Exhibit 10.7

EXECUTION VERSION

ASHFORD PRIME HOTEL MASTER MANAGEMENT AGREEMENT

by and between

ASHFORD PRIME TRS CORPORATION,

a Delaware corporation

and

REMINGTON LODGING & HOSPITALITY, LLC

a Delaware limited liability company

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TABLE OF CONTENTS

 

ARTICLE I DEFINITION OF TERMS

     7   

1.01

 

Definition of Terms

     7   

ARTICLE II TERM OF AGREEMENT

     17   

2.01

 

Term

     17   

2.02

 

Actions to be Taken upon Termination

     18   

2.03

 

Early Termination Rights; Liquidated Damages

     19   

ARTICLE III PREMISES

     23   

ARTICLE IV APPOINTMENT OF MANAGER

     23   

4.01

 

Appointment

     23   

4.02

 

Delegation of Authority

     24   

4.03

 

Contracts, Equipment Leases and Other Agreements

     24   

4.04

 

Alcoholic Beverage/Liquor Licensing Requirements

     24   

ARTICLE V REPRESENTATIONS AND WARRANTIES

     24   

5.01

 

Lessee Representations

     24   

5.02

 

Manager Representations

     25   

ARTICLE VI OPERATION

     26   

6.01

 

Name of Premises; Standard of Operation

     26   

6.02

 

Use of Premises

     27   

6.03

 

Group Services

     28   

6.04

 

Right to Inspect

     28   

ARTICLE VII WORKING CAPITAL AND INVENTORIES

     29   

7.01

 

Working Capital and Inventories

     29   

7.02

 

Fixed Asset Supplies

     29   

 

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ARTICLE VIII MAINTENANCE, REPLACEMENT AND CHANGES

     30   

8.01

 

Routine and Non-Routine Repairs and Maintenance

     30   

8.02

 

Capital Improvement Reserve

     30   

ARTICLE IX EMPLOYEES

     35   

9.01

 

Employee Hiring

     35   

9.02

 

Costs; Benefit Plans

     35   

9.03

 

Manager’s Employees

     37   

9.04

 

Special Projects - Corporate Employees

     37   

9.05

 

Termination

     38   

9.06

 

Employee Use of Hotel

     39   

9.07

 

Non-Solicitation

     39   

ARTICLE X BUDGET, STANDARDS AND CONTRACTS

     39   

10.01

 

Annual Operating Budget

     39   

10.02

 

Budget Approval

     39   

10.03

 

Operation Pending Approval

     40   

10.04

 

Budget Meetings

     40   

ARTICLE XI OPERATING DISTRIBUTIONS

     41   

11.01

 

Management Fee

     41   

11.02

 

Accounting and Interim Payment

     41   

ARTICLE XII INSURANCE

     42   

12.01

 

Insurance

     42   

12.02

 

Replacement Cost

     43   

12.03

 

Increase in Limits

     43   

12.04

 

Blanket Policy

     44   

12.05

 

Costs and Expenses

     44   

 

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12.06

 

Policies and Endorsements

     44   

12.07

 

Termination

     44   

ARTICLE XIII TAXES AND DEBT SERVICE

     45   

13.01

 

Taxes

     45   

13.02

 

Debt Service; Ground Lease Payments

     45   

ARTICLE XIV BANK ACCOUNTS

     45   

ARTICLE XV ACCOUNTING SYSTEM

     47   

15.01

 

Books and Records

     47   

15.02

 

Monthly Financial Statements

     47   

15.03

 

Annual Financial Statements

     47   

ARTICLE XVI PAYMENT BY LESSEE

     48   

16.01

 

Payment of Base Management Fee

     48   

16.02

 

Distributions

     48   

16.03

 

Payment Option

     48   

ARTICLE XVII RELATIONSHIP AND AUTHORITY

     49   

ARTICLE XVIII DAMAGE, CONDEMNATION AND FORCE MAJEURE

     50   

18.01

 

Damage and Repair

     50   

18.02

 

Condemnation

     50   

18.03

 

Force Majeure

     51   

18.04

 

Liquidated Damages if Casualty

     51   

18.05

 

No Liquidated Damages if Condemnation or Force Majeure

     51   

ARTICLE XIX DEFAULT AND TERMINATION

     52   

19.01

 

Events of Default

     52   

19.02

 

Consequence of Default

     52   

ARTICLE XX WAIVER AND INVALIDITY

     53   

 

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20.01

 

Waiver

     53   

20.02

 

Partial Invalidity

     53   

ARTICLE XXI ASSIGNMENT

     53   

ARTICLE XXII NOTICES

     54   

ARTICLE XXIII SUBORDINATION; NON-DISTURBANCE

     55   

23.01

 

Subordination

     55   

23.02

 

Non-Disturbance Agreement

     55   

ARTICLE XXIV PROPRIETARY MARKS; INTELLECTUAL PROPERTY

     56   

24.01

 

Proprietary Marks

     56   

24.02

 

Computer Software and Equipment

     56   

24.03

 

Intellectual Property

     56   

24.04

 

Books and Records

     57   

ARTICLE XXV INDEMNIFICATION

     57   

25.01

 

Manager Indemnity

     57   

25.02

 

Lessee Indemnity

     57   

25.03

 

Indemnification Procedure

     58   

25.04

 

Survival

     58   

25.05

 

No Successor Liability

     58   

ARTICLE XXVI NEW HOTELS AND NON-MANAGED HOTELS

     59   

ARTICLE XXVII GOVERNING; LAW VENUE

     59   

ARTICLE XXVIII MISCELLANEOUS

     60   

28.01

 

Rights to Make Agreement

     60   

28.02

 

Agency

     60   

28.03

 

Failure to Perform

     60   

28.04

 

Headings

     60   

 

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28.05

 

Attorneys’ Fees and Costs

     60   

28.06

 

Entire Agreement

     60   

28.07

 

Consents

     61   

28.08

 

Eligible Independent Contractor

     61   

28.09

 

Environmental Matters

     62   

28.10

 

Equity and Debt Offerings

     62   

28.11

 

Estoppel Certificates

     63   

28.12

 

Confidentiality

     63   

28.13

 

Modification

     63   

28.14

 

Counterparts

     63   

 

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ASHFORD PRIME HOTEL MASTER MANAGEMENT AGREEMENT

THIS ASHFORD PRIME HOTEL MASTER MANAGEMENT AGREEMENT is made and entered into on
this 19th day of November, 2013, by and between ASHFORD PRIME TRS CORPORATION, a
Delaware corporation (hereinafter referred to as “Lessee”), REMINGTON LODGING &
HOSPITALITY, LLC, a Delaware limited liability company (hereinafter referred to
as “Manager”), and for the limited purposes of Article VIII herein, the
Landlords (defined below).

R E C I T A L S:

1. Lessee desires to retain Manager to manage and operate each Hotel (as defined
below), and Manager is willing to perform such services for the account of
Lessee, all as more particularly set forth in this Agreement.

A G R E E M E N T S:

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:

ARTICLE I

DEFINITION OF TERMS

1.01 Definition of Terms. The following terms when used in this Agreement shall
have the meanings indicated below.

“Accounting Period” shall mean a calendar month.

“Addendum” shall have the meaning as set forth in Article XXVI.

“Agreement” shall mean this Master Management Agreement, and all amendments,
modifications, supplements, consolidations, extensions and revisions to this
Master Management Agreement approved by Lessee and Manager in accordance with
the provisions hereof.

“AHP” means Ashford Hospitality Prime, Inc., a Maryland corporation.

“Annual Operating Budget” shall have the meaning as set forth in Section 10.01.

“AOB Objection Notice” shall have the meaning as set forth in Section 10.02.

“Applicable Standards” shall mean standards of operation for the Premises which
are (a) in accordance with the requirements of the applicable Franchise
Agreement, this Agreement and all CCRs affecting the Premises and of which true
and complete copies have been made available by Lessee to Manager, (b) in
accordance with applicable Legal Requirements, (c) in accordance with the terms
and conditions of any Hotel Mortgage or Ground

 

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Lease to the extent not otherwise inconsistent with the terms of this Agreement
(to the extent Lessee has made available to Manager true and complete copies of
the applicable loan documents relating to any such Hotel Mortgage and/or the
Ground Leases), (d) in accordance with the Leases (to the extent Lessee has made
available to Manager a true and complete copy thereof), (e) in accordance with
the requirements of any carrier having insurance on the Hotel or any part
thereof (to the extent Manager has been given written notice of such
requirements or policies and/or has coordinated same on behalf of Lessee), and
(f) in accordance with the requirements of Section 856(d)(9)(D) of the Code for
qualifying each Hotel as a Qualified Lodging Facility.

“Approval Requirement” shall have the meaning as set forth in Section 8.02I.

“Base Management Fee” shall have the meaning as set forth in Section 11.01A.

“Benefit Plans” shall have the meaning as set forth in Section 9.02.

“Black-Scholes Amount” shall have the meaning as set forth in Section 16.03B.

“Black-Scholes Model” shall have the meaning as set forth in Section 16.03B.

“Business Day” shall mean any day excluding (i) Saturday, (ii) Sunday, (iii) any
day which is a legal holiday under the laws of the States of New York, Maryland
or Texas, and (iv) any day on which banking institutions located in such states
are generally not open for the conduct of regular business.

“Budgeted HP” shall mean the House Profit as set forth in the Annual Operating
Budget for the applicable Fiscal Year, as approved by Lessee and Manager
pursuant to Article X hereof.

“CCRs” shall mean those certain restrictive covenants encumbering the Premises
recorded in the real property records of the county where such premises are
located, as described in the owner policies of title insurance relating to such
premises, a copy of which are acknowledged received by the Manager.

“Capital Improvement Budget” shall have the meaning as set forth in
Section 8.02E.

“Cash Management Agreements” shall mean agreements, if any, entered into by
Lessee, Landlord and a Holder for the collection and disbursement of any Gross
Revenues, Deductions, Management Fees or excess Working Capital with respect to
the applicable Premises, which constitute a part of the loan documents executed
and delivered in connection with any Hotel Mortgage by Landlord.

“Capital Improvement Reserve” shall have the meaning as set forth in
Section 8.02A.

“CIB Objection Notice” shall have the meaning as set forth in Section 8.02E.

 

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“CPI” means the Consumer Price Index, published for all Urban Consumers for the
U.S. City Average for All Items, 1982-84=100 issued by the Bureau of Labor
Statistics of the United States Department of Labor, as published in the Wall
Street Journal.

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

“Commencement Date” shall have the meaning as set forth in Section 2.01.

“Competitive Set” shall mean, for each Hotel, the hotels situated in the same
market segment as such Hotel as noted on Schedule 1 to the applicable Addendum
for such Hotel, which competitive set shall include such Hotel. The Competitive
Set may be changed from time to time by mutual agreement of Lessee and Manager
to reasonably and accurately reflect a set within the market of such Hotel that
is comparable in rate quality and in operation to such Hotel and directly
competitive with such Hotel.

“Contract(s)” shall have the meaning as set forth in Section 4.03.

“Debt Service” shall mean actual scheduled payments of principal and interest,
including accrued and cumulative interest, payable by a Landlord with respect to
any Hotel Mortgage.

“Deductions” shall mean the following matters:

 

  1. Employee Costs and Expenses (including, Employee Claims but excluding
Excluded Employee Claims);

 

  2. Administrative and general expenses and the cost of advertising and
business promotion, heat, light, power, communications (i.e., telephone, fax,
cable service and internet) and other utilities and routine repairs, maintenance
and minor alterations pertaining to the Premises;

 

  3. The cost of replacing, maintaining or replenishing Inventories and Fixed
Asset Supplies consumed in the operation of the Premises;

 

  4. A reasonable reserve for uncollectible accounts receivable as reasonably
determined by Manager and approved by Lessee (such approval not to be
unreasonably withheld);

 

  5. All costs and fees of independent accountants, attorneys or other third
parties who perform services related to the Hotel or the operation thereof,
including, without limitation, an allocation of costs of Manager’s in-house
corporate counsel who performs legal services directly for the benefit of the
Hotels to be allocated on a fair and equitable cost basis as reasonably
determined by Manager and approved by Lessee (such approval not to be
unreasonably withheld);

 

  6.

The cost and expense of non-routine technical consultants and operational
experts for specialized services in connection with the Premises, including,
without limitation, an

 

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  allocation of costs of Manager’s corporate staff who may perform special
services directly related to the Hotels such as sales and marketing, revenue
management, training, property tax services, federal, state and/or local tax
services, recruiting, and similar functions or services as set forth in
Section 9.04, to be allocated on a fair and equitable cost basis as reasonably
determined by Manager and approved by Lessee (such approval not to be
unreasonably withheld);

 

  7. Insurance costs and expenses as provided in Article XII;

 

  8. Real estate and personal property taxes levied or assessed against the
Premises by duly authorized taxing authorities and such other taxes, if any,
payable by or assessed against Manager or the Premises related to the operation
and/or ownership of the Premises;

 

  9. Franchise fees, royalties, license fees, or compensation or consideration
paid or payable to the Franchisor (as hereinafter defined), or any successor
Franchisor, pursuant to a Franchise Agreement (as hereinafter defined);

 

  10. The Premises’ allocable share of the actual costs and expenses incurred by
Manager in providing Group Services as provided in Section 6.03 hereof;

 

  11. The Management Fee;

 

  12. Rental payments made under equipment leases; and

 

  13. Other expenses incurred in connection with the maintenance or operation of
the Premises not expressly set forth above and authorized pursuant to this
Agreement.

Deductions shall not include: (a) depreciation and amortization, (b) Debt
Service, (c) Ground Lease Payments, or (d) payments allocated or made to the
Capital Improvement Reserve.

“Designated Fees” shall have the meaning as set forth in Section 16.03.

“Effective Date” shall mean the date this Agreement is fully executed and
delivered.

“Eligible Independent Contractor” shall have the meaning as set forth in
Section 28.08.

“Emergency Expenses” shall mean any expenses, regardless of amount, which, in
Manager’s reasonable judgment, are immediately necessary to protect the physical
integrity or lawful operation of the Hotel or the health or safety of its
occupants.

“Employee Claims” shall mean any claims (including all fines, judgments,
penalties, costs, litigation and/or arbitration expenses, attorneys’ fees and
expenses, and costs of settlement with respect to any such claim) made by or in
respect of an employee or potential hire

 

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of Manager against Manager and/or Lessee which are based on a violation or
alleged violation of the Employment Laws or alleged contractual obligations.

“Employee Costs and Expenses” shall have the meaning as set forth in
Section 9.03.

“Employee Related Termination Costs” shall have the meaning as set forth in
Section 9.05.

“Employment Laws” shall mean all applicable federal, state and local laws
(including, without limitation, any statutes, regulations, ordinances or common
laws) regarding the employment, hiring or discharge of persons.

“Event(s) of Default” shall have the meaning set forth in Article XIX.

“Excluded Employee Claims” shall mean any Employee Claims (a) to the extent
attributable to a substantial violation by Manager of Employment Laws, or
(b) which do not arise from an isolated act of an individual employee but rather
is the direct result of corporate policies of Manager which either encourage or
fail to discourage the conduct from which such Employee Claim arises.

“Executive Employees” shall mean each member of the senior executive or Premises
level staff and each department head of the Hotel.

“Expiration Date” shall have the meaning as set forth in Section 2.01.

“FF&E” shall have the meaning as set forth in Section 8.01.

“Fiscal Year” shall mean the twelve (12) month calendar year ending December 31,
except that the first Fiscal Year and last Fiscal Year of the term of this
Agreement may not be full calendar years.

“Fixed Asset Supplies” shall mean supply items included within “Property and
Equipment” under the Uniform System of Accounts, including linen, china,
glassware, silver, uniforms, and similar items.

“Force Majeure” shall mean any act of God (including adverse weather
conditions); act of the state or federal government in its sovereign or
contractual capacity; war; civil disturbance, riot or mob violence; terrorism;
earthquake, flood, fire or other casualty; epidemic; quarantine restriction;
labor strikes or lock out; freight embargo; civil disturbance; or similar causes
beyond the reasonable control of Manager.

“Franchisor” shall mean the franchisors and any successor franchisors selected
by Lessee (subject to the terms of the Leases) identified on Exhibit “C” to the
applicable Addendum for the Hotel.

 

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“Franchise Agreement” shall mean any license agreements between a Franchisor and
Lessee and/or Landlord, as applicable, as such license agreements are amended
from time to time, and any other contract hereafter entered into between Lessee
and/or Landlord, as applicable, and such Franchisor pertaining to the name and
operating procedures, systems and standards, as described on Exhibit “C” to the
applicable Addendum for the Hotel.

“full replacement cost” shall have the meaning as set forth in Section 12.02.

“GAAP” shall mean generally accepted accounting principles consistently applied
as recognized by the accounting industry and standards within the United States.

“General Manager” or “General Managers” shall have the meanings as set forth in
Section 9.07.

“Gross Operating Profit” shall mean the actual gross operating profit of the
Premises determined generally in accordance with the Uniform System of Accounts,
consistently applied and consistent with the determination thereof in the Annual
Operating Budget.

“Gross Operating Profit Margin” shall mean for any applicable Fiscal Year, the
quotient expressed as a percentage, (i) the numerator of which is the Gross
Operating Profit, and (ii) the denominator of which is Gross Revenues.

“Gross Revenues” shall mean all revenues and receipts of every kind received
from operating the Premises and all departments and parts thereof, including but
not limited to, income from both cash and credit transactions, income from the
rental of rooms, stores, offices, banquet rooms, conference rooms, exhibits or
sale space of every kind, license, lease and concession fees and rentals (not
including gross receipts of licensees, lessees and concessionaires), vending
machines, 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,
Gross Revenues shall not include (a) gratuities to the Premises’ employees,
(b) federal, state or municipal excise, sales or use taxes or similar
impositions collected directly from customers, patrons or guests or included as
part of the sales prices of any goods or services paid over to federal, state or
municipal governments, (c) property insurance or condemnation proceeds
(excluding proceeds from business interruption or other loss of income
coverage), (d) proceeds from the sale or refinance of assets other than sales in
the ordinary course of business, (e) funds furnished by the Lessee,
(f) judgments and awards other than for lost business, (g) the amount of all
credits, rebates or refunds (which shall be deductions from Gross Revenues) to
customers, patrons or guests, (h) receipts of licensees, concessionaires, and
tenants, (i) payments received at any of the Hotels for hotel accommodations,
goods or services to be provided at other hotels, although arranged by, for or
on behalf of Manager; (j) the value of complimentary rooms, food and beverages,
(k) interest income, (l) lease security deposits, and (m) items constituting
“allowances” under the Uniform System of Accounts.

“Ground Lease Payments” shall mean payments due under any Ground Lease and
payable by Landlord thereunder.

 

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“Ground Lease” shall mean any ground lease agreements relating to the Hotel,
executed by Landlord with any third party landlords.

“Group Services” shall have the meaning as set forth in Section 6.03.

“Holder” shall mean the holder of any Hotel Mortgage and the indebtedness
secured thereby, and such holder’s successors and assigns.

“Hotel” shall mean the hotel or motel property leased by Lessee and managed by
Manager pursuant to an Addendum.

“Hotel Mortgage” shall mean, collectively, any mortgage or deed of trust
hereafter from time to time, encumbering all or any portion of the Premises (or
the leasehold interest therein), together with all other instruments evidencing
or securing payment of the indebtedness secured by such mortgage or deed of
trust and all amendments, modifications, supplements, extensions and revisions
of such mortgage, deed of trust, and other instruments.

“Hotel’s REVPAR Yield Penetration” shall mean, for a Hotel for any applicable
Fiscal Year, (i) such Hotel’s actual occupancy rate multiplied by the actual
average daily rate, divided by (ii) the Competitive Set’s occupancy rate
multiplied by the Competitive Set’s average daily rate for the same Fiscal
Period. The determination of the Competitive Set’s occupancy and rate shall be
made by reference to the Smith Travel Research reports or its successor or
comparable market research reports prepared by another nationally recognized
hospitality firm reasonably acceptable to Lessee and Manager.

“House Profit” shall mean the actual house profit of the Premises determined
generally in accordance with the Uniform System of Accounts, consistently
applied and consistent with the determination thereof in the Annual Operating
Budget.

“HP Test” shall have the meaning as set forth in Section 11.01B.

“Incentive Fee” shall have the meaning as set forth in Section 11.01B.

“Indemnifying Party” shall have the meaning as set forth in Section 25.03.

“Independent Directors” shall mean those directors of AHP who are “independent”
within the meaning of the rules of the New York Stock Exchange or such other
national securities exchange or interdealer quotation system on which AHP’s
common stock is then principally traded.

“Intellectual Property” shall have the meaning as set forth in Section 24.03.

“Inventories” shall mean “Inventories” as defined in the Uniform System of
Accounts, such as provisions in storerooms, refrigerators, pantries and
kitchens, beverages in wine cellars and bars, other merchandise intended for
sale, fuel, mechanical supplies, stationery, and other supplies and similar
items.

 

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“issuing party” shall have the meaning as set forth in Section 28.10.

“Key Employees” shall have the meaning as set forth in Section 9.07.

“Landlords” shall mean the landlords under the Leases.

“Leases” shall mean any lease agreements as amended, modified, supplemented, and
extended from time to time, executed by Lessee as tenant and the Landlords, as
described on Exhibit “B” attached to an Addendum.

“Legal Requirements” shall mean all laws, statutes, ordinances, orders, rules,
regulations, permits, licenses, authorizations, directions and requirements of
all governments and governmental authorities, which now or hereafter may be
applicable to the Premises and the operation of the Hotels.

“Lessee” shall have the meaning as set forth in the introductory paragraph of
this Agreement; provided, if Lessee is not the “lessee” under the Lease for the
Hotel or a Non-Managed Hotel, the term “Lessee” with respect to the Hotel or
Non-Managed Hotel shall mean the “lessee” under the Lease, as designated in the
applicable Addendum for the Hotel or Project Management Addendum for the
Non-Managed Hotel.

“Management Fee” shall collectively mean the Base Management Fee, the Incentive
Fee, the Project Management Fee, the Market Service Fee, and any other fees
payable to Manager pursuant to the terms of this Agreement.

“Manager” shall have the meaning as set forth in the introductory paragraph of
this Agreement.

“Manager Affiliate Entity” shall have the meaning as set forth in Article XXI.

“Market Service Fees” shall have the meaning as set forth in Section 8.02(G).

“Mutual Exclusivity Agreement” shall mean that certain Mutual Exclusivity
Agreement dated the date hereof among the Partnership, AHP, Manager and Monty J.
Bennett.

“Necessary Expenses” shall mean any expenses, regardless of amount, which are
necessary for the continued operation of the Hotel in accordance with Legal
Requirements and the Applicable Standards and which are not within the
reasonable control of Manager (including, but not limited to those for taxes,
utility charges, approved leases and contracts, licensing and permits).

“Net Operating Income” shall be equal to Gross Operating Profit less (i) all
amounts to be paid or credited to the Capital Improvement Reserve, and
(ii) Rental Payments to the extent that such rental payments are not properly
chargeable as an operating expense.

“Non-Disturbance Agreement” means an agreement, in recordable form in the
jurisdiction in which a Hotel is located, executed and delivered by the Holder
of a Hotel

 

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Mortgage or a Landlord, as applicable, (which agreement shall by its terms be
binding upon all assignees of such lender or landlord and upon any individual or
entity that acquires title to or possession of a Hotel (referred to as a
“Subsequent Owner”), for the benefit of Manager, pursuant to which, in the event
such holder (or its assignee) or landlord (or its assignee) or any Subsequent
Owner comes into possession of or acquires title to a Hotel, such holder (and
its assignee) or landlord (or its assignee) and all Subsequent Owners shall
(x) recognize Manager’s rights under this Agreement, and (y) shall not name
Manager as a party in any foreclosure action or proceeding, and (z) shall not
disturb Manager in its right to continue to manage the Hotels pursuant to this
Agreement; provided, however, that at such time, (i) this Agreement has not
expired or otherwise been earlier terminated in accordance with its terms, and
(ii) there are no outstanding Events of Default by Manager, and (iii) no
material event has occurred and no material condition exists which, after notice
or the passage of time or both, would entitle Lessee to terminate this
Agreement.

“non-issuing party” shall have the meaning as set forth in Section 28.10.

“Non-Managed Hotel” shall mean any hotel or motel property leased by Lessee from
an Affiliate of the Partnership for which a Project Management Addendum has been
executed and delivered by the parties thereto, and that is not a Hotel managed
by Manager pursuant to an Addendum.

“Notice” shall have the meaning as set forth in Article XXII.

“Operating Account” shall have the meaning as set forth in Article XIV.

“Partnership” means Ashford Hospitality Prime Limited Partnership, a Delaware
limited partnership.

“Payment Option Request” shall have the meaning as set forth in Section 16.03.

“Performance Cure Period” shall have the meaning as set forth in
Section 2.03(b)(i)(2).

“Performance Failure” shall have the meaning as set forth in
Section 2.03(b)(i)(1).

“Performance Test” shall have the meaning as defined in Section 2.03(b)(i).

“Predecessor Manager” shall have the meaning as set forth in Section 25.05.

“Premises” shall mean, as to each Hotel, the Lessee’s leasehold interest in such
Hotel and Site pursuant to the terms and conditions of the applicable Lease.

“Prime Rate” shall have the meaning as set forth in Section 28.03.

“Project Management Fee” shall have the meaning as set forth in Section 8.02G.

 

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“Project Management Addendum” shall have the meaning as set forth in Article
XXVI.

“Project Related Services” shall have the meaning as set forth in Section 8.02G.

“Property Service Account” shall have the meaning as set forth in Section 13.02.

“Proprietary Marks” shall have the meaning as set forth in Section 24.01.

“Prospectus” shall have the meaning as set forth in Section 28.10.

“Qualified Lodging Facility” shall mean a “qualified lodging facility” as
defined in Section 856(d)(9)(D) of the Code and means a “Lodging Facility”
(defined below), unless wagering activities are conducted at or in connection
with such facility by any person who is engaged in the business of accepting
wagers and who is legally authorized to engage in such business at or in
connection with such facility. A “Lodging Facility” is a hotel, motel or other
establishment more than one-half of the dwelling units in which are used on a
transient basis, and includes customary amenities and facilities operated as
part of, or associated with, the lodging facility so long as such amenities and
facilities are customary for other properties of a comparable size and class
owned by other owners unrelated to AHP.

“Reasonable Working Capital” shall have the meaning as set forth in
Section 16.02.

“Related Person” shall have the meaning as set forth in Section 28.08(e).

“Rental Payments” shall mean rental payments made under equipment leases
permitted pursuant to the terms of this Agreement.

“REVPAR” shall mean the revenue per available room, determined by taking the
actual occupancy rate of the applicable hotel and multiplying such rate by the
actual average daily rate of such hotel.

“Sale” shall mean any sale, assignment, transfer or other disposition, for value
or otherwise, voluntary or involuntary of Landlord’s title (whether fee or
leasehold) in the Hotel, or of a controlling interest therein, other than a
collateral assignment intended to provide security for a loan, and shall include
any such disposition through the disposition of the ownership interests in the
entity that holds such title and any lease or sublease of the Hotel.

“Site” shall mean, as to a Hotel, those certain tracts or parcels of land
described in “Exhibit B-1” attached to the applicable Addendum.

“Software” shall have the meaning as set forth in Section 24.02.

“Strike Price” shall have the meaning as set forth in Section 16.03.

 

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“Subject Hotel” shall have the meaning set forth in Section 2.03(b)(i).

“Targeted REVPAR Yield Penetration” shall mean, as to a Hotel, 80%.

“Term” shall mean, as to the Hotel, the contractual duration of this Agreement
for the Hotel, as defined in Section 2.01.

“Termination” shall mean the expiration or sooner cessation of this Agreement as
to a Hotel.

“Termination Date” shall have the meaning as set forth in Section 2.01.

“Uniform System of Accounts” shall mean the Uniform System of Accounts for the
Lodging Industry, 9th Revised Edition, as may be modified from time to time by
the International Association of Hospitality Accountants.

“Unrelated Person” shall have the meaning as set forth in Section 28.08(e).

“Working Capital” shall mean the amounts by which current assets exceed current
liabilities as defined by the Uniform System of Accounts which are reasonably
necessary for the day-to-day operation of the Premises’ business, including,
without limitation, the excess of change and petty cash funds, operating bank
accounts, receivables, prepaid expenses and funds required to maintain
Inventories, over the amount of accounts payable and accrued current
liabilities.

ARTICLE II

TERM OF AGREEMENT

2.01 Term. The term (“Term”) of this Agreement shall commence for each Hotel or
Non-Managed Hotel, as the case may be, on the “Commencement Date” as noted on
Exhibit “A” of the Addendum for such Hotel or the Project Management Addendum
for such Non-Managed Hotel, and, unless sooner terminated as herein provided,
shall continue until the “Termination Date.” For purposes of this Agreement, the
“Termination Date” for each Hotel or Non-Managed Hotel shall be the earlier to
occur of (i) the Expiration Date applicable to such Hotel or Non-Managed Hotel,
(ii) termination at the option of Lessee in connection with the bona fide Sale
of the Hotel or Non-Managed Hotel by Landlord or Lessee to an unaffiliated third
party as provided in and subject to the terms of Section 2.03(a) hereof,
(iii) termination at the option of Lessee after the Performance Test has not
been satisfied pursuant to and subject to the terms and conditions of
Section 2.03(b) below, (iv) termination at the option of Lessee for convenience
pursuant to and subject to the terms and conditions of Section 2.03(c) below, or
(v) termination by either Lessee or Manager pursuant to Article XVIII hereof in
connection with a condemnation, casualty or Force Majeure, subject to the terms
thereof. The “Expiration Date” with respect to a Hotel or Non-Managed Hotel
shall mean the 10th anniversary of the Commencement Date applicable to such
Hotel or Non-Managed Hotel, provided that such initial 10-year term may
thereafter be renewed by Manager, at its option, on the same terms and
conditions contained herein, for three (3) successive periods of seven
(7) Fiscal Years each, and thereafter, for a final period of four (4) Fiscal
Years; and provided further, that at the time of

 

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exercise of any such option to renew, an Event of Default by Manager does not
then exist beyond any applicable grace or cure period. If at any time of the
exercise of any renewal period, Manager is then in default under this Agreement,
then the exercise of the renewal option will be conditional on timely cure of
such default, and if such default is not timely cured, then Lessee may terminate
this Agreement regardless of the exercise of such renewal period and without the
payment of any fee or liquidated damages. If Manager desires to exercise any
such option to renew, it shall give Lessee Notice to that effect not less than
ninety (90) days prior to the expiration of the then current Term.
Notwithstanding the expiration or earlier termination of the Term, Lessee and
Manager agree that the obligations of Lessee to pay, remit, reimburse and to
otherwise indemnify Manager for any and all expenses and fees incurred or
accrued by Manager pursuant to the provisions of this Agreement prior to the
expiration or earlier termination of the Term (or actually incurred by Manager
after the termination) shall survive Termination, provided such expenses and
fees have been incurred consistent with the then current terms of this Agreement
and the applicable Annual Operating Budget or Capital Improvement Budget,
including, without limitation but only to the extent so consistent, all costs,
expenses and liabilities arising from the termination of the Premises’ employees
such as accrued vacation and sick leave, severance pay and other accrued
benefits, employer liabilities pursuant to the Consolidated Omnibus Budget
Reconciliation Act and employer liabilities pursuant to the Worker Adjustment
and Retraining Notification Act. In addition, subject to Section 19.02 below and
the foregoing sentence, upon Termination of this Agreement as to a Hotel or
Non-Managed Hotel, Lessee and Manager shall have no further obligations to one
another pursuant to this Agreement with respect to such Hotel or Non-Managed
Hotel, except that Section 2.02, obligations to make payments under Section 2.03
or Section 9.05, Section 9.07, the last sentence of Section 15.01, obligations
to make payments of termination fees pursuant to Article XVIII, Article XXIV,
Article XXV, Article XXVII and Section 28.12 shall survive Termination.

2.02 Actions to be Taken upon Termination. Upon a Termination of this Agreement
as to a Hotel, the following shall be applicable:

 

  A. Manager shall, within forty-five (45) days after Termination of this
Agreement as to a Hotel, prepare and deliver to Lessee a final accounting
statement with respect to the Hotel, in form and substance consistent with the
statements provided pursuant to Section 15.02, along with a statement of any
sums due from Lessee to Manager pursuant hereto, dated as of the date of
Termination. Within thirty (30) days after the receipt by Lessee of such final
accounting statement, the parties will make whatever cash adjustments are
necessary pursuant to such final statement. The cost of preparing such final
accounting statement shall be a Deduction. Manager and Lessee acknowledge that
there may be certain adjustments for which the necessary information will not be
available at the time of such final accounting, and the parties agree to
readjust such amounts and make the necessary cash adjustments when such
information becomes available.

 

  B.

As of the date of the final accounting referred to in subsection A above,
Manager shall release and transfer to Lessee any of Lessee’s funds which are
held or controlled by Manager with respect to the Hotel, with the exception of
funds to

 

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  be held in escrow pursuant to Section 9.05 and Section 12.07. During the
period between the date of Termination and the date of such final accounting,
Manager shall pay (or reserve against) all Deductions which accrued (but were
not paid) prior to the date of Termination, using for such purpose any Gross
Revenues which accrued prior to the date of Termination.

 

  C. Manager shall make available to Lessee such books and records respecting
the Hotel (including those from prior years, subject to Manager’s reasonable
records retention policies) as will be needed by Lessee to prepare the
accounting statements, in accordance with the Uniform System of Accounts, for
the Hotel for the year in which the Termination occurs and for any subsequent
year. Such books and records shall not include: (i) employee records which must
remain confidential pursuant to either Legal Requirements or confidentiality
agreements, or (ii) any Intellectual Property.

 

  D. Manager shall (to the extent permitted by Legal Requirements) assign to
Lessee, or to any other manager employed by Lessee to operate and manage the
Hotel, all operating licenses for the Hotel which have been issued in Manager’s
name; provided that if Manager has expended any of its own funds in the
acquisition of any of such licenses, Lessee shall reimburse Manager therefor if
it has not done so already.

 

  E. Lessee agrees that hotel reservations and any and all contracts made in
connection with hotel convention, banquet or other group services made by
Manager in the ordinary and normal course of business consistent with this
Agreement, for dates subsequent to the date of Termination and at rates
prevailing for such reservations at the time they were made, shall be honored
and remain in effect after Termination of this Agreement.

 

  F. Manager shall cooperate with the new operator of the Hotel as to effect a
smooth transition and shall peacefully vacate and surrender the Hotel to Lessee.

 

  G. Manager and Lessee agree to use best efforts to resolve any disputes
amicably and promptly under this Section 2.02 to effect a smooth transition of
the Hotel to Lessee and/or Lessee’s new manager.

2.03 Early Termination Rights; Liquidated Damages.

(a) Termination Upon Sale. Upon Notice to Manager, Lessee shall have the option
to terminate this Agreement with respect to one, more or all of the Hotels or
Non-Managed Hotels effective as of the closing of the Sale of such Hotels or
Non-Managed Hotels to a third party. Such Notice shall be given at least
forty-five (45) days’ in advance (unless otherwise required by Legal
Requirements, in which case Lessee shall provide such additional notice in order
to comply with such Legal Requirements) and shall inform Manager of the identity
of the contract purchaser. Manager, at its election, may offer to provide
management services to such contract purchaser after the closing of the sale.
Lessee shall, in connection with such Sale, by a separate document reasonably

 

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acceptable to Lessee and Manager, indemnify and save Manager harmless against
any and all losses, costs, damages, liabilities and court costs, claims and
expenses, including, without limitation, reasonable attorneys’ fees arising or
resulting from the failure of Lessee or such prospective purchaser to provide
any of the services contracted for in connection with the business booked for
such hotels to, and including, the date of such Termination, in accordance with
the terms of this Agreement, including without limitation, any and all business
so booked as to which facilities and/or services are to be furnished subsequent
to the date of Termination, provided that any settlement by Manager of any such
claims shall be subject to the prior written approval of Lessee which shall not
be unreasonably withheld, conditioned or delayed. In addition, the following
terms shall apply in connection with the sale of any Hotel:

(i) If this Agreement is terminated pursuant to Section 2.03(a) with respect to
a Hotel prior to the first anniversary of the Commencement Date applicable to
such Hotel, then Lessee shall pay to Manager on such termination, a termination
fee as liquidated damages and not as a penalty (provided that an Event of
Default by Manager is not then existing beyond any cure or grace periods set
forth in this Agreement) in an amount equal to the estimated Base Management Fee
and Incentive Fee that was estimated to be paid to Manager with respect to such
Hotel pursuant to the Annual Operating Budget for the remaining Accounting
Periods until the first anniversary of the Commencement Date for such Hotel
(irrespective of the Management Fees paid to Manager prior to the date of the
Termination with respect to such Hotel). If this Agreement is terminated
pursuant to Section 2.03(a) with respect to a Hotel after the first anniversary
of the Commencement Date applicable to such Hotel, then no termination fees
shall be payable by Lessee for such Hotel.

(b) Termination Due to Failure to Satisfy Performance Test.

(i) Performance Test. Lessee shall have the right to terminate this Agreement
with respect to any Hotel (for the purposes of this Section 2.03(b)(i) called
“Subject Hotel”), subject to the payment of a termination fee as set forth in
subsection (ii) below, in the event of the occurrence of the following
(collectively herein called, the “Performance Test”):

(1) If for any Fiscal Year (a) a Subject Hotel’s Gross Operating Profit Margin
for such Fiscal Year is less than seventy-five percent (75%) of the average
Gross Operating Profit Margin of comparable hotels in similar markets and
geographic locations to the applicable Hotel as reasonably determined by Lessee
and Manager, and (b) such Subject Hotel’s REVPAR Yield Penetration is less than
the Targeted REVPAR Yield Penetration for such Fiscal Year (herein (a) and
(b) collectively called “Performance Failure”); then

(2) Manager shall have a period of two (2) years, commencing with the next
ensuing Fiscal Year (the “Performance Cure Period”), to

 

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cure the Performance Failure after Manager’s receipt of Notice from Lessee of
such Performance Failure and Lessee’s intent to terminate this Agreement with
respect to the Subject Hotel if the Performance Failure is not cured within such
Performance Cure Period; and

(3) If after the first full Fiscal Year during the Performance Cure Period, the
Performance Failure remains uncured, then upon written Notice to Manager by
Lessee, Manager shall engage a consultant reasonably acceptable to Manager and
Lessee (with significant experience in the hotel lodging industry) to make a
written determination (within forty-five (45) days of such Notice) as to whether
another management company (with comparable breadth of knowledge and experience
as any of the hotel management companies owned and/or controlled by Archie
Bennett, Jr. and/or Monty Bennett, including with respect to number and type of
hotels managed in similar markets and geographical areas) could manage the
Subject Hotel in a materially more efficient manner. If such consultant
determination is in the negative, then Manager will be deemed not to be in
default under the Performance Test. If such consultant determination is in the
affirmative, then Manager agrees to engage such consultant (such cost and
expense to be shared by Lessee and Manager equally) to assist Manager during the
second Fiscal Year of the Performance Cure Period with the cure of the
Performance Failure; and

(4) If after the end of the Performance Cure Period, the Performance Failure
remains uncured and the consultant again makes a written determination that
another management company (with comparable breadth of knowledge and experience
as any of the hotel management companies owned and/or controlled by Archie
Bennett, Jr. and/or Monty Bennett, including with respect to number and type of
hotels managed in similar markets and geographical areas) could manage the
Subject Hotel in a materially more efficient manner, then Lessee may, at its
election, terminate this Agreement upon forty-five (45) days’ prior Notice to
Manager.

(ii) Termination Fees. If Lessee elects to terminate this Agreement with respect
to a Subject Hotel for failure to satisfy the Performance Test, Lessee shall pay
to Manager as liquidated damages but not as a penalty, a termination fee
(provided that there does not then exist an Event of Default by Manager under
this Agreement beyond any applicable cure periods) in the amount equal to 60% of
the product obtained by multiplying (A) 65% of the aggregate Base Management
Fees and Incentive Fees budgeted in the Annual Operating Budget applicable to
the Subject Hotel for the full current Fiscal Year in which such termination is
to occur (but in no event less than the Base Management Fees and Incentive Fees
for the preceding full Fiscal Year) by (B) nine (9).

 

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(iii) Finance Reports. Determinations of the performance of the Subject Hotel
shall be in accordance with the audited annual financial statements delivered by
Lessee’s accountant pursuant to Section 15.03 hereof.

(iv) Extension of Performance Cure Period. Notwithstanding the foregoing, if at
any time during the Performance Cure Period (a) Lessee is in material default
under any of its obligations under this Agreement, or (b) Lessee has terminated,
terminates or causes a termination of the Franchise Agreement (other than
defaults due to Manager) and does not obtain a new franchise agreement with a
comparable franchisor, or (c) the operation of the Hotel or the use of the
Hotel’s facilities are materially disrupted by casualty, condemnation, or events
of Force Majeure that are beyond the reasonable control of Manager, or by major
repairs to or major refurbishment of the Hotel, then, for such period, the
Performance Cure Period shall be extended.

(v) Renewal Period. If at the time of Manager’s exercise of a renewal period
with respect to any Hotel, such hotel is a Subject Hotel within a Performance
Cure Period, the exercise of such renewal period shall be conditional upon
timely cure of the Performance Failure, and if such Performance Failure is not
timely cured, then, notwithstanding the foregoing provisions, Lessee may elect
to terminate this Agreement with respect to such Subject Hotel pursuant to the
terms of this Section 2.03(b) without payment of any termination fee.

(c) Termination For Convenience. Lessee may terminate this Agreement with
respect to a particular Hotel or Non-Managed Hotel for convenience (except if
due to a Sale of a Hotel or Non-Managed Hotel, whereupon Section 2.03(a) shall
govern) upon ninety (90) days Notice to Manager, and shall pay to Manager as
liquidated damages but not as a penalty, a termination fee (provided that there
does not then exist an Event of Default by Manager under this Agreement beyond
any applicable cure or grace periods) in an amount equal to (i) with respect to
a Hotel, the product of (A) 65% of the aggregate Base Management Fees and
Incentive Fees budgeted in the Annual Operating Budget applicable to the Hotel
for the full current Fiscal Year in which such termination is to occur (but in
no event less than the Base Management Fees and Incentive Fees for the preceding
full Fiscal Year) by (B) nine (9), and (ii) with respect to a Non-Managed Hotel,
the product of (A) 65% of the aggregate Project Management Fees and Market
Service Fees estimated for the Non-Managed Hotel for the full current Fiscal
Year in which such termination is to occur (but in no event less than the
Project Management Fees and Market Service Fees for the preceding full Fiscal
Year) by (B) nine (9).

(d) Payment of Liquidated Damages. WITH RESPECT TO ANY TERMINATION FEES PAYABLE
IN CONNECTION WITH ANY EARLY TERMINATION RIGHT SET FORTH IN THIS SECTION 2.03,
OR IN SECTION 18.04 BELOW, LESSEE RECOGNIZES AND AGREES THAT, IF THIS AGREEMENT
IS TERMINATED WITH RESPECT TO ANY OF THE HOTELS FOR THE REASONS SPECIFIED IN
THIS SECTION 2.03 OR IN SECTION 18.04 BELOW, THEREBY ENTITLING MANAGER TO
RECEIVE THE TERMINATION

 

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FEES AS SET FORTH IN THIS SECTION 2.03 OR IN SECTION 18.04 BELOW, MANAGER WOULD
SUFFER AN ECONOMIC LOSS BY VIRTUE OF THE RESULTING LOSS OF MANAGEMENT FEES WHICH
WOULD OTHERWISE HAVE BEEN EARNED UNDER THIS AGREEMENT. BECAUSE SUCH FEES VARY IN
AMOUNT DEPENDING ON THE TOTAL GROSS REVENUES EARNED AT THE HOTELS AND
ACCORDINGLY WOULD BE EXTREMELY DIFFICULT AND IMPRACTICAL TO ASCERTAIN WITH
CERTAINTY, THE PARTIES AGREE THAT THE TERMINATION FEES PROVIDED IN THIS SECTION
2.03 AND IN SECTION 18.04 BELOW CONSTITUTE A REASONABLE ESTIMATE OF LIQUIDATED
DAMAGES TO MANAGER FOR PURPOSES OF ANY AND ALL LEGAL REQUIREMENTS, AND IT IS
AGREED THAT MANAGER SHALL NOT BE ENTITLED TO MAINTAIN A CAUSE OF ACTION AGAINST
LESSEE, EXCEPT AS SPECIFICALLY PROVIDED HEREIN, FOR ACTUAL DAMAGES IN EXCESS OF
THE TERMINATION FEES IN ANY CONTEXT WHERE THE TERMINATION FEES ARE PROVIDED BY
THIS AGREEMENT, AND RECEIPT OF SUCH FEES (TOGETHER WITH ALL OTHER AMOUNTS DUE
AND PAYABLE BY LESSEE TO MANAGER WITH RESPECT TO EVENTS OCCURRING PRIOR TO
TERMINATION OF THIS AGREEMENT WITH RESPECT TO THE APPLICABLE HOTELS OR AS
OTHERWISE PROVIDED HEREIN) SHALL BE MANAGER’S SOLE REMEDY FOR DAMAGES AGAINST
LESSEE IN ANY SUCH CASE. The foregoing shall in no way affect any other sums due
Manager under this Article II or otherwise hereunder, including, without
limitation, the Management Fees earned during the Term, or any other rights or
remedies, at law or in equity of Manager under this Agreement or under Legal
Requirements, including any indemnity obligations of Lessee to Manager under
this Agreement.

ARTICLE III

PREMISES

Manager shall be responsible, at the sole cost and expense of Lessee, for
keeping and maintaining the Premises fully equipped in accordance with plans,
specifications, construction safety and fire safety standards, and designs
pursuant to applicable Legal Requirements, the standards and requirements of a
Franchisor pursuant to any applicable Franchise Agreement, any applicable Hotel
Mortgage, the Leases and the Capital Improvement Budgets approved pursuant to
the terms hereof, subject in all respects to performance by Lessee of its
obligations pursuant to this Agreement.

ARTICLE IV

APPOINTMENT OF MANAGER

4.01 Appointment. Lessee hereby appoints Manager as its sole, exclusive and
continuing operator and manager to supervise and direct, for and at the expense
of Lessee, the management and operation of the Premises under the terms and
conditions hereinafter set forth. In exercising its duties hereunder, Manager
shall act as agent and for the account of Lessee. Manager hereby accepts said
appointment and agrees to manage the Premises during the Term of this Agreement
under the terms and conditions hereinafter set forth.

 

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4.02 Delegation of Authority. The operation of the Premises shall be under the
exclusive supervision and control of Manager who, except as otherwise
specifically provided in this Agreement, shall be responsible for the proper and
efficient management and operation of the Premises in accordance with this
Agreement, the Leases, the Franchise Agreements, the Capital Improvement Budget
and the Annual Operating Budget. Subject to the terms of such agreements and
budgets, the Manager shall have discretion and control in all matters relating
to the management and operation of the Premises, including, without limitation,
charges for rooms and commercial space, the determination of credit policies
(including entering into agreements with credit card organizations), food and
beverage service and policies, employment policies, procurement of inventories,
supplies and services, promotion, advertising, publicity and marketing, and,
generally, all activities necessary for the operation of the Premises. Manager
shall also be responsible for the receipt, holding and disbursement of funds and
maintenance of bank accounts in compliance with the Cash Management Agreements,
if applicable.

4.03 Contracts, Equipment Leases and Other Agreements. Manager is hereby
authorized to grant concessions, lease commercial space and enter into any other
contract, equipment lease, agreement or arrangement pertaining to or otherwise
reasonably necessary for the normal operation of the Premises (such concession,
lease, equipment lease, contract, agreement or arrangement hereinafter being
referred to individually as a “Contract” and collectively as “Contracts”) on
behalf of Lessee, as may be necessary or advisable and reasonably prudent
business judgment in connection with the operation of the Premises and
consistent with the Annual Operating Budget, and subject to any restrictions
imposed by the Franchise Agreements, Leases or any Hotel Mortgage, and subject
to the Lessee’s prior written approval of: (i) any Contract which provides for a
term exceeding one (1) year (unless such Contract is thirty day cancellable with
cost, premium or penalty equal to or less than $25,000.00) or (ii) any tenant
space lease, license or concession concerning any portion of the public space in
or on the Premises for stores, office space, restaurant space, or lobby space.
Lessee’s approval of any Contract shall not be unreasonably withheld, delayed or
conditioned. Unless otherwise agreed, all Contracts for the Premises shall be
entered into in Lessee’s name. Manager shall make available to Lessee, its
agents, and employees, at the Premises during business hours, executed
counterparts or certified true copies of all Contracts it enters into pursuant
to this Section 4.03.

4.04 Alcoholic Beverage/Liquor Licensing Requirements. With respect to any
licenses and permits held by Lessee or any of its subsidiaries for the sale of
any liquor and alcoholic beverages at any of the Premises, Manager agrees, as
part of its management duties and services under this Agreement, to fully
cooperate with any applicable liquor and/or alcoholic beverage authority and to
assist Lessee with any documentation and other requests of such authority to the
extent necessary to comply with any licensing and/or permitting requirements
applicable to the Premises.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

5.01 Lessee Representations. Upon execution of an Addendum or a Project
Management Addendum, the Lessee identified in the Addendum or Project Management

 

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Addendum, in order to induce Manager to enter into this Agreement, will be
deemed to hereby represent and warrant to Manager as of the date of such
Addendum as follows:

5.01.1. The execution of this Agreement is permitted by the organizational
documents of Lessee and this Agreement has been duly authorized, executed and
delivered on behalf of Lessee and constitutes the legal, valid and binding
obligation of Lessee enforceable in accordance with the terms hereof;

5.01.2. There is no claim, litigation, proceeding or governmental investigation
pending, or, to the best knowledge and belief of Lessee, threatened, against or
relating to Lessee, the properties or businesses of Lessee or the transactions
contemplated by this Agreement which does, or may reasonably be expected to,
materially or adversely affect the ability of Lessee to enter into this
Agreement or to carry out its obligations hereunder, and, to the best knowledge
and belief of Lessee, there is no basis for any such claim, litigation,
proceeding or governmental investigation except as has been fully disclosed in
writing by Lessee to Manager;

5.01.3. Neither the consummation of the transactions contemplated by this
Agreement on the part of Lessee to be performed, nor the fulfillment of the
terms, conditions and provisions of this Agreement, conflicts with or will
result in the breach of any of the terms, conditions or provisions of, or
constitute a default under, any agreement, indenture, instrument or undertaking
to which Lessee is a party or by which it is bound;

5.01.4. No approval of any third party (including any Landlord or the Holder of
any Hotel Mortgage in effect as of the date of this Agreement) is required for
Lessee’s execution, delivery and performance of this Agreement that has not been
obtained prior to the execution hereof;

5.01.5. Lessee holds all required governmental approvals required (if
applicable) to be held by it to lease the Hotel or Non-Managed Hotel; and

5.01.6. As of the date of this Agreement there are no defaults under any of the
Leases.

5.02 Manager Representations. Upon execution of an Addendum or Project
Management Addendum, Manager, in order to induce Lessee to enter into this
Agreement, will be deemed to hereby represent and warrant to Lessee as of the
date of such Addendum or Project Management Addendum as follows:

5.02.1. The execution of this Agreement is permitted by the organizational
documents of Manager and this Agreement has been duly authorized, executed and
delivered on behalf of Manager and constitutes a legal, valid and binding
obligation of Manager enforceable in accordance with the terms hereof;

5.02.2. There is no claim, litigation, proceeding or governmental investigation
pending, or, to the best knowledge and belief of Manager, threatened, against or
relating

 

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to Manager, the properties or business of Manager or the transactions
contemplated by this Agreement which does, or may reasonably be expected to,
materially or adversely affect the ability of Manager to enter into this
Agreement or to carry out its obligations hereunder, and, to the best knowledge
and belief of Manager, there is no basis for any such claim, litigation,
proceeding or governmental investigation, except as has been fully disclosed in
writing by Manager to Lessee;

5.02.3. Neither the consummation of the transactions contemplated by this
Agreement on the part of Manager to be performed, nor the fulfillment of the
terms, conditions and provisions of this Agreement, conflicts with or will
result in the breach of any of the terms, conditions or provisions of, or
constitute a default under, any agreement, indenture, instrument or undertaking
to which Manager is a party or by which it is bound;

5.02.4. No approval of any third party is required for Manager’s execution,
delivery and performance of this Agreement that has not been obtained prior to
the execution and delivery hereof;

5.02.5. Manager holds all required governmental approvals required to be held by
it to perform its obligations under this Agreement; and

5.02.6. Manager qualifies as an Eligible Independent Contractor, and during the
Term of this Agreement, agrees to continue to qualify as an Eligible Independent
Contractor.

ARTICLE VI

OPERATION

6.01 Name of Premises; Standard of Operation. During the Term of this Agreement,
the Premises shall be known and operated by Manager as a hotel licensed with the
applicable Franchisor as noted on Exhibit C to each Addendum, with additional
identification as may be necessary to provide local identification, provided
Manager and/or Lessee have obtained and are successful in continuously
maintaining the right to so operate the Premises, which Manager agrees to use
its reasonable best efforts to do. Manager agrees to manage the Premises, for
the account of Lessee, and so far as is legally possible, in accordance with the
Annual Operating Budget and Applicable Standards subject to Force Majeure. In
the event of termination of a Franchise Agreement for one or more of the
Premises, Manager shall operate such Premises under such other franchise
agreement, if any, as Lessee enters into or obtains as franchisee. If the name
of a Franchisor’s hotel system is changed, Lessee shall have the right to change
the name of the applicable Hotel to conform thereto.

Notwithstanding the foregoing or any other provision in this Agreement to the
contrary, Manager’s obligation with respect to operating and managing the Hotel
in accordance with any Hotel Mortgage, Ground Leases, the Leases and the CCRs
shall be limited to the extent (i) true and complete copies thereof have been
made available to Manager by Lessee reasonably sufficient in advance to allow
Manager to manage the Hotel in compliance with such documents, and (ii) the
provisions thereof and/or compliance with such provisions by Manager (a) are

 

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applicable to the day-to-day management, maintenance and routine repair and
replacement of the Hotel, the FF&E or any portion thereof, (b) do not require
contribution of funds from Manager, (c) do not materially increase Manager’s
obligations hereunder or materially decrease Manager’s rights or benefits
hereunder, (d) do not limit or restrict, or attempt to limit or restrict any
corporate activity or transaction with respect to Manager or any Manager
Affiliate Entity or any other activity, transfer, transaction, property or other
matter involving Manager or the Manager Affiliate Entities other than at the
Site of the Hotel and (e) are otherwise within the scope of Manager’s duties
under this Agreement. Lessee acknowledges and agrees, without limiting the
foregoing, that any failure of (i) Lessee to comply with the provisions of any
Hotel Mortgage, Ground Leases, the Leases and the CCRs or Legal Requirements or
(ii) Manager to comply with the provisions of any such agreements or Legal
Requirements arising out of, in the case of both (i) and (ii), (A) the condition
of the Hotel, and/or the failure of the Hotel to comply with the provisions of
such agreements, prior to the Commencement Date, (B) construction activities at
the Hotel prior to the Commencement Date, (C) inherent limitations in the design
and/or construction of, location of the Hotel and/or parking at the Hotel prior
to the Commencement Date, (D) failure of Lessee to provide funds, from
operations or otherwise, sufficient to allow timely compliance with the
provisions of the Applicable Standards or the Leases, the Ground Leases, any
Hotel Mortgage and/or the CCRs through reasonable and customary business
practices, and/or (E) Lessee’s failure to approve any matter reasonably
requested by Manager in Manager’s good faith business judgment as necessary or
appropriate to achieve compliance with such items, shall not be deemed a breach
by Manager of its obligations under this Agreement. Manager and Lessee agree,
that Manager may from time to time, so long as Manager is in compliance with the
Franchise Agreements and Legal Requirements, provide collateral marketing
materials in the rooms of the Hotel which advertise other hotels or programs of
Manager or its Affiliates (including, through a dedicated television channel in
the rooms of the Hotel), at the sole cost and expense of Manager, provided such
other hotels or programs being marketed by Manager are not competing directly in
the same market with the Hotel where the marketing materials and information are
being placed by Manager.

6.02 Use of Premises. Manager shall use the Premises solely for the operation of
the Hotel in accordance with the Applicable Standards and for all activities in
connection therewith which are customary and usual to such an operation. Subject
to the terms of this Agreement, Manager shall comply with and abide by all
applicable Legal Requirements, and the requirements of any insurance companies
covering any of the risks against which the Premises are insured, any Hotel
Mortgage, the Ground Leases, the Leases, and the Franchise Agreements. If there
are insufficient funds in the Operating Account to make any expenditure required
to remedy non-compliance with such Legal Requirements or with the requirements
of any Hotel Mortgage, the Ground Leases, the Leases, or the Franchise
Agreements or applicable insurance, Manager shall promptly notify Lessee of such
non-compliance and estimated cost of curing such non-compliance. If Lessee fails
to make funds available for the expenditure so requested by Manager within
thirty (30) days, Lessee agrees to indemnify and hold Manager harmless from and
against any and all costs, expenses and other liabilities incurred by Manager
resulting from such non-compliance (which such indemnity shall survive any
termination of this Agreement). In no event shall Manager be required to make
available or distribute, as applicable, sexually explicit materials or items of
any kind, whether through retail stores or gift shops located at the Hotel or
through “pay for view” programming in the guest rooms of the Hotel.

 

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6.03 Group Services. Manager may cause to be furnished to the Premises certain
services (“Group Services”) which are furnished generally on a central or
regional basis to other hotels managed by Manager or any Manager Affiliate
Entity and which benefit each hotel managed by Manager including, by way of
example and not by way of limitation, (i) marketing, advertising and promotion;
(ii) centralized accounting payroll processing, ADP management, management and
administration of accounts payable, accounts receivable and cash management
accounting and MIS support services; (iii) the preparation and maintenance of
the general ledger and journal entries, internal audit, budgeting and financial
statement preparation, (iv) recruiting, training, career development and
relocation in accordance with Manager’s or any Manager Affiliate Entities’
relocation plan; (v) employee benefits administration; (vi) engineering and risk
management; (vii) information technology; (viii) legal support (such as license
and permit coordination, filing and completion, standardized contracts,
negotiation and preparation, and similar legal services benefiting the Hotel);
(ix) purchasing arising out of ordinary hotel operations not otherwise
contemplated in Section 8.02G hereof; (x) internal audit services;
(xi) reservation systems; and (xii) such other additional services as are or may
be, from time to time, furnished for the benefit of Manager’s or any Manager
Affiliate Entities’ hotels or in substitution for services now performed at
Manager’s individual hotels which may be more efficiently performed on a group
basis. Group Services shall include Manager’s costs relating to the
establishment of an office(s) and the placement of Manager’s personnel at
international locations as may be reasonably required to oversee the performance
of its services and duties hereunder for international assets. International
office expenses, overhead, international personnel costs and benefits, travel
and other costs directly related to Manager’s personnel (other than property
level personnel who are employed at a Hotel and whose Employee Costs and
Expenses constitute Deductions) who oversee the operations of international
assets shall be allocated pro-rata to international Hotels based on room count
and/or revenues in a fair and equitable manner reasonably determined by Manager.
Manager shall assure that the costs and expenses incurred in providing Group
Services to the Premises shall have been allocated to the Premises on a pro-rata
basis consistent with the method of allocation to all of Manager’s (and any
Manager Affiliate Entities’) hotels receiving the same services, shall be
incurred at a cost consistent with the Annual Operating Budget and shall
constitute Deductions. All Group Services provided by Manager shall be at the
actual costs (without mark up for fee or profit to Manager or any Manager
Affiliate Entity, but including salary and employee benefit costs and costs of
equipment used in performing such services and overhead costs) of Group Services
for the benefit of all of Manager’s hotels receiving the same services, and
shall be of a quality comparable to which Manager could obtain from other
providers for similar services.

6.04 Right to Inspect. Lessee, the beneficial owners of Lessee, the Landlords
(to the extent permitted under such Leases), any Holder under any Hotel Mortgage
(to the extent permitted under such Hotel Mortgage), and their respective
agents, shall have access to the Premises at any and all reasonable times for
any purpose. Manager will be available to consult with and advise such parties,
at their reasonable request, concerning all policies and procedures affecting
all phases of the conduct of business at the Hotel.

 

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ARTICLE VII

WORKING CAPITAL AND INVENTORIES

7.01 Working Capital and Inventories. The Lessee shall cause funds to be
deposited in one or more operating accounts established by Manager, in amounts
sufficient to operate the Premises in accordance with the Annual Operating
Budget, including the establishment and maintenance of positive Working Capital
and Inventories as reasonably determined by Manager. All Working Capital and
Inventories are and shall remain the property of Lessee. In the event Lessee
fails to advance funds which are necessary in order to maintain positive Working
Capital and Inventories at reasonable levels for a Hotel, Manager shall have the
right to elect to terminate this Agreement upon sixty (60) days’ prior written
notice to Lessee with respect to the affected applicable Hotel. During such
sixty (60) day period, Lessee and Manager shall use reasonable efforts to
resolve the dispute over such Working Capital and Inventory requirements. If
such dispute is not resolved, then this Agreement shall terminate with respect
to the affected applicable Hotel on the sixtieth (60th) day following Manager’s
delivery of written notice of termination as provided above. If such dispute is
resolved, then the notice will be deemed rescinded and this Agreement shall not
be terminated pursuant to the notice with respect to the affected applicable
Hotel. Further, if Manager should so terminate this Agreement with respect to
the affected applicable Hotel and if Manager in good faith incurs expenditures,
or otherwise accrues liabilities in accordance with the Annual Operating Budget
and variances allowed herein, in each case, prior to the date of termination,
Lessee agrees to promptly indemnify and hold Manager harmless from and against
(i) any and all liabilities, costs and expenses properly incurred by Manager in
connection with the operations of the applicable Hotel through the date of
Termination of this Agreement with respect to such Hotel, and (ii) any and all
liabilities, costs and expenses properly incurred by Manager as a result of
Lessee’s failure to perform any obligation or pay any liability arising under
any service, maintenance, franchise or other agreements, employment
relationships (other than Excluded Employee Claims), leases or contracts
pertaining to the applicable Hotel after Termination of this Agreement with
respect to such Hotel. Lessee acknowledges that liabilities arising in
connection with the operation and management of the applicable Hotel including,
without limitation, all Deductions, incurred in accordance with the terms of
this Agreement, are and shall remain the obligations of Lessee, and Manager
shall have no liability therefor unless otherwise expressly provided herein. In
the event of a Termination by Manager pursuant to this Section 7.01, Manager
shall be entitled to a termination fee as liquidated damages but not as a
penalty, as set forth in connection with a termination for convenience as
described in Section 2.03(c) and subject to Section 2.03(d) above.

7.02 Fixed Asset Supplies. Lessee shall provide the funds necessary to supply
the Premises initially with Fixed Asset Supplies as reasonably determined by
Manager consistent with the cost budgeted therefor in the Annual Operating
Budget and otherwise consistent with the intent of the parties that the level of
such supplies will be adequate for the proper and efficient operation of the
Premises at the Applicable Standards. Fixed Asset Supplies shall remain the
property of Lessee.

 

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ARTICLE VIII

MAINTENANCE, REPLACEMENT AND CHANGES

8.01 Routine and Non-Routine Repairs and Maintenance. Manager, at the expense of
Lessee, shall maintain the Premises in good repair and condition as is required
by the Applicable Standards. Manager, on behalf of Lessee, shall make or cause
to be made such routine maintenance, repairs and minor alterations as Manager
from time to time deems reasonably necessary for such purposes, the cost of
which: (i) can be expensed under GAAP, (ii) shall be paid from Gross Revenues,
and treated as a Deduction, and (iii) are consistent with the Annual Operating
Budget. In addition, Manager, on behalf of Lessee, shall make or cause to be
made such non-routine repairs and maintenance, either to the Premises’ building
or its fixtures, furniture, furnishings and equipment (“FF&E”), pursuant to the
Capital Improvement Budget approved by Lessee and Landlord, the cost of which
shall be paid for in the manner described in Section 8.02. Manager and Lessee
shall use their respective best efforts to prevent any liens from being filed
against the Premises which arise from any maintenance, changes, repairs,
alterations, improvements, renewals or replacements in or to the Premises.
Lessee and Manager shall cooperate fully in obtaining the release of any such
liens. If the lien arises as a result of the fault of either party, then the
party at fault shall bear the cost of obtaining the lien release. All changes,
repairs, alterations, improvements, renewals or replacements made pursuant to
this Article VIII shall be the property of the Lessee.

8.02 Capital Improvement Reserve.

 

  A. Manager shall establish (on behalf of Landlord), in respect of each Fiscal
Year during the term of this Agreement, a reserve account on each Hotel’s books
of account (“Capital Improvement Reserve”) to cover the cost of:

 

  1. Replacements and renewals to the Premises’ FF&E; and

 

  2. Certain non-routine repairs and maintenance to the Hotel’s building(s)
which are normally capitalized under GAAP such as, but not limited to, exterior
and interior repainting, resurfacing, building walls, floors, roofs and parking
areas, and replacing folding walls and the like, and major repairs, alterations,
improvements, renewals or replacement to the Hotel’s building structure or to
its mechanical, electrical, heating, ventilating, air conditioning, plumbing or
vertical transportation systems.

 

  B. For each Fiscal Year, the Capital Improvement Reserve shall be an amount
equal to four percent (4%) of the Hotel’s Gross Revenues for the applicable year
(or greater if required by any Landlord, Holder or Franchisor), or in such other
amount as agreed to by Landlord, Lessee and Manager.

Payments of the percentage amounts specified above shall be made on an interim
accounting basis as specified in Section 11.02 hereof. Calculations and payments
from the Capital Improvement Reserve made with respect to each Accounting Period
shall be accounted for cumulatively for each Fiscal Year. After the close of
each Fiscal Year, any adjustments required by the Fiscal Year accounting shall

 

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be made by Manager. Any proceeds from the sale of the Premises’ FF&E no longer
necessary to the operations of the Premises shall also be credited to the
Capital Improvement Reserve. All payments from the Capital Improvement Reserve
shall be reserved and paid from Gross Revenues. Such payments and sale proceeds
shall be placed in an escrow account or accounts consistent with the
requirements of the Cash Management Agreements, if any. Any interest earned in
said account attributable to funds deposited pursuant to this Agreement shall be
added to such Capital Improvement Reserve, thereby reducing the amount required
to be placed in the account from Gross Revenues.

 

  C. Manager shall, in accordance with and subject to the Capital Improvement
Budget described in Section 8.02E, from time to time make such substitutions and
replacements of or renewals to FF&E and non-routine repairs and maintenance as
described in Section 8.01 as it deems necessary to maintain the Hotel as
required by this Agreement. Except as hereinafter provided, no expenditures will
be made except as otherwise provided in the Capital Improvement Budget without
the approval of Lessee and Landlord, and provided further, however, that if any
such expenditures which are required by reason of any (i) emergency, or
(ii) applicable Legal Requirements, or (iii) the terms of the Franchise
Agreement, or (iv) are otherwise required for the continued safe and orderly
operation of the Hotel, Manager shall immediately give Lessee and Landlord
notice thereof and shall be authorized to take appropriate remedial action
without such approval whenever there is a clear and present danger to life, limb
or property of the Hotel or its guests or employees. The cost of all such
changes, repairs, alterations, improvements, renewals, or replacements will be
paid for first from the Capital Improvement Reserve or other monies advanced by
Lessee from funds received or owned by Landlord. At the end of each Fiscal Year
any amount remaining in the Capital Improvement Reserve in excess of the amounts
unspent but contemplated to be spent pursuant to the Capital Improvement Budget
for such Fiscal Year or as otherwise approved by Lessee and Landlord may be
withdrawn by the Lessee on behalf of Landlord.

 

  D. All changes, repairs, alterations, improvements, renewals or replacements
made pursuant to this Article VIII shall be the property of Landlord.

 

  E.

Manager shall prepare a budget (“Capital Improvement Budget”) of the
expenditures necessary for replacement of FF&E and building repairs of the
nature contemplated by Section 8.01 during the ensuing Fiscal Year and shall
provide such Capital Improvement Budget to Lessee and Landlord for approval at
the same time Manager submits the Annual Operating Budget. The Capital
Improvement Budget shall not be deemed accepted by Lessee and Landlord in the
absence of their respective express written approval. Not later than thirty
(30) days after receipt by Lessee and Landlord of a proposed Capital Improvement
Budget (or such longer period as Lessee and Landlord may reasonably request on
Notice to the Manager), Lessee and/or Landlord may deliver a Notice (a “CIB
Objection Notice”) to the Manager stating that Lessee

 

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  and/or Landlord objects to any information contained in or omitted from such
proposed Capital Improvement Budget and setting forth the nature of such
objections with reasonable specificity. Failure of Lessee and/or Landlord to
deliver a CIB Objection Notice shall be deemed rejection of the Manager’s
proposed Capital Improvement Budget in its entirety. Upon receipt of any CIB
Objection Notice, the Manager shall, after consultation with Lessee and
Landlord, modify the proposed Capital Improvement Budget, taking into account
Lessee’s and/or Landlord’s objections, and shall resubmit the same to Lessee and
Landlord for Lessee’s approval within fifteen (15) days thereafter, and Lessee
and/or Landlord may deliver further CIB Objection Notices (if any) within
fifteen (15) days thereafter (in which event, the re-submission and review
process described above in this sentence shall continue until the proposed
Capital Improvement Budget in question is accepted and consented to by Lessee
and Landlord). Notwithstanding anything to the contrary set forth herein, Lessee
and Landlord shall have the right at any time subsequent to the acceptance and
consent with respect to any Capital Improvement Budget, on Notice to the
Manager, to revise, with the reasonable approval of Manager, such Capital
Improvement Budget or to request that the Manager prepare for Lessee’s and/or
Landlord’s approval a revised Capital Improvement Budget, taking into account
such circumstances as Lessee and Landlord deem appropriate; provided, however,
that the revision of a Capital Improvement Budget shall not be deemed a
revocation of the Manager’s authority with respect to such actions as the
Manager may have already taken prior to receipt of such revision notice in
implementing a previously approved budget or plan. Manager shall have the right
and discretion to expend funds from the Capital Improvement Reserve for
replacements and renewals of FF&E in the Hotel’s interior public areas and guest
rooms and routine maintenance, repairs and minor alterations during the Fiscal
Year in question (but not for any other capital expenditures) in accordance with
the provisions of the Capital Improvement Budget.

 

  F. It is the intent of Manager and Lessee to maintain the Premises in
conformance with the Applicable Standards. Accordingly, as the Hotel ages, if
the Capital Improvement Reserve established pursuant to the terms hereof is
insufficient to meet such standards, and if the Capital Improvement Budget
prepared in good faith by Manager and approved by Lessee and Landlord exceeds
the available and anticipated funds in the Capital Improvement Reserve, Lessee,
Landlord and Manager will consider the matter and Lessee and Landlord may elect
to:

 

  1. increase the annual reserve provision to provide the additional funds
required; or

 

  2. obtain financing for the additional funds required.

 

  G.

In consideration of the Project Management Fee (as defined below), Manager shall
be responsible for managing, coordinating, planning and executing the Capital
Improvement Budget and all major repositionings of the Hotel and, to the

 

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  extent Lessee has the right to direct such matters (e.g., the manager for the
Non-Managed Hotel does not have the right under its management agreement to
direct such matters or elects not to exercise such right), each Non-Managed
Hotel (for such purposes with respect to a Non-Managed Hotel, the term Capital
Improvement Budget shall mean the capital improvement budget for such
Non-Managed Hotel). In addition, Manager shall be paid additional fees at
current market rates (determined with reference to other third party providers
of such services who are not discounting such fees as result of fees generated
from other services) (collectively, the “Market Service Fees”), subject to the
Approval Requirement (defined in subparagraph 8.02(I) below), for the following
services (the “Project Related Services”) to be provided in accordance with the
Applicable Standards (with the understanding that Manager may subcontract for
any or all of the following Project Related Services) for the Hotel and, to the
extent Lessee has the right to direct such matters, Non-Managed Hotel:

 

  1. Construction Management - Manager shall, on major renovation tasks which
involve the selection and engagement of a general contractor, coordinate the
selection process with Lessee and/or Landlord, shall assist in the negotiation
of construction contracts, manage such construction contracts and related
issues, and shall engage separate contractors and subcontractors for specific
tasks outside the scope of the general contractor.

 

  2. Interior Design - With respect to any interior design elements involved in
the implementation of the Capital Improvement Budget, Manager shall be
responsible for overseeing the development of conceptual plans (consistent with
Lessee’s and Landlord’s objectives), shall arrange for preparation of
specifications, coordinate and make all fabric, flooring, furniture and wall
treatment selections (both colors and finishes), coordinate reselections and
document all selections in specification books as required under the terms of
the Franchise Agreement and coordinate all related franchise approvals, and will
manage the applicable Franchisor process on approval of all selections relating
to initial and final selections.

 

  3. Architectural - Manager shall, if applicable, make recommendations of
engagement of architects, negotiate architectural agreements on behalf of Lessee
and Landlord (with Lessee’s and Landlord’s approval), manage all architects
applicable to the implementation of the Capital Improvement Budget, oversee all
conceptual designs and sketches, review all necessary plans, drawings, shop
drawings and other matters necessary for the proper implementation of the
Capital Improvement Budget, and coordinate and manage all approvals necessary
for the implementation of the Capital Improvement Budget such as Franchisor
approvals, governmental approvals and Holder approvals.

 

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  4. FF&E Purchasing - Manager shall be responsible for the evaluation of all
specifications and negotiations of all prices associated with the purchasing of
FF&E, shall manage and issue all purchase orders and place orders necessary for
the proper and timely delivery of all FF&E.

 

  5. FF&E Expediting/Freight Management - Manager shall be responsible for the
expediting of all FF&E contemplated in an applicable Capital Improvement Budget
including managing the freight selection and shipping process in a cost
effective manner.

 

  6. FF&E Warehousing - Manager shall be responsible, if applicable, for the
management and coordination of all warehousing of goods delivered at the job
site, inspection of materials delivered, and the filing of all claims associated
with the delivery of defective or damaged goods.

 

  7. FF&E Installation and Supervision - Manager shall be responsible for the
management and oversight of the installation of all FF&E in compliance with
specifications and Franchisor standards as required to implement the Capital
Improvement Budget.

Manager shall be paid a project management fee (herein, the “Project Management
Fee”) equal to four percent (4%) of the total project costs associated with the
implementation of the Capital Improvement Budget (both hard and soft) payable
monthly in arrears based upon the prior calendar month’s total expenditures
under the Capital Improvement Budget until such time that the Capital
Improvement Budget and/or renovation project involves the expenditure of an
amount in excess of five percent (5%) of Gross Revenues of the applicable Hotel
or Non-Managed Hotel, whereupon the Project Management Fee shall be reduced to
three percent (3%) of the total project costs in excess of the five percent
(5%) of Gross Revenue threshold. The Project Management Fee shall be accounted
for and documented and consistent with the requirements of Section 11.02 herein.
Any onsite or dedicated personnel required for the direct supervision of the
implementation of a Capital Improvement Budget or other renovation project will
be a direct cost to, and shall be reimbursed by, the Landlord.

 

  H. Except as otherwise provided herein, in no event shall Manager realize any
kick backs, rebates, cash incentives, administration fees, concessions, profit
participations, investment rights or similar payments or economic consideration
from or in, as applicable, vendors or suppliers of goods or services. Manager
agrees that any such amounts or benefits derived shall be held in trust for the
benefit of Lessee or Landlord (as applicable).

 

  I.

Any Market Service Fees for the Project Related Services shall be, once
approved, reflected in the Capital Improvements Budget (such Market Service Fees
subject to any adjustments necessary for then existing market conditions)

 

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  shall be submitted for approval to Lessee and Landlord with the applicable
Capital Improvement Budget, and shall be deemed approved by the Lessee and
Landlord unless a majority of the Independent Directors of AHP affirmatively
vote that such Market Service Fees are not market (determined by reference to
fees charged by third party providers who are not hotel managers or who are not
discounting such fees as result of fees generated from other services) (herein
called the “Approval Requirement”). In the event that the majority of the
Independent Directors of AHP affirmatively votes that the Market Service Fees
proposed by Manager are not market, the Lessee and Manager agree to engage a
consultant reasonably satisfactory to both Lessee and Manager to provide then
current market information with respect to the proposed Market Service Fees and
a written recommendation as to whether such fees are market or not. If the
consultant’s recommendation provides that such Market Service Fees as proposed
by Manager are market, then the Landlord agrees to pay any consultant fees
incurred by such consultant in making the recommendation. If the consultant’s
recommendation does not support the Market Service Fees as proposed by Manager,
then Manager agrees to pay the consultant’s fees incurred in connection with the
recommendation and agrees to either re-submit Manager’s proposed Market Service
Fees consistent with the market research and recommendation of the consultant
for approval to Lessee and Landlord, or elect by Notice to Lessee and Landlord
that Manager will not provide the Project Related Services. If Manager elects
not to provide Project Related Services for a Non-Managed Hotel, no termination
fee shall be payable by Lessee under Section 2.03(c) of this Agreement.

ARTICLE IX

EMPLOYEES

9.01 Employee Hiring. Manager will hire, train, promote, supervise, direct the
work of and discharge all personnel working on the Premises. Manager shall be
the sole judge of the fitness and qualification of such personnel and is vested
with absolute discretion in the hiring, discharging, supervision, and direction
of such personnel during the course of their employment and in the operation of
the Premises.

9.02 Costs; Benefit Plans.

 

  A.

Manager shall fix the employees’ terms of compensation and establish and
maintain all policies relating to employment, so long as they are reasonable and
in accordance with the Applicable Standards and the Annual Operating Budget.
Without limiting the foregoing, Manager may, consistent with the applicable
budgets, enroll the employees of the Hotel in pension, medical and health, life
insurance, and similar employee benefit plans (“Benefit Plans”) substantially
similar to plans reasonably necessary to attract and retain employees and
generally remain competitive. The Benefit Plans may be joint plans for the
benefit of employees at more than one hotel owned, leased or managed by Manager
or Manager Affiliate Entities. Employer contributions to such plans

 

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(including any withdrawal liability incurred upon Termination of this Agreement)
and reasonable administrative fees (but without further markup by Manager),
which Manager may expend in connection therewith, shall be the responsibility of
Lessee and shall be a Deduction. The administrative expenses of any joint plans
will be equitably apportioned by Manager among properties covered by such plan.

 

  B.

Manager may elect to enroll employees in a medical and health Benefit Plan that
is a self insured health plan (the “Plan”) without collection of any fee or
profit to Manager or any Manager Affiliate Entity. The aggregate actual costs
incurred by Manager in operating and managing the Plan shall be allocated on a
pro rata basis by Manager among the properties covered by the Plan based on the
number of members participating in the Plan, and such costs shall include,
without limitation, the administration and payment of claims, costs and fees of
third party administration and gateway or reference pricing services, and
premiums for stop-loss insurance and reinsurance policies (collectively, the
“Health Plan Costs”). Prior to the commencement of each Plan year, Manager shall
in good faith establish premium levels for employee individual and family
coverages based on relevant factors such as historic health service consumption
by members participating in the Plan, participation in wellness programs, and
the projected Health Plan Costs for the upcoming Plan year (the “Health Care
Premiums”). The amount of employer contribution to Health Care Premiums for each
employee at a Hotel shall be a Deduction for such Hotel, and Manager may
periodically draw down from Gross Revenues for the Hotel the amount of such
employer contribution to Health Care Premiums as same become payable under the
terms of the Plan. Manager shall establish an account into which all Health Care
Premiums for the Plan shall be deposited and out of which Health Plan Costs
shall be paid (the “Plan Account”). Upon implementation of a Plan, Lessee shall
initially fund into a reserve (the “Reserve Account”) a cash amount equal to
fifteen percent (15%) of the estimated Health Plan Costs for the first Plan year
allocable to the Hotels (the “Plan Reserve”). Thereafter, Lessee shall be
responsible to maintain the level of the Plan Reserve in an amount not less than
ten percent (10%) of the estimated Health Plan Costs allocable to the Hotels for
the then current Plan year, as same may be adjusted from time to time during
such Plan year (the “Minimum Plan Reserve Balance”). Manager may transfer funds
(a) from the Plan Reserve to the Plan Account if and as reasonably necessary to
maintain at all times sufficient amounts in the Plan Account to pay Health Plan
Costs when due and payable, and (b) from the Plan Account to the Plan Reserve if
Manager reasonably determines that the balance in the Plan Account (whether by
deposit of Health Care Premiums or transfers from the Plan Reserve) exceeds that
which is reasonably necessary to pay Health Plan Costs when due and payable. If
in any Plan year the balance in the Plan Reserve falls below the Minimum Plan
Reserve Balance, including by reason of transfers of funds to the Plan Account
or an increase in the estimated Health Plan Costs allocable to the Hotels for
the then current Plan year (the “Reserve Shortfall”), Lessee shall deposit into
the Reserve Account the amount of the Reserve Shortfall within ten (10) days
after receipt of Manager’s written request therefore. If Lessee fails to timely
deposit the Reserve

 

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  Shortfall, Manager shall have the right (without affecting Manager’s other
remedies under this Agreement) to draw down from Gross Revenues for the Hotels
the amount of the Reserve Shortfall. If Gross Revenues are not sufficient to
fund the Reserve Shortfall, Manager shall have the right to withdraw the amount
of the Reserve Shortfall from the Operating Accounts, the Capital Improvements
Reserves, Working Capital or any other funds of Lessee held by or under the
control of Manager for the Hotels. If at any time the balance in the Plan
Reserve exceeds twenty percent (20%) of the estimated Health Plan Costs
allocable to the Hotels for the then current Plan year, as same may be adjusted
from time to time during such Plan year, such excess amounts shall be returned
to Lessee. Manager may elect in connection with the Plan to make contributions
to health reimbursement accounts (HRA) or health savings accounts (HSA)
maintained for the benefit of employees (“HRA/HSA Fundings”). In the event
Manager makes HRA/HSA Fundings for employees at a Hotel, such HRA/HSA Fundings
shall be a Deduction for such Hotel and shall be treated hereunder in the same
manner as other Employee Costs and Expenses.

9.03 Manager’s Employees. It is expressly understood and agreed that all such
personnel employed at the Hotel, including the Manager’s acting General Manager
for the Hotel, will be the employees of Manager for all purposes including,
without limitation, federal, state and local tax and reporting purposes, but the
expense incurred in connection therewith will be a Deduction and for Lessee’s
account. A General Manager’s compensation may be allocated to other Hotels on a
fair and equitable basis if the General Manager oversees and supervises other
Hotel operations. Manager shall use such care when hiring any employees as may
be common to the hospitality business and consistent with the Manager’s
standards of operation. Lessee acknowledges and agrees that Manager, as the
employer of the Hotel’s employees, shall be entitled to all federal, state
and/or local tax credits or benefits allowed to employers relating to the
Hotel’s employees including, without limitation, the Work Opportunity Tax
Credit, the Targeted Jobs Tax Credit, and similar tax credits (provided that
Manager shall pay all incremental fees, if applicable, to qualify for such tax
credits). Manager, in accordance with the Annual Operating Budget, may draw down
from Gross Revenues all costs and expenses, of whatever nature, incurred in
connection with such employees, including, but not limited to, wages, salaries,
on-site staff, bonuses, commissions, fringe benefits, employee benefits,
recruitment costs, workmen’s compensation and unemployment insurance premiums,
payroll taxes, vacation and sick leave (collectively, “Employee Costs and
Expenses”).

9.04 Special Projects - Corporate Employees. The costs, fees, compensation and
other expenses of any persons engaged by Manager to perform duties of a special
nature, directly related to the operation of the Premises, including, but not
limited to, in-house or outside counsel, accountants, bookkeepers, auditors,
employment search firms, marketing and sales firms, and similar firms of
personnel, shall be operating expenses, payable from and consistent with the
Annual Operating Budget and not the responsibility of the Manager. The costs,
fees, compensation and other expenses of those personnel of Manager assigned to
special projects for the Hotel shall also be operating expenses payable by the
Lessee and not the responsibility of Manager. The daily per diem rate for those
personnel shall be based upon the actual costs of Manager in providing its
personnel for such special services or projects, without mark-up for fee

 

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or profit but including salary and employee benefit costs and costs of equipment
used in performing such services, overhead costs, travel costs and long distance
telephone. Such special services shall include, but not be limited to, those
matters which are not included within the scope of the duties to be performed by
Manager hereunder and, if not provided by Lessee, would involve the Lessee’s
engagement of a third party to perform such services; for example, special sales
or marketing programs, market reviews, assistance in opening new food and
beverage facilities, legal services, accounting services, tax services,
insurance services, data processing, engineering personnel, and similar
services.

9.05 Termination. At Termination, subject to Section 2.01 above, Lessee shall
reimburse Manager for costs and expenses incurred by Manager which arise out of
either the transfer or termination of Manager’s employees at the Hotel, such as
reasonable transfer costs, compensation in lieu of vacation and sick leave,
severance pay (including a reasonable allowance for severance pay for Executive
Employees of the Hotel, the amount of such allowance not to exceed an amount
equal to Manager’s then current severance benefits for such terminated Executive
Employees, unless Lessee otherwise approves), unemployment compensation,
employer liability pursuant to the Consolidated Omnibus Budget Reconciliation
Act (COBRA liability) and the Worker Adjustment and Retraining Notification Act
(WARN Act) and other employment liability costs arising out of the termination
of the employment of the Manager’s employees at the Premises (herein
collectively called “Employee Related Termination Costs”). This reimbursement
obligation shall not apply to any corporate personnel of Manager assigned to the
Hotel for special projects or who perform functions for Manager at the corporate
level. In order to be reimbursable hereunder, any Employee Related Termination
Costs must be pursuant to policies of Manager which shall be consistent with
those of other managers managing similar hotels in similar markets and
geographical locations and which shall be subject to review and reasonable
approval of Lessee from time to time upon Notice from Lessee and which review
and approval shall occur no more than one time during each Fiscal Year during
the term of this Agreement.

At Termination, an escrow fund shall be established from Gross Revenues (or, if
Gross Revenues are not sufficient, with funds provided by Lessee) to reimburse
Manager for all reimbursable Employee Related Termination Costs.

Employee Related Termination Costs shall include Health Plan Costs allocable to
the Hotels that become payable under a Plan following a Termination. Manager
shall be entitled to hold the balance of funds in the Plan Reserve to pay such
Health Plan Costs as they become due for the following periods of time (the
“Contingency Period”): (a) six (6) months following Termination with respect to
Health Plan Costs relating to claims incurred prior to Termination, and eighteen
(18) months following Termination with respect to COBRA liability (or such
earlier date upon which there are no employees electing COBRA coverage relating
to such Termination) (the “Contingent Costs”). In addition, in the event Manager
reasonably determines that the balance of funds in the Plan Reserve is not
sufficient to cover Manager’s estimate of Contingent Costs, Lessee shall deposit
into the Plan Account on or before the date of Termination or following a
Termination, within ten (10) days after receipt of Manager’s written request
therefore, the amount that Manager reasonably determines is sufficient to cover
Manager’s estimate of Contingent Costs (the “Contingent Shortfall”). If Lessee
fails to timely

 

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deposit the Contingent Shortfall, Manager shall have the right (without
affecting Manager’s other remedies under this Agreement) to draw down from Gross
Revenues for the Hotels the amount of the Contingent Shortfall. If Gross
Revenues are not sufficient to fund the Contingent Shortfall, Manager shall have
the right to withdraw the amount of the Contingent Shortfall from the Operating
Accounts, the Capital Improvement Reserves, Working Capital or any other funds
of Lessee held by or under the control of Manager for the Hotel(s). Following
the expiration of the Contingency Period for a Termination of this Agreement in
its entirety, any balance remaining in the Plan Reserve shall be returned to
Lessee.

9.06 Employee Use of Hotel. Manager, in its discretion, may (i) provide lodging
for Manager’s Executive Employees and corporate staff visiting the Hotel in
connection with the performance of Manager’s services hereunder and allow them
the use of the facilities of the Hotel, and (ii) provide the management of the
Hotel with temporary living quarters within the Hotel and the use of all
facilities of the Hotel, in either case at a discounted price or without charge,
as the case may be. Manager shall, on a space available basis, provide lodging
at the Hotel for Lessee’s employees, officers and directors visiting the Hotel
and allow them the use of all facilities of the Hotel in either case without
charge, except for recreational facilities for which a charge will apply.

9.07 Non-Solicitation. During the term of this Agreement and for a period of two
(2) years thereafter, unless an Event of Default by Manager exists under this
Agreement beyond applicable grace or cure periods, or the Agreement has been
terminated as a result of an uncured Event of Default by Manager, Lessee agrees
that it (and its Affiliates) will not, without the prior written consent of
Manager, either directly or indirectly, alone or in conjunction with any other
person or entity, (i) solicit or attempt to solicit any general manager (each a
“General Manager” and, collectively, “General Managers”) of the Hotel or any
other hotels managed by Manager or any of Manager’s Executive Employees
(collectively, the General Manager and Executive Employees are herein called the
“Key Employees”) to terminate, alter or lessen Key Employees’ employment or
affiliation with Manager or to violate the terms of any agreement or
understanding between any such Key Employee and Manager, as the case may be, or
(ii) employ, retain, or contract with any Key Employee.

ARTICLE X

BUDGET, STANDARDS AND CONTRACTS

10.01 Annual Operating Budget. Not less than forty-five (45) days prior to the
beginning of each Fiscal Year, Manager shall submit to Lessee for each Hotel, a
budget (the “Annual Operating Budget”) setting forth in detail an estimated
profit and loss statement for the next twelve (12) Accounting Periods, or for
the balance of the Fiscal Year in the event of a partial first Fiscal Year,
including a schedule of hotel room rentals and other rentals and a marketing and
business plan for each Hotel, such budget to be substantially in the format of
Exhibit “D” attached to the Addendum for such Hotel.

10.02 Budget Approval. The Annual Operating Budget submitted to Lessee by
Manager shall be subject to the approval of Lessee (such approval not to be
unreasonably withheld). The Annual Operating Budget shall not be deemed accepted
by Lessee in the absence

 

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of its express written approval. Not later than thirty (30) days after receipt
by Lessee of a proposed Annual Operating Budget (or such longer period as Lessee
may reasonably request on Notice to Manager), Lessee may deliver an AOB
Objection Notice with reasonable detail to the Manager stating that Lessee
objects to any information contained in or omitted from such proposed Annual
Operating Budget and setting forth the nature of such objections with reasonable
specificity. Failure of Lessee to deliver an AOB Objection Notice shall be
deemed rejection of the Manager’s proposed Annual Operating Budget in its
entirety. Upon receipt of any AOB Objection Notice, the Manager shall, after
consultation with Lessee, modify the proposed Annual Operating Budget, taking
into account Lessee’s objections, and shall resubmit the same to Lessee for
Lessee’s approval within fifteen (15) days thereafter, and Lessee may deliver
further AOB Objection Notices (if any) within fifteen (15) days thereafter (in
which event, the re-submission and review process described above in this
sentence shall continue until the proposed Annual Operating Budget in question
is accepted and consented to by Lessee). Notwithstanding anything to the
contrary set forth herein, Lessee shall have the right at any time subsequent to
the acceptance and consent with respect to any Annual Operating Budget, on
Notice to the Manager, to revise such Annual Operating Budget or to request that
the Manager prepare for Lessee’s approval a revised Annual Operating Budget
(with the approval of Manager, such approval not to be unreasonably withheld),
taking into account such circumstances as Lessee deems appropriate; provided,
however, that the revision of an Annual Operating Budget shall not be deemed a
revocation of the Manager’s authority with respect to such actions as the
Manager may have already taken prior to receipt of such revision notice in
implementing a previously approved budget or plan. Lessee and Manager
acknowledge and agree that the Annual Operating Budgets are merely forecasts of
operating revenues and expenses for an ensuing year and shall be revised, by
agreement of Lessee and Manager, from time to time as business and operating
conditions shall demand. However, Manager shall use its reasonable best efforts
to operate the Premises in accordance with the Annual Operating Budget. The
failure of the Hotel to perform in accordance with such Annual Operating Budget
shall not constitute a default by Manager of this Agreement, however, the Lessee
has a right to terminate this Agreement with respect to a Subject Hotel if such
Subject Hotel fails to satisfy the Performance Test as set forth in
Section 2.03(c) above.

10.03 Operation Pending Approval. If the Annual Operating Budget (or any
component thereof) has not yet been approved by Lessee prior to any applicable
Fiscal Year, then, until approval of such Annual Operating Budget (or such
component) by Lessee, Manager shall operate the Hotel substantially in
accordance with the prior year’s Annual Operating Budget except for (a) those
components of the Annual Operating Budget for the applicable Fiscal Year
approved by Lessee, (b) the Necessary Expenses which shall be paid as required,
(c) the Emergency Expenses which shall be paid as required, and (d) those
expenses that vary in correlation with Gross Revenues and/or occupancy in the
aggregate.

10.04 Budget Meetings. At each budget meeting and at any additional meetings
during a Fiscal Year reasonably called by Lessee or Manager, Manager shall
consult with Lessee on matters of policy concerning management, sales, room
rates, wage scales, personnel, general overall operating procedures, economics
and operation and other matters affecting the operation of the Hotel.

 

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ARTICLE XI

OPERATING DISTRIBUTIONS

11.01 Management Fee. As consideration for the services to be rendered by
Manager pursuant to this Agreement as manager and operator of the Premises,
Manager shall be paid the following Base Management Fee and Incentive Management
Fee (as such terms are hereinafter defined), collectively called the “Management
Fee”, for each Hotel on a property by property basis as follows:

 

  A. Base Management Fee. The base management fee (“Base Management Fee”) shall
be equal to the greater of (i) $12,673.48 (to be increased annually based on any
increases in CPI over the preceding annual period), or (ii) three percent
(3%) of the Gross Revenues for each Accounting Period, to be paid monthly in
arrears. If this Agreement shall commence or expire on other than the first and
last day of a calendar month, respectively, the Base Management Fee shall be
apportioned based on the actual number of days of service in the month.

 

  B. Incentive Fee. The incentive fee (the “Incentive Fee”) shall be equal to
the lesser of (i) one percent (1%) of Gross Revenues for each Fiscal Year and
(ii) the amount by which the actual House Profit exceeds the Budgeted HP
determined on a property by property basis (“HP Test”). The Incentive Fee shall
be payable annually in arrears within ninety (90) days after the end of each
Fiscal Year; provided, however, if based on actual operations and revised
forecasts from time to time, it is reasonably anticipated that the Incentive Fee
is reasonably expected to be earned for such Fiscal Year, Lessee shall
reasonably consider payment of the Incentive Fee, pro-rata on a quarterly basis,
within twenty (20) days following the end of each calendar quarter, subject to
final adjustment within ninety (90) days following the end of the Fiscal Year.

11.02 Accounting and Interim Payment.

 

  A. Manager shall submit monthly, pursuant to Section 15.02, an interim
accounting to Lessee showing Gross Revenues, Deductions, House Profit, Gross
Operating Profit and Net Operating Income before Debt Service.

 

  B. Calculations and payments of the Base Management Fee made with respect to
each Accounting Period shall be made on an interim accounting basis and shall be
accounted for cumulatively for each Fiscal Year. After the end of each Fiscal
Year, Manager shall submit to Lessee an accounting for such Fiscal Year,
consistent with Section 15.03, which accounting shall be controlling over the
interim accountings. Any adjustments required by the Fiscal Year accounting
shall be made promptly by the parties.

 

  C. The Incentive Fee shall only be calculated and earned based upon the House
Profit achieving the required HP Test for any given Fiscal Year or a portion
thereof if the period of calculation cannot include the full period from
January 1 to December 31.

 

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  D. If Lessee raises no objection for any reason (excluding fraud) within one
(1) year from the receipt of annual accounting statements as provided herein (or
for fraud within any applicable statute of limitations period, and if no statute
of limitations period exists, then in no event to exceed four (4) years from
receipt of annual accounting statements as provided herein), such accounting
shall be deemed to have been accepted by Lessee as true and correct, and Lessee
shall have no further right to question its accuracy. Manager will provide
Lessee profit and loss statements for the current period and year-to-date,
including actual, budget and last year comparisons, as required by
Section 15.03.

ARTICLE XII

INSURANCE

12.01 Insurance. Manager shall coordinate with Lessee, at all times during any
period of development, construction, renovation, furnishing and equipping of the
Premises, the procurement and maintenance in amount and scope as available and
market for the hotel lodging industry for hotels of similar type and in similar
markets and geographical locations as the Hotel, public liability and indemnity
and property insurance with minimum limits of liability as required by Lessee,
the Landlords, any Holder, or Franchisors, if applicable, to protect Lessee,
Landlord, Manager, any Holder, and any Franchisor, if applicable, against loss
or damage arising in connection with the development, construction, renovation,
furnishing and equipping of the Premises (and pre-opening activities, if
applicable), including, without limitation, the following:

12.01.1. Extended Coverage, Boiler, Business Interruption and Liability
Insurance.

(a) Building insurance on the “Special Form” (formerly “All Risk” form)
(including earthquake and flood in reasonable amounts as determined by Lessee)
in an amount not less than 100% of the then “full replacement cost” thereof (as
defined below) or such other amount which is acceptable to Lessee, and personal
property insurance on the “Special Form” in the full amount of the replacement
cost thereof;

(b) Insurance for loss or damage (direct and indirect) from steam boilers,
pressure vessels or similar apparatus, now or hereafter installed in the Hotel,
in the minimum amount of $5,000,000 or in such greater amounts as are then
customary or as may be reasonably requested by Lessee from time to time;

(c) Loss of income insurance on the “Special Form”, in the amount of one year of
the sum of Base Rent plus Percentage Rent (as such terms are defined in and as
determined pursuant to the Leases) for the benefit of Landlords, and business
interruption insurance on the “Special Form” in the amount of one year of Gross
Operating Profit, for the benefit of Lessee. All loss of income insurance
proceeds shall be part of Gross Revenues;

(d) Commercial general liability insurance, with amounts not less than
$1,000,000 combined single limit for each occurrence and $2,000,000.00 for the
aggregate of all occurrences within each policy year, as well as excess
liability (umbrella) insurance with

 

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limited of at least $35,000,000 per occurrence, covering each of the following:
bodily injury, death, or property damage liability per occurrence, personal and
advertising injury, general aggregate, products and completed operations, and
“all risk legal liability” (including liquor law or “dram shop” liability if
liquor or alcoholic beverages are served at the Hotel);

(e) Automobile insurance on vehicles operating in conjunction with the Hotel
with limits of liability of at least $1,000,000.00 combined, single limit
coverage; and

(f) Insurance covering such other hazards and in such amounts as may be
customary for comparable properties in the area of the Hotel and is available
from insurance companies, insurance pools or other appropriate companies
authorized to do business in the State where the Hotel is located at rates which
are economically practicable in relation to the risks covered as may be
reasonably requested by Lessee and otherwise consistent with the costs allocated
therefor in the Annual Operating Budget.

12.01.2. Operational Insurance.

(a) Workers’ compensation and employer’s liability insurance as may be required
under Legal Requirements and as Manager may deem reasonably prudent covering all
of Manager’s employees at the Premises, with such deductible limits or
self-insured retentions as may be reasonably established from time to time by
Manager;

(b) Fidelity bonds, with limits and deductibles as may be reasonably requested
by Lessee, covering Manager’s employees in job classifications normally bonded
under prudent hotel management practices in the United States or otherwise
required by law; and

(c) Such other insurance in amounts as Manager in its reasonable judgment deems
advisable for its protection against claims, liabilities and losses arising out
of or connected with its performance under this Agreement, and otherwise
consistent with the costs allocated therefor in the Annual Operating Budget.

12.02 Replacement Cost. The term “full replacement cost” as used herein shall
mean the actual replacement cost of the Hotel requiring replacement from time to
time including an increased cost of construction endorsement, if available, and
the cost of debris removal. In the event either party to this Agreement believes
that full replacement cost (the then-replacement cost less such exclusions) has
increased or decreased at any time during the Term, it shall have the right to
have such full replacement cost re-determined.

12.03 Increase in Limits. If either party to this Agreement at any time deems
the limits of the personal injury or property damage under the comprehensive
commercial general liability insurance then carried to be either excessive or
insufficient, such parties shall endeavor in good faith to agree on the proper
and reasonable limits for such insurance to be carried and such insurance shall
thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section.

 

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12.04 Blanket Policy. Notwithstanding anything to the contrary contained in this
Article XII, Manager may include the insurance required hereunder within the
coverage of a so-called blanket policy or policies of insurance carried and
maintained by Manager; provided, however, that the coverage afforded to the
parties as required herein will not be reduced or diminished or otherwise be
different from that which would exist under a separate policy meeting all other
requirements of this Agreement by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article XII are
otherwise satisfied.

12.05 Costs and Expenses. Insurance premiums and any costs or expenses with
respect to the insurance, including, without limitation, agent’s and
consultant’s costs used to place insurance or adjust claims, shall be
Deductions. Premiums on policies for more than one year shall be charged
pro-rata against Gross Revenues over the period of the policies and to the
extent, through blanket policies, cover other hotels managed by Manager or owned
by Lessee or any of its Affiliates, shall be allocated based on rooms, number of
employees, values or other methods as determined to be reasonable by Manager and
Lessee. Any reserves, losses, costs, damages or expenses which are uninsured,
self-insured, or fall within deductible limits shall be treated as a cost of
insurance and shall be Deductions, subject to Article XXV.

12.06 Policies and Endorsements.

 

  A. Where permitted, all insurance provided for under this Article XII shall
name Lessee as insured, and Manager, any Holder, the Landlords, and, if
required, the Franchisors, as additional insureds. The party procuring such
insurance shall deliver to the other party certificates of insurance with
respect to all policies so procured, including existing, additional and renewal
policies and, in the event of insurance about to expire, shall deliver
certificates of insurance with respect to the renewal policies not less than ten
(10) days prior to the respective dates of expiration.

 

  B. All policies of insurance provided for under this Article XII shall, to the
extent obtainable, be with insurance companies licensed or authorized to do
business in the state in which the Premises are located, with a minimum rating
of A or better in the Best’s Insurance Guide and an S&P rating of at least A+V
(or such higher rating if so required by any Holder, Landlord or Franchisor),
and shall have attached thereto an endorsement that such policy shall not be
cancelled or materially changed without at least thirty (30) days’ (and for
Texas Hotels, ten (10) days’) prior written notice to Lessee. All insurance
policies obtained pursuant to this Article XII shall contain a standard waiver
of subrogation endorsement.

12.07 Termination. Upon Termination of this Agreement, an escrow fund in an
amount reasonably acceptable to Manager shall be established from Gross Revenues
(or, if Gross Revenues are not sufficient, with funds provided by Lessee) to
cover the amount of any costs which, in Manager’s reasonable business judgment,
will likely need to be paid by either Lessee or Manager with respect to pending
or contingent claims, including those which arise after Termination for causes
arising during the Term of this Agreement. Upon the final disposition of

 

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all such pending or contingent claims, any unexpended funds remaining in such
escrow shall be paid to Lessee.

ARTICLE XIII

TAXES AND DEBT SERVICE

13.01 Taxes.

(a) All real estate and ad valorem property taxes, assessments and similar
charges on or relating to the Premises during the Term of this Agreement shall
be paid by Manager, on behalf of Lessee, before any fine, penalty, or interest
is added thereto or lien placed upon the Premises, unless payment thereof is
stayed. All such payments shall be reserved and paid from Gross Revenues and
treated as Deductions in determining Net Operating Income. Gross Revenues
reserved for such purposes shall be placed in an escrow account or accounts
established pursuant to the requirements of any applicable Holder. Interest
earned in said account attributable to funds deposited pursuant to this
Agreement shall be added to such reserve, thereby reducing the amount required
to be placed in the account from Gross Revenues.

(b) Notwithstanding the foregoing, upon Lessee’s request, Manager shall, as a
Deduction, contest the validity or the amount of any such tax or assessment.
Lessee agrees to cooperate with Manager and execute any documents or pleadings
required for such purpose, provided that Lessee is satisfied that the facts set
forth in such documents or pleadings are accurate and that such execution or
cooperation does not impose any unreasonable obligations on Lessee, and Lessee
agrees to reimburse Manager as a Deduction for all expenses occasioned to
Manager by any such contest, provided that such expenses shall be approved by
Lessee prior to the time that they are incurred.

13.02 Debt Service; Ground Lease Payments. In the event of a Hotel Mortgage
and/or Ground Lease and upon direction of Lessee, Manager shall establish an
account (the “Property Service Account”) to pay Debt Service and/or Ground Lease
Payments in such periodic payments as required by any applicable Holder under
any applicable Hotel Mortgage and/or landlord under any Ground Lease. The
Property Service Account shall be funded by Landlord under the Lease from funds
paid by Landlord to Lessee. In the event sufficient funds are unavailable for
the payment of Debt Service and/or Ground Lease Payments from the Property
Service Account, then Manager shall notify Lessee in writing of such
insufficiency who shall in turn advise the Landlord under the applicable Lease
to replenish the Property Service Account to provide funds for payment of Debt
Service and/or Ground Lease Payments.

ARTICLE XIV

BANK ACCOUNTS

All funds made available to Manager by Lessee for operations of the Premises,
exclusive of those amounts described in Article VIII, shall be deposited into a
banking checking account or accounts to be established in the name of Lessee
(the “Operating Account”), consistent with the requirements of any Cash
Management Agreements, if any. The Operating Account shall be interest bearing
when possible. Subject to the limitation of Manager’s authority

 

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set forth herein, both Manager and Lessee shall be authorized to withdraw funds
from said Operating Account, except that Lessee may withdraw funds from said
account only if an Event of Default by Manager has occurred under this Agreement
or an event has occurred that with the passage of time might be an Event of
Default by Manager. Prior to any such withdrawal by Lessee, Lessee shall provide
Notice of same to Manager, and Manager shall not be liable to Lessee for any
checks written by Manager for operating expenses which are returned due to
insufficient funds caused by such Lessee withdrawal. From time to time both
Manager and Lessee shall designate signatory parties on such account and shall
provide written notice of such designation or change in designation to the other
party, and the signatures of such persons shall be formally and expressly
recognized by the bank in which such account or accounts are maintained. The
bank or banks to be utilized shall be selected and approved by Lessee and
Manager. All monies received shall be deposited in, including, but not limited
to, Gross Revenues, and expenses paid, including, but not limited to,
Deductions, shall be paid from such bank checking account(s) except that Manager
shall have the right to maintain payroll and petty cash funds and to make
payments therefrom as the same are customary and utilized in the lodging
business. Such funds shall not be commingled with Manager’s funds. Lessee shall
have the right, at its expense, to audit said account or accounts at any
reasonable time.

Manager may establish one or more separate bank accounts for handling payroll
costs in the name of Lessee. Such accounts shall be in a bank selected by
Manager and approved by Lessee, and shall be handled exclusively by the
individuals designated by Manager and approved in writing by Lessee. Funds shall
be deposited in the payroll account or accounts from the Operating Account, as
needed, in order to meet payroll requirements.

Until otherwise prescribed by Lessee in writing, the Operating Account shall be
under the control of Manager, without prejudice, however, to Manager’s
obligation to account to Lessee as and when provided herein. All receipts and
income, including without limitation, Gross Revenues shall be promptly deposited
in the Operating Account. Checks or other documents of withdrawal shall be
signed only by the individual representatives of Manager approved in writing by
Lessee and duly recognized for such purpose by the bank or banks in which the
referenced accounts are maintained. Manager shall supply Lessee with fidelity
bonds or other insurance insuring the fidelity of authorized signatories to such
accounts, unless said bonds or other insurance shall have been placed by Lessee
and delivered directly by the bonding or insurance company to Lessee. The cost
of such fidelity bonds or other insurance shall be a Deduction, at Lessee’s
expense, and subject to Lessee’s approval. Neither Lessee nor Manager shall be
responsible for any losses occasioned by the failure or insolvency of the bank
or banks in which the referenced accounts are maintained. Upon expiration or
termination of this Agreement for the Hotel and the payment to Manager of all
amounts due Manager hereunder upon such expiration or termination, as provided
in this Agreement, all remaining amounts in the referenced accounts shall be
transferred forthwith to Lessee, or made freely available to Lessee.

Manager shall not be required to advance funds, and Manager shall not be
obligated to incur any liability or obligation for Lessee’s account, without
assurance that necessary funds for the discharge thereof will be provided by
Lessee.

 

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All reserve accounts established pursuant to this Agreement shall be placed in
segregated interest-bearing accounts in the name of Lessee which interest shall
be added to such reserve and serve to reduce the amount required to be placed in
such reserve account.

ARTICLE XV

ACCOUNTING SYSTEM

15.01 Books and Records. Manager shall maintain an adequate and separate
accounting system in connection with its management and operation of the
Premises. The books and records shall be kept in accordance with GAAP and the
Uniform System of Accounts (to the extent consistent with GAAP) and shall be
maintained at all times either on the Premises, at the principal office of the
Manager, or in storage, for at least three (3) years after the Fiscal Year to
which the books and records relate. Lessee, the beneficial owners of Lessee, the
Landlords (to the extent permitted under the Leases), any Holder (to the extent
permitted under the Hotel Mortgage), any Franchisor (to the extent permitted
under any applicable Franchise Agreement), or their respective employees or duly
authorized agents, shall have the right and privilege of examining and
inspecting the books and records at any reasonable time. Upon termination of
this Agreement for a Hotel, all such books and records shall be turned over to
Lessee so as to insure the orderly continuance of the operation of the Hotel;
provided however, that all such books and records thereafter shall be available
to Manager at the Hotel at all reasonable times for inspection, audit,
examination and copying for a period of three (3) years.

15.02 Monthly Financial Statements. Within twenty-five (25) days following each
Accounting Period, Manager shall furnish Lessee with respect to the Hotel an
accrual basis balance sheet on Manager’s standard format in reasonable detail,
together with a reasonably detailed accrual basis profit and loss statement for
the calendar month next preceding and with a cumulative calendar year accrual
basis profit and loss statement to date, including a comparison to the Annual
Operating Budget and the Capital Improvements Budget and a statement of cash
flows for each monthly and cumulative period for which a profit and loss
statement is prepared. Further, from time to time as reasonably requested by
Lessee, Manager shall provide a statement of bank account balances, an
allocation to reserve accounts, a sources and uses statement, a narrative
discussing any of the aforementioned reports and material variances from the
Annual Operating Budget and the Capital Improvements Budget, such other reports
and financial statements as Lessee may reasonably request and as are customarily
provided by managers of similar hotel properties in the area of the Hotel
without Manager receiving additional fees to provide same.

15.03 Annual Financial Statements. Within forty-five (45) days after the end of
each Fiscal Year, Manager shall furnish to Lessee year-end financial statements
for the Hotel (including a balance sheet, income statement and statement of
sources and uses of funds) which statements shall be unaudited and shall be
prepared in accordance with GAAP and the Uniform System of Accounts (to the
extent consistent with GAAP). Lessee will engage an independent national
certified public accounting firm with hospitality experience and reasonably
acceptable to Lessee to provide audited annual financial statements. Manager
shall cooperate in all respects with such accountant in the preparation of such
statements, including the delivery of any

 

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financial information generated by Manager pursuant to the terms of this
Agreement and reasonably required by the Lessee’s accountant to prepare such
audited financial statements.

ARTICLE XVI

PAYMENT BY LESSEE

16.01 Payment of Base Management Fee. On the fifth (5th) day of each month
during the term of this Agreement, Manager shall be paid out of the Operating
Account, the Base Management Fee for the preceding Accounting Period, as
determined from the books and records referred to in Article XV.

16.02 Distributions. Subject to retention of Reasonable Working Capital
(including any amounts as required by the Capital Improvement Budget) and
retention of such reserves as may be required under any Hotel Mortgage and/or
Ground Lease, as applicable, Manager shall deliver to Lessee from the Operating
Account, any excess Working Capital for the preceding Accounting Period on the
25th day of the following month, and such amounts of Lessee’s money in the
possession or under the control of Manager as Lessee shall from time to time
request. For purposes of this Article “Reasonable Working Capital” shall mean an
amount reasonably determined by Manager at the same time as the monthly
financial statements are prepared pursuant to Section 15.02 hereof, but in no
event to exceed a sum equal to a ratio of current assets to current liabilities
of 2:1 (but excluding from such calculation cash restricted or unavailable under
any Cash Management Agreement).

16.03 Payment Option. Management Fees shall be paid in cash, except that subject
to the requirements of Section 5.02.6 and Section 28.08 Manager may request, no
later than thirty (30) days prior to the payment due date, by Notice to Lessee
(such request to be subject to the approval of a majority of the Independent
Directors of AHP, in their sole discretion, and to any applicable restrictions
of a national securities exchange (including NASDAQ NMS and NASDAQ Small Cap)
and to federal and state securities laws), payment of up to one-third (1/3rd) of
its Base Management Fee and up to one hundred percent (100%) of its Incentive
Fee, in the form of shares of common stock of AHP priced at the “Strike Price,”
or in the form of stock options priced in accordance with the “Black-Scholes
Model” (the “Payment Option Request”), as follows:

 

  A.

Common Stock at “Strike Price”. The number of shares of common stock of AHP to
be issued in lieu of the applicable Base Management Fees and/or Incentive Fee as
noted in the Payment Option Request (the “Designated Fees”) shall be based upon
the “Strike Price” of such common stock determined as follows: The term “Strike
Price” shall be and mean the amount obtained (rounded upward to the next highest
cent) by determining the simple average of the daily closing price of the common
stock of AHP for the twenty (20) trading days ending on the last trading day of
the calendar week immediately preceding the applicable payment due date on the
New York Stock Exchange or, if the shares of such common stock are not then
being traded on the New York Stock Exchange, then on the principal stock
exchange (including without limitation NASDAQ NMS or NASDAQ Small Cap) on which
such common stock is then

 

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  listed or admitted to trading as determined by AHP or, if such common stock is
not then so listed or admitted to trading the average of the last reported
closing bid and asked prices on such days in the over-the-counter market or, if
no such prices are available, the fair market value per share of such common
stock, as determined by a majority of the Independent Directors of AHP in their
sole discretion. The Strike Price shall not be subject to any adjustment as a
result of the issuance of any additional shares of common stock by AHP for any
purpose, except for stock splits (whether accomplished by stock dividends or
otherwise) or reverse stock splits occurring during the 20 trading days
referenced in the calculation of the Strike Price. Upon determination of the
Strike Price for such common stock (and provided payment in the form of common
stock has been approved by the board of directors of AHP), AHP agrees to issue
to Manager the number of shares of common stock in AHP determined by dividing
the Designated Fees by the Strike Price per share of common stock, and any
balance remaining shall be paid to Manager in cash.

 

  B. Options based on Black-Scholes Model. The number of stock options to be
issued in lieu of the Designated Fees shall be based upon the “Black-Scholes
Model” as follows: The term “Black-Scholes Model” means the Black-Scholes model
for valuing the “fair value” of an option calculated based on historical data
and calculated probabilities of future stock prices, reasonably applied. Upon
determination of the value of an option on the date such options are to be
issued, as determined using the Black-Scholes Model (the “Black-Scholes
Amount”), provided payment in the form of options has been approved by the board
of directors of AHP, AHP agrees to issue to Manager the number of options for
common stock of AHP determined by dividing the Designated Fees by the
Black-Scholes Amount per option, and any balance remaining shall be paid to
Manager in cash. The “Strike Price” for any option (which must be exercised
within ten (10) years of issuance), shall have the meaning of the term “Strike
Price” as used in subparagraph A above.

ARTICLE XVII

RELATIONSHIP AND AUTHORITY

Lessee and Manager shall not be construed as partners, joint venturers or as
members of a joint enterprise and neither shall have the power to bind or
obligate the other except as set forth in this Agreement. Nevertheless, Manager
is granted such authority and power as may be reasonably necessary for it to
carry out the provisions of this Agreement. This Agreement, either alone or in
conjunction with any other documents, shall not be deemed to constitute a lease
of any portion of the Premises. Nothing contained herein shall prohibit or
restrict Manager or any affiliate of Manager from operating, owning, managing,
leasing or constructing any hotel of any nature or description which may in any
manner compete with that of the Premises, except as otherwise set forth in the
Mutual Exclusivity Agreement; provided that Manager agrees to comply with the
conflicts policies of AHP. Except as otherwise expressly provided in this
Agreement, (a) all debts and liabilities to third persons incurred by Manager in
the course of its operation and management of the Hotel in accordance with the

 

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provisions of this Agreement shall be the debts and liabilities of Lessee only,
and (b) Manager shall not be liable for any such obligations by reason of its
management, supervision, direction and operation of the Hotel as agent for
Lessee. Manager may so inform third parties with whom it deals on behalf of
Lessee and may take any other reasonable steps to carry out the intent of this
paragraph.

ARTICLE XVIII

DAMAGE, CONDEMNATION AND FORCE MAJEURE

18.01 Damage and Repair. If, during the Term hereof, a Hotel is damaged or
destroyed by fire, casualty, or other cause, Lessee shall, subject to the
requirements of the applicable underlying Lease, repair or replace the damaged
or destroyed portion of the Hotel to the same condition as existed previously.
In the event the underlying Lease relating to such damaged Hotel is terminated
pursuant to the provisions of such Lease, Lessee may terminate this Agreement
with respect to such Hotel upon sixty (60) days’ Notice from the date of such
damage or destruction, in which case this Agreement shall then terminate with
respect to such Hotel sixty (60) days from the date of such notice and neither
party shall have any further rights, obligations, liabilities or remedies one to
the other hereunder with respect to such Hotel, except as otherwise provided in
Article II (provided that no termination fees shall be payable by Lessee
pursuant to Article II) and Section 18.04. If this Agreement remains in effect
with respect to such damaged Hotel and the damage does not result in a reduction
of Gross Revenues at such Hotel, the Management Fee will be unabated. If
however, this Agreement remain in effect with respect to such Hotel, but the
damage does result in a reduction of Gross Revenues at such Hotel, Lessee shall
be entitled to partial, pro rata abatement with respect to the Management Fee
until such time as such Hotel is restored.

18.02 Condemnation.

 

  A. In the event all or substantially all of a Hotel shall be taken in any
eminent domain, condemnation, compulsory acquisition, or similar proceeding by
any competent authority for any public or quasi-public use or purpose, this
Agreement shall terminate with respect to such Hotel, subject to the
requirements of the applicable underlying Lease. However, in any event of such
termination, Lessee shall give Manager at least fifteen (15) days prior Notice
of such termination. In the event of such termination, neither party shall have
any further rights, remedies, obligations or liabilities one to the other
hereunder with respect to such Hotel except as otherwise provided in Article II
above (provided that no termination fees shall be payable by Lessee pursuant to
Article II).

 

  B.

If a portion of the Premises shall be taken by the events described in
Section 18.02A or the entire Premises are temporarily affected, the result of
either of which is not to make it, in the reasonable business judgment of
Lessee, unreasonable to continue to operate the applicable Hotel, subject to the
requirements of the applicable underlying Lease, this Agreement shall not
terminate with respect to such Hotel. However, so much of any award for any such
partial taking or condemnation shall be made available to the extent

 

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  necessary to render the applicable Premises equivalent to its condition prior
to such event and the balance shall be paid to Lessee or the Holder, if required
by any Hotel Mortgage covering the Premises.

18.03 Force Majeure. If an event of Force Majeure directly involves a Hotel and
has a significant adverse effect upon the continued operations of such Hotel,
then Lessee shall be entitled to terminate this Agreement with respect to the
applicable Hotel by written Notice within sixty (60) days from the date of such
Force Majeure, and this Agreement shall then terminate with respect to the
applicable Hotel sixty (60) days from such notice, in which event neither Lessee
nor Manager shall have any further rights, remedies, obligations or liabilities,
one to the other, hereunder, with respect to the applicable Premises except as
otherwise provided in Article II (provided that no termination fees shall be
payable by Lessee pursuant to Article II).

18.04 Liquidated Damages if Casualty.

 

  A. Omitted.

 

  B. Casualty of a Hotel. Notwithstanding anything contained in this Agreement
to the contrary, if any Hotel is damaged pursuant to a casualty as set forth in
Section 18.01 hereof within the first year of the initial 10-year term for such
Hotel, and Lessee elects, for any reason, not to rebuild such Hotel, Lessee
agrees to pay Manager (provided there does not then exist an Event of Default by
Manager beyond any applicable cure periods), a termination fee, if any, that
would be owed if such hotel were then sold, as set forth in Section 2.03(a)(i)
above. However, if after the first year of the initial 10-year term for a Hotel,
such Hotel is damaged and Lessee elects not to rebuild such hotel even though
sufficient casualty proceeds are available to do so, then Lessee will pay to
Manager a termination fee (provided there does not then exist an Event of
Default by Manager beyond any applicable cure periods), equal to the product
obtained by multiplying (i) 65% of the aggregate Base Management Fee and
Incentive Fee estimated to be paid Manager budgeted in the Annual Operating
Budget applicable to such Hotel (but in no event less than the Base Management
Fee and Incentive Fee for the preceding full Fiscal Year) by (ii) nine (9).

Payment of the termination fees set forth in this Section 18.04 shall be subject
to Section 2.03(d) above with respect to liquidated damages.

18.05 No Liquidated Damages if Condemnation or Force Majeure. No liquidated
damages shall be payable in the event of a condemnation relating to a Hotel,
provided that Manager shall be entitled to seek recovery from the condemning
authority for its loss of contract and this Agreement shall not terminate for
that purpose. No liquidated damages shall be payable by Lessee as a result of
its termination of this Agreement as to a Hotel pursuant to Section 18.03 (Force
Majeure).

 

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ARTICLE XIX

DEFAULT AND TERMINATION

19.01 Events of Default. The following shall constitute events of default (each
an “Event of Default”):

 

  A. The filing of a voluntary petition in bankruptcy or insolvency or a
petition for reorganization under any bankruptcy law by Lessee or Manager;

 

  B. The consent to any 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 Lessee or Manager;

 

  C. The entering of an order, judgment or decree by any court of competent
jurisdiction, on the application of a creditor, adjudicating Lessee or Manager
as bankrupt or insolvent, or approving a petition seeking reorganization or
appointing a receiver, trustee, or liquidator of all or a substantial part of
such party’s assets, and such order, judgment or decree continues unstayed and
in effect for any period of ninety (90) days or more;

 

  D. The appointment of a receiver for all or any substantial portion of the
property of Lessee or Manager;

 

  E. The failure of Lessee or Manager to make any payment required to be made in
accordance with the terms of this Agreement within ten (10) days after receipt
of Notice, specifying said default with reasonable specificity, when such
payment is due and payable; or

 

  F. The failure of Lessee or Manager to perform, keep or fulfill any of the
other covenants, undertakings, obligations or conditions set forth in this
Agreement, and the continuance of such default for a period of thirty (30) days
after written notice of said failure; provided, however, if such default cannot
be cured within such thirty (30) day period and Lessee or Manager, as the case
may be, commences to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended so long as it shall require Lessee or Manager,
as the case may be, in the exercise of due diligence to cure such default, it
being agreed that no such extension (including the original 30 day cure period)
shall be for a period in excess of one hundred twenty (120) days.

 

  G. The Manager does not qualify as an Eligible Independent Contractor.

19.02 Consequence of Default. Upon the occurrence of any Event of Default, the
non-defaulting party may give the defaulting party Notice of intention to
terminate this Agreement (after the expiration of any applicable grace or cure
period provided in Section 19.01), and upon the expiration of thirty (30) days
from the date of such notice, this Agreement shall terminate, whereupon the
non-defaulting party shall be entitled to pursue all of its rights and remedies,
at

 

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law or in equity, under this Agreement (including, without limitation, any
indemnity obligations which shall survive termination of this Agreement) and any
other rights and remedies available under Legal Requirements except as otherwise
expressly limited by the terms of Article II. Notwithstanding the foregoing, in
the event that an Event of Default is applicable to one or more of the Hotels
but not all of the Hotels, such termination shall only be as to such applicable
Hotel(s).

ARTICLE XX

WAIVER AND INVALIDITY

20.01 Waiver. The failure of either party to insist upon a strict performance of
any of the terms or provisions of this Agreement or to exercise any option,
right or remedy herein contained, 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.

20.02 Partial Invalidity. In the event that any portion of this Agreement shall
be declared invalid by order, decree or judgment of a court, this Agreement
shall be construed as if such portion had not been inserted herein except when
such construction would operate as an undue hardship on the Manager or Lessee or
constitute a substantial deviation from the general intent and purpose of said
parties as reflected in this Agreement, in which event it shall be terminated.

ARTICLE XXI

ASSIGNMENT

Subject to the requirements of any Hotel Mortgage, Franchise Agreement, Ground
Lease or any of the Leases, neither party shall assign or transfer (by operation
of law or otherwise) or permit the assignment or transfer of this Agreement
without the prior written consent of the other (which may be withheld in its
sole discretion) and any such prohibited assignment or transfer shall be null
and void; provided, however, that Manager shall have the right, without such
consent, to assign its interest in this Agreement to any “Manager Affiliate
Entity”, provided such Manager Affiliate Entity qualifies as an Eligible
Independent Contractor as of the date of such transfer. The term “Manager
Affiliate Entity” shall mean any entity controlled directly or indirectly by
(i) Archie Bennett, Jr. and/or Monty Bennett, (ii) family partnerships or trusts
(the sole members or beneficiaries of which are at all times lineal descendants
of Archie Bennett, Jr. or Monty Bennett (including step-children) and spouses of
any of the foregoing), or (iii) by lineal descendants of Archie Bennett, Jr. or
Monty Bennett (including step-children) and spouses of any of the foregoing. For
purposes hereof, “controlled” shall mean (i) the possession, directly or
indirectly of a majority of the voting power and capital stock or ownership
interest of such entity, or (ii) the power to direct or cause the direction of
the management and policies of such entity in the capacity of chief executive
officer, president, chairman, or other similar capacity where they are actively
engaged and/or involved in providing such direction or control and spend a
substantial amount of time managing such entity. Any such permitted assignee
shall be deemed to be the Manager for purposes of this Agreement

 

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provided such assignee assumes all of Manager’s future obligations under this
Agreement pursuant to an assumption agreement reasonably acceptable to Lessee.
Any and all such assignments, however, shall at all times be subject to the
prior right, title and interest of Lessee with respect to the Premises. An
assignment by Manager or any permitted assignee of its interest in this
Agreement, shall not relieve Manager or any such permitted assignee, as the case
may be, from their respective obligations under this Agreement, and shall inure
to the benefit of, and be binding upon, their permitted successors and assigns.
For purposes of this Article XXI any change in the ownership of the Manager or
other event that would cause the Manager to fail to be a Manager Affiliate
Entity shall be deemed to be a transfer of this Agreement, prohibited by this
Article XXI unless first consented to in writing by Lessee.

ARTICLE XXII

NOTICES

All notices, demands, elections, or other communications that any party this
Agreement may desire or be required to be given hereunder shall be in writing
and shall be given by hand, by depositing the same in the United States mail,
first class, postage prepaid, certified mail, return receipt requested, or by a
recognized overnight courier service providing confirmation of delivery, to the
addresses set forth below, or at such address as may be designated by the
addressee upon written notice to the other party, (herein called “Notice”).

 

To Lessee:    Ashford Prime TRS Corporation (or its specified designee set forth
in an Addendum)    14185 Dallas Parkway, Suite 1100    Dallas, Texas 75254   
Attn: Chief Financial Officer    Fax: (972) 490-9605 With a copy to:    Ashford
Hospitality Prime Limited Partnership    14185 Dallas Parkway, Suite 1100   
Dallas, Texas 75254    Attn: General Counsel    Fax: (972) 490-9605 To Manager:
   Remington Lodging & Hospitality, LLC    14185 Dallas Parkway, Suite 1150   
Dallas, Texas 75254    Attn: Monty Bennett    Fax: (972) 980-2705

 

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With a copy to:    Remington Lodging & Hospitality, LLC    14185 Dallas Parkway,
Suite 1150    Dallas, Texas 75254    Attn: Legal Department    Fax: (972)
490-9605 To the Landlords:    c/o Ashford Hospitality Prime Limited Partnership
   14185 Dallas Parkway, Suite 1100    Dallas, Texas 75254    Attn: General
Counsel    Fax: (972) 490-9605

All notices given pursuant to this Article XXII shall be deemed to have been
given (i) if delivered by hand on the date of delivery or on the date that
delivery was refused by the addressee, or (ii) if delivered by certified mail or
by overnight courier, on the date of delivery as established by the return
receipt or courier service confirmation (or the date on which the return receipt
or courier service confirms that acceptance of delivery was refused by the
addressee).

ARTICLE XXIII

SUBORDINATION; NON-DISTURBANCE

23.01 Subordination. This Agreement shall be subject and subordinate to any
Hotel Mortgage and Lease, and Manager agrees to enter into a lender-manager or
landlord-manager (as applicable) agreement with respect to each Hotel, which
agreement shall contain reasonable provisions, including, without limitation,
Manager’s acknowledgment that its real estate interest in and to the applicable
Hotel, if any, created by this Agreement is subject and subordinate to the
applicable Hotel Mortgage or Lease, including providing any purchaser of such
Hotel at a foreclosure sale or deed-in-lieu of foreclosure, including the
Holder, with the right to terminate this Agreement with respect to the
applicable Hotel; provided, however, in no event will Manager agree to
subordinate or waive its right to receive fees, reimbursements or
indemnification payments under this Agreement arising prior to termination (but
(a) if this Agreement is terminated by the Holder or such purchaser or Landlord
(or its assignee) with respect to such Hotel, Manager shall not look to the
Holder for payment of such fees, reimbursements or indemnification payments and
Manager’s right to receive such fees, reimbursements or indemnification payments
shall be subordinated to the Holder’s rights and (b) if this Agreement is not
terminated by the Holder or such purchaser with respect to such Hotel, then such
fees, reimbursements or indemnification payments shall be payable by the Holder
or such purchaser). Notwithstanding the foregoing, Manager shall in no event be
obligated to perform its duties hereunder without payment and/or reasonable
assurance of payment of such fees, reimbursements or indemnification payments.

23.02 Non-Disturbance Agreement. Notwithstanding Section 23.01, Lessee agrees
that, prior to obtaining any Hotel Mortgage or executing any Lease, Lessee will
use its commercially reasonable efforts to obtain from each prospective Holder
or Landlord (as applicable), a Non-Disturbance Agreement pursuant to which
Manager’s rights under this Agreement will not be

 

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disturbed as a result of a default stemming from non-monetary factors which
(i) relate to Lessee and do not relate solely to the applicable Hotel, and
(ii) are not defaults by Manager under Section 19.01 of this Agreement. If
Lessee desires to obtain a Hotel Mortgage or to execute a Lease, Manager, on
written request from Lessee, shall promptly identify those provisions in the
proposed Hotel Mortgage or Lease documents which fall within the categories
described in clauses (i) and (ii) above, and Manager shall otherwise assist in
expediting the preparation of an agreement between the prospective Holder and/or
Landlord and Manager which will implement the provisions of this Section 23.02.

ARTICLE XXIV

PROPRIETARY MARKS; INTELLECTUAL PROPERTY

24.01 Proprietary Marks. During the Term of this Agreement, the name
“Remington,” whether used alone or in connection with other another word(s), and
all proprietary marks (being all present and future trademarks, trade names,
symbols, logos, insignia, service marks, and the like) of Manager or any one of
its Manager Affiliate Entities, whether or not registered (“Proprietary Marks”)
shall in all events remain the exclusive property of Manager and its Manager
Affiliate Entities. Lessee shall have no right to use any Proprietary Mark,
except during the term of this Agreement to have signage installed using any
Proprietary Mark in conformance with the specifications provided by Manager.
Upon Termination, any use of a Proprietary Mark by Lessee under this Agreement
shall immediately cease. Upon Termination, Manager shall have the option to
purchase, at their then book value, any items of the applicable Hotel’s
Inventories and Fixed Asset Supplies as may be marked with a Proprietary Mark.
In the event Manager does not exercise such option, Lessee agrees that it will
use any such items not so purchased exclusively in connection with the Hotel
until they are consumed.

24.02 Computer Software and Equipment. All “Software” (meaning all computer
software and accompanying documentation, other than software which is
commercially available, which are used by Manager in connection with the
property management system, any reservation system and all future electronic
systems developed by Manager for use in the Hotel) is and shall remain the
exclusive property of Manager or any one of its Manager Affiliate Entities (or
the licensor of such Software, as the case may be), and Lessee shall have no
right to use, or to copy, any Software. Upon Termination, Manager shall have the
right to remove from the Hotel, without compensation to Lessee, all Software,
and any computer equipment which is utilized as part of a centralized property
management system or is otherwise considered proprietary by Manager, excepting
any software which is owned by the applicable Franchisor; provided that Manager
shall cooperate with Lessee in the transition of the centralized management
system to the new manager, including in the change of any Software and computer
equipment. If any of such computer equipment is owned by Lessee or Landlord,
Manager shall reimburse Lessee for previous expenditures made by Lessee for the
purchase of such equipment, subject to a reasonable allowance for depreciation.

24.03 Intellectual Property. All “Intellectual Property” (meaning all Software
and manuals, brochures and directives issued by Manager to its employees at the
Hotel regarding procedures and techniques to be used in operating the Hotel)
shall at all times be proprietary to Manager or its Affiliates, and shall be the
exclusive property of Manager or its Affiliates. Upon

 

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Termination, all Intellectual Property shall be removed from the Hotel by
Manager, without compensation to Lessee.

24.04 Books and Records. All Books and Records maintained with respect to the
Hotel, including guest records but excluding employee records, shall be the sole
property of Lessee but may be used by the Manager during the Term in connection
with its management and operation of the Hotel.

ARTICLE XXV

INDEMNIFICATION

25.01 Manager Indemnity. Manager shall indemnify and hold Lessee (and Lessee’s
agents, principals, shareholders, partners, members, officers, directors,
attorneys and employees) harmless from and against all liabilities, losses,
claims, damages, costs and expenses (including, but not limited to, reasonable
attorneys’ fees and expenses) which are not covered by insurance proceeds that
may be incurred by or asserted against any such party and that arise from
(a) the fraud, willful misconduct or gross negligence of Manager; provided,
however, that the act or omission of any employee of Manager who is not an
Executive Employee, which act or omission is willful or constitutes fraud or
gross negligence on the part of such employee, shall not constitute fraud, gross
negligence or willful misconduct on the part of Manager unless Manager’s home
office or regional staff, or an Executive Employee, acted with gross negligence
in employing, training, supervising or continuing the employment of such
employee; (b) the infringement by Manager on the intellectual property rights of
any third party; (c) any Excluded Employee Claims; (d) knowing or reckless
placing, discharge, leakage, use or storage of hazardous materials on the
Premises or in the Hotel by Manager during the Term of this Agreement as set
forth in Section 28.09C; or (e) the breach by Manager of any provision of this
Agreement, including, without limitation, any action taken by Manager which is
beyond the scope of Manager’s authority under this Agreement, which is not cured
within any applicable notice and cure periods. Lessee shall promptly provide
Manager with written notice of any claim or suit brought against it by a third
party which might result in such indemnification.

25.02 Lessee Indemnity. Except with respect to matters for which Manager is
obligated to provide indemnification pursuant to Section 25.01, Lessee shall
indemnify and hold Manager (and Manager’s agents, principals, shareholders,
partners, members, officers, directors, attorneys and employees) harmless from
and against all liabilities, losses, claims, damages, costs and expenses
(including, but not limited to, reasonable attorneys’ fees and expenses) which
are not covered by insurance proceeds and that may be incurred by or asserted
against such party and that arise from or in connection with (a) the performance
of Manager’s services under this Agreement; (b) the condition or use of the
Hotel, to the fullest extent permitted by law, including without limitation, any
injury to person(s) or damage to property or business by reason of any cause
whatsoever in or about the Hotel; (c) any Employee Related Termination Costs,
including any liability to which Manager is subjected pursuant to the WARN Act
in connection with the termination of this Agreement, provided that Manager has
provided notices in the form (other than any reference to the time period)
required by the WARN Act within five (5) business days of Manager’s receipt of a
notice of the termination of this Agreement (excluding any termination of this
Agreement which results from the commission of any theft, embezzlement or other

 

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criminal misappropriation of funds of the Hotel or from the Lessee or any fraud
or felony by any Executive Employee that relates to or materially affects the
operation or reputation of the Hotel); (d) the Employee Costs and Expenses as
set forth in Article IX herein above; or (e) any Employee Claims, but excluding
any Excluded Employee Claims. Manager shall promptly provide Lessee with written
Notice of any claim or suit brought against it by a third party which might
result in such indemnification. THIS INDEMNITY PROVISION IS INTENDED TO
INDEMNIFY MANAGER (i) AGAINST THE CONSEQUENCES OF ITS OWN NEGLIGENCE OR FAULT
WHEN MANAGER IS SOLELY NEGLIGENT OR CONTRIBUTORILY, PARTIALLY, JOINTLY,
COMPARATIVELY OR CONCURRENTLY NEGLIGENT WITH LESSEE OR ANY OTHER PERSON (BUT IS
NOT GROSSLY NEGLIGENT, HAS NOT COMMITTED AN INTENTIONAL ACT OR MADE INTENTIONAL
OMISSION) AND (ii) AGAINST ANY LIABILITY OF MANAGER BASED ON ANY APPLICABLE
DOCTRINE OF STRICT LIABILITY.

25.03 Indemnification Procedure. Any party obligated to indemnify the other
party under this Agreement (the “Indemnifying Party”) shall have the right, by
Notice to the other party, to assume the defense of any claim with respect to
which the other party is entitled to indemnification hereunder. If the
Indemnifying Party gives such notice, (i) such defense shall be conducted by
counsel selected by the Indemnifying Party and approved by the other party, such
approval not to be unreasonably withheld or delayed (provided, however, that the
other party’s approval shall not be required with respect to counsel designated
by the Indemnifying Party’s insurer); (ii) so long as the Indemnifying Party is
conducting such defense with reasonable diligence, the Indemnifying Party shall
have the right to control said defense and shall not be required to pay the fees
or disbursements of any counsel engaged by the other party for services rendered
after the Indemnifying Party has given the Notice provided for above to the
other party, except if there is a conflict of interest between the parties with
respect to such claim or defense; and (iii) the Indemnifying Party shall have
the right, without the consent of the other party, to settle such claim, but
only provided that such settlement involves only the payment of money, the
Indemnifying Party pays all amounts due in connection with or by reason of such
settlement and, as part thereof, the other party is unconditionally released
from all liability in respect of such claim. The other party shall have the
right to participate in the defense of such claim being defended by the
Indemnifying Party at the expense of the other party, but the Indemnifying Party
shall have the right to control such defense (other than in the event of a
conflict of interest between the parties with respect to such claim or defense).
In no event shall (i) the other party settle any claim without the consent of
the Indemnifying Party so long as the Indemnifying Party is conducting the
defense thereof in accordance with this Agreement; or (ii) if a claim is covered
by the Indemnifying Party’s liability insurance, take or omit to take any action
which would cause the insurer not to defend such claim or to disclaim liability
in respect thereof.

25.04 Survival. The provisions of this Article shall survive the termination of
this Agreement with respect to acts, omissions and occurrences arising during
the Term.

25.05 No Successor Liability. Notwithstanding anything herein to the contrary,
Manager shall not be liable as a successor employer or entity for any actions
Manager’s predecessors ( a “Predecessor Manager”) may have taken in the
employer-employee

 

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relationship with Manager’s current or former employees or employees of
Manager’s agents before the commencement of the term.

ARTICLE XXVI

NEW HOTELS AND NON-MANAGED HOTELS

Lessee acknowledges and agrees that any Hotel leased by Lessee or its designees
from any Affiliates of the Partnership (including the Landlords) from and after
the Effective Date may at the election of the parties to the Mutual Exclusivity
Agreement either be subject to the terms and provisions of this Agreement
effective upon execution of an addendum to this Agreement (the “Addendum”) in
the form of Exhibit “A” attached hereto, or pursuant to a management agreement
in form and substance substantially similar to the terms of this Agreement with
either Manager or an Affiliate of Manager (provided said Affiliate constitutes
an Eligible Independent Contractor); provided that there does not then exist an
uncured Event of Default by Manager under this Agreement and the independent
director approval requirements under the Mutual Exclusivity Agreement have been
satisfied. Effective upon execution of said Addendum, all terms and conditions
of this Agreement shall be deemed amended to include and apply to such Hotel(s)
as provided in the Addendum. Lessee further acknowledges and agrees that any
Non-Managed Hotel leased by Lessee or its designees from any Affiliates of the
Partnership (including the Landlords) from and after the Effective Date may at
the election of the parties to the Mutual Exclusivity Agreement be subject to
the terms and provisions of this Agreement that expressly relate to Non-Managed
Hotels effective upon execution of an addendum to this Agreement (the “Project
Management Addendum”) in the form of Exhibit “B” attached hereto; provided that
there does not then exist an uncured Event of Default by Manager under this
Agreement and the independent director approval requirements under the Mutual
Exclusivity Agreement have been satisfied. Effective upon execution of said
Project Management Addendum, all terms and conditions of this Agreement relating
to Non-Managed Hotels shall be deemed amended to include and apply to such
Non-Managed Hotel(s) as provided in the Project Management Addendum.

ARTICLE XXVII

GOVERNING; LAW VENUE

This Agreement and its interpretation, validity and performance shall be
governed by the laws of the State of Texas without regard to its conflicts of
laws principles. In the event any court of law of appropriate judicial authority
shall hold or declare that the law of another jurisdiction is applicable, this
Agreement shall remain enforceable under the laws of the appropriate
jurisdiction. The parties hereto agree that venue for any action in connection
herewith shall be proper in Dallas County, Texas. Each party hereto consents to
the jurisdiction of any local, state or federal court situated in any of such
locations and waives any objection which it may have pertaining to improper
venue or forum non conveniens to the conduct of any proceeding in any such
court.

 

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ARTICLE XXVIII

MISCELLANEOUS

28.01 Rights 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 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.

28.02 Agency. Manager’s limited agency established by this Agreement is coupled
with an interest and may not be terminated by Lessee until the expiration of the
Term of this Agreement except as otherwise provided in this Agreement.

28.03 Failure to Perform. If Manager or Lessee at any time fails to make any
payments as specified or required hereunder or fails to perform any other act
required on its part to be made or performed hereunder without limitation, then
the other party after thirty (30) days’ written notice to the defaulting party
may (but shall not be obligated to) pay any such delinquent amount or perform
any such other act on the defaulting party’s part. Any sums thus paid and all
costs and expenses incurred in connection with the making of such payment or the
proper performance of any such act, together with interest thereon at the lesser
of (i) the interest rate allowed by the applicable usury laws or (ii) at the
Prime Rate plus three percent (3%), from the date that such payment is made or
such costs and expenses incurred, shall constitute a liquidated amount to be
paid by the defaulting party under this Agreement to the other party on demand.
For the purposes of this Section 28.03, the term “Prime Rate” shall mean the
“prime rate” as published in the “Money Rates” section of The Wall Street
Journal; however, if such rate is, at any time during the Term of this
Agreement, no longer so published, the term “Prime Rate” shall mean the average
of the prime interest rates which are announced, from time to time, by the three
(3) largest banks (by assets) headquartered in the United States which publish a
“prime rate”.

28.04 Headings. Headings of Articles and Sections are inserted only for
convenience and are in no way to be construed as a limitation on the scope of
the particular Articles or Sections to which they refer.

28.05 Attorneys’ Fees and Costs. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys’ fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

28.06 Entire Agreement. This Agreement, together with other writings signed by
the parties expressly stated to be supplementary hereto and together with any
instruments to be executed and delivered pursuant to this Agreement, constitutes
the entire agreement between the

 

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parties and supersedes all prior understandings and writings, and may be changed
only by a writing signed by the parties hereto.

28.07 Consents. Whenever the consent or approval of Lessee is required under the
terms of this Agreement, unless otherwise stated to the contrary, such consent
or approval may be granted or withheld by Lessee in its reasonable discretion.

28.08 Eligible Independent Contractor. During the Term of this Agreement,
Manager shall at all times qualify as an “eligible independent contractor” as
defined in Section 856(d)(9) of the Code (“Eligible Independent Contractor”). To
that end, during the Term of this Agreement, Manager agrees that:

(a) Manager shall not conduct wagering activities at any of the Hotels;

(b) Manager shall not own, directly or indirectly (within the meaning of
Section 856(d)(5) of the Code), more than thirty-five percent (35%) of the
outstanding stock of AHP;

(c) no more than thirty-five percent (35%) of the Manager’s partnership interest
(in its assets or net profits) shall 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%) (within the meaning of Section 856(d)(5) of the
Code) or more of the outstanding stock of AHP;

(d) neither AHP, the Partnership, the Landlords, nor the Lessee, shall derive
any income from the Manager or any of its subsidiaries; and

(e) Manager (or a person who is a “related person” within the meaning of
Section 856(d)(9)(F) of the Code (a “Related Person”) with respect to Manager)
shall be actively engaged in the trade or business of operating “qualified
lodging facilities” within the meaning of Section 856(d)(9)(D) of the Code
(defined below) for one or more persons who are not Related Persons with respect
to AHP or Lessee (“Unrelated Persons”). For purposes of determining whether the
requirement of this paragraph (e) has been met, Manager shall be treated as
being “actively engaged” in such a trade or business if Manager (i) derives at
least 10% of both its profits and revenue from operating “qualified lodging
facilities” within the meaning of Section 856(d)(9)(D) of the Code for Unrelated
Persons or (ii) complies with any regulations or other administrative guidance
under Section 856(d)(9) of the Code that provide a “safe harbor” rule with
respect to the hotel management business with Unrelated Persons that is
necessary to qualify as an “eligible independent contractor” within the meaning
of such Code section.

A “qualified lodging facility” is defined in Section 856(d)(9)(D) of the Code
and means a “Lodging Facility” (defined below), unless wagering activities are
conducted at or in connection with such facility by any person who is engaged in
the business of accepting wagers and who is fully authorized to engage in such
business at or in connection with such facility. A “Lodging Facility” is a
hotel, motel or other establishment more than one-half of the dwelling units in
which are used on a transient

 

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basis, and includes customary amenities and facilities operated as party of, or
associated with, the lodging facility so long as such amenities and facilities
are customary for other properties of a comparable size and class owned by other
owners unrelated to AHP.

28.09 Environmental Matters.

 

  A. For purposes of this Section 28.09, “hazardous materials” means any
substance or material containing one or more of any of the following: “hazardous
material,” “hazardous waste,” “hazardous substance,” “regulated substance,”
“petroleum,” “pollutant,” “contaminant,” or “asbestos,” as such terms are
defined in any applicable environmental law, in such concentration(s) or
amount(s) as may impose clean-up, removal, monitoring or other responsibility
under any applicable environmental law, or which may present a significant risk
of harm to guests, invitees or employees of the Hotel.

 

  B. Regardless of whether or not a given hazardous material is permitted on the
Premises under applicable environmental law, Manager shall only bring on the
Premises such hazardous materials as are needed in the normal course of business
of the Hotel.

 

  C. In the event of the discovery of hazardous materials (as such term may be
defined in any applicable environmental law) on the Premises or in the Hotel
during the Term of this Agreement, Lessee shall promptly remove, if required by
applicable environmental law, such hazardous materials, together with all
contaminated soil and containers, and shall otherwise remedy the problem in
accordance with all environmental laws (except to the extent knowingly or
recklessly caused by Manager during the Term of this Agreement, whereupon the
responsibility to promptly remove and/or remedy the environmental problem shall
be that of Manager and at Manager’s sole cost and expense). All costs and
expenses of the compliance with all environmental laws shall be paid by Lessee
from its own funds (except to the extent knowingly or recklessly caused by
Manager during the Term of this Agreement as set forth herein above).

28.10 Equity and Debt Offerings. Neither Lessee nor Manager (as an “issuing
party”) shall make reference to the other party (the “non-issuing party”) or any
of its Affiliates in any prospectus, private placement memorandum, offering
circular or offering documentation related thereto (collectively, referred to as
the “Prospectus”), issued by the issuing party, unless the non-issuing party has
received a copy of all such references. In no event will the non-issuing party
be deemed a sponsor of the offering described in any such Prospectus, nor will
it have any responsibility for the Prospectus, and the Prospectus will so state.
The issuing party shall be entitled to include in the Prospectus an accurate
summary of this Agreement but shall not include any proprietary mark of the
non-issuing party without prior written consent of the non-issuing party. The
issuing party shall indemnify, defend and hold the non-issuing party and its
Affiliates (and their respective directors, officers, shareholders, employees
and agents) 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, except for any such

 

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losses, costs, liability and damage arising from material misstatements or
omissions in a Prospectus based on information provided in writing by the
non-issuing party expressly for inclusion in the Prospectus.

28.11 Estoppel Certificates. Lessee and Manager will, at any time and from time
to time within fifteen (15) days of the request of the other party or a Holder,
or a Franchisor (if so permitted under the applicable Franchise Agreement), or a
Landlord (if so permitted under the applicable Lease), execute, acknowledge, and
deliver to the other party and such Holder, Franchisor or Landlord, as
applicable, a certificate certifying:

 

  A. That the Agreement is unmodified and in full force and effect (or, if there
have been modifications, that the same is in full force and effect as modified
and stating such modifications);

 

  B. The dates, if any, to which the distributions of excess Working Capital
have been paid;

 

  C. Whether there are any existing Event(s) of Default or events which, with
the passage of time, would become an Event of Default, by the other party to the
knowledge of the party making such certification, and specifying the nature of
such Event(s) of Default or defaults or events which, with the passage of time,
would become an Event of Default, if any; and

 

  D. Such other matters as may be reasonably requested.

Any such certificates may be relied upon by any party to whom the certificate is
directed.

28.12 Confidentiality. The Manager shall keep confidential all non-public
information obtained in connection with the services rendered under this
Agreement and shall not disclose any such information or use any such
information except in furtherance of its duties under this Agreement and as may
be required by any of its lenders or owners (provided said lenders and/or
owners, as applicable agree prior to disclosure to keep such information
confidential as set forth in this subparagraph 28.12), or as may be required by
applicable Legal Requirements or court order, or as may be required under any
Franchise Agreement, Hotel Mortgage, Lease or Ground Lease.

28.13 Modification. Any amendment, supplement or modification of this Agreement
must be in writing signed by both parties hereto.

28.14 Counterparts. This Agreement may be executed in multiple counterparts,
each of which is an original and all of which collectively constitute one
instrument.

[Signature Pages to Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers, as of the Effective Date.

 

LESSEE: ASHFORD PRIME TRS CORPORATION, a Delaware corporation By:  

/s/ David J. Kimichik

  David J. Kimichik   President MANAGER: REMINGTON LODGING & HOSPITALITY, LLC, a
Delaware limited liability company By:  

/s/ Monty J. Bennett

  Monty J. Bennett   Chief Executive Officer

--------------------------------------------------------------------------------

EXHIBIT “A”

Addendum to Ashford Prime Hotel Master Management Agreement

            , 20    

Remington Lodging & Hospitality, LLC

14185 Dallas Parkway, Suite 1150

Dallas, Texas 75254

Attn: Mr. Monty Bennett

 

  Re: Management of Hotel by Remington Lodging & Hospitality, LLC as Manager

Dear Mr. Bennett:

Please refer to the Ashford Prime Hotel Master Management Agreement, dated as of
            , 20    (the “Management Agreement”), between Ashford Prime TRS
Corporation, a Delaware corporation (“Lessee”) and Remington Lodging &
Hospitality, LLC, a Delaware limited liability company, as Manager
(“Remington”). Capitalized terms appearing but not defined herein shall have the
meanings ascribed to such terms in the Management Agreement.

Lessee, through its wholly owned subsidiary,                     , a Delaware
limited liability company (“New Lessee”), hereby appoints Remington to act as
manager of the                      property located at the location set forth
on Exhibit “A” attached to this Addendum (“Addendum”) and fully incorporated
herein by reference for all purposes (the “New Hotel”).

Accordingly, effective as of             , 20     (“Effective Date”), the
Management Agreement is amended and modified as follows:

1. New Lessee shall be a party to the Management Agreement as a “Lessee” and
agrees to be bound by all of the terms and conditions of the Management
Agreement as “Lessee” thereunder to the extent same are applicable to the New
Hotel. Lessee shall have no obligations under the Management Agreement with
respect to the New Hotel, and New Lessee shall have no obligations under the
Management Agreement with respect to any other Hotel (other than the New Hotel).

2. Remington’s retention by New Lessee as the manager of the New Hotel from and
after the Effective Date shall be subject to the terms and conditions of the
Management Agreement, as amended hereby, to the same extent as if New Lessee
were the “Lessee” thereunder.

3. The following exhibits and schedules attached to the Management Agreement are
hereby supplemented with the information on such exhibits as shown on the
following exhibits attached hereto:

 

Schedule 1-1

--------------------------------------------------------------------------------

Exhibits:

Exhibit “A” - Hotel Information for New Hotel

Exhibit “B” - Description of Lease for New Hotel

Exhibit “B-1” – Legal Description for Site of New Hotel

Exhibit “C” – Description of Franchise Agreement and Franchisor for New Hotel

Exhibit “D” – Annual Operating Budget for the Hotel

Schedules:

Schedule 1 - Competitive Set of New Hotel

[Signature pages to follow]

 

2

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Please execute in the space provided for your signature below to evidence your
agreement to the contents of this Addendum.

 

Sincerely yours, LESSEE: ASHFORD PRIME TRS CORPORATION, a Delaware corporation
By:  

 

Name:   David J. Kimichik Title:   President NEW LESSEE:                     
LLC, a Delaware limited liability company By:  

 

Name:   David J. Kimichik Title:   President

 

3

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AGREED TO AND ACCEPTED AS OF             , 20    : MANAGER:

REMINGTON LODGING & HOSPITALITY, LLC,

a Delaware limited liability company

By:  

 

  Monty Bennett   CEO

 

4

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EXHIBIT “A”

Hotel Information

 

Affiliate

Property Owner

  

Property

  

Commencement Date

     

 

5

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EXHIBIT “B”

Description of Lease

 

PROPERTY

  

LANDLORD

  

LESSEE

  

DATE OF LEASE

        

 

6

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EXHIBIT “B-1”

Legal Description of Site of New Hotel

 

7

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Exhibit “C”

Description of Franchise Agreement and Franchisor

 

8

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EXHIBIT “D”

Annual Operating Budget

 

9

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SCHEDULE 1

Competitive Set of Hotel

 

10

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EXHIBIT “B”

Project Management Addendum to Ashford Prime Hotel Master Management Agreement

            , 20    

Remington Lodging & Hospitality, LLC

14185 Dallas Parkway, Suite 1150

Dallas, Texas 75254

Attn: Mr. Monty Bennett

 

  Re: Project Management of a New Non-Managed Hotel by Remington Lodging &
Hospitality, LLC

Dear Mr. Bennett:

Please refer to the Ashford Prime Hotel Master Management Agreement, dated as of
            , 2013 (the “Management Agreement”), between Ashford Prime TRS
Corporation, a Delaware corporation (“Lessee”) and Remington Lodging &
Hospitality, LLC, a Delaware limited liability company (“Manager”). Capitalized
terms appearing but not defined herein shall have the meanings ascribed to such
terms in the Management Agreement.

Effective as of the date hereof (the “Commencement Date”), Lessee, through its
wholly owned subsidiary, Ashford TRS             LLC, a Delaware limited
liability company (“New Lessee”), hereby appoints Manager to manage, coordinate,
plan and execute the capital improvements budget (“Project Management Work”) and
Project Related Services for the                      property located at the
location set forth on Exhibit “A” attached to this Project Management Addendum
(the “New Non-Managed Hotel”), in exchange for payment by Lessee of the Project
Management Fee and Market Service Fees, all in accordance with and subject to
the terms and conditions of the Management Agreement.

In addition:

1. The New Non-Managed Hotel shall constitute a “Non-Managed Hotel” under the
Management Agreement. New Lessee shall be a party to the Management Agreement as
“Lessee” and agrees to be bound by all of the terms and conditions of the
Management Agreement as “Lessee” thereunder to the extent same are applicable to
the New Non-Managed Hotel. Lessee shall have no obligations under the Management
Agreement with respect to the New Non-Managed Hotel, and New Lessee shall have
no obligations under the Management Agreement with respect to any of the other
Hotels or other Non-Managed Hotels (other than the New Non-Managed Hotel).

2. Remington’s retention by New Lessee to perform Project Management Work and
Project Related Services at the New Non-Managed Hotel from and after the
Effective Date shall be

 

11

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subject to the terms and conditions of the Management Agreement to the same
extent as if New Lessee were the “Lessee” thereunder.

[Signature pages to follow]

 

12

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Please execute in the space provided for your signature below to evidence your
agreement to the contents of this Project Management Addendum.

 

Sincerely yours, LESSEE: ASHFORD TRS CORPORATION, a Delaware corporation By:  

 

Name:   David J. Kimichik Title:   President NEW LESSEE: ASHFORD TRS LLC, a
Delaware limited liability company By:  

 

Name:   David J. Kimichik Title:   President

 

13

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AGREED TO AND ACCEPTED AS OF             , 20    : MANAGER:

REMINGTON LODGING & HOSPITALITY, LLC,

a Delaware limited liability company

By:  

 

  Monty Bennett   CEO

 

14

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EXHIBIT “A”

Hotel Information

 

Affiliate

Property Owner

  

Property

  

 

15