Document:

Exhibit
10.28

 

EXHIBIT
A

 

NEW
CANDLEWOOD GUARANTY

 

 

GUARANTY
AGREEMENT

 

THIS GUARANTY AGREEMENT (this “Agreement”)
is made and given as of                 
    , 20    , by INTERCONTINENTAL
HOTELS GROUP PLC, a corporation organized and existing under the laws
of England and Wales (the “Guarantor”), for the benefit of HPT TRS IHG-1, INC.,
a Maryland corporation (together with its successors and assigns, the “Tenant”),
and HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust (together with its successors and
assigns, “Trust”; and Trust together with the Tenant, “HPT”).

 

W  I  T  N  E
S  S  E  T  H :

 

WHEREAS, on January     , 2006, the Guarantor delivered to HPT
that certain Second Amended and Restated Consolidated Guaranty Agreement (the “Consolidated
Guaranty”); and

 

WHEREAS, both the IHG4 Coverage Date and the IHG5 Coverage Date (as such
terms are defined in the Consolidated Guaranty) have occurred and the Guarantor
wishes to terminate its obligations under the Consolidated Guaranty in
accordance with Section 10 of the Consolidated Guaranty; and

 

WHEREAS, Section 10 of the Consolidated Guaranty requires, among other things,
that the Guarantor deliver this Guaranty Agreement to HPT in order to terminate
its obligations under the Consolidated Guaranty as aforesaid; and

 

WHEREAS, the
termination of its obligations under the Consolidated Guaranty as aforesaid
constitute a direct material benefit to the Guarantor;

 

NOW, THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the mutual receipt and legal sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

 

1.                                       Certain Terms. Capitalized
terms used and not otherwise defined in this Agreement shall have the meanings
ascribed to such terms in the Management Agreement (as hereinafter defined). The
following terms as used in this Agreement shall have the meanings set forth
below:

 

 

“Accounting Principles” shall mean
generally accepted accounting principles, as adopted in the United States of
America, consistently applied or, if the Guarantor’s principal place of
business is the United Kingdom, generally accepted accounting principles, as
adopted in the United Kingdom, consistently applied.

 

“Collateral Agency Agreement” shall mean
a written agreement, in form and substance reasonably acceptable to HPT, among
HPT, the Guarantor and the Collateral Agent pursuant to which the Collateral
Agent shall agree to hold any cash delivered to such Collateral Agent pursuant
to the terms of this Agreement as collateral agent on behalf of HPT, as the
same may be amended, restated, supplemented or otherwise modified from time to
time with the consent of the parties thereto. Among other things, the
Collateral Agency Agreement shall provide that (a) the Collateral Agent shall
look solely to the Guarantor for any amounts owed to the Collateral Agent in
connection with such agreement, (b) the Collateral Agent shall not offset any
amount owed to the Collateral Agent against the cash delivered to it pursuant
to the Collateral Agency Agreement and this Agreement, (c) the Collateral Agent
shall hold such cash as trust funds and not commingle such cash with any assets
of the Collateral Agent and (d) HPT shall be entitled to apply any cash
collateral held by the Collateral Agent to the overdue obligations of the
Guarantor hereunder in such order and at such times as HPT may determine in its
sole judgment.

 

“Collateral Agent” shall mean
a bank or other financial institution reasonably acceptable to HPT having a
rating of not less than BBB-/Baa3 rating from the Rating Agencies, which bank
or other financial institution is the collateral agent under the Collateral
Agency Agreement as such collateral agent may be replaced in accordance with
the terms of the Collateral Agency Agreement.

 

“Coverage Date” shall mean the date which
is the day after the second (2nd) consecutive calendar year for
which the Priority Coverage Ratio is equal to or exceeds 1.3.

 

“Guaranteed Obligations” shall mean the
payment to Tenant of (a) all of the Owner’s First Priority as and when due
under the Management Agreement determined without respect to Gross Revenue or
Operating Profits and (b) any and all liquidated damages due to Tenant under
the Management Agreement.

 

“Management Agreement” shall mean [that
certain Amended and Restated Management Agreement, dated as of January     ,
2005, between TRS1 and Manager] with respect to certain hotels being

 

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operated under the “Candlewood” brand] [that certain Management
Agreement, dated as of October 27, 2003, between TRS1 and Manager], as the same
may be amended, modified, supplemented, or otherwise altered from time to time.

 

“Manager” shall mean Intercontinental
Hotels Group Resources, Inc.

 

“Outstanding Balance” shall mean, from
time to time, Fifty Million Dollars ($50,000,000), less the excess of the
aggregate amount paid by the Guarantor under Section 3 hereof over the
aggregate of any amounts reimbursed to the Guarantor pursuant to the terms of
the Management Agreement.

 

“Provide Collateral” or “Provided
Collateral” shall mean:

 

(a)                                  delivery to
HPT of (i) a Satisfactory Letter of Credit or (ii) cash in an amount equal to
the then Outstanding Balance; or

 

(b)                                 the deposit
of cash equal to the then Outstanding Balance with the Collateral Agent to be
held by the Collateral Agent in accordance with the Collateral Agency Agreement
provided:(i) the Collateral Agency Agreement has been executed and delivered by
the parties thereto; (ii) HPT has a perfected first priority security interest
in any cash delivered to the Collateral Agent; (iii) HPT has received favorable
opinions of counsel, in form and substance reasonably satisfactory to HPT, with
respect to such perfected first priority interest, the valid existence and good
standing of the other parties to the Collateral Agency Agreement, the due
execution and delivery thereof by such other parties, the enforceability of the
Collateral Agency Agreement against such parties, and that any cash held by the
Collateral Agent pursuant to the Collateral Agency Agreement shall not be “property
of the estate” of Collateral Agent should any event described in Sections
17.1(a), (b) or (c) of the Management Agreement shall occur with
respect to the Collateral Agent; or

 

(c)                                  delivery to
HPT of other collateral satisfactory to HPT in its good faith discretion to
secure the Guaranteed Obligations;

 

provided, however, the
Guarantor shall not be deemed to have Provided Collateral if at any time the
Outstanding Balance exceeds the sum of (i) the then remaining balance drawable
under the Satisfactory Letter of Credit or the balance of the cash deposited by
the Guarantor hereunder, plus (ii) proceeds of any

 

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Satisfactory Letter of Credit or cash deposited hereunder, in either
case, applied to the Guaranteed Obligations.

 

“Rating Agencies” shall mean,
collectively, Standard’s & Poor’s Rating Services or its successor and
Moody’s Investor Services, Inc. or its successors; provided, however,
if the Rating Agencies (i) cease operations without successors or (ii) cease to
issue credit ratings, “Rating Agencies” shall mean a nationally recognized
organization periodically issuing ratings of the financial strength and/or
credit of United States domestic and international banking institutions
reasonably agreed to by HPT and the Guarantor.

 

“Reorganization” shall mean any merger,
consolidation, reorganization, change of control or any transaction pursuant to
which the Guarantor shall be or become a Subsidiary of any other Person.

 

“Satisfactory Letter of Credit” shall
mean a clean irrevocable letter of credit in form and substance reasonably
satisfactory to HPT in an amount equal to the Outstanding Balance issued by a
bank with a credit rating of not less than A2/A (or, if after the date hereof
the system of ratings used by the Rating Agencies changes in a material way,
their then equivalents of such credit rating in HPT’s reasonable judgment) from
the Rating Agencies, having an expiration date of not earlier than one year
after the date on which it was issued and which permits for partial draws.

 

“Substitute Guarantor” shall mean a
Person who assumes the Guarantor’s obligations hereunder in accordance with the
terms of Section 2.7 below and is either (a) a Person who satisfies the
Rating Agencies’ requirements for a single purpose bankruptcy remote entity who
has Provided Collateral or (b) a Person(s) with (i) a tangible net worth
determined in accordance with the Accounting Principles not less than Seven
Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with
a fair market value of not less than One Hundred Million Dollars (exclusive of
any note, instrument, security or claim issued by, against or in any way
dependent on the credit of, an Affiliate of Guarantor).

 

2.                                       Representations and Covenants. The
Guarantor represents, warrants, covenants and agrees that:

 

2.1                                 Validity of Agreement. The
Guarantor has duly and validly executed and delivered this Agreement; this
Agreement constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance

 

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with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting the rights and remedies of creditors; and the execution, delivery and
performance of this Agreement have been duly authorized by all requisite action
of the Guarantor and such execution, delivery and performance by the Guarantor
will not result in any breach of the terms, conditions or provisions of, or
conflict with or constitute a default under, or result in the creation of any
lien, charge or encumbrance upon any of the property or assets of the Guarantor
pursuant to the terms of, any indenture, mortgage, deed of trust, note, other
evidence of indebtedness, agreement or other instrument to which the Guarantor
is a party or by which the Guarantor or any property or assets of the Guarantor
is bound, or violate any provision of law applicable to the Guarantor, or any
order, writ, injunction, judgement or decree of any court applicable to the
Guarantor or any order or other public regulation of any governmental
commission, bureau or administrative agency applicable to the Guarantor.

 

2.2                                 Payment of Expenses. The
Guarantor agrees, as principal obligor and not as guarantor only, to pay to HPT
forthwith, upon demand, in immediately available Federal funds, all costs and
expenses (including court costs and reasonable legal expenses) incurred or
expended by HPT in connection with the enforcement of this Agreement, together
with interest at the Interest Rate on amounts recoverable under this Agreement
from the time such amounts become due until payment.

 

2.3                                 Reports. The
Guarantor shall timely deliver to HPT the Consolidated Financials required
under the Management Agreement and otherwise comply with the terms of the
Management Agreement applicable to it.

 

2.4                                 Financial Condition of Guarantor; Status of Guarantor. So long as the Guarantor’s obligations
under Section 3 below are outstanding, unless the Guarantor shall
have Provided Collateral to secure its obligations hereunder:

 

(a)                                  The
Guarantor shall at all times maintain a tangible net worth determined in
accordance with the Accounting Principles in an amount not less than Five
Hundred Million Dollars ($500,000,000) or if there has been a Reorganization,
or if the Guarantor is not the originally named Guarantor, Seven Hundred Fifty
Million Dollars ($750,000,000); and

 

(b)                                 The
Guarantor shall not engage in any Reorganization unless following such
Reorganization it has (i) a tangible net worth determined in accordance with
the Accounting Principles in

 

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an amount not less than Seven Hundred Fifty Million Dollars
($750,000,000) and (ii) unencumbered assets with a fair market value of not
less than One Hundred Million Dollars ($100,000,000) (exclusive of any note,
instrument, security or claim issued by, against or in any way dependent on the
credit of, an Affiliate of Guarantor).

 

2.5                                 Security. Upon the termination of the Guarantor’s
obligations under Section 3 or if the excess of aggregate amount paid by
the Guarantor under Section 3 over the aggregate of any amounts
reimbursed to it pursuant to the terms of the Management Agreement equals not
less than Fifty Million dollars ($50,000,000), HPT will return to the Guarantor
any Satisfactory Letter of Credit previously delivered to HPT or any unapplied cash
collateral then being held by HPT hereunder and shall direct the Collateral
Agent to return any cash being held by it under the Collateral Agency Agreement
to the Guarantor. HPT shall be entitled to draw upon any Satisfactory Letter of
Credit delivered to it (a) for the full amount thereof if at any time there is
less than thirty (30) days until the expiry date of such Satisfactory Letter of
Credit; (b) for the full amount thereof if the bank that issued such
Satisfactory Letter of Credit shall not have a credit rating of at least A/A2
(or, if after the date hereof the system of ratings used by the Rating Agencies
changes in a material way, their then equivalents in HPT’s reasonable judgment)
from the Rating Agencies and such satisfactory Letter of Credit shall not have
been replaced within thirty (30) days with a new Satisfactory Letter of Credit
delivered to HPT; or (c) to the extent and in the amounts then due and payable
hereunder, if the Guarantor shall fail to pay or perform any of its obligations
under this Guaranty in accordance with the terms hereof. HPT shall be entitled
to apply any cash collateral held by it or the Collateral Agent to the overdue
obligations of the Guarantor hereunder in such order and at such times as HPT
may determine in its sole judgment. Any cash collateral held by HPT shall not
be commingled with its other funds, and shall be invested, at the Guarantor’s
risk, in interest bearing investments reasonably acceptable to the Guarantor. Any
interest on such cash collateral, and any losses in such investments, shall
belong to IHG.

 

2.6                                 Legal Existence. The
Guarantor shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence. The Guarantor has
appointed attorneys Alston & Bird LLP, having an address at 1201 West
Peachtree Street, Atlanta, Georgia 30309-3424, Attn:  Managing Partner as its agent for service of
process. The Guarantor acknowledges and agrees that service of process on

 

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such agent shall constitute service of process on Guarantor with
respect to any and all claims hereunder or under any other Transaction
Document.

 

2.7                                 Substitute Guarantor. The then
Guarantor (the “Departing Guarantor”) shall be released from obligations
under Section 3 hereof on the following terms and conditions:

 

(a)                                  a Substitute
Guarantor shall assume pursuant to a written instrument satisfactory to HPT all
of the Guarantor’s obligations hereunder; and

 

(b)                                 HPT shall
receive an opinion of counsel satisfactory to HPT with respect to, among other
things, the existence and good standing of the Substitute Guarantor and the due
execution, delivery and enforceability of such assumption.

 

Upon the satisfaction of the foregoing
conditions and the expiration of all applicable preference or similar periods,
HPT shall deliver a release to the Departing Guarantor of its obligations
hereunder and the Substitute Guarantor shall be deemed the “Guarantor”
hereunder. Further, if the Substitute Guarantor has Provided Collateral or has
(i) a tangible net worth determined in accordance with the Accounting
Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000)
and (ii) unencumbered assets with a fair market value of not less than One Hundred
Million Dollars (exclusive of any note, instrument, security or claim issued
by, against or in any way dependent on the credit of, an Affiliate of
Guarantor), HPT shall return to the Departing Guarantor any letter of credit or
cash delivered by the Departing Guarantor and held by HPT hereunder and shall
direct the Collateral Agent to return to the Departing Guarantor any cash
delivered by the Departing Guarantor and held by such Collateral Agent pursuant
to the terms of the Collateral Agency Agreement.

 

3.                                       Guarantee.

 

(a)                                  The
Guarantor hereby unconditionally guarantees that the Guaranteed Obligations
which become due and payable during the term of the Management Agreement shall
be paid in full when due and payable subject to any applicable cure periods, whether
upon demand, at the stated or accelerated maturity thereof or upon any
mandatory or voluntary prepayment pursuant to any Transaction Document, or
otherwise.

 

(b)                                 This
guarantee is a guarantee of payment and not of collectibility and is absolute
and in no way conditional or contingent. In case any part of the Guaranteed
Obligations

 

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shall not have been paid when due and payable or performed at the time
performance is required, subject to any applicable cure periods, the Guarantor
shall, pay or cause to be paid to HPT the amount thereof as is then due and
payable and unpaid (including interest and other charges, if any, due thereon
through the date of payment in accordance with the applicable provisions of the
Transaction Documents) or perform or cause to be performed such obligations in
accordance with the Transaction Documents. Simultaneously with the giving of
any notice of default to the Manager under the Management Agreement, Tenant
shall give a copy of such notice to the Guarantor. Tenant shall accept any cure
of such default by the Guarantor provided such cure is completed within the
applicable cure period under the Management Agreement.

 

4.                                       Unenforceability of Guaranteed Obligations, Etc. If the Manager
is for any reason under no legal obligation to discharge any of the Guaranteed
Obligations, or if any other moneys included in the Guaranteed Obligations have
become unrecoverable from the Manager by operation of law or for any other
reason, including, without limitation, the invalidity or irregularity in whole
or in part of any Guaranteed Obligation or of any Transaction Document or any
limitation on the liability of the Manager thereunder or any limitation on the
method or terms of payment thereunder which may now or hereafter be caused or
imposed in any manner whatsoever, the guarantees contained in this Agreement
shall nevertheless remain in full force and effect in accordance with the terms
set forth herein and shall be binding upon the Guarantor to the same extent as
if the Guarantor at all times had been the principal debtor on all such
Guaranteed Obligations.

 

5.                                       Additional Guarantees. This
Agreement shall be in addition to any other guarantee or other security for the
Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable
by the invalidity of any such other guarantee or security or by any waiver,
amendment, release or modification thereof.

 

6.                                       Consents and Waivers, Etc. The
Guarantor hereby acknowledges receipt of correct and complete copies of each of
the Transaction Documents and consents to all of the terms and provisions
thereof, as the same may be from time to time hereafter amended or changed in
accordance therewith, and waives, to the extent the Guarantor lawfully may do
so, (a) presentment, demand for payment, and protest of nonpayment, of any of
the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of
diligence, presentment, demand and protest, (c) notice of any default hereunder
and any default,

 

A-8

 

breach or nonperformance or a Manager Event of Default under any of the
Guaranteed Obligations or the Transaction Documents, except as expressly
provided in Section 3, (d) notice of the terms, time and place of any
private or public sale of collateral held as security for the Guaranteed
Obligations, (e) demand for performance or observance of, and any enforcement
of any provision of, or any pursuit or exhaustion of rights or remedies against
the Manager or any other guarantor of the Guaranteed Obligations, under or
pursuant to the Transaction Documents, or any agreement directly or indirectly
relating thereto and any requirements of diligence or promptness on the part of
the holders of the Guaranteed Obligations in connection therewith, and (f) any
and all demands and notices of every kind and description with respect to the
foregoing or which may be required to be given by any statute or rule of law.

 

7.                                       No Impairment, Etc. The obligations, covenants, agreements
and duties of the Guarantor under this Agreement shall not be affected or
impaired by any assignment or transfer in whole or in part of any of the
Guaranteed Obligations without notice to the Guarantor, or any waiver by HPT or
any holder of any of the Guaranteed Obligations or by the holders of all of the
Guaranteed Obligations of the performance or observance by the Manager or any
other guarantor of any of the agreements, covenants, terms or conditions
contained in the Guaranteed Obligations or the Transaction Documents or any
indulgence in or the extension of the time for payment by the Manager or any
other guarantor of any amounts payable under or in connection with the
Guaranteed Obligations or the Transaction Documents or any other instrument or
agreement relating to the Guaranteed Obligations or of the time for performance
by the Manager or any other guarantor of any other obligations under or arising
out of any of the foregoing or the extension or renewal thereof, or the
modification or amendment made with the consent of the Guarantor of any duty,
agreement or obligation of the Manager or any other guarantor set forth in any
of the foregoing, or the voluntary or involuntary sale or other disposition of
all or substantially all the assets of the Manager or any other guarantor or
insolvency, bankruptcy, or other similar proceedings affecting the Manager or
any other guarantor or any assets of the Manager or any such other guarantor,
or the release or discharge of the Manager or any such other guarantor from the
performance or observance of any agreement, covenant, term or condition
contained in any of the foregoing without the consent of the holders of the
Guaranteed Obligations by operation of law.

 

8.                                       Reimbursement, Subrogation, Etc. The Guarantor
hereby covenants and agrees that the Guarantor will not enforce or

 

A-9

 

otherwise exercise any rights of reimbursement, subrogation,
contribution or other similar rights against the Manager or any other person
with respect to the Guaranteed Obligations prior to the irrevocable payment in
full of all amounts then due and owing but unpaid under the Management
Agreement, and until the Guaranteed Obligations have been satisfied in full,
the Guarantor shall not have any right of subrogation, and the Guarantor waives
any defense it may have based upon any election of remedies by HPT which
destroys the Guarantor’s subrogation rights or the Guarantor’s rights to
proceed against the Manager for reimbursement, including, without limitation,
any loss of rights the Guarantor may suffer by reason of any rights, powers or
remedies of the Manager in connection with any anti-deficiency laws or any
other laws limiting, qualifying or discharging the indebtedness to HPT. Until
all obligations of the Manager pursuant to the Transaction Documents shall have
been irrevocably paid and satisfied in full, the Guarantor waives any right to
enforce any remedy which HPT now has or may in the future have against the
Manager, any other guarantor or any other person and any benefit of, or any
right to participate in, any security whatsoever now or in the future held by
HPT. Nothing contained in this Section 8 shall limit any of Guarantor’s
rights under the Management Agreement.

 

9.                                       Defeasance; Guaranty Limitations. The Guarantor’s
obligations under Section 3 shall terminate upon the first to occur of
(a) the date on which the Guaranteed Obligations have been paid and performed
in full and all other obligations of the Guarantor to HPT under this Agreement
have been irrevocably satisfied in full and (b) the Coverage Date; provided,
however, if at any time, all or any part of any payment applied on
account of the Guaranteed Obligations is or must be rescinded or returned for
any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of the Manager), this Agreement, to the extent
such payment is or must be rescinded or returned, shall be deemed to have
continued in existence notwithstanding any such termination. Notwithstanding
anything contained in this Agreement to the contrary, in no event shall the
Guarantor’s liability under Section 3 hereof exceed the sum of
Fifty Million Dollars ($50,000,000) less (ii) the aggregate amount paid by the
Guarantor under Section 3 in excess of the aggregate of any amounts
reimbursed to it pursuant to the terms of the Management Agreement.

 

10.                                 Notices. (a)  Any and all
notices, demands, consents, approvals, offers, elections and other
communications required or permitted under this Agreement shall be deemed
adequately given if in writing and the same shall be delivered either by

 

A-10

 

hand, by telecopier with written acknowledgment of receipt (provided a
copy thereof is sent by Federal Express or similar expedited commercial carrier
for delivery on the next business day), or Federal Express or similar expedited
commercial carrier, addressed to the recipient of the notice, postpaid and
registered or certified with return receipt requested (if by mail), or with all
freight charges prepaid (if by Federal Express or similar carrier).

 

(b)  All
notices required or permitted to be sent hereunder shall be deemed to have been
given for all purposes of this Agreement upon the date of acknowledged receipt,
in the case of a notice by telecopier, and, in all other cases, upon the date
of receipt or refusal, except that whenever under this Agreement a notice is
either received on a day which is not a Business Day or
is required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.

 

(c)  All
such notices shall be addressed,

 

if to HPT to:

 

c/o
Hospitality Properties Trust

400
Centre Street

Newton,
Massachusetts 02458

Attn:  Mr. John G. Murray

[Telecopier
No. (617) 969-5730]

 

with a
copy to:

 

Sullivan
& Worcester LLP

One
Post Office Square

Boston,
Massachusetts 02109

Attn:  Warren M. Heilbronner, Esq.

[Telecopier
No. (617) 338-2880]

 

if to
the Guarantor to:

 

Intercontinental
Hotels Group PLC

67
Alma Road

Windsor

Berkshire
SL4 3HD

ENGLAND

Attn:
Company Secretary

Telecopier
No. +44 1753 410101

 

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with a copy to:

 

Intercontinental
Hotels Resources Group, Inc.

Three
Ravinia Drive

Suite
100

Atlanta,
Georgia 30346

Attn:  Vice President, Asset Management

[Telecopier
No. 770-604-5340]

 

(d)  By notice given as herein provided, the
parties hereto and their respective successors and assigns shall have the right
from time to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other address
within the United States of America.

 

11.                                 Successors and Assigns. Whenever in
this Agreement, any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party, including
without limitation the holders, from time to time, of the Guaranteed
Obligations; and all representations, warranties, covenants and agreements by
or on behalf of the Guarantor which are contained in this Agreement shall inure
to the benefit of HPT’s successors and assigns, including, without limitation,
such holders, whether so expressed or not.

 

12.                                 Applicable Law. Except as to
matters regarding the internal affairs of HPT and issues of or limitations on
any personal liability of the shareholders and trustees of HPT for obligations
of HPT, as to which the laws of the State of Maryland shall govern, this
Agreement and any other instruments executed and delivered to evidence,
complete or perfect the transactions contemplated hereby shall be interpreted,
construed, applied and enforced in accordance with the laws of New York
applicable to contracts between residents of New York which are to be performed
entirely within New York, regardless of (i) where any such instrument is
executed or delivered; or (ii) where any payment or other performance required
by any such instrument is made or required to be made; or (iii) where any
breach of any provision of any such instrument occurs, or any cause of action
otherwise accrues; or (iv) where any action or other proceeding is instituted or
pending; or (v) the nationality, citizenship, domicile, principal place of
business, or jurisdiction of organization or domestication of any party; or
(vi) whether the laws of the forum jurisdiction otherwise would apply the laws
of a jurisdiction other than Massachusetts; or (vii) any combination of the
foregoing.

 

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All actions and proceedings arising out of or in
any way relating to this Agreement shall be brought, heard, and determined
exclusively in an otherwise appropriate federal or state court located within
the State of New York. Guarantor hereby (i) submits to the exclusive
jurisdiction of any New York federal or state court of otherwise competent
jurisdiction for the purpose of any action or proceeding arising out of or
relating to this Agreement and (ii) voluntarily and irrevocably waives, and
agrees not to assert by way of motion, defense, or otherwise in any such action
or proceeding, any claim or defense that it is not personally subject to the
jurisdiction of such a court, that such a court lacks personal jurisdiction
over Guarantor or the matter, that the action or proceeding has been brought in
an inconvenient or improper forum, that the venue of the action or proceeding
is improper, or that this Agreement may not be enforced in or by such a court. To
the maximum extent permitted by applicable law, Guarantor consents to service
of process by registered mail, return receipt requested, or by any other manner
provided by law.

 

To the maximum extent permitted
by applicable law, each of the parties hereto waives its rights to trial by
jury with respect to this Agreement or any matter arising in connection
herewith.

 

13.                                 Modification of Agreement. No
modification or waiver of any provision of this Agreement, nor any consent to
any departure by the Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by HPT, and such modification,
waiver or consent shall be effective only in the specific instances and for the
purpose for which given. No notice to or demand on the Guarantor in any case
shall entitle the Guarantor to any other or further notice or demand in the
same, similar or other circumstances.

 

14.                                 Waiver of Rights by HPT. Neither any
failure nor any delay on HPT’s part in exercising any right, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise, or the
exercise of any other right, power or privilege.

 

15.                                 Severability. In case any
one or more of the provisions contained in this Agreement should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby, but this Agreement shall be reformed and
construed and enforced to the maximum extent permitted by applicable law.

 

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16.                                 Entire Contract. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and shall supersede and take the place of
any other instruments purporting to be an agreement of the parties hereto
relating to the subject matter hereof.

 

17.                                 Headings; Counterparts. Headings in
this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument, and in pleading or proving any provision of
this Agreement, it shall not be necessary to produce more than one of such
counterparts.

 

18.                                 Remedies Cumulative. No remedy
herein conferred upon HPT is intended to be exclusive of any other remedy, and
subject to the limitations set forth in Section 9 above, each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.

 

19.                                 Nonliability of Trustees. THE
DECLARATION OF TRUST ESTABLISHING TRUST, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT,
AND THE GUARANTOR HEREBY AGREES THAT, THE NAME “HOSPITALITY PROPERTIES TRUST”
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TRUST. ALL PERSONS DEALING
WITH TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TRUST FOR THE PAYMENT
OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

 

20.                                 Effective Date. This Agreement shall be of no force or
effect unless and until the Effective Date occurs.

 

A-14

 

WITNESS the
execution hereof under seal as of the date above first written.

 

	
   

  	
  INTERCONTINENTAL
  HOTELS GROUP PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED AND
  AGREED:

  	
   

  
	
   

  	
   

  
	
  HPT TRS IHG-1,
  INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HOSPITALITY
  PROPERTIES TRUST

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
   

  
									

 

A-15

 

EXHIBIT
B

 

NEW
STAYBRIDGE GUARANTY

 

 

GUARANTY
AGREEMENT

 

THIS GUARANTY AGREEMENT (this “Agreement”)
is made and given as of                 
    , 20    , by INTERCONTINENTAL
HOTELS GROUP PLC, a corporation organized and existing under the
laws of England and Wales (the “Guarantor”), for the benefit of HPT TRS IHG-1, INC.,
a Maryland corporation (together with its successors and assigns, the “Tenant”),
and HOSPITALITY PROPERTIES TRUST, a
Maryland real estate investment trust (together with its successors and
assigns, “Trust”; and Trust together with the Tenant, “HPT”).

 

W  I  T  N  E
S  S  E  T  H :

 

WHEREAS, on January     , 2006, the Guarantor delivered to HPT
that certain Amended and Restated Consolidated Guaranty Agreement (the “Consolidated
Guaranty”); and

 

WHEREAS, both the IHG4 Coverage Date and the IHG5 Coverage Date (as such
terms are defined in the Consolidated Guaranty) have occurred and the Guarantor
wishes to terminate its obligations under the Consolidated Guaranty in
accordance with Section 10 of the Consolidated Guaranty; and

 

WHEREAS, Section 10 of the Consolidated Guaranty requires, among other things,
that the Guarantor deliver this Guaranty Agreement to HPT in order to terminate
its obligations under the Consolidated Guaranty as aforesaid; and

 

WHEREAS, the
termination of its obligations under the Consolidated Guaranty as aforesaid
constitutes a direct material benefit to the Guarantor;

 

NOW, THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the mutual receipt and legal sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

 

1.                                       Certain Terms. Capitalized
terms used and not otherwise defined in this Agreement shall have the meanings
ascribed to such terms in the Management Agreement. The

 

 

following terms as used in this Agreement shall have the meanings set
forth below:

 

“Accounting Principles” shall mean
generally accepted accounting principles, as adopted in the United States of
America, consistently applied or, if the Guarantor’s principal place of
business is the United Kingdom, generally accepted accounting principles, as
adopted in the United Kingdom, consistently applied.

 

“Collateral Agency Agreement” shall mean
a written agreement, in form and substance reasonably acceptable to HPT, among
HPT, the Guarantor and the Collateral Agent pursuant to which the Collateral
Agent shall agree to hold any cash delivered to such Collateral Agent pursuant
to the terms of this Agreement as collateral agent on behalf of HPT, as the
same may be amended, restated, supplemented or otherwise modified from time to
time with the consent of the parties thereto. Among other things, the
Collateral Agency Agreement shall provide that (a) the Collateral Agent shall
look solely to the Guarantor for any amounts owed to the Collateral Agent in
connection with such agreement, (b) the Collateral Agent shall not offset any
amount owed to the Collateral Agent against the cash delivered to it pursuant
to the Collateral Agency Agreement and this Agreement, (c) the Collateral Agent
shall hold such cash as trust funds and not commingle such cash with any assets
of the Collateral Agent and (d) HPT shall be entitled to apply any cash
collateral held by the Collateral Agent to the overdue obligations of the
Guarantor hereunder in such order and at such times as HPT may determine in its
sole judgment.

 

“Collateral Agent” shall mean
a bank or other financial institution reasonably acceptable to HPT having a
rating of not less than BBB-/Baa3 rating from the Rating Agencies, which bank
or other financial institution is the collateral agent under the Collateral
Agency Agreement as such collateral agent may be replaced in accordance with
the terms of the Collateral Agency Agreement.

 

“Coverage Date” shall mean the date which
is the day after the second (2nd) consecutive calendar year for
which the Priority Coverage Ratio is equal to or exceeds 1.3.

 

“Guaranteed Obligations” shall mean the
payment to Tenant of (a) all of the Owner’s Priority as and when due under the
Management Agreement determined without respect to Gross Revenue or Operating
Profits and (b) any and all liquidated damages due to Tenant under the
Management Agreement.

 

B-2

 

“Management Agreement” shall mean [that
certain Amended and Restated Management Agreement, dated as of January     .
2005], between TRS1 and Manager, with respect to certain hotels being operated
under the “Staybridge” brand] [that certain Management Agreement, dated as of
July 1, 2003, between TRS1 and Manager] as the same may be amended, modified,
supplemented, or otherwise altered from time to time.

 

“Manager” shall mean Intercontinental
Hotels Group Resources, Inc.

 

“Outstanding Balance” shall mean, from
time to time, the Seventy Million Dollars ($70,000,000) less the excess of the
aggregate amount paid by the Guarantor under Section 3 hereof over the
aggregate amount reimbursed to the Guarantor pursuant to Section 10.1(l)
of the Management Agreement.

 

“Provide Collateral” or “Provided
Collateral” shall mean:

 

(a)                                  delivery to
HPT of (i) a Satisfactory Letter of Credit or (ii) cash in an amount equal to
the then Outstanding Balance; or

 

(b)                                 the deposit
of cash equal to the then Outstanding Balance with the Collateral Agent to be
held by the Collateral Agent in accordance with the Collateral Agency Agreement
provided:(i) the Collateral Agency Agreement has been executed and delivered by
the parties thereto; (ii) HPT has a perfected first priority security interest in
any cash delivered to the Collateral Agent; (iii) HPT has received favorable
opinions of counsel, in form and substance reasonably satisfactory to HPT, with
respect to such perfected first priority interest, the valid existence and good
standing of the other parties to the Collateral Agency Agreement, the due
execution and delivery thereof by such other parties, the enforceability of the
Collateral Agency Agreement against such parties, and that any cash held by the
Collateral Agent pursuant to the Collateral Agency Agreement shall not be “property
of the estate” of Collateral Agent should any event described in Sections
17.1(a), (b) or (c) of the Management Agreement shall occur with
respect to the Collateral Agent; or

 

(c)                                  delivery to
HPT of other collateral satisfactory to HPT in its good faith discretion to
secure the Guaranteed Obligations;

 

provided, however, the
Guarantor shall not be deemed to have Provided Collateral if at any time the
Outstanding Balance exceeds the sum of (i) the then remaining balance drawable
under

 

B-3

 

the Satisfactory Letter of Credit or the balance of the cash deposited
by the Guarantor hereunder, plus (ii) proceeds of any Satisfactory
Letter of Credit or cash deposited hereunder, in either case, applied to the
Guaranteed Obligations.

 

“Priority Coverage Ratio” shall mean, for
any period, the ratio of (a) the excess of Gross Revenue for such period over
the sum of the amounts distributed or applied for such period pursuant to Sections
10.1(a), (b), (e), (g), (h), (i), (k) and (l) of the Management Agreement,
to (b) the sum for such period of Owner’s Priority and Owner’s Percentage
Priority.

 

“Rating Agencies” shall mean,
collectively, Standard’s & Poor’s Rating Services or its successor and
Moody’s Investor Services, Inc. or its successors; provided, however,
if the Rating Agencies (i) cease operations without successors or (ii) cease to
issue credit ratings, “Rating Agencies” shall mean a nationally recognized
organization periodically issuing ratings of the financial strength and/or
credit of United States domestic and international banking institutions
reasonably agreed to by HPT and the Guarantor.

 

“Reorganization” shall mean any merger,
consolidation, reorganization, change of control or any transaction pursuant to
which the Guarantor shall be or become a Subsidiary of any other Person.

 

“Satisfactory Letter of Credit” shall
mean a clean irrevocable letter of credit in form and substance reasonably
satisfactory to HPT in an amount equal to the Outstanding Balance issued by a
bank with a credit rating of not less than A2/A (or, if after the date hereof
the system of ratings used by the Rating Agencies changes in a material way,
their then equivalents of such credit rating in HPT’s reasonable judgment) from
the Rating Agencies, having an expiration date of not earlier than one year
after the date on which it was issued and which permits for partial draws.

 

“Substitute Guarantor” shall mean a
Person who assumes the Guarantor’s obligations hereunder in accordance with the
terms of Section 2.7 below and is either (a) a Person who satisfies the
Rating Agencies’ requirements for a single purpose bankruptcy remote entity who
has Provided Collateral or (b) a Person(s) with (i) a tangible net worth
determined in accordance with the Accounting Principles not less than Seven
Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with
a fair market value of not less than One Hundred Million Dollars (exclusive of
any note, instrument, security or claim issued by,

 

B-4

 

against or in any way dependent on the credit of, an Affiliate of
Guarantor).

 

2.                                       Representations and Covenants. The
Guarantor represents, warrants, covenants and agrees that:

 

2.1                                 Validity of Agreement. The
Guarantor has duly and validly executed and delivered this Agreement; this
Agreement constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors; and the execution, delivery and performance of this
Agreement have been duly authorized by all requisite action of the Guarantor
and such execution, delivery and performance by the Guarantor will not result
in any breach of the terms, conditions or provisions of, or conflict with or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any of the property or assets of the Guarantor pursuant to the
terms of, any indenture, mortgage, deed of trust, note, other evidence of
indebtedness, agreement or other instrument to which the Guarantor is a party
or by which the Guarantor or any property or assets of the Guarantor is bound,
or violate any provision of law applicable to the Guarantor, or any order,
writ, injunction, judgement or decree of any court applicable to the Guarantor
or any order or other public regulation of any governmental commission, bureau
or administrative agency applicable to the Guarantor.

 

2.2                                 Payment of Expenses. The
Guarantor agrees, as principal obligor and not as guarantor only, to pay to HPT
forthwith, upon demand, in immediately available Federal funds, all costs and
expenses (including court costs and reasonable legal expenses) incurred or
expended by HPT in connection with the enforcement of this Agreement, together
with interest at the Interest Rate on amounts recoverable under this Agreement
from the time such amounts become due until payment.

 

2.3                                 Reports. The
Guarantor shall timely deliver to HPT the Consolidated Financials required
under the Management Agreement and otherwise comply with the terms of the Management
Agreement applicable to it.

 

2.4                                 Financial Condition of Guarantor; Status of Guarantor. So long as the Guarantor’s obligations
under Section 3 below are outstanding, unless the Guarantor shall
have Provided Collateral to secure its obligations hereunder:

 

B-5

 

(a)                                  The
Guarantor shall at all times maintain a tangible net worth determined in
accordance with the Accounting Principles in an amount not less than Five
Hundred Million Dollars ($500,000,000) or if there has been a Reorganization,
or if the Guarantor is not the originally named Guarantor, Seven Hundred Fifty
Million Dollars ($750,000,000); and

 

(b)                                 The
Guarantor shall not engage in any Reorganization unless following such
Reorganization it has (i) a tangible net worth determined in accordance with
the Accounting Principles in an amount not less than Seven Hundred Fifty
Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market
value of not less than One Hundred Million Dollars ($100,000,000) (exclusive of
any note, instrument, security or claim issued by, against or in any way
dependent on the credit of, an Affiliate of Guarantor).

 

2.5                                 Security. Upon the termination of the Guarantor’s
obligations under Section 3 or if the excess of aggregate amount paid by
the Guarantor under Section 3 over the aggregate amount reimbursed to it
pursuant to Section 10.1(l) of the Management Agreement equals not less than
Fifty Million dollars ($50,000,000), HPT will return to the Guarantor any Satisfactory
Letter of Credit previously delivered to HPT or any unapplied cash collateral
then being held by HPT hereunder and shall direct the Collateral Agent to
return any cash being held by it under the Collateral Agency Agreement to the
Guarantor. HPT shall be entitled to draw upon any Satisfactory Letter of Credit
delivered to it (a) for the full amount thereof if at any time there is less
than thirty (30) days until the expiry date of such Satisfactory Letter of
Credit; (b) for the full amount thereof if the bank that issued such
Satisfactory Letter of Credit shall not have a credit rating of at least A/A2
(or, if after the date hereof the system of ratings used by the Rating Agencies
changes in a material way, their then equivalents in HPT’s reasonable judgment)
from the Rating Agencies and such satisfactory Letter of Credit shall not have
been replaced within thirty (30) days with a new Satisfactory Letter of Credit
delivered to HPT; or (c) to the extent and in the amounts then due and payable
hereunder, if the Guarantor shall fail to pay or perform any of its obligations
under this Guaranty in accordance with the terms hereof. HPT shall be entitled
to apply any cash collateral held by it or the Collateral Agent to the overdue
obligations of the Guarantor hereunder in such order and at such times as HPT
may determine in its sole judgment. Any cash collateral held by HPT shall not
be commingled with its other funds, and shall be invested, at the Guarantor’s
risk, in interest bearing investments reasonably acceptable to the

 

B-6

 

Guarantor. Any interest on such cash collateral, and any losses in such
investments, shall belong to IHG.

 

2.6                                 Legal Existence. The
Guarantor shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence. The Guarantor has
appointed attorneys Alston & Bird LLP, having an address at 1201 West
Peachtree Street, Atlanta, Georgia 30309-3424, Attn:  Managing Partner as its agent for service of
process. Managing Partner as its agent for service of process. The Guarantor
acknowledges and agrees that service of process on such agent shall constitute
service of process on Guarantor with respect to any and all claims hereunder or
under any other Transaction Document.

 

2.7                                 Substitute Guarantor. The then
Guarantor (the “Departing Guarantor”) shall be released from obligations
under Section 3 hereof on the following terms and conditions:

 

(a)                                  a Substitute
Guarantor shall assume pursuant to a written instrument satisfactory to HPT all
of the Guarantor’s obligations hereunder; and

 

(b)                                 HPT shall
receive an opinion of counsel satisfactory to HPT with respect to, among other
things, the existence and good standing of the Substitute Guarantor and the due
execution, delivery and enforceability of such assumption.

 

Upon the satisfaction of the foregoing
conditions and the expiration of all applicable preference or similar periods,
HPT shall deliver a release to the Departing Guarantor of its obligations
hereunder and the Substitute Guarantor shall be deemed the “Guarantor”
hereunder. Further, if the Substitute Guarantor has Provided Collateral or has
(i) a tangible net worth determined in accordance with the Accounting
Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000)
and (ii) unencumbered assets with a fair market value of not less than One
Hundred Million Dollars (exclusive of any note, instrument, security or claim
issued by, against or in any way dependent on the credit of, an Affiliate of
Guarantor), HPT shall return to the Departing Guarantor any letter of credit or
cash delivered by the Departing Guarantor and held by HPT hereunder and shall
direct the Collateral Agent to return to the Departing Guarantor any cash delivered
by the Departing Guarantor and held by such Collateral Agent pursuant to the
terms of the Collateral Agency Agreement.

 

B-7

 

3.                                       Guarantee.

 

(a)                                  The
Guarantor hereby unconditionally guarantees that the Guaranteed Obligations
which become due and payable during the term of the Management Agreement shall
be paid in full when due and payable subject to any applicable cure periods,
whether upon demand, at the stated or accelerated maturity thereof or upon any
mandatory or voluntary prepayment pursuant to any Transaction Document, or
otherwise.

 

(b)                                 This
guarantee is a guarantee of payment and not of collectibility and is absolute
and in no way conditional or contingent. In case any part of the Guaranteed
Obligations shall not have been paid when due and payable or performed at the
time performance is required, subject to any applicable cure periods, the
Guarantor shall, pay or cause to be paid to HPT the amount thereof as is then
due and payable and unpaid (including interest and other charges, if any, due
thereon through the date of payment in accordance with the applicable
provisions of the Transaction Documents) or perform or cause to be performed
such obligations in accordance with the Transaction Documents. Simultaneously
with the giving of any notice of default to the Manager under the Management
Agreement, Tenant shall give a copy of such notice to the Guarantor. Tenant
shall accept any cure of such default by the Guarantor provided such cure is
completed within the applicable cure period under the Management Agreement.

 

4.                                       Unenforceability of Guaranteed Obligations, Etc. If the
Manager is for any reason under no legal obligation to discharge any of the
Guaranteed Obligations, or if any other moneys included in the Guaranteed
Obligations have become unrecoverable from the Manager by operation of law or
for any other reason, including, without limitation, the invalidity or
irregularity in whole or in part of any Guaranteed Obligation or of any
Transaction Document or any limitation on the liability of the Manager
thereunder or any limitation on the method or terms of payment thereunder which
may now or hereafter be caused or imposed in any manner whatsoever, the
guarantees contained in this Agreement shall nevertheless remain in full force
and effect in accordance with the terms set forth herein and shall be binding
upon the Guarantor to the same extent as if the Guarantor at all times had been
the principal debtor on all such Guaranteed Obligations.

 

5.                                       Additional Guarantees. This
Agreement shall be in addition to any other guarantee or other security for the
Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable
by the invalidity of any such other

 

B-8

 

guarantee or security or by any waiver, amendment, release or
modification thereof.

 

6.                                       Consents and Waivers, Etc. The
Guarantor hereby acknowledges receipt of correct and complete copies of each of
the Transaction Documents and consents to all of the terms and provisions
thereof, as the same may be from time to time hereafter amended or changed in
accordance therewith, and waives, to the extent the Guarantor lawfully may do
so, (a) presentment, demand for payment, and protest of nonpayment, of any of
the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of
diligence, presentment, demand and protest, (c) notice of any default hereunder
and any default, breach or nonperformance or a Manager Event of Default under
any of the Guaranteed Obligations or the Transaction Documents, except as
expressly provided in Section 3, (d) notice of the terms, time and place
of any private or public sale of collateral held as security for the Guaranteed
Obligations, (e) demand for performance or observance of, and any enforcement
of any provision of, or any pursuit or exhaustion of rights or remedies against
the Manager or any other guarantor of the Guaranteed Obligations, under or
pursuant to the Transaction Documents, or any agreement directly or indirectly
relating thereto and any requirements of diligence or promptness on the part of
the holders of the Guaranteed Obligations in connection therewith, and (f) any
and all demands and notices of every kind and description with respect to the foregoing
or which may be required to be given by any statute or rule of law.

 

7.                                       No Impairment, Etc. The obligations, covenants, agreements
and duties of the Guarantor under this Agreement shall not be affected or
impaired by any assignment or transfer in whole or in part of any of the
Guaranteed Obligations without notice to the Guarantor, or any waiver by HPT or
any holder of any of the Guaranteed Obligations or by the holders of all of the
Guaranteed Obligations of the performance or observance by the Manager or any
other guarantor of any of the agreements, covenants, terms or conditions
contained in the Guaranteed Obligations or the Transaction Documents or any
indulgence in or the extension of the time for payment by the Manager or any
other guarantor of any amounts payable under or in connection with the
Guaranteed Obligations or the Transaction Documents or any other instrument or
agreement relating to the Guaranteed Obligations or of the time for performance
by the Manager or any other guarantor of any other obligations under or arising
out of any of the foregoing or the extension or renewal thereof, or the
modification or amendment made with the consent of the Guarantor of any duty,
agreement or obligation of the Manager or any other

 

B-9

 

guarantor set forth in any of the foregoing, or the voluntary or
involuntary sale or other disposition of all or substantially all the assets of
the Manager or any other guarantor or insolvency, bankruptcy, or other similar
proceedings affecting the Manager or any other guarantor or any assets of the
Manager or any such other guarantor, or the release or discharge of the Manager
or any such other guarantor from the performance or observance of any
agreement, covenant, term or condition contained in any of the foregoing
without the consent of the holders of the Guaranteed Obligations by operation
of law.

 

8.                                       Reimbursement, Subrogation, Etc. The
Guarantor hereby covenants and agrees that the Guarantor will not enforce or otherwise
exercise any rights of reimbursement, subrogation, contribution or other
similar rights against the Manager or any other person with respect to the
Guaranteed Obligations prior to the irrevocable payment in full of all amounts
then due and owing but unpaid under the Management Agreement, and until the
Guaranteed Obligations have been satisfied in full, the Guarantor shall not
have any right of subrogation, and the Guarantor waives any defense it may have
based upon any election of remedies by HPT which destroys the Guarantor’s
subrogation rights or the Guarantor’s rights to proceed against the Manager for
reimbursement, including, without limitation, any loss of rights the Guarantor
may suffer by reason of any rights, powers or remedies of the Manager in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging the indebtedness to HPT. Until all obligations of the Manager
pursuant to the Transaction Documents shall have been irrevocably paid and
satisfied in full, the Guarantor waives any right to enforce any remedy which
HPT now has or may in the future have against the Manager, any other guarantor
or any other person and any benefit of, or any right to participate in, any
security whatsoever now or in the future held by HPT. Nothing contained in this
Section 8 shall limit the Guarantor’s rights under Section 10.1(l)
of the Management Agreement.

 

9.                                       Defeasance; Guaranty Limitations. The Guarantor’s
obligations under Section 3 shall terminate upon the first to occur of
(a) the date on which the Guaranteed Obligations have been paid and performed
in full and all other obligations of the Guarantor to HPT under this Agreement
have been irrevocably satisfied in full and (b) the Coverage Date; provided,
however, if at any time, all or any part of any payment applied on
account of the Guaranteed Obligations is or must

 

B-10

 

be rescinded or returned for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the Manager), this
Agreement, to the extent such payment is or must be rescinded or returned,
shall be deemed to have continued in existence notwithstanding any such
termination. Notwithstanding anything contained in this Agreement to the
contrary, the Guarantor’s liability under Section 3 hereof in the
aggregate shall not exceed (a) for the period ending on December 31, 2005, (i)
Fifty Million Dollars ($50,000,000) with respect to the portion of Owner’s
Priority attributable to the Original Hotels and (ii) an additional Sixteen
Million Dollars ($16,000,000) with respect to the portion of Owner’s Priority
attributable to the Expansion Hotels, and (b) thereafter, Seventy Million
Dollars ($70,000,000) with respect to the entire amount of Owner’s Priority; provided,
however, such liability shall be reduced by any advances made by Manager
under Section 10.3 of the Management Agreement which Manager elects to be
deemed advances hereunder pursuant to said Section and such liability shall be
increased by any reimbursements made to the Guarantor pursuant to Section
10.1(l) of the Management Agreement.

 

10.                                 Notices. (a)  Any and all
notices, demands, consents, approvals, offers, elections and other
communications required or permitted under this Agreement shall be deemed
adequately given if in writing and the same shall be delivered either by hand,
by telecopier with written acknowledgment of receipt (provided a copy thereof
is sent by Federal Express or similar expedited commercial carrier for delivery
on the next business day), or Federal Express or similar expedited commercial
carrier, addressed to the recipient of the notice, postpaid and registered or
certified with return receipt requested (if by mail), or with all freight
charges prepaid (if by Federal Express or similar carrier).

 

(b)  All
notices required or permitted to be sent hereunder shall be deemed to have been
given for all purposes of this Agreement upon the date of acknowledged receipt,
in the case of a notice by telecopier, and, in all other cases, upon the date
of receipt or refusal, except that whenever under this Agreement a notice is
either received on a day which is not a Business Day or
is required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.

 

B-11

 

(c)  All
such notices shall be addressed,

 

if to HPT to:

 

c/o
Hospitality Properties Trust

400
Centre Street

Newton,
Massachusetts  02458

Attn:  Mr. John G. Murray

[Telecopier
No. (617) 969-5730]

 

with a
copy to:

 

Sullivan
& Worcester LLP

One
Post Office Square

Boston,
Massachusetts  02109

Attn:  Warren M. Heilbronner, Esq.

[Telecopier
No. (617) 338-2880]

 

if to
the Guarantor to:

 

Intercontinental
Hotels Group PLC

67
Alma Road

Windsor

Berkshire
SL4 3HD

ENGLAND

Attn:
Company Secretary

Telecopier
No. +44 1753 410101

 

with a copy to:

 

Intercontinental
Hotels Group, Inc.

Three
Ravinia Drive

Suite
100

Atlanta,
Georgia 30346

Attn:  Vice President, Asset Management

[Telecopier
No. 770-604-5340]

 

(d)  By notice given as herein provided, the
parties hereto and their respective successors and assigns shall have the right
from time to time and at any time during the term of this Agreement to change
their respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other
address within the United States of America.

 

11.                                 Successors and Assigns. Whenever in
this Agreement, any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party, including
without limitation the holders, from time to time, of

 

B-12

 

the Guaranteed Obligations; and all representations, warranties,
covenants and agreements by or on behalf of the Guarantor which are contained
in this Agreement shall inure to the benefit of HPT’s successors and assigns,
including, without limitation, such holders, whether so expressed or not.

 

12.                                 Applicable Law. Except as to
matters regarding the internal affairs of HPT and issues of or limitations on
any personal liability of the shareholders and trustees of HPT for obligations
of HPT, as to which the laws of the State of Maryland shall govern, this
Agreement and any other instruments executed and delivered to evidence,
complete or perfect the transactions contemplated hereby shall be interpreted,
construed, applied and enforced in accordance with the laws of New York
applicable to contracts between residents of New York which are to be performed
entirely within New York, regardless of (i) where any such instrument is
executed or delivered; or (ii) where any payment or other performance required
by any such instrument is made or required to be made; or (iii) where any
breach of any provision of any such instrument occurs, or any cause of action
otherwise accrues; or (iv) where any action or other proceeding is instituted
or pending; or (v) the nationality, citizenship, domicile, principal place of
business, or jurisdiction of organization or domestication of any party; or
(vi) whether the laws of the forum jurisdiction otherwise would apply the laws
of a jurisdiction other than Massachusetts; or (vii) any combination of the
foregoing.

 

All actions and proceedings arising out of or in
any way relating to this Agreement shall be brought, heard, and determined
exclusively in an otherwise appropriate federal or state court located within
the State of New York. Guarantor hereby (i) submits to the exclusive
jurisdiction of any New York federal or state court of otherwise competent
jurisdiction for the purpose of any action or proceeding arising out of or
relating to this Agreement and (ii) voluntarily and irrevocably waives, and
agrees not to assert by way of motion, defense, or otherwise in any such action
or proceeding, any claim or defense that it is not personally subject to the
jurisdiction of such a court, that such a court lacks personal jurisdiction
over Guarantor or the matter, that the action or proceeding has been brought in
an inconvenient or improper forum, that the venue of the action or proceeding
is improper, or that this Agreement may not be enforced in or by such a court. To
the maximum extent permitted by applicable law, Guarantor consents to service
of process by registered mail, return receipt requested, or by any other manner
provided by law.

 

B-13

 

To the maximum extent permitted
by applicable law, each of the parties hereto waives its rights to trial by
jury with respect to this Agreement or any matter arising in connection
herewith.

 

13.                                 Modification of Agreement. No
modification or waiver of any provision of this Agreement, nor any consent to
any departure by the Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by HPT, and such modification,
waiver or consent shall be effective only in the specific instances and for the
purpose for which given. No notice to or demand on the Guarantor in any case
shall entitle the Guarantor to any other or further notice or demand in the
same, similar or other circumstances.

 

14.                                 Waiver of Rights by HPT. Neither any
failure nor any delay on HPT’s part in exercising any right, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise, or the
exercise of any other right, power or privilege.

 

15.                                 Severability. In case any
one or more of the provisions contained in this Agreement should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby, but this Agreement shall be reformed and
construed and enforced to the maximum extent permitted by applicable law.

 

16.                                 Entire Contract. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and shall supersede and take the place of
any other instruments purporting to be an agreement of the parties hereto
relating to the subject matter hereof.

 

17.                                 Headings; Counterparts. Headings in
this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument, and in pleading or proving any
provision of this Agreement, it shall not be necessary to produce more than one
of such counterparts.

 

18.                                 Remedies Cumulative. No remedy
herein conferred upon HPT is intended to be exclusive of any other remedy, and
subject to the limitations set forth in Section 9 above, each and every
remedy shall be cumulative and shall be in addition to every

 

B-14

 

other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.

 

19.                                 Nonliability of Trustees. THE
DECLARATION OF TRUST ESTABLISHING TRUST, A COPY OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT,
AND THE GUARANTOR HEREBY AGREES THAT, THE NAME “HOSPITALITY PROPERTIES TRUST”
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TRUST. ALL PERSONS DEALING
WITH TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TRUST FOR THE PAYMENT
OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

 

B-15

 

WITNESS the
execution hereof under seal as of the date above first written.

 

	
   

  	
  INTERCONTINENTAL
  HOTELS GROUP PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED AND
  AGREED:

  	
   

  
	
   

  	
   

  
	
  HPT TRS IHG-1,
  INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HOSPITALITY
  PROPERTIES TRUST

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  	
   

  
								

 

B-16Exhibit 10.31

 

THIS AGREEMENT is
made this 28th day of November 2005

 

BETWEEN:

 

(1)                                  19
RECORDINGS LIMITED of 33 Ransome’s Dock, 35-37 Parkgate Road, London SW11
4NP (“19”) and

 

(2)                                  19 TV LIMITED OF 33 Ransome’s Dock,
35-37 Parkgate Road, London SW11 4NP (“19 TV”) and

 

(3)                                  SIMCO LIMITED trading as SYCO MUSIC of
Bedford House, 69-79 Fulham High Street, London SW6 3JW (“Syco”) and

 

(4)                                  CKX UK HOLDINGS LIMITED of 100 New Bridge Street, London
EC4V 6JA (“CKX”) and

 

(5)                                  19 ENTERTAINMENT LIMITED
of 33 Ransome’s Dock, 35-37 Parkgate Road, London SW11 4NP (“19
Entertainment”).

 

(6)                                  SONY BMG MUSIC ENTERTAINMENT (UK) LIMITED of
Bedford House, 67-69 Fulham High Street, London SW6 3JW (“Sony BMG”).

 

WHEREAS:

 

(A)                              19
TV is the owner and creator of the Idol Format and 19 are entitled to acquire
the exclusive recording services of the Artists and have agreed to grant to
Syco options to acquire or to allow Nominated Labels to acquire rights in and
to certain Artists on the terms set out herein.

 

(B)                                Syco
is the owner and creator of the X Factor Format and has agreed to grant to 19
TV an interest and ownership participation in the X Factor Format on the terms
set out herein.

 

NOW IT IS AGREED as follows:-

 

1.                                       BACKGROUND.

 

It is
acknowledged that pursuant to an agreement between 19 and Ronagold Limited (“Ronagold”)
dated 8th February 2002 as the same has been varied and amended (“the
Ronagold Agreement”) 19 has granted to Ronagold the right to acquire rights in
and to Artists taking part in the first four (4) Idol Series in the UK
and to designate the US Licensee in respect of the first four (4) Idols Series in the USA
and accordingly the rights granted hereunder relate to the Artists taking part
in Idols Series subsequent thereto.

 

2.                                       UNITED STATES OF AMERICA (“USA”).

 

2.1                                 It
is acknowledged that there have been four (4) Idol Series previously
made and broadcast in USA. Ronagold appointed RCA Records as the US Licensee
for the first four (4) Idols Series in USA and RCA Records rights for
further

 

Series have
now expired.  The fifth Idol Series (being
the first in respect of which rights are granted to Syco hereunder) may
sometimes be referred to herein as “American Idol 5” (and subsequent Idol Series in
USA may be referred to as American Idol 6, American Idol 7, American Idol 8 and
American Idol 9).

 

 

2.2                                 19
hereby grants to Syco an exclusive irrevocable option to acquire American Idol
Record Rights for American Idol 5 and to require 19 to appoint a Nominated
Label to be the US Licensee in relation to American Idol 5. Syco hereby exercises
such option.

 

2.3                                 Subject
to clause 2.21 below, 19 agrees to enter into an agreement in the form of the
USA Licence with a Nominated Label for the Winning Artist of American Idol 5.
19 agrees to execute and Syco and Sony BMG agree to procure that the relevant
Nominated Label will execute such USA Licence promptly following the final
episode of American Idol 5.

 

2.4                                 Subject
to clause 2.21 below, 19 agrees to enter into an agreement in the form of the
USA Licence with a Nominated Label for any or all of the Finalists of American
Idol 5 other than the Winning Artist. The procedure for selection of the
Nominated Label identifying the Finalist concerned and entering into the
relevant USA Licence shall be as set out in clause 2.19 below.

 

2.5                                 If
Simon Cowell performs his services as a judge in American Idol 6, 19 hereby
grants to Syco an exclusive irrevocable option to acquire American Idol Record
Rights for American Idol 6 and to require 19 to appoint a Nominated Label to be
the US Licensee in relation to American Idol 6. Syco shall have the right to
exercise Syco’s option by written notice to 19 at any time prior to the date
thirty (30) days alter the first programme of American Idol 6 is transmitted in
USA.

 

2.6                                 Subject
to clause 2.21 below, if Syco exercises its option pursuant to clause 2.5 above. 19 agrees to enter into an
agreement in the form of the USA Licence with a Nominated Label for the Winning
Artist of American Idol 6. 19 agrees to execute and Syco and Sony BMG agree to
procure that the relevant Nominated Label will execute such USA Licence
promptly following the final episode of American Idol 6.

 

2.7                                 Subject
to clause 2.21 below if Syco exercises its option pursuant to clause 2.5 above,
19 agrees to enter into an agreement in the form of the USA Licence with a
Nominated Label for any or all of the Finalists of American Idol 6 other than
the Winning Artist. The procedure for selection of the Nominated Label, the
identity of the Finalist concerned and the execution of the relevant USA
Licence shall be as set out in clause 2.19 below.

 

2.8                                 If
Simon Cowell performs his services as a judge in American Idol 7, 19 hereby
grants to Syco an exclusive irrevocable option to acquire American Idol Record
Rights for American Idol 7 and to require 19 to appoint a Nominated Label to be
the US Licensee in relation to American Idol 7. Syco shall have the right to
exercise Syco’s option by written notice to 19 at any time prior to the date
thirty (30) days after the first programme of American Idol 7 is transmitted in
USA.

 

2.9                                 Subject
to clause 2.21 below, if Syco has exercised its option pursuant to clause 2.8
above, 19 agrees to enter into an agreement in the form of the USA Licence with
a Nominated Label for the Winning Artist of American Idol 7. 19 agrees to execute
and Syco and Sony BMG agree to procure that the relevant Nominated Label will
execute such USA Licence promptly following the final episode of American Idol
7.

 

2.10                           Subject
to clause 2.21 below, if Syco has exercised its option pursuant to clause :2.8
above, 19 agrees to enter into an agreement in the form of the USA Licence with
a Nominated Label for any or all of the Finalists of American Idol 7 other than
the Winning Artist. The procedure for selection of the Nominated Label, the
identity of the Finalist

 

2

 

concerned and the execution of the relevant USA Licence shall be as set
out in clause 2.19 below.

 

2.11                           If
Simon Cowell performs his services as a judge in American Idol 8, 19 hereby
grants to Syco an exclusive irrevocable option to acquire American Idol Record
Rights for American Idol 8 and to require 19 to appoint a Nominated Label to be
the US Licensee in relation to American Idol 8. Syco shall have the right to
exercise Syco’s option by written notice to 19 at any time prior to the date
thirty (30) days after the first programme of American Idol 8 is transmitted in
USA.

 

2.12                           Subject:
to clause 2.21 below, if Syco has exercised its option pursuant to clause 2.11
above, 19 agrees to enter into an agreement in the form of the USA Licence with
a Nominated Label for the Winning Artist of American Idol 8. 19 agrees to
execute and Syco and Sony BMG agree to procure that the Nominated Label will
execute such USA Licence promptly following the final episode of American Idol
8.

 

2.13                           Subject
to clause 2.21 below, if Syco has exercised its option pursuant to clause 2.11
above, 19 agrees to enter into an agreement in the form of the USA Licence with
a Nominated Label for any or all of the Finalists of American Idol 8 other than
the Winning Artist. The Procedure for selection of the Nominated Label, the
identity of the Finalist and the execution of the relevant USA Licence shall be
as set out in clause 2.19 below.

 

2.14                           If
Simon Cowell performs his services as a judge in American Idol 9, 19 hereby
grants to Syco an exclusive irrevocable option to acquire American Idol Record
Rights for American Idol 9 and to require 19 to appoint a Nominated Label to be
the US Licensee in relation to American Idol 9. Syco shall have the right to
exercise Syco’s option by written notice to 19 at any time within thirty (30)
days after the first programme of American Idol 9 is transmitted in USA.

 

2.15                           Subject
to clause 2.21 below, if Syco has exercised its option pursuant to clause 2.14
above, 19 agrees to enter into an agreement in the form of the USA Licence with
a Nominated Label for the Winning Artist of American Idol 9. 19 agrees to
execute and Syco and Sony BMG agree to procure that the Nominated Label will
execute such USA Licence promptly following the final episode of American Idol
9.

 

2.16                           Subject
to clause 2.21 below, if Syco has exercised its option pursuant to clause 2.14
above, 19 agrees to enter into an agreement in the form of the USA Licence with
a Nominated Label for any or all of the Finalists of American Idol 9 other than
the Winning Artist. The procedure for selection of the Nominated Label, the
identity of the Finalist and the execution of the relevant USA Licence shall be
as set out in clause 2.19.

 

2.17                           For the
purposes hereof “Nominated Label” shall be a Label nominated as follows:-

 

2.17.1                  in
respect of the Winner of the Idol Series in question 19 shall select and
nominate the identity of the Label to be Nominated Label for the Winner in
accordance with the procedure set out in sub-clause 2.18;

 

2.17.2                  in
respect of a Finalist other than a Winning Artist 19 shall select and nominate
the identity of the Label for the particular Finalist in accordance with the
procedure set out in sub-clause 2.19;

 

3

 

2.17.3                  in
respect of Compilation Recordings the identity of the Label shall be selected
by Syco in accordance with clause 3.3.

 

2.17.4                  for
the avoidance of doubt each Nominated Label must be a Label (as hereafter defined);

 

2.18                           Prior
to selecting the Label to be the Nominated Label for a Winning Artist 19 shall
(as soon as reasonably practical and in any event prior to reaching the stage
of the last 5 Finalists of each
Idols Series) contact Labels in good faith and shall be entitled to be
contacted by Labels to determine each Label’s interest in being the Nominated
Label. 19 agrees to consult the Labels and attend meetings with executives from
the Labels. 19 shall make its selection of the Nominated Label for the Winning
Artist of the Series in question by notice in writing to Syco within 7
days after transmission in USA of the final episode of that Series. 19 shall
act reasonably and in good faith in exercising its right of selection and shall
take into account the ‘genre’ or style of music of the Winning Artist concerned
and of the interested Labels and shall not seek to persuade any Label to vary
the financial provisions of the USA Licence for the benefit of 19 (but if any
Label of their own volition offers more favourable provisions 19 shall not be
in breach of this obligation (and similarly Syco and Sony BMG shall not be in
breach of clause 2.20 by preventing such actions)). If 19 does not make its
selection within 14 days after the transmission in USA of the final episode of
the Series concerned then the RCA Label shall be deemed to have been
selected by 19 and shall be the Nominated Label for the Winning Artist from
that Series.

 

2.19                           Prior
to selecting the label to be the Nominated Label for any Finalist other than a
Winning Artist 19 shall contact Labels and shall be entitled to be contacted by
Labels to determine each Label’s interest in being a Nominated Label for the
Finalist concerned. 19 agrees to consult the Labels and attend meetings with
executives from the Labels. Interested Labels which wish to become the US
Licensee for any Finalist shall declare their interest in such Finalist by
notice from the Label to 19 at any time up to 7 days after the transmission in
USA of final episode of the Series concerned PROVIDED THAT upon if expiry
of such seven (7) day period no Label has declared its interest 19 shall
promptly notify Syco in writing that such period has expired and the said seven
(7) day period shall be extended so that interested Labels may declare their
said interest to become US Licensee in respect of a particular Finalist within
five (5) business days from 19’s said notice. 19 shall make its selection
of the Nominated Label for each Finalist from those Labels formally declaring
their interest within 21 days after the final episode of the Series concerned.
19 shall act reasonably and in good faith in exercising its right of selection
and shall take into account the “genre” and style of music of the Finalist
concerned and the interested Labels and shall not seek to persuade any Label to
vary the financial provisions of the USA Licence for the benefit of 19 (but if
any Label of their own volition offers more favourable provisions 19 shall not
be in breach of this obligation (and similarly Syco and Sony BMG shall not be
in breach of clause 2.20 by preventing such actions)). If 19 fails or refuses
to make its selection within such time period then Syco shall be entitled to
nominate and select the Label to be the Nominated Label in place of 19. If only
one Label declares an interest in a Finalist, 19 shall select that Label as
Nominated Label. If no Label declares an interest in the Finalist concerned

 

4

 

19 shall be free to licence recordings by that Finalist to a third
party subject to the matching rights procedure herein.

 

2.20                           Syco
and Sony BMG agrees that each Label shall be free to contact 19 in relation to
Winning Artists and Finalists of each Series of American Idol in respect
of which Syco exercises an option pursuant to clauses 2.2, 2.5, 2.8, 2.11 and
2.14 above. Syco and Sony BMG further agree that they will act in good faith
and not frustrate 19’s freedom to select and nominate.

 

2.21                           For the
purposes of this clause 2 Simon Cowell shall be treated as having performed his
services as a judge if he completes filming the First Stage Television
Programmes in the relevant series of American Idol. If Simon Cowell fails to so
complete the filming of the First Stage Television Programmes in respect of a
series of American Idol by reason of Simon Cowell’s neglect or default then 19’s
obligation to enter into a USA Licence with a Nominated Label for the Winning
Artist or any Finalist from such Series shall immediately cease and Syco,
and the Nominated Label or Labels shall have no rights in relation to Winning
Artists, Finalists or Compilation Albums from such Series. If Simon Cowell
fails to so complete the filming of the First Stage Television Programmes for
reasons other than his neglect or default (including without limitation for
reasons of his illness or incapacity) then he shall be deemed to have so
completed his services and Syco’s rights hereunder in respect of such Series of
American Idol shall remain in full force and effect.

 

2.22                           Following
selection of a Nominated Label for any Finalist pursuant to clause 2.19 19 and
the Nominated Label in question shall promptly thereafter execute a separate
licence agreement in respect of each such Finalist in the form of the USA
Licence (and 19 shall deliver to the Nominated Label a signed inducement letter
in agreed form) save for the following amendments:-

 

(a)                                  clause
1.2 – “Artist” shall mean the relevant Finalist

 

(b)                                 clause
6.1.1(a) – the advance in respect of the First Contract Period shall be
£400,000 in lieu of £500,000 if the Finalist was placed second in the
Competition and shall be £300,000 in lieu of £500,000 if the Finalist was
placed third to last (inclusive) in the Competition;

 

(c)                                  clause
6.1.1(a) – the advance reduced in accordance with sub-clause (b) above
shall be payable as to fifty percent (50%)
thereof within seven (7) days after delivery to the Nominated Label
in question of the inducement letter signed by the Artist as to fifty percent (50%) thereof within seven (7) days
after the later of Delivery to the Nominated Label in question of the Recording
Commitment for the First Contract Period or delivery to the Nominated Label in
question of the inducement letter signed by the Artist;

 

(d)                                 clause
35 will be deleted and the Nominated Label in question will not use the logo
from the Series unless otherwise agreed but can use the name of the Series in
associated marketing;

 

(e)                                  the
Nominated Label in question will pay the reasonable legal costs of the lawyer
appointed to advise the Finalists on the form of recording agreement and
inducement letter.

 

5

 

3.                                       USA COMPILATION RECORDS

 

3.1                                 19
has no obligation to make or release Compilation Recordings featuring the
Finalists from any of American Idol 5,
American Idol 6, American Idol 7, American Idol 8 or American Idol 9.

 

3.2                                 In
the event that 19 wish to release (or authorise the release of) Compilation
Recordings in respect of a particular Idols Series 19 shall serve notice
on Syco no earlier than seven (7) days after transmission in the USA of
the first programme following selection of all of the Finalist in the relevant
Idol Series and not later than six (6) weeks prior to transmission in
the USA of the last programme in the relevant Idol Series confirming the
following:-

 

(a)                                  that
19 intends to make and release Compilation Recording(s) and the number of such
Compilation Recordings to be made (e.g. Single or EP or Album);

 

(b)                                 19’a
bona fide estimate of the recording costs and the producer advances to be
incurred by 19 in making the Compilation Recording(s) (‘which the parties do
not intend should exceed $375,000 in respect of a compilation album and other
costs incurred or to be incurred that 19 requires the Label to fund pursuant to
clause 4 of the USA Compilation Licence;

 

(c)                                  the
advance required by 19 pursuant to clause 1 of the USA Compilation Licence,
which shall be an amount equal to 70% of the amount credited to 19 as 19’s
share of US Net Profits from sales of the immediately preceding American Idol
Compilation Album and associated Compilation Recordings during the period of 12
months from initial USA release of such Album, subject to a minimum of $200,000
and a maximum of $400,000;

 

(d)                                 the
bona fide amount payable directly to the Finalists by way of advances against
royalties in respect of the Compilation Recordings;

 

(e)                                  the
proposed release date(s);

 

(f)                                    the
proposed track listing(s) [not to exceed fourteen (14) tracks].

 

3.3                                 Syco
shall select and nominate the Label (which shall be one (1) of RCA/J,
Arista, Columbia or Epic) to be the Nominated Label for the purpose of
exploitation of such Compilation Recordings and such Nominated Label shall have
and 19 hereby grants to such Nominated Label an exclusive irrevocable option to
release such Compilation Recordings which 19 wish to release. The Nominated
Label (or, at Syco’s discretion, Syco on behalf of the Nominated Label) shall
exercise its option by notice in writing to 19 within twenty one (21) days of
receipt of the notice from 19 described in clause 3.2. In the event that (Svco
or) the Nominated Label shall exercise such option the Nominated Label and 19
shall promptly thereafter enter into and execute the USA Compilation Licence.

 

3.4                                 For
the avoidance of doubt, no additional advances or royalties will be payable by
the Nominated Label in respect of making or exploitation of Compilation
Recordings other than pursuant to the USA Compilation Licence (for example, the
Nominated Label will not be obliged to pay any advances and/or royalties for
such recordings to any broadcaster or under any Licence Agreement entered into
in respect of the Winning Artist

 

6

 

or any other Finalist in respect of whom an option had been exercised
hereunder save in respect of royalties payable to 19 for a Winning Artist or
Finalist under a USA Licence if the Compilation Recording concerned is released
on that Artist’s records.

 

3.5                                 19
warrants that it shall (if it intends to make Compilation Recordings) procure
that it shall obtain the necessary rights from the Finalists so as to be able
to make and exploit Compilation Recordings.

 

3.6                                 For
the avoidance of doubt, the Nominated Label shall in relation to any
Compilation Recordings to which it acquires rights hereunder (i) refer to
the title of the Idol Series in question on the packaging of records
embodying the same and in all promotional and marketing materials therefor and (ii) incorporate
the Idol Series logo on the packaging of all records embodying such
Compilation Recordings and in all promotional and marketing materials therefor.
Inadvertent failure to comply with the foregoing shall not constitute a breach
of this agreement.

 

4.                                       UNITED KINGDOM (“UK”).

 

4.1                                 It
is acknowledged that there have been two (2) Idol Series previously
made and broadcast in UK (“Pop Idol 1” and “Pop Idol 2”) and accordingly rights
hereunder shall not commence until after two (2) further Idol Series (“Pop
Idol 3” and “Pop Idol 4”) have been broadcast (it being acknowledged that
rights in such Idol Series have been granted to Ronagold pursuant to the
Ronagold Agreement).

 

4.2.1                        If
Ronagold has exercised its option pursuant to the Ronagold Agreement in respect
of Pop Idol 3 and Pop Idol 4 and provided that Simon Cowell performs his
services as a judge in the Qualifying Pop Idol Series concerned (as
defined in clause 4.6)) 19 hereby grants to Syco separate independent
consecutive exclusive irrevocable options to enter into agreements with 19 in
the form of the UK Licence with each of the Winning Artists of each Qualifying
Pop Idol Series in UK.

 

4.3.1                        19 shall
send written notice to Syco confirming the following in respect of each
Qualifying Pop Idol Series in the UK:

 

(a)                                  the
identity of the Local TV Company for the UK;

 

(b)                                 Television
Rights have been granted to the Local TV Company pursuant to an agreement
between [Fremantle Media] and the Local TV Company (as evidenced by a letter
from [Fremantle Media] confirming the same if available);

 

(c)                                  the
TV channel or TV channels on which the relevant Idol Series is to be
broadcast in the UK;

 

(d)                                 the
minimum number of guaranteed episodes and the proposed times and dates of
transmission; and

 

(e)                                  any
material changes to the Idol Format (such as the number of Finalists) for the
UK.

 

Such notice
shall be sent as soon as the relevant information is available to 19 PROVIDED
THAT 19 shall in any event send Syco details of any of the above information
(or any information relevant thereto) as and when it arises

 

7

 

irrespective
of whether or not any formal agreement in respect of the Television Rights has
been concluded.

 

4.3.2                        Each
option shall be exercised by Syco by notice in writing to 19 within thirty (30)
days of receipt of the notice referred to in clause 4.3.1 above PROVIDED THAT
if 19 fail to serve such notice prior to ninety (90) days prior to the date of
the first transmission in the UK of the first programme in the Idol Series in
question Syco shall at any time thereafter be entitled (but not obliged) by
notice in writing to 19 to deem such notice as having being served.

 

4.4                                 In
the event that Syco exercises its option pursuant to clause 4.2.1 above in
respect of a particular Idol Series then subject to Simon Cowell
performing his services as a judge in the Idol Series concerned 19 and
Syco shall execute the UK Licence in relation to the Winning Artist of such
Idol Series promptly after the final episode of such Idol Series.

 

4.5                                 In
the event that Syco exercises its option pursuant to clause 4.2.1 above in
respect of a particular Idol Series then subject to Simon Cowell
performing his services as a judge in the Idol Series concerned 19 hereby
grants to Syco separate independent exclusive irrevocable options to enter into
agreements with 19 in the form of the UK Licence (as amended by clause 4.7) in
respect of each of the Finalists other than the Winning Artist for the Idol Series in
question. Each option shall be exercised by Syco by notice in writing to 19
within thirty (30) days after the final programme of the Idol Series in
question is transmitted in UK.

 

4.6                                 For
the purposes of this clause 4 Simon Cowell shall be treated as having performed
his services as a judge if he completes filming the First Stage Television
Programmes in the relevant Qualifying Pop Idol Series. If Simon Cowell fails to
so complete the filming of the First Stage Television Programmes in respect of
a Qualifying Pop Idol Series by reason of Simon Cowell’s neglect or
default then 19’s obligation to enter into a UK Licence with Syco of the
Winning Artist or any Finalist shall immediately cease and Syco, shall have not
rights in relation to Winning Artists, Finalists or Compilation Albums from
such Series. If Simon Cowell fails to so complete the filing of the First Stage
Television Programmes for reasons other than his neglect or default (including
without limitation for reasons of illness or incapacity) then he shall be
deemed to have so completed his services and Syco’s rights hereunder in respect
of such Qualifying Pop Idols Series shall remain in full force and effect.

 

4.7                                 In
the event that Syco exercises its option pursuant to clause 4.5 above
in respect of any Finalist (or Finalists) then 19 and Syco shall promptly
thereafter execute a separate licence agreement in respect of each such
Finalist in the form of the UK Licence (and 19 shall deliver to Syco a signed
inducement letter in agreed form) save for the following amendments:-

 

(a)                                  clause
1.2 – “Artist” shall mean the relevant Finalist in respect of whom Syco has
exercised its option;

 

(b)                                 clause
6.1.1(a) – the advance in respect of the First Contract Period shall be
£400,000 in lieu of £500,000 if the Finalist was placed second in the
Competition and shall be £300,000 in lieu of £500,000 if the Finalist was
placed third to tenth (inclusive) in the Competition;

 

8

 

(c)                                  clause
6.1.1(a) – the advance reduced in accordance with sub-clause (b) above
shall be payable as to 50% thereof within seven (7) days after delivery to
Syco of the inducement letter executed by the relevant Finalist and as to fifty
percent (50%) thereof within seven (7) days after the later of Delivery to
Syco of the Recording Commitment for the First Contract Period or delivery to
Syco of the inducement letter executed by the relevant Finalist;

 

(d)                                 clause
35 will be deleted and Syco will not use the logo from the Series unless
otherwise agreed but can use the name of the Series in associated
marketing.

 

4.8                                 UK COMPILATION RECORDINGS

 

4.8.1                        19 has no
obligation to make Compilation Recordings featuring the Finalists from Idols Series in
the UK.

 

4.8.2                        In the
event that 19 wish to release (or authorise the release thereof) Compilation
Recordings in respect of a particular Idols Series 19 shall serve notice
on Syco no earlier than seven (7) days after transmission in the UK of the
first programme following selection of all of the Finalists in the relevant
Idol Series and not later than six (6) weeks prior to transmission in
the UK of the last programme in the relevant Idol Series confirming the
following:-

 

(a)                                  that
19 intends to make and release Compilation Recording(s) and the number of such
Compilation Recordings to be made (e.g. Single or EP or Album);

 

(b)                                 19’a
bona fide estimate of the recording costs and the producer advances to be incurred
by 19 in making the Compilation Recording(s) (which the parties do not intend
should exceed £25,000 per track in aggregate);

 

(c)                                  the
bona fide amount payable directly to the Finalists by way of advances against
royalties in respect of the Compilation Recordings;

 

(d)                                 the
proposed release date(s);

 

(e)                                  the
proposed track listing(s);

 

(f)                                    the
proposed date for delivery of masters.

 

4.8.3                        Syco shall
have and 19 hereby grants to Syco an exclusive irrevocable option to release
such Compilation Recordings which 19 wish to release Syco shall exercise their
option by notice in writing to 19 within twenty one (21) days of receipt of the
notice from 19 described in clause 4.8.2. In the event that Syco shall exercise
such option Syco and 19 shall promptly thereafter enter into and execute the UK
Compilation Licence.

 

4.8.4                        For the
avoidance of doubt, no additional advances or royalties will be payable by Syco
in respect of making or exploitation of Compilation Recordings other than
pursuant to the UK Compilation Licence (for example, Syco will not be obliged
to pay any advances and/or royalties for such recordings to any broadcaster or
under any Licence Agreement entered into in respect of the Winning Artist or
any other Finalist in respect of whom Syco has exercised its option) save in
respect of royalties payable to 19 for a Winning Artist or Finalist under a UK
Licence if the Compilation Recording concerned is released on that Artist’s
records.

 

9

 

4.8.5                        19 warrants
that it shall (if it intends to make Compilation Recordings) procure that it
shall obtain the necessary rights from the Finalists so as to be able to make
and exploit Compilation Recordings.

 

4.8.6                        For the
avoidance of doubt, Syco shall in relation to any Compilation Recordings to
which it acquires rights hereunder (i) refer to the title of the Idol Series in
question on the packaging of records embodying the same and in all promotional
and marketing materials therefor and (ii) incorporate the Idol Series logo
on the packaging of all records embodying such Compilation Recordings and in
all promotional and marketing materials therefor. Inadvertent failure to comply
with the foregoing shall not constitute a breach of this agreement.

 

5.                                       MATCHING RIGHTS.

 

5.1                                 In
the event that Syco does not exercise any option in respect of any Finalist in
the UK or exercise an option in respect of any Compilation Recordings pursuant
to clause 4.8.3 or in the event that a Nominated Label does not declare any
interest in any Finalist or exercise an option in respect of any Compilation
Recordings then 19 shall be free to enter into an agreement with a third party
to exploit recordings by such Finalist or such Compilation Recordings (as
applicable) SAVE THAT 19 shall not enter into an agreement with a third party
on Material Terms less favourable (to 19):-

 

5.1.1                        than
those contained in the UK Licence as amended by clause 4.7 (in respect of a
Finalist in the UK);

 

5.1.2                        than
those contained in the USA Licence as amended by clause 2.22 (in respect of a
Finalist in USA);

 

5.1.3                        than
those contained in the UK Compilation Licence in respect of Compilation
Recordings in respect of Idol Series in the UK;

 

5.1.4                        than
those contained in the USA Compilation Licence in respect of Compilation Recordings
in respect of Idol Series in USA;

 

without
granting to The Applicable Party (as hereafter defined) a matching right in
respect of any less favourable offers as follows:-

 

5.2                                 If
19 receives any offer from a third party which it wishes to accept then 19
shall send a copy of such offer or offers (“the Offer Notice”) to the
Applicable Party. For the purposes hereof “The Applicable Party” shall mean
Syco if the offer in question relates to the UK Licence or the UK Compilation
Licence and a Label selected by Syco if the offer in question relates to the
USA Licence or the USA Compilation Licence.

 

5.3                                 Within
fourteen (14) days of receipt of the Offer Notice (“the Offer Notice Period”)
The Applicable Party shall be entitled to match the Material Terms of such
offer (“the Matching Right”) in which event 19 and The Applicable Party shall
be deemed to have entered into a fully binding agreement upon the terms of the
UK Licence or USA Licence or UK Compilation Licence or USA Compilation Licence
(as applicable) as amended by the Material Terms set out in the Offer Notice
and any other terms and conditions agreed between The Applicable Party and 19.
For the avoidance of doubt, in the event that The Applicable Party elects to
exercise the Matching Right, The Applicable Party shall not be obliged to agree
terms which are not Material Terms. Having notified 19 that it elects to

 

10

 

exercise the Matching Right 19 shall immediately inform any and all
third parties with whom they have been negotiating and shall desist from any
further discussions with any such third parties.

 

5.4                                 If
The Applicable Party does not notify 19 that it wishes to exercise the Matching
Right or notifies 19 in writing that it does not wish to exercise the Matching
Right then 19 shall be entitled to enter into the agreement with the third
party on terms no less favourable to 19 than those set out in the Offer Notice.

 

5.5                                 If
in accordance with the procedure set out above 19 enters into an agreement with
a third party 19 shall forthwith upon signature of any agreement send a fully
signed copy of such agreement together with any and all agreements related to
collateral thereto to The Applicable Party.

 

5.6                                 If
19 does not conclude an agreement with the third party upon terms no less
favourable to 19 than those contained in the Offer Notice 19 shall not be
entitled to grant the rights to any other person unless 19 again offers to The
Applicable Party a Matching Right as provided in 5.2 above.

 

5.7                                 In
this clause 5 “Material Terms”
shall mean:

 

5.7.1                        in
respect of agreements for Finalists in UK and USA – term, territory, rights
period, advances, royalties and product commitment;

 

5.7.2                        in
respect of agreements for Compilation Recordings for Finalists in the UK - the
term, territory, rights period, advances and the profit share provisions and
calculations giving the definition of “Profit” in the UK Compilation Licence;

 

5.7.3                        in
respect of agreements for Compilation Recordings for Finalists in the USA - the
term, territory, rights period, advances and the profit share provisions and
calculations giving the definition of “US Net Profits” in of the USA
Compilation Licence.

 

6.                                       19 AND 19 TV’S WARRANTIES AND AGREEMENTS.

 

6.1                                 19
and 19 TV agree that they shall procure in relation to each Idol Series in
the UK and USA that the Local Television Company shall require all contestants
to sign an agreement (“the Form”) (a copy of the form of which 19 shall supply
to Syco and if requested by Syco in respect of a particular Artist, 19 shall
supply a copy of the actual signed agreement in respect of such Artist)
providing for:-

 

6.1.1                        each
contestant to abide by the rules of the Competition and any restrictions
placed upon them by such rules (it being agreed that the rules will
require the final 50 contestants not to enter into a recording agreement with a
third party prior to the date three (3) months after the final episode of
the Series); and

 

6.1.2                        (as
a pre-condition to being a Finalist for Idol Series in UK and USA) each
Finalist to enter into a recording agreement with 19 incorporating an
obligation to enter into an inducement letter in the agreed form with Syco in
respect of a UK Licence and with the Nominated Label in respect of a USA
Licence;

 

6.2                                 19
shall not itself or through a third party release any Compilation Recording
unless and until Syco or the selected Label (as applicable) shall have failed
to

 

11

 

exercise their
option in respect thereof (subject to the matching rights of clause 5) and in any event (even if Syco or the
selected Label (as applicable)fail to exercise their option and decline to
exercise their matching rights) 19 agree that:-

 

(a)                                  in
the UK 19 shall procure that:-

 

(i)                                     no
album comprising Compilation Recordings (“Compilation Album”) in respect of a
particular Idol Series shall be released within the period commencing on
the date three (3) months prior to and ending on the date three (3) months
after the proposed date of release by Syco of an album embodying performances
by the Winner of the applicable Idol Series (upon request in writing from
19 Syco shall notify 19 of the proposed day of release);

 

(ii)                                  no
Compilation Album or single comprising Compilation Recordings in respect of a
particular Idol Series shall be released within the period commencing on
the date one (1) week prior to and ending on the date one (1) week
after the proposed date of release by Syco of a single embodying performances
by the Winner of the applicable Idol Series (upon request in writing from
19, Syco shall notify 19 of the proposed date of release);

 

(b)                                 in
the USA 19 shall procure that:-

 

(i)                                     no
album comprising Compilation Recordings (“Compilation Album”) in respect of a
particular Idol Series shall be released within the period commencing on
the date three (3) months prior to and ending on the date three (3) months
after the proposed date of release by the nominated Label of an album embodying
performances by the Winner of the applicable Idol Series (upon request in
writing from 19 the Nominated Label shall notify 19 of the proposed day of
release);

 

(ii)                                  no
Compilation Album or single comprising Compilation Recordings in respect of a
particular Idol Series shall be released within the period commencing on
the date one (1) week prior to and ending on the date one (1) week
after the proposed date of release by the nominated Label of a single embodying
performances by the Winner of the applicable Idol Series (upon request in
writing from 19 the Nominated Label shall notify 19 of the proposed date of
release);

 

(c)                                  the
names and likenesses of Artists in respect of whom Syco or the Nominated Label
exercise their option pursuant to this agreement shall not in the packaging and
marketing of any Compilation Recordings released by or on behalf of 19 or 19 TV
be given more prominence than the other artists featured thereon unless
otherwise mutually agreed by 19 and Syco or the Nominated Label in question (as
applicable);

 

12

 

6.3                                 19
and 19 TV further warrant and undertake that:-

 

6.3.1                        they
are and will remain entitled to enter into and perform this Agreement and to
grant Syco and the Nominated Labels the options and rights set out above;

 

6.3.2                        they
and 19 Entertainment and CKX shall and shall procure that Simon Fuller and all
companies within 19/CKX UK Holdings Limited group of companies (collectively “the
Group”) shall at 19’s cost do all things necessary to perfect the grant to Syco
of the options and rights set out above;

 

6.3.3                        neither
19 nor 19 TV nor any other entity within the Group shall do anything
inconsistent with any of Syco’s or any Nominated Label’s rights hereunder;

 

6.3.4                        19
has agreed to pay a royalty (solely out of 19’s share of royalties hereunder)
to Fremantle Media Group in respect of recordings by the Winning Artist;

 

6.3.5                        19
TV shall at Syco’s reasonable request use best endeavours to procure that the
Local Television Company in UK and USA shall enforce the rules of the
Competition and in particular the rule expressly referred to in clause
6.1.1 above;

 

6.3.6                        19
shall obtain all necessary rights from the Finalists so as to enable it to
enter into and exercise the UK Licence and the USA Licence in respect of any
such Finalists in respect of whom rights are acquired hereunder.

 

6.4                                 In
consideration of Syco entering into this agreement (it being acknowledged by
CKX and 19 Entertainment that it is to their benefit that it is so entered into
by Syco) 19 and CKX and 19 Entertainment hereby jointly and severally warrant
that 19 is and shall remain the entity to which Finalists in UK and USA shall
grant recording rights sufficient to enable 19 to execute the UK Licence and US
Licence and such rights shall not be relinquished or assigned to any other
person, firm, company or corporation.

 

7.                                       SIMON COWELL (“SC”).

 

7.1                                 Syco
hereby agree to procure that SC shall execute on the date hereof the letter set
out in Schedule 4.

 

7.2                                 Syco
warrants that it is entering into a service agreement with Simon Cowell for a
term expiring on 31st
December 2010. Such service agreement includes, inter alia:

 

7.2.1                        Simon
Cowell’s exclusive services as an executive producer or maker of television
programmes;

 

7.2.2                        Simon
Cowell’s exclusive services as a creative music executive in the record
industry (but excluding publishing).

 

8.                                       X FACTOR.

 

8.1                                 Syco
is the creator and owner of the X Factor Format.

 

8.12                           has
entered into an agreement with Fremantlemedia Worldwide Limited (“FWL”) dated
18th March 2004
in relation to television and ancillary rights in and to the X Factor Format (“the
X Factor Agreement”). A copy of the X Factor Agreement is annexed hereto as Schedule 5.
Where words in this clause 8 are used with an upper case first letter then
unless such words are separately defined in this agreement they shall bear the
meanings attributed thereto in the X Factor Agreement.

 

13

 

8.3                                 Syco
hereby grants and assigns to 19 TV during the Term (subject to clause 8.8.2
below) and subject to the other provisions of this agreement:

 

8.3.1                        a
one third (1/3) share of the copyright in the X Factor Format in the world
excluding USA;

 

8.3.2                        a
one third (1/3) share of Syco’s share of the copyright (if any) in the
Programmes made during the Term in the world excluding USA;

 

8.3.3                        a
one third (1/3) share of Syco’s share of the following monies received from FWL
pursuant to the X Factor Agreement and arising during the Term in respect of
exploitation of the X Factor Format in the world excluding USA:-

 

(a)                                  any
Production Fee received by Syco pursuant to and in accordance with clause 9;

 

(b)                                 Format
fees pursuant to and in accordance with clause 13;

 

(c)                                  Production
licensing fees pursuant to and in accordance with clause 14;

 

(d)                                 Syco’s
share of net receipts in respect of the exercise of Distribution Rights
pursuant to and in accordance with clause 15;

 

(e)                                  Syco’s
share of net receipts in respect of exploitation of Merchandising Rights
Interactive Rights or Video Rights (subject to sub-clause (g) below)
pursuant to and in accordance with clause 16;

 

(f)                                    Syco’s
share of net receipts in respect of exploitation of Telephony Rights pursuant
to and in accordance with clause 17 (excluding for the avoidance of doubt any
monies received by Syco in respect of any Telephony exploitation of Syco/BMG
Sony master recordings).

 

(g)                                 in
the event that the applicable BMG SONY and/or Syco affiliate in the territory
concerned exercises its option in relation to Video Rights pursuant to clause 7
of the X Factor Agreement then 19 shall be entitled to one third (1/3) of Syco’s
deemed net receipts as set out in clause 7 of the X Factor Agreement after
payment to FWL in accordance with clause 18(f) of the X Factor Agreement
and calculated as set out therein.

 

8.3.4                        In
the event that the X Factor Agreement terminates and rights revert to Syco then
Syco shall remain obliged to account or procure the accounting to 19 TV of a
commensurate share of income in respect of the X Factor Format as set out
herein in accordance with and subject to the terms hereof.

 

8.4                                 Notwithstanding
sub-clause 8.3 above or anything to the contrary herein contained:

 

8.4.1                        the
grant and assignment of rights to 19 TV pursuant to clause 8.3 shall be subject
always to the rights granted to FWL in the X Factor Agreement and as between
FWL and Syco and 19 TV FWL shall continue to be entitled to act under and in
accordance with the X Factor Agreement and take the benefits and suffer the
burdens thereunder as if there had been no grant or assignment of rights to 19
TV;

 

8.4.2                        19
TV shall have no interest or entitlement whether financial or otherwise in the
Reserved Rights specified in clause 5 of
the X Factor Agreement (including

 

14

 

Record Rights,
Music Publishing Rights, Artist Merchandising Rights and Concert Touring
Rights) or in any other rights acquired by Syco in connection with the artists
or musicians who take part in any X Factor Series including without
limitation all or any rights acquired pursuant to recording agreements, music
publishing agreements, management agreements, live performing or touring
agreements, merchandising agreements, advertising or endorsement agreements,
rights representation agreements or other income participation agreements in
such artist’s or musicians’ activities in the entertainment industry or in any
other income not specified in sub-clause 8.3.3;

 

8.4.3                        19
TV shall have no interest or entitlement whether financial or otherwise in the
title music for the Programmes as referred to in clause 6.

 

8.5                                 It
is confirmed and agreed that packaging fees incurred by Syco as referred to in
clause 27 of the X Factor Agreement shall be deducted off the top before
calculating 19 TV’s entitlement hereunder in the same manner as they are
deducted in calculating Syco’s entitlement under the X Factor Agreement.

 

8.6                                 Notwithstanding
the grant and assignment to 19 TV of rights in and to the X Factor Format and
in the Programmes 19 TV confirms and agrees that it shall have no right by
reason of acquiring such rights to veto or prevent or hinder or delay the
exploitation of the X Factor Format and the X Factor Series throughout the
world which shall continue to be exploited in accordance with the terms of the
X Factor Agreement SAVE THAT 19 TV shall be entitled to a reasonable approval over
the terms of licensing the Format in countries where the Format has not yet
been licensed subject to the following conditions:-

 

8.6.1                        19
TV shall have no right of approval over the sale or licensing of programmes
made and transmitted in one (1) country for broadcast or transmission in
another country;

 

8.6.2                        such
right of approval shall not be used to impede or prevent or delay the
exploitation of the X Factor Format or any X Factor Series in any
particular country;

 

8.6.3                        19
TV’s right of approval as aforesaid shall be limited to those matters which
remain within Syco’s control it being acknowledged that Syco are unable to
grant a right of approval over matters in respect of which approval or control
has already been granted to FWL pursuant to the X Factor Agreement (or to
broadcasters or other third parties pursuant to the operation of the X Factor
Agreement) whose rights shall operate in priority over those granted to 19 TV
hereunder.

 

8.7.1                        Syco
agrees to account to 19 TV for monies due to 19 TV in accordance with this
clause 8 within sixty (60) days of receipt of each accounting received from FWL
pursuant to the X Factor Agreement (and it is acknowledged that Syco are
accounted to quarterly by FWL).

 

8.7.2                        (a)                                  Unless within four (4) years
of the date on which an accounting has been made under clause 8.7.1 above 19 TV
shall have notified Syco in writing of any bona fide objections in respect
thereof, 19 TV shall be deemed to have accepted the

 

15

 

accuracy thereof which shall be final and binding upon 19 and not open
to dispute by 19 TV.

 

(b)                                 Syco agrees that 19 TV
may (but not more than once during any calendar year and only once with respect
to any particular accounting made by Syco) inspect examine and otherwise audit
(“Audit”) Syco’s books and records for the purposes of determining the accuracy
of Syco’s accountings hereunder. 19 TV shall not be entitled to Audit any
records which do not specifically relate to the exploitation of the X Factor
Format in respect of which a share of income is payable to 19 TV. All Audits
shall be made during regular business hours upon reasonable prior notice (not
less than sixty (60) days) and shall be conducted on 19 TV’s behalf by an
independent chartered accountant (“the Auditor”). Each examination shall be
made at 19 TV’s own expense at Syco’s regular place of business in the United
Kingdom where such books and/or records are maintained. 19 TV shall furnish
Syco with a copy of Auditor’s report promptly following the conclusion of the
Audit if 19 TV intends to make a claim based upon such Audit. If such Audit
reveals an underpayment to 19 TV often percent (10%) of total income due
hereunder during the period covered by such Audit or ten thousand pounds
(£10,000) whichever is the greater, then Syco shall pay all reasonable audit
costs (excluding accommodation, travel and subsistence costs) of such Audit. 19
TV agrees that, for the avoidance of doubt, neither the grant by Syco nor the
exercise by 19 TV of any right of Audit in connection with this Agreement
shall, of itself, give rise to or be deemed to be proof of debt.

 

(c)                                  19 TV may not engage
the Auditor to Audit when the Auditor is presently engaged in any other audit
or inspection of Syco’s (or its then current licensee’s) books and records of
account in respect of which any claim is still outstanding or is involved in
the negotiation of a settlement of such an audit or inspection on behalf of
another person. In such circumstances the applicable time period specified in
clause (a) above shall be suspended until the Auditor is not so engaged
(but by no more than six (6) months in any event). No person or firm shall
be designated as the Auditor if its remuneration is to be calculated wholly or
partially by reference to the amount of any discrepancy revealed by the Audit
and/or the terms of any settlement and/or the outcome of any proceedings
arising out of the Audit. No Audit may commence until the Auditor has executed
an unconditional undertaking to Syco in a form reasonably prescribed by Syco
providing, inter alia, that the Auditor shall treat as confidential all
information regarding Syco’s affairs and business which it may acquire in the
course of the Audit and not to disclose the same to 19 TV or to any third party
save to the extent necessary to discharge Auditor’s responsibilities to 19 TV
in relation to the Audit.

 

8.8.1                        Upon
expiry of the Term all rights granted to 19 TV hereunder in respect of the X
Factor Format and in the Programmes and the rights deriving therefrom including
without limitation:-

 

(a)                                  all rights of
ownership and/or copyright;

 

(b)                                 all financial
entitlements and any other rights of a financial nature;

 

16

 

(c)                                  all rights of
approval and/or consultation

 

shall subject to the terms of sub-clause 8.8.2 automatically cease and
determine and all such rights shall automatically revert to Syco without
further formality save that in the event that Syco requires that any acts or
things are done or any documents are executed in order to give further effect
to such cessation and reversion of rights then 19 TV shall do such acts and
things and sign all necessary documents required by Syco so as to give effect
to the above subject always to the Power of Attorney Procedure applying in
respect thereof.

 

8.8.2                        Notwithstanding
sub-clause 8.8.1 above Syco agree that in respect of Programmes created during
the Term (“Term Programmes”) and ongoing Distribution Rights and Video Rights
and Interactive Rights and Merchandising Rights and Telephony Rights relating
directly and identifiably to such Term Programmes then Syco shall remain
obliged to continue to account to 19 in respect of Syco’s share of monies
received from FWL pursuant to the X Factor Agreement in respect of exploitation
thereof in the world excluding the USA notwithstanding that it arises or is
received after the Term.

 

8.9                                 In
the event that a USA version of the X Factor Format is produced in USA (“the
USA Series”) during the Term Syco confirms and agrees that it shall have no
objection to 19 TV co-producing the USA Series with the USA production
company which has the right to produce the USA Series (“the USA Production
Company”) PROVIDED THAT 19 TV and the USA Production Company are able to agree
satisfactory terms between them to so co-produce the same and this arrangement
shall be at the sole cost of 19 TV and the USA Production Company and at no
cost to Syco. Syco makes no warranty that the USA Production Company shall
agree to so co-produce the USA Series with 19 TV but Syco shall do nothing
to prevent such arrangement happening in the event that 19 TV and the USA
Production Company can agree terms between them at no cost to Syco.

 

8.10.1                  It is
acknowledged that the X Factor Format contains (inter alia) the following
differences to the Idol Format:-

 

(a)                                  the Idol Format
involves only individual artists aged between 16 and 28 (save in certain
countries where the age limit in respect of Series prior to the date
hereof has been higher where such age limit shall in such country (only) apply
in lieu of 28) whereas the X Factor Format is open to individuals of any age
and groups of any age who are subsequently divided into three (3) categories
of contestants comprising:-

 

(i)                                     solo artists 24
years of age and younger;

 

(ii)                                  solo artists over 24
years of age;

 

(iii)                               groups;

 

(b)                                 the Idols Format
involves solely a competition between the artists whereas the X Factor Format
involves a competition between the judges with each judge being assigned to a
specific category of artist and being responsible for and “mentoring” each
artist within such category;

 

17

 

(c)                                  the X Factor Format
involves each judge reducing their category of artists to a more limited number
chosen by the judges by way of “boot camp” and/or “home visit”;

 

(herein referred to as “the X Factor
Characteristics”).

 

8.10.2                  Syco warrants
and agrees that Syco shall not and shall not authorise the removal of the X
Factor Characteristics from programmes based on the X Factor Format without 19
TV’s prior written consent (PROVIDED THAT nothing shall prevent Syco from
varying the details or particulars of any of the X Factor Characteristics so
long as the Characteristic remains in a meaningful form). Notwithstanding the
aforesaid it is acknowledged that Syco has 1icensed X Factor to Fox
Broadcasting Company for the USA and that during the term of that licence Fox
shall have the right to remove the X Factor Characteristics (or any of them) if
original episodes of American Idol cease to be broadcast in the USA by Fox
Broadcasting Company or otherwise.

 

8.10.3                  19 TV and 19
Entertainment and CKX hereby jointly and severally warrant and agree that that
they shall not and shall procure that any third party licensed to exploit the Idol
Format shall not include the X Factor Characteristics (or any variation or
permutation or adjustment thereof) in any programmes based on the Idol Format
without Syco’s prior written consent.

 

9.                                       THE PROCEEDINGS.

 

9.1                                 Reference
is made to the proceedings in the Chancery Division (Intellectual Property) of
the High Court of Justice under case number HCO4CO2878 between: 19 TV Limited (“the
Claimant”) and FremantleMedia Limited, Simon Cowell and Syco Limited (trading
as Syco TV) (together “the Defendants”).

 

9.2                                 As
a condition precedent to this agreement becoming effective, a settlement
agreement and an order of dismissal between the Claimant and the Defendants in
an agreed form shall be executed on the date hereof.

 

10.                                 DEFINITIONS.

 

The following
words or expressions shall have the meanings set against them below:-

 

10.1                           “Artist”:
a singer taking part in a Competition.

 

10.2                           “Competition”:
the competition to select a Winning Artist which forms part of the Idol Series in
the UK or USA.

 

10.3                           “Finalists”:
the number of Artists reaching the final stage of the Competition in the UK or
USA (which is anticipated to be 10 in the UK and 12 in USA) and such other
Artists in respect of whom 19 enter into recording agreements.

 

10.4                           “Idol
Format”: the television format “Pop Idol” or “Idols” or “American Idol” created
by 19 TV Limited and developed by 19 TV Limited and Fremantle Limited or any
format derived therefrom.

 

10.5                           “American
Idol Record Rights”: shall mean the exclusive right (by means of being the
exclusive licensee in accordance with this agreement) to exploit recordings by
Finalists of the Idol Series in question.

 

18

 

10.6                           “Local
TV Company”: the person, firm or corporation authorised to make an Idol Series in
the UK and USA.

 

10.7                           Intentionally
Deleted.

 

10.8                           Intentionally
Deleted.

 

10.9                           “Label”
shall mean each label entity or division wholly owned by Sony BMG Music
Entertainment Group in the USA from time to time including Arista, Columbia,
Epic, J Records, Jive, LaFace, RCA, RCA Victor, RLG Nashville, Sony Music
Nashville, Sony Urban Music, Provident Integrity and Verity.

 

10.10                     “Idol Series”:
a series of television programmes based on the Idol Format comprising a
separate Competition.

 

10.11                     “Television
Rights”: the right to develop and produce and arrange for
broadcast or other transmission of an Idol Series.

 

10.12                     “Winning
Artist”: the winner of the Competition in the UK or USA.

 

10.13                     “Term” shall
mean a period commencing or the date of transmission of the first episode of
the second X Factor Series in the UK namely 31st August 2005
and expiring on whichever is the earlier of:-

 

10.13.l               the
date of transmission of the last programme of American Idol 9 or

 

10.l3.2               the
date of first transmission of the last programme of American Idol 5, American Idol 6, American Idol 7 or
American Idol 8 in which SC has performed his services as a judge (as defined
in clause 2.21) prior to failing to perform his services as a judge (as defined
in clause 2.21) on the next successive Idols Series for reasons of his
neglect or default (for the avoidance of doubt illness or incapacity shall not
constitute neglect or default);

 

10.13.3            the date of first
transmission of the last programme of American Idol 5, American Idol 6, American Idol 7 or American Idol 8 in
which SC has performed his services as a judge (as defined in clause 2.21)
prior to Fox Broadcasting Company ceasing to approve SC as a judge or the loan
out agreement between Fox Square Productions Inc., and American Idol Productions
Inc., coming to an end for any other reason;

 

10.13.4            the date of first
transmission of the last programme of American Idol 5, American Idol 6, American Idol 7 or
American Idol 8 in which SC has performed his services as a judge (as defined
in clause 2.21) prior to SC serving written notice confirming that he is
permanently ceasing to render his services as a on-screen judge for American
Idol.

 

10.14                     “X Factor
Format”: shall mean the television format “X Factor” created by Syco.

 

10.15                     “X Factor Series”:
shall mean a series of television programmes based on the X Factor Format.

 

10.16                     “Qualifying
Pop Idol Series”: shall mean each Idol Series in the UK made during the
Term but excluding the first four (4) Pop Idol Series (from inception
whether made prior to or after the date hereof) in UK PROVIDED THAT if the Term
expires in the middle of

 

19

 

a particular Idol Series in the UK then if Simon Cowell has
completed his services in respect of the First Stage Television Programmes in
such Idol Series (as defined in clause 4.6) then such Idol Series shall
be a Qualifying Pop Idol Series.

 

10.17                     “Option
Warning Procedure”: a procedure that applies where expressly referred to herein
where if on expiry of any period during which Syco has the right to exercise an
option Syco has neither exercised such option nor notified 19 in writing that
it does not wish to exercise such option. If the Option Warning Procedure
applies:-

 

(a)                                  19
must promptly notify Syco in writing that the Company has not yet exercised its
relevant option (“Option Warning”);

 

(b)                                 Syco
may exercise its option at any time before receiving the Option Warning or
within five (5) business days of its receipt of the Option Warning;

 

(c)                                  the
relevant period of time to exercise the option continues until Syco exercises
its option or gives written notice to 19 that it does not wish to exercise its
option or until the end of the five (5) business
day period referred to in (b) above (whichever occurs first).

 

10.18                     “UK Licence”
shall mean an agreement in the form annexed hereto as Schedule 2.

 

10.19                     “USA Licence”
shall mean an agreement in the form annexed hereto as Schedule 1.

 

10.20                     “UK
Compilation Licence” shall mean any agreement in the form annexed hereto as Schedule 3.

 

10.21                     “Compilation
Recordings” shall mean recordings (whether individual recordings containing
performances by various different artists or a collection of separate
recordings by different artists) by predominantly all of the Finalists of all
particular Idol Series Intended for release on record.

 

10.22                     “USA
Compilation Licence” shall mean an agreement in the form annexed hereto as Schedule 7.

 

10.24                     “the First
Stage Television Programmes” shall mean those programmes in each Idol Series commencing
with the first programme in the Series and ending with the programme
immediately preceding the programme in which the public start voting for the
eviction/continued participation of the Finalists.

 

10.25                     “US Licensee” shall mean the
company exclusively entitled to exploit recordings by Finalists of the Idol Series in
question pursuant to the USA License.

 

11.                                 SYCO’S AND SONY BMG’S WARRANTIES AND AGREEMENTS

 

Syco and Sony BMG warrant and undertake that:-

 

11.1                           they
are and will remain entitled to enter into and perform this agreement;

 

11.2                           by
no later than the date one (1) day after the date of full execution hereof
Sony MG shall own one hundred percent (100%) of the shares in Syco.

 

12.                                 GENERAL.

 

12.1.1                  No party to this
agreement shall subject to sub-clause 12.1.2 be entitled to assign this
agreement to any third party other than:-

 

20

 

(a)                                  to
its holding company or its subsidiary or associated company; or

 

(b)                                 to
a person, firm or corporation acquiring all of the party’s stock or assets.

 

For the
purposes of this clause “holding company” and “subsidiary” shall have the
meanings set out in section 736 of the Companies Act 1985 and “associated
company” shall be a company which owns fifty percent (50%) or more of the
assignor or a company at least twenty five percent (25%) owned by a holding
company or subsidiary company of the assignor.

 

12.1.2                  Notwithstanding
sub-clause 12.1.1 above:-

 

(a)                                  19
TV shall have the right to assign its right to receive income pursuant to
sub-clause 8.3.4 but shall have no right to assign its share of copyright or
its right to a share of the copyright in the Format and the Programmes;

 

(b)                                 no
assignment shall be made in contravention of the provisions of clause 6.4.

 

12.2                           Each
party shall indemnify the other in respect of any loss, damage or cost
(including reasonable legal costs) incurred by the other as a result of a
breach by the first party of any of the provisions of this agreement. This
indemnity shall be limited to payments made pursuant to a court order or a
settlement made with the prior consent of the indemnifying party (such consent
not to be unreasonably withheld or delayed).

 

12.3         All payments to 19 or 19 TV under this
Agreement are exclusive of VAT which shall where appropriate be paid to 19 or
19 TV in addition upon receipt of a VAT invoice.

 

12.4                           All
notices under this agreement shall be in writing and shall be addressed as
follows:

 

To:  19: 19 Recordings Limited,
Unit 33 Ransome’s Dock, 35-37 Parkgate Road, London SW11 4NP. Attention: Simon
Fuller with a copy to Andy Stinson, 33 Ransome’s Dock, 3 5-37 Parkgate Road,
London SW11 4NP.

 

To Syco: Simco
Limited, Bedford House, 69-79 Fulham High Street, London SW63JW. Attention:
Chairman with a copy to SVP of Legal or Business Affairs, SONY BMG Music
Entertainment (UK) Limited at the same address and a copy to Messrs. Russells
of Regency House, 1/4. Warwick Street, London W1B 5W.

 

Or to such
other address as may be notified in accordance with this clause. Notices shall
be sent by hand or by registered or recorded delivery and shall be deemed given
on the day of delivery (if by hand) or the day one (1) day after the day
of posting (if by registered or recorded delivery) PROVIDED THAT public
holidays and the period between the Friday prior to 25th December in each
year and the first working day of the subsequent year (inclusive) shall be
excluded.

 

12.5.1                  The content and
subject matter of this agreement is confidential. No party to this agreement
shall directly or indirectly release any publicity or make any public:
statements or disclose any information whatsoever (save to professional
advisors) with respect to the execution of this agreement the terms or subject
matter thereof or anything else in connection with this agreement. Without
prejudice to the generality of the foregoing the parties agree that save as
requited by law there shall be no press release or other information released
to the press or any other media without all of the parties agreeing in writing
the wording, form and nature of such disclosure. It is acknowledged that there

 

21

 

will be an agreed press release. The parties further agree that they
shall not make any statements or disclose any information contrary to that set
out in the said agreed press release.

 

12.5.2                  19 and 19 TV
shall procure that 19’s Associates comply and abide by the terms of this clause
12.5 “19’s Associates” shall mean Simon Fuller and any firm, company or
corporation forming part of the Group.

 

12.5.3                  Syco and Sony
BMG shall procure that Syco’s Associates comply and abide by the terms of this
clause 12.5. “Syco’s Associates” shall mean Simon Cowell and any firm, company
or corporation forming part of the Sony BMG Group of Companies.

 

12.6                           All
agreements and obligations hereunder on the part of 19 and 19 TV are and will
remain joint and several.

 

12.7                           Each of
the parties shall sign, execute and do all such documents, deeds and act as may
be necessary to give effect to the provisions of this agreement.

 

12.8                           This
agreement shall be governed by the laws of England whose courts shall have
exclusive jurisdiction.

 

22

 

	
  SIGNED

  	
  )

  	
   

  	
   

  
	
  For and on behalf of

  	
  )

  	
   

  	
   

  
	
  19 RECORDINGS LIMITED

  	
  )

  	
   

  	
  /s/

  	
   

  
	
  in the presence of:-

  	
  )

  	
   

  	
  Director

  

 

 

	
  SIGNED

  	
  )

  	
   

  	
   

  
	
  For and on behalf of

  	
  )

  	
   

  	
   

  
	
  19 TV LIMITED

  	
  )

  	
   

  	
  /s/

  	
   

  
	
  in the presence of:-

  	
  )

  	
   

  	
  Director

  

 

 

	
  SIGNED

  	
  )

  	
   

  	
   

  
	
  For and on behalf of

  	
  )

  	
   

  	
   

  
	
  SIMCO LIMITED

  	
  )

  	
   

  	
  /s/

  	
   

  
	
  in the presence of:-

  	
  )

  	
   

  	
  Director

  

 

 

	
  SIGNED

  	
  )

  	
   

  	
   

  
	
  For and on behalf of

  	
  )

  	
   

  	
   

  
	
  CKX UK HOLDINGS LIMITED

  	
  )

  	
   

  	
  /s/

  	
   

  
	
  in the presence of:-

  	
  )

  	
   

  	
  Director

  

 

 

	
  SIGNED

  	
  )

  	
   

  	
   

  
	
  For and on behalf of

  	
  )

  	
   

  	
   

  
	
  19 ENTERTAINMENT LIMITED

  	
  )

  	
   

  	
  /s/

  	
   

  
	
  in the presence of:-

  	
  )

  	
   

  	
  Director

  

 

 

	
  SIGNED

  	
  )

  	
   

  	
   

  
	
  For and on behalf of

  	
  )

  	
   

  	
   

  
	
  SONY BMG MUSIC

  	
  )

  	
   

  	
  /s/

  	
   

  
	
  ENTERTAINMENT LIMITED

  	
  )

  	
   

  	
  Director

  
	
  in the presence of:-

  	
  )

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