Document:

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                                                                    Exhibit 10.1

                       LIMITED LIABILITY COMPANY AGREEMENT
                                       OF
                         STRATEGIC HOTEL FUNDING, L.L.C.

         THIS LIMITED LIABILITY COMPANY AGREEMENT, dated as of [__________],
2004 of Strategic Hotel Funding, L.L.C. (the "Company") is entered into by and
among Strategic Hotel Capital, Inc., as Managing Member (the "Managing Member"),
and the Persons identified on the signature pages hereto (the "Non-Managing
Members"), together with any other Persons who become Members (as defined
herein) in the Company as provided herein;

         WHEREAS, the Company was formed by the filing of a certificate of
formation with the Secretary of State of the State of Delaware on December 16,
1997 by an authorized person of the Company;

         WHEREAS, immediately prior to the execution hereof, Strategic Hotel
Capital, L.L.C., a Delaware limited liability company ("SHCLLC"), was the sole
member of the Company;

         WHEREAS, as part of the Formation and Structuring Transactions (as
defined below), the Company will issue Non-Managing Membership Interests (as
defined below) to SHCLLC as set forth on Exhibit A hereto;

         WHEREAS, as part of the Formation and Structuring Transactions, the
Company will issue Non-Managing Membership Interests to Strategic Hotel Capital
Limited Partnership ("SHCLP") as set forth on Exhibit A hereto;

         WHEREAS, the Members desire to admit the Managing Member as the sole
Managing Member of the Company upon the completion of the Managing Member's
initial public offering of its common stock and the contribution by the Managing
Member of the net proceeds from its initial public offering as set forth on
Exhibit A hereto; and

         WHEREAS, the Members desire to continue the Company under the Act (as
defined below) and to set forth their respective rights and duties relating to
the Company on the terms as provided herein;

         NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members hereby agree as
follows:

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                                    ARTICLE I
                                  DEFINED TERMS

         The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.

         "Act" means the Delaware Limited Liability Company Act, as it may be
amended from time to time, and any successor to such statute.

         "Additional Non-Managing Member" means a Person admitted to the Company
as a Non-Managing Member pursuant to Section 4.2 and who is shown as such on the
books and records of the Company.

         "Adjusted Capital Account" means the Capital Account maintained for
each Member as of the end of each Membership Year (a) increased by any amounts
which such Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (b)
decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

         "Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Adjusted Capital Account as of the
end of the relevant Membership Year.

         "Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 4.4.

         "Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.

         "Agreed Value" means (a) in the case of any Contributed Property set
forth on Exhibit B and as of the time of its contribution to the Company, the
Agreed Value of such property as set forth on Exhibit B; (b) in the case of any
Contributed Property not set forth on Exhibit B and as of the time of its
contribution to the Company, the 704(c) Value of such property or other
consideration, reduced by any liabilities either assumed by the Company upon
such contribution or to which such property is subject when contributed, and (c)
in the case of any property distributed to a Member by the Company, the
Company's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Member upon such
distribution or to which such property is subject at the time of distribution as
determined under Section 752 of the Code and the Regulations thereunder.

         "Agreement" means this Limited Liability Company Agreement and all
Exhibits attached hereto, as the same may be amended, supplemented or restated
from time to time.

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         "Assignee" means a Person to whom one or more Membership Units have
been transferred but who has not been admitted as a Substituted Non-Managing
Member, and who has the rights set forth in Section 11.5.

         "Available Cash" means, with respect to any period for which such
calculation is being made, (a) all cash revenues and funds received by the
Company from whatever source (excluding the proceeds of any Capital Contribution
to the Company pursuant to Section 4.1) plus the amount of any reduction
(including, without limitation, a reduction resulting because the Managing
Member determines such amounts are no longer necessary) in reserves of the
Company, which reserves are referred to in clause (b)(iv) below;

         (b) less the sum of the following (except to the extent made with the
proceeds of any Capital Contribution):

                  (i) all interest, principal and other debt payments made
         during such period by the Company,

                  (ii) all cash expenditures (including capital expenditures)
         made by the Company during such period,

                  (iii) investments in any entity (including loans made thereto)
         to the extent that such investments are not otherwise described in
         clauses (b)(i) or (ii), and

                  (iv) the amount of any reserve created or increase in reserves
         established during such period which the Managing Member determines are
         necessary or appropriate in its sole and absolute discretion.

         Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Company.

         "Bankruptcy" as to any Person, shall be deemed to have occurred when
(i) such Person commences a voluntary proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other similar
law now or hereafter in effect, (ii) such Person is adjudged as bankrupt or
insolvent, or a final and nonappealable order for relief under any bankruptcy,
insolvency or similar law now or hereafter in effect has been entered against
such Person, (iii) such Person executes and delivers a general assignment for
the benefit of such Person's creditors, (iv) such Person files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against such Person in any proceeding of the nature described in
clause (ii) above, (v) such Person seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for such Person or for all or
any substantial part of such Person's properties, (vi) any proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within 120
days after the commencement thereof, (vii) the appointment without such Person's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within 90 days of such appointment, or (viii) an appointment
referred to in clause (vii) is not vacated within 90 days after the expiration
of any such stay.

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         "Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for Federal income tax purposes as of
such date. A Member's share of the Company's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Member's Capital Account balance as maintained pursuant to Section
4.4 and the hypothetical balance of such Member's Capital Account computed as if
it had been maintained strictly in accordance with Federal income tax accounting
principles.

         "Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.

         "Capital Account" means the capital account maintained by the Company
for each Member pursuant to Section 4.4.

         "Capital Contribution" means, with respect to each Member, the total
amount of cash, cash equivalents and the Agreed Value of Contributed Property
which such Member contributes or is deemed to contribute to the Company pursuant
to Section 4.1 or 4.2 and which are intended to be treated as a contribution to
the Company pursuant to Section 721(a) of the Code.

         "Carrying Value" means (a) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property (or in the case of an
Adjusted Property, the fair market value of such property at the time of its
latest adjustment under Section 4.4(d)) reduced (but not below zero) by all
Depreciation with respect to such Contributed Property or Adjusted Property
charged to the Members' Capital Accounts and (b) with respect to any other
Company property, the adjusted basis of such property for Federal income tax
purposes, all as of the time of determination. The Carrying Value of any
property shall be adjusted from time to time in accordance with Section 4.4(d),
and to reflect changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Company Properties, as deemed appropriate by
the Managing Member.

         "Cash Amount" means an amount of cash per Unit equal to the number of
Units offered for redemption by the Redeeming Member (multiplied by the Unit
Adjustment Factor) multiplied by the Value of a Common Share on the Valuation
Date.

         "Certificate" means the Certificate of Formation relating to the
Company filed in the office of the Secretary of State of the State of Delaware,
as amended from time to time in accordance with the terms hereof and the Act.

         "Charter" means the Articles of Incorporation of the Managing Member
filed in the office of the Maryland State Department of Assessments and Taxation
on January 27, 2003, as amended from time to time in accordance with the terms
thereof and the Maryland General Corporation Law, and any successor to such
statute.

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          "Code" means the Internal Revenue Code of 1986, as amended. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.

         "Common Share Rights" has the meaning set forth in Section 4.2(e).

         "Common Shares" means the shares of common stock, $0.01 par value per
share, of the Managing Member.

         "Company" means Strategic Hotel Capital, L.L.C., the limited liability
company formed under the Act and any successor thereto.

         "Company Property" means such interests in real property and personal
property including without limitation, fee interests, interests in ground
leases, interests in joint ventures, interests in mortgages, and Debt
instruments as the Company may hold from time to time.

         "Consent" means the consent or approval of a proposed action by a
Member given in accordance with Section 14.1.

         "Contributed Property" means each property or other asset (but
excluding cash and cash equivalents), in such form as may be permitted by the
Act contributed or deemed contributed to the Company. Once the Carrying Value of
a Contributed Property is adjusted pursuant to Section 4.4, such property shall
no longer constitute a Contributed Property, but shall be deemed an Adjusted
Property for purposes of Section 4.4.

         "Debt" means, as to any Person, as of any date of determination, (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and title
thereto or the completion of such services, (b) all amounts owed by such Person
to banks or other Persons in respect of reimbursement obligations under letters
of credit, surety bonds and other similar instruments guaranteeing payment or
other performance of obligations by such Person, (c) all indebtedness for
borrowed money or for the deferred purchase price of property or services
secured by any lien on any property owned by such Person, to the extent
attributable to such Person's interest in such property, even though such Person
has not assumed or become liable for the payment thereof, (d) lease obligations
of such Person which, in accordance with generally accepted accounting
principles, should be capitalized and (e) all guarantees and other contingent
obligations of such Person with respect to Debt of others.

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

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         "Effective Date" means the date of closing of the initial public
offering of the Common Shares upon which date the contributions set forth on
Exhibit A shall become effective.

         "Events of Dissolution" has the meaning set forth in Section 13.1.

         "Exchange Act" has the meaning set forth in Section 7.1(a)(2).

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "Formation and Structuring Transactions" means the transactions
outlined in Exhibit A to the Structuring and Contribution Agreement.

         "IRS" means the Internal Revenue Service, which is charged with
administering the internal revenue laws of the United States.

         "Immediate Family" means, with respect to any natural Person, such
natural Person's spouse, parents, grandparents, descendants (including adopted
children and step-children), nephews, nieces, brothers, and sisters.

         "Incapacity" or "Incapacitated" means, (a) as to any individual Member,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his Person or his estate, (b) as to any
corporation that is a Member, the filing of a certificate of dissolution, or its
equivalent, for the corporation or the revocation of its charter, (c) as to any
partnership that is a Member, the dissolution and commencement of winding up of
the partnership, (d) as to any estate that is a Member, the distribution by the
fiduciary of the estate's entire interest in the Company, (e) as to trust that
is a Member, the termination of the trust (but not the substitution of a new
trustee), or (f) as to any Member, the Bankruptcy of such Member.

         "Indemnitee" means (a) any Person made a party to a proceeding by
reason of his status as (i) the Managing Member (including as a guarantor of any
Membership Debt) or (ii) an officer of the Company or a director or officer of
the Managing Member, and (b) such other Persons (including Affiliates of the
Managing Member or the Company) as the Managing Member may designate from time
to time, in its sole and absolute discretion.

         "Liquidating Transaction" means any sale or other disposition of all or
substantially all of the assets of the Company or a related series of
transactions that, taken together, results in the sale or other disposition of
all or substantially all of the assets of the Company.

         "Liquidator" has the meaning set forth in Section 13.2.

         "Managing Member" means Strategic Hotel Capital, Inc., a Maryland
corporation, and its successors as a Managing Member of the Company in
accordance with the terms of this Agreement.

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         "Managing Membership Interest" means a Membership Interest held by the
Managing Member (including any Membership Interest acquired by the Managing
Member pursuant to Section 4.2 hereof) that is a Managing Membership interest
and includes any and all benefits to which the Managing Member may be entitled
and all obligations of the Managing Member hereunder. A Managing Membership
Interest may be expressed as a number of Membership Units. All Membership Units
held by the Managing Member shall be deemed to be the Managing Member Interest.

         "Member" means individually, the Managing Member or a Non-Managing
Member, and "Members" means collectively, the Managing Member and the
Non-Managing Members.

         "Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).

         "Member Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).

         "Member Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Member Nonrecourse
Deductions with respect to a Member Nonrecourse Debt for a Membership Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(i)(2).

         "Membership Interest" means an ownership interest in the Company
representing a Capital Contribution by either a Non-Managing Member or the
Managing Member and includes any and all benefits to which the holder of such a
Membership Interest may be entitled as provided in this Agreement, together with
all obligations of such Person to comply with the terms and provisions of this
Agreement. A Membership Interest may be expressed as a number of Membership
Units.

         "Membership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Membership Minimum Gain, as well as any
net increase or decrease in Membership Minimum Gain, for a Membership Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(d).

         "Membership Record Date" means the record date established by the
Managing Member for the distribution of Available Cash pursuant to Section 5.1
hereof, which record date shall be the same as the record date established by
the Managing Member for a distribution to its shareholders of some or all of its
portion of such distribution, and also means any record date established by the
Managing Member in connection with any vote or consent of the Non-Managing
Members pursuant to this Agreement.

         "Membership Unit" or "Unit" means a fractional, undivided share of the
Membership Interests of all Members issued pursuant to Sections 4.1 and 4.2, in
such number as set forth on Exhibit A, as such Exhibit may be amended from time
to time. Any rights and preferences or other obligations with respect to Units
as may be authorized hereunder shall be set forth in Exhibit C hereto.

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         "Membership Year" means the fiscal year of the Company, which shall be
the calendar year.

         "Minimum Tax Distribution" means an amount per Membership Unit (other
than Preferred Units) for each calendar quarter for each taxable year of the
Company equal to the product of (i) the sum of (a) the greater of the highest
marginal Federal income tax rate for such taxable year applicable to (x)
individuals or (y) large, widely-held corporations and (b) the highest combined
marginal state and local income tax rates for such taxable year for the state
and city with the highest marginal income tax rates and (ii) the taxable income
allocable to each Membership Unit for such calendar quarter as reasonably
estimated by the Company.

         "Net Income" means for any taxable period, the excess, if any, of the
Company's items of income and gain for such taxable period over the Company's
items of loss and deduction for such taxable period. The items included in the
calculation of Net Income shall be determined in accordance with Section 4.4.
Once an item of income, gain, loss or deduction that has been included in the
initial computation of Net Income is subjected to the special allocation rules
in Sections 6.3 and 6.4, Net Income or the resulting Net Loss, whichever the
case may be, shall be recomputed without regard to such item.

         "Net Loss" means for any taxable period, the excess, if any, of the
Company's items of loss and deduction for such taxable period over the Company's
items of income and gain for such taxable period. The items included in the
calculation of Net Loss shall be determined in accordance with Section 4.4. Once
an item of income, gain, loss or deduction that has been included in the initial
computation of Net Loss is subjected to the special allocation rules in Sections
6.3 and 6.4, Net Loss or the resulting Net Income, whichever the case may be,
shall be recomputed without regard to such item.

         "New Securities" has the meaning set forth in Section 4.2(c).

         "Non-Managing Member" means any Person named as a Non-Managing Member
on Exhibit A, as such Exhibit may be amended from time to time, including any
Substituted Non-Managing Member or Additional Non-Managing Member, in such
Person's capacity as a Non-Managing Member in the Company.

         "Non-Managing Membership Interest" means a Membership Interest held by
a Non-Managing Member representing a fractional part of the Membership Interests
of all Non-Managing Members and includes any and all benefits to which such
Non-Managing Member may be entitled and all obligations of such Non-Managing
Member hereunder. A Non-Managing Membership Interest may be expressed as a
number of Membership Units.

         "Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Members pursuant to Section 6.4(b) if such properties
were disposed of in a taxable transaction in full satisfaction of such
liabilities and for no other consideration.

<PAGE>

         "Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Membership
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).

         "Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).

         "Notice of Redemption" means a Notice of Redemption substantially in
the form of Exhibit D.

         "Option Plans" means the option plans for Common Shares or Units, as
the case may be, restricted share plans or employee benefit plans established
by, or for the benefit of the employees of, the Managing Member, the Company or
any Subsidiary.

         "Percentage Interest" means, as to any Member, its interest in the
Company as determined by dividing the Membership Units owned by such Member by
the total number of Membership Units then outstanding and as specified on
Exhibit A, as such Exhibit may be amended from time to time.

         "Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company, estate or
other entity.

         "Plan Asset Regulation" means the regulations promulgated by the United
States Department of Labor in Title 29, Code of Federal Regulations, Part 2510,
Section 101.3, and any successor regulations thereto.

         "Preferred Shares" has the meaning set forth in Section 4.2(c).

         "Qualified REIT Subsidiary" means any Subsidiary of the Managing Member
that is a "qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code.

         "Recapture Income" means any gain recognized by the Company (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Company, which gain
is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.

         "Recourse Liabilities" has the meaning set forth in Regulations Section
1.752-1(a)(1).

         "Redeeming Member" shall have the meaning as set forth in Section
4.2(e)(1).

         "Redemption Right" shall have the meaning as set forth in Section
4.2(e)(1).

         "REIT" means a real estate investment trust under Section 856 of the
Code.

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         "REIT Requirements" shall have the meaning set forth in Section 5.1.

         "Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

         "Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Company recognized for Federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.4(b)(1)(i) or 6.4(b)(2)(i) to eliminate Book-Tax
Disparities.

         "704(c) Value" of any Contributed Property means the value of such
property as set forth on Exhibit B, or if no value is set forth on Exhibit B,
the fair market value of such property or other consideration at the time of
contribution as determined by the Managing Member using such reasonable method
of valuation as it may adopt. Subject to Section 4.4, the Managing Member shall
use such method as it deems reasonable and appropriate to allocate the aggregate
of the 704(c) Value of Contributed Properties among each separate property on a
basis proportional to its fair market value.

         "Shares" means any Common Shares, of any class, and Preferred Shares
issued to a Non-Managing Member pursuant to Section 4.2(e).

         "Shares Amount" shall mean a number of Common Shares equal to the
number of Units offered for redemption by a Redeeming Member, multiplied by the
Unit Adjustment Factor.

         "Specified Redemption Date" means the tenth Business Day after receipt
by the Managing Member of a Notice of Redemption.

         "Structuring and Contribution Agreement" means the Structuring and
Contribution Agreement, dated as of February 13, 2004, by and among the Company,
Strategic Hotel Capital, L.L.C. and the other parties thereto.

         "Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of (a) the voting power of the voting equity
securities or (b) the outstanding equity interests is owned, directly or
indirectly, by such Person.

         "Substituted Non-Managing Member" means a Person who is admitted as a
Non-Managing Member to the Company pursuant to Section 11.4.

         "Tendered Units" shall have the meaning set forth in Section 4.2(e)(1).

         "Transaction" has the meaning set forth in Section 11.2(c).

         "Unit Adjustment Factor" means initially 1.0, unless provided otherwise
in Exhibit C with respect to any specific class or series of Membership Units
issued after the date hereof; provided, however, that in the event that the
Managing Member (a) declares or pays a dividend on its outstanding Common Shares
in Common Shares or makes a distribution to all holders of its outstanding
Common Shares in Common Shares, (b) subdivides its outstanding Common Shares, or
(c) combines its outstanding Common Shares into a smaller number of Common
Shares, the Unit Adjustment Factor, as applicable, shall be adjusted by
multiplying the Unit Adjustment Factor by a fraction, the numerator of which
shall be the number of Common Shares issued and outstanding on the record date
(assuming for such purposes that such dividend, distribution, subdivision or
combination has occurred as of such time), and the denominator of which shall be
the actual number of Common Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination. Any adjustment to the Unit Adjustment Factor shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event. Any adjustment to the Unit
Adjustment Factor shall be carried forward to successive adjustments.

<PAGE>

         "Unrealized Gain" attributable to any item of Company Property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property (as determined under Section 4.4) as of such date, over
(b) the Carrying Value of such property (prior to any adjustment to be made
pursuant to Section 4.4) as of such date.

         "Unrealized Loss" attributable to any item of Company Property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Section 4.4) as
of such date, over (b) the fair market value of such property (as determined
under Section 4.4) as of such date.

         "Valuation Date" means the date of receipt by the Managing Member of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.

         "Value" means, with respect to a Common Share, of any class, the
average of the daily market price for the twenty (20) consecutive trading days
immediately preceding the Valuation Date. The market price for each such trading
day shall be: (a) if the Common Shares are listed or admitted to trading on any
securities exchange or the NASDAQ-National Market System, the closing price,
regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices on such day; (b) if the Common
Shares are not listed or admitted to trading on any securities exchange or the
NASDAQ-National Market System, the last reported sale price on such day or, if
no sale takes place on such day, the average of the closing bid and asked prices
on such day, as reported by a reliable quotation source designated by the
Managing Member; or (c) if the Common Shares are not listed or admitted to
trading on any securities exchange or the NASDAQ-National Market System and no
such last reported sale price or closing bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reliable quotation source designated by the Managing Member, or if there
shall be no bid and asked prices on such day, the average of the high bid and
low asked prices, as so reported, on the most recent day (not more than 20 days
prior to the date in question) for which prices have been so reported; provided,
however, that if there are no bid and asked prices reported during the 20 days
prior to the date in question, the Value of the Common Shares shall be
determined by the Managing Member acting in good faith on the basis of such
quotations and other information as it considers, in its judgment, appropriate.
In the event a holder of Common Shares, of any class, would be entitled to
receive Common Share Rights, then the Value of such Common Share Rights shall be
determined by the Managing Member acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.

<PAGE>

                                   ARTICLE II
                             ORGANIZATIONAL MATTERS

         Section 2.1       Organization and Continuation; Application of Act.

                  (a) Organization and Continuation of Company. The Managing
         Member and the Non-Managing Members do hereby continue the Company as a
         limited liability company according to all of the terms and provisions
         of this Agreement and otherwise in accordance with the Act. The
         Managing Member is the sole Managing Member and the Non-Managing
         Members are the sole Non-Managing Members of the Company.

                  (b) Application of Act. The Company is a limited liability
         company subject to the provisions of the Act and the terms and
         conditions set forth in this Agreement. Except as expressly provided
         herein to the contrary, the rights and obligations of the Members and
         the administration and termination of the Company shall be governed by
         the Act. No Member has any interest in any Company Property and the
         Membership Interests of each Member shall be personal property for all
         purposes.

         Section 2.2 Name. The name of the Company is Strategic Hotel Funding,
L.L.C. The Company's business may be conducted under any other name or names
deemed advisable by the Managing Member, including the name of the Managing
Member or any Affiliate thereof. The words "limited liability company," or
"L.L.C." or similar words or letters shall be included in the Company's name
where necessary for the purposes of complying with the laws of any jurisdiction
that so requires. The Managing Member in its sole and absolute discretion may
change the name of the Company at any time and from time to time and shall
notify the Non-Managing Members of such change in the next regular communication
to the Non-Managing Members; provided, however, that the name of the Company may
not be changed to include the name of any Non-Managing Member, or any variant
thereof, without the written consent of that Non-Managing Member.

         Section 2.3 Registered Office and Agent; Principal Office. The address
of the registered office of the Company in the State of Delaware is located c/o
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808, County of New Castle and the registered agent for service of
process on the Company in the State of Delaware at such registered office is the
Corporation Service Company. The principal office of the Company is located at
77 West Wacker Drive, Suite 4600, Chicago, Illinois 60601, or such other place
as the Managing Member may from time to time designate by notice to the
Non-Managing Members. The Company may maintain offices at such other place or
places within or outside the State of Delaware as the Managing Member deems
advisable.

<PAGE>

         Section 2.4 Term. The term of the Company shall continue until
dissolved pursuant to the provisions of Article XIII or as otherwise provided by
law.

                                   ARTICLE III
                                     PURPOSE

         Section 3.1 Purpose and Business. The purpose and nature of the
business to be conducted by the Company is (a) to conduct any business that may
be lawfully conducted by a limited liability company organized pursuant to the
Act, provided, however, that as long as the Managing Member has determined to
continue to qualify as a REIT, such business shall be limited to and conducted
in such a manner as to permit the Managing Member at all times to be classified
as a REIT for federal income tax purposes, unless the Managing Member ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Company, (b) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or the ownership of interests in
any entity engaged in any of the foregoing and (c) to do anything necessary or
incidental to the foregoing which, in each case, is not in breach of this
Agreement.

         Section 3.2 Powers. The Company is empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Company including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property;
provided, however, that as long as the Managing Member has determined to
continue to qualify as a REIT, the Company shall not take, or refrain from
taking, any action which, in the judgment of the Managing Member, in its sole
and absolute discretion, (i) could adversely affect the ability of the Managing
Member to continue to qualify as a REIT, (ii) could subject Managing Member to
any taxes under Section 857 or Section 4981 of the Code, or (iii) could violate
any law or regulation of any governmental body or agency having jurisdiction
over the Managing Member or its securities, unless any such action (or inaction)
under (i), (ii) or (iii) shall have been specifically consented to by the
Managing Member in writing.

         Section 3.3 Certain ERISA Matters. Each Member acknowledges that the
Company is intended to qualify as a "real estate operating company" (as such
term is defined in the Plan Asset Regulation). The Managing Member may structure
the investments in, relationships with and conduct with respect to Company
Properties and any other assets of the Company so that the Company will be a
"real estate operating company" (as such term is defined in the Plan Asset
Regulation).

<PAGE>

                                   ARTICLE IV
                    CAPITAL CONTRIBUTIONS; ISSUANCE OF UNITS;
                                CAPITAL ACCOUNTS

         Section 4.1       Capital Contributions of the Members.

                  (a) Initial Capital Contributions. At the time of the
         execution of this Agreement, the Members shall make or shall have made
         the Capital Contributions set forth in Exhibit A to this Agreement. The
         Members shall own Membership Units in the amounts set forth on Exhibit
         A and shall have a Percentage Interest in the Company as set forth on
         Exhibit A, which Percentage Interest shall be adjusted on Exhibit A
         from time to time by the Managing Member to the extent necessary to
         reflect accurately redemptions, conversions, Capital Contributions, the
         issuance of additional Membership Units, or similar events having an
         effect on a Member's Percentage Interest. The ownership of Membership
         Units may be evidenced by the form of certificates for units
         substantially in the form of Exhibit E; provided, however, that the
         Managing Member may provide that some or all of any or all classes or
         series of the Membership Units shall be uncertificated. Each
         certificate for Membership Units shall be consecutively numbered or
         otherwise identified. Certificates of Membership Units shall be signed
         by or in the name of the Company by the Chief Executive Officer, the
         President or a Vice President and by the Treasurer or an Assistant
         Treasurer or the Secretary or an Assistant Secretary of the Company.
         Where a certificate is countersigned by a transfer agent, other than
         the Company or an employee of the Company, or by a registrar, the
         signatures of one or more officers of the Company may be facsimiles. In
         case any officer, transfer agent or registrar who has signed or whose
         facsimile signature has been placed upon a certificate shall have
         ceased to be such officer, transfer agent or registrar before such
         certificate is issued, the certificate may be issued by the Company
         with the same effect as if such officer, transfer agent or registrar
         were such officer, transfer agent or registrar at the date of its
         issue.

                  (b) Additional Capital Contributions.

                           (1) No Member shall be assessed or, except as
                  provided for in Section 4.1(b)(2) and except for any such
                  amounts which a Non-Managing Member may be obligated to repay
                  under Section 10.5, be required to contribute additional funds
                  or other property to the Company. Any additional funds or
                  other property required by the Company, as determined by the
                  Managing Member in its sole discretion, may, at the option of
                  the Managing Member and without an obligation to do so (except
                  as provided for in Section 4.1(b)(2)), be contributed by the
                  Managing Member as additional Capital Contributions. If and as
                  the Managing Member or any other Member makes additional
                  Capital Contributions to the Company, each such Member shall
                  receive additional Membership Units as provided for in Section
                  4.2.

                           (2) Except to the extent provided in Section 7.5
                  below relating to interests in Company Properties held
                  directly by the Company or through Subsidiaries, the net
                  proceeds of any and all funds raised by or through the
                  Managing Member through the issuance of additional Shares of
                  the Managing Member shall be contributed to the Company as
                  additional Capital Contributions, and in such event the
                  Managing Member shall be issued additional Membership Units
                  pursuant to Section 4.2 below.

<PAGE>

                  (c) Return of Capital Contributions. Except as otherwise
         expressly provided herein, the Capital Contribution of each Member will
         be returned to that Member only in the manner and to the extent
         provided in Article V and Article XIII hereof, and no Member may
         withdraw from the Company or otherwise have any right to demand or
         receive the return of its Capital Contribution to the Company (as
         such), except as specifically provided herein. Under circumstances
         requiring a return of any Capital Contribution, no Member shall have
         the right to receive property other than cash, except as specifically
         provided herein. No Member shall be entitled to interest on any Capital
         Contribution or Capital Account notwithstanding any disproportion
         therein as between the Members. Except as specifically provided herein,
         the Managing Member shall not be liable for the return of any portion
         of the Capital Contribution of any Non-Managing Member, and the return
         of such Capital Contributions shall be made solely from Company assets.

                  (d) Liability of Members. No Member shall have any further
         personal liability to contribute money to, or in respect of, the
         liabilities or the obligations of the Company, nor shall any Member be
         personally liable for any obligations of the Company, except as
         otherwise provided in this Article IV or in the Act.

         Section 4.2       Issuances of Additional Membership Interests.

                  (a) Issuance to Other Than the Managing Member. The Managing
         Member is hereby authorized to cause the Company to issue such
         additional Membership Interests in the form of Membership Units for any
         Company purpose at any time or from time to time, to the Members (other
         than issuances to the Managing Member, which issuances are governed by
         Section 4.2(b) and Section 4.2(c)) or to other Persons for such
         consideration and on such terms and conditions as shall be established
         by the Managing Member in its sole and absolute discretion, all without
         the approval of any Non-Managing Members except to the extent provided
         herein; provided, however, that the Company also may from time to time
         issue to third parties additional Membership Interests (other than any
         such issuance to the Managing Member which is governed by Sections
         4.2(b) and 4.2(c)) in one or more classes, or one or more series of any
         of such classes, with such voting powers, full or limited, or no voting
         powers, and such designations, preferences and relative, participating,
         optional or other special rights, and qualifications, limitations or
         restrictions thereof, including voting powers, designations,
         preferences and relative, participating, optional or other special
         rights, and qualifications, limitations or restrictions senior to
         Non-Managing Membership Interests, as may be set forth in Exhibit C
         attached hereto from time to time, subject to Delaware law, including,
         without limitation, with respect to (i) the allocations of items of
         income, gain, loss, deduction and credit to each such class or series
         of Membership Interests, (ii) the right of each such class or series of
         Membership Interests to share in distributions, and (iii) the rights of
         each such class or series of Membership Interests upon dissolution and
         liquidation of the Company. To the extent more than one class of
         Membership Units is outstanding, the Membership Units in this Agreement
         shall be referred to as Class A Units. To the extent more than one
         class of Common Shares is outstanding, the Common Shares in this
         Agreement shall be referred to as Class A Common Shares.

<PAGE>

                  (b) Issuance to the Managing Member. The Company also may from
         time to time issue to the Managing Member additional Membership Units
         or other Membership Interests in one or more classes, or one or more
         series of any of such classes, with such voting powers, full or
         limited, or no voting powers, and such designations, preferences and
         relative, participating, optional or other special rights, and
         qualifications, limitations or restrictions thereof, including voting
         powers, designations, preferences and relative, participating, optional
         or other special rights, and qualifications, limitations or
         restrictions senior to Non-Managing Membership Interests, as may be set
         forth in Exhibit C attached hereto from time to time, all as shall be
         determined by the Managing Member, subject to Delaware law, including,
         without limitation, with respect to (i) the allocations of items of
         income, gain, loss, deduction and credit to each such class or series
         of Membership Interests, (ii) the right of each such class or series of
         Interests to share in distributions, and (iii) the rights of each such
         class or series of Membership Interests upon dissolution and
         liquidation of the Company; provided, however, that (x) the additional
         Membership Interests are issued in connection with an issuance of
         shares of the Managing Member, which shares have designations,
         preferences and other rights, all such that the economic interests are
         substantially similar to the designations, preferences and other rights
         of the additional Membership Interests issued to the Managing Member in
         accordance with this Section 4.2(b), and (y) the Managing Member shall
         make a Capital Contribution to the Company (1) in an amount equal to
         the net proceeds raised in connection with the issuance of such shares
         of the Managing Member in the event such shares are sold for cash or
         cash equivalents or (2) in the form of the property received in
         consideration for such shares, in the event such shares are issued in
         consideration for other property.

                  (c) Issuance of Additional Common Shares or Preferred Shares.
         The Managing Member is explicitly authorized to issue additional Common
         Shares, of any class, or preferred shares of beneficial interest of the
         Managing Member ("Preferred Shares"), or rights, options, warrants or
         convertible or exchangeable securities containing the right to
         subscribe for or purchase Common Shares, of any class, or Preferred
         Shares ("New Securities") and in connection therewith, as further
         provided in Section 4.2(b), (i) the Managing Member shall cause the
         Company to issue to the Managing Member Membership Interests or rights,
         options, warrants or convertible or exchangeable securities of the
         Company having designations, preferences and other rights, as may be
         set forth on Exhibit C attached hereto from time to time, all such that
         the economic interests are substantially similar to those of the New
         Securities, and (ii) the Managing Member shall contribute the net
         proceeds from, or the property received in consideration for, the
         issuance of such New Securities and from the exercise of rights
         contained in such New Securities to the Company. In connection with the
         issuance of Membership Interests which are substantially similar to New
         Securities, the Managing Member is authorized to modify or amend the
         distributions or allocations hereunder solely to the extent necessary
         to give effect to the designations, preferences and other rights
         pertaining to such Membership Interests.

<PAGE>

                  (d) Issuance Pursuant to Option Plans.

                           (1) Upon the exercise of an option granted by the
                  Managing Member for Common Shares, of any class, the Managing
                  Member shall cause the Company to issue to the Managing Member
                  one Membership Unit for each such Common Share acquired upon
                  such exercise pursuant to the Option Plans (or such other
                  number of Membership Units based on the relationship a
                  different class of Common Shares bears to Common Shares), and
                  the Managing Member shall contribute to the Company the net
                  proceeds received upon such exercise (it being understood that
                  the Managing Member may issue Common Shares in connection with
                  the Option Plans without receiving a specified amount of
                  proceeds and that the issuance of such Common Shares shall
                  nonetheless entitle the Managing Member to additional
                  Membership Units).

                           (2) The Managing Member shall cause the Company to
                  issue Membership Units to employees of the Company upon the
                  exercise by any such employees of an option to acquire
                  Membership Units granted by the Company pursuant to the Option
                  Plans in accordance with the terms of the Option Plans.
                  Membership Units so issued shall represent Non-Managing
                  Membership Interests.

                           (3) The Managing Member shall cause the Company to
                  issue Membership Units to any Subsidiary upon the exercise by
                  an employee of such Subsidiary of an option to acquire
                  Membership Units granted by such Subsidiary pursuant to the
                  Option Plans, and such Subsidiary shall transfer to the
                  Company the price per Membership Unit required by the Option
                  Plans to be paid by Subsidiaries. Membership Units issued to
                  any such Subsidiary shall represent Non-Managing Membership
                  Interests.

                  (e) Redemption of Units.

                           (1) Subject to the further provisions of this Section
                  4.2(e), and except as otherwise set forth in Exhibit C with
                  respect to any particular class or series of Membership Units
                  issued after the date hereof, each Non-Managing Member shall
                  have the right (i) on or after the date twelve (12) months
                  after the Effective Date, with respect to the Membership Units
                  acquired on or contemporaneously with the Effective Date, or
                  (ii) on or after such other date as expressly provided in
                  any agreement entered into between the Company and any
                  Non-Managing Member, including the Structuring and
                  Contribution Agreement, (the "Redemption Right") to require
                  the Company to redeem on a Specified Redemption Date all or a
                  portion of the Membership Units held by such Non-Managing
                  Member at a redemption price equal to and in the form of the
                  Cash Amount to be paid by the Company. The Redemption Right
                  shall be exercised pursuant to a Notice of Redemption
                  delivered to the Company (with a copy to the Managing Member)
                  by the Non-Managing Member who is exercising the Redemption
                  Right (the "Redeeming Member"); provided, however, that the
                  Company shall not be obligated to satisfy such Redemption
                  Right if the Managing Member elects to purchase the Membership
                  Units subject to the Notice of Redemption (the "Tendered
                  Units"); provided, further, that in the event the Managing
                  Member issues to all holders of Common Shares rights, options,
                  warrants or convertible or exchangeable securities entitling
                  the shareholders to subscribe for or purchase Common Shares,
                  or any other securities or property (collectively, the "Common
                  Share Rights") then (except to the extent such rights have
                  already been reflected in an adjustment to the Unit Adjustment
                  Factor as provided in Section 4.2(e)(2) below) the Redeeming
                  Member shall also be entitled to receive such Common Share
                  Rights that a holder of that number of Common Shares would be
                  entitled to receive. A Non-Managing Member may not exercise
                  the Redemption Right for less than ten thousand (10,000)
                  Membership Units or, if such Non-Managing Member holds less
                  than ten thousand (10,000) Membership Units, all of the
                  Membership Units held by such Non-Managing Member.

<PAGE>

                           (2) Notwithstanding the provisions of Section
                  4.2(e)(1), a Non-Managing Member that exercises the Redemption
                  Right shall be deemed to have offered to sell the Membership
                  Units described in the Notice of Redemption to the Managing
                  Member, and the Managing Member may, in its sole and absolute
                  discretion, elect to assume directly and satisfy a Redemption
                  Right, and acquire some or all of such Membership Units by
                  paying to the Redeeming Member either the Cash Amount, or the
                  Shares Amount, as elected by the Managing Member (in its sole
                  and absolute discretion), on the Specified Redemption Date,
                  whereupon the Managing Member shall acquire the Membership
                  Units offered for redemption by the Redeeming Member. If the
                  Managing Member shall elect to exercise its right to purchase
                  Membership Units under this Section 4.2(e)(2) with respect to
                  a Notice of Redemption, it shall so notify the Redeeming
                  Member promptly after the receipt by the Company of such
                  Notice of Redemption. In the event the Managing Member shall
                  exercise its right to purchase Membership Units with respect
                  to the exercise of a Redemption Right in the manner described
                  in the first sentence of this Section 4.2(e)(2), the Company
                  shall have no obligation to pay any amount to the Redeeming
                  Member with respect to Redeeming Member's exercise of the
                  Redemption Right, and each of the Redeeming Member, the
                  Company and the Managing Member shall treat the transaction
                  between the Managing Member and the Redeeming Member for
                  federal income tax purposes as a sale of the Redeeming
                  Member's Membership Units to the Managing Member.

                           (3) In the event of any change in the Unit Adjustment
                  Factor, the number of Membership Units held by each Member
                  shall be proportionately adjusted by multiplying the number of
                  Membership Units held by such Member immediately prior to the
                  change in the Unit Adjustment Factor by the new Unit
                  Adjustment Factor; the intent of this provision is that one
                  Membership Unit remains equivalent in value to one Common
                  Share without dilution (including any securities for which
                  Shares are exchanged in a transaction contemplated by Section
                  11.2(c)). In the event the Managing Member issues any Common
                  Shares in exchange for Membership Units pursuant to this
                  Section 4.2(e), any such Membership Units so acquired by the
                  Managing Member shall immediately thereafter be canceled by
                  the Company and the Company shall issue to the Managing Member
                  new Membership Units pursuant to Section 4.2(c) hereof. Each
                  Redeeming Member agrees to execute such documents as the
                  Managing Member may reasonably require in connection with the
                  issuance of Common Shares upon exercise of the Redemption
                  Right.

<PAGE>

                           (4) The Shares Amount, if applicable, shall be
                  delivered as duly authorized, validly issued, fully paid and
                  nonassessable Common Shares and, if applicable, free of any
                  pledge, lien, encumbrance or restriction, other than those
                  provided in the Charter, the Bylaws of the Managing Member,
                  the Securities Act, relevant state securities or blue sky laws
                  and any applicable registration rights agreement with respect
                  to such Common Shares entered into by the Redeeming Member.
                  Notwithstanding any delay in such delivery (but subject to
                  Section 4.2(e)(6)), the Redeeming Member shall be deemed the
                  owner of such Common Shares for all purposes, including
                  without limitation, rights to vote or consent, and receive
                  dividends, as of the Specified Redemption Date. In addition,
                  the Common Shares for which the Membership Units might be
                  exchanged shall also bear a legend which generally provides
                  the following:

                           THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
                  SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE
                  OWNERSHIP AND TRANSFER FOR THE PURPOSE, AMONG OTHERS, OF THE
                  CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
                  INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
                  AMENDED (THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS
                  AND EXCEPT AS EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER,
                  (I) NO INDIVIDUAL MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
                  SHARES OF THE CORPORATION'S COMMON STOCK IN EXCESS OF 9.8
                  PERCENT (IN VALUE OR NUMBER OF SHARES) OF THE OUTSTANDING
                  SHARES OF COMMON STOCK OF THE CORPORATION UNLESS SUCH
                  INDIVIDUAL IS AN EXCEPTED HOLDER (IN WHICH CASE THE EXCEPTED
                  HOLDER LIMIT SHALL BE APPLICABLE); (II) NO INDIVIDUAL MAY
                  BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK OF
                  THE CORPORATION IN EXCESS OF 9.8 PERCENT OF THE VALUE OF THE
                  TOTAL OUTSTANDING SHARES OF CAPITAL STOCK OF THE CORPORATION,
                  UNLESS SUCH INDIVIDUAL IS AN EXCEPTED HOLDER (IN WHICH CASE
                  THE EXCEPTED HOLDER LIMIT SHALL BE APPLICABLE); (III) NO
                  PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN CAPITAL STOCK
                  THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
                  UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE
                  CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (IV) NO PERSON
                  MAY TRANSFER SHARES OF CAPITAL STOCK IF SUCH TRANSFER WOULD
                  RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY
                  FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR
                  CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR
                  CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK WHICH CAUSES OR
                  WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN
                  SHARES OF CAPITAL STOCK IN EXCESS OR IN VIOLATION OF THE ABOVE
                  LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF
                  THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE VIOLATED, THE
                  SHARES OF CAPITAL STOCK REPRESENTED HEREBY WILL BE
                  AUTOMATICALLY TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE
                  BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION,
                  THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND
                  CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE
                  DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP
                  OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS
                  DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN
                  EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
                  DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS
                  IN THIS LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE
                  CORPORATION, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A
                  COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND
                  OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF CAPITAL STOCK
                  OF THE CORPORATION ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR
                  SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE
                  CORPORATION AT ITS PRINCIPAL OFFICE.

<PAGE>

                           (5) Each Non-Managing Member covenants and agrees
                  with the Managing Member that all Tendered Units shall be
                  delivered to the Managing Member free and clear of all liens,
                  claims and encumbrances whatsoever and should any such liens,
                  claims and/or encumbrances exist or arise with respect to such
                  Tendered Units, the Managing Member shall be under no
                  obligation to acquire the same. Each Non-Managing Member
                  further agrees that, in the event any state or local property
                  transfer tax is payable solely with respect to its Tendered
                  Units transferred to the Managing Member (or its designee),
                  such Non-Managing Member shall assume and pay such transfer
                  tax.

                           (6) Notwithstanding the provisions of Section 4.2(e)
                  or any other provision of this Agreement, a Member (i) shall
                  not be entitled to effect a Redemption for cash or an exchange
                  for Common Shares to the extent the ownership or right to
                  acquire Common Shares pursuant to such exchange by such Member
                  on the Specified Redemption Date could cause such Member or
                  any other Person to violate the restrictions on ownership and
                  transfer of Common Shares set forth in the Charter and (ii)
                  shall have no rights under this Agreement to acquire Common
                  Shares which would otherwise be prohibited under the Charter.
                  To the extent any attempted redemption or exchange for Common
                  Shares would be in violation of this Section 4.2(e)(6), it
                  shall be null and void ab initio and such Member shall not
                  acquire any rights or economic interest in the cash otherwise
                  payable upon such redemption or the Common Shares otherwise
                  issuable upon such exchange.

<PAGE>

                           (7) Notwithstanding anything herein to the contrary
                  (but subject to Section 4.2(e)(6)), with respect to any
                  redemption or exchange for Common Shares pursuant to this
                  Section 4.2(e):

                                    (i) All Membership Units acquired by the
                  Managing Member pursuant thereto shall automatically, and
                  without further action required, be converted into and deemed
                  to be Managing Member Interests comprised of the same number
                  and class of Membership Units.

                                    (ii) The consummation of any redemption or
                  exchange for Common Shares shall be subject to the expiration
                  or termination of the applicable waiting period, if any, under
                  the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
                  amended.

                                    (iii) Each Redeeming Member shall continue
                  to own all Membership Units subject to any redemption or
                  exchange for Common Shares, and be treated as a Non-Managing
                  Member with respect to such Membership Units for all purposes
                  of this Agreement, until the Specified Redemption Date. Until
                  a Specified Redemption Date, the Redeeming Member shall have
                  no rights as a stockholder of the Managing Member with respect
                  to such Redeeming Member's Membership Units.

         Section 4.3 No Preemptive Rights. Except as specifically provided in
this Agreement, no Person shall have any preemptive, preferential or other
similar right with respect to (a) additional Capital Contributions or loans to
the Company, or (b) issuance or sale of any Membership Units.

         Section 4.4       Capital Accounts of the Members.

                  (a) General. The Company shall maintain for each Member a
         separate Capital Account in accordance with the rules of Regulations
         Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by
         (a) the amount of all Capital Contributions made by such Member to the
         Company pursuant to this Agreement and (b) all items of income and gain
         (including income and gain exempt from tax) computed in accordance with
         Section 4.4(b) hereof and allocated to such Member pursuant to Sections
         6.1 through Section 6.3 of the Agreement, and decreased by (i) the
         amount of cash or Agreed Value of all actual and deemed distributions
         of cash or property made to such Member pursuant to this Agreement and
         (ii) all items of deduction and loss computed in accordance with
         Section 4.4(b) hereof and allocated to such Member pursuant to Sections
         6.1 through Section 6.3 of the Agreement.

<PAGE>

                  (b) Income, Gains, Deductions and Losses. For purposes of
         computing the amount of any item of income, gain, loss or deduction to
         be reflected in the Members' Capital Accounts, unless otherwise
         specified in this Agreement, the determination, recognition and
         classification of any such item shall be the same as its determination,
         recognition and classification for Federal income tax purposes
         determined in accordance with Section 703(a) of the Code (for this
         purpose all items of income, gain, loss or deduction required to be
         stated separately pursuant to Section 703(a)(1) of the Code shall be
         included in taxable income or loss), with the following adjustments:

                           (1) Except as otherwise provided in Regulations
                  Section 1.704-1(b)(2)(iv)(m), the computation of all items of
                  income, gain, loss and deduction shall be made without regard
                  to any election under Section 754 of the Code which may be
                  made by the Company.

                           (2) The computation of all items of income, gain,
                  loss and deduction shall be made without regard to the fact
                  that items described in Sections 705(a)(1)(B) or 705(a)(2)(B)
                  of the Code are not includable in gross income or are neither
                  currently deductible nor capitalized for Federal income tax
                  purposes.

                           (3) Any income, gain or loss attributable to the
                  taxable disposition of any Company Property shall be
                  determined as if the adjusted basis of such property as of
                  such date of disposition were equal in amount to the Company's
                  Carrying Value with respect to such property as of such date.

                           (4) In lieu of the depreciation, amortization, and
                  other cost recovery deductions taken into account in computing
                  such taxable income or loss, there shall be taken into account
                  Depreciation for such fiscal year.

                           (5) In the event the Carrying Value of any Company
                  asset is adjusted pursuant to Section 4.4(d) hereof, the
                  amount of any such adjustment shall be taken into account as
                  gain or loss from the disposition of such asset.

                           (6) Any items specially allocated under Section 6.4
                  hereof shall not be taken into account.

                  (c) Transfers of Membership Units. A transferee of a
         Membership Unit shall succeed to a pro rata portion of the Capital
         Account of the transferor.

                  (d) Unrealized Gains and Losses.

<PAGE>

                           (1) Consistent with the provisions of Regulations
                  Section 1.704-1(b)(2)(iv)(f), and as provided in Section
                  4.4(d)(2), the Carrying Values of all Company assets shall be
                  adjusted upward or downward to reflect any Unrealized Gain or
                  Unrealized Loss attributable to such Company Property, as of
                  the times of the adjustments provided in Section 4.4(d)(2)
                  hereof, as if such Unrealized Gain or Unrealized Loss had been
                  recognized on an actual sale of each such property and
                  allocated pursuant to Section 6.1 of the Agreement.

                           (2) Such adjustments shall be made as of the
                  following times: (i) immediately prior to the acquisition of
                  an additional interest in the Company by any new or existing
                  Member in exchange for more than a de minimis Capital
                  Contribution; (ii) immediately prior to the distribution by
                  the Company to a Member of more than a de minimis amount of
                  Property as consideration for an interest in the Company; and
                  (iii) immediately prior to the liquidation of the Company or
                  the Managing Member's interest in the Company within the
                  meaning of Regulations Section 1.704-l(b)(2)(ii)(g); provided,
                  however, that adjustments pursuant to clauses (i) and (ii)
                  above shall be made only if the Managing Member reasonably
                  determines that such adjustments are necessary or appropriate
                  to reflect the relative economic interests of the Members in
                  the Company.

                           (3) In accordance with Regulations Section
                  1.704-1(b)(2)(iv)(e), the Carrying Values of Company assets
                  distributed in kind shall be adjusted upward or downward to
                  reflect any Unrealized Gain or Unrealized Loss attributable to
                  such Company Property, as of the time any such asset is
                  distributed.

                           (4) In determining such Unrealized Gain or Unrealized
                  Loss the aggregate cash amount and fair market value of all
                  Company assets (including cash or cash equivalents) shall be
                  determined by the Managing Member using such reasonable method
                  of valuation as it may adopt, or in the case of a liquidating
                  distribution pursuant to Article XIII of this Agreement, be
                  determined and allocated by the Liquidator using such
                  reasonable methods of valuation as it may adopt. The Managing
                  Member, or the Liquidator, as the case may be, shall allocate
                  such aggregate value among the assets of the Company (in such
                  manner as it determines in its sole and absolute discretion to
                  arrive at a fair market value for individual properties).

                  (e) Modification by Managing Member. The provisions of this
         Agreement relating to the maintenance of Capital Accounts are intended
         to comply with Regulations issued under Sections 704(b) and 514 (c)(9)
         of the Code, and shall be interpreted and applied in a manner
         consistent with such Regulations. In the event the Managing Member
         shall determine that it is prudent to modify the manner in which the
         Capital Accounts, or any debits or credits thereto (including, without
         limitation, debits or credits relating to liabilities which are secured
         by contributed or distributed property or which are assumed by the
         Company, the Managing Member, or any Non-Managing Members) are computed
         in order to comply with such Regulations, the Managing Member may make
         such modification; provided, however, that it will not have a material
         effect on the amounts distributable to any Person pursuant to Article
         XIII of this Agreement upon the liquidation of the Company. The
         Managing Member also shall (a) make any adjustments that are necessary
         or appropriate to maintain equality between the Capital Accounts of the
         Members and the amount of Company capital reflected on the Company's
         balance sheet, as computed for book purposes, in accordance with
         Regulations Section 1.704-1(b)(2)(iv)(q), and (b) make any appropriate
         modifications in the event unanticipated events might otherwise cause
         this Agreement not to comply with Regulations Section 1.704-1(b).

<PAGE>

                                    ARTICLE V
                                  DISTRIBUTIONS

         Section 5.1 Requirement and Characterization of Distributions. The
Managing Member shall cause the Company to distribute quarterly all, or such
portion as the Managing Member may in its discretion determine, of Available
Cash among the Members (i) first, with respect to any class of Membership
Interests issued pursuant to Section 4.2(a) or 4.2(b) which are entitled to a
preference over Membership Units on the distribution of Available Cash and are
specially allocated items under Section 6.1 prior to allocated items with
respect to amounts distributed pursuant to clause (ii) below (and within and
among such classes, in order of the preferences designated therein and pro rata
among any such classes), and (ii) thereafter, pro rata in accordance with their
respective Percentage Interests from time to time as determined by the Managing
Member; provided that Available Cash for each calendar quarter shall be
distributed on the last Business Day of March, June, September and December of
each year in an amount with respect to each Membership Unit equal to the Minimum
Tax Distribution; provided, however, that in no event may a Member receive a
distribution of Available Cash with respect to a Unit if such Member is entitled
to receive a dividend from the Managing Member which is derived from a
distribution of Available Cash to the Managing Member with respect to a Common
Share for which such Unit has been redeemed or exchanged. In the event the
Company is subject to any tax or other obligation that is attributable to the
interest of one or more Members in the Company, but fewer than all the Members,
such tax or other obligation shall be specially allocated to, and charged
against the Capital Account of, such Member or Members, and the amounts
otherwise distributable to such Member or Members pursuant to this Agreement
shall be reduced by such amount. The Managing Member shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with its qualification as a REIT, to cause the Company to distribute sufficient
amounts to enable the Managing Member, for so long as the Managing Member has
determined to qualify as a REIT, to pay stockholder dividends that will (a)
satisfy the requirements for qualifying as a REIT under the Code and Regulations
("REIT Requirements"), and (b) except to the extent otherwise determined by the
Managing Member, avoid any federal income or excise tax liability of the
Managing Member.

         Section 5.2 Amounts Withheld. All amounts withheld pursuant to the Code
or any provisions of any state or local tax law and Section 10.5 hereof with
respect to any allocation, payment or distribution to the Managing Member, or
any Non-Managing Members or Assignees shall be treated as amounts distributed to
the Managing Member or such Non-Managing Members, or Assignees pursuant to
Section 5.1 for all purposes under this Agreement.

<PAGE>

         Section 5.3 Distributions Upon Liquidation. Proceeds from a Liquidating
Transaction shall be distributed to the Members in accordance with Section 13.2.

         Section 5.4 Initial Structuring Distributions. Notwithstanding any
provisions to the contrary contained elsewhere in this Agreement, the following
distributions by the Company to Strategic Hotel Capital, L.L.C. are hereby
authorized, approved and ratified: (i) the Company's general partnership
interests in SHCLP and Strategic Hotel Capital Limited Partnership II, (ii)
$[_______] million of available cash and (iii) the Company's interests in the
Private Pool Properties (as such term is defined in the Structuring and
Contribution Agreement).

                                   ARTICLE VI
                                   ALLOCATIONS

         Section 6.1 Allocations For Capital Account Purposes Other than the
Taxable Year of Liquidation. Subject to a preferential allocation of gain or net
income to any class of Membership Interests issued pursuant to Section 4.2(a) or
4.2(b) which are entitled to a preference over Membership Units on the
distribution of Available Cash, for purposes of maintaining the Capital Accounts
and in determining the rights of the Members among themselves, the Company's
items of income, gain, loss and deduction (computed in accordance with Section
4.4 hereof) shall be allocated among the Members for each taxable year (or
portion thereof) as provided herein below:

                  (a) Net Income. After giving effect to the special allocations
         set forth in Sections 6.2 and 6.3 below, Net Income shall be allocated
         to the Members in accordance with their respective Percentage
         Interests.

                  (b) Net Losses. After giving effect to the special allocations
         set forth in Sections 6.2 and 6.3 below, Net Losses shall be allocated
         to the Members in accordance with their respective Percentage
         Interests.

                  (c) Nonrecourse Liabilities. For purposes of Regulations
         Section 1.752-3(a), the Members agree that Nonrecourse Liabilities of
         the Company in excess of the sum of (i) the amount of Membership
         Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain
         shall be allocated among the Members in the manner determined by the
         Managing Member, provided that such allocation shall be permissible
         under Regulations Section 1.752-3.

                  (d) Gains. Any gain allocated to the Members upon the sale or
         other taxable disposition of any Company asset shall to the extent
         possible, after taking into account other required allocations of gain
         pursuant to Section 6.3 below, be characterized as Recapture Income in
         the same proportions and to the same extent as such Members have been
         allocated any deductions directly or indirectly giving rise to the
         treatment of such gains as Recapture Income, all in such a manner
         consistent with Regulation Section 1.1245-1.

<PAGE>

         Section 6.2 Allocations for Capital Account Purposes in the Taxable
Year of Liquidation. Subject to Section 6.3, the Net Income and Net Loss of the
Company for the taxable year of liquidation of the Company shall be allocated
prior to the final liquidating distributions of the Company and shall be
allocated first to eliminate any Member's Adjusted Capital Account Deficit and
then, to the extent permissible under Sections 704(b) and 514(c)(9) of the Code,
in a manner such that the Capital Accounts of the Members immediately prior to
such final liquidating distributions are equal to the amount which would have
been distributable to the Members under Section 5.1 if such distributions were
to be governed by Section 5.1. Notwithstanding the preceding sentence, actual
distributions made subsequent to the allocations under this Section 6.2 shall be
made pursuant to Section 5.3.

         Section 6.3 Special Allocation Rules. Notwithstanding any other
provision of this Agreement, the following special allocations shall be made in
the following order:

                  (a) Minimum Gain Chargeback. Notwithstanding any other
         provisions of Article VI, if there is a net decrease in Membership
         Minimum Gain during any Membership Year, each Member shall be specially
         allocated items of Company income and gain for such year (and, if
         necessary, subsequent years) in an amount equal to such Member's share
         of the net decrease in Membership Minimum Gain, as determined under
         Regulations Section 1.704-2(g). Allocations pursuant to the previous
         sentence shall be made in proportion to the respective amounts required
         to be allocated to each Member pursuant thereto. The items to be so
         allocated shall be determined in accordance with Regulations Section
         1.704-2(f)(6). This Section 6.3(a) is intended to comply with the
         minimum gain chargeback requirements in Regulations Section 1.704-2(f)
         and for purposes of this Section 6.3(a) only, each Member's Adjusted
         Capital Account Deficit shall be determined prior to any other
         allocations pursuant to Section 6.1 of the Agreement with respect to
         such fiscal year and without regard to any decrease in Member Minimum
         Gain during such fiscal year.

                  (b) Member Minimum Gain Chargeback. Notwithstanding any other
         provision of Article VI (except Section 6.3(a) hereof), if there is a
         net decrease in Member Minimum Gain attributable to a Member
         Nonrecourse Debt during any Membership Year, each Member who has a
         share of the Member Minimum Gain attributable to such Member
         Nonrecourse Debt, determined in accordance with Regulations Section
         1.704-2(i)(5), shall be specially allocated items of Company income and
         gain for such year (and, if necessary, subsequent years) in an amount
         equal to such Member's share of the net decrease in Member Minimum Gain
         attributable to such Member Nonrecourse Debt, determined in accordance
         with Regulations Section 1.704-2(i)(5). Allocations pursuant to the
         previous sentence shall be made in proportion to the respective amounts
         required to be allocated to each Member pursuant thereto. The items to
         be so allocated shall be determined in accordance with Regulations
         Section 1.704-2(i)(4). This Section 6.3(b) is intended to comply with
         the minimum gain chargeback requirement in such Section of the
         Regulations and shall be interpreted consistently therewith. Solely for
         purposes of this Section 6.3(b), each Member's Adjusted Capital Account
         Deficit shall be determined prior to any other allocations pursuant to
         Article VI of this Agreement with respect to such fiscal year, other
         than allocations pursuant to Section 6.3(a) hereof.

<PAGE>

                  (c) Qualified Income Offset. In the event any Member
         unexpectedly receives any adjustments, allocations or distributions
         described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
         1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), and after giving
         effect to the allocations required under Sections 6.3(a) and 6.3(b)
         hereof, such Member has an Adjusted Capital Account Deficit, items of
         Company income and gain shall be specially allocated to such Member in
         an amount and manner sufficient to eliminate, to the extent required by
         the Regulations, its Adjusted Capital Account Deficit created by such
         adjustments, allocations or distributions as quickly as possible. It is
         intended that this Section 6.3(c) qualify and be construed as a
         "qualified income offset" within the meaning of Regulations
         1.704-1(b)(2)(ii)(d), which shall be controlling in the event of a
         conflict between such Regulations and this Section 6.3(c).

                  (d) Nonrecourse Deductions. Nonrecourse Deductions for any
         taxable period shall be allocated to the Members in the manner
         determined by the Managing Member, provided that such allocation shall
         be permissible under Section 704(b) of the Code.

                  (e) Member Nonrecourse Deductions. Any Member Nonrecourse
         Deductions for any fiscal year shall be specially allocated to the
         Member who bears the economic risk of loss with respect to the Member
         Nonrecourse Debt to which such Member Nonrecourse Deductions are
         attributable in accordance with Regulations Sections 1.704-2(b)(4) and
         1.704-2(i)(2).

                  (f) Code Section 754 Adjustments. To the extent an adjustment
         to the adjusted tax basis of any Company asset pursuant to Section
         734(b) or 743(b) of the Code is required, pursuant to Regulations
         Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
         Capital Accounts, the amount of such adjustment to the Capital Accounts
         shall be specially allocated to the Members in a manner consistent with
         the manner in which their Capital Accounts are required to be adjusted
         pursuant to such Section of the Regulations.

         Section 6.4       Allocations for Tax Purposes.

                  (a) General. Except as otherwise provided in this Section 6.4,
         for Federal income tax purposes, each item of income, gain, loss and
         deduction shall be allocated among the Members in the same manner as
         its correlative item of "book" income, gain, loss or deduction is
         allocated pursuant to Sections 6.1 and 6.3 of this Agreement.

<PAGE>

                  (b) To Eliminate Book-Tax Disparities. In an attempt to
         eliminate Book-Tax Disparities attributable to a Contributed Property
         or Adjusted Property, items of income, gain, loss, and deduction shall
         be allocated for Federal income tax purposes among the Members as
         follows:

                           (1) (i) In the case of a Contributed Property, such
                  items attributable thereto shall be allocated among the
                  Members consistent with the principles of Section 704(c) of
                  the Code in a manner that takes into account the variation
                  between the 704(c) Value of such property and its adjusted
                  basis at the time of contribution, and (ii) any item of
                  Residual Gain or Residual Loss attributable to a Contributed
                  Property shall be allocated among the Members in the same
                  manner as its correlative item of "book" gain or loss is
                  allocated pursuant to Sections 6.1 and 6.3 of this Agreement.

                           (2) (i) In the case of an Adjusted Property, such
                  items shall (A) first, be allocated among the Members in a
                  manner consistent with the principles of Section 704(c) of the
                  Code in a manner to take into account the Unrealized Gain or
                  Unrealized Loss attributable to such property and the
                  allocations thereof pursuant to Section 4.4 and (B) second, in
                  the event such property was originally a Contributed Property,
                  be allocated among the Members in a manner consistent with
                  Section 6.4(b)(1)(i), and (ii) any item of Residual Gain or
                  Residual Loss attributable to an Adjusted Property shall be
                  allocated among the Members in the same manner as its
                  correlative item of "book" gain or loss is allocated pursuant
                  to Sections 6.1 and 6.4 of this Agreement.

                           (3) All other items of income, gain, loss and
                  deduction shall be allocated among the Members in the same
                  manner as their correlative item of "book" gain or loss is
                  allocated pursuant to Sections 6.1 and 6.3 of this Agreement.

                  (c) Power of Managing Member to Elect Method. To the extent
         Treasury Regulations promulgated pursuant to Section 704(c) of the Code
         permit a partnership to utilize alternative methods to eliminate the
         disparities between the agreed value of property and its adjusted
         basis, and subject to any agreements existing between the Company and
         any Member or Members prior to the date hereof, the Managing Member
         shall have the authority to elect the method to be used by the Company
         and such election shall be binding on all Members.

<PAGE>

                                   ARTICLE VII
                      MANAGEMENT AND OPERATION OF BUSINESS

         Section 7.1       Management.

                  (a) Powers of Managing Member. Except as otherwise expressly
         provided in this Agreement, all management powers over the business and
         affairs of the Company are exclusively vested in the Managing Member,
         and no Non-Managing Member shall have any right to participate in or
         exercise control or management power over the business and affairs of
         the Company. Notwithstanding anything to the contrary in this
         Agreement, the Managing Member may not be removed by the Non-Managing
         Members with or without cause. In addition to the powers now or
         hereafter granted a Managing Member of a limited liability company
         under applicable law or which are granted to the Managing Member under
         any other provision of this Agreement, the Managing Member, subject to
         Section 7.3 hereof, shall have full power and authority to do all
         things deemed necessary or desirable by it to conduct the business of
         the Company, to exercise all powers set forth in Section 3.2 hereof and
         to effectuate the purposes set forth in Section 3.1 hereof including,
         without limitation:

                           (1) the making of any expenditures (including,
                  without limitation, making prepayments on loans and borrowing
                  money to permit the Company to make distributions to its
                  Members in such amounts as will permit the Managing Member (so
                  long as the Managing Member has determined to qualify as a
                  REIT) to avoid the payment of any federal income tax
                  (including, for this purpose, any excise tax pursuant to
                  Section 4981 of the Code) and to make distributions to its
                  stockholders sufficient to permit the Managing Member to
                  maintain REIT status), the lending or borrowing of money, the
                  assumption or guarantee of, or other contracting for,
                  indebtedness and other liabilities, the issuance of evidences
                  of indebtedness (including the securing of same by mortgage,
                  deed of trust or other lien or encumbrance on the Company's
                  assets) and the incurring of any obligations it deems
                  necessary for the conduct of the activities of the Company;

                           (2) the making of tax, regulatory and other filings,
                  or rendering of periodic or other reports to the New York
                  Stock Exchange, governmental or other agencies having
                  jurisdiction over the business or assets of the Company, the
                  registration of any class of securities of the Company under
                  the Securities Exchange Act of 1934, as amended (the "Exchange
                  Act"), and the listing of any debt securities of the Company
                  on any exchange;

                           (3) subject to Section 7.12, the acquisition,
                  disposition, sale, conveyance, mortgage, pledge, encumbrance,
                  hypothecation, contribution or exchange of any assets of the
                  Company or the merger or other combination of the Company with
                  or into another entity on such terms as the Managing Member
                  deems proper;

<PAGE>

                           (4) the use of the assets of the Company (including,
                  without limitation, cash on hand) for any purpose consistent
                  with the terms of this Agreement and on any terms it sees fit
                  including, without limitation, the financing of the conduct of
                  the operations of the Managing Member, the Company or any of
                  the Company's Subsidiaries, the lending of funds to other
                  Persons (including, the Managing Member or any of the
                  Company's Subsidiaries) and the repayment of obligations of
                  the Company and its Subsidiaries and any other Person in which
                  it has an equity investment and the making of capital
                  contributions to its Subsidiaries, the holding of any real,
                  personal and mixed property of the Company in the name of the
                  Company or in the name of a nominee or trustee (subject to
                  Section 7.10), the creation, by grant or otherwise, of
                  easements or servitudes, and the performance of any and all
                  acts necessary or appropriate to the operation of the Company
                  assets including, but not limited to, applications for
                  rezoning, objections to rezoning, constructing, altering,
                  improving, repairing, renovating, rehabilitating, razing,
                  demolishing or condemning any improvements or property of the
                  Company or any Subsidiary of the Company;

                           (5) the negotiation, execution, and performance of
                  any contracts, conveyances or other instruments (including
                  with Affiliates of the Company to the extent provided in
                  Section 7.6) that the Managing Member considers useful or
                  necessary to the conduct of the Company's operations or the
                  implementation of the Managing Member's powers under this
                  Agreement including, without limitation, the execution and
                  delivery of leases on behalf of or in the name of the Company
                  (including the lease of Company Property for any purpose and
                  without limit as to the term thereof, whether or not such term
                  (including renewal terms) shall extend beyond the date of
                  termination of the Company and whether or not the portion so
                  leased is to be occupied by the lessee or, in turn, subleased
                  in whole or in part to others);

                           (6) the opening and closing of bank accounts, the
                  investment of Company funds in securities, certificates of
                  deposit and other instruments, and the distribution of Company
                  cash or other Company assets in accordance with this
                  Agreement;

                           (7) the selection and dismissal of employees of the
                  Company or the Managing Member (including, without limitation,
                  employees having titles such as "president", "vice president",
                  "secretary" and "treasurer"), and the engagement and dismissal
                  of agents, outside attorneys, accountants, engineers,
                  appraisers, consultants, contractors and other professionals
                  on behalf of the Managing Member or the Company and the
                  determination of their compensation and other terms of
                  employment or hiring;

                           (8) the maintenance of such insurance for the benefit
                  of the Company and the Members and the directors and officers
                  of the Company as it deems necessary or appropriate;

                           (9) the formation of, or acquisition of an interest
                  in, and the contribution of property to, any further limited
                  or general partnerships, joint ventures or other relationships
                  that it deems desirable (including, without limitation, the
                  acquisition of interests in, and the contribution of property
                  to, its Subsidiaries and any other Person in which it has an
                  equity investment from time to time); provided, that, as long
                  as the Managing Member has determined to continue to qualify
                  as a REIT, the Company may not engage in any such formation,
                  acquisition or contribution that could cause the Managing
                  Member to fail to qualify as a REIT;

<PAGE>

                           (10) the control of any matters affecting the rights
                  and obligations of the Company, including the conduct of
                  litigation and the incurring of legal expense and the
                  settlement of claims and litigation, and the indemnification
                  of any Person against liabilities and contingencies to the
                  extent permitted by law;

                           (11) the undertaking of any action in connection with
                  the Company's direct or indirect investment in its
                  Subsidiaries or any other Person (including, without
                  limitation, the contribution or loan of funds to, incurring
                  indebtedness on behalf of, or guaranteeing the obligations of
                  any such Persons);

                           (12) the determination of the fair market value of
                  any Company property distributed in kind using such reasonable
                  method of valuation as it may adopt;

                           (13) the management, operation, leasing, landscaping,
                  repair, alteration, demolition or improvement of any real
                  property or improvements owned by the Company or any
                  Subsidiary of the Company or any Person in which the Company
                  has made a direct or indirect equity investment;

                           (14) holding, managing, investing and reinvesting
                  cash and other assets of the Company;

                           (15) the collection and receipt of revenues and
                  income of the Company;

                           (16) the exercise, directly or indirectly through any
                  attorney-in-fact acting under a general or limited power of
                  attorney, of any right, including the right to vote,
                  appurtenant to any asset or investment held by the Company;

                           (17) the exercise of any of the powers of the
                  Managing Member enumerated in this Agreement on behalf of or
                  in connection with any Subsidiary of the Company or any other
                  Person in which the Company has a direct or indirect interest,
                  or jointly with any such Subsidiary or other Person;

                           (18) the exercise of any of the powers of the
                  Managing Member enumerated in this Agreement on behalf of any
                  Person in which the Company does not have an interest pursuant
                  to contractual or other arrangements with such Person;

                           (19) the making, execution and delivery of any and
                  all deeds, leases, notes, deeds to secure debt, mortgages,
                  deeds of trust, security agreements, conveyances, contracts,
                  guarantees, warranties, indemnities, waivers, releases or
                  legal instruments or agreements in writing necessary or
                  appropriate in the judgment of the Managing Member for the
                  accomplishment of any of the powers of the Managing Member
                  enumerated in this Agreement;

<PAGE>

                           (20) the issuance of Membership Interests, as
                  appropriate, pursuant to Section 4.2 of this Agreement; and

                           (21) the consummation of the Formation and
                  Structuring Transactions.

                  (b) No Approval Required for Above Powers. Except as expressly
         provided in this Agreement (including, without limitation, the last
         sentence of this Section 7.1(b)), each of the Members agrees that the
         Managing Member is authorized to execute, deliver and perform the
         above-mentioned agreements and transactions on behalf of the Company
         without any further act, approval or vote of the Members,
         notwithstanding any other provision of this Agreement, the Act or any
         applicable law, rule or regulation to the fullest extent permitted
         under the Act or other applicable law, rule or regulation. The
         execution, delivery or performance by the Managing Member or the
         Company of any agreement authorized or permitted under this Agreement
         shall not constitute a breach by the Managing Member of any duty that
         the Managing Member may owe the Company or the Non-Managing Members or
         any other Persons under this Agreement or of any duty stated or implied
         by law or equity.

                  (c) Insurance. At all times from and after the date hereof,
         the Managing Member may cause the Company to obtain and maintain
         casualty, liability and other insurance on Company Properties and
         liability insurance for the Indemnitees hereunder. The right to procure
         such insurance on behalf of the Indemnitees shall in no way mitigate or
         otherwise affect the right of any such Indemnitee to indemnification
         under Section 7.7.

                  (d) Working Capital Reserves. At all times from and after the
         date hereof, the Managing Member may cause the Company to establish and
         maintain working capital reserves in such amounts as the Managing
         Member, in its sole and absolute discretion, deems appropriate and
         reasonable from time to time.

                  (e) No Obligation to Consider Tax Consequences to Non-Managing
         Members. In exercising its authority under this Agreement, the Managing
         Member may, but shall be under no obligation to, take into account the
         tax consequences to any Member of any action taken by it. The Managing
         Member and the Company shall not have liability to a Non-Managing
         Member under any circumstances as a result of an income tax liability
         incurred by such Non-Managing Member as a result of an action (or
         inaction) by the Managing Member pursuant to its authority under this
         Agreement.

                  (f) No Obligation To Expend Individual Funds, etc. Except as
         otherwise provided herein, to the extent the duties of the Managing
         Member require expenditures of funds to be paid to third parties, the
         Managing Member shall not have any obligations hereunder except to the
         extent that Company funds are reasonably available to it for the
         performance of such duties, and nothing herein contained shall be
         deemed to authorize or require the Managing Member, in its capacity as
         such, to expend its individual funds for payment to third parties or to
         undertake any individual liability or obligation on behalf of the
         Company.

<PAGE>

         Section 7.2 Certificate of Formation. To the extent that such action is
determined by the Managing Member to be reasonable and necessary or appropriate,
the Managing Member shall file amendments to and restatements of the Certificate
and do all the things to maintain the Company as a limited liability company (or
an entity in which the Non-Managing Members have limited liability) under the
laws of the State of Delaware and each other jurisdiction in which the Company
may elect to do business or own property. Subject to the terms of Section
8.5(a)(4) hereof, the Managing Member shall not be required, before or after
filing, to deliver or mail a copy of the Certificate, as it may be amended or
restated from time to time, to any Non-Managing Member. The Managing Member
shall use all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited liability company (or an
entity in which the Non-Managing Members have limited liability) in the State of
Delaware and any other jurisdiction in which the Company may elect to do
business or own property.

         Section 7.3 Restrictions on Managing Member's Authority. The Managing
Member may not, without the written Consent of all of the Non-Managing Members,
take any action in contravention of this Agreement including, without
limitation:

                  (a) take any action that would make it impossible to carry on
         the ordinary business of the Company, except as otherwise provided in
         this Agreement (provided that this restriction shall not be deemed to
         restrict the sale, lease, transfer or disposition of all or
         substantially all of the Company's assets as may otherwise be provided
         herein);

                  (b) possess Company property, or assign any rights in specific
         Company property, for other than a Company purpose except as otherwise
         provided in this Agreement (other than this Section 7.3);

                  (c) admit a Person as a Member, except as otherwise provided
         in this Agreement; or

                  (d) perform any act that would subject a Member to personal
         liability for the debts, obligations and liabilities of the Company
         except as provided herein or under the Act.

         Section 7.4       Responsibility for Expenses.

                  (a) No Compensation. Except as provided in this Section 7.4
         and elsewhere in this Agreement (including the provisions of Articles V
         and VI regarding distributions, payments and allocations to which it
         may be entitled), the Managing Member shall not be compensated for its
         services as Managing Member of the Company.

<PAGE>

                  (b) Responsibility for Ownership and Operation Expenses. The
         Company shall be responsible for and shall pay all expenses relating to
         the Company's ownership of its assets, and the operation of, or for the
         benefit of, the Company. The Managing Member is hereby authorized to
         pay compensation for accounting, administrative, legal, technical,
         management and other services rendered to the Company. The Managing
         Member shall be reimbursed on a monthly basis, or such other basis as
         the Managing Member may determine in its sole and absolute discretion,
         for all expenses it incurs relating to the Company's ownership of its
         assets and the operation of, or for the benefit of, the Company;
         provided, however, that the amount of any such reimbursement shall be
         reduced by any interest or other amounts earned by the Managing Member
         with respect to bank accounts or other instruments held by it as
         permitted in Section 7.5(a). The Non-Managing Members acknowledge that
         all such expenses of the Managing Member are deemed to be for the
         benefit of the Company. Such reimbursements shall be in addition to any
         reimbursement to the Managing Member as a result of indemnification
         pursuant to Section 7.7 hereof. In the event that certain expenses are
         incurred for the benefit of the Company and other entities (including
         the Managing Member), such expenses shall be allocated to the Company
         and such other entities in such a manner as the Managing Member in its
         sole and absolute discretion deems fair and reasonable. All payments
         and reimbursements hereunder shall be characterized for federal income
         tax purposes as expenses of the Company incurred on its behalf, and not
         as expenses of the Managing Member.

                  (c) Responsibility for Organization Expenses. The Company
         shall be responsible for and shall pay all expenses incurred relating
         to the admission of the Managing Member to the Company.

                  (d) Common Share Repurchases. If the Managing Member shall
         elect to purchase from its stockholders Common Shares for the purpose
         of delivering such Common Shares to satisfy an obligation under any
         dividend reinvestment program adopted by the Managing Member, any
         employee stock purchase plan adopted by the Managing Member, or any
         similar obligation or arrangement undertaken by the Managing Member in
         the future or for the purpose of retiring such Common Shares, the
         purchase price paid by the Managing Member for such Common Shares and
         any other expenses incurred by the Managing Member in connection with
         such purchase shall be considered expenses of the Company and shall be
         advanced to the Managing Member or reimbursed to the Managing Member,
         subject to the condition that: (i) if such Common Shares subsequently
         are sold by the Managing Member, the Managing Member shall pay to the
         Company any proceeds received by the Managing Member for such Common
         Shares (which sales proceeds shall include the amount of dividends
         reinvested under any dividend reinvestment or similar program;
         provided, that a transfer of Common Shares for Membership Units
         pursuant to Section 4.2(e) would not be considered a sale for such
         purposes); and (ii) if such Common Shares are not retransferred by the
         Managing Member within thirty (30) days after the purchase thereof, or
         the Managing Member otherwise determines not to retransfer such Common
         Shares, the Managing Member, shall cause the Company to redeem a number
         of Membership Units held by the Managing Member equal to the number of
         such Common Shares, as adjusted (x) pursuant to Section 7.5 (in the
         event the Managing Member acquires material assets, other than on
         behalf of the Company) and (y) for stock dividends and distributions,
         stock splits and subdivisions, reverse stock splits and combinations,
         distributions of rights, warrants or options, and distributions of
         evidences of indebtedness or assets relating to assets not received by
         the Managing Member pursuant to a pro rata distribution by the Company
         (in which case such advancement or reimbursement of expenses shall be
         treated as having been made as a distribution in redemption of such
         number of Membership Units held by the Managing Member).

<PAGE>

                  (e) If and to the extent any reimbursements to the Managing
         Member pursuant to this Section 7.4 constitute gross income of the
         Managing Member (as opposed to the repayment of advances made by the
         Managing Member on behalf of the Company), such amounts shall
         constitute guaranteed payments within the meaning of Section 707(c) of
         the Code, shall be treated consistently therewith by the Company and
         all Members, and shall not be treated as distributions for purposes of
         computing the Members' Capital Accounts.

         Section 7.5       Outside Activities of the Managing Member.

                  (a) The Managing Member shall not directly or indirectly enter
         into or conduct any business, other than in connection with the
         ownership, acquisition and disposition of Membership Interests as a
         Managing Member or Non-Managing Member and the management of the
         business of the Company, its operation as a public reporting company
         with a class (or classes) of securities registered under the Exchange
         Act and listed on the New York Stock Exchange, its operation as a REIT
         and such activities as are incidental thereto. The Managing Member
         shall not own any assets other than Membership Interests (except for
         certain interests in Company Properties held directly by the Managing
         Member or which have been caused by the Managing Member to be
         contributed to or purchased by Subsidiaries, which interests shall not
         exceed 1% of the aggregate economic interests of any property) and
         other than such bank accounts or similar instruments as it deems
         necessary to carry out its responsibilities contemplated under this
         Agreement and the Charter. The Managing Member and Affiliates of the
         Managing Member may acquire Non-Managing Membership Interests and shall
         be entitled to exercise all rights of a Non-Managing Member relating to
         such Non-Managing Membership Interests.

                  (b) Purchases of Shares. In the event the Managing Member
         purchases Shares, then the Managing Member shall cause the Company to
         purchase from it an equal number of Membership Units (after application
         of the Unit Adjustment Factor) on the same terms that the Managing
         Member purchased such Shares.

         Section 7.6       Contracts with Affiliates.

                  (a) Loans. The Managing Member may cause the Company to lend
         or contribute to its Subsidiaries or other Persons in which the Company
         has an equity investment, and such Persons may borrow funds from the
         Company, on terms and conditions established in the sole and absolute
         discretion of the Managing Member. The foregoing authority shall not
         create any right or benefit in favor of any Subsidiary or any other
         Person.

<PAGE>

                  (b) Transfers of Assets. Except as provided in Section 7.5(a),
         the Managing Member may cause the Company to transfer assets to joint
         ventures, other partnerships, corporations or other business entities
         in which the Company is or thereby becomes a participant upon such
         terms and subject to such conditions consistent with this Agreement and
         applicable law as the Managing Member in its sole discretion deems
         advisable.

                  (c) Employee Benefit Plans. The Managing Member, in its sole
         and absolute discretion and without the approval of the Non-Managing
         Members, may propose and adopt on behalf of the Managing Member and the
         Company employee benefit plans funded by the Company for the benefit of
         employees of the Managing Member, the Company, Subsidiaries of the
         Company or any Affiliate of any of them in respect of services
         performed, directly or indirectly, for the benefit of the Company, the
         Managing Member, or any of the Company's Subsidiaries, including any
         such plan which requires the Company, the Managing Member or any of the
         Company's Subsidiaries to issue or transfer Membership Units to
         employees. The Managing Member also is expressly authorized to cause
         the Company to issue to it Membership Units corresponding to Common
         Shares issued by the Managing Member pursuant to any such plan or any
         similar or successor plan and to repurchase such Membership Units to
         the extent necessary to permit the Managing Member to repurchase such
         Common Shares in accordance with such plan.

                  (d) Other Agreements. The Managing Member is expressly
         authorized to enter into, on its own behalf or in the name and on
         behalf of the Company, asset management agreements, cross-indemnity
         agreements, registration rights agreements with respect to the Common
         Shares, right of first opportunity arrangements or other conflict
         avoidance agreements with various Affiliates of the Company and the
         Managing Member, including Strategic Hotel Capital, L.L.C., on such
         terms as the Managing Member, in its sole and absolute discretion,
         believes are advisable. Any indemnification pursuant to this Section
         7.7 shall be made only out of the assets of the Company, and any
         insurance proceeds from any liability policy covering the Managing
         Member and any Indemnitee, and neither the Managing Member nor any
         Non-Managing Member shall have any obligation to contribute to the
         capital of the Company or otherwise provide funds to enable the Company
         to fund its obligations under this Section 7.7, except to the extent
         otherwise expressly agreed to by such Member and the Company.

<PAGE>

         Section 7.7       Indemnification.

                  (a) General. The Company shall indemnify, in accordance with
         and to the fullest extent now or hereafter permitted by law, any Person
         who was or is a party or is threatened to be made a party to any
         threatened, pending or completed action, suit or proceeding, whether
         civil, criminal, administrative or investigative (other than an action
         by or in the right of the corporation) by reason of the fact that the
         Person is or was a Member, director, officer, employee or agent of the
         Company or the Managing Member, or is or was serving at the request of
         the Company as a director, officer, employee or agent of another
         corporation, partnership, joint venture, trust or other enterprise,
         against expenses (including attorneys' fees), judgments, fines and
         amounts paid in settlement actually and reasonably incurred by the
         Person in connection with such action, suit or proceeding if the Person
         acted in good faith and in a manner the Person reasonably believed to
         be in or not opposed to the best interests of the Company, and, with
         respect to any criminal action or proceeding, had no reasonable cause
         to believe the Person's conduct was unlawful. The termination of any
         action, suit or proceeding by judgment, order, settlement, conviction,
         or upon a plea of nolo contendere or its equivalent, shall not, of
         itself, create a presumption that the Person did not act in good faith
         and in a manner which the Person reasonably believed to be in or not
         opposed to the best interests of the Company, and, with respect to any
         criminal action or proceeding, had reasonable cause to believe that the
         Person's conduct was unlawful.

                  (b) Actions in the Right of the Company. The Company shall
         indemnify any Person who was or is a party or is threatened to be made
         a party to any threatened, pending or completed action or suit by or in
         the right of the Company to procure a judgment in its favor by reason
         of the fact that the Person is or was a Member, director, officer,
         employee or agent of the Company or the Managing Member, or is or was
         serving at the request of the Company as a director, officer, employee
         or agent of another corporation, partnership, joint venture, trust or
         other enterprise against expenses (including attorneys' fees) actually
         and reasonably incurred by the Person in connection with the defense or
         settlement of such action or suit if the Person acted in good faith and
         in a manner the Person reasonably believed to be in or not opposed to
         the best interests of the Company and except that no indemnification
         shall be made in respect of any claim, issue or matter as to which such
         Person shall have been adjudged to be liable to the Company unless and
         only to the extent that the court in which such action or suit was
         brought shall determine upon application that, despite the adjudication
         of liability but in view of all the circumstances of the case, such
         Person is fairly and reasonably entitled to indemnity or such expenses
         which such court shall deem proper.

                  (c) Authorization. Any indemnification under subsections (a)
         and (b) of this section (unless ordered by a court) shall be made by
         the Company only as authorized in the specific case upon a
         determination that indemnification of the present or former Member,
         director, officer, employee or agent is proper in the circumstances
         because the Person has met the applicable standard of conduct set forth
         in subsections (a) and (b) of this section. Such determination shall be
         made in the sole and absolute discretion of the Managing Member.

                  (d) In Advance of Final Disposition. Expenses (including
         attorneys' fees) incurred by a Person entitled to indemnification
         hereunder in defending any civil, criminal, administrative or
         investigative action, suit or proceeding may be paid by the Company in
         advance of the final disposition of such action, suit or proceeding
         upon receipt of an undertaking by or on behalf of such Person to repay
         such amount if it shall ultimately be determined that such Person is
         not entitled to be indemnified by the Company as authorized in this
         section. Such expenses (including attorneys' fees) incurred by such
         Persons may be so paid upon such terms and conditions, if any, as the
         Managing Member deems appropriate.

<PAGE>

                  (e) Non-Exclusive Section. The indemnification and advancement
         of expenses provided by, or granted pursuant to, this Agreement shall
         not be deemed exclusive of any other rights to which those seeking
         indemnification or advancement of expenses may be entitled under any
         agreement, or otherwise, both as to action in such Person's official
         capacity and as to action in another capacity while holding such
         office.

                  (f) Insurance. The Company shall have power to purchase and
         maintain insurance on behalf of any Person who is or was a Member,
         director, officer, employee or agent of the Company, or is or was
         serving at the request of the Company as a director, officer, employee
         or agent of another corporation, partnership, joint venture, trust or
         other enterprise against any liability asserted against such Person and
         incurred by such Person in any such capacity, or arising out of such
         Person's status as such, whether or not the Company would have the
         power to indemnify such Person against such liability under this
         section.

                  (g) Merger and Consolidation; Other Enterprises. For purposes
         of this section, references to "the Company" shall include, in addition
         to the resulting entity, any constituent entity (including any
         constituent of a constituent) absorbed in a consolidation or merger
         which, if its separate existence had continued, would have had power
         and authority to indemnify its members, directors, officers, and
         employees or agents, so that any person who is or was a Member,
         director, officer, employee, or agent of such constituent entity, or is
         or was serving at the request of such constituent entity as a director,
         officer, employee or agent of another corporation, partnership, joint
         venture trust or other enterprise, shall stand in the same position
         under this section with respect to the resulting or surviving
         corporation as such Person would have with respect to such constituent
         entity if its separate existence had continued. For purposes of this
         section, references to "other enterprises" shall include employee
         benefit plans; references to "fines" shall include any excise taxes
         assessed on a Person with respect to any employee benefit plan; and
         references to "serving at the request of the Company" shall include any
         service as a Member, director, officer, employee or agent of the
         Company which imposes duties on, or involves services by, such Member,
         director, officer, employee, or agent with respect to an employee
         benefit plan, its participants or beneficiaries; and a Person who acted
         in good faith and in a manner such Person reasonably believed to be in
         the interest of the participants and beneficiaries of an employee
         benefit plan shall be deemed to have acted in a manner "not opposed to
         the best interests of the Company" as referred to in this section.

<PAGE>

                  (h) Continuation. The indemnification and advancement of
         expenses provided by, or granted pursuant to, this section shall,
         unless otherwise provided when authorized or ratified, continue as to a
         Person who has ceased to be a Member, director, officer, employee or
         agent and shall inure to the benefit of the heirs, executors and
         administrators of such a Person.

                  (i) Interested Transactions. A Person entitled to
         indemnification hereunder shall not be denied indemnification in whole
         or in part under this Section 7.7 because the Indemnitee had an
         interest in the transaction with respect to which the indemnification
         applies if the transaction was otherwise permitted by the terms of this
         Agreement.

                  (j) Binding Effect. The provisions of this Section 7.7 are for
         the benefit of the Indemnitees, their heirs, successors, assigns and
         administrators and shall not be deemed to create any rights for the
         benefit of any other Persons. Any amendment, modification or repeal of
         this Section 7.7 or any provision hereof shall be prospective only and
         shall not in any way affect the limitations on the Company's liability
         to any Indemnitee under this Section 7.7 as in effect immediately prior
         to such amendment, modification or repeal with respect to claims
         arising from or relating to matters occurring, in whole or in part,
         prior to such amendment, modification or repeal, regardless of when
         such claims may arise or be asserted.

                  (k) Reimbursements to Managing Member Shall Not Be Treated As
         Distributions. If and to the extent any reimbursements to the Managing
         Member pursuant to this Section 7.7 constitute gross income of the
         Managing Member (as opposed to the repayment of advances made by the
         Managing Member on behalf of the Company) such amounts shall constitute
         guaranteed payments within the meaning of Section 707(c) of the Code,
         shall be treated consistently therewith by the Company and all Members,
         and shall not be treated as distributions for purposes of computing the
         Members' Capital Accounts.

         Section 7.8       Liability of the Managing Member.

                  (a) General. Notwithstanding anything to the contrary set
         forth in this Agreement, the Managing Member shall not be liable for
         monetary damages to the Company, any Members or any Assignees for
         losses sustained or liabilities incurred as a result of errors in
         judgment or of any act or omission, unless (i) the Managing Member
         actually received an improper benefit in money, property or services
         (in which case, such liability shall be for the amount of the benefit
         in money, property or services actually received), or (ii) the Managing
         Member's action or failure to act was the result of active and
         deliberate dishonesty, gross negligence or bad faith and was material
         to the cause of action being adjudicated; provided, however, that the
         Managing Member shall owe the same duty of care to the Non-Managing
         Members as its directors owe to the Shareholders of the Managing
         Member.

<PAGE>

                  (b) No Obligation to Consider Interests of Non-Managing
         Members. The Non-Managing Members expressly acknowledge that the
         Managing Member is acting on behalf of the Company and the Managing
         Member's shareholders collectively, that, except as otherwise provided
         in Section 7.8(a), the Managing Member is under no obligation to
         consider the separate interests of the Non-Managing Members (including,
         without limitation, the tax consequences to Non-Managing Members or
         Assignees) in deciding whether to cause the Company to take (or decline
         to take) any actions which the Managing Member has undertaken in good
         faith on behalf of the Company, and that the Managing Member shall not
         be liable for monetary damages for losses sustained, liabilities
         incurred, or benefits not derived by Non-Managing Members in connection
         with such decisions, unless (i) the Managing Member actually received
         an improper benefit in money, property or services (in which case, such
         liability shall be for the amount of the benefit in money, property or
         services actually received), or (ii) the Managing Member's action or
         failure to act was the result of active and deliberate dishonesty,
         gross negligence or bad faith and was material to the cause of action
         being adjudicated.

                  (c) Acts of Agents. Subject to its obligations and duties as
         Managing Member set forth in Section 7.1(a) hereof, the Managing Member
         may exercise any of the powers granted to it by this Agreement and
         perform any of the duties imposed upon it hereunder either directly or
         by or through its agents. The Managing Member shall not be responsible
         for any misconduct or negligence on the part of any such agent
         appointed by it in good faith.

                  (d) Effect of Amendment. Any amendment, modification or repeal
         of this Section 7.8 or any provision hereof shall be prospective only
         and shall not in any way affect the limitations on the Managing
         Member's liability to the Company and the Non-Managing Members under
         this Section 7.8 as in effect immediately prior to such amendment,
         modification or repeal with respect to claims arising from or relating
         to matters occurring, in whole or in part, prior to such amendment,
         modification or repeal, regardless of when such claims may arise or be
         asserted.

         Section 7.9       Other Matters Concerning the Managing Member.

                  (a) Reliance on Documents. The Managing Member may rely and
         shall be protected in acting or refraining from acting upon any
         resolution, certificate, statement, instrument, opinion, report,
         notice, request, consent, order, bond, debenture, or other paper or
         document believed by it to be genuine and to have been signed or
         presented by the proper party or parties.

                  (b) Reliance on Consultants and Advisers. The Managing Member
         may consult with legal counsel, accountants, appraisers, management
         consultants, investment bankers and other consultants and advisers
         selected by it, and any act taken or omitted to be taken in reliance
         upon the opinion of such Persons as to matters which such Managing
         Member reasonably believes to be within such Person's professional or
         expert competence shall be conclusively presumed to have been done or
         omitted in good faith and in accordance with such opinion.

<PAGE>

                  (c) Action Through Officers and Attorneys. The Managing Member
         shall have the right, in respect of any of its powers or obligations
         hereunder, to act through any of its duly authorized officers and a
         duly appointed attorney or attorneys-in-fact. Each such attorney shall,
         to the extent provided by the Managing Member in the power of attorney,
         have full power and authority to do and perform all and every act and
         duty which is permitted or required to be done by the Managing Member
         hereunder.

                  (d) Action Related to Maintaining REIT Status. Notwithstanding
         any other provisions of this Agreement or any non-mandatory provision
         of the Act, any action of the Managing Member on behalf of the Company
         or any decision of the Managing Member to refrain from acting on behalf
         of the Company, undertaken in the good faith belief that such action or
         omission is necessary or advisable in order (i) to protect the ability
         of the Managing Member, for so long as the Managing Member has
         determined to qualify as a REIT, to continue to qualify as a REIT or
         (ii) to avoid the Managing Member incurring any taxes under Section 857
         or Section 4981 of the Code, is expressly authorized under this
         Agreement and is deemed approved by all of the Members.

         Section 7.10 Title to Company Assets. Title to Company assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Company as an entity, and no Member, individually or
collectively, shall have any ownership interest in such Company assets or any
portion thereof. Title to any or all of the Company assets may be held in the
name of the Company, the Managing Member or one or more nominees, as the
Managing Member may determine, including Affiliates of the Managing Member. The
Managing Member hereby covenants, declares and warrants that any Company assets
as to which legal title is held in the name of the Managing Member or any
nominee or Affiliate of the Managing Member shall be held by the Managing Member
or such nominee or Affiliate for the exclusive use and benefit of the Company in
accordance with the provisions of this Agreement; provided, however, that the
Managing Member shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Company as soon as reasonably practicable.
All Company assets shall be recorded as the property of the Company in its books
and records, irrespective of the name in which legal title to such Company
assets is held.

         Section 7.11 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Company shall be
entitled to assume that the Managing Member has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the Company
and to enter into any contracts on behalf of the Company, and such Person shall
be entitled to deal with the Managing Member as if it were the Company's sole
party in interest, both legally and beneficially. Each Non-Managing Member
hereby waives any and all defenses or other remedies which may be available
against such Person to contest, negate or disaffirm any action of the Managing
Member in connection with any such dealing. In no event shall any Person dealing
with the Managing Member or its representatives be obligated to ascertain that
the terms of this Agreement have been complied with or to inquire into the
necessity or expedience of any act or action of the Managing Member or its
representatives. Each and every certificate, document or other instrument
executed on behalf of the Company by the Managing Member or its representatives
shall be conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (a) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Company and (c) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and is
binding upon the Company.

<PAGE>

         Section 7.12 Limitation on Transfers of Certain Properties. Until
September 30, 2007, the Managing Member shall not dispose of any interest in the
property commonly referred to as the New Orleans Hyatt other than in a
transaction (including any transaction with the Managing Member and its
Affiliates) that qualifies based on an opinion (in form and substance reasonably
satisfactory to The Prudential Insurance Company of America (for so long as it
or one of its Affiliates remains a Member) of Mayer, Brown, Rowe & Maw, counsel
to the Company (or other counsel reasonably satisfactory to The Prudential
Insurance Company of America (for so long as it or one of its Affiliates remains
a Member)) that such transaction will qualify as a tax deferred exchange under
Section 1031 of the Code (with no gain or recognition to any Non-Managing
Member) and other than a pledge of any or all of the assets of the Company to
secure a loan or other financing of the Managing Member. From and after
September 30, 2007, the Managing Member shall use its commercially reasonable
efforts to effect any disposition of an interest in the New Orleans Hyatt (other
than a pledge of any or all of the assets of the Company to secure a loan or
other financing of the Managing Member) in a transaction qualifying as a tax
deferred exchange under Section 1031 of the Code.

                                  ARTICLE VIII
                 RIGHTS AND OBLIGATIONS OF NON-MANAGING MEMBERS

         Section 8.1 Limitation of Liability. The Non-Managing Members shall
have no liability under this Agreement except as expressly provided in this
Agreement, including Section 10.5 hereof, or under the Act.

         Section 8.2 Management of Business. No Non-Managing Member or Assignee
(other than the Managing Member, any of its Affiliates or any officer, director,
employee, member or agent of the Managing Member, the Company or any of their
Affiliates, in their capacity as such) shall take part in the operation,
management or control (within the meaning of the Act) of the Company's business,
transact any business in the Company's name or have the power to sign documents
for or otherwise bind the Company. The transaction of any such business by the
Managing Member, any of its Affiliates or any officer, director, employee,
member or agent or trustee of the Managing Member, the Company or any of their
Affiliates, in their capacity as such, shall not affect, impair or eliminate the
limitations on the liability of the Non-Managing Members or Assignees under this
Agreement.

<PAGE>

         Section 8.3 Outside Activities of Non-Managing Members. Subject to any
agreements entered into pursuant to Section 7.6 hereof and subject to any other
agreements entered into by a Non-Managing Member or its Affiliates with the
Managing Member, the Company or a Subsidiary, the following rights shall govern
outside activities of Non-Managing Members: (a) any Non-Managing Member (other
than the Managing Member) and any officer, director, employee, agent, trustee,
Affiliate or shareholder of any Non-Managing Member shall be entitled to and may
have business interests and engage in business activities in addition to those
relating to the Company, including business interests and activities in direct
competition with the Company; (b) neither the Company nor any Members shall have
any rights by virtue of this Agreement in any business ventures of any
Non-Managing Member or Assignee; (c) none of the Non-Managing Members (in their
capacities as Non-Managing Members) nor any other Person shall have any rights
by virtue of this Agreement or the Company relationship established hereby in
any business ventures of any other Person, other than the Managing Member, and
such Person shall have no obligation pursuant to this Agreement to offer any
interest in any such business ventures to the Company, any Non-Managing Member
or any such other Person, even if such opportunity is of a character which, if
presented to the Company, any Non-Managing Member or such other Person, could be
taken by such Person; (d) the fact that a Non-Managing Member may encounter
opportunities to purchase, otherwise acquire, lease, sell or otherwise dispose
of real or personal property and may take advantage of such opportunities
himself or introduce such opportunities to entities in which it has or has not
any interest, shall not subject such Member to liability to the Company or any
of the other Members on account of the lost opportunity; and (e) except as
otherwise specifically provided herein, nothing contained in this Agreement
shall be deemed to prohibit a Non-Managing Member or any Affiliate of a
Non-Managing Member from dealing, or otherwise engaging in business, with
Persons transacting business with the Company or from providing services
relating to the purchase, sale, rental, management or operation of real or
personal property (including real estate brokerage services) and receiving
compensation therefor, from any Persons who have transacted business with the
Company or other third parties. Nothing in this Section 8.3 is intended to alter
any fiduciary obligations of any Person under applicable Delaware law.

         Section 8.4 Return of Capital and Priority Among Members. Except
pursuant to the Redemption Rights set forth in Section 4.2(e) hereof, no Member
shall be entitled to the withdrawal or return of his or her Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Company as provided herein. No Member or
Assignee shall have priority over any other Member or Assignee either as to the
return of Capital Contributions or otherwise unless expressly provided in this
Agreement, as to profits, losses, distributions or credits.

         Section 8.5 Rights of Non-Managing Members Relating to the Company.

                  (a) Copies of Business Records. In addition to other rights
         provided by this Agreement or by the Act, and except as limited by
         Section 8.5(c) hereof, each Non-Managing Member shall have the right,
         for a purpose reasonably related to such Non-Managing Member's interest
         as a Non-Managing Member in the Company, upon written demand with a
         statement of the purpose of such demand and at such Non-Managing
         Member's own expense:

                           (1) to obtain a copy of the most recent annual and
                  quarterly reports filed with the Securities and Exchange
                  Commission by the Managing Member pursuant to the Exchange
                  Act, and each communication sent to all of the stockholders of
                  the Managing Member;

<PAGE>

                           (2) to obtain a copy of the Company's Federal, state
                  and local income tax returns for each Membership Year;

                           (3) to obtain a current list of the name and last
                  known business, residence or mailing address of each Member;

                           (4) to obtain a copy of this Agreement and the
                  Certificate and all amendments thereto, together with executed
                  copies of all powers of attorney pursuant to which this
                  Agreement, the Certificate and all amendments thereto have
                  been executed; and

                           (5) to obtain true and full information regarding the
                  amount of cash and a description and statement of any other
                  property or services contributed by each Member and which each
                  Member has agreed to contribute in the future, and the date on
                  which each became a Member.

                  (b) Notification of Changes in Unit Adjustment Factor. The
         Company shall notify each Non-Managing Member in writing of any change
         made to the Unit Adjustment Factor within 10 Business Days of the date
         such change becomes effective.

                  (c) Confidential Information. Notwithstanding any other
         provision of this Section 8.5, the Managing Member may keep
         confidential from the Non-Managing Members, for such period of time as
         the Managing Member determines in its sole and absolute discretion to
         be reasonable, any Company information that (i) the Managing Member
         believes to be in the nature of trade secrets or other information the
         disclosure of which the Managing Member in good faith believes is not
         in the best interests of the Company or (ii) the Company is required by
         law or by agreements with unaffiliated third parties to keep
         confidential.

                  (d) Debt Allocation. The Managing Member may allow (but shall
         not be required to allow) any Non-Managing Member to guarantee on a
         "bottom dollar basis," an amount of indebtedness of the Company or any
         successor thereto, as is necessary from time to time to provide an
         allocation of debt to such Non-Managing Member equal to the amount of
         debt then required to be allocated to such Non-Managing Member to
         enable such Non-Managing Member to avoid recognizing gain pursuant to
         Section 731(a)(1) of the Code as a result of a deemed distribution of
         money to such Non-Managing Member pursuant to Section 752(b) of the
         Code. The Managing Member may, in its discretion, permit other
         Non-Managing Members to provide similar guarantees from time to time or
         as a result of minimum gain chargebacks.

<PAGE>

                  (e) Notice for Certain Transactions. In the event of (a) a
         dissolution or liquidation of the Company or the Managing Member, (b) a
         merger, consolidation or combination of the Company or the Managing
         Member with or into another Person (including the events set forth in
         Sections 11.2(c) and 11.2(d)), (c) the sale of all or substantially all
         of the assets of the Company or the Managing Member, or (d) the
         transfer by the Managing Member of all or any part of its interest in
         the Company, the Managing Member shall give written notice thereof to
         each Non-Managing Member at least twenty (20) Business Days prior to
         the effective date or, to the extent applicable, record date of such
         transaction, whichever comes first.

                                   ARTICLE IX
                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

         Section 9.1 Records and Accounting. The Managing Member shall keep or
cause to be kept at the principal office of the Company appropriate books and
records with respect to the Company's business, including, without limitation,
all books and records necessary to provide to the Non-Managing Members any
information, lists and copies of documents required to be provided pursuant to
Section 9.3 hereof or required by the Act. Any records maintained by or on
behalf of the Company in the regular course of its business may be kept on, or
be in the form of, punch cards, magnetic tape, photographs, micrographics or any
other information storage device; provided, however, that the records so
maintained are convertible into clearly legible written form within a reasonable
period of time. The books of the Company shall be maintained for financial
purposes on an accrual basis in accordance with generally accepted accounting
principles and for tax reporting purposes on the accrual basis.

         Section 9.2       Fiscal Year. The fiscal year of the Company shall be
the calendar year.

         Section 9.3       Reports.

                  (a) Annual Reports. As soon as practicable, but in no event
         later than 120 days after the close of each Membership Year, or such
         earlier date that they are filed with the Securities and Exchange
         Commission, the Managing Member shall cause to be mailed to each
         Non-Managing Member as of the close of the Company Year, an annual
         report containing financial statements of the Company, or of the
         Managing Member if such statements are prepared solely on a
         consolidated basis with the Managing Member, for such Membership Year,
         presented in accordance with generally accepted accounting principles,
         such statements to be audited by a nationally recognized firm of
         independent public accountants selected by the Managing Member.

                  (b) Quarterly Reports. As soon as practicable, but in no event
         later than 60 days after the close of each calendar quarter (except the
         last calendar quarter of each year), or such earlier date that they are
         filed with the Securities and Exchange Commission, the Managing Member
         shall cause to be mailed to each Non-Managing Member as of the last day
         of the calendar quarter, a report containing unaudited financial
         statements of the Company, or of the Managing Member, if such
         statements are prepared solely on a consolidated basis with the
         Managing Member, and such other information as may be required by
         applicable law or regulation, or as the Managing Member determines to
         be appropriate.

<PAGE>

                                    ARTICLE X
                                   TAX MATTERS

         Section 10.1 Preparation of Tax Returns. The Managing Member shall
arrange for the preparation and timely filing of all returns of Company income,
gains, deductions, losses and other items required of the Company for Federal
and state income tax purposes and shall use all reasonable efforts to furnish
the tax information reasonably required by the Managing Member and the
Non-Managing Members for Federal and state income tax reporting purposes within
60 days after the close of such taxable year. Each Non-Managing Member shall
promptly provide the Managing Member with any information reasonably requested
by the Managing Member relating to any Contributed Property contributed
(directly or indirectly) by such Non-Managing Member to the Company.

         Section 10.2 Tax Elections. Except as otherwise provided herein, the
Managing Member shall, in its sole and absolute discretion, determine whether to
make any available election pursuant to the Code, except that the election under
Section 754 of the Code in accordance with applicable regulations thereunder
shall be made at the request of any Member. The Managing Member shall have the
right to seek to revoke any such election (including without limitation, any
election under Section 754 of the Code) upon the Managing Member's determination
in its sole and absolute discretion that such revocation is the best interests
of the Members.

         Section 10.3      Tax Matters Member.

                  (a) General. The Managing Member shall be the "tax matters
         Member" of the Company for Federal income tax purposes. Pursuant to
         Section 6223(c) of the Code, upon receipt of notice from the IRS of the
         beginning of an administrative proceeding with respect to the Company,
         the tax matters Member shall provide the Members notice of such receipt
         and shall furnish the IRS with the name, address and profit interest of
         each of the Non-Managing Members; provided, however, that such
         information is provided to the Company by the Non-Managing Members. The
         Non-Managing Members shall provide such information to the Company as
         the Managing Member shall reasonably request.

                  (b) Powers. The tax matters Member is authorized, but not
         required:

                           (1) to enter into any settlement with the IRS with
                  respect to any administrative or judicial proceedings for the
                  adjustment of Company items required to be taken into account
                  by a Member for income tax purposes (such administrative
                  proceedings being referred to as a "tax audit" and such
                  judicial proceedings being referred to as "judicial review"),
                  and in the settlement agreement the tax matters Member may
                  expressly state that such agreement shall bind all Members,
                  except that such settlement agreement shall not bind any
                  Member (a) who (within the time prescribed pursuant to the
                  Code and Regulations) files a statement with the IRS providing
                  that the tax matters Member shall not have the authority to
                  enter into a settlement agreement on behalf of such Member or
                  (b) who is a "notice Member" (as defined in Section 6231 of
                  the Code) or a member of a "notice group" (as defined in
                  Section 6223(b)(2) of the Code);

<PAGE>

                           (2) in the event that a notice of a final
                  administrative adjustment at the Company level of any item
                  required to be taken into account by a Member for tax purposes
                  (a "final adjustment") is mailed or otherwise given to the tax
                  matters Member, to seek judicial review of such final
                  adjustment, including the filing of a petition for
                  readjustment with the Tax Court or the United States Claims
                  Court, or the filing of a complaint for refund with the
                  District Court of the United States for the district in which
                  the Company's principal place of business is located;

                           (3) to intervene in any action brought by any other
                  Member for judicial review of a final adjustment;

                           (4) to file a request for an administrative
                  adjustment with the IRS at any time and, if any part of such
                  request is not allowed by the IRS, to file an appropriate
                  pleading (petition, complaint or other document) for judicial
                  review with respect to such request;

                           (5) to enter into an agreement with the IRS to extend
                  the period for assessing any tax which is attributable to any
                  item required to be taken into account by a Member for tax
                  purposes, or an item affected by such item; and

                           (6) to take any other action on behalf of the Members
                  of the Company in connection with any tax audit or judicial
                  review proceeding to the extent permitted by applicable law or
                  regulations.

                  The taking of any action and the incurring of any expense by
         the tax matters Member in connection with any such proceeding, except
         to the extent required by law, is a matter in the sole and absolute
         discretion of the tax matters Member, and the provisions relating to
         indemnification of the Managing Member set forth in Section 7.7 of this
         Agreement shall be fully applicable to the tax matters Member in its
         capacity as such.

                  (c) The tax matters Member shall, upon the request of any
         Member, provide such Member with copies of any tax returns, elections
         or any returns or documents to be filed with the IRS at least ten
         Business Days prior to the date such filing is required.

                  (d) Reimbursement. The tax matters Member shall receive no
         compensation for its services. All third-party costs and expenses
         incurred by the tax matters Member in performing its duties as such
         (including legal and accounting fees) shall be borne by the Company.
         Nothing herein shall be construed to restrict the Company from engaging
         an accounting firm and a law firm to assist the tax matters Member in
         discharging its duties hereunder, so long as the compensation paid by
         the Company for such services is reasonable.

<PAGE>

         Section 10.4 Organizational Expenses. The Company shall elect to deduct
expenses, if any, incurred by it in organizing the Company ratably over a
60-month period as provided in Section 709 of the Code.

         Section 10.5 Withholding. Each Non-Managing Member hereby authorizes
the Company to withhold from or pay on behalf of or with respect to such
Non-Managing Member any amount of Federal, state, local, or foreign taxes that
the Managing Member determines that the Company is required to withhold or pay
with respect to any amount distributable or allocable to such Non-Managing
Member pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Company pursuant to Section 1441, 1442,
1445 or 1446 of the Code. Any amount paid on behalf of or with respect to a
Non-Managing Member shall constitute a loan by the Company to such Non-Managing
Member, which loan shall be repaid by such Non-Managing Member within 15 days
after notice from the Managing Member that such payment must be made unless (a)
the Company withholds such payment from a distribution which would otherwise be
made to the Non-Managing Member or (b) the Managing Member determines, in its
sole and absolute discretion, that such payment may be satisfied out of the
available funds of the Company which would, but for such payment, be distributed
to the Non-Managing Member. Any amounts withheld pursuant to the foregoing
clauses (a) or (b) shall be treated as having been distributed to such
Non-Managing Member. Each Non-Managing Member hereby unconditionally and
irrevocably grants to the Company a security interest in such Non-Managing
Member's Membership Interest to secure such Non-Managing Member's obligation to
pay to the Company any amounts required to be paid pursuant to this Section
10.5. In the event that a Non-Managing Member fails to pay any amounts owed to
the Company pursuant to this Section 10.5 when due, the Managing Member may, in
its sole and absolute discretion, elect to make the payment to the Company on
behalf of such defaulting Non-Managing Member, and in such event shall be deemed
to have loaned such amount to such defaulting Non-Managing Member and shall
succeed to all rights and remedies of the Company as against such defaulting
Non-Managing Member (including, without limitation, the right to receive
distributions). Any amounts payable by a Non-Managing Member hereunder shall
bear interest at the base rate on corporate loans at large United States money
center commercial banks, as published from time to time in the Wall Street
Journal, plus four percentage points (but not higher than the maximum lawful
rate) from the date such amount is due (i.e., 15 days after demand) until such
amount is paid in full. Each Non-Managing Member shall take such actions as the
Company or the Managing Member shall request in order to perfect or enforce the
security interest created hereunder.

                                   ARTICLE XI
                            TRANSFERS AND WITHDRAWALS

         Section 11.1      Transfer.

                  (a) Definition. The term "transfer," when used in this Article
         XI with respect to a Membership Unit, shall be deemed to refer to a
         transaction by which the Managing Member purports to assign its
         Managing Membership Interest to another Person or by which a
         Non-Managing Member purports to assign its Non-Managing Membership
         Interest to another Person, and includes a sale, assignment, gift,
         pledge, encumbrance, hypothecation, mortgage, exchange or any other
         disposition by law or otherwise. The term "transfer" when used in this
         Article XI does not include any exchange or redemption of Membership
         Units by a Non-Managing Member pursuant to Section 4.2(e).

<PAGE>

                  (b) Requirements. No Membership Interest shall be transferred,
         in whole or in part, except in accordance with the terms and conditions
         set forth in this Article XI. Any transfer or purported transfer of a
         Membership Interest not made in accordance with this Article XI shall
         be null and void.

         Section 11.2      Transfer of Managing Member's Membership Interest.

                  (a) General. The Managing Member may not transfer any of its
         Managing Membership Interest or withdraw as Managing Member except as
         provided in Section 11.2(b) or in connection with a transaction
         described in Section 11.2(c).

                  (b) Transfer to Company. The Managing Member may transfer
         Membership Interests held by it to the Company in accordance with
         Section 7.5(b) hereof.

                  (c) Transfer in Connection With Reclassification,
         Recapitalization, or Business Combination Involving Managing Member.
         Except as otherwise provided in Section 11.2(d), the Managing Member
         shall not engage in any merger, consolidation or other business
         combination with or into another Person or sale of all or substantially
         all of its assets, or any reclassification, or recapitalization or
         change of outstanding Common Shares (other than a change in par value,
         or from par value to no par value, or as a result of a subdivision or
         combination as described in the definition of "Unit Adjustment Factor")
         ("Transaction"), unless as a result of the Transaction each
         Non-Managing Member thereafter remains entitled to redeem each
         Membership Unit owned by such Non-Managing Member (after application of
         the Unit Adjustment Factor) for an amount of cash, securities, or other
         property equal to the greatest amount of cash, securities or other
         property which such Non-Managing Member would have received from such
         Transaction, if such Non-Managing Member had exercised its Redemption
         Right immediately prior to the Transaction, provided that if, in
         connection with the Transaction, a purchase, tender or exchange offer
         shall have been made to and accepted by the holders of more than 50
         percent of the outstanding Common Shares, the holders of Membership
         Units shall receive the greatest amount of cash, securities, or other
         property which a Non-Managing Member would have received had it
         exercised the Redemption Right and received Common Shares in exchange
         for its Membership Units immediately prior to the expiration of such
         purchase, tender or exchange offer. In connection with any merger,
         consolidation or business combination described in this Section 11.2(c)
         in which Common Shares were exchanged for securities of the acquiring
         Person, the Non-Managing Members shall (unless Non-Managing Members
         Consent is obtained) remain entitled to exercise their Redemption Right
         with respect to such Person and the Unit Adjustment Factor shall
         continue to apply.

<PAGE>

                  (d) Merger Involving Managing Member Where Surviving Entity's
         Assets Contributed to Company. Notwithstanding Section 11.2(c), the
         Managing Member may merge with another entity if, under the terms of
         the transaction, Non-Managing Members will not engage in a sale or
         exchange for Federal income tax purposes and immediately after such
         merger substantially all of the assets of the surviving entity, other
         than Membership Units held by the Managing Member, are contributed to
         the Company as a Capital Contribution in exchange for Membership Units
         with a fair market value equal to the 704(c) Value of the assets so
         contributed.

         Section 11.3      Non-Managing Members' Rights to Transfer.

                  (a) General. Prior to twelve (12) months after the closing of
         the initial public offering of Common Shares, no Non-Managing Member
         shall transfer all or any portion of its Membership Interests to any
         transferee without the consent of the Managing Member, which consent
         may be withheld in its sole and absolute discretion; provided, however,
         that Strategic Hotel Capital, L.L.C. may transfer its Membership
         Interests to its security holders as set forth in the Structuring and
         Contribution Agreement. After such twelve (12) month anniversary and
         subject to the remaining provisions of this Section 11.3 as well as
         Section 11.4, a Non-Managing Member may transfer all or any portion of
         his Membership Interest, or any of such Non-Managing Member's rights as
         a Non-Managing Member, without the prior written consent of the
         Managing Member. In order to effect such transfer, the Non-Managing
         Member must deliver to the Managing Member a duly executed copy of the
         instrument making such transfer and such instrument must evidence the
         written acceptance by the assignee of all of the terms and conditions
         of this Agreement and represent that such assignment was made in
         accordance with all applicable laws and regulations. Notwithstanding
         the foregoing, any transferee of any transferred Membership Interest
         shall be subject to any and all ownership limitations contained in the
         Charter. Unless admitted as a Non-Managing Member, no transferee,
         whether by a voluntary transfer, by operation of law or otherwise,
         shall have any rights hereunder, other than the rights of an Assignee
         as provided in Section 11.5.

                  (b) Incapacitated Non-Managing Members. If a Non-Managing
         Member is subject to Incapacity, the executor, administrator, trustee,
         committee, guardian, conservator or receiver of such Non-Managing
         Member's estate shall have all the rights of a Non-Managing Member, but
         not more rights than those enjoyed by other Non-Managing Members for
         the purpose of settling or managing the estate and such power as the
         Incapacitated Non-Managing Member possessed to transfer all or any part
         of his or its interest in the Company. The Incapacity of a Non-Managing
         Member, in and of itself, shall not dissolve or terminate the Company.

                  (c) Transfers Contrary to Securities Laws. The Managing Member
         may prohibit any transfer otherwise permitted under this Section 11.3
         by a Non-Managing Member of its Membership Units if, in the opinion of
         legal counsel to the Company, such transfer would require filing of a
         registration statement under the Securities Act or would otherwise
         violate any Federal or state securities laws or regulations applicable
         to the Company or the Company Units.

<PAGE>

                  (d) Publicly Traded Partnership Restrictions. No Member may
         assign or transfer any Membership Unit (or any portion thereof or
         interest therein) if such assignment or transfer would result in the
         sum of the percentage interests in Membership Units transferred during
         the Company's taxable year exceeding two percent (2%) of the total
         Membership Units of the Company. Notwithstanding the foregoing, the
         following transfers shall be disregarded in determining whether
         Membership Units in excess of two percent (2%) of the Membership Units
         have been transferred during the Company's taxable year:

                           (1) transfers in which the tax basis of the
                  Membership Unit in the hands of the transferee is determined,
                  in whole or in part, by reference to the basis of the
                  Membership Unit in the hands of the transferor or is
                  determined under Section 732 of the Code;

                           (2) transfers at death, including transfers from an
                  estate or testamentary trust;

                           (3) transfers between members of a family (for this
                  purpose, including only brothers and sisters (whether by the
                  whole or half blood), spouses, ancestors and lineal
                  descendants);

                           (4) transfers involving the issuance of interests by
                  (or on behalf of) the Company in exchange for cash, property
                  or services;

                           (5) transfers involving distributions from a
                  retirement plan qualified under Section 401(a) of the Code or
                  an individual retirement account;

                           (6) transfers by a Member and any related persons
                  (within the meaning of Section 267(b) or 707(b)(1) of the
                  Code) in one or more transactions during any 30 calendar day
                  period of Membership Units representing in the aggregate more
                  than two percent (2%) of the total Membership Units; and

                           (7) transfers by one or more Members of Membership
                  Units representing in the aggregate 50 percent or more of the
                  total Membership Units in one transaction or a series of
                  related transactions.

Any Member seeking to transfer or assign Membership Units pursuant to any of the
foregoing disregarded transfers shall, prior to such transfer or assignment,
deliver to the Company a certificate of a duly authorized officer of such Member
setting forth the facts relating to such transfer or assignment and the basis
for disregarding such transfer for these purposes. The Company shall, in the
sole and absolute discretion of the Managing Member, determine whether to permit
such transfer or assignment; provided, that any transfer that complies with any
exception in Section 11.3(d)(1) through (d)(7) shall be permitted. Any attempted
transfer or assignment in contravention of the provisions of this Section
11.3(d) or that is not permitted by the Managing Member pursuant to the
preceding sentence shall be null and void ab initio, the purported transferor
shall continue to be the Member for all purposes and the purported transferee
shall not become a Member as a result of such purported transfer, and the
Company shall in no event admit such purported transferee as a Member or
otherwise recognize any rights of such purported transferee (including, without
limitation, any right to receive distributions (directly or indirectly) or to
acquire any interest in the capital or profits of the Company). Any Member
seeking to transfer or assign Membership Units may request confirmation from the
Company that such transfer or assignment is permissible under Section 11.3(a) or
the first sentence of this Section 11.3(d).

<PAGE>

         Section 11.4      Substituted Non-Managing Members.

                  (a) Consent of Managing Member Required. A Non-Managing Member
         shall have the right in its discretion to substitute a transferee as a
         Non-Managing Member in his place, in which event such substitution
         shall occur if the Non-Managing Member so provides; provided, however,
         that any transferee desiring to become a Substituted Non-Managing
         Member must furnish to the Managing Member (i) evidence of acceptance
         in form satisfactory to the Managing Member of all of the terms and
         conditions of this Agreement, including, without limitation, the power
         of attorney granted in Article XVI and (ii) such other documents or
         instruments as may be required in the reasonable discretion of the
         Managing Member in order to effect such Person's admission as a
         Substituted Non-Managing Member.

                  (b) Rights and Duties of Substituted Non-Managing Members. A
         transferee who has been admitted as a Substituted Non-Managing Member
         in accordance with this Article XI shall have all the rights and powers
         and be subject to all the restrictions and liabilities of a
         Non-Managing Member under this Agreement.

                  (c) Amendment of Exhibit A. Upon the admission of a
         Substituted Non-Managing Member, the Managing Member shall amend
         Exhibit A to reflect the name, address, number of Membership Units, and
         Percentage Interest of such Substituted Non-Managing Member and to
         eliminate or adjust, if necessary, the name, address and interest of
         the predecessor of such Substituted Non-Managing Member.

         Section 11.5 Assignees. If a Non-Managing Member, in its sole and
absolute discretion, does not provide for the admission of any permitted
transferee under Section 11.4(a) as a Substituted Non-Managing Member, as
described in Section 11.4, such transferee shall be considered an Assignee for
purposes of this Agreement. An Assignee shall be entitled to all the rights of
an assignee of a Non-Managing Membership Interest under the Act, including the
right to receive distributions from the Company and the share of Net Income, Net
Losses, gain, loss and Recapture Income attributable to the Company Units
assigned to such transferee, but shall not be deemed to be a holder of
Membership Units for any other purpose under this Agreement, and shall not be
entitled to vote such Membership Units in any matter presented to the
Non-Managing Members for a vote (such Membership Units being deemed to have been
voted on such matter in the same proportion as all Membership Units held by
Non-Managing Members are voted). In the event any such transferee desires to
make a further assignment of any such Membership Units, such transferee shall be
subject to all the provisions of this Article XI to the same extent and in the
same manner as any Non-Managing Member desiring to make an assignment of
Membership Units.

<PAGE>

         Section 11.6      General Provisions.

                  (a) Withdrawal of Non-Managing Member. No Non-Managing Member
         may withdraw from the Company other than as a result of (i) a permitted
         transfer of all of such Non-Managing Member's Membership Units in
         accordance with this Article XI and the transferee of such Membership
         Units being admitted to the Company as a Substituted Non-Managing
         Member or (ii) pursuant to redemption or exchange of all of its
         Membership Units under Section 4.2(e).

                  (b) Transfer of All Membership Units by Non-Managing Member.
         Any Non-Managing Member who shall transfer all of his Membership Units
         in a transfer permitted pursuant to this Article XI where the
         transferee was admitted as a Substituted Non-Managing Member or
         pursuant to the redemption or exchange of all of its Membership Units
         under Section 4.2(e) shall cease to be a Non-Managing Member.

                  (c) Timing of Transfers. Transfers pursuant to this Article XI
         may only be made on the first day of a calendar month of the Company,
         unless the Managing Member otherwise agrees.

                  (d) Allocation When Transfer Occurs. If any Membership
         Interest is transferred during any quarterly segment of the Company's
         fiscal year in compliance with the provisions of this Article XI or
         redeemed or converted pursuant to Section 4.2(e), Net Income, Net
         Losses, each item thereof and all other items attributable to such
         interest for such fiscal year shall be divided and allocated between
         the transferor Member and the transferee Member by taking into account
         their varying interests during the fiscal year in accordance with
         Section 706(d) of the Code, based upon the interim closing of the books
         method. Solely for purposes of making such allocations, each of such
         items for the calendar month in which the transfer or redemption occurs
         shall be allocated to the Person who is a Member as of midnight on the
         last day of said month. All distributions of Available Cash with
         respect to which the Membership Record Date is before the date of such
         transfer or redemption shall be made to the transferor Member, and all
         distributions of Available Cash with Membership Record Dates thereafter
         shall be made to the transferee Member.

                                   ARTICLE XII
                              ADMISSION OF MEMBERS

         Section 12.1 Admission of Successor Managing Member. A successor to all
of the Managing Member's Managing Membership Interest pursuant to Section 11.2
hereof who is proposed to be admitted as a successor Managing Member shall be
admitted to the Company as the Managing Member, effective upon such transfer.
Any such transferee shall carry on the business of the Company without
dissolution. In each case, the admission shall be subject to the successor
Managing Member executing and delivering to the Company an acceptance of all of
the terms and conditions of this Agreement and such other documents or
instruments as may be required to effect the admission.

<PAGE>

         Section 12.2      Admission of Additional Non-Managing Members.

                  (a) General. A Person who makes a Capital Contribution to the
         Company in accordance with this Agreement or who exercises an option to
         receive Membership Units shall be admitted to the Company as an
         Additional Non-Managing Member only upon furnishing to the Managing
         Member (i) evidence of acceptance in form reasonably satisfactory to
         the Managing Member of all of the terms and conditions of this
         Agreement, including, without limitation, the power of attorney granted
         in Article XVI hereof and (ii) such other documents or instruments as
         may be required in the reasonable discretion of the Managing Member in
         order to effect such Person's admission as an Additional Non-Managing
         Member.

                  (b) Consent of Managing Member Required. Notwithstanding
         anything to the contrary in this Section 12.2, no Person shall be
         admitted as an Additional Non-Managing Member without the consent of
         the Managing Member, which consent may be given or withheld in the
         Managing Member's sole and absolute discretion. The admission of any
         Person as an Additional Non-Managing Member shall become effective on
         the date upon which the name of such Person is recorded on the books
         and records of the Company, following the consent of the Managing
         Member to such admission.

         Section 12.3 Amendment of Agreement and Certificate. For the admission
to the Company of any Member, the Managing Member shall take all steps necessary
and appropriate under the Act to amend the records of the Company and, if
necessary, to prepare as soon as practical an amendment of this Agreement
(including an amendment of Exhibit A) and, if required by law, shall prepare and
file an amendment to the Certificate and may for this purpose exercise the power
of attorney granted pursuant to Article XVI hereof.

                                  ARTICLE XIII
                           DISSOLUTION AND LIQUIDATION

         Section 13.1 Dissolution. The Company shall not be dissolved by the
admission of Substituted Non-Managing Members or Additional Non-Managing Members
or by the admission of a successor Managing Member in accordance with the terms
of this Agreement. The Company shall dissolve, and its affairs shall be wound
up, upon the first to occur of any of the following ("Events of Dissolution"):

                  (a) Withdrawal of Managing Member--an event of withdrawal of
         the Managing Member, as defined in the Act, unless, within 90 days
         after the withdrawal all the remaining Members agree in writing to
         continue the business of the Company and to the appointment, effective
         as of the date of withdrawal, of a substitute Managing Member;

<PAGE>

                  (b) Voluntary Dissolution--from and after the date of this
         Agreement, with the Consent of a majority of the Percentage Interests
         of the Non-Managing Members, an election to dissolve the Company made
         by the Managing Member, in its sole and absolute discretion;

                  (c) Judicial Dissolution Decree--entry of a decree of judicial
         dissolution of the Company pursuant to the provisions of the Act;

                  (d) Sale of Company's Assets--the sale or disposition of all
         or substantially all of the assets and properties of the Company or a
         related series of transactions that, taken together, result in the sale
         or other disposition of all or substantially all of the assets of the
         Company;

                  (e) Bankruptcy or Insolvency of Managing Member--the Managing
         Member

                           (1) makes an assignment for the benefit of creditors;

                           (2) files a voluntary petition in bankruptcy;

                           (3) is adjudged a bankrupt or insolvent, or has
                  entered against it an order for relief in any bankruptcy or
                  insolvency proceeding;

                           (4) files a petition or answer seeking for itself any
                  reorganization, arrangement, composition, readjustment,
                  liquidation, dissolution or similar relief under any statute,
                  law or regulation;

                           (5) files an answer or other pleading admitting or
                  failing to contest the material allegations of a petition
                  filed against it in any proceeding of this nature; or

                           (6) seeks, consents to or acquiesces in the
                  appointment of a trustee, receiver or liquidator of the
                  Managing Member or of all or any substantial part of its
                  properties; or

                  (f) Readjustment, etc. One hundred and twenty (120) days after
         the commencement of any proceeding against the Managing Member seeking
         reorganization, arrangement, composition, readjustment, liquidation,
         dissolution or similar relief under any statute, law or regulation, the
         proceeding has not been dismissed, or if within 90 days after the
         appointment without the Managing Member's consent or acquiescence of a
         trustee, receiver or liquidator of the Managing Member or of all or any
         substantial part of its properties, the appointment is not vacated or
         stayed, or within 90 days after the expiration of any such stay, the
         appointment is not vacated.

<PAGE>

         Section 13.2      Winding Up.

                  (a) General. Upon the occurrence of an Event of Dissolution,
         the Company shall continue solely for the purposes of winding up its
         affairs in an orderly manner, liquidating its assets, and satisfying
         the claims of its creditors and Members. No Member shall take any
         action that is inconsistent with, or not necessary to or appropriate
         for, the winding up of the Company's business and affairs. The Managing
         Member (or, in the event there is no remaining Managing Member, any
         Person elected by a majority in interest of the Non-Managing Members
         (the "Liquidator")) shall be responsible for overseeing the winding up
         and dissolution of the Company and shall take full account of the
         Company's liabilities and property and the Company property shall be
         liquidated as promptly as is consistent with obtaining the fair value
         thereof, and the proceeds therefrom (which may, to the extent
         determined by the Managing Member, include shares of stock in the
         Managing Member) shall be applied and distributed in the following
         order:

                           (1) First, to the payment and discharge of all of the
                  Company's debts and liabilities to creditors other than the
                  Members;

                           (2) Second, to the payment and discharge of all of
                  the Company's debts and liabilities to the Members, pro rata
                  in accordance with amounts owed to each such Member; and

                           (3) The balance, if any, to the Managing Member and
                  Non-Managing Members in accordance with their Capital
                  Accounts, after giving effect to all contributions,
                  distributions, and allocations for all periods.

                  The Managing Member shall not receive any additional
         compensation for any services performed pursuant to this Article XIII
         other than reimbursement of its expenses as provided for in Section
         7.4.

                  (b) Where Immediate Sale of Company's Assets Impractical.
         Notwithstanding the provisions of Section 13.2(a) hereof which require
         liquidation of the assets of the Company, but subject to the order of
         priorities set forth therein, if prior to or upon dissolution of the
         Company the Liquidator determines that an immediate sale of part or all
         of the Company's assets would be impractical or would cause undue loss
         to the Members, the Liquidator may, in its sole and absolute
         discretion, defer for a reasonable time the liquidation of any assets
         except those necessary to satisfy liabilities of the Company (including
         to those Members as creditors) or, with the Consent of the Non-Managing
         Members holding a majority of the Non-Managing Membership Units,
         distribute to the Members, in lieu of cash, as tenants in common and in
         accordance with the provisions of Section 13.2(a) hereof, undivided
         interests in such Company assets as the Liquidator deems not suitable
         for liquidation. Any such distributions in kind shall be made only if,
         in the good faith judgment of the Liquidator, such distributions in
         kind are in the best interest of the Members, and shall be subject to
         such conditions relating to the disposition and management of such
         properties as the Liquidator deems reasonable and equitable and to any
         agreements governing the operation of such properties at such time. The
         Liquidator shall determine the fair market value of any property
         distributed in kind using such reasonable method of valuation as it may
         adopt.

<PAGE>

         Section 13.3 Capital Contribution Obligation. If any Member has a
deficit balance in his or her Capital Account (after giving effect to all
contributions, distributions and allocations for the taxable years, including
the year during which such liquidation occurs), such Member shall have no
obligation to make any contribution to the capital of the Company with respect
to such deficit, and such deficit at any time shall not be considered a debt
owed to the Company or to any other Person for any purpose whatsoever, except to
the extent otherwise expressly agreed to by such Member and the Company.

         Section 13.4 Compliance with Timing Requirements of Regulations;
Allowance for Contingent or Unforeseen Liabilities or Obligations.
Notwithstanding anything to the contrary in this Agreement, in the event the
Company is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article XIII
to the Managing Member and Non-Managing Members who have positive Capital
Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2)
(including any timing requirements therein). In the discretion of the Managing
Member, a pro rata portion of the distributions that would otherwise be made to
the Managing Member and Non-Managing Members pursuant to this Article XIII may
be: (i) distributed to a liquidating trust established for the benefit of the
Managing Member and Non-Managing Members for the purposes of liquidating Company
assets, collecting amounts owed to the Company, and paying any contingent or
unforeseen liabilities or obligations of the Company or of the Managing Member
arising out of or in connection with the Company (the assets of any such trust
shall be distributed to the Managing Member and Non-Managing Members from time
to time, in the reasonable discretion of the Managing Member, in the same
proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Managing Member and Non-Managing Members
pursuant to this Agreement); or (ii) withheld or escrowed to provide a
reasonable reserve for Company liabilities (contingent or otherwise) and to
reflect the unrealized portion of any installment obligations owed to the
Company, provided that such withheld or escrowed amounts shall be distributed to
the Managing Member and Non-Managing Members in the manner and priority set
forth in Section 13.2(a) as soon as practicable.

         Section 13.5 Other Events. Notwithstanding any other provision of this
Article XIII, in the event the Company is liquidated within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g) but no Event of Dissolution has
occurred, the Company's property shall not be liquidated, the Company's
liabilities shall not be paid or discharged, and the Company's affairs shall not
be wound up. Instead, for federal income tax purposes the Company shall be
deemed to have contributed all of its assets and liabilities to a new limited
liability company in exchange for an interest in the new limited liability
company and, immediately thereafter, the terminated Company shall be deemed to
distribute interests in the new Company to the Managing Member and Non-Managing
Members in proportion to their respective Membership Interests in liquidation of
the terminated Company.

         Section 13.6 Rights of Non-Managing Members. Except as specifically
provided in this Agreement, each Non-Managing Member shall look solely to the
assets of the Company for the return of his Capital Contribution and shall have
no right or power to demand or receive property other than cash from the
Company. Except as specifically provided in this Agreement, no Non-Managing
Member shall have priority over any other Non-Managing Member as to the return
of his Capital Contributions, distributions, or allocations.

<PAGE>

         Section 13.7 Notice of Dissolution. In the event an Event of
Dissolution or an event occurs that would, but for provisions of Section 13.1,
result in a dissolution of the Company, the Managing Member shall, within 30
days thereafter, provide written notice thereof to each of the Members and to
all other parties with whom the Company regularly conducts business (as
determined in the discretion of the Managing Member) and shall publish notice
thereof in a newspaper of general circulation in each place in which the Company
regularly conducts business (as determined in the discretion of the Managing
Member).

         Section 13.8 Cancellation of Certificate. Upon the completion of the
liquidation of the Company as provided in Section 13.2 hereof, the Company shall
be terminated and the Certificate and all qualifications of the Company as a
foreign limited liability company in jurisdictions other than the State of
Delaware shall be canceled and such other actions as may be necessary to
terminate the Company shall be taken.

         Section 13.9 Reasonable Time for Winding-Up. A reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the Company
and the liquidation of its assets pursuant to Section 13.2 hereof, in order to
minimize any losses otherwise attendant upon such winding-up, and the provisions
of this Agreement shall remain in effect between the Members during the period
of liquidation.

                                   ARTICLE XIV
                        AMENDMENT OF AGREEMENT; MEETINGS

         Section 14.1      Amendments.

                  (a) General. Amendments to this Agreement may be proposed by
         the Managing Member or by any Non-Managing Members holding 25 percent
         or more in the aggregate of the Membership Interests held by all
         Non-Managing Members. Following such proposal, the Managing Member
         shall submit any proposed amendment to the Non-Managing Members. The
         Managing Member shall seek the written vote of the Members on the
         proposed amendment or shall call a meeting to vote thereon and to
         transact any other business that it may deem appropriate. For purposes
         of obtaining a written consent, the Managing Member may require a
         response within a reasonable specified time, but not less than 15 days,
         and failure to respond in such time period shall constitute a consent
         which is consistent with the Managing Member's recommendation (if so
         recommended) with respect to the proposal; provided, that, an action
         shall become effective at such time as requisite consents are received
         even if prior to such specified time. Except as provided in Section
         14.1(b), 14.1(c) or 14.1(d), a proposed amendment shall be adopted and
         be effective as an amendment hereto if it is approved by the Managing
         Member and it receives the Consent of Non-Managing Members holding a
         majority of the Percentage Interests of the Non-Managing Members.

<PAGE>

                  (b) Managing Member's Power to Amend. Notwithstanding Section
         14.1(a), the Managing Member shall have the power, without the consent
         of the Non-Managing Members, to amend this Agreement as may be required
         to facilitate or implement any of the following purposes:

                           (1) to add to the obligations of the Managing Member
                  or surrender for the benefit of the Non-Managing Members any
                  right or power granted to the Managing Member or any Affiliate
                  of the Managing Member;

                           (2) to reflect the issuance of additional Membership
                  Interests or the admission, substitution, termination, or
                  withdrawal of Members in accordance with this Agreement;

                           (3) to set forth the rights, powers, duties, and
                  preferences of the holders of any additional Membership
                  Interests issued pursuant to Section 4.2(b) hereof;

                           (4) to reflect a change that is of an inconsequential
                  nature and does not adversely affect the Non-Managing Members
                  in any material respect, or to cure any ambiguity, correct or
                  supplement any provision in this Agreement not inconsistent
                  with law or with other provisions;

                           (5) to satisfy any requirements, conditions, or
                  guidelines contained in any order, directive, opinion, ruling
                  or regulation of a Federal or state agency or contained in
                  Federal or state law;

                           (6) to reflect such changes as are reasonably
                  necessary for the Managing Member to maintain its status as a
                  REIT, including changes which may be necessitated due to a
                  change in applicable law (or an authoritative interpretation
                  thereof) or a ruling of the IRS; and

                           (7) to modify the manner in which Capital Accounts
                  are computed as set forth in Section 4.4(e).

                  The Managing Member will provide notice to the Non-Managing
         Members when any action under this Section 14.1(b) is taken.

                  (c) Consent of Adversely Affected Member Required.
         Notwithstanding Section 14.1(a) and Section 14.1(b) hereof, this
         Agreement shall not be amended without the Consent of each Member
         adversely affected if such amendment would (i) convert a Non-Managing
         Member's interest in the Company into a Managing Member's interest
         (except as a result of the Managing Member acquiring such interest),
         (ii) modify the limited liability of a Non-Managing Member, (iii) alter
         rights of the Member to receive distributions pursuant to Article V, or
         the allocations specified in Article VI (except as permitted pursuant
         to Section 4.2 and Section 14.1(b)(3) hereof), (iv) alter or modify the
         Redemption Right as set forth in Sections 4.2(e) and 11.2(b), and
         related definitions hereof, (v) cause the termination of the Company
         prior to the time set forth in Sections 2.5 or 13.1 or (vi) amend this
         Section 14.1(c). Further, no amendment may alter the restrictions on
         the Managing Member's authority set forth in Section 7.3 without the
         Consent specified in that section. This Section 14.1(c) does not
         require unanimous consent of all Members adversely affected unless the
         amendment is to be effective against all Members adversely affected.

<PAGE>

                  (d) When Consent of Majority of Non-Managing Membership
         Interests Required. Notwithstanding Section 14.1(a) hereof, the
         Managing Member shall not amend Section 4.2(b), the second sentence of
         Section 7.1(a), Sections 7.5, 7.6, 7.8, 11.2, and 14.1(c), this Section
         14.1(d) or Section 14.2 without the Consent of two-thirds of the
         Percentage Interests of the Non-Managing Members.

         Section 14.2      Meetings of the Members.

                  (a) General. Meetings of the Members may be called by the
         Managing Member and shall be called upon the receipt by the Managing
         Member of a written request by Non-Managing Members holding 25 percent
         or more of the Membership Interests. The call shall state the nature of
         the business to be transacted. Notice of any such meeting shall be
         given to all Members not less than seven days nor more than 30 days
         prior to the date of such meeting. Members may vote in person or by
         proxy at such meeting. Whenever the vote or Consent of Members is
         permitted or required under this Agreement, such vote or Consent may be
         given at a meeting of Members or may be given in accordance with the
         procedure prescribed in Section 14.1 hereof. Except as otherwise
         expressly provided in this Agreement, the Consent of holders of a
         majority of the Percentage Interests shall control.

                  (b) Informal Action. Any action required or permitted to be
         taken at a meeting of the Members may be taken without a meeting if a
         written Consent setting forth the action so taken is signed by a
         majority of the Percentage Interests of the Members (or such other
         percentage as is expressly required by this Agreement). Such Consent
         may be in one instrument or in several instruments, and shall have the
         same force and effect as a vote of a majority of the Percentage
         Interests of the Members (or such other percentage as is expressly
         required by this Agreement). Such Consent shall be filed with the
         Managing Member. An action so taken shall be deemed to have been taken
         at a meeting held on the effective date so certified.

                  (c) Proxies. Each Non-Managing Member may authorize any Person
         or Persons to act for him by proxy on all matters in which a
         Non-Managing Member is entitled to participate, including waiving
         notice of any meeting, or voting or participating at a meeting. Every
         proxy must be signed by the Non-Managing Member or his
         attorney-in-fact. No proxy shall be valid after the expiration of 11
         months from the date thereof unless otherwise provided in the proxy.
         Every proxy shall be revocable at the pleasure of the Non-Managing
         Member executing it.

<PAGE>

                  (d) Conduct of Meeting. Each meeting of Members shall be
         conducted by the Managing Member or such other Person as the Managing
         Member may appoint pursuant to such rules for the conduct of the
         meeting as the Managing Member or such other Person deems appropriate.

                                   ARTICLE XV
                               GENERAL PROVISIONS

         Section 15.1 Addresses and Notice. All notices and demands under this
Agreement shall be in writing, and may be either delivered personally (which
shall include deliveries by courier), by telefax, telex or other wire
transmission (with request for assurance of receipt in a manner appropriate with
respect to communications of that type, provided that a confirmation copy is
concurrently sent by a nationally recognized express courier for overnight
delivery) or mailed, postage prepaid, by certified or registered mail, return
receipt requested, directed to the parties at their respective addresses set
forth on Exhibit A, as it may be amended from time to time, and, if to the
Company, such notices and demands sent in the aforesaid manner must be delivered
at its principal place of business set forth above. Unless delivered personally
or by telefax, telex or other wire transmission as above (which shall be
effective on the date of such delivery or transmission), any notice shall be
deemed to have been made three (3) days following the date so mailed. Any party
hereto may designate a different address to which notices and demands shall
thereafter be directed by written notice given in the same manner and directed
to the Company at its office hereinabove set forth.

         Section 15.2 Titles and Captions. All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the scope
or intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.

         Section 15.3 Pronouns and Plurals. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.

         Section 15.4 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.

         Section 15.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.

         Section 15.6 Waiver of Partition. The Members hereby agree that the
Company Properties are not and will not be suitable for partition. Accordingly,
each of the Members hereby irrevocably waives any and all rights (if any) that
it may have to maintain any action for partition of any of the Company
Properties.

<PAGE>

         Section 15.7 Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the matters contained herein; it
supersedes any prior agreements or understandings among them and it may not be
modified or amended in any manner other than pursuant to Article XIV.

         Section 15.8 Securities Law Provisions. The Membership Units have not
been registered under the Federal or state securities laws of any state and,
therefore, may not be resold unless appropriate Federal and state securities
laws, as well as the provisions of Article XI hereof, have been complied with.

         Section 15.9 Remedies Not Exclusive. Any remedies herein contained for
breaches of obligations hereunder shall not be deemed to be exclusive and shall
not impair the right of any party to exercise any other right or remedy, whether
for damages, injunction or otherwise.

         Section 15.10 Time. Time is of the essence of this Agreement.

         Section 15.11 Creditors. None of the provisions of this Agreement shall
be for the benefit of, or shall be enforceable by, any creditor of the Company.

         Section 15.12 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.

         Section 15.13 Execution Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.

         Section 15.14 Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.

         Section 15.15 Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.

         Section 15.16 No Rights as Stockholders. Nothing contained in this
Agreement shall be construed as conferring upon the holders of Membership Units
any rights whatsoever as stockholders of the Managing Member, including without
limitation any right to receive dividends or other distributions made to
stockholders of the Managing Member or to vote or to consent or to receive
notice as stockholders in respect of any meeting of stockholders for the
election of directors of the Managing Member or any other matter.

<PAGE>

                                   ARTICLE XVI
                                POWER OF ATTORNEY

         Section 16.1      Power of Attorney.

                  (a) Scope. Each Non-Managing Member and each Assignee
         constitutes and appoints the Managing Member, any Liquidator, and
         authorized officers and attorneys-in-fact of each, and each of those
         acting singly, in each case with full power of substitution, as its
         true and lawful agent and attorney-in-fact, with full power and
         authority in its name, place and stead to:

                           (1) execute, swear to, acknowledge, deliver, publish,
                  file and record in the appropriate public offices (a) all
                  certificates, documents and other instruments (including,
                  without limitation, this Agreement and the Certificate and all
                  amendments or restatements thereof) that the Managing Member
                  or the Liquidator deems appropriate or necessary to form,
                  qualify or continue the existence or qualification of the
                  Company as a limited liability company (or an entity in which
                  the Non-Managing Members have limited liability) in the State
                  of Delaware and in all other jurisdictions in which the
                  Company may conduct business or own property; (b) all
                  instruments that the Managing Member or any Liquidator deems
                  appropriate or necessary to reflect any amendment, change,
                  modification or restatement of this Agreement in accordance
                  with its terms; (c) all conveyances and other instruments or
                  documents that the Managing Member or any Liquidator deems
                  appropriate or necessary to reflect the dissolution and
                  liquidation of the Company pursuant to the terms of this
                  Agreement, including, without limitation, a certificate of
                  cancellation; (d) all instruments relating to the admission,
                  withdrawal, removal or substitution of any Member pursuant to,
                  or other events described in, Article XI, XII or XIII hereof
                  or the Capital Contribution of any Member; and (e) all
                  certificates, documents and other instruments relating to the
                  determination of the rights, preferences and privileges of
                  Membership Interests; and

                           (2) execute, swear to, acknowledge and file all
                  ballots, consents, approvals, waivers, certificates and other
                  instruments appropriate or necessary, in the sole and absolute
                  discretion of the Managing Member, to make, evidence, give,
                  confirm or ratify any vote, consent, approval, agreement or
                  other action which is made or given by the Members hereunder
                  or is consistent with the terms of this Agreement or
                  appropriate or necessary, in the sole discretion of the
                  Managing Member, to effectuate the terms or intent of this
                  Agreement.

                  Nothing contained herein shall be construed as authorizing the
         Managing Member to amend this Agreement except in accordance with
         Article XIV hereof or as may be otherwise expressly provided for in
         this Agreement.

                  (b) Irrevocability. The foregoing power of attorney is hereby
         declared to be irrevocable and a power coupled with an interest, in
         recognition of the fact that each of the Members will be relying upon
         the power of the Managing Member to act as contemplated by this
         Agreement in any filing or other action by it on behalf of the Company,
         and it shall survive and not be affected by the subsequent Incapacity
         of any Non-Managing Member or Assignee and the transfer of all or any
         portion of such Non-Managing Member's or Assignee's Membership Units
         and shall extend to such Non-Managing Member's or Assignee's heirs,
         successors, assigns and personal representatives. Each such
         Non-Managing Member or Assignee hereby agrees to be bound by any
         representation made by the Managing Member, acting in good faith
         pursuant to such power of attorney; and each such Non-Managing Member
         or Assignee hereby waives any and all defenses which may be available
         to contest, negate or disaffirm the action of the Managing Member,
         taken in good faith under such power of attorney. Each Non-Managing
         Member or Assignee shall execute and deliver to the Managing Member or
         the Liquidator, within 15 days after receipt of the Managing Member's
         request therefor, such further designation, powers of attorney and
         other instruments as the Managing Member or the Liquidator, as the case
         may be, deems necessary to effectuate this Agreement and the purposes
         of the Company.

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Limited
Liability Company Agreement of Strategic Hotel Funding, L.L.C. as of the date
first written above.

                                  Managing Member:

                                  Strategic Hotel Capital, Inc.

                                  By:____________________________________
                                  Name:
                                  Title:

                                  Non-Managing Members:

                                  Strategic Hotel Capital, L.L.C.

                                  By:____________________________________
                                  Name:
                                  Title:

                                  Strategic Hotel Capital Limited Partnership

                                  By:  Strategic Hotel Capital, L.L.C., its
                                       General Partner

                                  By:____________________________________
                                  Name:
                                  Title:

<PAGE>

                                    EXHIBIT A
                           MEMBERS, CONTRIBUTIONS AND
                              MEMBERSHIP INTERESTS

<TABLE>
<CAPTION>
                                                                          Agreed Value of
                                                             Cash           Contributed         Membership        Percentage
                 Name and Address of Member               Contribution       Property             Units            Interest
<S>                                                       <C>             <C>                   <C>               <C>
Managing Member:
  Strategic Hotel Capital, Inc......................
  77 West Wacker Drive
  Chicago, IL 60601

Non-Managing Members:
  Strategic Hotel Capital, L.L.C. ..................
  c/o 77 West Wacker Drive
  Chicago, IL 60601

  Strategic Hotel Capital Limited Partnership
  c/o 77 West Wacker Drive
  Chicago, IL 60601 ................................

[Names and Addresses]...............................
   TOTAL............................................
</TABLE>

<PAGE>

                                    EXHIBIT B
                          VALUE OF CONTRIBUTED PROPERTY

Underlying Property                                    Basis        Agreed Value
-------------------                                    -----        ------------

<PAGE>

                                    EXHIBIT C
                         RIGHTS AND PREFERENCES OF UNITS

<PAGE>

                                    EXHIBIT D
                              NOTICE OF REDEMPTION

         The undersigned hereby irrevocably (a) elects to exercise its
Redemption Right set forth in the Limited Liability Company Agreement of
Strategic Hotel Funding, L.L.C. (the "Agreement"; capitalized terms used and not
otherwise defined herein shall have the meanings assigned to such terms in the
Agreement), with respect to an aggregate of __________ Membership Units, (b)
surrenders such Membership Units and all right, title and interest therein, and
(c) directs that the Cash Amount or Shares Amount (as determined by the Managing
Member) deliverable upon exercise of the Redemption Right be delivered to the
address specified below, and if Common Shares are to be delivered, such Common
Shares be registered or placed in the name(s) and at the address(es) specified
below.

Dated: ____________

Name of Non-Managing Member: ___________________________________

                                     (Signature of Non-Managing Member)

                                     (Street Address)

                                     (City) (State) (Zip Code)

                                     Signature Guaranteed by:

If Common Shares are to be issued, issue to:

Please insert social security or identifying number:

Name:

<PAGE>

                                    EXHIBIT E
                            FORM OF UNIT CERTIFICATE<PAGE>

                                                                    Exhibit 10.3

                                    FORM OF

                                LEASE AGREEMENT

                            DATED AS OF ______, 2004

                                    BETWEEN

                        -------------------------------,

                                   AS LESSOR

                                      AND

                       --------------------------------,

                                   AS LESSEE

<PAGE>

                                TABLE OF CONTENTS

                                                                       Page

ARTICLE I.................................................................1

  1.1       Leased Property...............................................1
  1.2       Term..........................................................2

ARTICLE II................................................................2

ARTICLE III..............................................................14

  3.1       Rent.........................................................14
  3.2       Confirmation of Percentage Rent..............................17
  3.3       Additional Charges...........................................18
  3.4       Rent Payable Without Deduction...............................18
  3.5       Budgets......................................................19
  3.6       Approval of Capital Budget...................................19
  3.7       Capital Projects.............................................20
  3.8       Books and Records............................................20

ARTICLE IV...............................................................20

  4.1       Payment of Impositions.......................................20
  4.2       Notice of Impositions........................................21
  4.3       Adjustment of Impositions....................................21
  4.4       Utility Charges..............................................21
  4.5       Insurance Premiums...........................................21
  4.6       Other Charges................................................21
  4.7       Reimbursement for Additional Charges.........................21

ARTICLE V................................................................21

  5.1       No Termination, Abatement, Etc...............................21
  5.2       Abatement Procedures.........................................22

ARTICLE VI...............................................................22

  6.1       Ownership of the Leased Property.............................22
  6.2       Lessee's Personal Property...................................23
  6.3       Lessor's Representations.....................................23
  6.4       Lessee's Representations.....................................23
  6.5       Lessor's Lien................................................23

                                      -i-
<PAGE>

ARTICLE VII..............................................................23

  7.1       Condition of the Leased Property.............................23
  7.2       Use of the Leased Property...................................24
  7.3       Lessor to Grant Easements, Etc...............................25

ARTICLE VIII.............................................................25

  8.1       Compliance with Legal and Insurance
            Requirements, Etc............................................25
  8.2       Legal Requirement Covenants..................................25
  8.3       Environmental Covenants......................................26

ARTICLE IX...............................................................28

  9.1       Maintenance and Repair.......................................28
  9.2       FF&E Reserve.................................................29
  9.3       Encroachments, Restriction, Etc..............................31

ARTICLE X................................................................31

  10.1      Alterations..................................................31
  10.2      Salvage......................................................31
  10.3      Joint Use Agreements.........................................31

ARTICLE XI...............................................................32

  11.1      Liens........................................................32

ARTICLE XII..............................................................32

  12.1      Permitted Contests...........................................32

ARTICLE XIII.............................................................33

  13.1      General Insurance Requirements...............................33
  13.2      Responsibility for Insurance.................................34
  13.3      Replacement Cost.............................................35
  13.4      Workers' Compensation........................................35
  13.5      Waiver of Subrogation........................................35
  13.6      Form Satisfactory, Etc.......................................35
  13.7      Increase in Limits...........................................36
  13.8      Blanket Policy...............................................36
  13.9      Separate Insurance...........................................36
  13.10     Reports On Insurance Claims..................................36

                                      -ii-
<PAGE>

ARTICLE XIV..............................................................37

  14.1      Insurance Proceeds...........................................37
  14.2      Reconstruction in the Event of Damage or
            Destruction Covered by Insurance.............................37
  14.3      Reconstruction in the Event of Damage or
            Destruction Not Covered by Insurance.........................38
  14.4      Lessee's Property and Business
            Interruption Insurance.......................................38
  14.5      Abatement of Rent............................................39
  14.6      Damage Near End of Term......................................39
  14.7      Waiver.......................................................39

ARTICLE XV...............................................................39

  15.1      Definitions..................................................39
  15.2      Parties' Rights and Obligations..............................40
  15.3      Total Taking.................................................40
  15.4      Allocation of Award..........................................40
  15.5      Partial Taking...............................................40
  15.6      Temporary Taking.............................................41

ARTICLE XVI..............................................................41

  16.1      Events of Default............................................41
  16.2      Surrender....................................................43
  16.3      Damages......................................................43
  16.4      Waiver.......................................................44
  16.5      Application of Funds.........................................44

ARTICLE XVII.............................................................44

  17.1      Lessor's Right to Cure Lessee's Default......................44

ARTICLE XVIII............................................................45

  18.1      REIT Requirements............................................45
  18.2      Lessee Officer and Employee Limitation.......................46
  18.3      Payments to Affiliates of Lessee.............................47
  18.4      Management Agreement.........................................47

ARTICLE XIX..............................................................47

  19.1      Holding Over.................................................47

ARTICLE XX...............................................................48

  20.1      Risk of Loss.................................................48

                                     -iii-
<PAGE>

ARTICLE XXI..............................................................48

  21.1      Indemnification..............................................48

ARTICLE XXII.............................................................49

  22.1      Subletting and Assignment....................................49
  22.2      Attornment...................................................50
  22.3      Permitted Sublease and Assignment............................50
  22.4      Sublease Limitation..........................................50

ARTICLE XXIII............................................................51

  23.1      Officer's Certificates; Financial Statements;
            Lessor's Estoppel Certificates and Covenants.................51

ARTICLE XXIV.............................................................52

  24.1      Lessor's Right to Inspect....................................52

ARTICLE XXV..............................................................52

  25.1      No Waiver....................................................52

ARTICLE XXVI.............................................................53

  26.1      Remedies Cumulative..........................................53

ARTICLE XXVII............................................................53

  27.1      Acceptance of Surrender......................................53

ARTICLE XXVIII...........................................................53

  28.1      No Merger of Title...........................................53

ARTICLE XXIX.............................................................53

  29.1      Conveyance by Lessor.........................................53
  29.2      Other Interests..............................................53

ARTICLE XXX..............................................................54

  30.1      Quiet Enjoyment..............................................54

ARTICLE XXXI.............................................................54

  31.1      Notices......................................................54

                                      -iv-
<PAGE>

ARTICLE XXXII............................................................54

  32.1      Appraisers...................................................54

ARTICLE XXXIII...........................................................55

  33.1      Lessor May Grant Mortgages...................................55
  33.2      Lessee's Right to Cure.......................................55
  33.3      Grant of Easements or Imposition of Restrictions.............56
  33.4      Outparcels, Leases and Licenses..............................56

ARTICLE XXXIV............................................................56

  34.1      Miscellaneous................................................56
  34.2      Transition Procedures........................................56
  34.3      Waiver of Presentment, etc...................................57

ARTICLE XXXV.............................................................57

  35.1      Memorandum of Lease..........................................57

ARTICLE XXXVI............................................................57

  36.1      Compliance with Management Agreement.........................57

ARTICLE XXXVII...........................................................58

  37.1      Arbitration..................................................58

EXHIBIT A -          Legal Description
EXHIBIT B -          Schedule of Lease Terms

                                      -v-
<PAGE>

                                 LEASE AGREEMENT

                  THIS LEASE AGREEMENT (this "Lease"), made as of the ___ day of
________, 2004, by and between _______________________________, a Delaware
limited liability company (the "Lessor"), and _____________________________, a
Delaware limited liability company (the "Lessee"), provides as follows:

                              W I T N E S S E T H:

                  WHEREAS, Lessor and Lessee desire to enter into this Lease to
evidence the terms and conditions upon which Lessor will lease and demise to
Lessee the Leased Property, and the terms and conditions upon which Lessee will
lease and take from Lessor the Leased Property.

                  NOW, THEREFORE, intending to be legally bound, Lessor and
Lessee agree that Lessor, in consideration of the payment of rent by Lessee to
Lessor, the covenants and agreements to be performed by Lessee, and upon the
terms and conditions hereinafter stated, does hereby rent and lease unto Lessee,
and Lessee does hereby rent and lease from Lessor, the Leased Property.

                                   ARTICLE I

                  1.1 Leased Property. The Leased Property is comprised of
Lessor's interest in the following:

                  (a) the parcel of land more particularly described in the
legal description attached hereto as Exhibit A (the "Land");

                  (b) all buildings, structures and other improvements and
appurtenances of every kind, including, but not limited to the Hotel, the
alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines
(on-site and offsite), parking areas and roadways appurtenant to such buildings
and structures presently situated upon the Land (collectively, the "Leased
Improvements");

                  (c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;

                  (d) all equipment, machinery, fixtures, and other items of
property required for or incidental to the use of the Leased Improvements as a
hotel, including all components thereof, now or hereafter permanently affixed to
or incorporated into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which to the greatest
extent permitted by law are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto (collectively, the "Fixtures");

<PAGE>

                  (e) all furniture and furnishings and all other items of
personal property (excluding Inventory and personal property owned by Lessee)
located on, and used in connection with, the operation of the Leased
Improvements as a hotel, together with all replacements, modifications,
alterations and additions thereto; and

                  (f) all existing leases of space within the Leased Property
(including any security deposits or collateral held by Lessor pursuant thereto).

THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, FINANCING INSTRUMENTS, MORTGAGES,
DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH WOULD BE
DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY
THEREOF.

                  1.2 Term. The term of the Lease (the "Term") shall commence on
the date of this Lease (the "Commencement Date") and shall end on the fifth
(5th) anniversary of the last day of the month in which the Commencement Date
occurs, unless sooner terminated or later renewed and extended in accordance
with the provisions hereof.

                                   ARTICLE II

                  Definitions. For all purposes of this Lease, except as
otherwise expressly provided or unless the context otherwise requires, (a) the
terms defined in this Article have the meanings assigned to them in this Article
and include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as are at the time applicable, (c) all
references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:

                  Accounting Period: Accounting Period shall mean each four (4)
week accounting period of Manager corresponding to calendar months. If Manager
shall, for a bona fide business reason, change its Accounting Period during the
Term, appropriate adjustments, if any, shall be made with respect to the timing
of certain accounting and reporting requirements of this Lease; provided,
however, that, in no event shall any such change or adjustment alter the amount
or frequency of payment of Base Rent within any Fiscal Year, or alter the
frequency of payment of Percentage Rent to less than four (4) times during any
Fiscal Year, or otherwise increase or reduce any monetary obligation under this
Lease.

                                      -2-
<PAGE>

                  Accounting Period Statement: Accounting Period Statement shall
have the meaning given such term in Section 23.1(d).

                  Additional Charges:  As defined in Section 3.3.

                  Affiliate: As used in this Lease, the term "Affiliate" of a
person shall mean (a) any Person that, directly or indirectly, Controls or is
Controlled by or is under common Control with such Person, (b) any other person
that owns, beneficially, directly or indirectly, more than fifty percent (50%)
of the outstanding capital stock, shares or equity interests of such Person, or
(c) any officer, director, employee, partner or trustee of such Person or any
person Controlling, Controlled by or under common Control with such Person
(excluding trustees and persons serving in similar capacities who are not
otherwise an Affiliate of such person). The term "Person" means and includes
individuals, corporations, limited liability companies, general and limited
partnerships, stock companies or associations, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts, or
other legal entities and governments and agencies and political subdivisions
thereof, and the heirs, executors, administrators, legal representatives,
successors and assigns of such Person where the context so admits.

                  Annual Budgets: As used in this Lease, the term "Annual
Budgets" shall mean the Operating Budget and Capital Budget prepared, delivered
and approved in accordance with Section 3.6.

                  Annual Revenue Computation:  As defined in Exhibit B.

                  Award:  As defined in Section 15.1(c).

                  Base Rate: The rate of interest announced publicly by
Citibank, N.A., in New York, New York, from time to time, as such bank's base
rate. If no such rate is announced or becomes discontinued, then such other rate
as Lessor may reasonably designate.

                  Base Rent:  As defined in Article III.

                  Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which national banks in the City of New York, New
York, or in the municipality wherein the Leased Property is located are closed.

                  Capital Budget:  As defined in Section 3.5(b).

                  Capital Expenditures: Amounts advanced to pay the costs of
Capital Improvements.

                  Capital Improvements: Non-routine, major repairs, alterations,
improvements, renewals, replacements and additions to the Leased Property,
including, without limitation, to (A) the external walls and internal
load-bearing walls (other than windows and plate glass) of the Hotel; (B) the
roof of the Hotel; (C) private roadways, parking areas, sidewalks and curbs
appurtenant thereto (other than cleaning, patching and striping); (D)
mechanical, electrical, heating, ventilating, air conditioning, plumbing systems
and vertical transportation that service common areas, entire wings of the Hotel
or the entire Hotel, including conduit and ductwork connected thereto.

                                      -3-
<PAGE>

                  CERCLA: The Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.

                  Code: The Internal Revenue Code of 1986, as amended.

                  Commencement Date: As defined in Section 1.2 of the Lease.

                  Condemnation, Condemnor: As defined in Section 15.1.

                  Consumer Price Index: The "Consumer Price Index" published by
the Bureau of Labor Statistics of the United States Department of Labor, U.S.
City Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984 =
100) or, in the event publication thereof ceases, by reference to whatever index
then published by the United States Department of Labor at that time is most
nearly comparable as a measure of general changes in price levels for urban
areas, as reasonably determined by Lessor and Lessee.

                  Control: (Including the correlative meanings of the terms
"controlled by", "controlling" and "under common control with"), as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, through the ownership of voting securities, partnership interests or
other equity interests.

                  Date of Taking: As defined in Section 15.1(b).

                  Eligible Independent Contractor: A management company that
meets the following requirements:

                  (a)      The management company does not own, directly or
                           indirectly, more than 35% of the outstanding stock of
                           SHC.

                  (b)      If the management company is a corporation, no more
                           than 35% of the total combined voting power of its
                           outstanding stock (or 35% of the total shares of all
                           classes of its outstanding stock) or, if it is not a
                           corporation, no more than 35% of the ownership
                           interest in its assets or profits is owned, directly
                           or indirectly, by one or more Persons owning 35% or
                           more of the outstanding stock of SHC.

                  (c)      Neither SHC, Lessor, Lessee, nor any Affiliate
                           thereof derives any income from the management
                           company.

                                      -4-
<PAGE>

                  (d)      At the time that the management company enters into a
                           management agreement with Lessee to operate the
                           Leased Property, the management company (or any
                           "related person" within the meaning of Section 856(d)
                           (9)(F) of the Code) is actively engaged in the trade
                           or business of operating "qualified lodging
                           facilities" within the meaning of Section
                           856(d)(9)(D) of the Code for any Person who is not a
                           "related person" within the meaning of Section
                           856(d)(9)(F) of the Code with respect to SHC or
                           Lessee (an "Unrelated Person"). For purposes of
                           determining whether the requirement of this paragraph
                           (d) has been met, a management company shall be
                           treated as being actively engaged in such a trade or
                           business if the management company (i) derives at
                           least 10% of both its profits and revenue from
                           operating "qualified lodging facilities" within the
                           meaning of Section 856(d)(9)(D) of the Code for
                           Unrelated Persons or (ii) complies with any
                           regulations or other administrative guidance under
                           Section 856(d)(9) of the Code that provide a "safe
                           harbor" rule with respect to the amount of hotel
                           management business with Unrelated Persons that is
                           necessary to qualify as an "eligible independent
                           contractor" within the meaning of such Code section.

                  Environmental Authority: Any department, agency or other body
or component of any Government that exercises any form of jurisdiction or
authority under any Environmental Law.

                  Environmental Authorization: Any license, permit, order,
approval, consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.

                  Environmental Laws: All applicable federal, state, local and
foreign laws and regulations relating to pollution of the environment (including
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, laws and regulations relating
to emissions, discharges, Releases or threatened Releases of Hazardous Materials
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
Environmental Laws include, but are not limited to, CERCLA, FIFRA, RCRA, SARA
and TSCA.

                  Environmental Liabilities: Any and all obligations to pay the
amount of any judgment or settlement, the cost of complying with any settlement,
judgment or order for injunctive or other equitable relief, the cost of
compliance or corrective action in response to any notice, demand or request
from an Environmental Authority, the amount of any civil penalty or criminal
fine, and any court costs and reasonable amounts for attorney's fees, fees for
witnesses and experts, and costs of investigation and preparation for the
defense of any claim or any Proceeding, regardless of whether such Proceeding is
threatened, pending or completed, that may be or have been asserted against or
imposed upon Lessor, Lessee, any Predecessor, the Leased Property or any
property used therein and arising out of:

                                      -5-
<PAGE>

                  (a)      Failure of Lessee, Lessor, any Predecessor or the
                           Leased Property to comply at any time with all
                           Environmental Laws; Presence of any Hazardous
                           Materials on, in, under, at or in any way affecting
                           the Leased Property;

                  (c)      A Release at any time of any Hazardous Materials on,
                           in, at, under or in any way affecting the Leased
                           Property;

                  (d)      Identification of Lessee, Lessor or any Predecessor
                           as a potentially responsible party under CERCLA or
                           under any Environmental Law similar to CERCLA;

                  (e)      Presence at any time of any above-ground and/or
                           underground storage tanks, as defined in RCRA or in
                           any applicable Environmental Law on, in, at or under
                           the Leased Property or any adjacent site or facility;
                           or

                  (f)      Any and all claims for injury or damage to persons or
                           property arising out of exposure to Hazardous
                           Materials originating or located at the Leased
                           Property, or resulting from operation thereof or any
                           adjoining property.

                  Event of Default:  As defined in Section 16.1.

                  Fair Market Rental: The fair market rental of the Leased
Property means the rental which a willing tenant not compelled to rent would pay
a willing landlord not compelled to lease for the use and occupancy of such
Leased Property, (a) assuming that Lessee is not in default hereunder and (b)
determined in accordance with the appraisal procedures set forth in Article
XXXII or in such other manner as shall be mutually acceptable to Lessor and
Lessee.

                  Fair Market Value: The fair market value of the Leased
Property means an amount equal to the price that a willing buyer not compelled
to buy would pay a willing seller not compelled to sell for such Leased
Property, (a) assuming the same is unencumbered by this Lease, (b) determined in
accordance with the appraisal procedures set forth in Article XXXII or in such
other manner as shall be mutually acceptable to Lessor and Lessee, (c) assuming
that such seller must pay customary closing costs and title premiums, and (d)
taking into account the positive or negative effect on the value of the Leased
Property attributable to the interest rate, amortization schedule, maturity
date, prepayment penalty and other terms and conditions of any encumbrance that
is assumed by the transferee. In addition, in determining the Fair Market Value
with respect to damaged or destroyed Leased Property such value shall be
determined as if such Leased Property has not been so damaged or destroyed.

                                      -6-
<PAGE>

                  FF&E Estimate: As defined in Section 9.2(c).

                  FF&E Reserve: As defined in Section 9.2(a).

                  FIFRA:  The Federal Insecticide, Fungicide, and Rodenticide
Act, as amended.

                  Fiscal Year: The 12-month period from January 1 to December
31.

                  Fixtures: As defined in Section 1.1(d).

                  Food and Beverage Revenues: Shall mean (a) gross revenue from
the sale of food and beverages that are prepared at the Hotel and sold or
delivered on or off the Hotel by or on behalf of Lessee (including, without
limitation, revenues from mini-bars), whether for cash or for credit, including
in respect of guest rooms, banquet rooms, meeting rooms and other similar rooms
and (b) gross revenue from the rental of banquet, meeting and other similar
rooms. Food and Beverage Revenues shall be determined in a manner consistent
with the Uniform System. Food and Beverage Revenues shall not include the
following:

         (a)      sales by Lessee's subtenants, licensees and concessionaires,
                  the rent, license fees or concession payments from which are
                  included in Gross Revenues, and any rent, license fees,
                  concession payments or other amounts paid to Lessee by any
                  such subtenants, licensees and concessionaires;

         (b)      vending machine sales;

         (c)      any gratuities or service charges added to a customer's bill
                  or statement in lieu of a gratuity that is paid directly to
                  Hotel employees, to the extent actually paid to such
                  employees;

         (d)      credits, rebates or refunds; or

         (e)      sales taxes or taxes of any other kind imposed on the sale of
                  food or beverages.

                  Furniture and Equipment: For purposes of this Lease, the terms
"furniture and equipment" shall mean collectively all furniture, furnishings,
wall coverings, fixtures and hotel equipment and systems located at, or used in
connection with, the Hotel, together with all replacements therefor and
additions thereto, including, without limitation, (i) all equipment and systems
required for the operation of kitchens and bars, if any, laundry and dry
cleaning facilities, (ii) office equipment, (iii) dining room wagons, materials
handling equipment, cleaning and engineering equipment, (iv) telephone and
computerized accounting systems, (v) vehicles and (vi) and any other items
included within "property and equipment" under the Uniform System.

                                      -7-
<PAGE>

                  Government: The United States of America, any state, district
or territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any political subdivision of
any of the foregoing.

                  Gross Operating Expenses: For purposes of this Lease, the term
"Gross Operating Expenses" shall mean all salaries and employee expense and
payroll taxes (including salaries, wages, bonuses and other compensation of all
employees at the Hotel, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Lease, governmental fees and assessments, food, beverages, laundry
service expense, the cost of Inventories and fixed asset supplies, license fees,
advertising, marketing, reservation systems and any and all other operating
expenses as are reasonably necessary for the proper and efficient operation of
the Hotel incurred by Lessee in accordance with the provisions hereof
(excluding, however, (i) federal, state and municipal excise, sales and use
taxes collected directly from patrons and guests or as a part of the sales price
of any goods, services or displays, such as gross receipts, admissions, cabaret
or similar or equivalent taxes paid over to federal, state or municipal
governments, (ii) expenditures by Lessor pursuant to Article XIII and (iii)
payments on any Mortgage or other mortgage or security instrument on the Leased
Property); all determined in accordance with generally accepted accounting
principles and the Uniform System. No part of Lessee's central office overhead
or general or administrative expense (as opposed to that of the Hotel) shall be
deemed to be a part of Gross Operating Expenses, as herein provided; provided
that accounting services provided to the Leased Property but performed at
Lessee's central office shall be included in Gross Operating Expenses.
Reasonable out-of-pocket expenses of Lessee incurred for the account of or in
connection with the hotel operations, including but not limited to postage,
telephone charges and reasonable travel expenses of employees, officers and
other representatives and consultants of Lessee and its Affiliates, shall be
deemed to be a part of Gross Operating Expenses and such persons shall be
afforded reasonable accommodations, food, beverages, laundry, valet and other
such services by and at the hotel without charge to such persons or Lessee.

                  Gross Operating Profit: For any Fiscal Year, the excess of
Gross Revenues for such Fiscal Year over Gross Operating Expenses for such
Fiscal Year.

                  Gross Revenues: All revenues, receipts, and income of any kind
derived directly or indirectly by Lessee from or in connection with the Hotel
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts) whether on a cash basis
or credit, paid or collected, determined in accordance with generally accepted
accounting principles and the Uniform System, excluding, however: (i) funds
furnished by Lessor, (ii) federal, state and municipal excise, sales, and use
taxes collected directly from patrons and guests or as a part of the sales price
of any goods, services or displays, such as gross receipts, admissions, cabaret
or similar or equivalent taxes and paid over to federal, state or municipal
governments, (iii) gratuities, (iv) proceeds of insurance and Condemnation, (v)
proceeds from sales other than sales in the ordinary course of business, (vi)
all loan proceeds from financing or refinancings of the hotel or interests
therein or components thereof, (vii) judgments and awards, except any portion
thereof arising from normal business operations of the Hotel, (viii) items
constituting "allowances" under the Uniform System.

                                      -8-
<PAGE>

                  Hazardous Materials: All chemicals, pollutants, contaminants,
wastes and toxic substances, including without limitation:

                  (a)      Solid or hazardous waste, as defined in RCRA or in
                           any Environmental Law;

                  (b)      Hazardous substances, as defined in CERCLA or in any
                           Environmental Law;

                  (c)      Toxic substances, as defined in TSCA or in any
                           Environmental Law;

                  (d)      Insecticides, fungicides, or rodenticides, as defined
                           in FIFRA or in any Environmental Law; and

                  (e)      Gasoline or any other petroleum product or byproduct,
                           polychlorinated biphenyls, asbestos and urea
                           formaldehyde.

                  Hotel: The hotel and/or other facility offering lodging and
other services or amenities being operated or proposed to be operated on the
Leased Property.

                  Hotel Revenues: Room Revenues, Food and Beverage Revenues and
Other Revenues, collectively.

                  Impositions: Collectively, all taxes (including, without
limitation, all taxes imposed under the laws of the State, as such laws may be
amended from time to time, and all ad valorem, sales and use, single business,
commercial residence or occupancy, gross receipts, transaction privilege, rent
or similar taxes as the same relate to or are imposed upon Lessor, Lessee or the
business conducted upon the Leased Property), assessments (including, without
limitation, all assessments for public improvements or benefit, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term), water, sewer or other rents and charges, excises,
tax inspection, authorization and similar fees and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Lessee (including all interest and penalties
thereon caused by any failure in payment by Lessee), which at any time prior to,
during or with respect to the Term hereof may be assessed or imposed on or with
respect to or be a lien upon (a) Lessor's interest in the Leased Property, (b)
the Leased Property, or any part thereof or any rent therefrom or any estate,
right, title or interest therein, or (c) any occupancy, operation, use or
possession of, or sales from, or activity conducted on or in connection with the
Leased Property, or the leasing or use of the Leased Property or any part
thereof by Lessee. Nothing contained in this definition of Impositions shall be
construed to require Lessee to pay (1) any tax based on net income, net worth or
capital (whether denominated as a franchise or capital stock or other tax)
imposed on Lessor or any other person, or (2) any net revenue tax of Lessor or
any other person, or (3) any tax imposed with respect to the sale, exchange or
other disposition by Lessor of any Leased Property or the proceeds thereof, or
(4) any single business, gross receipts (other than a tax on any rent received
by Lessor from Lessee), transaction, privilege or similar taxes as the same
relate to or are imposed upon Lessor, except to the extent that any tax,
assessment, tax levy or charge that Lessee is obligated to pay pursuant to the
first sentence of this definition and that is in effect at any time during the
Term hereof is totally or partially repealed, and a tax, assessment, tax levy or
charge set forth in clause (1) or (2) is levied, assessed or imposed expressly
in lieu thereof, or (5) any interest or penalties imposed on Lessor as a result
of the failure of Lessor to file any return or report timely and in the form
prescribed by law or to pay any tax or imposition, except to the extent such
failure is a result of a breach by Lessee of its obligations pursuant to Section
4.1, or (6) any Impositions imposed on Lessor that are a result of Lessor not
being considered a "United States person" as defined in Section 7701(a)(30) of
the Code, or (7) any Impositions that are enacted or adopted by their express
terms of this Lease or (8) any Impositions imposed as a result of a breach of
covenant or representation by Lessor in any agreement entered into by Lessor
governing Lessor's conduct or operation or as a result of the negligence or
willful misconduct of Lessor.

                                      -9-
<PAGE>

                  Indemnified Party: Either of a Lessee Indemnified Party or a
Lessor Indemnified Party.

                  Indemnifying Party: Any party obligated to indemnify an
Indemnified Party pursuant to Section 8.3 or Article XXI.

                  Insurance Requirements: All terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.

                  Inventory: All "Inventories of Merchandise" and "Inventories
of Supplies" as defined in the Uniform System, including, but not limited to,
linens and other non-depreciable personal property, and including any property
of the type described in Section 1221(1) of the Code.

                  Land:  As defined in Article I.

                  Lease:  This Lease, as it relates to the Leased Property.

                  Leased Improvements; Leased Property:  Each as defined in
Article I.

                  Legal Requirements: All federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting either the Leased Property or the
maintenance, construction, use or alteration thereof (whether by Lessee or
otherwise), whether now or hereafter enacted or in existence including, without
limitation, (a) all laws, rules or regulations pertaining to the environment,
occupational health and safety and public health, safety or welfare, and (b) any
laws, rules or regulations that may (1) require repairs, modifications or
alterations in or to the Leased Property or (2) in any way adversely affect the
use and enjoyment thereof; and all permits, licenses and authorizations and
regulations relating thereto and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to Lessee
(other than encumbrances created by Lessor without the consent of Lessee), at
any time in force affecting the Leased Property.

                                      -10-
<PAGE>

                  Lending Institution: Any insurance company, credit company,
federally insured commercial or savings bank, national banking association,
savings and loan association, employees welfare, pension or retirement fund or
system, corporate profit sharing or pension trust, college or university, or
real estate investment trust, including any corporation qualified to be treated
for federal tax purposes as a real estate investment trust, such trust having a
net worth of at least $10,000,000.

                  Lessee:  Lessee designated on this Lease and its
permitted successors and assigns.

                  Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any
other Person against whom any claim for indemnification may be asserted
hereunder as a result of a direct or indirect ownership interest (including a
stockholder's interest) in Lessee, the officers, directors, stockholders,
employees, agents and representatives of Lessee and any corporate stockholder,
agent, or representative of Lessee, and the respective heirs, personal
representatives, successors and assigns of any such officer, director,
stockholder, employee, agent or representative.

                  Lessee's Personal Property:  As defined in Section 6.2.

                  Lessor:  Lessor designated on this Lease and its
respective successors and assigns.

                  Lessor Indemnified Party: Lessor, any Affiliate of Lessor, or
any other Person against whom any claim for indemnification may be asserted
hereunder as a result of a direct or indirect ownership interest (including a
stockholder's or partnership interest) in Lessor, the officers, directors,
stockholders, employees, agents and representatives of the general partner of
Lessor and any partner, agent, or representative of Lessor, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, partner, stockholder, employee, agent or representative.

                  Management Agreement:  As defined in Section 18.4.

                  Manager:  As defined in Section 18.4.

                  Mortgage:  As defined in Section 29.2.

                  Notice:  A notice given pursuant to Article XXXI.

                  Officer's Certificate: A certificate of Lessee reasonably
acceptable to Lessor, signed by the chief financial officer or other authorized
officer of the entity authorized so to sign on behalf of Lessee, or any other
person whose power and authority to act has been authorized by delegation in
writing by any such officer.

                                      -11-
<PAGE>

                  Operating Budget:  As defined in Section 3.5(a).

                  Other Revenues: All revenues, receipts and income of any kind
derived directly or indirectly from or in connection with the Hotel and included
in Gross Revenues, other than Room Revenues, and Food Sales and Beverage
Revenues.

                  Overdue Rate: On any date, a rate equal to the Base Rate plus
5% per annum, but in no event greater than the maximum rate then permitted under
applicable law.

                  Payment Date:  Any due date for the payment of any
installment of Base Rent or Percentage Rent.

                  Percentage Rent:  As defined in Section 3.1(b).

                  Personal Property Taxes: All personal property taxes imposed
on the furniture, furnishings or other items of personal property located on,
and used in connection with, the operation of the Leased Improvements as a hotel
(other than Inventory and other personal property owned by Lessee), together
with all replacement, modifications, alterations and additions thereto.

                  Predecessor: Any Person whose liabilities arising under any
Environmental Law have or may have been retained or assumed by Lessee, either
contractually or by operation of law, relating to the Leased Property.

                  Primary Intended Use:  As defined in Section 7.2(b).

                  Proceeding: Any judicial action, suit or proceeding (whether
civil or criminal), any administrative proceeding (whether formal or informal),
any investigation by a governmental authority or entity (including a grand
jury), and any arbitration, mediation or other non-judicial process for dispute
resolution.

                  Qualified Manager: A Manager that is (or is controlled by,
controlling or under common control with) either (a) an entity then owned or
controlled by the executive management or shareholders of SHC, or (b) a
professional management company which at the time of its engagement as Manager
shall be the property manager for at least ten (10) hotel properties containing
at least one thousand three hundred (1,300) rooms exclusive of the Leased
Property.

                  Quarterly Revenues Computation:  As defined in Exhibit B.

                  RCRA:  The Resource Conservation and Recovery Act, as amended.

                  Real Estate Taxes: All real estate taxes, including general
and special assessments, if any, which are imposed upon the Land, and any
improvements thereon.

                                      -12-
<PAGE>

                  Release: A "Release" as defined in CERCLA or in any
Environmental Law, unless such Release has been properly authorized and
permitted in writing by all applicable Environmental Authorities or is allowed
by such Environmental Law without authorizations or permits.

                  Rent:  Collectively, the Base Rent, Percentage Rent, and
Additional Charges.

                  Revenues Computations:  Shall mean, collectively, the
Quarterly Revenues Computation, and the Annual Revenues Computation.

                  Room Revenues: Gross revenue from the rental of guest rooms,
whether to individuals, groups or transients, at the Hotel, determined in a
manner consistent with the Uniform System and excluding the following:

                  (a)      the amount of all credits, bad debt written off,
                           rebates or refunds to customers, guests or patrons;
                           and

                  (b)      all sales taxes or any other taxes imposed on the
                           rental of such guest rooms; and

                  (c)      any fees collected for amenities including, but not
                           limited to, telephone, laundry, movies or
                           concessions.

                  SARA:  The Superfund Amendments and Reauthorization Act of
1986, as amended.

                  SHC:  Strategic Hotel Capital, Inc., a Maryland corporation.

                  State:  The State or Commonwealth of the United States in
which the Leased Property is located.

                  Subsidiaries:  Entities in which Lessee owns, directly or
indirectly, more than 50% of the voting stock or Control, as applicable
(individually, a "Subsidiary").

                  Taking: A taking or voluntary conveyance during the Term
hereof of all or part of the Leased Property, or any interest therein, or right
accruing thereto or use thereof, as the result of, or in settlement of, any
Condemnation or other eminent domain proceeding affecting the Leased Property
whether or not the same shall have actually been commenced.

                  Term:  As defined in Section 1.4.

                  TSCA:  The Toxic Substances Control Act, as amended.

                  Unavoidable Delays: Delays due to strikes, lock-outs, labor
unrest, inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the other party hereto to perform any obligations of such party under
this Lease or any guaranty of this Lease.

                                      -13-
<PAGE>

                  Uneconomic for its Primary Intended Use: A state or condition
of the Hotel such that, in the good faith judgment of Lessee, reasonably
exercised and evidenced by the resolution of the governing body of the entity
authorized to act on behalf of Lessee, the Hotel cannot be operated on a
commercially practicable basis for its Primary Intended Use, taking into
account, among other relevant factors, the number of usable rooms and projected
revenues, such that Lessee intends to, and shall, complete the cessation of
operations from the Hotel.

                  Uniform System: Shall mean the "Uniform System of Accounts for
Hotels" (9th Revised Edition, 1996) as published by the American Hotel and Motel
Association, as it may be amended from time to time with such exceptions as may
be required by the provision of this Lease.

                  Unsuitable for its Primary Intended Use: A state or condition
of the Hotel such that, in the good faith judgment of Lessee, reasonably
exercised and evidenced by the resolution of the governing body of the entity
authorized to act on behalf of Lessee, due to casualty damage or loss through
Condemnation, the Hotel cannot function as an integrated hotel facility
consistent with standards applicable to a well maintained and operated hotel.

                  Working Capital: Shall mean funds that are used in the
day-to-day operation of the business of the Hotel, including, without
limitation, amounts sufficient for the maintenance of change and petty cash
funds, amounts deposited in operating bank accounts, receivables, amounts
deposited in payroll accounts, prepaid expenses and funds required to maintain
Inventories, less accounts payable and accrued current liabilities.

                                  ARTICLE III

                  3.1 Rent. Lessee will pay or cause Manager to pay, on behalf
of Lessee, to Lessor by wire transfer of immediately available federal funds or
by other means acceptable to Lessor in its sole discretion, in lawful money of
the United States of America which shall be legal tender for the payment of
public and private debts, without offset, abatement, demand or deduction (unless
otherwise expressly provided in this Lease) at Lessor's address set forth on the
signature page or at such other place or to such other Person, as Lessor from
time to time may designate in a Notice, all Base Rent, Percentage Rent and
Additional Charges, during the Term, as follows:

                  (a) Base Rent. Commencing on the Commencement Date, the annual
sum in the amount set forth on Exhibit B hereto (as adjusted under Section
3.1(d)) as the "Base Rent" for the Leased Property, payable in advance in equal,
consecutive monthly installments, on or before the tenth day of each calendar
month of the Term ("Base Rent"); provided, however, that the first and last
monthly payments of Base Rent shall be pro-rated as to any partial month
(subject to adjustment as provided in Sections 5.2, 14.5 and 15.3); and

                                      -14-
<PAGE>

                  (b) Percentage Rent. For each Fiscal Year during the Term
commencing with the Fiscal Year beginning January 1, 2004, Tenant shall pay
percentage rent ("Percentage Rent") quarterly, with respect to the four calendar
quarters of each Fiscal Year, in an amount calculated using the following
formula:

           The amount equal to the Quarterly Revenues Computation (as
                     defined on Exhibit B attached hereto)

                                      less

           an amount equal to the Base Rent paid year to date for the
                             applicable Fiscal Year

                                      less

          an amount equal to Percentage Rent paid year to date for the
                             applicable Fiscal Year

                                     equals

                  Percentage Rent for the applicable quarter.

                  (c) Officer's Certificates. Within 30 days after the last day
of each quarter of each Fiscal Year (or part thereof) in the Term, Lessee shall
deliver to Lessor an Officer's Certificate reasonably acceptable to Lessor,
together with the applicable quarterly Percentage Rent payment, setting forth
the calculation of Percentage Rent accrued and paid for such quarter including
the Quarterly Revenues Computation. Such quarterly payments shall be based on
the formulas set forth in Section 3.1(b). There shall be no reduction in the
Base Rent regardless of the result of the Quarterly Revenues Computation.

                  In addition, on or before March 31 of each year, commencing
with March 31, 2005, Lessee shall deliver to Lessor an Officer's Certificate
reasonably acceptable to Lessor setting forth the computation of the actual
Percentage Rent that accrued for each quarter of the Fiscal Year that ended on
the immediately preceding December 31. Additionally, if the annual Percentage
Rent due and payable for any Fiscal Year (as shown in the applicable Officer's
Certificate) exceeds the amount actually paid as Percentage Rent by Lessee for
such year, Lessee shall pay such excess to Lessor at the time such certificate
is delivered. If the Percentage Rent actually due and payable for such Fiscal
Year is shown by such certificate to be less than the amount actually paid as
Percentage Rent for the applicable Fiscal Year, Lessor shall reimburse such
amount to Lessee, subject to Lessor's right to confirm the annual Percentage
Rent in Section 3.2 hereof.

                  Any difference between the annual Percentage Rent due and
payable for any Fiscal Year (as shown in the applicable Officer's Certificate)
and the total amount of quarterly payments for such Fiscal Year actually paid by
Lessee as Percentage Rent, whether in favor of Lessor or Lessee, shall bear
interest at the Overdue Rate, which interest shall accrue from the due date of
the last quarterly payment for the Fiscal Year until the amount of such
difference shall be paid or otherwise discharged. Any such interest payable to
Lessor shall be deemed to be and shall be payable as Additional Charges.

                                      -15-
<PAGE>

                  The obligation to pay Percentage Rent due through the date of
termination of this Lease shall survive the expiration or earlier termination of
the Term, and a final reconciliation, taking into account, among other relevant
adjustments, any adjustments which are accrued after such expiration or
termination date but which related to Percentage Rent accrued prior to such
termination date, and Lessee's good faith best estimate of the amount of any
unresolved contractual allowances, shall be made not later than two (2) years
after such expiration or termination date, but Lessee shall advise Lessor within
sixty (60) days after such expiration or termination date of Lessee's best
estimate at that time of the approximate amount of such adjustments, which
estimate shall not be binding on Lessee or have any legal effect whatsoever.

                  (d) CPI Adjustments. On January 1st of each Fiscal Year during
the Term (each, a "CPI Adjustment Date"), the Base Rent then in effect, and the
threshold dollar amounts of Room Revenues, Food and Beverage Revenues, and Other
Revenues then included in the Revenues Computations set forth in Section 3.1(b),
shall be adjusted as follows:

(1)      The average Consumer Price Index for the twelve months ended on
         September 30 of the most recently completed Fiscal Year shall be
         divided by the average Consumer Price Index for the twelve months ended
         on September 30 of the prior Fiscal Year;

(2)      The new Base Rent for the then current Fiscal Year shall be equal to
         the product of the Base Rent in effect in the most recently ended
         Fiscal Year and the quotient obtained under subparagraph (1) above;

(3)      The new threshold dollar amounts in the applicable Revenues
         Computations described in Section 3.1(b) above for the then current
         Fiscal Year shall be (i) in the case of Room Revenues, the product of
         the threshold dollar amounts of Room Revenues in effect in the most
         recently ended Fiscal Year and the quotient obtained in subparagraph
         (1) above, (ii) in the case of Food and Beverage Revenues, the product
         of the threshold dollar amounts of Food and Beverage Revenues in effect
         in the most recently ended Fiscal Year and the quotient obtained in
         subparagraph (1) above, and in the case of Other Revenues, the product
         of the threshold dollar amounts of Other Revenues in effect in the most
         recently ended Fiscal Year and the quotient obtained in subparagraph
         (1) above.

                  By way of example, on the first CPI Adjustment Date, the
amount of Base Rent and the threshold dollar amounts of Hotel Revenues in the
Revenues Computations for the Fiscal Year commencing January 1, 2005 shall be
adjusted to reflect any change in the average Consumer Price Index for the
twelve months ended September 30, 2004 as compared to the twelve months ended
September 30, 2003.

                                      -16-
<PAGE>

                  Lessor shall calculate the annual Consumer Price Index
adjustments as soon as reasonably possible after the Consumer Price Index
becomes available and shall notify Lessee in writing of the amount of the annual
adjustment, together with a copy of the computation showing the adjustment
amount.

                  Adjustments calculated as set forth above in the Base Rent and
threshold dollar amounts of Hotel Revenues shall be effective on each CPI
Adjustment Date. If Rent is paid in any Fiscal Year prior to determination of
the amount of any adjustment to Base Rent or the threshold dollar amounts of
Hotel Revenues applicable for such Fiscal Year, payment adjustments for any
shortfall in or overpayment of Rent paid shall be made with the first Base Rent
payment due after the amount of the adjustments is determined.

(4)      If (i) a significant change is made in the number or nature (or both)
         of items used in determining the Consumer Price Index, or (ii) the
         Consumer Price Index shall be discontinued for any reason, the Bureau
         of Labor Statistics shall be requested to furnish a new index
         comparable to the Consumer Price Index, together with information which
         will make possible a conversion to the new index in computing the
         adjusted Base Rent and threshold dollar amounts of Hotel Revenues
         hereunder. If for any reason the Bureau of Labor Statistics does not
         furnish such an index and such information, the parties will instead
         mutually select, accept and use such other index or comparable
         statistics on the cost of living in Washington, D.C. that is computed
         and published by an agency of the United States or a responsible
         financial periodical of recognized authority.

                  3.2 Confirmation of Percentage Rent. Lessee shall utilize, or
cause to be utilized, an accounting system for the Leased Property in accordance
with its usual and customary practices, and in accordance with generally
accepted accounting principles and the Uniform System, that will accurately
record all data necessary to compute Percentage Rent, and Lessee shall retain,
for at least five (5) years after the expiration of each Fiscal Year (and in any
event until the reconciliation described in Section 3.1(d) for such Fiscal Year
has been made), reasonably adequate records conforming to such accounting system
showing all data necessary to compute Percentage Rent for the applicable Fiscal
Years. Lessor, at its expense (except as provided herein below), shall have the
right from time to time by its accountants or representatives to audit the
information that formed the basis for the data set forth in any Officer's
Certificate provided under Section 3.1(c) and, in connection with such audits,
to examine all Lessee's records (including supporting data, sales and excise tax
returns and franchise reports) reasonably required to verify Percentage Rent,
subject to any prohibitions or limitations on disclosure of any such data under
Legal Requirements. If any such audit discloses a deficiency in the payment of
Percentage Rent, and either Lessee agrees with the result of such audit or the
matter is otherwise determined or compromised, Lessee shall forthwith pay to
Lessor the amount of the deficiency, as finally agreed or determined, together
with interest at the Overdue Rate from the date when said payment should have
been made to the date of payment thereof; provided, however, that as to any
audit that is commenced more than two (2) years after the date Percentage Rent
for any Fiscal Year is reported by Lessee to Lessor, the deficiency, if any,
with respect to such Percentage Rent shall bear interest at the Overdue Rate
only from the date such determination of deficiency is made unless such
deficiency is the result of gross negligence or willful misconduct on the part
of Lessee, in which case interest at the Overdue Rate will accrue from the date
such payment should have been made to the date of payment thereof. If any such
audit discloses that the Percentage Rent actually due from Lessee for any Fiscal
Year exceeds those reported by Lessee by more than 3%, Lessee shall pay the cost
of such audit and examination. Any proprietary information obtained by Lessor
pursuant to the provisions of this Section shall be treated as confidential,
except that such information may be used, subject to appropriate confidentiality
safeguards, in any litigation between the parties and except further that Lessor
may disclose such information to prospective lenders, investors and underwriters
and to any other persons to whom disclosure is necessary to comply with
applicable laws, regulations and government requirements. The obligations of
Lessee contained in this Section shall survive the expiration or earlier
termination of this Lease. Any dispute as to the existence or amount of any
deficiency in the payments of Percentage Rent as disclosed by Lessor's audit
shall, if not otherwise settled by the parties, be submitted to arbitration
using the procedures set forth in Article XXXVII hereof.

                                      -17-
<PAGE>

                  3.3 Additional Charges. In addition to the Base Rent and
Percentage Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions (other than
Impositions which are Lessor's obligations hereunder), and (b) in the event of
any failure on the part of Lessee to pay any of those items referred to in
clause (a) of this Section 3.3, Lessee also will promptly pay and discharge
every fine, penalty, interest and cost that may be added for non-payment or late
payment of such items (the items referred to in clauses (a) and (b) of this
Section 3.3 being additional rent hereunder and being referred to herein
collectively as the "Additional Charges"), and Lessor shall have all legal,
equitable and contractual rights, powers and remedies provided either in this
Lease or by statute or otherwise in the case of non-payment of the Additional
Charges as in the case of non-payment of the Base Rent including, but not
limited to, the right to pay such Additional Charges on behalf of Lessee and to
require reimbursement thereof by Lessee, together with interest thereon at the
Overdue Rate. If any installment of Base Rent, Percentage Rent or Additional
Charges (but only as to those Additional Charges that are payable directly to
Lessor) shall not be paid on its due date, Lessee will pay Lessor on demand, as
Additional Charges, a late charge (to the extent permitted by law) computed at
the Overdue Rate on the amount of such installment, from the due date of such
installment to the date of payment thereof. To the extent that Lessee pays any
Additional Charges to Lessor pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges to the entity
to which they would otherwise be due and Lessor shall pay same from monies
received from Lessee.

                  3.4 Rent Payable Without Deduction. The Rent shall be paid to
Lessor so that this Lease shall yield to Lessor the full amount of the
installments of Base Rent, Percentage Rent and Additional Charges throughout the
Term, all as more fully set forth in Article V, but subject to Section 9.2(b)
hereof or any other provisions of this Lease that expressly provide for
adjustment or abatement of Rent or other charges or expressly provide that
certain expenses or maintenance shall be paid or performed by Lessor.

                                      -18-
<PAGE>

                  3.5 Budgets. Not later than sixty (60) days prior to the
commencement of each Fiscal Year, Lessee shall submit the following budgets to
Lessor:

                  (a) An operating budget ("Operating Budget") shall be prepared
in accordance with this Section 3.5(a). The Operating Budget shall be prepared
in good faith and otherwise in accordance with the Uniform System to the extent
applicable and shall show by month and quarter and for the full Fiscal Year in
the degree of detail specified by the Uniform System, the following:

                  (1)      Lessee's reasonable estimate of Gross Revenues
                           (including room rates and Hotel Revenues), Gross
                           Operating Expenses, and Gross Operating Profits for
                           the forthcoming Fiscal Year itemized on schedules on
                           a quarterly basis as reasonably approved by Lessor
                           and Lessee, as same may be revised or replaced from
                           time to time by Lessee and reasonably approved by
                           Lessor, together with the assumptions, in narrative
                           form, forming the basis of such schedules.

                  (2)      An estimate of the amounts to be dedicated to
                           routine, non-capital repair and maintenance.

                  (3)      A cash flow projection.

                  (4)      Lessee's reasonable estimate of Percentage Rent by
                           quarter for the Fiscal Year.

                  (5)      A narrative description of the program for
                           advertising and marketing the Hotel for the
                           forthcoming Fiscal Year containing a detailed budget
                           itemization of the proposed advertising expenditures
                           by category and the assumptions, in narrative form,
                           forming the basis of such budget itemizations.

                  (b) A capital budget ("Capital Budget") containing a
description in reasonable detail of the proposed Capital Improvements and an
estimate of all amounts Lessor will be requested to provide for Capital
Improvements to the Hotel or any of its components for the Fiscal Year. The
Capital Budget shall be prepared in accordance with the Uniform System to the
extent applicable.

                  3.6 Approval of Capital Budget. Within thirty (30) days
following submission of the Capital Budget to Lessor, Lessor shall give Lessee
written notice either (a) that Lessor approves the Capital Budget or (b)
indicating with reasonable specificity the respects in which Lessor objects to
the Capital Budget. In the latter event, Lessor and Lessee shall act promptly,
reasonably and in good faith to seek to resolve Lessor's objections. In the
event that Lessor and Lessee fail to reach agreement with respect to the Capital
Budget within thirty (30) days after receipt of Lessor's written notice, Lessee
and Lessor shall refer any disputed Capital Budget matter to arbitration using
procedures set forth in Article XXXVII hereof and each party shall endeavor to
cause such arbitration to be completed as quickly as possible, but in any event
not later than six (6) months following referral to arbitration. In the event
Lessor fails to deliver the notice set forth in this section within the required
time period, the Capital Budget shall be deemed approved. Lessor shall be
obligated to make all Capital Expenditures which are pursuant to a Capital
Budget which has been approved or deemed approved in accordance with the
procedures set forth above.

                                      -19-
<PAGE>

                  3.7 Capital Projects. (a) The selection of all design
professionals and contractors for capital projects shall be made by Lessor,
after consultation with Lessee. (b) Lessor may require that all contracts in
connection with capital projects be subject to competitive bidding procedures
reasonably acceptable to Lessor. Lessor shall also have the right to review and
approve all contract bids, whether competitively bid or not. Lessor may also
retain, at its sole cost and expense, an inspecting architect or engineer to
monitor costs, time, quality and performance for all capital projects.

                  3.8 Books and Records. Lessee shall keep full and adequate
books of account and other records reflecting the results of operation of the
Hotel on an accrual basis, all in accordance with the Uniform System and
generally accepted accounting principles and the obligations of Lessee under
this Lease. The books of account and all other records relating to or reflecting
the operation of the Hotel shall be kept either at the Hotel or at Lessee's
offices in Chicago, Illinois and shall be available to Lessor and its
representatives and its auditors or accountants, at all reasonable times for
examination, audit, inspection, and transcription. All of such books and records
pertaining to the Hotel, including, without limitation, books of account, guest
records and front office records, at all times shall be the property of Lessor
and shall not be removed from the Hotel or Lessee's offices without Lessor's
approval.

                                   ARTICLE IV

                  4.1 Payment of Impositions. Subject to Article XII relating to
permitted contests, Lessee will pay, or cause to be paid, all Impositions (other
than Real Estate Taxes and Personal Property Taxes, which shall be paid by
Lessor) before any fine, penalty, interest or cost may be added for non-payment,
such payments to be made directly to the taxing or other authorities where
feasible, and will promptly furnish to Lessor copies of official receipts or
other satisfactory proof evidencing such payments. Lessee's obligation to pay
such Impositions shall be deemed absolutely fixed upon the date such Impositions
become a lien upon the Leased Property or any part thereof. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Imposition),
Lessee may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Imposition) in installments and, in such event, shall pay
such installments during the Term hereof (subject to Lessee's right of contest
pursuant to the provisions of Article XII) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto. Lessor, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of Lessor's net
income, gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes, Real Estate Taxes, Personal Property Taxes
and taxes on its capital stock, and Lessee, at its expense, shall, to the extent
required or permitted by applicable laws and regulations, prepare and file all
tax returns and reports in respect of any Imposition as may be required by
governmental authorities. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Lessee, the same shall be paid over to or
retained by Lessee if no Event of Default shall have occurred hereunder and be
continuing. If an Event of Default shall have occurred and be continuing, any
such refund shall be paid over to or retained by Lessor. Any such funds retained
by Lessor due to an Event of Default shall be applied as provided in Article
XVI. Lessor and Lessee shall, upon request of the other, provide such data as is
maintained by the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and reports. Lessee
shall file all Personal Property Tax returns in such jurisdictions where it is
legally required to so file. Lessor, to the extent it possesses the same, and
Lessee, to the extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for any
property classified as personal property. Where Lessor is legally required to
file Personal Property Tax returns, Lessee shall provide Lessor with copies of
assessment notices in sufficient time for Lessor to file a protest. Lessor may,
upon notice to Lessee, at Lessor's option and at Lessor's sole expense, protest,
appeal, or institute such other proceedings (in its or Lessee's name) as Lessor
may deem appropriate to effect a reduction of real estate or personal property
assessments for those Impositions to be paid by Lessor, and Lessee, at Lessor's
expense as aforesaid, shall fully cooperate with Lessor in such protest, appeal,
or other action. Lessor hereby agrees to indemnify, defend, and hold harmless
Lessee from and against any claims, obligations, and liabilities against or
incurred by Lessee in connection with such cooperation. Billings for
reimbursement of Personal Property Taxes by Lessee to Lessor shall be
accompanied by copies of a bill therefor and payment thereof which identify the
personal property with respect to which such payments are made. Lessor, however,
reserves the right to effect any such protest, appeal or other action and, upon
notice to Lessee, shall control any such activity, which shall then go forward
at Lessor's sole expense. Upon such notice, Lessee, at Lessor's expense, shall
cooperate fully with such activities.

                                      -20-
<PAGE>

                  4.2 Notice of Impositions. To the extent Lessor is notified of
any Impositions, Lessor shall give prompt Notice to Lessee of such Impositions
payable by Lessee hereunder, provided that Lessor's failure to give any such
Notice shall in no way diminish Lessee's obligations hereunder to pay such
Impositions, but such failure shall obviate any default hereunder for a
reasonable time after Lessee receives Notice of any Imposition which it is
obligated to pay during the first taxing period applicable thereto and Lessor
shall be responsible for any interest or penalties incurred as a result of
Lessor's failure to promptly forward the same.

                  4.3 Adjustment of Impositions. Impositions imposed in respect
of the tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's obligation to pay its prorated
share thereof after termination shall survive such termination.

                  4.4 Utility Charges. Lessee will be solely responsible for
obtaining and maintaining utility services to the Leased Property and will pay
or cause to be paid all charges for electricity, gas, oil, water, sewer and
other utilities used in the Leased Property during the Term.

                  4.5 Insurance Premiums. Lessor and Lessee, as the case may be,
will pay or cause to be paid all premiums for the insurance coverages required
to be maintained by them under Article XIII.

                  4.6 Other Charges. Lessee shall pay or cause to be paid all
other amounts, liabilities and obligations arising in connection with the Leased
Property except those obligations expressly assumed by Lessor pursuant to the
provisions of this Lease or expressly stated not to be an obligation of Lessee
pursuant to this Lease.

                  4.7 Reimbursement for Additional Charges. If Lessee pays or
causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon expiration or
sooner termination of this Lease, Lessee may, within a reasonable time after the
end of the Term, provide Notice to Lessor of its estimate of such amounts.
Lessor shall promptly reimburse Lessee for all payments of such taxes and other
similar Additional Charges that are attributable to any period after the Term of
this Lease.

                                    ARTICLE V

                  5.1 No Termination, Abatement, Etc. Except as otherwise
specifically provided in this Lease, and except for loss of the Management
Agreement solely by reason of any action or inaction by Lessor, Lessee, to the
extent permitted by law, shall remain bound by this Lease in accordance with its
terms and shall neither take any action without the written consent of Lessor to
modify, surrender or terminate the same, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of the Rent, or setoff against the
Rent, nor shall the obligations of Lessee be otherwise affected by reason of (a)
any damage to, or destruction of, any Leased Property or any portion thereof
from whatever cause or any Taking of the Leased Property or any portion thereof,
(b) the lawful or unlawful prohibition of, or restriction upon, Lessee's use of
the Leased Property, or any portion thereof, or the interference with such use
by any Person, or by reason of eviction by paramount title, (c) any claim which
Lessee has or might have against Lessor by reason of any default or breach of
any warranty by Lessor under this Lease or any other agreement between Lessor
and Lessee, or to which Lessor and Lessee are parties, (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Lessor or any assignee or transferee
of Lessor, or (e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Lessee from any such obligations as a
matter of law; provided, however, that the foregoing shall not apply or be
construed to restrict any other rights Lessee may have as a result of Lessor's
gross negligence or willful misconduct. Lessee hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now be conferred upon
it by law to (1) modify, surrender or terminate this Lease or quit or surrender
the Leased Property or any portion thereof, or (2) entitle Lessee to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Lessee hereunder, except as otherwise specifically provided in this Lease.
The obligations of Lessee hereunder shall be separate and independent covenants
and agreements and the Rent and all other sums payable by Lessee hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease or by
termination of this Lease other than by reason of an Event of Default.

                                      -21-
<PAGE>

                  5.2 Abatement Procedures. In the event of a partial Taking as
described in Section 15.5, the Lease shall not terminate, but the Base Rent
shall be abated in the manner and to the extent that is fair, just and equitable
to both Lessee and Lessor, taking into consideration, among other relevant
factors, the number of usable rooms, the amount of square footage, or the
revenues affected by such partial Taking. If Lessor and Lessee are unable to
agree upon the amount of such abatement within 30 days after such partial
Taking, the matter may be submitted by either party to arbitration in accordance
with the provisions of Article XXXVII hereof for resolution.

                                   ARTICLE VI

                  6.1 Ownership of the Leased Property. Lessee acknowledges that
the Leased Property is the property of Lessor and that Lessee has only the right
to the possession and use of the Leased Property upon the terms and conditions
of this Lease.

                  6.2 Lessee's Personal Property. Lessee will acquire and
maintain through the Term such Inventory as is required to operate the Leased
Property in the manner contemplated by this Lease. Lessee may (and shall as
provided hereinbelow), at its expense, install, affix or assemble or place on
any parcels of the Land or in any of the Leased Improvements, any items of
personal property (including Inventory) owned by Lessee. Lessee, at the
commencement of the Term, and from time to time thereafter, shall provide Lessor
with an accurate list of all such items of Lessee's personal property
(collectively, the "Lessee's Personal Property"). Lessee may, subject to the
first sentence of this Section 6.2 and the conditions set forth below, remove
any of Lessee's Personal Property set forth on such list at any time during the
Term or upon the expiration or any prior termination of the Term. All of
Lessee's Personal Property, other than Inventory, not removed by Lessee within
ten (10) days following the expiration or earlier termination of the Term shall
be considered abandoned by Lessee and may be appropriated, sold, destroyed, or
otherwise disposed of by Lessor without first giving Notice thereof to Lessee,
without any payment to Lessee and without any obligation to account therefor.
Lessee will, at its expense, restore the Leased Property to the condition
required by Section 9.1(d), including repair of all damage to the Leased
Property caused by the removal of Lessee's Personal Property, whether effected
by Lessee or Lessor. Upon the expiration or earlier termination of the Term,
Lessor or its designee shall have the option to purchase all Inventory on hand
at the Leased Property at the time of such expiration or termination for a sale
price equal to the fair market value of such Inventory. Lessee may make such
financing arrangements, title retention agreements, leases or other agreements
with respect to Lessee's Personal Property as it sees fit provided that Lessee
first advises Lessor of any such arrangement and such arrangement expressly
provides that in the event of Lessee's default thereunder, Lessor (or its
designee) may assume Lessee's obligations and rights under such arrangement.

                                      -22-
<PAGE>

                  6.3 Lessor's Representations. Lessor represents and warrants
that (a) Lessor has full authority to grant to Lessee the leasehold interest
described in this Lease, and (b) that this Lease has been duly authorized by all
necessary action on behalf of Lessor.

                  6.4 Lessee's Representations. Lessee represents and warrants
that (a) Lessee is a validly existing limited liability company organized under
the laws of the State of Delaware and is qualified to do business in all states
in which it is required to so qualify due to the nature of its business
activities, (b) Lessee has the requisite power and authority to enter into this
Lease and (c) this Lease has been duly authorized by all necessary action on
behalf of Lessee.

                  6.5 Lessor's Lien. To the fullest extent permitted by
applicable law, Lessor is granted a first priority lien and security interest on
all Lessee's Personal Property now or hereinafter placed in or upon the Leased
Property, and such lien and security interest shall remain attached to such
Lessee's Personal Property until payment in full of all Rent and satisfaction of
all of Lessee's obligations hereunder; provided, however, Lessor shall
subordinate its lien and security interest to that of any non-Affiliate of
Lessee which finances such Lessee's Personal Property or any non-Affiliate
conditional seller of such Lessee's Personal Property, the terms and conditions
of such subordination to be satisfactory to Lessor in the exercise of reasonable
discretion. Lessee shall, upon the request of Lessor, file such financing
statements or execute such other documents or instruments reasonably requested
by Lessor to perfect the lien and security interests herein granted.

                                  ARTICLE VII

                  7.1 Condition of the Leased Property. Lessee acknowledges
receipt and delivery of possession of the Leased Property. Lessee has examined
and otherwise has knowledge of the condition of the Leased Property and has
found the same to be satisfactory for its purposes hereunder. Lessee is leasing
the Leased Property "as is" in its present condition. Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property. LESSOR
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE
LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN
OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY
OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT
ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT THE LEASED
PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LESSOR OR LESSOR'S AGENTS OR
EMPLOYEES WITH RESPECT THERETO, EXCEPT AS EXPRESSLY SET FORTH HEREIN.

                                      -23-
<PAGE>

                  7.2 Use of the Leased Property.

                  (a) Lessee covenants that it will proceed with all due
diligence and will exercise commercially reasonable efforts to obtain and to
maintain all approvals needed to, or to cause Manager to, use and operate the
Leased Property and the Hotel under applicable local, state and federal law.
Lessor shall cooperate with Lessee in this regard, including executing all
applications and consents required to be signed by Lessor in order for Lessee to
obtain and maintain such approvals.

                  (b) Lessee shall, and shall cause Manager to, use or cause to
be used the Leased Property only as a hotel facility, and for such other uses as
may be necessary or incidental to such use or such other use as otherwise
approved by Lessor (the "Primary Intended Use"). Lessee shall not, and Lessee
shall ensure that Manager shall not, use the Leased Property or any portion
thereof for any other use without the prior written consent of Lessor, which
consent may be granted, denied or conditioned upon Lessor's sole discretion. No
use shall be made or permitted to be made of the Leased Property, and no acts
shall be done, which will cause the cancellation or increase the premium of any
insurance policy covering the Leased Property or any part thereof (unless
another adequate policy satisfactory to Lessor is available and Lessee pays any
premium increase), and Lessee shall not, and shall ensure that Manager shall
not, sell or permit to be kept, used or sold in or about the Leased Property any
article which may be prohibited by law or fire underwriter's regulations. Lessee
shall, at its sole cost, comply with all of the requirements pertaining to the
Leased Property of any insurance board, association, organization or company
necessary for the maintenance of insurance, as herein provided, covering the
Leased Property and Lessee's Personal Property. Further, Lessee shall not, and
Lessee shall ensure that Manager shall not, take or omit to take any action, the
taking or omission of which materially impairs the usefulness of the Leased
Property or any part thereof for its Primary Intended Use.

                  (c) Subject to the provisions of Articles XIV and XV, Lessee
covenants and agrees that during the Term it will, and shall cause Manager to,
(1) operate continuously the Leased Property as a hotel facility, (2) maintain
appropriate certifications and licenses for such use, and (3) will seek to
maximize the Gross Revenues generated therefrom consistent with sound business
practices.

                  (d) Lessee shall not, and Lessee shall ensure that Manager
shall not, (1) commit or suffer to be committed any waste on the Leased
Property, or in the Hotel, nor shall Lessee cause or permit any unlawful
nuisance thereon or therein, or (2) suffer or permit the Leased Property or any
portion thereof, or Lessee's Personal Property, to be used in such a manner as
(i) might reasonably tend to impair Lessor's (or Lessee's, as the case may be)
title thereto or to any portion thereof, or (ii) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public, as such,
or of implied dedication of the Leased Property or any portion thereof, except
as necessary in the ordinary and prudent operation of the Hotel on the Leased
Property.

                                      -24-
<PAGE>

                  (e) In the event that, in the reasonable determination of
Lessor and Lessee, it shall no longer be economically practical to operate the
Leased Property as a Hotel, Lessor may elect to terminate this Lease, by
providing to Lessee Notice thereof, which Notice shall set forth in reasonable
detail the reasons therefor.

                  7.3 Lessor to Grant Easements, Etc. Lessor will, from time to
time, so long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost and expense (but subject to the approval
of Lessor, which approval shall not be unreasonably withheld or delayed), (a)
grant easements and other rights in the nature of easements with respect to the
Leased Property to third parties, (b) release existing easements or other rights
in the nature of easements which are for the benefit of the Leased Property, (c)
dedicate or transfer unimproved portions of the Leased Property for road,
highway or other public purposes, (d) execute petitions to have the Leased
Property annexed to any municipal corporation or utility district, (e) execute
amendments to any covenants and restrictions affecting the Leased Property and
(f) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications, transfers, petitions and amendments
(to the extent of its interests in the Leased Property), but only upon delivery
to Lessor of an Officer's Certificate stating that such grant, release,
dedication, transfer, petition or amendment does not interfere with the proper
conduct of the business of Lessee on the Leased Property and does not materially
reduce the value of the Leased Property.

                                  ARTICLE VIII

                  8.1 Compliance with Legal and Insurance Requirements, Etc.
Subject to Section 8.3(b) below and Article XII relating to permitted contests,
Lessee, at its expense, shall, or shall cause Manager to (a) comply with all
applicable Legal Requirements and Insurance Requirements in respect of the use,
operation, maintenance, repair and restoration of the Leased Property, and (b)
procure, maintain and comply with all appropriate licenses and other
authorizations required for any use of the Leased Property and Lessee's Personal
Property, if any, then being made and which are material to the operation of the
Leased Property, and for the proper erection, installation, operation and
maintenance of the Leased Property or any part thereof.

                  8.2 Legal Requirement Covenants. Subject to Section 8.3(b)
below, Lessee covenants and agrees that the Leased Property and Lessee's
Personal Property shall not be used for any unlawful purpose, and that Lessee
shall not, and Lessee shall ensure that Manager shall not, permit or suffer to
exist any unlawful use of the Leased Property by others. Lessee shall, or shall
cause Manager to, acquire and maintain all appropriate licenses, certifications,
permits and other authorizations and approvals needed to operate the Leased
Property in its customary manner for the Primary Intended Use, and any other
lawful use conducted on the Leased Property as may be permitted from time to
time hereunder. Lessee further covenants and agrees that Lessee's use and
Manager's use of the Leased Property and maintenance, alteration, and operation
of the same, and all parts thereof, shall at all times conform to all Legal
Requirements, unless the same are finally determined by a court of competent
jurisdiction to be unlawful (and Lessee shall cause all such sub-tenants,
invitees or others to so comply with all Legal Requirements). Lessee may,
however, upon prior Notice to Lessor, contest the legality or applicability of
any such Legal Requirement or any licensure or certification decision if Lessee
maintains such action in good faith, with due diligence, without prejudice to
Lessor's rights hereunder, and at Lessee's sole expense. If by the terms of any
such Legal Requirement compliance therewith pending the prosecution of any such
proceeding may legally be delayed without the incurrence of any lien, charge or
liability of any kind against the Hotel or Lessee's leasehold interest therein
and without subjecting Lessee or Lessor to any liability, civil or criminal, for
failure so to comply therewith, Lessee may delay compliance therewith until the
final determination of such proceeding. If any lien, charge or civil or criminal
liability would be incurred by reason of any such delay, Lessee, on the prior
written consent of Lessor, which consent shall not be unreasonably withheld, may
nonetheless contest as aforesaid and delay as aforesaid provided that such delay
would not subject Lessor to criminal liability and Lessee both (a) furnishes to
Lessor security reasonably satisfactory to Lessor against any loss or injury by
reason of such contest or delay and (b) prosecutes the contest with due
diligence and in good faith.

                                      -25-
<PAGE>

                  8.3 Environmental Covenants. Lessor and Lessee (in addition
to, and not in diminution of, Lessee's covenants and undertakings in Sections
8.1 and 8.2 hereof) covenant and agree as follows:

                  (a) At all times hereafter until the later of (i) such time as
all liabilities, duties or obligations of Lessee to Lessor under the Lease have
been satisfied in full and (ii) such time as Lessee completely vacates the
Leased Property and surrenders possession of the same to Lessor, Lessee shall
fully comply with all Environmental Laws applicable to the Leased Property and
the operations thereon. Lessee agrees to give Lessor prompt written notice of
(1) all Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating to
any Environmental Liability or relating to the issuance, revocation or change in
any Environmental Authorization required for operation of the Leased Property;
(3) all Releases at, on, in, under or in any way affecting the Leased Property,
or any Release known by Lessee at, on, in or under any property adjacent to the
Leased Property; and (4) all facts, events or conditions that could reasonably
lead to the occurrence of any of the above-referenced matters.

                  (b) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities other than Environmental Liabilities which were caused
by the acts, or grossly negligent failures to act, of Lessee.

                  (c) Lessee hereby agrees to defend, indemnify and save
harmless any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities which were caused by the acts, or grossly negligent
failures to act, of Lessee.

                  (d) If any Proceeding is brought against any Indemnified Party
in respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Section 8.3(b) or (c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceedings, or cause the same to be resisted and defended by counsel
designated by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless such counsel has been approved by the Indemnifying
Party, which approval shall not be unreasonably withheld. The Indemnifying Party
shall not be liable for any settlement of any such Proceeding made without its
consent, which shall not be unreasonably withheld, but if settled with the
consent of the Indemnifying Party, or if settled without its consent (if its
consent shall be unreasonably withheld), or if there be a final nonappealable
judgment for an adversary party in any such Proceeding, the Indemnifying Party
shall indemnify and hold harmless the Indemnified Parties from and against any
liabilities incurred by such Indemnified Parties by reason of such settlement or
judgment.

                  (e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to Lessee stating such Indemnified Party's
basis for such belief, an Indemnified Party shall be given immediate access to
the Leased Property (including, but not limited to, the right to enter upon,
investigate, drill wells, take soil borings, excavate, monitor, test, cap and
use available land for the testing of remedial technologies), Lessee's
employees, and to all relevant documents and records regarding the matter as to
which a responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may be conditioned or
restricted as may be reasonably necessary to ensure compliance with law and the
safety of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable.

                                      -26-
<PAGE>

                  (f) The indemnification rights and obligations provided for in
this Article VIII shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease.

                  (g) The indemnification rights and obligations provided for in
this Article VIII shall survive the termination of this Lease.

For purposes of this Section 8.3, all amounts for which any Indemnified Party
seeks indemnification shall be computed net of (i) any actual income tax benefit
resulting therefrom to such Indemnified Party, (ii) any insurance proceeds
received (net of tax effects) with respect thereto, and (iii) any amounts
recovered (net of tax effects) from any third parties based on claims the
Indemnified Party has against such third parties which reduce the damages that
would otherwise be sustained; provided that in all cases, the timing of the
receipt or realization of insurance proceeds or income tax benefits or
recoveries from third parties shall be taken into account in determining the
amount of reduction of damages. Each Indemnified Party agrees to use its
reasonable efforts to pursue, or assign to Lessee or Lessor, as the case may be,
any claims or rights it may have against any third party which would materially
reduce the amount of damages otherwise incurred by such Indemnified Party.

                                      -27-
<PAGE>

Notwithstanding anything to the contrary contained in this Lease, if Lessor
shall become entitled to the possession of the Leased Property by virtue of the
termination of the Lease or repossession of the Leased Property, then Lessor may
assign its indemnification rights under Section 8.3 of this Lease (but not any
other rights hereunder) to any Person to whom Lessor subsequently transfers the
Leased Property, subject to the following conditions and limitations, each of
which shall be deemed to be incorporated into the terms of such assignment,
whether or not specifically referred to therein:

(1)      The indemnification rights referred to in this section may be assigned
         only if a known Environmental Liability then exists or if a Proceeding
         is then pending or, to the knowledge of Lessee or Lessor, then
         threatened with respect to the Leased Property;

(2)      Such indemnification rights shall be limited to Environmental
         Liabilities relating to or specifically affecting the Leased Property;
         and

(3)      Any assignment of such indemnification rights shall be limited to the
         immediate transferee of Lessor and shall not extend to any such
         transferee's successors or assigns.

                                   ARTICLE IX

                  9.1 Maintenance and Repair.

                  (a) Unless caused by Lessee's negligence or willful misconduct
or that of its employees or agents, Lessee shall not be required to bear the
cost of any Capital Improvements. Lessor shall be responsible for all Capital
Expenditures, subject to Lessor's right to approve all Capital Expenditures, in
connection with Lessor's approval or deemed approval of the Capital Budget
pursuant to Section 3.6. Except as set forth in the preceding sentence, nothing
herein shall be construed to require Lessor to build or rebuild any improvement
on the Leased Property, or to fund any repairs, replacements, alterations,
restorations or renewals of any nature or description to the Leased Property,
whether ordinary or extraordinary, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, in connection with this Lease, or
to maintain the Leased Property in any way (other than Capital Expenditures
pursuant to an approved Capital Budget as contemplated by Section 3.6). Lessee
hereby waives, to the extent permitted by law, the right to make repairs at the
expense of Lessor pursuant to any law in effect at the time of the execution of
this Lease or hereafter enacted. Lessor shall have the right to give, record and
post, as appropriate, notices of nonresponsibility under any mechanic's lien
laws now or hereafter existing.

                  (b) Lessee will keep the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto that are under Lessee's
control, including windows and plate glass, parking lots, mechanical, electrical
and plumbing systems and equipment (including conduit and ductwork), and
non-load bearing interior walls, in good order and repair, except for ordinary
wear and tear (whether or not the need for such repairs occurred as a result of
Lessee's use, any prior use, the elements or the age of the Leased Property, or
any portion thereof), and, except as otherwise provided in Articles XIV or XV,
with reasonable promptness, make all necessary and appropriate repairs,
replacements, and improvements thereto of every kind and nature, whether
interior or exterior, ordinary or extraordinary, foreseen or unforeseen, or
arising by reason of a condition existing prior to the commencement of the Term
of this Lease (concealed or otherwise), or required by any governmental agency
having jurisdiction over the Leased Property, except as to the structural
elements of the Leased Improvements. All repairs shall, to the extent reasonably
achievable, be at least equivalent in quality to the original work. Lessee will
not take or omit to take any action, the taking or omission of which might
materially impair the value or the usefulness of the Leased Property or any part
thereof for its Primary Intended Use. Notwithstanding any other provision of
this Lease, however, other than under Articles XIV and XV on the conditions set
forth therein, Lessee shall not be required to bear the costs of complying with
this section with respect to items classified as capital items under U.S.
generally accepted accounting principles.

                                      -28-
<PAGE>

                  (c) Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (i) constituting the request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
repair or demolition of or to the Leased Property or any part thereof, or (ii)
giving Lessee any right, power or permission to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against Lessor
in respect thereof or to make any agreement that may create, or in any way be
the basis for any right, title, interest, lien, claim or other encumbrance upon
the estate of Lessor in the Leased Property, or any portion thereof.

                  (d) Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the condition in
which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in accordance with Section
9.1(b) above during the entire Term of the Lease, or damage by casualty or
Condemnation (subject to the obligations of Lessee to restore or repair as set
forth herein).

                  9.2 FF&E Reserve.

                  (a) Upon execution of this Lease, Lessee has established a
reserve account (the "FF&E Reserve") in a bank designated by Lessee and approved
by Lessor. The purpose of the FF&E Reserve is to cover the cost of: (i)
replacements and renewals of the Hotel's Furniture and Equipment and Fixtures;
(ii) certain routine repairs and maintenance to any Hotel building which are
normally capitalized under GAAP such as exterior and interior repainting,
resurface building walls, floors, roofs and parking areas, and replacing folding
walls and the like; and (iii) major repairs, alterations, improvements to the
Hotel's buildings, structure, roof, or exterior facade, or to its mechanical,
electrical, heating, ventilating, air conditioning, plumbing or vertical
transportation systems. Lessee agrees that it will, from time to time, execute
such reasonable documentation as may be requested by Lessor and any Lessor
mortgagee to assist Lessor and such Lessor mortgagee in establishing or
perfecting Lessor mortgagee's security interest in Lessor's residual interest in
the funds which are in the FF&E Reserve; provided, however, that no such
documentation shall contain any amendment to or modification of any of the
provisions of this Lease. It is acknowledged and agreed, that during the Term,
funds in the FF&E Reserve are the property of Lessee.

                                      -29-
<PAGE>

                  (b) Throughout the Term, Lessee shall, on behalf of Lessor,
transfer (within ten (10) Business Days after the end of each calendar month
during the Term) into the FF&E Reserve an amount equal to __% of Room Revenues
for such calendar month. Lessee's obligation to pay Base Rent as set forth in
Section 3.1(a) hereof shall be offset each month by the amount so deposited into
the FF&E Reserve. Together with the documentation provided to Lessor pursuant to
Section 3.1, Lessee shall also deliver to Lessor an Officer's Certificate
setting forth the total amount of deposits made to and expenditures from the
FF&E Reserve for the preceding Fiscal Year, together with a reconciliation of
such expenditures with the FF&E Estimate (as defined below).

                  (c) With respect to each Fiscal Year during the Term, Lessee
shall prepare an estimate (the "FF&E Estimate") of FF&E Reserve expenditures
necessary during the ensuing Fiscal Year, and shall submit such FF&E Estimate to
Lessor, on or before December 1st of the preceding Fiscal Year, for its review
and approval, which approval shall not be unreasonably withheld. In the event
that Lessor shall fail to respond within thirty (30) days after receipt of the
FF&E Estimate, such FF&E Estimate shall be deemed approved by Lessor. All
expenditures from the FF&E Reserve shall be (as to both the amount of such
expenditure and the timing thereof) both reasonable and necessary, given the
objective that the Hotel be maintained and operated to a standard comparable to
competitive hotels. All amounts from the FF&E Reserve shall be paid to Persons
who are not Affiliates of Lessee without markup or allocated internal costs by
Lessee or its Affiliates.

                  (d) Lessee shall, consistent with the FF&E Estimate approved
by Lessor, from time to time make expenditures from the FF&E Reserve as it deems
necessary provided that Lessee shall not materially deviate from the FF&E
Estimate approved by Lessor without the prior approval of Lessor, which approval
shall not be unreasonably withheld, except in the case of emergencies where
immediate action is necessary to prevent imminent harm to person or property.

                  (e) Upon the expiration of the Term, funds in the FF&E Reserve
and all property purchased with funds from the FF&E Reserve during the Term
shall be paid, granted and assigned to Lessor.

                  (f) Notwithstanding anything to the contrary contained in this
Section 9.2, so long as the Management Agreement is in full force and effect and
Manager is maintaining the reserves required thereunder, Lessee's obligation to
maintain the FF&E Reserve and other obligations under this Section 9.2 shall be
deemed to have been met.

                                      -30-
<PAGE>

                  9.3 Encroachments, Restriction, Etc. If any of the Leased
Improvements, at any time, materially encroach upon any property, street or
right-of-way adjacent to the Leased Property, or violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting the Leased Property, or any part thereof, or impair the rights of
others under any easement or right-of-way to which the Leased Property is
subject, then promptly upon the request of Lessor or at the behest of any person
affected by any such encroachment, violation or impairment, Lessee shall, at its
expense, subject to its right to contest the existence of any encroachment,
violation or impairment and in such case, in the event of an adverse final
determination, either (a) obtain valid and effective waivers or settlements of
all claims, liabilities and damages resulting from each such encroachment,
violation or impairment, whether the same shall affect Lessor or Lessee or (b)
make such changes in the Leased Improvements, and take such other actions, as
Lessee in the good faith exercise of its judgment deems reasonably practicable
to remove such encroachment, and to end such violation or impairment, including,
if necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use substantially
in the manner and to the extent the Leased Improvements were operated prior to
the assertion of such violation, impairment or encroachment. Any such alteration
shall be made in conformity with the applicable requirements of Article X.
Lessee's obligations under this Section 9.3 shall be in addition to and shall in
no way discharge or diminish any obligation of any insurer under any policy of
title or other insurance held by Lessor.

                                   ARTICLE X

                  10.1 Alterations. After receiving approval of Lessor, which
approval shall not be unreasonably withheld, Lessee shall have the right to make
such additions, modifications or improvements to the Leased Property from time
to time as Lessee deems desirable for its permitted uses and purposes, provided
that such action will not significantly alter the character or purposes or
significantly detract from the value or operating efficiency thereof and will
not significantly impair the revenue-producing capability of the Leased Property
or adversely affect the ability of Lessee to comply with the provisions of this
Lease. The cost of such additions, modifications or improvements to the Leased
Property shall be paid by Lessee, and all such additions, modifications and
improvements shall, without payment by Lessor at any time, be included under the
terms of this Lease and upon expiration or earlier termination of this Lease
shall pass to and become the property of Lessor. Nothing set forth in this
Section 10.1 is intended to abrogate or limit Lessor's obligations to make
Capital Expenditures as set forth in the approved Capital Budget pursuant to
Section 3.7.

                  10.2 Salvage. All materials which are scrapped or removed in
connection with the making of repairs required by Articles IX or X shall be or
become the property of Lessor or Lessee depending on which party is paying for
or providing the financing for such work.

                  10.3 Joint Use Agreements. If Lessee constructs additional
improvements that are connected to the Leased Property or share maintenance
facilities, HVAC, electrical, plumbing or other systems, utilities, parking or
other amenities, the parties shall enter into a mutually agreeable
cross-easement or joint use agreement, the form of which has been approved in
advance by Lessor, to make available necessary services and facilities in
connection with such additional improvements, to protect each of their
respective interests in the properties affected, and to provide for separate
ownership, use, and/or financing of such improvements.

                                      -31-
<PAGE>

                                   ARTICLE XI

                  11.1 Liens. Subject to the provision of Article XII relating
to permitted contests, Lessee will not and Lessee shall ensure that Manager does
not, directly or indirectly, create or allow to remain and will promptly
discharge, at its expense, any lien, encumbrance, attachment, title retention
agreement or claim upon the Leased Property or any attachment, levy, claim or
encumbrance in respect of the Rent, not including, however, (a) this Lease, (b)
the matters, if any, included as exceptions in the title policy insuring
Lessor's interest in the Leased Property, (c) restrictions, liens and other
encumbrances which are consented to in writing by Lessor or any easements
granted pursuant to the provisions of Section 7.3 of this Lease, (d) liens for
those taxes upon Lessor which Lessee is not required to pay hereunder, (e)
subleases permitted by Article XXII hereof, (f) liens for Impositions or for
sums resulting from noncompliance with Legal Requirements so long as (1) the
same are not yet payable or are payable without the addition of any fine or
penalty or (2) such liens are in the process of being contested as permitted by
Article XII, (g) liens of mechanics, laborers, materialmen, suppliers or vendors
for sums either disputed or not yet due, provided that (1) the payment of such
sums shall not be postponed under any related contract for more than 60 days
after the completion of the action giving rise to such lien and such reserve or
other appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor or (2) any such liens are in
the process of being contested as permitted by Article XII hereof, and (h) any
liens which are the responsibility of Lessor pursuant to the provisions of
Article XXXIII of this Lease.

                                  ARTICLE XII

                  12.1 Permitted Contests. Lessee, or Manager at Lessee's
direction, shall have the right to contest the amount or validity of any
Imposition to be paid by Lessee or any Legal Requirement or Insurance
Requirement or any lien, attachment, levy, encumbrance, charge or claim
("Claims") not otherwise permitted by Article XI, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other security reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon will be paid, or (b)
deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security for
the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all Claims
which may be assessed against or become a Claim on the Leased Property, or any
part thereof, in said legal proceedings. Lessee shall furnish Lessor and any
lender of Lessor with reasonable evidence of such deposit within five (5) days
of the same. Lessor agrees to join in any such proceedings if the same be
required to legally prosecute such contest of the validity of such Claims;
provided, however, that Lessor shall not thereby be subject to any liability for
the payment of any costs or expenses in connection with any proceedings brought
by Lessee; and Lessee covenants to indemnify and save harmless Lessor from any
such costs or expenses. Lessee shall be entitled to any refund of any Claims and
such charges and penalties or interest thereon which have been paid by Lessee or
paid by Lessor and for which Lessor has been fully reimbursed. In the event that
Lessee fails to pay any Claims when due or to provide the security therefor as
provided in this paragraph and to diligently prosecute any contest of the same,
Lessor may, upon ten (10) days' advance Notice to Lessee, pay such charges
together with any interest and penalties and the same shall be repayable by
Lessee to Lessor as Additional Charges at the next Payment Date provided for in
this Lease; provided, however, that should Lessor reasonably determine that the
giving of such Notice would risk loss to the Leased Property or cause damage to
Lessor, then Lessor shall give such Notice as is practical under the
circumstances. Lessor reserves the right to contest any of the Claims at its
expense not pursued by Lessee. Lessor and Lessee agree to cooperate in
coordinating the contest of any claims.

                                      -32-
<PAGE>

                                  ARTICLE XIII

                  13.1 General Insurance Requirements. At all times during the
Term of this Lease and at any other time Lessee shall be in possession of the
Leased Property, the Leased Property shall be insured against the risks and in
the amounts described below. This insurance shall be written by qualified,
solvent companies which can legally write insurance in the State. The policies
must name the party obtaining the policy as the insured and the other party, as
an additional named insured. Losses shall be payable to Lessor or Lessee as
provided in this Lease. Subject to Section 13.10, any loss adjustment for
coverages insuring both parties shall require the written consent of Lessor and
Lessee, each acting reasonably and in good faith. Evidence of insurance shall be
deposited with Lessor. The policies on the Leased Property, including the Leased
Improvements, Fixtures and Lessee's Personal Property, at a minimum shall
include:

                  (a) Building insurance of risks on the "Special Form" or "All
Risk Form" in an amount not less than 100% of the then full replacement cost
thereof (as defined in Section 13.3), and personal property insurance on the
"Special Form" or "All Risk Form" in the full amount of the replacement cost
thereof;

                  (b) Earthquake and flood insurance in reasonable and adequate
amounts as mutually agreed by Lessor and Lessee;

                  (c) Insurance for loss or damage (direct and indirect) from
steam boilers, pressure vessels or similar apparatus, now or hereafter installed
in the Hotel, in the minimum amount of $5,000,000 or in such greater amounts as
are then customary from time to time;

                  (d) Loss of income insurance on the "Special Form" or "All
Risk Form", in the amount of the greater of (i) one year of Base Rent or (ii)
the prior Fiscal Year's Base Rent plus Percentage Rent for the benefit of
Lessor, and business income or business interruption insurance on the "Special
Form" or "All Risk Form" in amounts not less than one year of gross profit, for
the benefit of Lessee;

                                      -33-
<PAGE>

                  (e) Commercial general liability insurance, with amounts not
less than $10,000,000 covering each of the following: bodily injury, death, or
property damage liability per occurrence, personal and advertising injury,
general aggregate, products and completed operations, with respect to Lessor,
and liquor law or "dram shop" liability, if liquor or alcoholic beverages are
served on the Leased Property, with respect to Lessor and Lessee;

                  (f) Insurance covering such other hazards and in such amounts
as may be customary for comparable properties in the area of the Leased Property
and is available from insurance companies, insurance pools or other appropriate
companies authorized to do business in the State at rates which are economically
practicable in relation to the risks covered as may be reasonably requested by
Lessor;

                  (g) Fidelity bonds with limits and deductibles as may be
reasonably requested by Lessor, covering Lessee's employees in job
classifications normally bonded under prudent hotel management practices in the
United States or otherwise required by law;

                  (h) Workers' compensation insurance to the extent necessary to
protect Lessor and the Leased Property against Lessee's workers' compensation
claims;

                  (i) Vehicle liability insurance for owned, non-owned, and
hired vehicles, in the amount of $1,000,000; and

                  (j) Such other insurance as Lessor may reasonably request for
facilities such as the Leased Property and the operation thereof.

                  13.2 Responsibility for Insurance. Lessee shall obtain or
cause to be obtained the insurance and pay the premiums for the coverages
described in Section 13.1(c), and Section 13.1(e) through (i) and for that
portion of the premium for the coverage described in Section 13.1(d) that is
attributable to business interruption insurance, and Lessor shall obtain the
insurance and pay the premiums for the coverages described in Sections 13.1(a),
(b), (d), and (j) (excluding that portion of the premium for the coverage
described in Section 13.1(d) that is attributable to business interruption
insurance that is for the benefit of Lessee). The party responsible for the
premium for any insurance coverage shall also be responsible for any and all
deductibles and self-insured retentions in connection with such coverages. In
the event that either party can obtain comparable insurance required to be
carried by the other party from comparable insurers and at a cost significantly
less than that at which such other party can obtain such coverage, the parties
shall cooperate in good faith to obtain such coverage at the lower cost and
shall allocate the premiums therefor in accordance with the provisions of the
first sentence of this Section 13.2.

                                      -34-
<PAGE>

                  Notwithstanding the foregoing, so long as the Management
Agreement is in full force and effect and Manager is maintaining the insurance
required thereunder as well as any additional insurance required by Lessor's
mortgage lender, Lessor and Lessee's obligations to maintain the insurance
required under this Article XIII shall be deemed to have been met (provided,
that the costs therefor shall be allocated between Lessor and Lessee in the
manner contemplated by the first sentence of this Section 13.2).

                  13.3 Replacement Cost. The term "full replacement cost" as
used herein shall mean the actual replacement cost of the Leased Property
requiring replacement from time to time including an increased cost of
construction endorsement, if available, and the cost of debris removal. In the
event either party believes that full replacement cost (the then-replacement
cost less such exclusions) has increased or decreased at any time during the
Lease Term, it shall have the right to have such full replacement cost
redetermined by an independent accredited appraiser approved by the other, which
approval shall not be unreasonably withheld. The party desiring to have the full
replacement cost so redetermined shall, on receipt of such determination by such
appraiser, give written notice thereof to the other party. The determination of
such appraiser shall be final and binding on the parties, and Lessor shall
conform the amount of the insurance carried to the amount so determined by the
appraiser.

                  13.4 Workers' Compensation. Lessee, at its sole cost, shall at
all times maintain adequate workers' compensation insurance coverage for all
persons, if any, employed by Lessee on the Leased Property. Such workers'
compensation insurance shall be in accordance with the requirements of
applicable local, state and federal law.

                  13.5 Waiver of Subrogation. All insurance policies carried by
Lessor or Lessee covering the Leased Property, the Fixtures, the Hotel or
Lessee's Personal Property, including, without limitation, contents, fire and
casualty insurance, shall expressly waive any right of subrogation on the part
of the insurer against the other party. The parties hereto agree that their
policies will include such waiver clause or endorsement even though extra
premium may result therefrom.

                  13.6 Form Satisfactory, Etc. All of the policies of insurance
referred to in this Article XIII shall be written in a form, with deductibles
and by insurance companies reasonably satisfactory to Lessor; provided, however,
that the qualitative financial condition and operating performance (or
claims-paying ability) of such insurance companies must be rated in at least the
third highest rating category of a nationally recognized statistical rating
organization or rated at least A:VIII by A.M. Best. Lessee shall be permitted to
acquire insurance through insurance companies which are Affiliates of Lessee and
which otherwise satisfy the requirements of this Article XIII, provided that the
terms of such insurance shall be no more favorable to such Affiliates than would
the same insurance if purchased from an independent third party. Lessee shall
pay all of the premiums therefor, and deliver such policies or certificates
thereof to Lessor prior to their effective date (and, with respect to any
renewal policy, thirty (30) days prior to the expiration of the existing
policy), and in the event of the failure of Lessee either to effect such
insurance as herein called for or to pay the premiums therefor, or to deliver
such policies or certificates thereof to Lessor at the times required, Lessor
shall be entitled, but shall have no obligation, to effect such insurance and
pay the premiums thereon, and Lessee shall reimburse Lessor for any premium or
premiums paid by Lessor for the coverages required under this Section upon
written demand therefor, and Lessee's failure to repay the same within thirty
(30) days after Notice of such failure from Lessor shall constitute an Event of
Default within the meaning of Section 16.1(b). Each insurer mentioned in this
Article XIII shall agree, by endorsement to the policy or policies issued by it,
or by independent instrument furnished to Lessor, that it will give to Lessor
thirty (30) days' written notice before the policy or policies in question shall
be materially altered, allowed to expire or canceled.

                                      -35-
<PAGE>

                  13.7 Increase in Limits. If either Lessor or Lessee at any
time deems the limits of the personal injury or property damage under the
comprehensive public liability insurance then carried to be either excessive or
insufficient, Lessor and Lessee shall endeavor in good faith to agree on the
proper and reasonable limits for such insurance to be carried and such insurance
shall thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section.

                  13.8 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article XIII, each of Lessee and Lessor may bring the
insurance provided for herein within the coverage of a so-called blanket policy
or policies of insurance carried and maintained by Lessee or Lessor, as the case
may be; provided, however, that the coverage afforded to Lessor and Lessee will
not be reduced or diminished or otherwise be different from that which would
exist under a separate policy meeting all other requirements of this Lease by
reason of the use of such blanket policy of insurance, and provided further that
the requirements of this Article XIII are otherwise satisfied.

                  13.9 Separate Insurance. Neither Lessor nor Lessee shall take
out separate insurance concurrent in form or contributing in the event of loss
with that required in this Article to be furnished, or increase the amount of
any then existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance are included therein as additional insured, and the loss is
payable under such additional separate insurance in the same manner as losses
are payable under this Lease. In the event either party shall take out any such
separate insurance or increase any of the amounts of the then existing
insurance, it shall immediately notify the other party thereof.

                  13.10 Reports On Insurance Claims. Each of Lessor and Lessee
(as applicable) shall promptly investigate and make a complete and timely
written report to the appropriate insurance company, as to all accidents, claims
for damage relating to the ownership, operation, and maintenance of the Leased
Property, any damage or destruction to the Leased Property and the estimated
cost of repair thereof and shall prepare any and all reports required by any
insurance company in connection therewith. All such reports shall be timely
filed with the insurance company as required under the terms of the insurance
policy involved, and a final copy of such report shall be furnished to the
non-filing party. Lessee shall not adjust, settle, or compromise any insurance
loss, or execute proofs of such loss, with respect to the insurance coverages
set forth in Sections 13.1(a), 13.1(b) or 13.1(c), in the aggregate amount of
$10,000 or more, with respect to any single casualty or other event, without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld, delayed or conditioned.

                                      -36-
<PAGE>

                                  ARTICLE XIV

                  14.1 Insurance Proceeds. Subject to the provisions of Section
14.6, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any policy of insurance
required by Article XIII of this Lease shall be paid to Lessor and held in trust
by Lessor in an interest-bearing account, shall be made available, if
applicable, for reconstruction or repair, as the case may be, of any damage to
or destruction of the Leased Property, or any portion thereof, and, if
applicable, shall be paid out by Lessor from time to time for the reasonable
costs of such reconstruction or repair upon satisfaction of reasonable terms and
conditions specified by Lessor. Any excess proceeds of insurance remaining after
the completion of the restoration or reconstruction of the Leased Property shall
be equitably apportioned between Lessor and Lessee in proportion to the then
fair market values of the respective estates and interests of Lessor and Lessee
in and to the Leased Property and under this Lease. If neither Lessor nor Lessee
is required or elects to repair and restore, and the Lease is terminated without
purchase by Lessee as described in Section 14.2, all such insurance proceeds
shall be retained by Lessor. All salvage resulting from any risk covered by
insurance shall belong to Lessor.

                  14.2 Reconstruction in the Event of Damage or Destruction
Covered by Insurance.

                  (a) Except as provided in Section 14.6, if during the Term the
Leased Property is totally or partially destroyed by a risk covered by the
insurance described in Article XIII and the Hotel thereby is rendered Unsuitable
for its Primary Intended Use, Lessee may, at Lessee's option, either (1) restore
or cause Manager to restore the Hotel to substantially the same condition as
existed immediately before the damage or destruction and otherwise in accordance
with the terms of the Lease (subject to the provisions of Section 14.2(c)), or
(2) terminate the Lease with respect to the Leased Property without further
liability hereunder and all insurance proceeds shall be equitably apportioned
between Lessor and Lessee in proportion to the then fair market values of the
respective estates and interests of Lessor and Lessee in and to the Leased
Property and under this Lease. If this Lease terminates pursuant to this Section
14.2(a), Lessee shall pay all Rent due through the date of such termination. If
Lessee restores the Hotel, the insurance proceeds shall be paid out by Lessor
from time to time for the reasonable costs of such restoration upon satisfaction
of reasonable terms and conditions, and any excess proceeds remaining after such
restoration shall be equitably apportioned between Lessor and Lessee in
proportion to the then fair market values of the respective estates and
interests of Lessor and Lessee in and to the Leased Property and under this
Lease.

                  (b) Except as provided in Section 14.6, if during the Term the
Leased Property is partially destroyed by a risk covered by the insurance
described in Article XIII, but the Hotel is not thereby rendered Unsuitable for
its Primary Intended Use, Lessee shall restore or cause Manager to restore the
Hotel to substantially the same condition as existed immediately before the
damage or destruction and otherwise in accordance with the terms of the Lease,
subject to the provisions of Section 14.2(c). Such damage or destruction shall
not terminate this Lease; provided, however, that if Lessee cannot within a
reasonable time obtain all necessary government approvals, including building
permits, licenses and conditional use permits, after diligent efforts to do so,
to perform all required repair and restoration work and to operate the Hotel for
its Primary Intended Use in substantially the same manner as that existing
immediately prior to such damage or destruction and otherwise in accordance with
the terms of the Lease, Lessee may give Lessor written notice of termination of
the Lease and terminate this Lease with respect to the Leased Property without
further liability hereunder other than for accrued obligations hereunder and any
other obligations which survive the termination of this Lease and Lessor shall
be entitled to retain all insurance proceeds. If Lessee restores the Hotel, the
insurance proceeds shall be paid out by Lessor from time to time for the
reasonable costs of such restoration upon satisfaction of reasonable terms and
conditions specified by Lessor, and any excess proceeds remaining after such
restoration shall be equitably apportioned between Lessor and Lessee in
proportion to the then fair market values of the respective estates and
interests of Lessor and Lessee in and to the Leased Property and under this
Lease.

                                      -37-
<PAGE>

                  (c) If the estimated cost of the repair or restoration exceeds
the amount of proceeds received by Lessor and Lessee from the insurance required
under Article XIII (other than as a result of Lessee's failure to maintain the
types and amounts of insurance coverage required by Article XIII), and Lessee
indicates a desire to restore the Hotel if adequate funds were made available,
then if Lessor elects to direct Lessee to make such repairs or restoration,
Lessor shall be obligated to contribute any excess amounts needed to restore the
Hotel prior to the commencement of work thereon. Such difference to be held in
trust, together with any other insurance proceeds, for application to the cost
of repair and restoration, shall be paid by Lessor to Lessee promptly after
Lessor receives Lessee's written invoice therefor. In the event Lessee indicates
a desire to restore the Hotel but Lessor declines to provide the additional
funds necessary to do so, each of Lessor or Lessee shall have the right to
terminate this Lease as to the Hotel in question, without in any way affecting
this Lease with respect to any other Leased Property, by giving notice to the
other. Upon such termination all insurance proceeds with respect to the Leased
Property in question shall be retained by Lessor.

                  14.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance. Except as provided in Section 14.6, if during the Term the
Hotel is totally or substantially destroyed by a risk not covered by the
insurance described in Article XIII, whether or not such damage or destruction
renders the Hotel Unsuitable for its Primary Intended Use, Lessee at its option
may either (a) restore the Hotel to substantially the same condition it was in
immediately before such damage or destruction and such damage or destruction
shall not terminate this Lease (subject to the provisions of Section 14.2(c)),
or (b) terminate the Lease with respect to the Leased Property without further
liability hereunder. If such damage or destruction is not material, Lessee shall
restore the Hotel to substantially the same condition as existed immediately
before the damage or destruction and otherwise in accordance with the terms of
the Lease, and such damage or destruction shall not terminate the Lease.

                  14.4 Lessee's Property and Business Interruption Insurance.
All insurance proceeds payable by reason of any loss of or damage to any of
Lessee's Personal Property and the business interruption insurance maintained
for the benefit of Lessee shall be paid to Lessee; provided, however, no such
payments shall diminish or reduce the insurance payments otherwise payable to or
for the benefit of Lessor hereunder.

                                      -38-
<PAGE>

                  14.5 Abatement of Rent. Any damage or destruction due to
casualty notwithstanding, this Lease shall remain in full force and effect
provided that Lessee's obligation to make rental payments and to pay all other
charges required by this Lease shall not abate during the period required for
the applicable repair and restoration; provided that Lessee shall receive a
credit against such rental payments and other charges in an amount equal to any
loss of income insurance proceeds actually received by Lessor pursuant to any
loss of income insurance pursuant to Section 13.1(d).

                  14.6 Damage Near End of Term. Notwithstanding any provisions
of Section 14.2 or 14.3 appearing to the contrary, if damage to or destruction
of the Hotel rendering it Unsuitable for its Primary Intended Use occurs during
the last 24 months of the Term, then Lessee shall have the right to terminate
this Lease by giving written notice to Lessor within thirty (30) days after the
date of damage or destruction, whereupon all accrued Rent shall be paid
immediately, and this Lease shall automatically terminate five (5) days after
the date of such notice, without any further liability by Lessee to Lessor other
than liabilities that expressly survive a termination of this Lease.

                  14.7 Waiver. Lessee hereby waives any statutory rights of
termination that may arise by reason of any damage or destruction of the Hotel
that Lessor is obligated to restore or may restore under any of the provisions
of this Lease.

                                   ARTICLE XV

                  15.1 Definitions.

                  (a) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.

                  (b) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.

                  (c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation (after deduction of
all reasonable legal fees and other reasonable costs and expenses, including,
without limitation, expert witness fees incurred by Lessor, in connection with
obtaining any such Award).

                  (d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.

                                      -39-
<PAGE>

                  15.2 Parties' Rights and Obligations. If during the Term there
is any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV.

                  15.3 Total Taking. If title to the fee of the whole of the
Leased Property is condemned by any Condemnor, this Lease shall cease and
terminate as of the Date of Taking by the Condemnor. If title to the fee of less
than the whole of the Leased Property is so taken or condemned, which
nevertheless renders the Leased Property Unsuitable or Uneconomic for its
Primary Intended Use, Lessee and Lessor shall each have the option, by notice to
the other, at any time prior to the Date of Taking, to terminate this Lease as
of the Date of Taking. Upon such date, if such Notice has been given, this Lease
shall thereupon cease and terminate. All Base Rent, Percentage Rent and
Additional Charges paid or payable by Lessee hereunder shall be apportioned as
of the Date of Taking, and Lessee shall promptly pay Lessor such amounts.

                  15.4 Allocation of Award. The total Award made with respect to
the Leased Property or for loss of rent, or for Lessor's loss of business beyond
the Term, shall be solely the property of and payable to Lessor. Any Award made
for loss of Lessee's business during the remaining Term, if any, for the taking
of Lessee's Personal Property, or for removal and relocation expenses of Lessee
in any such proceedings shall be the sole property of and payable to Lessee. In
any Condemnation proceedings, Lessor and Lessee shall each seek its Award in
conformity herewith, at its respective expense; provided, however, neither party
shall initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to the other party.

                  15.5 Partial Taking. If title to less than the whole of the
Leased Property is condemned, and the Leased Property is still suitable for its
Primary Intended Use and not Uneconomic for its Primary Intended Use, or if
Lessee or Lessor is entitled but neither elects to terminate this Lease as
provided in Section 15.3, Lessee at its cost shall with all reasonable dispatch,
but only to the extent of any Award made available to Lessee and any other sums
advanced by Lessor pursuant to the next sentence, restore the untaken portion of
any Leased Improvements so that such Leased Improvements constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to the Condemnation. If the condemnation awards are not
adequate to restore the Hotel to that condition, each of Lessor and Lessee shall
have the right to terminate this Lease, by giving Notice to the other; provided,
however that, if such termination is by Lessee, Lessor shall have the right, in
its sole discretion, to nullify the termination and keep this Lease in full
force by providing, within thirty (30) days after Lessee's Notice of
termination, a Notice to Lessee of Lessor's unconditional, legally binding
obligation to be responsible for all restoration costs in excess of the total
Award. If this Lease is not terminated and Lessee restores the Hotel, the
condemnation awards, and any other sums made available by Lessor as aforesaid,
shall be held in trust by Lessor and paid out by Lessor from time to time for
the reasonable costs of such restoration upon satisfaction of reasonable terms
and conditions, and any excess awards remaining after such restoration shall be
retained by Lessor unless the partial condemnation materially impairs the
operations or financial performance of the Hotel, in which latter event the
award shall be equitably apportioned between Lessor and Lessee in proportion to
the then fair market values of the respective estates and interests of Lessor
and Lessee in and to the Leased Property and under this Lease.

                                      -40-
<PAGE>

                  15.6 Temporary Taking. If the whole or any part of the Leased
Property or of Lessee's interest under this Lease is condemned by any Condemnor
for its temporary use or occupancy, this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay, in the manner and at the terms herein
specified, the full amounts of Base Rent and Additional Charges. In addition,
Lessee shall pay Percentage Rent at a rate equal to the average Percentage Rent
during the last three preceding Fiscal Years (or if three Fiscal Years shall not
have elapsed, the average during the preceding Fiscal Years). Except only to the
extent that Lessee may be prevented from so doing pursuant to the terms of the
order of the Condemnor, Lessee shall continue to perform and observe all of the
other terms, covenants, conditions and obligations hereof on the part of Lessee
to be performed and observed, as though such Condemnation had not occurred. In
the event of any Condemnation as in this Section 15.6 described, the entire
amount of any Award made for such Condemnation allocable to the Term of this
Lease, whether paid by way of damages, rent or otherwise, shall be paid to
Lessee. Lessee covenants that upon the termination of any such period of
temporary use or occupancy it will, at its sole cost and expense (subject to
Lessor's contribution as set forth below), restore the Leased Property as nearly
as may be reasonably possible to the condition in which the same was immediately
prior to such Condemnation, unless such period of temporary use of occupancy
extends beyond the expiration of the Term, in which case Lessee shall not be
required to make such restoration. If restoration is required hereunder, Lessor
shall contribute to the cost of such restoration that portion of its entire
Award that is specifically allocated to such restoration in the judgment or
order of the court, if any, and Lessee shall fund the balance of such costs.

                                  ARTICLE XVI

                  16.1 Events of Default. If any one or more of the following
events (individually, an "Event of Default") occurs:

                  (a) if Lessee fails to make payment of the Base Rent,
Percentage Rent or Additional Charges within ten (10) days after written notice
from Lessor that the same has become due and payable; or

                  (b) except as set forth in Section 16.1(a), if either party
fails to observe or perform any other term, covenant or condition of this Lease
and such failure is not cured by such party within a period of thirty (30) days
after receipt by such party of Notice thereof from the other party, unless such
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case it shall not be deemed an Event of Default if such party proceeds
promptly and with due diligence to cure the failure and diligently completes the
curing thereof provided, however, in no event shall such cure period extend
beyond ninety (90) days after such Notice; or

                  (c) if Lessee, any parent entity (which for the purposes of
this Section shall be deemed to include any direct or indirect parent entity
with effective management control over Lessee) or lease guarantor shall file a
petition in bankruptcy or reorganization for an arrangement pursuant to any
federal or state bankruptcy law or any similar federal or state law, or shall be
adjudicated a bankrupt or shall make an assignment for the benefit of creditors
or shall admit in writing its inability to pay its debts generally as they
become due, or if a petition or answer proposing the adjudication of Lessee, any
parent entity or lease guarantor as a bankrupt or its reorganization pursuant to
any federal or state bankruptcy law or any similar federal or state law shall be
filed in any court and Lessee, any parent entity or lease guarantor shall be
adjudicated a bankrupt and such adjudication shall not be vacated or set aside
or stayed within ninety (90) days after the entry of an order in respect
thereof, or if a receiver of Lessee, any parent entity or lease guarantor or of
the whole or substantially all of the assets of Lessee, any parent entity or
lease guarantor shall be appointed in any proceedings brought by Lessee, any
parent entity or lease guarantor or if any such receiver, trustee or liquidator
shall be appointed in any proceeding brought against Lessee, any parent entity
or lease guarantor shall not be vacated or set aside or stayed within ninety
(90) days after such appointment; or

                                      -41-
<PAGE>

                  (d) if Lessee, any parent entity or lease guarantor is
liquidated or dissolved, or begins proceedings toward such liquidation or
dissolution, or, if Lessee, any parent entity or lease guarantor in any manner,
permits the sale or divestiture of substantially all of its assets; or

                  (e) if the estate or interest of Lessee in the Leased Property
or any part thereof (i) is voluntarily or involuntarily transferred, assigned,
conveyed, levied upon or attached in any proceeding (unless Lessee is contesting
such lien or attachment in good faith in accordance with Article XII hereof) or
(ii) is transferred, assigned or conveyed; or

                  (f) if, except as a result of damage, destruction or a partial
or complete Condemnation, Lessee voluntarily ceases operations on the Leased
Property for a period in excess of thirty (30) days; or

                  (g) if an Event of Default has been declared by Manager under
the Management Agreement with respect to the Hotel on the Leased Premises as a
result of any action or failure to act by Lessee or any other person with whom
Lessee contracts for management services at the Hotel (other than a failure to
complete a Capital Improvement required by the Manager resulting from Lessor's
failure to fund the Capital Expenditure therefor pursuant to Section 9.1(b)) and
Lessee has failed, within thirty (30) days thereafter, to cure such default by
either (1) curing the underlying default under the Management Agreement and
paying all costs and expenses associated therewith, or (2) obtaining at Lessee's
sole cost and expense a substitute management agreement with a substitute
manager acceptable to Lessor, on terms and conditions acceptable to Lessor;
provided, however, that if Lessee is in good faith disputing an assertion of
default by the Manager or is proceeding diligently to cure such default, the
30-day period shall be extended for such period of time as Lessee continues
during this period to dispute such default in good faith or diligently proceeds
to cure such default (but in any event not longer than ninety (90) days
following the assertion of default by the Manager) and so long as there is no
period during which the Hotel is not operated pursuant to a Management Agreement
approved by Lessor; or

                  (h) the occurrence of an Event of Default under any guaranty
of lease in favor of Lessor with respect to Lessee's obligations under this
Lease.

                                      -42-
<PAGE>

                  Then, and in any such event, Lessor may exercise one or more
remedies available to it herein or at law or in equity, including, but not
limited to, its right to terminate this Lease, or, in the case of a breach by
Lessor under subsection (b) above, Lessee may exercise one or more remedies
available to it herein or at law or in equity, including, but not limited to,
its right to terminate this Lease.

                  If litigation is commenced with respect to any alleged default
under this Lease, the prevailing party in such litigation shall receive, in
addition to its damages incurred, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith.

                  No Event of Default (other than a failure to make a payment of
money) shall be deemed to exist under clause (b) during any time the curing
thereof is prevented by an Unavoidable Delay, provided that upon the cessation
of such Unavoidable Delay, Lessee remedies such default or Event of Default
without further delay.

                  16.2 Surrender. If an Event of Default occurs (and the event
giving rise to such Event of Default has not been cured within the curative
period relating thereto as set forth in Section 16.1) and is continuing, whether
or not this Lease has been terminated pursuant to Section 16.1, Lessee shall, if
requested by Lessor so to do, immediately surrender and assign to Lessor or
Lessor's designee the Leased Property including, without limitation, any and all
books, records, files, licenses, permits and keys relating thereto, and quit the
same and Lessor may enter upon and repossess the Leased Property by reasonable
force, summary proceedings, ejectment or otherwise, and may remove Lessee and
all other persons and any and all personal property from the Leased Property,
subject to rights of any hotel guests and to any requirement of law. Lessee
hereby waives any and all requirements of applicable laws for service of notice
to re-enter the Leased Property. Lessor shall be under no obligation to, but may
if it so chooses, relet the Leased Property or otherwise mitigate Lessor's
damages, except unless otherwise required by applicable law.

                  16.3 Damages. Neither (a) the termination of this Lease, (b)
the repossession of the Leased Property, (c) the failure of Lessor to relet the
Leased Property, nor (d) the reletting of all or any portion thereof, shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all Rent due and payable
with respect to the Leased Property to and including the date of such
termination.

                  Lessee shall forthwith pay to Lessor, at Lessor's option, as
and for liquidated and agreed current damages for Lessee's default, either:

(1)      Without termination of Lessee's right to possession of the Leased
         Property, each installment of Rent (including Percentage Rent as
         determined below) and other sums payable by Lessee to Lessor under the
         Lease as the same becomes due and payable, which Rent and other sums
         shall bear interest at the Overdue Rate, and Lessor may enforce, by
         action or otherwise, any other term or covenant of this Lease; or

                                      -43-
<PAGE>

(2)      the sum of:

         (A)      the unpaid Rent which had been earned at the time of
                  termination, repossession or reletting, and

         (B)      the worth at the time of termination, repossession or
                  reletting of the amount by which the unpaid Rent for the
                  balance of the Term after the time of termination,
                  repossession or reletting, exceeds the amount of such rental
                  loss that Lessee proves could be reasonably avoided and as
                  reduced for rentals received after the time of termination,
                  repossession or reletting, if and to the extent required by
                  applicable law, and

         (C)      any other amount necessary to compensate Lessor for all the
                  detriment proximately caused by Lessee's failure to perform
                  its obligations under this Lease or which in the ordinary
                  course of things, would be likely to result therefrom. The
                  worth at the time of termination, repossession or reletting of
                  the amount referred to in subparagraph (B) is computed by
                  discounting such amount at the discount rate of the Federal
                  Reserve Bank of New York at the time of award plus 1%.

Percentage Rent for the purposes of this Section 16.3 shall be a sum equal to
(i) the average of the annual amounts of the Percentage Rent for the three
Fiscal Years immediately preceding the Fiscal Year in which the termination,
re-entry or repossession takes place, or (ii) if three (3) Fiscal Years shall
not have elapsed, the average of the Percentage Rent during the preceding Fiscal
Years during which the Lease was in effect, or (iii) if one Fiscal Year has not
elapsed, the amount derived by annualizing the Percentage Rent from the
effective date of this Lease.

                  16.4 Waiver. If this Lease is terminated pursuant to Section
16.1, Lessee waives, to the extent permitted by applicable law, (a) any right to
a trial by jury in the event of summary proceedings to enforce the remedies set
forth in this Article XVI, and (b) the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt and Lessor waives
any right to "pierce the corporate veil" of Lessee other than to the extent
funds shall have been inappropriately paid any Affiliate of Lessee following a
default resulting in an Event of Default.

                  16.5 Application of Funds. Any payments received by Lessor
under any of the provisions of this Lease during the existence or continuance of
any Event of Default shall be applied to Lessee's obligations in the order that
Lessor may determine or as may be prescribed by the laws of the State.

                                  ARTICLE XVII

                  17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails
to make any payment or to perform any act required to be made or performed under
this Lease including, without limitation, Lessee's failure to comply with the
terms of any Management Agreement other than a failure to complete improvements
required by the Manager because Lessor has not provided Lessee with funds
therefor, and fails to cure the same within the relevant time periods provided
in Section 16.1, Lessor, without waiving or releasing any obligation of Lessee,
and without waiving or releasing any obligation or default, may (but shall be
under no obligation to) at any time thereafter make such payment or perform such
act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and, subject
to Section 16.4, take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case to the
extent permitted by law) so incurred, together with a late charge thereon (to
the extent permitted by law) at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessor, shall be paid by Lessee to
Lessor on demand. The obligations of Lessee and rights of Lessor contained in
this Article shall survive the expiration or earlier termination of this Lease.

                                      -44-
<PAGE>

                                 ARTICLE XVIII

                  18.1 REIT Requirements. Lessee understands that in order for
SHC to qualify as a REIT, the following requirements (the "REIT Requirements")
must be satisfied:

                  (a) Anything contained in this Lease to the contrary
notwithstanding, the average of the fair market value at the beginning and end
of a Fiscal Year of Lessor's personal property that is leased to Lessee under
the Lease shall not exceed 15% of the average of the aggregate fair market
values of all of the Leased Property at the beginning and at the end of such
Fiscal Year (the "Personal Property Limitation"). If Lessor reasonably
anticipates that the Personal Property Limitation will be exceeded with respect
to the Leased Property for any Fiscal Year, Lessor shall notify Lessee, and
Lessee either (i) shall purchase at fair market value any personal property
anticipated to be in excess of the Personal Property Limitation ("Excess
Personal Property") either from Lessor or a third party or (ii) shall lease the
Excess Personal Property from a third party. In either case, Lessee's Rent
obligation shall be equitably adjusted. In addition, in the case of the purchase
or lease of Excess Personal Property by Lessee from a third party, the Lessor's
capital expenditure reserve obligation shall be appropriately decreased to
reflect the reduced need for Lessor-owned personal property. Notwithstanding
anything to the contrary set forth above, Lessee shall not be responsible in any
way for determining whether or not Lessee has exceeded or will exceed the
Personal Property Limitation, and shall not be liable to Lessor or any of its
shareholders in the event that the Personal Property Limitation is exceeded, as
long as Lessee meets its obligation to acquire or lease any Excess Personal
Property as provided above. This Section 18.1 is intended to ensure that the
Rent qualifies as "rents from real property," within the meaning of Section
856(d) of the Code, or any similar or successor provisions thereto, and shall be
interpreted in a manner consistent with such intent.

                  (b) Anything contained in this Lease to the contrary
notwithstanding, Lessee shall not sublet the Leased Property on any basis such
that the rental to be paid by the sublessee thereunder would be based, in whole
or in part, on either (i) the net income or net profits derived by the business
activities of the sublessee, or (ii) any other formula such that any portion of
the Rent would fail to qualify as "rents from real property" within the meaning
of Section 856(d) of the Code, or any similar or successor provision thereto.

                                      -45-
<PAGE>

                  (c) Lessee cannot sublet the Leased Property to any Person in
which SHC, owns, directly or indirectly, a 10% or more interest, within the
meaning of Section 856(d)(2)(B) of the Code, or any similar or successor
provisions thereto.

                  (d) Lessee agrees to make an election to be, and to operate as
a "taxable REIT subsidiary" of SHC within the meaning of Section 856(e) of the
Code, or any similar or successor provision thereto.

                  (e) Lessee shall not (i) directly or indirectly operate or
manage a "lodging facility" within the meaning of Section 856(d)(9)(D)(ii) of
the Code or a "health care facility" within the meaning of Section
856(e)(6)(D)(ii) or (ii) directly or indirectly provide to any other person
(under a franchise, license, or otherwise) rights to any brand name under which
any lodging facility or health care facility is operated; provided, however,
that Lessee may provide such rights to Manager to operate or manage a lodging
facility as long as such rights are held by Lessee as a franchisee, licensee, or
in a similar capacity and such lodging facility is either owned by Lessee or is
leased to Lessee by Lessor or one of its Affiliates.

                  (f) Lessee agrees, and agrees to use reasonable efforts to
cause its Affiliates, to use their best efforts to permit the REIT Requirements
to be satisfied. Lessee agrees and agrees to use reasonable efforts to cause its
Affiliates, to cooperate in good faith with SHC and Lessor to ensure that the
REIT Requirements are satisfied, including but not limited to, providing SHC
with information about the ownership of Lessee, and its Affiliates to the extent
that such information is reasonably available. Lessee agrees, and agrees to use
reasonable efforts to cause its Affiliates, upon request by SHC, and, where
appropriate, at SHC's expense, to take reasonable action necessary to ensure
compliance with the REIT Requirements. Immediately after becoming aware that the
REIT Requirements are not, or will not be, satisfied, Lessee shall notify, or
use reasonable efforts to cause its Affiliates to notify, SHC of such
noncompliance.

                  (g) Both Lessee and Lessor agree that no provision of this
lease shall be construed so as to cause SHC to fail to qualify as a REIT.

                  18.2 Lessee Officer and Employee Limitation. Anything
contained in this Lease to the contrary notwithstanding, none of the officers or
employees of Lessee or any Lessee Affiliate shall be officers or employees of
Manager (or any Person who operates or manages the Leased Property). In
addition, if a Person serves as both (a) a director of Lessee or any Lessee
Affiliate and (b) a director or trustee and officer (or employee) of Manager (or
any Person who operates or manages the Leased Property), that Person shall not
receive any compensation for serving as a director of Lessee or any Lessee
Affiliate. If a Person serves as both (i) director or Manager of any Lessee
Affiliate (or any Person who operates or manages the Leased Property) and (ii) a
director and officer (or employee) of Lessee, that Person shall not receive any
compensation for serving as a director or Manager of such Lessee Affiliate.

                                      -46-
<PAGE>

                  18.3 Payments to Affiliates of Lessee. Notwithstanding
anything to the contrary contained in this Lease, Lessee shall make no payments
to Affiliates as Gross Operating Expenses unless expressly set forth in the
Operating Budget or an approved Capital Budget or otherwise expressly agreed to
in writing by Lessor, in either case, after full written disclosure (including
information regarding competitive pricing) by Lessee to Lessor of the
affiliation and any other related information requested by Lessor. Furthermore,
Lessee shall be permitted to contract with its Affiliates for management and
other services and to pay fees for such services, provided that such contracts
and fees are disclosed in writing to Lessor and such fees shall not be included
in Gross Operating Expenses and Lessee's obligation to pay such fees shall be
subordinated to Lessee's obligation to pay Base Rent, Percentage Rent and
Additional Charges to Lessor pursuant to the terms of this Lease.

                  18.4 Management Agreement. Lessee agrees that in order to
comply with certain of the REIT Requirements, it will, at all times, during the
Term cause the Leased Property to be operated and managed by a management
company ("Manager") that is an Eligible Independent Contractor. Lessee shall
provide Lessor with an executed copy of all agreements relating to the
management or operation of the Hotel (a "Management Agreement"). Lessor shall
have the right in its sole and absolute discretion to approve or disapprove in
advance any Manager or proposed Manager of the Hotel which is not a Qualified
Manager. No fees or other amounts payable by Lessee to any Manager shall excuse
Lessee from its obligations to pay Rent and other amounts payable by Lessee to
Lessor hereunder. No Management Agreement may be amended or modified in any
material respect without the prior written consent of Lessor.

                                  ARTICLE XIX

                  19.1 Holding Over. If Lessee for any reason remains in
possession of the Leased Property after the expiration or earlier termination of
the Term, such possession shall be as a tenant at sufferance during which time
Lessee shall pay as rental each month two (2) times the aggregate of (a)
one-twelfth of the aggregate Base Rent and Percentage Rent payable with respect
to the last Fiscal Year of the Term, (b) all Additional Charges accruing during
the applicable month and (c) all other sums, if any, payable by Lessee under
this Lease with respect to the Leased Property. During such period, Lessee shall
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenancies at sufferance, to continue its occupancy and
use of the Leased Property. Nothing contained herein shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease.

                                      -47-
<PAGE>

                                   ARTICLE XX

                  20.1 Risk of Loss. During the Term, the risk of loss or of
decrease in the enjoyment and beneficial use of the Leased Property in
consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
attachments, levies or executions (other than those caused by Lessor and those
claiming from, through, or under Lessor) is assumed by Lessee except as
specifically provided in this Lease, and, in the absence of gross negligence,
willful misconduct or breach of this Lease by Lessor, Lessor shall in no event
be answerable or accountable therefor, nor shall any of the events mentioned in
this Section entitle Lessee to any abatement of Rent except as specifically
provided in this Lease.

                                  ARTICLE XXI

                  21.1 Indemnification. Notwithstanding the existence of any
insurance, and without regard to the policy limits of any such insurance or
self-insurance, but subject to Section 16.4 and Article VIII, Lessee will
protect, indemnify, hold harmless and defend Lessor from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Lessor Indemnified Parties by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about the Leased Property or adjoining sidewalks, including, without limitation,
any claims under liquor liability, "dram shop" or similar laws, (b) any past,
present or future use, misuse, non-use, condition, management, maintenance or
repair by Lessee or any of its agents, employees or invitees of the Leased
Property or Lessee's Personal Property or any litigation, proceeding or claim by
governmental entities or other third parties to which a Lessor Indemnified Party
is made a party or participant related to such use, misuse, non-use, condition,
management, maintenance, or repair thereof by Lessee or any of its agents,
employees or invitees, including any failure of Lessee or any of its agents,
employees or invitees to perform any obligations under this Lease or imposed by
applicable law (other than arising out of a Condemnation proceedings), (c) any
Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the part of Lessee to perform or
comply with any of the terms of this Lease, and (e) the non-performance of any
of the terms and provisions of any and all existing and future subleases of the
Leased Property to be performed by the landlord thereunder.

                  Lessor shall indemnify, save harmless and defend Lessee
Indemnified Parties from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses imposed upon or
incurred by or asserted against Lessee Indemnified Parties as a result of (i)
the gross negligence or willful misconduct of Lessor arising in connection with
this Lease; (ii) any failure on the part of Lessor to perform or comply with any
of the terms of this Lease; (iii) any Impositions that are the obligations of
Lessor pursuant to the applicable provisions of this Lease; (iv) any liability
arising under the Management Agreement as a result of inadequate funding by
Lessor for Capital Expenditures; (v) liabilities or obligations arising under
the Americans with Disabilities Act (except to the extent relating to
alterations performed by or actions taken by Lessee subsequent to the
Commencement Date of this Lease); or (vi) contractual liabilities to third
parties not affiliated with Lessee (including managers) relating to, or arising
out of, the termination of this Lease by reason of an Event of Default by Lessor
prior to the expiration of any such third party contract.

                                      -48-
<PAGE>

                  To the extent that neither of the foregoing paragraphs applies
to a particular liability, action, claim, damage, cost or expense arising out of
operation of the Leased Property, such liability, action, claim, damage, cost or
expense shall be paid as a Gross Operating Expense.

                  Any amounts that become payable by an Indemnifying Party under
this Section shall be paid within ten (10) days after liability therefor on the
part of the Indemnifying Party is determined by litigation or otherwise, and if
not timely paid, shall bear a late charge (to the extent permitted by law) at
the Overdue Rate from the date of such determination to the day of payment. An
Indemnifying Party, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against the Indemnified
Party. The Indemnified Party, at its expense, shall be entitled to participate
in any such claim, action, or proceeding, and the Indemnifying Party may not
compromise or otherwise dispose of the same without the consent of the
Indemnified Party, which may not be unreasonably withheld. Nothing herein shall
be construed as indemnifying a Lessor Indemnified Party against its own grossly
negligent acts or omissions or willful misconduct.

                  Lessee's or Lessor's liability for a breach of the provisions
of this Article shall survive any termination of this Lease.

                                  ARTICLE XXII

                  22.1 Subletting and Assignment. Subject to the provisions of
Article XVIII and Section 22.2 and any other express conditions or limitations
set forth herein, Lessee may, but only with the prior written consent of Lessor,
which consent may not be unreasonably withheld or delayed, (a) assign this Lease
or sublet all or any part of the Leased Property to an Affiliate of Lessee, or
(b) sublet any retail or restaurant portion of the Leased Improvements in the
normal course of the Primary Intended Use; provided that any subletting to any
party other than an Affiliate of Lessee shall not individually as to any one
such subletting, or in the aggregate, materially diminish the actual or
potential Percentage Rent payable under this Lease. Any other assignment or
subletting shall require the express written consent of Lessor, which consent
may be withheld, delayed or conditioned in Lessor's sole discretion. In the case
of a subletting, the sublessee shall comply with the provisions of Section 22.2,
and in the case of an assignment, the assignee shall assume in writing and agree
to keep and perform all of the terms of this Lease on the part of Lessee to be
kept and performed and shall be, and become, jointly and severally liable with
Lessee for the performance thereof. Notwithstanding the above, Lessee may assign
the Lease without the consent of Lessor to any party providing a loan to Lessee
or any of its affiliates (a "Lender") provided (i) the assignment is for the
purpose of granting a collateral interest in Lessee's economic interest in the
Leases or in any future leases between Lessor and Lessee, to the Lender, or in
the economic interest of any Affiliate of Lessee in the Leases, to secure such
loan and (ii) such assignment is not made in violation of Lessee's
organizational documents. In case of either an assignment or subletting made
during the Term, Lessee shall remain primarily liable, as principal rather than
as surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Lessee
hereunder. An original counterpart of each such sublease and assignment and
assumption, duly executed by Lessee and such sublessee or assignee, as the case
may be, in form and substance satisfactory to Lessor, shall be delivered
promptly to Lessor. Any transfer of a Controlling interest in Lessee shall be
subject to the same limitations as are applicable to a direct assignment of this
Lease pursuant to this Section 22.1.

                                      -49-
<PAGE>

                  22.2 Attornment. Lessee shall insert in each sublease
permitted under Section 22.1 provisions to the effect that (a) such sublease is
subject and subordinate to all of the terms and provisions of this Lease and to
the rights of Lessor hereunder, (b) if this Lease terminates before the
expiration of such sublease, the sublessee hereunder will, at Lessor's option,
attorn to Lessor and waive any right the sublessee may have to terminate the
sublease or to surrender possession thereunder as a result of the termination of
this Lease, and (c) if the sublessee receives a written Notice from Lessor or
Lessor's assignees, if any, stating that an uncured Event of Default exists
under this Lease, the sublessee shall thereafter be obligated to pay all rentals
accruing under said sublease directly to the party giving such Notice, or as
such party may direct. All rentals received from the sublessee by Lessor or
Lessor's assignees, if any, as the case may be, shall be credited against the
amounts owing by Lessee under this Lease.

                  22.3 Permitted Sublease and Assignment. Notwithstanding the
foregoing, but subject to the provisions of Section 22.4 and any other express
conditions and limitations set forth herein, Lessee may, without Lessor's
consent, (a) sublease space at the Leased Property for newsstand, gift shop,
health club, restaurant, bar, retail, food concession, arcades, game rooms,
rental car desk, travel office or commissary purposes or similar concessions in
furtherance of the Primary Intended Use, and (b) sublease additional space at
the Leased Property for any such ancillary uses, so long as such additional
subleases do not demise, in the aggregate, in excess of 2,000 square feet and
will not violate or affect any Legal Requirement or Insurance Requirement.

                  22.4 Sublease Limitation. For so long as Lessor or any
Affiliate of Lessor shall seek to qualify as a real estate investment trust,
anything contained in this Lease to the contrary notwithstanding, Lessee shall
not sublet the Leased Property on any basis such that the rental to be paid by
any sublessee thereunder would be based, in whole or in part, on either (a) the
income or profits derived by the business activities of such sublessee, or (b)
any other formula such that any portion of such sublease rental would fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code or any similar or successor provision thereto.

                                      -50-
<PAGE>

                                 ARTICLE XXIII

                  23.1 Officer's Certificates; Financial Statements; Lessor's
Estoppel Certificates and Covenants.

                  (a) At any time and from time to time upon not less than ten
(10) days' Notice by Lessor, Lessee will furnish to Lessor an Officer's
Certificate certifying that this Lease is unmodified and in full force and
effect (or that this Lease is in full force and effect as modified and setting
forth the modifications), the date to which the Rent has been paid, whether to
the knowledge of Lessee there is any existing default or Event of Default
hereunder by Lessor or Lessee, and such other information as may be reasonably
requested by Lessor. Any such certificate furnished pursuant to this Section may
be relied upon by Lessor, any lender and any prospective purchaser of the Leased
Property.

                  (b) Throughout the Term, Lessee will furnish to Lessor all
financial statements and financial and operating information, and access to
Lessee's books and records as are required by Lessor, as reasonably determined
by Lessor.

                  (c) At any time and from time to time upon not less than ten
(10) days' Notice by Lessee, Lessor will furnish to Lessee or to any person
designated by Lessee an estoppel certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications), the date to which Rent
has been paid, whether to the knowledge of Lessor there is any existing default
or Event of Default on Lessee's part hereunder, and such other information as
may be reasonably requested by Lessee.

                  (d) Within twenty (20) days after the close of each Accounting
Period, Lessee shall cause Manager to deliver an interim accounting (the
"Accounting Period Statement") to Lessor showing Gross Revenues, and
applications and distributions thereof for the preceding Accounting Period.
Lessee shall cause Manager to transfer to Lessee, with each Accounting Period
Statement, any interim amounts due Lessee subject to Working Capital needs, and
shall retain any interim amounts due Manager. Calculations and payments of the
management fees due Manager, and distributions to Lessee made with respect to
each Accounting Period within a Fiscal Year shall be accounted for cumulatively.
Within sixty (60) days after the end of each Fiscal Year, Lessee shall cause
Manager to deliver to Lessee and Lessor a statement (the "Annual Operating
Statement") in reasonable detail summarizing the operations of the Hotel for the
immediately preceding Fiscal Year and a certificate of Manager's chief
accounting officer certifying that, to the best of his or her knowledge, such
Annual Operating Statement is true and correct. Subject to the right to audit
described in Section 23.1(e) below, the parties shall, within ten (10) business
days after Lessor's receipt of such Annual Operating Statement, make any
adjustments, by cash payment, in the amounts paid or retained for such Fiscal
Year as are needed because of the final figures set forth in such Annual
Operating Statement. Such Annual Operating Statement shall be controlling over
the preceding Accounting Period Statements. Notwithstanding anything to the
contrary herein, so long as the Management Agreement is in full force and
effect, to the extent the financial reporting requirements herein are different
than the financial reporting requirements in the Management Agreement, the
financial requirements in the Management Agreement shall control over the
financial reporting requirements herein, including those set forth in Sections
23.1(e), (f) and (g) hereof.

                                      -51-
<PAGE>

                  (e) Books of control and account pertaining to operations at
the Hotel shall be kept on the accrual basis and in all material respects in
accordance with the Uniform System and generally acceptable accounting
principles consistently applied. Lessee, upon Lessor's reasonable request and at
reasonable intervals during Manager's normal business hours, shall examine such
records. If Lessor desires Lessee to audit, examine or review the Annual
Operating Statement, Lessor shall notify Lessee and Manager in writing within
sixty (60) days after receipt of such Annual Operating Statement of its desire
for Lessee to audit and Lessee shall begin such audit no sooner than thirty (30)
days and no later than sixty (60) days after Manager's receipt of such notice.
Lessee shall complete such audit within ninety (90) days after commencement
thereof. The terms of the Management Agreement concerning such audit shall
govern the same.

                  (f) Lessee shall cause all funds derived from operation of the
Hotel to be deposited by Manager in bank accounts (the "Operating Accounts")
established by Manager and Lessee in a bank or banks designated by Manager,
subject to Lessor's reasonable approval. Withdrawals from said Operating
Accounts shall be made solely by representatives whose signatures have been
authorized by Lessee. Reasonable petty cash funds can be maintained at the
Hotel. Lessee shall cause all payments to be made by Manager under the
Management Agreement to be made from the Operating Accounts, petty cash funds,
or from the FF&E Reserve (in accordance with the terms of the Management
Agreement). Lessee may elect to cause Manager to pay any payments required to be
paid by Lessor to the existing mortgagee in accordance with the terms of the
Mortgage, and any other amounts required to be paid by Lessor under this Lease,
and any such sums so paid by Manager to the existing mortgagee or to any other
party on behalf of Lessor shall be credited against Rent payments due hereunder
from Lessee to Lessor. Notwithstanding the foregoing, any amounts paid to the
existing mortgagee or to any other party on behalf of Lessor that exceed Rent
payments hereunder shall be reimbursed to Lessee by Lessor.

                                  ARTICLE XXIV

                  24.1 Lessor's Right to Inspect. Lessee shall permit Lessor and
its authorized representatives as frequently as reasonably requested by Lessor
to inspect the Leased Property and Lessee's accounts and records pertaining
thereto and make copies thereof, during usual business hours upon reasonable
advance notice, subject only to any business confidentiality requirements
reasonably requested by Lessee.

                                  ARTICLE XXV

                  25.1 No Waiver. No failure by Lessor or Lessee to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.

                                      -52-
<PAGE>

                                  ARTICLE XXVI

                  26.1 Remedies Cumulative. To the extent permitted by law, each
legal, equitable or contractual right, power and remedy of Lessor or Lessee now
or hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.

                                 ARTICLE XXVII

                  27.1 Acceptance of Surrender. No surrender to Lessor of this
Lease or of the Leased Property or any part thereof, or of any interest therein,
shall be valid or effective unless agreed to and accepted in writing by Lessor
and no act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.

                                 ARTICLE XXVIII

                  28.1 No Merger of Title. There shall be no merger of this
Lease or of the leasehold estate created hereby by reason of the fact that the
same Person or entity may acquire, own or hold, directly or indirectly: (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate and (b) the fee estate in the Leased Property.

                                  ARTICLE XXIX

                  29.1 Conveyance by Lessor. If Lessor or any successor owner of
the Leased Property conveys the Leased Property in accordance with the terms
hereof other than as security for a debt, and the grantee or transferee of the
Leased Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other transfer as to the Leased
Property and all such future liabilities and obligations shall thereupon be
binding upon the new owner.

                  29.2 Other Interests. This Lease and Lessee's interest
hereunder shall at all times be subject and subordinate to the lien and security
title of any deeds to secure debt, deeds of trust, mortgages, or other interests
heretofore or hereafter granted by Lessor in order to finance or refinance the
Leased Property and to any and all advances to be made thereunder and to all
renewals, modifications, consolidations, replacements, substitutions, and
extensions thereof (all of which are herein called the "Mortgage").

                                      -53-
<PAGE>

                                  ARTICLE XXX

                  30.1 Quiet Enjoyment. So long as Lessee pays all Rent as the
same becomes due and complies with all of the terms of this Lease and performs
its obligations hereunder, in each case within the applicable grace periods, if
any, Lessee shall peaceably and quietly have, hold and enjoy the Leased Property
for the Term hereof, free of any claim or other action by Lessor or anyone
claiming by, through or under Lessor, but subject to all liens and encumbrances
subject to which the Leased Property was conveyed to Lessor or hereafter
consented to by Lessee or provided for herein. Notwithstanding the foregoing,
Lessee shall have the right by separate and independent action to pursue any
claim it may have against Lessor as a result of a breach by Lessor of the
covenant of quiet enjoyment contained in this Section. Except as otherwise
provided in this Lease, no failure by Lessor to comply with the foregoing
covenant shall give Lessee the right to cancel or terminate this Lease or abate,
reduce or make a deduction from or offset against the Rent or any other sum
payable under this Lease, or fail to perform any other obligation of Lessee
hereunder.

                                  ARTICLE XXXI

                  31.1 Notices. All notices, demands, requests, consents
approvals and other communications ("Notice" or "Notices") hereunder shall be in
writing and personally served or mailed (by registered or certified mail, return
receipt requested and postage prepaid), addressed to Lessor at its principal
office, as indicated on the signature page hereof, Attention: General Counsel
and addressed to Lessee as indicated on the signature page hereof, Attention:
General Counsel, or to such other address or addresses as either party may
hereafter designate. All Notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Lease upon the date
of receipt or refusal, except that whenever under this Lease 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.

                                 ARTICLE XXXII

                  32.1 Appraisers. If it becomes necessary to determine the Fair
Market Value or Fair Market Rental of the Leased Property for any purpose of
this Lease, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a person selected to act
as appraiser on its behalf. Within ten (10) days after Notice, Lessor (or
Lessee, as the case may be) shall appoint a second person as appraiser on its
behalf. The appraisers thus appointed, each of whom must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto) with at least five years' experience in the State appraising property
similar to the Leased Property, shall, within forty-five (45) days after the
date of the Notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the Fair Market Value or Fair Market Rental thereof
as of the relevant date (giving effect to the impact, if any, of inflation from
the date of their decision to the relevant date); provided, however, that if
only one appraiser shall have been so appointed, then the determination of such
appraiser shall be final and binding upon the parties. To the extent consistent
with sound appraisal practice as then existing at the time of any such
appraisal, such appraisal shall be made on a basis consistent with the basis on
which the Leased Property was appraised for purposes of determining its Fair
Market Value at the time the Leased Property was acquired by Lessor. If two
appraisers are appointed and if the difference between the amounts so determined
does not exceed 5% of the lesser of such amounts, then the Fair Market Value or
Fair Market Rental shall be an amount equal to 50% of the sum of the amounts so
determined. If the difference between the amounts so determined exceeds 5% of
the lesser of such amounts, then such two appraisers shall have twenty (20) days
to appoint a third appraiser. If no such appraiser shall have been appointed
within such twenty (20) days or within ninety (90) days of the original request
for a determination of Fair Market Value or Fair Market Rental, whichever is
earlier, either Lessor or Lessee may apply to any court having jurisdiction to
have such appointment made by such court. Any appraiser appointed by the
original appraisers or by such court shall be instructed to determine the Fair
Market Value or Fair Market Rental within forty-five (45) days after appointment
of such appraiser. The determination of the appraiser which differs most in the
terms of dollar amount from the determinations of the other two appraisers shall
be excluded, and 50% of the sum of the remaining two determinations shall be
final and binding upon Lessor and Lessee as the Fair Market Value or Fair Market
Rental of the Leased Property, as the case may be. This provision for
determining by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by applicable
law. Lessor and Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
appraiser appointed by it and each shall pay one-half of the fees and expenses
of the third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.

                                      -54-
<PAGE>

                                 ARTICLE XXXIII

                  33.1 Lessor May Grant Mortgages. Without the consent of
Lessee, Lessor may, subject to the terms and conditions set forth below in this
Section 33, from time to time, directly or indirectly, create or otherwise cause
to exist any Mortgage upon the Leased Property, or any portion thereof or
interest therein, whether to secure any borrowing or other means of financing or
refinancing.

                  33.2 Lessee's Right to Cure. If Lessor breaches any covenant
to be performed by it under this Lease, Lessee, after Notice to and demand upon
Lessor, without waiving or releasing any obligation hereunder, and in addition
to all other remedies available to Lessee, may (but shall be under no obligation
at any time thereafter to) make such payment or perform such act for the account
and at the expense of Lessor. All sums so paid by Lessee and all costs and
expenses (including, without limitation, reasonable attorneys' fees) so
incurred, together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid or incurred by Lessee, shall be paid by
Lessor to Lessee on demand or, following entry of a final, nonappealable
judgment against Lessor for such sums, may be offset by Lessee against the Base
Rent payments next accruing or coming due. The rights of Lessee hereunder to
cure and to secure payment from Lessor in accordance with this Section 33.2
shall survive the termination of this Lease with respect to the Leased Property.

                                      -55-
<PAGE>

                  33.3 Grant of Easements or Imposition of Restrictions. Lessor
may not grant easements or impose restrictions with respect to any Leased
Property (other than those contemplated by Section 7.3) without the express
written consent of Lessee, which consent may not be unreasonably withheld.

                  33.4 Outparcels, Leases and Licenses. Lessor, without the
consent of Lessee, shall have the right to (a) develop, subdivide, lease, sell,
construct, operate or maintain improvements on that portion of the Land, if any,
not necessary for the operations of the Hotel, provided the intended use of such
portion of the Land would not materially interfere with the operations of the
Hotel (as determined by Lessee in its reasonable discretion), and (b) lease or
license portions of the Leased Property for telecommunications and similar or
related facilities, billboards or other uses, to the extent such leases or
licenses do not materially interfere with the operations of the Hotel; provided,
however, that in the event such lease or license is for a rooftop
telecommunications antennae, then the revenues received by Lessor shall be
distributed 50% to Lessee and 50% to Lessor. Lessee agrees to (i) cooperate with
Lessor or any designee of Lessor with respect to any outparcel or lease or
license which is in compliance with the provisions of this Section and (ii)
terminate this Lease as to any outparcel created under this Section.

                                 ARTICLE XXXIV

                  34.1 Miscellaneous. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other interest
rate provided for in any provision of this Lease are based upon a rate in excess
of the maximum rate permitted by applicable law, the parties agree that such
charges shall be fixed at the maximum permissible rate. Neither this Lease nor
any provision hereof may be changed, waived, discharged or terminated except by
a written instrument in recordable form signed by Lessor and Lessee. All the
terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The headings in this Lease are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof. This Lease shall be
governed by and construed in accordance with the laws of the State, but not
including its conflicts of laws rules.

                  34.2 Transition Procedures. Upon the expiration or termination
of the Term of this Lease, for whatever reason, Lessor and Lessee shall do the
following (and the provisions of this Section 34.2 shall survive the expiration
or termination of this Lease until they have been fully performed) and, in
general, shall cooperate in good faith to effect an orderly transition with
respect to the management of the Hotel.

                  (a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use its best efforts (i) to transfer to
Lessor or Lessor's nominee or assignee the Management Agreement and all
licenses, operating permits and other governmental authorizations and all
contracts, including contracts with governmental or quasi-governmental entities,
that may be necessary for the operation of the Hotel (collectively, "Licenses"),
or (ii) if such transfer is prohibited by law or Lessor otherwise elects, to
cooperate with Lessor or Lessor's nominee in connection with the processing by
Lessor or Lessor's nominee of any applications for, all Licenses; provided, in
either case, that the costs and expenses of any such transfer or the processing
of any such application shall be paid by Lessor or Lessor's nominee.

                                      -56-
<PAGE>

                  (b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Lease, and the
assignee shall assume all leases and concession agreements in effect with
respect to the Hotel then in Lessee's name.

                  (c) Books and Records. All books and records for the Hotel
kept by Lessee pursuant to Section 3.7 shall be delivered promptly to Lessor or
Lessor's nominee, simultaneously with the termination of this Lease, but such
books and records shall thereafter be available to Lessee at all reasonable
times for inspection, audit, examination, and transcription for a period of one
(1) year and Lessee may retain (on a confidential basis) copies or computer
records thereof.

                  (d) Remittance. Lessee shall remit to Lessor or Lessor's
nominee, simultaneously with the termination of this Lease, all funds remaining,
if any, after payment of all accrued Gross Operating Expenses, and other amounts
due Lessee and after deducting the costs of any scheduled repair, replacement,
or refurbishment of Furniture and Equipment with respect to which deposits have
been made.

                  34.3 Waiver of Presentment, etc. Lessee waives all
presentments, demands for payment and for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as expressly granted herein.

                                  ARTICLE XXXV

                  35.1 Memorandum of Lease. Lessor and Lessee shall promptly
upon the request of either enter into a short form memorandum of this Lease, in
form suitable for recording under the laws of the State in which reference to
this Lease, and all options contained herein, shall be made. Lessee shall pay
all costs and expenses of recording such memorandum of this Lease.

                                 ARTICLE XXXVI

                  36.1 Compliance with Management Agreement. Lessee shall comply
in every respect with the provisions of the Management Agreement (other than
requirements with respect to funding Capital Improvements which shall be the
responsibility of Lessor) so as to avoid any default thereunder during the term
of this Lease. Lessee shall not terminate, extend, modify or enter into any
Management Agreement without in each instance first obtaining Lessor's prior
written consent. Lessor and Lessee agree to cooperate fully with each other in
the event it becomes necessary to obtain a Management Agreement extension or
modification or a new manager for the Leased Property. If the Management
Agreement expires prior to the expiration of the Lease Term, Lessee, with the
prior approval of Lessor, shall endeavor to obtain a new or extended management
agreement. In the event of a change in the manager for the Leased Property,
Lessor and Lessee shall promptly negotiate, if applicable, in good faith
appropriate and mutually acceptable modifications to the Rent terms for such
Leased Property under this Lease. In the event that Lessor and Lessee are unable
to agree, within sixty (60) days after such change in the manager, that
modifications to the Rent terms are warranted by the change in manager or to
agree on appropriate modifications to the Rent terms either Party may elect to
submit the matter to arbitration pursuant to Article XXXVII hereof. During the
pendency of the negotiations and/or arbitration, Lessee shall continue to pay
Rent in accordance with the terms of the Lease, with possible retroactive
adjustments based on the outcome of the negotiations and/or arbitration. If upon
any expiration or earlier termination of the Lease (other than upon an Event of
Default by Lessee), a Management Agreement remains in effect, or would but for
such expiration or termination remain in effect, Lessor shall indemnify, defend
and hold Lessee harmless with respect to the obligations and liabilities arising
thereunder after the date of expiration or termination of this Lease.

                                      -57-
<PAGE>

                                 ARTICLE XXXVII

                  37.1 Arbitration. Except as otherwise expressly provided, in
the event a dispute should arise concerning the interpretation or application of
any of the provisions of this Lease, the parties agree that the dispute shall be
submitted to arbitration by the American Arbitration Association under its then
prevailing rules, except as modified by this Article XXXVII. The Arbitration
Tribunal shall be formed of three (3) Arbitrators each of which shall have at
least five (5) years' experience in hotel operation, management or ownership,
one (1) to be appointed by each of Lessor and Lessee and the third (3rd) to be
appointed by the American Arbitration Association. The arbitration shall take
place in the county in which the Leased Property is located and shall be
conducted in the English language. The arbitration award shall be final and
binding upon the parties hereto and subject to no appeal, and shall deal with
the question of costs of arbitration and all matters related thereto. Judgment
upon the award rendered may be entered into any court having jurisdiction, or
applications may be made to such court for an order of enforcement. Any
arbitration under this Article XXXVII shall be submitted within three (3) months
following the notice which triggers the arbitration, and shall be concluded
within one (1) year thereafter. In the event either of the foregoing deadlines
are missed, either party may proceed to commence a court proceeding to resolve
the dispute.

                  IN WITNESS WHEREOF, the parties have executed this Lease by
their duly authorized officers as of the date first above written.

                            [Signature Page Follows]

                  [Remainder of Page Intentionally Left Blank]

                                      -58-
<PAGE>

                                 SIGNATURE PAGE

LEASE AGREEMENT

                                  LESSOR

                                  _______________________________, a Delaware
                                  limited liability company

                                  By:
                                      -----------------------------------------
                                  Name:
                                        ---------------------------------------
                                  Its:
                                      -----------------------------------------

                                  77 West Wacker Drive, Suite 4600
                                  Chicago, Illinois 60601

State of _______)
                ) SS.
County of ______)

                  On the _____ day of ________________ in the year 2004, before
me, the undersigned, personally appeared ___________ personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

                                              ----------------------------
                                              Notary Public

Signature and Office of individual
taking acknowledgement

                        SIGNATURES CONTINUED ON NEXT PAGE

<PAGE>

                                 SIGNATURE PAGE

LEASE AGREEMENT

                                   LESSEE

                                   ___________________________, a Delaware
                                   limited liability company

                                   By:
                                         ---------------------------
                                   Name:
                                         ---------------------------
                                   Its:
                                         ---------------------------
                                         77 West Wacker Drive, Suite 4600
                                         Chicago, Illinois 60601

State of _______)
                ) SS.
County of ______)

                  On the _____ day of ________________ in the year 2004, before
me, the undersigned, personally appeared ___________ personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

                                             ----------------------------
                                             Notary Public

Signature and Office of individual
taking acknowledgement

<PAGE>

                                    Exhibit A
                                Legal Description

<PAGE>

                                    Exhibit B
                             Schedule of Lease Terms

Name and Location of Hotel

Base Rent: The annual sum of $_________ (as adjusted under Section 3.1(d)).

Percentage Rent:

Revenues Computation to be used for Quarterly Revenue Computation and Annual
Revenue Computation:

(a) ROOM REVENUES: (i) an amount equal to __% of the first $_________ in year to
date Room Revenues (as adjusted under Section 3.1(d)) plus (ii) an amount equal
to __% of all year to date Room Revenues in excess of $_________ and less than
$__________ (as adjusted under Section 3.1(d)), plus (iii) an amount equal to
__% of all year to date Room Revenues equal to or in excess of $_________ (as
adjusted under Section 3.1(d)).

                                      plus

(b) FOOD AND BEVERAGE REVENUES: (i) an amount equal to __% of the first
$__________ in year to date Food and Beverage Revenues (as adjusted under
Section 3.1(d)) plus (ii) an amount equal to __% of all year to date Food and
Beverage Revenues in excess of $__________ and less than $__________ (as
adjusted under Section 3.1(d)), plus (iii) an amount equal to __% of all year to
date Food and Beverage Revenues equal to or in excess of $__________ (as
adjusted under Section 3.1(d)).

                                      plus

(c) OTHER REVENUES: (i) an amount equal to __% of the first $_________ in year
to date Other Revenues (as adjusted under Section 3.1(d)) plus (ii) an amount
equal to __% of all year to date Other Revenues in excess of $_________ and less
than $__________ (as adjusted under Section 3.1(d)), plus (iii) an amount equal
to __% of all year to date Other Revenues equal to or in excess of $__________.

                                       B-1

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