**Exhibit 10.18**

 

# FIRST AMENDMENT TOMANAGEMENT AGREEMENT

#  

**THIS FIRST AMENDMENT TO MANAGEMENT AGREEMENT**(this “Amendment”) ismade as of September 18, 2003 by and between INTERCONTINENTAL HOTELS GROUPRESOURCES, INC., a Delaware corporation (“Manager”), and HPT TRS IHG-1, INC., a Maryland corporation (“Owner”).

 

**WHEREAS**, Manager andOwner entered into that certain Management Agreement, dated as of July 1, 2003(the “Management Agreement”);and

 

**WHEREAS**, Manager andOwner wish to amend the Management Agreement to, among other things, includethe Hotels located at the Sites listed on Exhibit A attached hereto(the “ExpansionHotels”);

 

**NOW, THEREFORE,**inconsideration of the mutual promises and covenants herein contained and othergood and valuable consideration, the receipt and sufficiency of which areherein acknowledged, Owner and Manager, intending to be legally bound, herebyagree as follows:

 

1.                     Capitalizedterms used in this Amendment and not otherwise defined herein shall have themeaning ascribed thereto in the Management Agreement.

 

2.                     Section1.10 of the Management Agreement is amended by deleting from the first andsecond line the phrase “for each Hotel, the 2004 Fiscal Year” and inserting thefollowing in its place:

 

with respect to each Original Hotel, the 2004 Fiscal Year, and withrespect to each Expansion Hotel, the 2006 Fiscal Year;

 

3.                     Section1.10 of the Management Agreement is further amended by inserting after thephrase “the 2004 Fiscal Year” on the fifth line thereof the phrase “or the 2006Fiscal Year, as applicable.”

 

4.                     Sections1.11 and 1.12 of the Management Agreement are deleted in their entirety and thefollowing inserted in their place:

 

1.11 “Brand”  shall mean,collectively, the Staybridge Suites hotel service marks or, with respect to theBuckhead Hotel, the service marks of the Buckhead Brand, the Brand Standards,and all of the attributes 

 

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and features customarily associated with the Staybridge Suites hotelchain in North America or, with respect to the Buckhead Hotel, the BuckheadBrand, in either case, from time to time.

 

1.12 “Brand Standards” shall mean the standards of operation, as amended from time to time, ineffect at substantially all hotels which are operated under the StaybridgeSuites name as may be specified in manuals and other guidelines provided by theowner of the System Marks or its Affiliates; provided, however,with respect to the Buckhead Hotel, the term “Brand Standards” shallmean the standards of operation from time to time required of owners of similarhotels.

 

5.                     Section1.66 of the Management Agreement is amended by inserting after the phrase “the2004 Fiscal Year” the phrase “or the 2006 Fiscal Year, as applicable.”

 

6.                     Section1.67 of the Management Agreement is amended by deleting the phrase “SixteenMillion Eight Hundred Seventy Two Thousand Dollars ($16,872,000)” and replacingit with “Thirty Six Million Eight Hundred Seventy Two Thousand Dollars($36,872,000).”

 

7.                     Section1.27 of the Management Agreement is amended by inserting the following at theend thereof:

 

The Deposit shall be increased as provided in Section 33 of the FirstAmendment.

 

8.                     Section1.79 of the Management Agreement is amended by inserting “Original” after “each”in the first line thereof.

 

9.                     Section1.79 of the Management Agreement is hereby further amended by inserting thefollowing at the end thereof:

 

“Reserve Percentage” shall mean with respect to the ExpansionHotels, the following percentages for the following periods:

 
| Through 12/31/06 |   | 0      | %      |
|------------------|--------|--------|--------|
|             |   |   |   |
| Thereafter       |   | 5      | %      |

 

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10.                   Section1.82 of the Management Agreement is deleted in its entirety and replaced withthe following:

 

1.82 “Restricted Period” shall mean, for each Original Hotel,the period ending on third****(3rd)anniversary of the Effective Date and for each Expansion Hotel**,**the period ending on the third (3rd)anniversary of the Expansion Date.

 

11.                   Section1.87 of the Management Agreement is deleted in its entirety and the followinginserted in its place:

 

1.87 “Sites” shall mean, collectively, the parcels of realestate more particularly described in Exhibits A-1 and A-2.

 

12.                   Section1.90 of the Management Agreement is amended by inserting after “hotels” in thelast line thereof the following:

 

or withrespect to the Buckhead Hotel, the Buckhead Brand.

 

13.                   Thereis inserted after Section 1.98 of the Management Agreement the following newSections:

 

1.99 “Buckhead Brand” shall mean the then hotel brand underwhich the Buckhead Hotel is to be operated in accordance with Section 34(e)of the First Amendment.

 

1.100 “Buckhead Hotel” shall mean, the Hotel located at PharrRoad, Atlanta, Georgia.

 

1.101 “Expansion Date” shall mean, the later of (i) October 6,2003 and (ii) the date on which Owner delivers possession of the ExpansionHotels to Manager.

 

1.102 “Expansion Hotel” shall mean, each Hotel located on a Sitedescribed in Exhibit A-2.

 

1.103 “First Amendment” shall that certain First Amendment ToManagement Agreement dated September 18, 2003 between Manager and Owner.

 

1.104 “Manager’s Share” shall mean a fraction, (a)the numeratorof which is the amount of Initial Working Capital and (b)the denominator 

 

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of which is the sum of (i) the amount of Initial Working Capital, plus(ii) $750,000.

 

1.105 “Original Hotel” shall mean each Hotel located on a Sitedescribed in Exhibit A-1.

 

14.                   Section2.1 of the Management Agreement is amended by inserting the following after thesecond sentence thereof:

 

Owner acknowledges that the ExpansionHotels are to be converted to the Brand Standards following the Expansion Date.Manager shall complete such conversion promptly after the Expansion Date, butin all events on or before December 31, 2008; provided, however,Manager shall not be obligated to cause the Expansion Hotels to conform withthe requirements of the Brand Standards which have been waived as set forth onExhibit B to the First Amendment.

 

15.                   Section2.6 of the Management Agreement is deleted and replaced with the following:

 

2.6  Condition of the Hotels.Manager acknowledges receipt and delivery of possession of each Original Hotel,and Manager accepts each Original Hotel and, subject to the terms of Sections35, 36 and 41 of the First Amendment, each Expansion Hotel in its “as is”condition as of, respectively, the Effective Date and the Expansion Date,subject to the rights of parties in possession, the existing title, includingall covenants, conditions, restrictions, reservations, mineral leases,easements and other matters of record or that are visible or apparent on theHotels, all applicable Legal Requirements, and such other matters which wouldbe disclosed by an inspection of the Hotels and the record title thereto or byan accurate survey thereof. MANAGER REPRESENTS THAT:  IT HAS INSPECTED THE HOTELS INCLUDING THEFF&E AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOFSATISFACTORY; AS OF THE EFFECTIVE DATE, THE ORIGINAL HOTELS ARE IN COMPLIANCEWITH THE BRAND STANDARDS IN ALL MATERIAL RESPECTS; EXCEPT FOR CAPITALREPLACEMENT TO BE MADE FROM TIME TO TIME USING FUNDS TO BE DEPOSITED IN THERESERVE ACCOUNT PURSUANT TO SECTION 5.2(a) AND SECTION 33 OF THE FIRSTAMENDMENT, MANAGER CURRENTLY DOES

 

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NOT ANTICIPATED THE NEED TO MAKE CAPITAL REPLACEMENTS DURING THE FIRSTFIVE YEARS OF THE TERM (PROVIDED, HOWEVER, SUCH REPRESENTATION ISNOT A GUARANTY OR WARRANTY THAT NO SUCH CAPITAL REPLACEMENT WILL BE REQUIRED);AND, EXCEPT AS PROVIDED IN SECTION 36 OF THE FIRST AMENDMENT, IT IS NOT RELYINGON ANY REPRESENTATION OR WARRANTY OF OWNER, PURCHASER OR ANY OF THEIR AGENTS OREMPLOYEES WITH RESPECT TO ANY OF THE MATTERS SET FORTH IN THIS SECTION. SUBJECTTO THE TERMS OF SECTION 36 AND SECTION 37 OF THE FIRST AMENDMENT, MANAGERWAIVES ANY CLAIM OR ACTION AGAINST OWNER AND PURCHASER WITH RESPECT TO THECONDITION OF THE HOTELS. EXCEPT AS PROVIDED IN SECTION 36 OF THE FIRSTAMENDMENT, PURCHASER AND OWNER MAKE NO WARRANTY OR REPRESENTATION, EXPRESS ORIMPLIED, WITH RESPECT TO THE HOTELS OR ANY PART THEREOF, EITHER AS TO ITSFITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OROTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENTOR PATENT.

 

16.                   Forpurposes of determining whether Owner and its Affiliates own or lease at leastfifty (50%) percent of the hotels comprising the Brand under Section 6.1 of theManagement Agreement, the Expansion Hotels shall be excluded as thoughExpansion Hotels were neither owned or leased by Owner or its Affiliates and asthough the Expansion Hotels were not a portion of the hotels comprising thebrand.

 

17.                   Thefirst sentence of Section 5.1 of the Management Agreement is deleted andreplaced with the following:

 

Manager shall (a) contribute to the Working Capital for the Hotels anamount reasonably sufficient to pay (i) Operating Costs for the Original Hotelsfor the first thirty (30) days of operating the same following the EffectiveDate and (ii) Operating Costs for the Expansion Hotels for the first thirty(30) days of operating the same following the Expansion Date to the extent suchOperating Costs for the Expansion Hotels for such period exceeds $750,000collectively, the “Initial Working Capital”) and (b) upon the executionand delivery hereof, pay to Owner the monthly 

 

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installment of Owner’s Priority for the month in which the EffectiveDate occurs.

 

18.                   Onthe Expansion Date Owner shall advance to Manager an amount equal to the excessof $750,000 over the actual Working Capital of the Expansion Hotels deliveredto Manager on the Expansion Date. The amount so advanced shall be added to theWorking Capital of the Hotels and used to pay Operating Costs as they come due.

 

19.                   Thelast sentence of Section 5.1 of the Management Agreement is deleted andreplaced with the following:

 

Upon the expiration or earlier termination of the Term, the WorkingCapital of the Hotels shall be applied to pay all Operating Costs and allamounts owned to Owner to the extent Gross Revenues are insufficient. Thereafter,any remaining Working Capital shall be applied as follows:  (i) first, provided there is no uncuredManager Default, to Manager, Manager’s Share of any remaining Working Capital;and (ii) to Owner, the balance of the Working Capital.

 

20.                   Section7.5 of the Management Agreement is amended by inserting at theend thereof the following:

 

Notwithstanding the foregoing**,**theBuckhead Hotel shall be included in the Reservation System for the BuckheadBrand, and Owner acknowledges that the other Expansion Hotels shall be added tothe Reservation System as soon as practicable after the Expansion Date.

 

21.                   Section7.7(a) of the Management Agreement is amended by inserting “andSection 33 of the First Amendment” after “7.7(b)” in the first linethereof.

 

22.                   Section8.2(a) of the Management Agreement is amended by inserting the following afterthe first sentence thereof:

 

Notwithstandingthe foregoing, (i) Manager shall not be obligated to prepare or deliver YearlyBudgets for the Expansion Hotels for the 2003 and 2004 Fiscal Years; (ii)Manager shall deliver to Owner, each month until January, 2005, Manager’s thenmost current forecast of the Expansion Hotels for the next twelve (12) months,which forecasts shall be 

 

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inManager’s customary form; and (iii) on or before December 15, 2003, Managershall provide to Owner a month-by-month schedule of the draws from the ReserveAccount which Manager anticipates to make during the 2004 and 2005 fiscal yearin connection with renovating the Expansion Hotels; and (iv) Manager shallperiodically provide Owner with updates to such schedule consistent with goodmanagement and construction practices.

 

23.                   Thereis inserted at the end of Section 9.1(a) of the Management Agreement, thefollowing:

 

Notwithstanding anything contained herein to the contrary, to theextent that Base Management Fees for the Expansion Hotels for any Fiscal Yearup to and including the Fiscal Year ending on December 31, 2008 are not paid inaccordance with the terms hereof, the same shall not accrue from year to year,and Manager shall not be entitled to receive the payment thereof from the GrossRevenues of any subsequent Fiscal Year. For purpose of this Section 9.1(a),the Gross Revenues of the Expansion Hotels and the applications thereof shallbe calculated separately from the calculations of the Gross Revenues andapplications thereof of the Original Hotels.

 

24.                   Thefollowing is inserted at the end of the first sentence of Section 9.2 of theManagement Agreement:

 

provided, however,Manager shall pay as Operating Costs, only the service fees (excludingfranchise fees) generally payable by franchisees of the Buckhead Brand.

 

25.                   Section10.1(c) is deleted in its entirety and replaced with the following:

 

(c)           Third, to Owner, first,all Owner’s Priority then due and payable and then all accrued but unpaid Owner’sPriority which accrued pursuant to the terms of Section 10.3 during theFiscal Year to which such Gross Revenues pertain;

 

26.                   Thefollowing is inserted after the first sentence of Section 10.3:

 

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Notwithstanding anything contained herein to the contrary, to theextent that for any Fiscal Month prior to January, 2006 Operating Profitsattributable to the Expansion Hotels for such month are insufficient to pay theportion of Owner’s Priority attributable to such Hotels for such month, Managermay defer paying up to $333,333 of such portion of Owner’s Priority for suchmonth. Amounts which are so deferred shall nevertheless be deemed accrued; provided,however, Owner shall not be entitled to payment of any amounts sodeferred except as provided in Section 10.1(c) (i.e., the same shall not accruefrom year to year but shall only be payable out of Gross Revenues of the FiscalYear to which such deferred amounts pertain).

 

27.                   Section17.3 of the Management Agreement is amended by changing the title thereof to “OwnerEvents of Default and Remedies for Owner Defaults” and inserting “anyrepresentation or warranty made by Owner in this Agreement proves to be untruewhen made in any material respect or” after the word “event” in the first linethereof.

 

28.                   Thephrase “Fifty Million Dollars ($50,000,000)” in Section 17.2 of the ManagementAgreement is hereby deleted in its entirety and is replaced with “SeventyMillion Dollars ($70,000,000).”  Manageracknowledges and agrees that but for the liquidated damages clause contained inthe Management Agreement as modified hereby, Owner would not enter into thisAmendment.

 

29.                   Section24.18 of the Management Agreement is deleted and replaced with:

 

Nonliability of Trustees.EACH DECLARATION OF TRUST ESTABLISHING EACH ENTITY COMPRISING PURCHASER, A COPYOF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (EACH, A “DECLARATION”), IS DULYFILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,PROVIDES THAT, AND MANAGER HEREBY AGREES THAT, THE NAMES “HPT IHG PROPERTIESTRUST” AND “HPTSHC PROPERTIES TRUST” REFER TO THE TRUSTEES UNDER THE APPLICABLEDECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, ANDTHAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF ANY ENTITYCOMPRISING PURCHASER 

 

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SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANYOBLIGATION OF, OR CLAIM AGAINST, SUCH ENTITY. ALL PERSONS DEALING WITH ANYENTITY COMPRISING PURCHASER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SUCHENTITY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

 

30.                   ExhibitA to the Management Agreement is hereby amended by renaming it Exhibit A-1.Exhibit A to this Amendment is inserted as Exhibit A-2 to theManagement Agreement after such Exhibit A-1.

 

31.                   ExhibitC to the Management Agreement is deleted in its entirety and replaced with ExhibitC attached hereto.

 

32.                   Thereis added to the end of Exhibit D to the Management Agreement the maps showing,or other descriptions of, the Restricted Areas for the Expansion Hotels setforth in Exhibit D hereto.

 

33.                   Manageragrees to increase the Deposit by Twenty Million Dollars ($20,000,000), andOwner agrees to, or cause Purchaser to, advance up to Thirty Million Dollars($30,000,000) in the aggregate into the Reserve Account, all on the followingterms and conditions:

 

(a)           Onor before the Expansion Date, Owner or Purchaser shall deposit in the ReserveAccount Ten Million Dollars ($10,000,000), and Manager shall deliver to OwnerTen Million Dollars ($10,000,000) which shall be added to and be a part of theDeposit.

 

(b)           Onor before December 31, 2006, Manager shall deliver to Owner, in the aggregate,under this Section 33(b) and Section 33(e),an additional TenMillion Dollars ($10,000,000) which shall be added to and be a part of theDeposit.

 

(c)           If,at any times prior to December 31, 2006, the funds in the Reserve Account shallbe insufficient for the purposes for which the Reserve Account is maintained inManager’s sole judgment, Manager shall give Owner written notice thereof, whichnotice shall set forth, in reasonable detail, the calculation of suchinsufficiency and such other information with respect thereto as Owner mayreasonably require. Provided that there is then no uncured Manager Default,Owner shall, within twenty (20) Business Days after such notice, advance (orcause Purchaser to advance) the amount of such insufficiency to Manager for 

 

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deposit into the Reserve Account. Ownerhereby consents to the Material Repairs to be made by Manager, and expendituresmade from the Reserve Account in connection therewith, prior to December 31,2006 to cause the Expansion Hotels to comply with applicable Brand Standards orto correct any deferred maintenance thereto.

 

(d)           Thereshall be no adjustment to Owner’s Priority on account of the first TwentyMillion Dollars ($20,000,000) advanced by Owner or Purchaser pursuant to this Section33. However, the annual amount of Owner’s Priority shall be increased byten percent (10%) of the excess of the aggregate amount advanced under this Section33 over Twenty Million Dollars ($20,000,000). Such increase shall beeffective as of the dates on which such excess advances are made. Except asprovided herein, there shall be no adjustment to Owner’s Priority on account ofadvances made pursuant to this Section 33.

 

(e)           Unlessand until the Deposit shall have been increased by Twenty Million Dollars($20,000,000) in the aggregate under Sections 33(a)and 33(b), theaggregate amount to be advanced by Owner or Purchaser pursuant to Sections33(a)and 33(c) shall not exceed such aggregate increase to theDeposit.

 

(f)            Themaximum aggregate amount to be advanced pursuant to Sections 33(a)and 33(c)is Thirty Million Dollars ($30,000,000), and Owner shall not be obligated to,or to cause Purchaser to, advance any amounts under this Section 33 inexcess of such maximum aggregate amount.

 

(g)           Noadvances shall be requested under this Section 33 after December 31,2006.

 

34.   Thefollowing terms shall apply to the Buckhead Hotel:

 

(a)           TheBuckhead Hotel will be operated as a Buckhead Brand hotel. Accordingly,notwithstanding anything contained in the Management Agreement, any referenceto “Staybridge Suites” or the “Brand” in the Management Agreement shall withrespect to the Buckhead Hotel only be deemed to refer to the Buckhead Brand.

 

(b)           Managermay market the Buckhead Hotel for sale until December 31, 2009. If prior tosuch date Manager receives a bona fide arm’s-length binding unconditional offerto purchase the Buckhead Hotel from an unrelated third party having thefinancial capacity to implement the terms of such offer for a purchase priceacceptable to Manager and otherwise on customary terms (an “Offer”),Manager shall 

 

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give Owner and Purchaser notice thereof,which notice shall include a copy of the Offer executed by such third party. Inthe event that Owner and Purchaser shall fail to accept or reject such Offerwithin thirty (30) days after receipt of such notice, such Offer shall bedeemed to be rejected by them. If Owner and Purchaser shall either sell theBuckhead Hotel pursuant to such Offer, or reject such Offer, effective as ofthe date of such sale or, if the Offer was rejected or deemed rejected, theproposed date of sale contained in such Offer, as the case may be, thisAgreement shall terminate with respect to the Buckhead Hotel, and the Owner’sPriority shall be reduced by an amount equal to ten percent (10%) of the netproceeds of sale received by Owner or Purchaser or, in the case of such arejection, the projected net proceeds determined by reference to such Offer. Ifany Offer is accepted by Purchaser and Owner, but the sale pursuant thereto isnot consummated, Manager shall continue to have the right to market theBuckhead Hotel on the foregoing terms.

 

(c)           Theterms of Sections 4.4 and 4.7 of the Management Agreement shall not apply toany sale of the Buckhead Hotel made pursuant to an Offer delivered by Manager.

 

(d)           If the ManagementAgreement with respect to the Buckhead Hotel shall expire or terminate otherthan in connection with the sale thereof as herein contemplated, Owner shall beentitled (but not obligated) to operate the Buckhead Hotel under the Buckhead Brandname for a period of one (1) year following such termination in accordance withthe terms of the Management Agreement and the payment of any applicableServices Fee; provided, however, Owner shall not be obligated toincur any additional cost or expense in connection with any Capital Replacementto or at the Buckhead Hotel to the extent attributable solely to complying withthe Buckhead Brand standards.

 

(e)           Managershall elect, by notice given to Owner promptly after the date hereof, the hotelbrand under which the Buckhead Hotel shall be operated. From time to time, withthe prior written consent of Owner (which consent shall not be unreasonablywithheld), Manager may elect to change the hotel brand under which the BuckheadHotel will be operated.

 

35.   Owner shall, or shall cause Purchaser to, promptly after the date hereofgive Candlewood Management, Inc. (“Candlewood”) a notice terminating theexisting management agreement with Candlewood (the “Candlewood ManagementAgreement”) with respect to the Expansion Hotels in accordance with theterms of Section 7.2 thereof. In connection therewith, Owner shall directCandlewood to (a) 

 

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reasonably cooperate with Manager in order toeffectuate a smooth turnover of the management and operations of the ExpansionHotels; (b) provide Manager full access to the Expansion Hotels from and afterthe date hereof through and including the Expansion Date; (c) on the ExpansionDate transfer to Manager all FF&E reserves and capital replacement reservesheld by Candlewood; (d) on the Expansion Date transfer to Manager any and allreservations fees, advanced deposits and similar prepaid items; (e) on theExpansion Date transfer all telephone numbers used in connection with theoperation of the Expansion Hotels; (f) cooperate with Manager in Manager’sefforts to engage employees of the Expansion Hotels; (g) on the Expansion Datedeliver to Manager all books and records of the Expansion Hotels, provided thatCandlewood may retain copies of any of the same for Candlewood’s records; (h)on the Expansion Date, deliver possession of the Expansion Hotels, togetherwith any and all keys or other access devices to Manager; (i) effective as ofthe Expansion Date, assign to Manager all booking, reservation, service andoperating contracts relating to exclusively to the occupancy or operation ofthe Expansion Hotels and entered into in the ordinary course of business byCandlewood; (j) effective as of the Expansion Date, assign to Manager anyassignable licenses and permits pertaining to the Expansion Hotels andotherwise reasonably cooperate with Manager as may be necessary for thetransfer of any and all hotel licenses and permits to Manager. Neither Ownernor Purchaser shall have any liability to Manager for Candlewoods failure to doany of the foregoing; provided, however, Owner shall, or shallcause Purchaser to, use its reasonable efforts to enforce the terms of saidmanagement agreement and attempt to cause Candlewood to do the foregoing.

 

36.   HPTSHCProperties Trust (“HPTSHC”) warrants and represents that: itsinvestigation of the Expansion Hotels made in connection with the acquisition of the Expansion Hotels wasconducted in a manner consistent in all material respects with the standardsgenerally employed by HPTSHC, Owner and their Affiliates(collectively, the “HPTGroup”) in connection with their acquisitions of hotel properties; and,based on such investigation, when HPTSHC acquired the Expansion Hotels itbelieved that the statements in Exhibit E (other than the statement inparagraph **Error! Reference source not found.**thereof) were true in all material respects except as disclosed in the materials previously furnished or obtained byManager or otherwise disclosed in writing to, or known by, Manager. Managershall have the right, subject to the receipt of any required consents and theterms of any applicable agreement, to pursue, in the name of HPTSCH, any andall rights HPTSCH may have under or 

 

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with respect to any title insurance policy, engineering report, survey,zoning opinion or report or environmental study obtained by HPTSHC inconnection with such acquisition. The terms of Section 40 shall apply toany recovery by Manager in connection therewith.

 

37.                   Eachof HPTSHC and Owner warrants andrepresents to Manager that, except as disclosed in the materials previouslyfurnished or obtained by Manager or otherwise disclosed in writing to, or knownby, Manager: it has not done anythingsince the date of its acquisition of the Expansion Hotels to cause any of thestatements in Exhibit E to be untrue in any material respect on theExpansion Date; and to Owner’s Knowledge the statements in Exhibit E aretrue in all material respects asof the date hereof. HPTSHC and Owner shall not between the date hereofand the Expansion Date do anything which causes the statements in Exhibit Eto be untrue in any material respect on the Expansion Date.

 

38.                   Therepresentations and warranties made in this Agreement by Owner and HPTSHC aremade as of the date hereof. All representations and warranties made in thisAgreement by HPTSHC and Owner shall survive the Expansion Date.

 

39.                   Asused herein, the term “Owner’s Knowledge” shall mean the actual (and notthe imputed or constructive) knowledge of John Murray without any inquiry ofother personnel employed by the HPT Group. HPTSHC and Owner warrant and represent to Manager that JohnMurray is the officer of the HPT Group to whom any condition which wouldrender any of the statements in Exhibit E untrue in any material respectshould be reported by any employee of the HPT Group that first discovers suchcondition and that the HPT Group has in place, either formally or informally,systems designed to make sure that John Murray receives such reports.

 

40.                   Anyamounts recovered during the Term by Owner or Manager from any third party(other than from or in respect of any claim of the HPT Group against Wyndham International, Inc., Summerfield HPTLease Company, L.P. or any of their Affiliates) with respect a defectivecondition at any of the Expansion Hotels in excess of the cost of recoveringthe same (including, without limitation, attorneys’ fees) shall be depositedinto the Reserve Account or applied as the parties reasonably agree.

 

41.                   Owner shall be responsible for any and allcosts or expenses of owning and operating the Expansion Hotels prior to theExpansion Date (including, without limitation, 

 

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all applicable real and personalproperty, sales, hotel-motel, excise, gross receipts and use taxes andassessments and any accrued unpaid vacation, sick leave and similar benefitsowed to existing employees of the Expansion Hotels who are employed at the ExpansionHotels on the Expansion Date. Owner shall pay when due such costs and expensesitself or timely advance funds to Manager to pay such costs and expenses. Ownershall file or cause to be filed all returns for any tax periods prior to thetax period in which the Expansion Date occurs.

 

42.                   Except to the extent solely attributable tomatters pertaining to or arising from or in connection with any act or omissionof Manager or its Affiliates, Owner shall indemnify, defend and hold harmlessManager and its Affiliates for, from and against any cost, loss, damage orexpense including, but not limited to, reasonable attorneys’ fees and all courtcosts and other expenses of litigation, whether or not taxable under local law(each, a “Loss and Expense”) for any claims of any nature whatsoever made byeach of Candlewood, Wyndham International, Inc., Summerfield HPT Lease Company,L.P. or any of their respective Affiliates pertaining to the Expansion Hotels.Such indemnity is subject to the following terms and conditions:

 

(a)           If Manager or its Affiliate suffer or incurany Loss and Expense or any action is commenced against, or claim is made orthreatened against, Manager or its Affiliate against which Owner is toindemnify Manager or its Affiliate, Manager or its Affiliate shall give Ownernotice thereof within thirty (30) days of becoming aware that it has sufferedsuch Loss and Expense or of such action or claim.

 

(b)           Owner shall conduct and control, throughcounsel of its own choosing, reasonably acceptable to Manager or its Affiliate,any third party action or claim, but the indemnified party may, at itselection, participate in the defense thereof at its sole cost and expense. Managerand its Affiliates shall cooperate with Owner in defending any claim or actionfor which indemnity is sought hereunder. Such cooperation shall include accessduring normal business hours afforded to Owner to, and reasonable retention byManager and its Affiliates of, records and information which are reasonablyrelevant to such action or claim, and making employees available on a mutuallyconvenient basis to provide additional information and explanation of anymaterial provided hereunder.

 

(c)           If Owner shall fail to defend any action orclaim, then Manager or its Affiliate may defend, through counsel of its 

 

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own choosing, such action orclaim, and (so long as it gives Owner at least fifteen (15) days’ notice of theterms of the proposed settlement thereof and permits Owner to then undertakethe defense thereof) settle such action or claim and to recover from Owner orHPTSHC the amount of such settlement or of any judgment and the reasonablecosts and expenses of such defense.

 

(d)           Owner shall be entitled to compromise orsettle any such action or claim without the prior written consent of Manager,provided it or HPTSHC pays all amounts due under this Section 42 and theterms and conditions of suchcompromise or settlement:(i) include a full release of Manager and its affectedAffiliates from the action or claim which is the subject of the settlementproposal; and (ii) do not include any term or condition which would restrict inany material manner the continued management and operations of the ExpansionHotels in substantially the manner then being managed and operated by Manageror which would impose any continuing obligations or liability of any nature onManager or its Affiliates.

 

43.                   Managerhereby consents to the amendment to the Lease of even date herewith pursuant towhich Owner leases the Expansion Hotels from HPTSHC.

 

44.                   Allreferences in the Management Agreement to the Management Agreement shall bedeemed to be references thereto as amended hereby.

 

45.                   If the Expansion Date does not occur on orbefore December 31, 2003, this Amendment shall terminate and be of no furtherforce or effect. Such termination shall not release or relieve either partyfrom any breach hereof theretofore accruing.

 

46.                   Asmodified hereby, the Management Agreement is in full force and effect and ishereby ratified and confirmed.

 

47.                   ThisAmendment may be executed in one or more counterparts, all of whichcounterparts shall constitute but one and the same document.

 

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**IN WITNESS WHEREOF**, the parties hereto haveduly executed and delivered this Amendment effective as of the day and yearfirst above written.

 
| ** ** | **OWNER**:                  |
|------------|-----------------------------|
|       |                        |
| ** ** | **HPT TRS IHG-1, INC.**     |
|       |                        |
|       |                        |
|       | By:                         | /s/ John G. Murray |   |
|       | Name:                       | John G. Murray |   |
|       | Title:                      | Vice President |   |
|       |                        |
|       |                        |
| ** ** | **MANAGER**:                |
|       |                        |
|       |                        |
| ** ** | **INTERCONTINENTAL HOTELS** |
| ** ** | **GROUP RESOURCES, INC.**   |
|       |                        |
|       | By:                         | /s/ Stevan D. Porter |   |
|       | Name:                       | Stevan D. Porter |   |
|       | Title:                      | President |   |
|            |                             |  |  |  |  |  |  |

 

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Purchaser in consideration of good andvaluable consideration, joins in the foregoing Amendment to evidence itsagreement to be bound by the terms of Section 34(b). In addition, HPTSHCProperties Trust joins in the foregoing Amendment to evidence its agreement tobe bound by the terms of Sections 36 through and including 40 andSections 4.1 through and including 4.7 of the Management Agreement and Articles15 and 16 thereof subject to the terms of Section 24.18 thereof.

 
| ** ** | **PURCHASER**:           |
|------------|--------------------------|
|       |                     |
|       | HPT IHG PROPERTIES TRUST |
|       |                     |
|       |                     |
|       | By:                      | /s/ John G. Murray |   |
|       | Name:                    | John G. Murray |   |
|       | Title:                   | President |   |
|       |                     |
|       | Date of Execution:       |
|       |                     |
|       | HPTSHC PROPERTIES TRUST  |
|       |                     |
|       |                     |
|       |                     |
|       | By:                      | /s/ John G. Murray |   |
|       | Name:                    | John G. Murray |   |
|       | Title:                   | President |   |
|       |                     |
|       | Date of Execution:       |
|            |                          |  |  |  |  |

 

17

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**THE FOLLOWING EXHIBITS HAVE BEEN OMITTED AND WILLBE SUPPLEMENTALLY FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION UPONREQUEST:**

** **
| **Exhibit**   | ** ** | **Document**                                          |
|---------------|------------|-------------------------------------------------------|
| ** **    | ** ** | ** **                                            |
| Exhibit A     |       | Exhibit A-2 to the Management Agreement               |
|          |       |                                                  |
| Exhibit A-2   |       | Legal Descriptions                                    |
|          |       |                                                  |
| **Exhibit B** | ** ** | **Waiver of Brand Standards for  the Expansion**      |
| ** **    | ** ** | **Hotels**                                            |
| ** **    | ** ** | ** **                                            |
| **Exhibit C** | ** ** | **Substitute Exhibit C to the  Management Agreement** |
| ** **    | ** ** | ** **                                            |
| **Exhibit D** | ** ** | **Restricted Areas for the  Expansion Hotels**        |
| ** **    | ** ** | ** **                                            |
| **Exhibit E** | ** ** | **Condition of the Expansion  Hotels**                |

 

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