Document:

Exhibit 10.16

 

AMENDED AND RESTATED DEPOSIT AGREEMENT

 

THIS AMENDED AND RESTATED DEPOSIT AGREEMENT
(this “Agreement”) is made and entered into as of the 6th day of
January, 2006 by and among HPT TRS IHG-1, Inc., a Maryland corporation (“Staybridge
Owner”), HPT TRS IHG-2, Inc., a Maryland corporation (“IC Owner”),
HPT IHG PR, Inc., a Puerto Rico corporation (“PR Landlord”), and HPT TRS
IHG-3, Inc., a Maryland corporation (“FC Owner” and together with
Staybridge Owner, IC Owner and PR Landlord, collectively, the “HPT Parties”),
InterContinental Hotels Group Resources, Inc., a Delaware corporation (“Staybridge
Manager”), IHG Management (Maryland) LLC, a Maryland limited liability
company (“IHG Maryland”), InterContinental Hotels Group (Canada), Inc.,
a corporation under the laws of Ontario, Canada (“IHG Canada” and
together with IHG Maryland, collectively, “IC Manager” and together with
Staybridge Manager, collectively, the “IHG Parties”).

 

BACKGROUND STATEMENT

 

Staybridge Owner and Staybridge Manager entered into that certain
Management Agreement dated as of July 1, 2003, and amended said Management
Agreement by (i) that certain First Amendment to Management Agreement
dated as of September 18, 2003, (ii) that certain Second Amendment to
Management Agreement dated as of March, 2004, (iii) that certain Third
Amendment to Management Agreement dated as of February 16, 2005, and (iv) that
certain Fourth Amendment to Management Agreement dated as of January 6, 2006
(as so amended and as the same may hereafter be amended, modified or
supplemented from time to time in accordance with the terms thereof, the “Staybridge
Management Agreement”). Pursuant to Section 17.5 of the Staybridge
Management Agreement, the Staybridge Owner is holding the “Deposit” to secure
the performance by Staybridge Manager of the “Secured Obligations” (as such
terms are defined in the Staybridge Management Agreement). As used in this
Agreement, the term “Deposit” shall have the meaning ascribed to such term in
the Staybridge Management Agreement for all purposes hereof and the term “Staybridge
Secured Obligations” shall have the meaning ascribed to the term “Secured
Obligations” in the Staybridge Management Agreement for all purposes hereof.

 

IC Owner and IHG Maryland entered into that certain Management
Agreement, dated as of February 16, 2005, and (together with IHG Canada)
amended said Management Agreement by that certain First Amendment to Management
Agreement, dated as of May 31, 2005 (as so amended, the “Original IC
Management Agreement”).

 

PR Landlord and InterContinental Hotels (Puerto Rico), Inc. (“PR
Tenant”) entered into that certain Lease Agreement, dated as of February
16, 2005 (as the same has been, and may hereafter be, amended, modified or
supplemented from time to time in accordance with the terms thereof, the “PR
Lease”).

 

InterContinental Hotels Group PLC (“Guarantor”), a corporation
organized and existing under the laws of England and Wales and the ultimate
parent entity of each of the IHG Parties and PR Tenant, executed and delivered
that certain Amended and Restated Consolidated Guaranty Agreement dated as of
February 16, 2005 (the “Original PLC Guaranty”) in favor of Staybridge
Owner, IC Owner, PR Landlord and Hospitality Properties Trust, a Maryland real
estate investment trust.

 

 

IC Owner and IC Manager entered into that certain Amended and Restated
Management Agreement, dated as of January 6, 2006 (as the same may hereafter be
amended, modified or supplemented from time to time in accordance with the
terms thereof, the “IC Management Agreement”), which amended and
restated the Original IC Management Agreement, as further described in the IC
Management Agreement.

 

Staybridge Owner, IC Owner, PR Landlord, Staybridge Manager and IC
Manager entered into that certain Deposit Agreement, dated as of January 6,
2006 (the “Original Deposit Agreement”), pursuant to which the parties
thereto agreed that the Deposit shall stand as security for IC Manager’s and PR
Tenant’s observance and performance of certain covenants and agreements set forth
in the IC Management Agreement and the PR Lease as well as the Staybridge
Secured Obligations.

 

On or about the date hereof, FC Owner and IHG Maryland are entering
into that certain Management Agreement in conjunction with FC Owner’s or its
affiliate’s acquisition of certain hotels (as the same may hereafter be
amended, modified or supplemented from time to time in accordance with the
terms thereof, the “FC Management Agreement”).

 

On or about the date hereof, Guarantor is executing and delivering that
certain Second Amended and Restated Consolidated Guaranty Agreement (as the
same may hereinafter be amended, modified or supplemented from time to time in
accordance with the terms thereof, the “PLC Guaranty”). The PLC Guaranty
amends and restates the Original PLC Guaranty, as further described in the PLC
Guaranty.

 

In consideration of (i) FC Owner’s or its affiliate’s acquisition of
said hotels and FC Owner’s and IHG Maryland’s entering into the FC Management
Agreement, (ii) IC Owner and IC Manager agreeing to replenish the Deposit
pursuant to the terms of the IC Management Agreement, and (iii) FC Owner and
IHG Maryland agreeing to replenish the Deposit pursuant to the terms of the FC
Management Agreement, all of the parties hereto have agreed that the Deposit
shall stand as security for IC Manager’s, PR Tenant’s and IHG Maryland’s
observance and performance of certain covenants and agreements set forth in the
IC Management Agreement, the PR Lease and the FC Management Agreement, as well
as the Staybridge Secured Obligations. The IHG Parties and PR Tenant are all
wholly-owned subsidiaries of Guarantor and acknowledge and agree that each has
received good and valuable consideration for the respective rights and
obligations set forth in this Agreement. The HPT Parties are all wholly-owned
subsidiaries of Hospitality Properties Trust and acknowledge and agree that
each has received good and valuable consideration for the respective rights and
obligations set forth in this Agreement.

 

As hereinbelow provided, the parties hereto hereby intend that the
Deposit shall be made available to satisfy the Staybridge Secured Obligations,
the IC Secured Obligations (as hereinafter defined) and the FC Secured
Obligations (as hereinafter defined) on the condition and to the extent that
such obligations are not timely paid pursuant to the PLC Guaranty. In
connection therewith, each of the Staybridge Management Agreement and the IC
Management Agreement has been amended, and the FC Management Agreement has been
executed,  to provide for the
replenishment of the Deposit to the extent any portion of the Deposit shall be
applied to the Staybridge Secured Obligations under the Staybridge Management
Agreement or to the IC Secured Obligations or the FC Secured Obligations under
this Agreement.

 

2

 

NOW, THEREFORE, in consideration of the Staybridge Management
Agreement, the IC Management Agreement and the FC Management Agreement and the
mutual promises and covenants contained therein and herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
that the Original Deposit Agreement is hereby amended and restated as follows:

 

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

 

2.             Deposit
Availability. The Deposit is hereby agreed to stand as security for (i) the
Staybridge Secured Obligations, (ii) the payment to IC Owner of all of the “Owner’s
First Priority” as and when due under the IC Management Agreement determined
without respect to Gross Revenue thereunder or Operating Profits thereunder,
the timely performance of all of the covenants to be performed by IC Manager
under the IC Management Agreement and the payment to PR Landlord of all of the “Minimum
Rent” as and when due under the PR Lease and the timely performance of all of
the covenants to be performed by the PR Tenant under the PR Lease
(collectively, the “IC Secured Obligations”), and (iii) the payment to
FC Owner of all of the “Owner’s First Priority” as and when due under the FC
Management Agreement determined without respect to Gross Revenue thereunder or
Operating Profits thereunder and the timely performance of all of the covenants
to be performed by IHG Maryland under the FC Agreement (the “FC Secured
Obligations”, and together with the Staybridge Secured Obligations and IC
Secured Obligations, collectively, the “Secured Obligations”). Accordingly,
the establishment and existence of the Deposit pursuant to the Staybridge
Management Agreement notwithstanding, each of IC Owner, PR Landlord and FC
Owner shall have the option to elect, in its sole discretion, whether and when
to apply funds from the Deposit with respect to any of the IC Secured
Obligations or FC Secured Obligations without regard to when and whether
Staybridge Owner shall have made or shall be simultaneously electing whether
and when to apply funds from the Deposit with respect to any of the Staybridge
Secured Obligations; provided, however, none of Staybridge Owner,
IC Owner, PR Landlord, FC Owner shall apply the Deposit to any of the Secured
Obligations for which the Guarantor is responsible under the PLC Guaranty
unless (a) the Guarantor shall have failed to pay any amount due 

 

3

 

under the Guaranty for a period
of five (5) days after notice, or (b) an event described in Sections 17.1(a),
17.1(b) or 17.1(c) of the Staybridge Management Agreement shall have occurred
with respect to the Guarantor.

 

3.             Deposit
Replenishment. Any other provision of the Staybridge Management Agreement,
the IC Management Agreement or the FC Management Agreement to the contrary
notwithstanding, in the event of any application of the Deposit pursuant to the
terms of the Staybridge Management Agreement or this Agreement, the Deposit
shall be replenished as required under the Staybridge Management Agreement by
any or all of Staybridge Manager, IC Manager or IHG Maryland to the extent
funds are available for such application in accordance with the terms of the
Staybridge Management Agreement, the IC Management Agreement or the FC
Management Agreement, as applicable, irrespective of whether the Deposit was
applied pursuant to the Staybridge Management Agreement or this Agreement. That
is, just as the Deposit is available to satisfy the Staybridge Secured
Obligations, the IC Secured Obligations and the FC Secured Obligations, funds
available under all of the Staybridge Management Agreement, the IC Management
Agreement and the FC Management Agreement may be used to replenish the Deposit.
Nothing contained in this Agreement is intended nor shall be construed to alter
the provisions concerning the required amount of the Deposit at any given time.
Notwithstanding any provisions in the Staybridge Management Agreement to the
contrary, the balance of the Deposit shall not be returned to the Staybridge
Manager until the satisfaction in full of all of the Secured Obligations.

 

4.             Subrogation.
Each of Staybridge Manager, IC Manager and IHG Maryland hereby covenants and
agrees that it will not enforce or otherwise exercise any rights of
reimbursement, subrogation, contribution or other similar rights against the
other until such time as the Deposit has been fully replenished. Until the
Secured Obligations have been satisfied in full, neither Staybridge Manager, IC
Manager nor IHG Maryland shall have any right of subrogation, and each waives
any defense it may have based upon any election of remedies by the HPT Parties
which destroys their subrogation rights or their rights to proceed against one
another for reimbursement, including, without limitation, any loss of rights
any of them may suffer by reason of any rights, powers or remedies of the HPT
Parties in connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging the indebtedness. Until all obligations of the IHG
Parties and PR Tenant pursuant to the Secured Obligations shall have been
irrevocably paid and satisfied in full, each of Staybridge Manager, IC Manager
and IHG Maryland waives any right to enforce any remedy which any of the HPT
Parties now has or may in the future have against the other or the PR Tenant
with respect to the Deposit, draws therefrom or the replenishment thereof.

 

5.             Construction.
It is the intention of the parties hereto that the Deposit be available to
benefit each of the HPT Parties as herein provided and that all of the IHG
Parties shall have the obligations with respect to the Deposit correspondingly
as set forth herein. Accordingly, in the event of any conflict between the
terms and provisions of any of the Staybridge Management Agreement, the IC
Management Agreement or the FC Management Agreement on the one hand and this
Agreement on the other hand, the terms and provisions of this Agreement shall
govern and control, but only to the extent necessary to give effect to the
intent of the parties hereto, and the Staybridge Management Agreement, the IC
Management Agreement and the FC Management Agreement shall remain unmodified
and in full force and effect except to the extent necessary to give full effect
to this Agreement.

 

4

 

6.             General
Provisions. This Agreement may be executed in one or more counterparts, all
of which counterparts shall constitute but one and the same instrument. This
Agreement shall be binding upon and shall inure to the benefit of the permitted
successors in interest and the assigns of the parties hereto as provided in the
Staybridge Management Agreement, the IC Management Agreement and the FC
Management Agreement, as applicable. This Agreement, together with the
Staybridge Agreement, the IC Management Agreement and the FC Management
Agreement, collectively constitute the entire agreement of the parties with
respect to the availability of the Deposit to the IC Secured Obligations and
the FC Secured Obligations and the replenishment of the Deposit by IC Manager
pursuant to the IC Management Agreement and IHG Maryland pursuant to the FC
Management Agreement, and shall supersede and take the place of any other
documents, agreement or understandings of the parties purporting to be in
agreement relating to the subject matter hereof.

 

7.             Governing Law. This Agreement shall be governed by
the laws of the State of Maryland.

 

8.             Restatement.
This Agreement supercedes, amends and restates in its entirety the Original Deposit
Agreement.

 

[Signatures on Following Pages]

 

5

 

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement effective as of the day and year first above written.

 

	
   

  	
  “STAYBRIDGE OWNER”

  
	
   

  	
   

  
	
   

  	
  HPT TRS IHG-1, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray, Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “IC OWNER”

  
	
   

  	
   

  
	
   

  	
  HPT TRS IHG-2, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray, Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “PR LANDLORD”

  
	
   

  	
   

  
	
   

  	
  HPT IHG PR, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray, President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “FC OWNER”

  
	
   

  	
   

  
	
   

  	
  HPT TRS IHG-3, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray, Vice President

  
							

 

[Signatures Continue on Next Page]

 

6

 

	
   

  	
  “STAYBRIDGE MANAGER”

  
	
   

  	
   

  
	
   

  	
  InterContinental Hotels Group Resources, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Robert J. Chitty

  
	
   

  	
   

  	
  Robert J. Chitty, Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “IHG MARYLAND”

  
	
   

  	
   

  
	
   

  	
  IHG Management (Maryland) LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Robert J. Chitty

  
	
   

  	
   

  	
  Robert J. Chitty, Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “IHG CANADA”

  
	
   

  	
   

  
	
   

  	
  INTERCONTINENTAL HOTELS GROUP (CANADA) INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Robert J. Chitty

  
	
   

  	
   

  	
  Robert J. Chitty, Vice President

  
								

 

7Exhibit
10.17

 

MANAGEMENT
AGREEMENT

BY AND

 

BETWEEN

 

HPT
TRS IHG-1, INC.

 

AND

 

INTERCONTINENTAL
HOTELS GROUP RESOURCES, INC.

 

 

Table of Contents

 

	
   

  	
  Page

  
	
  ARTICLE 1 DEFINITIONS

  	
  1

  
	
   

  	
  1.1  8.1(c) Statement

  	
  1

  
	
   

  	
  1.2  Accounting Principles

  	
  1

  
	
   

  	
  1.3  Affiliate

  	
  1

  
	
   

  	
  1.4  Agreed Upon Procedure Letter

  	
  1

  
	
   

  	
  1.5  Authorized Mortgage

  	
  2

  
	
   

  	
  1.6  Arbitration

  	
  2

  
	
   

  	
  1.7  Award

  	
  2

  
	
   

  	
  1.8  Bank Accounts

  	
  2

  
	
   

  	
  1.9  Base Management Fee

  	
  2

  
	
   

  	
  1.10  Base Year

  	
  2

  
	
   

  	
  1.11  Brand

  	
  3

  
	
   

  	
  1.12  Brand Standards

  	
  3

  
	
   

  	
  1.13  Buildings

  	
  3

  
	
   

  	
  1.14  Business Day

  	
  3

  
	
   

  	
  1.15  Capital Replacements

  	
  3

  
	
   

  	
  1.16  Capital Replacements Budget

  	
  3

  
	
   

  	
  1.17  Code

  	
  3

  
	
   

  	
  1.18  Collateral Agency Agreement

  	
  3

  
	
   

  	
  1.19  Collateral Agent

  	
  3

  
	
   

  	
  1.20  Competitor

  	
  4

  
	
   

  	
  1.21  Condemnation

  	
  4

  
	
   

  	
  1.22  Condemnor

  	
  4

  
	
   

  	
  1.23  Consolidated Financials

  	
  4

  
	
   

  	
  1.24  Consumer Price Index

  	
  4

  
	
   

  	
  1.25  Controlling Interest

  	
  4

  
	
   

  	
  1.26  Debt Service Coverage Ratio

  	
  4

  
	
   

  	
  1.27  Deposit

  	
  4

  
	
   

  	
  1.28  Disbursement Rate

  	
  4

  
	
   

  	
  1.29  Effective Date

  	
  4

  
	
   

  	
  1.30  Environmental Laws

  	
  4

  
	
   

  	
  1.31  Environmental Notice

  	
  4

  
	
   

  	
  1.32  Expiration Date

  	
  4

  
	
   

  	
  1.33  Fiscal Month

  	
  5

  
	
   

  	
  1.34  Fiscal Year

  	
  5

  
	
   

  	
  1.35  Furniture, Fixtures and Equipment or
  FF&E

  	
  5

  
	
   

  	
  1.36  Government Agencies

  	
  5

  
	
   

  	
  1.37  Gross Revenues

  	
  5

  
	
   

  	
  1.38  Guarantor

  	
  6

  
	
   

  	
  1.39  Guaranty

  	
  6

  
	
   

  	
  1.40  Hazardous Substances

  	
  6

  
	
   

  	
  1.41  Hotel

  	
  6

  
	
   

  	
  1.42  HPT

  	
  7

  
	
   

  	
  1.43  IHG

  	
  7

  
	
   

  	
  1.44  Incentive Management Fee

  	
  7

  
	
   

  	
  1.45  Initial Term

  	
  7

  
	
   

  	
  1.46  Initial Working Capital

  	
  7

  

 

i

 

	
   

  	
  1.47  Insurance Requirements

  	
  7

  
	
   

  	
  1.48  Interest Rate

  	
  7

  
	
   

  	
  1.49  Lease

  	
  7

  
	
   

  	
  1.50  Legal Requirements

  	
  7

  
	
   

  	
  1.51  Management Fees

  	
  7

  
	
   

  	
  1.52  Manager

  	
  8

  
	
   

  	
  1.53  Manager Default

  	
  8

  
	
   

  	
  1.54  Manager Event of Default

  	
  8

  
	
   

  	
  1.55  Material Repair

  	
  8

  
	
   

  	
  1.56  New Management Agreement

  	
  8

  
	
   

  	
  1.57  NOI

  	
  8

  
	
   

  	
  1.58  Officer’s Certificate

  	
  8

  
	
   

  	
  1.59  Opening Date

  	
  8

  
	
   

  	
  1.60  Operating Cost(s)

  	
  8

  
	
   

  	
  1.61  Operating Equipment

  	
  9

  
	
   

  	
  1.62  Operating Profit

  	
  9

  
	
   

  	
  1.63  Operating Standards

  	
  9

  
	
   

  	
  1.64  Operating Supplies

  	
  9

  
	
   

  	
  1.65  Owner

  	
  9

  
	
   

  	
  1.66  Owner’s
  Percentage Priority

  	
  10

  
	
   

  	
  1.67  Owner’s Priority

  	
  10

  
	
   

  	
  1.68  Parent

  	
  10

  
	
   

  	
  1.69  Person

  	
  10

  
	
   

  	
  1.70  Pledged Hotels

  	
  10

  
	
   

  	
  1.71  Priority Coverage Ratio

  	
  10

  
	
   

  	
  1.72  Purchase Agreement

  	
  10

  
	
   

  	
  1.73  Purchaser

  	
  10

  
	
   

  	
  1.74  Renewal Terms

  	
  10

  
	
   

  	
  1.75  Repairs

  	
  10

  
	
   

  	
  1.76  Replacement Property

  	
  11

  
	
   

  	
  1.77  Reservation System

  	
  11

  
	
   

  	
  1.78  Reserve Account

  	
  11

  
	
   

  	
  1.79  Reserve Percentage

  	
  11

  
	
   

  	
  1.80  Residual Distribution

  	
  11

  
	
   

  	
  1.81  Restricted Area

  	
  11

  
	
   

  	
  1.82  Restricted Period

  	
  11

  
	
   

  	
  1.83  Rooms Revenue

  	
  11

  
	
   

  	
  1.84  SARA

  	
  11

  
	
   

  	
  1.85  Secured Obligations

  	
  11

  
	
   

  	
  1.86  Services Fees

  	
  11

  
	
   

  	
  1.87  Sites

  	
  11

  
	
   

  	
  1.88  Subsidiary

  	
  11

  
	
   

  	
  1.89  Substitute Tenant

  	
  12

  
	
   

  	
  1.90  System Marks

  	
  12

  
	
   

  	
  1.91  Term

  	
  12

  
	
   

  	
  1.92  Transaction Documents

  	
  12

  
	
   

  	
  1.93  Transferred Hotels

  	
  12

  

 

ii

 

	
   

  	
  1.94  Uniform System of Accounts

  	
  12

  
	
   

  	
  1.95  Ultimate Parent

  	
  12

  
	
   

  	
  1.96  Unsuitable for Its Permitted Use

  	
  12

  
	
   

  	
  1.97  Working Capital

  	
  12

  
	
   

  	
  1.98  Yearly Budget

  	
  12

  
	
  ARTICLE 2 SCOPE OF
  AGREEMENT

  	
  13

  
	
   

  	
  2.1  Engagement of Manager

  	
  13

  
	
   

  	
  2.2  Additional Services

  	
  14

  
	
   

  	
  2.3  Use of Hotels

  	
  15

  
	
   

  	
  2.4  Right to Inspect

  	
  15

  
	
   

  	
  2.5  Right of Offset

  	
  15

  
	
   

  	
  2.6  Condition of the Hotels

  	
  15

  
	
  ARTICLE 3 TERM AND
  RENEWALS

  	
  16

  
	
   

  	
  3.1  Term

  	
  16

  
	
   

  	
  3.2  Renewal Term

  	
  16

  
	
   

  	
  3.3  Owner’s Termination Right at End of Term

  	
  16

  
	
  ARTICLE 4 TITLE TO HOTEL

  	
  16

  
	
   

  	
  4.1  Covenants of Title

  	
  16

  
	
   

  	
  4.2  Non-Disturbance

  	
  17

  
	
   

  	
  4.3  Financing

  	
  17

  
	
   

  	
  4.4  Sale of a Hotel

  	
  19

  
	
   

  	
  4.5  Sale of All the Hotels

  	
  20

  
	
   

  	
  4.6  The Lease

  	
  20

  
	
   

  	
  4.7  Restricted Sale

  	
  20

  
	
  ARTICLE 5 REQUIRED FUNDS

  	
  20

  
	
   

  	
  5.1  Working Capital

  	
  20

  
	
   

  	
  5.2  Reserve Account

  	
  21

  
	
   

  	
  5.3  Additional Requirements for Reserve

  	
  22

  
	
   

  	
  5.4  Ownership of Replacements

  	
  22

  
	
   

  	
  5.5  Manager Reserve Advances

  	
  22

  
	
   

  	
  5.6  No Additional Contributions

  	
  23

  
	
  ARTICLE 6 BRAND STANDARDS
  AND MANAGER’S CONTROL

  	
  23

  
	
   

  	
  6.1  Brand Standards

  	
  23

  
	
   

  	
  6.2  Manager’s Control

  	
  23

  
	
   

  	
  6.3  Arbitration

  	
  23

  
	
  ARTICLE 7 OPERATION OF THE
  HOTEL

  	
  23

  
	
   

  	
  7.1  Permits

  	
  24

  
	
   

  	
  7.2  Equipment and Supplies

  	
  24

  
	
   

  	
  7.3  Personnel

  	
  24

  
	
   

  	
  7.4  Sales, Marketing and Advertising

  	
  25

  
	
   

  	
  7.5  Reservation and Communication Services

  	
  25

  
	
   

  	
  7.6  Maintenance and Repairs

  	
  26

  
	
   

  	
  7.7  Material Repairs

  	
  26

  
	
   

  	
  7.8  Liens; Credit

  	
  27

  
	
   

  	
  7.9  Real Estate and Personal Property Taxes

  	
  27

  
	
   

  	
  7.10  Contest

  	
  28

  

 

iii

 

	
  ARTICLE 8 FISCAL MATTERS

  	
  28

  
	
   

  	
  8.1  Accounting Matters

  	
  28

  
	
   

  	
  8.2  Yearly Budgets

  	
  30

  
	
   

  	
  8.3  Bank Accounts

  	
  30

  
	
   

  	
  8.4  Consolidated
  Financials

  	
  31

  
	
  ARTICLE 9 FEES TO MANAGER

  	
  31

  
	
   

  	
  9.1  Management Fees

  	
  31

  
	
   

  	
  9.2  Services Fees

  	
  32

  
	
  ARTICLE 10 DISBURSEMENTS

  	
  32

  
	
   

  	
  10.1  Disbursement of Funds

  	
  32

  
	
   

  	
  10.2  Residual Distribution

  	
  33

  
	
   

  	
  10.3  Owner’s
  Priority

  	
  34

  
	
   

  	
  10.4  Owner’s Percentage Priority

  	
  34

  
	
   

  	
  10.5  No Interest

  	
  34

  
	
   

  	
  10.6  Amounts Outstanding
  at End of Term

  	
  34

  
	
   

  	
  10.7  Survival

  	
  34

  
	
  ARTICLE 11 CERTAIN OTHER
  SERVICES

  	
  35

  
	
   

  	
  11.1  Optional Services

  	
  35

  
	
   

  	
  11.2  Purchasing

  	
  35

  
	
  ARTICLE 12 SIGNS AND
  SERVICE MARKS

  	
  35

  
	
   

  	
  12.1  Signs

  	
  35

  
	
   

  	
  12.2  System Marks

  	
  35

  
	
   

  	
  12.3  System Mark Litigation

  	
  36

  
	
  ARTICLE 13 INSURANCE

  	
  36

  
	
   

  	
  13.1  Insurance Coverage

  	
  36

  
	
   

  	
  13.2  Insurance Policies

  	
  38

  
	
   

  	
  13.3  Insurance Certificates

  	
  39

  
	
   

  	
  13.4  Insurance Proceeds

  	
  39

  
	
   

  	
  13.5  Manager’s Insurance Program

  	
  39

  
	
  ARTICLE 14 INDEMNIFICATION
  AND WAIVER OF SUBROGATION

  	
  39

  
	
   

  	
  14.1  Indemnification

  	
  39

  
	
   

  	
  14.2  Waiver of Subrogation

  	
  39

  
	
   

  	
  14.3  Survival

  	
  40

  
	
  ARTICLE 15 DAMAGE TO AND
  DESTRUCTION OF THE HOTEL

  	
  40

  
	
   

  	
  15.1  Termination

  	
  40

  
	
   

  	
  15.2  Restoration

  	
  41

  
	
  ARTICLE 16 CONDEMNATION

  	
  41

  
	
   

  	
  16.1  Total Condemnation

  	
  41

  
	
   

  	
  16.2  Partial Condemnation

  	
  42

  
	
   

  	
  16.3  Temporary Condemnation

  	
  42

  
	
   

  	
  16.4  Effect of Condemnation

  	
  43

  
	
  ARTICLE 17 DEFAULT AND
  TERMINATION

  	
  43

  
	
   

  	
  17.1  Manager Events of Default

  	
  43

  
	
   

  	
  17.2  Remedies for Manager Defaults

  	
  44

  
	
   

  	
  17.3  Remedies for Owner Defaults

  	
  45

  
	
   

  	
  17.4  Post Termination Obligations

  	
  45

  
	
   

  	
  17.5  Deposit

  	
  47

  

 

iv

 

	
  ARTICLE 18 NOTICES

  	
  48

  
	
   

  	
  18.1  Procedure

  	
  48

  
	
  ARTICLE 19 RELATIONSHIP,
  AUTHORITY AND FURTHER ACTIONS

  	
  49

  
	
   

  	
  19.1  Relationship

  	
  49

  
	
   

  	
  19.2  Further Actions

  	
  50

  
	
  ARTICLE 20 APPLICABLE LAW

  	
  50

  
	
  ARTICLE 21 SUCCESSORS AND
  ASSIGNS

  	
  50

  
	
   

  	
  21.1  Assignment

  	
  50

  
	
   

  	
  21.2  Binding Effect

  	
  51

  
	
  ARTICLE 22 RECORDING

  	
  51

  
	
   

  	
  22.1  Memorandum
  of Agreement

  	
  52

  
	
   

  	
  ARTICLE 23 FORCE MAJEURE

  	
  52

  
	
   

  	
  23.1  Operation of Hotel

  	
  52

  
	
   

  	
  23.2  Extension of Time

  	
  52

  
	
  ARTICLE 24 GENERAL PROVISIONS

  	
  52

  
	
   

  	
  24.1  Trade Area Restriction

  	
  52

  
	
   

  	
  24.2  Environmental Matters

  	
  53

  
	
   

  	
  24.3  Authorization

  	
  53

  
	
   

  	
  24.4  Severability

  	
  54

  
	
   

  	
  24.5  Merger

  	
  54

  
	
   

  	
  24.6  Formalities

  	
  54

  
	
   

  	
  24.7  Consent to Jurisdiction; No Jury Trial

  	
  54

  
	
   

  	
  24.8  Performance on Business Days

  	
  55

  
	
   

  	
  24.9  Attorneys’ Fees

  	
  55

  
	
   

  	
  24.10  Section and Other Headings

  	
  55

  
	
   

  	
  24.11  Documents

  	
  55

  
	
   

  	
  24.12  Remedies Not Cumulative

  	
  55

  
	
   

  	
  24.13  No Political Contributions

  	
  55

  
	
   

  	
  24.14  REIT Qualification

  	
  55

  
	
   

  	
  24.15  Further Compliance with Section 856(d) of
  the Code

  	
  56

  
	
   

  	
  24.16  Adverse Regulatory Event

  	
  56

  
	
   

  	
  24.17  Commercial Leases

  	
  57

  
	
   

  	
  24.18  Nonliability of Trustees

  	
  57

  
	
   

  	
  24.19  Arbitration

  	
  58

  
	
   

  	
  24.20  Estoppel Certificates

  	
  59

  
	
   

  	
  24.21  Confidentiality

  	
  59

  
	
   

  	
  24.22  Hotel Warranties

  	
  60

  

 

v

 

MANAGEMENT AGREEMENT

 

THIS MANAGEMENT AGREEMENT
(this “Agreement”) is made and entered into as of July 1, 2003, by and
between HPT TRS IHG-1, INC., a Maryland corporation (“Owner”), and
INTERCONTINENTAL HOTELS GROUP RESOURCES, INC. a Delaware corporation (“Manager”).

 

W  I  T  N  E  S
S  E  T  H

 

WHEREAS, pursuant to
the Purchase Agreement (this and other capitalized terms used and not otherwise
defined herein having the meanings ascribed to such terms in Article 1),
on the Effective Date: (a) Purchaser is acquiring the Hotels from Manager or
its Affiliate(s); (b) Purchaser and Owner, its Affiliate, are entering into the
Lease; and (c) Owner and Manager are entering into this Agreement; and

 

WHEREAS, Owner
wishes to engage Manager and Manager wishes to be engaged to manage and operate
the Hotels, subject to and upon the terms and conditions set forth in this
Agreement.

 

NOW, THEREFORE, in
consideration of the mutual promises and covenants herein contained and other
good and valuable consideration, the receipt and sufficiency of which are
herein acknowledged, Owner and Manager, intending to be legally bound, hereby
agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

Capitalized Term used in this Agreement and
not otherwise defined herein shall have the meanings set forth below, in the
Section of this Agreement referred to below, or in such other document or
agreement referred to below:

 

1.1           “8.1(c) Statement”  shall have the meaning given such term in
Section 8.1(c).

 

1.2           “Accounting Principles”  shall mean generally accepted accounting
principles, as adopted in the United States of America, consistently applied.

 

1.3           “Affiliate” 
shall mean, with respect to any Person, (a) in the case of any such
Person which is a partnership, any partner in such partnership; (b) in the case
of any such Person which is a limited liability company, any member of such
company; (c) any other Person which is a Parent, or Subsidiary or a Subsidiary
of a Parent with respect to such Person or to one or more of the persons
referred to in the preceding clauses (a) and (b), and; (d) any other Person who
is an officer, director, trustee or employee of, or partner in, such Person or
any Person referred to in the preceding clauses (a), (b) and (c).

 

1.4           “Agreed Upon Procedure Letter”  shall mean, a letter from Ernst & Young
or another firm of independent certified public accountant (the “auditor”)
selected by Manager and approved by Owner (which approval shall not be
unreasonably withheld or delayed), which letter shall, subject to the limitations
and conditions imposed by the auditor, 

 

 

address the following components and such other reasonable matters as
Owner, and the auditor shall reasonably agree:

 

(a)           That auditor
has tested Manager’s systems of internal controls.

 

(b)           That auditor has
verified that the information provided was generated from the same reporting
systems as Manager uses for its regular periodic accounting and reporting.

 

(c)           That auditor
has verified the mathematical accuracy of the 8.1(c) Statement.

 

(d)           That auditor has
recomputed the annual calculation of Management Fees, Service Fees,
contributions to the Reserve Account, expenditures from the Reserve Account,
Owner’s Percentage Priority and the Residual Distribution.

 

(e)           That auditor
has confirmed the Hotels subjected to audit procedures by Manager’s internal
audit department, if any, and reviewed work papers provided in connection
therewith. If auditor has performed hotel level audit procedures at any Hotel,
auditor shall identify those Hotels and list the procedures performed and
results obtained. In any event at least three Hotels shall be subjected to
audit procedures each Fiscal Year by either internal audit or the auditor.

 

1.5           “Authorized Mortgage”  shall mean any first mortgage, first
deed-of-trust or first deed to secure debt and other related security documents
granted in connection therewith now or hereafter granted by Purchaser to secure
a loan to, or other debt of, Purchaser or its Affiliates which is made by an
institutional lender, investment bank, publicly traded investment fund or other
similar Person regularly making loans secured by hotels or incurred in
connection with the issuance of a mortgage backed security, which loan or debt
provides for (i) level payments of interest and principal and (ii) amortization
and other terms which are commercially reasonable.

 

1.6           “Arbitration” 
shall mean an arbitration conducted in accordance with the terms of Section
24.19.

 

1.7           “Award”  shall have the meaning given such term in the
Lease.

 

1.8           “Bank
Accounts”  shall mean one or more
bank accounts established for the operation of the Hotels in Owner’s name at a
bank selected by Manager and approved by Owner.

 

1.9           “Base
Management Fee”  shall mean seven
percent (7%) of the aggregate Gross Revenues at the Hotels in each Fiscal Year
during Term.

 

1.10         “Base Year”  shall mean, for each Hotel, the 2004 Fiscal
Year; provided, however, if there shall occur a casualty,
condemnation or other force majeure event with respect to a Hotel which causes
a material decline in Gross Revenues for such Hotel for the 2004 Fiscal Year or
a force majeure event nationally or in any relevant market that results in a
ten percent (10%) annual decline in REVPAR for the Upscale Segment (or other
appropriate segment) as calculated by Smith Travel Research, nationally or in
the relevant market, which causes a material decline in Gross Revenues for any
Hotel, the 

 

2

 

Base Year for such Hotel
shall be adjusted to be the first full Fiscal Year of operation of such Hotel
after the termination of any such casualty, condemnation or force majeure
event.

 

1.11         “Brand”  shall mean, collectively, the Staybridge
Suites hotel service marks, the Brand Standards, and all of the attributes and
features customarily associated with the Staybridge Suites hotel chain in North
America from time to time.

 

1.12         “Brand
Standards”  shall mean the standards
of operation, as amended from time to time, in effect at substantially all
hotels which are operated under the Staybridge Suites name, which standards
shall include, but not be limited to, standards of operation from time to time
required of owners of similar hotels or may be specified in manuals and other
guidelines provided by the owner of the System Marks or its Affiliates.

 

1.13         “Buildings”  shall mean, collectively, all buildings,
structures and improvements now or hereafter located on the Sites, and all
fixtures and equipment attached to, forming a part of and necessary for the
operation of such buildings, structures and improvements as a hotel (including,
without limitation, heating, lighting, sanitary, air-conditioning, laundry,
refrigeration, kitchen, elevator and similar items) having guest sleeping
rooms, each with bath, and such (i) restaurants, bars, banquet, meeting and
other public areas; (ii) commercial space, including concessions and shops;
(iii) parking facilities and areas; (iv) storage and service areas; (v)
recreational facilities and areas; (vi) permanently affixed signage; (vii)
public grounds and gardens; and (viii) other facilities and appurtenances, as
may hereafter be attached to and form a part of such building, structures an
improvements in accordance with this Agreement.

 

1.14         “Business
Day”  shall mean any day other than
Saturday, Sunday, or any other day on which banking institutions in The
Commonwealth of Massachusetts are authorized by law or executive action to
close.

 

1.15         “Capital
Replacements”  shall mean,
collectively, replacements and renewals to the FF&E and Repairs which are
normally capitalized under the Accounting Principles.

 

1.16         “Capital
Replacements Budget”  shall mean the
annual budget for Capital Replacements at the Hotels, covering a Fiscal Year,
as prepared by Manager and approved by Owner as part of a Yearly Budget.
References to Yearly Budget shall be deemed to incorporate the Capital
Replacement Budget unless specifically excluded.

 

1.17         “Code”  shall mean the Internal Revenue Code of 1986
and the Treasury Regulations promulgated thereunder, each as from time to time
amended.

 

1.18         “Collateral
Agency Agreement”  shall have the
meaning given such term in the Guaranty.

 

1.19         “Collateral
Agent”  shall have the meaning given
such term in the Guaranty.

 

3

 

1.20         “Competitor”  shall mean any Person which owns directly or
through an Affiliate a hotel brand, trade name, system, or chain having at
least fifteen (15) hotels (excluding a mere franchisee or mere passive
investor).

 

1.21         “Condemnation”  shall have the meaning given such term in the
Lease

 

1.22         “Condemnor”  shall have the meaning given such term in the
Lease.

 

1.23         “Consolidated
Financials”  shall mean for any
fiscal year or any interim period of any Person, annual or interim financial
statements of such Person prepared on a consolidated basis, including such
Person’s consolidated balance sheet and the related statements of income and
cash flows, all in reasonable detail, and setting forth in comparative form the
corresponding figures for the corresponding period in the preceding fiscal
year, and prepared in accordance with the Accounting Principles throughout the
periods reflected or if such Person’s principal place of business is the United
Kingdom, in accordance with generally accepted accounting principles, as
adopted in the United Kingdom, consistently applied throughout the periods
reflected provided that any such financial statement which is audited shall
contain a reconciliation of any differences between such accounting principles
and Accounting Principles.

 

1.24         “Consumer
Price Index”  shall mean the Consumer
Price Index for all Urban Consumers, U.S. City Average, published by the United
States Bureau of Labor Statistics.

 

1.25         “Controlling
Interest”  shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
business, management or policies of such Person.

 

1.26         “Debt
Service Coverage Ratio”  shall mean,
with respect to any loan or other debt secured by an Authorized Mortgage, the
quotient obtained by dividing (a) the NOI of the properties securing such loan
or other debt for the twelve (12) months ending on such date by (b) regularly
scheduled interest and principal payments projected to be paid thereunder
during the first (1st) twelve (12)
months after the first day of the month next after the date on which such
Authorized Mortgage is granted divided.

 

1.27          “Deposit”  shall have the meaning given such term in Section
17.5.

 

1.28         “Disbursement
Rate”  shall mean a per annum rate
equal to the greater of (i) the sum of the per annum rate for twenty (20) year
U.S. Treasury Obligations as published in The Wall Street Journal, plus
three hundred (300) basis points and (ii) ten percent (10%).

 

1.29         “Effective
Date”  shall mean the date hereof.

 

1.30         “Environmental
Laws”  shall have the meaning given
such term in Section 24.2(b).

 

1.31         “Environmental
Notice”  shall have the meaning given
such terms in Section 24.2(a).

 

1.32         “Expiration
Date”  shall mean the date on which
the Term shall expire.

 

4

 

1.33         “Fiscal
Month”  shall mean each calendar
month in the Term or each partial calendar month in the Term.

 

1.34         “Fiscal Year”  shall mean each calendar year in the Term and
each partial calendar year in the Term.

 

1.35         “Furniture,
Fixtures and Equipment” or “FF&E”  shall mean, collectively, all furniture,
furnishings and equipment (except Operating Equipment and real property
fixtures) now or hereafter located and installed in or about the Hotels which
are used in the operation thereof as hotels in accordance with the standards
set forth in this Agreement, including, without limitation (i) office
furnishings and equipment; (ii) specialized hotel equipment necessary for the
operation of any portion of the Building as a Staybridge Suites hotel, including
equipment for kitchens, laundries, dry cleaning facilities, bars, restaurants,
public rooms, commercial space, parking areas, and recreational facilities; and
(iii) all other furnishings and equipment hereafter located and installed in or
about the Buildings which are used in the operation of the Buildings as a
Staybridge Suites hotel in accordance with the standards set forth in this
Agreement.

 

1.36         “Government
Agencies”  shall mean any court,
agency, authority, board (including, without limitation, environmental
protection, planning and zoning), bureau, commission, department, office or
instrumentality of any nature whatsoever of any governmental or
quasi-governmental unit of the United States or any state or any county or any
political subdivision of any of the foregoing, whether now or hereafter in
existence, having jurisdiction over Owner, the Sites or the Hotels.

 

1.37         “Gross
Revenues”  shall mean for any period
with respect to each Hotel, all revenues and income of any nature derived
directly or indirectly from such Hotel or from the use or operation thereof,
including without limitation room sales; food and beverage sales (regardless of
whether Owner, Manager or any of their Affiliates own the items being sold);
telephone, telegraph, fax and internet revenues; rental or other payments from
lessees, subleases, concessionaires and others occupying or using space or
rendering services at such Hotel (but not the gross receipts of such lessees,
subleases or concessionaires); and the actual cash proceeds of business
interruption, use, occupancy or similar insurance; provided, however,
that Gross Revenues shall not include the following (and there shall be
appropriate deductions made in determining Gross Revenues for):  gratuities or service charges in the nature
of a gratuity added to a customer’s bill; federal, state or municipal excise,
sales or use taxes or any other taxes collected directly from patrons or guests
or included as part of the sales price of any goods or services; interest
received or accrued with respect to the funds in the Reserve Account or (other
than for purposes of calculating the Incentive Management Fee and the Residual
Distribution) the other operating accounts of the Hotels; any refunds, rebates,
discounts and credits of a similar nature, given, paid or returned in the
course of obtaining Gross Revenues or components thereof; insurance proceeds
(other than proceeds from business interruption or other loss of income
insurance; condemnation proceeds (other than for a temporary taking); credits
or refunds made to customers, guests or patrons; sums and credits received by
Owner for lost or damaged merchandise; proceeds from the sale or other
disposition of a Hotel, any part thereof, of 

 

5

 

FF&E or any other assets
of the Hotels; or proceeds of any financing or re-financing; the Initial
Working Capital and any other matters specifically excluded from Gross Revenues
pursuant to this Agreement.

 

1.38         “Guarantor”  shall mean the Guarantor under the Guaranty.

 

1.39         “Guaranty”  shall mean the Guaranty Agreement of even
date herewith made by IHG for the benefit of, inter  alia, Owner,
as the same may be amended, supplemented or replaced from time to time.

 

1.40         “Hazardous
Substances”  shall mean any
substance:

 

(a)           the presence of
which requires or may hereafter require notification, investigation or
remediation under any federal, state or local statute, regulation, rule,
ordinance, order, action or policy; or

 

(b)           which is or
becomes defined as a “hazardous waste,” “hazardous material” or “hazardous
substance” or “pollutant” or “contaminant” under any present or future federal,
state or local statute, regulation, rule or ordinance or amendments thereto
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et  seq.)
and the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.) and the regulations promulgated thereunder; or

 

(c)           which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is or becomes regulated by any
governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, any state of the United States, or any
political subdivision thereof; or

 

(d)           the presence of
which at a Hotel causes or materially threatens to cause an unlawful nuisance
upon such Hotel or to adjacent properties or poses or materially threatens to
pose a hazard to such Hotel or to the health or safety of persons on or about
such Hotel; or

 

(e)           without
limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons or volatile organic compounds; or

 

(f)            without
limitation, which contains polychlorinated biphenyls (PCBs) or asbestos or urea
formaldehyde foam insulation; or

 

(g)           without
limitation, which contains or emits radioactive particles, waves or material;
or

 

(h)           without
limitation, constitutes materials which are now or may hereafter be subject to
regulation pursuant to the Material Waste Tracking Act of 1988, or any
applicable laws promulgated by any Government Agencies.

 

1.41         “Hotel”  shall mean each Hotel located at a Site
including all of the Owner’s interest in such Site, the Building there, the Furniture,
Fixtures and Equipment there, the Operating 

 

6

 

Equipment there and the
Operating Supplies there; provided, however, upon the termination
of the Agreement with respect to less than all of the Hotels, pursuant to the
terms hereof or otherwise, the term “Hotel” shall, with respect to the
obligation of the parties thereafter accruing, only refer to a Hotel with
respect to which this Agreement is in full force and effect.

 

1.42         “HPT”  shall mean Hospitality Properties Trust, a
Maryland real estate investment trust, together with its successors and
permitted assigns.

 

1.43         “IHG”  shall mean Intercontinental Hotels Group PLC,
its successors and assigns.

 

1.44         “Incentive
Management Fee”  shall mean for any Fiscal
Year, fifty percent (50%) of the excess, if any, of Gross Revenues from all of
the Hotels in excess of the applications thereof made pursuant to Sections
10.1(a) through and including 10(n).

 

1.45         “Initial
Term”  shall mean the period
commencing on the Effective Date and ending on the last day of the month in
which occurs the day that is twenty (20) years after the Effective Date.

 

1.46         “Initial
Working Capital”  shall have the
meaning given to such term in Section 5.1.

 

1.47         “Insurance
Requirements”  shall mean all terms
of any insurance policy required by this Agreement and all requirements of the
issuer of any such policy and all orders, rules and regulations and any other
requirements of the National Board of Fire Underwriters (or any other body exercising
similar functions) binding upon the Hotels.

 

1.48         “Interest
Rate”  shall mean a rate, not to
exceed the maximum legal interest rate, equal to the greater of (i) twelve
(12%) percent per annum and (ii) two percent (2%) per annum in excess of the Disbursement
Rate determined as of the first day that interest accrues on any amount to
which such Interest Rate is to be applied.

 

1.49         “Lease”  shall mean the Lease Agreement dated as of
the Effective Date, by and between HPT IHG Properties Trust and Owner, as the
same may be amended from time to time in accordance with the terms of this
Agreement.

 

1.50         “Legal
Requirements”  shall mean all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees, injunctions and
requirements affecting Owner(excluding any requirements which affect Owner’s
status as a real estate investment trust), a Hotel or the maintenance,
construction, alteration, management or operation thereof, whether now or hereafter
enacted or in existence, including, without limitation, (a) all permits,
licenses, authorizations, certificates and regulations necessary to operate a
Hotel, (b) all covenants, agreements, restrictions and encumbrances, (c) all
Environmental Laws and (d) the outcome of any Arbitration.

 

1.51         “Management
Fees”  shall mean, collectively, the
Base Management Fee and the Incentive Management Fee.

 

7

 

1.52         “Manager”  shall have the meaning given such term in the
preamble to this Agreement.

 

1.53         “Manager
Default”  shall mean a Manager Event
of Default or any other circumstances with which the giving of notice, the
passage of time or both would constitute a Manager Event of Default or
otherwise entitle Owner to terminate this Agreement in its entirety pursuant to
the terms hereof.

 

1.54         “Manager
Event of Default”  shall have the
meaning given such term in Section 17.1.

 

1.55         “Material
Repair”  shall mean a Repair the cost
which exceeds $250,000; provided, however, on January 1 of each
year starting in 2005 said $250,000 shall be adjusted to reflect the percentage
change in the Consumer Price Index since the prior January 1.

 

1.56         “New
Management Agreement”  shall have the
meaning given such term in Section 4.4.

 

1.57         “NOI”  shall mean, with respect to any property, for
any period, the Gross Operating Profit (as defined in the Uniform System of
Accounts) of such property for such period net of, for such period and such
property, real and personal property taxes and casualty and liability insurance
premiums, an imputed reserve for capital replacements equal to five percent
(5%) of gross revenues, an imputed management fee equal to three percent (3%)
of gross revenues and an imputed royalty fee of five percent (5%) of room
revenues.

 

1.58         “Officer’s
Certificate”  shall mean as to any
Person, a certificate of the chief executive officer, chief financial officer
or chief accounting officer of such Person, duly authorized, accompanying the
financial statements required to be delivered by such Person pursuant to Sections
8.1 and 17.4, in which such officer shall certify to such officer’s
best knowledge (a) that such statements have been properly prepared in
accordance with the Accounting Principles, (b) in the event that the certifying
party is an officer of IHG or another Guarantor, that such statements are true,
correct and complete in all material respects and fairly present the
consolidated financial condition of such Person at and as of the dates thereof
and the results of its and their operations for the periods covered thereby and
that there is no default on the part of the Guarantor under the Guaranty, and
(c) in the event that the certifying party is an officer of Manager and the
certificate is being given in such capacity, that such statements fairly
present the financial operation of the Hotels.

 

1.59         “Opening
Date”  shall mean for each Hotel, the
date set forth as such on Exhibit B for such Hotel.

 

1.60         “Operating
Cost(s)”  shall mean, collectively,
all costs and expenses of the Hotels (regardless of whether the same is
incurred by Owner, Purchaser or Manager) that are normally charged as an
operating expense under Accounting Principles, including, without limitation:

 

(i)            the cost of
Operating Supplies, wages, salaries and employee fringe benefits, advertising
and promotional expenses, the cost of personnel training programs, utility 

 

8

 

and energy costs, operating
licenses and permits, maintenance costs, and equipment rentals;

 

(ii)           all
expenditures made for maintenance and repairs to keep the Hotel in good
condition and repair (other than Capital Replacements);

 

(iii)          premiums for
insurance required hereunder;

 

(iv)          the Services
Fees;

 

(v)           real estate and
personal property taxes and expenses except to the extent expressly specified
otherwise herein;

 

(vi)          audit, legal
and accounting fees and expenses except to the extent expressly specified
otherwise herein; and

 

(vii)         rent or lease
payment for equipment used at the Hotels in the operation thereof.

 

Notwithstanding anything contained herein to the contrary, Operating
Costs shall exclude:  (a) the Base
Management Fee and the Incentive Management Fee; (b) items expressly excluded
from Operating Costs pursuant to the terms hereof; (c) items for which Manager
or its Affiliates are to indemnify Purchaser or Owner; (d) items for which
Owner or its Affiliates are to indemnify Manager (e) items for which Manager or
its Affiliates has expenses agreed under the Transaction Documents to be liable
at its own cost and expense; (f) amounts payable to Owner or its Affiliates
under the Purchase Agreement or the Transaction Documents or for periods not
included in the Term; (g) any reimbursement of advances made by Manager or
Owner; (h) the cost of Capital Replacements; (i) the Minimum Rent and the
Additional Rent under the Lease; (j) debt service on any loan or other debt
secured by an Authorized Mortgage or other financing obtained by Purchaser,
Owner or Manager other than equipment financing permitted hereunder; and (k)
except as provided in Sections 2.2, 6.1 or 11.1, the cost of
providing any services by the Manager or its Affiliates using their own
personnel to the Hotels which are not performed at the Hotels; and (l) any cost
incurred in connection with the sale of the Hotels from Manager to Owner
including, without limitation, any expense incurred in connection with
performing obligations under the Purchase Agreement or any agreement,
instrument, indemnity or undertaking executed and delivered by any IHG Party in
connection with the Closing thereunder.

 

1.61         “Operating
Equipment”  shall have the meaning
given to the term “Property and Equipment” under the Uniform System of
Accounts.

 

1.62         “Operating
Profit”  shall mean for any period,
the excess, if any, of Gross Revenues for all of the Hotels for such period
over the sum of Operating Costs for such Period.

 

1.63         “Operating
Standards”  shall have the meaning
given such term in Section 2.1.

 

1.64         “Operating
Supplies”  shall have the meaning
given to the term “Inventories” under the Uniform System of Accounts.

 

1.65         “Owner”  shall have the meaning given such term in the
preamble to this Agreement and shall include its successors and assigns.

 

9

 

1.66         “Owner’s Percentage Priority” 
shall mean, for each Fiscal Year after the 2004 Fiscal Year, an amount,
not less than zero ($0) equal to the aggregate of the sum of seven and one-half
percent (7.5%) of the Gross Revenues of each Hotel for such Fiscal Year in
excess of the Gross Revenues for such Hotel for its Base Year.

 

1.67         “Owner’s
Priority”  shall mean an annual
amount equal to the sum of (a) Sixteen Million Eight Hundred Seventy Two
Thousand Dollars ($16,872,000) per annum plus, (b) effective on the date of
each disbursement by Purchaser or Owner pursuant to Sections 5.2 (c), 15.2
(in excess of net insurance proceeds) or 16.2 (in excess of the Award)
hereof, an amount equal to the amount so disbursed multiplied by the
Disbursement Rate (determined as of the dates on which such sums are advanced)
plus, (c) effective as of the first day of the first Renewal Term, the amount,
if any, to be added to the Owner’s Priority pursuant to Sections 17.5(b)
or 17.5(d). Owner’s Priority shall be subject to further adjustment as
provided in Section 15.1(c).

 

1.68         “Parent”  shall mean with respect to any Person, any
Person who owns directly, or indirectly through one or more Subsidiaries or
Affiliates, greater than fifty percent (50%) of the voting or beneficial
interest in, or otherwise has the right or power (whether by contract, through
ownership of securities or otherwise) to control, such Person.

 

1.69         “Person”  shall mean any individual or entity, and the
heirs, executors, administrators, legal representatives, successors and assigns
of such individual or entity where the context so admits.

 

1.70         “Pledged
Hotels”  shall mean, with respect to
any loan or other debt secured by an Authorized Mortgage, collectively, the
Hotels which secure such loan or other debt.

 

1.71         “Priority
Coverage Ratio”  shall mean for any
period, for any Hotel or group of Hotels, the quotient of (a) the excess of
Gross Revenue for such Hotel or group of Hotels for such period over amounts
distributed or applied for such period pursuant to Sections 10.1(a), (b),
(f) (h) and (i), of this Agreement allocated to such Hotel or group
of Hotels (as applicable), divided by (b) the sum of the Owner’s Priority
allocated to such Hotel or group of Hotels (as applicable)for such period, plus
the Owner’s Percentage Priority for such period allocated to such Hotels or
group of Hotel (as applicable), plus, for purposes of Section 17.5(b)
only, any increase in the Owner’s Priority that will occur upon the return of
the Deposit to Manager pursuant to that Section.

 

1.72         “Purchase
Agreement”  shall mean that certain
Purchase and Sale Agreement between HPT and Manager or its Affiliate(s)
pursuant to which Purchaser has on the Effective Date acquired the Hotels from
Manager or its Affiliate(s).

 

1.73         “Purchaser”  shall mean the Landlord under the Lease.

 

1.74         “Renewal
Terms”  shall mean any period of
years extending the Term of this Agreement, commencing upon the expiration of
the Initial Term or any extensions thereto, as provided in Article 3.

 

1.75         “Repairs”  shall have the meaning given such term in Section
7.6.

 

10

 

1.76         “Replacement
Property”  shall mean a Staybridge
Suite hotel or other type of hotel mutually acceptable to the parties acquired
by Purchaser in substitution for a Hotel with respect to which this Agreement
was terminated pursuant to Section 16.1.

 

1.77         “Reservation
System”  shall mean a computerized
network of high speed terrestrial and satellite-linked hardware and data lines
connecting hotels, central reservation centers, data processing centers and
travel agencies which provides reservation services to the Staybridge Suites
hotel chain in North America.

 

1.78         “Reserve
Account”  shall mean an
interest-bearing account established for funds to be held in reserve for
Capital Replacements in Purchaser’s name at a bank selected by Purchaser.

 

1.79         “Reserve
Percentage”  shall mean with respect
to each Hotel, the following percentages for the following periods:

 

	
  Period after first day of

  the Fiscal Month following

  such Hotel’s Opening Date

  	
   

  	
  Reserve Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  0 – 12 months

  	
   

  	
  2

  	
  %

  
	
  13 – 24 months

  	
   

  	
  3

  	
  %

  
	
  25 – 36 months

  	
   

  	
  4

  	
  %

  
	
  37th month and thereafter

  	
   

  	
  5

  	
  %

  

 

1.80         “Residual
Distribution”  shall mean amounts to
be distributed to Owner pursuant to Section 10.2.

 

1.81         “Restricted
Area”  shall mean, for any Hotel, the
area around such Hotel depicted on Exhibit D.

 

1.82         “Restricted
Period”  shall mean, for each Hotel,
the period ending on the third (3rd) anniversary of the Effective Date.

 

1.83         “Rooms Revenue”  shall mean all revenue derived from the
rental of guest rooms in a Hotel determined in accordance with the Accounting
Principles.

 

1.84         “SARA”  shall mean the Superfund Amendments and
Reauthorization Act of 1986.

 

1.85         “Secured
Obligations”  shall have the meaning
given such term in Section 17.5.

 

1.86         “Services
Fees”  shall mean the fees specified
in Section 9.2.

 

1.87         “Sites”  shall mean the parcels of real estate more
particularly described on Exhibit A.

 

1.88         “Subsidiary”  shall mean with respect to any Person, any
entity (a) in which such Person owns directly, or indirectly, greater than
twenty percent (20%) of the voting or beneficial interest or (b) which such
Person otherwise has the right or power to control (whether by contract,
through ownership of securities or otherwise).

 

11

 

1.89         “Substitute
Tenant”  shall have the meaning given
and term in Section 4.2.

 

1.90         “System
Marks”  shall mean all service marks,
trademarks, copyrights, trade names, logo types, commercial symbols, patents or
other similar rights or registrations now or hereafter held, applied for or
licensed by Manager or any Affiliate of Manager in connection with the
Staybridge Suites brand of hotels.

 

1.91         “Term”  shall mean the term of this Agreement as it
may be extended or terminated.

 

1.92         “Transaction
Documents”  shall mean, collectively,
this Agreement, the Purchase Agreement, any agreement, instrument, indemnity or
undertaking executed and delivered by an IHG Party in connection with the
Closing, the Guaranty and the Collateral Agency Agreement.

 

1.93         “Transferred
Hotels”  shall have the meaning given
such term in Section 4.4.

 

1.94         “Uniform
System of Accounts”  shall mean the
Uniform System of Accounts for the Lodging Industry, Ninth Revised Edition,
1996, as published by the Educational Institute of the American Hotel and Motel
Association, as it may be amended from time to time.

 

1.95         “Ultimate
Parent”  shall mean, with respect to
any Person, each Parent of such Person who in turn has no Parent.

 

1.96         “Unsuitable
for Its Permitted Use”  shall mean
with respect to a Hotel, a state or condition of such Hotel such that (a)
following any damage or destruction involving such Hotel, such Hotel cannot be
operated in the good faith judgment of Manager or Owner on a commercially
practicable basis and it cannot reasonably be expected to be restored to
substantially the same condition as existed immediately before such damage or
destruction and otherwise as required under Article 15 hereof, using
only the net proceeds of insurance obtained in connection therewith and other
funds that Owner or Manager elect to provide pursuant to the terms of Article
15 hereof within twelve (12) months following such damage or destruction or
such shorter period of time as to which business interruption insurance is
available to cover amounts payable to Owner hereunder and other costs related
to the Hotel following such damage or destruction, or (b) as the result of a
partial taking by Condemnation, such Hotel cannot be operated, in the good
faith judgment of Manager or Owner on a commercially practicable basis in light
of then existing circumstances.

 

1.97         “Working
Capital”  shall mean funds that are
used (or held for use) in the day-to-day operation of the business of the
Hotels, including, without limitation, change and petty cash funds, amounts
deposited in operating bank accounts, receivables, amounts deposited in payroll
accounts, prepaid expenses and funds required to maintain Operating Supplies,
less accounts payable and accrued current liabilities, exclusive of any funds
in the Reserve Account.

 

1.98         “Yearly
Budget”  shall mean, with respect to
each Hotel, the annual operating budget of such Hotel, covering a Fiscal Year,
as prepared by Manager in accordance with the Accounting Principles and
approved by Owner. Such budget shall include an operating 

 

12

 

budget, a business plan and
a Capital Replacement Budget. Without limiting the generality
of the foregoing, the Yearly Budget shall include a
projection of the estimated financial results of the operation of each Hotel
for the Fiscal Year. Such projection shall project the estimated Gross
Revenues, departmental profits, Operating Costs and Operating Profit for the
Fiscal Year for each Hotel.

 

ARTICLE 2

 

SCOPE OF AGREEMENT

 

2.1           Engagement of
Manager. Subject to the terms of this Agreement, Owner hereby grants to
Manager the sole and exclusive right to supervise and direct the management and
operation of the Hotels for the Term. Manager hereby accepts such grant and
agrees that it will control, supervise and direct the management and operation
of the Hotels, in an efficient and economical manner consistent with standards
prevailing in well managed hotels similar to the Hotels, including all
activities in connection therewith which are customary and usual to such an
operation (all of the foregoing, collectively, the “Operating Standards”).
Subject to the terms and conditions of this Agreement, the Operating Standards
and the Brand Standards, Manager shall have the right to determine operating
policy, standards of operation, quality of service and any other matters
affecting customer relations or management and operation of the Hotels. Without
limiting the generality of the foregoing, and in addition to the other
functions to be performed by Manager pursuant to this Agreement, Manager shall,
in connection with the Hotels and in accordance with the Brand Standards, the
Operating Standards and the terms of this Agreement, perform each of the
following functions, provided, however, except as otherwise set
forth in this Agreement, the costs and expenses of performing the following
functions shall be Operating Costs:

 

(a)           Establish and
revise, as necessary, administrative policies and procedures, including
policies and procedures for the control of revenue and expenditures, for the
purchasing of supplies and services, for the control of credit, and for the
scheduling of maintenance, and verify that the foregoing procedures are
operating in a sound manner.

 

(b)           Manage
expenditures to replenish Operating Supplies and Operating Equipment, make
payments on accounts payable and collect accounts receivable.

 

(c)           Arrange for and
supervise public relations and advertising and prepare marketing plans.

 

(d)           Procure all
Operating Supplies and replacement Operating Equipment.

 

(e)           Provide, or
cause to be provided, risk management services relating to the types of
insurance required to be obtained or provided by Manager under this Agreement.

 

(f)            Reasonably
cooperate (provided that except as herein expressly provided Manager shall not
be obligated to enter into any amendments of this Agreement or, unless Owner
agrees to reimburse Manager therefore, to incur any material expense including any
internal expenses) in any attempt(s) to: (i) effectuate a sale or other
transfer of a Hotel 

 

13

 

subject to the terms of Sections 4.4
and 4.5 of this Agreement; or (ii) to obtain any Authorized Mortgage.

 

(g)           Negotiate,
enter into and administer service contracts and licenses for the operation of
the Hotels, including, to the extent appropriate, contracts and licenses for
health and safety systems maintenance, electricity, gas, telephone, cleaning,
elevator and boiler maintenance, air conditioning maintenance, laundry and dry
cleaning, master television service, use of copyrighted materials (such as
music and videos), entertainment and other services as Manager deems advisable.

 

(h)           Negotiate,
enter into and administer contracts for the use of banquet and meeting
facilities and guest rooms by groups and individuals.

 

(i)            Take reasonable
action to collect and institute in its own name or in the name of Owner or a
Hotel, in each instance as Manager in its reasonable discretion deems
appropriate, legal actions or proceedings to collect charges, rent or other
income derived from the operation of the Hotels or to oust or dispossess
guests, tenants, members or other persons in possession therefrom, or to cancel
or terminate any lease, license or concession agreement for the breach thereof
or default thereunder by the tenant, licensee or concessionaire.

 

(j)            Make
representatives available to consult with and advise Owner or Owner’s designee
at Owner’s reasonable request concerning policies and procedures affecting the
conduct of the business of the Hotels.

 

(k)           Collect and
account for and remit to governmental authorities all applicable excise, sales,
occupancy and use taxes or similar governmental charges collected by or at the
Hotels directly from guests, members or other patrons, or as part of the sales
price of any goods, services or displays, such as gross receipts, admission or
similar or equivalent taxes, duties, levies or charges.

 

(l)            Keep Owner
advised of events which might reasonably be expected to have a material effect
on the financial performance or value of any Hotel.

 

(m)          To the extent
in Manager’s control, obtain and maintain all approvals necessary to use and
operate the Hotels in accordance with the Brand Standards, Operating Standards
and Legal Requirements.

 

(n)           Perform such
other tasks with respect to the Hotels as are generally performed by managers
of similar hotels consistent with the Operating Standards and the Brand
Standards.

 

2.2           Additional Services. Any fees for
services not included in the Management Fees for the Hotels shall be consistent
with fees established for similar types of hotels managed by Manager or its
Affiliates. Any disputes under this Section 2.2 shall be resolved by
Arbitration.

 

14

 

2.3           Use of Hotels. Manager shall
not use, and shall exercise commercially reasonable efforts to prevent the use
of, the Hotels and Owner’s and Manager’s personal property used in connection
with the Hotels, if any, for any unlawful purpose. Manager shall not commit,
and shall use commercially reasonable efforts to prevent the commission of, any
waste at the Hotels. Manager shall not use, and shall use commercially
reasonable efforts to prevent the use of, the Hotels in such a manner as will
constitute an unlawful nuisance thereon or therein. Manager shall use
commercially reasonable efforts to prevent the use of the Hotels in such a
manner as might reasonably be expected to impair Owner’s or Purchaser’s title
thereto or any portion thereof or might reasonably be expected to give rise for
a claim or claims for adverse use or adverse possession by the public, as such,
or of implied dedication of the Hotels or any portion thereof.

 

2.4           Right to
Inspect. Manager shall permit Owner and its authorized representatives to
inspect or show the Hotels during usual business hours upon not less than
twenty four (24) hours’ notice, provided that any inspection by Purchaser or
its representatives shall not unreasonably interfere with the use and operation
of the Hotels and further provided that in the event of an emergency as
determined by Purchaser in its reasonable discretion, prior notice shall not be
required.

 

2.5           Right of Offset. Manager shall
not offset against any amounts owed to Owner; provided, however,
Manager may offset amounts which Owner has failed to fund in violation of Section
5.2(c) against the amounts owed to Owner hereunder provided that after
giving effect to such offset there shall still be paid to Owner an amount
sufficient to pay regularly scheduled payments of interest and principal under
any loan or other debt secured by an Authorized Mortgage and attributable to
the Pledged Hotels.

 

2.6           Condition of
the Hotels. Manager acknowledges receipt and delivery of
possession of each Hotel, and Manager accepts each Hotel in its “as is”
condition as of the Effective Date, subject to the rights of parties in
possession, the existing title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Hotels, all applicable Legal
Requirements, and such other matters which would be disclosed by an inspection
of the Hotels and the record title thereto or by an accurate survey thereof. MANAGER
REPRESENTS THAT:  IT HAS INSPECTED THE
HOTELS INCLUDING THE FF&E AND ALL OF THE FOREGOING AND HAS FOUND THE
CONDITION THEREOF SATISFACTORY AND IN COMPLIANCE WITH THE BRAND STANDARDS IN
ALL MATERIAL RESPECTS; EXCEPT FOR CAPITAL REPLACEMENT TO BE MADE FROM TIME TO
TIME USING FUNDS TO BE DEPOSITED IN THE RESERVE ACCOUNT PURSUANT TO SECTION
5.2(a), MANAGER CURRENTLY DOES NOT ANTICIPATED THE NEED TO MAKE CAPITAL
REPLACEMENTS DURING THE FIRST FIVE YEARS OF THE TERM (PROVIDED, HOWEVER,
SUCH REPRESENTATION IS NOT A GUARANTY OR WARRANTY THAT NO SUCH CAPITAL
REPLACEMENT WILL BE REQUIRED); AND IT IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY OF OWNER, PURCHASER OR ANY OF THEIR AGENTS OR EMPLOYEES WITH RESPECT
TO ANY OF THE MATTERS SET FORTH IN THIS SECTION. MANAGER WAIVES ANY CLAIM OR
ACTION AGAINST OWNER AND PURCHASER WITH RESPECT TO THE CONDITION OF THE HOTELS.

 

15

 

PURCHASER AND OWNER MAKE NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE HOTELS OR
ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT.

 

ARTICLE 3

 

TERM AND RENEWALS

 

3.1           Term. The term of
this Agreement shall be for a period beginning on the Effective Date and
continuing for the Initial Term and any extension of the term hereof in
accordance with the provision of this Agreement, unless sooner terminated as
hereinafter provided.

 

3.2           Renewal Term. The Term may
be extended, at Manager’s option, for up to two (2) consecutive periods (each,
a “Renewal Term”) of twelve (12) years and six (6) months each on not
less than two (2) years’ prior notice to Owner. In the event Manager fails to
give notice of its election not to exercise either of its options to extend the
Term on or before the date which is the day prior to the date that is two (2)
years prior to the then Expiration Date, Manager shall be deemed to have exercised
the applicable extension option. The terms and provisions of this Agreement
will remain in effect as stated herein during any Renewal Term except that
Manager shall have no right to extend the Term beyond the Renewal Terms herein
provided.

 

3.3           Owner’s Termination
Right at End of Term. If Manager, gives notice of its election not to
extend or if Manager shall have no further right to extend the Term, at any
time during the last two years of the Term, Owner may terminate this Agreement
on not less than thirty (30) days’ prior written notice.

 

ARTICLE 4

 

TITLE TO HOTEL

 

4.1           Covenants of
Title. During the Term, provided no Manager Default exists, Manager shall
have the right peaceably and quietly to operate the Hotels in accordance with
the terms of this Agreement, free from interference, disturbance and eviction
by Owner or Purchaser or by any other Person or Persons claiming by, through or
under Owner or Purchaser, subject only to termination of this Agreement as
herein provided. Except as may otherwise be provided herein, Owner, at Owner’s
own expense (and not as an Operating Cost), shall prosecute all appropriate
actions, judicial or otherwise, required to assure such quiet and peaceable
operation by Manager and shall pay and discharge any rental obligations under
the Lease. Without Manager’s written consent, which consent shall not be
unreasonably withheld, Owner shall not enter into an agreement, covenant or
encumbrance affecting title to the Hotels except in connection with Authorized
Mortgages and sales or transfers of the Hotels not prohibited hereby.

 

16

 

4.2           Non-Disturbance. Purchaser
agrees that in the event the Lease terminates prior to expiration or earlier
termination of the Term, so long as (i) there exists no uncured Manager Event
of Default and (ii) Owner is not otherwise entitled to terminate this
Agreement: (a) Manager shall not be disturbed in its rights under this
Agreement by Purchaser; (b) Purchaser shall assume the obligations of Owner
under this Agreement; and (c) Manager shall attorn to Purchaser and recognize
Purchaser as the “Owner” under this Agreement. Purchaser shall have the right
to assign all of its right, title and interest in, to and under this Agreement
to a new tenant (a “Substitute Tenant”) to which Purchaser shall lease
the Hotels (pursuant to a lease which imposes no greater risks, obligations,
duties or liability on Manager than the Lease (assuming the same had not been
terminated) and for a term equal to the unexpired term of this Agreement) which
Substitute Tenant shall expressly assume all of the Owner’s obligations under
this Agreement. Upon such assignment to, and assumption by, a Substitute
Tenant, Purchaser shall be relieved of all future obligations arising under
this Agreement (other than any expressly imposed on Purchaser pursuant to Sections
4.2 through and including 4.7), Manager shall attorn to the
Substitute Tenant and recognize the Substitute Tenant as the “Owner” under this
Agreement, and the term “Lease” as used in this Agreement shall be deemed to
refer to such lease between Purchaser and the Substitute Tenant.

 

4.3           Financing.

 

(a)           Purchaser shall
be entitled to encumber the Hotels or any of them with one or more Authorized
Mortgages which is expressly subordinate to this Agreement or in connection
with which the following terms and conditions are satisfied:

 

(i)            loan or other debt
secured by such Authorized Mortgage shall not be cross-collateralized with
other property or hotels which are not managed or franchised by Manager, IHG or
their respective Affiliates;

 

(ii)           the principal amount
secured by such Authorized Mortgage shall not exceed the sum of seventy five
percent (75%) (or, if less than four (4) Hotels secure such principal amount,
sixty five percent (65%)) of the sum of the fair market value as of the date of
the granting of such Authorized Mortgage of the Pledged Hotels and the other
properties securing such principal amount;

 

(iii)          as of the date of the
granting of such Authorized Mortgage, the Debt Service Coverage Ratio
associated with such loan or debt secured thereby shall not be less than (i)1.4 if fewer than four (4) Hotels
secure such loan or other debt or (ii) 1.3 if
four (4) or more Hotels secure such loan or other debt; and

 

(iv)          the holder of such
Authorized Mortgage shall execute and deliver to Manager (Manager agreeing to
likewise execute and deliver to such holder) a so-called subordination,
non-disturbance and attornment agreement which shall provide that:

 

17

 

(A)  this Agreement and Manager’s
rights hereunder are subject and subordinate to the Authorized Mortgage, the
lien thereof, the rights of the holder thereof and to any and all advances made
thereunder, interest thereon or costs incurred in connection therewith;

 

(B)   so long as this Agreement is in
full force and effect and there exists no Manager Event of Default, Manager’s
rights under this Agreement shall not be disturbed by reason of such
subordination or by reason of foreclosure of such Authorized Mortgage or
receipt of deed in lieu of foreclosure;

 

(C)   Manager shall attorn to the
holder or the purchaser at any such foreclosure or the grantee of any such deed
(each, a “Successor Purchaser”);

 

(D)  in the event of such attornment,
the terms of this Agreement binding on Purchaser and Manager shall continue in
full force and effect as a direct agreement between such Successor Purchaser
and Manager, upon all the terms, conditions and covenants set forth herein,
except that the Successor Purchaser shall not be (1) bound by any payment of
Owner’s Priority, Owner’s Percentage Priority or the Residual Distribution in
advance of when due; (2) bound by any amendment or modification of this
Agreement made after the date that Manager first had written notice of such
Authorized Mortgage without the consent of the holder thereof; (3) liable in
any way to Manager for any act or omission, neglect or default on the part of
Purchaser or Owner under this Agreement; (4) obligated to perform any work or improvements
to be done by Purchaser or Owner or to make any advances except for those
advances to be made pursuant to Section 5.2(c) from and after the date
on which such Successor Purchaser acquired the Hotel(s); or (5) subject to any
counterclaim or setoff which theretofore accrued to Manager against Purchaser
or Owner;

 

(E)   In the event of a casualty or
condemnation affecting any Pledged Hotel which does not result in the
termination of this Agreement with respect to such Pledged Hotel, the net
insurance proceeds or Award shall be applied to the restoration of such Hotel
as herein provided; and

 

(F)   Such other terms or are
customary for similar agreements.

 

(b)           In the event
less than all of the Hotels are to secure loan or other debt secured by an
Authorized Mortgage, Owner shall have the right to cause the Pledged Hotels to
be managed pursuant to a separate management agreement which agreement shall be
for a term equal to the unexpired portion of the Term and otherwise on
substantially the same terms of this Agreement except as otherwise provided
herein provided that the Pledged Hotels in the aggregate and the remaining
Hotels in the aggregate shall have Priority Coverage Ratios for the 12-month
period ending on the last day of the month next prior to the date on which such
Authorized Mortgage is granted such Priority 

 

18

 

Coverage Ratios are equal to
each other or equal to, or greater than, 1.3. In connection with entering into
such separate management agreement, the parties shall make appropriate
allocations of Owner’s Priority, amounts in the Reserve Account, the Deposit
(based on Exhibit C), the Working Capital, and any outstanding advances
made by Owner, Manager or their respective Affiliates so that the obligations
allocable to the Hotels subject to such Authorized Mortgage shall not be due
from the other Hotels and vice  versa. The allocation of Owner’s
Priority for each Hotel shall be proportional to the NOI of such Hotel for the
then most recently ended twelve (12) months relative to the NOI of all the
other Hotels for such period. Without the consent of Manager, the holder of any
Authorized Mortgage shall have the right to elect to be subject and subordinate
to this Agreement, such subordination to be effective upon such terms and
conditions as such holder may direct which are not inconsistent with the
provisions hereof.

 

4.4           Sale of a Hotel. In the event
of a sale or transfer of any Hotel to an Affiliate of Purchaser, this Agreement
shall remain in full force and effect without regard to such sale or transfer. The
following shall apply each time Purchaser sells or otherwise transfers less
than all of the Hotels other than to an Affiliate:

 

(a)           Subject to the
terms of Section 4.7 and the execution or delivery of a New Management
Agreement as provided below, this Agreement with respect to such Hotel(s) (the “Transferred
Hotels”) shall be terminated effective as of the date title is transferred
to such Transferred Hotels.

 

(b)           Simultaneously
with such termination, Manager and the transferee of the Transferred Hotels or
Owner (if the Lease remains in full force and effect with respect to the
Transferred Hotels) or any tenant under a new lease with respect to the
Transferred Hotels (which new lease shall have a term equal to the then
unexpired term of the Lease and shall impose no greater liability,
responsibility, or obligation on Manager than the Lease) shall enter into a new
management agreement (a “New Management Agreement”) with Manager on
substantially the same terms as this Agreement except as otherwise provided
herein for a term equal to the unexpired portion of the Term of this Agreement.

 

(c)           Manager,
Purchaser and the transferee (or its tenant, acting reasonably, shall allocate
amounts in the Reserve Account, the Deposit (based on Exhibit C) and the
Working Capital between the Transferred Hotels and the other Hotels. The
parties shall also make reasonable allocations with respect to Owner’s
Priority, and any outstanding advances made by Owner, Manager or their
respective Affiliates. The allocation of Owner’s Priority for each Hotel shall
be proportional to the NOI of such Hotel for the then most recently ended
twelve (12) months relative to the NOI of all the other Hotels for such period.
Amounts which are allocated to the Transferred Hotels shall be transferred to
the transferee thereof to be held by Manager or such transferee (or its tenant)
pursuant to the New Management Agreement.

 

(d)           Following such
sale or transfer, Owner, its Affiliates and the Hotels which are not
Transferred Hotels shall have no responsibilities with respect to amounts that
are so 

 

19

 

transferred and the
transferee, its tenant and their Affiliates and the Transferred Hotels shall have
no responsibility with respect to amounts which are not so transferred.

 

(e)           From and after
the consummation of such sale or other transfer and compliance with the terms
hereof, the term “Hotels” as used herein shall not include the Transferred
Hotels.

 

(f)            Owner shall be
responsible to cause its Affiliates, any new tenant and the transferee to
execute and deliver the documents contemplated by this Section 4.4
to be executed and delivered by them.

 

(g)           The Hotels
which are to be Transferred Hotels in the aggregate and the remaining Hotels in
the aggregate shall have a Priority Coverage Ratios for the 12-month period
ending on the last day of the month next prior to the date of such transfer
which are either (i) equal to each other or (ii) equal to, or greater than,
1.3.

 

(h)           Not less than
ten (10) days prior to commencing to market any Hotel for sale, Purchaser
(unless it is a Successor Purchaser) shall solicit from Manager an offer to
purchase such Hotel.

 

4.5           Sale of All the
Hotels. If Purchaser sells or otherwise transfers all of the Hotels to a
single transferee in a single transaction, (a) the transferee shall assume
Purchaser’s obligations hereunder and (b) Purchaser shall be released and
relieved from any and all obligation hereunder. In connection with such
transfer, Owner may assign this Agreement, to the transferee or its Affiliate,
and provided the assignee assumes all of Owner’s obligations hereunder
thereafter accruing, Owner shall be released and relieved from all such
obligations.

 

4.6           The Lease. The Lease
shall not be amended or modified in any way which would materially increase
Manager’s obligations hereunder or materially reduce its rights hereunder. In
the event of a conflict between the terms hereof and the terms of the Lease,
the terms hereof shall govern.

 

4.7           Restricted Sale. Except in
connection with a foreclosure of an Authorized Mortgage, neither Purchaser nor
Owner shall transfer its interest in any Hotel directly or indirectly, to any
Person which: (i) is in control of or controlled by Persons who have been
convicted of felonies; (ii) is a Competitor or an Affiliate of a Competitor; or
(iii) lacks the financial capabilities to perform Owner’s obligations
hereunder.

 

ARTICLE 5

 

REQUIRED FUNDS

 

5.1           Working Capital. Manager shall
contribute to the Working Capital for the Hotels an amount reasonably
sufficient to pay Operating Costs for the first thirty (30) days of operating
of the Hotels following the Effective Date (the “Initial Working Capital”)
and (b) upon the execution and delivery hereof, pay to Owner the monthly
installment of Owner’s Priority for the month in which the Effective Date
occurs. Promptly after the 

 

20

 

month in which the Effective
Date occurs, the parties shall agree on the amount of the Initial Working
Capital which Manager so contributed. After the first thirty (30) days of
operating the Hotels, upon written notice from Manager, Owner shall advance any
additional funds, over and above the Initial Working Capital, necessary to pay
Operating Costs (but not Owner’s Priority) as they come due. Any such request
by Manager shall be accompanied by a reasonably detailed explanation of the
reasons for the request. All funds so advanced for Working Capital shall be
utilized by Manager to pay Operating Costs as they come due. If Owner does not
advance such additional Working Capital within two (2) Business Days after
notice, Manager, as its exclusive remedy, shall have the right either to (i)
advance such additional Working Capital or (ii) terminate this Agreement on ten
(10) days’ advance written notice to Owner; provided, however,
such notice of termination shall be void ab  initio if Owner
advances the requested funds necessary to pay Operating Costs prior to the end
of the tenth (10th) day after the
receipt of such termination notice. If Manager fails to either make such
advance or give notice of termination within ten (10) days, after the
expiration of such two (2) Business Days, Owner may elect by written notice to
Manager to terminate this Agreement, which termination shall be effective ten
(10) days after the date such notice is given. Upon the expiration or earlier
termination of the Term, provided there is no uncured Manager Default, after
the payment of all Operating Costs and all amounts owed to Owner, Manager shall
be entitled to retain the Initial Working Capital.

 

5.2           Reserve Account.

 

(a)           Manager shall
transfer from the Bank Accounts to the Reserve Account in cash on or before the
25th day of each Fiscal Month, beginning on August
25, 2003 and continuing for each and every month during the Term an aggregate
amount equal to the sum of each Hotel’s Reserve Percentage of its Gross
Revenues for the prior Fiscal Month. Amounts in the Reserve Account are to pay
for Capital Replacements undertaken after the Effective Date required to
maintain any and all of the Hotels in accordance with the Operating Standards
and the Brand Standards; provided, however, notwithstanding anything in
this Agreement to the contrary, no additional cost or expense shall be incurred
or paid in connection with any Capital Replacements made during the last two
(2) years of the Term to the extent attributable solely to complying with the
Brand Standards. The amounts so paid into the Reserve Account shall be
recorded on the Hotels’ books of account as “Reserve for FF&E Replacements.”  Except as expressly provided herein, any
expenditures for Capital Replacements during any Fiscal Year which have been
approved in the yearly Capital Replacements Budget may be made without Owner’s
further approval and, to the extent available, may be made by Manager from the
Reserve Account. Any amounts remaining in the Reserve Account at the close of
each Fiscal Year will be carried forward and retained in the Reserve Account.
Any and all portions of the Hotels which are scrapped or removed in connection
with the making of any major or non-major repairs, renovations, additions,
alterations, improvements, removals or replacements at the Hotels shall be
disposed of by Manager and any net proceeds thereof shall be deposited in the
Reserve Account and not included in Gross Revenues. In addition, any proceeds
from the sale of FF&E no longer necessary to the operation of the Hotels
shall be added to the Reserve Account. Manager shall be entitled to use funds
in the Reserve Account to make 

 

21

 

Capital Replacements at any
and all of the Hotels regardless of the Hotel from which such funds originate.

 

(b)           Manager shall
be the only party entitled to withdraw funds from the Reserve Account until a
Manager Default shall occur.

 

(c)           If, at any
time, the funds in the Reserve Account shall be insufficient for Capital
Replacements which are set forth in the Capital Replacement Budget or required
to comply with the Operating Standards, Brand Standards, Insurance Requirements
or Legal Requirements, Manager shall give Owner written notice thereof, which
notice shall set forth, in reasonable detail, the nature of the required
action, the estimated cost thereof (including the amount which is in excess of
the amount of funds in such Reserve Account) and such other information with
respect thereto as Owner may reasonably require. Provided that there is then no
uncured Manager Default, Owner shall, within twenty (20) Business Days after
such notice, disburse (or cause Purchaser to disburse) such required funds to
Manager for deposit into the Reserve Account. In such event Owner’s Priority
shall be adjusted as provided for herein in the definition of Owner’s Priority.

 

(d)           If Owner shall
fail to disburse (or cause Purchaser to disburse) funds to Manager for deposit
into the Reserve Account in violation of Section 5.2(c), which failure
continues for five (5) days after the giving of notice from Manager to Owner,
in addition to Manager’s other remedies hereunder or under the HPT Guaranty (as
defined in the Purchase Agreement) Manager shall be entitled, but not
obligated, to deposit in the Reserve Account the amount of funds which Owner so
failed to disburse.

 

(e)           Upon the
expiration or earlier termination of the Term, Manager shall disburse to Owner,
or as Owner shall direct, all amounts remaining in the Reserve Account after
payments of all expenses on account of Capital Replacements incurred by Manager
during the Term.

 

5.3           Additional
Requirements for Reserve. All expenditures from the Reserve Account
shall be (as to both the amount of each such expenditure and the timing
thereof) both reasonable and necessary given the objective that the Hotels will
be maintained and operated to a standard comparable to competitive properties
and in accordance with the Operating Standards and the Brand Standards.

 

5.4           Ownership of
Replacements. All Capital Replacements made pursuant to this
Agreement and all amounts in the Reserve Account, shall be the property of
Owner or Purchaser, as applicable, as provided under the Lease.

 

5.5           Manager Reserve
Advances. Manager shall have the right to propose certain
Capital Replacements not required by the Operating Standards or the Brand Standards
which Manager reasonably believes would maximize the profit potential of one or
more of the Hotels. If Owner does not agree to provide funds for the same,
Manager shall have the right to contribute to the Reserve Account the cost of
same and cause such Capital Replacement to be made.

 

22

 

5.6           No Additional
Contributions. Except as otherwise expressly provided in this
Agreement, Owner shall not, under any circumstances, be required to, or provide
funds to, build or rebuild any improvement at the Hotel, or to make any
repairs, replacements, alterations, restorations or renewals of any nature or
description to the Hotel, whether ordinary or extraordinary, structural or
nonstructural, foreseen or unforeseen.

 

ARTICLE 6

 

BRAND STANDARDS AND MANAGER’S CONTROL

 

6.1           Brand Standards. Manager shall
operate each Hotel as a Staybridge Suites hotel in accordance with the terms of
this Agreement, the Brand Standards and the Operating Standards. Manager and
its affiliates which own the System Marks and Brand Standards reserve the right
to revise and amend the System Marks or Brand Standards from time to time on a
non-discriminatory basis; provided, however, at any time while
Owner and its Affiliates own or lease at least fifty percent (50%) of the
hotels comprising the Brand, no revision or amendment to the Brand Standards or
System Marks shall be made without Owner’s prior written approval, which
approval shall not be unreasonably withheld, conditioned or delayed and shall
be deemed given if no written objection thereto is given by Owner within twenty
(20) days after receipt of a request for such approval given by Manager. Owner
also agrees that the Hotel will be required to participate in Brand-wide or
area programs that are implemented after the date hereof from time to time by
Manager or its Affiliates with respect to the Brand. The allocable cost of
participation in such programs (to the extent not duplicative of the services
for which the Management Fee is being paid, shall be Operating Costs of the
Hotel to the extent the same are consistent in all material respects with the
amounts for the same included in the applicable Yearly Budget.

 

6.2           Manager’s
Control. Subject to the terms of this Agreement, Manager shall have
uninterrupted control over the operation of the Hotel. Owner acknowledges that
under this Agreement, Owner delegates all authorities and responsibilities for
operation of the Hotel to Manager provided, however, Manager
shall not be entitled to make any agreement or commitment binding on Owner
except as herein expressly provided. Manager shall be solely responsible for
determining room rates, food and beverage menu prices, charges to guests for
other Hotel services and the terms of guest occupancy and admittance to the
Hotels, use of rooms for commercial purposes, policies relating to
entertainment, labor policies, publicity and promotion activities and
technology services and equipment to be used in the Hotel. Manager shall review
with Owner from time to time, and during the annual review of the Yearly
Budget, material changes in policies, practices and procedures and their effect
on the financial performance of the Hotels.

 

6.3           Arbitration. Any dispute
under this Article 6 shall be resolved by Arbitration.

 

23

 

ARTICLE 7

 

OPERATION OF THE HOTEL

 

7.1           Permits. Manager, as
an Operating Cost, shall obtain and maintain in its name (or Owner’s or
Purchaser’s name to the extent the same is required by applicable Legal
Requirements)in full force and effect all necessary operating licenses and
permits, including liquor, bar, restaurant, sign and hotel licenses, as may be
required for the operation of the Hotels in accordance with this Agreement, the
Brand Standards and the Operating Standards. Owner and/or Purchaser shall
reasonably cooperate with Manager in obtaining any such operating licenses or
permits. Any costs or expenses (including, without limitation, reasonable
attorneys’ fees) incurred by Owner and/or Purchaser in connection therewith
shall constitute Operating Costs. Manager will use reasonable efforts to comply
with all Legal Requirements imposed in connection with any such licenses and
permits and at all times use commercially reasonable efforts to manage the
Hotels in accordance with, and cause the Hotels to comply with, such Legal
Requirements, any other Legal Requirements and Insurance Requirements
applicable to any Hotel.

 

7.2           Equipment and
Supplies. Manager shall procure pursuant to the Yearly
Budgets all such Operating Supplies and Operating Equipment as Manager deems
necessary for the normal and ordinary course of operation of the Hotel in
accordance with the Brand Standards and Operating Standards.

 

7.3           Personnel.

 

(a)           All personnel
employed at the Hotels will be employees of Manager. Manager will hire,
supervise, direct, discharge and determine the compensation, other benefits and
terms of employment of all personnel working in the Hotels. Manager, in the
exercise of reasonable discretion and business judgment, will be the sole judge
of the fitness and qualifications of such personnel and is vested with absolute
discretion in the hiring, supervising, directing, discharging and determining
the compensation, other benefits and terms of employment of such personnel. In
such discretion, Manager may elect to staff certain functions at offsite or
regional locations, or to provide employee benefits on a Brand-wide or other
multi-location basis and shall equitably allocate the employee costs among the
hotels participating in such staffing or benefits. Owner shall not interfere
with the performance of employment duties of, or give orders or instructions
to, any personnel employed at the Hotel. Except as otherwise provided herein,
Operating Costs will include all expenses, costs or charges which are allocable
to the Term and are related to or incidental to any on-site personnel employed
in the operation of the Hotels (including, without limitation, salaries, wages,
other compensation, benefit contributions and premiums, net of amounts paid by
Hotel employees; stop-loss insurance premiums; group health plan benefit
payments in excess of contribution and premium amounts paid by Hotel employees;
pay for vacation, holidays, sick leave and other leaves of absence; workers’
compensation premiums; workers compensation benefit payments paid by Manager;
reasonable and customary administrative fees and taxes; and severance benefits
applicable under Manager’s then current human resources policies).

 

(b)           Manager shall
comply with all Legal Requirements pertaining to labor relations and the
personnel employed by it pursuant to this Agreement. Manager shall not enter
into any 

 

24

 

written employment
agreements with any person which purport to bind the Owner without obtaining
Owner’s consent, which consent may be withheld in Owner’s sole and absolute
discretion. If either Manager or Owner shall be required, pursuant to any such
Legal Requirement, to recognize a labor union or to enter into collective
bargaining with a labor union, the party so required shall promptly notify the
other. The terms of this Section 7.3(b) shall survive the expiration or
earlier termination of this Agreement.

 

(c)                                  No employee of
the Hotels shall reside at the Hotels without the prior written approval of
Owner. No person shall be given gratuitous accommodations or services without
prior approval of Owner except in accordance with usual practices of the Brand
and the hotel and travel industry.

 

(d)          
To the extent consistent with the applicable Yearly Budget, Operating
Cost may include up to $5,000 per Hotel, per Fiscal Year for travel related
expense of Manager’s senior operational personnel in connection with their
visits to the Hotel. Said $5,000 shall be adjusted every January 1 starting in
2005 to reflect the percentage change in the Consumer Price Index since the
prior January 1.

 

7.4          
Sales, Marketing and Advertising. Manager shall and/or shall
cause its Affiliates to:

 

(a)          
advertise and promote the business of the Hotels;

 

(b)          
institute and supervise a sales and marketing program for the Hotels;

 

(c)          
include the Hotels in Manager’s and its Affiliates’ Brand related
local, regional and worldwide promotional and advertising programs;

 

(d)          
represent the Hotels through Manager’s and its Affiliates’ worldwide
sales offices;

 

(e)            include the Hotels in the
Hotels loyalty program, presently called “Priority Club”, including, without
limitation, inclusion of the Hotels in promotional materials distributed to
participants of such program;

 

(f)           
coordinate the Hotels’ participation in travel programs marketed by
airlines, travel agents and government tourist departments when Manager
determines such participation to be advisable; and

 

(g)          
cause the Hotels to participate in sales and promotional campaigns and
activities involving complimentary rooms, food and beverages to bona fide
travel agents, tourist officials and airline representatives where Manager has
determined that such participation is in furtherance of the Hotels’ business
and is customary in the travel industry or in the practices and policies of
Manager.

 

7.5          
Reservation and Communication Services. The Hotels shall be
included as participating hotels on the Reservation System operated by Manager,
its Affiliates or agent(s) for the benefit of Staybridge Suites hotels from and
after the Effective Date. Manager will provide the following services to the
Hotels through the Reservation System:

 

25

 

(a)                                  acceptance of
reservations for the Hotels through the Reservation System from individual
customers and groups who contact Manager (or its Affiliates or agents) directly
or through a regional reservation or sale office of Manager or its Affiliates
or agents;

 

(b)                                 acceptance of
reservations for the Hotels through other hotels in the Brand;

 

(c)                                  acceptance of
reservations for the Hotels through the reservation systems of other providers
in the travel industry, including, without limitation, global distribution
systems and general sales agencies with which Manager (or its Affiliates) may
have agreements from time to time, whereby the reservation systems of such
parties are available for communication of reservations to hotels in the Brand;

 

(d)                                 acceptance of
reservations for the Hotel received through alternative communications channels
such as the internet; and

 

(e)                                  access to the
Hotels of the communications network used by Manager (or its Affiliates) for
communication between it and hotels in the Brand.

 

7.6                                 Maintenance and
Repairs. Subject to the terms hereof, Manager shall promptly make or cause to
be made all repairs, replacements, corrections, maintenance, alterations,
improvements, renovations, installations, replacements, renewals and additions
(collectively, “Repairs”) of every kind and nature, whether interior or
exterior, structural or nonstructural, ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
commencement of the Term (concealed or otherwise) necessary or appropriate to
maintain the Hotels including all private roadways, sidewalks and curbs located
thereon for which Owner, Purchaser or a Hotel has responsibility in good order
and repair, reasonable wear and tear excepted (whether or not the need for such
Repairs occurs as a result of Owner’s or Manager’s use, any prior use, the
elements or the age of the Hotels, or any portion thereof), and in conformity
with Legal Requirements, Brand Standards and the Operating Standards. All
Repairs shall be made in a good, workmanlike manner, consistent with Manager’s
and industry standards for like hotels in like locales, in accordance with all
applicable Legal Requirements. To the extent such Repairs cannot be performed
by Manager’s on-site staff, Manager shall entitled to cause such repairs to be
performed by third parties or, subject to Owner’s prior approval, Affiliates of
Manager acting under separate Technical Services Agreements pursuant to Section
11.1.

 

7.7                                 Material
Repairs.

 

(a)                                  Except as set forth
in Section 7.7(b), prior to making any Material Repair, Manager shall
submit, to Owner in writing, a proposal setting forth, in reasonable detail,
the proposed Material Repair and shall provide to Owner such plans and
specifications, and such permits, licenses, contracts and such other
information concerning the same as Owner may reasonably request. Owner shall
have twenty (20) Business Days to approve or disapprove all materials submitted
to Owner, in connection with any such proposal; provided, however,
(i) Owner may not withhold its approval of a Material Repair with 

 

26

 

respect to such items as are
(A) required in order for the Hotels to comply with Brand Standards (except
during the last two (2) years of the Term as set forth in Section 5.2(a))
or Operating Standards; or (B) required by reason of or under any Insurance
Requirement or Legal Requirement, or otherwise required for the continued safe
and orderly operation of each Hotel and (ii) Owner’s approval shall not be
required with respect to the cost of any proposed Material Repair if the same
is set forth as a separate line item in the then applicable Capital
Replacements Budget. If Owner fails to disapprove of such Material Repair
within such twenty (20) Business Days, Owner shall be deemed to have approved
same.

 

(b)                                 In the event
that a condition should exist in or about the Hotel of an emergency nature or
in violation of applicable Legal Requirements or Insurance Requirements,
including structural conditions, which requires immediate repair necessary to
prevent imminent danger or damage to persons or property, Manager is hereby
authorized to take all steps and to make all expenditures necessary to repair
and correct any such condition, regardless of whether provisions have been made
in the applicable Yearly Budget for any such expenditures or if sufficient
funds exist in the Reserve Accounts. Upon the occurrence of such an event or
condition, Manager will communicate to Owner all available information
regarding such event or condition as soon as reasonably possible and will take
reasonable steps to obtain Owner’s approval before incurring such expenses. Expenditures
under this Section 7.7(b) shall be paid from the Reserve Account or
otherwise paid in accordance with Section 5.2(c) to the extent such
expenditure is properly considered a Capital Replacement.

 

(c)                                  No Capital
Replacement shall be made which would tie-in or connect a Hotel with any other
improvements on property adjacent to such Hotel (and not part of its Site)
including, without limitation, tie-ins of buildings or other structures or
utilities (other than connections to public or private utilities) without the
prior written approval of Owner, which approval may be granted or withheld in
Owner’ sole and absolute discretion.

 

7.8                                 Liens; Credit. Manager shall
use commercially reasonable efforts to prevent any liens from being filed
against any Hotel which arise from any Repairs in or to such Hotels. Manager
shall use commercially reasonable efforts to cause the release of any such
liens from the Hotels. If any such lien arises as a result of or in connection
with a Manager Default, then Manager shall bear the cost of obtaining the lien
release (exclusive of the cost of the Repair to which it pertains, unless
Manager is otherwise responsible therefor) and the same shall not constitute an
Operating Cost. In no event shall any party borrow money in the name of, or
pledge the credit of, any other party. Manager shall not allow any lien to exist
with respect to its interest in this Agreement. Manager shall not finance the
cost of any Repair by the granting of a lien on, or security interest in, any
Hotel or Manager’s interest therein or hereunder.

 

7.9                                 Real Estate and
Personal Property Taxes. Manager shall pay as Operating Costs, prior
to delinquency, all taxes and assessments which may become a lien on, or are
assessed against, any Hotel or any component thereof and which may be due and
payable for the Term, unless payment thereof is being contested by Manager, as
hereinafter provided, enforcement is stayed and the amount so contested is
escrowed 

 

27

 

or guaranteed in a form
satisfactory to Owner. Owner shall, promptly after receipt thereof by Owner,
give Manager copies of all notices as to all such taxes and assessments.

 

7.10                           Contest. Manager shall
have the right in Manager’s or Owner’s name to contest or protest any tax or
assessment or proposed assessment which may become a lien on, or be assessed
against, any Hotel or any component thereof due and for the Term or any Legal
Requirement payable by appropriate legal proceedings, conducted in good faith
and with due diligence provided that (a) such contest shall not cause Purchaser
or Owner to be in default under any Authorized Mortgage, (b) no part of a Hotel
nor any Gross Revenues therefrom shall be in any immediate danger of sale,
forfeiture, attachment or loss, and (c) Owner and Purchaser are not exposed to
any risk for criminal or civil liability.

 

ARTICLE 8

 

FISCAL MATTERS

 

8.1                                 Accounting
Matters.

 

(a)                                  Manager
shall maintain books and records reflecting the results of Hotel operations on
an accrual basis in accordance with the Uniform System of Accounts and the
Accounting Principles. In consideration thereof, Manager shall be paid the
accounting fee as provided in Article 8. Owner and Manager and their
respective independent accounting firms and representatives will have the right
to examine such books and records of the Hotel at any reasonable time and to
make and retain copies thereof. Manager shall retain, for at least three (3)
years after the expiration of each Fiscal Year, reasonably adequate records
showing Gross Revenues and applications thereof for the Hotels for such Fiscal
Year (which obligation shall survive termination hereof).

 

(b)                                 On
or before the twenty-fifth (25th) day after the end of each Fiscal Month,
Manager shall furnish Owner with a detailed operating statements setting forth
the results of operations at the Hotels with respect to such month showing for
each Hotel, Gross Revenues, Rooms Revenues, revenue per available room,
occupancy percentage and average daily rate, Operating Costs, Operating Profit,
the applications and distributions thereof and its Owner’s Percentage Priority
together with an Officer’s Certificate. Such statements may be provided
electronically to Owner.

 

(c)                                  Not
less than ten (10) days prior to the date on which Owner or any of its
Affiliates are required to file audited financial statements with the United
States Securities and Exchange Commission (but in all events on or before
February 15 of each year), Manager shall deliver to Owner and Purchaser an
Officer’s Certificate (the “8.1(c) Statement”) setting forth the totals
for each Hotel and for all of the Hotels of Gross Revenues and Operating Costs,
the calculation of Owner’s Percentage Priority and the Residual Distribution
and deposits to, and expenditures from, the Reserve Account together with an
Agreed Upon Procedures Letter with respect thereto. The cost of obtaining such
letter shall be an Operating Cost.

 

28

 

(d)                                 If
any amounts due to Owner as shown in an Officer’s Certificate or audit provided
pursuant to Sections 8.1(f) or 17.4 exceed the amounts previously
paid with respect thereto to Owner, Manager shall pay such excess to Owner at
such time as the Officer’s Certificate or audit is delivered, together with
interest at the Interest Rate from the date due. (Any such interest which
accrues after the day that is ten (10) Business Days after the date on which
the 8.1(c) Statement is delivered and any such interest which results
from Manager’s willful understatement of amounts due to Owner shall not be
Operating Costs, but shall be paid by Manager.) 
If Owner’s Percentage Priority due as shown in an Officer’s Certificate
or audit is less than the amount previously paid with respect thereto to Owner,
Owner shall be entitled to retain the same but shall credit such overpayment
against the next installment of Owner’s Percentage Priority. If any Management
Fee due to Manager as shown on an Officer’s Certificate or audit is less than
the amount previously paid to Manager on account thereof, Manager shall, within
ten (10) Business Days after the date on which such Officer’s Certificate or
audit is delivered, deposit the overpayment in the Bank Accounts. If the
Residual Distribution due as shown on the Officer’s Certificate or audit is
less than the amount previously paid to Owner with respect thereto, Owner shall
promptly deposit (or deliver to Manager who will in turn deposit) the
overpayment in the Bank Accounts. In no event shall (i) any amount previously
deposited in the Reserve Account be withdrawn therefrom pursuant to this Article
8 or (ii) distributions of Owner’s Priority be subject to adjustment.

 

(e)                                  In
addition, Manager shall provide Owner with information relating to the Hotels,
Manager and its Affiliates that (i) may be required in order for Owner or its
Affiliates to prepare financial statements in accordance with Accounting
Principles or to comply with any Legal Requirement including, without
limitation, any applicable securities laws and regulations and the United
States Securities and Exchange Commission’s interpretation thereof, (ii) may be
required for Owner or any of its Affiliates to prepare federal, state or local
tax returns, or (iii) is of the type that Manager customarily prepares for
other hotel owners or itself.

 

(f)                                    At
Owner’s election and at Owner’s cost except as otherwise provided herein, a
certified audit of the Hotels’ operations may be performed annually, and after
the Expiration Date, by a nationally recognized, independent certified public
accounting firm appointed by Owner. In the event that Owner elects to have such
an audit performed, Owner must give notice of its election within twelve (12)
months after its receipt of the applicable 8.1(c) Statement. Any dispute
concerning the correctness of an audit shall be settled by Arbitration. Manager
shall pay the cost of any audit revealing an understatement of Owner’s
Percentage Priority and the Residual Distribution by more than three percent
(3%) in the aggregate, and such cost shall not be an Operating Cost. In the
event that either no notice of audit is given within said twelve (12) months,
or no audit is in fact commenced within eighteen (18) months after receipt of
the 8.1(c) Statement, such operating statement will constitute the final
statement for that Fiscal Year, deemed to have been approved by Owner.

 

(g)                                 The
terms of this Section 8.1 shall survive the expiration or earlier
termination of the Term.

 

29

 

8.2                                 Yearly Budgets.

 

(a)                                  Not
less than sixty (60) days prior to the first day of each Fiscal Year after the
2003 Fiscal Year, Manager shall submit to Owner for Owner’s approval a proposed
Yearly Budget for each Hotel including a proposed Capital Replacements Budget
for each Hotel for the ensuing full or partial Fiscal Year, as the case may be.
Owner’s approval of the Yearly Budgets and the Capital Replacements Budgets
shall not be unreasonably withheld or delayed. If Owner fails to disapprove of
a proposed Yearly Budget within thirty (30) days after the submission thereof
to Owner for its approval, the same shall be deemed approved. Manager will,
from time to time not less often than quarterly, issue periodic forecasts of
operating performance to Owner reflecting any significant unanticipated
changes, variables or events or describing significant additional unanticipated
items of income or expense. Manager will provide Owner with the material data
and information utilized in preparing the Yearly Budgets and the Capital
Replacements Budgets or any revisions thereof. Manager will not be deemed to
have made any guaranty, warranty or representation whatsoever in connection
with the Yearly Budgets and the Capital Replacements Budgets, except that the
proposed Yearly Budgets, including the Capital Replacements Budgets, reflect
Manager’s best professional estimates of the matters they describe. Manager
shall use its reasonable efforts, subject to the Operating Standards, to
operate and manage the Hotels in accordance with their Yearly Budgets. The
Yearly Budgets for the Hotels for 2003 Fiscal Year shall be those most recently
delivered by Manager to Owner on or before the Effective Date.

 

(b)                                 In
the event Owner disapproves or raises any objections to the proposed Yearly
Budget, or any portion thereof, or any revisions thereto, Owner and Manager
shall cooperate with each other in good faith to resolve the disputed or
objectionable items. If Owner disapproves of a proposed Yearly Budget, Owner
will disapprove on a specific line-by-line basis to the extent reasonably
practical. Any dispute with respect to a proposed Yearly Budget which is not
resolved by the parties within thirty (30) days after the submission thereof to
Owner shall be resolved by Arbitration.

 

(c)                                  In
the event Owner and Manager are not able to resolve the disputed or
objectionable matters raised by Owner in regard to a Yearly Budget prior to the
commencement of the applicable Fiscal Year, either voluntarily or by means of
Arbitration, Manager is authorized to operate the Hotel in accordance with the
proposed Yearly Budget; provided, however, that as for disputed
budget items, Manager may not expend more than the previous year’s budgeted
amount for such item (if any), increased by a percentage equal to the increase
in the Consumer Price Index during the last year unless such expenditure is of
the type contemplated under Section 7.7(b) or is for an expense (such as
real estate taxes, insurance premiums or utilities) which are beyond the
Managers reasonable control. For purposes of this section, “increase in the
Consumer Price Index during the last year” shall mean the percentage increase
in the Consumer Price Index for the twelve (12) month period ending immediately
prior to the date of submission of the disputed proposed Yearly Budget.

 

30

 

8.3                                 Bank Accounts.

 

(a)                                  The
revenues of the Hotel shall be deposited into the one or more Bank Accounts. The
Bank Accounts will be separate and distinct from any other accounts, reserves
or deposits required by this Agreement, and Manager’s designees who are
included in the coverage of any required fidelity or similar insurance will be
the only parties authorized to draw upon any Bank Account; provided, however,
such designees shall only be authorized to draw upon a Bank Account for
purposes authorized by the terms of this Agreement.

 

(b)                                 So
long as this Agreement is in full force and effect and there is no uncured
Manager Default, Manager shall have exclusive control of the Bank Accounts. Nothing
contained herein is to be construed as preventing Manager from maintaining
separate payroll accounts or petty cash funds and making payments therefrom as
the same may be customary in the hotel business or the Brand Standards.

 

8.4                                 Consolidated Financials. Each Ultimate Parent of Manager and each Guarantor shall furnish to Owner
within ten (10) days after the filing by such Ultimate Parent or any Guarantor
of any material filing with respect to the securities of such Ultimate Parent
or such Guarantor or any financial statement with any governmental agency,
quasi-governmental agency or stock exchange, a copy of the same; provided,
however, if a Guarantor or Ultimate Parent of Manager is not required to
file interim and annual financial statements with the Securities and Exchange
Commission or its equivalent in the United Kingdom such Guarantor or Ultimate
Parent shall furnish the following statements to Owner:

 

(a)                                  Within forty-five (45) days after each interim
period for which such Ultimate Parent or Guarantor prepares Consolidated
Financials, the Consolidated Financials of such Ultimate Parent or Guarantor
for such period accompanied by an Officer’s Certificate; and

 

(b)                                 within ninety (90) days after each fiscal year of
such Ultimate Parent or Guarantor, the Consolidated Financials of such Ultimate
Parent or such Guarantor for such fiscal year audited by a firm of independent
certified public accountants reasonably satisfactory to Owner accompanied by an
Officer’s Certificate.

 

ARTICLE 9

 

FEES TO MANAGER

 

9.1                                 Management
Fees. As consideration for the management and operation of the Hotel by
Manager, Manager shall earn the following fees, which fees shall be payable as
provided in Section 10.1.

 

(a)                                  The
Base Management Fee shall be paid in monthly installments in arrears based on
the Gross Revenues of the Hotels for the prior Fiscal Month. The Base
Management Fee for any period less than a full twelve (12) month Fiscal Year
shall be paid on the basis of Gross Revenues for that period.

 

31

 

(b)                                 The
Incentive Management Fee shall be paid in monthly installments in arrears. The Incentive
Management Fee for any period less than a full twelve (12) month Fiscal Year
shall be paid on the basis of Gross Revenues for that period.

 

9.2                                 Services
Fees. Manager shall pay as Operating Costs, usual and customary system fees
and assessments on an area-wide basis for the systems of hotels comprising the
Brand which currently include a reservation and marketing fee of two and
one-half percent (2.5%) of Rooms Revenue, an accounting fee of Fifteen Dollars
($15) per guest room per month and a Priority Club Fee of five percent (5%) of
all charges at a Hotel to Priority Club members. Each of the foregoing Services
Fees shall be adjusted from time to time to reflect the Hotels’ equitable
portion of the Manager’s and its Affiliates’ actual out-of-pocket costs for
providing the services to which such fees pertain. Not less frequently than
annually, Manager shall provide to Owner financial statements with respect to
all fees comparable to the Services Fees collected by Manager and its
Affiliates and the applications thereof; provided, however,
Manager shall not be obligated to provide such statements with respect to the
accounting fee until such time as it has in place the means of producing such
statements. Manager covenants, warrants and represents that each hotel in the
Brand pays, and shall at all times pay, the same fees for such services and all
such fees collected by Manager are, and will be, applied to the cost of
providing such services to all hotels in the Brand without profit to Manager or
its Affiliates except to the extent that such profit for any year shall be
applied to the cost of providing such services in the subsequent year; provided,
however, Manager and its Affiliates shall not retain any such profits
for an unreasonable period of time. Any disputes under this Section 9.2
shall be resolved by Arbitration.

 

ARTICLE 10

 

DISBURSEMENTS

 

10.1                           Disbursement
of Funds. As and when received by Manager or the Hotels, all Gross Revenues
from all of the Hotels shall be deposited into the Bank Accounts and applied in
the following order of priority to the extent available:

 

(a)                                  First,
to pay all Operating Costs;

 

(b)                                 Second,
to fund the Reserve Account as required by Section 5.2 for the previous
Fiscal Month;

 

(c)                                  Third, to Owner, all
accrued but unpaid Owner’s Priority;

 

(d)                                 Fourth,
to (i) reimburse Manager for any amounts advanced by Manager pursuant to Section
5.2(d) together with interest on the outstanding amounts thereof at the
Interest Rate (determined as of the date of the applicable advance) (ii) to pay
for Capital Replacements which Owner failed to timely fund pursuant to Section
5.2(c).

 

32

 

(e)                                  Fifth,
to fund the Reserve Account to the extent that the aggregate amounts previously
funded for prior periods is less than the amount required to be funded for such
periods pursuant to the terms of Section 5.2;

 

(f)                                    Sixth,
(commencing in 2005) to Owner, all accrued but unpaid Owner’s Percentage
Priority;

 

(g)                                 Seventh,
to Manager, interest at the Interest Rate (determined as of the date of the
applicable advance) on any outstanding amounts advanced by Manager pursuant to Section
15.2(c).

 

(h)                                 Eighth,
to Manager, any accrued but unpaid Base Management Fee for the previous Fiscal
Month but no other period;

 

(i)                                     Ninth, to reimburse Owner for any advances made
by Owner to Working Capital;

 

(j)                                     Tenth,
to reimburse Manager for any advances made by Manager to Working Capital in
excess of the Initial Working Capital;

 

(k)                                  Eleventh, to replenish any portion of the Deposit that shall have been
applied to the Secured Obligations;

 

(l)                                     Twelfth, to reimburse the Guarantor for payments
made by it on account of the Guaranteed Obligations under the Guaranty provided,
however, if the Guarantor shall have Provided Collateral under the
Guaranty, then the amount to be reimbursed to the Guarantor under this Section
10.1(l) shall be disbursed to Owner, to be held by Owner as collateral for
the Guarantor’s obligations under the Guaranty until the Outstanding Balance
(determined as though the disbursement made under this Section 10.1(l)
were made to the Guarantor) under the Guaranty does not exceed the sum of (i)
the then remaining balance drawable under the Satisfactory Letter of Credit
posted under the Guaranty or the balance of the cash deposited by the Guarantor
thereunder, plus (ii) proceeds of any such Satisfactory Letter of Credit
or cash deposited thereunder, in either case, applied to the Guaranteed
Obligations thereunder;

 

(m)                               Thirteenth, to reimburse Manager for (i) advances made by
Manager pursuant to Section 15.2(c) to the extent then due and payable
and (ii) other contributions made by it to the Reserve Account other than
pursuant to Section 5.2(d);

 

(n)                                 Fourteenth, to pay Manager accrued but unpaid Base
Management Fees for prior Fiscal Months; and

 

(o)                                 Fifteenth, to Manager, the Incentive Management
Fee.

 

10.2                           Residual
Distribution. Simultaneously with the making of each payment of the
Incentive Management Fee, the then remaining Gross Revenues will be disbursed
to Owner. Except as herein provided, Manager shall have no responsibility to
incur Operating Costs or undertake any Capital Replacement except to the extent
Manager is 

 

33

 

reasonably assured that funds to pay such Operating Costs and for such
Capital Replacements will be timely available.

 

10.3         Owner’s Priority.
Owner’s Priority shall be due and payable in advance in equal monthly
installments on the first day of each Fiscal Month, pro-rated for any partial
month, regardless of any inadequacy of Gross Revenues or Operating Profits. If
any installment of Owner’s Priority is not paid when due, the same shall accrue
interest at the Interest Rate. (Such interest shall be payable on demand, shall
not be an Operating Cost, and shall be paid by Manager.)  Appropriate adjustments shall be made to
reflect any change in Owner’s Priority on account of advances made by Owner or
Purchaser on the first Business Day of the month next after the date as of
which such change occurs. As installments of Owner’s Priority are to be paid in
advance, Manager may advance amounts due on account of a monthly installment of
Owner’s Priority for a Fiscal Month and reimburse itself from Operating Profits
for such Fiscal Month amounts so advanced; provided, however, if
Operating Profits for such Fiscal Month in excess of the amount to be
contributed to the Reserve Account pursuant to Section 5.2 are
insufficient to make such reimbursements, the amount of such insufficiency
shall be deemed an advance to Working Capital, and Manager shall be entitled to
the reimbursement thereof only pursuant to Section 10.1(j); provided,
however, by notice given to Owner within thirty (30) days after the end
of Fiscal Month, Manager may elect to deem the amount of such insufficiency an
advance under the Guaranty (and not an advance to Working Capital). If Manager
shall so make such election, the amount of such insufficiency shall be
reimbursed to the Guarantor as provided in Section 10.1(l). If Owner
fails to receive any installment of Owner’s Priority as and when due, Owner may
terminate this Agreement on not less than thirty (30) days’ notice; provided,
however, such notice shall be void ab initio if such installment
together with any interest accrued thereon is paid to Owner prior to the
thirtieth (30th) day after such notice is given.

 

10.4                           Owner’s
Percentage Priority. Owner’s Percentage Priority shall be calculated on a
Hotel-by-Hotel basis, and shall accrue and be payable in monthly installments
to the extent that Gross Revenues year-to-date at any Hotel exceed Gross
Revenues for such Hotel for the corresponding period in its Base Year. The
installment of Owner’s Percentage Priority for each Fiscal Month shall be due
and payable on the twenty fifth (25th)
day of the following month.

 

10.5                           No
Interest. Except as expressly provided herein, no interest shall accrue or
be payable to either party hereunder on account of any amount owed to such
party hereunder.

 

10.6                           Amounts Outstanding at End of Term. Unless this Agreement is wrongfully terminated
by Owner upon the expiration or earlier termination of this Agreement, Manager shall have no claim
against Owner, Purchaser or the Hotels for amounts owed to it under this
Agreement which have not been paid by reason of the inadequacy of Gross
Revenues or Operating Profits.

 

10.7                           Survival. The terms of
this Article 10 shall survive the expiration or earlier termination of
the Term.

 

34

 

ARTICLE 11

 

CERTAIN OTHER SERVICES

 

11.1                           Optional
Services. Owner acknowledges that Manager and its Affiliates sometimes
provide separate, optional services which may relate to the Hotels in addition
to those which are encompassed by this Agreement. Owner agrees to consider in
good faith any proposals presented to it by Manager or any of Manager’s
Affiliates for such additional services relative to the Hotels; it being
understood, however that this Section shall in no event be construed to require
Owner to accept any such proposals.

 

11.2                           Purchasing.
In making purchasing decisions with respect to products and service used in the
operation of the Hotels, Manager will exercise reasonable business judgment in
accordance with the Operating Standards. Manager shall be entitled to contract
with its Affiliates, others in whom Manager or its Affiliates has an ownership
interest and others with whom Manager or its Affiliates have contractual
relationships to provide goods and/or services to the Hotels’ provided that the
prices and/or terms for such goods and/or services are competitive and no worse
than the prices and/or terms that such provider charges unrelated third-parties.
In determining whether such prices and/or terms are so competitive, they will
be compared to the prices and/or terms which are available from comparably
qualified providers for goods and/or services of similar quality grouped in
reasonable categories, rather than being compared item by item. Subject to the
foregoing proviso, the prices charged for such goods or services may include
overhead and the allowance of a reasonable return to the provider. Subject to
the foregoing proviso, Owner acknowledges and agrees that the providers of such
goods and/or services may retain for their own benefit any credits, rebates or
commissions received with respect to such purchases. Notwithstanding anything
contained herein to the contrary, Manager will act in a manner that enables
Owner and the Hotels to gain not less than the same benefits with respect to
purchasing as are made available to other hotels of the same category as the
Hotels which other hotels are owned or operated by Manager or its Affiliates. Disputes
under this Section 11.2 shall be resolved by Arbitration.

 

ARTICLE 12

 

SIGNS AND SERVICE MARKS

 

12.1                           Signs.
To the extent not in place on the Effective Date, Manager
agrees to erect and install, in accordance with all applicable Legal
Requirements, all necessary signs under the Brand Standards.

 

12.2                           System
Marks. It is understood and agreed by Owner that the name Staybridge Suites
and all System Marks are the exclusive property of Manager or its Affiliates. Owner
agrees and acknowledges the exclusive right of ownership of Manager and its
Affiliates to the System Marks and the Reservation System. Except for any
rights 

 

35

 

expressly granted to Owner
in this Agreement, Owner hereby disclaims any right or interest therein,
regardless of the legal protection afforded thereto. Except for any rights
expressly granted to Owner in this Agreement, in the event of termination or
cancellation of this Agreement, whether as a result of a default by Manager or
otherwise, Owner shall not hold itself out as, or operate the Hotels as, a
Staybridge Suites hotels, and will immediately cease using the name Staybridge
Suites, and all other System Marks in connection with the name or operation of
the Hotel as of the Expiration Date. Promptly after the Expiration Date (or
such later date on which Manager shall cease to operate the Hotels) and the
expiration of any right granted to Owner to use the System Marks, subject to
the terms of Section 17.4, Owner shall remove all signs, furnishings,
printed material, emblems, slogans or other distinguishing characteristics
which are now or hereafter may be connected or identified with the Brand or
Reservation System. Owner shall not use any System Marks or any part,
combination or variation thereof in the name of any partnership, corporation or
other business entity, nor allow the use thereof by others.

 

12.3                           System
Mark Litigation.

 

(a)                                  Manager,
IHG and each other Guarantor shall hold Owner and its Affiliates harmless from
and indemnify and defend Owner and its Affiliates against any and all costs and
expenses incurred by Owner or its Affiliates (including, without limitation,
attorneys’ fees reasonably incurred), arising out of the use of System Marks at
or in connection with the operation of the Hotels by Owner or its designees
pursuant to the terms of this Agreement or by Manager or its Affiliates.

 

In the event a
Hotel, Owner or Manager is the subject of any litigation or action brought by
any party seeking to claim rights in or to restrain the use of any System Mark
used by Manager in connection with the Hotel, then, provided Owner is a party
to such litigation or action and further provided that Manager shall have
provided to Owner either a guaranty in form and substance reasonably
satisfactory to Owner with respect to Manager’s obligations under Section
12.3(a) or collateral to secure Manager’s obligations under Section
12.3(a) reasonably satisfactory to Owner, the conduct of any suit whether
brought by Manager or instituted against Owner and/or Manager shall be under
the absolute control of counsel nominated and retained by Manager
notwithstanding that Manager may not be a party to such suit.

 

(b)                                 The
Owner shall not bring suit against any user of any System Mark alleging or
asserting any claim based on Owner’s right, title or interest as of the
Effective Date in any System Mark.

 

(c)                                  The terms of
this Section 12.3 shall survive the expiration or earlier termination of
this Agreement.

 

ARTICLE 13

 

INSURANCE

 

13.1                           Insurance
Coverage. Unless Owner elects to procure and maintain the insurance
required hereunder, as an Operating Cost, which election may be made from time
to 

 

36

 

time and withdrawn from time
to time on not less than thirty (30) days’ notice, to the extent commercially
available (regardless of whether it is available on reasonable terms) Manager
shall procure and maintain as an Operating Cost, at all times during the Term
or while it is in possession of any of the Hotels, reasonable and adequate
amounts of casualty, liability and other usual and customary types of insurance
for the Hotels and their operations. Without limiting the generality of the
foregoing, Manager shall obtain and maintain, with insurance companies of
recognized responsibility a minimum of the following insurance to the extent
commercially available (regardless of whether it is available on reasonable
terms):

 

(a)                                  “Special
Form” property insurance, including insurance against loss or damage by fire,
vandalism and malicious mischief, terrorism (if available on commercially
reasonable terms), earthquake, explosion of steam boilers, pressure vessels or
other similar apparatus, now or hereafter installed in the Hotels, with
equivalent coverage as that provided by the usual extended coverage
endorsements, in an amount equal to one hundred percent (100%) of the then full
replacement cost of the property requiring replacement (excluding foundations)
from time to time, including an increased cost of construction endorsement;

 

(b)                                 Business
interruption and blanket earnings plus extra expense under a rental value
insurance policy or endorsement covering risk of loss during the lesser of the
first twelve (12) months of reconstruction or the actual reconstruction period
necessitated by the occurrence of any of the hazards described in subparagraph
(a) above, in such amounts as may be customary for comparable properties
managed or leased by Manager or its Affiliates in the surrounding area and in
an amount sufficient to prevent Owner or Purchaser from becoming a co-insurer;

 

(c)                                  Commercial
general liability insurance, including bodily injury and property damage (on an
occurrence basis and on a 1993 ISO CGL form or on a form customarily maintained
by similarly situated hotels, including, without limitation, broad form
contractual liability, independent contractor’s hazard and completed operations
coverage, aggregate limit as applicable) in an amount not less than Two Million
Dollars ($2,000,000) per occurrence and umbrella coverage of all such claims in
an amount not less than Fifty Million Dollars ($50,000,000) per occurrence;

 

(d)                                 Flood
(if a Hotel is located in whole or in part within an area identified as an area
having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968, as amended, or the
Flood Disaster Protection Act of 1973, as amended (or any successor acts thereto))
and insurance against such other hazards and in such amounts as may be
available under the National Flood Insurance Program and customary for
comparable properties in the area;

 

(e)                                  Worker’s
compensation insurance coverage for all persons employed by Manager at the
Hotels with statutory limits and otherwise with limits of and provisions in
accordance with the requirements of applicable local, state and federal law,
and employer’s liability insurance as is customarily carried by similar
employers which coverage shall be written by an insurance company of recognized
responsibility, as a qualified self-insurer subject 

 

37

 

to applicable state requirements and approvals, or specific to the
State of Texas, as a nonsubscriber;

 

(f)                                    Employment
practices liability insurance with limits of Twenty Five Million Dollars
($25,000,000); and

 

(g)                                 Such
additional insurance as may be required, from time to time by (i) any Legal
Requirement, (ii) any holder of an Authorized Mortgage or (iii) which is
otherwise reasonably required.

 

13.2                           Insurance
Policies.

 

(a)                                  All
insurance provided for under this Article 13 must be effected by
policies issued by insurance companies of good reputation and of sound
financial responsibility and will be subject to Owner’s reasonable approval.

 

(b)                                 All
insurance policies (other than workers’ compensation policies) shall be issued
in the name of Purchaser with Manager and Owner and any holder of an Authorized
Mortgage being named as additional insureds; provided, however,
subject to Owner’s obligations under Article 15, Manager shall not be
named as an additional insured on, and shall not have any interest in the
proceeds of, any property insurance. Purchaser or the holder of an Authorized
Mortgage shall be named loss payee(s) on any property insurance.

 

(c)                                  The
insurance herein required may be brought within the coverage of a so-called
blanket policy or policies of insurance carried and maintained by Owner or
Manager, provided that such blanket policies fulfill the requirements contained
herein.

 

(d)                                 In
the event Owner or Manager believes that the then full replacement cost of a
Hotel has increased or decreased at any time during the Term, such party, at
its own cost, 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 or delayed. The party
desiring to have the full replacement cost so redetermined shall forthwith, on
receipt of such determination by such appraiser, give written notice thereof to
the other parties. The determination of such appraiser shall be final and
binding on the parties hereto until any subsequent determination under this Section
13.2(d), and the party obligation to maintain insurance hereunder shall
forthwith conform the amount of the insurance carried to the amount so
determined by the appraiser. Such replacement value determination will not be
necessary so long as a Hotel is insured through a blanket replacement value
policy.

 

(e)                                  All
insurance policies and endorsements required pursuant to this Article 13
shall be fully paid for, nonassessable and, except for umbrella, worker’s
compensation, flood and earthquake coverage, shall be issued by insurance
carriers authorized to do business in the state where each Hotel is located,
having a general policy holder’s rating of no less than B++ in Best’s latest
rating guide.

 

(f)                                    All
such policies shall provide Owner, Manager and any holder of an Authorized
Mortgage if required by the same, thirty (30) days’ prior written notice of any
material 

 

38

 

change or cancellation of
such policy and the property insurance policies shall provide for a waiver of
subrogation, to the extent available.

 

13.3                           Insurance
Certificates. Manager shall deliver to Owner, Purchaser and any holder of
an Authorized Mortgage, certificates of insurance with respect to all policies
so procured by it and, in the case of insurance policies about to expire, shall
deliver certificates with respect to the renewal thereof. In the event Manager
shall fail to effect such insurance as herein required, to pay the premiums
therefor, or to deliver, within fifteen (15) days of a request therefor, such
certificates, Owner shall have the right, but not the obligation, to acquire
such insurance and pay the premiums therefor, which amounts shall be payable to
Owner, upon demand, as an Operating Cost, together with interest accrued
thereon at the Interest Rate (which interest shall not be an Operating Cost,
but shall be paid by Manager) from the date such payment is made until (but
excluding) the date repaid.

 

13.4                           Insurance
Proceeds. All proceeds payable by reason of any loss or damage to a Hotel,
or any portion thereof (other than the proceeds of any business interruption
insurance), shall be paid directly to Purchaser as its interest may appear and
all loss adjustments with respect to losses payable to Manager shall require
the prior written consent of Purchaser.

 

13.5                           Manager’s
Insurance Program.

 

(a)                                  Manager
will obtain quotations for insurance on an annual basis and provide, when
available, such quotations to Owner for its approval or rejection. If Owner
rejects such quotations, it may obtain such insurance and thereafter Owner
shall maintain, as an Operating Cost, the insurance, the quotation for which
Owner rejected.

 

(b)                                 Owner
acknowledges that in the event the insurance required hereunder is provided
through Manager’s insurance program, to the extent available, the costs and
charges therefore will be paid as an Operating Cost without regard to whether
such payment is to an Affiliate of Manager and whether that Affiliate receives
a profit as a result thereof.

 

ARTICLE 14

 

INDEMNIFICATION AND WAIVER OF SUBROGATION

 

14.1                           Indemnification.
Each of the parties hereto shall indemnify, defend and hold harmless the other
for, from and against any cost, loss, damage or expense (including, but not
limited to, reasonable attorneys fees and all court costs and other expenses of
litigation, whether or not taxable under local law) to the extent caused by or
arising from: the failure of the indemnifying party to duly and punctually
perform any of its obligations owed to the other; or any gross negligence or
willful misconduct of the indemnifying party.

 

14.2                           Waiver
of Subrogation. To the fullest extent permitted by law, each of Owner and
Manager hereby waives any and all rights of subrogation and right of recovery
or cause of action, and agrees to release the other and Purchaser from
liability for loss or 

 

39

 

damage to property to the
extent such loss or damage is covered by valid and collectible insurance in
effect at the time of such loss or damage or which would have been covered if
the insurance required by this Agreement were being carried; provided, however,
that such waiver shall be of no force or effect if the party benefiting
therefrom fails to obtain and maintain the insurance required to be obtained
and maintained by it. Such waivers are in addition to, and not in limitation or
derogation of, any other waiver or release contained in this Agreement. Written
notice of the terms of the above waivers shall be given to the insurance
carriers of Owner and Manager, and the insurance policies shall be properly
endorsed, if necessary, to prevent the invalidation of said policies by reason
of such waivers.

 

14.3                           Survival. The terms of
this Article 14 shall survive the expiration or earlier termination of
this Agreement.

 

ARTICLE 15

 

DAMAGE TO AND DESTRUCTION OF THE HOTEL

 

15.1                           Termination.

 

(a)                                  If
during the Term any Hotel shall be totally or partially destroyed and the Hotel
is thereby rendered Unsuitable for Its Permitted Use, (i) Manager may terminate
this Agreement with respect to such Hotel on sixty (60) days’ written notice to
Owner, or (ii) Owner may terminate this Agreement with respect to such Hotel by
written notice to Manager, whereupon, this Agreement, with respect to such
Hotel, shall terminate and Owner or Purchaser shall be entitled to retain the
insurance proceeds payable on account of such damage.

 

(b)                                 Notwithstanding
any provisions of Section 15.2 below to the contrary, if damage to or
destruction of any Hotel occurs during the last twenty four (24) months of the
then Term (after giving effect to any exercised options to extend the same) and
if such damage or destruction cannot reasonably be expected to be fully
repaired and restored prior to the date that is twelve (12) months prior to the
end of such Term, then either Owner or Manager may terminate this Agreement
with respect to such Hotel on not less than thirty (30) days’ advance notice.

 

(c)                                  Upon
any termination under this Article 15 or 16, the Owner’s Priority
shall be reduced, and provided there is then no uncured Manager Default and the
Priority Coverage Ratio for the Hotels (other than such Hotel with respect to
which this Agreement has been so terminated) for the prior Fiscal Year is
greater than 1.0, Owner shall return to Manager the portion of the Deposit
allocable to such terminated Hotel as set forth on Exhibit C. In calculating
the reduction in Owner’s Priority, the allocation of Owner’s Priority for each
Hotel shall be proportional to the NOI of such Hotel for the then most recently
ended twelve (12) months relative to the NOI of all the other Hotels for such
period.

 

(d)                                 Manager
hereby waives any statutory rights of termination which may arise by reason of
any damage to or destruction of any Hotel.

 

40

 

15.2                           Restoration.

 

(a)                                  If
during the Term any Hotel is damaged or destroyed by fire, casualty or other
cause but is not rendered Unsuitable for Its Permitted Use, Owner shall make
the net proceeds of insurance received in connection with such casualty (excluding
the proceeds of business interruption or similar insurance which are a portion
of Gross Revenues) and any other amount Owner elects to contribute toward
restoration available to Manager for restoration of such Hotel subject to
customary terms applicable to advances and construction loans (to the extent
applicable) and the terms of the Lease and any Authorized Mortgage, and Owner
shall make, or shall cause there to be made, all Repairs necessary to restore
such Hotel to substantially the same condition as existed prior to such
casualty. If Owner elects to retain Manager’s services in connection with such
Repairs, the terms of Section 11.1 shall apply.

 

(b)                                 Any
casualty which does not result in a termination of this Agreement with respect
to the applicable Hotel shall not excuse the payment of sums due to Owner
hereunder with respect to such Hotel.

 

(c)                                  If
the net proceeds of the insurance received in connection with a casualty or an
Award received in connection with a Condemnation are insufficient to complete
the required Repairs, Owner shall have the right (but not the obligation) to
contribute (or cause Purchaser to contribute) the amount of such insufficiency.
If Owner elects not to contribute such insufficiency by notice given to Manager
within ten (10) Business Days after a notice given by Manager to Owner
reasonably detailing the existence of such insufficiency, Manager shall have
the right to contribute such insufficiency. If Manager fails to contribute such
insufficiency to an account of Owner to be used in completing such Repairs
within ten (10) Business Days after Owner’s election, the Hotel subject to such
casualty or Condemnation shall be deemed Unsuitable for its Permitted Use and
the terms of Section 15.1 or 16.1, as applicable, shall apply. Subject
to the terms of Section 10.1, Manager shall be entitled to the return of
amounts funded by it under this Section 15.2(c) in equal monthly installments
based upon the number of months remaining in the Term after the month in which
such advance is made (after giving effect to any then exercised or deemed
exercised options to extend).

 

ARTICLE 16

 

CONDEMNATION

 

16.1                           Total
Condemnation. If either (x) the whole of a Hotel shall be taken by
Condemnation, or (y) a Condemnation of less than the whole of a Hotel renders
such Hotel Unsuitable for Its Permitted Use, this Agreement shall terminate
with respect to such Hotel and Owner and Purchaser shall seek the Award for
their interests in such Hotel as provided in the Lease, which Award shall
belong solely to them. In addition, Manager shall have the right to initiate or
participate in such proceedings as it deems advisable to recover any damages to
which Manager may be entitled; provided, however, that Manager
shall be entitled to retain the award or compensation it may obtain through
such proceedings which are conducted separately from those of Owner and
Purchaser only if such award 

 

41

 

or compensation does not
reduce the award or compensation otherwise available to Owner and Purchaser. If
this Agreement is so terminated with respect to a Hotel, Owner and Purchaser
shall make reasonable efforts to use the Award to acquire a Replacement
Property proposed by Manager to which this Agreement shall be extended; provided,
however:

 

(a)                                  Purchaser
and Owner shall not be obligated to expend in the aggregate more than the Award
in connection with (i) investigating and negotiating to purchase all properties
proposed by Manager to be the Replacement Property (including, without
limitation, attorneys’ and consultants’ fees and title search and survey costs)
and (ii) acquiring a Replacement Property (including, without limitation, the
purchase price therefor, title insurance premiums and transfer taxes);

 

(b)                                 Purchaser
and Owner shall have no obligation to acquire any proposed Replacement Property
unless the projected NOI thereof and each of every other aspect of the proposed
Replacement Property which Purchaser reasonably considers relevant is
comparable in Purchaser’s sole judgment in all respect to the Hotel which is
being replaced;

 

(c)                                  Purchaser
and Owner shall not be obligated to investigate more than three (3) proposed
properties;

 

(d)                                 Owner’s
Priority will be increased by an amount equal to the reduction therein resulting
from the termination of this Agreement with respect to the Hotel which is being
replaced; and

 

(e)                                  Purchaser
shall not be obligated to acquire any proposed Replacement Property, if Manager
and Owner do not reasonably agree upon an appropriate amendment hereto pursuant
to which this Agreement will be extended to such property.

 

                                                If
Purchaser decides to acquire a proposed Replacement Property, simultaneously
with such acquisition the Lease and this Agreement shall be appropriately
amended so as to cover such Replacement Property.

 

16.2                           Partial
Condemnation. In the event of a Condemnation of less than the whole of a
Hotel such that such Hotel is not rendered Unsuitable for Its Permitted Use,
Owner shall, to the extent of the Award and any additional amounts disbursed by
Owner or Purchaser, commence promptly and continue diligently to restore the
untaken portion of such Hotel so that such Hotel shall constitute a complete
architectural unit of the same general character and condition (as nearly as
may be possible under the circumstances) as existed immediately prior to such
Condemnation, in full compliance with all Legal Requirements, using the Award
made available therefor and any other funds Owner elects to contribute subject
to customary terms applicable to advances of construction loans (to the extent
applicable). If Owner elects to retain Manager’s services in connection
therewith, the terms of Section 11.1 shall apply.

 

16.3                           Temporary
Condemnation. In the event of any temporary Condemnation of a Hotel or Owner’s
interest therein, this Agreement shall continue in full force and effect. The 

 

42

 

entire amount of any Award
made for such temporary Condemnation allocable to the Term, whether paid by way
of damages, rent or otherwise, shall constitute Gross Revenues. For purposes of
this Agreement, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twelve (12) months.

 

16.4                           Effect
of Condemnation. Any condemnation which does not result in a termination of
this Agreement in accordance with its terms with respect to the applicable
Hotel shall not excuse the payment of sums due to Owner hereunder with respect
to such Hotel and this Agreement shall remain in full force and effect as to
such Hotel.

 

ARTICLE 17

 

DEFAULT AND TERMINATION

 

17.1                           Manager Events
of Default. Each of the following shall constitute a “Manager
Event of Default:”

 

(a)                                  The
filing by Manager, or the Guarantor of a voluntary petition in bankruptcy or
insolvency or a petition for reorganization under any bankruptcy law, or the
admission by Manager, or the Guarantor that it is unable to pay its debts as
they become due, or the institution of any proceeding by Manager, or the
Guarantor for its dissolution or earlier termination.

 

(b)                                 The
consent by Manager, or the Guarantor to an involuntary petition in bankruptcy
or the failure to vacate, within ninety (90) days from the date of entry
thereof, any order approving an involuntary petition with respect to Manager,
or the Guarantor.

 

(c)                                  The
entering of an order, judgment or decree by any court of competent
jurisdiction, on the application of a creditor, adjudicating Manager, or the
Guarantor as bankrupt or insolvent or approving a petition seeking
reorganization or appointing a receiver, trustee, or liquidator of all or a
substantial part of Manager’s, or the Guarantor’s assets, and such order,
judgment or decree’s continuing unstayed and in effect for an aggregate of
sixty (60) days (whether or not consecutive).

 

(d)                                 The
failure of Manager or the Guarantor or any Affiliate of any of them to make any
payment required to be made in accordance with the terms of this Agreement or
any Transaction Document which failure continues beyond any applicable notice
and grace period.

 

(e)                                  The
failure of Manager, its Ultimate Parent, the Collateral Agent or any Guarantor
or any Affiliate of any of them to perform, keep or fulfill any of the other
covenants, undertakings, obligations or conditions set forth in this Agreement
or any Transaction Document on or before the date required for the same, which
failure continues for a period of thirty (30) days after receipt of written
notice demanding such cure; provided, however, if such failure is
susceptible of cure, but such cure cannot be accomplished within said thirty
(30) day period, said thirty (30) days shall be extended for so long as is
reasonably necessary to effect such cure provided that such cure is commenced
within 

 

43

 

thirty (30) days after such notice is given and is thereafter
diligently pursued to completion.

 

(f)                                    The
failure of Manager to maintain insurance coverages required to be maintained by
Manager under this Agreement.

 

(g)                                 The
failure by Manager, its Ultimate Parent or any Guarantor to deliver to Owner
any financial statement as and when required by the Transaction Documents,
which failure continues for a period of ten (10) Business Days after written
notice from Owner.

 

(h)                                 Any
representation or warranty made by Manager or any of its Affiliates in this
Agreement or any Transaction Document proves to have been false in any material
respect on the date when made or deemed made; provided, however,
if Manager did not know of such falseness at the time such representation or
warranty was made, and the facts or circumstances giving rise to such falseness
are susceptible of cure, Manager shall have up to thirty (30) days after notice
from Owner to effectuate such cure.

 

(i)                                     The
failure of any Ultimate Parent of Manager or the Guarantor to timely and fully
keep and observe any obligations under the Transaction Documents or any other
document or instrument executed and delivered in connection herewith to
maintain any net worth, unencumbered assets or to deliver any collateral, in
all cases, required under the Transaction Documents, which is not cured within
ten (10) days after notice from Owner to Manager.

 

17.2                           Remedies
for Manager Defaults. So long as a Manager Event of Default shall be
outstanding, Owner shall have (in addition to its other rights and remedies at
law, in equity or otherwise) the right to terminate this Agreement. Upon such
termination, or if this Agreement is terminated pursuant to Sections 5.1 or
10.3, Owner shall be entitled to liquidated damages. Owner’s right to
receive liquidated damages has been agreed to due to the uncertainty,
difficulty and/or impossibility of ascertaining the actual damages suffered by
Owner. Further, if not for Owner’s right to receive such liquidated damages,
Purchaser would not have entered into the Purchase Agreement, Purchaser would
not have acquired the Hotels and Owner would not have entered into the Lease. MANAGER
HEREBY ACKNOWLEDGES AND AGREES THAT SUCH LIQUIDATED DAMAGES ARE NOT A PENALTY,
BUT ARE TO COMPENSATE OWNER AND ITS AFFILIATES FOR THE EXPENSE AND LOST
EARNINGS WHICH MAY RESULT FROM ARRANGING SUBSTITUTE MANAGEMENT FOR THE HOTELS
AS WELL AS TO COMPENSATE FOR THE RENT OWNER MUST PAY UNDER THE LEASE AND THE
PRICE PAID FOR THE HOTELS BY OWNER’S AFFILIATE. Such liquidated damages shall
be equal to the sum of (i) the sum of (A) Fifty Million Dollars ($50,000,000)
less (B) the aggregate amount paid by the Guarantor under Section 3 of
the Guaranty in excess of the aggregate amount reimbursed to the Guarantor
pursuant to Section 10.1(l), plus (ii) the outstanding balance of the
Deposit. Owner shall be entitled to interest, at the Interest Rate, on such
liquidated damages from the date of such termination until the date of payment
of such damages and interest. Except with respect to Owner’s rights and
remedies for any breach or violations by Manager of the 

 

44

 

terms of Section 17.4,
Owner shall look solely to the Deposit or any other collateral hereafter pledged
securing Manager’s obligations hereunder for satisfaction of any claim of Owner
against Manager hereunder, provided, however, nothing contained
herein is intended to, nor shall limit or reduce the obligations of the
Guarantor under the Guaranty or limit Owner’s rights with respect thereto.

 

17.3                           Remedies
for Owner Defaults. In the event Owner fails to perform its obligations
hereunder, Manager shall have the right to institute forthwith any and all
proceedings permitted by law or equity (provided they are not specifically
barred under the terms of this Agreement), including, without limitation,
actions for specific performance and/or damages; provided, however,
except as may be expressly provided in this Agreement, Manager shall have no
right to terminate this Agreement by reason of such a failure by Owner or
otherwise. Manager shall be entitled to terminate this Agreement in the event
of a violation of the terms of Section 4.7 by Purchaser or Owner. Except
as otherwise specifically provided in this Agreement, Manager hereby waives all
rights arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law, (a) to modify, surrender or terminate this Agreement
or quit or surrender any Hotel or any portion thereof, or (b) to obtain (i) any
abatement, reduction, suspension or deferment of the sums allocable or
otherwise payable to Owner or other obligations to be performed by Manager
hereunder or (ii) any increase in any amounts payable to Manager hereunder. The
obligations of each party hereunder shall be separate and independent covenants
and agreements.

 

17.4                           Post
Termination Obligations. Upon expiration or earlier termination of this
Agreement for any reason, Owner and Manager shall proceed as follows:

 

(a)                                  Within
sixty (60) days following the effective date of such expiration or earlier
termination, Manager will submit to Owner an audited final accounting of the
results of Hotel operations and all accounts between Owner and Manager through
the effective date of such expiration or earlier termination, the cost of which
audit shall be shared equally by Manager and Owner and shall not be an
Operating Cost and shall be performed by Ernst & Young or another
accounting firm selected by Manager and approved by Owner. Said final accounting
will promptly be submitted by Manager to Owner for its approval. Owner shall
not unreasonably withhold or delay its approval of the final accounting and any
such disapproval shall contain reasonably detailed explanation for disapproval.
Within thirty (30) days after delivery of such final accounting, the parties
will make appropriate adjustments to any amounts previously paid or due under
this Agreement.

 

(b)                                 On
the effective date of such expiration or earlier termination, Manager will
deliver to Owner all books and records of the Hotels, provided that Manager may
retain copies of any of the same for Manager’s records. Notwithstanding the
foregoing, Manager will not be required to deliver to Owner any information or
materials (including, without limitation, software, database, manuals and
technical information) which are proprietary property of Manager.

 

45

 

(c)                                  On
the effective date of such expiration or earlier termination, Manager will
deliver possession of the Hotels, together with any and all keys or other
access devices, to Owner.

 

(d)                                 On
the effective date of such expiration or earlier termination Manager will
assign to Owner or its designee, and Owner or such designee will assume, all
booking, reservation, service and operating contracts relating exclusively to
the occupancy or operation of the Hotels and entered into in the ordinary
course of business by Manager in accordance with this Agreement. Owner agrees
to indemnify and hold Manager harmless from liability or other obligations
under any such agreements relating to acts or occurrences, including Owner’s or
such designee’s failure to perform, on or after the effective date of such
assignment.

 

(e)                                  Manager
will assign to Owner or its designee any assignable licenses and permits
pertaining to the Hotels and will otherwise reasonably cooperate with Owner as
may be necessary for the transfer of any and all Hotel licenses and permits to
Owner or Owner’s designee.

 

(f)                                    Manager shall release and transfer to Owner or
Purchaser, as applicable, any funds
of Owner or Purchaser which are held or controlled by Manager.

 

(g)                                 Manager shall have the option, to be exercised
within thirty (30) days after termination or expiration, to purchase, at their
then book value, any FF&E, Operating Equipment or other personal property
as may be marked with any System Mark at the Hotels. In the event Manager does
not exercise such option, Owner agrees that it will use any such items not so
purchased exclusively in connection with the Hotels until they are consumed;
provided however, Manager shall not be entitled to purchase FF&E, Operating
Equipment or other personal property located at a Hotel which is to be operated
under the Brand name or by Manager, until such Hotel shall no longer be so
operated.

 

(h)                                 Owner shall have the right to operate the
improvements on the applicable Sites
without modifying the structural design of same and without making any Material
Repair, notwithstanding the fact that such design or certain features thereof
may be proprietary to Manager or its Affiliates and/or protected by trademarks
or service marks held by Manager or an Affiliate, provided that such use shall
be confined to the applicable Sites. Further, provided that the applicable
Hotels then satisfy the Brand Standards (unless the Hotels fail to satisfy such
Brand Standards due to a breach hereof by Manager), Owner shall be entitled
(but not obligated) to operate such of the Hotels as Owner designates under the
Brand name for a period of one (1) year following such termination in
consideration for which Owner shall pay the then standard franchise and system
fees for the Brand and comply with the other applicable terms and conditions of
the form of franchise agreement then being entered into with respect to the
Brand.

 

(i)                                     Manager shall transfer to Owner the telephone
numbers used in connection with the operation of the Hotels (but not the Brand
generally).

 

46

 

(j)                                     Manager
shall cooperate with Owner’s or its designees’ efforts to engage employees of
the Hotels.

 

(k)                                  If
requested by Owner prior to such expiration or earlier termination of this
Agreement in whole or in part, Manager shall continue to manage under the Brand
any affected Hotels designated by Owner after such expiration or earlier
termination for up to one (1) year, on such reasonable terms (which shall
include an agreement to reimburse Manager for its reasonable out-of-pocket
costs and expenses, and reasonable administrative costs and a management fee of
seven and one-half percent (7.5%) of Gross Revenues as Owner and Manager shall
reasonably agree.

 

The provisions of this Section 17.4 shall survive the expiration
or earlier termination of this Agreement.

 

17.5                           Deposit.

 

(a)                                  As
security for (i) the faithful observance and performance by the Manager of all
the terms, covenants and conditions of this Agreements to be observed and
performed by the Manager, including, without limitation, the payment of the
Owner’s Percentage Priority and the Residual Distribution pursuant to this
Agreement, and (ii) the payment to Owner on the first day each month of
the installment of Owner’s Priority for such month regardless of the inadequacy
of the Gross Revenues or Operating Profit for any month for such purpose (all
of the foregoing, collectively, the “Secured Obligations”), Manager has
deposited with Owner simultaneously with the execution and delivery hereof the
sum of Sixteen Million Eight Hundred Seventy Two Thousand Dollars ($16,872,000)
(as the same may be drawn down and replenished from time to time pursuant to
this Agreement, the “Deposit”). The Owner shall have the option to
elect, in its sole discretion, whether and when to apply funds from the Deposit
with respect to any of the Secured Obligations; provided however, Owner shall
not apply the Deposit to any Secured Obligation for which the Guarantor is
responsible under the Guaranty unless (a) the Guarantor shall have failed to
pay any amount due under the Guaranty for a period of five (5) days after
notice or (b) an event described in Sections 17.1(a), 17.1(b) or 17.1(c)
shall have occurred with respect to the Guarantor.

 

(b)                                 Upon
the expiration of the Term, provided, there is then no uncured Manager Default,
the Owner shall return the outstanding balance of the Deposit to Manager. In
addition, if the Term is duly extended by Manager beyond the Initial Term, on
not less than two (2) years’ prior notice from the Manager to Owner, Owner
shall return the outstanding balance of the Deposit to Manager upon the
expiration of the Initial Term or the first Renewal Term and its receipt and
approval of the statements required to be delivered pursuant to Section
8.1(c) for the last four (4) calendar years of the Initial Term or the
Renewal Term, as applicable, which approval shall not be unreasonably withheld,
conditioned or delayed provided that:

 

(i)                                     there
is the no uncured Manager Default;

 

47

 

(ii)                                  each
installment of Owner’s Priority for every month during the Initial Term and, if
applicable, the first Renewal Term, shall have been paid together with any
interest accrued thereon;

 

(iii)                               the
Priority Coverage Ratio for all of the Hotels in the aggregate for each of the
four calendar years prior to the expiration of the Initial Term or first
Renewal Term, as applicable, shall be not less than 1.3; and

 

(iv)                              the
Owner’s Priority shall be increased by an amount equal to the aggregate sum of
all of the Hotels’ Adjustments to Owner’s Priority set forth on Exhibit C.

 

(c)                                  Owner
may commingle the Deposit with its other funds and any interest earned on
account of the Deposit shall be for the benefit of the Owner.

 

(d)                                 If
HPT’s credit rating as of the day that is twelve (12) months before the end of
the Term from the Rating Agencies (as defined in the Guarantee) shall be less
than BBB-/Baa 3, then during the last twelve (12) months of the Term, provided
there is at all times thereafter no uncured Manager Default, Manager shall be entitled
to reduce the monthly installments of Owner’s Priority payable by Manager for
each of the last twelve (12) months of the Term, by an amount equal to
one-twelfth (1/12th) of the then remaining balance of the Deposit
and, if Manager makes such election, Owner shall be entitled to retain a
portion of the Deposit equal to the amount by which the Owner’s Property is so
reduced in the aggregate.

 

ARTICLE 18

 

NOTICES

 

18.1                           Procedure.

 

(a)                                  Any
and all notices, demands, consents, approvals, offers, elections and other
communications required or permitted under this Agreement shall be deemed
adequately given if in writing and the same shall be delivered either by hand,
by telecopier with written acknowledgment of receipt (provided if notice is
given by telecopier, a copy shall also be sent on the following Business Day by
Federal Express or similar expedited commercial carrier), or by Federal Express
or similar expedited commercial carrier, addressed to the recipient of the
notice, with all freight charges prepaid (if by Federal Express or similar
carrier).

 

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

 

48

 

(c)                                  All such
notices shall be addressed as follows:

 

	
  If to Owner: 

  	
  HPT TRS IHG-1, INC.

  
	
   

  	
   

  	
  c/o Hospitality Properties Trust

  
	
   

  	
   

  	
  400 Centre Street

  
	
   

  	
   

  	
  Newton, Massachusetts 02458

  
	
   

  	
   

  	
  Attn: President

  
	
   

  	
   

  	
  Facsimile: 617/969-5730

  
				

 

	
  with a copy to: Sullivan & Worcester
  LLP

  
	
   

  	
   

  	
  One Post Office Square

  
	
   

  	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
   

  	
  Attn: Warren M. Heilbronner, Esq.

  
	
   

  	
   

  	
  Facsimile: 617-338-2880

  

 

	
  If to
  Manager: Intercontinental Hotels Group

  
	
   

  	
   

  	
  Resources,
  Inc.

  
	
   

  	
   

  	
  c/o Six
  Continents Hotels, Inc.

  
	
   

  	
   

  	
  3 Ravinia
  Drive, Suite 100

  
	
   

  	
   

  	
  Atlanta,
  Georgia 30346

  
	
   

  	
   

  	
  Attn: Vice
  President of Operations

  
	
   

  	
   

  	
  Facsimile:
  770-604-8875

  

 

	
  with a copy
  to: Intercontinental Hotels Group

  
	
   

  	
   

  	
  Resources,
  Inc.

  
	
   

  	
   

  	
  c/o Six
  Continents Hotels, Inc.

  
	
   

  	
   

  	
  3 Ravinia
  Drive, Suite 100

  
	
   

  	
   

  	
  Atlanta,
  Georgia 30346

  
	
   

  	
   

  	
  Attn:
  General Counsel - Operations

  
	
   

  	
   

  	
  Facsimile:
  770-604-5802

  

 

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

 

ARTICLE 19

 

RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS

 

19.1                           Relationship.
Manager shall be the agent of Owner with a limited agency solely for the purpose
of operating the Hotels and carrying out ordinary and customary transactions
for that purpose. Manager shall not have fiduciary duties to Owner by virtue of
this Agreement. Owner and Manager shall not be construed as joint venturers or
partners of each other, and neither shall have the power to bind or obligate
the other except as set forth in this Agreement. Manager shall not constitute a
tenant or subtenant of Owner and this Agreement shall not constitute Owner a
franchisee of Manager or of any of Manager’s Affiliates. This Agreement shall
not create a franchise or a franchisor/franchisee relationship within the
meaning of the Federal Trade Commission 

 

49

 

Act, any rule or regulation
promulgated, or any other state or federal law, rule or regulation or
administrative or judicial decision.

 

19.2                           Further
Actions. Each of the parties agrees to execute all contracts, agreements
and documents and take all actions necessary to comply with the provisions of
this Agreement and the intent hereof.

 

ARTICLE 20

 

APPLICABLE LAW

 

This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts between residents of New York which are to be performed
entirely within New York, regardless of (a) where this Agreement is executed or
delivered, (b) where any payment or other performance required by this
Agreement is made or required to be made, (c) where any breach of any provision
of this Agreement occurs, or any cause of action otherwise accrues, (d) where
any action or other proceeding is instituted or pending, (e) the nationality,
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party, (f) whether the laws of the forum
jurisdiction otherwise would apply the laws of a jurisdiction other than
Massachusetts, (g) the location of the Hotels or any applicable Hotel, or (h)
any combination of the foregoing.

 

ARTICLE 21

 

SUCCESSORS AND ASSIGNS

 

21.1                           Assignment.

 

(a)                                  Except as expressly provided below, Manager shall
not assign, mortgage, pledge, hypothecate or otherwise transfer its interest in
all or any portion of this Agreement
or any rights arising under this Agreement or suffer or permit such interests
or rights to be assigned, transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the management of the Hotels by anyone other than
Manager or Owner. For purposes of this Section 21.1, an assignment of
this Agreement shall be deemed to include any transaction which results in
Manager no longer being an Affiliate of Guarantor or pursuant to which all or
substantially all of Manager’s assets are transferred to any Person who is not
an Affiliate of Guarantor.

 

(b)                                 Manager shall have the right, without Owner’s
consent, to (i) assign its interest in this Agreement (i) to IHG or any
Affiliate of IHG provided such assignee satisfies the requirements of Section
24.15, (ii) in connection with a merger, corporate restructuring or
consolidation of IHG or a sale of all or substantially all of the assets of IHG
and (iii) in connection with a sale of all or substantially all of the assets
(including associated management agreements) owned by IHG and its Affiliates
relating to the Brand. If Owner and its Affiliates shall own or lease more than
fifty percent (50%) of the hotels comprising the Brand, IHG shall not, and
Manager shall cause IHG not to, transfer all or substantially all of the assets
of IHG relating to the Brand other than to a Person who at 

 

50

 

all
times is an Affiliate of IHG. At Owner’s election, Manager shall assign this
Agreement to any Person who is not an Affiliate of IHG that acquires all or
substantially all of the assets of IHG relating to the Brand and shall cause
such Person to assume all of Manager’s obligations thereafter accruing
hereunder.

 

(c)                                  Owner shall not assign, mortgage, pledge,
hypothecate or otherwise transfer its interest in all or any portion of this
Agreement or any rights arising under this Agreement without the prior written consent of Manager except
(i)in connection with a sale of a Hotel in accordance with the terms of Sections
4.4 and 4.5, (ii) to Purchaser or an Affiliate of Purchaser,(iii) to
Manager or an Affiliate of Manager, (iv) to an Affiliate of Owner in a merger,
corporate restructuring or consolidation of Purchaser or any of its
Affiliates,(v) in connection with the granting of an Authorized Mortgage or
(vi) to a Substitute Tenant as provided in Section 4.2; provided,
however, in each instance (other than in connection with a collateral
assignment) that the assignee hereof assumes all of Owner’s obligation
hereunder and under the other Transaction Documents thereafter accruing.

 

(d)                                 In the event either party consents to an assignment of this Agreement by the other,
no further assignment shall be made without the express consent in writing of
such party, unless such assignment may otherwise be made without such consent
pursuant to the terms of this Agreement. An assignment by Owner of its interest
in this Agreement approved or permitted pursuant to the terms hereof shall
relieve Owner of its obligations under this Agreement thereafter accruing.

 

(e)                                  In
the event fifty percent (50%) or more of the hotels comprising the Brand cease
to be Staybridge Suites hotels and are converted to another brand in a single
transaction or a series of related transactions, Owner may elect to require
Manager to promptly convert at its own cost and expense (and not as an
Operating Cost and without reimbursement from the Reserve Account) the Hotels
to the brand of hotels to which such other hotels are converted. In such event,
all references herein to “Staybridge Suites” shall be deemed to refer to the
trade name of the system of hotels to which the Hotels are to be so converted.

 

21.2                           Binding
Effect. The terms, provisions, covenants, undertakings, agreements,
obligations and conditions of this Agreement shall be binding upon and shall
inure to the benefit of the successors in interest and the assigns of the
parties hereto with the same effect as if mentioned in each instance where the
party hereto is named or referred to, except that no assignment, transfer,
sale, pledge, encumbrance, mortgage, lease or sublease by or through Owner, as
the case may be, in violation of the provisions of this Agreement shall vest
any rights in the assignee, transferee, purchaser, secured party, mortgagee,
pledgee, lessee, sublessee or occupant.

 

51

 

ARTICLE 22

 

RECORDING

 

22.1                           Memorandum
of Agreement. As of the Effective Date, at the option of Manager, Owner and
Manager agree to execute, acknowledge and record a Memorandum of this Agreement
in the land records of the states and counties where the Hotels are located, in
a form reasonably satisfactory to Manager.

 

ARTICLE 23

 

FORCE MAJEURE

 

23.1                           Operation
of Hotel. If at any time during the Term it becomes necessary in Manager’s
reasonable opinion to cease or alter operations at any Hotel in order to
protect the health, safety and welfare of the guests and/or employees of such
Hotel, or such Hotel itself, for reasons of force majeure beyond the control of
Manager such as, but not limited to, acts of war, insurrection, civil strife
and commotion, labor unrest or acts of God, then in such event Manager may
close and cease or alter operation of all or part of such Hotel, reopening and
commencing or resuming operation when Manager deems that such may be done
without jeopardy to such Hotel, its guests and employees.

 

23.2                           Extension
of Time. Owner and Manager agree that, with respect to any obligation,
other than the payment of money, to be performed by a party during the Term,
neither party will be liable for failure so to perform when prevented by any
occurrence beyond the reasonable control of such party, herein referred to as a
“force majeure” including, without limitation, occurrences such as strike,
lockout, breakdown, accident, order or regulation of or by any governmental
authority, failure of supply or inability, by the exercise of reasonable
diligence, to obtain supplies, parts or employees necessary to perform such
obligation, or war or other emergency. The time within which such obligation
must be performed will be extended for a period of time equivalent to the
number of days of delay from such cause.

 

ARTICLE 24

 

GENERAL PROVISIONS

 

24.1                           Trade
Area Restriction. Notwithstanding anything to the contrary in this
Agreement, neither Manager nor any Affiliate shall acquire, own, manage,
operate or open any hotel as a “Staybridge Suite” hotel nor shall Manager or
any Affiliate authorize a third party to operate or open any hotel as a “Staybridge
Suite” hotel that is within the Restricted Area of any Hotel during its
Restricted Period, unless such hotel (a) is owned or leased by Owner or its
Affiliate; (b) is owned, operated, managed, franchised or under development on
the Effective Date and has been specifically identified in writing at or prior
to the time of the execution of the Purchase Agreement; or (c) is part of an
acquisition by IHG or its Affiliates
of an interest (including an interest as a franchisor) in a chain or group of
not less than ten (10) hotels (such acquisition to occur in a single
transaction or a series of related transactions). The terms of this Section
24.1 shall apply only to “Staybridge Suites” hotels and shall not in any way
restrict the ownership, management, franchising or operation other brands or
flags of any hotels owned or operated by Manager or its Affiliates within the
Restricted Area.

 

52

 

24.2                           Environmental
Matters.

 

(a)                                  Manager
shall not store, spill upon, dispose of or transfer to or from any Hotel any
Hazardous Substance, except in compliance with all Legal Requirements. Manager
shall maintain the Hotels at all times free of any Hazardous Substance (except
in compliance with all Legal Requirements). Manager (i) upon receipt of notice
or knowledge shall promptly notify Purchaser and Owner in writing of any
material change in the nature or extent of Hazardous Substances at any Hotel,
(ii) shall file and transmit to Purchaser and Owner a copy of any Community
Right to Know report which is required to be filed by the Manager with respect
to any Hotel pursuant to SARA Title III or any other Legal Requirements, (iii)
shall transmit to Purchaser and Owner copies of any citations, orders, notices
or other governmental communications received by Manager with respect thereto
(collectively, “Environmental Notice”), which Environmental Notice
requires a written response or any action to be taken and/or if such
Environmental Notice gives notice of and/or presents a material risk of any
material violation of any Legal Requirement and/or presents a material risk of
any material cost, expense, loss or damage, (iv) shall observe and comply with
all Legal Requirements relating to the use, maintenance and disposal of
Hazardous Substances and all orders or directives from any official, court or
agency of competent jurisdiction relating to the use or maintenance or
requiring the removal, treatment, containment or other disposition thereof, and
(v) shall pay or otherwise dispose of any fine, charge or imposition related
thereto.

 

(b)                                 In
the event of the discovery of Hazardous Substances other than those maintained
in accordance with Legal Requirements on any portion of any Site or in any
Hotel during the Term, Manager shall use reasonable efforts promptly (i) clean
up and remove from and about such Hotel all Hazardous Substances thereon, if
appropriate, (ii) contain and prevent any further release or threat of release
of Hazardous Substances on or about such Hotel, and (iii) use good faith
efforts to eliminate any further release or threat of release of Hazardous
Substances on or about such Hotel, and (iv) otherwise effect a remediation of
the problem in accordance with (A) the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq.,
as amended; (B) the regulations promulgated thereunder, from time to time;
(C) all Federal, state and local laws, rules and regulations (now or
hereafter in effect) dealing with the use, generation, treatment, storage,
disposal or abatement of Hazardous Substances; and (D) the regulations
promulgated thereunder, from time to time (collectively referred to as “Environmental
Laws”).

 

(c)                                  To
the extent any service required to be performed under this Section 24.2
or cost incurred under this Section 24.2 is not due to the fault of
Manager or is not performed or incurred in the operations of the Hotels in the
ordinary course, the same shall be governed by Section 11.1; provided,
however, to the extent that Section 11.1 shall apply to such
services or costs, Owner shall be entitled to engage a third party to perform
such services.

 

24.3                           Authorization.
Owner represents that it has full power and authority to execute this Agreement
and to be bound by and perform the terms hereof. Manager represents it 

 

53

 

has full power and authority
to execute this Agreement and to be bound by and perform the terms hereof. On
request, each such party will furnish to the other evidence of such authority.

 

24.4                           Severability.
If any provision of this Agreement shall be held or deemed to be, or shall in
fact be, invalid, inoperative or unenforceable as applied to any particular
case in any jurisdiction or jurisdictions, or in all jurisdictions or in all
cases, because of the conflict of any provision with any constitution or
statute or rule of public policy or for any other reason, such circumstance
shall not have the effect of rendering the provision or provisions in question
invalid, inoperative or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to the extent that such other
provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein and such provision
reformed so that it would be valid, operative and enforceable to the maximum
extent permitted in such jurisdiction or in such case.

 

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

 

24.6                           Formalities.
Any amendment or modification of this Agreement must be in writing signed by
all parties hereto. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original. The captions for each Article are
intended for convenience only.

 

24.7                           Consent to
Jurisdiction; No Jury Trial.

 

(a)                                  Except
as provided in Section 24.19, all actions and proceedings arising out of
or in any way relating to this Agreement shall be brought, heard, and
determined exclusively in an otherwise appropriate federal or state court
located within the State of New York. Except as provided in Section 24.19,
the parties hereby (a) submit to the exclusive jurisdiction of any New York
federal or state court of otherwise competent jurisdiction for the purpose of
any action or proceeding arising out of or relating to this Agreement and (b)
voluntarily and irrevocably waive, and agree not to assert by way of motion,
defense, or otherwise in any such action or proceeding, any claim or defense
that they are not personally subject to the jurisdiction of such a court, that
such a court lacks personal jurisdiction over any party or the matter, that the
action or proceeding has been brought in an inconvenient or improper forum,
that the venue of the action or proceeding is improper, or that this Agreement
may not be enforced in or by such a court. To the maximum extent permitted by
applicable law, each party consents to service of process by registered mail,
return receipt requested, or by any other manner provided by law.

 

54

 

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

 

24.8                           Performance
on Business Days. In the event the date on which performance or payment of
any obligation of a party required hereunder is other than a Business Day, the
time for payment or performance shall automatically be extended to the first
Business Day following such date.

 

24.9                           Attorneys’
Fees. If any lawsuit or arbitration or other legal proceeding arises in
connection with the interpretation or enforcement of this Agreement, the
prevailing party therein shall be entitled to receive from the other party the
prevailing party’s costs and expenses, including reasonable attorneys’ fees
incurred in connection therewith, in preparation therefor and on appeal
therefrom, which amounts shall be included in any judgment therein.

 

24.10                     Section and
Other Headings. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

 

24.11                     Documents.
Throughout the Term, Owner agrees to furnish Manager copies of all notices
relating to real and personal property taxes and insurance statements, all
financing documents (including notes and mortgages) relating to the Hotel and
such other documents pertaining to the Hotels as Manager may request.

 

24.12                     No
Consequential Damages. Except as may be expressly provided herein, in no
event shall either party be liable for any consequential, exemplary or punitive
damages suffered by the other as the result of a breach of this Agreement. Time
is of the essence with respect to this Agreement.

 

24.13                     No
Political Contributions. Notwithstanding anything contained in this
Agreement to the contrary, no money or property of the Hotels shall be paid or
used or offered, nor shall Owner or Manager directly or indirectly use or
offer, consent or agree to use or offer, any money or property of the Hotels
(i) in aid of any political party, committee or organization, (ii) in aid of any
corporation, joint stock or other association organized or maintained for
political purposes, (iii) in aid of any candidate for political office or
nomination for such office, (iv) in connection with any election, (v) for any
political purpose whatever, or (vi) for the reimbursement or indemnification of
any person for any money or property so used.

 

24.14                     REIT
Qualification. Manager shall, as an Operating Cost, take all actions
reasonably requested by Owner or Purchaser as may be necessary to ensure that Purchaser’s
rental income from Owner under the Lease qualifies as “rents from real property”
pursuant to Sections 856(d)(2), 856(d)(8)(B) and 856(d)(9) of the Code; provided,
however, any additional costs or expenses (including internal costs and
expenses) incurred by Manager in complying with such a request shall be borne
by Owner (and 

 

55

 

shall not be an Operating
Cost) to the extent the same together with the costs to Manager referred to in Section
24.16 exceeds $25,000 over the Term in the aggregate.

 

24.15                     Further
Compliance with Section 856(d) of the Code. Throughout the Term (including
the Effective Date), the Manager shall qualify as an “eligible independent
contractor” as defined in Section 856(d)(9)(A) of the Code. To that end,
Manager:

 

(a)                                  shall
not permit wagering activities to be conducted at or in connection with any
Hotel by any person who is engaged in the business of accepting wagers and who
is legally authorized to engage in such business at or in connection with such
Hotel;

 

(b)                                 shall
use reasonable efforts to cause each Hotel to qualify as a “qualified lodging
facility” under Section 856(d)(9)(D) of the Code;

 

(c)                                  shall
not own, directly or indirectly or constructively (within the meaning of
Section 856(d)(5) of the Code), more than thirty five percent (35%) of the
shares of HPT (whether by vote, value or number of shares), and Manager shall
otherwise comply with any regulations or other administrative or judicial
guidance now or hereafter existing under said Section 856(d)(5) of the Code
with respect to such ownership limits; and

 

(d)                                 shall
be actively engaged (or shall, within the meaning of Section 856(d)(9)(F) of
the Code, be related to a person that is so actively engaged) in the trade or
business of operating “qualified lodging facilities” (defined below) for a
person who is not a “related person” within the meaning of Section 856(d)(9)(F)
of the Code with respect to HPT or Owner (“Unrelated Persons”). In order
to meet this requirement, the Manager agrees that it (or any “related person”
with respect to Manager within the meaning of Section 856(d)(9)(F) of the Code)
(i) shall derive at least ten percent (10%) of both its revenue and profit from
operating “qualified lodging facilities” for Unrelated Persons and (ii) shall
comply with any regulations or other administrative or judicial guidance under
Section 856(d)(9) of the Code 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.

 

(e)                                  A
“qualified lodging facility” is defined in Section 856(d)(9)(D) of the Code and
means a “lodging facility” (defined below), unless wagering activities are
conducted at or in connection with such facility by any person who is engaged
in the business of accepting wagers and who is legally authorized to engage in
such business at or in connection with such facility. A “lodging facility” is a
hotel, motel or other establishment more than one-half of the dwelling units in
which are used on a transient basis, and includes customary amenities and
facilities operated as part of, or associated with, the lodging facility so
long as such amenities and facilities are customary for other properties of a
comparable size and class owned by other owners unrelated to HPT.

 

24.16                     Adverse
Regulatory Event. In the event of an Adverse Regulatory Event arising from
or in connection with this Agreement, Owner and Manager shall work together in
good faith to amend this Agreement to eliminate the impact of such Adverse
Regulatory Effect; provided, however, Manager shall have no
obligation to materially reduce its 

 

56

 

rights or materially
increase its obligation under this Agreement, all taken as a whole, or to bear
any costs or expenses (including internal costs and expenses) in excess of
$25,000 in the aggregate over the Term under Section 24.14 and this Section
24.16. For purposes of this Agreement, the term “Adverse Regulatory Effect”
means any time that a law, statute, ordinance, code, rule or regulation imposes
(or could impose in Owner’s reasonable opinion) any material threat to HPT’s
status as a “real estate investment trust” under the Code or to the treatment
of amounts paid to such Purchaser as “rents from real property” under Section
856(d) of the Code. Each of Manager and Owner shall inform the other of any
Adverse Regulatory Event of which it is aware and which it believes likely to
impair compliance of any of the Hotels with respect to the aforementioned
sections of the Code.

 

24.17                     Commercial
Leases. Manager shall not enter into any sublease with respect to any Hotel
(or any part thereof) unless the same has been approved by Purchaser in its sole
and absolute discretion; provided, however, Manager may sublease
or grant concessions or licenses to shops or any other space at a Hotel subject
to the following terms and conditions: (a) subleases and concessions are for
newsstand, gift shop, parking garage, heath club, restaurant, bar or commissary
purposes or similar concessions; (b) such subleases and concessions do not have
a term in excess of lesser of five (5) years or the remaining Term under this
Agreement; (c) such subleases and concessions do not demise, (i) in the
aggregate, in excess of Two Thousand (2,000) square feet of any Hotel, or (ii)
for any single sublease, in excess of Five Hundred (500) square feet of any
Hotel; (d) any such sublease, license or concession to an Affiliate of a Manager
shall be on terms consistent with those that would be reached through
arms-length negotiation; (e) for so long as Purchaser or any Affiliate of
Purchaser shall seek to qualify as a real estate investment trust under the
Code, anything contained in this Agreement to the contrary notwithstanding,
Manager shall not sublet or otherwise enter into any agreement with respect to
a Hotel on any basis such that in the opinion of the Owner the rental or other
fees to be paid by any sublessee thereunder would be based, in whole or in
part, on either (i) the income or profits derived by the business activities of
such sublessee, or (ii) 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 865(d) of the Internal Revenue Code of 1986, as amended, or
any similar or successor provision thereto; (f) such lease or concession will
not violate or affect any Legal Requirement or Insurance Requirement; (g)
Manager shall obtain or cause the subtenant to obtain such additional insurance
coverage applicable to the activities to be conducted in such subleased space
as Owner and any mortgagee under an Authorized Mortgage may reasonably require;
and (b) not less than twenty (20) days prior to the date on which Manager
proposes to enter into any sublease or concession, Manager shall provide a copy
thereof to Owner.

 

24.18                     Nonliability
of Trustees. THE DECLARATION OF TRUST ESTABLISHING PURCHASER, A COPY OF
WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED
WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND,
PROVIDES THAT, AND MANAGER HEREBY AGREES THAT, THE NAME “HPT IHG PROPERTIES
TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION 

 

57

 

COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT
NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF PURCHASER SHALL BE HELD
TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR
CLAIM AGAINST, PURCHASER. ALL PERSONS DEALING WITH PURCHASER, IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF PURCHASER FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.

 

24.19                     Arbitration.

 

(a)                                  Whenever
in this Agreement it is provided that a dispute is to be resolved by an
Arbitration, such dispute shall be finally resolved pursuant to an arbitration
before a panel of three (3) arbitrators who will conduct the arbitration
proceeding in accordance with the provisions of this Agreement and the rules of
the American Arbitration Association. Unless otherwise mutually agreed by Owner
and Manager, the arbitration proceedings will be conducted in New York, New
York. All arbitrators appointed by or on behalf of either party shall be
independent persons with recognized expertise in the operation of hotels of
similar size and class as the Hotels with not less than five (5) years’
experience in the hotel industry. The party desiring
arbitration will give written notice to that effect to the other party,
specifying in such notice the name, address and professional qualifications of
the person designated as arbitrator on its behalf. Within fifteen (15) days
after service of such notice, the other party will give written notice to the
party desiring such arbitration specifying the name, address and professional
qualifications of the person designated to act as arbitrator on its behalf. The
two arbitrators will, within fifteen (15) days thereafter, select a third,
neutral arbitrator. As soon as possible after the selection of the third
arbitrator, and no later than fifteen (15) days thereafter, the parties will
submit their positions on each disputed item in writing to the three
arbitrators. The decision of the arbitrators so chosen shall be given within a
period of twenty (20) days after the appointment of such third arbitrator. The
arbitrators must, by majority vote, agree upon and approve the substantive
position of either Owner or Manager with respect to each disputed item, and are
not authorized to agree upon or impose any other substantive position which has
not been presented to the arbitrators by Manager or Owner. It is the intention
of the parties that the Arbitrator’s rule only on the substantive positions
submitted to them by the parties and the Arbitrators are not authorized to
render rulings which are a compromise as to any such substantive position. A
decision in which any two (2) arbitrators so appointed and acting hereunder
concur in writing with respect to each disputed item shall in all cases be
binding and conclusive upon Owner and Manager and a copy of said decision shall
be forwarded to the parties. The parties request that the Arbitrator assess the
costs and expenses of the Arbitration and their fees against the parties based
on a finding as to which parties substantive positions were not upheld. Otherwise
the fees and expenses of the arbitration will be treated as an Operating Cost
unless otherwise determined by the arbitrators.

 

(b)                                 If
the party receiving a request for Arbitration fails to appoint its arbitrator
within the time above specified, or if the two arbitrators so selected cannot
agree on the selection of the third arbitrator within the time above specified,
then either party, on behalf of both 

 

58

 

parties, may request such
appointment of such second or third arbitrator, as the case may be, by
application to any judge of any court in New York County, New York of competent
jurisdiction upon ten (10) days’ prior written notice to the other party of
such intent.

 

(c)                                  If
there shall be a dispute with respect to whether a party has unreasonably
withheld, conditioned or delayed its consent with respect to a matter for which
such party has agreed herein not to unreasonably withhold its consent, such
dispute shall be resolved by Arbitration.

 

(d)                                 Any
disputes under Sections 2.1 or 7.6 shall be resolved by
Arbitration; provided, however, notwithstanding the foregoing,
Owner shall be entitled to seek and obtain injunctive and other equitable
relief if it believes there has been a breach of Manager’s obligation under
either of said Sections.

 

24.20                     Estoppel
Certificates. Each party to this Agreement shall at any time and from time
to time, upon not less than fifteen (15) days’ prior notice from the other
party, execute, acknowledge and deliver to such other party, or to any third
party specified by such other party, a statement in writing:  (a) certifying that this Agreement is
unmodified and in full force and effect (or if there have been modifications,
that the same, as modified, is in full force and effect and stating the
modifications); (b) stating whether or not to the best knowledge of the
certifying party (i) there is a continuing default by the non-certifying party
in the performance or observance of any covenant, agreement or condition
contained in this Agreement, or (ii) there shall have occurred any event which,
with the giving of notice or passage of time or both, would become such a
default, and, if so, specifying each such default or occurrence of which the
certifying party may have knowledge; (c) stating the date to which
distributions of Operating Profits have been made; and (d) stating such other
information as the non-certifying party may reasonably request. Such statement
shall be binding upon the certifying party and may be relied upon by the
non-certifying party and/or such third party specified by the non-certifying
party as aforesaid, including, without limitation its and its Affiliates’
lenders and any prospective purchaser or mortgagee of any Hotel.

 

24.21                     Confidentiality.

 

(a)                                  The
parties hereto agree that the matters set forth in this Agreement and the
information provided pursuant to the terms hereof are strictly confidential and
each party will make every effort to ensure that the information is not
disclosed to any outside person or entities (including the press) without the
prior written consent of the other party except may be required by law and as
may be reasonably necessary to obtain licenses, permits, and other public
approvals necessary for the refurbishment or operation of the Hotels, or in
connection with financing, proposed financing, sale or proposed sale.

 

(b)                                 No
reference to Manager or to any of its Affiliates will be made in any
prospectus, private placement memorandum, offering circular or offering
documentation related thereto (collectively referred to as the “Prospectus”), issued by Owner or
any of its Affiliates, which is designated to interest potential investors in a
Hotel, unless Manager 

 

59

 

(c)                                  has
previously received a copy of all such references. However, regardless of
whether Manager does or does not so receive a copy of all such references,
neither Manager nor any of its Affiliates will be deemed a sponsor of the
offering described in the Prospectus, nor will it have any responsibility for
the Prospectus, and the Prospectus will so state. Unless Manager agrees in
advance, the Prospectus will not include any trademark, symbols, logos or
designs of Manager or any of its Affiliates.

 

24.22                     Hotel
Warranties. Manager shall be entitled to enforce in the name of Owner any
warranties held by Owner with respect to the Hotels or any portion thereof.

 

60

 

IN WITNESS WHEREOF,
the parties hereto have duly executed and delivered this Agreement effective as
of the day and year first above written.

 

	
   

  	
  OWNER:

  
	
   

  	
   

  
	
   

  	
  HPT TRS IHG-1, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John G. Murray

  	
   

  
	
   

  	
  Name:

  	
   John G. Murray

  	
   

  
	
   

  	
  Title:

  	
   Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MANAGER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTERCONTINENTAL HOTELS GROUP 

  RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Robert G. Gunkel

  	
   

  
	
   

  	
  Name:

  	
  Robert G. Gunkel

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
							

 

61

 

Purchaser in consideration of good and
valuable consideration, joins in the foregoing Agreement to evidence its
agreement to be bound by the terms of Sections 4.1 through and including
4.7 and Articles 15 and 16 thereof subject to the terms of
Section 24.18.

 

	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  HPT IHG PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John G. Murray

  	
   

  
	
   

  	
  Name:

  	
  John G. Murray

  	
   

  
	
   

  	
  Title:

  	
   President

  	
   

  
	
   

  	
   

  
	
   

  	
  Date of Execution: July 1, 2003

  
						

 

62

 

THE FOLLOWING EXHIBITS HAVE BEEN OMITTED AND
WILL BE SUPPLEMENTALLY FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION UPON
REQUEST:

 

	
  Exhibit

  	
   

  	
  Document

  
	
   

  	
   

  	
   

  
	
  A

  	
   

  	
   

  	
  The Sites

  
	
   

  	
   

  	
   

  	
   

  
	
  B

  	
   

  	
   

  	
  Opening Dates

  
	
   

  	
   

  	
   

  	
   

  
	
  C

  	
   

  	
   

  	
  Allocations

  
	
   

  	
   

  	
   

  	
   

  
	
  D

  	
   

  	
   

  	
  Restricted Area

  

 

A-1

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