Document:

Exhibit 10.2

    
       

      Exhibit
        10.2

    

     

     

    
      
        
          

          

        

         

      

    

    
      

      LIMITED
        LIABILITY COMPANY AGREEMENT

      

      of

      

      

      MYSTIC
        PARTNERS, LLC

      

      a
        Delaware Limited Liability Company

      

      

       

      Dated
        as
        of _______, 2005

       

       

      
         

        
          

          

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      TABLE
        OF
        CONTENTS

       

      
        
          
            	
                    1.

                  	 	
                    DEFINED
                      TERMS

                  	
                    1

                  
	
                    2.

                  	 	
                    ORGANIZATION

                  	
                    14

                  
	 	 	
                    2.1

                  	
                    Continuation

                  	
                    14

                  
	 	 	
                    2.2

                  	
                    Name
                      and Principal Place of Business.

                  	
                    15

                  
	 	 	
                    2.3

                  	
                    Term

                  	
                    15

                  
	 	 	
                    2.4

                  	
                    Registered
                      Agent and Registered Office

                  	
                    15

                  
	 	 	
                    2.5

                  	
                    Purpose
                      of Company

                  	
                    15

                  
	 	 	
                    2.6

                  	
                    Members;
                      Membership Interests.

                  	
                    16

                  
	 	 	
                    2.7

                  	
                    Limitation
                      on Liability

                  	
                    16

                  
	 	 	
                    2.8

                  	
                    Title
                      to Company Property

                  	
                    16

                  
	
                    3.

                  	 	
                    CAPITAL

                  	
                    16

                  
	 	 	
                    3.1

                  	
                    Initial
                      Capital Contributions.

                  	
                    16

                  
	 	 	
                    3.2

                  	
                    Additional
                      Capital Contributions

                  	
                    17

                  
	 	 	
                    3.3

                  	
                    Return
                      of Capital; No Interest on Capital

                  	
                    19

                  
	 	 	
                    3.4

                  	
                    No
                      Third-Party Beneficiary

                  	
                    19

                  
	 	 	
                    3.5

                  	
                    Capital
                      Accounts.

                  	
                    19

                  
	
                    4.

                  	 	
                    MANAGEMENT
                      OF THE COMPANY

                  	
                    21

                  
	 	 	
                    4.1

                  	
                    Authority
                      of Managing Member.

                  	
                    21

                  
	 	 	
                    4.2

                  	
                    Restriction
                      of Managing Member’s Authority

                  	
                    23

                  
	 	 	
                    4.3

                  	
                    Budgeting
                      and Business Plan

                  	
                    24

                  
	 	 	
                    4.4

                  	
                    Managing
                      Member’s Time and Effort; Conflicts

                  	
                    25

                  
	 	 	
                    4.5

                  	
                    Competitive
                      Ventures.

                  	
                    25

                  
	 	 	
                    4.6

                  	
                    Indemnification

                  	
                    27

                  
	 	 	
                    4.7

                  	
                    Certificates
                      and Instruments

                  	
                    27

                  
	 	 	
                    4.8

                  	
                    Management
                      Cost Reimbursement

                  	
                    28

                  
	 	 	
                    4.9

                  	
                    Leases

                  	
                    28

                  
	 	 	
                    4.10

                  	
                    Asset
                      Management Fee

                  	
                    28

                  
	 	 	
                    4.11

                  	
                    Property
                      Management.

                  	
                    28

                  
	
                    5.

                  	 	
                    DISTRIBUTIONS

                  	
                    30

                  
	 	 	
                    5.1

                  	
                    Distributions
                      Generally

                  	
                    30

                  
	 	 	
                    5.2

                  	
                    Distributions
                      of Net Cash Flow and Capital Proceeds

                  	
                    30

                  
	 	 	
                    5.3

                  	
                    Distributions
                      Upon Final Liquidation

                  	
                    32

                  
	 	 	
                    5.4

                  	
                    The
                      Right to Withhold

                  	
                    32

                  
	
                    6.

                  	 	
                    ALLOCATIONS

                  	
                    32

                  
	 	 	
                    6.1

                  	
                    In
                      General

                  	
                    32

                  
	 	 	
                    6.2

                  	
                    Allocations

                  	
                    32

                  
	 	 	
                    6.3

                  	
                    Limitation
                      on Allocation of Losses

                  	
                    33

                  
	 	 	
                    6.4

                  	
                    Additional
                      Allocation Provisions

                  	
                    33

                  
	
                    7.

                  	 	
                    BOOKS
                      AND RECORDS; ACCOUNTING; TAX ELECTIONS

                  	
                    34

                  
	 	 	
                    7.1

                  	
                    Company
                      Books

                  	
                    34

                  
	 	 	
                    7.2

                  	
                    Records

                  	
                    35

                  
	 	 	
                    7.3

                  	
                    Company
                      Tax Elections; Tax Controversies

                  	
                    35

                  
	 	 	
                    7.4

                  	
                    Fiscal
                      Year

                  	
                    36

                  
	 	 	
                    7.5

                  	
                    Financial
                      Reports

                  	
                    36

                  
	 	 	
                    7.6

                  	
                    REIT
                      Status

                  	
                    37

                  

          

           

          
            
              
              

            

            
              i

              
                

              

            

            
              
              

            

          

           

          
            	
                    8.

                  	 	
                    TRANSFERS
                      AND ENCUMBRANCES OF COMPANY INTERESTS

                  	
                    37

                  
	 	 	
                    8.1

                  	
                    Restricted
                      Transfers and Encumbrances

                  	
                    37

                  
	 	 	
                    8.2

                  	
                    Substitution
                      of Approved Transferee for Member

                  	
                    38

                  
	 	 	
                    8.3

                  	
                    Possible
                      Amendment

                  	
                    39

                  
	
                    9.

                  	 	
                    ADDITIONAL
                      MEMBERS

                  	
                    39

                  
	 	 	
                    9.1

                  	
                    Admissions
                      and Withdrawals

                  	
                    39

                  
	 	 	
                    9.2

                  	
                    Cessation
                      of Managing Member

                  	
                    39

                  
	 	 	
                    9.3

                  	
                    New
                      Managing Member

                  	
                    40

                  
	
                    10.

                  	 	
                    DISSOLUTION
                      AND WINDING UP

                  	
                    40

                  
	 	 	
                    10.1

                  	
                    Dissolution
                      and Distributions of Property

                  	
                    40

                  
	 	 	
                    10.2

                  	
                    Dissolution
                      Events

                  	
                    40

                  
	 	 	
                    10.3

                  	
                    Liquidation
                      and Final Distribution Proceeds

                  	
                    40

                  
	 	 	
                    10.4

                  	
                    Cancellation
                      of Certificate

                  	
                    41

                  
	 	 	
                    10.5

                  	
                    No
                      Capital Contribution Upon Dissolution

                  	
                    41

                  
	
                    11.

                  	 	
                    REPRESENTATIONS,
                      WARRANTIES AND COVENANTS OF THE MEMBERS

                  	
                    41

                  
	 	 	
                    11.1

                  	
                    Authority

                  	
                    41

                  
	 	 	
                    11.2

                  	
                    Consents

                  	
                    41

                  
	 	 	
                    11.3

                  	
                    No
                      Conflict

                  	
                    42

                  
	 	 	
                    11.4

                  	
                    No
                      Broker

                  	
                    42

                  
	 	 	
                    11.5

                  	
                    Foreign
                      Partner

                  	
                    42

                  
	
                    12.

                  	 	
                    REQUIRED
                      SALE

                  	
                    42

                  
	 	 	
                    12.1

                  	
                    Offers

                  	
                    42

                  
	 	 	
                    12.2

                  	
                    Response

                  	
                    42

                  
	 	 	
                    12.3

                  	
                    No
                      Suspension of Rights Under Article 13

                  	
                    43

                  
	
                    13.

                  	 	
                    BUY-SELL
                      DISPUTE RESOLUTION

                  	
                    44

                  
	 	 	
                    13.1

                  	
                    Exercise

                  	
                    44

                  
	 	 	
                    13.2

                  	
                    Closing

                  	
                    45

                  
	 	 	
                    13.3

                  	
                    Buy-Sell
                      Default

                  	
                    45

                  
	 	 	
                    13.4

                  	
                    Payment
                      of Debts

                  	
                    46

                  
	 	 	
                    13.5

                  	
                    Release
                      of Capital Contribution Obligations

                  	
                    46

                  
	 	 	
                    13.6

                  	
                    Operations
                      in Pre-Closing Period

                  	
                    46

                  
	 	 	
                    13.7

                  	
                    Suspension
                      of Rights Under Article 12

                  	
                    47

                  
	
                    14.

                  	 	
                    MISCELLANEOUS

                  	
                    47

                  
	 	 	
                    14.1

                  	
                    Right
                      of First Offer

                  	
                    47

                  
	 	 	
                    14.2

                  	
                    Waiver
                      of Conflict of Interest

                  	
                    48

                  
	 	 	
                    14.3

                  	
                    Amendment
                      by Members

                  	
                    48

                  
	 	 	
                    14.4

                  	
                    Amendment
                      by Managing Member

                  	
                    48

                  
	 	 	
                    14.5

                  	
                    Waivers

                  	
                    48

                  
	 	 	
                    14.6

                  	
                    No
                      Assignments; Binding Effect

                  	
                    48

                  
	 	 	
                    14.7

                  	
                    Notices

                  	
                    48

                  
	 	 	
                    14.8

                  	
                    Certain
                      Waivers

                  	
                    49

                  
	 	 	
                    14.9

                  	
                    Preservation
                      of Intent

                  	
                    49

                  
	 	 	
                    14.10

                  	
                    Entire
                      Agreement

                  	
                    49

                  
	 	 	
                    14.11

                  	
                    Certain
                      Rules of Construction

                  	
                    49

                  
	 	 	
                    14.12

                  	
                    Counterparts

                  	
                    50

                  
	 	 	
                    14.13

                  	
                    Governing
                      Law; Venue

                  	
                    50

                  

          

        

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      
        
          	Exhibits	 

        

        
          	
                  A

                	
                  Members,
                    Capital Contributions and Capital Sharing
                    Ratios

                

        

      

      
        	
                1.1

              	
                Membership
                  Interests and Owner Entities

              

      

      
        	
                1.2

              	
                Description
                  of the Property

              

      

      
        	
                1.3

              	
                Form
                  of Lease

              

      

      
        	
                2.5.2

              	
                Owner
                  Entity Operating Agreement

              

      

      
        	
                3.1.2

              	
                Pre-Closing
                  Costs Reimbursable Amounts

              

      

      
        	
                4.3

              	
                Initial
                  Operating Budget and Business Plan

              

      

      
        	
                4.8

              	
                Management
                  Agreement 

              

      

      

      Index
        of Defined Terms

       

      
        	
                Act

              	
                1

              	 	
                Event
                  of Bankruptcy

              	
                4

              
	
                Adjusted
                  Capital Account

              	
                2

              	
                 

              	
                Gross
                  Asset Value

              	
                5

              
	
                Adjusted
                  Capital Account Deficit

              	
                2

              	 	
                Gross
                  Revenue

              	
                6

              
	
                Affiliate

              	
                2

              	 	
                Hartford
                  Hilton

              	
                4

              
	
                Agreement

              	
                1

              	 	
                Hartford
                  Marriott

              	
                4

              
	
                Agreement
                  Date

              	
                1

              	 	
                Initiating
                  Member

              	
                42

              
	
                Asset
                  Management Fee

              	
                28

              	 	
                Initiating
                  Notice

              	
                44

              
	
                Asset
                  Manager

              	
                28

              	 	
                Investor
                  Class A Member

              	
                6

              
	
                Business
                  Day

              	
                2

              	 	
                Investor
                  Class A Membership Interest

              	
                6

              
	
                Business
                  Plan

              	
                24

              	 	
                Investor
                  Class B Member

              	
                6

              
	
                Buy-Sell
                  Closing Date

              	
                45

              	 	
                Investor
                  Class B Membership Interest

              	
                6

              
	
                Buy-Sell
                  Option

              	
                44

              	 	
                Lease

              	
                6

              
	
                Capital
                  Account

              	
                19

              	 	
                Lessee

              	
                7

              
	
                Capital
                  Contribution

              	
                2

              	 	
                Losses

              	
                11

              
	
                Capital
                  Contribution Default

              	
                18

              	 	
                Major
                  Decision

              	
                7

              
	
                Capital
                  Proceeds

              	
                2

              	 	
                Major
                  Dispute

              	
                9

              
	
                Capital
                  Sharing Ratio

              	
                2

              	 	
                Major
                  Dispute Notice

              	
                23

              
	
                Capital
                  Transaction

              	
                2

              	 	
                Management
                  Agreements

              	
                28

              
	
                Cause

              	
                3

              	 	
                Management
                  Fee

              	
                29

              
	
                Certificate
                  of Formation

              	
                1

              	 	
                Managing
                  Member

              	
                9

              
	
                Change
                  in Control

              	
                3

              	 	
                Member
                  Loan Interest Rate

              	
                9

              
	
                Code

              	
                3

              	 	
                Member
                  Minimum Gain

              	
                9

              
	
                Company

              	
                1

              	 	
                Member
                  Nonrecourse Debt

              	
                9

              
	
                Company
                  Minimum Gain

              	
                3

              	 	
                Member
                  Nonrecourse Deductions

              	
                9

              
	
                Competitive
                  Venture

              	
                25

              	 	
                Members

              	
                1,9

              
	
                Conflicting
                  Activity

              	
                25

              	 	
                Membership
                  Interest

              	
                9

              
	
                Contribution
                  Account

              	
                3

              	 	
                Membership
                  Interests

              	
                1

              
	
                Contribution
                  Agreement

              	
                3

              	 	
                Minority
                  Interest Holder

              	
                9

              
	
                Contribution
                  Agreement Closing

              	
                4

              	
                 

              	
                Minority
                  Interests

              	
                9

              
	
                Contribution
                  Agreement Closing Date

              	
                4

              	 	
                Net
                  Cash Flow

              	
                9

              
	
                Control

              	
                4

              	 	
                Net
                  Operating Income

              	
                10

              
	
                Defaulted
                  Acquirer

              	
                45

              	 	
                Non-Discretionary
                  Expenses

              	
                10

              
	
                Defaulted
                  Amount

              	
                18

              	 	
                Non-Initiating
                  Member

              	
                42

              
	
                Depreciation

              	
                4

              	 	
                Non-Managing
                  Member

              	
                10

              
	
                Development
                  Asset Entity

              	
                4

              	 	
                Nonrecourse
                  Deductions

              	
                10

              
	
                Development
                  Assets

              	
                4

              	 	
                Offer

              	
                42

              
	
                Dissolution
                  Event

              	
                4

              	
                 

              	
                Offeree

              	
                44

              
	
                Distributable
                  Funds

              	
                30

              	 	
                Offeror

              	
                44

              
	
                Effective
                  Date

              	
                48

              	 	
                Old
                  Plans

              	
                24

              
	
                Encumbrance

              	
                4

              	 	
                Operating
                  Account

              	
                29

              
	
                Entity

              	
                4

              	 	
                Operating
                  Budget

              	
                24

              
	
                Epoch
                  Member

              	
                1

              	 	
                Operating
                  Expenses

              	
                10

              

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

      

      
        	
                Operating
                  Revenues

              	
                11

              	 	
                Residual
                  Sharing Ratios

              	
                13

              
	
                Owner
                  Entities

              	
                1

              	
                 

              	
                Response
                  Period

              	
                42

              
	
                Owner
                  Entity

              	
                11

              	 	
                Sale
                  Notice

              	
                42

              
	
                Owner
                  Entity Operating Agreement

              	
                15

              	 	
                Site
                  Improvement Work

              	
                13

              
	
                Part
                  Owned Entity

              	
                11

              	
                 

              	
                Stabilized
                  Asset Entity

              	
                13

              
	
                Part
                  Owned Property

              	
                11

              	 	
                Stabilized
                  Assets

              	
                13

              
	
                Part
                  Owned Property Lessee

              	
                11

              	 	
                Target

              	
                42

              
	
                Patriot
                  Act

              	
                22

              	 	
                Tax
                  Contest

              	
                13

              
	
                Permitted
                  Expense

              	
                7

              	 	
                Tax
                  Correspondence

              	
                13

              
	
                Person

              	
                11

              	 	
                Tax
                  Liability Distribution

              	
                31

              
	
                Pre-Closing
                  Costs Reimbursement Amount

              	
                17

              	 	
                Tax
                  Matters Member

              	
                35

              
	
                Preferred
                  Return

              	
                11

              	 	
                Third
                  Party Purchaser

              	
                42

              
	
                Preferred
                  Return Account

              	
                11

              	 	
                Transfer

              	
                13

              
	
                Profits

              	
                11

              	 	
                Transferred

              	
                13

              
	
                Project
                  Acquisition Costs

              	
                12

              	 	
                Valuation
                  Amount

              	
                44

              
	
                Properties

              	
                1

              	 	
                Venture
                  Package

              	
                25

              
	
                Property

              	
                1

              	 	
                Waterford
                  Class Membership Interest

              	
                14

              
	
                Property
                  Manager

              	
                28

              	 	
                Waterford
                  Member

              	
                1

              
	
                Regulatory
                  Allocations

              	
                33

              	 	
                Wholly
                  Owned Entity

              	
                14

              
	
                REIT

              	
                37

              	 	
                Wholly
                  Owned Property

              	
                14

              
	
                Removal
                  Event

              	
                39

              	 	
                Wholly
                  Owned Property Lessee

              	
                14

              
	
                Replacement
                  Acquirer

              	
                45

              	 	
                Working
                  Capital

              	
                29

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      LIMITED
        LIABILITY COMPANY OPERATING AGREEMENT

      of

      MYSTIC
        PARTNERS, LLC

       

      THIS
        LIMITED LIABILITY COMPANY OPERATING AGREEMENT
        (this
“Agreement”)
        of
        MYSTIC PARTNERS, LLC (the “Company”)
        is made
        and entered into as of ____________, 2005 (the “Agreement
        Date”)
        by and
        among HERSHA HOSPITALITY LIMITED PARTNERSHIP, a Virginia limited partnership,
        having an address at 510 Walnut Street, 9th
        fl.,
        Philadelphia PA 19106 (“Investor
        Member”),
        and
MYSTIC
        HOTEL INVESTORS, LLC
        and
WATERFORD
        HOSPITALITY GROUP, LLC,
        each a
        Delaware limited liability company having an address at 914 Hartford Turnpike,
        P.O. Box 715, Waterford, CT 06385 (collectively, “Waterford
        Member”).
        Investor Member and Waterford Member are sometimes hereinafter collectively
        referred to as the “Members”
        and
        individually as a “Member.”

      

      W I T N E S S E T H:

      

      WHEREAS:

      

      Waterford
        Member is the owner of the membership interests specified on Exhibit
        1.1
        (the
“Membership
        Interests”)
        in the
        limited liability companies (the “Owner
        Entities”)
        specified on Exhibit
        1.1;

      

      Each
        of
        the Owner Entities owns or has a leasehold interest in the respective land,
        as
        identified on Exhibit
        1.2,
        and the
        hotel and other improvements located thereon (each, individually, a
“Property”
        and
        collectively, the “Properties”),
        all as
        more particularly described on Exhibit
        1.2;
        

      

      The
        parties hereto desire to form a limited liability company to acquire the
        entities owning the Properties, subject to the Minority Interests (hereinafter
        defined), and to develop and operate the Properties as hotels with potentially
        other compatible uses for portions thereof.

      

      The
        Company was formed pursuant to a Certificate of Formation (the “Certificate
        of Formation”)
        filed
        with the Delaware Secretary of State on ___________, 2005.

      

      NOW,
        THEREFORE, in consideration of the mutual covenants and promises contained
        herein and for other good and valuable consideration, the receipt and adequacy
        of which are hereby acknowledged, the parties hereto agree as
        follows:

      

      

      
        	
                1.

              	
                DEFINED
                  TERMS

              

      

      

      In
        addition to the defined terms set forth above and elsewhere in this Agreement,
        the following terms shall have the definitions hereinafter indicated whenever
        used in this Agreement with initial capital letters:

      

      “Act”
        means
        the Delaware Limited Liability Company Act, as previously or hereafter
        amended.

      
         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      “Adjusted
        Capital Account”
        means,
        with respect to any Member, the balance, if any, in such Member’s Capital
        Account as of the end of the relevant taxable year, after: (i) crediting
        to such
        Capital Account any amounts that such Member is obligated to restore pursuant
        to
        Regulations Section 1.704-1(b)(2)(ii)(c) (or is deemed to be obligated to
        restore pursuant to the penultimate sentences of Regulations Sections
        1.704-2(g)(1) and 1.704-2(i)(5)) and (ii) debiting from such Capital Account
        the
        items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and
        (6).

      

      “Adjusted
        Capital Account Deficit”
        means,
        with respect to any Member, the deficit balance, if any, in such Member’s
        Adjusted Capital Account. 

      

      The
        foregoing definitions of Adjusted Capital Account and of Adjusted Capital
        Account Deficit are intended to comply with the provisions of Regulation
        Section
        1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
        therewith.

      

      “Affiliate”
        means a
        Person that directly or indirectly, through one or more intermediaries, has
        Control of or is Controlled by, or is under common Control with, the Person
        specified. “Affiliate” shall also include the spouse, ancestors, descendents and
        siblings of any Person that is an individual, Affiliates of such family members
        and trusts for the benefit of an Affiliate of the relevant Person.

      

      “Business
        Day”
        means
        any day other than a Saturday, Sunday or other day on which commercial banks
        in
        New York are authorized or required to close under the laws of the State
        of New
        York.

      

      “Capital
        Contribution”
        means,
        with respect to any Member, the amount of money and the initial Gross Asset
        Value of any property (other than money) contributed to the Company by such
        Member, less the amount of liabilities of such Member assumed by the Company
        or
        that are secured by any property contributed by such Member to the Company.
        The
        initial Capital Contributions of the Members are as set forth on Exhibit
        A.

      

      “Capital
        Proceeds”
        means
        the net proceeds of a Capital Transaction distributed to the Company by an
        Owner
        Entity. 

      

      “Capital
        Sharing Ratio”
        means
        the percentages in which the Members participate in, and bear, certain Company
        items. The initial Capital Sharing Ratios of the Members are as
        follows:

      

      
        
          	 	
                  Investor
                    Class A Member:

                	
                  66.7%
                    with respect to Stabilized Assets Entities and

                

        

        
          	 	 	0% with respect to Development Assets
                  Entities

        

      

      

      
        
          	 	
                  Investor
                    Class B Member:

                	
                  0%
                    with respect to Stabilized Assets Entities and

                

        

        
          	 	 	50% with respect to Development Assets
                  Entities

        

      

      

      
        
          	 	
                  Waterford
                    Member:

                	
                  33.3%
                    with respect to Stabilized Assets Entities and

                

        

        
          	 	 	50% with respect to Development Assets
                  Entities

        

      

      

      “Capital
        Transaction”
        means a
        transaction pursuant to which (i) an Owner Entity finances or refinances
        any
        Property or any portion thereof, except
        for acquisition financing,
        (ii)
        all or any portion of any Property is sold, condemned, exchanged or otherwise
        disposed of, (iii) insurance proceeds or other damages in respect of any
        Property are recovered by an Owner Entity, or (iv) any other transaction
        that,
        in accordance with generally accepted accounting principles, is considered
        capital in nature.

      
         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

      

      “Cause”
        means
        the existence or occurrence of any of the following events or conditions
        with
        respect to (1) a Member, (2) any Controlling Affiliate of a Member or
        (3) any Affiliate of a Member regardless of whether Controlling, if
        such
        Affiliate or its executive officers and employees have direct involvement
        in the
        Company or any Property, as the case may be: (a) the indictment for a felony
        involving a crime or crimes of moral turpitude or dishonesty or for a Patriot
        Act (hereinafter defined) offense (in each case, whether or not convicted),
        misapplication, conversion or theft of any funds belonging to the Company;
        or
        (b) the commission of fraud, gross negligence or willful misconduct
        with
        respect to the Company or any Property. For the avoidance of doubt, the
        indictment of a Member or any executive officer or employee of them for a
        felony
        involving a crime or crimes of moral turpitude or dishonesty (whether or
        not
        convicted), or the misapplication of funds belonging to the Company or the
        commission of fraud, gross negligence or willful misconduct with respect
        to the
        Company or any Property shall not be curable and “Cause” shall be deemed to
        exist upon the occurrence or existence of any such event.

      

      “Change
        in Control”
        means,
        with respect to any Person, the occurrence of any of the following:

      

      (i)   
          the
        sale
        of all or substantially all of that Person’s assets;

      

      (ii)  
          the
        merger, reorganization, share exchange, recapitalization, restructuring or
        consolidation of that Person, if such transaction would result in the voting
        securities of that Person outstanding immediately prior thereto no longer
        representing (either by remaining outstanding or by being converted into
        voting
        securities of the surviving entity) at least 50% of the combined voting power
        of
        the voting securities of that Person or such surviving entity outstanding
        immediately after such transaction; 

      

      (iii)   
         the
        acquisition by any “Person” or “Group” (within the meaning of Sections 13(d) and
        14(d)(2) of the Securities Exchange Act of 1934) of an aggregate of 50% or
        more
        of the beneficial ownership (within the meaning of Rule 13d-3 of the Securities
        Exchange Act of 1934) of the issued and outstanding voting securities of
        that
        Person.

      

      “Code”
        means
        the Internal Revenue Code of 1986, as previously or hereafter
        amended.

      

      “Company
        Minimum Gain”
        means
“partnership minimum gain” as defined in Treasury Regulation Section
        1.704-2(d).

      

      “Contribution
        Account”
        means,
        with respect to each Member, an account maintained for such Member on the
        Company’s books and records in the amount of that Member’s Capital
        Contributions, less all distributions made in accordance with Sections
        5.2.3.A
        and
5.2.3.B,
        but in
        no event less than zero.

      

      “Contribution
        Agreement”
        means
        that certain Membership Interest Contribution Agreement, dated June __, 2005,
        among the Company, Waterford Hospitality Group, LLC and Mystic Hotel Investors,
        LLC with respect to the Property.

      
         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

      

      “Contribution
        Agreement Closing”
        means
        the closing of the transaction set forth in the Contribution Agreement,
i.e.,
        the
        acquisition by the Company of the Owner Entities (subject to the Minority
        Interests), pursuant to the Contribution Agreement.

      

      “Contribution
        Agreement Closing Date”
        means
        the date upon which the Contribution Agreement Closing occurs.

      

      “Control”
        (including the terms “controlling”, “controlled by” or “under common control
        with”) means the possession, directly or indirectly, through one or more
        intermediaries, of the power to direct or cause the direction of the management
        or policies of a Person, whether through the ownership of voting securities,
        by
        contract or otherwise.

      

      “Depreciation”
        means,
        for each fiscal year or other period, an amount equal to the federal income
        tax
        depreciation, amortization or other cost recovery deduction allowable with
        respect to an asset for such year or other period, except that if the Gross
        Asset Value of an asset differs from its adjusted basis for federal income
        tax
        purposes at the beginning of such year or other period, Depreciation shall
        be an
        amount that bears the same ratio to such beginning Gross Asset Value as the
        federal income tax depreciation, amortization or other cost recovery deduction
        for such year or other period bears to such beginning adjusted tax basis;
        provided, however, that if the federal income tax depreciation, amortization
        or
        other cost recovery deduction for such year is zero, Depreciation shall be
        determined with reference to such beginning Gross Asset Value using any
        reasonable method selected by Tax Matters Member.

      

      “Development
        Assets”
        means
        the following Properties: Hartford Hilton, Hartford, CT (the “Hartford
        Hilton”);
        and
        the Hartford Marriott, Hartford, CT (the “Hartford
        Marriott”),
        but
        only, in the case of the Hartford Marriott, from and after the date (if ever)
        that the Company shall acquire the membership interests of the company that
        owns
        the Hartford Marriott Property (subject to Minority Interests) in accordance
        with the terms of the Contribution Agreement.

      

      “Development
        Asset Entity”
        an Owner
        Entity that owns, in whole or part, a Development Asset; provided that the
        Owner
        Entity that owns the Hartford Marriott Property shall be considered an Owner
        Entity only from and after the date (if ever) that the Company shall acquire
        the
        membership interest of such company in accordance with the terms of the
        Contribution Agreement.

      

      “Dissolution
        Event”
        means
        any event specified in Section
        10.2
        that
        results in the dissolution and winding up of the Company.

      

      “Encumbrance”
        means a
        pledge, alienation, mortgage, hypothecation, encumbrance, lien or collateral
        assignment by any other means, whether for value or no value and whether
        voluntary or involuntary (including, by operation of law or by judgment,
        levy,
        attachment, garnishment, bankruptcy or other legal or equitable
        proceedings).

      

      “Entity”
        means
        any general partnership, limited partnership, limited liability partnership,
        corporation, limited liability company, joint venture, trust, business trust,
        cooperative or association.

      

      “Event
        of Bankruptcy”
        means,
        with respect to any Person, the occurrence of: 

      
         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

      

      
        	 	
                ·

              	
                an
                  assignment by the Person for the benefit of creditors;
                  

              

      

      

      
        	 	
                ·

              	
                the
                  filing by the Person of a voluntary petition in bankruptcy;
                  

              

      

      

      
        	 	
                ·

              	
                the
                  entry of a judgment by any court that the Person is bankrupt or
                  insolvent,
                  or the entry against the Person of an order for relief in any bankruptcy
                  or insolvency proceeding; 

              

      

      

      
        	 	
                ·

              	
                the
                  filing of a petition or answer by the Person seeking for itself
                  any
                  reorganization, arrangement, composition, readjustment, liquidation,
                  dissolution or similar relief under any statute, law or regulation;
                  

              

      

      

      
        	 	
                ·

              	
                the
                  filing by the Person of an answer or other pleading admitting or
                  failing
                  to contest the material allegations of a petition filed against
                  it in any
                  proceeding for reorganization or of a similar nature;
                  

              

      

      

      
        	 	
                ·

              	
                the
                  consent or acquiescence of the Person to the appointment of a trustee,
                  receiver or liquidator of the Person or of all or any substantial
                  part of
                  its properties; or 

              

      

      

      
        	 	
                ·

              	
                any
                  event or occurrence not included in the foregoing list that is
                  referenced
                  in Section 18-304 of the Act.

              

      

      

      “Gross
        Asset Value”
        means,
        with respect to any asset, the asset’s adjusted basis for federal income tax
        purposes, except as follows:

      

      A.    
        The
        initial Gross Asset Value of any asset contributed by a Member to the Company
        shall be the gross fair market value of such asset, as determined by Investor
        Member and Waterford Member (acting together), or pursuant to the Contribution
        Agreement, as applicable.

      

      B.    
        The
        Gross
        Asset Values of all Company assets shall be adjusted to equal their respective
        gross fair market values, as determined by Investor Member and Waterford
        Member
        (acting together), as of the following times:

      

      i.   
         immediately
        prior to the acquisition of an additional interest in the Company by a new
        or
        existing Member, if Managing Member reasonably determines that such adjustment
        is necessary or appropriate to reflect the relative economic interests of
        the
        Members in the Company;

       

      ii.   
         immediately
        prior to the distribution by the Company to a Member of more than a de
        minimis amount
        of
        Company property as consideration for an interest in the Company, if Managing
        Member reasonably determines that such adjustment is necessary or appropriate
        to
        reflect the relative economic interests of the Members in the
        Company;

       

       
          iii.     immediately
        prior to the liquidation of the Company within the meaning of Regulations
        Section 1.704-1(b)(2)(ii)(g);
        and

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      iv.   
         at
        such
        other times as Managing Member shall reasonably determine necessary or advisable
        in order to comply with Regulations Sections 1.704-1(b) and
        1.704-2.

      

      C.      
        The
        Gross
        Asset Value of any Company asset distributed to a Member shall be the gross
        fair
        market value of such asset on the date of distribution as determined by Investor
        Member and Waterford Member (acting together).

      

      D.      The
        Gross
        Asset Values of Company assets shall be increased (or decreased) to reflect
        any
        adjustments to the adjusted basis of such assets pursuant to Code Section
        734(b)
        or Code Section 743(b), but only to the extent that such adjustments are
        taken
        into account in determining Capital Accounts pursuant to Regulations Section
        1.704-1 (b)(2)(iv)(m);
        provided, however,
        that
        Gross Asset Values shall not be adjusted pursuant to this clause D to the
        extent
        that Managing Member determines that an adjustment pursuant to clause B is
        necessary or appropriate in connection with a transaction that would otherwise
        result in an adjustment pursuant to this clause D.

      

      E.    
         If
        the
        Gross Asset Value of a Company asset has been determined or adjusted pursuant
        to
        clauses A, B or D of this definition, such Gross Asset Value shall thereafter
        be
        adjusted by the Depreciation taken into account with respect to such Company
        asset for purposes of computing Profits and Losses. 

      

      “Gross
        Revenue”
        shall
        mean, as to any Year, all revenues and receipts of every kind derived from
        the
        operation of the Property and all departments and parts thereof, including,
        but
        not limited to, receipts (from both cash and credit transactions), before
        commissions and discounts for prompt or cash payments, from the rental of
        guest
        rooms, meeting rooms, stores, offices, exhibit or sales space of any kind,
        parking charges, license and concession fees and rentals (but not including
        the
        gross receipts of any licensees, lessees and concessionaires), booking fees,
        telephone and television viewing charges, food and beverage sales, wholesale
        and
        retail sales, proceeds, if any, from business interruption or other loss
        of
        income insurance; provided, however, Gross Revenues shall not included
        gratuities to Property employees or Federal, State and Municipal excise,
        sales
        and use taxes or similar impositions collected directly from patrons or guests
        or included as part of the sales price of any goods or services.

      

      “Investor
        Class A Member”
        means
        the Member holding the interest so designated on Exhibit
        A
        hereto.
        On the date hereof, Investor Member is the Investor Class A Member.

      

      “Investor
        Class A Membership Interest”
        means
        the class of Membership Interest issued to the Investor Class A
        Member.

      

      “Investor
        Class B Member”
        means
        the Member holding the interest so designated on Exhibit
        A
        hereto.
        On the date hereof, Investor Member is the Investor Class B Member.

      

      “Investor
        Class B Membership Interest”
        means
        the class of Membership Interest issued to the Investor Class B
        Member.

      

      “Lease”
        means a
        Lease Agreement with respect to a Property between a Lessee and an Owner
        Entity,
        substantially in the form attached hereto as Exhibit
        1.3.

      
         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

      

      “Lessee”
        means a
        Wholly Owned Property Lessee or a Part Owned Property Lessee. 

      

      “Major
        Decision”
        means
        any decision regarding each of the matters described below:

      

      
        	 	
                ·

              	
                The
                  financing or refinancing of, or the increasing of any indebtedness
                  secured
                  by any interest in any Owner Entity, any Property or any Lease,
                  or any
                  interest or estate therein, or the incurrence of any other secured
                  or
                  unsecured borrowings or other indebtedness by the Company or the
                  Owner
                  Entities, including determination of the terms and conditions thereof,
                  and
                  any amendments to such terms and conditions except as contemplated
                  in the
                  approved Business Plan or the prepayment in whole or in part of
                  any loan
                  or other type of financing with respect to the Company or any Property;
                  

              

      

      

      
        	 	
                ·

              	
                Any
                  sale, transfer, grant of option, exchange, mortgage, financing,
                  hypothecation or encumbrance or abandonment of all, or any part
                  of or any
                  interest in any Owner Entity, any Property or any other material
                  asset of
                  the Company or an Owner Entity (other than the sale or transfer
                  of any
                  Owner Entity or Property in accordance with Article 12 hereof),
                  and, in
                  each such case, the material terms and conditions thereof, excluding,
                  however, incidental sales, exchanges, conveyances, transfers or
                  other
                  dispositions of personal property or fixtures used in the operation
                  and
                  management of the Properties if such disposition of personal property
                  and
                  fixtures in accordance with this clause, together with all other
                  such
                  dispositions in the calendar year in question, involves property
                  having a
                  value or sales price of less than $500,000 in the aggregate;
                  

              

      

      

      
        	 	
                ·

              	
                Any
                  acquisition by the Company or any Owner Entity of any real property
                  or
                  development rights or any other material asset other than in accordance
                  with the Business Plan;

              

      

      

      
        	 	
                ·

              	
                The
                  requirement of any additional Capital
                  Contributions;

              

      

      

      
        	 	
                ·

              	
                The
                  approval or adoption of an annual Business Plan and an annual Operating
                  Budget, and any material amendment, modification or other change
                  thereto
                  or deviation therefrom;

              

      

      

      
        	 	
                ·

              	
                The
                  amendment or replacement of any franchise agreement with respect
                  to any
                  Property that is a hotel, to the extent that the Company or any
                  Owner
                  Entity is the franchisee or has the ability, directly or indirectly,
                  to
                  determine the franchisee;

              

      

      

      
        	 	
                ·

              	
                The
                  entering into, amendment or replacement of a
                  Lease;

              

      

      

      
        	 	
                ·

              	
                Unless
                  otherwise specified herein, the selection of property managers,
                  and any
                  amendment of any Management Agreement;

              

      

      

      
        	 	
                ·

              	
                The
                  incurring of any cost or expense or incurring of any obligation
                  or
                  liability by or for the Company or an Owner Entity that is not
                  a Permitted
                  Expense; for such purposes, “Permitted
                  Expense”
                  shall mean (i) Operating Expenses, capital improvements, replacements
                  and
                  debt service as set forth in the approved Business Plan or Operating
                  Budget, or, in the case of capital improvements, that is less than
                  $25,000
                  with respect to the particular project, (ii) emergency expenses,
                  (iii)
                  with respect to each item in the Operating Budget (other than
                  Non-Discretionary Expenses), the expenditure contemplated by such
                  Operating Budget item plus 10% of each such item, (iv) Non-Discretionary
                  Expenses and (v) any reasonable costs or expenses incurred in implementing
                  a Major Decision approved by all Members and not otherwise already
                  included in a Business Plan or Operating
                  Budget;

              

      

      
         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

      

      
        	 	
                ·

              	
                The
                  selection or replacement of the Company’s or any Owner Entities’
                  accountants, legal counsel, or other material
                  advisors;

              

      

      

      
        	 	
                ·

              	
                The
                  taking, initiation, prosecution, stipulation or settlement or any
                  similar
                  action with respect to any legal action or dispute on behalf of
                  the
                  Company or an Owner Entity with any third party or government or
                  regulatory agency, except in the normal course of
                  business;

              

      

      

      
        	 	
                ·

              	
                The
                  commencement of any case, proceeding or other action seeking protection
                  for the Company or any Owner Entity as debtor under any existing
                  or future
                  law of any jurisdiction or otherwise relating to an Event of Bankruptcy,
                  insolvency, reorganization or relief of
                  debtors;

              

      

      

      
        	 	
                ·

              	
                Issuance
                  of any press release or other written materials regarding the Company
                  (as
                  opposed to any Property) or any other
                  Member;

              

      

      

      
        	 	
                ·

              	
                Changes
                  in the depreciation or accounting methods or other methods with
                  respect to
                  the tax or accounting treatment of Company
                  transactions;

              

      

      

      
        	 	
                ·

              	
                Extension
                  of the existence of the Company beyond the date set forth in Section
                  2.3;

              

      

      

      
        	 	
                ·

              	
                Entering
                  into, amending, modifying or changing any contract or agreement
                  by the
                  Company or an Owner Entity with an Affiliate of any Member, or
                  employing
                  or paying any compensation to such Affiliate, except as expressly
                  permitted by this Agreement, the Management Agreement or as part
                  of any
                  Business Plan;

              

      

      

      
        	 	
                ·

              	
                The
                  acquisition of any Minority
                  Interest;

              

      

      

      
        	 	
                ·

              	
                Establishment
                  of and amounts to be held as operating reserves and contingency
                  reserves
                  for the Company and each Owner
                  Entity;

              

      

      

      
        	 	
                ·

              	
                Except
                  in accordance with Section
                  5.2,
                  the making of any distributions of the Owner Entities or the
                  Company;

              

      

      

      
        	 	
                ·

              	
                The
                  appointment of replacement or additional officers of the Company,
                  it being
                  agreed by the Members that the initial officers of the Company
                  shall be
                  Del Lauria, President, Mark Wolman, Vice President and Glenn Jette,
                  Treasurer and it being further agreed that such officers shall
                  have the
                  powers and duties as Managing Member shall from time to time determine
                  necessary or convenient for the conduct of the Company’s business;
                  

              

      

      

      
        	 	
                ·

              	
                Matters
                  set forth in Section 4.2.1, and 

              

      

      
         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

      

      In
        the
        event that authority to take any of the foregoing actions or make the foregoing
        decisions with respect to a particular Property is partially or wholly vested
        in
        an Owner Entity or a Lessee, then such action shall be a Major Decision only
        to
        the extent (if at all) that the Company may have the authority to make or
        implement such decision, it being understood, however, that the Company shall
        seek (and the Members shall cooperate in so effecting, and shall cause their
        Affiliates to cooperate) with respect to any Major Decision rendered under
        the
        terms of this Agreement, to impose or implement such Major Decision at the
        level
        of the relevant Owner Entity or Lessee, to the extent permitted under the
        applicable limited liability company and lease documents.

      

      “Major
        Dispute”
        means
        the failure of the Members to agree upon or approve any Major Decision or
        other
        action requiring the consent of all Members, in accordance with Section
        4.2.

      

      “Managing
        Member”
        means
        Waterford Member, initially, or any other Person who is hereafter appointed
        as a
        managing member of the Company in accordance with this Agreement and applicable
        law, until the date that such Person resigns or is removed from its role
        as a
        managing member.

      

      “Members”
        mean,
        collectively, Investor Member and Waterford Member and/or any other Person
        hereafter admitted as a member of the Company in accordance with this Agreement
        and applicable law.

      

      “Member
        Loan Interest Rate”
        means a
        simple rate of interest equal to the prime rate of U.S. money center commercial
        banks as published in The
        Wall Street Journal
        (or if
        more than one such rate is published, the average of such rates), plus two
        percent per annum.

      

      “Member
        Minimum Gain”
        means
        minimum gain attributable to “partner non-recourse debt” determined in
        accordance with Treasury Regulation Section 1.704-2(i).

      

      “Member
        Nonrecourse Debt”
        means
“partner nonrecourse debt” as defined in Treasury Regulation Section
        1.704-2(b)(4).

      

      “Member
        Nonrecourse Deductions”
        means
“partner nonrecourse deductions” as defined in Treasury Regulation Section
        1.704-2(i)(2).

      

      “Membership
        Interest”
        means
        the interest, as a Member, of any Person in the Company.

      

      “Minority
        Interests”
        means
        the ownership interest of any Person (other than the Company) in an Owner
        Entity
        that owns any Part Owned Property.

      

      “Minority
        Interest Holder”
        means
        any Person that owns a Minority Interest.

      

      “Net
        Cash Flow”
        means,
        with respect to any fiscal year or other accounting period, Net Operating
        Income
        less (a) debt service (including interest and principal payments) on loans
        to
        the Owner Entities, less (b) capital expenditures not paid from (i) reserves,
        (ii) capital contributions to the Owner Entities by its members or (iii)
        Capital
        Transactions, less (c) increases or decreases in reserves for working capital,
        operating deficits and capital items, established by the Owner Entities or
        such
        other amount as may be approved by the Entities, less (d) Incentive Fees,
        less
        (e) all amounts required to be paid to Minority Interest Holders.

      
         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

      

      [NOTE:
        INCOME AND EXPENSE RELATED DEFINITIONS TO BE CONFORMED WITH THE FINAL STRUCTURE
        OF COMPANY HOLDINGS, AS AGREED BY THE PARTIES IN GOOD FAITH. RESERVE
        REQUIREMENTS MAY BE REFERENCED IN OWNER ENTITY OPERATING
        AGREEMENTS]

      

      “Net
        Operating Income”
        means,
        for any period, Operating Revenues, less (i) Operating Expenses, less (ii)
        real
        property and personal property taxes, income taxes, and other taxes other
        than
        payroll taxes, less (iii) insurance premiums and deductibles, less (iv) leases
        or purchase money financing of FF&E or of real property and improvements,
        less (v) Base Fees and fees payable to the asset manager, less (vi)
        Lessee-related expenses, and less (vii) additions to any operating and
        replacement reserves, in the amount of

      

      for
        Stabilized Assets: 4% of Gross Revenue, until the second anniversary of the
        date
        hereof, and 5% of Gross Revenue thereafter,

      

      for
        the
        Hartford Hilton: 3% of Gross Revenue, until the second anniversary of the
        date
        hereof, thereafter 4% of Gross Revenue until the fourth anniversary of the
        date
        hereof, and 5% of Gross Revenue thereafter, 

      

      for
        the
        Hartford Marriott (if applicable): $0 until the first anniversary of the
        date
        hereof, thereafter 3% of Gross Revenue until the fifth anniversary of the
        date
        hereof, and 4% of Gross Revenue thereafter, 

      

      or
        such
        higher amount as may be required pursuant to the franchise agreement or loan
        with respect to the applicable hotel.

      

      “Non-Discretionary
        Expenses”
        shall
        mean third party expenses over which Managing Member and the Property Manager
        have no control (including, for example, items that are budgeted for and/or
        approved by the Members, taxes, water and sewer costs and assessments, union
        labor contract costs and property-related expenses reasonably required to
        be
        incurred as a result of force
        majeure).

      

      “Non-Managing
        Member”
        means
        any Member(s) other than Managing Member.

      

      “Nonrecourse
        Deductions”
        means
        deductions as described in Treasury Regulation Section 1.704-2(c).

      

      “Operating
        Expenses”
        means,
        for any period, the current obligations of the Owner Entities for such period,
        determined in accordance with sound accounting principles approved by the
        Owner
        Entities and applicable to commercial real estate, consistently applied,
        for
        operating expenses of the Property. Operating Expenses shall not include
        any
        non-cash expenses such as depreciation or amortization.

      

      “Operating
        Revenues”
        means,
        for any period, the gross revenues of the Owner Entities arising from the
        ownership and leasing of the Properties during such period, including proceeds
        of any business interruption insurance, but specifically excluding the proceeds
        of Capital Transactions and capital contributions made by members.

      
         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

      

      “Owner
        Entity”
        means a
        Development Asset Entity or a Stabilized Asset Entity that is owned in whole
        or
        part by the Company; provided that the Owner Entity that owns the Hartford
        Marriott Property shall be considered an Owner Entity only from and after
        the
        date (if ever) that the Company shall acquire the membership interest of
        such
        company in accordance with the terms of the Contribution Agreement.

      

      “Part
        Owned Entity”
        meant
        the entities owning the Part Owned Properties in the percentage interests
        as set
        forth in Exhibit
        1.1.

      

      “Part
        Owned Property”
        means
        any Property that is not wholly owned by the Company or by a wholly owned
        subsidiary of the Company. On the date hereof, the following Properties are
        a
        Part Owned Property:

      Residence
        Inn, Danbury, CT;

      [Hartford
        Marriott, Hartford, CT; to be included only if and when the membership interests
        in the company owning the Hartford Marriott are acquired by the
        Company];

      Hartford
        Hilton, Hartford, CT;

      Dunkin
        Donuts, 790 West St., Southington, CT; and

      Residence
        Inn Southington, Southington, CT.

       

      “Part
        Owned Property Lessee”
        means
        one or more limited liability companies formed through Affiliates of the
        Members
        to lease and operate a Part Owned Property and in which the Minority Interest
        Holder shall have an interest percentage in proportion to its Minority Interest
        in such Part Owned Property and as to which such Affiliates shall hold
        respective ownership interests in the same proportion as the Affiliated Members
        hold ownership interests in the Company.

      

      “Person”
        means
        and includes any individual or Entity.

      

      “Preferred
        Return”
        means,
        for each Member, an amount that accrues on the average daily balance of such
        Member’s Contribution Account at a per annum rate of eight and one-half percent
        (8.5%) from the date such Member’s Capital Contributions are made until the
        Preferred Return is paid to the respective contributing Member as provided
        herein. The Preferred Return of the Members shall not be compounded.

      

      “Preferred
        Return Account”
        means
        for each Member an account maintained for Member to which shall be credited
        the
        accrued Preferred Return of such Member and from which shall be debited the
        amount of any distributions of the Preferred Return to such Member pursuant
        to
Section
        5.2.2.A or 5.2.2.B
        hereof,
        as well as any distribution of the “Preferred Return” as defined in the Limited
        Liability Company Agreement of [Leaseco, LLC] dated ___, 2005, made to a
        Member
        or its Affiliate by a Lessee.

      

      “Profits”
        and
“Losses”
        means
        for each fiscal year or other period an amount equal to the Company’s taxable
        income or loss with respect to the relevant period, determined in accordance
        with Code Section 703(a) (for this purpose, all items of income, gain, loss
        or
        deduction required to be stated separately pursuant to Code Section 703(a)(1)
        shall be included in taxable income or loss), with the following
        adjustments:

      
         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

      

      
        	 	
                ·

              	
                Any
                  income of the Company that is exempt from federal income tax and
                  not
                  otherwise taken into account in computing Profits and Losses pursuant
                  to
                  this clause shall be added to such taxable income or
                  loss;

              

      

      

      
        	 	
                ·

              	
                Any
                  expenditures of the Company described in Code Section 705(a)(2)(B)
                  or
                  treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
                  Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
                  in
                  computing Profits or Losses pursuant to this clause, shall be subtracted
                  from such taxable income or loss;

              

      

      

      
        	 	
                ·

              	
                If
                  the Gross Asset Value of any Company asset is adjusted pursuant
                  to clauses
                  B or C of the definition of Gross Asset Value, the amount of such
                  adjustment shall be taken into account in the taxable year of adjustment
                  as gain or loss from the disposition of such asset for purposes
                  of
                  computing Profits or Losses;

              

      

      

      
        	 	
                ·

              	
                Gain
                  or loss resulting from any disposition of Company property with
                  respect to
                  which gain or loss is recognized for federal income tax purposes
                  shall be
                  computed by reference to the Gross Asset Value of the property
                  disposed
                  of, notwithstanding that the adjusted tax basis of such property
                  differs
                  from its Gross Asset Value;

              

      

      

      
        	 	
                ·

              	
                In
                  lieu of the depreciation, amortization and other cost recovery
                  deductions
                  taken into account in computing such taxable income or loss, there
                  shall
                  be taken into account Depreciation for such fiscal year or other
                  period,
                  computed in accordance with the definition of
                  Depreciation;

              

      

      

      
        	 	
                ·

              	
                To
                  the extent an adjustment to the adjusted tax basis of any asset
                  included
                  in Company assets pursuant to Code Section 734(b) or Code Section
                  743(b)
                  is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4)
                  to
                  be taken into account in determining Capital Accounts as a result
                  of a
                  distribution other than in liquidation of a Member’s interest, the amount
                  of such adjustment shall be treated as an item of gain (if the
                  adjustment
                  increases the basis of the asset) or loss (if the adjustment decreases
                  the
                  basis of the asset) from the disposition of the asset and shall
                  be taken
                  into account for the purposes of computing Profits and Losses;
                  and

              

      

      

      
        	 	
                ·

              	
                Notwithstanding
                  any other provision of this definition any items of income, gain,
                  loss or
                  deduction that are specially allocated pursuant to Article
                  6
                  shall not be taken into account in computing Profits or Losses.
                  The amount
                  of items of income, gain, loss and deduction available to be specially
                  allocated pursuant to Article
                  6
                  shall be determined using rules analogous to those set forth in
                  this
                  definition.

              

      

      

      “Project
        Acquisition Costs”
        means
        all costs incurred by the Company or paid as a capital contribution to an
        Owner
        Entity in connection with or related to the acquisition of the Properties
        by the
        Owner Entities or the acquisition of the Owner Entities by the Company, the
        obtaining of all necessary approvals for development and construction of
        the
        Development Assets not obtained as of the Contribution Agreement Closing
        Date,
        and the formation of the Company not including any Lessees but including,
        (i)
        any amounts paid by the Company under the Contribution Agreement in connection
        with the acquisition of the Owner Entities, (ii) any amounts paid pursuant
        to
Section
        3.1.2
        hereof,
        (iii) all costs of title insurance, recording fees, and all costs and fees
        of
        lawyers, architects, engineers and other professionals, including any of
        same
        expended for “due diligence” in connection with the acquisition of the
        Properties or the Owner Entities, (iv) all costs of permits and approvals
        for
        the acquisition of the Owner Entities, (v) all costs incurred in the assumption
        of any franchise or operating agreements by a Lessee, (vi) all costs incurred
        in
        the assumption, negotiation or refinancing of any indebtedness with respect
        to
        any Property and (vii) the cost of any negotiations with, and payments made
        on
        any account to, the Minority Interest Holders in respect of (A) the acquisition
        by the Company of the Owner Entities, (B) the establishment of any Lessee
        or (C)
        acquisition of any Minority Interest. Project Acquisition Costs shall be
        tracked
        and allocated among the Properties as applicable.

      
         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

      

      “Residual
        Sharing Ratios”
        means
        the percentages in which Members participate in distributions of Net Cash
        Flow
        and Capital Proceeds pursuant to Section
        5.2.
        The
        Residual Sharing Ratios of the Members are as follows:

      

      
        
          	 	
                  Investor
                    Class A Member:

                	
                  56.7%
                    with respect to Stabilized Assets and
                    0%

                

        

        
          	 	 	 with respect to Development
                  Assets;

        

      

      

      
        
          	 	
                  Investor
                    Class B Member:

                	
                  0%
                    with respect to Stabilized Assets and
                    35%

                

        

        
          	 	 	 with respect to Development
                  Assets;

        

      

      

      
        
          	 	
                  Waterford
                    Class Member:

                	
                  43.3%
                    with respect to Stabilized Assets and 65%

                

        

        
          	 	 	with respect to Development
                  Assets.

        

      

      

      “Site
        Improvement Work”
        means
        any work required to construct or improve all parking and other common areas
        of
        any Property, including utilities, drainage, irrigation, grading, paving,
        roadwork, parking areas, curbing, signs, lighting and landscaping.

      

      “Stabilized
        Assets”
        means
        the following Properties: (1) Residence Inn by Marriott and Whitehall Mansion,
        Mystic, CT; (2) Courtyard by Marriott, Warwick, RI; (3) Courtyard by Marriott
        and Rosemont Suites, Norwich, CT; (4) SpringHill Suites by Marriott, Waterford,
        CT; (5) Mystic Marriott Hotel and Spa, Groton, CT; (6) Residence Inn by
        Marriott, Southington, CT, and ancillary Dunkin Donuts; (7) Residence Inn
        by
        Marriott, Danbury, CT.

      

      “Stabilized
        Asset Entity”
        an Owner
        Entity that owns, in whole or part, a Stabilized Asset.

      

      “Tax
        Contest”
        means an
        audit, review, examination, or any other administrative or judicial proceeding
        with the purpose or effect of redetermining any taxes (including any
        administrative or judicial review of any claim for refund).

      

      “Tax
        Correspondence”
        means
        all written and oral communications from the IRS (or other taxing authority)
        relating to any item of income, gain, loss or deduction arising with respect
        to
        any activities or assets of the Company, whether communicated with respect
        to an
        audit or otherwise.

      

      “Transfer”
        and
“Transferred”
        means a
        sale, transfer, assignment, conveyance, gift, bequest or disposition by any
        other means, whether for value or no value and whether voluntary or involuntary
        (including, by realization upon any Encumbrance or by operation of law or
        by
        judgment, levy, attachment, garnishment, bankruptcy or other legal or equitable
        proceedings).

      
         

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

      

      “Waterford
        Class Membership Interest”
        means
        the class of Membership Interest issued to the Waterford Member.

      

      “Wholly
        Owned Entity”
        means
        the entities owning the Wholly Owned Properties.

      

      “Wholly
        Owned Property”
        means
        any Property that is wholly owned by the Company or by a subsidiary of the
        Company. On the date hereof, the following Properties are Wholly Owned
        Properties:

      

      Courtyard
        Hotel Warwick, Warwick, RI

      Residence
        Inn, Mystic, CT

      Courtyard,
        Norwich, CT

      Springhill
        Suites, Waterford, CT 

      Marriott,
        Mystic, CT

      

      “Wholly
        Owned Property Lessee”
        means a
        limited liability company formed by or through Affiliates of the Members
        to
        lease and operate the Wholly Owned Properties and as to which such Affiliates
        shall hold respective ownership interests in the same proportion as the
        Affiliated Members hold ownership interests in the Company. 

      

      A
        reference to any agreement, budget, document or schedule shall include such
        agreement, budget, document or schedule as revised, amended, modified or
        supplemented from time to time in accordance with its terms and the terms
        of
        this Agreement. The singular includes the plural and the plural includes
        the
        singular. The words “include”, “includes” and “including” are not limiting.
        Reference to a particular “Section” or “Articles” refers to that section or
        articles of this Agreement unless otherwise indicated. The words “herein”,
“hereof”, “hereunder” and words of like import shall refer to this Agreement as
        a whole and not to any particular section or subdivision of this
        Agreement.

      

      

      
        	
                2.

              	
                ORGANIZATION

              

      

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      
        	
                2.2

              	
                Name
                  and Principal Place of Business.

              

      

      
         

      

      2.2.1   
            The
        name
        of the Company is set forth on the cover page to this Agreement. The Members
        may
        change the name of the Company or adopt such trade or fictitious names for
        use
        by the Company as the Members may from time to time determine. All business
        of
        the Company shall be conducted under such name, and title to all Company
        property shall be held in such name.

      

      2.2.2     
          The
        principal place of business and office of the Company shall be located at
        914
        Hartford Turnpike, Waterford, CT 06385, or at such other place or places
        as
        Investor Member and Waterford Member (acting together) may from time to time
        designate.

       

      2.3        
         Term.  
            The
        term
        of the Company commenced on ____________, 2005, the date of the filing of
        the
        Certificate of Formation pursuant to the Act, and shall continue until December
        31, 2055, unless sooner terminated or further extended pursuant to the
        provisions of this Agreement.

       

      2.4         
        Registered
        Agent and Registered Office.   
        The
        name
        of the Company’s registered agent for service of process shall be CT Corporation
        Systems, and the address of the Company’s registered agent in the State of
        Connecticut shall be ____________________. Managing Member may, upon notice
        to
        all Members, change such agent and such office from time to time.

       

      
        	
                2.5

              	
                Purpose
                  of Company.

              

      

       

      2.5.1      
         The
        purpose of the Company is to engage in the following business and financial
        activities in accordance with the terms of this Agreement: to acquire, own,
        hold, maintain, lease, improve, develop, finance, pledge, encumber, mortgage,
        assign, sell, exchange, lease, dispose of and otherwise deal with any Property
        (through the Owner Entities), together with such other activities as may
        be
        ancillary or related to, or otherwise necessary or advisable in connection
        with
        the foregoing. The Company, without the written consent of all Members, shall
        not engage in any business unrelated to the Properties and shall not own
        any
        assets other than those related to the Properties or otherwise in furtherance
        of
        the purposes of the Company.

      

      2.5.2      
         Each
        Property shall be separately held by an Owner Entity that is wholly owned
        by the
        Company or owned by the Company and the Minority Interest Holders. Each Owner
        Entity shall be operated under an agreement (each such agreement, an
“Owner
        Entity Operating Agreement”)
        substantially in the form attached hereto as Exhibit
        2.5.2,
        in the
        case of any Wholly Owned Property, and with respect to any Part Owned Property
        in the form of any operating agreement now in effect, with such changes as
        may
        be mutually approved by Investor Member, Waterford Member and the relevant
        Minority Interest Holder. The Managing Member shall be the manager of the
        Owner
        Entities and implement the decisions of the Members made pursuant to each
        Owner
        Entity Operating Agreement. 

      

      2.5.3      
         It
        is the
        Members’ intention to cause the Properties to be operated and maintained by the
        Owner Entities as quality hotels (with ancillary retail components) and for
        the
        Property now operated as a Dunkin Donuts to be operated as that or another
        retail use approved by the Members, pursuant to commercially reasonable
        conditions and standards, with a view to maximizing the Net Cash Flow and
        Capital Proceeds. Members intend that the funding for the Properties shall
        be
        provided first from Operating Revenues and from Capital Contributions (together
        with, in the case of the Part Owned Properties, the proportional capital
        contributions of Minority Interest Holders) or third party loans. 

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      
        	
                2.6

              	
                Members;
                  Membership Interests.

              

      

      
         

      

      2.6.1      
         The
        Company shall have three classes of Membership Interests: Investor Class
        A,
        Investor Class B and Waterford Class, each class having identical rights
        on all
        matters other than as expressly provided herein.

      

      2.6.2      
         Effective
        as of the Agreement Date, the Members of the Company shall be Investor Member
        and Waterford Member. Except as expressly permitted by this Agreement, no
        other
        Person shall be admitted as a member of the Company and no additional membership
        interests shall be issued.

      

      2.6.3       
        Waterford
        Member shall be the initial Managing Member of the Company, and shall bear
        responsibility and authority for the affairs and management of the Company
        to
        the extent contemplated hereby, except to the extent that this Agreement
        contemplates that a Non-Managing Member, the Property Manager or the Tax
        Matters
        Member shall have specific responsibility or authority with respect
        thereto.

       

      2.7         Limitation
        on Liability.  
         Except
        as
        otherwise expressly provided in the Act, the debts, obligations and liabilities
        of the Company, whether arising in contract, tort or otherwise, shall be
        solely
        the debts, obligations and liabilities of the Company, and no Member shall
        be
        obligated personally for any such debt, obligation or liability of the Company
        solely by reason of being a Member of the Company. Except as otherwise expressly
        provided in the Act and in Section 4.6 hereof, the liability of each
        Member shall be limited to the amount of Capital Contributions required to
        be
        made by such Member in accordance with the provisions of this Agreement,
        but
        only when and to the extent the same shall become due pursuant to the provisions
        of this Agreement. 

       

      2.8         Title
        to Company Property.   
        All property owned by the Company, whether real or personal, tangible or
        intangible, shall be deemed to be owned by the Company as an entity, and
        no
        Member, individually, shall have any ownership of such property. 

       

      
        	
                3.

              	
                CAPITAL

              

      

       

      
        	
                3.1

              	
                Initial
                  Capital Contributions.

              

      

      

      3.1.1       
        The
        Members acknowledge that on or prior to the date hereof, Waterford Member
        and
        Investor Member have made Capital Contributions to the Company as follows:
        

      

      A.    
        In
        exchange for the Waterford Class Membership Interests and the payment to
        the
        Waterford Member of [$___________],
        the
        Waterford Member shall have transferred as a capital contribution to the
        Company
        all of its interests in each Wholly Owned Entity (which shall comprise all
        of
        the outstanding interests in each Wholly Owned Entity) and all of its interests
        in the Part Owned Entities, in each case free and clear of any and all
        Encumbrances, and with a net fair market value (it being understood and agreed
        that such fair market value shall equal the Contribution Value) of [$_________]
        after
        giving effect to the Cash Payment (as defined in the Contribution Agreement)
        made to Waterford Member in accordance with the Contribution Agreement),
        as
        shown on Exhibit
        A.
        The
        parties acknowledge and agree that the contribution to the Company of the
        Waterford Member’s interest in the Owner Entities shall be treated as a part
        disguised sale, described in Code Section 707 and the Treasury Regulations
        promulgated thereunder, and as a part capital contribution described in Code
        Section 721. The parties further acknowledge and agree that [$________]
        of the
        cash paid to Waterford Member and [$______]
        of the
        liabilities of Waterford Member that are assumed by the Company relate to
        capital expenditures with respect to the Wholly Owned Properties incurred
        during
        the two-year period prior to the contribution, and therefore shall not be
        considered sales proceeds in the disguised sale pursuant to the Treasury
        Regulations promulgated under Code Section 707.

      
         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

      

      B.    
        In
        exchange for the Investor Class A Membership Interests, the Investor Member
        shall have made Capital Contributions in cash to the Company in the amount
        of
[$__________].

      

      C.    
        In
        exchange for the Investor Class B Membership Interests, the Investor Member
        shall have made Capital Contributions in cash to the Company in the amount
        of
[$_________].
        

      

      D.    
        The
        Capital Contributions are allocated to the various Owner Entities in accordance
        with Exhibit
        A.
        

      

      3.1.2      
        On
        the
        Contribution Agreement Closing Date, Waterford Member and Investor Member
        shall
        make further Capital Contributions in accordance with the Capital Sharing
        Ratios
        of the amount required to pay all amounts due and payable under the terms
        of the
        Contribution Agreement, as well as all other Project Acquisition Costs (subject
        to the allocations for such costs established under the Contribution Agreement)
        and to establish appropriate operating reserves and accounts, as determined
        by
        Investor Member and Waterford Member. On the Contribution Agreement Closing
        Date, the Company shall reimburse each Member for those third party expenses
        and
        other expenses set forth in Exhibit
        3.1.2,
        incurred by it or its Affiliates prior to the date of this Agreement
        (collectively, the “Pre-Closing
        Costs Reimbursement Amount”).

       

      
        	
                3.2

              	
                Additional
                  Capital Contributions.

              

      

       

      3.2.1      
        Except
        as
        otherwise required by law or pursuant to this Section and Section
        3.1,
        no
        Member shall be required to make any additional Capital Contributions to
        the
        Company. At any time and from time to time following the making of the initial
        Capital Contributions set forth in Section
        3.1,
        the
        Members may determine by unanimous consent that the Company requires additional
        cash Capital Contributions and the amount, terms and conditions thereof in
        connection with the development of the Property (including, for renovation
        or
        construction of buildings, common areas and other site improvements, or payment
        of Operating Expenses and subject, in the case of the Part Owned Properties,
        to
        the approval rights of the Minority Holders in respect of additional Capital
        Contributions and agreement to bear their ratable share of any additional
        Capital Contributions), or to meet the ordinary Operating Expenses of the
        Company. Any such additional Capital Contributions shall be made in accordance
        with the applicable Capital Sharing Ratios. Capital Contributions made to
        fund
        an Owner Entity shall be used only for that purpose and shall otherwise be
        returned to the respective Members in the amounts contributed. 

      
         

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

      

      3.2.2      
        In
        the
        event that the Waterford Member’s interests in the Development Asset Entity that
        owns the Hartford Marriott located in Hartford, Connecticut (the “Deferred Property”)
        is not
        purchased by the Company as a Development Asset on or prior to the date hereof
        pursuant to Section
        3.1,
        then at
        such time as the conditions to the purchase of the Deferred Property set
        forth
        in Section 14.2.4 of the Contribution Agreement have been satisfied, (A)
        the
        Waterford Member shall transfer all of its interests in the Deferred Property
        to
        the Company (which shall be the percentage of the outstanding interests in
        the
        Deferred Property as shown on Exhibit A), free and clear of any and all
        Encumbrances and with a net fair market value to be credited as a Capital
        Contribution of [$_________] (after giving effect to payments made to the
        Waterford Member in accordance with the Contribution Agreement), as shown
        on
Exhibit
        A;
        (B) the
        Investor Member shall make a Capital Contribution in the amount of [$________],
        [and (C) the Company shall pay the Waterford Member [$__________] as the
        Cash
        Payment (as defined in the Contribution Agreement) allocated to the Deferred
        Property]. The Waterford Member and Investor Member shall make further Capital
        Contributions in accordance with the Capital Sharing Ratios applicable to
        the
        Development Assets in the amount required to pay all amounts due and payable
        under the terms of the Contribution Agreement, as well as all other Project
        Acquisition Costs, if any, to acquire the Deferred Property (subject to the
        Minority Interests) and to establish appropriate operating reserves and accounts
        for the Deferred Property, as determined by Investor Member and Waterford
        Member. 

      

      3.2.3       
        Upon
        a
        determination by the Members to require additional Capital Contributions,
        Managing Member shall issue a written notice of such determination and stating
        the amount of each Member’s Capital Contribution. Each Member shall make payment
        of its Capital Contribution within 15 Business Days after written notice
        of the
        call therefor, in the case where the aggregate Capital Contributions demanded
        of
        all Members are less than or equal to $100,000, and within 20 Business Days,
        in
        the case where the aggregate Capital Contributions demanded of all Members
        exceed $100,000. Capital Contributions (other than the initial Capital
        Contribution of Waterford Member as provided in Section
        3.1)
        shall
        be made in cash unless otherwise agreed by each Member. Failure to make a
        Capital Contribution when required hereunder shall be a “Capital
        Contribution Default,”
        following which:

      

      A.           
        distributions
        made in accordance with clauses
        5.2.2
        or
5.2.3,
        shall
        be amended to reflect the following deemed changes to the Members’ Capital
        Accounts and Capital Sharing Ratios: 

      

      i.     
        the
        non-defaulting Member shall be deemed to have made an additional Capital
        Contribution equal to one-half of the portion of the capital call that the
        defaulting Member failed to make (the “Defaulted
        Amount”),
        and

      

      ii.    
        the
        non-defaulting Member’s Capital Account shall similarly be increased by one-half
        of the Defaulted Amount, and the Capital Sharing Ratio shall be recalculated
        on
        the basis of the revised Capital Account balances. 

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      Notwithstanding
        the foregoing, for the purpose of further Capital Contributions, the defaulting
        Member shall nonetheless be required to make Capital Contributions at the
        initial Capital Sharing Ratio that existed prior to (and without giving effect
        to) any such deemed adjustment, and

      

      B.          
        the
        provisions of Section
        9.2
        shall
        also apply.

      

      3.2.4       
        If
        a
        Member or the Managing Member believes that there are insufficient Company
        resources available to meet the emergency expenditures of the Company, any
        Property or Owner Entity occasioned on account of imminent threats of property
        damage or personal injury or death, in order to remedy such emergency or
        casualty, it shall notify the other Members and provide details of the amounts
        required and the reasons therefor. The Members may thereafter agree but shall
        have no obligation to, contribute the additional capital as a Capital
        Contribution pursuant to the provisions of Section
        3.2.1.
        If, for
        any reason, any Member is unwilling or unable to contribute its share of
        such
        additional capital, the other Member may loan to the Company the required
        amount
        as an advance to the Company (a “Member
        Loan”).
        Each
        such Member Loan shall be evidenced by a note of the Company bearing interest
        at
        the Member Loan Interest Rate and, if applicable, on-lent to the applicable
        Owner Entity on the same terms. Repayment of a Member Loan shall not be a
        distribution under Article
        5.
        All
        outstanding Member Loans shall be repaid in full, together with all accrued
        interest, prior to any distribution to the Members.

       

      3.3         
        Return
        of Capital; No Interest on Capital.  
         Except as expressly provided in this Agreement, no Member shall be
        entitled to the return of any or all of its Capital Contribution. Neither
        a
        Member’s Capital Account nor its Capital Contribution shall earn
        interest.

       

      3.4         
        No
        Third-Party Beneficiary.  
         No creditor or other third party having dealings with the Company
        shall
        have the right to enforce the right or obligation of any Member to make Capital
        Contributions or to pursue any other right or remedy hereunder or at law
        or in
        equity, it being understood and agreed that the provisions of this Agreement
        shall be solely for the benefit of, and may be enforced solely by, the parties
        hereto and their respective successors and assigns. None of the rights or
        obligations of the Members herein set forth to make Capital Contributions
        to the
        Company shall be deemed an asset of the Company for any purpose by any creditor
        or other third party, nor may such rights or obligations be sold, transferred
        or
        assigned by the Company or pledged or encumbered by the Company to secure
        any
        debt or other obligation of the Company or of any of the Members.

       

      
        	
                3.5

              	
                Capital
                  Accounts.

              

      

      

      3.5.1      
        There
        shall be established for each Member on the books of the Company, as of the
        date
        hereof, a Capital Account, which shall be increased and decreased in the
        manner
        set forth herein.

      

      3.5.2      
        “Capital
        Account”
        means,
        with respect to each Member, an account maintained for such Member on the
        Company’s books and records in accordance with the following
        provisions:

      
         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

      

      A.      
           To
        each
        Member’s Capital Account there shall be added (a) the amount of cash and the
        initial Gross Asset Value of any property contributed by such Member to the
        capital of the company, (b) such Member’s share of (i) Profits and (ii) any
        items in the nature of income or gain that are specially allocated pursuant
        to
Article
        6
        and (c)
        the amount of any Company liabilities assumed by such Member or that are
        secured
        by any Company property distributed to such Member.

      

      B.         
         From
        each
        Member’s Capital Account there shall be subtracted (a) the amount of (i) cash
        and (ii) the Gross Asset Value of any Company property distributed to such
        Member pursuant to any provision of this Agreement (other than amounts paid
        as
        interest or in repayment of principal on any loan by a Member to the Company),
        (b) such Member’s share of (i) Losses and (ii) any items in the nature of
        expenses or losses that are specially allocated pursuant to Article
        6
        and (c)
        the amount of any liabilities of such Member assumed by the Company or that
        are
        secured by any property contributed by such Member to the Company.

      

      C.          
        In
        determining the amount of any liability for purposes of Sections
        3.5.2.A
        and
3.5.2.B,
        there
        shall be taken into account Code Section 752(c) and any other applicable
        provisions of the Code and the Regulations.

      

      D.          
        A
        Member
        who has more than one interest in the Company shall have a single Capital
        Account that reflects all such interests regardless of the class of interests
        owned by such Member and regardless of the time or manner in which such
        interests were acquired.

      

      3.5.3       
        Adjustments
        to Capital Accounts in respect to Company income, gain, loss, deduction and
        non-deductible expenditures (or item thereof) shall be made with reference
        to
        the federal tax treatment of such items (and, in the case of book items,
        with
        reference to the federal tax treatment of the corresponding tax items) at
        the
        Company level, without regard to any requisite or elective tax treatment
        of such
        items at the Member level.

      

      3.5.4       
        The
        provisions of this Section and the other provisions of this Agreement relating
        to the maintenance of Capital Accounts are intended to comply with Regulations
        Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied in a
        manner
        consistent with such Regulations. In the event that Managing Member shall
        determine that it is prudent to modify the manner in which Capital Accounts,
        or
        any additions or subtractions thereto (including, adjustments relating to
        liabilities that are secured by contributed or distributed property or that
        are
        assumed by the Company or the Members), are computed in order to comply with
        such Regulations, Managing Member shall be entitled to make such modification,
        provided that it is not likely to have a material effect on the amounts
        distributable to any Member pursuant to Section
        10.3
        upon
        dissolution of the Company. 

      

      3.5.5        
        No
        adjustments shall be made to the Capital Account of any Member by reason
        of
        payment or receipt of any fees by it or any Affiliate pursuant to Article
        4
        hereof.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      
        	
                4.

              	
                MANAGEMENT
                  OF THE COMPANY

              

      

      
         

      

      
        	
                4.1

              	
                Authority
                  of Managing Member.

              

      

      

      4.1.1        
        Managing
        Member shall conduct the day-to-day management of the Company and (subject
        to
        the consent, management and other rights of Minority Interest Holders) each
        Owner Entity in order to implement the purposes of the Company identified
        in
Section
        2.5,
        the
        applicable Business Plan, Operating Budget and all Major Decisions and other
        decisions of the Members that have then been made. Without limiting the
        generality of the foregoing, except
        to the extent that any of the following would constitute a Major
        Decision
        or
        otherwise require the consent of all Members under the terms hereof, Managing
        Member, acting in its reasonable discretion but without any requirement of
        any
        consent or approval from any other Member, shall have general responsibility
        for
        the following with respect to the Company and the Owner Entities:

      

      A.         
        To
        implement all Major Decisions the Members have made;

      

      B.          
        To
        employ, engage or contract with or dismiss from employment or engagement
        Persons
        to the extent deemed necessary by Managing Member for the operation and
        management of the Company business, including but not limited to, contractors,
        subcontractors, engineers, architects, surveyors, mechanics, consultants,
        accountants, investment bankers, underwriters, insurance brokers and others
        as
        contemplated by the Business Plan (it being understood that unless the Members
        shall unanimously agree otherwise, PriceWaterhouseCoopers shall provide general
        auditing services for the Company, as an expense of the Company, and KPMG
        shall
        provide Sarbanes-Oxley Act compliance control testing for the Company, at
        the
        request of Investor and as an expense of Investor); provided that the cost
        of
        any control established by the Company on the advice of KPMG or otherwise
        in
        accordance with the Sarbanes-Oxley Act shall be an expense of the
        Company;

      

      C.           To
        acquire and enter into any contract of insurance contemplated by the Business
        Plan;

      

      D.          
        To
        conduct banking transactions on behalf of the Company and the Owner Entities
        in
        the ordinary course of business; 

      

      E.           
        To
        demand, sue for, receive, and otherwise take steps to collect or recover
        all
        debts, rents, proceeds, interests, dividends, goods, chattels, income from
        property, damages and all other property, to which the Company or the Owner
        Entities may be entitled or that are or may become due to the Company or
        the
        Owner Entities from any Person in the ordinary course of business; to implement
        the decisions of the Members to commence, prosecute, enforce, defend, answer,
        oppose, contest and abandon all legal proceedings in which the Company or
        the
        Owner Entities is or may hereafter be interested; and to submit to arbitration
        any accounts, debts, claims, disputes and matters that may arise between
        the
        Company or the Owner Entities and any other Person; 

      

      F.          
        To
        take
        all reasonable measures necessary to ensure compliance by the Company or
        the
        Owner Entities with applicable agreements, and other contractual obligations
        and
        arrangements, entered into by the Company or the Owner Entities from time
        to
        time in accordance with the provisions of this Agreement, including periodic
        reports as required to be submitted to lenders;

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      G.         
        To
        maintain the Company’s and the Owner Entities’ books and records, which shall
        include, but not be limited to, separately tracking and accounting for the
        portion of Net Cash Flow that is attributable to each Property;

      

      H.         
        To
        prepare and deliver, or cause to be prepared and delivered, all financial
        and
        other reports with respect to the operations of the Company and the Owner
        Entities and all federal and state tax returns and reports;

      

      I.           To
        pay or
        reimburse any and all fees, costs and expenses incurred in the formation
        and
        organization of the Company;

      

      J.          To
        do all
        acts that are necessary, customary or appropriate for the protection,
        maintenance, repair, operation and preservation of the Company’s
        assets;

      

      K.        
        To
        establish and maintain any and all reserves, working capital accounts and
        other
        cash or similar balances in such amounts as the Members have
        determined;

      

      L.         
        To
        enter
        into any Lease; and

      

      M.        
        In
        general, to exercise all of the general rights, privileges and powers permitted
        to be exercised by the provisions of the Act.

      

      4.1.2       
        Managing
        Member shall have the right, power and authority to execute documents on
        behalf
        of the Company and the Owner Entities to implement the Business Plan, and
        otherwise in the ordinary course of business. The signature of Managing Member
        shall be sufficient to bind the Company. Notwithstanding the foregoing, if
        requested in writing by Managing Member, each Member shall execute and deliver
        those documents deemed necessary or desirable by Managing Member in order
        to
        carry out the provisions of this Agreement. The exercise of any of the rights
        or
        powers of the Member pursuant to the terms of this Agreement shall not be
        deemed
        to be taking part in the affairs of the Company or the exercise of control
        over
        the affairs of the Company. 

      

      4.1.3      
        Managing
        Member shall provide to the Non-Managing Members, promptly following receipt,
        copies of all material notices from any Person and copies of all notices
        from
        any government or judicial body.

      

      4.1.4      
        Managing
        Member shall implement and enforce an anti-money laundering policy and a
        program
        of compliance with the Uniting and Strengthening America by Providing
        Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
        ACT)
        Act of 2001, Public Law 107-56 (October 26, 2001) as the same may be amended
        from time to time, and corresponding provisions of future laws (the
“Patriot
        Act”).

      

      4.1.5      
        Managing
        Member agrees to use good faith, reasonable efforts to operate and cause
        each
        Owner Entity to operate each Property as a quality hotel (with ancillary
        retail
        components) pursuant to commercially reasonable conditions and standards
        in
        accordance with the purposes of the Company identified in Section
        2.5
        and the
        applicable Business Plan and Operating Budget.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      
        	
                4.2

              	
                Restriction
                  of Managing Member’s Authority.

              

      

      
         

      

      4.2.1        
        Notwithstanding
        the foregoing provisions of Section
        4.1,
        except
        as otherwise (i.e.,
        other
        than in Section
        4.1)
        expressly permitted by this Agreement, Managing Member agrees that it will
        not
        take any actions within the scope of a Major Decision or any other decision
        expressly reserved to the Non-Managing Members hereunder without the prior
        written consent of all Non-Managing Members. In addition to any other matter
        designated herein as a Major Decision, Major Decisions also shall include
        the
        following:

      

      A.         Admit
        any
        new Member to the Company or issue additional Membership Interests (other
        than
        as provided in Section
        8.1).

      

      B.          Cause
        the
        Company to merge with or into any other entity.

      

      C.          Engage
        in
        any business unrelated to the Property, or own any assets other than those
        related to the Property or otherwise in furtherance of the purposes of the
        Company.

      

      D.          Amend
        this Agreement or the governing documents of any Owner Entity, except as
        otherwise provided in Article
        14.

      

      E.           Sell
        or
        lease any Property or any portion thereof to an Affiliate of Managing Member,
        except pursuant to a Lease or as provided in Article
        12
        or
Article
        13.

      

      F.           Dissolve
        or liquidate the Company (except as otherwise provided in Article
        10),
        unless
        required by law.

      

      All
        Major
        Decisions and actions on the matters set forth in Section
        4.2.1
        (and all
        other matters requiring the consent of the Members hereunder) shall require
        written notice to all Members issued by the Managing Member or any Member.
        Managing Member shall cause written minutes to be prepared of all actions
        taken
        by the decision of the Members with respect to Major Decisions or other matters
        requiring the consent of the Members hereunder, whether by formal meeting,
        telephonic meeting or otherwise.

      

      4.2.2       If,
        within five days of such notice, the Members cannot agree on a Major Decision,
        any Member may issue a written notice (the “Major
        Dispute Notice”).
        In
        order to be effective, any Major Dispute Notice must contain a description
        of
        the Major Decision on which the Members have been unable to agree and must
        contain the following language typed in BOLD PRINT on the face of the Major
        Dispute Notice:

      

      THIS
        NOTICE IS GIVEN PURSUANT TO THE LIMITED LIABILITY COMPANY AGREEMENT OF MYSTIC
        PARTNERS, LLC (THE “AGREEMENT”)
        IN
        ORDER TO ADVISE A MEMBER THAT A MAJOR DISPUTE WILL EXIST UNDER THE AGREEMENT
        UNLESS THE MEMBERS ARE ABLE TO AGREE WITHIN 30 DAYS WITH RESPECT TO THE MATTERS
        SET FORTH IN THIS NOTICE.

      
         

        
          
            
            

          

          
            23

            
              

            

          

          
            
            

          

        

      

      The
        Members shall in good faith meet to discuss and resolve the Major Decision
        in
        question. If, within 30 days of the delivery of a Major Dispute Notice, the
        Members are still unable to agree on the Major Decision in question, then
        there
        shall exist a Major Dispute hereunder.

       

      4.3          
        Budgeting
        and Business Plan.
        On or
        before November 15 of each year, Managing Member shall prepare and submit
        to the
        other Member with respect to the upcoming calendar year a draft:

      

      4.3.1   
        operating
        budget (the “Operating
        Budget”)
        for the
        Company and the Owner Entities (subject to any approval rights of the Minority
        Interest Holders in respect of the Part Owned Properties), setting forth
        by line
        item the estimated rents, revenues and other receipts of the Company and
        the
        Owner Entities, and the operating expenses and capital items for the Company
        and
        each Owner Entity, including anticipated reserves; and

      

      4.3.2    
        business
        plan (the “Business
        Plan”)
        for the
        Company, in light of the Operating Budget, setting forth an executive summary
        outlining the business strategy and budgeted and forecasted financial
        information for the upcoming period, and containing a comprehensive statement
        setting forth the overall plan for the business of the Company, including
        proposed financings and refinancings, development or redevelopment.

      

      Any
        reference in this Agreement to an “approved Operating Budget” and “approved
        Business Plan” means an Operating Budget or Business Plan, respectively, as
        unanimously approved by the Members in accordance with this Section, as the
        same
        may be subsequently amended from time to time by the Members in accordance
        with
Section
        4.2.
        In
        preparing and approving each Operating Budget and Business Plan and any
        revisions or amendments thereto, Managing Member will consider, among other
        things, the previous year’s experience, current and projected market conditions
        and anticipated future needs in light of such projections. Waterford Member
        and
        Investor Member will promptly consider any proposed annual Business Plan
        and
        Operating Budget or amendment thereto. The failure of Waterford Member and
        Investor Member to approve unanimously an annual Operating Budget and Business
        Plan within 30 days after its presentation to them will constitute a Major
        Dispute under Section
        4.2.3;
        however, the Members shall work in good faith to approve an Operating Budget
        and
        Business Plan in order to avoid a Major Dispute. Upon approval and adoption
        of
        an Operating Budget and Business Plan, the previously effective annual Operating
        Budget and Business Plan shall be completely superseded and no longer effective.
        

      

      If
        an
        annual Operating Budget or Business Plan has not been approved unanimously
        in
        accordance with this Section with respect to any fiscal year by the start
        of the
        fiscal year, then annual the Operating Budget or Business Plan, as applicable,
        in effect for the immediately preceding Fiscal Year (the “Old
        Plans”)
        will
        (subject to the proviso at the end of this sentence) serve as the interim
        annual
        Operating Budget and/or Business Plan until a new annual Operating Budget
        and
        Business Plan is so approved (if at all); provided, however, that the Old
        Plans
        will be deemed to include all items that have been agreed upon and, with
        respect
        to each Operating Budget or line item thereof that has not been approved
        by the
        Members, a corresponding Operating Budget or line item that: (A) is based
        on the
        Operating Budget or particular line item thereof, for the then current fiscal
        year (inflation adjusted) and (B) reflects increases in amounts payable with
        respect to Non-Discretionary Expenses. Attached hereto as Exhibit
        4.3
        are the
        agreed Business Plan and Operating Budget for the remainder of calendar year
        2005.

      
         

        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

      

      In
        addition, Managing Manager or any Member may from time to time present proposed
        amendments to the annual Business Plan to Members for approval. 

       

      4.4          
        Managing
        Member’s Time and Effort; Conflicts.  
         Managing Member and Tax Matters Member shall devote whatever time,
        effort
        and skill as is reasonably required to fulfill their respective obligations
        under this Agreement. Except as provided in Section 4.5, each Member may
        engage in any business or activity, including those that may conflict or
        compete
        with the Company (“Conflicting Activity”), and any such Member shall not
        be required to offer any opportunity in any business or activity to such
        Persons
        or otherwise provide compensation to such Persons therefor. 

       

      
        	
                4.5

              	
                Competitive
                  Ventures. 

              

      

      

      4.5.1         
        Each
        Member agrees that neither it nor its Affiliates will develop, purchase,
        own or
        manage any competitive hotel (other than a Property or other hotels in respect
        of which any Member has undertaken any planning or development activity,
        or that
        is owned, operated by any Member or their respective Affiliates, as of the
        date
        hereof) within a five-mile radius of any of the Properties (a “Competitive
        Venture”)
        unless,
        with respect to each such Competitive Venture, the acquiring or developing
        party
        has offered to the other Member hereunder the right to participate in the
        ownership, development and management of such property on terms substantially
        similar to the terms available to the offering Member, at the rate of 66.7%
        Investor Member participation/ 33.3% Waterford Member participation, in the
        case
        of a Competitive Venture located within five miles of a Stabilized Asset,
        and at
        the rate of 50% Investor Member participation/50% Waterford Member
        participation, in the case of a Competitive Venture located within five miles
        of
        a Development Asset, together, in each case, with a management agreement
        with
        Property Manager in the form incorporated herein by reference. If the proposed
        Competitive Venture is within five miles of both a Development Asset and
        a
        Stabilized Asset, the participation percentage shall be determined by the
        nearest asset.

      

      4.5.2        The
        Member seeking to develop, purchase, own or manage a Competitive Venture
        shall
        submit to the other Member, in confidence, each of the following (to the
        extent
        that each such item is applicable and available, given the nature of the
        proposed Competitive Venture) (the “Venture
        Package”):

      

      A.      
        a
        description of the Competitive Venture and of the real property to be purchased
        or otherwise acquired, including survey and title information if
        available;

      

      B.      
         financial
        projections with respect to the Competitive Venture for a minimum of five
        years,
        and, in the case of an acquisition, historical financial statements with
        for a
        minimum of three years, to the extent available; such financial statements
        to
        include projected operating statements, and a before- and after-tax calculation
        (based upon a pro forma tax rate) of (i) the projected internal rate of return
        to be derived from the proposed investment in the Competitive Venture, and
        (ii)
        the unleveraged yield on cost to be derived from the Competitive
        Venture;

      
         

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

      

      C.       
         a
        detailed, itemized acquisition and, if applicable, initial development budget
        containing all line items customary for a commercial development or
        redevelopment and development schedule with respect to any proposed construction
        or redevelopment of the Competitive Venture, which budget shall, among other
        items, estimate all costs of development and the aggregate equity investment
        and
        the approximate schedule upon which such funds are to be
        contributed;

      

      D.       
         a
        summary
        of the terms of any financing arrangements proposed in connection with the
        Competitive Venture and copies of all commitments and financing documents
        then
        available;

      

      E.         
        a
        summary
        of the terms of any management arrangements proposed in connection with the
        Competitive Venture and copies of the following to the extent available:
        all
        commitments, term sheets, management agreements and other documents either
        executed or proposed with a property manager and information about the financial
        strength, background, experience and qualifications of any such proposed
        property manager;

      

      F.         
         a
        summary
        of the terms of any proposed arrangements with any proposed investor in
        connection with the Competitive Venture and copies of the following to the
        extent then available: all commitments, term sheets, management agreements,
        development agreements, operating/joint venture agreement and other documents
        either executed or proposed with such investor and information about the
        financial strength, background, experience and qualifications of any such
        proposed investor;

      

      G.           copies
        of
        any acquisition agreement, construction contract, architect’s agreements,
        proposed lease form, or other documents either executed or proposed in
        connection with the Competitive Venture;

      

      H.        
         detailed
        market information, including an overview of all existing and proposed
        competitive properties and identifying sales/operating results of comparable
        properties over the most recent three-year period; 

      

      I.           
        structural
        engineering reports and environmental reports with respect to the Competitive
        Venture if then available, provided,
        however,
        that if
        either structural engineering reports or environmental reports, or both,
        are not
        then available for such Project, the offeree Member may condition its investment
        in such Competitive Venture on its receipt and review of such report or reports
        and approval thereof;

      

      J.           information
        about zoning or other permitting issues applicable to the Competitive Venture,
        if any; and

      

      K.          such
        other information and documentation as the Member shall reasonably request
        in
        connection with its review of the proposed Competitive Venture.

      
         

        
          
            
            

          

          
            26

            
              

            

          

          
            
            

          

        

      

      The
        offeree Member shall have 20
        days
        in which to review the Venture Package and determine whether to participate
        in
        the Competitive Venture. If the offeree Member does not agree to participate
        within such 20 day period, the other Member may proceed with the Competitive
        Venture for its own account or with others.

       

      
        	
                4.6

              	
                Indemnification.

              

      

       

      4.6.1    
          Managing
        Member and Tax Matters Member, and all agents acting on their or the Company’s
        behalf, shall not be liable, responsible, or accountable, in damages or
        otherwise, to the Members or the Company for doing any act or failing to
        do any
        act, the effect of which may cause or result in loss or damage to the Company
        or
        the other Member save and except that which arises from Managing Member’s or Tax
        Matters Member’s fraud, willful misconduct, breach of fiduciary duty or material
        and willful breach of their covenants and obligations under this Agreement.
        The
        Company shall indemnify, protect and hold each Member and any such agent
        harmless against all claims, expenses (including reasonable attorneys’ fees),
        losses, penalties and liability whatsoever by reason of any act performed
        or
        omitted to be performed by it in connection with the business of the Company,
        including reasonable attorneys’ fees incurred in connection with the defense of
        any action based on any such act or omission (which attorneys’ fees may be paid
        as incurred), except that such indemnification shall not apply with respect
        to a
        claim if and to the extent the claim is attributable to or caused by Managing
        Member’s or Tax Matters Member’s fraud, willful misconduct, breach of fiduciary
        duty or material and willful breach of its covenants and obligations under
        this
        Agreement. 

      

      4.6.2     
         In
        the
        event that any existing or future lender requires a nonrecourse carveout
        guaranty, each Member agrees to give such a guaranty, subject to indemnity
        by
        the Company for all losses not caused by the indemnitee, and by the other
        Member
        for losses caused by it. In the event that any obligations of the Company
        must
        be undertaken by the Members on a joint and several basis or if, under any
        other
        circumstances, a demand is made of a Member with respect to an obligation
        or
        liability of the Company (other than obligations and liabilities caused by
        the
        intentional act, willful misconduct or gross negligence of either Member),
        each
        Member shall make a mandatory capital contribution (and the proceeds there
        of
        shall be immediately disbursed to the Member(s) who have made any disbursement
        pursuant to such demand) so that the Members bear such liability according
        to
        their Capital Sharing Ratios.

       

      4.7          
        Certificates
        and Instruments.   
        Each Member covenants and agrees that it will, within 5 days following request
        by the other Member:

      

      4.7.1     
         execute,
        swear to, acknowledge and/or deliver (A) all certificates and other instruments
        and all amendments of this Agreement that Managing Member reasonably deems
        appropriate or necessary to form, qualify, or continue the qualification
        of, the
        Company as a limited liability company in all jurisdictions in which the
        Company
        may conduct business or own the Property in accordance with this Agreement;
        (B)
        all instruments that Managing Member reasonably deems appropriate or necessary
        to reflect any amendment, change, modification or restatement of this Agreement
        properly made in accordance with Sections
        14.3
        and
14.4;
        (C) all
        conveyances and other instruments or documents that Managing Member reasonably
        deems appropriate or necessary to reflect, in accordance with this Agreement,
        the acquisition or disposition of all or any portion of any Property or Owner
        Entity, the admission or withdrawal of any Member and the dissolution and
        liquidation of the Company; and (D) all instruments relating to the admission
        or
        withdrawal of any Member pursuant to and in accordance with this Agreement;
        and

      
         

        
          
            
            

          

          
            27

            
              

            

          

          
            
            

          

        

      

      4.7.2   
         swear
        to,
        represent or acknowledge, confirm, or ratify that any vote, consent, approval,
        agreement or other action, which is made or given properly by the Member
        hereunder or is consistent with the terms of this Agreement has been made
        or
        given (whether or not such specific Member voted in favor thereof or consented
        thereto).

       

      4.8          
        Management
        Cost Reimbursement.    
        The Company shall on demand reimburse all reasonable travel expenses and
        third
        party expenses incurred by Managing Member in connection with the business
        of
        the Company as contemplated hereunder and made pursuant to the Operating
        Budget
        and Business Plan. Furthermore, the Company shall reimburse Tax Matters Member
        for the reasonable cost of the services of its in-house accountants in
        connection with Owner Entity, Property or Company accounting. All expenses
        incurred with respect to any tax matter that does or may affect the Company,
        including but not limited to expenses incurred by Waterford Member acting
        in its
        capacity as Tax Matters Member in connection with Company-level administrative
        or judicial tax proceedings, shall be paid out of Company assets, whether
        or not
        included in an annual Business Plan.

       

      4.9          
        Leases.    
        Each Owner Entity, as landlord, shall enter into a Lease with a Lessee, as
        tenant, to lease, operate and manage the Property owned by such Owner Entity,
        such lease transactions to be structured so as to preserve, to the extent
        possible, the economic results that would otherwise pertain hereunder. The
        Owner
        Entity Operating Agreements and all financing arrangements and contracts
        entered
        into by an Owner Entity shall permit such Leases and related
        transactions.

       

      4.10        
        Asset
        Management Fee.    
        Pursuant to certain Asset Management Agreements to be entered into by the
        Owner
        Entities or the Property Manager and Investor Member (the “Asset
        Manager”),
        the
        Asset Manager shall be paid an asset management fee (the “Asset Management
        Fee”)
        in the
        amount in the amount of 1% of Operating Revenues, with respect to the Stabilized
        Assets, and 0.25% of Operating Revenues, with respect to Development Assets.
        The
        Asset Management Fee shall be payable monthly in arrears, based on Property
        Manager’s estimate of Operating Revenues for the month then expiring, and shall
        reflect, in each monthly payment, Property Manager’s reconciliation of the
        estimated Operating Revenues for the prior calendar month against the actual,
        final Operating Revenues for that period. The parties acknowledge and agree
        that
        the Asset Management Fee shall be treated as a guaranteed payment pursuant
        to
        Code Section 707(c).

       

      
        	
                4.11

              	
                Property
                  Management.

              

      

       

      4.11.1    
         Each
        Lessee shall enter into a separate management agreement substantially in
        the
        form attached hereto as Exhibit
        4.8
        (the
“Management
        Agreements”)
        with a
        property manager (the “Property
        Manager”).
        Waterford Hotel Group, Inc., an Affiliate of Waterford Member, shall be the
        initial Property Manager, unless and until such Person ceases to be the property
        manager pursuant to the Management Agreement. The Property Manager is not
        required to be a Member of the Company; provided, however, that Investor
        Member
        shall have the right to remove the initial Property Manager as Property Manager
        (a) in the event that Waterford Member shall cease to be a Member, (b) in
        the
        event that Waterford Hotel Group, Inc. is no longer an Affiliate of Waterford
        Member, (c) for Cause or (d) if a Removal Event occurs, and in the case of
        event
        (c) or (d), Investor Member shall have the sole right to designate a replacement
        Property Manager. Under each Management Agreement, Property Manager shall
        provide property management services for each Property and the Owner Entities
        for a management fee (the “Management
        Fee”)
        in the
        amount contemplated by the Management Agreement except that, with respect
        to the
        Properties known as Dunkin Donuts, Southington and Residence Inn, Southington,
        the nominal base management fee shall be 4% of Gross Revenue (as defined
        in the
        Management Agreements) and the Manager shall be directed (and shall agree)
        to
        remit a portion of such fee (in the amount of 1% of Operating Revenues) to
        the
        Owner Entity, to be applied to the Asset Management Fee. In addition,
        the
        Lessees shall pay any sales tax due and payable in connection with the
        foregoing
        goods
        and services, as provided in the Management Agreements. The Management Fee
        shall
        be calculated on a Property-by-Property basis, with the intent that any Minority
        Interest Holders bear their ratable share of the Management Fee with respect
        to
        any Part Owned Property.

      
         

        
          
            
            

          

          
            28

            
              

            

          

          
            
            

          

        

      

      4.11.2     
         Subject
        to any present or future requirements of any lender to the Company or an
        Owner
        Entity, the Management Agreements shall instruct the Property Manager and
        delegate to the Property Manager the authority to:

      

      A.       
        collect
        Gross Revenue and other revenues of the Property, 

      

      B.        
        deposit
        such funds into operating accounts (each such account, an “Operating
        Account”)
        in each
        Lessee’s name and in respect of which the Property Manager and Managing Member
        shall have check-writing authority; 

      

      C.        
        withdraw
        from such Operating Account to pay Operating Expenses that are then due and
        payable and that are contemplated by the Business Plan or Operating Budget
        or
        approved by all Members (subject in the case of Part Owned Properties to
        the
        rights and obligations of the Minority Interest Holders); 

      

      D.        
        pay
        from
        such Operating Account the Asset Management Fee and the Management Fee; and
        

      

      E.         
        remit
        monthly on the last Business Day of the month from such Operating Account
        to a
        separate account designated by the Managing Member (and in respect of which
        Property Manager shall have no withdrawal authority) all remaining Operating
        Account funds, but only to the extent the foregoing exceed the Working Capital
        (hereinafter defined) for the upcoming calendar month. “Working
        Capital”
        for any
        calendar month means the amount equal to the result (but only if such result
        is
        a positive number) of (i) the projected Operating Expenses contemplated to
        be
        paid, (ii) minus projected Operating Revenues contemplated to be received
        in the
        following month, (iii) plus reserves established or required to be established
        or funded during the relevant time period in accordance with the terms of
        this
        Agreement, (iv) minus cash on hand and reserves on hand and available for
        the
        purpose of the payment of expenses enumerated in clause (i), above, (v) plus
        any
        operating shortfalls that Property Manager reasonably expects to incur in
        the
        upcoming calendar quarter, based on the historic seasonality of occupancy
        rates.

      
         

        
          
            
            

          

          
            29

            
              

            

          

          
            
            

          

        

      

      4.11.3   
         The
        Management Agreement shall be expressly subject to this Agreement. The
        Management Agreement shall have an initial term of five years and shall
        thereafter be renewable by Manager for two terms of five years,
        each.

       

      
        	
                5.

              	
                DISTRIBUTIONS

              

      

       

      5.1         
         Distributions
        Generally.    
         Distributions of Company assets shall be made only in accordance
        with this
        Article and Article 10.

       

      
        	
                5.2

              	
                Distributions
                  of Net Cash Flow and Capital
                  Proceeds.

              

      

       

                     
        5.2.1        From
        time
        to time, but not less often than annually with respect to Net Cash Flow and
        within 30 days after a Capital Transaction with respect to Capital Proceeds,
        Managing Member shall determine the amount, if any, of Distributable Funds
        (hereinafter defined) available for distribution to Members in accordance
        with
        this Section. Distributable Funds shall then be distributed to the Members
        in
        accordance with the provisions of this Article. “Distributable
        Funds”
        shall
        mean Net Cash Flow on hand (after repayment of any outstanding Member Loans)
        and
        Capital Proceeds actually received. 

      

      5.2.2        Distributable
        Funds with respect to any Property constituting Net Cash Flow shall be
        distributed to the Members in the following order of priority:

      

      A.    
         first,
        to
        Investor Class A Member and Investor Class B Member (in proportion to the
        relative Capital Sharing Ratios as between the Investor Class A Member and
        Investor Class B Member) in the amount of any unpaid balance in that Member’s
        Preferred Return Account with respect to all Property; 

      

      B.    
         then,
        to
        Waterford Member in the amount of any unpaid balance in that Member’s Preferred
        Return Account with respect to all Property; and

      

      C.    
         any
        excess, to the Members in accordance with their Residual Sharing Ratios with
        respect to such Property.

      

      Notwithstanding
        the foregoing, distributions pursuant to Sections
        5.2.2.A
        and
5.2.2.B,
        shall
        be made only to the extent such unreturned balance has accrued during the
        Fiscal
        Year in which such distribution is made, it being understood that for the
        purposes of this Section
        5.2,
        only,
        each Member’s Preferred Return Account balance shall be deemed to be $0 at the
        commencement of each Fiscal Year, regardless of all amounts distributed in,
        or
        Preferred Return Account balances accrued with respect to, prior
        periods.

      

      5.2.3      
        Distributable
        Funds with respect to any Property constituting Capital Proceeds shall be
        distributed to the Members in the following order of priority:

      
         

        
          
            
            

          

          
            30

            
              

            

          

          
            
            

          

        

      

      A.   
         first,
        to
        Investor Class A Member or Investor Class B Member, as appropriate, the return
        of its Capital Contributions in respect of such Property;

      

      B.      then,
        to
        Waterford Class Member, the return of its Capital Contributions in respect
        of
        such Property; 

      

      C.    
         then,
        to
        Investor Class A Member or Investor Class B Member, in the amount of 8.5%
        multiplied by the Capital Contributions made by such Member, attributed solely
        to the Property generating the relevant Capital Proceeds and calculated without
        regard to distributions made in accordance with Section
        5.2.2;
        

      

      D.   
         then,
        to
        Waterford Member, in the amount of 8.5% multiplied by the Capital Contributions
        made by such Member, attributed solely to the Property generating the relevant
        Capital Proceeds and calculated without regard to distributions made in
        accordance with Section
        5.2.2;
        and

      

      E.     
         last,
        to
        the Members in accordance with their Residual Sharing Ratios.

      

      5.2.4     
         Investor
        Member and Waterford Member (acting together) shall determine using reasonable
        judgment whether, and to what extent, Net Cash Flow and Capital Proceeds
        shall
        be distributed or shall be set aside and retained in a working capital reserve
        or capital expenditure reserve, or reserves for funds to be used for the
        payment
        or reduction of any Company or Owner Entity indebtedness. At such time as
        the
        Net Cash Flow is finally determined with respect to a Company fiscal year,
        the
        Company shall distribute to the Members in accordance with Section
        5.2.2,
        the
        Members’ respective undistributed shares, if any, of the Company’s actual Net
        Cash Flow for such fiscal year, and if advance distributions to a Member
        exceed
        such Member’s distributable share of such actual Net Cash Flow for such fiscal
        year, as finally determined, such Member shall immediately repay to the Company
        the amount of such excess, and any amounts not so repaid by a Member may
        be
        deducted from the next distributions of Net Cash Flow or Capital Proceeds
        distributable to such Member.

      

      5.2.5     
          Notwithstanding
        the foregoing, the Company shall make cash distributions to the Members out
        of
        Net Cash Flow in amounts intended to enable (and at such times as necessary
        to
        enable) the Members to discharge their United States federal, state and local
        income tax liabilities arising from the allocations made pursuant to
Article
        6
        (a
“Tax
        Liability Distribution”).
        The
        amount of any such Tax Liability Distribution shall be determined by Managing
        Member in its discretion, taking into account (a) the maximum combined
        United States and [Connecticut] tax rate applicable to individuals or
        corporations (whichever is higher) on ordinary income and net short-term
        capital
        gain or on net long-term capital gain, as applicable, and taking into account
        the deductibility of state and local income taxes for United States federal
        income tax purposes (and the deductibility of local income taxes for state
        income tax purposes, if applicable), and (b) the amounts so allocated
        pursuant to Article
        6
        to each
        Member, and otherwise based on such reasonable assumptions as Managing Member
        determines in good faith to be appropriate. Tax Liability Distributions shall
        be
        made to the Members pro
        rata
        in
        accordance with their respective allocation of the corresponding item(s)
        of gain
        or income, and shall be treated as advances with respect to amounts otherwise
        to
        be received by such Members pursuant to this Section
        5.2.

      
         

        
          
            
            

          

          
            31

            
              

            

          

          
            
            

          

        

      

      5.2.6    
        Notwithstanding
        the provisions of Sections
        5.2.2
        to the
        contrary, any Incentive Fees (as defined in the Management Agreement) payable
        to
        the Property Manager in accordance with the terms of the Management Agreement
        shall be paid to Manager immediately prior to distributions under Sections
        5.2.2.C.
        [PAYMENT AND PAYMENT MECHANISM TO BE REVISED TO CONFORM WITH STRUCTURE, AS
        AGREED BY THE PARTIES IN GOOD FAITH.]

       

      5.3         
         Distributions
        Upon Final Liquidation.  
         Upon a final liquidation of the Company in accordance with Article
        10, all of the Company’s assets shall be distributed as set forth in
Section 10.3.

       

      5.4          
        The
        Right to Withhold.   
        The Company shall withhold from any distribution such amounts as are required
        to
        be withheld by the laws of any taxing jurisdiction (or shall pay on behalf
        of or
        with respect to such Member any taxes that Managing Member or Tax Matters
        Member
        determines that the Company is required to pay with respect to any amount
        allocable to such Member pursuant to this Agreement). Such withheld amounts
        shall be treated as amounts distributed to the respective Members on whose
        account the withholding was imposed. Any amount paid on behalf of or with
        respect to a Member pursuant to this Section 5.4 shall constitute a loan
        by the Company to such Member, which loan such Member shall repay within
        15 days
        after notice from the Company that such payment must be made unless (i) the
        Company withholds such payment from a distribution that would otherwise be
        made
        to the Member or (ii) all Members jointly determine that such payment may
        be
        satisfied out of Net Cash Flow that would, but for such payment, be distributed
        to the Member. Each Member hereby unconditionally and irrevocably grants
        to the
        Company a security interest in such Member's obligation to pay to the Company
        any amounts required to be paid pursuant to this Section 5.4. Any amounts
        payable by a Member hereunder shall bear interest at the prime rate as published
        from time to time in the Wall
        Street Journal
        (but not
        higher than the maximum lawful rate from the time such amount is due
        (i.e.,
        15 days
        after demand) until such amount is paid in full. Each Member shall take such
        actions as the Company shall request in order to perfect or enforce the security
        interest created hereunder. A Member's obligation hereunder shall survive
        the
        dissolution, liquidation or winding up of the Company. 

       

      
        	
                6.

              	
                ALLOCATIONS

              

      

       

      6.1         
         In
        General.    
         Profits and Losses of the Company shall be determined and allocated
        with
        respect to each fiscal year of the Company as of the end of such year, and
        at
        such times as the Gross Asset Value of any asset is adjusted pursuant to
        the
        definition of Gross Asset Value. Subject to the other provisions of this
        Article, an allocation to a Member of a share of Profits or Losses shall
        be
        treated as an allocation of the same share of each item of income, gain,
        loss
        and deduction that is taken into account in computing Profits or
        Losses.

       

      6.2           
        Allocations.    
         Except as otherwise provided in this Article, Profits and Losses
        of the
        Company shall be allocated for each fiscal year or other period to the Members
        such that the positive balance of the Adjusted Capital Account of each Member
        immediately following such allocation is, as closely as possible, equal
        (proportionately) to the amount of the distributions that would be made to
        such
        Member pursuant to Section 5.2.3 if the Company were dissolved, its
        affairs wound up and all of its assets sold for an amount equal to their
        Gross
        Asset Value, all Company liabilities were satisfied (limited with respect
        to
        each nonrecourse liability to the Gross Asset Value of the assets securing
        such
        liability) and the remaining cash was distributed in accordance with the
        priority set forth in Section 5.2.3.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      6.3          
        Limitation
        on Allocation of Losses.     
        The Losses allocated to any Member pursuant to Section 6.2 shall not
        exceed the maximum amount of Losses that can be so allocated without causing
        such Member to have an Adjusted Capital Account Deficit at the end of any
        fiscal
        year. All Losses in excess of the limitation set forth in this Section
        6.3 shall be allocated to the other Members, pro rata to the allocation
        of
        other Losses to such Members, subject to the limitations of this Section
        6.3.

      
         

      

      6.4        
         Additional
        Allocation Provisions.    
        Notwithstanding the foregoing provisions of this Article (other than Section
        6.3), the special allocations required by this Section 6.4 shall be
        made in the following order of priority:

      

      
        	 	
                6.4.1

              	
                Regulatory
                  Allocations.

              

      

      

      A.     
        If
        there
        is a net decrease in Company Minimum Gain or Member Minimum Gain during any
        fiscal year, the Members shall be allocated items of Company income and gain
        for
        such year (and, if necessary, for subsequent years) in accordance with Treasury
        Regulation Section 1.704-2(f) or Section 1.704-2(i)(4), as applicable. It
        is
        intended that this Section
        6.4.1.A
        qualify
        and be construed as a “minimum gain chargeback” and a “chargeback of member
        nonrecourse debt minimum gain” within the meaning of such Regulations, which
        shall be controlling in the event of a conflict between such Regulations
        and
        this Section
        6.4.1.A.

      

      B.     
        Any
        Member Nonrecourse Deductions for any fiscal year shall be specially allocated
        to the Member(s) who bear the economic risk of loss with respect to the Member
        Nonrecourse Debt to which such deductions are attributable.

      

      C.    
         If
        any
        Member unexpectedly receives an adjustment, allocation or distribution described
        in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items
        of
        Company income and gain shall be allocated, in accordance with Treasury
        Regulation Section 1.704-1(b)(2)(ii)(d), to the Member in an amount and manner
        sufficient to eliminate, to the extent required by such Regulation, the Adjusted
        Capital Account Deficit of the Member as quickly as possible. It is intended
        that this Section
        6.4.1.C
        qualify
        and be construed as a “qualified income offset” within the meaning of Treasury
        Regulation 1.704-1(b)(2)(ii)(d), which shall be controlling in the event
        of a
        conflict between such Regulation and this Section
        6.4.1.C.

      

      6.4.2       The
        allocations set forth in Section
        6.3,
        Sections
        6.4.1.A,
        B
        and
C
        (the
“Regulatory
        Allocations”)
        are
        intended to comply with certain regulatory requirements, including, the
        requirements of Treasury Regulation Sections 1.704-1(b) and 1.704-2.
        Notwithstanding the provisions of Section
        6.2,
        the
        Regulatory Allocations shall be taken into account in allocating other items
        of
        income, gain, loss and deduction among the Members so that, to the extent
        possible, the net amount of such allocations of other items and the Regulatory
        Allocations to each Member shall be equal to the net amount that would have
        been
        allocated to each such Member if the Regulatory Allocations had not
        occurred.

      
         

        
          
            
            

          

          
            33

            
              

            

          

          
            
            

          

        

      

      6.4.3   
         For
        purposes of determining a Member’s proportional share of the Company’s “excess
        nonrecourse liabilities” with respect to any Property within the meaning of
        Treasury Regulations Section 1.752-3(a)(3), each Member’s interest in Profits
        shall be such Member’s Capital Sharing Ratio with respect to such
        Property.

      

      6.4.4   
         In
        the
        event that the Code or any Treasury Regulations promulgated thereunder require
        allocations of items of income, gain, loss, deduction or credit different
        from
        those set forth in this Agreement, upon the advice of the Company’s counsel or
        accountants, Managing Member is hereby authorized to make new allocations
        in
        reliance upon the Code, the Treasury Regulations and such advice of the
        Company’s counsel or accountants, such new allocations shall be deemed to be
        made pursuant to the fiduciary obligation of Managing Member to the Company
        and
        the Non-Managing Members, and no such new allocation shall give rise to any
        claim or cause of action by any Non-Managing Member.

      

      6.4.5  
          Notwithstanding
        the foregoing provisions of this Article
        6,
        income,
        gain, loss and deduction with respect to property contributed to the Company
        by
        a Member shall be allocated among the Members, pursuant to Regulations Section
        1.704-3(b), so as to take account of the variation, if any, between the adjusted
        basis of such property to the Company and its initial Gross Asset Value
        (computed in accordance with the definition of Gross Asset Value). In the
        event
        the Gross Asset Value of any Company asset is adjusted pursuant to clause
        B of
        the definition thereof, subsequent allocations of income, gain, loss and
        deduction with respect to such asset shall take account of the variation,
        if
        any, between the adjusted basis of such asset for federal income tax purposes
        and its Gross Asset Value in the same manner as under Code Section 704(c)
        and
        the applicable Regulations, consistent with the requirements of Section
        1.704-1(b)(2)(iv)(g) of the Regulations. Allocations pursuant to this
Section
        6.4.5
        are
        solely for purposes of federal, state and local income taxes and shall not
        affect, or in any way be taken into account in computing, any Member’s Capital
        Account or share of Profits, Losses, other tax items or distributions pursuant
        to any provision of this Agreement.

      

      

      
        	
                7.

              	
                BOOKS
                  AND RECORDS; ACCOUNTING; TAX
                  ELECTIONS

              

      

       

      7.1        
         Company
        Books.
        Managing Member shall maintain the books of the Company, for financial reporting
        purposes, on an accrual basis in accordance with generally accepted accounting
        principles. Managing Member shall make all decisions as to accounting matters
        in
        its reasonable judgment, other than those that would constitute Major Decisions
        or that are contemplated to be made by Tax Matters Member hereunder. Managing
        Member shall establish appropriate procedures (which procedures shall be
        reasonably acceptable to Non-Managing Member) to track Net Cash Flow and
        Capital
        Proceeds with respect to each Property, in order to attribute income and
        distributions among the Development Assets and the Stabilized Assets, for
        the
        purpose of distributions pursuant to Sections 5.2.2. and 5.2.3.
        and the other provisions of this Agreement. Managing Member shall make
        allocations in accordance with such procedure.

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      7.2        
         Records.    
        Managing Member shall keep at the Company’s office the following Company
        documents:

      
         

      

      7.2.1   
          a
        current
        list of the full name and last known business or residence address of each
        Member, together with the Capital Contribution, Capital Sharing Ratio and
        Membership Interest of each Member;

      

      7.2.2  
           copies
        of
        all certificates evidencing membership interests and executed copies of any
        powers of attorney pursuant to which other filings have been made;

      

      7.2.3  
           copies
        of
        the Company’s federal, state, and local income tax or information returns and
        reports, if any, for the six most recent tax years;

      

      7.2.4 
            copies
        of
        this Agreement and all amendments to this Agreement and all other agreements
        to
        which the Company or an Owner Entity is party;

      

      7.2.5 
            financial
        statements of the Company for the six most recent tax years; and

      

      7.2.6   
          the
        Company’s books and records as they relate to the internal affairs of the
        Company for the current and past three tax years.

      

      On
        reasonable advance notice to Managing Member, any Member (or an authorized
        representative thereof) shall have the right to inspect, examine and make
        photocopies or extracts from any of the foregoing at the offices of the Company,
        and to meet with the Persons responsible for preparing any of the
        foregoing.

       

      7.3         
         Company
        Tax Elections; Tax Controversies.
        Waterford Member (in such capacity, “Tax Matters Member”)
        is
        hereby designated as the “Tax Matters Partner” pursuant to the requirements of
        Section 6231(a)(7) of the Code.

      

      7.3.1   
         The
        Tax
        Matters Member shall promptly deliver to each Member copies of all written
        Tax
        Correspondence and shall promptly advise each Member of the content of any
        substantive verbal Tax Correspondence. The Tax Matters Member shall use all
        reasonable efforts to provide each Member and its attorneys the opportunity
        to
        attend any such conversations, and shall keep each Member advised of all
        developments with respect to any proposed adjustments that come to the Tax
        Matters Member’s attention. In addition, the Tax Matters Member shall (x)
        provide to each Member draft copies of any substantive correspondence or
        filing
        to be submitted by the Tax Matters Member to the IRS (or other taxing
        authority), including, with respect to any Tax Contest (a “Written
        Submission”),
        at
        least 14 business days prior to the date the Written Submission is required
        to
        be submitted, (y) shall consider in good faith changes or comments to the
        Written Submission requested by other Members, and shall consult with such
        other
        Members with respect to such changes and comments, and (z) shall provide
        to each
        Member a final copy of the Written Submission. The Tax Matters Member shall
        provide each Member with notice reasonably in advance of any scheduled meetings
        or conferences (including telephone conferences) with respect to any scheduled
        meetings or conferences. The Tax Matters Member will take such reasonable
        actions, including providing powers of attorney, as may be necessary, for
        each
        Member and its counsel to attend such meetings and conferences. Each Member
        shall provide the Tax Matters Member with written comments to drafts of Written
        Submissions delivered pursuant to this Section
        7.3.1
        within 7
        business days of receipt of such drafts.

      
         

        
          
            
            

          

          
            35

            
              

            

          

          
            
            

          

        

      

      7.3.2  
             The
        Tax
        Matters Member agrees that it will not take the following actions without
        each
        Member’s consent (such consent not to be unreasonably withheld):

      

      A.   
         Settling
        or proposing a settlement with the IRS regarding a Tax Contest;

      

      B.   
         Terminating
        an extension of the statute of limitations regarding the Company’s tax
        year;

      

      C.   
         Seeking
        technical advice or otherwise involving IRS personnel outside the audit team
        or
        using procedures outside the normal audit procedures with respect to a Tax
        Contest; and

      

      D.   
         If
        a Tax
        Contest results in a deficiency, choosing the forum for appeals or litigation,
        and settling or proposing a settlement for such a controversy.

      

      7.3.3      
        At
        the
        Company’s expense, the Managing Member shall cause Price Waterhouse Coopers (or
        such other accounting firm mutually acceptable to the Members) to prepare
        the
        Federal income tax returns for the Company and all other tax and information
        returns of the Company, including state and local tax returns. Managing Member
        may extend the time for filing any such tax returns as provided for under
        applicable statutes. At least 30 days prior to filing the Federal and state
        income tax returns and information returns of the Company, Managing Member
        shall
        deliver to the members for their review a copy of the Company’s Federal and
        state income tax returns and information returns in the form proposed to
        be
        filed for each Taxable Year, and shall incorporate all reasonable changes
        or
        comments to such proposed tax returns and information returns requested by
        Members at least ten days prior to the filing date for such returns. After
        taking into account any such requests changes as described above, Managing
        Member shall cause the Company to timely file, taking into account any
        applicable extensions, such tax returns. Within 20 days after filing such
        Federal and state income tax returns and information returns of the Company,
        Managing Member shall cause the Company to deliver to each Member a copy
        of the
        Company’s Federal and state income tax returns and information returns as filed
        for each Taxable Year, together with any additional tax-related information
        in
        the possession of the Company that such Member may reasonably and timely
        request
        in order to properly prepare its own income tax returns.

      

      7.3.4   
          To
        the
        extent that the Company may, or is required to, make elections for Federal,
        state or local income or other tax purposes, such elections shall be made
        by the
        Managing Member with the consent of each Member; provided that if requested
        by
        any Member, Managing Member shall make a Section 754 election.

       

      7.4        
         Fiscal
        Year.   
        The fiscal year of the Company shall be the calendar year, unless otherwise
        required by the Code or determined by the Members.

       

      7.5         
        Financial
        Reports.
        Managing Member shall prepare or cause to be prepared and shall furnish each
        Member as specified below or otherwise as soon as practicable the following
        (at
        the expense of the Company):

      
         

        
          
            
            

          

          
            36

            
              

            

          

          
            
            

          

        

      

      7.5.1   
          On
        or
        before March 31 of each calendar year, for the preceding year, the following:
        all information necessary for the preparation by each Member of its federal
        income tax return as to the Company’s income, gains, losses, deductions or
        credits and the allocations thereof to each Member, including a Schedule
        K-1 (or
        any other comparable form subsequently required by the Internal Revenue
        Service), and a copy of the federal income tax return of the Company, and
        any
        state or local income tax return required for the Company;

      

      7.5.2   
          Within
        30
        days after the end of each fiscal quarter, for each Property, quarterly
        unaudited profit and loss statements, balance sheets and related statements
        of
        retained earnings and cash flow (which unaudited statements shall be, to
        Managing Member’s best knowledge, true, correct and complete) and comparing the
        results of operations of each Property for such quarter and for the year
        to date
        to the Operating Budget; 

      

      7.5.3    
         Monthly,
        such additional reporting as Investor Member may reasonably
        request;

      

      7.5.4   
          Within
        30
        days after the end of each fiscal quarter, a summary of each Member’s Capital
        Contributions to date plus each Member’s share of approved but unfunded Capital
        Contributions; and

      

      7.5.5   
          Within
        90
        days after the end of each fiscal year, annual audited financial
        statements.

       

      7.6          
        REIT
        Status.   
        The Members, upon receipt of written notice of any act or omission that
        adversely affects the ability of Hersha Hospitality Trust to qualify as a
        real
        estate investment trust (“REIT”)
        under
        Section 856 of the Code or subjects Investor Member to any additional taxes
        under the Code, will use their commercially reasonable best efforts to take
        such
        action, or cause the Company and the Owner Entities to take such action,
        or
        refrain from taking any action, in each case as requested by Investor Member
        to
        ensure continued qualification of Hersha Hospitality Trust as a REIT and
        avoid
        the imposition of additional taxes under the Code.

      

      

      
        	
                8.

              	
                TRANSFERS
                  AND ENCUMBRANCES OF COMPANY
                  INTERESTS

              

      

       

      8.1          Restricted
        Transfers and Encumbrances.   
        Except with the consent of the other Members, and other than as expressly
        provided herein, no Member may directly or indirectly Transfer all or any
        portion of its Membership Interest (or any right to receive distributions),
        nor
        grant or permit an Encumbrance of all or any portion of or any interest in
        its
        Membership Interest. Any purported Transfer or Encumbrance of any Membership
        Interest (except as expressly permitted or consented to by all other Members
        as
        aforesaid) shall be null and void. In addition, any (1) Change in Control
        of
        Waterford Member or of any Controlling Affiliate of Waterford Member or (2)
        disposition of any interest, direct or indirect, in Waterford Member or any
        Controlling Affiliate of Waterford Member shall be subject to the approval
        of
        Investor Member, which approval may be given, withheld or made subject to
        conditions determined by Investor Member. Notwithstanding the foregoing,
        for the
        purpose of the restrictions contained in this Article,

      
         

      

      8.1.1   
         Transfers
        of interests in Waterford Member (a) among Persons who hold a direct or indirect
        equity interest in Waterford Member as of the date hereof or who hereafter
        acquire an interest in accordance with the terms hereof (but with respect
        to
        transfers by or to Persons who acquire an interest after the date hereof,
        the
        allocation of ownership interests resulting from such transfers shall in
        no
        event exceed 49% of the voting ownership interest of the Company, as provided
        in
        clause (d), below), (b) by any of the foregoing to a personal trust established
        for estate planning or tax reasons, (c) by any of the foregoing to their
        immediate family members or (d) to other Persons in one or more transactions
        in
        amounts aggregating not more than 49% of the total voting ownership interest
        of
        Waterford Member, shall not be restricted or require any consent hereunder;
        

      

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

       

      8.1.2   
         Transfers
        of direct or indirect interests in Investor Member shall not be subject to
        the
        consent of any other Member; provided that in the event of a Change in Control
        of Investor Member, Waterford Member may invoke the provisions of Section
        13;
        and

      

      8.1.3   
         Investor
        Class B Member may freely Transfer its Membership Interest, representing
        its
        rights to all payments in respect of the Development Assets hereunder, and
        the
        transferee shall be entitled to copies of all notices delivered to Investor
        Class B Member in accordance with the terms hereof, provided that the initial
        Investor Member shall remain the sole party authorized to vote, give consents
        and otherwise act with respect to the entire Membership Interest initially
        held
        by Investor Member on the date hereof, and Investor Member shall remain liable
        hereunder to Contributor Member for all obligations with respect to such
        entire
        Membership Interest;

      

      provided,
        in each case, that the relevant Transfer would not cause a default or otherwise
        restrict the Company’s rights under any financing or franchise agreement to
        which the Company or any Property is then subject. Subject to the foregoing
        exceptions, a Person to whom a Membership Interest is Transferred may be
        admitted to the Company as a Member only with the consent of the other Member,
        which may be given or withheld in the other Member’s sole and absolute
        discretion. 

       

      8.2         
         Substitution
        of Approved Transferee for Member.   
        A transferee of a Membership Interest pursuant to Section 8.1 shall have
        no right to become a substituted Member with respect to the transferred Company
        Interest unless the following conditions are satisfied: the Member making
        such
        Transfer and the assignee shall furnish the other Member with such documents
        regarding the Transfer as the other Member may reasonably request (in form
        and
        substance reasonably satisfactory to the other Member), including a copy
        of the
        Transfer instrument, an assumption and ratification by the assignee of this
        Agreement (if the assignee is to be admitted as a Member), and a legal opinion
        or other reasonably satisfactory evidence to the non-Transferring Member
        that
        the Transfer (i) complies with applicable federal and state securities laws,
        (ii) will not cause the Company to be classified as other than a “partnership”
        or as a publicly traded partnership for federal income tax purposes, and
        (iii)
        will not cause the Company to be in breach of or default under any credit
        agreement, mortgage, deed of trust, security agreement or other agreement
        encumbering any Property or otherwise binding on the Company. Upon any transfer
        of a Membership Interest pursuant to this Section, the transferor and transferee
        shall file with the Company an executed or authenticated copy of the written
        instrument of assignment to it. Any transferee under this Section shall,
        as a
        condition to the effectiveness of the assignment to it of the economic benefits
        of Membership Interest, acknowledge in writing that the rights to the Membership
        Interest acquired by it are subject to the restrictions on Transfers set
        forth
        in this Article.

       

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

       

      8.3          
        Possible
        Amendment.    
        The parties hereto agree to amend the transfer provisions of this Article
        if Tax
        Matters Member reasonably determines that such amendment is necessary for
        the
        Company to be treated as a partnership for federal, Delaware and/or Connecticut
        income tax purposes.

       

       

      
        	
                9.

              	
                ADDITIONAL
                  MEMBERS

              

      

       

      9.1          
        Admissions
        and Withdrawals.    
         No Person shall be admitted to the Company as a Member except in
        accordance with Article 8. No Member shall be entitled to withdraw from
        the Company without the consent of each Member, which consent may be given,
        withheld or made subject to conditions determined by that Member, in its
        sole
        and absolute discretion. Neither the admission of a Member nor the withdrawal
        of
        a Member, whether in accordance with this Agreement or not, shall cause the
        dissolution of the Company. If any Member voluntarily or involuntarily withdraws
        from the Company, then it shall be and remain liable for all obligations
        and
        liabilities incurred by it as a Member, and shall be liable to the Company
        and
        the other Member for all indemnifications set forth herein arising prior
        to its
        withdrawal and for any liabilities, losses, claims, damages, costs and expenses
        (including reasonable attorney’s fees) incurred by the Company as a result of
        any withdrawal in breach of this Agreement. Any purported admission, withdrawal
        or removal that is not in accordance with this Agreement shall be null and
        void.

       

      9.2         
        Cessation
        of Managing Member.  
         Waterford Member shall cease to be Managing Member of the Company
        at the
        election of Investor Member, and any other or future Managing Member shall
        cease
        to be Managing Member at the election of the Non-Managing Member, upon the
        earliest to occur of one of the following events (in each case, a “Removal
        Event”):

      

      9.2.1   
          the
        filing of a certificate of dissolution, or its equivalent, for Managing Member
        (unless withdrawn, revoked or corrected within 30 days);

      

      9.2.2    
         an
        Event
        of Bankruptcy of Managing Member; 

      

      9.2.3   
          A
        Capital
        Contribution Default by Managing Member in excess of 60 days; 

      

      9.2.4    
         Managing
        Member commits a material breach or material default of this Agreement and
        such
        breach or default is not cured within 15 days after written notice by the
        non-defaulting Member, or if such breach does not involve the failure to
        pay
        money and cannot reasonably be cured within such 15-day period, such breach
        is
        not cured within 90 days after such written notice so long as the cure for
        the
        same has commenced within said 15-day period and Manager Member is diligently
        and continuously pursuing the cure of the same; 

      

      9.2.5   
          If
        Property Manager is then an Affiliate of Managing Member, the Management
        Agreement shall have been terminated on account of a default of Property
        Manager
        thereunder; or

      

      9.2.6   
          Cause
        with respect to the Managing Member. 

       

      
        
          
            
            

          

          
            39

            
              

            

          

          
            
            

          

        

      

      
         

        9.3         
           New
          Managing Member.    
           Except as set forth in the next sentence, no Person shall become
          a
          Managing Member of the Company without the written approval of all Members,
          which approvals may be given or withheld, or made subject to such conditions
          as
          are determined by the applicable Member, in such Member’s sole and absolute
          discretion. In the event of an occurrence of an event described in Section
          9.2 hereof, the remaining Member shall (on notice to all other Members)
          immediately become the new, sole Managing Member and the Company shall
          continue
          without interruption (but such remaining Member shall not be entitled to
          receive
          any fees or reimbursements then accrued and originally payable to the former
          Managing Member under this Agreement), and any successor Managing Member
          may be
          appointed by such remaining Member.

        
           

        

      

      
        	
                10.

              	
                DISSOLUTION
                  AND WINDING UP

              

      

       

      10.1       
         Dissolution
        and Distributions of Property.   
         Except for dissolution expressly permitted by this Agreement, no
        Member
        shall have the right to, and each Member hereby agrees that it shall not
        (and
        hereby irrevocably waives any right to), seek to dissolve or cause the
        dissolution of the Company or to seek to cause a partial or whole distribution
        or sale of the Property or a partition of the Company or any of its assets,
        whether by court action or otherwise, it being agreed that any actual or
        attempted partition, dissolution, distribution or sale would cause a substantial
        hardship to the Company and the remaining Member(s). 

       

      10.2       
         Dissolution
        Events.     The
        Company shall be dissolved upon the earliest to occur of one of the following
        events:

      

      10.2.1    
         the
        first
        occurrence of any event set forth in Sections
        9.2.1
        or
9.2.2;
        provided, however, that within 60 days after such event, the remaining Members
        (A) may elect in their sole and absolute discretion to continue the Company
        and
        (B) may designate a new, successor Managing Member as set forth in Section
        9.3,
        in
        which case the Company shall not be dissolved;

      

      10.2.2    
         the
        sale,
        transfer or disposition of every Property or all interests of the Company
        therein; or

      

      10.2.3    
         the
        happening of any other event causing its dissolution under the Act.

      

      Notwithstanding
        anything contained herein to the contrary, to the extent permitted by applicable
        law, the Company shall not dissolve or merge with or into any other entity,
        or
        convert into another form of business entity, or otherwise terminate, and
        the
        Company shall continue (and not dissolve) for so long as a single solvent
        Member
        exists. Notwithstanding anything contained herein to the contrary, to the
        extent
        permitted by applicable law, an Event of Bankruptcy respecting the Company
        shall
        not cause a dissolution of the Company.

       

      
        	
                10.3

              	
                Liquidation
                  and Final Distribution
                  Proceeds.

              

      

       

      10.3.1    
         Upon
        the
        dissolution of the Company pursuant to Sections
        10.2.1
        through
10.2.4,
        the
        Company shall thereafter engage in no further business other than that which
        is
        necessary to wind up the business. The steps to be accomplished by the
        liquidator are as follows: 

      
         

        
          
            
            

          

          
            40

            
              

            

          

          
            
            

          

        

      

      A.   
         as
        promptly as possible after dissolution and again after final liquidation,
        the
        liquidator shall cause a proper accounting to be made by the auditor of the
        Company’s assets, liabilities, and operations through the last day of the
        calendar month in which the dissolution shall occur or the final liquidation
        shall be completed, as applicable;

      

      B.   
         the
        liquidator shall pay all of the debts and liabilities of the Company or
        otherwise make adequate provision therefor (including the establishment of
        a
        cash escrow fund for contingent liabilities in such amount and for such term
        as
        the liquidator may reasonably determine); and

      

      all
        remaining assets of the Company shall be distributed to the Members in
        accordance with Section
        5.2.3.

       

      10.4        
         Cancellation
        of Certificate.    
        On completion of the distribution of Company assets, the Member (or such
        other
        person as the Act may require or permit) shall file a Certificate of
        Cancellation with the Secretary of State of Delaware, and take such other
        actions as may be necessary to terminate the existence of the
        Company.

       

      10.5          
        No
        Capital Contribution Upon Dissolution.  
         Each Member shall look solely to the assets of the Company for all
        distributions with respect to the Company, its Capital Contribution thereto,
        its
        Capital Account and its share of Profits or Losses, and shall have no recourse
        therefor (upon dissolution or otherwise) against Managing Member or any
        Non-Managing Member. If, upon liquidation of the Company or upon liquidation
        of
        a Member’s interest in the Company, a Member has a deficit balance in its
        Capital Account (after giving effect to all contributions, distributions
        and
        allocations for all taxable years, including the year during which the
        liquidation occurs), such Member shall not be obligated to make any capital
        contribution with respect to such deficit.

      

      

      
        	
                11.

              	
                REPRESENTATIONS,
                  WARRANTIES AND COVENANTS OF THE
                  MEMBERS

              

      

      

      To
        induce
        the other Member to enter into this Agreement, each Member hereby represents,
        warrants and covenants as follows to the Company and to the other
        Member:

       

      11.1       
         Authority.   
         It has been duly formed and is a validly existing in the jurisdiction
        of
        its formation, is in good standing, and with requisite power to execute this
        Agreement and perform all its obligations hereunder. The persons and entities
        executing this Agreement and all assignments contemplated hereby on its behalf
        have the power and authority to enter into this Agreement. The execution,
        delivery and performance of this Agreement by it has been duly and validly
        authorized by all necessary action of it. This Agreement has been duly executed
        and delivered by it and constitutes a legal, valid and binding obligation
        of
        such Member, enforceable against it in accordance with the terms
        hereof.

       

      11.2        
        Consents.    
         It has obtained all consents required to enter into and perform this
        Agreement required under any company agreement, shareholder agreement, limited
        liability company agreement, covenant, charter, declaration of trust, or
        other
        agreement concerning it or to which it is a party or which is binding upon
        it or
        by any law or regulations or any judgment, order or decree of any governmental
        body, agency or court having jurisdiction over it.

       

      
        
          
          

        

        
          41

          
            

          

        

        
          
          

        

      

       

      11.3        
         No
        Conflict.   
         Neither the execution and delivery of this Agreement nor the consummation
        of the transactions herein contemplated will conflict with, result in a breach
        of or constitute (with or without the giving of notice or the passing of
        time,
        or both) a default under, or otherwise adversely affect any contract, agreement,
        instrument, license or undertaking to which such Member or any of its Affiliates
        is a party or by which it or any of them or any of their respective properties
        or assets is or may be bound.

      
         

      

      11.4          
        No
        Broker.  
         Neither Investor Member nor any of its Affiliates have dealt with
        any
        broker or finder in connection with the transactions between the parties
        hereto
        contemplated by this Agreement, except that Waterford Member has dealt with
        Hodges Ward Elliott, whom Waterford Member will pay pursuant to a separate
        agreement. Each Member agrees to defend, indemnify and hold the other harmless
        from and against any and all loss, liability party may incur arising by reason
        of the above representation being false.

       

      11.5        
         Foreign
        Partner.  
         It is neither a “foreign person” within the meaning of Code Section
        1445(f) nor a “foreign partner” within the meaning of Code Section
        1446(e).

      

      Each
        Member hereby agrees to and shall defend, indemnify, and hold the Company
        and
        the other Member harmless from and against any loss or damage caused by or
        accruing from a breach by such indemnifying Member of any representation,
        warranty or covenant made by it in this Agreement.

      

      

      
        	
                12.

              	
                REQUIRED
                  SALE.

              

      

       

      The
        provisions of this article shall be subject to the consent, distribution
        and
        other rights of Minority Holders in all respects, with respect to any Part
        Owned
        Property.

       

      12.1        Offers.   
        If at any time after the third anniversary of the acquisition of the Properties,
        a Member desires to offer one or more Properties or Owner Entities
        (“Target”)
        for
        sale to third parties not Affiliated with such Member (“Third Party
        Purchaser”)
        on
        terms specified by such Member (including the sales price, method of payment,
        anticipated closing date measured from the date of any to-be-executed contract),
        or that Member receives from a Third Party Purchaser a bona fide written
        cash
        offer (i.e.,
        not
        seller-financed) for the purchase of the Target on terms that such Member
        desires for the Company to accept (such specified terms or bona fide offer,
        the
“Offer”),
        then
        the Member desiring so to make or accept the Offer (“Initiating
        Member”)
        shall
        provide written notice of the terms of such Offer (the “Sale
        Notice”)
        to the
        other Member (“Non-Initiating Member”).
        Any
        Offer must be in an amount at least equal to the amount of all indebtedness
        secured by the Target. 

       

      12.2       
        Response.    
        Non-Initiating Member shall have 15 Business Days from the date of the delivery
        of Sale Notice (the “Response Period”)
        to
        provide notice to Initiating Member of its willingness or unwillingness to
        make
        or accept the Offer to Third Parties Purchasers; failure to deliver such
        notice
        shall constitute an election to sell the Target on the terms of the
        Offer.

      
         

        
          
            
            

          

          
            42

            
              

            

          

          
            
            

          

        

      

      12.2.1  
          Purchase
        Option.  
         If Non-Initiating Member notifies the Company that it is unwilling
        to make
        or accept the Offer, Non-Initiating Member may at the same time give notice
        to
        Initiating Member of its election to purchase the Target, in which case
        Non-Initiating Member shall purchase the Target (subject to the rights of
        any
        Minority Interest Holders) on the terms set forth in the Offer. Non-Initiating
        Member shall have until 30 days from the date of delivery of the Sale Notice
        to
        execute a definitive sale contract with the Company and until 90 days after
        the
        delivery of the Sale Notice in which to close on the purchase of the Target.
        Non-Initiating Member’s failure to timely exercise this option shall be deemed
        an election to sell the Target on the terms of the Offer. If Initiating Member
        or Non-Initiating Member defaults at the closing, the non-defaulting party
        shall
        have the right to bring suit in the name of the Company for damages, for
        specific performance, or exercise any other remedy available at law or in
        equity, and such default shall be deemed a material default under this
        Agreement. Upon payment at closing, the Company and Non-Initiating Member
        shall
        execute and deliver all documents reasonably required to transfer the
        Target.

      

      12.2.2  
          Offer
        Acceptable.  
         If Non-Initiating Member consents to the Company selling the Target
        on the
        terms of the Offer or fails to exercise its purchase option with respect
        to the
        Target, then Initiating Member shall be permitted to sell, on behalf of the
        Company, the Target for cash at a price not less than 95% of the price set
        forth
        in the Offer and substantially on the other terms and conditions set forth
        in
        the Offer for a period of up to 90 days following the expiration of the Response
        Period. If Initiating Member enters into a bona fide contract with a Third
        Party
        Purchaser to sell the Target for cash at the price set forth in the Offer
        and
        substantially on the other terms and conditions set forth in the Offer within
        such 90-day period, Initiating Member shall have an additional period of
        60 days
        after the date of such contract (that is, within 150 days after the end of
        the
        Response Period) in which to consummate the sale. If Initiating Member is
        unable
        to enter into a bona fide contract to sell the Target for cash at the price
        set
        forth in the Offer and substantially on the other terms and conditions set
        forth
        in the Offer within such 90-day period, or, if after having obtained such
        bona
        fide contract, Initiating Member is unable to consummate such sale within
        150
        days after the end of the Response Period, then the Offer shall be terminated,
        and thereafter Initiating Member must again submit an Offer to Non-Initiating
        Member under the terms of this Article before it may sell the Target pursuant
        to
        this Article.

      

      12.2.3  
          Sale
        By the Company.    In the event of the sale of any Property
        to a Third Party Purchaser in accordance with this Article, then the sale
        will
        be treated as a sale by the applicable Owner Entity, and the Capital Proceeds
        resulting therefrom shall be distributed accordingly. In the event of a purchase
        of a Property by the Non-Initiating Member under this Article, then
        Non-Initiating Member shall pay to Initiating Member the proceeds that
        Initiating Member would have received in a liquidation, had the Property
        been
        sold at the Offer price and the Company thereupon liquidated. At the request
        of
        either Member and so long as the same can be accomplished at no additional
        cost,
        expense or delay to the Company and so long as the Company is not required
        to
        take title to any exchange property, the Members will give fair consideration
        to, but will be under no obligation to implement, any structure proposed
        by the
        requesting member for disposing of the Property in a manner that permits
        the
        requesting Member to report its share of the sales proceeds as a tax-free
        exchange under Section 1031 of the Code. 

       

      12.3        
        No
        Suspension of Rights Under Article 13.  
         Notwithstanding anything to the contrary contained in this Agreement,
        a
        Member’s exercise of its rights under this Article shall not affect or prevent a
        Member’s exercise of its rights under Article 13 hereof, it being
        understood that the rights of a Member under Article 13 are superior to
        those of a Member under this Article.

      
         

        
          
            
            

          

          
            43

            
              

            

          

          
            
            

          

        

      

      

      
        	
                13.

              	
                BUY-SELL
                  DISPUTE RESOLUTION

              

      

       

      
        	
                13.1

              	
                Exercise.

              

      

       

      13.1.1    
         From
        and
        after the third anniversary of the Contribution Agreement Closing Date, in
        the
        event that:

      

      A.   
         at
        any
        time there exists a Major Dispute (other than failure to agree on an Operating
        Budget or a Business Plan), in which case either Member may be an initiating
        party; or 

      

      B.    
         an
        Event
        of Bankruptcy shall occur or exist with respect to a Member or its direct
        or
        indirect parent entity, in which case only the other Member may be the
        initiating party, or if, 

      

      13.1.2   
         at
        any
        time, the proviso in Section
        8.1.2
        applies,
        in which case only Waterford Member may be the initiating party,

      

      then
        the
        Member that is permitted to be the initiating party under this Section may
        exercise its right to initiate the provisions of this Article (the “Buy-Sell
        Option”).
        The
        Member desiring to exercise the Buy-Sell Option (“Offeror”)
        shall
        do so by giving notice (the “Initiating
        Notice”)
        to the
        other Member (“Offeree”)
        setting
        forth a statement of intent to invoke its rights under this Article, stating
        therein the aggregate dollar amount (the “Valuation
        Amount”)
        that
        Offeror would be willing to pay for the assets of the Company as of the Buy-Sell
        Closing Date (hereinafter defined) free and clear of all liabilities (as
        if
        unencumbered), but subject to the rights of the Minority Interest Holders
        with
        respect to any Part Owned Property. The only closing adjustments or prorations
        to the Valuation Amount shall be the amount of monetary payment obligation
        liabilities to which the Properties are subject and the pro rata adjustment
        to
        reflect any Minority Interests. Notwithstanding anything to the contrary
        contained in this Agreement, in no event will the purchase price paid for
        a
        Membership Interest pursuant to this Article be less than zero.

      

      After
        receipt of such notice, Offeree shall elect either to (1) sell its entire
        Membership Interest to Offeror for an amount equal to the amount Offeree
        would
        have been entitled to receive if the Company had sold its assets for the
        Valuation Amount on the Buy-Sell Closing Date and the Company had immediately
        paid all Company liabilities and distributed the resulting Capital Proceeds
        to
        the Members in satisfaction of their interests in the Company pursuant to
        the
        liquidating provisions of Article
        10
        hereof,
        or (2) purchase the entire Membership Interest of Offeror for an amount equal
        to
        the amount Offeror would have been entitled to receive if the Company had
        sold
        all of its assets for the Valuation Amount on the Buy-Sell Closing Date and
        the
        Company had immediately paid all Company liabilities and distributed the
        resulting Capital Proceeds of the sale to the Members in satisfaction of
        their
        interests in the Company pursuant to the liquidating provisions of Article
        10
        hereof.
        If the Buy-Sell Option is exercised, then Offeree shall have 45 days after
        the
        giving of Offeror’s notice in which to exercise either of its options by giving
        written notice to Offeror. If Offeree does not elect to acquire Offeror’s
        Membership Interest within the 45-day period, Offeree shall be deemed to
        have
        elected to sell its interest to Offeror. Within 3 Business Days after an
        election has been made under this Section (whether deemed or otherwise) the
        acquiring Member shall deposit with an escrow agent selected by the selling
        Member and reasonably acceptable to the acquiring Member an earnest money
        deposit in an amount equal to 10% of the amount the selling Member is entitled
        to receive for its Membership Interest under this Section, which deposit
        will be
        applied to the purchase price at Closing. Only contemporaneously with the
        closing under this Article, the acquiring Member may assign its right to
        acquire
        the interest of the selling Member to another party designated by the acquiring
        Member so long as the acquiring Member remains liable for such
        purchase.

       

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

       

      13.2         Closing.  
         The closing of an acquisition pursuant to this Article shall be held
        at
        the principal place of business of the Company on a mutually acceptable date
        (the “Buy-Sell Closing Date”)
        not
        later than 90 days after the Initiating Notice. The acquiring Member may
        extend
        the Buy-Sell Closing Date for up to sixty days after the foregoing 90-day
        period, provided that not later than 75 days after the Initiating Notice
        the
        acquiring Member has given notice of such extension and unconditionally made
        a
        purchase deposit of $1,000,000 in escrow with an escrow agent mutually
        acceptable to acquiring Member and selling Member. At the Closing of the
        disposition and acquisition of such interests the following shall
        occur:

      
         

      

      13.2.1       
         The
        selling Member shall assign to the acquiring Member or its designee the selling
        Member’s Membership Interest in accordance with the instructions of the
        acquiring Member, and shall execute and deliver to the acquiring Member or
        its
        designee all documents which may be reasonably required to give effect to
        the
        disposition and acquisition of such interests, in each case free and clear
        of
        all liens, claims, and encumbrances, with covenants of general warranty;
        

      

      13.2.2        
         if
        any
        assumption fees under any loan are due or owing due to the assignment of
        a
        Member’s Membership Interest, then the Company shall pay for such fees when due;
        and

      

      13.2.3        
         The
        acquiring Member shall pay to the selling Member the consideration therefor
        in
        cash.

       

      
        	
                13.3

              	
                Buy-Sell
                  Default.

              

      

       

      13.3.1  
          If
        the
        acquiring Member (for such purposes the “Defaulted
        Acquirer”)
        defaults in its obligation to buy in accordance with this Article, then the
        selling Member (for such purposes, the “Replacement
        Acquirer”)
        shall
        exercise one of the following alternative remedies within 30 days after the
        Defaulted Acquirer’s default as the Replacement Acquirer’s sole and exclusive
        remedy for such default:

      

      A.  
         The
        Replacement Acquirer shall purchase the Defaulted Acquirer’s Membership Interest
        on the terms set forth above, such closing to occur not later than 180 days
        after the Initiating Notice, except that the purchase price shall be 90%
        of the
        amount that the Defaulted Acquirer would be entitled to receive for its
        Membership Interest under Section
        13.1;
        or

      
         

        
          
            
            

          

          
            45

            
              

            

          

          
            
            

          

        

      

      B.   
        The
        Replacement Acquirer shall retain the earnest money deposit as full liquidated
        damages for such default of the Defaulted Acquirer, the Members hereby
        acknowledging and agreeing that it is impossible to more precisely estimate
        the
        damages to be suffered by the Replacement Acquirer upon the Defaulted Acquirer’s
        default and the Members acknowledge and agree that the earnest money deposit
        that may be retained by the Replacement Acquirer is intended not as a penalty,
        but as full liquidated damages for such default of the Defaulted Acquirer.
        In
        the event the Defaulted Acquirer failed to make its earnest money deposit
        as
        required in Section
        13.1
        and the
        Replacement Acquirer has elected its remedy under this Section
        13.3,
        then
        the Replacement Acquirer shall have the right to recover an award or judgment
        against the Defaulted Acquirer in the amount of such required earnest money
        deposit, together with its reasonable attorneys’ fee and costs incurred in
        obtaining such award or judgment.

      

      13.3.2    
         If
        the
        selling Member defaults in its obligation to sell in accordance with this
        Article, the acquiring Member shall exercise one of the following alternative
        remedies within 30 days after the selling Member’s default as the acquiring
        Member’s sole and exclusive remedy for such default:

      

      A.   
         The
        acquiring Member shall be entitled to demand and receive a return of its
        earnest
        money deposit previously deposited with the selling Member; or

      

      B.     
        The
        acquiring Member shall be entitled to seek specific performance of the selling
        Member’s obligations under this Article, the Members expressly agreeing that the
        remedy at law for breach of the obligations of the selling Member set forth
        in
        this Article is inadequate in view of (A) the complexities and uncertainties
        in
        measuring the actual damage to be sustained by the acquiring Member on account
        of the default of the selling Member; and (B) the uniqueness of the Company
        business and the Members’ relationships.

       

      13.4        Payment
        of Debts.    
        If, at the Buy-Sell Closing Date, the selling Member has any outstanding
        debts
        to the Company or the acquiring Member relating to the Company, all proceeds
        of
        the purchase price due the selling Member for its Membership Interest will
        be
        paid to the Company or the acquiring Member (pro--rata in accordance with
        the
        amounts owed by the selling Member to each) for and on behalf of the selling
        Member until all the debts will have been paid and discharged in full. The
        acquiring Member will be entitled to deduct from the amounts otherwise payable
        to the selling Member any and all amounts owed to the acquiring Member,
        including damages owed by reason of any default, to the extent agreed by
        the
        parties or to the extent such damages have been reduced to an arbitration
        award
        or a final nonappealable judgment, as applicable. 

       

      13.5      
         Release
        of Capital Contribution Obligations.   
         At the time of closing on the purchase and sale of a Membership Interest
        pursuant to this Article, each selling Member will be released from any further
        obligation to make Capital Contributions to the Company.

       

      13.6      
         Operations
        in Pre-Closing Period.   
         From the date the Initiating Notice is given until the date the closing
        occurs under this Article or, if earlier, the date on which the Members agree
        not to proceed with such closing, the Company will continue to be operated
        in
        the ordinary course as though the closing were not going to occur, the Members
        will continue to have all power and authority granted in this Agreement
        (including the power to make distributions), and the Members will exercise
        their
        power and authority in good faith and without regard to the fact that such
        closing may occur (although the selling Member shall not unreasonably withhold
        any consents with respect to the Property during such period); provided,
        however, that, any and all distributions received by the selling Member from
        the
        Company during such period representing distributions of Capital Proceeds
        shall
        be credited against and reduce the price otherwise payable to the selling
        Member
        for its Membership Interest and any Capital Contributions made by the selling
        Member during such period shall be added to and increase the price otherwise
        payable to the selling Member for its Membership Interest, and the Company
        shall
        not agree to sell or otherwise dispose of any Property; however, the Company
        shall be authorized to consummate any transactions that were the subject
        of
        binding contractual obligations entered into prior to the commencement of
        such
        period.

       

      
        
          
          

        

        
          46

          
            

          

        

        
          
          

        

      

       

      13.7         
        Suspension
        of Rights Under Article 12.  
         Notwithstanding anything to the contrary contained in this Agreement,
        at
        any time a Member has exercised the Buy-Sell Option in accordance with this
        Article, then the Members’ respective rights under Article 12 shall not
        be exercised or pursued (unless a binding sale contract is then in effect)
        unless and until the initiation of the Buy-Sell Option is withdrawn or rescinded
        by Offeror or unless and until the occurrence of a breach or default with
        respect to the Buy-Sell Option by the acquiring Member.

       

       

      
        	
                14.

              	
                MISCELLANEOUS

              

      

       

      14.1       
         Right
        of First Offer.  
         In the event that Waterford Member desires to sell to any party that
        is
        not an Affiliate any property Waterford Member then owns (other than its
        Membership Interest), regardless of whether Waterford Member has then identified
        a purchaser, then Waterford Member shall present a written proposal to Investor
        Member setting forth all material terms of a proposed sale and shall provide
        Investor Member with the information required to be provided in a Venture
        Package under Section 4.5 and other customary due diligence information
        and access with respect to the relevant property, including legal, financial,
        accounting, operational and environmental books and records. Investor Member
        shall have 15 days in which to notify Waterford Member as to whether Investor
        Member will accept the terms of the proposed sale. In the event that Investor
        Member notifies Waterford Member within said 15-day period that Investor
        Member
        desires to accept the proposal from Waterford Member, then Investor Member
        and
        Waterford Member shall work towards a binding agreement containing substantially
        all of the terms and conditions set forth in said proposal.

      

      In
        the
        event that Investor Member fails to so notify Waterford Member within such
        fifteen day period, Waterford Member shall be free to make the same offer
        upon
        substantially the same terms, or a purchase price not ten percent lower than
        such terms, to a third party for a period of 90 days from the date which
        is the
        end of said fifteen-day period. If no such binding commitment is obtained
        between Waterford Member and a third party within said 90-day period, then,
        before entering into any such proposed agreement, Waterford Member must again
        notify and offer to Investor Member the contemplated sale under this
Section
        14.1.
        

       

      
        
          
          

        

        
          47

          
            

          

        

        
          
          

        

      

       

      14.2       Waiver
        of Conflict of Interest.   
         The Company and the Members may, at their option, be represented
        by the
        same counsel. The attorneys, accountants and other experts who perform services
        for the Company may also perform services for a Member. To the extent that
        the
        foregoing representation constitutes a conflict of interest, the Company,
        Managing Member and each Non-Managing Member hereby expressly waive any such
        conflict of interest.

      
         

      

      14.3        Amendment
        by Members.    
        Except as otherwise stated in Section 4.7.1 or 14.4 the written
        approval of each Member shall be required to amend or waive any provision
        of
        this Agreement.

       

      14.4       
        Amendment
        by Managing Member.    
        Notwithstanding Section 14.3, any provision of this Agreement may be
        amended or waived from time to time by Managing Member, without the consent
        of
        any Non-Managing Member, only to the extent that such amendment or waiver
        is
        necessary or advisable in the opinion of Managing Member: (i) to qualify
        or
        continue the qualification of the Company as a limited liability company
        in
        which the Members have limited liability under the laws of any state; (ii)
        to
        ensure that the Company will be treated as a partnership for federal income
        tax
        purposes; (iii) to ensure that all allocations of Profits and Losses are
        respected for federal income tax purposes; and (vi) to properly reflect the
        Members and their respective Capital Sharing Ratios, as such Members may
        change
        due to admissions and withdrawals of Members in accordance with this Agreement.
        

      

      However,
        no amendment or waiver referred to above that would alter a Member’s Capital
        Contribution, Capital Account or Capital Sharing Ratio (except to the extent
        that such are indirectly affected by any amendments or waivers pertaining
        to
        such admissions or withdrawals of Managing or Non-Managing Members), the
        liability of a Member to third parties, or the removal of any Member shall
        be
        permitted without the prior approval of the Member so affected.

       

      14.5         Waivers.  
         No waiver by any Member of any default with respect to any provision,
        condition or requirement hereof shall be deemed to be a waiver of any other
        provision, condition or requirement hereof; nor shall any delay or omission
        of
        any Member to exercise any right hereunder in any manner impair the exercise
        of
        any such right accruing to it hereafter.

       

      14.6         
        No
        Assignments; Binding Effect.   
        This Agreement shall not be assigned or otherwise transferred (by operation
        of
        law or otherwise) by any Member (except as may be expressly permitted in
        this
        Agreement). This Agreement shall be binding upon and inure to the benefit
        of the
        parties hereto and their heirs, executors, administrators, successors, legal
        representatives and assigns permitted in accordance with this Agreement and
        the
        Act.

       

      14.7        
         Notices.  
         Any notice, approval, consent or other communication required or
        permitted
        to any Member under this Agreement shall be in writing and shall be deemed
        to
        have been duly given or made: (i) if delivered personally
        by courier or otherwise, then as of the date delivered (the “Effective
        Date”)
        or if
        delivery is refused, then as of the date presented (also an “Effective
        Date”),
        or
        (ii) if sent or mailed by Federal Express, Express Mail or other overnight
        mail
        service to the Company and to each Member, then as of the first Business
        Day
        after the date so mailed (also an “Effective Date”). Each communication
        shall be addressed as follows:

      
         

        
          
            
            

          

          
            48

            
              

            

          

          
            
            

          

        

      

      

      
        	 	
                If
                  to Investor Member:

              	
                Hersha
                  Hospitality Trust

              	 
	 	 	
                510
                  Walnut Street, 9th
                  fl.

              	 
	 	 	
                Philadelphia,
                  PA 19106

              	 
	 	 	
                Attn:
                  Jay H. Shah

              	 
	 	 	 	 
	 	
                with
                  a copy to:

              	
                Hunton
                  & Williams LLP

              	 
	 	 	
                1900
                  K Street NW

              	 
	 	 	
                Washington,
                  DC 20006

              	 
	 	 	
                Attn:
                  John M. Ratino, Esq.

              	 
	 	 	 	 
	 	
                If
                  to Waterford Member:

              	
                c/o
                  Waterford Group, LLC

              	 
	 	 	
                914
                  Hartford Turnpike

              	 
	 	 	
                P.O.
                  Box 715

              	 
	 	 	
                Waterford,
                  CT 06385

              	 
	 	 	
                Attn:
                  Len Wolman

              	 
	 	 	 	 
	 	
                with
                  a copy to:

              	
                Latham
                  & Watkins LLP

              	 
	 	 	
                885
                  Third Ave.

              	 
	 	 	
                New
                  York, NY 10022

              	 
	 	 	
                Attn:
                  Raymond Lin (024576-0017)

              	 
	 	 	 	 

      

      

      The
        parties may change their addresses for subsequent notice, by a notice sent
        to
        each other party. The parties may also send courtesy notices by facsimile
        to
        Investor Member at ______________, or to Waterford Member at (860) 447-8554,
        although such facsimile notices shall not be considered to have been officially
        given hereunder.

       

      14.8         
        Certain
        Waivers.   
         The Members waive any and all rights they may have to a jury trial,
        and
        any and all rights they may have to punitive, special, exemplary, or
        consequential damages, in respect of any dispute based on this
        Agreement.

       

      14.9         
        Preservation
        of Intent.   
         If any provision of this Agreement is determined by any court having
        jurisdiction to be illegal or in conflict with any laws of any state or
        jurisdiction, then the Members agree that such provision shall be modified
        to
        the extent legally possible so that the intent of this Agreement may be legally
        carried out. If any one or more of the provisions contained herein, or the
        application thereof in any circumstances, is held invalid, illegal or
        unenforceable in any respect or for any reason, then the validity, legality
        and
        enforceability of any such provision in every other respect and of the remaining
        provisions hereof shall not be in any way impaired or affected, it being
        intended that all of the Members’ rights and privileges shall be enforceable to
        the fullest extent permitted by law.

       

      14.10       
         Entire
        Agreement.   
         This Agreement sets forth the entire and only agreement or understanding
        between the Members relating to the subject matter hereof and supersedes
        and
        cancels all previous agreements negotiations, commitments and representations
        in
        respect thereof among them, and no Member shall be bound by any conditions,
        definitions, warranties or representations with respect to the subject matter
        of
        this Agreement.

       

      14.11       
         Certain
        Rules of Construction.   
         All Article or Section titles or other captions in this Agreement
        are for
        convenience only, and shall not be deemed part of this Agreement and in no
        way
        define, limit, extend or describe the scope or intent of any provisions hereof.
        Unless the context otherwise requires: (i) an accounting term not otherwise
        defined has the meaning assigned to it in accordance with generally accepted
        accounting principles; (ii) words in the singular include the plural, and
        words
        in the plural include the singular; (iii) provisions apply to successive
        events
        and transactions; (iv) “herein”“hereof” and other words of similar import refer
        to this Agreement as a whole and not to any particular Article, Section or
        other
        subdivision; and (v) all references to “clauses,”“Sections” or “Articles” refer
        to clauses, Sections or Articles of this Agreement.

       

      
        
          
          

        

        
          49

          
            

          

        

        
          
          

        

      

       

      14.12        
         Counterparts.   
         This Agreement may be executed in any number of counterparts, each
        of
        which shall be deemed an original, but all of which shall constitute one
        and the
        same instrument.

      
         

      

      14.13        
         Governing
        Law; Venue.   
         This Agreement shall be governed by and construed in accordance with
        the
        laws of the State of Delaware.

       

      
        
          
          

        

        
          50

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        the
        Members have caused this Agreement to be duly executed by their respective
        and
        duly authorized representatives as of the date first above written.

       

      
        	 	
                INVESTOR
                  MEMBER: 

              	 
	 	 	 
	 	
                HERSHA
                  HOSPITALITY LIMITED 

              	 
	 	
                PARTNERSHIP

              	 
	 	 	 
	 	
                By:
                   ________________________________________

              	 
	 	
                Name:
                  ___________________________________

              	 
	 	
                Title:
                  ____________________________________

              	 
	 	 	 
	 	 	 
	 	
                WATERFORD
                  MEMBER:

              	 
	 	 	 
	 	
                MYSTIC
                  HOTEL INVESTORS, LLC

              	 
	 	 	 
	 	
                By:  ________________________________________

              	 
	 	
                Name:
                  ___________________________________

              	 
	 	
                Title:
                  ____________________________________

              	 
	 	 	 
	 	 	 
	 	
                [WATERFORD
                  HOSPITALITY GROUP, LLC

              	 
	 	 	 
	 	
                By:  ________________________________________

              	 
	 	
                Name:
                  ___________________________________

              	 
	 	
                Title:
                  ______________________________________]Exhibit 10.3

    
      
        

      
Exhibit
      10.3

      

      
 

      
        

        

      

       

       

      MANAGEMENT
        AGREEMENT

      

      

      between

      

      

      [LESSEE
        ENTITY]

      

      Lessee

      

      

      and

      

      

      WATERFORD
        HOTEL GROUP, INC.

      Manager

      

      

      

      Dated
        as
        of _____________, 2005

      

      

      Property:______________

       

       

      
        

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      TABLE
        OF CONTENTS

      

      
        	 	 	 	
                Page

              
	 	 	 	 
	
                1.

              	 	
                DEFINITIONS

              	
                1

              
	 	 	 	 
	
                2.

              	 	
                APPOINTMENT
                  OF MANAGER

              	
                6

              
	 	 	 	 
	
                3.

              	 	
                MANAGEMENT
                  AND OPERATION SERVICES.

              	
                7

              
	
                 

              	 	 	 
	
                4.

              	 	
                MANAGEMENT
                  FEES

              	
                13

              
	
                 

              	 	 	 
	
                5.

              	 	
                INSURANCE

              	
                14

              
	
                 

              	 	 	 
	
                6.

              	 	
                REPRESENTATIONS,
                  WARRANTIES, INDEMNITIES AND COVENANTS

              	
                17

              
	
                 

              	 	 	 
	
                7.

              	 	
                DAMAGE;
                  CONDEMNATION; TRANSFER; REVOCATION

              	
                20

              
	
                 

              	 	 	 
	
                8.

              	 	
                TERM
                  AND TERMINATION

              	
                20

              
	
                 

              	 	 	 
	
                9.

              	 	
                MISCELLANEOUS

              	
                24

              

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

      MANAGEMENT
        AGREEMENT

      

      

      THIS
        MANAGEMENT AGREEMENT (the “Agreement”)
        is
        dated as of ____________, 2005 (the “Effective
        Date”),
        by
        and between [Lessee Entity] (“Lessee”)
        which
        is the lessee of the parcels of real estate that are the subject of this
        Agreement and Waterford Hotel Group, Inc., a corporation existing under the
        laws
        of the State of Connecticut (“Manager”).

      

      RECITALS

      

      A. 
Lessee
        leases from ____________________ (“Owner”) the property commonly known as
        _______________ (the “Property”) pursuant to a Lease Agreement (“Lease”) between
        Lessee and Owner, dated as of the date hereof;

      

      B. 
Lessee
        desires to engage Manager to manage and operate the Property and, by so doing,
        obtain the benefit of Manager’s expertise in management and operation of the
        Property.

      

      C. 
Manager
        is willing to furnish such services, all subject to the terms and conditions
        set
        forth in this Agreement.

      

      THEREFORE,
        in consideration of the premises and the mutual covenants contained in this
        Agreement, the receipt and sufficiency of which are hereby acknowledged,
        the
        parties hereto agree as follows:

      

      AGREEMENT

      

      
        
          	
                  1.

                	
                  DEFINITIONS

                

        

      

      

      1.1          
        Defined
        Terms.
        When
        used in this Agreement, the following terms shall have the meanings set forth
        below.

      

      “ADA”
        means
        The Americans with Disabilities Act of 1990, as amended.

      

      “Affiliate”
        means,
        as to any entity, each other entity that directly, or indirectly through
        one or
        more intermediaries, owns or Controls, is Controlled by or under common Control
        with, such entity or is a director, officer, manager, member, or partner
        of such
        entity.

      

      “Agreement”
        has the
        meaning set forth in the preamble hereto.

      

      “Annual
        Business Plan”
        means
        with respect to each Fiscal Year, the business plan of the Property for such
        Fiscal Year, including the sales and marketing plan, estimated budget of
        operations, and estimated budget of capital expenditures for the Property,
        which
        Plan shall be subject to review and approval by Lessee as more fully set
        forth
        in Section
        3.4.

      

      “Annual
        Financial Statements”
        has the
        meaning set forth in Section
        3.3.3.

      

      “Base
        Fee”
        means
        the basic management fee payable to Manager under Section
        4.1.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      “Capital
        Transaction”
        means a
        transaction pursuant to which (i) the Owner finances or refinances the Property
        or any portion thereof, except for acquisition financing, (ii) all or any
        portion of the Property is sold, condemned, exchanged or otherwise disposed
        of,
        (iii) insurance proceeds or other damages in respect of the Property are
        recovered by the Owner, or (iv) any other transaction that, in accordance
        with
        generally accepted accounting principles, is considered capital in
        nature.

      

      “Control(led)(ling)”
        means,
        the possession, directly or indirectly, through one or more intermediaries,
        of
        the power to direct or cause the direction of the management or policies
        of an
        entity, whether through the ownership of voting securities, by contract or
        otherwise. 

      

      “Debt
        Amortization”
        means
        all payments of principal relating to mortgages, term loans, lines of credit,
        capital leases and other indebtedness.

      

      “Employees”
        means
        all of the employees hired for the operation, management and maintenance
        of the
        Property during the Term, including the Executive Staff and all other employees
        temporarily or permanently assigned to a position at the Property.

      

      “Executive
        Staff”
        means
        the General Manager for the Property and, if applicable, the Director of
        Sales
        and Marketing and the Controller for the Property.

      

      “Fiscal
        Year”
        means
        the fiscal year of the Property established by Lessee, which is a period
        of
        twelve consecutive months ending on December 31 of each year; provided, however,
        that with respect to any partial Fiscal Year period occurring at the beginning
        or the end of the Term, the term “Fiscal Year” shall be deemed to mean only that
        portion of such Fiscal Year that is included within the Term.

      

      “Force
        Majeure”
        means
        any event which results in delay or failure of performance beyond such party's
        reasonable control and which could not be prevented by its exercise of
        reasonable diligence, including strike (except a strike by the Employees),
        an
        act of God or the public enemy, expropriation or confiscation of facilities,
        compliance with any order or decree of any governmental authority, an unforeseen
        change in laws, regulations or orders, acts of declared or undeclared war,
        the
        presence or use of any weapon of war employing atomic fission or radioactive,
        biological, or chemical forces (whether in time of peace or war), public
        disorder, rebellion or sabotage, revolution, epidemic, riot or
        explosion.

      

      “Franchise”
        means
        the franchise arrangement pursuant to which the Property is branded, including
        the franchise agreement and other documents evidencing such arrangement.
        On the
        date hereof, the Property is operated under a Franchise with the brand
        identified on Exhibit A.

      

      “Franchise
        Agreement”
        shall
        mean all the documents which evidence the Franchise.

      

      “Furniture,
        Fixtures, and Equipment”
        or
“FF&E”
        means:

      

      (i)         
        Operating
        Equipment;

      (ii)        
        furniture,
        fixtures, and specialized hotel equipment for guest rooms and common/public
        areas (which term shall include without limitation all equipment necessary
        for
        the operation of kitchens, laundries, dry cleaning facilities, bars, recreation,
        health club and spa facilities, special lighting, and other equipment excluding
        permanent fixtures);

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      (iii)       
        office
        furniture and equipment; and

      (iv)      
        such
        other furniture, furnishings and equipment as are requisite for the operation
        of
        the Property and its facilities.

      

      “General
        Manager”
        means
        the general manager for the Property assigned by Manager, who shall be the
        senior supervisor of all Employees at the Property level.

      

      “Gross
        Revenues”
        means,
        all revenues and receipts of every kind derived from the operation of the
        Property and all departments and parts thereof, including receipts (from
        both
        cash and credit transactions), before commissions and discounts for prompt
        or
        cash payments, from the rental of guest rooms, meeting rooms, stores, offices,
        exhibit or sales space of any kind, parking charges, license and concession
        fees
        and rentals (but not including the gross receipts of any licensees, lessees
        and
        concessionaires), booking fees, telephone and television viewing charges,
        food
        and beverage sales, wholesale and retail sales, proceeds, if any, from business
        interruption or other loss of income insurance; provided, however, Gross
        Revenues shall not included gratuities to Property employees or federal,
        state
        and municipal excise, sales and use taxes or similar impositions collected
        directly from patrons or guests or included as part of the sales price of
        any
        goods or services.

      

      “Hazardous
        Material”
        means
        asbestos, asbestos-containing material, petroleum, petroleum products, waste
        material, waste oil, halogenated and non-halogenated solvents, PCBs, regulated
        chemicals and substances, and all other materials that are classified as
        hazardous or dangerous, toxic, a pollutant, a contaminant, or are otherwise
        regulated under any Laws.

      

      “Incentive
        Fee”
        means
        any incentive management fee payable to Manager under Section
        4.1.

      

      “Initial
        Allocated Price”
        means,
        with respect to the Property, the initial allocated price for such Property
        as
        set forth on Exhibit
        1.8
        of the
        Membership Interests Contribution Agreement, dated as of June __, 2005, by
        and
        among Mystic Hotel Investors, LLC and Waterford
        Hospitality Group, LLC,
        and
        Hersha Hospitality Limited Partnership.

      

      “Laws”
        means
        all applicable laws, rules, regulations, requirements, orders, judgments,
        notices, determinations, and ordinances of any federal, state, county,
        municipal, judicial or other authority having jurisdiction over the Property,
        now or hereafter in force, including any alcoholic beverage control board,
        liquor commission, health inspector, public safety agency, and insurance
        board
        or company covering any of the risks against which Lessee or Manager are
        insured
        as required by this Agreement.

      

      “Lessee”
        shall
        have the meaning set forth in the preamble hereof.

      

      “Lessee
        Member Equity”
        means
        an amount equal to the initial equity contributed to the Lessee by each member
        thereof plus any additional equity contributed to the Lessee by its members
        thereafter.

      

      “Licenses”
        means
        all licenses, permits, franchises, and other necessary approvals and
        authorizations for the development, operation, maintenance and repair of
        the
        Property or otherwise (together with any bonds or other surety requirements
        related thereto), including those relating to occupancy, construction, repair,
        maintenance, room rentals, sale or serving of food or alcoholic beverages,
        sanitation, health, or identification or directional signage.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      “Management
        Fees”
        means
        the fees payable to Manager for services provided under this Agreement,
        including any Base Fee and Incentive Fee, together with any sales or similar
        tax
        payable thereon.

      

      “Manager”
        means
        the entity identified as such in the preamble, its successors and assigns;
        and
        for purposes of all rights of indemnity, insurance coverage and disclaimer
        of
        liability, the Affiliates of Manager and the agents, employees, officers,
        directors, shareholders, managers, members, and partners of Manager, its
        Affiliates or any of such successors and assigns.

      

      “Minimum
        Balance”
        means a
        cash amount equal to “Working Capital”, as that term is defined in Lessee’s
        Limited Liability Company Agreement, dated ___________, 2005, a copy of which
        Manager has reviewed, which amount shall be deposited and maintained by Lessee
        in the Property Accounts as set forth in Section
        2.2.

      

      “Mystic”
        shall
        mean Mystic Partners, LLC.

      

      “Mystic
        Member Equity”
        shall
        mean an amount equal to the initial equity contributed to Mystic by each
        member
        thereof plus any additional equity contributed to Mystic by its members
        thereafter.

      

      “Net
        Distributable Funds”
        has the
        meaning set forth in Section
        4.1.2.

      

      “Net
        Operating Income”
        means,
        for any period, Operating Revenues less (i) Operating Expenses, less (ii)
        real
        property and personal property taxes and other taxes other than payroll taxes,
        less (iii) insurance premiums and deductibles, less (iv) leases or purchase
        money financing of FF&E or of real property and improvements, less (v) Base
        Fees and fees payable to the asset manager, less (vi) Lessee-related expenses,
        and less (vii) additions to any operating and replacement reserves, in the
        amount of

      

      for
        Stabilized Assets: 4% of Gross Revenue, until the second anniversary of the
        date
        hereof, and 5% of Gross Revenue thereafter,

      

      for
        the
        Hartford Hilton: 3% of Gross Revenue, until the second anniversary of the
        date
        hereof, thereafter 4% of Gross Revenue until the fourth anniversary of the
        date
        hereof, and 5% of Gross Revenue thereafter, 

      

      for
        the
        Hartford Marriott (if applicable): $0 until the first anniversary of the
        date
        hereof, thereafter 3% of Gross Revenue until the fifth anniversary of the
        date
        hereof, and 4% of Gross Revenue thereafter, 

      

      or
        such
        higher amount as may be required pursuant to the franchise agreement or loan
        with respect to the applicable hotel.

      

      “Operating
        Budget”
        has the
        meaning set forth in Section
        3.4.1.

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      “Operating
        Equipment”
        means
        all necessary chinaware, glassware, linens, silverware, uniforms, utensils
        and
        other items of a similar nature, including such items bearing the name or
        identifying characteristics of the Franchise.

      

      “Operating
        Expenses”
        means,
        for any period, the current obligations of the Owner for such period, determined
        in accordance with sound accounting principles approved by the Owner and
        applicable to commercial real estate, consistently applied, for operating
        expenses of the Property. Operating Expenses shall not include any non-cash
        expenses such as depreciation or amortization.

      

      “Operating
        Revenues”
        means,
        for any period, the gross revenues of the Owner arising from the ownership
        and
        leasing of the Property during such period, including proceeds of any business
        interruption insurance, but specifically excluding the proceeds of Capital
        Transactions and capital contributions made by members.

      

      “Operating
        Supplies”
        means
        the inventories of paper supplies, office supplies, cleaning materials, food
        and
        beverage and similar consumable items for the Property.

      

      “Owner”
        has the
        meaning set forth in the recitals hereto.

      

      “Property”
        has the
        meaning set forth in the recitals hereto.

      

      “Property
        Accounts”
        has the
        meaning set forth in Section
        3.5.1.

      

      “REIT”
        means
        Hersha Hospitality Trust.

      

      “Replacement
        Reserve”
        means
        (i) [for Stabilized Assets, 4% of Gross Revenues, until the second anniversary
        of the date hereof, and 5% of Gross Revenues thereafter, for the Hartford
        Hilton, 3% of Gross Revenues, until the second anniversary of the date hereof,
        thereafter 4% of Gross Revenues until the fourth anniversary of the Date
        hereof,
        and 5% of Gross Revenues thereafter and for the Hartford Marriott: $0 until
        the
        first anniversary of the Date hereof, thereafter 3% of Gross Revenues until
        the
        fifth anniversary of the Date hereof, and 4% of Gross Revenues thereafter]
        or
        (ii) such higher amount as may be required pursuant to the franchise agreement
        or loan with respect to the Property.

      

      “STR
        RevPar”
        means
        the revenue per available room index with respect to the Property at any
        given
        time as provided in the Smith Travel Research Report with respect to such
        Property. 

      

      “Term”
        means
        the term of this Agreement, and any extensions thereof as set forth in
Section
        8.1.

      

      “Twelve
        Percent Return”
        means,
        an amount that accrues on the average daily balance of the Lessee Member
        Equity
        and Mystic Member Equity, respectively, at a per annum rate of twelve percent
        (12%). The Twelve Percent Return shall accrue on the Lessee Member Equity
        and
        the Mystic Member Equity, respectively, from the date such equity is contributed
        until the date the Twelve Percent Return is paid. The Twelve Percent Return
        shall not be compounded. 

      

      “Uniform
        System”
        means
        the Uniform
        System of Accounts for the Lodging Industry,
        as
        recommended and adopted by the Hotel Association of New York City, Inc.,
        and
        adopted by the American Hotel & Lodging Association (9th revised edition) or
        such revised editions as adopted or modified from time to time.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      1.2          
        Accounting
        Terms.
        Accounting terms used in this Agreement but not defined in this Article shall
        have the meanings provided in the Uniform System. Any term used that is not
        defined in the Uniform System shall have the meaning given it under generally
        accepted accounting principles.

      

      1.3          
        Rules
        of Interpretation.
        A
        reference to any agreement, budget, document or schedule shall include such
        agreement, budget, document or schedule as revised, amended, modified or
        supplemented from time to time in accordance with its terms and the terms
        of
        this Agreement. The singular includes the plural and the plural includes
        the
        singular. The words “include”, “includes” and “including” are not limiting.
        Reference to a particular “Section” or “Articles” refers to that section or
        articles of this Agreement unless otherwise indicated. The words “herein”,
“hereof”, “hereunder” and words of like import shall refer to this Agreement as
        a whole and not to any particular section or subdivision of this
        Agreement.

       

       

      
        	
                2.

              	
                APPOINTMENT
                  OF MANAGER

              

      

      

      2.1          
        Appointment.
        Lessee
        hereby appoints and employs Manager as its exclusive agent to manage and
        operate
        the Property for the Term. Manager accepts such appointment and agrees to
        manage
        and operate the Property during the Term in accordance with the terms and
        conditions of this Agreement. 

      

      2.2          
        Working
        Capital.
        Lessee
        shall make working capital available to Manager for managing and operating
        the
        Property and, upon the execution hereof, shall deposit cash equal to the
        Minimum
        Balance into the Property Accounts. Thereafter, Lessee shall maintain in
        the
        Property Accounts at all times working capital equal to the Minimum Balance
        and,
        as and when needed, shall promptly increase the amount of working capital
        as
        necessary to pay Operating Expenses to the extent Gross Revenues are
        insufficient. Lessee shall remit to Manager all amounts requested by Manager
        to
        maintain sufficient working capital to meet all anticipated Operating Expenses
        or other agreed-upon expenditures as provided in the Operating Budget, within
        five days of Manager’s request therefor. Notwithstanding anything in this
        Agreement to the contrary, Manager shall not have any liability for any loss,
        liability, penalties, or damages incurred by the Property or Lessee that
        result
        from Lessee’s failure to provide sufficient funds to pay Operating Expenses
        within five (5) business days after Manager’s written request
        therefor.

      

      2.3          
        Authority.
        Except
        as otherwise provided in this Agreement, and subject to the Annual Business
        Plan, Manager shall have full power and authority to manage and operate the
        Property and to determine all programs and policies with respect thereto
        to the
        extent such are consistent with the terms of the Franchise Agreements. Manager
        shall maintain, manage, and operate the Property in a manner consistent with
        the
        Franchise Agreements and properties of a comparable class and condition having
        similar facilities in comparable markets. Manager shall have exclusive
        discretion and control in all matters relating to the management, operation,
        supervision, and maintenance of the Property, consistent with the Annual
        Business Plan, and may take any action reasonably necessary to fulfill its
        responsibilities under this Agreement; provided, however, Manager shall consult
        with Lessee prior to implementing any material changes in policies and
        procedures relating to the Property. In case of emergencies which shall threaten
        continued operations or which may result in the immediate suspension of
        operations of the Property, or shall expose Lessee or Manager to criminal
        liability, or any other emergency which in Manager’s judgment will be deemed to
        be of a serious nature, then in such event Manager shall take such stop-gap
        measures and actions as it may in good faith deem necessary to temporarily
        alleviate the emergency condition, which measures and actions shall be at
        Lessee's expense. Manager shall give prompt notification of any such emergency
        to Lessee and, if possible, shall provide such notice to Owner in advance
        of
        taking such stop-gap measures or actions.

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      2.4          
        Ownership
        and Possession of Property.
        At the
        commencement of the Term, Lessee shall deliver to Manager the Property and
        its
        operations and, subject to the terms hereof, shall not interfere in any way
        with
        the day-to-day management of the Property by Manager. Lessee agrees that
        it
        shall keep leasehold title to the Property during the Term, except as otherwise
        provided under Section
        8.3.1.

      

      2.5          
        Licenses.
        Lessee
        shall procure with the assistance of Manager all Licenses necessary to enable
        Manager to operate the Property in compliance with all applicable Laws and
        in a
        manner consistent with other hotels of comparable size, class, and standing.
        

      

      2.6          
        Compliance
        with Law and Agreements.
        Lessee
        and Manager shall use their good faith efforts to comply with all Laws
        applicable to the Property or the manner of its operation. Lessee further
        agrees
        to pay, keep, observe, and perform all payments, terms, covenants, conditions,
        and obligations under any lease, franchise, concession, mortgage, deed of
        trust,
        security agreement, covenant, condition, or restriction that affects the
        Property. 

      

      2.7          
        Franchise
        Affiliation.
        Lessee
        shall perform all of Lessee’s obligations under the terms of all agreements
        related to the Franchise, and Manager shall operate the Property in compliance
        with the regulations of the Franchise subject to Lessee’s funding such Operating
        Expenses required therefor as provided in Section
        2.2.
        Lessee
        shall furnish Manager with true and complete copies of all agreements, manuals
        and other documents governing or related to the Franchise.

      

      2.8          
        Employer
        Status.
        All
        Employees shall be employees of Lessee, and all compensation and benefits
        of
        such employees shall be paid by Manager on behalf of Lessee, and the amount
        of
        such payments shall immediately be reimbursed to Manager by Lessee in accordance
        with Sections
        3.5
        and
2.2.
        Accordingly, Manager may establish appropriate payroll accounts covering
        all
        Employees and may make arrangements such that Manager can draw on the Property
        Accounts to transfer funds to such payroll accounts immediately upon its
        payment
        of such compensation to the Employees. 

       

       

      
        	
                3.

              	
                MANAGEMENT
                  AND OPERATION SERVICES.

              

      

      

      3.1          
        Management
        and Operation Services.
        In its
        capacity as agent and manager on behalf of Lessee, Manager shall supervise,
        manage, and operate the Property in accordance with the Franchise Agreements
        and
        in the same manner as is customary and usual in the operation of comparable
        facilities and shall provide such services as are customarily provided by
        operators of hotels of comparable size, class, condition and standing consistent
        with the Property’s facilities, all in accordance with the procedures,
        practices, management techniques, and other rules of operation used by Manager
        in operating similar properties, subject to (i) the terms of the Annual Business
        Plan, (ii) the Lessee’s funding or other performance of its obligations in
        accordance with the terms thereof, (iii) any deficiencies in the physical
        and
        operating condition of the Property which make it impossible or impractical
        to
        comply with such obligations, (iv) the ability of Lessee or Manager to obtain
        all Licenses which would enable Manager to comply with such obligations,
        and (v)
        the occurrence of a Force Majeure. Manager shall be entitled to use and rely
        on
        its reasonable business judgment in making all decisions necessary for the
        performance of its obligations under this Agreement. The services to be provided
        by Manager shall include:

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      3.1.1         Development,
        in conjunction with the Annual Business Plan, of a marketing plan for the
        Property. Manager shall make all necessary arrangements for execution of
        such
        plan and negotiate and contract with appropriate advertising agencies on
        Lessee’s behalf;

      

      3.1.2         Selection,
        employment (on Lessee’s behalf, as its agent), promotion, termination where
        appropriate, supervision, direction, and training (including seminars and
        meetings sponsored by Manager or others in and out of town) of all such
        Employees as may be required to manage and operate the Property to such
        standards as are expected of properties of comparable size, class, condition,
        and standing. Subject to any applicable employment agreement or collective
        bargaining agreement, the determination of compensation for all Employees
        shall
        be the sole duty and responsibility of Manager, but such compensation shall
        be
        appropriate for the region, shall be comparable to salaries or wages paid
        to
        employees of similar facilities for similar work, and shall be subject to
        the
        Lessee’s approval in the Annual Business Plan; provided, however that prior to
        hiring any Executive Staff, Manager will deliver the resume of such proposed
        Executive Staff candidate to Lessee. Lessee shall have a period not to exceed
        ten (10) days after its receipt of such resume to interview such Executive
        Staff
        candidate and Manager shall consider Lessee’s views in Manager’s decision as to
        hiring any such Executive Staff candidate but shall not be required to follow
        Lessee’s views as to the hiring of any such Executive Staff candidate. Lessee
        shall not interfere with or give orders or instructions to
        Employees;

      

      3.1.3         Manager
        shall, from time to time, develop and implement employment policies, procedures
        and programs for the Property (collectively, the “Employment Policies”)
        reasonably designed to effect compliance with all applicable civil rights,
        discrimination, retirement, employment and labor laws, rules and regulations.
        The Employment Policies shall be consistent with industry standards for
        reputable hotel management companies;

      

      3.1.4         Providing
        Employees with Manager’s benefit package and incentive plan (to the eligible
        Employees) in effect from time to time;

      

      3.1.5         Maintenance
        of the Property in good repair and condition, ordinary wear and tear excepted,
        subject to and in accordance with the Annual Business Plan and the Franchise
        Agreements or as otherwise approved by Lessee, except where an emergency
        exists
        requiring prompt action for the protection or safety of the Property or its
        occupants or as required by Laws in which case Manager shall give prompt
        notice
        to Lessee and may immediately make any necessary repairs, following which
        a
        written report shall be made to Lessee;

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      3.1.6         Installation
        of Manager’s accounting and operating systems, including the maintenance of
        required books and records and internal accounting and operating controls
        during
        the Term, but excluding any reconciliation, updating, and auditing of existing
        accounting and operating systems that may be required to bring the existing
        books and records of the Property current and excluding any certification.
        During the Term, Manager shall maintain the records and books of account
        for the
        Property in accordance with the Uniform System;

      

      3.1.7         Obtaining,
        granting and administering such subleases, vending concessions, and privileges
        in the name of the Lessee (which may include a gift shop, newsstand, and
        parking
        facilities) as are reasonably necessary or desirable in connection with the
        operation of the Property; provided, however, that all such subleases not
        subject to termination within 90 days shall be subject to Lessee’s prior written
        approval;

      

      3.1.8         Negotiation
        and execution on behalf of Lessee of service contracts and other contracts
        reasonably necessary or desirable in connection with the operation or
        maintenance of the Property in the usual course of business; provided, however,
        that Manager shall not execute any contract that binds Lessee to pay in excess
        of $10,000 over the term of such contract except as approved by Lessee in
        Annual
        Business Plan or otherwise unless such contract provides for its termination
        without cause on notice of 30 days or less;

      

      3.1.9         Procuring
        all Operating Supplies and all other materials and supplies in the name of,
        on
        the account of, and at the expense of Lessee; and

      

      3.1.10        Making
        or
        installing or causing to be made or installed, at Lessee’s expense and in the
        name of Lessee, all necessary and proper repairs, decoration, revisions,
        alterations, rebuildings, replacements, additions and improvements in and
        to the
        Property, its buildings and other improvements, and its furnishings and
        equipment in accordance with comparable facilities. Prior to Manager’s entering
        into any contract on Lessee’s behalf for the performance of work or the purchase
        of items with respect to the Property, the cost of which would exceed $25,000
        and would be classified as a capital expenditure under the Uniform System,
        Manager shall notify Lessee in writing thereof and state whether the price
        of
        any such work or purchase is competitive with the price of similar work or
        purchase in the market in which the Property is located provided,
        however, that this provision shall only apply with respect to such contracts,
        the costs associated with which are not included in the current approved
        Operating Budget. 

      

      3.2          
        Accounts
        and Records.
        All
        books, accounts, and records maintained for the operation of the Property
        shall
        be available on reasonable notice during regular office hours for inspection
        and
        audit by Lessee or its representatives at the location where such records
        are
        maintained by Manager. All of such books, accounts and records including
        guest
        records and front office records shall be the property of Lessee. Upon
        termination of this Agreement, Manager shall deliver to Lessee all books
        and
        records of the Property in its possession, except for records maintained
        electronically, electronic or written reports from which shall be supplied
        to
        Lessee. Property records retained by Lessee or Manager after termination
        shall
        be made available for inspection or copying by the other party on reasonable
        notice and at mutually convenient times for one (1) year after termination
        of
        this Agreement. Manager may retain copies of any books and records for its
        own
        record-keeping purposes. 

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      3.3          
        Financial
        Statements.
        Manager
        and Lessee agree as follows with respect to financial statements and
        reports:

      

      3.3.1         All
        Financial Statements shall be prepared in accordance with the Uniform System
        to
        the extent applicable and shall otherwise be prepared in accordance with
        Manager’s standard financial reporting and budgeting practices which reporting
        and budgeting practices shall be consistent with those used in the hospitality
        industry for hotels of similar size and type to the Property. The Financial
        Statements shall be prepared based upon the books and records. Any disputes
        as
        to the contents of any Financial Statement or any accounting matter hereunder
        shall be determined by an independent certified public accountant to be agreed
        upon by both parties, whose decision shall be final and conclusive as to
        both
        Manager and Lessee. The cost of any audit, review or compilation shall be
        an
        Operating Expense. Lessee acknowledges that it has the responsibility to
        review
        for accuracy any financial information furnished by Manager and used in any
        tax
        return or filing of Lessee or its equity Lessees. Manager shall cooperate
        with
        Lessee’s auditors to the extent reasonably requested. A copy of the audit report
        shall be furnished to Manager;

      

      On
        or
        before the 20th day following the end of each month, Manager shall mail or
        deliver to Lessee financial statements covering the operations of the Property
        for the entire preceding month, which statements shall consist of: (i) a
        balance
        sheet; (ii) an income and expense statement by department showing results
        of the
        Property’s operation for the preceding calendar month and Fiscal Year and
        comparing the current calendar month and Fiscal Year-to-date performance
        with
        the Annual Business Plan and previous year performance (if available); (iii)
        Gross Revenues, Net Operating Income, and any applications and/or distributions
        thereof; and (iv) calculations and payments of Management Fees; and (v) such
        other reports as Lessee may reasonably request. 

      

      On
        or
        before the 30th
        day
        following the end of each month, Manager shall mail or deliver to Lessee
        financial statements covering the operations of the property for the entire
        preceding month, which statements shall consist of (i) a source and use of
        funds
        statement and (ii) a forecasted cash flow statement for the next 90 days
        and
        year which identify and explain working capital requirements during such
        period
        in excess of $150,000.

      

      On
        or
        before the 20th
        day
        following the end of each quarter, Manager shall mail or deliver to Lessee
        financial statements covering the operations of the Property for the entire
        preceding quarter, which statements shall consist of a consolidated income
        and
        expense statement for the preceding calendar quarter and Fiscal Year and
        comparing the current calendar quarter and Fiscal Year-to-date performance
        with
        the Annual Business Plan and previous year performance (if
        available).

      

      3.3.2         In
        addition, Manager shall make available to Lessee daily statistics on the
        operation of the Property including month-to-date and prior year variances;
        and

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      3.3.3         On
        or
        before the 90th day following the end of the Fiscal Year, Manager shall mail
        or
        deliver to Lessee unaudited financial statements for the preceding year,
        which
        statements shall consist of: (i) a balance sheet; (ii) a cash flow report;
        (iii)
        a profit and loss statement; and (iv) a variance report comparing the actual
        performance of the Property to the Annual Business Plan (the “Annual
        Financial Statements”).
        

      

      3.4          
        Annual
        Business Plan.

      

      3.4.1        On
        or
        before 90 days after the commencement date of this Agreement for the first
        Fiscal Year and on or prior to November 15 (or 15 days prior to the end of
        each
        Fiscal Year in the event that a Fiscal Year does not terminate on December
        31 of
        such year) of each Fiscal Year thereafter, Manager shall submit to Lessee
        the
        proposed Annual Business Plan for the Property for the next Fiscal Year.
        Notwithstanding the foregoing, the Annual Business Plan submitted hereunder
        shall be submitted to Lessee at such other time as may be required by the
        Owner
        upon 90 days prior written notice to Manager notifying Manager of the date
        on
        which such Annual Business Plan must be submitted. The Annual Business Plan
        shall include the marketing plan provided for in Section
        3.1.1,
        an
        operating budget setting forth in reasonable line-item detail the projected
        income from and expenses of all aspects of the Operations of the Property
        (“Operating
        Budget”)
        for
        the next Fiscal Year, including a schedule of the Property room rentals,
        restaurant and lounge revenue, and miscellaneous income, and a schedule of
        expected special repairs and maintenance and a capital replacement budget
        describing proposed capital projects and expenditures for the Property including
        FF&E expenditures all in reasonable line-item detail. If the commencement
        date of this Agreement occurs after the end of the second quarter of the
        Property’s Fiscal Year, Lessee and Manager shall reasonably determine the detail
        required for a pro forma business plan for the remainder of the current Fiscal
        Year, which abbreviated business plan also shall be provided to Lessee within
        45
        days after the commencement date of this Agreement. Operating Budget information
        shall be presented on a monthly basis and shall include all income from and
        expenses and operating costs related to the operation of the Property. The
        Operating Budget shall be prepared in accordance with the Uniform System
        to the
        extent applicable and shall otherwise be prepared in accordance with Manager’s
        standard financial reporting and budgeting practices which reporting and
        budgeting practices shall be consistent with those used in the hospitality
        industry for hotels of similar size and type to the Property.

      

      3.4.2         Lessee
        shall have 30 days from the date of its receipt of the Annual Business Plan
        submitted by Manager to notify Manager in writing of any objections thereto.
        If
        Lessee does not so notify Manager within the 30-day period, then the Annual
        Business Plan shall be deemed approved by Lessee. If Lessee objects to all
        or
        part of any Annual Business Plan proposed by Manager, Lessee shall furnish
        Manager with the reasons for its objections and Manager and Lessee shall
        in good
        faith negotiate a mutually satisfactory Annual Business Plan. Until the Annual
        Business Plan is approved, Manager shall manage, operate, and maintain the
        Property in accordance with its reasonable business judgment and consistent
        to
        the extent applicable with the most recently approved Annual Business
        Plan.

      

      3.4.3       Each
        Annual Business Plan presented for Lessee’s approval and any budgets, reports,
        or projections prepared by Manager shall be prepared in good faith based
        on
        Manager’s experience and reasonable expectations for the Property’s performance.
        However, Lessee acknowledges that Manager makes no guarantee, warranty, or
        representation regarding the attainability of the goals or limits set forth
        in
        the Annual Business Plan or any budgets, reports, or projections prepared
        by it
        or that there will be profits or that there will not be losses from the
        operation of the Property.

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      3.5         Disposition
        of Funds from Property Operations.
        Funds
        originating from the Property’s operation or from the Lessee for payment of
        Operating Expenses shall be received, handled, and disbursed as
        follows:

      

      3.5.1       All
        Gross
        Revenues received in the operation of the Property shall be funds of Lessee
        and
        shall be deposited by Manager in one or more accounts (collectively, the
        “Property
        Accounts”)
        at a
        reputable banking institution or institutions acceptable to Lessee in the
        name
        of Manager, as agent of Lessee. Manager and the managing member of Mystic
        shall
        be the only parties authorized to withdraw funds from the Property Accounts.
        Lessee shall grant to Manager the exclusive authority as its agent in order
        that
        the withdrawal of funds and handling of the Property Accounts shall be effected
        exclusively by such individual persons as may be designated from time to
        time
        for such purpose by Manager and such individuals shall be bonded or insured
        in
        manner reasonably acceptable to Lessee.

      

      3.5.2       Out
        of
        such Property Accounts, Manager is authorized to pay all Operating Expenses
        and
        to make any other payments (or reimbursements thereof) incurred in connection
        with the ownership, maintenance, and operation of the Property, including
        all
        compensation and benefits of Employees, Management Fees, and all reimbursements
        or other payments due to Manager under this Agreement;

      

      3.5.3       On
        the
        last Business Day of each month, Manager shall cause all amounts in the Property
        Accounts in excess of the Minimum Balance to be wired electronically to a
        bank
        account designated for such purposes by Lessee.

      

      [Add
        subsection for payment of Asset Manager’s fee where
        applicable]

      

      3.6         Corporate
        Employees.
        No
        salaries of Manager’s corporate employees (as distinguished from the Executive
        Staff and all other Employees) shall be paid from the operation of the Property
        unless and to the extent that such corporate employees are actually engaged
        in
        the operation of the Property or filling a permanent or temporary position
        at
        the Property. Manager shall be reimbursed for the compensation of such corporate
        employees in accordance with Sections
        3.5
        and
2.2.
        Manager
        shall also have the right to have such corporate employees performing services
        hereunder relating to the Property lodged at the Property from time to time
        free
        of charge. 

      

      3.7         Reimbursement
        of Expenses.
        If
        Manager advances any funds for the payment of expenses in the maintenance
        or
        operation of the Property, or in the performance of this Agreement, such
        amounts
        shall be reimbursed to Manager from the Property Accounts and, to the extent
        insufficient funds exist therein, by Lessee within fifteen days of delivery
        by
        Manager of an invoice therefor. Lessee understands and agrees that Manager
        shall
        have no obligation to advance any of its own funds in connection with the
        operation of the Property.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      
        
          	
                  4.

                	
                  MANAGEMENT
                    FEES

                

        

      

       

      4.1         
         Management Fees.

       

      4.1.1        As
        compensation for the services rendered by Manager under this Agreement, Lessee
        shall pay to Manager a sum (the “Base
        Fee”)
        equal
        to three percent (3%) of Gross Revenues for the Property, plus applicable
        Connecticut taxes and out of pocket expenses of travel to and from the Property
        by the Manager and staff.

      

      4.1.2        As
        an
        incentive fee, Lessee shall also pay to Manager a sum (the “Incentive
        Fee”)
        equal
        to ten percent (10%) of the Net Distributable Funds available to Lessee on
        an
        annual basis to Manager on or before 60 days after the end of the Fiscal
        Year
        for which such fee is paid, together with a statement itemizing determination
        of
        Net Distributable Funds. “Net
        Distributable Funds”
        means
Net
        Operating Income less (i) debt service (including principal and interest
        and
        other amounts due and payable) payable to lenders in connection with loans
        to
        the Owner Entities and (ii) an amount equal to the
        Twelve Percent Return (the “Member
        Return”).
        

      

      4.1.3        Notwithstanding
        anything to the contrary herein, the calculation of the Member Return shall
        reflect only amounts from the current Fiscal Year and such amounts shall
        not be
        compounded over more than one Fiscal Year.

      

      4.2          
        Payment
        and Adjustment of Management Fees.

      

      4.2.1        Base
        Fees
        shall be calculated by Manager on a monthly basis based on the month-end
        financial statements for each month delivered pursuant to Section
        3.3.1.
        Base
        Fees (plus any sales or similar tax payable thereon) shall be payable monthly
        to
        Manager; provided, that an adjustment, if necessary, shall first be made
        on a
        cumulative year-to-date basis taking into account the total monthly Base
        Fees
        paid to date and the Gross Revenues earned to date. Any amounts due to Lessee
        shall be credited against the next monthly payment(s) of Base Fees.

      

      4.2.2        Incentive
        Fees shall be calculated by Manager on an annual basis based on the year-end
        financial statements for each Fiscal Year. Upon the delivery of such year-end
        financial statements pursuant to Section
        3.3.3,
        Lessee
        shall have twenty (20) calendar days to advise Manager of any disagreement
        with
        such calculation of the Incentive Fee for such Fiscal Year. Payment of all
        Incentive Fees (plus any sales or similar tax payable thereon) shall be made
        as
        provided in Section
        3.5
        following the end of each Fiscal Year. At the time of the Fiscal Year-end
        audit
        conducted by Lessee or Lessee’s representatives or by other agreement between
        Lessee and Manager, an adjustment in the Incentive Fee for such Fiscal Year
        will
        be made if necessary. Any amounts due to Manager shall be made as provided
        in
Section
        3.5
        within
        30 days after such adjustment. Any amounts due to Lessee shall be credited
        against the next payment(s) of Management Fees or, upon written notice by
        Lessee
        to Manager, refunded to Lessee within 30 days.

      

      4.2.3        At
        the
        end of the Term, all accrued Management Fees shall become immediately due
        and
        payable. In the case of any partial month, the Base Fee shall be calculated
        on a
        prorated basis using the Gross Revenues received for such partial month over
        the
        days elapsed in such partial month. The Incentive Fee shall be prorated on
        the
        basis of Net Distributable Funds on hand, adjusted to reflect accrued
        liabilities and receivables, whether or not then billed, and shall be adjusted
        to reflect the actual Net Distributable Funds not later than 90 days after
        the
        end of the Term. Any other Management Fees shall be calculated on a prorated
        basis based on the days elapsed for the period in question. Payment of all
        Management Fees, whether during or at the end of the Term, shall be made
        from
        the Property Accounts or by Lessee within thirty (30) days of delivery by
        Manager of an invoice therefor. 

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      
        	
                5.

              	
                INSURANCE

              

      

      

      5.1          
        Coverage
        Requirements.
        The
        following insurance shall be secured and maintained with respect to the Property
        at all times during the Term:

      

      5.1.1         
        All
        risk
        (now known as “Special Causes of Loss Form”) property insurance, including fire,
        windstorm, and other risks covered by extended coverage endorsements on the
        buildings and other improvements at the Property and contents (including
        FF&E) in an amount equal to the full replacement value thereof with all
        coinsurance waived or an agreed amount endorsement. Flood and earthquake
        coverage shall be procured with limits acceptable to Lessee and Manager with
        all
        coinsurance waived or an agreed amount endorsement if the Facility is in
        a
        federally recognized flood zone or an area of high seismic activity, as
        applicable. If the Property is located in a flood zone, maximum limits available
        through NFIP are acceptable;

      

      5.1.2         
        All
        risk
        business interruption insurance, including fire, windstorm, and other risks
        covered on an actual loss sustained/gross earnings basis of the Property
        for the
        entire period of any such business interruption, or not less than 12 months
        with
        all coinsurance waived or an agreed amount endorsement and with an extended
        period of indemnity of at least 180 days. If the Property is located in a
        flood
        zone, business interruption insurance (BI) is required with respect to that
        Property as Lessee may reasonably require;

      

      5.1.3         
        Insurance
        against loss from accidental damage to, or from the explosion of, boilers,
        air
        conditioning systems, including refrigeration and heating apparatus, pressure
        vessels and pressure pipes in an amount equal to the full replacement value
        of
        such items with all coinsurance waived or an agreed amount
        endorsement;

      

      5.1.4         
        Business
        interruption insurance against loss from accidental damage to, or from the
        explosion of, boilers, air conditioning systems, including refrigeration
        and
        heating apparatus, pressure vessels and pressure pipes for full recovery
        of the
        net profits for the entire period of any such business
        interruption;

      

      5.1.5         
        Comprehensive
        or Commercial general liability for any claims or losses arising or resulting
        from the Property, with combined single limits of $1,000,000 per each occurrence
        and $2,000,000 in the general aggregate for (i) bodily injury, (ii) death,
        (iii)
        property damage, (iv) assault and battery, (v) false arrest, detention or
        imprisonment or malicious prosecution, (vi) libel, slander, defamation or
        violation of the right of privacy, or (vii) wrongful entry or
        eviction;

      

      5.1.6         
        If
        valet
        parking will be provided at the Property, garagekeepers liability insurance
        in a
        minimum amount of $300,000 for physical damage and $5,000,000 for
        liability;

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      5.1.7         
        Statutory
        workers’ compensation insurance on all Employees in accordance with the
        requirements of applicable law; 

      

      5.1.8         
        Employment
        practices liability insurance in an amount not less that $1,000,000, per
        occurrence and $1,000,000 in the aggregate;

      

      5.1.9         
        Insurance
        against such other insurable risks as any mortgagee of the Property or the
        franchisor of the Franchise may, from time to time, reasonably
        require;

      

      5.1.10        Liquor
        Liability (if applicable) for combined single limits of bodily injury and
        property damage of not less than $1,000,000 per occurrence;

      

      5.1.11        Business
        Auto Liability including owned, non-owned and hired vehicles for combined
        single
        limits of bodily injury and property damage of not less than $1,000,000 per
        occurrence;

      

      5.1.12        Umbrella
        Excess Liability in amounts not less than $25,000,000 in excess of the liability
        insurance required in subsections
        5.1.5,
        5.1.7,
        5.1.10
        and
5.1.11
        above.
        The amount of such coverage shall be increased as Franchisor or any mortgagee
        holding a mortgage encumbering the Property requires; and

      

      5.1.13        Comprehensive
        crime insurance in a minimum amount of $500,000.

      

      5.1.14        Insurance
        covering such other hazards and in such amounts as may be customarily carried
        by
        prudent Managers of hotels having a quality and service level similar to
        the
        Property as may be reasonably requested by Lessee.

      

      5.2         
        If
        either
        Manager or Lessee at any time deems the limits and/or retentions of the
        coverages outlined herein then carried to be either excessive or insufficient,
        Manager and Lessee shall endeavor in good faith to agree in writing on the
        proper and reasonable limits for such insurance to be carried and such insurance
        shall thereafter be carried with the limits and/or retentions thus agreed
        on
        until further change pursuant to the terms hereof. All of the policies of
        insurance referred to herein shall be written in a form and with deductibles
        satisfactory to Lessee. In the event of the failure of Manager either to
        effect
        such insurance as herein called for or to pay the premiums therefore, or
        to
        deliver such certificates thereof to Owner and Lessee at the times required,
        Lessee or Owner shall be entitled, but shall have no obligation, to effect
        such
        insurance and pay the premiums.

      

      5.3         
        Responsibility
        to Maintain.
        During
        the Term, Manager at the expense of and as agent of Lessee, shall procure
        and
        maintain the insurance policies required under Section
        5.1.
        The
        costs of all insurance for the Property shall be an Operating Expense. On
        request, Manager shall furnish Lessee with a schedule of insurance obtained
        with
        respect to the Property listing the policy numbers of the insurance obtained,
        the names of the companies issuing such policies, the names of the parties
        insured, the amounts and expiration date or dates of such policies, and the
        risks covered thereby.

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      5.4         
        Policies
        and Endorsements.
        All
        policies of insurance (with the exception of the policy required under clause
        5.1.8)
        shall
        be written on an “occurrence” basis, if possible. Any deductibles within the
        insurance policies required above shall not exceed $25,000 (with the exception
        of the policy required under clause 5.1.8,
        which
        shall not exceed $100,000). All insurance provided for hereunder shall be
        effected by policies issued by insurance companies rated no less than A-VI
        in
        Best’s Insurance Guide (or such other rating approved by Lessee, Owner’s and/or
        Lessee’s mortgagee or any Franchisor, from time to time). Manager shall deliver
        to Lessee certificates of insurance with respect to all of the policies of
        insurance so procured, including existing, additional and renewal policies,
        and
        in the case of insurance about to expire, shall deliver certificates of
        insurance with respect to the renewal policies prior to the effective date
        thereof. All policies of insurance provided for under this Article
        5
        shall
        have attached thereto (a) an endorsement that such policy shall not be canceled
        or materially changed without at least 10 days prior written notice in the
        case
        of nonpayment (and at least 30 days prior written notice in all other cases)
        to
        Lessee and Manager, and (b) an endorsement to the effect that no act or omission
        of Lessee or Manager shall affect the obligation of the insurer to pay the
        full
        amount of any loss sustained. Upon any termination of this Agreement, Lessee
        or
        Manager shall procure “tail” coverage for any insurance policy maintained
        hereunder on a “claims made” basis, the costs of which coverage will be an
        Operating Expense. 

      

      5.5         
        Named
        Insureds.
        All
        policies of insurance required under clauses
        5.1.1
        through
5.1.4
        shall be
        carried in the name of Lessee and any Owner and/or Lessee mortgagee, and
        Manager
        shall be named as a loss payee as to business interruption insurance. Losses
        thereunder shall be payable to the parties as their respective interests
        may
        appear. Any loss adjustment in excess of $100,000 shall require the consent
        of
        Lessee and Manager. All insurance policies required in clauses
        5.1.5,
        5.1.6
        and
5.1.9
        through
5.1.13
        shall
        name Lessee and Manager, their Affiliates, and the directors, officers, agents
        and employees of each such entity as named insureds on a primary basis,
        irrespective of any other coverage, whether collectable or not. Policies
        required in clauses
        5.1.7,
        5.1.8
        and
5.1.13
        shall be
        written in the name of the employer. 

      

      5.6         
        Waiver
        of Liability.
        Neither
        Manager nor Lessee shall assert against the other, and each party does hereby
        waive with respect to each other, or against any other entity or person named
        as
        additional insureds on any policies carried under this Article
        5,
        any
        claims for any losses, damages, liability or expenses (including attorneys’
        fees) incurred or sustained by either of them on account of injury to persons
        or
        damage to property arising out of the ownership, development, construction,
        completion, operation or maintenance of the Property, to the extent that
        the
        same are covered by the insurance required under this Article
        5.
        Each
        policy of insurance shall contain a specific waiver of subrogation reflecting
        the provisions of this Section
        5.5,
        and a
        provision to the effect that the existence of the preceding waiver shall
        not
        affect the validity of any such policy or the obligation of the insurer to
        pay
        the full amount of any loss sustained.

      

      5.7         
        Insurance
        by Manager.
        Any
        insurance provided by Manager under this Article
        5
        may be
        effected under policies of blanket insurance which cover other properties
        of
        Manager and its affiliates, and Manager shall have the right to charge the
        Property with the Property’s pro rata share of such premiums, which shall be
        allocated to the Property on the same basis as allocated to other properties
        participating in such coverage. Such allocation must be reasonable and not
        result in higher costs or diminished or altered coverage than those that
        would
        be incurred if such insurance covered just the Property. Any policies of
        insurance maintained by Manager pursuant to the provisions of this Article
        5
        may
        contain deductible provisions in such amounts as are maintained with respect
        to
        other properties participating in such coverage, for which Lessee shall be
        responsible or which Manager, at Lessee’s expense, may pay. 

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      5.8         
        Review
        of Limits.
        All
        insurance policy limits established in this Article shall be reviewed by
        the
        parties annually, or sooner if reasonably requested by Manager or Lessee,
        to
        determine the suitability of such insurance limits in view of exposures
        reasonably anticipated.

      

      5.9         
        Limitation
        on Scope of Services.
        Lessee
        acknowledges that neither Manager nor any insurance broker or insurance
        consultant that Manager may retain makes any representation or warranty,
        and
        shall not be deemed to make any representation or warranty, regarding the
        nature
        or extent of the insurance coverages that should be considered by Lessee
        as
        necessary or advisable for the ownership and operation of the Property. Lessee
        assumes all risks in connection with the adequacy of any insurance and waives
        any claim against Manager, for any liability, cost or expense arising out
        of any
        uninsured or under-insured claim, in part or in full, of any nature. Lessee
        acknowledges that it has and shall continue to monitor the coverage and limits
        of all insurance provided or procured by Manager and unless addressed in
        a
        specific meeting in writing to Manager all of such insurance is deemed adequate
        and complete for the Property and Lessee.

      

       

      
        
          	
                  6.

                	
                  REPRESENTATIONS,
                    WARRANTIES, INDEMNITIES AND
                    COVENANTS

                

        

      

      

      6.1         
        Mutual
        Representations and Warranties.
        Each of
        Lessee and Manager represents and warrants to the other that: (a) all recitals
        and representations made by it or in respect of it in this Agreement are
        true
        and correct; (b) it is duly formed or organized, validly existing, and in
        good
        standing under the applicable Laws of its jurisdiction of organization; (c)
        all
        requisite corporate, partnership, or company action has been taken to permit
        it
        to enter into this Agreement and carry out the terms hereof, (d) the officer,
        partner, manager or member signing this Agreement for it is authorized to
        do so;
        and (e) to the best of its knowledge, neither its execution of this Agreement
        nor the consummation of the transactions contemplated hereby will: (i) violate
        any provision of Laws or any judgment, writ, injunction, order, or decree
        of any
        court of competent authority applicable to it; (ii) result in or constitute
        a
        breach or default (or an occurrence that, by lapse of time or the giving
        of
        notice, or both, would constitute a breach or default) under any indenture,
        contract, or other commitment or restriction to which it is a party of by
        which
        it is party or by which it is bound; (iii) require any consent, vote, or
        approval that, at any time of the transaction involved, has not been obtained;
        or (iv) result in the creation or imposition of any lien or encumbrance upon
        the
        Property or breach any instrument affecting the Property.

      

      6.2         
        Lessee’s
        Representations and Warranties.
        Lessee
        represents and warrants to Manager that: (a) the Property is zoned for the
        uses
        intended under this Agreement, and all necessary Licenses for such uses and
        for
        the food and beverage (including the sale and service of liquor, if applicable)
        operations of the Property have been obtained and are in full force and effect;
        (b) to the best of its knowledge and information, no Hazardous Materials
        are
        present in or on the Property other than cleaning solvents and similar materials
        necessary for the maintenance of the Property; (c) to the best of its knowledge
        and information, the Property is in material compliance with the ADA; (d)
        no
        other management contract or similar agreement with any other manager or
        management company is now in effect that covers the Property; and (e) it
        holds a
        valid leasehold interest to the Property and that there are no outstanding
        agreements, covenants, restrictions, options, encumbrances or the like which
        may
        affect the right of Lessee to enter into this Agreement or to retain such
        title
        and right during the Term.

      
        
          
          

        

        
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      6.3         
        Manager’s
        Covenants.

      

      6.3.1         
        During
        the Term, Manager shall not permit wagering activities to be conducted at
        or in
        connection with the Property 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 the Property.

      

      6.3.2         
        During
        the Term, no more than 35% of the total combined voting power of the Manager’s
        outstanding stock (or 35% of the total shares of all classes of its outstanding
        stock) shall be owned by one or more persons owning 35% or more of the
        outstanding stock of the REIT. For this purpose, if any person has an option
        to
        acquire stock, such stock shall be considered as owned by such person. If
        the
        REIT or the Manager becomes aware that, due to the application of the
        constructive stock ownership rules of Section 856(d)(5) of the Code, more
        than
        35% of the total combined voting power of the Manager’s outstanding stock (or
        35% of the total shares of all classes of its outstanding stock) is treated
        as
        owned by one or more persons owning 35% or more of the outstanding stock
        of the
        REIT (a “Constructive Ownership Problem”), the REIT or the Manager will promptly
        notify the other party. If the REIT concludes that the Constructive Ownership
        Problem could reasonably prevent the REIT from qualifying as a real estate
        investment trust under Subchapter M of the Code, the Manager shall have 15
        days
        to fix the Constructive Ownership Problem. If the Manager does not fix the
        Constructive Ownership Problem within 15 days, then, notwithstanding anything
        to
        the contrary in this Agreement, the REIT shall have the right to cause the
        Lessee to terminate this Agreement without the payment of a termination fee
        or
        penalty.

      

      6.3.3         
        At
        the
        time Manager enters into this Agreement, Manager shall be actively engaged
        in
        the trade or business of operating Qualified Lodging Facilities for Unrelated
        Persons. In order to meet this requirement, Manager agrees that (i) at the
        time
        Manager enters into this Agreement, it shall derive at least 10% of both
        its
        revenue and profit from operating Qualified Lodging Facilities for Unrelated
        Persons and (ii) at the request of the REIT, it shall use commercially
        reasonable efforts to comply with any future regulations or other administrative
        guidance with respect to the amount of hotel management business that is
        necessary for Manager to qualify as an “eligible independent contractor” under
        Section 856(d)(9) of the Code.

      

      For
        purposes of this Section 6.3, the following terms shall have the meanings
        set
        forth below:

      

      “Lodging
        Facility” means 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 the
        REIT.

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      “Qualified
        Lodging Facility” means a Lodging Facility, 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.

      

      “Unrelated
        Person” means an entity that is not (i) the REIT or the Lessee or (ii) owned
        more than 50%, by vote or value, by the REIT or the Lessee.

      

      6.4         
        Indemnification
        by Manager.
        Manager
        shall indemnify, defend, and hold harmless Lessee, its Affiliates and their
        successors and assigns, and the respective officers, directors, shareholders,
        managers, members, partners, agents, contractors and employees of Lessee,
        its
        Affiliates and any such successors and assigns (“Lessee
        Indemnitees”),
        from
        and against any and all claims, damages, costs, expenses, demands, actions
        and
        causes of action, losses, liabilities, or penalties (including reasonable
        legal
        fees) charged to the Property or suffered by Lessee Indemnitees, to the extent
        that such claims, damages, costs, expenses, demands, actions and causes of
        action, losses, liabilities, or penalties are incurred by Lessee Indemnitees
        as
        a result of (i) the fraud, willful misconduct or gross negligence of the
        Manager, its employees or agents, (ii) the breach by Manager of any term
        of this
        Agreement (including any claims of harassment or alleged harassment of any
        employee by Manager or any employee or agent of Manager), (iii) any act,
        omission, or condition related to operations on the Property under any of
        the
        Licenses and (iv) any action taken by Manager, its employee or agent, which
        is
        beyond the scope of Manager’s authority under this Agreement. The provisions of
        this Section 6.4 shall survive the expiration or termination of this Agreement
        and shall be binding upon Manager’s successors and assigns.

      

      6.5         
        Indemnification
        by Lessee.
        Lessee
        shall indemnify, defend, and hold harmless Manager and the Manager, its
        Affiliates and their successors and assigns, and the respective officers,
        directors, shareholders, managers, members, partners, agents, contractors
        and
        employees of Manager, its Affiliates and any such successors and assigns,
        from
        and against any and all claims, damages, costs, expenses, demands, actions
        and
        causes of action, losses, liabilities, or penalties (including reasonable
        legal
        fees) arising from or related to: (i) (a) the design or construction of the
        Property before, during or after the Term and (b) the management, operation
        or
        maintenance of the Property before or after the Term, in each case, including
        those matters arising from or related to the ADA or to the presence of Hazardous
        Materials on the Property; (ii) any act, omission, or condition occurring
        or
        existing in connection with or attributable to Manager, its assigns, affiliates,
        or the General Manager being the named licensee or permittee under any of
        the
        Licenses for the Property; and (iii) the acts of any of the Employees or
        the
        employment, hiring, promotion, termination, or supervision of any of the
        Employees by Lessee (including any liability related to the Worker Adjustment
        and Retraining Notification Act, 29 U.S.C. §§2101; Title VII of the Civil Rights
        Acts of 1964 and 1991; the ADA; the Age Discrimination in Employment Act;
        Employee Retirement Income Security Act and other Laws related to Employees),
        except, with respect to subclauses (i) and (ii) above, to the extent such
        liabilities are incurred by Manager due to the fraud, willful misconduct
        or
        gross negligence of Manager, its employees or agents and with respect to
        subclause (iii) above, to the extent such liabilities are incurred by Manager
        due to the fraud, willful misconduct or negligence of Manager, its employees
        or
        agents. The provisions of this Section 6.5 shall survive the expiration or
        termination of this Agreement and shall be binding upon Lessee’s successors and
        assigns.

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      6.6         
        Defense
        Costs.
        Any
        legal proceedings that are instituted against Lessee or Manager, or both,
        related to the operation, management, or maintenance of the Property shall
        be
        payable from the Property Accounts and shall be defended at Lessee’s expense, to
        the extent funds generated by the Property are insufficient.

       

       

      
        	
                7.

              	
                DAMAGE;
                  CONDEMNATION; TRANSFER;
                  REVOCATION

              

      

      

      7.1         
        Damage
        or Destruction.
        If the
        Property shall be substantially damaged by fire or other casualty and such
        damage will materially and adversely affect the operation of the Property,
        Lessee or Manager, by written notice to the other party given within 60 days
        after the occurrence of such event, shall have the right to terminate this
        Agreement. For the purposes hereof, the Property shall be deemed to have
        been
        substantially damaged and such damage will materially and adversely affect
        the
        operation of the Property if the estimated length of time required to restore
        the Property substantially to its condition and character just prior to the
        occurrence of such casualty shall be in excess of 180 days. 

      

      7.2         
        Condemnation.
        If all
        of the Property, or such portion thereof as in the reasonable opinion of
        Manager
        or Lessee makes it unfeasible to restore and continue to operate the Property
        for the purposes contemplated under this Agreement, is appropriated or taken
        through the exercise of the power of eminent domain (or by agreement in lieu
        thereof) or similar police power or regulation that has that effect, then
        Lessee
        or Manager, by written notice to the other party given within 60 days after
        the
        occurrence of such event, shall have the right to terminate this Agreement.
        

      

      7.3         
        Revocation
        of License or Franchise.
        If any
        revocation or termination of any of the Licenses or the Franchise occurs,
        which
        in the reasonable opinion of Manager or Lessee makes it unfeasible to continue
        to operate the Property for the purposes contemplated under this Agreement,
        then
        Lessee or Manager, by written notice to the other party given within 60 days
        after the occurrence of such event, shall have the right to terminate this
        Agreement. 

      

      7.4         
        Restoration;
        Interim Management Fees.
        If this
        Agreement does not terminate under Section
        7.1
        or
7.2
        in the
        event of casualty or condemnation of the Property, then Lessee shall proceed
        with all due diligence to commence and complete the restoration of the Property
        to its full operation. In such event, Lessee shall pay Manager, each month
        during such period that the Property is not fully operable, an amount equal
        to
        the average monthly Management Fees paid to Manager for the twelve months
        immediately preceding the casualty or condemnation. If Lessee shall fail
        to
        proceed with all due diligence to commence and complete the restoration of
        the
        Property to its full operation, Manager shall retain and have the right to
        terminate this Agreement upon 30 days’ written notice to Lessee. 

      

      

      
        	
                8.

              	
                TERM
                  AND TERMINATION

              

      

      

      8.1         
        Term.
        The
        Term of this Agreement shall commence on ____________, 2005 and shall continue
        until the fifth anniversary of such date, unless earlier terminated in
        accordance with the provisions of this Agreement. This Agreement shall be
        in
        effect from the date hereof.

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      8.2         
        Renewal.
        This
        Agreement shall be automatically renewed, at the sole option of Manager,
        at the
        end of the current Term for two successive terms of five years, each,
provided,
        that
        the members of Mystic have been paid the Twelve Percent Return during at
        least
        three of the five years of the initial Term of this Agreement. 

      

      8.3         
        Events
        of Termination.
        This
        Agreement may be terminated at any time by mutual written agreement of Lessee
        and Manager, or by written notice under the following conditions:

      

      8.3.1        Transfer
        of the Property.
        If
        Owner desires to transfer all or substantially all of the Property pursuant
        to a
        bona fide written offer, Lessee shall have the right to terminate this Agreement
        with respect to the Property, effective upon such transfer, upon (a) written
        notice to Manager no less than 20 days prior to the closing of the transfer
        of
        the Property and (b) payment to Manager (in addition to all Management Fees
        otherwise due and payable hereunder) of a liquidated amount equal to (i)
        the
        Management Fees payable to Manager for the immediately preceding 12 months,
        if
        the purchase price for the Property is less than 110% of the Initial Allocated
        Price or (ii) the Management Fees payable to Manager for the immediately
        preceding 24 months, if the purchase price for the Property is greater than
        or
        equal to 110% of the Initial Allocated Price. As used in this Article 8,
        “transfer” includes the closing of a transaction to sell the Property.

      

      8.3.2        Performance
        and Certain Transfers.
        This
        Agreement is terminable by Lessee upon 20 days’ prior written notice if: (a) (i)
        the Net Operating Income for the Property for two consecutive 12 month periods
        from and after the Effective Date is less than the trailing 12 month Net
        Operating Income as of the Effective Date and (ii) the STR RevPar for the
        Property for two consecutive 12 month periods from and after the Effective
        Date
        is less than the STR RevPar for the Property set forth on Schedule
        1
        attached
        hereto and made a part hereof or (b) [Mystic Hospitality, LLC] transfers
        its
        membership interest in Lessee to anyone other than an Affiliate.

      

      8.3.3        Default
        by Manager.
        If
        Lessee reasonably determines that Manager has defaulted under any provision
        of
        this Agreement, then Lessee shall give Manager written notice specifying
        such
        default. Manager shall have 30 days after the effective date of the notice
        to
        cure such default; provided, however, if, for reasons beyond its reasonable
        control, Manager requires more than 30 days to cure such default and commences
        and proceeds diligently to cure such default within the 30-day period, then
        Manager shall be given such additional time as may be reasonably necessary
        to
        cure such default. If Manager fails or refuses to cure, or to commence and
        proceed diligently to cure, such default within such time periods, Lessee
        may
        terminate this Agreement.

      

      8.3.4        Default
        by Lessee.
        If (i)
        Manager does not receive the Management Fees as required under this Agreement
        or
        any other payment due to Manager from Lessee within 15 days after Manager
        has
        made written demand therefor, (ii) Lessee fails to provide funds requested
        by
        Manager to meet anticipated Operating Expense requirements as provided in
        Section
        2.2,
        or
        (iii) Lessee defaults under any other agreement related to the Property or
        entered into in connection with the transactions contemplated under this
        Agreement, and any applicable notice and opportunity to cure have been given
        under such other agreement, then Manager may terminate this Agreement. If
        Manager reasonably determines that Lessee has defaulted under any other
        provision of this Agreement, then Manager shall give Lessee written notice
        specifying such default and Lessee shall have 30 days after the effective
        date
        of the notice to cure such default; provided, however, if, for reasons beyond
        its reasonable control, Lessee requires more than 30 days to cure such default
        and commences and proceeds diligently to cure such default within the 30-day
        period, then Lessee shall be given such additional time as may be reasonably
        necessary to cure such default. If Lessee fails or refuses to cure, or to
        commence and proceed diligently to cure, such default within such time periods,
        Manager may terminate this Agreement.

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      8.3.5        Insolvency.
        Either
        Manager or Lessee may terminate this Agreement by written notice to the other
        party if the other party: (i) applies for or consents to the appointment
        of a
        receiver, trustee, or liquidator of all or a substantial part of its assets;
        (ii) makes a general assignment for the benefit of its creditors; (iii) files
        for a voluntary reorganization, composition, arrangement with creditors,
        liquidation, or similar relief under any present or future statute; (iv)
        takes
        any action in contemplation of dissolution; (v) is the subject of an involuntary
        petition under any such law, which petition is not dismissed within 60 days
        after filing; or (vi) if, in the absence of any of the above events or prior
        to
        the occurrence of any of the above events, the conduct of the other party
        combined with outstanding balances due and the apparent inability to pay
        ordinary-course-of-business expenses as they become due create a reasonable
        belief in the other party that the provisions of this Agreement cannot be
        performed.

      

      8.3.6        Force
        Majeure.
        If any
        Force Majeure has, in either Manager’s or Lessee’s reasonable opinion, a
        significant adverse effect upon the operation of the Property, then Manager
        or
        Lessee may terminate this Agreement by written notice to the other party,
        which
        termination shall be effective 30 days after the date of such
        notice.

      

      8.4         
        Remedies
        of Manager.
        In the
        event of any termination of this Agreement under Section
        8.3.4
        or
8.3.5
        (where
        Lessee is the “other party”) Manager shall be entitled to recover the actual
        damages suffered by Manager. In no event shall Lessee be liable to Manager,
        or
        anyone claiming by, under or through Manager, for any special, exemplary,
        punitive or consequential damages, whatsoever the nature of the event of
        default
        hereunder, such damages and claims therefor being expressly waived by
        Manager.

      

      8.5         
        Remedies
        of Lessee.
        In the
        event of any termination of this Agreement under Section
        8.3.3
        or
8.3.5
        (where
        Manager is the “other party”), Lessee shall be entitled to recover the actual
        damages suffered by Lessee, up to the maximum amount of Management Fees
        collected and retained by Manager hereunder during the immediately preceding
        twelve month period, which shall be the sole and exclusive remedy of Lessee
        on
        account of such termination. In no event shall Manager be liable to Lessee,
        or
        anyone claiming by, under or through Lessee, for any special, exemplary,
        punitive or consequential damages, whatsoever the nature of the event of
        default
        hereunder, such damages and claims therefor being expressly waived by Lessee.
        

      

      8.6         
        Amounts
        Due.

      

      8.6.1      
        Upon
        termination of this Agreement, reasonable provisions may be made by Manager
        to
        reserve in the Property Accounts or otherwise to withhold from Lessee a
        reasonable sum to make final settlement of certain adjustments such as credit
        card disputes, insurance premiums, compensation adjustments, insurance and
        employee-benefits audits, termination fees, liquor audit and other tax-related
        adjustments, Employee-related adjustments, and other reasonably foreseeable
        liabilities as may be reasonably necessary, provided,
        however, that Manager shall not have the right to make such provisions for
        any
        reserves if the making of such reserves would constitute a major decision
        under
        Lessee’s or Mystic’s limited liability company agreement. 

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      8.6.2        Upon
        termination of this Agreement, all sums remaining in the Property Accounts
        after
        the payments provided for in Sections
        3.5
        and
3.6
        shall be
        immediately paid to Lessee, except for: (i) a sum equal to Manager’s reasonable
        estimate of Operating Expenses for the last month’s operations to include
        payroll, taxes, utilities, maintenance, and service contracts; and (ii) the
        amount withheld under subsection 8.6.1 above. Manager shall, within 60 days
        following termination, remit to Lessee any funds remaining after payment
        of the
        expenses noted in this Section
        8.6.2.
        In the
        event that the reserves required under subsection 8.6.1 above are inadequate
        for
        their intended purposes, Lessee shall pay such additional amounts to Manager
        as
        reasonably determined by Manager to be necessary to maintain a reserve fund
        for
        any such foreseeable liabilities and Lessee shall remit to Manager promptly
        upon
        demand any amounts paid by Manager as a result of such inadequate
        reserves.

      

      8.6.3        Post-termination
        Actions.
        Lessee
        shall indemnify, defend, and hold harmless Manager, its Affiliates and their
        successors and assigns and the respective officers, directors, shareholders,
        managers, members, partners, agents, contractors and employees of Manager,
        its
        Affiliates and any such successors and assigns, from and against any and
        all
        claims, damages, losses, liabilities, or penalties (including reasonable
        legal
        fees) that Manager or such entities may incur on account of Lessee’s failure
        after termination to timely pay obligations incurred by Manager on Lessee’s
        behalf prior to termination and/or perform agreements entered into by Manager
        on
        behalf of Lessee prior to termination to the extent such obligations were
        incurred and/or agreements entered into by Manager in accordance with the
        Annual
        Business Plan or as permitted by this Agreement. Upon termination of this
        Agreement, Manager shall furnish Lessee with a detailed accounting of all
        of
        Lessee’s funds for which Manager is responsible and of any payment to be made by
        Lessee to Manager under any of the terms of this Agreement. 

      

      8.7         
        Suspension
        of Obligations.
        Manager’s obligations shall be suspended for all periods during which operations
        are not reasonably possible due to the events addressed in Article
        7
        or due
        to any default of Lessee and Manager’s obligations shall be modified to the
        extent of changes in the Property due to any such events or defaults by
        Lessee.

       

      8.8         
        Rebates
        and Discounts.
        Because
        of its purchasing power derived through its operations, its management of
        the
        Property and its management or franchising of other hotels, Manager and/or
        its
        Affiliates may from time to time negotiate rebates and discounts from the
        vendors of certain products and services. Manager agrees that the portion
        of
        such rebates and discounts allocable to the Property will be promptly passed
        on
        to the Lessee. 

       

      8.9         
        Post-termination.
        For a
        period of thirty (30) days after any termination or expiration of this
        Agreement, Manager shall reasonably cooperate with Lessee in the transition
        and
        orderly transfer of management of the Property to Lessee or Lessee’s designated
        agent. Manager shall assign operating licenses used in the operation of the
        Property, issued in the name of Manager, to Lessee. In the event licenses
        are
        not assignable, Manager shall reasonably cooperate with Lessee to cause such
        licenses to be reissued in the name of Lessee, Owner or a new property manager.
        Manager shall peacefully vacate and surrender the Property to
        Lessee.

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      
        	
                9.

              	
                MISCELLANEOUS

              

      

      

      9.1         
        Notices.
        All
        notices, demands, and requests that are required to be given by either party
        shall be in writing and shall be personally delivered or sent by certified
        mail
        or recognized overnight courier, postage or fees prepaid, addressed as set
        forth
        below or to such other place as either party may from time to time designate
        in
        a written notice to the other party. Notices, demands, and requests shall
        be
        deemed served or given for all purposes under this Agreement at the time
        such
        notice, demand, or request is delivered:

      

      
        	
                To
                  Lessee:

              
	 	
                [Lessee
                  Entity]

              
	 	 

	 	  

	
                 

              	
                
                  Attn:

                

              	
                 
                  

              
	 	 	 
	
                with
                  a copy to:

              
	 	  

	 	  

	 	
                
                  Attn:

                

              	
                 
                  

              
	 	 	 
	
                To
                  Manager:

              
	 	
                Waterford
                  Hotel Group, Inc.

              
	 	
                914
                  Hartford Turnpike

              
	 	
                Waterford,
                  CT 06385

              
	 	
                Attn:
                  Len Wolman, Chairman

              
	 	 	 
	
                with
                  a copy to:

              
	 	
                Waterford
                  Hotel Group, Inc.

              
	 	
                914
                  Hartford Turnpike

              
	 	
                Waterford,
                  CT 06385

              
	 	
                Attn:
                  Robert W. Winchester, President

              

      

      

      Each
        party hereto has designated the individual named above under such party’s
        address for notices to serve as its representative in dealing with the other
        party hereto. Each party herewith specifically authorizes the other to rely
        on
        the written representations and agreements of its representative, and agrees
        to
        be legally bound thereby. Each party reserves the right, from time to time,
        upon
        written notice given pursuant hereto, to designate another person as its
        representative. All communications between Lessee and Manager must be directly
        to these representatives as noted. No communication relative to Manager’s
        obligations under this contract will be directed to the Executive Staff or
        any
        Employees.

      

      9.2         
        Agency,
        No Third-Party Beneficiaries.
        Manager
        shall act solely on behalf of Lessee as agent and not on its own behalf.
        The
        agency established by this Agreement is coupled with an interest and may
        not be
        terminated or revoked by Lessee, except as provided in Section
        8.3.
        Nothing
        contained in this Agreement shall be construed as creating, between the parties
        hereto or with any third party, a partnership, joint venture or any relationship
        other than agency. All debts, obligations, and other liabilities incurred
        for
        the Property through the actions of Manager in the performance of its duties
        shall be incurred on behalf of Lessee and Manager shall not be liable for
        the
        payment thereof. No obligation of either party shall be enforceable by any
        person other than the parties hereto and no third party is intended to be
        or
        shall be deemed to be a third-party beneficiary of this
        Agreement.

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      9.3         
        Trade
        Names, Etc.
        Trade
        names, trademarks, service marks, and trade dress of either party may be
        used by
        the other party only in connection with the management and operation of the
        Property, and neither party shall thereby acquire any right to such other
        party’s names, marks, or dress. Upon termination of this Agreement, each party
        shall as soon as practicable discontinue using any such names, marks, and
        dress
        of the other in any materials published or displayed by such party, and shall
        not intentionally engage in any business or advertising practice that could
        lead
        the public to believe that any continuing relationship, affiliation, or identity
        exists with such other party as to the Property.

      

      9.4         
        Property
        in Promotional Materials.
        Lessee
        hereby authorizes Manager to use the name of the Property and its features
        in
        promotional materials that list other properties under Manager’s management and
        to note Manager’s management of the Property on displays or signs in appropriate
        places in the Property and in promotional materials related to or listing
        the
        Property.

      

      9.5         
        Mortgage
        Financing of Property.
        This
        Agreement (including payment of any Management Fees due hereunder) shall
        be
        subordinate to any mortgage encumbering the Property, and Manager agrees
        to
        enter into a lender-manager agreement with respect to the Property, which
        agreement shall contain reasonable lender-manager provisions, including
        Manager’s acknowledgement that its real estate interest in and to the Property,
        if any, created by this Agreement is subordinate to any mortgage encumbering
        such Property and that any purchaser of the Property at a foreclosure sale
        or
        deed-in-lieu of foreclosure (including the lender) shall have the right to
        terminate this Agreement with respect to the Property; provided, however,
        in no
        event will Manager agree to subordinate or waive its right to receive
        reimbursements or indemnification payments under this Agreement arising prior
        to
        termination. Notwithstanding the foregoing, if this Agreement is terminated
        by
        the lender or such purchaser with respect to the Property, Manager shall
        not
        look to the lender or such purchaser for payment of such reimbursements or
        indemnification payments, and if this Agreement is not terminated by the
        lender
        or such purchaser with respect to the Property, then such reimbursements
        or
        indemnification payments as well as any Management Fees due hereunder shall
        be
        payable to Manager by the lender or such purchaser.

      

      9.6         
        Employment
        of Manager Employees.
        Lessee
        agrees that, if any of the corporate staff of Manager leave the employment
        of
        Manager for any reason, including termination by Manager, neither Lessee
        nor
        Owner shall employ such Manager employee in any capacity for at least one
        year
        following such termination of employment with Manager.

      

      9.7         
        Approvals
        and Consents.
        Whenever the approval or consent of either party is required under this
        Agreement, such approval or consent shall not be unreasonably delayed or
        withheld.

      

      9.8         
        Overdue
        Amounts.
        All
        amounts due to any party hereto, whether before or after termination of this
        Agreement, shall be paid on or before the dates required in this Agreement.
        Amounts not paid when due shall bear interest at the rate of eight percent
        (8%)
        per annum from the date due until such amounts are paid in full.

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      9.9         
        Attorney’s
        Fees.
        If any
        legal proceedings are required to enforce this Agreement or to resolve any
        dispute related to this Agreement, the prevailing party shall be entitled
        to
        recover all costs, expenses, and attorney’s fees related thereto.

      

      9.10        Survival.
        The
        representations and warranties, contained in this Agreement shall survive
        execution hereof, and the indemnities contained in this Agreement shall survive
        termination hereof, shall remain binding upon, and shall inure to the benefit
        of, the parties’ respective permitted successors and assigns.

      

      9.11        Severability.
        If any
        provision or clause contained in this Agreement or the application of any
        provision or clause to any person or circumstance is limited by the court
        or
        held invalid or unenforceable, the remainder hereof and the application of
        such
        provision or clause to other persons or circumstances shall remain fully
        valid
        and enforceable.

      

      9.12        Entire
        Agreement.
        This
        Agreement constitutes the entire agreement between the parties relative to
        the
        Property and supersedes all prior agreements, whether in writing or oral.
        This
        Agreement may be executed simultaneously in two or more counterparts, each
        of
        which shall be deemed an original, but all of which together shall constitute
        one instrument.

      

      9.13        Waiver
        of Provisions.
        None of
        the conditions or provisions of this Agreement shall be held to have been
        waived
        by any act, omission, knowledge, course of conduct, or knowledge of Manager
        or
        Lessee, or its respective agents or employees, unless such waiver is expressly
        contained in a written instrument signed by a duly authorized officer or
        officers of the waiving party.

      

      9.14        Modification.
        This
        Agreement may be amended or otherwise modified only by an instrument signed
        by
        both Lessee and Manager.

      

      9.15        Successors
        and Assigns.
        Neither
        Lessee nor Manager may assign this Agreement or any of its rights under this
        Agreement without the prior written consent of the other, except to an
        Affiliate, subsidiary, or any successor or assign that may result from merger,
        consolidation, or reorganization of such party. As a condition to such consent,
        any such assignee shall, in writing, assume and agree to be bound by all
        of the
        terms and provisions of this Agreement applicable to the assigned rights
        and/or
        obligations and shall cure any existing defaults of the assignor hereunder;
        provided, however, that Lessee shall not be released from its obligations
        under
        this Agreement unless Manager otherwise so agrees in writing. The assigning
        party shall deliver to the other party a copy of any instrument of assignment.
        Any transfer of a Controlling interest in either party shall be deemed an
        assignment of this Agreement.

      

      9.16        Governing
        Law.
        This
        Agreement shall be governed by, and construed and interpreted in accordance
        with, the Laws of the State of Connecticut.

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        the
        parties hereto have executed this Agreement as the date first above
        written.

      

      
        	 	
                [LESSEE
                  ENTITY]

              
	 	
                (“Lessee”)

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	  

	 	 	
                Name:

              	   

	 	 	
                Title:

              	 
	 	 	 	 
	 	 	 	 
	 	
                WATERFORD
                  HOTEL GROUP, INC.

              
	 	
                (“Manager”)

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	  

	 	 	
                Name:
                  Robert W. Winchester

              
	 	 	
                Title:
                  President

              

      

       

      27

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