Document:

Form of Management Agreement  between Prism Hotels and Capital Lodging

 Exhibit 10.5 
  
 MANAGEMENT AGREEMENT 
  
 BETWEEN 
  
 CAPITAL LODGING TRS OPERATIONS, INC. 
  
 AND 
  
 PRISM HOSPITALITY, L.P. 
  
 A TEXAS LIMITED
PARTNERSHIP 

			
		
	 ARTICLE 1 DEFINITIONS
	  	1
		
	 1.1 Definitions
	  	1
		
	 ARTICLE 2 TERM AND EXTENSIONS
	  	8
		
	 2.1 Commencement Date
	  	8
		
	 2.2 Term
	  	8
		
	 ARTICLE 3 MANAGEMENT FEES AND PAYMENTS TO MANAGER & LESSEE
	  	8
		
	 3.1 Base Management Fee
	  	8
		
	 3.2 Incentive Management Fee.
	  	8
		
	 3.3 Newco Restricted Shares
	  	9
		
	 3.4 True Up
	  	9
		
	 ARTICLE 4 OPERATIONAL STANDARDS
	  	9
		
	 4.1 Operational Standards
	  	9
		
	 4.2 Manager and Lessee Control
	  	10
		
	 4.3 Contractual Authority
	  	10
		
	 4.4 Meetings
	  	11
		
	 ARTICLE 5 OPERATION OF THE HOTELS
	  	11
		
	 5.1 Licenses
	  	11
		
	 5.2 Operating Equipment and Operating Supplies
	  	12
		
	 5.3 Personnel
	  	12
		
	 5.4 Routine Maintenance and Repairs
	  	13
		
	 5.5 Capital Expenditures
	  	13
		
	 5.6 Emergency Repairs
	  	14
		
	 5.7 Repairs Required by Law
	  	14
		
	 ARTICLE 6 FISCAL MATTERS
	  	15
		
	 6.1 Accounting Matters
	  	15
		
	 6.2 Proposed Annual Plan.
	  	16
		
	 6.3 Funding; Bank Accounts
	  	19
		
	 6.4 Cash Management
	  	19
		
	 6.5 Reimbursement of Out-of-Pocket Expenses
	  	20
		
	 ARTICLE 7 DISBURSEMENTS
	  	20
		
	 7.1 Disbursement of Funds
	  	20
		
	 7.2 Lessee’s Distribution
	  	21

  

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	 ARTICLE 8 FRANCHISE
	  	21
		
	 8.1 Selection by Lessee
	  	21
		
	 8.2 Definition of Marks
	  	21
		
	 8.3 Rights Upon Termination of a Franchise
	  	21
		
	 ARTICLE 9 TAXES AND INSURANCE
	  	22
		
	 9.1 Property Taxes
	  	22
		
	 9.2 Insurance Coverage
	  	22
		
	 9.3 Insurance Policies
	  	22
		
	 ARTICLE 10 INDEMNIFICATION
	  	23
		
	 10.1 Liabilities; Indemnification; Third Parties
	  	23
		
	 ARTICLE 11 CASUALTY AND CONDEMNATION
	  	24
		
	 11.1 Casualty
	  	24
		
	 11.2 Condemnation
	  	25
		
	 11.3 Business Interruption Insurance
	  	25
		
	 ARTICLE 12 DEFAULT AND TERMINATION
	  	26
		
	 12.1 Events of Default
	  	26
		
	 12.2 Termination
	  	26
		
	 12.3 Hotel Reservations/Group Contracts Honored
	  	29
		
	 12.4 Post-Termination Matters: Reimbursements to Manager
	  	29
		
	 12.5 Post-Termination Matters; WARN Act
	  	30
		
	 12.6 Extension of Date of Termination
	  	30
		
	 12.7 Automatic Termination
	  	30
		
	 ARTICLE 13 ADDITIONAL AGREEMENTS OF MANAGER
	  	30
		
	 13.1 Noncompetition
	  	30
		
	 13.2 Right of First Offer
	  	31
		
	 ARTICLE 14 NOTICES
	  	32
		
	 ARTICLE 15 RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS
	  	33
		
	 15.1 Relationship
	  	33
		
	 15.2 Further Actions
	  	33
		
	 ARTICLE 16 APPLICABLE LAW; SEVERABILITY
	  	33
		
	 ARTICLE 17 SUCCESSORS AND ASSIGNS
	  	34
		
	 17.1 Assignment
	  	34
		
	 17.2 Binding Effect
	  	34

  

 ii 

			
		
	 ARTICLE 18 FORCE MAJEURE
	  	34
		
	 18.1 Operation of Hotels
	  	34
		
	 18.2 Extension of Time
	  	34
		
	 ARTICLE 19 GENERAL PROVISIONS
	  	35
		
	 19.1 Authorization
	  	35
		
	 19.2 Interest
	  	35
		
	 19.3 Formalities
	  	35
		
	 19.4 Estoppel Certificate
	  	35
		
	 19.5 No Representations
	  	35
		
	 19.6 Not an Interest in Real Estate
	  	36
		
	 19.7 Independent Contractor
	  	36
		
	 19.8 Assistance with Proposed Sale, Financing, Refinancing
	  	36
		
	 19.9 General Compliance with Laws
	  	36
		
	 19.10 Costs of Compliance
	  	37
		
	 19.11 Equal Opportunity Employer
	  	37
		
	 19.12 Time
	  	37
		
	 19.13 Severability
	  	37
		
	 19.14 Authority Limited
	  	37
		
	 19.15 Exclusiveness of Compensation
	  	37
		
	 19.16 Contracts with Affiliates of Manager
	  	37
		
	 19.17 Subordination
	  	38
		
	 19.18 Limitation of Liability
	  	38
		
	 19.19 Limitation on Acquisition of Debt
	  	38
		
	 19.20 Eligible Independent Contractor
	  	38
		
	 19.21 Modifications
	  	39

  
 Schedule 1 - Hotels 
 Schedule 2 - Incentive Management Fee 
 Schedule 3 - Insurance 
 Schedule 4 - Lessee’s Capitalization Policy 
 Schedule 5 - Non-Competition 

Schedule 6 - Capital Expenditure Management Compensation 
  

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 MANAGEMENT AGREEMENT 
  
 THIS AGREEMENT (“Agreement”) is effective as of
                        , 2004 (the “Execution Date”), by and between Prism Hospitality, L.P., a Texas limited
partnership or any affiliate thereof (as applicable, “Manager”) and Capital Lodging TRS Operations, Inc., a Delaware corporation (“Lessee”). Any Exhibit or other attachment hereto is hereby incorporated by reference into this
Agreement unless otherwise stated herein. 
  
 RECITALS:

  
 A. Effective as of the Commencement Date, Lessee shall
lease each of the Hotels set forth on Schedule 1 from subsidiaries of Capital Lodging, L.P., a Delaware limited partnership (collectively, “Owner”), other than FF&E constituting a part thereof, which shall be owned by Lessee;
and 
  
 B. Lessee desires to retain Manager to manage and operate
the Hotels, and Manager desires to accept such appointment; and 
  
 C. Lessee and Manager desire to evidence their agreement for Manager to manage the Hotels as more particularly set forth below. 
  
 NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, Lessee and Manager agree as follows: 
  
 ARTICLE 1 
 DEFINITIONS 
  
 1.1 Definitions. As used herein the following terms shall have the respective meanings indicated below: 
  
 Affiliate – any corporation or other entity controlled by, controlling or under common control with Lessee or Manager, as applicable. The
words “control,” “controlled” and “controlling” mean ownership, directly or indirectly, of ten percent (10%) or more of the legal or beneficial ownership interest of such corporation or other entity or the power to
direct or cause the direction of the management and policies of any such entity. 
  
 Approved Budget – as defined in Section 6.2(c)(iii). 
  
 Average Base Management Fee – the total Base Management Fees payable to Manager under this Agreement for the 12 month period immediately
preceding the event requiring a determination of the Average Base Management Fee, divided by 12. If there are not 12 months from the Commencement Date to the end of such period for which the Average Base Management Fee is being calculated, then the
Average Base Management Fee is the total Base Management Fees payable for the total of the months in such period divided by the number of such months. Partial months are not included in these calculations. 
  
 Bank Account – as defined in Section 6.3(b). 

 Base Management Fee – as defined in Section 3.1(a). 
  
 Buildings – all buildings, structures and improvements now
located or hereafter constructed on the Sites and all fixtures and equipment attached to, forming a part of and necessary for the operation of such buildings, structures or improvements as hotels (including, without limitation, heating, lighting,
plumbing, sanitary system, air-conditioning, laundry, refrigeration, kitchen, elevators and similar items) and such (i) restaurants, bars, banquet, meeting and other public areas, (ii) commercial space, including concessions and shops, (iii) garage
and parking space, (iv) storage and service areas, (v) recreational facilities and areas, (vi) public grounds and gardens, permanently affixed signage, (vii) other facilities and appurtenances and (viii) the number of keyed guest rooms as presently
exist on the Site or are hereafter added thereon during the Term. 
  
 Capital Expenditures – as defined in Section 5.5(b). 
  
 Capital Expenditures Budget – as defined in Section 6.2(c)(ii). 
  
 Commencement Date – as defined in Section 2.1. 
  

Defaulting Party – as defined in Section 12.2(d)(i). 
  
 Early Termination Date – as defined in Section 12.2(a)(i). 
  
 Early Termination Fee – as defined in Section 12.2(a)(i).

  
 Event of Default – as defined in Section
12.1. 
  
 Exercise Period – as defined in
Section 13.2. 
  
 FF&E – all fixtures,
furniture, furnishings and equipment (not including Operating Equipment) required for the operation of the Buildings as hotels in accordance with the standards set forth in this Agreement, including, without limitation, (i) office furnishings and
equipment, and (ii) specialized hotel equipment necessary for the operation of any portion of the Buildings as a hotel, including equipment for kitchens, laundries, dry cleaning facilities, bars, restaurants, public rooms, commercial and parking
space, and recreational facilities 
  
 FF&E/Capital
Improvement Reserve Fund – a reserve fund for Capital Expenditures established by Owner under the terms of a Permitted Mortgage and held and disbursed by Mortgagee pursuant to procedures established by Mortgagee. 
  
 Fiscal Year – the calendar year from January 1 to December 31,
unless and until Lessee and Manager otherwise mutually agree in writing, which agreement shall be attached hereto and incorporated herein where applicable. 
  
 Fixed Charges – shall mean, with respect to each Hotel, those costs and expenses of such Hotel expressly excluded from Operating Costs,
including the following: 
  
 (i) Base Management
Fee; 
  

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 (ii) Incentive Management Fee; 
  
 (iii) personal property insurance premiums; 
  
 (iv) taxes assessed against personal property located at the
Hotels; and 
  
 (v) rental payments on operating
leases (excludes capital leases, leases of the entire hotel realty and FF&E, and ground leases). 
  
 Force Majeure – as defined in Section 18.1. 
  
 Force Majeure Cessation – as defined in Section 18.1. 
  
 Franchise Standards – the operational and other standards expressly set forth in the Franchises and governing
the operation and maintenance of each of the Hotels pursuant thereto. 
  
 Franchises – those certain agreements set forth on Schedule 1 which allow for the operation of the Hotels pursuant to and in accordance with the terms, conditions and Franchise Standards set forth therein; or any
subsequent franchise arrangements pertaining to the Hotels entered into by Owner. 
  
 GAAP – generally accepted accounting principles, consistently applied. 
  
 Hotel – a collective term for the Site, the Building, the FF&E, the Operating Equipment and the Operating Supplies pertaining to each
Hotel listed on Schedule 1. 
  
 Incentive Management
Fee – as defined in Section 3.2(a). 
  
 Index – the Consumer Price Index for All Urban Consumers (1982-84=100) as published by the United States Bureau of Labor Statistics U.S. City Average, as amended. If the compilation and/or publication of such Index shall be
discontinued or transferred to any other governmental department or bureau or agency, Manager shall (subject to Lessee’s approval, which shall not be unreasonably withheld) fix an alternate index or method to implement the parties’
intention that the purchasing power of the amounts to be adjusted by reference to the Index (as hereinafter provided in this Agreement) shall be the same as the purchasing power of the stated amounts as of the Execution Date. Likewise, if such Index
shall be modified as to components, computing methods or otherwise, then Manager may (subject to Lessee’s approval, which shall not be unreasonably withheld) fix an alternate index or method, as aforesaid, or Manager may utilize an appropriate
conversion factor so as to achieve substantially the same result as would have been obtained if the Consumer Price Index in effect and as computed, calculated and constituted on the Execution Date were still then in effect. 
  
 Interested Persons – as defined in Section 19.4.

  
 Investment Policy – as defined in Section
6.4. 
  

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 Lessee’s Costs – with respect to each Hotel, those costs not directly related to the
operation of such Hotel, including, but not limited to, the following: 
  
 (i) lease payments to Owner pursuant to the lease for such Hotel; 
  
 (ii) depreciation of the FF&E and Operating Equipment, and amortization of financing costs and other costs; 
  
 (iii) debt service (principal and interest) on any Permitted
Mortgage of the Lessee; 
  
 (iv) rental payments
pursuant to any capital leases of Lessee; 
  
 (v)
charges for common area maintenance or owner’s association dues; 
  
 (vi) other recurring and non-recurring ownership costs, such as Lessee’s entity administration and servicing costs; and 
  
 (vii) such other cash expenditures (including Capital Expenditures), which are normally treated as a capital expenditure under GAAP.

  
 Lessee’s Report – as defined in Section
6.1(d). 
  
 License Indemnity – as defined in
Section 5.1. 
  
 Licenses – as defined in
Section 5.1. 
  
 Losses – as defined in
Section 10.1(c). 
  
 Manager Change of Control
– the occurrence of any of the following events: (i) the adoption or approval by the partners of Manager of a plan or proposal relating to the direct or indirect sale or other disposition of all or substantially all of the assets of Manager;
(ii) the adoption or approval by the partners of Manager of a plan or proposal relating to the liquidation, dissolution or winding up of Manager; (iii) the acquisition by any individual(s), entity(ies) or group(s) (other than Steve Van and Chris
Russell, to the extent that Chris Russell acquires such ownership interests from Steve Van), including any “person,” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), individually or in the aggregate, of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, directly or indirectly, of either (a) 25% or more of the limited partner interests in Manager, or (b) 25% or
more of the total voting power of any class or classes of securities of Manager or of the general partner of Manager which individually or together have the power (by right to vote or grant or withhold approval) to direct the actions of Manager or
of the general partner of Manager, respectively; (iv) the general partner of Manager ceases to be the sole general partner of Manager or grants or sells to any third party the power to control or direct the actions of Manager as if such third party
were a general partner of Manager; 
  

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 (v) Manager is a party to any entity conversion or any merger or consolidation or similar transaction in which Manager is
not the surviving entity in such merger or consolidation or similar transaction; or (vi) either Steve Van or Chris Russell cease to remain employed by Manager in their current capacity, with their current responsibilities, unless, in the case of
Chris Russell, a successor to Chris Russell is appointed to fulfill his responsibilities and such successor is acceptable to Lessee in its sole and absolute discretion (in such case, the cessation of employment by such successor shall constitute a
Manager Change of Control). 
  
 Management Fee – the
Base Management Fee and Incentive Management Fee payable to Manager, as set forth in Article 3. 
  
 Marks – as defined in Section 8.2. 
  
 Mortgagee – the holder of a Permitted Mortgage. 
  
 Negotiation Period – as defined in Section 13.2. 
  
 Net Operating Income – Total Revenues less the aggregate of Operating Costs and Fixed Charges. 
  
 Newco – Capital Lodging Trust. a Maryland real estate investment
trust. 
  
 Newco IPO – Newco’s underwritten
initial public offering of shares of its common stock, registered on Form S-11 
 and declared effective by the Securities and Exchange
Commission. 
  
 Newco IPO Closing – the receipt by
Newco of the net proceeds of the Newco IPO. 
  
 Newco
Restricted Shares – as defined in Section 3.3. 
  
 Non-Defaulting Party – as defined in Section 12.2(d)(i). 
  
 Operating Budget – as defined in Section 6.2(c)(ii). 
  
 Operating Costs – with respect to each Hotel, the entire cost and expense of maintaining, operating and supervising the operation of such
Hotel, other than the Fixed Charges. Operating Costs shall be the sum of such costs and expenses which are normally charged as a cost of operation under GAAP and the Uniform System of Accounts, including, without limitation, the following:

  
 (i) the cost of Operating Supplies and
Operating Equipment; 
  
 (ii) wages, salaries,
employee benefits, payroll taxes, bonuses, relocation expenses and other costs related to employees at such Hotel; 
  
 (iii) advertising and promotional expenses incurred directly by such Hotel; 
  
 (iv) administrative and general expenses of such Hotel; 
  

 5 

 (v) the fees and expenses incurred pursuant to such Hotel’s Franchise; 

 
 (vi) the cost of personnel training programs, including
travel and related expenses; 
  
 (vii) charges
for reservation-related distribution systems; 
  
 (viii) utility and energy costs; 
  
 (ix) operating licenses and permits; 
  
 (x) grounds and landscaping maintenance costs; 
  
 (xi) all expenditures made for routine maintenance and repairs to keep such Hotel in good condition and repair or as required by such Hotel’s Franchise; 
  
 (xii) applicable insurance premiums, such as for
workers’ compensation and automobile; 
  
 (xiii) the cost of accounting fees, which for such purposes shall be deemed to be $__ per available room per night, payroll services and legal fees, for services directly related to the operation of such Hotel and its facilities;

  
 (xiv) Reimbursed Expenses; 
  
 (xv) reasonable increases in reserves for uncollectible
accounts receivable as set forth in such Hotel’s Proposed Annual Plan and Approved Budget, but not limited to the amounts set forth in such Proposed Annual Plan and Approved Budget; and 
  
 (xvi) credit card and travel agent commissions. 

 
 Operating Equipment – all operating equipment required for the
operation of a Hotel, including chinaware, glassware, linens, silverware, utensils, uniforms and all other similar items. 
  
 Operating Supplies – all consumable items used in the operation of a Hotel, including food and beverages, fuel, soap, cleaning materials,
guest room amenities, paper supplies, and all other similar items. 
  
 Operational Standards – as defined in Section 4.1. 
  
 Period Of Use – as defined in Section 5.1. 
  
 Permitted Mortgage – shall mean any mortgage, deed of trust, deed to secure debt or other similar instrument encumbering all or any portion of any Hotel, whether now in existence or hereafter created.

  
 Preliminary Operating Budget – as defined in
Section 6.2(a). 
  

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 Property Taxes – taxes assessed against real or personal property located at a Hotel.

  
 Proposed Annual Plan – as defined in Section
6.2(c)(ii). 
  
 Reimbursed Expenses – as defined
in Section 6.5(a). 
  
 Renewal Notice – as
defined in Section 2.2. 
  
 Sarbanes-Oxley – as
defined in Section 6.1(f). 
  
 Site – the land
upon which a Hotel is situated. 
  
 Tax and Insurance Fund
– with respect to each Hotel, a reserve fund to pay property taxes and insurance established by Lessee under the terms of the Permitted Mortgage and held and disbursed by Mortgagee pursuant to procedures established by Mortgagee. 
  
 Term – as defined in Section 2.2. 
  
 Terminated Hotels – any Hotel as to which Lessee or Manager, as
the case may be, has exercised its respective rights under Section 12.2 to terminate this Agreement with respect to such Hotel. Following the exercise of any such right and except as otherwise expressly provided in Section 12.2 or
Section 13.1, the term “Hotels” shall no longer include any Terminated Hotel and Schedule 1 shall be so modified to remove reference to such Terminated Hotels. In the event of the termination of this Agreement in whole in
accordance with Section 12.2, all Hotels shall be deemed Terminated Hotels. 
  
 Three Year Plan – as defined in Section 6.2(b)(i). 
  
 Total Revenues – with respect to each Hotel, all revenues and income of any nature derived directly or indirectly from such Hotel or from the
use or operation thereof, including revenues from guest room sales, food and beverage sales, telephone, facsimile and/or internet services, in-room video and valet service receipts, rental or other payments from lessees and sublessees (but not the
gross receipts of such lessees and sublessees), and the proceeds of business interruption, use, occupancy or similar insurance. If Manager itself operates any facilities within such Hotel (e.g., newsstand, gift shop, business center, or other
store) instead of having them operated by a lessee, the gross receipts of such facility or store shall also be included in Total Revenues. Total Revenues shall be determined on an accrual basis and in accordance with GAAP and the Uniform System of
Accounts. 
  
 The calculation of Total Revenues shall exclude the
following: (i) any gratuities or service charges added to a customer’s bill and distributed as compensation to such Hotel’s employees other than Banquet Service Charges as defined by the Uniform System of Accounts; (ii) any credits or
refunds made to customers, guests or patrons; (iii) any sums and credits received by Lessee for lost or damaged merchandise; (iv) any sales taxes, excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist taxes or charges; (v)
any proceeds from the sale or other disposition of such Hotel, FF&E, or other capital assets; (vi) any interest paid with respect to the FF&E/Capital Improvement Reserve Fund, the Bank Account or any other deposit or investment of Hotel
funds; (vii) any fire and extended coverage insurance 
  

 7 

 proceeds; (viii) any condemnation awards; and (ix) any proceeds of financing or refinancing of such Hotel. 
  
 Trade Name – as defined in Section 8.1(a). 
  
 Transaction – as defined in Section 13.2. 
  
 Transaction Notice – as defined in Section 13.2.

  
 Uniform System of Accounts – as defined in
Section 6.1(a). 
  
 WARN Act – as defined in
Section 5.3(c). 
  
 ARTICLE 2 
 TERM AND EXTENSIONS 
  
 2.1 Commencement Date. The commencement date (“Commencement Date”) of the Term hereunder shall be 12:01 a.m. local time on the date of
the Newco IPO Closing. 
  
 2.2 Term. This Agreement shall
have a term (the “Term”) commencing on the Commencement Date and expiring on December 31, 2009, unless sooner terminated in accordance with the provisions of this Agreement. This Agreement shall be extended for consecutive one-year renewal
terms (each such renewal term to commence on the day immediately following the last day of the then-expiring term) by Lessee giving written notice to Manager (“Renewal Notice”) at least 120 days prior to the last day of the then-expiring
term, which notice, if any, shall specify which of the Hotels shall be subject to such extension. If Lessee gives a Renewal Notice, (i) the Term with respect to the Hotels specified in the Renewal Notice shall be extended by one year from the last
day of the then-expiring Term, and (ii) the Term of this Agreement shall expire on the last day of the one-year renewal term with respect to which such Renewal Notice is given. 
  
 ARTICLE 3 
 MANAGEMENT FEES AND PAYMENTS TO MANAGER & LESSEE 
  
 3.1 Base Management Fee. 
  
 (a)
In consideration of the management of the Hotels by Manager, Lessee agrees to pay to Manager the Base Management Fee with respect to each of the Hotels. The “Base Management Fee” shall mean and refer to a fee equal to three percent (3.0%)
of Total Revenues with respect to each month (or portion thereof). 
  
 (b) The Base Management Fee for the immediately preceding month shall be paid monthly to Manager on the 20th days of each month from the Bank Account. 
  
 3.2 Incentive Management Fee. 
  
 (a) In addition to the Base Management Fee, Lessee also agrees to pay Manager the “Incentive Management
Fee” commencing with Fiscal Year 2004. The Incentive 
  

 8 

 Management Fee shall mean and refer to a fee calculated as set forth on Schedule 2. As set forth
on Schedule 2, the Incentive Management Fee shall be calculated on a consolidated basis; provided that in no event shall the Incentive Management Fee exceed three percent (3.0%) of Total Revenues of all of the Hotels in the aggregate.

  
 (b) The Incentive Management Fee for each
Fiscal Year shall be paid as set forth on Schedule 2. 
  
 3.3 Newco Restricted Shares. On the Commencement Date, Lessee shall cause Newco to deliver to Manager such number of shares of restricted stock of Newco having an aggregate value of $200,000, (based upon the public offering price per
share of Newco stock sold in the Newco IPO) (the “Newco Restricted Shares”). The Newco Restricted Shares to be issued shall be allocated amongst Steve Van, Chris Russell and such other employees of Manager as designated in writing by
Manager on or prior to                         , 2004. Except as otherwise provided herein, the terms governing the Newco
Restricted Shares shall conform as to form and substance with the form and substance of the terms governing Newco Restricted Shares issued in connection with the Newco IPO. Subject to the terms and conditions set forth in this Agreement, the Newco
Restricted Shares shall vest over the five (5) year period commencing on the Commencement Date, vesting as to twenty percent (20%) on the third (3rd) anniversary of the Commencement Date and as to thirty percent (30%) on the fourth (4th) anniversary
thereof and vesting as to fifty percent (50%) on the fifth (5th) anniversary thereof, provided that such vesting shall be contingent on this Agreement remaining in full force and effect as of such vesting dates. In the event this Agreement is
terminated with respect to all of the Hotels pursuant to Section 12.2, all unvested Newco Restricted Shares shall be forfeited effective on the date of such termination (or in the case of a termination by Manager pursuant to Section
12.2(a)(ii) effective on the date of delivery of such termination notice to Lessee). In the event this Agreement is terminated with respect to some, but less than all of, the Hotels pursuant to Section 12.2, a fraction of all unvested
Newco Restricted Shares shall be forfeited effective on the date of such termination, the numerator of which shall be equal to the Total Revenues of such Terminated Hotels for the most recently completed Fiscal Year and the denominator of which
shall be equal to the Total Revenues of all Hotels (including such Terminated Hotels) for the most recently completed Fiscal Year. 
  
 3.4 True Up. Manager shall include in the annual Lessee’s Report delivered to Lessee pursuant to Section 6.1 a calculation of all
Management Fees earned by Manager under this Agreement for the Fiscal Year. To the extent that any sums remain due and payable to Manager at such time, Lessee shall pay Manager such sums within 30 days. To the extent that Manager has received any
amounts in excess of the Management Fees that were properly payable to Manager during the Fiscal Year, then Manager shall reimburse Lessee within 30 days. 
  
 ARTICLE 4 
 OPERATIONAL STANDARDS

  
 4.1 Operational Standards. Manager covenants to and
shall operate the Hotels in accordance with the terms of this Agreement and the operational standards developed by Manager in connection with its hotel management business, as such operational standards are modified, revised or amended from time to
time at all times consistent and in accordance with 
  

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 the Franchise Standards, as applicable (collectively, the “Operational Standards”). Lessee shall cooperate with
Manager throughout the Term (as the same may be extended) so that Manager shall be able to operate the Hotels in accordance with the Operational Standards. Manager may make such changes to the Operational Standards during the Term of this Agreement
as are reasonable for the operation of the Hotels. Manager will not, without Lessee’s approval or pursuant to an Approved Budget, make any material changes to FF&E or make any Capital Expenditures. 
  
 4.2 Manager and Lessee Control. 
  
 (a) Subject to the provisions of this Agreement including
compliance with each of the Approved Budgets and the above Operational Standards, Manager shall: 
  
 (i) manage the day-to-day operation of the Hotels during the Term of this Agreement; 
  
 (ii) determine operating policy, standards of operation,
quality of service and any other matters affecting customer relations or the efficient management and operation of the Hotels, including, without limitation, the use of space therein; 
  
 (iii) determine the terms of guest admittance to the Hotels, use of rooms for commercial purposes, use of
Hotel space for retail business and other services, policies relating to entertainment, labor policies, charges for rooms and commercial space, credit policies, food and beverage services, menu prices and other guest charges, receipt, holding and
disbursement of funds, maintenance of bank accounts, the procurement of inventories, supplies and services, promotion and publicity. 
  
 (b) Manager may provide reasonable and customary complimentary or discounted food, beverages, rooms and the use of other facilities of the
Hotels to existing or potential customers, employees and others. All such complimentary or discounted items shall be disclosed to Lessee in writing as part of the monthly Lessee’s Report. If any such complimentary item will decrease Total
Revenues by ten percent (10%) or more, then Manager will obtain Lessee’s prior approval for the complimentary item. 
  
 (c) Manager shall engage legal counsel and prosecute legal claims relating to the Hotels, provided that if a claim exceeds $20,000 or the
estimated cost of such legal services to defend a claim is expected to exceed $10,000 in the reasonable judgment of Manager, then the choice of legal counsel and actions to be taken shall be subject to the prior approval of Lessee. 
  
 4.3 Contractual Authority. Manager shall not have the right, power or
authority to enter into agreements or incur liability on behalf of Lessee except as expressly set forth herein. Any action taken by Manager which is not expressly permitted by this Agreement shall not bind or create any claim against Lessee. Subject
to the provisions of this Agreement including compliance with an Approved Budget, Manager is authorized to make, enter into and perform in the name of, for the account of, and on behalf of Lessee, as an Operating Cost, any operating contracts and
agreements deemed necessary by Manager to carry out and put into effect the terms and conditions of this Agreement, including the execution by Manager in Lessee’s name of equipment leases and the like relating to the Hotels. Notwithstanding
anything to the contrary in 
  

 10 

 the foregoing, Manager shall not, without Lessee’s prior written approval, execute any contract in Lessee’s
name which (a) is not provided for in an Approved Budget; (b) extends beyond one (1) year and is not cancelable by Lessee without penalty thereafter upon 60 days notice or less; (c) involves Capital Expenditures; or (d) provides for aggregate
payments by Lessee over the life of the contract (taking into account Lessee’s early termination rights, if any) in excess of $25,000 for any individual contract, or when combined with other contracts entered into by Manager relating to a
single Hotel, provides for aggregate cumulative payments by Lessee over the life of the contracts (taking into account Lessee’s early termination rights, if any) in excess of $100,000. Manager shall execute in Lessee’s name all leases of
retail or rooftop space in the Hotels, all of which shall be subject to the prior written approval of Lessee. 
  
 4.4 Meetings. Meetings with respect to the Hotels shall be held once per month unless mutually agreed to otherwise by Lessee and Manager. Such
meetings shall be held at such location as mutually agreed upon by the parties. At each such meeting, the parties will review the status of the following: (i) results of operations; and (ii) Capital Expenditures. An agenda of the additional items,
if any, to be discussed at each meeting shall be prepared by Lessee and delivered to Manager not less than five (5) days prior to each meeting. Manager may add additional items to the agenda proposed by Lessee by providing prior written notice to
Lessee. Upon Lessee’s request, minutes shall be prepared by Manager as to each such meeting and circulated thereafter to Lessee for review and verification. Such minutes shall be in summary form and shall refer only to the agenda items
discussed and the decisions and actions agreed to be taken with respect to such agenda items. 
  
 ARTICLE 5 
 OPERATION OF THE HOTELS 
  
 5.1 Licenses. Lessee warrants that to its actual knowledge there will
be no covenants or restrictions which would prohibit or limit Manager (provided that the necessary licenses and permits (the “Licenses”) therefor have been obtained) from operating the Hotels, including cocktail lounges, restaurants and
other facilities in accordance with the Operational Standards. In cooperation with Lessee, Manager or an Affiliate of Manager shall apply for, process and take all necessary steps to procure, as an Operating Cost, all Licenses required for the
operation of the Hotels and related facilities, including, but not limited to, liquor licenses for the sale of alcoholic beverages at all restaurants, bars, lounges, banquet rooms, meeting rooms and guest rooms at the Hotels. Licenses held in
Lessee’s name as of the Commencement Date shall remain in Lessee’s name, and Licenses currently held in the prior manager’s name (including liquor licenses) shall be held in Manager’s name. The parties agree to assist one another
in connection with such party’s efforts to obtain any such licenses. Manager undertakes to comply with any conditions set out in any such Licenses and at all times to operate and manage the Hotels in accordance with such conditions and any
other legal requirements. Upon the expiration or sooner termination of this Agreement (whether expiration or termination of this Agreement in whole or with respect to one or more Terminated Hotels), Manager agrees (with respect to all Licenses if
this Agreement expires or is terminated in whole or otherwise with respect to such Licenses relating to the operations of the Terminated Hotels) to the extent permitted by applicable law, to sell, assign, transfer and convey to Lessee or its
designee all of Manager’s right, title and interest in and to all such Licenses (including liquor licenses), without charge (other than any expenses of transfer, which shall be Reimbursed Expenses), or (in the event such assignment is not
permitted by 
  

 11 

 applicable law) to use reasonable efforts to provide Lessee or Lessee’s designee with the use and benefits of such
Licenses until such time (not to exceed 365 days) as Lessee and/or its designee are able to obtain new Licenses (any such period of time, the “Period of Use”); provided that Lessee shall indemnify, defend and hold harmless (the
“License Indemnity”) Manager and its Affiliates, and their respective agents, officers, employees, directors and shareholders, from and against any and all losses, costs, liabilities, expenses and claims (whether administrative or judicial
and including, without limitation, any attorneys’ fees and expenses), arising from Lessee’s use of such Licenses pursuant to this Section 5.1. The License Indemnity shall survive the termination of this Agreement. Lessee will
reimburse Manager for reasonable out-of-pocket expenses incurred by Manager in connection with maintaining the Licenses for Lessee’s use during any Period of Use. 
  
 5.2 Operating Equipment and Operating Supplies. Manager shall procure as an Operating Cost all Operating Supplies and
Operating Equipment as Manager deems necessary to the normal and ordinary course of operation of the Hotels and to operate the Hotels in accordance with the Operational Standards. 
  
 5.3 Personnel. 
  
 (a) All personnel employed at the Hotels at all times shall be the employees of Manager or of an Affiliate of Manager. All employees shall
be employed “at will” and Manager shall not enter into any employment contract without the prior written consent of Lessee. Manager shall have discretion to hire, fire, promote, supervise, direct and train all employees at the Hotels, to
fix their compensation and benefits, and generally to establish and maintain all policies relating to employment and employment benefits. Notwithstanding the preceding sentence, Lessee shall have the right to review the qualifications of any person
proposed as a general manager and shall have the right to approve such person(s) prior to Manager making a commitment to hire such person. Subject to the provisions of this Agreement including compliance with the Approved Budgets, the costs
pertaining to all employees at the Hotels arising out of the employer-employee relationship, including, without limitation, salaries, benefits (including vacation, sick and personal days and accruals at the accrual rate established by Manager),
bonuses, relocation costs, reasonable employment-related legal costs, costs incurred in connection with governmental laws and regulations and insurance roles, and such other expenses as may be approved by Lessee in its reasonable discretion
(e.g., costs of defense of employees charged with a crime in connection with the performance of their duties at a Hotel and costs of defending claims brought by Hotel employees against Lessee, Manager or any Hotel) shall be an Operating Cost.

  
 (b) As deemed necessary by Manager, Manager
may propose to Lessee that other employees of Manager or an Affiliate of Manager may be assigned temporarily or on a part-time basis to perform services at a Hotel. Any such assignments shall be subject to the following terms and conditions:

  
 (i) any such assignment shall be subject to
Lessee’s prior written approval; 
  

 12 

 (ii) Manager shall provide Lessee with costs estimates and an explanation of how the
assignment is for the benefit of such Hotel; 
  
 (iii) a reasonable allocable portion of such temporary or part-time employee’s salary (including employee benefits) while performing services at such Hotel, and actual expenses incurred by such employee in traveling to and from such
Hotel, will be reimbursed to Manager by Lessee, as an Operating Expense (the allocable salary shall be reasonable based on the nature of the services provided); 
  
 (iv) such employees will be entitled to complimentary lodging, food and beverages, and other amenities, and
use of Hotel facilities while performing such services provided that any such complimentary lodging must not reduce Total Revenues. 
  
 (c) Upon expiration or other termination of this Agreement (whether expiration or termination of this Agreement in whole or with respect
to one or more Terminated Hotels), Lessee will reimburse Manager for reasonable costs and expenses incurred by Manager with respect to all Hotels if this Agreement expires or is terminated in whole or otherwise with respect to the Terminated Hotels,
accrued prior to or arising out of either the transfer or termination of Hotel employees, including, without limitation, work-related injury claims which may have been incurred, but have not been received by Manager or, if applicable, Lessee, as of
the effective date of transfer, reasonable transfer costs, severance pay, unemployment compensation, costs incurred pursuant to the Worker Adjustment and Retraining Notification Act of 1988 (as amended, the “WARN Act”) and other, related
liabilities. 
  
 5.4 Routine Maintenance and Repairs.
Subject to the availability of sufficient funds therefor, and in accordance with an Approved Budget, Manager shall maintain each Hotel in good repair and condition and in conformity with the Operational Standards and applicable laws and regulations,
and shall make or cause to be made such routine maintenance, repairs and minor alterations, the cost of which can be expensed under GAAP, as Manager, from time to time, deems necessary for such purposes and in order for such Hotel to maintain a
competitive position. The cost of such routine maintenance, repairs and alterations shall be paid from Total Revenues and shall be treated as an Operating Cost; to the extent that Hotel revenues are insufficient therefor, Manager shall not be
obligated to perform such routine maintenance and repairs. Expenditures under this Section 5.4 shall not be paid from the FF&E/Capital Improvement Reserve Fund. The determination of whether an expenditure is for routine repairs and
maintenance under this Section 5.4 or, in the alternative, a Capital Expenditure (as defined below) under Section 5.5 shall be made in accordance with this Agreement, GAAP, and the Uniform System of Accounts. 
  
 5.5 Capital Expenditures. 
  
 (a) With respect to each Hotel, in addition to routine
maintenance, repairs and alterations under Section 5.4, and subject to the limitations of such Hotel’s Approved Budget, Manager shall have the obligation to replace FF&E and make such Capital Expenditures as Lessee deems to be
beneficial to such Hotel or its operation or which Lessee determines to be necessary in order to maintain such Hotel’s competitive position in the market place or to maintain such Hotel in accordance with the Operational Standards. Expenditures
under this 
  

 13 

 Section 5.5 shall be subject to prior written approval of Lessee or shall be pursuant to the
Capital Expenditures Budget approved by Lessee and shall be paid from the FF&E/Capital Improvement Reserve Fund. Manager shall be responsible for complying with the policies and procedures of Mortgagee for release of the funds for Capital
Expenditures from the FF&E/Capital Improvement Reserve Fund. In consideration of Manager’s management of Capital Expenditure projects, Manager shall receive compensation as set forth on Schedule 6. 
  
 (b) The determination as to whether the expenditure is a
Capital Expenditure will be made in accordance with GAAP. As used herein, “Capital Expenditures” shall mean and include repairs, replacements, alterations, renewals and improvements to each of the Hotels which are normally capitalized
under GAAP, including, without limitation, those items defined as FF&E repairs, alterations, improvements, renewals or replacements to the Building’s structure or to its mechanical, electrical, heating, ventilating, air conditioning,
plumbing or vertical transportation systems, exterior and interior repainting, and resurfacing building walls, floors, roofs and parking areas and expenditures for any computer and communications hardware, software, materials, and related labor
expenses as further defined in accordance with Lessee’s capitalization policy attached hereto as Schedule 4. 
  
 5.6 Emergency Repairs. 
  
 (a) In the event a condition should exist in, on or about any Hotel of an emergency nature, including those defined as Capital
Expenditures hereunder, which condition requires immediate action to preserve and protect such Hotel, to assure its continued operation or to protect such Hotel guests or employees, then Manager shall attempt to contact Lessee for approval (written
or verbal) to take all steps and to make all expenditures necessary to repair and correct any such condition. 
  
 (b) If Manager is unable to contact Lessee for prior approval, and such emergency repairs can be made at a cost that is less than 5% of
forecasted Total Revenues for the then calendar month (as set forth in Section 6.2(c) and reported in the Lessee’s Report), Manager, on behalf of Lessee as an Operating Expense or Capital Expenditure, is authorized to take all steps and
to make all expenditures necessary to repair and correct any such condition, whether or not provisions have been made in such Hotel’s Approved Budget for any such emergency expenditures. 
  
 (c) Manager shall use reasonable efforts to advise Lessee as
promptly as possible of any expenditures made or to be made under this Section 5.6(c). 
  
 (d) Expenditures under this Section 5.6 shall be paid from the Bank Account. 
  
 5.7 Repairs Required by Law. 
  
 (a) In the event that, at any time during the Term, repairs
to or additions, changes or corrections in any Hotel of any nature shall be required by reason of any laws, ordinances, rules or regulations now or hereafter in force, or by order of any governmental or municipal power, department, agency, authority
or officer, whether such repairs, etc. are Capital Expenditures or otherwise, then Manager shall promptly notify Lessee. 
  

 14 

 (b) Manager shall cause all such repairs, additions, changes or corrections that are
approved by Lessee. 
  
 (c) Expenditures under
this Section 5.7 shall be subject to prior written approval of Lessee or shall be pursuant to the Capital Expenditures Budget approved by Lessee and shall be paid from the FF&E/Capital Improvement Reserve Fund (for Capital Expenditures)
or from the Bank Account (for Operating Costs). 
  
 (d) Manager shall be responsible for complying with the policies and procedures of Mortgagee for release of the funds for Capital Expenditures from the FF&E/Capital Improvement Reserve Fund. 
  
 ARTICLE 6 
 FISCAL MATTERS 
  
 6.1 Accounting Matters. 
  
 (a) Manager shall maintain an accurate accounting system, in accordance with the Uniform System of Accounts with its management of the Hotels. For all purposes under this Agreement, “Uniform System of
Accounts” shall mean the Uniform System of Accounts for the Lodging Industry, Ninth Revised Edition, 1996, as adopted by the American Hotel and Motel Association and all future amendments thereto. The books and records reflecting operations of
each Hotel shall be maintained either at such Hotel, at the principal office of Manager or at a regional accounting office, at Manager’s option, provided that manager shall give notice to Lessee of the location of such books and records.

  
 (b) Lessee, OP, the Mortgagee(s), and the
independent accounting firms of Lessee, the Mortgagee(s) and Manager shall each have the right and privilege of examining such books and records at any reasonable time during normal business hours following 5 calendar days advance notice to Manager.
Any such review shall be completed without material disruption to the operations of any Hotel. 
  
 (c) Upon request of Lessee and at Lessee’s sole cost and expense, a certified audit of the operations of any or all of the Hotels
shall be performed by a nationally recognized, independent Certified Public Accounting firm with expertise in the lodging industry as appointed by Lessee. Manager shall cooperate in good faith with Lessee and its representatives to facilitate such
audit. 
  
 (d) Manager shall prepare and furnish
to Lessee, within 10 calendar days after the end of each calendar month, financial statements for the Hotels setting forth the financial position and results of operations of each Hotel for such calendar month and the calendar year-to-date, with
comparisons to the then current Operating Budget and the previous year’s results. Manager shall also prepare and furnish to Lessee, within 15 calendar days after the end of each Fiscal Year, financial statements for each Hotel setting forth the
financial position and results of operations of each Hotel for such Fiscal Year, with comparisons to the then current Operating Budget and the previous year’s results. The monthly and annual reports are collectively referred to as the
“Lessee’s Report”). 
  

 15 

 (e) Each Lessee’s Report shall also include: 
  
 (i) forecasted statement of cash flow (provided on a monthly
and quarterly basis). 
  
 (ii) a detailed
description of Operating Costs, including the Base Management Fee, charges for Additional Services, all Reimbursed Expenses, and all Operating Costs paid to affiliates of Manager (as described in Section 19.16). 
  
 (f) Manager shall provide, and cooperate with the
preparation of, all documentation required for Lessee’s indirect parent’s compliance with The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) Section 404 including, but not limited to, documentation of internal control systems and
processes and the quarterly and annual testing of the same in a manner sufficient for Lessee’s indirect parent to certify to the Securities and Exchange Commission, its external auditor and to shareholders that such controls are operating as
designed. Such documentation, testing and reporting pursuant to Sarbanes-Oxley Section 404 shall be a Lessee’s Cost. Manager will conduct an internal audit in accordance with Lessee’s internal audit polity to be conducted at each Hotel at
least one time per year. Such audit will be an Operating Cost of the Hotel. Additionally, Manager will cause its employees to provide signed certifications to support Lessee’s indirect parent’s obligation to provide certifications to the
Securities and Exchange Commission in connection with its quarterly reports on Form 10-Q and its annual reports on Form 10-K pursuant to Sarbanes-Oxley Sections 302 and 906, or any other certification required in the future. 
  
 (g) Manager shall also provide Lessee with additional
operating and financial data as Lessee may reasonably request (including, without limitation, any reporting as may be required by the Mortgagee and monthly reforecasts), the cost of providing such data to be an Operating Cost of such Hotel.

  
 6.2 Proposed Annual Plan. 
  
 (a) Preliminary Operating Budget. For Fiscal Year
2004, Lessee and Manager agree to use the existing projections as set forth in the REIT Company Model, dated May 13, 2004 (the “Model”), as prepared by Lessee and Manager for each Hotel (the projections for each Hotel, a “Preliminary
Operating Budget”).] 
  
 (b) Three Year
Plan. 
  
 (i) Lessee and Manager have
prepared and agreed upon a three year business plan (as amended from time to time, the “Three Year Plan”) for each Hotel, initially covering the period from the Commencement Date through December 31, 2007. 
  
 (ii) At least 30 days prior to the commencement of each
calendar year, commencing with calendar year 2006, Lessee and Manager shall jointly agree and approve an amendment of the Three Year Plan then in effect to extend its term by one year (e.g. prior to December 1, 2006, Lessee and Manager shall extend
the Three Year Plan through December 31, 2008, mutually agreeing upon the amounts of the line items for the calendar year 2008 portion thereof). The amounts specified for each line item with respect to the final year of the Three 
  

 16 

 Year Plan as so extended shall be determined by the parties in a manner consistent with the approval of
Approved Budgets as set forth in Section 6.2(c) below. 
  
 (c) Operating Budget/Approval. 
  
 (i) At least 45 days prior to the commencement of each subsequent calendar year, Manager shall submit to Lessee an annual market and property penetration forecast for the operation of each of the Hotels for the
immediately following Fiscal Year containing revenue projections. 
  
 (ii) At least 30 days prior to the commencement of each subsequent calendar year, Manager shall submit to Lessee (A) projected budgets of revenues and expenses (the “Operating Budget”), (B) a marketing plan,
and (C) plans and estimates of the expenditures necessary, in such detail as Lessee shall reasonably require, for Capital Expenditures (the “Capital Expenditures Budget”). The market and property penetration forecast, Operating Budget,
marketing plan, and the Capital Expenditures Budget for each Hotel comprise such Hotel’s “Proposed Annual Plan.” 
  
 (iii) Manager shall review each of the Proposed Annual Plans with Lessee, and subject to Lessee’s approval, which shall not be
unreasonably withheld, the Proposed Annual Plan for each Hotel shall become the “Approved Budget” for such Hotel and Manager shall implement it during the successive Fiscal Year. Lessee shall approve the Proposed Annual Plans or state its
specific objections thereto (or to any specific item or items therein) within 30 days after the Proposed Annual Plan is submitted by Manager to Lessee. 
  
 (iv) In the event Lessee objects to any of the Proposed Annual Plans or any specific line item or items of the Proposed Annual Plans prior
to commencement of the Fiscal Year in question, pending resolution thereof, the Proposed Annual Plans or the specific line item or items of expense (not revenue) that have not been approved shall be suspended and replaced for the Fiscal Year in
question by an amount equal to the amount of such budget item or items for the Fiscal Year in question as set forth in the Three Year Plan then in effect. Lessee and Manager shall use their good faith efforts to resolve Lessee’s objections as
soon as possible whereupon such resolution shall be incorporated into such Approval Annual Plan. Notwithstanding the foregoing, in the event Lessee fails to respond with any objections to a Proposed Annual Plan within 30 days after submittal by
Manager, then such Proposed Annual Plan shall be deemed not approved. 
  
 (v) The meeting of targets within each of the Approved Budgets may be used to determine Hotel employee bonuses and compensation; however, the Incentive Management Fee paid to Manager is based solely on the formula
described in Section 3.2 and the Incentive Management Fee shall not be adjusted based on Manager successfully meeting targets in any Approved Budget. 
  
 (d) Variance from Approved Budget. Manager may, without Lessee’s approval, make aggregate expenditures in any Fiscal Year
which exceed an Approved Budget, provided that such excess does not exceed such expenditures as provided in such Approved Budget by more than 5% (the “5% Limitation”). In addition, Manager may expend in excess of 
  

 17 

 such 5% Limitation under the following circumstances (provided such expenditures are reasonable in nature
and amount and are a direct result of such circumstances): 
  
 (i) as the result of increased costs due to increased occupancy rates above the assumptions set forth in such Approved Budget or Lessee’s Reports (or other information) provided by Manager to Lessee; or

  
 (ii) as the result of an emergency, as
described in Section 5.6, or 
  
 (iii) as
the result of weather related costs or increases in the cost of utilities based upon changes in utility rates. 
  
 The provisions of this Section 6.2(d) shall operate notwithstanding the provisions of Section 6.2(c) above, or anything to the contrary
contained elsewhere in this Agreement, Manager shall promptly notify Lessee of any expenditures that have been or are expected to be made in excess of an Approved Budget pursuant to this Section 6.2(d) and of the reasons therefor. Inclusion
of such information in the Lessee’s Report will satisfy this notice requirement. 
  
 (e) Revised Budget. In addition to the additional amounts Manager may expend pursuant to Section 6.2(d) above, Lessee and
Manager acknowledge and agree that there may occur from time to time unpredicted significant changes, variables or events affecting the operation of a Hotel, including unanticipated changes in occupancy rates, market conditions, or additional
unanticipated items of income or expense. In such event, Manager may request variance(s) from an Approved Budget, which are reasonable and necessary to continue to operate such Hotel in accordance with the Operational Standards. Lessee’s
approval of such a request shall not be unreasonably withheld. Any such request by Manager shall be submitted to Lessee in writing with an explanation thereof and shall be accompanied by supporting information for the request. Lessee shall respond
to any such request within 30 days of the receipt thereof. Notwithstanding the foregoing, in the event Lessee fails to respond within 30 days after submittal by Manager, then the request shall be deemed not approved. 
  
 (f) Reasonable Efforts. Manager agrees to use all
reasonable efforts to operate each of the Hotels within the applicable Preliminary Operating Budgets and the applicable Approved Budgets and in a manner designed to maximize Net Operating Income. 
  
 (g) Consultation. At the time of the review by Lessee
with Manager of the Proposed Annual Plans and at any additional meetings during the Fiscal Year reasonably called by Lessee and Manager, Manager shall, as necessary, consult with Lessee concerning any material changes Manager is contemplating with
respect to its policies concerning management of the Hotels, sales, room rates, wage scales, personnel, general operating procedures, economics and operation and other matters affecting the operation of the Hotels. 
  
 6.3 Funding; Bank Accounts. 
  
 (a) Funds necessary to pay for all Operating Costs and
Lessee’s Costs relating to each Hotel shall be paid from such Hotel’s Total Revenues, the Tax and Insurance Fund, and from the FF&E/Capital Improvement Reserve Fund. The performance of all activities by 
  

 18 

 Manager hereunder shall be on behalf, and for the account, of Lessee. Accordingly, Manager shall be
authorized to pay any Operating Costs and Lessee’s Costs out of the Bank Account. 
  
 (b) With respect to each Hotel, Manager shall establish in the name of Lessee, with Lessee’s tax identification number, and for
Lessee’s account such bank accounts (the accounts for each individual Hotel are collectively referred to as the “Bank Account”) as Manager deems necessary for the operation of such Hotel at a bank or banks approved by Lessee into
which all funds advanced to such Hotel by Lessee or otherwise derived from the operation of such Hotel shall be deposited. The parties shall mutually cooperate to minimize the amount of idle cash on deposit in the Bank Account. 
  
 (c) The Bank Account shall provide that Lessee and
Lessee’s designees shall be the only parties authorized to draw upon the Bank Account. For manual checks written by on-site employees at such Hotel, Lessee’s designees shall include two employees of Manager who must both be signatories on
any checks from the Bank Account. For checks generated through an automated system at Manager’s home office, only one signature of an employee of Manager shall be required. 
  
 (d) Lessee shall have the sole authority to change the authorized Bank Account signatories (including the
employees of Manager). 
  
 (e) Any and all monies
received from the operation of each Hotel shall pass through the Bank Account. Manager agrees to handle such Bank Account as may be required by the terms of any loan or financing documents on such Hotel, including the establishment of a separate
reserve account if so required, upon reasonable notice from Lessee. Nothing herein contained shall be construed to deprive Manager of the right to maintain petty cash funds at a Hotel and to make payments therefrom pursuant to the standard practices
employed in the hospitality industry; provided Manager shall make a complete accounting for the same as required under this Agreement. 
  
 6.4 Cash Management. Manager shall manage all cash balances from the operation of each Hotel and may invest the same on behalf of Lessee, from time
to time, as reasonably determined by Lessee. Any investments made pursuant to this Section 6.4 shall be made in compliance with Manager’s investment policy (“Investment Policy”) (the primary objective of which is the
preservation of principal). The Investment Policy expressly limits Manager’s investment options hereunder to the following: (a) obligations of the United States government, (b) commercial paper rated A1/P1, (c) money market mutual funds with
daily liquidity options and having an asset value of $50 million or more, and (d) commercial bank instruments issued by federally insured banks with at least $1 billion in total assets. 
  
 6.5 Reimbursement of Out-of-Pocket Expenses. 
  
 (a) It is agreed that Lessee shall reimburse Manager and its Affiliates for actual, reasonable and necessary
out-of-pocket costs which they shall incur as an Operating Cost in connection with the performance of this Agreement (collectively, the “Reimbursed Expenses”). Such reimbursements shall be in addition to the Management Fee. 
  

 19 

 (b) Reimbursed Expenses may include, without limitation, reasonable travel, meals,
lodging, entertainment, telephone, electronic communication, postage, air express, costs of recruitment (including applicable agent’s fee) and other incidental expenses; provided that, none of the foregoing expenses shall be for items of
administrative overhead of Manager. 
  
 (c)
Initially, Manager shall be entitled to reimbursement of Reimbursed Expenses with respect to each Hotel from the Bank Account of such Hotel at the time incurred and such Reimbursed Expenses shall be reported in detail in the Lessee’s Report as
provided for in Section 6.1(e). However, Lessee, at its election, may in the future implement a procedure requiring that Reimbursed Expenses be submitted to Lessee for prior written approval, such approval not to be unreasonably withheld or
delayed, and then reimbursed from such Bank Account promptly following such prior written approval. 
  
 ARTICLE 7 
 DISBURSEMENTS 
  
 7.1 Disbursement of Funds. All funds derived from the operation of
each Hotel shall be deposited into the respective Bank Account created pursuant to the requirements of Section 6.3. With respect to each Hotel, there shall in turn be disbursed by Manager for and on behalf of Lessee, funds from such
Hotel’s Bank Account toward the following items, as they relate to such Hotel, to the extent available (with appropriate reserves established to provide for items payable less frequently than monthly) in the following order of priority
(provided that, the priority shall be altered to the extent necessary to comply with the requirements of any Permitted Mortgage): 
  
 (a) all Operating Costs, including the Base Management Fee, charges for Additional Services, and all Reimbursed Expenses; 
  
 (b) payment of emergency expenditures as provided under
Section 5.6; 
  
 (c) all real and personal
property taxes and assessments due and payable; 
  
 (d) premiums on general liability insurance and premiums for other insurance pursuant to Article 9 and Schedule 3; 
  
 (e) if instructed by Lessee, debt service on any Permitted Mortgage; 
  
 (f) rental payments pursuant to any existing ground lease or capital leases, including any and all charges
for common area maintenance or owners’ association dues; and 
  
 (g) all Lessee’s Costs not otherwise expressly set forth above. 
  
 7.2 Lessee’s Distribution. After the disbursements pursuant to Section 7.1, Net Operating Income shall be disbursed monthly to Lessee;
provided that, Lessee in its sole discretion may direct that a balance be left in the Bank Account to fund future Operating Expenses. Notwithstanding that Manager is authorized to and shall make the disbursements set forth above to the extent funds
are available. It is understood that Lessee will be solely liable for 
  

 20 

 (i) all Operating Costs, and (ii) all sales taxes, excise taxes, or other taxes which may be assessed by any taxing
authority with respect to the Hotels or the operation thereof. 
  
 ARTICLE 8 
 FRANCHISE 
  
 8.1 Selection by Lessee. 
  
 (a) On or prior to the Commencement Date Lessee shall have entered into the Franchises. During the remainder of the Term, each Hotel shall
operate under the respective Franchise set forth on Schedule 1 or any subsequent Franchise selected by Lessee. Each Hotel shall be operated under the respective trade names set forth on Schedule 1 (each, a “Trade Name”) or
under another Trade Name that is consistent with any subsequent franchise arrangement. 
  
 (b) Manager shall from time to time notify Lessee in writing of any deficiencies of any Hotel under its Franchise. 
  
 (c) Subject to funds being available made available by
Lessee, Manager shall be obligated to comply with any product improvement plan, operating standards changes, or other requirements of each Franchise, as may be imposed from time to time, as an Operating Cost or Capital Expenditure, as appropriate.

  
 (d) All costs, fees, royalties and expenses
due and payable under a Franchise shall be paid as Operating Costs. 
  
 8.2 Definition of Marks. As used herein, “Marks” shall mean the Trade Names and any other name, service marks, trademarks, slogans and the like (including all improvements and additions whenever made to or associated with
any thereof by the parties or anyone else) now or hereafter used by Manager pursuant to the Franchises. 
  
 8.3 Rights Upon Termination of a Franchise. Upon any termination or expiration of any Franchise for any reason whatsoever, unless Lessee or OP
enters into a separate franchise with respect to the use of the Trade Names in connection with the applicable Hotel, Manager shall cause each affected Hotel to immediately cease all uses of its Trade Name and Marks and shall remove from each
affected Hotel, cover or otherwise conceal, any signs containing the Marks and, within 30 days following such termination or expiration, cease to use any Operating Equipment, Operating Supplies, inventory, supplies or any other materials containing
the Marks and perform any other activity required by the franchisor upon the termination of such Franchise. 
  
 ARTICLE 9 
 TAXES AND INSURANCE 
  
 9.1 Property Taxes. 
  
 (a) Manager shall pay all Property Taxes, unless disbursed
by Mortgagee, on behalf of Lessee not less than ten (10) days prior to the applicable due dates and promptly furnish Lessee with proof of payment of Property Taxes. Property Taxes relating to each Hotel 
  

 21 

 will be paid from the applicable Tax and Insurance Funds. Manager shall be responsible for complying with
the policies and procedures of Mortgagee for release of the funds for payment of Property Taxes from each Tax and Insurance Fund, as applicable. 
  
 (b) Manager shall from time to time advise Lessee of the desirability of contesting the validity or amount of any Property Tax. Lessee
may, whether or not Manager so recommends, pursue a tax contest, and Manager agrees to cooperate therewith. Costs and expenses incurred by Lessee and Manager in connection with a tax contest shall be Operating Expenses. 
  
 9.2 Insurance Coverage. 
  
 (a) Lessee shall procure and maintain insurance coverage as
set forth on Schedule 3. Manager may from time to time submit proposals to Lessee whereby Manager will procure and maintain insurance coverage to be provided by Lessee, and Lessee may accept or reject any such proposals in Lessee’s
discretion. 
  
 (b) Manager shall procure and
maintain insurance coverage to be provided by Manager as set forth on Schedule 3. 
  
 (c) Except as otherwise directed by Lessee, payment for all such insurance coverage shall be from the Tax and Insurance Funds, to the
extent permitted under the Permitted Mortgages, and otherwise from the Bank Accounts. 
  
 (d) In connection with all significant construction at any Hotel, Lessee or Manager (whichever is the contracting party) will cause the
general contractor to maintain, with a reputable insurer, Builder’s Risk and General Liability insurance. 
  
 9.3 Insurance Policies. 
  
 (a) All insurance provided for under this Article 9 shall be effected by policies issued by insurance companies of good reputation
and of sound financial responsibility and shall meet the requirements of any Permitted Mortgage and be subject to Lessee’s approval. 
  
 (b) Certificates of Insurance shall be delivered to Lessee and Manager on or before the Commencement Date. All insurance policies shall be
renewed, and proof of such renewals shall be delivered to Lessee and Manager at least ten (10) days prior to their respective expiration dates. 
  
 (c) All insurance policies under Section 9.2 shall be written in the name of Lessee, Mortgagee (if any) and any other appropriate
parties designated by Lessee or Manager being named thereon as additional insureds (as their respective interests may appear), except for workers’ compensation insurance and other insurance with respect to which it is impractical and
inappropriate to name other parties as additional insureds. 
  
 (d) All casualty insurance policies shall be endorsed specifically to the effect that the proceeds of any building, contents or business interruption losses shall be made payable to Lessee, the Mortgagee, as their
interests may appear, unless otherwise required by any 
  

 22 

 Mortgagee. All such policies of insurance shall also be endorsed specifically to the effect that such
policies shall not be canceled or materially changed without at least 30 days prior written notice to Lessee, the Mortgagee(s) and Manager. Each party shall use all reasonable efforts to cause any policy which it is responsible to obtain to provide
that the insurer shall not have any rights of subrogation to any claim which either party hereto may have or acquire against the other. Neither Lessee nor Manager shall have any claim against the other with respect to the failure of any insurance
carrier to provide the coverage or protection placed with such carrier as contemplated by this Agreement. 
  
 (e) Certificates of Insurance (and copies of policies, to the extent required) shall be sent to Manager and to Lessee at their respective
addresses set forth in Article 14 hereof and to the Mortgagee(s) at such addressees as the Mortgagee(s) shall designate. 
  
 (f) All coverage limits and deductible amounts set forth in Schedule 3 shall be reviewed by Lessee and Manager from time to time
for the purpose of determining the coverage limits and deductible amounts then appropriate for properties similar in type and construction to the Hotels and for the nature of the business being conducted. Manager and Lessee shall cooperate in good
faith to arrive at an agreement on such matters. 
  
 ARTICLE 10

 INDEMNIFICATION 
  
 10.1 Liabilities; Indemnification; Third Parties. 
  
 (a) Except as provided for below, all debts and liabilities arising in the course of business of the Hotels or otherwise in connection
with the use, occupancy or operation thereof (including, without limitation, all such liabilities under or with respect to environmental laws, hazards or claims) during the Term are and shall be the obligation of Lessee. Manager shall not be liable
or otherwise responsible for any such debts or liabilities by reason of its management, supervision and operation of the Hotels during such Term, including, without limitation, work-related injury claims which may have been incurred, but have not
been received by Manager or, if applicable, Lessee as of the termination thereof. 
  
 (b) Notwithstanding the provisions of paragraph (a), Manager shall be liable for any such debt or liability that arises because of
Manager’s breach of this Agreement, fraud, gross negligence or willful misconduct. 
  
 (c) Manager shall defend, indemnify and hold harmless Lessee and its Affiliates, and their respective agents, officers, employees,
directors and shareholders, from and against any and all losses, costs, liabilities, expenses and claims (whether administrative or judicial), including, without limitation, reasonable attorneys’ fees and expenses (all of the foregoing being
referred to as “Losses”), arising from any matter for which Manager is responsible under this Agreement, but only but only to the extent such Losses are caused by Manager’s breach of this Agreement, fraud, gross negligence or willful
misconduct (excluding, however, any such loss, cost, liability, expense or claim covered by insurance maintained in accordance with this Agreement). 
  

 23 

 (d) Except as to specific acts or omissions for which Manager is liable under paragraph
(b), or for which Manager has agreed to indemnify Lessee in paragraph (c) above, Lessee hereby agrees to defend, indemnify and hold Manager and its Affiliates, and their respective agents, officers, employees, partners, members, directors and
shareholders, harmless from and against Losses occurring out of or by reason of this Agreement or otherwise arising in connection with the ownership, use, occupancy or operation of the Hotels (excluding, however, any such loss, cost, liability,
expense or claim covered by the insurance required to be maintained in accordance with this Agreement). 
  
 (e) No person or entity shall be deemed to be a third party beneficiary of any term or provision of this Agreement, including, without
limitation, the terms and provisions of this Section 10.1, and no person or entity shall have any rights of subrogation or similar rights under this Section 10.1, other than Affiliates of Lessee and Manager, respectively, entitled to
indemnification pursuant to the provisions of this Article 10. All indemnification obligations under this Agreement and the provisions of this Article 10 shall survive the expiration and any termination of this Agreement. 

 
 ARTICLE 11 
 CASUALTY AND CONDEMNATION 
  
 11.1 Casualty. 
  
 (a) If, during the Term, any Hotel incurs minor damage by fire, casualty or other cause, Manager shall, with all reasonable diligence, repair or replace the damaged portion of such Hotel to the reasonably same condition as existed
previously. Manager shall comply with the terms and conditions of any insurance policy and with any Permitted Mortgage to obtain the proceeds from the insurance described in Article 9 which insurance shall be applied to such repairs or
replacements. 
  
 (b) In the event damage or
destruction to any Hotel from any cause materially and adversely affects the operation of such Hotel, Lessee shall promptly commence and complete repairing, rebuilding or replacement of such Hotel to substantially the same character as existed prior
to the damage or destruction provided replacement is justified in comparison to the anticipated profitability of such Hotel during the remaining Term, and provided that the available insurance proceeds (plus the amount of the deductible with respect
thereto) permit such repair, rebuilding or replacement. In the event Lessee chooses to not undertake the repairs, rebuilding or replacements specified above, this Agreement shall terminate with respect to such affected Hotel without the payment of
the Early Termination Fee or other penalty of any kind. 
  
 11.2
Condemnation. 
  
 (a) In the event all or
substantially all of any Hotel shall be taken in any eminent domain, condemnation, compulsory acquisition, or similar proceeding by any competent authority for any public or quasi-public use or purpose, or in the event a portion of any Hotel shall
be so taken, but the result is that it is uneconomic to continue to operate such Hotel as a hotel of the same character and class, this Agreement shall terminate with respect to such affected Hotel without the payment of the Early Termination Fee or
other penalty of any kind. 
  

 24 

 Lessee shall have the sole right to any condemnation award. Schedule 1 shall be modified
accordingly to delete reference to such Terminated Hotel and this Agreement shall otherwise continue in full force and effect with respect to the non-Terminated Hotels. 
  
 (b) In the event a portion of any Hotel shall be taken by the events described in Section 11.2(a) or
an entire Hotel is affected but on a temporary basis, and the result is not to make it unreasonable to continue to operate such Hotel, this Agreement shall not terminate. However, provided that Lessee determines that the cost of repair, rebuilding
or replacement is justified in comparison to the anticipated profitability of such Hotel during the remaining term of this Agreement, so much of any award for any such partial taking or condemnation as shall be necessary to render such Hotel
equivalent to its condition prior to such event shall be used for such purpose; the balance of such award, if any, shall be paid to Lessee. 
  
 11.3 Business Interruption Insurance. Any proceeds from business interruption insurance payable to Lessee or Manager hereunder, including, without
limitation, payments made in connection with, or with respect to periods before or after, the termination of this Agreement pursuant to Sections 11.1 or 11.2, shall be (except as required by any Permitted Mortgage) fairly and equitably
apportioned between Lessee and Manager in accordance with their respective interests and equities to the end that the fair value of Manager’s expectable compensation under this Agreement for the period covered by such business interruption
insurance shall be paid to Manager, but any sum paid to Manager shall not exceed the compensation payable to Manager if this Agreement had been terminated without cause as contemplated by Section 12.2(a)(i) (including Manager’s right to
any Early Termination Fee). 
  
 ARTICLE 12 
 DEFAULT AND TERMINATION 
  
 12.1 Events of Default. It shall be an event of default hereunder (an “Event of Default”) if any one or more of the following events
shall occur: 
  
 (a) Subject to the terms of
Article 18 below, if either party shall fail to timely perform any of its duties and obligations under, or shall otherwise breach the terms of, this Agreement; or 
  
 (b) If either party shall do any of the following: 
  
 (i) voluntarily or involuntarily be dissolved (except that
if either party is a partnership and is dissolved solely by reason of the death, insanity, disappearance, bankruptcy or lack of legal capacity of one or more of its general partners and its remaining partners, within 60 days, elect, pursuant the
partnership agreement of such partnership to continue such partnership’s business, then such party shall not be considered as “dissolved” for the purposes hereof); 
  
 (ii) apply for or consent to the appointment of a receiver, trustee or liquidator of all or a substantial
part of its assets; 
  
 (iii) file a voluntary
petition in bankruptcy or otherwise voluntarily avail itself of any federal or state laws for the relief of debtors; 
  

 25 

 (iv) admit in writing its inability to pay its debts as they become due; 
  
 (v) make a general assignment for the benefit of creditors;

  
 (vi) file a petition or an answer seeking
reorganization or arrangement with creditors or to take advantage of any insolvency law or file an answer admitting the material allegations of any petition filed against it in any bankruptcy, reorganization or insolvency proceeding; 
  
 (vii) be the subject of an order, judgment or decree entered
by any court of competent jurisdiction, in the application of any one or more creditors of such party adjudicating it a bankrupt or insolvent or approving a petition seeking reorganization or appointing a receiver, trustee or liquidator of all or a
substantial part of its assets, and such order, judgment or decree shall become final. 
  
 12.2 Termination. 
  
 (a) Termination Not for Cause. 
  
 (i) Termination by Lessee. Notwithstanding anything to the contrary contained herein, Lessee may terminate this Agreement in its entirety and/or with respect to any Hotel without cause, prior to the expiration
of the Term upon at least sixty (60) days prior written notice to Manager, in which event Lessee shall pay to Manager, on the effective date of such termination (“Early Termination Date”) and as full compensation to Manager with respect to
the Terminated Hotels, the following amounts (collectively, the “Early Termination Fee”): 
  
 (1) If the Early Termination Date occurs prior to the first anniversary of the Commencement Date, an amount equal to (a) the Average Base
Management Fee related to the Terminated Hotels, multiplied by (b) twenty- four (24); or 
  
 (2) If the Early Termination Date occurs on or after the first anniversary of the Commencement Date but prior to the second anniversary
of the Commencement Date, an amount equal to the product of (a) the Average Base Management Fee related to the Terminated Hotels multiplied by (b) twelve (12); or 
  
 (3) If the Early Termination Date occurs on or after the second anniversary of the Commencement Date but
prior to the fifth anniversary of the Commencement Date, an amount equal to the product of (a) the Average Base Management Fee related to the Terminated Hotels multiplied by (b) six (6); or 
  
 (4) If the Early Termination Date occurs after the fifth
anniversary of the Commencement Date, the early termination fee shall be $0. 
  
 Notwithstanding the date specified for termination in such termination notice, Lessee may delay the Early Termination Date in its entirety or with respect to any Terminated Hotel for a period of up to one year from the date of delivery of
such notice in order to transition the management services. In the event Lessee desires to so delay termination, Lessee shall provide notice thereof to Manager prior to the date that is thirty (30) days prior to the date specified for termination in

  

 26 

 Lessee’s termination notice. Thereafter, Lessee may terminate this Agreement (in its entirety or with respect to any
Hotel specified in Lessee’s initial termination notice) on thirty (30) days prior notice to Manager. 
  
 (ii) Termination by Manager. Except as provided below, Manager may terminate this Agreement in its entirety, without cause, prior
to the expiration of the Term upon at least one hundred eighty (180) days notice to Lessee; provided that Lessee may elect to delay such termination in its entirety or with respect to any Terminated Hotel for a period of up to one hundred eighty
(180) days from the date of termination specified in Manager’s notice to Lessee in order to transition the management services. In the event Lessee desires to so delay termination, Lessee shall provide notice thereof to Manager prior to the
date that is thirty (30) days prior to the date specified for termination in Manager’s notice to Lessee. Thereafter, Lessee may terminate this Agreement on thirty (30) days prior notice to Manager. During such extension period Lessee shall
continue to pay Manager its Base Management Fee hereunder, but in no event shall Lessee be liable for the payment of any Early Termination Fee, with respect to such Terminated Hotels. In the event Manager exercises its rights under this Section
12.2(a)(ii), Manager shall forfeit all accrued and unpaid Incentive Management Fees hereunder and all unvested Newco Restricted Shares shall be terminated as of the date of delivery of the termination notice to Lessee. No Incentive
Management Fees shall accrue after the delivery of such termination notice to Lessee. Notwithstanding anything to the contrary contained herein, any termination of this Agreement by Manager pursuant to this Article 12, shall not relieve
Manager of its obligations under Section 13.1, which shall continue to survive in accordance with the terms thereof. 
  
 (b) Performance Based Termination. With respect to the Fiscal Year ending December 31, 2004 (“FY04”), in the event EBITDA
of any Hotel for FY04 is less than ninety-five percent (95%) of such Hotel’s EBITDA for the twelve months ended January 31, 2004, Lessee may terminate this Agreement with respect to such Hotel, upon at least ninety (90) days prior notice. With
respect to each Fiscal Year ending after December 31, 2004, in the event that as of the end of any Fiscal Year EBITDA of any Hotel is less than ninety percent (90%) of the EBITDA thereof as specified in the Three Year Plan for such Fiscal Year,
Lessee may terminate this Agreement with respect to such Hotel, upon at least ninety (90) days prior notice. In the event Lessee and Manager have not mutually agreed on terms of the Three Year Plan for any period commencing on or after January 1,
2008, the target EBITDA for such period to be used in determining whether they condition set forth above has been satisfied shall be deemed to equal the amount therefor set forth in the Model. Notwithstanding the date specified for termination in
any such termination notice, Lessee may delay the date of such termination with respect to any Terminated Hotel for a period of up to one year from the date of delivery of such notice in order to transition the management services. In the event
Lessee desires to so delay termination, Lessee shall provide notice thereof to Manager prior to the date that is thirty (30) days prior to the date specified for termination in Lessee’s termination notice. Thereafter, Lessee may terminate this
Agreement with respect to such Terminated Hotel on thirty (30) days prior notice to Manager. In no event shall Lessee be liable for the payment of any Early Termination Fee with respect to any termination pursuant to this Section 12.2(b).

  
 (c) Termination Upon Manager Change of
Control. Manager shall notify Lessee of any proposed Manager Change of Control no later than sixty (60) days prior to the 
  

 27 

 occurrence thereof. Lessee shall have the right (exercisable by the giving of written notice to Manager)
to terminate this Agreement immediately upon a Manager Change of Control. Such notice shall specify a date of termination that is up to one year from the date of delivery of such notice. Notwithstanding the foregoing, Lessee may terminate this
Agreement on a date prior to the date specified in such notice; provided Lessee gives thirty (30) days prior notice to Manager. In no event shall Lessee be liable for the payment of any Early Termination Fee with respect to any termination pursuant
to this Section 12.2(c). 
  
 (d)
Termination Upon an Event of Default. 
  
 (i) Upon the occurrence of any Event of Default under Section 12.1(a) by or with respect to one of the parties hereto (the “Defaulting Party”), the other party hereto (the “Non-Defaulting Party”) shall have the
right (exercisable by the giving of written notice to the Defaulting Party) to terminate this Agreement, in whole, or, at the election of the Non-Defaulting Party, with respect to any Hotel subject to such breach, if the Defaulting Party fails to
remedy such Event of Default within ten (10) days after its receipt of notice to remedy if such default relates to the payment of a sum of money and, in all other cases, within 90 days after its receipt of notice to remedy; provided, however, that
if such Event of Default be of a non-monetary nature and if it cannot reasonably be remedied within such 90 day period, then such 90 day period shall be deemed to be extended for such additional period as may reasonably be required to remedy the
same if the Defaulting Party shall promptly commence to remedy upon receipt of notice from the Non-Defaulting Party and shall continue therewith with due diligence. 
  
 (ii) With respect to the occurrence of an Event of Default under Section 12.1(b), this Agreement
shall terminate, in whole, or, with respect to any Hotel subject to such breach, at the election of the Non-Defaulting Party, upon such occurrence, or at any time after such occurrence provided such Event of Default has not been remedied.

  
 (iii) In the event of termination by Lessee
pursuant to this Section 12.2(d), such notice shall specify a date of termination that is up to one year from the date of delivery of such notice. Notwithstanding the foregoing, Lessee may terminate this Agreement on a date prior to the date
specified in such notice; provided Lessee gives thirty (30) days prior notice to Manager. In no event shall Lessee be liable for the payment of any Early Termination Fee with respect to any termination pursuant to this Section 12.2(d).

  
 (e) Additional Rights. Upon any breach
or wrongful termination hereof, in addition to the termination rights provided for above, (i) Manager shall be entitled to seek its actual damages including payment for unpaid Management Fees and Reimbursable Expenses, (ii) Lessee may seek its
actual damages, and (iii) either party may exercise any other right or remedy available at law or in equity. 
  
 12.3 Hotel Reservations/Group Contracts Honored. Upon termination of this Agreement, in whole, or with respect to one or more Terminated Hotels,
for any reason, Lessee agrees that Hotel reservations and any and all contracts made in connection with Hotel convention, banquet or other group services made by Manager in the ordinary and normal course of business, for dates subsequent to the date
of termination and at rates prevailing for such 
  

 28 

 reservations at the time they were made, shall be honored and remain in effect after the date of termination of this
Agreement. 
  
 12.4 Post-Termination Matters:
Reimbursements to Manager. Upon any termination or expiration of this Agreement, in whole, or with respect to one or more Terminated Hotels, for any reason whatsoever (including, without limitation, pursuant to Section 12.2 above),
Manager and Lessee expressly agree that all records pertaining to the Terminated Hotels shall remain intact including the financial records, documents, correspondence or other materials proprietary to such Terminated Hotels. Manager shall have the
right to make copies of its proprietary and non-proprietary files and information relating to its management of the Hotels. Upon such termination or expiration, within 20 days of billing thereof, Lessee shall pay to Manager, in addition to any other
amounts due pursuant to this Agreement (i) Manager’s reasonable out-of-pocket costs incurred by reason of requests by Lessee for assistance after termination of this Agreement and not otherwise reasonably expected of Manager in the orderly
termination of its operations at such Terminated Hotels, (ii) any unpaid fees and other charges and reimbursements due Manager hereunder, and (iii) to the extent reasonable and consistent with Manager’s standard practices and industry
standards, termination-related employee expenses, including payments of accrued and earned sick and vacation time, pension, bonus and other termination payments due to employees. 
  
 12.5 Post-Termination Matters; WARN Act. In the event that Lessee elects or is required to close any Hotel, Manager
shall be responsible for compliance with WARN Act, but Lessee shall reimburse Manager for any penalties, fines or expenses caused by the fault of Lessee. Lessee shall not reimburse Manager for penalties, fines, or expenses caused by Manager’s
failure to comply with WARN Act requirements through the fault of Manager. This Section 12.5 shall survive the expiration or termination of this Agreement. 
  
 12.6 Extension of Date of Termination. Notwithstanding anything to the contrary contained in this Agreement, the date
of termination of this Agreement, other than upon expiration pursuant to Section 2.2, shall be extended so that the date of termination after notice of termination is given to or by Manager shall be on a date which is not earlier than 15 days
plus the number of days, if any, Manager is required to give its employees advance notice of termination of employment as required by the WARN Act, or any similar federal or state statute. 
  
 12.7 Automatic Termination. Notwithstanding anything to the contrary
provided herein, this Agreement shall become effective on the Commencement Date. In the event that the Commencement Date shall not have occurred on or prior to August 31, 2004, this Agreement shall be void ab initio and of no force or effect.

  
 ARTICLE 13 
 ADDITIONAL AGREEMENTS OF MANAGER 
  
 13.1 Noncompetition. 
  
 (a) During the Term and continuing for a period of eighteen months after the expiration or termination thereof (the “Noncompetition
Period”), Manager will not (without Lessee’s prior written consent) directly or indirectly own, operate, manage, control, lease (or 
  

 29 

 participate in ownership, operation, management, control or leasing of) any other hotel that is in
competition with any Hotel. Without limiting the foregoing, any hotel within the radius from the perimeter of any Site as specified on Schedule 5 shall be deemed to be in competition with a Hotel. 
  
 (b) Without limiting Section 13.1(a), during the
Noncompetition Period, Manager shall not directly or indirectly operate, manage, control or lease (or participate in operation, management, control or leasing of) any other hotels owned by a real estate investment trust or public company principally
engaged in the business of owning, operating, managing or leasing hotels, other than the Holiday Inn Select Garland Texas. 
  
 (c) In the event that any of the provisions of this Section 13.1 should ever be adjudicated to exceed the time, geographic,
service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. 

 
 (d) This Section 13.1 shall continue to survive
for a period of one year following the date of expiration or earlier termination of this Agreement, and as to any termination (other than termination of this Agreement in its entirety) pursuant to Section 12.2 relating to any Terminated
Hotel(s), this Section 13.1 shall continue to survive with respect to such Terminated Hotel(s) for a period of one year from the date of such termination and shall otherwise continue to survive with respect to the non-Terminated Hotels in
accordance with its terms. Notwithstanding the foregoing, in the event Lessee terminates this Agreement in whole or in part, pursuant to Section 12.2(a)(i) the following shall apply: (A) if this Agreement is terminated in its entirety
pursuant to Section 12.2(a)(i)(1), then this Section 13.1 shall continue to survive for a period of eighteen months from the date of such termination; and (B) if this Agreement is terminated with respect to any Hotel(s) (but not in its
entirety) pursuant to Section 12.2(a)(i)(1), then this Section 13.1 shall continue to survive with respect to such Terminated Hotel(s) for a period of eighteen months from the date of such termination and shall otherwise continue to
survive with respect to the non-Terminated Hotels in accordance with its terms. 
  
 (e) Notwithstanding Section 13.1(d), the restrictions set forth in Section 13.1(a) shall terminate as to any Terminated
Hotel upon the sale or transfer of such Terminated Hotel to a non-Affiliate of Lessee. 
  
 13.2 Right of First Offer. 
  
 (a) Prior to consummating any Asset Purchase, Asset Sale, or Joint Venture (a “Transaction”), Manager shall give written notice to Lessee of such Transaction, including a reasonable description of the
material terms thereof (the “Transaction Notice”). Lessee shall have fifteen (15) days after receipt of the Transaction Notice (the “Exercise Period”) to elect, (A) in the case of an Asset Sale by Manager, to purchase not less
than one hundred percent (100%) of the Target Asset on substantially the same terms and conditions set forth in the applicable Transaction Notice, or (B) in the case of a Joint Venture, to participate with Manager in such Joint Venture in equal
shares or interests, subject to substantially the same terms and conditions applicable to Manager in such Joint Venture, and/or to participate as any JV 
  

 30 

 Counterparty therein on substantially the same terms as set forth in such Transaction Notice. If prior to
the end of the Exercise Period, Lessee elects to participate in such Transaction as provided in the previous sentence, then Manager and Lessee shall negotiate the terms of a definitive agreement(s) governing the Transaction for not greater than
forty-five (45) days following the end of the Exercise Period (the “Negotiation Period”); provided, however, that the Negotiation Period shall be extended for the length of time necessary to account for any delays in executing any
definitive agreement caused by circumstances outside the reasonable control of Lessee, including, without limitation, delays caused by or attributable to Manager, any third party or any government rule or regulation. If following the expiration of
the Negotiation Period, no definitive agreement has been executed with respect to the Transaction, Manager shall be entitled, without Lessee’s participation, to consummate the Transaction with a third party on substantially the same terms and
conditions set forth in the Transaction Notice for a period of one (1) year following the expiration of the Negotiation Period. If such Transaction is not consummated within such one (1) year period, the rights of Lessee pursuant to this Section
13.2 shall be reinstated with respect to such Transaction. For purposes of this Section 13.2, “Lessee” shall include any Affiliate thereof. 
  

For purposes of this Section 13.2, the following terms shall have the respective meanings set forth below: 
  
 “Asset Purchase” shall mean the purchase, acquisition or assumption
of any interest in hotel properties or related assets or operations, hotel leases, or any interest in a loan or loan portfolio the underlying asset(s) of which consists primarily of hotel properties (such interest(s), collectively, “Applicable
Assets”). 
  
 “Asset Sale” shall mean the sale,
transfer, disposition or assignment of Applicable Assets. 
  
 “Joint Venture” shall mean a joint venture, partnership, coinvestment or similar transaction involving equity and/or debt concerning any or all of the development, acquisition, operation, ownership or disposition of Applicable
Assets. Each counterparty to a Joint Venture shall be referred to as a “JV Counterparty.” 
  
 “Target Asset” shall mean the Applicable Assets in any Asset Purchase or Asset Sale. 
  
 (b) This Section 13.2 shall continue to survive any
termination pursuant to Section 12.2, other than a termination of this Agreement in its entirety. 
  
 ARTICLE 14 
 NOTICES 
  
 All consents, approvals, notices or other communications provided for in this
Agreement shall be in writing and delivered in person, or sent by reputable and traceable overnight delivery service or by postage prepaid Registered or Certified Mail, to the respective addresses for Lessee and Manager set forth below, until such
time as written notice, as provided hereby, of a change of address with a new address to be used thereafter is delivered to the other party. Notices will be deemed delivered upon confirmation of delivery at the current notice address referenced

  

 31 

 above. Upon request, a party shall send copies of any notice or communication by ordinary mail as instructed by the other
party. 
  
 All notices and other communications required or
permitted to be given hereunder shall be given to the applicable party at the address set forth below: 
  

			
	If to Lessee, to:	  	Capital Lodging TRS Operations, Inc.
	 	  	2927 Maple Avenue, Suite 503
	 	  	Dallas, Texas 75201
	 	  	Attention: Edward J. Rohling
		
	With a copy to:	  	Morgan, Lewis & Bockius LLP
	 	  	300 South Grand, 22nd Floor
	 	  	Los Angeles, California 90071
	 	  	Attention: Steven M. Ruskin, Esq.
		
	If to Manager, to:	  	Prism Hospitality, L.P.
	 	  	8235 Douglas Avenue, Suite 600
	 	  	Dallas, Texas 75225
	 	  	Attention: ___________________

  
 In order to facilitate communications
between Lessee and Manager, the parties designate the above-referenced representatives to act pursuant to this Agreement. Upon notice to the other, the parties may, at any time, substitute or add a representative. 
  
 ARTICLE 15 
 RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS 
  
 15.1 Relationship. Manager and Lessee shall not be construed as joint venturers or partners of each other and neither shall have the power to bind
or obligate the other except as set forth in this Agreement. 
  
 15.2 Further Actions. Lessee agrees to execute all contracts, agreements and documents, and to take all actions necessary to comply with the provisions of this Agreement and the intent hereof. 
  
 ARTICLE 16 
 APPLICABLE LAW; SEVERABILITY 
  
 The interpretation, validity and performance of this Agreement shall be governed by the laws of the State of Texas (without regard to its conflicts of laws provisions). If any of the terms and provisions hereof shall
be held invalid or unenforceable for any reason, such invalidity or unenforceability shall in no event affect any of the other terms or provisions hereof, all such other terms and provisions to be valid and enforceable to the fullest extent
permitted by law. 
  

 32 

 ARTICLE 17 
 SUCCESSORS AND ASSIGNS 
  
 17.1 Assignment. 
  
 (a) Subject
to Section 12.2(b), Manager, with the prior written consent of Lessee, such consent not be unreasonably withheld, shall have the right to assign from time to time this Agreement and its rights and interests hereunder (i) to any successor or
assignee of Manager which may result from any merger, consolidation or reorganization with, or any sale or assignment to, any corporation, individual, partnership or other entity which shall acquire all or substantially all of Manager’s hotel
management business, (ii) as security for any existing or future indebtedness of Manager or its Affiliates, and (iii) to any Affiliate of Manager. No such transfer shall relieve Manager of any of its liabilities or obligations hereunder. Any such
assignee shall agree to be bound by the terms and conditions of this Agreement. Except as hereinabove provided, Manager shall not assign or in any manner sell or transfer any of its rights and interests as Manager hereunder without the prior written
consent of Lessee. 
  
 (b) Lessee shall have the
right, without the payment of any transfer or similar fee, to assign this Agreement as it relates to any Hotel to any Affiliate of Lessee or to any third party acquiring such Hotel. Any such assignee shall assume all obligations of Lessee under this
Agreement. 
  
 17.2 Binding Effect. Subject to the
restrictions on assignment set forth elsewhere in this Agreement, this Agreement shall be binding upon and inure to the benefit of Lessee and its successors and assigns, and shall be binding upon and inure to the benefit of Manager and its
successors and assigns. 
  
 ARTICLE 18 
 FORCE MAJEURE 
  
 18.1 Operation of Hotels. If at any time during the term hereof it becomes necessary in Manager’s reasonable opinion to cease operation of any
Hotel in order to protect such Hotel and/or the health, safety and welfare of the guests and/or employees of such Hotel for reasons including, without limitation, acts of war, insurrection, civil strife and commotion, labor unrest or acts of God
(“Force Majeure”), then in such event Manager may close and cease operation of all or part of such Hotel, reopening and commencing operation when Manager, in consultation with Lessee, deems that such may be done without jeopardy to such
Hotel, its guests and employees. Notwithstanding anything to the contrary contained in Article 12 or otherwise in this Agreement, any such cessation of operation (“Force Majeure Cessation”) occurring pursuant to this Section
18.1 shall not be deemed or considered an Event of Default. 
  
 18.2 Extension of Time. With respect to any obligation to be performed by a party during the Term, such party shall in no event be liable for failure to perform when prevented by any Force Majeure cause beyond the reasonable control
of such party such as strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, failure of supply or inability, by the exercise of reasonable diligence, to obtain supplies, parts or employees necessary to perform
such obligation, or war or other emergency. Subject to Article 2 hereof, the 
  

 33 

 time within which such obligation shall be performed shall be extended for a period of time equivalent to the delay from
such cause. 
  
 ARTICLE 19 
 GENERAL PROVISIONS 
  
 19.1 Authorization. Lessee represents that it has full power and authority to execute this Agreement and to be bound by and perform the terms
hereof. Manager represents that it has full power and authority to execute this Agreement and to be bound by and perform the terms hereof. On request, each party shall furnish to the other party evidence of such authority. 
  
 19.2 Interest. Any amount payable to Manager which shall not be paid
within 30 days of the date when due shall accrue interest at 1% over the “prime rate” as published in the Wall Street Journal, as the same may be changed from time to time. 
  
 19.3 Formalities. Any change to or modification of this Agreement must be in writing signed by both parties hereto.
Any consent or approval required or permitted hereunder shall be made in writing by the party granting such consent or approval. This Agreement shall be executed in one or more counterparts, each of which shall be deemed an original. The captions
for each Article are intended for convenience only. 
  
 19.4
Estoppel Certificate. Either party shall, at any time and from time to time, upon not less than ten (10) days prior written request from the other, execute, acknowledge and deliver to the requesting party, in form reasonably satisfactory to
the requesting party, a written statement certifying (if true) (i) that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the
modifications); (ii) that there is no outstanding notice of an Event of Default hereunder and, to the best of such party’s knowledge, no event has occurred or condition exists which, with the giving of notice or the passage of time or both,
would constitute an Event of Default hereunder, and (iii) such other accurate information as may be reasonably requested by the requesting party or by any of the Interested Persons (as hereinafter defined). It is intended that any such statement
delivered pursuant to this Section 19.4 may be relied upon by the requesting party, any current or prospective Mortgagee or other party providing financing to Lessee or Manager (as the case may be), a prospective purchaser of any Hotel or
permitted assignee of Manager’s rights and interests hereunder, and the respective successors and assigns of any of the foregoing (the “Interested Persons”). 
  
 19.5 No Representations. 
  
 (a) Lessee and Manager acknowledge there have been no representations, inducements, promises or agreements made by Manager or Lessee other
than those specifically set forth herein. 
  
 (b)
Financial projections, budgets or similar forecasts as may have been prepared or in the future will be prepared by Manager or its Affiliates do not take into account, nor make provisions for, any unexpected rise or decline in local or general
economic conditions or other factors beyond the control of Manager. Manager and its Affiliates cannot and do not warrant or guarantee in any way such financial projections, budgets or other forecasts. Any 
  

 34 

 financial projections, budgets or forecasts provided have been prepared on the basis of information
available at the time of such preparation and Manager’s and its Affiliate’s experience in the hotel industry. Such financial projections, budgets and forecasts have been prepared for information only and not as an inducement for action.
Lessee further understands and acknowledges that no guaranty is made or implied by Manager or its Affiliates as to the cost, or the future financial success or profitability, of the Hotels. 
  
 19.6 Not an Interest in Real Estate. This Agreement is not, and shall
not be deemed or construed, at any time or for any purpose, to be or create any interest in real estate or any lien or other encumbrance of any kind whatsoever against any Hotel or the land upon which it is erected. 
  
 19.7 Independent Contractor. Lessee and Manager intend, acknowledge
and agree that the relationship between Lessee and Manager pursuant to this Agreement is that of a principal and an independent contractor and that all employees and personnel necessary for the operation of the Hotels shall in every instance be the
employees or independent contractors of Manager and not of Lessee. Nothing contained herein shall be deemed to constitute Lessee and Manager as partners or joint venturers. Manager hereby covenants that it will refrain from any activity that could
create, or be deemed to create, a conflict of interest with Lessee in the discharge of Manager’s obligations under this Agreement. 
  
 19.8 Assistance with Proposed Sale, Financing, Refinancing. Manager shall cooperate with and assist Lessee from time to time in any attempt(s) by
Lessee to sell, finance or refinance any of the Hotels. Such cooperation shall not entitle Manager to any additional compensation and Manager shall not be deemed to be acting as a broker unless Lessee and Manager enter into a separate written
agreement engaging Manager as broker with respect any Hotel. Such cooperation shall include, without limitation, answering prospective purchasers’ or lenders’ questions about the Hotels or their operations. Manager shall also provide,
promptly upon request by Lessee, an estoppel certificate executed by Manager certifying that no uncured default by Lessee exists under this Agreement or, if such a default exists, stating the nature thereof. 
  
 19.9 General Compliance with Laws. Manager shall operate and maintain
the Hotels, in compliance with all applicable laws, statutes, ordinances, rules, regulations, requirements, orders, notices, and determinations of any federal, state or municipal authority, and the requirements of any insurance companies covering
any of the risks against which the Hotels are insured. Without limiting the generality of the immediately foregoing sentence, Manager shall (i) upon request of Lessee, contract with a qualified independent contractor to prepare an inspection report
on behalf of Lessee to determine whether the Hotels are in compliance with the Americans with Disabilities Act and if not in compliance, shall propose to Lessee a plan to bring any non-complying Hotels into compliance, and (ii) promptly notify
Lessee of the necessity for and assist Lessee in obtaining and maintaining any and all licenses, permits, or approvals required of Lessee by any applicable federal, state or municipal authority in connection with the ownership or operation of the
Hotels. 
  
 19.10 Costs of Compliance. The cost of the
Hotels’ compliance with any such applicable law, statute, ordinance, rule, regulation, requirement, order, notice, or determination shall be governed by Section 5.7. 
  

 35 

 19.11 Equal Opportunity Employer. Manager represents and warrants to Lessee that Manager is an
equal opportunity non-discriminatory employer. Manager and Lessee each mutually agree that there shall be no discrimination against or segregation of any person or of a group of persons on account of race, color, creed, religion, handicap, sex,
sexual orientation or national origin, in the lease, transfer, use, occupancy, advertising, promotion, sale, tenure or enjoyment of the Hotels or in the provision of services thereto, nor shall Lessee or Manager permit any such practice or practices
of discrimination or segregation with reference to the selection, location, number, use or occupancy of guests. 
  
 19.12 Time. Time is of the essence of this Agreement. 
  
 19.13 Severability. If any provision of this Agreement or application to any party or circumstances shall be determined by any court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances, other than those as to which it is so determined invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by law. 
  
 19.14 Authority Limited. Manager’s authority shall be derived wholly from this Agreement, and Manager has no authority to act for or represent
Lessee except as herein expressly specified. 
  
 19.15
Exclusiveness of Compensation. The payments to be made to Manager hereunder shall be in lieu of all other and further compensation or commissions of any nature whatsoever for the services described herein and this Agreement shall be
considered as a special agreement between the parties hereto covering the appointment and compensation of Manager to the exclusion of any other method of compensation unless otherwise agreed to in writing. Without limiting the foregoing and except
for the compensation expressly set forth in this Agreement, Manager shall not be entitled to any commission, fee or other compensation upon the sale or other disposition of any of the Hotels by Lessee. 
  
 19.16 Contracts with Affiliates of Manager. 
  
 (a) Notwithstanding anything to the contrary contained
herein, Lessee shall have the right to approve any contract made by Manager with any affiliate of Manager in advance of the execution of that contract. In the event any goods and services procured by Manager for the operation of the Hotels are
obtained from Manager or any affiliate of Manager any such contract, purchase order or procurement shall require the prior written approval of Lessee. In any such event the amount to be paid to Manager or its affiliate as a fee for services or
otherwise in connection with any such contract, purchase order or procurement shall be no greater than the fees charged by other third parties offering comparable goods and services in an arms-length transaction. 
  
 (b) An affiliate of Manager may receive a fee in connection
with services and products procured, provided or performed for the Hotels, provided that Lessee first has approved in writing the provision of such services and products by such specific affiliate of Manager and that such services and products are
furnished on terms and conditions competitive with those 
  

 36 

 available from unaffiliated sources. Lessee may require Manager to engage vendors and services providers
designated by Lessee provided the costs thereof are competitive. 
  
 19.17 Subordination. This Agreement is subordinate to all liens and mortgages existing as of the effective date of this Agreement or hereafter granted. Upon request by Lessee, Manager shall confirm such subordination in writing.

  
 19.18 Limitation of Liability. Manager agrees that
Manager shall look only to Lessee’s interest in the Hotels for satisfaction of any claim now existing or hereafter arising or accruing against Lessee, its officers, partners, shareholders, directors, agents or employees and in no event shall
Lessee have any personal liability hereunder beyond the estate and interest, if any, of Lessee in the Hotels. 
  
 19.19 Limitation on Acquisition of Debt. Manager agrees that Manager shall not, without the prior written consent of Lessee, acquire any loan or
debt that is secured by or related to the Hotels (including debt secured by a Permitted Mortgage). It is the intent of the parties that any opportunity to acquire any such loan or debt (at a discount or otherwise) shall be undertaken by Manager only
after consultation with Lessee and with Lessee having an opportunity to participate in any such transaction. The provisions of this Section shall survive termination of this Agreement. 
  
 19.20 Eligible Independent Contractor. During the Term of this Agreement, Manager shall at all times qualify as an
“eligible independent contractor” (an “Eligible Independent Contractor”) within the meaning of Section 856(d)(9) of the Internal Revenue Code of 1986, as amended (the “Code”). To that end, Manager covenants that, during
the Term of this Agreement: 
  
 (a) Manager shall
not conduct or permit wagering activities at any of the Hotels; 
  
 (b) Manager shall not own (within the meaning of Section 856(d)(5) of the Code) more than thirty percent (30%) of the outstanding stock of Newco; 
  
 (c) No more than thirty percent (30%) of the partnership interests in Manager (determined by reference to
interests in either the capital or net profits of Manager) shall be owned (within the meaning of Section 856(d)(5) of the Code) in the aggregate thirty percent (30%) or more of the outstanding stock of Newco; 
  
 (d) Manager (or a person who is a “related
person,” within the meaning of Section 856(d)(9)(F) of the Code (a “Related Person”), with respect to Manager) shall be actively engaged in the trade or business of operating “Qualified Lodging Facilities,” as defined below,
for one or more persons who are not Related Persons with respect to Newco or Lessee (“Unrelated Persons”). For purposes of determining whether the requirements of this Section 19.20(d) have been met, Manager shall be treated as
being actively engaged in such a trade or business if Manager (i) derives at least ten percent (10%) of both its profits and revenues from operating Qualified Lodging Facilities for Unrelated Persons, or (ii) complies with any regulations or other
administrative guidance under Section 845(d)(9) of the Code with respect to 
  

 37 

 the amount of hotel management business with Unrelated Persons that is necessary for Manager to qualify
as an Eligible Independent Contractor; 
  
 (e)
For purposes of this Section 19.20, a “Qualified Lodging Facility” means a Lodging Facility, as defined below, unless wagering activities are conducted at or in connection with such facility by any person who is engaged in the
business of accepting wagers and who is fully authorized to engage in such activities at or in connection with such facility. A “Lodging Facility” is a hotel, motel or other establishment more than one-half of the dwelling units in which
are used on a transient basis, and includes customary amenities and facilities operated as part of, or associated with, the lodging facility so long as such amenities and facilities are customary for other properties of a comparable size and class
owned by other owners who are Unrelated Persons. 
  
 19.21
Modifications. Manager agrees to amend and/or modify the terms and conditions of this Agreement as may be requested by Lessee to the extent such amendments and/or modifications (i) are necessary or appropriate to provide that the provisions
of this Agreement appropriately reflect the ownership structure through which the Hotels are held, and (ii) do not adversely affect Manager’s economic benefits hereunder. 
  

 38 

 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement effective as of
____________, 2004. 
  

			
	LESSEE:
	
	 CAPITAL LODGING TRS OPERATIONS, INC.

		
	By:	 	 
	 	 	

	 Name:
	 	 
	 	 	

	Title:	 	 
	 	 	

 . 

			
	MANAGER:
	
	 Prism Hospitality, L.P.

	 a Texas limited partnership

		
	By:	 	 Prism Hospitality Management, L.L.C.

	 	 	 a Texas limited liability company

	 	 	 
	 By:
	 	 Prism Hotel Partners, L.P.

	 	 	 a Texas limited partnership

	 	 	 Its: sole managing member

	 	 	 
	 By:
	 	 Prism Hotel Partners G.P., Inc.

	 	 	 a Texas corporation

	 	 	 Its: sole general partner

			
	 
		
	By:	 	 
	 	 	

	Name:	 	 
	 	 	

	 Title:
	 	 
	 	 	

 : 
  

 [Signature Page to Management Agreement]Form of Asset Management Agreement

 Exhibit 10.6 
  
 ASSET MANAGEMENT AGREEMENT 
  
 THIS AGREEMENT FOR ASSET MANAGEMENT SERVICES (this “Agreement”) between Capital Lodging Operating Partnership, L.P., a Delaware limited
partnership (“Manager”) and AP/APH Ventures, LLC, a Delaware limited liability company (“Company”) is entered into this      day of
                    , 2004, to be effective as of the closing date of the initial public offering (the “IPO”) of the common
shares of Capital Lodging, a Maryland real estate investment trust (“Capital Lodging”) and an affiliate of the Manager (the “Effective Date”). 
  
 RECITALS 
  
 A. Company, through separate subsidiaries (the “Owners”), holds ownership interests in those certain hotels more particularly set forth
on Exhibit A attached hereto (collectively, the “Hotels,” and individually, a “Hotel”) 
  
 B. Manager is willing to provide certain asset management services, as set forth on Exhibit B (the “Services”), with respect to
the Hotels. 
  
 C. Company desires to retain Manager to perform
the Services. 
  
 NOW, THEREFORE, in consideration of the
covenants, promises, agreements and conditions contained herein, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Company and Manager agree as follows: 
  
 AGREEMENT 
  
 1. Services. Manager agrees to provide the Services for the Term (as defined below) in accordance with the terms and
provisions of this Agreement. Manager will devote such resources as is required in order to perform the Services, and will have control of the means and methods used to provide the Services. Manager shall use its commercially reasonable efforts to
promote the success of the Hotels and shall cooperate with the Company in the advancement of the best interests of the Hotels. 
  
 2. Term. The term of this Agreement (the “Term”) shall be five (5) years commencing on the Effective Date unless terminated
earlier in accordance with the terms hereof. 
  
 3.
Compensation and Reimbursement of Expenses. Company will pay and provide the following compensation and reimbursement to Manager: 
  
 3.1 Asset Management Fee. 
  
 (a) Company shall pay Manager a monthly asset management fee in the amount set forth below (the “Management Fee”). The
Management Fee will be due and payable for each calendar month in arrears on the tenth (10th) day of the calendar month immediately following the calendar month in which the Management Fee is earned. If the 

 Effective Date is on a day other than the first day of a calendar month or if this Agreement is
terminated on a day other than the last day of a calendar month, then the Management Fee for the calendar month in which the Effective Date falls or during which the Agreement is terminated, respectively, shall be prorated for such calendar month by
multiplying such Management Fee by a ratio, the numerator of which is the number of days in such calendar month within the Term and the denominator of which is the number of days in such calendar month. 
  
 (b) The Management Fee shall initially be $33,333.00 per
month and, beginning on January 1, 2006, such amount shall be subject to an annual increase equal to five percent (5%), in each case, subject to reduction as set forth below, and prorated for any partial calendar month to which such amount applies
in the same manner as set forth in Section 3.1(a). 
  
 (c) In the event that two or more of the Hotels are sold, transferred or otherwise conveyed to a third party unaffiliated with Company (a “Sale”), whether through a single transaction or through
multiple, separate transactions, the total aggregate Management Fee to be paid to Manager pursuant to this Agreement shall be reduced as of the date on which Company provides notice of the closing of the Sale immediately following which two or less
Hotels remain subject to this Agreement (the “Applicable Sale”), to $25,000 per month for periods ending prior to January 1, 2006 and increased at a rate of five percent (5%) per year thereafter. 
  
 In the event of an Applicable Sale, the Management Fee shall be reduced
effective as of the first day of the calendar month immediately following the date of the Applicable Sale; provided, however, in the event that the Applicable Sale occurs on the first day of a calendar month, the Management Fee shall
be reduced as of the date of the Applicable Sale (such date being the “Adjustment Date”). 
  
 3.2 Expenses. Company shall reimburse Manager for all customary Expenses (as defined below) incurred by representatives of Manager
while performing the Services. “Expenses” shall be defined as the reasonable cost of all (a) transportation (including travel on commercial flights within the continental United States in coach class for any flight less than 1,300
miles and in first or business class for any flight equal to or greater than 1,500 miles), lodging, food and beverage, telecommunications and other usual and customary expense while traveling away from the applicable Manager representative’s
residence on behalf of Company; (b) long distance telephone charges; (c) printing, copying, mailing and delivery; and (d) other usual and customary expenses incurred in connection with Manager’s performing the Services under this Agreement, but
excluding any general overhead or similar costs and expenses, including, without limitation, rent, personal property and equipment expenses, employee compensation and other fixed costs. Any reimbursement owing to Manager from time to time under this
Section 3.2 will be paid within thirty (30) days after receipt by Company of an expense report accompanied by substantiating receipts or invoices. 
  
 4. Termination. 
  
 4.1 Without Cause. Either party may terminate this Agreement without Cause, immediately upon the abandonment of the IPO by Capital
Lodging prior to the Effective 
  

 2 

 Date. On or after December 31, 2005, Company may terminate this Agreement at any time, without Cause,
upon ninety (90) days written notice to Manager. 
  
 4.2 With Cause. Company may terminate this Agreement for Cause at any time upon two (2) days written notice to Manager, unless a longer period is specifically set forth in the succeeding sentence. “Cause” shall be
defined as (a) a material breach of this Agreement, but excluding any such breach capable of being cured which has been cured within fifteen (15) days following written notice thereof; (b) a failure to perform the Services which has not been cured
within fifteen (15) days following written notice thereof; (c) misappropriation of any Company funds or property; or (d) Manager’s gross negligence, fraud, willful misconduct or violation of law. 
  
 4.3 Sale of Hotels. Upon the Sale of any Hotel, such
Hotel shall no longer be covered by this Agreement, and Manager shall no longer perform Services related to such Hotel. Upon the Sale of all of the Hotels, whether through a single transaction or through multiple, separate transactions, this
Agreement shall automatically terminate as of the date of the Sale of the last Hotel. 
  
 5. Ownership of Work Product. All right, title and interest in and to any data relating to Company’s business operations, including, without limitation, all data and information relating to the Hotels,
will remain the exclusive property of Company, whether or not provided to Manager during the provision of the Services. Within twenty (20) days following the expiration of the Term, Manager will promptly return to Company all copies in
Manager’s possession of any of Company’s data, records or other materials of whatever nature or kind, including materials incorporating proprietary information of Company, and will furnish to Company all work in progress or portions
thereof, including all incomplete work. 
  
 6.
Confidentiality. During the Term, Company and the Owners, either directly or through their directors, officers, employees, legal counsel, independent certified public accounts or other agents, advisors or representatives (collectively,
“Company Parties”), will give Manager access to, and Manager will become familiar with, various trade secrets, confidential financial information, proprietary information of Company, the Owners and others, and other information
relating to Company and the Owners including, without limitation, information related to the Hotels (collectively, the “Confidential Material”). Confidential Material does not include any information or material that either (a) is
or becomes generally available to the public other than as a direct or indirect result of a disclosure by Manager or Manager’s (or Manager’s subsidiaries’ or affiliates’) directors, officers, employees, legal counsel, lenders and
their legal counsel, independent certified public accountants or other agents, advisors or representatives (collectively, including Manager, “Manager Parties”); (b) was known to Manager on a lawful and nonconfidential basis prior to
its disclosure to Manager by Company Parties; or (c) becomes available to Manager on a lawful and nonconfidential basis from a third party source (other than Company Parties). Neither this Agreement nor the delivery or communication of any
Confidential Material by the Company Parties to Manager or to any other person or entity shall constitute a waiver by Company or the Owners of any privilege, including, without limitation, privileges pertaining to attorney-client communications and
attorney work product, that may be asserted by Company or the Owners. Manager will not at any time use or disclose any Confidential Material to any person other than Company or the Owners, and Manager shall be 
  

 3 

 responsible for preventing Manager Parties from so disclosing any such Confidential Material, and Manager will use its
commercially reasonable efforts and take all such action as is necessary, at its sole expenses, to prevent any disclosure thereof, including, without limitation, the commencement and prosecution of court proceedings; provided, however,
that Manager may disclose such information (i) to those Manager Parties who shall require access thereto for the purpose of performing the Services and who are informed of the confidential nature of the Confidential Material and agree to be bound by
the terms hereof; (ii) as may be required by law or to comply with lawful judicial process (and then only after providing Company advance written notice of such disclosure and an opportunity to contest the same); or (iii) with Company’s prior
written consent, which may be withheld in Company’s sole discretion. Manager shall use the Confidential Material solely for purposes of performing the Services. Upon Company’s written request, Manager shall promptly return to Company (or
Company’s designees), or certify the destruction of, the Confidential Material and any copy of copies thereof made by Manager Parties. 
  
 7. Dispute Resolution. 
  
 7.1 Arbitration. Any dispute, controversy or claim (except an action for a temporary restraining order, preliminary injunction or
similar equitable relief) asserted by any party hereto against another party arising out of or relating to this Agreement or any document or agreement executed pursuant to this Agreement or the breach thereof, shall be settled by arbitration if so
requested by any party pursuant to Section 7.2. The arbitration shall be conducted by one arbitrator, who shall be appointed pursuant to the Commercial Arbitration Rules of the American Arbitration Association (“AAA”). The
arbitration shall be held in New York, New York, and shall be conducted in accordance with the Commercial Arbitration Rules of the AAA, except that the rules set forth in this Section 7 shall govern such arbitration to the extent that they
conflict with the rules of the AAA. 
  
 7.2
Notice; Procedures. Upon written notice by a party to the other parties of a request for arbitration hereunder, the parties shall use their best efforts to cause the arbitration to be conducted in an expeditious manner with such arbitration
to be completed within sixty (60) days after selection of the arbitrator. In the arbitration, New York law shall govern, except to the extent those laws conflict with the Commercial Arbitration Rules of the AAA and the provisions of this Section
7. The arbitrator shall permit and set deadlines for reasonable discovery at the request of either party. All other procedural matters shall be within the discretion of the arbitrator. In the event a party fails to comply with the procedures in
any arbitration in any manner as determined by the arbitrator, the arbitrator shall fix a reasonable period of time for compliance and, if a party fails to comply within such period, a remedy deemed just by the arbitrator, including, without
limitation, an award of default, may be imposed. The prevailing party in any such arbitration shall be awarded costs, including, without limitation, attorneys’ fees, by the arbitrator. 
  
 7.3 Binding Nature. The determination of the
arbitrator shall be final and binding on the parties. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. 
  
  

 4 

 8. Manager’s Representations and Warranties. Manager represents and warrants to Company that
the execution and delivery by Manager of this Agreement does not, and the performance by Manager of Manager’s obligations hereunder will not, with or without the giving or notice or the passage of time, or both: (a) violate any judgment, writ,
injunction or order of any court, arbitrator or governmental agency to which Manager is subject; or (b) conflict with, result in the termination or breach of any provision(s) of, or constitute a default under, any agreement to which Manager is a
party or by which Manager is or may be bound. 
  
 9.
Company’s Representations and Warranties. Company represents and warrants to Manager that the execution and delivery by Company of this Agreement does not, and the performance by Company of Company’s obligations hereunder will not,
with or without the giving or notice or the passage of time, or both: (a) violate any judgment, writ, injunction or order of any court, arbitrator or governmental agency to which Company is subject; or (b) conflict with, result in the termination or
breach of any provision(s) of, or constitute a default under, any agreement to which Company is a party or by which Company is or may be bound. 
  
 10. Indemnification. In performing the Services, Manager is acting solely in an advisory capacity to Company, and, unless caused by the gross
negligence or willful misconduct of Manager, breach of this Agreement by Manager or any act or omission by Manager constituting Cause, Manager shall not be liable, directly or indirectly, for any event or occurrence at or in connection with the
Hotels or for any debt or liability whatsoever incurred in connection with the Hotels. Company shall indemnify and hold harmless Manager from and against any and all liability, loss, claims, damages, costs and expenses
(“Liabilities”) arising out of or incurred in connection with the ownership, management or operation of the Hotels (including, without limitation, any Liability related to any environmental or hazardous materials condition or
occurrence), except those Liabilities caused by the negligence, gross negligence or willful misconduct of Manager, breach of this Agreement by Manager or any act or omission by Manager constituting Cause. 
  
 11. Miscellaneous. 
  
 11.1 Remedies. Except as otherwise provided herein,
the remedies provided by this Agreement will be cumulative and concurrent, and may be pursued singly, successively or together, and may be exercised as often as occasion therefor will occur. No single or partial exercise by any party of any right,
power or remedy will preclude any other or further exercise thereof or of any other remedy. 
  
 11.2 Authority To Execute. Each person executing this Agreement represents an warrants that it is duly authorized to execute this
Agreement by the party on whose behalf it is so executing. Further, each party represents and warrants that the execution of this Agreement will not conflict with, violate or result in a breach of any terms, conditions or provisions of any law,
regulation, order, writ, regulation, decree or award of any court of governmental entity with jurisdiction or any agreement to which such party is a party. 
  
 11.3 Counterparts. This Agreement may be executed in counterparts, each of which (or any combination of which) when signed by all
of the parties shall be deemed an original, but all of which when taken together shall constitute one agreement. Executed copies 
  

 5 

 hereof may be delivered by telecopier and upon receipt shall be deemed originals and binding upon the
parties hereto, and actual originals shall be promptly delivered thereafter. 
  
 11.4 Binding Effect; No Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, Manager may
not assign this Agreement or its rights or obligations hereunder to an entity that is not an affiliate of Manager without the prior written approval of Company, which approval may be given or withheld in Company’s sole and arbitrary discretion.

  
 11.5 Section Headings. The section
headings herein are inserted only for convenience and reference and shall in no way define, limit or prescribe the scope or intent of any provisions of this Agreement. 
  
 11.6 Entire Agreement. This Agreement contains the entire agreement of the parties hereto with
respect to the subject matter hereof and no prior written or oral agreement shall have any force or effect or be binding upon the parties hereto. 
  
 11.7 Severability. If any portion of this Agreement is declared by a court of competent jurisdiction to be void or unenforceable,
such portion shall be deemed as severed from this Agreement, and the balance of this Agreement shall remain in effect. 
  
 11.8 Governing Law. The terms and provisions of this Agreement shall be construed under and governed by the laws of the State of
New York, notwithstanding any choice of law or conflict of laws principles. If any action or proceeding is brought concerning this Agreement, it shall be brought in, and the sole and exclusive venue of any such action shall be, a court of competent
jurisdiction sitting in New York, New York, or, if in a federal court, in the Southern District of New York. 
  
 11.9 Waivers. No failure or delay in exercising any right under this Agreement shall operate as a waiver thereof or of any other
right, and the failure of any party to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation,
from having the effect of any original violation. Any waiver by a party of a particular breach or default of this Agreement shall not be deemed to be a waiver of any other prior or subsequent breach or default, and no waiver of any provision of this
Agreement shall be effective unless made in writing. 
  
 11.10 Amendment. This Agreement may not be amended or terminated except by a written instrument signed by the parties hereto. 
  
 11.11 Attorney Fees. Should any party hereto institute any action or proceeding in court or through arbitration to interpret or
enforce any provision hereof or for damages by reason of any alleged breach of any provision of this Agreement or for any remedy, the substantially prevailing party shall receive and be awarded all reasonable attorneys’ fees and all court costs
in connection with said proceedings. 
  
 11.12
Notices. Any notices required by any provision of this Agreement shall be made in writing (including electronic communication) and delivered by United States registered 
  

 6 

 or certified mail, postage prepaid, by reputable overnight courier, prepaid, or by facsimile. Such notice
shall be effective three (3) days after the mailing thereof by registered or certified mail, one (1) business day after the mailing thereof by overnight courier, and on the day of confirmed delivery by facsimile. Each party shall give notice to the
other party in the event of any change of address. Rejection or refusal to accept delivery or the inability to deliver because of a change of address of which no notice was given shall be deemed to be receipt of notices as of the date such notice
was deposited in the mail or delivered to the courier or transmitted via confirmed facsimile. Notices shall be addressed as follows: 
  

			
	If to Company:	  	 AP/APH Ventures, LLC
 c/o Apollo Real Estate Advisors, L.P.
 Two Manhattanville Road
 Purchase, New York 10577-2118
 Attention: Ronald J. Solotruk
 Facsimile: (914) 694-1727

		
	With a copy to:	  	 Apollo Advisors, L.P.
 10250 Constellation Boulevard, Suite 2900
 Los Angeles, California 90067
 Attention: Michael Weiner
 Facsimile:
(310) 843-1950

		
	If to Manager:	  	 Capital Lodging Operating Partnership, L.P.
 2927 Maple Avenue, Suite 503
 Dallas, Texas 75201
 Attention: Edward Rohling
 Facsimile:
(214) 721-1095

		
	With a copy to:	  	 Morgan, Lewis & Bockius LLP
 300 South Grand Avenue, Suite 2200
 Los Angeles, California 90071
 Attention: Steven M. Ruskin
 Facsimile: (213) 612-2501

  
 11.13 Survival. Notwithstanding the expiration or termination of this Agreement or the Term, this Agreement shall continue in full force and effect as to any provision(s) requiring observance or performance subsequent to any such
termination or expiration. 
  
 [SIGNATURE PAGE FOLLOWS] 

 

 7 

 IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the Effective Date.

  

			
	 COMPANY:
  
 AP/APH VENTURES, LLC
  
 By:    AP/APMC Partners, LLC,
 a Delaware limited liability company,
 its manager
  
 By:    AP/APMC-MM, LLC,
 its managing member
  
 By:    Kronus Property III, Inc.
 its
manager

		
	By:	 	 
	 	 	

	Name:	 	 
	 	 	

	Title:	 	 
	 	 	

  
  

			
	 MANAGER:
  
 CAPITAL LODGING OPERATING
 PARTNERSHIP, L.P.
  
 By:    Capital Lodging General Partner, LLC,
 a Delaware limited liability company,
 its general partner

		
	By:	 	 
	 	 	

	Name:	 	 
	 	 	

	Title:	 	 
	 	 	

  
 [Signature Page
to Asset Management Agreement] 

 EXHIBIT A 
  
 LIST OF HOTELS 
  

													
	 Name

	 	 Flag

	 	 City

	 	 State

	 	 Keys

	 	 Manager

	 	 Owner

	 Stoneleigh
	 	 Independent
  
	 	 Dallas
  
	 	 Texas
  
	 	 158
  
	 	 Prism
  
	 	 AP/APH Stoneleigh, L.P.
  

	

							
	Radisson Historic Richmond	 	Radisson	 	Richmond	 	Virginia	 	230	 	Prism	 	 Historic Richmond Hotel, LLC
  

	

							
	Radisson Greentree	 	Radisson	 	Greentree	 	Pennsylvania	 	467	 	Radisson	 	 AP/APH Pittsburgh, L.P.
  

	

							
	Radisson Plaza Warwick	 	Radisson	 	Philadelphia	 	Pennsylvania	 	545	 	Radisson	 	 AP/RAD Venture, L.P.
  

	

  

 A-1 

 EXHIBIT B 
  
 SERVICES 
  
 The following scope of work will be performed by Manager: 
  

	•	Competition Analysis—Review hotels in Competitive Sets. Study history of RevPAR penetration. Establish penetration benchmarks. Monitor monthly. Establish and maintain
property level communication link with competitors to obtain short term high and low demand periods for effective yield management and short term performance analysis. 

  

	•	Overall Performance Analysis—Define the ongoing performance status of each property: 

  

	 	 ̈	Identify the unique strengths of each property and determine the degree to which the strengths are used to a competitive advantage. 

  

	 	 ̈	Identify each property’s weaknesses and determine corrective action for those weaknesses that detract from property value. 

  

	 	 ̈	Study market and cost structure to find opportunities to increase revenues and/or reduce costs. Search for underutilized square footage that could provide lease income and review
alternate, higher profit uses for Hotel space generally. Review outsourcing opportunities in conjunction with branded manager. Study validity of any stated profit contribution from large scale beverage operations. 

  

	 	 ̈	Factor in hidden costs on F&B management, security, insurance, human resources, etc. and analyze importance to property rooms revenue generating ability.

  

	 	 ̈	Research new supply threats. Research all major demand generators to identify any changes that might reduce travel volume. 

  

	•	Key Personnel Review—At each Hotel, identify key employees, consultants or others providing services with attitudinal and competency problems and recommend effective
replacements. 

  

	•	Annual Budget and Plan Review—Eliminate expenses that do not directly contribute to revenues, especially expenses that contribute solely to management prestige.
Recommend changes to Annual Budget and Plan and oversee, direct and monitor implementation of the same. Recommend changes to Operating Budgets and oversee, direct and monitor implementation of the same. Establish benchmark comparisons to both
industry and owned property performance statistics. 

  

 B-1 

	•	Sales and Marketing Plans Review—Review Sales and Marketing Plans for effectiveness, efficiency, reality and cost. Assure that benefits flow to the real estate owner,
not the branded manager’s branch development. Focus sales department review on the quantity and quality of relationships with group and individual room bookers. Recommend changes to Sales and Marketing Plans and oversee, direct and monitor
implementation of the same. Search for and eliminate complex, costly marketing and advertising programs that create images rather than directly creating bookings. 

  

	•	Monthly Financial Review—Establish monthly Operating Statement Review & Critique practice throughout portfolio. Review Actual/Budget/Variance/Reason at each property
with Company. Require written monthly operating statement critiques including “Action Items” for every material under-performing line item. 

  

	•	Cap Ex Budgets Review—Analyze maintenance Cap Ex budgets separately from ROI Cap Ex budgets. Determine likelihood of projected yield of ROI expenditures. Recommend
changes to Cap Ex budgets and scope and oversee, direct and monitor implementation of the same. Review recent Cap Ex works to review degree to which enhancements are being exploited for financial gain. 

  

	•	Accelerated Asset Manager Orientation—On-site rotation at hotels as needed to assess and manage each property. Discuss Recent Property Performance with Executive
Committee at each Hotel. Attend regularly scheduled property-level staff meetings. 

  

	•	Interface with Branded Managers—Establish regular meeting schedule and agenda with branded management companies, focusing on specific expectations and accountability for
results. 

  

	•	Benefit Flows to Real Estate—Continually monitor management company decisions to assure that decisions benefit real estate owners, not management companies. Review the
volume purchasing benefits from the branded operators and assure that benefits flow to the real estate owners and not solely to the branded operator. Review contractual commitments process at property level to limit any surprise encumbrances at
exit. 

  

	•	Strategic Plan Review—Review any existing Strategic Plans and revise as necessary. 

  
 Reporting to Company: 
  

	•	Provide bi-monthly “state of the portfolio” report, with specific contents to be mutually agreed upon, to Company. 

  

	•	Assist Hotel managers in designing a weekly flash report that is useful to the Company and the applicable Hotel. 

  

	Ÿ	Quarterly Board meeting at Company’s New York office. 

  

 B-2

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