Persons”).  Manager or such Related Person
shall derive at least ten percent (10%) of each of its revenue and profit from
operating or managing “qualified operating facilities” within the meaning of
Section 856(d)(9)(D) of the Code for Unrelated Persons and shall comply with any
regulations or other administrative guidance now or hereafter existing under
Section 856(d)(9) of the Code with respect to the amount of hotel management
business that needs to be conducted with Unrelated Persons in order for Manager
to qualify as an “eligible independent contractor” under said Section 856(d)(9).

 

11.35  Adverse Regulatory Event.  In the event of an Adverse Regulatory Event
arising from or in connection with this Agreement, Tenant and Manager shall work
together in good faith to amend this Agreement to eliminate the impact of such
Adverse Regulatory Effect.  For purposes of this Agreement, the term “Adverse
Regulatory Effect” means any time that a law, statute, ordinance, code, rule or
regulation imposes upon Tenant (or could imposes upon Tenant in Tenant’s
reasonable opinion), any material threat to either Landlord’s or Landlord’s
Affiliate’s

 

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status as a “real estate investment trust” under the Code or to the treatment of
amounts paid to Landlord as “rents from real property” under Section 856(d) of
the Code.  Each of Manager and Tenant shall inform the other of any Adverse
Regulatory Event of which it is aware and which it believes likely to impair
compliance of any of the Hotels with respect to the aforementioned sections of
the Code.

 

11.36  Commercial Leases.  For so long as one or more of the Hotels are owned by
Landlord and leased to Tenant as part of an ownership structure that is subject
to REIT tax requirements, Manager agrees that Manager shall not enter into any
sublease with respect to any Hotel (or any part thereof) without first providing
Landlord with a copy thereof.  Landlord shall have twenty (20) days from the
date of its receipt of such proposed sublease to give written notice to Manager
indicating whether such sublease would, in Landlord’s reasonable judgment,
provide for a rental to be paid by the sublessee thereunder based (or considered
to be based), in whole or in part, on the income or profits derived by the
business activities of the sublessee, or any other formula, such that any
portion of the rent payable under the sublease would fail to qualify as “rents
from real property” within the meaning of Section 856(d) of the Code, or any
similar or successor provisions thereto.  If Landlord provides timely notice of
its determination that such proposed sublease would provide for such a rental
then Manager will not enter into such proposed sublease.  If Landlord shall fail
to give Manager such written notice within such twenty (20) day period, Landlord
shall be estopped from claiming that such sublease violates the terms of this
Section 11.36.

 

11.37  Waiver of Jury Trial.  In the event there occurs a Dispute, or an aspect
of a Dispute, which under the Rules must be referred to a court for
determination, each of Tenant and Manager hereby absolutely, irrevocably and
unconditionally waive trial by jury in connection with any litigation, action,
suit or proceeding relating to the resolution of such Dispute.  With respect to
any Hotel located in the State of California, the foregoing provisions of this
Section 11.37 constitute the written consent of Tenant and Manager to waive
their right to a jury trial, as contemplated by CCP 631(d)(2) and either party
may submit the provisions of this Section 11.37 to the applicable court or
judicial body to evidence such consent of the parties.

 

ARTICLE XII

 

DEFINITION OF TERMS

 

12.01  Definition of Terms.

 

The following terms when used in this Agreement and the Addenda attached hereto
shall have the meanings indicated:

 

“AAA” shall have the meaning ascribed to such term in Section 11.22.A hereof.

 

“Accounting Period” shall mean the four (4) week accounting periods having the
same beginning and ending dates as Manager’s four (4) week accounting periods,
except that an Accounting Period may occasionally contain five (5) weeks when
necessary to conform Manager’s accounting system to the calendar. Manager shall
have the right, at its discretion, to modify the definition of Accounting Period
to mean a calendar month or such other period of

 

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time as is consistent with the accounting periods that Manager may implement,
from time to time, with respect to the System.  If Manager makes such a
modification, then references in this Agreement to a particular number of
Accounting Periods shall be read as the number of Accounting Periods that most
closely correspond to the same period of time (e.g. twenty-six (26)
four (4) week Accounting Periods would correspond to twenty-four (24) calendar
month Accounting Periods).

 

“Addenda” shall mean any addendum attached hereto from time to time.

 

“Additional Manager Advances” shall mean advances by Manager under Sections
4.01.E, 4.03.B, 4.03.D, and 4.05.A hereof, together with simple interest at the
rate of nine percent (9%) per annum on the outstanding balance thereof from time
to time.

 

“Additional Marriott Advance” shall mean an Additional Marriott Advance under
the Pooling Agreement, and if the Pooling Agreement does not apply to any Hotel,
the portion of such Additional Marriott Advances determined to be allocable to
such Hotel in accordance with the Pooling Agreement, together with simple
interest at the rate of nine percent (9%) per annum on the outstanding balance
thereof from time to time.

 

“Advance Notice” shall have the meaning ascribed to such term in
Section 4.03.B.2 hereof.

 

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

 

“Agreement” shall mean this Management Agreement between Tenant and Manager,
including the exhibits and the addenda from time to time attached hereto.

 

“Annual Operating Projection” shall have the meaning ascribed to such term in
Section 4.04 hereof.

 

“Annual Operating Statement” shall have the meaning ascribed to such term in
Section 4.01.C.

 

“Arbitration” shall mean the process described in Section 11.22.A hereof.

 

“Arbitration Award” shall have the meaning ascribed to such term in
Section 11.22.A hereof.

 

“Available Funds” shall have the meaning ascribed to such term in Section 3.02.B
hereof.

 

“Award” shall have the meaning ascribed to such term in the Lease.

 

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“Buildings” shall have the meaning ascribed to such term in Section A of the
Recitals.

 

“Business Day” shall mean any day other than Saturday, Sunday, or any other day
on which banking institutions in the Commonwealth of Massachusetts or the State
of Maryland are authorized by law or executive action to close.

 

“Capital Addition” shall have the meaning ascribed to such term in
Section 5.08.A hereof.

 

“Central Office Services” shall have the meaning ascribed to such term in
Section 1.03 hereof.

 

“Chain Services” shall have the meaning ascribed to such term in Section 1.03;
provided, however, that the First Incentive Management Fee for each Hotel is
intended to cover only the services currently listed (as of the Effective Date)
in clause (i) of the definition of Chain Services in Section 1.03 other than the
charges for the national and regional reservations system service which shall be
paid as a Deduction.  Accordingly, if there are expenditures that were
originally treated as Deductions but that are later determined to be more
properly treated as Chain Services, or if additional central or regional
services are (after the Effective Date) furnished for the benefit of hotels in
the System, each Hotels’ allocable share of such expenditures shall be treated
as Deductions and shall not be covered by the First Incentive Management Fee for
such Hotels.  Conversely, if there are expenditures that were (as of the
Effective Date) listed in clause (i) of the definition of Chain Services and
included in Chain Services (as of the Effective Date) but that are later
determined to be more properly furnished at the Hotels instead of on a central
or regional basis, such expenditures shall not later be treated as a Deduction
but shall continue to be covered by the First Incentive Management Fee for each
of such Hotels. Any fees for services not included in the First Incentive
Management Fee for the Hotels shall be consistent with fees established for the
System. [each agreement to conform to relevant brand services]

 

“Claims” shall have the meaning ascribed to such term in Section 11.23 hereof.

 

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

 

“Condemnation” shall mean, with respect to any Hotel, (a) the exercise of any
governmental power with respect to such Hotel or any interest therein, whether
by legal proceedings or otherwise, by a Condemnor of its power of condemnation,
(b) a voluntary sale or transfer of any Hotel or any interest therein, to any
Condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending, or (c) a taking or voluntary conveyance of any Hotel
or any interest therein, or right accruing thereto or use thereof, as the result
or in settlement of any Condemnation or other eminent domain proceeding
affecting any Hotel or any interest therein, whether or not the same shall have
actually been commenced.

 

“Condemnor” shall mean any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.

 

“Controlling Interest” shall mean (i) if the Person is a corporation, the right
to exercise, directly or indirectly, more than fifty percent (50%) of the voting
rights attributable to the shares

 

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of such Person (through ownership of such shares or by contract), or (ii) if the
Person is not a corporation, the possession, directly or indirectly, of the
power to direct or cause the direction of the business, management or policies
of such Person.

 

“Deduction” shall have the meaning ascribed to such term in the definition of
Operating Profit.  Deductions shall not include (i) payments with respect to
items for Manager has given an indemnity, to the extent of such indemnity,
(ii) payments with respect to items for which Manager has agreed to be liable at
its own cost and expense herein, (iii) any item specifically stated not to be a
Deduction herein, and (iv) any item for which Manager or any Affiliate has
agreed to be liable (other than at the cost and expense of Tenant or any
Affiliate) under the terms of any Incidental Document or any other agreement
between Manager or any Affiliate and Tenant or any Affiliate.

 

“Default” shall have the meaning ascribed to such term in Section 9.01.

 

“Disbursement Rate” shall have the meaning ascribed to such term in the Lease.

 

“Disputes” shall have the meaning ascribed to such term in Section 11.22.A.

 

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

 

“Environmental Costs” shall have the meaning ascribed to such term in
Section 11.08.C hereof.

 

“Environmental Laws” shall have the meaning ascribed to such term in
Section 11.08.B hereof.

 

“Environmental Notice” shall have the meaning ascribed to such term in
Section 11.08.A hereof.

 

“Environmental Obligation” shall have the meaning ascribed to such term in
Section 11.08.A hereof.

 

“Estimated Costs” shall have the meaning ascribed to such term in
Section 11.08.D hereof.

 

“Existing CC&R’s” shall have the meaning ascribed to such term in
Section 8.02.A.

 

“Exit Hotel” shall mean a Hotel designated as a property to be sold in
accordance with the terms of the Exit Hotel Agreement.

 

“Exit Hotel Agreement” shall mean the Exit Hotel Agreement dated as of
                               among, inter alia, Landlord, Tenant and Manager.

 

“Expert” shall mean an independent, nationally recognized hotel consulting firm
or individual consultant and which shall be a firm of independent certified
public accountants with respect to disputes arising under Sections 4.01.D or
4.02.B, which is qualified to resolve the issue in question, which has not, as
of the date of appointment, or within two (2) years prior to

 

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such date, been employed or otherwise engaged by either party, either directly
or as a consultant or other service provider, in connection with any other
matter and who is appointed in each instance by agreement of the parties or,
failing agreement, each party shall select one (1) such Expert, provided the
requirement that an Expert not have been employed or otherwise engaged by a
party within two (2) years prior to the appointment shall not apply to the
Experts selected by each party, and the two (2) respective Experts so selected
shall select another Expert.  If either party calls for an Expert determination
pursuant to the terms hereof, the parties shall have ten (10) days from the date
of such request to agree upon an Expert and, if they fail to agree, each party
shall have an additional ten (10) days to make its respective selection of an
Expert, and within ten (10) days of such respective selections, the two (2)
respective Experts so selected shall select another Expert.  If either party
fails to make its respective selection of an Expert within the second ten (10)
day period provided for above, or if the two (2) respective firms and/or
individuals so selected shall fail to select a third Expert, then such Expert(s)
shall be appointed by AAA, shall have at least ten (10) years recent
professional experience as to the subject matter in question, and otherwise
shall satisfy the standards herein for an Expert.

 

“Event of Default” shall have the meaning ascribed to such term in Section 9.01.

 

“FF&E” shall mean furniture, fixtures and equipment, including without
limitation:  furnishings, fixtures, decorative items, signage, audio-visual
equipment, kitchen equipment and appliances, cabinetry, laundry equipment,
housekeeping equipment, telecommunications systems, security systems and front
desk and back-of-the house computer equipment; provided, however, that the term
“FF&E” shall not include Fixed Asset Supplies or Software.

 

“First Incentive Management Fee” shall mean, with respect to each Fiscal Year or
portion thereof, an amount equal to thirty percent (30%) of Operating Profit
remaining after deducting amounts paid or payable in respect of Sections
3.02.B(1) and (2) for such Fiscal Year.

 

“Fiscal Year” shall mean Manager’s Fiscal Year which as of the Effective Date
ends at midnight on the Friday closest to December 31 in each calendar year; the
new Fiscal Year begins on the Saturday immediately following said Friday.  Any
partial Fiscal Year between the Effective Date and the commencement of the first
full Fiscal Year shall constitute a separate Fiscal Year.  A partial Fiscal Year
between the end of the last full Fiscal Year and the Termination of this
Agreement shall also constitute a separate Fiscal Year.  If Manager’s Fiscal
Year is changed in the future, appropriate adjustment to this Agreement’s
reporting and accounting procedures shall be made; provided, however, that no
such change or adjustment shall alter the term of this Agreement or in any way
reduce or in any material respect delay the distributions of Operating Profit or
other payments due hereunder, and provided further, that for so long as the
Pooling Agreement is in force, Manager’s Fiscal Year shall not change unless
conforming changes are made to the Fiscal Year applicable to all Portfolio
Properties then subject to the Pooling Agreement.

 

“Fixed Asset Supplies” shall mean items included within “Operating Equipment”
under the Uniform System of Accounts that may be consumed in the operation of
the Hotel or are not capitalized, including, but not limited to, linen, china,
glassware, tableware, uniforms, and similar items used in the operation of the
Hotel.

 

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“Franchise Agreement” means, with respect to each Hotel, the Franchise Agreement
entered into with respect to such Hotel by and between Marriott and Tenant, as
the same may be amended, modified or supplemented from time to time.

 

“Franchisor” shall have the meaning ascribed to such term in each Franchise
Agreement.

 

“Future CC&R’s” shall have the meaning ascribed to such term in Section 8.02.A
hereof.

 

“GAAP” shall mean generally accepted accounting principles, consistently
applied.

 

“Government Agencies” shall mean any court, agency, authority, board (including,
without limitation, environmental protection, planning and zoning), bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit of the United States or the State or
any county or any political subdivision of any of the foregoing, whether now or
hereafter in existence, having jurisdiction over Tenant or the Hotels operated
thereon.

 

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

 

“Gross Room Revenues” shall include with respect to each Hotel, all gross
revenues attributable to or payable for rental of guest rooms at such Hotel,
after deductions for bad debts and discounts for prompt cash payments and
refunds from Rental of Guest Rooms, including, without limitation, all credit
transactions, whether or not collected, but excluding (i) any sales or room
taxes collected by Manager for transmittal to the appropriate taxing authority,
and (ii) any revenues from sales or rentals of ancillary goods, such as VCR
rentals, telephone income and fireplace log sales and sales from in-room service
bars.  Gross Room Revenues shall also include the proceeds from any business
interruption insurance applicable to loss of revenues due to the
non-availability of guest rooms and for guaranteed no-show revenue which is
collected.  Gross Room Revenues shall be accounted for in accordance with the
Uniform System of Accounts.

 

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“Guaranty Term” shall have the meaning given such term in the Marriott Guaranty
Agreement.

 

“Guest Room” shall mean with respect to each Hotel, a lodging unit in such
Hotel.

 

“Hazardous Substances” shall mean any substance:

 

the presence of which requires or may hereafter require notification,
investigation or remediation under any federal, state or local statute,
regulation, rule, ordinance, order, action or policy; or

 

which is or becomes defined as a “hazardous waste”, “hazardous material” or
“hazardous substance” or “pollutant” or “contaminant” under any present or
future federal, state or local statute, regulation, rule or ordinance or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. et seq.) and
the Resource Conservation and Recovery Act (42 U.S.C. section 6901 et seq.) and
the regulations promulgated thereunder; or

 

which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, any state of the United States, or any
political subdivision thereof; or

 

the presence of which at a Hotel causes or materially threatens to cause an
unlawful nuisance upon such Hotel or to adjacent properties or poses or
materially threatens to pose a hazard to such Hotel or to the health or safety
of persons on or about such Hotel; or

 

without limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons or volatile organic compounds; or

 

without limitation, which contains polychlorinated biphenyls (PCBs) or asbestos
or urea formaldehyde foam insulation; or

 

without limitation, which contains or emits radioactive particles, waves or
material; or

 

without limitation, constitutes materials which are now or may hereafter be
subject to regulation pursuant to the Material Waste Tracking Act of 1988, or
any applicable laws promulgated by any Government Agencies.

 

“Hotel” shall mean each Site together with the Buildings and all other
improvements constructed or to be constructed on such Site pursuant to this
Agreement, and all FF&E installed or located on such Site or in the Buildings,
and all easements or other appurtenant rights thereto owned by Landlord together
with, for purposes of this Agreement, all office equipment, telephone equipment,
motor vehicles, and other equipment leased by Tenant as permitted

 

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hereunder and Fixed Asset Supplies at such Hotel, in each of the foregoing
instances as and when the same hereunder subject to the terms of this Agreement.

 

“HPT” shall mean Hospitality Properties Trust, its successors and permitted
assigns.

 

“Impositions” shall have the meaning ascribed to such term in the Lease with the
exclusions set forth in Section 7.01.C hereof.

 

“Incidental Documents” shall mean all documents entered into by Marriott,
Manager, Tenant, Landlord, HPT, and/or the managers under the Other Management
Agreements in connection with the transactions contemplated, inter alia, by this
Agreement, the Pooling Agreement, and the Marriott Guaranty Agreement.

 

“Index” shall mean the Consumer Price Index for Urban Wage Earners and Clerical
Workers, All-Cities, All Items 1982-1984 = 100, as published by the Bureau of
Labor Statistics or, in the event publication thereof ceases, by reference to
whatever index then published by the United States Department of Labor at that
time is most nearly comparable as a measure of general changes in price levels
for urban areas, as reasonably determined by Manager and Tenant.

 

“Initial Term” shall have the meaning ascribed to such term in Section 2.01.A
hereof.

 

“Insurance Requirements” shall mean all terms of any insurance policy required
by this Agreement and all requirements of the issuer of any such policy and all
orders, rules and regulations and any other requirements of the National Board
of Fire Underwriters (or any other body exercising similar functions) binding
upon the Hotels.

 

“Insurance Retention” shall have the meaning ascribed to such term in Section
6.01.F hereof.

 

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

 

“Landlord” shall mean as of any date the landlord under the Lease as of such
date.

 

“Landlord Default” shall have the meaning ascribed to such term in Section
9.01.F hereof.

 

“Landlord Sale of a Hotel” shall have the meaning ascribed to the term “Sale of
a Hotel” in the Owner Agreement.

 

“Lease” shall mean the Amended, Restated and Consolidated Master Lease Agreement
between Landlord and Tenant in effect from time to time relating to the Hotels
and other Portfolio Properties and any replacement leases of the Hotels and
other Portfolio Properties by the fee owner thereof to Tenant which provides for
Landlord to fund additional capital investment as provided for under such Lease,
which Lease may be amended from time to time,

 

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without Manager’s consent, provided the same does not (a) impose any material
cost, expense or obligation upon Manager, or (b) reduce any amounts that would
otherwise be payable to Manager hereunder, or (c) otherwise be expected to
interfere with the operation and maintenance of the Hotels or Manager’s
obligations hereunder.  Tenant shall provide Manager a copy of any amendment
promptly following execution.

 

“Lease Term” shall have the meaning ascribed to such term under the Lease.

 

“Lease Year” shall mean each Fiscal Year with the initial Lease Year commencing
on the commencement of the Lease term and ending on the Friday closest to
December 31.

 

“Legal Requirements” shall mean, with respect to each Hotel, all federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting such Hotel
or the maintenance, construction, alteration or operation thereof, whether now
or hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate such Hotels, and (b) all covenants, agreements, restrictions and
encumbrances contained in any instruments at any time in force affecting such
Hotels which either (i) do not require the approval of Manager, or (ii) have
been approved by Manager as required hereby, including those which may (A)
require material repairs, modifications or alterations in or to such Hotels or
(B) in any way materially and adversely affect the use and enjoyment thereof,
but excluding any requirements arising as a result of Landlord’s status as a
real estate investment trust, and (c) all valid and lawful requirements of
courts and other government agencies or authorities pertaining to reporting,
licensing, permitting, investigation, remediation and removal of underground
improvements (including, without limitation, treatment or storage tanks, or
water, gas or oil wells), or emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pesticides, petroleum or
petroleum products, pollutants, contaminants or hazardous or toxic substances,
materials or wastes whether solid, liquid or gaseous in nature, into the
environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid of gaseous in
nature.

 

“License” shall mean any license, permit, decree, act, order, authorization or
other approval or instrument which is necessary in order to operate each Hotel
in accordance with Legal Requirements and pursuant to System Standards and
otherwise in accordance with this Agreement.

 

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

 

“Manager Default” shall have the meaning ascribed to such term in Section 9.01.

 

“Manager Event of Default” shall have the meaning ascribed to such term in
Section 9.01.

 

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“Manager’s Reserve Advance” shall have the meaning ascribed to such term in
Section 5.07.F hereof.

 

“Marketing Fund” shall mean that certain fund (or any successor to such fund)
maintained by Marriott, to pay for the following System costs: all costs
associated with developing, preparing, producing, directing, administering,
conducting, maintaining and disseminating advertising, marketing, promotional
and public relations materials, programs, campaigns, sales and marketing
seminars and training programs, and similar activities of every kind and nature,
including the Courtyard by Marriott directory; and conducting market research;
provided, however, that any costs described in this definition of Marketing Fund
may, at the option of the Manager and any association which may be formed by the
Courtyard by Marriott franchisees, be charged directly to each hotel in the
System on the basis of actual use by or benefit to each hotel and, in such
event, shall become Deductions.  Tenant shall contribute to the Marketing Fund
    percent (   %) of Gross Room Revenues of each Hotel or such other amount
(not to exceed     percent (   %) of Gross Room Revenues as may be provided for
members of the System by Franchisor from time to time), and such contribution
shall be a Deduction. [each agreement to conform to relevant brand]

 

“Marriott” shall mean Marriott International, Inc., a Delaware corporation and
its permitted successors and assigns.

 

“Marriott Companies” shall mean Manager, Marriott, and any Affiliate of Manager
or Marriott.

 

“Marriott Guaranty Advances” shall mean advances under the Marriott Guaranty
Agreement allocated to pay a portion of Tenant’s Priority (as more particularly
set forth in the Marriott Guaranty Agreement) with respect to the Hotel.

 

“Marriott Guaranty Agreement” shall mean the Guaranty Agreement dated of even
date herewith by and between Marriott and Tenant, which such guaranty is
personal to Tenant and to any Affiliate of HPT or Tenant that may succeed Tenant
under this Management Agreement.

 

“Master Funding Agreement” shall mean that certain Master Funding Agreement
dated as of January 1, 2011 among Landlord, Tenant and Marriott.

 

“Minimum Rent” shall, for each Hotel, for any period, mean the amount of Minimum
Rent allocable to such Hotel which accrues under the Lease for such period.

 

“Mortgage” shall mean any mortgage indebtedness obtained by Landlord to finance
a Hotel, and may take the form of a mortgage, deed of trust or security document
customarily in use in the jurisdiction in which the Site for such Hotel is
located.

 

“Mortgagee” shall mean the holder of any Mortgage.

 

“Officer’s Certificate” shall mean a certificate executed by a vice president of
Manager which certifies that with respect to the Annual Operating Statement
delivered under Section 4.01.C(2) and the annual accounting delivered under
Section 4.01.D(1) hereof, that the accompanying statement or accounting has been
properly prepared in accordance with GAAP and fairly presents the financial
operations of the Hotels.

 

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“Operating Loss” shall mean, with respect to each Hotel, a negative Operating
Profit for such Hotel.

 

“Operating Profit” shall mean, with respect to each Hotel, the excess of Gross
Revenues over the following deductions, but excluding (i) payments with respect
to items for Manager has given an indemnity, to the extent of such indemnity,
(ii) payments with respect to items for which Manager has agreed to be liable at
its own cost and expense herein, (iii) any item specifically stated not to be a
Deduction herein, and (iv) any item for which Manager or any Affiliate has
agreed to be liable (other than at the cost and expense of Tenant or any
Affiliate) under the terms of any Incidental Document or any other agreement
between Manager or any Affiliate and Tenant or any Affiliate (“Deductions”)
[each agreement to conform to relevant brand] incurred by Manager in accordance
with the Operating Standards and the terms of this Agreement, on behalf of
Tenant, in operating the Hotel:

 

1.                     the cost of sales, including, without limitation,
compensation, fringe benefits, payroll taxes and other costs related to Hotel
employees (the foregoing costs shall not include salaries and other employee
costs of executive personnel of Manager who do not work at the Hotel on a
regular basis; except that the foregoing costs shall include the allocable
portion of the salary and other employee costs of any general manager or other
supervisory personnel assigned to a “cluster” of hotels which includes the
Hotel);

 

2.                     departmental expenses incurred at departments within the
Hotel; administrative and general expenses; the cost of marketing incurred by
the Hotel; advertising and business promotion incurred by the Hotel; heat,
light, and power; computer line charges; and routine repairs, maintenance and
minor alterations treated as Deductions under Section 5.02;

 

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

 

4.                     a reasonable reserve for uncollectible accounts
receivable as determined by Manager;

 

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

 

6.                     all costs and fees of technical consultants and
operational experts who are retained or employed by Manager and/or Affiliates of
the Manager for specialized services (including, without limitation, quality
assurance inspectors) and the cost of attendance by employees of the Hotel at
training and manpower development programs sponsored by Manager;

 

7.                     the System Fee;

 

8.                     insurance costs and expenses as provided in Section 6.01
hereof;

 

9.                     taxes, if any, payable by or assessed against Manager
related to this Agreement or to Manager’s operation of the Hotel (exclusive of
Manager’s income taxes) and all Impositions;

 

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10.                   transfers to the Hotel’s Reserve required pursuant to
Section 5.03.C hereof;

 

11.                   transfers required to be made, as they may change from
time to time, to the Marketing Fund in order for the Hotel to remain a member of
the System (such contributions are presently     percent (   %) of Gross Room
Revenues) and shall be consistent with policies established for the System;

 

12.                   all usual and customary sums charged to the Hotel for room
reservations obtained for the Hotel through the reservation system used by
Manager or through other reservation facilities operated by Manager or its
Affiliates which are charged to members of the System (the current system-wide
charge is           percent (   %) of Gross Room Revenues, plus $     per
reservation made through the reservation system, but is subject to change which
will be made in accordance with policies for the System);

 

13.                   the Hotel’s share of the costs and expenses of
participating in programs and activities prescribed for members of the System
(including those central or regional services set forth in Section 1.03(c)(ii)
hereof) to the extent such costs are not paid from the Marketing Fund (and which
shall be consistent with policies established for the system);

 

14.                   the costs of commercially reasonable efforts of causing
the Hotel to be in compliance with each and every provision of the Lease
(regardless of whether or not such compliance is a requirement of this
Agreement);

 

15.                   such other costs and expenses incurred by Manager as are
specifically provided for elsewhere in this Agreement or are otherwise
reasonably necessary for the proper and efficient operation of the Hotel; and

 

16.                   such other costs and expenses paid to Landlord or Tenant
pursuant to the Lease or this Agreement, if such costs and expenses would have
been a Deduction if paid directly by Manager to a third person in respect of the
Hotel.

 

The term “Deductions” shall not include (a) debt service payments pursuant to
any Mortgage, and (b) payments pursuant to equipment leases or other forms of
financing obtained by Tenant for the FF&E located in or connected with a Hotel,
both of which shall be paid or caused to be paid by Tenant from its own funds,
the Reserve to the extent permitted hereunder, or from funds provided by
Landlord under the Lease.

 

The term “Deductions” shall not include (a) Rent payable under the Lease, (b)
any reimbursement to Manager for advances Manager makes with respect to a Hotel
as permitted hereunder, and (c) the First Incentive Management Fee and the
Second Incentive Management Fee for any Hotel.

 

“Operating Standards” shall have the meaning ascribed to such term in Section
1.02.A hereof.

 

“Other Environmental Costs” shall have the meaning ascribed to such term in
Section 11.08.C hereof.

 

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“Other Franchise Agreements” means the Franchise Agreements between Marriott or
an Affiliate and Tenant with respect to the Portfolio Properties other than the
Hotels.

 

“Other Management Agreements” means the Management Agreements between Manager or
an Affiliate and Tenant with respect to the Portfolio Properties other than the
Hotels.

 

“Overdue Rate” shall have the meaning ascribed to such term in the Lease.

 

“Owner Agreement” shall mean the Owner Agreement dated of even date herewith by
and among Landlord, Tenant, Marriott and Manager with respect to the Hotels and
other Portfolio Properties.

 

“Person” shall mean any individual or entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such individual
or entity where the context so admits.

 

“Pooling Agreement” means the Pooling Agreement by and among Manager, Marriott,
Tenant and others dated as of the date of this Agreement under which the Gross
Revenues, Working Capital, and Reserves of the Hotels are pooled with Gross
Revenues, Working Capital and Reserves of the other Portfolio Properties, as the
same may be supplemented, amended, or modified from time to time.

 

“Portfolio Properties” shall mean, as of any date, the Hotels subject to the
Pooling Agreement together with the other properties whose Gross Revenues,
Working Capital and Reserves are as of such date pooled with the Gross Revenues,
Working Capital and Reserves of the Hotels under the Pooling Agreement.

 

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

 

“Proprietary Information” shall mean (a) all computer software and accompanying
documentation (including all future upgrades, enhancements, additions,
substitutions and modifications thereof), other than computer software which is
commercially available, which are used by Tenant or Manager in connection with
the property management system, the reservation system and all future electronic
systems developed by Tenant or Manager for use in any Hotel, (b) all manuals,
brochures and directives used by Tenant or Manager at any Hotel regarding the
procedures and techniques to be used in operating any such Hotel, (c) customer
lists, and (d) employee records which must remain confidential either under
Legal Requirements or under reasonable corporate policies of Tenant or Manager;
provided, however, that “Proprietary Information” shall not include any
software, manuals, brochures or directives issued by Marriott, as Franchisor to
Tenant, as franchisee, under the Franchise Agreement.

 

“Prorated Portions” shall have the meaning ascribed to such term in Section
4.01.A hereof.

 

“Prospectus” shall have the meaning ascribed to such term in Section 11.09.B
hereof.

 

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“Purchase and Sale Agreement” shall mean the Purchase and Sale Agreement
identified on the Addendum hereto.

 

“Qualified Mortgage” shall have the meaning ascribed to such term in the Owner
Agreement.

 

“Reimbursable Advances” shall mean the amounts paid or payable in respect of
Item (2) of Section 3.02.B

 

“Renewal Term(s)” shall have the meaning ascribed to such term in Section 2.01
hereof.

 

“Renovations” shall mean the renovation and improvement work to certain
Portfolio Properties pursuant to the Renovation-Related Agreements.

 

“Renovation Agreement” shall mean that certain Renovation Agreement dated as of
                               among Landlord, Tenant, and Marriott
International Design & Construction Services, Inc.

 

“Renovation-Related Agreements” shall mean the Master Funding Agreement and the
Renovation Agreement.

 

“Rent” shall mean, for any period, for each Hotel, Minimum Rent and any
additional rent allocated to such Hotel and accrued under the Lease for such
Hotel for such period, provided the same does not exceed, in each instance, the
corresponding amount of Tenant’s Priority with respect to each such Hotel.

 

“Replacement Cost” shall have the meaning ascribed to such term in Section
6.01.C hereof.

 

“Reserve” shall have the meaning ascribed to such term in Section 5.03.B hereof.

 

“Reserve Estimate” shall have the meaning ascribed to such term in Section
5.04.A hereof.

 

“Restricted Trade Area” shall have the meaning ascribed to such term in Section
11.21 hereof.

 

“Rules” shall have the meaning ascribed to such term in Section 11.22.A hereof.

 

“Sale of a Hotel” shall mean any sale, assignment, transfer or other
disposition, for value or otherwise, voluntary or involuntary, of the Tenant’s
leasehold title to a Hotel and related property.  For purposes of this
Agreement, a Sale of a Hotel shall also include a lease (or sublease) of all or
substantially all of Tenant’s leasehold interest in a Hotel and any sale,
assignment, transfer or other disposition, for value or otherwise, voluntary or
involuntary, in a single transaction or a series of transactions, of the
Controlling Interest in Tenant, but shall not include any conveyance which
results in HPT or an HPT Affiliate holding a Controlling Interest in such
Tenant, Landlord or immediate parent of such Tenant.

 

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“SEC” shall mean the United States Securities Exchange Commission.

 

“Second Incentive Management Fee” shall mean, with respect to each Fiscal Year
or portion thereof, an amount payable to Manager, the amount equal to
thirty-seven and one-half percent (37.5%) of Operating Profit remaining after
deducting amounts paid or payable in respect of Sections 3.02.B(1) through (4)
hereof.

 

“Section 11.08 Costs” shall have the meaning ascribed to such term in Section
11.08.C hereof.

 

“Security Deposit” shall mean the security deposit held by Landlord as security
for Tenant’s obligations under the Lease in respect of a Hotel.

 

“Security Deposit Advances” shall mean advances made pursuant to the terms of
the Security Deposit Agreement.

 

“Security Deposit Agreement” shall mean the Security Deposit Agreement of even
date herewith among, inter alia, Marriott and Tenant.

 

“Security Deposit Replenishment” shall mean the amounts paid or payable in
respect of Section 3.02.B(4) to the replenishment of any Security Deposit
Advances with respect to a Hotel to replenish the Security Deposit for such
Hotel.

 

“Site” shall have the meaning ascribed to such term in Section A of the
Recitals.

 

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

 

“State” means, with respect to each Hotel, the state in which such Hotel is
located.

 

“Sum Due Marriott” shall have the meaning ascribed to such term in Section
3.02.B.2 hereof.

 

“Sum Due Tenant” shall have the meaning ascribed to such term in Section
3.02.B.2 hereof.

 

“System” shall mean all hotels which are operated under the Trade Names listed
on the Addenda.

 

“System Fee” shall mean, with respect to each Hotel, during any Fiscal Year, an
amount equal to                   (   %) percent of Gross Room Revenues of such
Hotel. [each agreement to conform to relevant brand]

 

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“System Services” shall have the meaning ascribed to such term in Section 1.03.

 

“System Standards” shall mean either (or both as the context requires) of the
following two categories of standards:  (i) the operational standards (for
example, services offered to guests, cleanliness, staffing, employee
compensation and benefits, Chain Services, frequent traveler programs and other
similar programs, etc.); and (ii) the physical standards (for example, quality
of the Improvements, FF&E, and Fixed Asset Supplies, frequency of FF&E
replacements, etc.); each of such standards shall be the standard which is
generally prevailing or in the process of being implemented at other hotels in
the System, on a fair and consistent basis with other hotels in the System
including all services and facilities in connection therewith that are customary
and usual at comparable hotels in the System; provided, however, that if the
market area or the physical peculiarities of the Hotels warrant, in the
reasonable judgment of Manager, a deviation from such standards shall be
permitted.

 

“Tenant” shall have the meaning ascribed to such term in the Preamble or shall
mean any successor or permitted assignee, as applicable.

 

“Tenant Advances” shall have the meaning ascribed to such term in Section
3.02.B.2 hereof.

 

“Tenant Default” shall have the meaning ascribed to such term in Section 9.06.

 

“Tenant Event of Default” shall have the meaning ascribed to such term in
Section 9.06.

 

“Tenant Operating Loss Advances” shall have the meaning ascribed to such term in
Section 4.01.E hereof.

 

“Tenant’s Priority” shall mean, for each Hotel, for each full Fiscal Year, an
amount equal to the amount set forth on the applicable Addenda, or a pro rata
portion thereof in any partial Fiscal Year; provided, however, effective on the
date of each disbursement by Landlord pursuant to Sections 5.1.3(b), 10.2 or
11.2 of the Lease and Section 1(a) of the Master Funding Agreement for each
applicable Hotel, or by Tenant pursuant to Section 5.07 hereof with respect to
such Hotel, in each instance at the request of or with the approval of Landlord,
Tenant’s Priority payable with respect to each Accounting Period for such Hotel
shall be increased by an amount equal to the quotient obtained by dividing (a)
nine percent (9%) times the amounts so disbursed, by (b) thirteen (13).  If any
disbursement is made during any Accounting Period on a day other than the first
day of an Accounting Period, the Tenant’s Priority payable for such Hotel on the
first day of the immediately following Accounting Period (after having been so
increased) shall be further increased (but only for such instant Accounting
Period) by the amount by which Tenant’s Priority for the preceding Accounting
Period, as adjusted for disbursement on a per diem basis, exceeded the amount of
Tenant’s Priority actually paid to Tenant for such preceding Accounting Period.

 

“Tenant’s Priority Shortfall” shall have the meaning ascribed to such term in
Section 3.02.C.

 

“Tenant Reserve Advance” means an advance by Tenant under Section 5.07.F hereof.

 

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“Tenant’s Personal Property” shall mean all motor vehicles, consumable
inventories and supplies, furniture, furnishings, movable walls and partitions,
equipment and machinery and all other tangible personal property of Tenant, if
any, acquired by Tenant on and after the date hereof and located at a Hotel or
used in Tenant’s business at a Hotel, and all modifications, replacements,
alterations and additions to such personal property.

 

“Tenant’s Termination Threshold” shall mean, with respect to a Hotel, an amount
equal to ninety percent (90%) of Tenant’s Priority with respect to such Hotel
for any Accounting Period.

 

“Tenant Working Capital Advances” shall mean the aggregate of all funds remitted
by Tenant to Manager in order to fund additional Working Capital under Section
4.05 hereof, or pursuant to the Pooling Agreement to the extent allocable to the
Hotels.

 

“Term” shall have the meaning ascribed to such term in Section 2.01 hereof.

 

“Termination” shall mean, with respect to each Hotel, the expiration or sooner
cessation of the Term with respect to such Hotel.

 

“Trade Names” shall have the meaning ascribed to such term in Section 11.21
hereof.

 

“Uniform System of Accounts” shall mean the Uniform System of Accounts for the
Lodging Industry, Tenth Revised Edition, 2006, as published by the American
Hotel & Lodging Educational Institute, as revised from time to time to the
extent such revision has been or is in the process of being generally
implemented within the System.

 

“Unsuitable for Its Permitted Use” shall mean, with respect to a Hotel, a state
or condition of such Hotel such that (a) following any damage or destruction
involving such Hotel, such Hotel cannot be operated in the good faith judgment
of Manager on a commercially practicable basis and it cannot reasonably be
expected to be restored to substantially the same condition as existed
immediately before such damage or destruction and otherwise as required under
Section 6.02.D. hereof, within nine (9) months following such damage or
destruction or such shorter period of time as to which business interruption
insurance is available to cover Rent and other costs related to the Hotel
following such damage or destruction, or (b) as the result of a partial taking
by Condemnation, such Hotel cannot be operated, in the good faith judgment of
Manager on a commercially practicable basis in light of then existing
circumstances.

 

“Vacation Club Products” shall mean timeshare, fractional, interval, vacation
club, destination club, vacation membership, private membership club, private
residence club, and points club products, programs and services and shall be
broadly construed to include other forms of products, programs and services
wherein purchasers acquire an ownership interest, use right or other entitlement
to use certain determinable holiday villa or apartment units and associated
facilities on a periodic basis and pay for such ownership interest, use right or
other entitlement in advance.

 

“Work” shall have the meaning ascribed to such term in Section 6.02.D hereof.

 

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“Working Capital” shall mean, with respect to each Hotel, funds that are used in
the day-to-day operation of the business of such Hotel, including, without
limitation, amounts sufficient for the maintenance of change and petty cash
funds, amounts deposited, in operating bank accounts, receivables, amounts
deposited in payroll accounts, prepaid expenses and funds required to maintain
Inventories, less accounts payable and accrued current liabilities.

 

[SIGNATURES BEGIN ON THE FOLLOWING PAGE]

 

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

 

 

 

TENANT:

 

 

 

WITNESS:

 

HPT TRS MRP, INC.,

 

 

a Maryland corporation

 

 

 

 

 

 

 

 

By:

 

Print Name:

 

 

Print Name:

 

 

 

Title:

 

 

S-1

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MANAGER:

 

 

 

 

 

 

WITNESS:

 

NAME:

 

 

 

 

 

 

 

 

By:

 

Print Name:

 

 

Print Name:

 

 

 

Title:

 

 

S-2

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