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OPERATING AGREEMENT
OF IHR INVEST HOSPITALITY HOLDINGS, LLC
  HOTEL INVEST DEUCE MM, LLC,
   HOTEL INVEST DEUCE LP, LLC
  INTERSTATE INVEST, LLC




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TABLE OF CONTENTS
 PageARTICLE 1 DEFINITIONS
    
    
    2ARTICLE 2 FORMATION OF COMPANY
    
    
    82.01 Formation
    
    
    82.02 Name
    
    
    92.03 Principal Place of Business
    
    
    92.04 Registered Office and Registered Agent
    
    
    92.05 Term
    
    
    9ARTICLE 3 PURPOSE AND POWERS OF COMPANY
    
    
    93.01 Purpose
    
    
    93.02 Powers
    
    
    9ARTICLE 4 RIGHTS AND DUTIES OF MANAGING MEMBER AND THE
EXECUTIVE COMMITTEE
    
    
    104.01 Management
    
    
    104.02 Other Power and Authority
    
    
    134.03 Liability for Certain Acts
    
    
    134.04 No Exclusive Duty to Company
    
    
    144.05 Bank Accounts
    
    
    154.06 Indemnity of Managing Member, Employees and Other Agents
    
    
    154.07 Resignation or Termination of Managing Member
    
    
    174.08 Expenses
    
    
    174.09 Exculpation
    
    
    18ARTICLE 5 RIGHTS AND OBLIGATIONS OF MEMBERS
    
    
    185.01 Limitation of Liability
    
    
    185.02 Company Debt Liability
    
    
    185.03 List of Members
    
    
    195.04 Company Books
    
    
    195.05 Company Property; Nature of Interests in the Company
    
    
    195.06 Priority
    
    
    195.07 Liability of a Member to the Company
    
    
    195.08 Exculpation
    
    
    195.09 Loans
    
    
    19ARTICLE 6 CONTRIBUTIONS TO THE COMPANY, PERCENTAGE
INTERESTS AND CAPITAL ACCOUNTS
    
    
    196.01 Members Capital Contributions
    
    
    19i




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Table of Contents
(Continued)
 Page6.02 Additional Contributions
    
    
    196.03 Capital Accounts
    
    
    206.04 Withdrawal or Reduction of Members Contributions to Capital
    
    
    21ARTICLE 7 REPRESENTATIONS, WARRANTIES AND COVENANTS
    
    
    217.01 Representations and Warranties of the Members
    
    
    217.02 Acknowledgment of the Partner Non-Managing Member
    
    
    227.03 Partner Non-Managing Member Operating Agreement
    
    
    227.04 Additional Representations and Warranties
    
    
    23ARTICLE 8
DISTRIBUTIONS, ALLOCATIONS, INCOME TAX, ELECTIONS AND REPORTS
    
    
    238.01 Distributions
    
    
    238.02 Limitation Upon Distributions
    
    
    248.03 Allocations
    
    
    248.04 Accounting Principles
    
    
    258.05 Interest on and Return of Capital Contributions
    
    
    258.06 Loans to Company
    
    
    258.07 Accounting Period
    
    
    258.08 Records, Audits and Reports
    
    
    258.09 Tax Returns and Tax Elections
    
    
    258.10 Tax Matters Member
    
    
    26ARTICLE 9 TRANSFERABILITY
    
    
    279.01 General
    
    
    279.02 Effect of Transfer
    
    
    27ARTICLE 10 DISSOLUTION AND TERMINATION
    
    
    2810.01 Dissolution
    
    
    2810.02 Winding-Up, Liquidation and Distribution of Assets
    
    
    2810.03 Articles of Dissolution
    
    
    2910.04 Effect of Filing of Articles of Dissolution
    
    
    2910.05 Return of Contribution Nonrecourse to Other Members
    
    
    29ARTICLE 11 RIGHT OF FIRST OFFER
    
    
    3011.01 First Offer Notice
    
    
    30ii




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Table of Contents
(Continued)
 Page11.02 Partner Non-Managing Member Election
    
    
    3011.03 Procedures
    
    
    3011.04 Remedies
    
    
    31ARTICLE 12 MISCELLANEOUS PROVISIONS
    
    
    3212.01 Notices
    
    
    3212.02 Governing Law
    
    
    3312.03 Waivers
    
    
    3412.04 Confidentiality
    
    
    3412.05 Amendments
    
    
    3512.06 Construction
    
    
    3512.07 Headings
    
    
    3612.08 Entirety; Waiver
    
    
    3612.09 Further Assurances
    
    
    3612.10 Consent
    
    
    3612.11 Severability
    
    
    3612.12 Heirs, Successors and Assigns
    
    
    3612.13 Waiver of Jury Trial
    
    
    3712.14 Creditors
    
    
    3712.15 Prevailing Party
    
    
    3712.16 Counterparts
    
    
    37iii




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OPERATING AGREEMENT
  R E C I T A L S
 Exhibit 1




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A G R E E M E N T
  ARTICLE 1
 DEFINITIONS
  Act Del. C. et seq.
 Additional Capital Contributions
 Affiliate
 Bankruptcy Action provided however




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Business Plan Exhibit 2
 Capital Contribution
 Capital Expenditures
 Capital Reserves
 Capital Transaction
 Company
 Company Interest
 Company Percentage Interest Exhibit A




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provided however
 Company Property
 Confidential Information
 Consent
 Contract
 Contributing Member
 Courts
 Designated Price
 Distribution Amount
 Election Notice
 First IRR Hurdle Event
 First Offer Notice
 Franchise Agreement
 Gross Capital Proceeds




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Gross Operating Receipts
 III Manager
 III Non-Managing Member
 Indemnified Party
 Initial Members
 Interstate
 IRR
 IRR Hurdle Event
 Lender
 Loan
 Loan Documents




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Managing Member
 Member
 Net Capital Proceeds e.g.
 Net Operating Cash Flow
 Non-Contributing Member
 Non-Managing Member
 Operating Expenses




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Operating Reserves
 Partner Non-Managing Member
 Partner Termination Event
      Person
 Project
 Project Entities




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Property
 Property Management Agreement
 Property Manager
 Replacement Managing Member
 ROFO Price
 Second IRR Hurdle Event
 Shortfall Loan
 Tax Matters Member
 Transfer
 Withdrawal Event
 ARTICLE 2
 FORMATION OF COMPANY
 Formation




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Name
 Principal Place of Business
 Registered Office and Registered Agent
 Term
 ARTICLE 3
 PURPOSE AND POWERS OF COMPANY
 Purpose
 Powers




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ARTICLE 4
 RIGHTS AND DUTIES OF MANAGING MEMBER AND THE
EXECUTIVE COMMITTEE
 Management




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provided however
  provided however




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provided however
  provided however




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Other Power and Authority
 Liability for Certain Acts




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No Exclusive Duty to Company
 Exhibit 4




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Bank Accounts
 Indemnity of Managing Member, Employees and Other Agents
  provided however




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provided however




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Resignation or Termination of Managing Member provided however
   Expenses




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Exhibit 3 Exhibit 3
  Exculpation
 ARTICLE 5
 RIGHTS AND OBLIGATIONS OF MEMBERS
 Limitation of Liability
 Company Debt Liability




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List of Members
 Company Books
 Company Property; Nature of Interests in the Company
 Priority provided however
 Liability of a Member to the Company
 Exculpation
 Loans
 ARTICLE 6
 CONTRIBUTIONS TO THE COMPANY, PERCENTAGE INTERESTS
AND CAPITAL ACCOUNTS
 Members Capital Contributions Exhibit
B
 Additional Contributions




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pro rata
 Non-Contributing Member pro rata pro rata pro rata
  Capital Accounts
 Exhibit C




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Withdrawal or Reduction of Members Contributions to Capital
   Return of Capital
 ARTICLE 7
 REPRESENTATIONS, WARRANTIES AND COVENANTS
 Representations and Warranties of the Members




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Acknowledgment of the Partner Non-Managing Member . ,
 Partner Non-Managing Member Operating Agreement




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Additional Representations and Warranties
 ARTICLE 8
 DISTRIBUTIONS, ALLOCATIONS,
INCOME TAX, ELECTIONS AND REPORTS
 Distributions
   first then
 second pro rata




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then
 third pro rata pro rata
 fourth pro rata pro rata
 Limitation Upon Distributions
     Allocations Exhibit C




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Accounting Principles
 Interest on and Return of Capital Contributions
 Loans to Company
 Accounting Period
 Records, Audits and Reports
         Tax Returns and Tax Elections




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th
  Tax Matters Member
  provided however




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ARTICLE 9
 TRANSFERABILITY
 General ab initio
 Effect of Transfer pro rata




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ARTICLE 10
 DISSOLUTION AND TERMINATION
 Dissolution
   Winding-Up, Liquidation and Distribution of Assets
    Exhibit C




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[Intentionally Blank.]
   Articles of Dissolution
 Effect of Filing of Articles of Dissolution
 Return of Contribution Nonrecourse to Other Members




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ARTICLE 11
 RIGHT OF FIRST OFFER
 First Offer Notice
 Partner Non-Managing Member Election
 provided however
 Procedures




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provided however
  provided however
     Remedies




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ARTICLE 12
 MISCELLANEOUS PROVISIONS
 Notices




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Governing Law




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provided however
 Waivers
     Confidentiality




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provided however
 provided
   Amendments
 Construction




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Headings
 Entirety; Waiver
   Further Assurances provided however
 Consent
 Severability
 Heirs, Successors and Assigns




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Waiver of Jury Trial EACH OF THE MEMBERS HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH WAIVER IS INFORMED AND VOLUNTARY
 Creditors
 Prevailing Party
 Counterparts
 Intentionally Blank
 Contract
 Side Letter
 Exhibit 3




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Transaction Exhibit 3 Non-Funding
Member
 Termination Option Electing Party Election Notice Non-Electing Party




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Put/Call Provisions
 pro rata




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pro rata pro rata pro rata pro rata
 pro rata




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pro rata
   )




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provided however
   Exculpation




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Claiming Parties




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MEMBERS:HOTEL INVEST DEUCE MM, LLC, 
a Delaware limited liability companyBy:

/s/  John
R. FraserName:
    John R. FraserTitle:
    PresidentHOTEL INVEST DEUCE LP, LLC,
a Delaware limited liability companyBy:
    /s/  John
R. FraserName:
    John R. FraserTitle:
    PresidentINTERSTATE INVEST, LLC
a Delaware limited liability companyBy:

/s/  James
A. Crolle IIIName:
    James
A. Crolle IIITitle:
    Assistant General Counsel




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JOINDER BY INTERSTATE HOTEL AND RESORTS, INC.




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INTERSTATE HOTELS & RESORTS, INC.By:
    /s/  James
A. Crolle IIIName:
    James
A. Crolle IIITitle:
    Assistant General Counsel




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JOINDER BY INVESTCORP PROPERTIES LIMITED




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INVESTCORP PROPERTIES LIMITED, a Delaware corporationBy:

/s/  John
R. FraserName:
    John R. FraserTitle:
    President




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EXHIBIT 1
 PROPERTY DESCRIPTION




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EXHIBIT 2
 INITIAL BUSINESS PLAN




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EXHIBIT 3
 SOURCES AND USES




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EXHIBIT 4
 RESTRICTED AREA




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EXHIBIT 5
 [INTENTIONALLY BLANK]




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EXHIBIT A
 PERCENTAGE INTERESTS
 Member
    
    Percentage InterestHOTEL INVEST DEUCE LP, LLC
    
    
    84
    %INTERSTATE INVEST, LLC
    
    
    15
    %HOTEL INVEST DEUCE MM HOLDINGS, LLC
    
    
    1
    %100
    %




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EXHIBIT B
 CAPITAL CONTRIBUTIONS
 Member
    
    ContributionHOTEL INVEST DEUCE LP, LLC
    
    $
    24,328,343.01HOTEL INVEST DEUCE MM, LLC
    
    $
    289,623.13INTERSTATE INVEST, LLC
    
    $
    4,344,346.97TOTAL
    
    $
    28,962,313.11




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EXHIBIT C
 TAX ALLOCATIONS
 Section 1. Allocations Of Profits And Losses .
 1.1 In General .
 1.2 Allocations of Profits and Losses . Section 2 Exhibit C
 1.2.1
 1.2.2 Section 8.01
 1.3 Allocations in Anticipation of Liquidation . Section 1.2 Section 1.3
 Section 2. Regulatory Allocations
 2.1 Minimum Gain Chargeback .




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2.2 Qualified Income Offset .
 2.3 Loss Allocations .
 2.4 Nonrecourse Deductions .
 2.5 Member Nonrecourse Deductions .
 2.6 Code Section 754 Adjustment .
 2.7 Guaranteed Payments .
 Section 3. Special Rules
 3.1. Tax Allocations . Section 3.2 Exhibit C
 3.2. Section704(c)Compliance .




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3.3. Modifications Exhibit C
 3.4 Allocations on Transfer of Interests
 Section 4. Capital Accounts
 4.1. Establishment and Maintenance .
 4.1.1.
 4.1.2.
 4.1.3.
 4.1.4.
 Section 5. Other Matters
 5.1. Distributions in Kind




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Exhibit C
 5.2. Classification as a Partnership
 5.3. Fiscal Year .
 Section 6. Definitions
 Exhibit C Exhibit A
  Adjusted Capital Account Deficit 
  Book Basis  , however
  Code 
  Company Minimum Gain 
  Member Minimum Gain 
  Member Nonrecourse Debt 
  Profits  and  Losses 




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(a)
 (b)
 (c)
 (d)
 (e) Section 2
  Regulations 