Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made
and entered into this 10 day of March, 2006, by and between Hilton U.K. Hotels
Limited (the “Company”) and Ian Russell Carter (the “Executive”).

 

WHEREAS, the Board of
Directors of the Company (the “Board”) has determined that it is in the best
interests of the Company and its shareholders to employ the Executive as the
Chief Executive Officer of Hilton International, and the Executive desires to
continue to serve in that capacity;

 

WHEREAS, the parties
hereto desire to enter into this Agreement to define and set forth the terms
and conditions of the employment of the Executive by the Company and to
accurately set forth the Executive’s restrictive covenants;

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth below and in the
attached Annexes, it is hereby covenanted and agreed by the Company and the
Employee as follows:

 

 

1.                                       Employment
Period. This Agreement is conditional upon Closing as defined in a sale and
purchase agreement dated December 29, 2005 entered into between Hilton
Hotels Corporation (“HHC”), Hilton Group plc, Ladbroke Group International
Limited, Ladbroke Group Limited, and Town & County Factors Limited. In
the event of this condition not being satisfied before June 30, 2006, then
the provisions of this Agreement shall be null and void and of no further
effect and the parties shall be released and discharged from their respective
obligations under this Agreement. On Closing, the Company shall employ the Executive,
and the Executive shall serve the Company, on the terms and conditions set
forth in this Agreement until the Executive’s employment shall be terminated in
accordance with Section 5 below (“Employment Period”).

 

2.                                       Position
and Duties.

 

(a)  During the
Employment Period, the Executive shall be employed as the Chief Executive
Officer of Hilton International. In his executive capacities, the Executive
shall report to and perform the duties reasonably assigned by the
President and Chief Operating Officer of HHC, the Company’s principal owner. In
addition, the Executive shall also serve as an Executive Vice President of HHC.

 

(b)                                 During
the Employment Period, and excluding any periods of holiday and sick leave, the
Executive shall devote substantially all of his attention and time during
normal business hours to the business and affairs of the Company and to the
extent necessary to discharge the responsibilities assigned to the Executive
under this Agreement, using the Executive’s reasonable best efforts to carry
out such responsibilities faithfully and efficiently. Executive shall be
subject to and shall abide by the policies and practices of the Company and of
HHC, including the HHC policy 

 

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on Insider Trading as
well as the Company Code of Conduct. Copies of both documents are attached
hereto as Annex 1.

 

3.                                       Location.

 

(a)  The Executive
shall be primarily located at Maple Court, Central Park, Reeds Crescent,
Watford, Hertfordshire WD24 4QQ or at such other location as may from time
to time be agreed between the parties. Additionally, the Executive may be
requested to relocate to a different primary location at the discretion of the
President and Chief Operating Officer of HHC, such relocation to be subject to
the Executive’s agreement to the extent that it is not within a 50 mile radius
of the Company’s offices at Maple Court.

 

(b)  The Executive
shall travel to and work at any of the Company’s or HHC’s locations within or
outside the United Kingdom in the manner and on the occasions as the President
and Chief Operating Officer of HHC may require.

 

(c)  The Company
shall provide reasonable relocation expenses of the Executive in accordance
with the Company’s policy if the Executive is relocated to a different primary
location that is not within reasonable daily traveling distance of Maple Court.

 

4.                                       Compensation.

 

(a)  One-time
Signing Bonus. A one-time cash “signing” bonus of £282,486 shall be paid to the
Executive within 14 days of the Closing.

 

(b)  Base Salary. During
the Employment Period, the Executive shall receive an annualized base salary (“Annual
Base Salary”) of £415,254, payable in accordance with the regular payroll
practices of the Company. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually; the first such review taking place with
effect from January 1, 2007.

 

(c)  Annual Bonus. In
addition to the Annual Base Salary, the Executive shall be eligible for an
annual bonus (the “Annual Bonus”) as determined pursuant to the terms of
applicable HHC or Company executive bonus schemes. For the fiscal year 2006,
the target Annual Bonus is an amount equal to at least sixty percent (60%), but
not to exceed ninety percent (90%), of Annual Base Salary paid in that fiscal year.

 

(d)  Transaction
Closing Cash Award. The parties acknowledge the Executive’s entitlement to a
cash award of £4,745,763 payable by reason of Closing (“Transaction Closing
Cash Award”). The Executive and the Company have agreed that the Transaction
Closing Cash Award shall not be paid on Closing but is instead payable as
follows:

 

(i) £847,458
shall be paid within 30 days of the Closing;

 

(ii) three
annual payments of £1,299,435 shall be made within 30 days following January 31,
2007, January 31, 2008, and January 31, 2009 (each, an “Anniversary
Date”).

 

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For the avoidance of
doubt, the Transaction Closing Cash Award shall continue to be payable even in
the event of a termination of the Agreement. Hence, in the event that the
Executive’s employment terminates for any reason prior to January 31,
2009, the Company will pay to the Executive any outstanding installments of the
Transaction Closing Cash Award, less any necessary tax withholdings, within 7
days of the date that the Executive’s employment terminates. For the avoidance
of doubt, the Executive will have no duty to mitigate in respect of this
payment. Further the Company does not view this payment to be a penalty but
considers it to be a genuine commercial payment.

 

(e)  Stock. Executive
shall be eligible to be granted equity-based awards under HHC’s equity plans to
at least the same extent as other comparable executives of the Company and HHC.
On Closing, and subject to HHC Board approval at the March, 2006 Board meeting,
Executive shall be granted, pursuant to the terms of the Hilton Hotels
Corporation 2004 Omnibus Equity Compensation Plan:

 

(i)  25,000
Restricted Stock Units;

 

(ii)  25,000
Performance Shares; and

 

(iii)  125,000
shares of Restricted Stock.

 

The terms and conditions of each grant shall be set
forth in individual grant agreements. Upon termination of his employment, the
Executive shall have no claim against the Company for loss arising out of
ineligibility to exercise any stock options granted to him or otherwise in
relation to any equity plan and the rights of the Executive shall be determined
solely by the rules of the relevant equity plan in force at the date of
termination of his employment.

 

(f)  Holiday. The
Executive shall (in addition to the normal public holidays) be entitled to paid
holiday at the rate of 25 working days in each year of service. The Executive’s
holiday entitlement shall increase to 27 working days in the year in which he
completes 5 years’ continuous service with the Company, and to 28 days in the
year in which he completes 7 years’ continuous service with the Company. Any
holiday accruing to the Executive for any period of service of twelve months
ending on 31 March, if not taken within that twelve month period, shall not be
carried forward to the next or subsequent period and no remuneration in lieu
will be paid or payable unless otherwise agreed in writing with the President
and Chief Operating Officer of HHC. The Executive’s entitlement to holiday
shall be calculated as accruing proportionately to the number of weeks
completed in the employment of the Company in that twelve month period. Upon
termination of the Executive’s employment for any reason the Executive shall be
entitled to pay in lieu of any accrued but untaken holiday entitlement or be
required to repay to the Company any salary received in respect of any holiday
taken in excess of the accrued holiday entitlement until the Termination Date.
Any such sum due to the Company may be deducted from any remuneration or
other monies otherwise payable to the Executive.

 

(g)  Sick Pay. In
the event of the Executive’s absence due to his incapacity arising from illness
or accident, the Company will continue to pay the Executive his Base Salary for
a period of such absence up to a maximum of either 6 consecutive calendar
months or an aggregate of 180 

 

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working days (whether
consecutive or not) in any 12 consecutive calendar months which payments shall
include statutory sick pay or other benefits payable under any relevant
legislation.

 

(h)  Other Benefits. During the Employment
Period, the Executive shall be entitled to all benefits for which he shall be
eligible under any benefit plans, schemes or similar arrangements which the
Company provides from time to time to its comparable executive employees
generally. Participation shall be subject to the terms and conditions of each
of these plans, schemes or arrangements as they may be amended from time
to time. The Company has no liability to the Executive (or his dependents) for
failure or refusal by the insurer or provider to pay benefits or for cessation
of benefits on termination of the Executive’s employment.

 

(i)  Deductions. The
Executive hereby authorizes the Company to deduct from any remuneration accrued
and due to him under the terms of this Agreement (whether or not actually paid
during the Employment Period):  (i) any
overpayment of salary or expenses or payment made to the Executive by mistake
or through any misrepresentation; (ii) any debt owed by the Executive to
the Company or any affiliated company; and (iii) any other sum or sums
which may from time to time be required to be authorized pursuant to Section 13
of the Employment Rights Act of 1996 (“ERA”).

 

5.                                       Termination
of Employment.

 

(a)  By Either Party. The Executive’s employment
and, save to extent that its provisions are expressed to apply beyond
termination, this Agreement may be terminated by

 

(i)  the Executive
giving to the Company not less than twelve months’ written notice to expire at
any time; or

 

(ii)  the Company
giving to the Executive not less than twelve months’ notice in writing to
expire at any time.

 

The Company may, at its
sole discretion, terminate Executive’s employment immediately by making a
payment of Annual Base Salary under Section 4(b), the minimum Annual Bonus
under Section 4(c) and an amount equal to the cost of the Company of
providing the benefits set out in Sections 4(e) and 4(h) which would
have otherwise been payable or would have arisen had the Executive’s employment
continued for the twelve month notice period or any unexpired part thereof.
Any unpaid Transaction Closing Cash Award shall be paid pursuant to Section 4(d).

 

If either party gives
notice to terminate this Agreement, the Executive agrees that for a period not
exceeding six months the Board may in its absolute discretion:

 

(a)           require
the Executive to perform only such duties as it may allocate to him or not to
perform any of his duties;

 

(b)           require
the Executive not to have any contact with customers or clients or suppliers of
the Company or any affiliated company nor any contact (other than

 

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purely social contact)
with such employees of the Company or any affiliated company as the Board shall
determine;

 

(c)           require
the Executive not to attend any premises of the Company or of any affiliated
company;

 

(d)           require
the Executive forthwith to resign as a director of the Company or any
affiliated company (without providing any reason for doing so); and

 

(e)           appoint
another person to perform his responsibilities jointly with him or in his
place;

 

The Executive further
agrees that such action on the part of the Company shall not constitute a
breach of this Agreement nor shall the Executive have any claim against the
Company in respect of any such action and that the Executive’s obligations to
act in good faith and in the best interests of the Company and all Group
Companies shall remain in full force and effect.

 

Provided always that
throughout such period the Company shall continue to provide the Executive’s
salary and contractual benefits.

 

Notwithstanding the foregoing, in no event shall the Company be
required to pay Severance Benefits (as defined below) to Executive that exceed
2.99 times the sum of the Executive’s base salary plus most recent bonus (or,
if the Executive is not currently an employee of the company, the Executive’s
target bonus). “Severance Benefits” shall include cash payments following
termination of employment, including, but not limited to lump sum severance
payments, periodic cash payments, and payments for consulting fees or salary
continuation. “Severance Benefits” shall not include: (i) payments pursuant to
the Company’s retirement plans, savings plans, deferred compensation plans or
welfare benefit plans, (ii) the value of accelerated vesting or payment of any
outstanding equity-based award pursuant to the Company’s or HHC’s equity
compensation plans, (iii) any benefits or perquisites provided under plans or
programs applicable to the Company’s or HHC’s employee generally, or (iv) any
amount that the Corporate Governance and Nominating Committee of HHC determine
in good faith to be a reasonable settlement of any claim made against the
Company. In addition, penalty tax reimbursement and gross up payments will not
count for purposes of the 2.99 times limit.

 

(b)  Age 65 or Death.
The Executive’s employment and the Employment Period shall terminate
automatically upon the last day of the month during which the Executive attains
the age of 65 years. The Executive’s employment and the Agreement shall also
terminate automatically upon the Executive’s death during the Employment
Period.

 

(c)  Disability. The
Company shall be entitled to terminate the Executive’s employment with not less
than six months’ written notice to expire at any time because of the Executive’s
Disability during the Employment Period, save where the Executive is in receipt
of benefit under a disability scheme for which it is required that Executive
remain an employee, in 

 

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which event the Executive shall remain an employee for the purposes
only of continuing to receive any benefits payable under the disability scheme
for so long as such benefits shall be payable under the disability scheme, but
in all other respects his employment shall have terminated, in particular, he
shall no longer be entitled to receive any remuneration or other benefits under
this Agreement (including, without limitation, any salary, bonus, private
medical insurance, life insurance, pension contributions or grants under any
share or incentive scheme of the Company. “Disability” means that (i) the
Executive has been unable, for a period of 180 consecutive business days, after
reasonable accommodation, to perform the Executive’s duties under this
Agreement, as a result of physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive’s legal representative, has determined that the
Executive’s incapacity is total and permanent. The Executive agrees to
reasonably cooperate with the Company in order to obtain the physician’s
evaluation of the Executive.

 

(d)  By the
Company for Cause. The Company may immediately terminate the Executive’s
employment during the Employment Period for Cause. “Cause” means:  (i) a material breach of this Agreement; (ii)
repeated violation of this agreement and/or the Company’s policies which, after
warning, would normally result in discharge; (iii) gross misconduct or
commission of any criminal offence (excluding an offence under road traffic
legislation in the United Kingdom or elsewhere in respect of which a custodial
sentence is not imposed on him), or which could materially and adversely affect
the affairs of the Company; (iv) any act of theft or dishonesty; (v) personal
conduct which reflects in a significant and material manner unfavorably on the
Company’s reputation or business; (vii) disqualification by any court from
holding a directorship of any company (whether Company or otherwise); and
(viii) bankruptcy or other circumstances that compound with Executive’s
creditors. The Company may only terminate the Executive by reason of clauses
(i) or (ii) above if the Executive shall not have remedied such breach or
violation, as applicable, within 30 days after receiving written notice from
the Company specifying the details thereof; however, the Company, if it has
reason to suspect that any one or more of the events set out above has or may
have occurred shall be entitled (but without prejudice to its rights
subsequently to terminate the Executive’s employment on the same or any other
ground) to suspend the Executive on full pay, save in circumstances whereby such
suspension would inhibit the Executive’s ability to remedy any breach or
violation, for so long as the Company reasonably requires to verify or
investigate any such circumstances, but in no event for more than 90 days.

 

(e)  Obligations of
Executive on Termination. Upon the termination of the Executive’s employment
with the Company or (if the Company so requires) following notice of
termination of employment being given by either party the Executive shall
immediately resign without claim for compensation for loss of office (but
without prejudice to any claim he may have against the Company arising out
of any breach of this Agreement by the Company) from such directorships,
offices, or other positions he may then hold as nominee or representative
of the Company and of any other HHC company or any associated company by virtue
of his employment hereunder. On termination of his employment hereunder, the
Executive shall also deliver up to the Company or its duly authorized
representative all documents, records and papers (including any information
stored on computers, laptops, CDs or any other medium for storing such
information) and any company credit card or any other property of the Company
or HHC which may be his possession or under his control, and no copies
shall be retained by him.

 

6

 

(f)  Date of
Termination. The “Date of Termination” means the earliest of:  (i) the date of termination of the
Executive’s employment by either Executive or Company; (ii) the last day
of the month during which the Executive attains the age of 65 years; (iii) the
date on which employment is terminated by reason of Disability; or (iv) date of
Executive’s death.

 

6.                                       Confidential
information; Non-solicitation; Non-competition; No Conflict. During the
Employment Period and in the event of Executive’s termination of employment for
any reason, except as stated below, the Executive agrees as follows:

 

(a)  The Executive
shall hold in a fiduciary capacity for the benefit of the Company and HHC all
secret or confidential information, including, but not limited to: knowledge or
data, customer information, supplier information, cost and pricing information,
marketing and sales techniques, strategies and programs, computer programs and
software, know-how, trade secrets, and financial information relating to the
Company or any of its affiliated companies and their respective businesses that
the Executive obtains during the Executive’s employment by the Company or any
of its affiliated companies and that is not public knowledge (other than as a
result of the Executive’s violation of this paragraph (a) of Section 6)
(“Confidential Information”). The Executive shall not communicate, divulge or
disseminate Confidential Information at any time during or after the Executive’s
employment with the Company, except in the good faith performance of his duties
hereunder, without the prior written consent of the Company or as otherwise
required by law or legal process. Upon termination of the Executive’s employment
with the Company for any reason, the Executive agrees to return to the Company
all of its property including originals and copies of Company issued keys,
business documents, computer software, printouts, advertisements, brochures,
equipment, sales aids, price books, manuals, notebooks, and any other record,
document or tangible property relating to the Company and its business and
shall not procure, photocopy or copy any property of the Company after
notification of, or in anticipation of, termination of employment.

 

(b)  Nothing in this
Agreement shall restrict the rights of the Executive to make a Protected
Disclosure under the ERA. If the Executive has a particular grievance, concern,
disclosure or information of a particularly sensitive nature or has reasonable
grounds to believe that the Company has committed a crime, a breach of its
legal obligations, a miscarriage of justice or a breach of health and safety or
environmental legislation, the Executive should raise this in the first
instance with a non-executive director of the Company of the Executive’s
choice.

 

(c)                                  (i)                                     In
consideration of all of the compensation and benefits provided to the Executive
under this Agreement and in light of the Executive’s position with the Company,
during the Employment Period, and for a period of 6 months after the
termination of the Executive’s employment by the Company for any reason other
than the expiration of the Employment Period, the Executive will not, except
with the prior written consent of the Board, directly or indirectly, own,
manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as an officer,
director, employee, partner, principal, agent, representative, consultant or otherwise
with, or use or permit Executive’s name to be used in connection with, any
business or enterprise which is engaged in any business that is competitive
with any business or enterprise in which the Company or HHC is engaged at the
Date of Termination, both within the United States and internationally, in
which the Executive was involved at any time during the previous twelve months.

 

7

 

(ii)                                  The
restrictions of subparagraph (c)(i) shall not be construed to prohibit the
ownership by the Executive of less than two percent of any class of
securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the
Securities Exchange Act of 1934 (the “Exchange Act”), or in any company any part of
whose share or loan capital is traded on the London Stock Exchange or in
respect of which dealing takes place on the Alternative Investment Market or in
any other recognized investment exchange, provided that such ownership
represents a passive investment and that neither the Executive nor any group of
persons including the Executive in any way, either directly or indirectly,
manages or exercises control of any such corporation, guarantees any of its
financial obligations, otherwise takes any part in its business, other
than exercising the Executive’s rights as a shareholder, or seeks to do any of
the foregoing.

 

(iii)                               In
addition, the Executive agrees that he will not, for a period of 12 months
after the termination of the Executive’s employment with the Company for any
reason, without the prior written consent of the Company, whether directly or
indirectly, (A) employ, whether as an employee, officer, director, agent,
consultant or independent contractor, or solicit the employment of, any Senior
Executive known personally to the Executive who is or at any time during the
previous twelve months was an employee, representative, officer or director of
the Company or any of its subsidiaries or (B) solicit, deal with, divert,
take away, or attempt to solicit, divert or take away, any of the Company’s
customers with whom the Executive was actively engaged or involved by virtue of
his duties at any time during the previous twelve months.

 

For the
purposes of this Section 6, “Senior Executive” means a person who is or was at
any time whilst the Executive was employed by the Company or engaged by any
company in the Group:-

 

(A)          engaged or employed as an employee at
management grade 4 or above director or consultant of that company; or

 

(B)           engaged in a capacity in which he
obtained Confidential Information; and was so engaged at any time during the
period of 12 months prior to the Termination Date;

 

(d)                                 The
Executive represents to the Company that neither his continuation of employment
hereunder nor the performance of his duties hereunder conflicts with any
contractual commitment on his part to any third party or violates or
interferes with any rights of any third party.

 

(e)                                  The
Executive acknowledges and agrees that the restrictions contained in this Section are
reasonable and necessary to protect and preserve the legitimate interests,
properties, goodwill and business of the Company, that the Company would not
have entered into this Agreement in the absence of such restrictions and that
irreparable injury will be suffered by the Company should the Executive breach
any of those provisions. The Executive represents and acknowledges that (i) the
Executive has been advised by the Company to consult Executive’s own legal counsel
in respect of this Agreement, and (ii) that the Executive has had full
opportunity, prior to execution of this Agreement, to review thoroughly this
Agreement with the Executive’s counsel. The Executive further acknowledges and
agrees that a breach of any of the restrictions in this Section 

 

8

 

cannot be adequately
compensated by monetary damages. The Executive agrees that, in the case of any
violation of the provisions of this Section 6, the Executive shall forfeit
all payments not yet made under this Agreement at the time of any violation of
this Section 6 and that the Company shall be entitled to preliminary and
permanent injunctive relief, without the necessity of proving actual damages or
posting of a bond, which rights shall be cumulative and in addition to any
other rights or remedies to which the Company may be entitled at law or in
equity. The Executive further agrees that if any of the restrictions in section 6
is held to be void or ineffective for any reason but would be held to be valid
and effective if part of its wording were deleted, that restriction shall
apply with such deletions as may be necessary to make it valid and
effective. The restrictions contained in each sub-section of Section 6
shall be construed as separate and individual restrictions and shall each be
capable of being severed without prejudice to the other restrictions or to the
remaining provisions. The Executive irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding arising out of this Section 6,
including without limitation, any action commenced by the Company for
preliminary and permanent injunctive relief and other equitable relief, may be
brought in the High Court of Justice of England and Wales, (ii) consents
to the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, and  (iii) waives any
objection which the Executive may have to the laying of venue of any such
suit, action or proceeding in any such court. The Executive also irrevocably
and unconditionally consents to the service of any process, pleadings, notices
or other papers in a manner permitted by the notice provisions of Section 10
hereof.

 

7.                                       Inventions.

 

(a) As
soon as practicable the Executive shall promptly disclose confidentially to the
Company full details, including drawings and models, if any, of any and all
inventions, improvements, designs development, discovery or processes relating
to the businesses of the Company and HHC which he may make or discover in
the course of his employment (alone or with any other person) and shall treat
the said invention, development, discovery, improvement or process and all
information relating thereto as confidential. The Executive acknowledges that
the property including all intellectual property rights in such invention,
improvement, design, development, discovery or process vests in the Company
absolutely under applicable law (including, in particular, section 39 of
the Patent Act 1977) subject to the limits set out therein and the provisions
of Section 7(b) shall apply.

 

(b) 
The Executive shall, and to the extent that the invention, improvement, design,
development, discovery or process was made or discovered jointly with any other
person, or persons (who are not employees of the Company) shall use his best
endeavours to procure that such other person shall, if and when required by the
Company, do all acts and things at the cost of the Company as may be
necessary or desirable:

 

(i)  to obtain or join with the Company or its nominee in
obtaining patents or any other intellectual property right protections in
respect of any such invention, improvement, design development, discovery or
process in the United Kingdom or any other part of the world;

 

9

 

(ii)  to vest the
same and any trade marks in the Company or as the Company may direct
absolutely and for its exclusive benefit; and

 

(iii)  provide to
the Company all such assistance as the Company may require in relation to
the resolution of any questions concerning patent, copyright or other
intellectual property proprietary rights assigned by virtue of this Section 8;
and decisions as to the procuring of a patent or other appropriate protection
and exploitation shall be in the sole discretion of the Company.

 

(c) 
The Executive shall not otherwise apply for a patent or any other intellectual
property right protection for any such inventions, improvements, designs or
processes.

 

(d) 
If the Executive in the course of his duties under this Agreement or other
duties specifically assigned to him originates any design (whether registrable
or not) or other work in which copyright may subsist, he shall treat such
design or copyright as confidential to the Company and shall promptly disclose
full details of it (including drawings and models if any) to the Company and
shall (subject to Section 8(e) and until such time as the rights may be
fully and absolutely vested in the Company) hold his interest in it for the
Company.

 

(e) 
In consideration of the Company entering into this Agreement the Executive
hereby agrees:

 

(i)  except in so far as such rights already vest in Company
under applicable law (including Sections 11(2) and 215(3) of the
Copyright, Designs and Patents Act 1988), to assign (including, to the extent
necessary, by way of future assignment) to the Company all copyright and other
intellectual property and similar rights, if any, for the full terms throughout
the world in respect of all copyright for works originated, conceived, written
or made by the Executive during the continuance of this Agreement (except only
those works originated, conceived, written or made by the Executive wholly
outside his normal working hours and wholly unconnected with his employment hereunder);
and

 

(ii)                                  to
the extent any such rights exist, irrevocably and unconditionally to waive in
favor of the Company any and all moral rights conferred on the Executive by
virtue of the Copyright Designs and Patents Act 1988 for any design or
copyright work in which copyright is vested in the Company.

 

(f) 
The Executive will at the request and expense of the Company do all things
necessary or desirable to vest and/or substantiate the rights of the Company
under this Section 7.

 

(g)  By way of security for his obligations under
this Section 7 and for the purpose of giving effect to any such obligation but
not otherwise, the Executive hereby irrevocably appoints the Company to be his
attorney in his name and on his behalf to execute, sign and do any such deeds,
instruments and things and generally use his name to give the Company or its
nominee the full benefit of this Section 7 and a certificate in writing
signed by any Executive or the Secretary of the 

 

10

 

Company that
any instrument or act falls within the authority hereby conferred shall be
conclusive evidence that such is the case so far as any third party is
concerned.

 

8.                                       Successors.

 

(a)  This Agreement
is personal to the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than by will or the
laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive’s legal representatives.

 

(b)  This Agreement
shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

 

(c)  The Company
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would have
been required to perform it if no such succession had taken place. As used
in this Agreement, “Company” shall mean both the Company as defined above and
any such successor that assumes and agrees to perform this Agreement, by
operation of law or otherwise.

 

9.                                       Recordkeeping.
Executive authorizes the Company and HHC in accordance with the provisions of
the Data Protection Act 1998 and any regulations made under it to process
personal data manually or electronically including (without limitation) sensitive
personal data relating to him for the purposes of the administration and
management of his employment and the Company’s business.

 

Executive
further consents to the transfer of such information by the Company and HHC
outside the European Economic Area (as defined from time to time) to its
associated companies and other business entities or persons who work for or on
behalf of the Company, and acknowledges that such companies and business
entities and persons may be required to process such personal and sensitive
personal data by law or other applicable regulations, as well as for the purposes
of the Company’s and HHC’s business. Executive acknowledges that by virtue of
the transfer, he may no longer have the same rights to which he is entitled
under English data protection laws. Further details of the Company’s policy in
relation to record keeping and examples of the way in which personal data will
be used are set out in the Company’s Data Protection Policy, a copy of which is
attached hereto as Annex 2.

 

Executive
consents to the Company monitoring its communication and electronic equipment
including, without limitation, the Company’s telephone, facsimile and e-mail
systems, information stored on the Company’s computer equipment (including all
electronically stored information and any electronic media that are the
property of the Company) and recordings from the Company’s closed circuit
television cameras.

 

11

 

12.                                 Miscellaneous.

 

(a)  This Agreement
shall be governed by, and construed in accordance with, the laws of England,
without reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors and
legal representatives. The parties to this Agreement submit to the jurisdiction
of the English Courts as regards any claim, dispute or matter arising out of or
relating to this Agreement. This Clause is for the benefit of the Company and
HHC and shall not limit their right to take proceedings in any other court of
competent jurisdiction.

 

(b)                                 All
notices and other communications under this Agreement shall be in writing and
shall be given by hand to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

Ian Russell Carter

Maple Court, Central
Park,

Reeds Crescent, Watford,
Hertfordshire WD24 4QQ

United Kingdom

 

 

If to the Company:

 

Hilton Hotels Corporation

9336 Civic Center Drive

Beverly Hills, CA  90210

USA

Attention: General
Counsel

 

or to such other address
as either party furnishes to the other in writing in accordance with this
paragraph (b) of Section 12. Notices and communications shall be
effective when actually received by the addressee.

 

(c)                                  The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.
If any provision of this Agreement shall be held invalid or unenforceable in
part, the remaining portion of such provision, together with all other
provisions of this Agreement, shall remain valid and enforceable and continue
in full force and effect to the fullest extent consistent with law.

 

(d)                                 Notwithstanding
any other provision of this Agreement, the Company may withhold from
amounts payable under this Agreement all federal, state, local and foreign
taxes or deductions that are required to be withheld by applicable laws or
regulations.

 

12

 

(e)                                  The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision of, or to assert any right under, this Agreement shall not be deemed
to be a waiver of such provision or right or of any other provision of or right
under this Agreement.

 

(f)                                    This
Agreement may be executed in several counterparts, each of which shall be
deemed an original, and said counterparts shall constitute but one and the same
instrument.

 

(g)                                 All
existing agreements between the Company and the Executive relating to the
employment of the Executive shall be deemed to have been cancelled with effect
from Closing.

 

(h)  The
information contained herein and within Annex 3 constitutes a written statement
of the terms of employment of the Executive in compliance with the provisions
of Sections 1 and 3 of the ERA.

 

13.                                 The
respective rights and obligations of the parties hereunder shall survive any
termination of the Executive’s employment or arrangements to the extent necessary
to the intended preservation of such rights and obligations, including, but not
by way of limitation, those rights and obligations set forth in Sections 4(d),
5(a), 6, and 7.

 

13

 

IN WITNESS WHEREOF, the
Executive has hereunto set the Executive’s hand and, pursuant to the
authorization of its Board of Directors, the Company has caused this Agreement
to be executed in its name on its behalf, all as of the day and year first
above written.

 

	
  EXECUTED as a Deed by

  	
  )

  	
   

  
	
  HILTON U.K. HOTELS LIMITED

  	
  )

  	
   

  
	
  acting by:

  	
  )

  	
   

  
	
   

  	
   

  
	
   

  	
  Director /s/ Robert M. La Forgia

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Director/Secretary /s/ Madeleine A. Kleiner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED as a Deed by

  	
  ) /s/ Ian R. Carter

  	
   

  
	
  IAN RUSSELL CARTER in the

  	
  )

  	
   

  
	
  presence of:

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness’ signature: /s/ Martin C. Lowery

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Martin C. Lowery

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address: 1080 E. Alejo Road

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Occupation: Vice President, Human Resources

  	
   

  
				

14Exhibit 10.1

 

AMENDED AND RESTATED

ADVISORY AGREEMENT

 

THIS AMENDED AND RESTATED ADVISORY AGREEMENT
(this “Agreement”) is entered into as of January 1, 2006, by and between
Hospitality Properties Trust, a Maryland real estate investment trust (the “Company”),
Reit Management & Research LLC, a Delaware limited liability company,
successor in interest to HRPT Advisors, Inc. (the “Advisor”), and, solely with
respect to Section 15 of this Agreement with respect to certain
non-competition covenants, Barry M. Portnoy, Gerard M. Martin and Adam D.
Portnoy.

 

WHEREAS, the Company and the Advisor are
parties to an Advisory Agreement, dated as of January 1, 1998 (as amended,
the “Original Agreement”), and Barry M. Portnoy and Gerard M. Martin are
parties to the Original Agreement solely with respect to certain covenants in
Section 15 thereof;

 

WHEREAS, the Company, through its Independent
Trustees (as hereinafter defined), has requested that the Original Agreement be
amended to add Adam D. Portnoy as a party thereto solely with respect to
Section 15 of the Original Agreement with respect to certain non-competition
covenants, and the Company and Adam D. Portnoy have agreed to that amendment;
and

 

WHEREAS, in connection with that amendment,
the parties hereto desire to restate the Original Agreement, as so amended;

 

NOW, THEREFORE, in consideration of the
mutual agreements herein set forth, the parties hereto agree that the Original
Agreement is hereby amended and restated to read in its entirety as follows:

 

1.             General Duties
of the Advisor. The Advisor shall use its best efforts to present
to the Company a continuing and suitable investment program consistent with the
investment policies and objectives of the Company. Subject to the supervision
of the Company’s Board of Trustees (the “Trustees”) and upon their direction,
and consistent with the provisions of the Company’s declaration of trust (as
amended and restated from time to time, the “Declaration”) , the Advisor shall:

 

(a)           serve as the
Company’s investment advisor, with its obligations to include providing
research and economic and statistical data in connection with the Company’s
investments and recommending changes in the Company’s investment policies, when
appropriate;

 

(b)           investigate and
evaluate investment opportunities and make recommendations concerning such
opportunities to the Trustees;

 

(c)           manage the
Company’s short term investments including the acquisition and sale of money
market instruments in accordance with the Company’s policies;

 

(d)           administer the day
to day operations of the Company;

 

(e)           investigate,
select and conduct relations and enter into appropriate contracts on behalf of
the Company with other individuals, corporations and entities in furtherance of
the investment activities of the Company; 

 

 

(f)            upon request of
the Trustees, act as attorney in fact or agent in acquiring and disposing of
investments and funds of the Company and in handling, prosecuting and settling
any claims of the Company;

 

(g)           upon request of
the Trustees, invest and reinvest any money of the Company;

 

(h)           obtain for the
Company, when appropriate, the services of property managers or management
firms to perform customary property management services with regard to the real
estate properties owned by or in the possession of the Company, and perform
such supervisory or monitoring services on behalf of the Company with respect
to the activities of such property managers or management firms as would be
performed by a prudent owner, including but not limited to closely supervising
the activities of such property managers or management firms, visiting the
properties, participating in property management budgeting, reviewing the
accounting of property income and expenses, reporting on the financial status
of the properties and reviewing the accounting of property income and expenses,
reporting on the financial status of the properties and reviewing and approving
marketing plans, but excluding the actual on-site property management functions
performed by said property managers or management firms;

 

(i)            obtain for the
Company such services as may be required for other activities relating to the
investment portfolio of the Company;

 

(j)            administer such
day-to-day bookkeeping and accounting functions as are required for the proper
management of the assets of the Company, contract for audits and prepare or
cause to be prepared such reports as may be required by any governmental
authority in connection with the ordinary conduct of the Company’s business,
including without limitation, periodic reports, returns or statements required
under the Securities Exchange Act of 1934, as amended, the Internal Revenue
Code of 1986, as amended (as in effect from time to time, the “Internal Revenue
Code”), the securities and tax securities of any jurisdiction in which the
Company is obligated to file such reports, or the rules and regulations
promulgated under any of the foregoing;

 

(k)           provide office
space, office equipment and the use of accounting or computing equipment when
required, and provide personnel necessary for the performance of the foregoing
services; and

 

(l)            from time to
time, or at any time requested by the Trustees, make reports thereto of its
performance of the foregoing services to the Company.

 

In performing its services under this Agreement,
the Advisor may utilize facilities, personnel and support services of various
of its Affiliates (as defined below). The Advisor shall be responsible for
paying such Affiliates for their personnel and support services and facilities
out of its own funds. Notwithstanding the above, the Company may request, and
will pay for the direct costs of, services provided by Affiliates of the
Advisor provided that such request is approved by a majority vote of the
Directors who are not Affiliates of the Advisor and who do not perform any
services for the Company except as Trustee (the “Independent Trustees”).

 

As used in this Agreement, the term “Affiliate”
means, as to any Person, (i) any other Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) any
other Person that owns beneficially, directly or indirectly, five percent (5%)
or more of the outstanding capital 

 

 

stock, shares or equity interests of such
Person, or (iii) any officer, director, employee, general partner or trustee of
such Person or of any Person controlling, controlled by or under common control
with such Person (excluding Trustees who are not otherwise Affiliates of such
Person). The term “Person” means and includes individuals, corporations,
limited partnerships, general partnerships, joint stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, limited liability companies, and other
entities.

 

In performing its services hereunder with
respect to the Company, the Advisor shall adhere to, and shall require its
officers and employees in the course of providing such services to the Company
to adhere to, the Company’s Code of Business Conduct and Ethics, as in effect from
time to time. In addition, the Advisor shall make available to its officers and
employees providing such services to the Company the procedures for the
receipt, retention and treatment of complaints regarding accounting, internal
accounting controls or auditing matters relating to the Company and for the
confidential, anonymous submission by such officers and employees of concerns
regarding questionable accounting or auditing matters relating to the Company,
as set forth in the Company’s Procedures Regarding Concerns or Complaints about
Accounting, Internal Accounting Controls or Auditing Matters, as in effect from
time to time.

 

2.             Bank Accounts. The Advisor
shall establish and maintain one or more bank accounts in its own name or, at
the direction of the Trustees, in the name of the Company, and shall collect
and deposit into such account or accounts and disburse therefrom any monies on
behalf of the Company, provided that no funds in any such account shall be
commingled with any funds of the Advisor or any other Person. The Advisor shall
from time to time render an appropriate accounting of such collections and
payments to the Trustees and to the auditors of the Company.

 

3.             Records. The Advisor
shall maintain appropriate books of account and records relating to services
performed pursuant to this Agreement, which books of account and records shall
be available for inspection by representatives of the Company upon reasonable
notice during ordinary business hours.

 

4.             Information
Furnished Advisor. The Trustees shall at all times keep the Advisor
fully informed with regard to the investment policies of the Company, the
capitalization policy of the Company, and generally the Trustees’ then-current
intentions as to the future of the Company. In particular, the Trustees shall
notify the Advisor promptly of their intention to sell or otherwise dispose of
any of the Company’s investments or to make any new investment. The Company
shall furnish the Advisor with a certified copy of all financial statements, a
signed copy of each report prepared by independent certified public
accountants, and such other information with regard to its affairs as the
Advisor may from time to time reasonably request. The Company shall retain
legal counsel and accountants to provide such legal and accounting advice and
services as the Advisor or the Trustees shall deem necessary or appropriate to
adequately perform the functions of the Company.

 

5.             REIT
Qualification. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from any action (including, without
limitation, the furnishing or rendering of services to tenants of property or
managing real property) which, in its judgment made in good faith, or in the
judgment of the Trustees as transmitted to the Advisor in writing, would (a)
adversely affect the status of the Company as a real estate investment trust as
defined and limited in the Internal Revenue Code or the regulations and rulings
thereunder or which would make the 

 

 

Company subject to the Investment Company Act of 1940, as amended, or
(b) violate any law, rule, regulation or statement of policy of any
governmental body or agency having jurisdiction over the Company or over its
securities, or (c) otherwise not be permitted by the Declaration or Bylaws of
the Company, except if such action shall be ordered by the Trustees, in which
event the Advisor shall promptly notify the Trustees of the Advisor’s judgment
that such action would adversely affect such status or violate any such law,
rule or regulation or the Declaration or Bylaws of the Company and shall
refrain from taking such action pending further clarification or instructions
from the Trustees. In addition, the Advisor shall take such affirmative steps
which, in its judgment made in good faith, or in the judgment of the Trustees
as transmitted to the Advisor in writing, would prevent or cure any action
described in (a), (b) or (c) above.

 

6.             Self-Dealing. Neither the
Advisor nor any Affiliate of the Advisor shall sell any property or assets to
the Company or purchase any property or assets from the Company, directly or
indirectly, except as approved by a majority of the Independent Trustees. In
addition, except as otherwise provided in Sections 1, 9, or 10 hereof, or
except as approved by a majority of the Independent Trustees, neither the
Advisor nor any Affiliate of the Advisor shall receive any commission or other
remuneration, directly or indirectly, in connection with the activities of the
Company or any joint venture or partnership in which the Company is a party. Except
for compensation received by the Advisor pursuant to Section 9 hereof, all
commissions or other remuneration received by the Advisor or an Affiliate of
the Advisor and not approved by the Independent Trustees under Sections 1 or 10
hereof or this Section 6 shall be reported to the Company annually within
ninety (90) days following the end of the Company’s fiscal year.

 

Upon request of any Trustee, the Advisor
shall from time to time promptly furnish the Company with information on a
confidential basis as to any investments within the Company’s investment
policies made by the Advisor for its own account.

 

7.             No Partnership
or Joint Venture. The Company and the Advisor are not partners or
joint venturers with each other and neither the terms of this Agreement nor the
fact that the Company and the Advisor have joint interests in any one or more
investments shall be construed so as to make them such partners or joint
venturers or impose any liability as such on either of them.

 

8.             Fidelity Bond. The Advisor
shall not be required to obtain or maintain a fidelity bond in connection with
the performance of its services hereunder.

 

9.             Compensation. The Advisor
shall be paid, for the services rendered by it to the Company pursuant to this
Agreement, an annual advisory fee (the “Advisory Fee”) equal to 0.70 percent of
the Average Invested Capital (as defined below) computed as of the last day of
the Company’s fiscal year up to $250,000,000, and 0.50 percent of the Average
Invested Capital equal to or exceeding $250,000,000. In addition, the Advisor
shall be paid an annual incentive fee (the “Incentive Fee”), consisting of a
number of shares of the Company’s Common Shares of Beneficial Interest (“Common
Shares”) with a value (determined as provided below) equal to 15 percent of the
amount by which Cash Available for Distribution to Shareholders (as defined
below) for such fiscal year exceeds Cash Available for Distribution to
Shareholders for the fiscal year immediately prior to such fiscal year, but in
no event shall the Incentive Fee payable in respect of any year exceed $.02
multiplied by the weighted average number of Common Shares outstanding during
such year.

 

 

Payment of the Incentive Fee shall be made by
issuance of Common Shares, under the Company’s 1995 Incentive Share Award Plan
or otherwise. The number of Common Shares to be issued in payment of the
Incentive Fee shall be the whole number of shares (disregarding any fraction)
equal to the value of the Incentive Fee, as provided above, divided by the
average closing price of the Common Shares on the New York Stock Exchange
during the month of December in the year for which the computation is made. (The
Advisory Fee and Incentive Fee are hereinafter collectively referred to as the “Fees.”)

 

For purposes of this Agreement:  “Average Invested Capital” of the Company
shall mean the daily weighted average of the total historical cost of the
assets of the Company invested, directly or indirectly, in equity interests in
and loans secured by real estate and personal property owned in connection with
such real estate (collectively, “Properties”) (including capitalized closing
costs and costs which may be allocated to intangibles or are unallocated),
before reserves for depreciation or bad debts or other similar noncash
reserves, computed by taking the weighted average of such values. “Cash
Available for Distribution” shall mean, for any period, the net income of the
Company, before real estate depreciation, amortization and other non-cash or
non-recurring items, less the amount, if any, included in the calculation
thereof which represents rental income recognized by the Company in respect of
amounts which, pursuant to leasing arrangements relating to any of the
Properties, the Company is required to escrow or reserve for renovations and
refurbishments. Calculation of Average Invested Capital shall be made annually
by the Company; calculation of Cash Available for Distribution to Shareholders
shall be made annually by the Company’s independent certified public
accountants.

 

The Advisory Fee shall be computed and
payable within thirty (30) days following the end of each fiscal month by the
Company, and the Incentive Fee shall be computed and payable within thirty (30)
days following the public availability of the Company’s annual audited
financial statements for each fiscal year. Such computations shall be based
upon the Company’s monthly or annual financial statements, as the case may be,
and shall be in reasonable detail. A copy of such computations shall promptly
be delivered to the Advisor accompanied by payment of the Fees shown thereon to
be due and payable.

 

The payment of the aggregate annual Fees
payable for any fiscal year shall be subject to adjustment as of the end of
each fiscal year. On or before the 30th day after public availability of the
Company’s annual audited financial statements for each fiscal year, the Company
shall deliver to the Advisor an Officer’s Certificate (a “Certificate”)
reasonably acceptable to the Advisor and certified by an authorized officer of
the Company setting forth (i) the Average Invested Capital and Funds From
Operations for the Company’s fiscal year ended upon the immediately preceding
December 31, and (ii) the Company’s computation of the Fees payable for said
fiscal year.

 

If the aggregate annual Fees payable for said
fiscal year as shown in such Certificate exceed the aggregate amounts
previously paid with respect thereto by the Company, the Company shall include
its check for such deficit and deliver the same to the Advisor with such
Certificate.

 

If the aggregate annual Fees payable for said
fiscal year as shown in such Certificate are less than the aggregate amounts
previously paid with respect thereto by the Company, the Company shall specify
in such Certificate whether the Advisor should (i) remit to the Company its
check in an amount equal to such difference or (ii) grant the Company a credit
against the Fees next coming due in the amount of such difference until such
amount has been fully paid or otherwise discharged.

 

 

10.           Additional
Services.

 

(a)           The Advisor
shall provide to the Company an internal audit function meeting applicable
requirements of the New York Stock Exchange and the Securities and Exchange
Commission and otherwise in scope approved by the Company’s Audit Committee
commencing as of October 1, 2003. As additional compensation payable pursuant
to Section 10 to the Advisor for such additional services, the Company
agrees to reimburse the Advisor, within 30 days of the receipt of the invoice
therefor, for a pro rata share (as agreed to by the Independent Trustees from
time to time) of the following costs of the Advisor:

 

(i)            employment
expenses of the Advisor’s internal audit manager and other employees of the
Advisor actively engaged in providing internal audit services, including but
not limited to salary, wages, payroll taxes and the cost of employee benefit
plans; and

 

(ii)           the reasonable
travel and other out-of-pocket expenses of the Advisor relating to the
activities of the Advisor’s internal audit manager and other of the Advisor’s
employees actively engaged in providing internal audit services and the
reasonable third party expenses which the Advisor incurs in connection with its
provision of internal audit services.

 

(b)           If, and to the
extent that, the Company shall request the Advisor to render services on behalf
of the Company other than those required to be rendered by the Advisor in
accordance with the terms of this Agreement, such additional services shall be
compensated separately on terms to be agreed upon between the Advisor and the
Company from time to time.

 

11.           Expenses of the
Advisor. Without regard to the compensation received by the Advisor from the
Company pursuant to this Agreement, the Advisor shall bear the following
expenses incurred in connection with the performance of its duties under this
Agreement:

 

(a)           employment
expenses of the personnel employed by the Advisor, including but not limited
to, salaries, wages, payroll taxes and the cost of employee benefit plans;

 

(b)           fees and travel
and other expenses paid to directors, officers and employees of the Advisor,
except fees and travel and other expenses of such persons who are Trustees or
officers of the Company incurred in their capacities as Trustees or officers of
the Company;

 

(c)           rent,
telephone, utilities, office furniture, equipment and machinery and other
office expenses of the Advisor, except to the extent such expenses relate
solely to an office maintained by the Company separate from the office of the
Advisor; and

 

(d)           miscellaneous
administrative expenses incurred in supervising, monitoring and inspecting real
property and other investments of the Company or relating to performance by the
Advisor of its obligations hereunder.

 

12.           Expenses of the
Company. Except as expressly otherwise provided in this Agreement, the Company
shall pay all its expenses not payable by the Advisor, and, without limiting
the generality of the foregoing, it is specifically agreed that the following
expenses of the Company shall be paid by the Company and shall not be paid by
the Advisor:

 

 

(a)           the cost of
borrowed money;

 

(b)           taxes on income
and taxes and assessments on real property, if any, and all other taxes
applicable to the Company;

 

(c)           legal,
auditing, accounting, underwriting, brokerage, listing, reporting, registration
and other fees, and printing, engraving and other expenses and taxes incurred
in connection with the issuance, distribution, transfer, trading, registration
and stock exchange listing of the Company’s securities, including transfer
agent’s, registrar’s and indenture trustee’s fees and charges;

 

(d)           expenses of
organizing, restructuring, reorganizing or terminating the Company, or of
revising, amending, converting or modifying the Company’s organizational
documents;

 

(e)           fees and travel
and other expenses paid to Trustees and officers of the Company in their
capacities as such (but not in their capacities as officers or employees of the
Advisor) and fees and travel and other expenses paid to advisors, contractors,
mortgage services, consultants, and other agents and independent contractors
employed by or on behalf of the Company;

 

(f)            Expenses
directly connected with the acquisition, disposition or ownership of real
estate interests or other property (including the costs of foreclosure,
insurance premiums, legal services, brokerage and sales commissions,
maintenance, repair, improvement and local management or property), other than
expenses with respect thereto of employees of the Advisor, to the extent that
such expenses are to be borne by the Advisor pursuant to Section 11 above;

 

(g)           all insurance
costs incurred in connection with the Company (including officer and trustee
liability insurance) or in connection with any officer and trustee indemnity
agreement to which the Company is a party;

 

(h)           expenses
connected with payments of dividends or interest or contributions in cash or
any other form made or caused to be made by the Trustees to holders of
securities of the Company;

 

(i)            all expenses
connected with communications to holders of securities of the Company and other
bookkeeping and clerical work necessary to maintaining relations with holders
of securities, including the cost of printing and mailing certificates for
securities and proxy solicitation materials and reports to holders of the
Company’s securities;

 

(j)            legal,
accounting and auditing fees and expenses, other than those described in
subsection (c) above; and

 

(k)           expenses
relating to any office or office facilities maintained by the Company separate
from the office of the Advisor.

 

13.           Annual
Operating Expenses Limitation Requiring Refunds by the Advisor. There shall
be a limitation (the “Limitation”) on Operating Expenses (as defined below) of
the Company for each fiscal year which shall be the lower of the following:

 

(a)           the greater of
(i) 2% of the Average Invested Capital of the Company for such fiscal year; and
(ii) 25% of the Net Income (as defined below) of the Company for such fiscal
year; or

 

 

(b)           the lowest of
any applicable operating expense limitations that may be imposed by law or
regulation in a state in which any securities of the Company are or will be
qualified for sale or by a national securities exchange on which any securities
of the Company are or may be listed, as such limitations may be altered from
time to time.

 

For purposes of this Agreement, “Operating
Expenses” shall be calculated on the basis of the Company’s annual audited
financial statements and shall be deemed to mean the aggregate annual expenses
regarded as ordinary operating expenses in accordance with generally accepted
accounting principles (including the Fees), exclusive of the following:

 

(i)            the expenses
set forth in subsections (a) through (d), inclusive, and (f) of Section 12
hereof;

 

(ii)           non-cash
expenditures, including provisions for depreciation, depletion, bad debt
reserve and amortization;

 

(iii)          losses on the
disposition of assets and provisions for such losses;

 

(iv)          options granted
to the Advisor; and

 

(v)           other
extraordinary charges including, without limitation, litigation costs.

 

For purposes of this Agreement, “Net Income”
for any period shall be calculated on the basis of the Company’s audited
financial statements and shall be deemed to mean total revenues applicable to
such period, less the expenses applicable to such period, including additions
to reserves for depreciation or bad debts or other similar noncash reserves,
determined in accordance with generally accepted accounting principles.

 

On or before the 30th day after public availability
of the Company’s annual audited financial statements for each fiscal year, the
Advisor shall refund (to the extent of the aggregate Fees it has received with
respect to such year) to the Company the amount, if any, by which the Operating
Expenses exceeded the Limitation; provided however, that unless such action is
prohibited by laws or regulations, the Company may instead permit such refund
to be effected by a reduction in the amount of the Fees to be paid by the
Company during the fiscal years following the fiscal year with respect to which
such refund is to be made until such time as any such refund is fully paid and
provided the Limitation imposed by this Section 13 shall require that only so
much of such excess need be refunded as is conclusively determined by the
Trustees, including a majority of the Independent Trustees, to be unjustified.

 

14.           Limits of
Advisor Responsibility. The Advisor assumes no responsibility other
than to render the services described herein in good faith and shall not be
responsible for any action of the Trustees in following or declining to follow
any advice or recommendation of the Advisor. The Advisor, its shareholders,
directors, officers, employees and Affiliates will not be liable to the
Company, its shareholders, or others, except by reason of acts constituting bad
faith, willful or wanton misconduct or gross negligence. The Company shall
reimburse, indemnify and hold harmless the Advisor, its shareholders,
directors, officers and employees and its Affiliates for and from any and all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever in respect of or arising from any acts or omissions of the
Advisor undertaken in good faith and in accordance with the standard set forth
above pursuant to the authority granted to it by this Agreement.

 

 

15.           Other
Activities of Advisor. None of the Advisor, Barry M. Portnoy,
Gerard M. Martin nor Adam D. Portnoy shall, without the consent of the Company’s
Independent Trustees, (i) provide advisory services to, or serve as a director
or officer of, any other REIT which is principally engaged in the business of
ownership of hotel properties or (ii) make direct investments in hotel
facilities. Nothing herein shall prevent the Advisor from engaging in other
activities or businesses or from acting as advisor to any other Person
(including other real estate investment trusts) provided that no such activity
shall conflict with the Advisor’s obligations under the immediately preceding
sentence; provided, further, however, that the Advisor shall notify the Company
in writing in the event that it does so act as an advisor to another real
estate investment trust. The Advisor shall be free from any obligation to
present to the Company any particular investment opportunity which comes to the
Advisor. Without limiting the foregoing provisions, the Advisor agrees, upon
the request of any Trustee of the Company, to disclose certain investment
information concerning the Advisor or certain of its Affiliates, provided,
however, that such disclosure shall be required only if it does not constitute
a breach of any fiduciary duty or obligation of the Advisor.

 

Directors, officers, employees and agents of
the Advisor or of its Affiliates may serve as Trustees, officers, employees,
agents, nominees or signatories of the Company. When executing documents other
otherwise acting in such capacities for the Company, such persons shall use
their respective titles in the Company. Such persons shall receive no
compensation from the Company for their services to the Company in any such
capacities.

 

16.           Term,
Termination. This Agreement shall continue in force and effect
until December 31, 2006 unless extended or sooner terminated in accordance with
the terms of this Section 16. The expiration date of the then current term of
this Agreement is referred to herein as the “Termination Date.”  The Company shall give written notice to the
Advisor prior to the Termination Date of its intention to renew this Agreement
and the period of such extension. Such renewal shall be determined by a
majority of the Independent Trustees of the Company.

 

Notwithstanding any other provision of this
Agreement to the contrary, this Agreement, or any extension hereof, may be
terminated by either party hereto upon sixty (60) days’ written notice to the
other party, pursuant to a majority vote of the Independent Trustees; or, in
the case of a termination by the Advisor, by a majority vote of the directors
of the Advisor.

 

Paragraph 19 hereof shall govern the rights,
liabilities and obligations of the parties upon termination of this Agreement;
and, except as provided in paragraph 20, such termination shall be without
further liability of either party to the other than for breach or violation of
this Agreement prior to termination.

 

17.           Assignment. The Company
may terminate this Agreement at any time in the event of its assignment by the
Advisor except an assignment to a corporation, association, trust, or other
successor organization which may take over the property and carry on the
affairs of the Advisor; provided that, following such assignment, the persons
who controlled the operations of the Advisor immediately prior to the
assignment shall control the operation of the successor organization, including
the performance of its duties under this Agreement, and such successor
organization shall be bound by the same restrictions by which the Advisor was
bound prior to such assignment. Such assignment or any other assignment of this
Agreement by the Advisor shall bind the assignee hereunder in the same manner
as the Advisor is bound hereunder. This 

 

 

Agreement shall not be assignable by the Company without the prior
written consent of the Advisor, except in the case of any assignment by the
Company to a corporation or other organization which is the successor to the
Company, in which case such successor shall be bound hereby and by the terms of
said assignment in the same manner and to the same extent as the Company is
bound hereby.

 

18.           Default,
Bankruptcy, Etc. of the Advisor. At the sole option of the
Company, this Agreement may be terminated immediately upon written notice of
such termination from the Trustees to the Advisor if any of the following
events shall have occurred:

 

(a)           the Advisor
shall have violated any provision of this Agreement and, after written notice
from the Trustees of such violation, shall have failed to cure such default
within thirty (30) days;

 

(b)           a petition
shall have been filed against the Advisor for an involuntary proceeding under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, and such petition shall not have been dismissed within ninety (90) days
of filing; or a court having jurisdiction shall have appointed a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Advisor for any substantial portion of its property, or ordered the winding
upon or liquidation of its affairs, and such appointment or order shall not
have been rescinded or vacated within ninety (90) days of such appointment or
order; or

 

(c)           the Advisor
shall have commenced a voluntary proceeding under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall have made
any general assignment for the benefit of creditors, or shall have failed
generally to pay its debts as they became due.

 

The Advisor agrees that, if any of the events
specified in Paragraphs (b) or (c) of this Section 18 shall occur, it will give
written notice thereof to the Trustees within seven (7) days following the
occurrence of such event.

 

19.           Action Upon
Termination. From and after the effective date of any
termination of this Agreement pursuant to Sections 16, 17 or 18 hereof, the
Advisor shall be entitled to no compensation for services rendered hereunder
for the then-current term of this Agreement, but shall be paid, on a pro rata
basis, all compensation due for services performed prior to such termination
(reduced by the amount, if any, of the Fees to be refunded by the Advisor pursuant
to Section 13 hereof, which section shall apply pro rata to the applicable
portion of the fiscal year in which termination occurs in the event of a
termination occurring at other than the end of the Company’s fiscal year. Upon
such termination, the Advisor immediately shall:

 

(a)           pay over to the
Company all monies collected and held for the account of the Company by it
pursuant to this Agreement, after deducting therefrom any accrued Fees (reduced
by amounts owed by the Advisor to the Company pursuant to the last paragraph of
Section 13 hereof) and reimbursements for its expenses to which it is then
entitled;

 

(b)           deliver to the
Trustees a full and complete accounting, including a statement showing all sums
collected by it and a statement of all sums held by it for the period
commencing with the date following the date on its last accounting to the
Trustees; and

 

 

(c)           deliver to the
Trustees all property and documents of the Company then in its custody or
possession.

 

The amount of Fees paid to the Advisor upon
termination shall be subject to adjustment pursuant to the following mechanism.
On or before the 30th day after public availability of the Company’s annual
audited financial statements for the fiscal year in which termination occurs,
the Company shall deliver to the Advisor a Certificate reasonably acceptable to
the Advisor and certified by an authorized officer of the Company setting forth
(i) the Average Invested Real Estate Assets, Cash Available for Distribution to
Shareholders and Funds From Operations for the Company’s fiscal year ended upon
the immediately preceding December 31, and (ii) the Company’s computation of
the Fees payable upon the date of termination (reduced by the aggregate amount
of any excess expenses to be refunded pursuant to Section 13 hereof, which
Section shall apply to the applicable portion of the fiscal year in which
termination occurs in the event of a termination occurring at other than the
end of the Company’s fiscal year.

 

If the annual Fees owed upon termination as shown
in such Certificate exceed the Fees paid by the Company upon termination, the
Company shall include its check for such deficit and deliver the same to the
Advisor with such Certificate.

 

If the Annual Fees owed upon termination as
shown in such Certificate are less than the Fees paid by the Company upon
termination, the Advisor shall remit to the Company its check in an amount
equal to such difference.

 

20.           Trustee Action. Wherever
action on the part of the Trustees is contemplated by this Agreement, action by
a majority of the Trustees, including a majority of the Independent Trustees,
shall constitute the action provided for herein.

 

21.           Notices. Any notice,
report or other communication required or permitted to be given hereunder shall
be in writing unless some other method of giving such notice, report or other
communication is accepted by the party to whom it is given, and shall be given
by being delivered at the following addresses to the parties hereto:

 

If to the Company:

 

Hospitality Properties Trust

400 Centre Street

Newton, MA 02458

Attention:  President

 

If to the Advisor:

 

Reit Management & Research LLC

400 Centre Street

Newton, MA 02458

Attention:  President

 

Such notice shall be effective upon its receipt by the party to whom it
is directed. Either party hereto may at any time given notice to the other
party in writing of a change of its address for purposes of this paragraph 21.

 

 

22.           Amendments. The Agreement
shall not be amended, changed, modified, terminated, or discharged in whole or in
part except by an instrument in writing signed by each of the parties hereto,
or by their respective successors or assigns, or otherwise as provided herein.

 

23.           Successors and
Assigns. This Agreement shall be binding upon any successors or permitted assigns
of the parties hereto as provided herein.

 

24.           Governing Law. The
provisions of this Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.

 

25.           Captions. The captions
included herein have been inserted for ease of reference only and shall not be
construed to affect the meaning, construction or effect of this Agreement.

 

26.           Entire
Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes and
cancels any pre-existing agreements with respect to such subject matter.

 

27.           Attorneys’ Fees. If any legal
action is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys’ fees and other costs
incurred in that action in addition to any other relief to which it or they may
be entitled.

 

[Remainder of page
intentionally left blank.]

 

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their duly authorized officers, under
seal, as of the day and year first above written.

 

 

	
   

  	
  HOSPITALITIES PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John G. Murray

  	
   

  
	
   

  	
   

  	
  Name: John G. Murray

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
  REIT MANAGEMENT & RESEARCH LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jennifer B. Clark

  	
   

  
	
   

  	
   

  	
  Name: Jennifer B. Clark

  
	
   

  	
   

  	
  Title:   Vice President

  

 

	
  SOLELY AS TO SECTION 15 HEREOF:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Barry M. Portnoy

  	
   

  	
   

  
	
  Barry M. Portnoy

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Gerard M. Martin

  	
   

  	
   

  
	
  Gerard M. Martin

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Adam D. Portnoy

  	
   

  	
   

  
	
  Adam D. Portnoy

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