Document:

<PAGE>

                                                                    Exhibit 10.5

                           ASSET MANAGEMENT AGREEMENT

                                     BETWEEN

                         STRATEGIC HOTEL CAPITAL, L.L.C.

                                    AS CLIENT

                                       AND

                                 SHC DTRS, INC.

                                   AS MANAGER

<PAGE>

                           ASSET MANAGEMENT AGREEMENT

                  THIS ASSET MANAGEMENT AGREEMENT (this "AGREEMENT") is made as
of June __, 2004 by and between STRATEGIC HOTEL CAPITAL, L.L.C., a Delaware
limited liability company (the "CLIENT"), and SHC DTRS, INC., a Delaware
corporation (the "MANAGER").

                                 R E C I T A L S

                  WHEREAS, Client has no employees and wishes to retain Manager
as an independent contractor to provide the Services (as defined below) to
Client for seven hotel properties, in each case under the supervision and at the
direction of Client;

                  WHEREAS, Manager is willing to render such Services to Client
for seven hotel properties, and Client is willing to pay the Asset Management
Fee (as defined below) to Manager on the terms and conditions set forth herein;

                               A G R E E M E N T S

         NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Client and Manager hereby agree as follows:

         1. DEFINITIONS

         For purposes of this Agreement, unless the context clearly indicates
otherwise, the following terms shall have the following meanings:

         (a)  "AFFILIATE" means, with respect to any Person, any other Person
              that, directly or indirectly through one or more intermediaries,
              controls, is controlled by, or is under common control with, such
              Person. For purposes of this definition, the term "CONTROL", as
              used with respect to any Person, means the possession, directly
              or indirectly, of the power to direct or cause the direction of
              the management of such Person, whether through the ownership of
              voting securities, partnership interests or other ownership
              interests, by contract or otherwise. The terms "CONTROLS",
              "CONTROLLING" and "CONTROLLED" have correlative meanings.

         (b)  "APPROVED BUSINESS PLAN" shall have the meaning ascribed to it in
              Section 2.4.

         (c)  "CLIENT" shall have the meaning ascribed to it in the preamble,
              and any permitted successor or assignee.

         (d)  "COMMENCEMENT DATE" shall mean the date of this Agreement.
<PAGE>

         (e)  "CONTROLLING SHAREHOLDER" with respect to a Person shall mean a
              shareholder which possesses, directly or indirectly, the power to
              direct or cause the direction of the management of such Person,
              whether through the ownership of voting securities, partnership
              interests or other ownership interests, by contract or otherwise.

         (f)  "FUNDING" means Strategic Hotel Funding, L.L.C., a Delaware
              limited liability company.

         (g)  "HOTEL" shall mean any of the hotel properties set forth in
              Exhibit A hereto (collectively, the "HOTELS"). Following a Hotel
              Disposition, the term "Hotels" shall be amended to exclude the
              Hotel that is no longer held by Client.

         (h)  "HOTEL DISPOSITION" shall mean a sale, transfer or other
              disposition of a Hotel or any interest in a Hotel, pursuant to
              which direct or indirect control of the Hotel is no longer held
              by Client or an Affiliate thereof.

         (i)  "HOTEL OPERATORS" shall mean the hotel management companies that
              have been engaged by Client to provide property management
              services to the Hotels pursuant to management agreements or
              leases.

         (j)  "HOTEL OPERATOR BUDGET" shall have the meaning ascribed to it in
              Section 2.4(a).

         (k)  "MANAGER" shall have the meaning ascribed to it in the preamble,
              and any permitted successor or assignee.

         (l)  "PARTY" means Client or Manager, as the context requires;
              "PARTIES" means Client and Manager collectively.

         (m)  "PERSON" means any natural person, corporation, partnership,
              trust, limited liability company, unincorporated organization,
              government or any agency or political subdivision, or any other
              entity that may be treated as entity under applicable law.

         (n)  "PROPOSED BUSINESS PLAN" shall have the meaning ascribed to it in
              Section 2.4(a).

         (o)  "REMAINING VALUE" shall mean the sum of the values for each of
              the remaining Hotels as listed in Exhibit A, and shall be
              calculated using the values listed in Exhibit A immediately
              following each Hotel Disposition.

         (p)  "REIT" means Strategic Hotel Capital, Inc., a Maryland
              corporation.

         (q)  "TERM" means the period commencing on the Commencement Date and
              ending on the Termination Date.

                                      -2-
<PAGE>

         (r)  "TERMINATED HOTEL" means any Hotel (or portion thereof) with
              respect to which this Agreement has been terminated pursuant to
              the terms of Article 3. For the avoidance of doubt, each
              Terminated Hotel shall cease to be a Hotel for purposes of this
              Agreement.

         2. ENGAGEMENT OF MANAGER AND MANAGER'S SERVICES

         Section 2.1. Engagement of Manager. Client hereby engages and retains
Manager to render to Client the Services (as defined below) with respect to the
Hotels. Manager hereby accepts such engagement and agrees, during the Term and
on the terms and conditions set forth herein, to render, or to make satisfactory
arrangements for the provision of, such Services at Client's expense (as set
forth herein). Client and Manager acknowledge that Client will retain title,
ownership, and, other than as delegated hereunder, exclusive control of the
Hotels (and any other assets that may be held from time to time by Client), and
that Manager will not acquire title to, or control of, any interest in, or any
rights whatsoever in or with respect to, the Hotels (or such other assets), or
any income, receipts, proceeds, or revenues deriving from any of the foregoing.

         Section 2.2. Services. Client hereby appoints Manager to manage the
day-to-day business of Client, which shall include providing the services set
forth in Exhibit B and such other things as may be necessary or convenient
thereto. Client and Manager acknowledge that Client has retained independent
Hotel Operators to act as managers and provide customary hotel management
services. Manager agrees to monitor such Hotel Operators and advise Client of
the non-performance by any such Hotel Operator of any of its material
obligations under the relevant management agreement. Manager agrees to cooperate
with Client in enforcing the terms of the management agreements. The services
contemplated by this Section 2.2 (including Exhibit B) are referred to in this
Agreement as the "SERVICES". Notwithstanding anything in this Agreement to the
contrary, Manager shall at all times be subject to the control of Client's Board
of Managers in the performance of the Services. Subject to the terms hereof,
Manager is authorized to act for Client in its own name or in the name of
Client, as deemed necessary or advisable by Manager. In no case will the Manager
provide services described in 856(l)(3)(A) of the Internal Revenue Code.

         From time to time after the date hereof, Client agrees to cooperate in
good faith with Manager and take all appropriate action and execute any
documents which may be necessary or reasonably advisable for Manager to perform
the Services contemplated hereunder.

         Section 2.3. Limitation on Manager's Authority. Manager shall not take
or permit to be taken any of the actions set forth in Exhibit C (each, a
"SIGNIFICANT ACTION") without the prior written consent of Client (and Client
shall have the exclusive right, power and authority to take all such Significant
Actions). In addition to the foregoing, if an emergency exists with respect to
which expenditures are in Manager's professional and reasonable determination
necessary for the preservation or the safety of any of the Hotels, for the
safety of the occupants of any of the Hotels, or to avoid the suspension of any
necessary service to any of the Hotels or if the failure to take any such action
would (in Manager's professional and reasonable determination) result in a
material default pursuant to any material contract or agreement to which Client
is a party or would (in Manager's professional and reasonable determination)
have a material adverse effect upon the value of any Hotel, such expenditures
will be made by Manager without the prior approval of Client only to the extent
necessary to remedy such emergency, material default or material adverse effect.
Manager shall give Client prompt written notice of any such action taken
pursuant to the foregoing authorization. Client acknowledges that Manager's
determination as to whether such expenditures are necessary to remedy an
emergency, material default or material adverse effect will, of necessity, be a
matter of judgment, which judgment shall be respected unless it was manifestly
unreasonable under the circumstances.

                                      -3-
<PAGE>

         Whenever this Agreement provides that consent or approval is required
of or acts shall be performed by or at the discretion of Client, all such
consents, approvals and acts are to be made, given, or performed only upon the
prior written consent of the Board of Managers of Client, or any person
designated in writing by the Board of Managers who shall be vested with the
authority of Client, until such time, as any, as Manager shall receive written
notice from Client designating one or more new authorized representatives of
Client.

         Section 2.4. Approved Business Plans.

         (a) Prior to the commencement of Client's fiscal year (but no later
than thirty (30) days following approval of all Hotel Operator Budgets, as
defined below) or more frequently from time to time as Client shall reasonably
request, Manager shall prepare for Client a proposed business plan covering all
of the Hotels (a "PROPOSED BUSINESS PLAN") for the forthcoming fiscal year (or
any other period to which such Proposed Business Plan relates) and shall submit
such Proposed Business Plan to Client. Each Proposed Business Plan shall (i)
incorporate all of the annual business plans and budgets prepared by the Hotel
Operators for each of the Hotels and approved by Client (each such approved
annual business plan and budget, a "HOTEL OPERATOR BUDGET"), and (ii) specify
corporate level expenses. Client shall review the Proposed Business Plan
submitted to it, and may propose such modifications as Client shall deem
necessary or appropriate (other than changes to any Hotel Operator Budget). A
Proposed Business Plan must be approved by Client, Manager (Manager's consent
not to be unreasonably withheld), and to the extent applicable, the relevant
Hotel Operators, to become effective (once approved, an "APPROVED BUSINESS
PLAN"). A Proposed Business Plan shall (i) identify the expenses in respect of
its implementation and (ii) include a detailed operating budget (monthly income
and expense), cash flow projections and a capital expenditure plan for each of
the Hotels. From time to time, if a Hotel Operator Budget is revised and such
revision is approved by Client, Client may revise or request that Manager revise
all or any portion of an Approved Business Plan to reflect the changes to the
Hotel Operator Budget.

         (b) Client and Manager agree that the Hotel Operator Budgets for fiscal
year 2004 shall be deemed approved by Client as of the date hereof and shall be
incorporated into the Proposed Business Plan for fiscal year 2004. For purposes
of approving the Proposed Business Plan for fiscal year 2004, Client shall have
the right to approve corporate level expenses only.

         (c) Client acknowledges that with regard to any annual business plan
and budget prepared by a Hotel Operator for a Hotel (each, a "Proposed Hotel
Operator Budget"), Client may have rights of approval under the management
agreements depending on whether the budget relates to capital expenditures or
operations, and that the management agreements specify time frames during which
such budget must be approved or disapproved during each fiscal year and the
consequences of disapproval. Manager shall promptly submit to Client each
Proposed Hotel Operator Budget that it receives and Client shall respond so as
to permit Manager to make Client's views on such budgets known to the Hotel
Operators within the time frames required by the management agreements. If
Client fails to timely respond to Manager within the time required for Manager
to make its views known to the relevant Hotel Operator, such Proposed Hotel
Operator Budget as submitted by Manager to Client shall be deemed approved.
Notwithstanding the foregoing, so long as Client timely responds to Manager
within the time required for Manager to make its views known to the relevant
Hotel Operator, as between Client and Manager, Client shall have the final
decision making authority to approve or disapprove each Proposed Hotel Operator
Budget. Each Proposed Hotel Operator Budget which is approved (or deemed
approved) shall form a component of the Approved Business Plan.

                                      -4-
<PAGE>

         (d) In the event that the Proposed Hotel Operator Budget for any Hotel
is not approved by Client and therefore, Hotel Operator and Client are unable to
agree to an annual business plan and budget, the Proposed Business Plan for any
fiscal year submitted by Manager shall include the annual business plan and
budget required under the terms of the relevant management agreement for such
Hotel while Hotel Operator and Client remain in disagreement, and once the
annual business plan and budget for such Hotel is approved and becomes a "Hotel
Operator Budget", the Proposed Business Plan or Approved Business Plan, as the
case may be, shall be revised to reflect the Hotel Operator Budget for such
Hotel.

         Section 2.5. Duty of Care.

(a)      In carrying out its duties and performing the Services and observing
         and performing its covenants and obligations under this Agreement,
         Manager shall at all times act honestly, in good faith, and in the
         best interests of Client and the Hotels, and in accordance with and
         subject to the provisions of this Agreement.

(b)      Manager will commit sufficient resources and funds to enable it to
         perform all of its duties and obligations required under this
         Agreement in a timely, professional, and cost-efficient manner,
         provided, that Client shall pay the Asset Management Fee and reimburse
         Manager for all Reimbursable Expenses in a timely manner.

(c)      Manager shall keep Client informed of all matters that are material to
         the interests of Client.

(d)      Manager shall exercise the diligence, skill and care in performing the
         Services that a prudent asset manager would exercise in comparable
         circumstances, with a view to ensuring compliance by Client with
         Client's contractual obligations, including loan agreements and other
         financing documents.

(e)      In carrying out its duties under this Agreement, Manager shall not
         enter into any transactions with Affiliates of Manager at the expense
         of Client without the prior written consent of Client.

                                      -5-
<PAGE>

         Section 2.6. Books and Records.

(a)      At all times during the Term, Manager shall maintain at its principal
         place of business, or at such other location as Client may reasonably
         approve, a complete and accurate set of books and records related to
         the Hotels, provided, however, that some of these books and records may
         be held by the Hotel Operators or any other advisor appointed by
         Client.

(b)      Manager shall make the files, books, and records maintained by Manager
         on behalf of Client available to Client, and any lender that is
         providing financing to Client or Client's Affiliates and/or any other
         Person designated by Client, as Client may require from time to time or
         as an applicable loan agreement may require.

(c)      The records and accounts maintained by Manager on behalf of Client
         shall be prepared in accordance with generally accepted accounting
         principles in the United States and shall accurately reflect all items
         of income and expense allocable to the management, servicing and
         disposition of the Hotels, as well as such other information that
         Client may reasonably require.
(d)      At all times during the Term and for a further period of three (3)
         years following the Termination Date, Client, any lender that is
         providing financing to Client or Client's Affiliates, and/or any other
         Person designated by Client, and their duly authorized agents,
         representatives, or employees may, at such reasonable times as Client,
         such lender, or such other Person may determine, inspect, audit, and
         copy any of the books, records, files, reports, and other materials
         maintained by Manager on behalf of Client under this Agreement that
         relate to Client or that otherwise pertain to the Hotels or to
         Manager's performance under this Agreement. After the Termination Date,
         Manager may satisfy this obligation by providing all such files to
         Client.

         Section 2.7. Fidelity Bonds. Manager has obtained, and will maintain at
all times during the Term, with reputable surety or insurance companies the
insurance specified in Schedule 1, covering all officers, employees, or other
persons having access to (or acting in any capacity with respect to) any of
Client's funds, documents, or assets. Such insurance shall insure and protect
Client against loss resulting from fraud, theft and dishonest and other wrongful
acts as well as insure and protect Client against any actual or alleged breach
of duty, neglect, error, misstatement, misleading statement or omission
committed in the conduct of Manager's business. Manager shall cause to be
delivered to Client a certificate of insurance that provides that should the
insurance policies be cancelled prior to their expiration dates, the insurer
will provide at least thirty (30) days written notice to Client. Client shall
also be notified promptly in writing of all draws or claims against the
insurance policies related to this Agreement.

         3. TERM AND TERMINATION

         Section 3.1. Term. The initial term of this Agreement shall commence on
the Commencement Date and shall expire on the last day of the calendar month in
which the fifth (5th) anniversary of the Commencement Date occurs. Thereafter,
this Agreement shall automatically renew annually unless either Party gives
ninety (90) days' prior written notice to the other Party electing not to extend
this Agreement for a renewal term. The date upon which this Agreement actually
terminates, whether by expiration of the term or pursuant to Sections 3.2, 3.3,
3.4, 3.5, or 3.6 below, is referred to as the "TERMINATION DATE".

                                      -6-
<PAGE>

         Section 3.2. Termination for Manager Event of Default. If at any time
during the Term any Manager Event of Default (as defined below) shall occur,
Client shall have the right to terminate this Agreement. Client's termination
right shall be exercisable by the delivery to Manager of a written notice
specifying the event or circumstance that resulted in the occurrence of a
Manager Event of Default (a "MANAGER DEFAULT NOTICE"). This Agreement shall
terminate immediately with effect from the date of delivery to Manager of a
Manager Default Notice. "MANAGER EVENT OF DEFAULT" means that Manager or any
Controlling Shareholder of Manager (i) is the subject of a criminal indictment
or an equivalent criminal proceeding before any court for a felony or for a
crime involving moral turpitude or dishonesty (or an attempt of dishonesty) or
for criminal activity that is punishable by imprisonment, (ii) is or becomes
bankrupt or insolvent, (iii) commits gross negligence, fraud, or willful
misconduct with regard to the affairs of Client, any Affiliate of Client, or any
Hotel, or (iv) is in material breach or default under this Agreement.

         Section 3.3. Termination for Manager Change-in-Control. If at any time
during the Term any Manager Change-in-Control (as defined below) shall occur,
Client shall have the right to terminate this Agreement. Client's termination
right shall be exercisable by the delivery to Manager of a written notice
specifying the event or circumstance that resulted in the occurrence of a
Manager Change-in-Control (a "CHANGE-IN-CONTROL NOTICE"). This Agreement shall
terminate with effect thirty (30) days from the date of delivery to Manager of a
Change-in-Control Notice. "MANAGER CHANGE-IN-CONTROL" means (i) a material
change in the senior management of Manager, Funding, or the REIT (and/or any
Person that controls Manager, Funding, or the REIT), which change, in Client's
reasonable judgment, is detrimental to the provision of the Services to Client
under this Agreement, (ii) any transaction or series of transactions, after the
Commencement Date, in which any Person (or any two or more Persons acting in
concert) acquires (or acquire), directly or indirectly, a 50% or greater
interest in Manager, Funding or the REIT (and/or in any Person that controls
Manager, Funding or the REIT), (iii) a merger or consolidation or series of
related mergers or consolidations involving any one or more of Manager, Funding
or the REIT in which such person is not the surviving entity (unless the
indirect ownership and control of Manager, Funding or the REIT, as applicable,
is unchanged after such merger or consolidation or series of related mergers or
consolidations, provided that a merger or consolidation or series of mergers or
consolidations which results in not more than a 20% change in ownership and does
not otherwise result in a "Change of Control" (as such term is defined in that
certain Credit Agreement dated as of June __, 2004 (the "REVOLVER"), among
Funding, as the Borrower, various financial institutions, as the Lenders, and
Deutsche Bank Trust Company Americas, as the Administrative Agent) will not
cause a Manager Change-in-Control), or (iv) the sale, transfer, or other
disposition of all or substantially all of the assets of Manager, Funding or the
REIT or the liquidation or dissolution of Manager, Funding, or the REIT. For
purposes of clause (iii) above, the term "Change of Control" as defined in the
Revolver is incorporated by reference herein and as if fully set forth herein,
and shall survive repayment or other discharge of any and all loans under the
Revolver.

         Section 3.4. Discretionary Termination. At any time after the second
anniversary of the Commencement Date, Client may elect, in Client's sole
discretion and for any reason, to terminate this Agreement by delivering written
notice to Manager (a "DISCRETIONARY TERMINATION NOTICE") specifying the date of
termination of this Agreement (which date shall be not less than ninety (90)
days immediately following the date of the Discretionary Termination Notice).
This Agreement shall terminate on the date of termination set forth in the
Discretionary Termination Notice. If Client terminates this Agreement pursuant
to this Section 3.4 and the Discretionary Termination Notice is given prior to
the third anniversary of the commencement date, Client shall pay to Manager on
the Termination Date a one-time termination fee equal to three times the monthly
Asset Management Fee in force at the time of delivery of the Discretionary
Termination Notice. If Client terminates this Agreement pursuant to this Section
3.4 and the Discretionary Termination Notice is given after the third
anniversary of the Commencement Date, there shall be no termination fee.

                                      -7-
<PAGE>

         Section 3.5. Termination for Client Event of Default. If at any time
during the Term a Client Event of Default (as defined below) shall occur,
Manager shall have the right to terminate this Agreement. Manager's termination
right shall be exercisable by the delivery to Client of a written notice
specifying the event or circumstances that resulted in the occurrence of a
Client Event of Default (a "CLIENT DEFAULT NOTICE"). This Agreement shall
terminate immediately with effect from the date of delivery to Client of a
Client Default Notice. "CLIENT EVENT OF DEFAULT" means that Client or any
Controlling Shareholder of Client (i) is the subject of a criminal indictment or
an equivalent criminal proceeding before any court or tribunal for a felony or
for a crime involving moral turpitude or dishonesty (or an attempt of
dishonesty) or for criminal activity that is punishable by imprisonment, (ii) is
or becomes bankrupt or insolvent, or (iii) is in material breach or default
under this Agreement.

         Section 3.6. Termination on Disposition.

         (a) This Agreement shall terminate automatically with respect to any
Hotel upon: (i) the sale or other disposition by Client of such Hotel or portion
of such Hotel, and/or (ii) expropriation by a governmental authority for at
least thirty (30) days with respect to such Hotel or a material portion of such
Hotel, and/or (iii) the demolition or destruction of more than 25% of such
Hotel; provided, that Client shall have given Manager at least thirty (30) days
prior written notice of such event. For the avoidance of doubt, in the event
that this Agreement has terminated with respect to each Hotel pursuant to this
Section 3.6(a), but not with respect to Client pursuant to Section 3.6(b) below,
this Agreement will remain in effect between Manager and Client, and Client will
continue to be obligated to pay the Asset Management Fee determined pursuant to
Section 5(a) below.

         (b) This Agreement shall terminate automatically with respect to Client
and all of the Hotels upon: (i) the sale or other disposition of all of the
membership or other interests in Client and/or (ii) the sale or other
disposition by Client of all of the Hotels; provided, that Client shall have
given Manager at least thirty (30) days prior written notice of such event;
provided, further, that no termination pursuant to this Section 3.6(b) shall be
effective prior to the first anniversary of the Commencement Date.

         Section 3.7. Rights on Termination.

         (a) From and after the Termination Date and without prejudice to any
remedy available under applicable law, all rights and obligations of the Parties
under this Agreement shall terminate other than in respect of: (i) amounts
accrued and payable but not yet paid by Client to Manager under this Agreement,
(ii) Manager's obligations pursuant to Section 2.6, (iii) breaches of Article 6
occurring prior to the Termination Date, (iv) indemnity obligations provided in
Article 7 and (v) the obligations set forth in this Section 3.7.

                                      -8-
<PAGE>

         (b) Following a termination pursuant to this Agreement, Manager, as
directed by Client, either will immediately deliver to Client all documents,
files, books, papers, computer files and records and accounts relating to Client
and the relevant Terminated Hotels or otherwise held by Manager on behalf of
Client (the "RECORDS") or will hold the Records for up to three (3) years, as
Client shall direct. Manager may satisfy this obligation by providing all such
files to Client. For avoidance of doubt, all Records shall belong exclusively to
Client.

         (c) Following a termination pursuant to this Agreement, Client and
Manager will cooperate with each other to effect an efficient and smooth
transition of responsibility with respect to the relevant Terminated Hotels and
Client.

         (d) Within twenty (20) days following a termination pursuant to this
Agreement, Manager shall account for and transmit to Client all of the funds in
the accounts maintained by Manager related to the relevant Terminated Hotels or
belonging to Client with respect thereto.

         (e) Following a termination of this Agreement pursuant to Section 3.6,
Client shall reimburse Manager for post-closing expenses that relate to Hotel
Dispositions occurring on or prior to the Termination Date and are incurred by
Manager within 90 days following the Termination Date or for such longer period
as the contract related to such Hotel Dispositions may otherwise require Client
to act.

         4. EXPENSES; BANK ACCOUNTS. Manager shall pay, without reimbursement
from Client, all salaries of officers and employees of Manager and overhead
expenses, including, without limitation, rent, electricity, telephone and
general office expenses incurred by Manager in the ordinary course of rendering
the Services. Except as otherwise set forth herein, Client shall be solely
responsible for funding all amounts required in connection with the ownership,
operations, financing and holding of the Hotels, and Manager shall not be
required to pledge its credit in connection with the Services rendered
hereunder. Client and its subsidiaries shall bear all other reasonable and
necessary out of pocket expenses ("REIMBURSABLE EXPENSES") incurred by or on
behalf of Client or its subsidiaries in the conduct of the business of the
Hotels as provided for herein, including, without limitation, (i) fees and
expenses of legal counsel, tax counsel, tax accountants, financial consultants,
engineers or other third-party advisers or consultants with respect to the
Services; (ii) appraisal costs, brokerage fees and commissions, fees and
expenses of custodians or depositories appointed for the safekeeping of Client's
property, and all other expenses incurred in connection with financing, holding
and disposing of property of Client; (iii) accounting, bookkeeping, auditing and
other similar expenses (other than those services provided by Manager and its
personnel); (iv) expenses of preparing, printing and distributing reports and
other documents to be distributed to Client; (v) expenses relating to reporting
to any governmental agency; (vi) funding working capital, capital expenditures
or other funds at the Hotels; (vii) costs associated with post-closing
documentation or pro rations with respect to Terminated Hotels; (viii)
reasonable travel and other business related expenses of Manager related to the
Services; (ix) costs to retain a transfer agent for the investors in Client and
its affiliates and (x) all other similar costs and expenses; provided, however,
that Manager shall obtain Client's pre-approval for any expense in excess of
$25,000, provided, further, that such pre-approval may be granted by approval of
the Approved Business Plan, or, to the extent not contemplated therein, by means
of a separate written approval. Manager shall maintain accurate records of the
foregoing expenses and shall provide evidence of such expenses to Client upon
request. Manager shall pay such Reimbursable Expenses directly from the bank
accounts of Client or its subsidiaries, or, if Manager shall pay such
Reimbursable Expenses from its own accounts, Client shall reimburse Manager for
Reimbursable Expenses within thirty (30) days of Client's receipt of Manager's
written request for reimbursement. Client shall ensure that Manager is a
signatory on all bank accounts as may be necessary for Manager to receive and
disburse funds from the Hotels in accordance with the Approved Business Plan.

                                      -9-
<PAGE>

         5. ASSET MANAGEMENT FEE

         (a) For the Services provided and to be provided by Manager pursuant to
this Agreement, Client shall pay Manager an asset management fee (the "ASSET
MANAGEMENT FEE") determined as follows:

               (i)  until the first anniversary of the Commencement Date and
                    thereafter until the occurrence of a Hotel Disposition (if
                    no prior Hotel Disposition has occurred), the Asset
                    Management Fee shall be $416,666.67 per month (totaling
                    $5,000,000 per year);

               (ii) thereafter, and adjusted upon each subsequent Hotel
                    Disposition, the monthly Asset Management Fee shall be
                    one-twelfth (1/12th) of the greater of (A) 50 basis points
                    (0.50%) of the Remaining Value of the Hotels, provided that
                    such amount shall not exceed $5,000,000 per year, and (B)
                    $1,000,000.

         (b) The Asset Management Fee shall be payable monthly, in arrears, on
the last day of each calendar month, provided that if the last day of the
calendar month is not a Business Day, then the next subsequent Business Day. If
this Agreement is not in effect for the entire month, the Asset Management Fee
shall be adjusted to reflect the proportion of days during the month the
Agreement is in effect. If one or more Hotel Dispositions occur between monthly
payments of the Asset Management Fee affecting the rate of the Asset Management
Fee, then the Asset Management Fee payable at the end of the calendar month
shall be adjusted to reflect the proportion of days during the month each rate
is in effect.

         6. REPRESENTATIONS, WARRANTIES AND COVENANTS

         Section 6.1. Representations, Warranties and Covenants of Manager.
Manager (and each Affiliate of Manager that performs Services that would
otherwise be provided by Manager under this Agreement) represents, warrants, and
covenants (acknowledging that Client has relied on each such representation,
warranty, and covenant in entering into this Agreement) as follows:

                                      -10-
<PAGE>

         (a) Manager is a company duly organized, validly existing, and in good
standing under the laws of Delaware and is duly qualified to carry on business
under the laws applicable to it in each jurisdiction where it carries on
business. No authorization, consent, approval, license or exemption under any
law, rule, or regulation is required by Manager to enter into and perform its
obligations under this Agreement.

         (b) The execution, delivery, and performance of this Agreement have
been duly authorized by all necessary corporate action by Manager.

         (c) Manager has full right, power, and authority to enter into and
perform its obligations under this Agreement and has full power and authority to
carry on its business as now conducted and as presently proposed to be
conducted.

         (d) Manager's performance of the Services shall be in full compliance
with all applicable laws.

         (e) This Agreement is a valid and legally binding obligation of Manager
and is enforceable against Manager in accordance with its terms (except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of equity), and
the execution, delivery, and performance of this Agreement by Manager does not
and will not violate any agreement binding on Manager or its principals.

         Section 6.2. Representations and Warranties of Client. Client
represents and warrants (acknowledging that Manager has relied on each such
representation and warranty in entering into this Agreement) as follows:

         (a) Client is a company duly organized, validly existing, and in good
standing under the laws of Delaware and is duly qualified to carry on business
under the laws applicable to it in each jurisdiction where it carries on
business. No authorization, consent, approval, license, or exemption under any
law, rule, or regulation is required by Client to enter into and perform its
obligations under this Agreement.

         (b) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary limited liability company action by Client.

         (c) Client has full right, power, and authority to enter into and
perform its obligations under this Agreement and has full power and authority to
carry on its business as now conducted and as presently proposed to be
conducted.

         (d) This Agreement is a valid and legally binding obligation of Client
and is enforceable against Client in accordance with its terms (except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of equity), and
the execution, delivery, and performance of this Agreement by Client does not
and will not violate any agreement binding on Client.

                                      -11-
<PAGE>

         Section 6.3. Continuing Representations. Manager and Client agree that
each of the provisions of this Article 6 shall be a continuing representation,
warranty, and covenant of Manager and Client during the Term, and Manager and
Client shall take all actions as shall from time to time be necessary to cure
any breach or violation by such Person and to obtain any authorizations,
consents, approvals and clearances in order that such representations,
warranties and covenants by it shall be true and correct at all times during the
foregoing period.

         7. INDEMNIFICATION

         Section 7.1. Indemnification by Client. Manager and its employees,
agents, shareholders, officers, partners, members and Affiliates, together with
their respective heirs, executors and administrators (individually, an
"INDEMNITEE") shall each, to the full extent permitted by law, be indemnified
and held harmless by Client from and against any and all losses, costs, damages,
liabilities, expenses (including legal fees and expenses and the cost of any
investigation or preparation), judgments, fines, settlements and other amounts
arising from or incurred or imposed upon such Indemnitee in connection with any
claims, demands, actions, suits or other proceedings (whether civil, criminal,
administrative or investigative) and any appeal thereof in which such Indemnitee
may be involved, or threatened to be involved, as a party or otherwise by reason
of such Indemnitee's position or capacity pursuant to this Agreement or which
relates to Client, its property, business or affairs, or by reason of any action
or omission or alleged action or omission by such Indemnitee in such position or
capacity, whether or not such Indemnitee remains in the position or capacity
pursuant to which such Indemnitee became entitled to indemnification under this
Section 7.1, at the time any such loss, cost, damage, liability, expense,
judgment, fine, settlement or other amount is paid or incurred (including legal
fees), and regardless of whether such claim, demand, action, suit or other
proceeding is brought, made or threatened by a third party, by Client, or
otherwise by or on behalf of Client, if such Indemnitee's action did not
constitute willful or wanton misconduct, fraud or gross negligence as determined
by a court of competent jurisdiction. Provided such judgment, order, settlement
or its equivalent does not so hold, the termination of a proceeding by judgment,
order, settlement or its equivalent, shall not, of itself, create a presumption
that any Indemnitee's actions constituted willful or wanton misconduct, fraud or
gross negligence.

         Section 7.2. Indemnification by Manager. Client and its employees,
agents, shareholders, officers, partners, members and Affiliates, together with
their respective heirs, executors and administrators (individually, a "CLIENT
INDEMNITEE") shall each, to the full extent permitted by law, be indemnified and
held harmless by Manager from and against any and all losses, costs, damages,
liabilities, expenses (including legal fees and expenses and the cost of any
investigation or preparation), judgments, fines, settlements and other amounts
arising from or incurred or imposed upon such Client Indemnitee in connection
with any claims, demands, actions, suits or other proceedings (whether civil,
criminal, administrative or investigative) and any appeal thereof in which such
Client Indemnitee may be involved, or threatened to be involved, as a party or
otherwise by reason of the Manager's willful or wanton misconduct, fraud or
gross negligence as determined by a court of competent jurisdiction. Provided
such judgment, order, settlement or its equivalent does not so hold, the
termination of a proceeding by judgment, order, settlement or its equivalent,
shall not, of itself, create a presumption that Manager's actions constituted
willful or wanton misconduct, fraud or gross negligence.

                                      -12-
<PAGE>

         Section 7.3. The indemnification provided by this Article 7 shall be in
addition to any other rights to which Indemnitees or Client Indemnitee may be
entitled under any agreement, as a matter of law, or otherwise.

         8. Notices. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered (a) on the date personally delivered, as evidenced by an executed
receipt, (b) two business days after its delivery by certified mail, return
receipt requested, (c) one business day after deposit with a nationally
recognized overnight courier or (d) one business day following delivery by
facsimile provided a confirmation is obtained and provided further a duplicate
of such item is furnished in accordance with (a), (b) or (c) above within two
business days after its delivery by facsimile, if addressed to the respective
Parties as follows:

         If to Client, each of:

         Strategic Hotel Capital, L.L.C.
         c/o Goldman, Sachs & Co.
         100 Crescent Court
         Suite 1000
         Dallas, Texas 75201
         Attn: Todd Giannoble
         Facsimile: (214) 855-6305

         and

         Strategic Hotel Capital, L.L.C.
         c/o Prudential Investments
         8 Campus Drive
         Parsippany, New Jersey 07054
         Attn: Rick Romano
         Facsimile: (973) 734-1475

         If to Manager:

         SHC DTRS, Inc.
         c/o Strategic Hotel Capital, Inc.
         77 West Wacker Drive
         Suite 4600
         Chicago, Illinois 60601
         Attn.:  General Counsel
         Facsimile:  (312) 658-5799

Each of Manager and Client may change its address by giving notice in writing to
the other Party stating its new address. Commencing on the tenth (10th) day
after giving such notice, such newly designated address shall be such Party's
address for purposes of all notices or other communications required or
permitted to be given pursuant to this Agreement.

                                      -13-
<PAGE>

         9. Assignment.

         Section 9.1. Assignment by Client. Client may not assign its rights or
obligations under this Agreement in whole or in part without the prior written
consent of Manager, which consent may be withheld in Manager's sole and absolute
discretion. Notwithstanding the foregoing, Client may dispose of any Hotel or
Hotels or any interest in a Hotel or Hotels pursuant to a Hotel Disposition
without the consent of Manager, in which event this Agreement shall terminate
solely with respect to such Hotel or Hotels.

         Section 9.2. Assignment by Manager. Manager may not assign its rights
or obligations under this Agreement in whole or in part without the prior
written consent of Client, which consent may be withheld in Client's sole and
absolute discretion. Notwithstanding the foregoing, without Client's consent,
Manager may assign its rights to receive payment of the Asset Management Fee
from Client and Manager may delegate any or all of its obligations under this
Agreement to any Affiliate of Manager provided that Manager shall remain liable
for the performance of such obligations.

         10. GENERAL

         Section 10.1. No Exclusivity. Manager shall not be bound to perform the
Services exclusively for Client and may perform services, whether similar to the
Services performed for Client or otherwise, for itself or for any other entity.

         Section 10.2. Disclosure. The matters set forth in this Agreement and
all statements, reports, projections, and other information or data that is
marked "confidential" ("CONFIDENTIAL INFORMATION") and provided by a Party in
connection with the performance of its obligations under this Agreement are
strictly confidential and each party will make every effort to ensure that
Confidential Information is not disclosed to any Person without the prior
written consent of the other Party; provided, however, that each of the Parties
shall be permitted to disclose this Agreement or such facts regarding this
Agreement as may be required by law or regulation, including rules of the
Securities and Exchange Commission, or to the extent disclosure may be advised
by counsel to comply with any such law or regulation.

         Section 10.3. Entire Agreement. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter hereof.

         Section 10.4. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

         Section 10.5. Limitation of Liability. Notwithstanding anything to the
contrary contained herein, the liability of Client hereunder shall be limited to
the assets of Client and no member of Client or any of their Affiliates or their
unaffiliated companies, officers, directors, shareholders or any other Person,
disclosed or undisclosed, shall be personally liable hereunder. Notwithstanding
anything to the contrary contained herein, the liability of Manager hereunder
shall be limited to the assets of Manager and those of its parent company,
Strategic Hotel Funding, L.L.C., and no Affiliate of Manager (other than
Strategic Hotel Funding, L.L.C.) or its unaffiliated companies, officers,
directors, shareholders or any other Person, disclosed or undisclosed, shall be
personally liable hereunder.

                                      -14-
<PAGE>

         Section 10.6. Manager as Independent Contractor. For all purposes of
this Agreement, Manager shall be an independent contractor and not an employee
or dependent agent of Client, and nothing in this Agreement shall be construed
as making Client a co-venturer with Manager or any Affiliate of Manager. If
Manager executes any third-party agreement on behalf of Client with respect to
any matter, Manager shall execute such third-party agreement, "SHC DTRS, Inc.,
on behalf of Strategic Hotel Capital, L.L.C." To the extent Client negotiates
any third party agreement which shall be signed by Manager on behalf of Client,
Client shall use commercially reasonable efforts to include a provision in such
third party agreement stating, in substantially similar terms, that "Manager is
executing this agreement on behalf of Client and not as a principal, and Manager
shall have no personal liability with respect to the foregoing."

         Section 10.7. No Waiver. No consent or waiver, express or implied, by a
Party of any breach or default by any other Party in the performance by such
other Party of its obligations under this Agreement shall be deemed or construed
to be a consent or waiver to or of any other breach or default in the
performance by such other Party of the same or any other obligation of such
other Party under this Agreement. Failure on the part of a Party to complain of
any act or failure to act of another Party or to declare another Party in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such first mentioned Party of its rights under this Agreement.

         Section 10.8. Further Assurances. The Parties agree to execute,
acknowledge, deliver, file and record such further certificates, amendments,
instruments, powers of attorney and documents, and to do all such other acts and
things, as may be required by law or as, in the reasonable judgment of any other
Party, may be necessary or advisable to carry out the intent and purpose of this
Agreement.

         Section 10.9. Successors and Assigns. All of the terms and provisions
of this Agreement shall be binding upon the Parties and their respective
successors and assigns, but shall inure to the benefit of and be enforceable by
the successors and assigns of the Parties only to the extent that they are
permitted successors and permitted assigns pursuant to the terms of this
Agreement, and only if such permitted successors or permitted assigns
contractually agree with the other Parties to be bound by the obligations of the
assigning Party under this Agreement.

         Section 10.10. Amendments. This Agreement may not be modified, changed,
or amended except with the prior written consent of Client and Manager.

         Section 10.11. Severability. If any term or provision of this Agreement
is finally held to be invalid, illegal or unenforceable, (x) the remaining terms
and provisions of this Agreement shall be unimpaired and (y) the invalid,
illegal, or unenforceable term or provision shall be deemed replaced by a term
or provision that is legal, valid, and enforceable and that comes closest to
expressing the intention of the illegal, invalid, or unenforceable term or
provision.

                                      -15-
<PAGE>

         Section 10.12. Remedies Not Exclusive. The rights available to the
Parties under this Agreement and at law shall be deemed to be several and not
dependent on each other and each such right shall be accordingly construed as
complete in itself and not by reference to any other such right. Any one or more
and/or any combination of any such rights may be exercised by a Party from time
to time and no such exercise shall exhaust the right or preclude the other
Parties from exercising any one or more of such rights or combinations of rights
from time to time thereafter or simultaneously. Notwithstanding the foregoing,
the indemnity obligations set forth in Section 7 hereof shall in all events
govern the indemnity obligations of each Party to the other Party.

         Section 10.13. Subordination. Manager acknowledges and agrees that any
payment due to Manager under this Agreement shall be in all respects subordinate
(to the extent required by the relevant lender) to the payment obligations set
forth in any financing agreements (as such agreements may be amended from time
to time) entered into on or after the Commencement Date by Client and/or
Client's Affiliate(s), and Manager shall execute and deliver, promptly upon
request by Client, all subordination agreements and other instruments or
documents that may be required by Client (or any lender to Client and/or any
lender to Client's Affiliate(s)) to evidence or effectuate such subordination.
For the avoidance of doubt, the Parties acknowledge that the obligations of
Client hereunder are solely the obligations of Client and not of its
subsidiaries.

         Section 10.14. Applicable Law. This Agreement shall be governed by, and
shall be construed in accordance with, the laws of the State of New York,
without regard to conflict of law provisions thereof.

         Section 10.15. Arbitration. Except as otherwise expressly provided, in
the event a dispute should arise concerning the interpretation or application of
any of the provisions of this Agreement, the Parties agree that the dispute
shall be submitted to arbitration by the American Arbitration Association under
its then prevailing rules. The arbitration tribunal shall be formed of three (3)
arbitrators each of which shall have at least five (5) years' experience in
hotel operation, management or ownership, one (1) to be appointed by each of
Client and Manager and the third (3rd) to be appointed by the American
Arbitration Association. The arbitration shall take place in Chicago, Illinois
and shall be conducted in English. The arbitration award shall be final and
binding upon the Parties and subject to no appeal, and shall deal with the
question of costs of arbitration and all matters related thereto. Judgment upon
the award rendered may be entered into any court having jurisdiction, or
applications may be made to such court for an order of enforcement. Any
arbitration under this Section 10.15 shall be submitted within three (3) months
following the notice which triggers the arbitration, and shall be concluded
within one (1) year thereafter. In the event either of the foregoing deadlines
are missed, either Party may proceed to commence a court proceeding to resolve
the dispute.

         Section 10.16. No Third-Party Rights. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than the Parties
any legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the Parties
and their successors and permitted assigns.

                                      -16-
<PAGE>

         Section 10.17. Headings and Captions. The headings and captions
contained in this Agreement are for convenience only and do not constitute part
of this Agreement and shall not affect in any way the construction, meaning, or
interpretation of this Agreement.

                              [Signatures follow.]

                                      -17-
<PAGE>

                  IN WITNESS WHEREOF, Manager and Client have executed this
Agreement as of the date and year first above written.

                                       MANAGER:

                                       SHC DTRS, INC.

                                       By: _______________________________
                                            Name:
                                            Title:

                                       CLIENT:

                                       STRATEGIC HOTEL CAPITAL, L.L.C.

                                       By: _______________________________
                                            Name:
                                            Title:<PAGE>

                                                                    Exhibit 10.6

                    INDEMNIFICATION AND SEPARATION AGREEMENT

         INDEMNIFICATION AND SEPARATION AGREEMENT (this "Agreement"), dated June
__ 2004, between Strategic Hotel Capital, L.L.C., a Delaware limited liability
company ("SHC LLC"), and Strategic Hotel Funding, L.L.C., a Delaware limited
liability company ("SHC Funding").

                                    RECITALS

         WHEREAS, the Board of Managers of SHC LLC has determined that it is in
the best interests of SHC LLC and its members to complete an initial public
offering (the "IPO") of shares of Strategic Hotel Capital, Inc., a Maryland
corporation ("SHC Inc."), which will be the managing member of SHC Funding;

         WHEREAS, as a result of the IPO and the Formation and Structuring
Transactions (as defined below), SHC Funding will no longer be a wholly-owned
subsidiary of SHC LLC; and

         WHEREAS, in connection with the foregoing, the parties desire to set
forth certain agreements regarding releases, indemnification and cooperation
following separation.

         NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, SHC LLC and SHC Funding agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         For the purpose of this Agreement the following capitalized terms shall
have the meanings specified herein.

         "Action" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international governmental authority or any arbitration or mediation
tribunal.

         "Asset Management Agreement" shall mean that certain Asset Management
Agreement, dated the date hereof, between SHC LLC, as client, and SHC DTRS Inc.,
a subsidiary of SHC Funding, as manager.

         "Commingled Claims" means, collectively, any Third Party Claim (i)
which involves any employee, officer, manager, consultant or agent that was
employed or engaged by both the SHC LLC Business and the SHC Funding Business,
(but excluding any employee, officer, manager, agent or consultant employed or
engaged by one of the Hotels, as defined below) and which is not primarily
attributable only to the SHC LLC Business, on the one hand, or only to the SHC
Funding Business on the other, or (ii) in which both SHC LLC and SHC Funding are
named and which is not primarily attributable only to the SHC LLC Business, on
the one hand, or only to the SHC Funding Business on the other, or (iii)
involving both the SHC LLC Business and the SHC Funding Business.

<PAGE>

         "Formation and Structuring Transactions" shall have the meanings
assigned thereto in the Registration Statement on Form S-11 filed by SHC Inc. in
connection with the IPO.

         "Funding Hotels" shall mean the Hotels listed under the definition "SHC
Funding Business."

         "Funding Liability" shall mean a Liability relating to, arising out of
or in connection with (i) the ownership, business or operations of the Funding
Hotels (or any of them), whether arising before or after the effective date of
the Formation and Structuring Transactions, (ii) the Formation and Structuring
Transactions, including the IPO or (iii) wages, compensation and benefits owed
to employees of SHC LLC or any of its subsidiaries who are or become employees
of any member of the SHC Funding Group in connection with the Formation and
Structuring Transactions.

         "Hotel" shall mean one of the hotel properties listed under the
definitions of the SHC Funding Business or the SHC LLC Business.

         "Indemnifying Party" has the meaning set forth in Section 2.5(a)
hereof.

         "Indemnitee" has the meaning set forth in Section 2.5(a) hereof.

         "Information" means information, in written, oral, electronic or other
tangible or intangible forms, stored in any medium, including studies, reports,
records, books, contracts, instruments, computer data, disks, diskettes, tapes,
computer programs or other technical, financial, employee or business
information or data.

         "Intercompany Agreements" has the meaning set forth in Section 2.1(c)
hereof.

         "IPO Closing Date" shall mean the date on which shares of common stock
of SHC Inc. are issued pursuant to the IPO.

         "Liabilities" means all debts, liabilities, guarantees, assurances,
commitments and obligations, whether fixed, contingent or absolute, asserted or
unasserted, matured or unmatured, liquidated or un-liquidated, accrued or not
accrued, known or unknown, due or to become due, whenever or however arising
(including, without limitation, whether arising out of any contract or tort
based on negligence or strict liability) and whether or not the same would be
required by generally accepted accounting principles and accounting policies to
be reflected in financial statements or disclosed in the notes thereto. For
purposes of any indemnification hereunder, "Liabilities" shall be deemed also to
include any and all damages, claims, suits, judgments, fines, penalties, costs
and expenses of any kind or character, including attorney's reasonable fees.

                                       2
<PAGE>

         "LLC Hotels" shall mean the Hotels listed under the definition "SHC LLC
Business."

         "LLC Liability" shall mean a Liability relating to, arising out of or
in connection with (i) the ownership, business or operations of the LLC Hotels
(or any of them), whether arising before or after the date of the Formation and
Structuring Transactions, or (ii) any other Liability of the SHC LLC Group or
the SHC Funding Group which relates to acts or omissions of any such parties
prior to consummation of the Formation and Structuring Transactions (including
the IPO) and which is not a Funding Liability. For the avoidance of doubt, the
term LLC Liability shall include, without limitation, (i) any liabilities for
income taxes of SHC Funding and SHC LLC and their direct and indirect
subsidiaries relating to periods ending on or prior to the closing of the IPO,
but excluding any liabilities for income taxes associated with SHC Inc. or as a
result of the Formation and Structuring Transactions, which shall be a Funding
Liability and (ii) any liabilities (including contingent liabilities such as
indemnification obligations) of SHC Funding, SHC LLC and their respective direct
and indirect subsidiaries in connection with sales of hotel properties occurring
prior to the effective date of the Formation and Structuring Transactions;
provided, however, that the amount of the LLC Liability shall be reduced by (i)
any benefits or amounts that are received by the SHC Funding Group in respect of
any LLC Hotel or sale of hotel properties by SHC Funding, SHC LLC and their
respective direct and indirect subsidiaries that occurred prior to the effective
date of the Formation and Structuring Transactions (e.g., a deferred purchase
price, pro-rations, etc.) and (ii) insurance recoveries and any other amounts
that are received by the SHC Funding Group from third parties relating to,
arising out of or in connection with an LLC Liability.

         "Management Agreement" shall mean, in relation to a Hotel, the
management agreement, operating agreement or lease pursuant to which the
business of the Hotel is conducted by a Manager.

         "Manager" shall mean, with respect to a Hotel, the third party
conducting the operations of such Hotel pursuant to the terms of the Management
Agreement relating to such Hotel.

         "SHC Funding Business" means: the business and operations of SHC
Funding and its partially and wholly-owned direct and indirect subsidiaries
after giving effect to the consummation of the Formation and Structuring
Transactions, including, without limitation, the ownership, business and
operations of the following hotel properties, whether conducted or occurring
prior to, on or after the effective date of the Formation and Structuring
Transactions:

                  (1)   Hyatt Regency New Orleans;
                  (2)   Hyatt Regency Phoenix;
                  (3)   Hilton Burbank Airport and Convention Center;
                  (4)   Marriott Rancho Las Palmas Resort;
                  (5)   Hyatt Regency La Jolla at Aventine;
                  (6)   Marriott Chicago Schaumburg;

                                       3
<PAGE>

                  (7)   Marriott Lincolnshire Resort;
                  (8)   Inter.Continental Prague;
                  (9)   Loews Santa Monica Beach Hotel;
                  (10)  Embassy Suites Lake Buena Vista Resort;
                  (11)  Marriott Hamburg;
                  (12)  Four Seasons Mexico City;
                  (13)  Paris Marriott Champs Elysees; and
                  (14)  Four Seasons Punta Mita Resort.

         "SHC Funding Group" or "SHC Indemnitees" means SHC Funding and its
partially and wholly-owned direct and indirect subsidiaries and their respective
members, managers, officers and employees after giving effect to the Formation
and Structuring Transactions.

         "SHC LLC Business" means the business and operations of SHC LLC and its
partially or wholly-owned direct or indirect subsidiaries (other than members of
the SHC Funding Group) after giving effect to the consummation of the Formation
and Structuring Transactions; including, without limitation, the ownership,
business and operations of the following hotel properties, whether conducted or
occurring prior to, on or after the effective date of the Formation and
Structuring Transactions:

                  (1) The Essex House, a Westin Hotel;
                  (2) Marriott New York East Side;
                  (3) Loews Beverly Hills;
                  (4) Westin Santa Clara;
                  (5) Hyatt Regency San Francisco;
                  (6) Park Hyatt San Francisco; and
                  (7) Ritz-Carlton, Laguna Niguel.

         "SHC LLC Group" or "SHC LLC Indemnitees" means SHC LLC and its wholly-
and partially-owned direct and indirect subsidiaries (other than members of the
SHC Funding Group) and their respective members, managers, officers and
employees after giving effect to the transactions contemplated by the Formation
and Structuring Transactions.

         "Third Party Claim" has the meaning set forth in Section 2.5(a) of this
Agreement.

                                   ARTICLE II
                        MUTUAL RELEASES; INDEMNIFICATION

         Section 2.1 Release of Pre-Closing Claims.

         (a) SHC Funding Release. Except as provided in Section 2.1(c) and
Section 2.4, effective as of the IPO Closing Date, SHC Funding does hereby, for
itself and as agent for each member of the SHC Funding Group, release and
forever discharge the SHC LLC Indemnitees from any and all Liabilities
whatsoever related to, arising from or in connection with the SHC Funding
Business (whether arising at law or in equity (including any right of
contribution), and whether arising under any contract or agreement, by operation
of law or otherwise), existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the IPO Closing
Date, including, without limitation, any such acts, events or conditions on or
before the IPO Closing Date in connection with the Formation and Structuring
Transactions, including the IPO.

                                       4
<PAGE>

     (b) SHC LLC Release. Except as provided in Section 2.1(c) and Section 2.4,
effective as of the IPO Closing Date, SHC LLC does hereby, for itself and as
agent for each member of the SHC LLC Group, release and forever discharge the
SHC Funding Indemnitees from any and all Liabilities whatsoever related to,
arising from or in connection with the SHC LLC Business (whether arising at law
or in equity (including any right of contribution), whether arising under any
contract or agreement, by operation of law or otherwise) existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the IPO Closing Date, other than wages, compensation
and benefits owed to employees of SHC LLC or any of its subsidiaries who are or
become employees of any member of the SHC Funding Group in connection with the
Formation and Structuring Transactions.

         (c) Excluded Liabilities; No Impairment. Nothing contained in Section
2.1(a) or (b) shall release any claims under, or impair any right of any person
to enforce the Asset Management Agreement or this Agreement (the "Intercompany
Agreements").

         (d) No Actions as to Released Claims. SHC Funding agrees, for itself
and as agent for each member of the SHC Funding Group, not to make any claim or
demand, or commence any Action asserting any claim or demand, including any
claim of contribution or any indemnification, against SHC LLC or any other
person released pursuant to Section 2.1(a), with respect to any Liabilities
released pursuant to Section 2.1(a). SHC LLC agrees, for itself and as agent for
each member of the SHC LLC Group, not to make any claim or demand, or commence
any Action asserting any claim or demand, including any claim of contribution or
any indemnification, against SHC Funding or any other person released pursuant
to Section 2.1 (b), with respect to any Liabilities released pursuant to Section
2.1(b).

         Section 2.2 Indemnification by SHC Funding. Except as otherwise
provided in this Agreement, SHC Funding shall indemnify, defend and hold
harmless the SHC LLC Indemnitees from and against any and all Liabilities that
any third party seeks to impose upon the SHC LLC Indemnitees, or which are
imposed upon the SHC LLC Indemnitees, if and to the extent such Liabilities
relate to, arise out of or result from any of the following items (without
duplication):

                  (i) subject to Section 2.4, the SHC Funding Business or the
         Formation and Structuring Transactions, including the IPO;

                  (ii) any breach by any member of the SHC Funding Group of the
         Intercompany Agreements; and

                                       5
<PAGE>

                  (iii) subject to Section 2.4, any Liabilities of the SHC
         Funding Group (other than those included in the definition of LLC
         Liability).

         In the event that any member of the SHC Funding Group makes a payment
to the SHC LLC Indemnitees hereunder, and any of the SHC LLC Indemnitees
subsequently diminishes the Liabilities on account of which such payment was
made, either directly or through a third-party recovery, SHC LLC will promptly
repay (or will procure an SHC LLC Indemnitee to promptly repay) such member of
the SHC Funding Group the amount by which the payment made by such member of the
SHC Funding Group exceeds the actual cost to the SHC LLC Indemnitee of the
associated indemnified Liability; provided, however, that in the event that any
indemnified Liability that was diminished is subsequently reinstated such that
the net amount paid by such member of the SHC Funding Group is less than the
amount of the reinstated Liability, such member of the SHC Funding Group shall
pay the difference to SHC LLC or the SHC LLC Indemnitee, as applicable.

Section 2.3 Indemnification by SHC LLC. Except as otherwise provided in this
Agreement, SHC LLC shall indemnify, defend and hold harmless the SHC Funding
Indemnitees from and against any and all Liabilities that any third party seeks
to impose upon the SHC Funding Indemnitees, or which are imposed upon the SHC
Funding Indemnitees, if and to the extent such Liabilities relate to, arise out
of or result from any of the following items (without duplication):

                  (i) subject to Section 2.4, the SHC LLC Business;

                  (ii) any breach by any member of the SHC LLC Group of the
         Intercompany Agreements; and

                  (iii) subject to Section 2.4, any Liabilities of the SHC LLC
         Group (other than those included in the definition of Funding
         Liability).

         In the event that any member of the SHC LLC Group makes a payment to
the SHC Funding Indemnitees hereunder, and any of the SHC Funding Indemnitees
subsequently diminishes the Liabilities on account of which such payment was
made, either directly or through a third-party recovery, SHC Funding will
promptly repay (or will procure an SHC Funding Indemnitee to promptly repay)
such member of the SHC LLC Group the amount by which the payment made by such
member of the SHC LLC Group exceeds the actual cost to the SHC Funding
Indemnitee of the indemnified Liability; provided, however, that in the event
that any indemnified Liability that was diminished is subsequently reinstated
such that the net amount paid by such member of the SHC LLC Group is less than
the amount of the reinstated Liability, such member of the SHC LLC Group shall
pay the difference to SHC Funding or the SHC Funding Indemnitee, as applicable.

         Section 2.4 Indemnification of Specific Claims; Allocation of
Liabilities. Notwithstanding anything herein to the contrary:

                                       6
<PAGE>

         (a) Indemnification by SHC Funding. SHC Funding shall indemnify, defend
and hold harmless the SHC LLC Indemnitees from and against any and all
Liabilities that any third party seeks to impose upon the SHC LLC Indemnitees,
or which are imposed upon the SHC LLC Indemnitees, if and to the extent such
Liabilities relate to, arise out of or result from any of the following
agreements (collectively, the "Guarantees"):

                  (i) the Joint and Several Accessory Guarantees, dated July 10,
         2003, by SHC LLC in favor of Deutsche Immobilien Fonds
         Aktiengesellschaft ("DFMA") relating to the Paris Marriott Champs
         Elysees and dated December 16, 2003 by SHC LLC in favor of DFMA
         relating to the Hamburg Marriott;

                  (ii) the Guarantee, dated June 26, 2003, by SHC LLC in favor
         of Aareal Bank AG relating to the Inter.Continental Prague;

                  (iii) the Guarantee, dated June 14, 2000, by SHC LLC in favor
         of Marriott Hotel Management GmbH and its affiliates relating to the
         lease agreement for the Marriott Hamburg;

                  (iv) the Guarantee, dated August 24, 1998, by SHC LLC included
         in the Management Agreement, dated August 24, 1998, between SHC Burbank
         LLC and Hilton Hotels Corporation relating to the obligations of SHC
         Burbank LLC under that management agreement;

                  (v) the Guarantee, dated September 30, 1997, by SHC LLC in
         favor of Promus Hotels Florida, Inc. relating to SHC Funding's
         agreement to purchase Embassy Suites Lake Buena Vista;

                  (vi) the Guaranty, dated January 22, 1998, by SHC LLC in favor
         of Marriott International, Inc. and Marriott Hotel Services Inc.
         relating to the purchase and management of Marriott Rancho Las Palmas
         Resort, as amended by that Amendment of Guaranties dated as of January
         1, 2000;

                  (vii) the Guaranty of Management Agreement, dated March 4,
         1998, by SHC LLC in favor of Loews Santa Monica Hotel, Inc. related to
         the management of Loews Santa Monica Beach Hotel;

                  (viii) any guarantee related to the Westward Look Hotel in
         Tucson Arizona;

                  (ix) any other guaranties or indemnification obligations
         granted to third parties relating to the Funding Hotels.

         (b) Release. Following the date hereof, SHC Funding will use its
reasonable best efforts to obtain a complete release of SHC LLC (and all other
members of the SHC LLC Group if applicable) from all liabilities and obligations
under the Guarantees. The release relating to such guarantees shall be in form
and substance reasonably satisfactory to SHC LLC; provided, however, that SHC
Funding shall not be required to spend more than a nominal amount of its own
funds to obtain such release.

                                       7
<PAGE>

         (c) Indemnification by SHC LLC. SHC LLC shall indemnify, defend and
hold harmless the SHC Funding Indemnitees from and against any and all
Liabilities that any third party seeks to impose upon the SHC Funding
Indemnitees, or which are imposed upon the SHC Funding Indemnitees, if and to
the extent such Liabilities relate to, arise out of or result from the matters
described in Schedule 2.4.

         (d) Allocation of Liabilities and Cooperation. In connection with the
Formation and Structuring Transactions and this Agreement, the parties hereto
shall use commercially reasonable good faith efforts to account for the assets
and liabilities of the SHC Funding Group and the SHC LLC Group in a usual and
customary fashion (including by allocating to each of such entities appropriate
levels of cash to meet ordinary course obligations) and to allocate among the
members of the SHC Funding Group and the SHC LLC Group assets and liabilities as
of the IPO Closing Date which are Funding Liabilities or LLC Liabilities or
which are allocable to the SHC LLC Business or the SHC Funding Business in
accordance with the terms of this Agreement and other agreements relating to the
Formation and Structuring Transactions. The parties will use reasonable and
customary methods of allocating such assets (including cash) and liabilities
among the entities comprising the SHC Funding Group and the SHC LLC Group to
carry out the purposes and intent of this Agreement and the Formation and
Structuring Transactions. The agreement to allocate liabilities shall include an
assumption by the appropriate parties of accrued liabilities which are to be
borne by a particular party pursuant to this Agreement and the Formation and
Structuring Transactions. The parties hereto shall reasonably cooperate with
respect to claims and liabilities relating to insurance, tax and employee
benefits matters including with respect to any claims which relate to periods
ending on or prior to the IPO Closing Date so that any such claims and
liabilities are properly allocated in accordance with this Agreement.

         (e) Limitations on Indemnification. In determining indemnification
payments pursuant to this Section 2.4, the parties shall make appropriate
adjustments for recovery of tax benefits and insurance coverage. A party
entitled to indemnification pursuant to this Section 2.4 shall use its
commercially reasonable efforts to mitigate any damages for which it may be
entitled to indemnification hereunder. If each party owes an amount to the
other, the two amounts shall be offset and netted against each other and only
the net amount shall be paid.

         Section 2.5 Procedures for Defense, Settlement and Indemnification of
Third Party Claims.

         (a) Notice of Claims. If an SHC LLC Indemnitee or an SHC Funding
Indemnitee, as applicable (an "Indemnitee"), receives notice or otherwise learns
of the assertion by a person (including any regulatory authority) who is not a
member of the SHC LLC Group or the SHC Funding Group of any claim or of the
commencement by any such person of any Action (collectively, a "Third Party
Claim") with respect to which a party (an "Indemnifying Party") may be obligated
to provide indemnification to such Indemnitee pursuant to Section 2.2, 2.3 or
2.4, SHC LLC and SHC Funding, as applicable, will ensure that such Indemnitee
shall give such Indemnifying Party written notice thereof within thirty (30)
days after becoming aware of such Third Party Claim. Any such notice shall
describe the Third Party Claim in reasonable detail. Notwithstanding the
foregoing, the delay or failure of any Indemnitee or other person to give notice
as provided in this Section 2.5(a) shall not relieve the related Indemnifying
Party of its obligations under this Article II, except to the extent that such
Indemnifying Party is actually and substantially prejudiced by such delay or
failure to give notice.

                                       8
<PAGE>

         (b) Defense of Claims. Other than in the case of a Commingled Claim, an
Indemnifying Party shall manage the defense of and may settle or compromise any
Third Party Claim so long as such settlement or compromise contains a full and
unconditional release of each Indemnified Party. Within thirty (30) days after
the receipt of notice from an Indemnitee in accordance with Section 2.5(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee that the Indemnifying Party will assume
responsibility for managing the defense of such Third Party Claim. With respect
to any Commingled Claim, the parties (i) shall determine which party shall
manage the defense of, and may seek to settle or compromise, such Commingled
Claim based upon the specific facts of such claim, and (ii) agree to cooperate
fully and maintain a joint defense (in a manner that will preserve the
attorney-client privilege with respect thereto) so as to minimize such
Liabilities and defense costs associated therewith.

         (c) Defense By Indemnitee. If an Indemnifying Party fails to assume
responsibility for managing the defense of a Third Party Claim or to diligently
defend such Third Party Claim, or fails to notify an Indemnitee that it will
assume responsibility as provided in Section 2.5(b), such Indemnitee may manage
the defense of such Third Party Claim and may settle such Third Party Claim
without the consent of the Indemnifying Party.

         (d) No Settlement By Indemnitee Without Consent. Unless the
Indemnifying Party has failed to manage the defense of the Third Party Claim in
accordance with the terms of this Agreement, or has failed to notify an
Indemnitee that it will assume responsibility as provided in Section 2.5(b), no
Indemnitee may settle or compromise any Third Party Claim without the consent of
the Indemnifying Party.

         Section 2.6 Additional Matters Regarding Indemnification.

         (a) Substitution. In the event of an Action in which the Indemnifying
Party is not a named defendant, if either the Indemnitee or the Indemnifying
Party shall so request, the parties shall endeavor to substitute the
Indemnifying Party for the named defendant. If such substitution or addition
cannot be achieved for any reason or is not requested, the rights and
obligations of the parties regarding indemnification and the management of the
defense of claims as set forth in this Article II shall not be altered.

         (b) Subrogation. In the event of payment by or on behalf of any
Indemnifying Party to or on behalf of any Indemnitee in connection with any
Third Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee, in whole or in part based upon whether
the Indemnifying Party has paid all or only part of the Indemnitee's Liability,
as to any events or circumstances in respect of which such Indemnitee may have
any right, defense or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.

                                       9
<PAGE>

         Section 2.7 Survival of Indemnities. The rights and obligations of SHC
LLC and SHC Funding under this Article II shall survive the sale or other
transfer by any party of any assets or businesses or the assignment by it of any
Liabilities or the sale by any member of the SHC LLC Group or the SHC Funding
Group of the capital stock or other equity interests of any subsidiary to any
person.

         Section 2.8 Agreement For Exchange of Information. Subject to
applicable confidentiality restrictions and subject to providing the
contemplated Information only to those persons who require such Information in
the course of their duties, each of SHC LLC and SHC Funding agree to provide, or
cause to be provided, to each other, at any time after the IPO Closing Date, as
soon as reasonably practicable after written request therefor, any Information
in the possession or under the control of such party that the requesting party
reasonably needs:

         (a) to comply with reporting, disclosure, filing or other requirements
imposed on the requesting party by a regulatory authority having jurisdiction
over the requesting party or otherwise required by law;

         (b) for use in any regulatory proceeding, judicial proceeding or other
proceeding or in order to satisfy audit, accounting, claims, regulatory,
litigation or other similar requirements;

         (c) to comply with its obligations under this Agreement; or

         (d) in connection with the ongoing businesses of SHC LLC or SHC Funding
as it relates to the conduct of such businesses, as the case may be;

provided, however, that in the event that either party determines that any such
provision of Information could be commercially detrimental, violate any
applicable law or agreement, or waive any attorney-client privilege, the parties
shall take all reasonable measures to permit the compliance with such
obligations in a manner that avoids any such harm or consequence.

         Section 2.9 Other Agreements. SHC LLC and SHC Funding agree to execute
and deliver, or to use their reasonable commercial efforts to cause to be
executed and delivered by the appropriate parties, such other agreements,
instruments and other documents as may be necessary or desirable in order to
effect the purposes of this Agreement and the Formation and Structuring
Transactions. The parties shall cooperate reasonably with each other in
connection with any steps required to be taken as part of their respective
obligations under this Agreement and the Formation and Structuring Transactions,
and shall (a) furnish upon request to each other such further information; and
(b) do such other acts and things, all as the other party may reasonably request
for the purpose of carrying out the intent of this Agreement and the Formation
and Restructuring Transactions.

                                       10
<PAGE>

                                   ARTICLE III
                                  MISCELLANEOUS

         Section 3.1 Entire Agreement. This Agreement, and the Schedules
attached hereto, constitute the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all prior written and
oral and all contemporaneous oral agreements and understandings with respect to
the subject matter hereof.

         Section 3.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

         Section 3.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by telecopy with answer back, by express or overnight mail delivered
by a nationally recognized air courier (delivery charges prepaid), or by
registered or certified mail (postage prepaid, return receipt requested) as
follows:

                  if to SHC LLC:

                  Strategic Hotel Capital, L.L.C.
                  c/o Goldman, Sachs & Co.
                  100 Crescent Court
                  Suite 1000
                  Dallas, Texas 75201
                  Attn: Todd Giannoble
                  Facsimile: (214) 855-6305

                  and

                  Strategic Hotel Capital, L.L.C.
                  c/o Prudential Investments
                  8 Campus Drive
                  Parsippany, New Jersey 07054
                  Attn: Rick Romano
                  Facsimile: (973) 734-1475

                  if to SHC Funding:

                  c/o Strategic Hotel Capital, Inc.
                  77 West Wacker Drive
                  Suite 4600
                  Chicago, Illinois 60601
                  Attn.:  General Counsel
                  Facsimile:  (312) 658-5799

                                       11
<PAGE>

or to such other address as the party to whom notice is given may have
previously furnished to the other in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy or by overnight air
courier shall be deemed effective on the first Business Day following the day on
which such notice or communication was sent. Any notice or communication sent by
registered or certified mail shall be deemed effective on the third Business Day
following the day on which such notice or communication was mailed. As used in
this Section 3.3, "Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the State of New York are
authorized or obligated by law or executive order to close.

         Section 3.4 Parties in Interest. This Agreement and the other documents
referred to herein, shall be binding upon SHC LLC and SHC Funding and inure
solely to the benefit of the SHC Funding Indemnitees and the SHC LLC Indemnitees
and their respective permitted assigns, and nothing in this Agreement, express
or implied, is intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.

         Section 3.5 Counterparts. This Agreement and the other documents
referred to herein, may be executed in counterparts, each of which shall be
deemed to be an original but all of which shall constitute one and the same
agreement.

         Section 3.6 Assignment. The rights and obligations in this Agreement
may not be assigned or delegated by any party hereto, in whole or in part,
without the express prior written consent of the other party hereto.

         Section 3.7 Severability. If any term or other provision of this
Agreement is determined by a nonappealable decision by a court, administrative
agency or arbitrator to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the fullest extent possible.

         Section 3.8 Failure or Indulgence Not Waiver. No failure or delay on
the part of either party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right.

         Section 3.9 Amendment. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to this Agreement.

                                       12
<PAGE>

         Section 3.10 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
an Article or a Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated.

                            [signature pages follow]

                                       13
<PAGE>

WHEREFORE, the parties have signed this Agreement effective as of the date first
set forth above.

STRATEGIC HOTEL CAPITAL, L.L.C.               STRATEGIC HOTEL FUNDING, L.L.C.

By:                                           By:
    ---------------------------------             ------------------------------
    Name:                                         Name:
    Title:                                        Title:

                                       14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00068-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00068-of-00352.parquet"}]]