Document:

Exhibit
10.24

 

MANAGEMENT AGREEMENT

 

BY AND

 

BETWEEN

 

HPT TRS IHG-2, INC.

 

AND

 

IHG MANAGEMENT (MARYLAND) LLC

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1   DEFINITIONS

  	
   

  	
   

  
	
  1.1

  	
  8.1(c) Statement 

  	
   

  	
   

  
	
  1.2

  	
  Accounting Principles 

  	
   

  	
   

  
	
  1.3

  	
  Affiliate 

  	
   

  	
   

  
	
  1.4

  	
  Agreed Upon Procedure Letter 

  	
   

  	
   

  
	
  1.5

  	
  Arbitration 

  	
   

  	
   

  
	
  1.6

  	
  Authorized Mortgage 

  	
   

  	
   

  
	
  1.7

  	
  Award 

  	
   

  	
   

  
	
  1.8

  	
  Bank Accounts 

  	
   

  	
   

  
	
  1.9

  	
  Base Management Fee 

  	
   

  	
   

  
	
  1.10

  	
  Base Priority Amount 

  	
   

  	
   

  
	
  1.11

  	
  Base Year 

  	
   

  	
   

  
	
  1.12

  	
  Brand 

  	
   

  	
   

  
	
  1.13

  	
  Brand Standards 

  	
   

  	
   

  
	
  1.14

  	
  Buildings 

  	
   

  	
   

  
	
  1.15

  	
  Business Day 

  	
   

  	
   

  
	
  1.16

  	
  Canadian Consumer Price Index 

  	
   

  	
   

  
	
  1.17

  	
  Canadian Hotel 

  	
   

  	
   

  
	
  1.18

  	
  Canadian Manager 

  	
   

  	
   

  
	
  1.19

  	
  Canadian Services 

  	
   

  	
   

  
	
  1.20

  	
  Capital Replacements 

  	
   

  	
   

  
	
  1.21

  	
  Capital Replacements Budget 

  	
   

  	
   

  
	
  1.22

  	
  Closing 

  	
   

  	
   

  
	
  1.23

  	
  Code 

  	
   

  	
   

  
	
  1.24

  	
  Collateral Agency Agreement 

  	
   

  	
   

  
	
  1.25

  	
  Collateral Agent 

  	
   

  	
   

  
	
  1.26

  	
  Competitor 

  	
   

  	
   

  
	
  1.27

  	
  Condemnation 

  	
   

  	
   

  
	
  1.28

  	
  Condemnor 

  	
   

  	
   

  
	
  1.29

  	
  Consolidated Financials 

  	
   

  	
   

  
	
  1.30

  	
  Consumer Price Index 

  	
   

  	
   

  
	
  1.31

  	
  Crowne Plaza Hotels 

  	
   

  	
   

  
	
  1.32

  	
  Debt Service Coverage Ratio 

  	
   

  	
   

  
	
  1.33

  	
  Disbursement Rate 

  	
   

  	
   

  
	
  1.34

  	
  Effective Date 

  	
   

  	
   

  
	
  1.35

  	
  Environmental Notice 

  	
   

  	
   

  
	
  1.36

  	
  Expiration Date 

  	
   

  	
   

  
	
  1.37

  	
  Fiscal Month 

  	
   

  	
   

  
	
  1.38

  	
  Fiscal Year 

  	
   

  	
   

  
	
  1.39

  	
  Furniture, Fixtures and Equipment or FF&E

  	
   

  	
   

  
	
  1.40

  	
  Government Agencies 

  	
   

  	
   

  
	
  1.41

  	
  Gross Revenues 

  	
   

  	
   

  
	
  1.42

  	
  GST 

  	
   

  	
   

  
	
  1.43

  	
  Guarantor 

  	
   

  	
   

  

 

i

 

	
  1.44

  	
  Guaranty 

  	
   

  	
   

  
	
  1.45

  	
  Hazardous Substances 

  	
   

  	
   

  
	
  1.46

  	
  Holiday Inn Hotels 

  	
   

  	
   

  
	
  1.47

  	
  Hotel 

  	
   

  	
   

  
	
  1.48

  	
  HPT 

  	
   

  	
   

  
	
  1.49

  	
  IHG 

  	
   

  	
   

  
	
  1.50

  	
  Incentive Management Fee 

  	
   

  	
   

  
	
  1.51

  	
  Initial Term 

  	
   

  	
   

  
	
  1.52

  	
  Initial Working Capital 

  	
   

  	
   

  
	
  1.53

  	
  Insurance Requirements 

  	
   

  	
   

  
	
  1.54

  	
  Intellectual Property 

  	
   

  	
   

  
	
  1.55

  	
  InterContinental Hotels 

  	
   

  	
   

  
	
  1.56

  	
  Interest Rate 

  	
   

  	
   

  
	
  1.57

  	
  Lease 

  	
   

  	
   

  
	
  1.58

  	
  Legal Requirements 

  	
   

  	
   

  
	
  1.59

  	
  Management Fees 

  	
   

  	
   

  
	
  1.60

  	
  Manager 

  	
   

  	
   

  
	
  1.61

  	
  Manager Default 

  	
   

  	
   

  
	
  1.62

  	
  Manager Event of Default 

  	
   

  	
   

  
	
  1.63

  	
  Material Repair 

  	
   

  	
   

  
	
  1.64

  	
  New Management Agreement 

  	
   

  	
   

  
	
  1.65

  	
  NOI 

  	
   

  	
   

  
	
  1.66

  	
  Non-Economic Hotel 

  	
   

  	
   

  
	
  1.67

  	
  Offer 

  	
   

  	
   

  
	
  1.68

  	
  Officer’s Certificate 

  	
   

  	
   

  
	
  1.69

  	
  Operating Costs 

  	
   

  	
   

  
	
  1.70

  	
  Operating Equipment 

  	
   

  	
   

  
	
  1.71

  	
  Operating Profit 

  	
   

  	
   

  
	
  1.72

  	
  Operating Standards 

  	
   

  	
   

  
	
  1.73

  	
  Operating Supplies 

  	
   

  	
   

  
	
  1.74

  	
  Other Documents 

  	
   

  	
   

  
	
  1.75

  	
  Owner 

  	
   

  	
   

  
	
  1.76

  	
  Owner’s First Priority 

  	
   

  	
   

  
	
  1.77

  	
  Owner’s First Priority Adjustment Rate 

  	
   

  	
   

  
	
  1.78

  	
  Owner’s Fixed Priority 

  	
   

  	
   

  
	
  1.79

  	
  Owner’s Percentage Priority 

  	
   

  	
   

  
	
  1.80

  	
  Owner’s Second Priority 

  	
   

  	
   

  
	
  1.81

  	
  Parent 

  	
   

  	
   

  
	
  1.82

  	
  Person 

  	
   

  	
   

  
	
  1.83

  	
  Pledged Hotels 

  	
   

  	
   

  
	
  1.84

  	
  Pooled FF&E Hotels 

  	
   

  	
   

  
	
  1.85

  	
  PR Guaranty 

  	
   

  	
   

  
	
  1.86

  	
  PR Indemnity 

  	
   

  	
   

  
	
  1.87

  	
  PR Lease 

  	
   

  	
   

  
	
  1.88

  	
  PR Property 

  	
   

  	
   

  
	
  1.89

  	
  PR Stock Agreement 

  	
   

  	
   

  
	
  1.90

  	
  PR Tenant

  	
   

  	
   

  

 

ii

 

	
  1.91

  	
  Principal Documents

  	
   

  	
   

  
	
  1.92

  	
  Priority Coverage Ratio 

  	
   

  	
   

  
	
  1.93

  	
  Purchase Agreement 

  	
   

  	
   

  
	
  1.94

  	
  Purchaser 

  	
   

  	
   

  
	
  1.95

  	
  Renewal Terms

  	
   

  	
   

  
	
  1.96

  	
  Repairs

  	
   

  	
   

  
	
  1.97

  	
  Replacement Property

  	
   

  	
   

  
	
  1.98

  	
  Reservation System

  	
   

  	
   

  
	
  1.99

  	
  Reserve Account

  	
   

  	
   

  
	
  1.100

  	
  Reserve Percentage

  	
   

  	
   

  
	
  1.101

  	
  Residual Distribution

  	
   

  	
   

  
	
  1.102

  	
  Restricted Area

  	
   

  	
   

  
	
  1.103

  	
  Restricted Period 

  	
   

  	
   

  
	
  1.104

  	
  Rooms Revenue

  	
   

  	
   

  
	
  1.105

  	
  RST

  	
   

  	
   

  
	
  1.106

  	
  Sales Tax 

  	
   

  	
   

  
	
  1.107

  	
  Severance Date

  	
   

  	
   

  
	
  1.108

  	
  Sites

  	
   

  	
   

  
	
  1.109

  	
  Specially Designated or Blocked Person

  	
   

  	
   

  
	
  1.110

  	
  Staybridge Hotels 

  	
   

  	
   

  
	
  1.111

  	
  Subsidiary

  	
   

  	
   

  
	
  1.112

  	
  Substitute Tenant

  	
   

  	
   

  
	
  1.113

  	
  Successor Purchaser 

  	
   

  	
   

  
	
  1.114

  	
  System Fees 

  	
   

  	
   

  
	
  1.115

  	
  System Marks

  	
   

  	
   

  
	
  1.116

  	
  Term 

  	
   

  	
   

  
	
  1.117

  	
  Transaction Documents

  	
   

  	
   

  
	
  1.118

  	
  Transferred Hotel

  	
   

  	
   

  
	
  1.119

  	
  Uniform System of Accounts

  	
   

  	
   

  
	
  1.120

  	
  Ultimate Parent

  	
   

  	
   

  
	
  1.121

  	
  Unsuitable for its Permitted Use

  	
   

  	
   

  
	
  1.122

  	
  Working Capital

  	
   

  	
   

  
	
  1.123

  	
  Yearly Budget

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2   SCOPE
  OF AGREEMENT

  	
   

  	
   

  
	
  2.1

  	
  Engagement of Manager

  	
   

  	
   

  
	
  2.2

  	
  Additional Services

  	
   

  	
   

  
	
  2.3

  	
  Use of Hotels

  	
   

  	
   

  
	
  2.4

  	
  Right to Inspect

  	
   

  	
   

  
	
  2.5

  	
  No Right of Offset

  	
   

  	
   

  
	
  2.6

  	
  Condition of the Hotels

  	
   

  	
   

  
	
  2.7

  	
  Non-Economic Hotels

  	
   

  	
   

  
	
  2.8

  	
  No Early Termination of Manager; Nature of
  Relationship etc 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3   TERM
  AND RENEWALS

  	
   

  	
   

  
	
  3.1

  	
  Term 

  	
   

  	
   

  
	
  3.2

  	
  Renewal Term

  	
   

  	
   

  

 

iii

 

	
  3.3

  	
  Owner’s Termination Right at End of Term 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4   TITLE
  TO HOTEL 

  	
   

  	
   

  
	
  4.1

  	
  Covenants of Title 

  	
   

  	
   

  
	
  4.2

  	
  Non-Disturbance 

  	
   

  	
   

  
	
  4.3

  	
  Financing 

  	
   

  	
   

  
	
  4.4

  	
  Sale of a Hotel to an Affiliate 

  	
   

  	
   

  
	
  4.5

  	
  Sale of All the Hotels 

  	
   

  	
   

  
	
  4.6

  	
  The Lease 

  	
   

  	
   

  
	
  4.7

  	
  Restricted Sale 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5   REQUIRED
  FUNDS 

  	
   

  	
   

  
	
  5.1

  	
  Working Capital 

  	
   

  	
   

  
	
  5.2

  	
  Reserve Account 

  	
   

  	
   

  
	
  5.3

  	
  Additional Requirements for Reserve 

  	
   

  	
   

  
	
  5.4

  	
  Ownership of Replacements 

  	
   

  	
   

  
	
  5.5

  	
  No Additional Contributions 

  	
   

  	
   

  
	
  5.6

  	
  Pooled Reserves 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6   BRAND
  STANDARDS AND MANAGER’S CONTROL 

  	
   

  	
   

  
	
  6.1

  	
  Brand Standards 

  	
   

  	
   

  
	
  6.2

  	
  Manager’s Control 

  	
   

  	
   

  
	
  6.3

  	
  Arbitration 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7   OPERATION
  OF THE HOTEL 

  	
   

  	
   

  
	
  7.1

  	
  Permits 

  	
   

  	
   

  
	
  7.2

  	
  Equipment and Supplies 

  	
   

  	
   

  
	
  7.3

  	
  Personnel 

  	
   

  	
   

  
	
  7.4

  	
  Sales, Marketing and Advertising 

  	
   

  	
   

  
	
  7.5

  	
  Reservation and Communication Services 

  	
   

  	
   

  
	
  7.6

  	
  Maintenance and Repairs 

  	
   

  	
   

  
	
  7.7

  	
  Material Repairs 

  	
   

  	
   

  
	
  7.8

  	
  Liens; Credit 

  	
   

  	
   

  
	
  7.9

  	
  Real Estate and Personal Property Taxes 

  	
   

  	
   

  
	
  7.10

  	
  GST
  and RST 

  	
   

  	
   

  
	
  7.11

  	
  Contest 

  	
   

  	
   

  
	
  7.12

  	
  Privacy 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8   FISCAL
  MATTERS

  	
   

  	
   

  
	
  8.1

  	
  Accounting Matters 

  	
   

  	
   

  
	
  8.2

  	
  Yearly Budgets 

  	
   

  	
   

  
	
  8.3

  	
  Bank
  Accounts 

  	
   

  	
   

  
	
  8.4

  	
  Consolidated Financials 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9   FEES
  TO MANAGER

  	
   

  	
   

  
	
  9.1

  	
  Management Fees 

  	
   

  	
   

  
	
  9.2

  	
  System
  Fees 

  	
   

  	
   

  
						

 

iv

 

	
  ARTICLE 10   DISBURSEMENTS

  	
   

  	
   

  
	
  10.1

  	
  Disbursement of Funds

  	
   

  	
   

  
	
  10.2

  	
  Residual Distribution

  	
   

  	
   

  
	
  10.3

  	
  Owner’s First Priority

  	
   

  	
   

  
	
  10.4

  	
  Owner’s Percentage Priority

  	
   

  	
   

  
	
  10.5

  	
  Owner’s Second Priority

  	
   

  	
   

  
	
  10.6

  	
  No
  Interest

  	
   

  	
   

  
	
  10.7

  	
  Calculation of Interim Disbursements

  	
   

  	
   

  
	
  10.8

  	
  Amounts Outstanding at End of Term

  	
   

  	
   

  
	
  10.9

  	
  Allocation of Owner’s Fixed Priority

  	
   

  	
   

  
	
  10.10

  	
  Survival

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11   CERTAIN
  OTHER SERVICES

  	
   

  	
   

  
	
  11.1

  	
  Optional Services

  	
   

  	
   

  
	
  11.2

  	
  Purchasing

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12   SIGNS
  AND SERVICE MARKS

  	
   

  	
   

  
	
  12.1

  	
  Signs

  	
   

  	
   

  
	
  12.2

  	
  System
  Marks

  	
   

  	
   

  
	
  12.3

  	
  System
  Mark Litigation

  	
   

  	
   

  
	
  12.4

  	
  Other Intellectual Property Provisions

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13   INSURANCE

  	
   

  	
   

  
	
  13.1

  	
  Insurance Coverage

  	
   

  	
   

  
	
  13.2

  	
  Insurance Policies

  	
   

  	
   

  
	
  13.3

  	
  Insurance Certificates

  	
   

  	
   

  
	
  13.4

  	
  Insurance Proceeds

  	
   

  	
   

  
	
  13.5

  	
  Manager’s Insurance Program

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 14   INDEMNIFICATION
  AND WAIVER OF SUBROGATION

  	
   

  	
   

  
	
  14.1

  	
  Indemnification

  	
   

  	
   

  
	
  14.2

  	
  Waiver of Subrogation

  	
   

  	
   

  
	
  14.3

  	
  Survival

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 15   DAMAGE
  TO AND DESTRUCTION OF THE HOTEL

  	
   

  	
   

  
	
  15.1

  	
  Termination

  	
   

  	
   

  
	
  15.2

  	
  Restoration

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 16   CONDEMNATION

  	
   

  	
   

  
	
  16.1

  	
  Total Condemnation

  	
   

  	
   

  
	
  16.2

  	
  Partial Condemnation

  	
   

  	
   

  
	
  16.3

  	
  Temporary Condemnation

  	
   

  	
   

  
	
  16.4

  	
  Anaheim Taking

  	
   

  	
   

  
	
  16.5

  	
  Effect of Condemnation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 17   DEFAULT
  AND TERMINATION

  	
   

  	
   

  
	
  17.1

  	
  Manager Events of Default

  	
   

  	
   

  
	
  17.2

  	
  Remedies for Manager Defaults

  	
   

  	
   

  
									

 

v

 

	
  17.3

  	
  Owner Events of Default and Remedies for Owner Defaults

  	
   

  	
   

  
	
  17.4

  	
  Post Termination Obligations

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 18   NOTICES

  	
   

  	
   

  
	
  18.1

  	
  Procedure

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 19   RELATIONSHIP,
  AUTHORITY AND FURTHER ACTIONS

  	
   

  	
   

  
	
  19.1

  	
  Relationship

  	
   

  	
   

  
	
  19.2

  	
  Further Actions

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 20   APPLICABLE
  LAW

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 21   SUCCESSORS
  AND ASSIGNS

  	
   

  	
   

  
	
  21.1

  	
  Assignment

  	
   

  	
   

  
	
  21.2

  	
  Binding Effect

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 22   RECORDING

  	
   

  	
   

  
	
  22.1

  	
  Memorandum of Agreement

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 23   FORCE
  MAJEURE

  	
   

  	
   

  
	
  23.1

  	
  Operation of Hotel

  	
   

  	
   

  
	
  23.2

  	
  Extension of Time

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 24   GENERAL
  PROVISIONS

  	
   

  	
   

  
	
  24.1

  	
  Trade
  Area Restriction

  	
   

  	
   

  
	
  24.2

  	
  Environmental Matters

  	
   

  	
   

  
	
  24.3

  	
  Authorization

  	
   

  	
   

  
	
  24.4

  	
  Severability

  	
   

  	
   

  
	
  24.5

  	
  Merger

  	
   

  	
   

  
	
  24.6

  	
  Formalities

  	
   

  	
   

  
	
  24.7

  	
  Consent to Jurisdiction; No Jury Trial

  	
   

  	
   

  
	
  24.8

  	
  Performance on Business Days

  	
   

  	
   

  
	
  24.9

  	
  Attorneys’
  Fees

  	
   

  	
   

  
	
  24.10

  	
  Section and Other Headings

  	
   

  	
   

  
	
  24.11

  	
  Documents

  	
   

  	
   

  
	
  24.12

  	
  No Consequential Damages

  	
   

  	
   

  
	
  24.13

  	
  No Political Contributions

  	
   

  	
   

  
	
  24.14

  	
  REIT Qualification

  	
   

  	
   

  
	
  24.15

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

  	
   

  	
   

  
	
  24.16

  	
  Adverse Regulatory Event

  	
   

  	
   

  
	
  24.17

  	
  Adverse Canadian Event

  	
   

  	
   

  
	
  24.18

  	
  Commercial Leases

  	
   

  	
   

  
	
  24.19

  	
  Nonliability of Trustees

  	
   

  	
   

  
	
  24.20

  	
  Arbitration

  	
   

  	
   

  
	
  24.21

  	
  Estoppel Certificates

  	
   

  	
   

  
	
  24.22

  	
  Confidentiality

  	
   

  	
   

  
	
  24.23

  	
  Hotel Warranties

  	
   

  	
   

  

 

vi

 

	
  24.24

  	
  Currency

  	
   

  	
   

  
	
  24.25

  	
  Independent Covenants

  	
   

  	
   

  

 

vii

 

MANAGEMENT AGREEMENT

 

MANAGEMENT AGREEMENT (this “AGREEMENT”) is
made and entered into as of February 16, 2005, by and between HPT TRS
IHG-2, INC., a Maryland corporation (“OWNER”), and IHG MANAGEMENT (MARYLAND)
LLC, a Maryland limited liability company (“MANAGER”).

 

W I T N E S S E T H

 

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

 

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

 

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

 

ARTICLE 1

 

DEFINITIONS

 

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

 

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

 

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

 

1.3                                 “AFFILIATE”
shall mean, with respect to any Person, (a) in the case of any such Person
which is a partnership, any partner in such partnership; (b) in the case of any
such Person which is a limited liability company, any member of such

 

 

company; (c) any other Person which is a Parent, or Subsidiary or a
Subsidiary of a Parent with respect to such Person or to one or more of the
persons referred to in the preceding clauses (a) and (b); and (d) any other
Person who is an officer, director, trustee or employee of, or partner in, such
Person or any Person referred to in the preceding clauses (a), (b) and (c).

 

1.4                                 “AGREED
UPON PROCEDURE LETTER” shall mean a letter from Ernst & Young or another
firm of independent certified public accountants (the “auditor”) selected by
Manager and approved by Owner (which approval shall not be unreasonably
withheld or delayed) which letter shall, subject to the limitations and
conditions imposed by the auditor, address the following components and such
other reasonable matters as Owner and the auditor shall reasonably agree:

 

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

 

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

 

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

 

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

 

(e)                                  That auditor has
confirmed that the Hotels are subjected to audit procedures by Manager’s
internal audit department, if any, and reviewed work papers provided in
connection therewith. If auditor has performed hotel level audit procedures at
any Hotel, auditor shall identify those Hotels and list the procedures performed
and results obtained. In any event at least three (3) of the Pooled FF&E
Hotels shall be subjected to audit procedures each Fiscal Year by either
internal audit or the auditor.

 

(f)                                    “ANAHEIM
CONDEMNATION” shall mean any Condemnation pursuant to, or in connection with,
the Future Street Dedication in accordance with the City of Anaheim Master Plan
of Streets (as the same may be amended, altered or replaced from time to time)
referred to on the survey entitled “ALTA/ACSM Land Title Survey prepared for
InterContinental Hotels Group,” prepared by

 

2

 

Millman Surveying, Inc., dated August 16, 2004, last revised January 27,
2005.

 

1.5                                 “ARBITRATION”
shall mean an arbitration conducted in accordance with the terms of SECTION 24.20.

 

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

 

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

 

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

 

1.9                                 “BASE
MANAGEMENT FEE” shall mean three percent (3%) of the aggregate Gross Revenues
at the Hotels in each Fiscal Year during the Term.

 

1.10                           “BASE
PRIORITY AMOUNT” shall initially mean the following annual amounts with respect
to the corresponding periods:

 

	
  Period

  	
   

  	
  Annual Amount

  	
   

  
	
  Effective
  Date - December 31, 2005

  	
   

  	
  $

  	
  26,018,731.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thereafter

  	
   

  	
  $

  	
  27,644,902.00

  	
   

  

 

3

 

Provided that Purchaser performs its obligations under Section 3.2(b)
of the Purchase Agreement, the Base Priority Amount shall be increased by
$850,000 per annum on each of January 1, 2006 and January 1, 2007 and
by $425,000 per annum on January 1, 2008.

 

1.11                           “BASE
YEAR” shall mean the 2006 Fiscal Year; PROVIDED, HOWEVER, if there shall occur
a casualty, condemnation or other force majeure event with respect to a Hotel
which causes a material decline in Gross Revenues for such Hotel or a force
majeure event as described in SECTION 23.1 in Canada, the United States or
Caribbean Region or in any relevant market that results in a ten percent (10%)
annual decline in REVPAR for the Upscale segment with respect to the Staybridge
Hotels, the Luxury segment with respect to the InterContinental Hotels, the
Upscale segment with respect to Crowne Plaza Hotels and Mid-Scale with F and B
segment with respect to the Holiday Inn Hotels, or other appropriate segment,
as determined by Smith Travel Research, in Canada, the United States or Caribbean
Region or in the relevant market, which, in either case, causes a material
decline in Gross Revenues for such Hotel for the 2006 Fiscal Year, the Base
Year for such Hotel shall be adjusted to be the first full Fiscal Year of
operation of such Hotel after the resolution of any such casualty, condemnation
or force majeure event and the return of such Hotel to its substantially normal
status.

 

1.12                           “BRAND”
shall mean: with respect to the Staybridge Hotels, the Staybridge Suites hotel
service marks; with respect to the InterContinental Hotels, the
InterContinental hotel service marks; with respect to the Crowne Plaza Hotels,
the Crowne Plaza hotel service marks; and with respect to the Holiday Inn
Hotels, the Holiday Inn hotel service marks, excluding any separate Holiday Inn
Express service marks; together with, in each instance, the applicable Brand
Standards, and all of the attributes and features customarily associated with,
as applicable, Staybridge Suites hotels, InterContinental hotels, Crowne Plaza
hotels and the Holiday Inn hotels in North America from time to time.

 

1.13                           “BRAND
STANDARDS” shall mean the standards of operation, as amended from time to time,
in effect at substantially all hotels which are operated under, as applicable,
the Staybridge Suites, InterContinental, Crowne Plaza or Holiday Inn name as
may be specified in manuals and

 

4

 

other guidelines provided by the owner of the System Marks or its
Affiliates.

 

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

 

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

 

1.16                           “CANADIAN
CONSUMER PRICE INDEX” shall mean the Consumer Price Index (All Items for
Ontario, base year 1992-=100) published by Statistics Canada or if such index
is no longer published, such other index as is published in substitution
therefor.

 

1.17                           “CANADIAN
HOTEL” shall mean a Hotel located in Canada.

 

1.18                           “CANADIAN
MANAGER” shall have the meaning given such term in SECTION 21.1(b).

 

1.19                           “CANADIAN
SERVICES” shall have the meaning given such term in SECTION 21.1(b).

 

1.20                           “CAPITAL
REPLACEMENTS” shall mean, collectively, replacements and renewals to the
FF&E and Repairs which are normally capitalized under the Accounting
Principles.

 

1.21                           “CAPITAL
REPLACEMENTS BUDGET” shall mean the annual budget for Capital Replacements at
the Hotels, covering a Fiscal Year, as prepared by Manager and approved by
Owner as part of a Yearly Budget. References to Yearly Budget shall be deemed
to

 

5

 

incorporate the Capital Replacements Budget unless specifically
excluded.

 

1.22                           “CLOSING”
shall mean the Closing under the Purchase Agreement.

 

1.23                           “CODE”
shall mean the United States Internal Revenue Code of 1986 and the Treasury
Regulations promulgated thereunder, each as from time to time amended, and any
reference to any statutory or regulatory provision shall be deemed to be a
reference to any successor statutory or regulatory provision.

 

1.24                           “COLLATERAL
AGENCY AGREEMENT” shall have the meaning given such term in the Guaranty.

 

1.25                           “COLLATERAL
AGENT” shall have the meaning given such term in the Guaranty.

 

1.26                           “COMPETITOR”
shall mean any Person (other than Manager and its Affiliates) which owns
directly or through an Affiliate a hotel brand, trade name, system, or chain
having at least fifteen (15) hotels (excluding a mere franchisee or mere
passive investor).

 

1.27                           “CONDEMNATION”
shall have the meaning given such term in the Lease.

 

1.28                           “CONDEMNOR”
shall have the meaning given such term in the Lease.

 

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

 

6

 

1.30                           “CONSUMER
PRICE INDEX” shall mean the Consumer Price Index for all Urban Consumers, U.S.
City Average, published by the United States Bureau of Labor Statistics or if
such index is no longer published, such other index as is published in
substitution therefor.

 

1.31                           “CROWNE
PLAZA HOTELS” shall mean the Hotels that are operated as of the date hereof as
Crowne Plaza hotels.

 

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

 

1.33                           “DISBURSEMENT
RATE” shall mean a per annum rate equal to the greater of (i) the sum of the
per annum rate for fifteen (15) year U.S. Treasury Obligations as published in
THE WALL STREET JOURNAL, plus four hundred thirty (430) basis points and (ii)
nine and five-tenths percent (9.5%).

 

1.34                           “EFFECTIVE
DATE” shall mean the date of this Agreement.

 

1.35                           “ENVIRONMENTAL
NOTICE” shall have the meaning given such term in SECTION 24.2(a).

 

1.36                           “EXPIRATION
DATE” shall mean the date on which the Term shall expire.

 

1.37                           “FISCAL
MONTH” shall mean each calendar month in the Term or each partial calendar
month in the Term.

 

1.38                           “FISCAL
YEAR” shall mean each calendar year in the Term and each partial calendar year
in the Term.

 

1.39                           “FURNITURE,
FIXTURES AND EQUIPMENT” or “FF&E” shall mean, collectively, all furniture,
furnishings and equipment (except Operating Equipment and real property
fixtures included in the definition of Buildings) now or hereafter located and
installed in or about the Hotels which are used in the operation thereof as
hotels in accordance with the standards set forth in this Agreement, including,
without limitation (i) office furnishings and equipment; (ii) specialized hotel
equipment

 

7

 

necessary for the operation of any portion of the Building as a
Staybridge Suites, InterContinental, Crowne Plaza or Holiday Inn, as
applicable, hotel, including equipment for kitchens, laundries, dry cleaning
facilities, bars, restaurants, public rooms, commercial space, parking areas,
and recreational facilities; and (iii) all other furnishings and equipment
hereafter located and installed in or about the Buildings which are used in the
operation of the Buildings as hotels in accordance with the standards set forth
in this Agreement.

 

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

 

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

 

8

 

proceeds from business interruption or other loss of income insurance);
condemnation proceeds (other than for a temporary taking); credits or refunds made
to customers, guests or patrons; sums and credits received by Owner for lost or
damaged merchandise; proceeds from the sale or other disposition of a Hotel,
any part thereof, of FF&E or any other assets of the Hotels; or proceeds of
any financing or re-financing; the Initial Working Capital and any other matters
specifically excluded from Gross Revenues pursuant to this Agreement.

 

1.42                           “GST”
shall mean goods and services taxes imposed pursuant to Part IX of the EXCISE
TAX ACT (Canada) and any other similar value added tax that is refundable.

 

1.43                           “GUARANTOR”
shall mean the Guarantor under the Guaranty.

 

1.44                           “GUARANTY”
shall mean that certain Amended and Restated Consolidated Guaranty Agreement of
even date herewith made by IHG for the benefit of, INTER ALIA, Owner, as the
same may be amended, supplemented or replaced from time to time, but
specifically excluding any New Guaranty given pursuant to the Guaranty as the
same may be amended, supplemented or replaced from time to time.

 

1.45                           “HAZARDOUS
SUBSTANCES” shall mean any substance:

 

(a)                                  the presence of which
requires or may hereafter require notification, investigation or remediation
under any Legal Requirement; or

 

(b)                                 which is or becomes
defined as a “hazardous waste,” “hazardous material” or “hazardous substance”
or “pollutant” or “contaminant” under any present or future Legal Requirement
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 ET SEQ.) and the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.)
and the regulations promulgated thereunder; or

 

(c)                                  which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is or becomes regulated by any Government
Agency; or

 

(d)                                 the presence of which
at a Hotel causes or materially threatens to cause an unlawful nuisance upon
such Hotel or to

 

9

 

adjacent properties or poses or materially threatens to pose a hazard
to such Hotel or to the health or safety of persons; or

 

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

 

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

 

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

 

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

 

1.46                           “HOLIDAY
INN HOTELS” shall mean the Hotels that are operated as of the date hereof as
Holiday Inn hotels.

 

1.47                           “HOTEL”
shall mean each Hotel located at a Site including all of the Owner’s interest
in such Site, the Building there, the Furniture, Fixtures and Equipment there,
the Operating Equipment there and the Operating Supplies there; PROVIDED,
HOWEVER, upon the termination of the Agreement with respect to less than all of
the Hotels, pursuant to the terms hereof or otherwise, the term “Hotel” shall,
with respect to the obligation of the parties thereafter accruing, only refer
to a Hotel with respect to which this Agreement is in full force and effect.

 

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

 

1.49                           “IHG”
shall mean InterContinental Hotels Group PLC, its successors and assigns.

 

1.50                           “INCENTIVE
MANAGEMENT FEE” shall mean for any Fiscal Year, fifty percent (50%) of the
excess, if any, of (i) Gross Revenues from all of the Hotels over (ii) the
applications thereof made pursuant to SECTIONS 10.1(a) through and including
10.1(q).

 

1.51                           “INITIAL
TERM” shall mean the period commencing on the Effective Date and ending on December 31,
2029.

 

10

 

1.52                           “INITIAL
WORKING CAPITAL” shall have the meaning given to such term in SECTION 5.1.

 

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

 

1.54                           “INTELLECTUAL
PROPERTY” shall have the meaning given to such term in SECTION 12.4.

 

1.55                           “INTERCONTINENTAL
HOTELS” shall mean the Hotels that are operated as of the date hereof as
InterContinental hotels.

 

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

 

1.57                           “LEASE”
shall mean, collectively, the one or more Lease Agreements pursuant to which
Owner leases the Hotels from Purchaser or certain of its Affiliates as in
effect on the date hereof, as the same may be amended from time to time in
accordance with the terms of this Agreement.

1.58                           “LEGAL
REQUIREMENTS” shall mean all federal (United States and Canada), state,
provincial, county, municipal, local and other governmental statutes, laws,
rules, orders, regulations, by-laws, ordinances, judgments, decrees,
injunctions and requirements affecting Owner (excluding any requirements which
affect Owner’s status as a real estate investment trust), Purchaser, Manager, a
Hotel or the maintenance, construction, alteration, management or operation
thereof, whether now or hereafter enacted or in existence, including, without
limitation, (a) all permits, licenses, authorizations, certificates and
regulations necessary to operate a Hotel, (b) all covenants, agreements, ground
leases, restrictions and encumbrances, (c) the outcome of any Arbitration and
(d) any collective bargaining agreement or other agreement or legal requirement
pertaining to any union representing employees of a Hotel.

 

1.59                           “MANAGEMENT
FEES” shall mean, collectively, the Base Management Fee and the Incentive
Management Fee.

 

11

 

1.60                           “MANAGER”
shall have the meaning given such term in the preamble to this Agreement.

 

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

 

1.62                           “MANAGER
EVENT OF DEFAULT” shall have the meaning given such term in SECTION 17.1.

 

1.63                           “MATERIAL
REPAIR” shall mean a Repair the cost of which exceeds $250,000; PROVIDED,
HOWEVER, on January 1 of each year starting in 2006 said $250,000 shall be
adjusted to reflect the percentage change in the Consumer Price Index since the
prior January 1.

 

1.64                           “NEW
MANAGEMENT AGREEMENT” shall have the meaning given to such term in SECTION 24.17.

 

1.65                           “NOI”
shall mean, with respect to any property, for any period, the Gross Operating
Profit (as defined in the Uniform System of Accounts) of such property for such
period net of, for such period and such property, real and personal property
taxes and casualty and liability insurance premiums, an imputed reserve for
capital replacements equal to five percent (5%) of gross revenues and an
imputed management fee equal to three percent (3%) of gross revenues. To the
extent that any amount (or portion thereof) used to calculate NOI is
denominated in any currency other than United States Dollars, the same shall be
converted to United States dollars using a reasonable method consistent with
the Accounting Principles then employed by Manager and its Affiliates when accounting
for foreign currencies.

 

1.66                           “NON-ECONOMIC
HOTEL” shall mean any Hotel which has been designated a Non-Economic Hotel
pursuant to the terms hereof (so long as such designation has not been deemed
withdrawn pursuant to the terms of SECTION 2.7(a)).

 

1.67                           “OFFER”
shall mean a bona fide arm’s-length binding unconditional offer to purchase a
Non-Economic Hotel free and clear of any rights of Manager hereunder made by an
unrelated third party having the financial capacity to implement the terms of
such offer which provides for an all cash purchase price acceptable to Manager
and is otherwise on customary terms.

 

12

 

1.68                           “OFFICER’S
CERTIFICATE” shall mean as to any Person, a certificate of the chief executive
officer, chief financial officer or chief accounting officer of such Person,
duly authorized, accompanying the financial statements required to be delivered
by such Person pursuant to SECTIONS 8.1, 8.4 or 17.4 or otherwise pursuant to
the PR Guaranty, in which such officer shall certify to such officer’s best
knowledge (a) that such statements have been properly prepared in accordance
with the Accounting Principles, (b) in the event that the certifying party is
an officer of IHG or another Guarantor, that such statements are true, correct
and complete in all material respects and fairly present the consolidated
financial condition of such Person at and as of the dates thereof and the
results of its and their operations for the periods covered thereby and that
there is no default on the part of the Guarantor under the Guaranty, and (c) in
the event that the certifying party is an officer of Manager and the certificate
is being given in such capacity, that such statements fairly present the
financial operation of the Hotels.

 

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

 

(i)                                     the
cost of Operating Supplies, wages, salaries and employee fringe benefits,
advertising and promotional expenses, the cost of personnel training programs,
utility and energy costs, operating licenses and permits, maintenance costs,
and equipment rentals;

 

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

 

(iii)                               premiums
for insurance required hereunder;

 

(iv)                              the
System Fees;

 

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

 

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

 

13

 

(vii)                           rent or
lease payments under ground leases or for equipment used at the Hotels in the
operation thereof; and

 

(viii)                        Sales
Taxes (except as provided below) payable on or in respect of Operating Costs
(including those Operating Costs which are reimbursed hereunder).

 

Notwithstanding anything contained herein to the contrary, Operating
Costs shall exclude: (a) the Base Management Fee and the Incentive Management
Fee; (b) items expressly excluded from Operating Costs pursuant to the terms
hereof; (c) items for which Manager or its Affiliates are to indemnify
Purchaser or Owner; (d) items for which Owner or its Affiliates are to
indemnify Manager; (e) items for which Manager or its Affiliates has agreed
under the Transaction Documents to be liable at its own cost and expense; (f)
amounts payable to Owner or its Affiliates under the Purchase Agreement or the
Transaction Documents or for periods not included in the Term; (g) any
reimbursement of advances made by Manager or Owner; (h) the cost of Capital
Replacements; (i) the Minimum Rent and the Additional Rent under the Lease; (j)
debt service on any loan or other debt secured by an Authorized Mortgage or
other financing obtained by Purchaser, Owner or Manager other than equipment
financing permitted hereunder; (k) except as provided in SECTIONS 2.2, 6.1 or
11.1, the cost of providing any services by the Manager or its Affiliates using
their own personnel to the Hotels which are not performed at the Hotels; (l)
any cost incurred in connection with the sale of the Hotels from Manager or its
Affiliates to Owner or its Affiliates including, without limitation, any
expense incurred in connection with performing obligations under the Purchase
Agreement or any agreement, instrument, indemnity or undertaking executed and
delivered by IHG or any of its Affiliates in connection with the Closing; (m)
gratuities or service charges in the nature of a gratuity added to a customer’s
bill, Sales Tax or any other taxes collected directly from patrons or guests or
included as part of the sales price of any goods or services sold to patrons or
guests, provided Manager shall apply any amounts collected on account of such
excluded items to the obligations to which they pertain; (n) costs and expenses
relating to transfers of any Hotel by Purchaser pursuant to SECTIONS 4.4 or
4.5; (o) costs and expenses incurred by Owner in connection with providing
asset management services and related undertakings pursuant to SECTION 2.8(b);
and (p) GST payable on or in respect of Operating Costs (including those
Operating Costs which are reimbursed hereunder) and/or on or in respect of any
amounts payable to Manager or the

 

14

 

Canadian Manager hereunder, including but not limited to, the Base
Management Fee and the Incentive Management Fee.

 

1.70                           “OPERATING
EQUIPMENT” shall have the meaning given to the term “Property and Equipment”
under the Uniform System of Accounts.

 

1.71                           “OPERATING
PROFIT” shall mean: with respect to any Hotel, for any period, the excess, if
any, of Gross Revenues for such Hotel for such period over Operating Costs for
such Hotel for such period; and with respect to all of the Hotels (or a group
of Hotels), for any period, the excess, if any, of Gross Revenues for all of
the Hotels (or such group of Hotels) for such period over Operating Costs for
all of the Hotels (or such group of Hotels) for such period.

 

1.72                           “OPERATING
STANDARDS” shall have the meaning given such term in SECTION 2.1.

 

1.73                           “OPERATING
SUPPLIES” shall have the meaning given to the term “Inventories” under the
Uniform System of Accounts.

 

1.74                           “OTHER
DOCUMENTS” shall mean, collectively, the Purchase Agreement, the PR Stock
Agreement and any other agreement, instrument, indemnity or undertaking
executed and delivered by IHG or any of its Affiliates in connection with the
Closing or the closing under the PR Stock Agreement or any other Transaction
Document.

 

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

 

1.76                           “OWNER’S
FIRST PRIORITY” shall mean an annual amount equal to the sum of (a) the Base
Priority Amount plus, (b) effective on the date of each disbursement by
Purchaser or Owner pursuant to SECTIONS 5.2(c)(iv) or 15.2 (in excess of net
insurance proceeds or the Award), an amount equal to the amount so disbursed
multiplied by the Owner’s First Priority Adjustment Rate (determined as of the
dates on which such sums are advanced). Owner’s First Priority shall be subject
to further adjustment as provided in SECTIONS 2.7, 15.1(c) and 24.17(b).

 

1.77         “OWNER’S FIRST PRIORITY ADJUSTMENT RATE”
shall mean a per annum rate equal to the greater of (x) eight and five-tenths
(8.5%) percent and (y) the sum of the rate for fifteen (15) year U.S. Treasury
Obligations, as published in the WALL STREET JOURNAL, plus three hundred thirty
(330) basis points.

 

15

 

1.78         “OWNER’S FIXED PRIORITY” shall mean
Owner’s First Priority and Owner’s Second Priority, collectively.

 

1.79         “OWNER’S
PERCENTAGE PRIORITY” shall mean, for each Fiscal Year after the 2006 Fiscal
Year for each Hotel, an amount equal to seven and one-half percent (7.5%) of
the excess, if any, of Gross Revenues of such Hotel for such Fiscal Year over
the Gross Revenues for such Hotel for its Base Year.

 

1.80         “OWNER’S SECOND PRIORITY” shall mean an
annual amount equal to the sum of (a) Three Million Thirty Seven Thousand Five
Hundred Dollars ($3,037,500), plus (b) effective on the date of each
disbursement by Purchaser or Owner pursuant to SECTIONS 5.2(c)(ii) hereof, an
amount equal to the amount so disbursed multiplied by the applicable
Disbursement Rate (determined as of the dates on which such sums are advanced).
Owner’s Second Priority shall be subject to further adjustment as provided in
SECTIONS 2.7, 15.1(c) and 24.17(b).

 

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

 

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

 

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

 

1.84                           “POOLED
FF&E HOTELS” shall mean the Hotels and, after the closing under the PR
Stock Agreement and subject to the limitations on transfer set forth in the PR
Lease, so long as the PR Property is owned by an Affiliate of Purchaser, the PR
Property.

 

1.85                           “PR
GUARANTY” shall have the meaning given to such term in the Guaranty.

 

16

 

1.86                           “PR
INDEMNITY” shall mean that certain Indemnity Agreement to be executed and
delivered by the Guarantor pursuant to the PR Stock Agreement at the closing
thereunder.

 

1.87                           “PR
LEASE” shall mean that certain lease to be entered into pursuant to the PR
Stock Agreement between the owner of the PR Property, on the one hand, and
Manager’s Affiliate, on the other hand, with respect to the InterContinental Hotel
in San Juan, Puerto Rico, as the same may be amended from time to time.

 

1.88                           “PR
PROPERTY” shall have the meaning ascribed to the term “Property” in the PR
Lease.

 

1.89                           “PR
STOCK AGREEMENT” shall mean that certain Amended and Restated Stock Purchase
Agreement pursuant to which an Affiliate of Manager sold or will sell the stock
of the owner of the PR Property to an Affiliate of Owner, as the same may be
amended from time to time.

 

1.90                           “PR
TENANT” shall mean the tenant under the PR Lease.

 

1.91                           “PRINCIPAL
DOCUMENTS” shall mean, collectively, this Agreement, the PR Lease, the
Guaranty, the PR Guaranty, the PR Indemnity and the Collateral Agency
Agreement.

 

1.92                           “PRIORITY
COVERAGE RATIO” shall mean for any period, for any Hotel or group of Hotels,
the quotient of (a) the excess of Operating Profit for such Hotel or group of
Hotels over an implied reserve for capital replacements equal to five percent
(5%) of Gross Revenues for such Hotel or group of Hotels (as applicable)
divided by (b) the sum of the Owner’s First Priority allocated pursuant to SECTION 10.9
to such Hotel or group of Hotels (as applicable) for such period. To the extent
that any amount (or portion thereof) used to calculate the Priority Coverage
Ratio is denominated in any currency other than United States Dollars, the same
shall be converted to United States Dollars using a reasonable method
consistent with the Accounting Principles used by Manager and its Affiliates to
account for foreign currencies.

 

1.93                           “PURCHASE
AGREEMENT” shall mean, collectively, one or more purchase agreements between
Owner or its Affiliate(s) and Manager or its Affiliate(s) pursuant to which
Purchaser has on the Effective Date acquired the Hotels from Manager or its
Affiliate(s), as the same may be amended from time to time.

 

17

 

1.94                           “PURCHASER”
shall mean, collectively, the landlords under the Lease.

 

1.95                           “RENEWAL
TERMS” shall mean any extension of the Term of this Agreement, commencing upon
the expiration of the Initial Term or any extensions thereto, as provided in ARTICLE 3.

 

1.96                           “REPAIRS”
shall have the meaning given such term in SECTION 7.6.

 

1.97                           “REPLACEMENT
PROPERTY” shall mean a hotel mutually acceptable to the parties acquired by
Purchaser in substitution for a Hotel with respect to which this Agreement was
terminated pursuant to SECTION 16.1.

 

1.98                           “RESERVATION
SYSTEM” shall mean a computerized network of high speed terrestrial and
satellite-linked hardware and data lines connecting hotels, central reservation
centers, data processing centers and travel agencies which provides reservation
services to the Staybridge Suites, InterContinental, Crowne Plaza or Holiday
Inn, as applicable, hotels in North America.

 

1.99                           “RESERVE
ACCOUNT” shall mean an interest-bearing United States dollar account
established for funds to be held in reserve for Capital Replacements in
Purchaser’s name at a bank selected by Purchaser.

 

1.100                     “RESERVE
PERCENTAGE” shall mean the following percentages for the corresponding periods:

 

	
  Year

  	
   

  	
  Rate

  	
   

  
	
  2005

  	
   

  	
  0

  	
  %

  
	
  2006

  	
   

  	
  0

  	
  %

  
	
  2007

  	
   

  	
  3.0

  	
  %

  
	
  2008

  	
   

  	
  3.5

  	
  %

  
	
  2009

  	
   

  	
  4.0

  	
  %

  
	
  2010

  	
   

  	
  4.5

  	
  %

  
	
  Thereafter

  	
   

  	
  5.0

  	
  %

  

 

1.101                     “RESIDUAL
DISTRIBUTION” shall mean amounts to be distributed to Owner pursuant to SECTION 10.2.

 

1.102                     “RESTRICTED
AREA” shall mean, for any Hotel, the area around such Hotel depicted on EXHIBIT
D.

 

18

 

1.103                     “RESTRICTED
PERIOD” shall mean: for each Staybridge Hotel and Holiday Inn Hotel, the period
ending on the third (3rd) anniversary of the Effective Date; and for each
InterContinental Hotel and Crowne Plaza Hotel, the period ending on the fifth
(5th) anniversary of the Effective Date.

 

1.104                     “ROOMS
REVENUE” shall mean all revenue derived from the rental of guest rooms in a
Hotel in whatever currency collected determined in accordance with the
Accounting Principles.

 

1.105                     “RST”
shall mean retail sales taxes imposed pursuant to the RETAIL SALES TAX ACT
(Ontario).

 

1.106                     “SALES
TAX” shall mean all federal (U.S. and Canada), state, provincial, municipal or
local sales, use, excise, GST, value added, retail sales, gross receipts and
occupancy taxes, duties, levies, charges or similar governmental charges,
whether imposed now or in the future.

 

1.107                     “SEVERANCE
DATE” shall have the meaning given to such term in the Guaranty.

 

1.108                     “SITES”
shall mean the parcels of real estate more particularly described on EXHIBIT A.

 

1.109                     “SPECIALLY
DESIGNATED OR BLOCKED PERSON” shall mean (i) a Person designated by the U.S.
Department of Treasury’s Office of Foreign Assets Control from time to time as
a “specially designated national or blocked person” or similar status, (ii) a
Person described in Section 1 of the U.S. Executive Order 13224, issued September 23,
2001, or (iii) a person or entity otherwise identified by Government Agencies
as a person or entity with which either Party is prohibited from transacting
business. As of the Effective Date, a list of such designations and the text of
the Executive Order are published at: www.ustreas.gov/offices/enforcement/ofac.

 

1.110                     “STAYBRIDGE
HOTELS” shall mean the Hotels that are operated as of the date hereof as
Staybridge Suites hotels.

 

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

 

19

 

1.112                     “SUBSTITUTE
TENANT” shall have the meaning given the term in SECTION 4.2.

 

1.113                     “SUCCESSOR
PURCHASER” shall have the meaning given to such term in SECTION 4.3(a)(iv).

 

1.114                     “SYSTEM
FEES” shall mean the fees specified in SECTION 9.2, excluding the e-mail
service fee and the accounting fee described therein. 

 

1.115                     “SYSTEM
MARKS” shall mean all service marks, trademarks, copyrights, trade names, logo
types, commercial symbols, patents or other similar rights or registrations now
or hereafter held, applied for or licensed by Manager or any Affiliate of
Manager in connection with the Staybridge Suites, InterContinental, Crowne
Plaza or Holiday Inn, as applicable, brand of hotels.

 

1.116                     “TERM”
shall mean the term of this Agreement as it may be extended or terminated
pursuant to the terms of this Agreement.

 

1.117                     “TRANSACTION
DOCUMENTS” shall mean, collectively, the Principal Documents and the Other
Documents.

 

1.118                     “TRANSFERRED
HOTEL” shall mean a Canadian Hotel which is sold or otherwise transferred by
Purchaser and Owner (other than to an Affiliate) pursuant to SECTION 24.17.

 

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

 

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

 

1.121                     “UNSUITABLE
FOR ITS PERMITTED USE” shall mean with respect to a Hotel, a state or condition
of such Hotel such that (a) following any damage or destruction involving such
Hotel, such Hotel cannot be operated in the good faith judgment of Manager or
Owner on a commercially practicable basis and it cannot reasonably be expected
to be restored to substantially the same condition as existed immediately
before such damage or destruction and otherwise as required under ARTICLE 15
hereof, using only the net proceeds of insurance obtained in connection

 

20

 

therewith and other funds that Owner or Manager elect to provide
pursuant to the terms of ARTICLE 15 hereof within twelve (12) months
following such damage or destruction or such shorter period of time as to which
business interruption insurance is available to cover amounts payable to Owner
hereunder and other costs related to the Hotel following such damage or
destruction, (b) as the result of a partial taking by Condemnation, such Hotel
cannot be operated in the good faith judgment of Owner on a commercially
practicable basis in light of then existing circumstances, or (c) as the result
of a partial taking by Condemnation (other than an Anaheim Condemnation) such
Hotel cannot be operated in the good faith judgment of Manager on a
commercially practicable basis in light of then existing circumstances.

 

1.122                     “WORKING
CAPITAL” shall mean funds, in whatever currency, that are used (or held for
use) in the day-to-day operation of the business of the Hotels, including,
without limitation, change and petty cash funds, amounts deposited in operating
bank accounts, receivables, deposits with utility providers, amounts deposited
in payroll accounts, prepaid expenses, amounts to pay GST on the Owner’s “taxable
supplies” (including, without limitation, Operating Supplies, Operating Equipment,
rent under the Lease, and Management Fees), and funds required to maintain
Operating Supplies, less accounts payable and accrued current liabilities,
exclusive of any funds in the Reserve Account.

 

1.123                     “YEARLY
BUDGET” shall mean, with respect to each Hotel, the annual operating budget of
such Hotel, covering a Fiscal Year, as prepared by Manager in accordance with
the Accounting Principles and approved by Owner. Such budget shall include an
operating budget, a business plan and a Capital Replacements Budget. Without
limiting the generality of the foregoing, the Yearly Budget shall include a
projection of the estimated financial results of the operation of each Hotel
for the Fiscal Year. Such projection shall project the estimated Gross
Revenues, departmental profits, Operating Costs and Operating Profit for the
Fiscal Year for each Hotel.

 

ARTICLE 2

 

SCOPE OF AGREEMENT

 

2.1                                 ENGAGEMENT
OF MANAGER. Subject to the terms of this Agreement, Owner hereby grants to
Manager the sole and exclusive right to supervise and direct the management and
operation of the Hotels for the Term as Owner’s agent coupled with an

 

21

 

interest. Manager hereby accepts said grant and agrees that it will
control, supervise and direct the management and operation of the Hotels, all
subject to the terms, requirements and conditions of this Agreement, with
commercially reasonable efforts in doing so, and in an efficient and economical
manner consistent with standards prevailing in well managed hotels similar to
the Hotels, including all activities in connection therewith which are
customary and usual to such an operation (the foregoing standards constituting
the “Operating Standards”). Without limiting the generality of the foregoing,
and in addition to the other functions to be performed by Manager pursuant to
this Agreement, Manager shall perform (or shall cause its Affiliates to
perform), in connection with the Hotels and in accordance with the applicable
Brand Standards, the Operating Standards and the terms of this Agreement, each
of the following functions, PROVIDED, HOWEVER, except as otherwise set forth in
this Agreement, the costs and expenses of performing the following functions
shall be Operating Costs:

 

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

 

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

 

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

 

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

 

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

 

(f)                                    Reasonably
cooperate (provided that except as herein expressly provided Manager shall not
be obligated to enter into any amendments of this Agreement or, unless Owner
agrees to reimburse Manager therefor, to incur any material expense including
any internal expenses) in any attempt(s) to: (i) effectuate a sale or other
transfer of a Hotel subject to the terms of SECTIONS 4.4 and 4.5 of this
Agreement; or (ii) to obtain any Authorized Mortgage.

 

22

 

(g)                                 Negotiate,
enter into and administer service contracts and licenses for the operation of
the Hotels, including, without limitation, and to the extent appropriate,
contracts and licenses for health and safety systems maintenance, electricity,
gas, telephone, cleaning, elevator and boiler maintenance, air conditioning
maintenance, laundry and dry cleaning, master television service, use of
copyrighted materials (such as music and videos), entertainment and other
services as Manager deems advisable.

 

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

 

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

 

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

 

(k)                                  Collect
and account for and remit to Government Agencies all applicable excise, sales,
value added, occupancy and use taxes or similar governmental charges collected
by or at the Hotels directly from guests, members, other patrons, tenants,
licensees, concessionaires or other occupants, or as part of the sales price of
any goods, services, rentals or displays, such as gross receipts, admission or
similar or equivalent taxes, duties, levies or charges, and prepare, sign and
submit to the applicable Government Agencies the applicable returns and reports
therefor on behalf of Owner, in Owner’s name and using Owner’s registration.

 

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

 

(m)                               To
the extent in Manager’s control, obtain and maintain all approvals necessary to
use and operate the Hotels

 

23

 

in accordance with the applicable Brand Standards, Operating Standards
and Legal Requirements.

 

(n)                                 Use
its reasonable efforts to keep all ground, underlying and parking leases in full
force and effect and arrange appropriate substitutes for any such lease which
ceases to be or is reasonably anticipated to cease to be in full force and in
effect.

 

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

 

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

 

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

 

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

 

2.5                                 NO
RIGHT OF OFFSET. Manager shall not offset against any amounts owed to Owner;
PROVIDED, HOWEVER, Manager may offset amounts which Owner has failed to fund in
violation of SECTION 5.2(c)

 

24

 

(or, so long as PR Property is a Pooled FF&E Hotel, the landlord
under the PR Lease has failed to fund in violation of Section 5.1.3(b) of
the PR Lease) against the amounts owed to Owner hereunder provided that after
giving effect to all such offsets there shall still be paid to Owner an amount sufficient
to pay regularly scheduled payments of interest and principal under any loan or
other debt secured by an Authorized Mortgage and attributable to the Pledged
Hotels.

 

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

 

2.7                                 NON-ECONOMIC
HOTELS.

 

(a)                                  Manager
shall be entitled to designate as a Non-Economic Hotel any Hotel for which, in
each of any three (3) consecutive full Fiscal Years during the Term, the
Operating Profit is less than the sum of (i) amounts to be funded to the

 

25

 

Reserve Account pursuant to SECTION 5.2(a) on account of such
Hotel, plus (ii) Owner’s Fixed Priority attributable to such Hotel pursuant to
EXHIBIT C hereto; PROVIDED, HOWEVER, that the number of Hotels designated as
Non-Economic Hotels under this Agreement (other than those with respect to
which such designation has been withdrawn or deemed withdrawn, but including
those which have been sold pursuant to this SECTION 2.7) shall not exceed
three (3). If subsequent to a Hotel being designated as a Non-Economic Hotel
but prior to its sale pursuant to this SECTION 2.7, the Operating Profit
of such Hotel for any Fiscal Year shall exceed the sum of amounts to be funded
to the Reserve Account pursuant to SECTION 5.2(a) on account of such
Hotel, plus the portion of the Owner’s Fixed Priority for such Fiscal Year so
attributable to such Hotel, such designation shall be deemed withdrawn;
provided, however, if Manager is then negotiating a sale of such Hotel to a
third party, such designation shall not be deemed withdrawn for a period of
three (3) months.

 

(b)                                 So
long as there is no Manager Default or Manager Event of Default, Manager may
market each Hotel that is a Non-Economic Hotel for sale. In addition, if
Manager reasonably anticipates based on projections prepared in the ordinary
course that a Hotel will become a Non-Economic Hotel within the next twelve
(12) months, Manager may market such Hotel for sale; provided, however, no
Hotel shall be sold pursuant to this SECTION 2.7 other than Non-Economic Hotels.
If Manager receives an Offer, Manager shall give Owner and Purchaser notice
thereof, which notice shall include a copy of the executed Offer. In the event
that Owner and Purchaser shall fail to accept or reject such Offer within five
(5) Business Days after receipt of such notice, such Offer shall be deemed to
be rejected by them. Provided there is no Manager Default or Manager Event of Default,
if Owner and Purchaser shall either sell such Non-Economic Hotel pursuant to
such Offer or reject or be deemed to have rejected such Offer, then effective
as of the date of such sale or, if the Offer was rejected or deemed rejected,
the proposed date of sale contained in such Offer, as the case may be, the
following shall apply: (i) the Term shall terminate with respect to such Non-Economic
Hotel; (ii) no further Owner’s Percentage Priority shall accrue with respect to
such Non-Economic Hotel’s Gross Revenues which accrue after such termination;
(iii) the Owner’s First Priority shall be reduced by an amount equal to eight
percent (8%) of the net (after taking into account any costs paid by Manager)
proceeds of sale received by Owner or Purchaser (or, in the case of such a
rejection, eight percent (8%) of the projected net (after taking

 

26

 

into account any costs to be paid by Manager) proceeds of sale which
would have been received by Owner or Purchaser determined by reference to such
Offer); and (iv) the Owner’s Second Priority shall be reduced by one half of
one percent (0.5%) of such net proceeds (or, in the case of a rejection, one
half of one percent (0.5%) of such projected net proceeds).

 

2.8                                 NO
EARLY TERMINATION OF MANAGER; NATURE OF RELATIONSHIP ETC.

 

(a)                                  So
long as this Agreement is in full force and effect and Owner is not entitled
pursuant to the terms hereof to terminate this Agreement in its entirety, Owner
covenants and agrees not to hire, engage, appoint or employ any other manager
to manage any Hotel prior to the expiration or earlier termination of the Term
with respect to such Hotel. Any otherwise applicable principles of law
notwithstanding, it is Owner’s intent and agreement that Manager shall manage
each Hotel pursuant to this Agreement through the Term so long as this Agreement
is in full force and effect with respect to such Hotel.

 

(b)                                 Owner
shall provide appropriate asset management services with respect to the Hotels
at no cost or expense to Manager (and shall use reasonable efforts to cooperate
with Manager in order to keep all ground, underlying and parking leases in full
force and effect). The costs and expenses incurred by Owner in connection with
providing such asset management services shall not be Operating Costs. Owner
shall, from time to time, upon the request of Manager provide Manager with the
name, telephone number, fax number and email address of the individual
responsible for providing such asset management services. Manager will
cooperate with and assist the Owner in every reasonable and proper way to permit
Owner to carry out its duties and exercise its rights hereunder with respect to
the Hotels.

 

(c)                                  Without
limiting the scope or intent of the provisions of SECTION 19.1 of this
Agreement, each of the parties acknowledges and agrees that (i) the execution
and delivery by the other of this Agreement is substantial and essential
consideration for their respective Affiliates’ purchase and sale of the Hotels
pursuant to the Purchase Agreement, (ii) but for the execution and delivery of
this Agreement, Manager’s Affiliates would not have sold the Hotels to
Purchaser, (iii) but for the execution and delivery of this Agreement, Owner’s
Affiliates would not have purchased the Hotels from Manager’s Affiliates, (iv)
the terms and provisions of the Purchase Agreement, including the purchase
price set forth therein, the PR Stock Agreement and the PR Lease were

 

27

 

negotiated and agreed upon on the basis and upon the condition that
this Agreement be executed and delivered at the time of the closing of the sale
of the Hotels to Purchaser, (v) this Agreement fairly, accurately and fully
sets forth the agreement between Owner and Manager regarding Manager’s
management of the Hotels through the Term, (vi) there are no duties or
obligations between the parties not expressly set forth herein and (vii) each
of the parties hereto has a duty of commercial good faith and fair dealing.

 

(d)                                 Any
common law or other rule or restriction that would otherwise apply
notwithstanding, but subject to the terms of SECTION 24.1, Manager, Owner and
their respective Affiliates are free to manage, engage in or license other business
activities, including activities involving transient lodging and related
activities. Except as provided in SECTION 24.1, nothing herein or otherwise
shall prevent Manager, Owner or their respective Affiliates from owning,
managing or licensing other facilities, and Manager, Owner and their respective
Affiliates may manage, engage in or license any business activity at any other
location whether or not competing with the Hotels, without the consent or
approval of, or liability to, the other and without offering the other any opportunity
to participate therein. Subject to the terms of SECTION 24.1, each party
hereby waives any claim or cause of action, of whatever nature and however derived,
relating to or arising in any way out of the other’s ownership, licensing or
management of any other hotel or commercial property wherever located.

 

ARTICLE 3

 

TERM AND RENEWALS

 

3.1                                 TERM.
The term of this Agreement shall be for a period beginning on the Effective
Date and continuing for the Initial Term and any extension of the term hereof
in accordance with the provisions of this Agreement, unless sooner terminated
as herein provided. Manager acknowledges that if the ground lease for the
InterContinental Hotel in Toronto, Ontario is terminated, the lessor thereunder
may terminate this Agreement upon giving not less than 180 days’ notice, which
notice shall be given within ninety (90) days after such ground lease is
terminated.

 

3.2                                 RENEWAL
TERM. Provided the term of the PR Lease is simultaneously extended in
accordance with the terms of the PR Lease, the Term may be extended, at Manager’s
option, for up to two (2) consecutive periods (each, a “RENEWAL TERM”) of
fifteen

 

28

 

(15) years each on not less than two (2) years’ prior notice to Owner.
If Manager fails to give notice of its election not to exercise either of its options
to extend the Term on or before the date which is the day prior to the date
that is two (2) years prior to the then Expiration Date or if PR Tenant fails
to give notice of its election not to exercise either of its options to extend
the term of the PR Lease on or before the date which is the day prior to the
date that is two (2) years prior to the then expiration date of the PR Lease,
Manager shall be deemed to have exercised the applicable extension option. The
terms and provisions of this Agreement will remain in effect as stated herein
during any Renewal Term except that Manager shall have no right to extend the
Term beyond the Renewal Terms herein provided.

 

3.3                                 OWNER’S
TERMINATION RIGHT AT END OF TERM. If Manager gives notice of its election not
to extend the Term, or the PR Tenant gives notice of its election not to extend
the term of the PR Lease, or Manager shall have no further right to extend the
Term, then at any time during the last two years of the Term, Owner may
terminate this Agreement on not less than thirty (30) days’ prior written
notice.

 

ARTICLE 4

 

TITLE TO HOTEL

 

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

 

29

 

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

 

4.3                                 FINANCING.

 

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

 

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

 

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

 

30

 

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

 

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

 

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

 

(B)                                so
long as this Agreement is in full force and effect and there exists no Manager
Default which has not been cured within any applicable notice or grace period,
Manager’s rights under this Agreement shall not be disturbed by reason of such
subordination or by reason of foreclosure of such Authorized Mortgage or
receipt of deed in lieu of foreclosure;

 

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

 

(D)                               in
the event of such attornment, the terms of this Agreement binding on Purchaser
and Manager shall continue in full force and effect as a direct agreement
between such Successor Purchaser and Manager, upon all the terms, conditions
and covenants set forth herein, except that the Successor Purchaser shall not
be (1) bound by any payment of Owner’s Fixed Priority, Owner’s Percentage
Priority or the Residual Distribution in advance of when due; (2) bound by any
amendment or modification of this Agreement made after the date that Manager
first had written notice of such Authorized Mortgage without the consent of the
holder thereof; (3)

 

31

 

liable in any way to Manager for any act or
omission, neglect or default on the part of Purchaser or Owner under this Agreement;
(4) obligated to perform any work or improvements to be done by Purchaser or
Owner or to make any advances except for those advances to be made pursuant to SECTION 5.2(c)
from and after the date on which such Successor Purchaser acquired the
Hotel(s); or (5) subject to any counterclaim or setoff which theretofore
accrued to Manager against Purchaser or Owner;

 

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

 

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

 

(b)                                 In
the event less than all of the Hotels are to secure the loan or other debt
secured by an Authorized Mortgage, Owner shall have the right to cause the
Pledged Hotels to be managed pursuant to a separate management agreement which
agreement shall be for a term equal to the unexpired portion of the Term and
otherwise on substantially the same terms of this Agreement except as otherwise
provided herein, provided that the Pledged Hotels in the aggregate and the
remaining Hotels in the aggregate shall have Priority Coverage Ratios for the
12-month period ending on the last day of the month next prior to the date on
which such Authorized Mortgage is granted equal to each other or equal to, or
greater than, 1.3. In connection with entering into such separate management
agreement, the parties shall make appropriate allocations of Owner’s Fixed
Priority, amounts in the Reserve Account, the Working Capital, and any outstanding
advances made by Owner, Manager or their respective Affiliates so that the
obligations allocable to the Hotels subject to such Authorized Mortgage shall
not be due from the other Hotels and VICE VERSA. The allocation of Owner’s Fixed
Priority for each Hotel shall be proportional to the NOI of such Hotel for the
then most recently ended twelve (12) months relative to the NOI of all the other
Hotels for such period. Without the consent of Manager, the holder of any Authorized
Mortgage shall have the right to elect to be subject and subordinate to this
Agreement, such subordination to be

 

32

 

effective upon such terms and conditions as such holder may direct
which are not inconsistent with the provisions hereof.

 

(c)                                  Manager
shall be entitled to pay any overdue regularly scheduled payments of interest
and principal on any Authorized Mortgage from the Operating Profits of all of
the Hotels subject to such Authorized Mortgage and to credit any such payments
against disbursement obligations for Owner’s Fixed Priority.

 

4.4                                 SALE
OF A HOTEL TO AN AFFILIATE. In the event of a sale or transfer of Purchaser’s
interest in any Hotel to an Affiliate of the Purchaser with such Affiliate
assuming Purchaser’s obligations under the Lease, this Agreement shall remain
in full force and effect without regard to such sale or transfer.

 

4.5                                 SALE
OF ALL THE HOTELS. If Purchaser sells or otherwise transfers all of the Hotels
to a single transferee in a single transaction, (a) the transferee shall assume
Purchaser’s obligations hereunder and (b) Purchaser shall be released and
relieved from any and all obligation hereunder. In connection with such
transfer, Owner may assign this Agreement to the transferee or its Affiliate,
and provided the assignee assumes all of Owner’s obligations hereunder
thereafter accruing, Owner shall be released and relieved from all such
obligations. Except as provided in SECTIONS 2.7 or 24.17 or in connection with
the foreclosure of an Authorized Mortgage or deed-in-lieu of such foreclosure,
Purchaser and its Affiliates and their successors and assigns shall not sell
less than all the Pooled FF&E Hotels to any Person except to an Affiliate
as provided in SECTION 4.4 or in Section 15.6 of the PR Lease.

 

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

 

4.7                                 RESTRICTED
SALE. Except as provided in SECTION 2.7 or in connection with a
foreclosure of an Authorized Mortgage, neither Purchaser nor Owner shall transfer
its interest in any Hotel, directly or indirectly, (a) to any Person which: (i)
is in control of or controlled by Persons who have been convicted of felonies;
(ii) is a Competitor or an Affiliate of a Competitor; (iii) lacks the financial
capabilities to perform Owner’s obligations hereunder; or (iv) is a Specially
Designated or Blocked Person or (b) if such transfer would materially adversely
affect the ability of Manager or its Affiliates to

 

33

 

obtain or retain any license or permit for the Hotels or comply with
any applicable ground or parking leases for the Hotels.

 

ARTICLE 5

 

REQUIRED FUNDS

 

5.1                                 WORKING
CAPITAL. Manager shall contribute to the Working Capital for the Hotels an
amount (the “INITIAL WORKING CAPITAL”) reasonably sufficient to pay Operating
Costs for the Hotels and GST required to be paid by Owner (including, without
limitation, any GST on or in respect of Operating Supplies, Operating Equipment
and any other items acquired by Owner in connection with the closing under the
Purchase Agreement) for the first thirty (30) days of operating the Hotels
following the Effective Date after taking into account Gross Revenues and GST
collected from patrons, guests and others of, or at, the Hotels. Promptly after
the month in which the Effective Date occurs, the parties shall agree on the
amount of the Initial Working Capital which Manager so contributed. After the
first thirty (30) days of operating the Hotels, upon written notice from
Manager, Owner may, but shall not be obligated to, advance any additional
funds, over and above the Initial Working Capital, necessary to pay Operating
Costs and/or GST required to be paid by Owner (but not Owner’s First Priority
or Owner’s Second Priority) as they come due. Any such request by Manager shall
be accompanied by a reasonably detailed explanation of the reasons for the
request. All funds so advanced for Working Capital shall be utilized by Manager
to pay Operating Costs and/or such GST as they come due. If Owner does not
advance such additional Working Capital within two (2) Business Days after notice,
Manager, as its exclusive remedy, shall have the right either to (i) advance
such additional Working Capital or (ii) terminate this Agreement on ten (10)
days’ advance written notice to Owner; PROVIDED, HOWEVER, such notice of termination
shall be void AB INITIO if Owner advances the requested funds necessary to pay
Operating Costs and such GST prior to the end of the tenth (10th) day after the
receipt of such termination notice. If Manager fails to either make such
advance or give notice of termination within ten (10) days, then after the expiration
of such two (2) Business Days, Owner may elect by written notice to Manager to
terminate this Agreement, which termination shall be effective ten (10) days
after the date such notice is given. Upon the expiration or earlier termination
of the Term, the Working Capital of the Hotels shall be applied to pay all
Operating Costs, such GST and all amounts owed to Owner to the extent Gross
Revenues are insufficient. Thereafter, Manager shall be

 

34

 

entitled to retain the Initial Working Capital, and the balance of the
Working Capital shall belong to Owner. All refunds and (the cash equivalents
of) any input credits in respect to GST paid from Working Capital shall remain
part of the Working Capital.

 

5.2                                 RESERVE
ACCOUNT.

 

(a)                                  Manager
shall transfer from the Bank Accounts to the Reserve Account in cash on or
before the 25th day of each Fiscal Month, beginning on February 25, 2007
and continuing for each and every month during the Term, an aggregate amount equal
to the Reserve Percentage applicable to the calendar year in which the prior
Fiscal Month occurred times the Gross Revenues at each Hotel for the prior
Fiscal Month. The amount to be contributed to the Reserve Account on account of
the Gross Revenues of the Canadian Hotels shall be calculated using Canadian
dollars but shall be contributed to the Reserve Account in United States
dollars in accordance with SECTION 24.24. Subject to the terms of SECTION 5.2(g),
amounts in the Reserve Account are to pay for Capital Replacements undertaken
after the Effective Date required to maintain any and all of the Hotels in
accordance with the Operating Standards and the Brand Standards; PROVIDED,
HOWEVER, notwithstanding anything in this Agreement to the contrary, no
additional cost or expense shall be incurred or paid in connection with any Capital
Replacements made during the last two (2) years of the Term to the extent
attributable solely to complying with the Brand Standards. The amounts so paid
into the Reserve Account shall be recorded on the Hotels’ books of account as “Reserve
for FF&E Replacements.” Except as expressly provided herein, any expenditures
for Capital Replacements during any Fiscal Year which have been approved in the
yearly Capital Replacements Budget may be made without Owner’s further approval
and, to the extent available, may be made by Manager from the Reserve Account.
Any amounts remaining in the Reserve Account at the close of each Fiscal Year
will be carried forward and retained in the Reserve Account. Any and all
portions of the Hotels which are scrapped or removed in connection with the
making of any major or non-major repairs, renovations, additions, alterations,
improvements, removals or replacements at the Hotels shall be disposed of by
Manager and any net proceeds thereof shall be deposited in the Reserve Account
and not included in Gross Revenues. In addition, any proceeds from the sale of
FF&E no longer necessary to the operation of the Hotels and any refunds or
(the cash equivalents of) input credits attributable to GST paid with funds
from the Reserve Account shall be added to the Reserve Account. Manager shall
be

 

35

 

entitled to use funds in the Reserve Account to make Capital Replacements
at any and all of the Hotels regardless of the Hotel from which such funds
originate. To the extent that the cost of any such Capital Replacements are to
be paid for in a currency other than United States dollars, Manager shall
exchange an appropriate portion of the funds in the Reserve Account into such
other currency at the best rates and terms commercially available to Manager at
the time of such exchange for such purpose on or about the date such funds are
withdrawn from the Reserve Account and applied to pay such costs in accordance
with Manager’s general practice for Capital Replacements. All costs of such
exchange shall be Operating Costs.

 

(b)                                 Subject
to the terms of SECTION 5.6, Manager shall be the only party entitled to
withdraw funds from the Reserve Account until a Manager Default shall occur.

 

(c)                                  Subject
to the terms of SECTIONS 5.2(f) and 5.2(g), additional amounts shall be funded
into the Reserve Account to pay for Capital Replacements as follows:

 

(i)                                     Either
Owner or Manager may propose that additional funds be funded into the Reserve
Account.

 

(ii)                                  If
both parties give their approval to a proposed funding within twenty (20)
Business Days after a request for such approval is given from one party to the
other, Owner shall (or shall cause Purchaser to) fund the approved amount into
the Reserve Account within twenty (20) Business Days after both parties approve
in writing of such funding provided that there is then no uncured Manager
Default. Neither party shall unreasonably withhold its approval of such a
proposed funding; PROVIDED, HOWEVER, no purchaser at foreclosure of an
Authorized Mortgage or grantee of a deed in lieu of such foreclosure nor any
Person claiming by, through or under such purchaser or grantee shall have an
obligation to so not withhold its consent; PROVIDED FURTHER, HOWEVER, Owner
will consider the likelihood of its receiving the increase in Owner’s Second
Priority which would result from its making such advance as well as the effect
on the value of the Hotels resulting from the delay or failure in making the
proposed Capital Replacements. Upon such funding, Owner’s Second Priority will
be adjusted as provided in the definition of such term.

 

36

 

(iii)                               If
Owner proposes in writing such funding for the purpose of making particular
Capital Replacements but Manager does not approve of the same in writing within
twenty (20) Business Days after Owner gives such proposal to Manager, Owner
shall have the right, but not the obligation, to make such funding, and Manager
shall cause such Capital Replacements to be made with the amounts so funded
unless such Capital Replacements conflict with the applicable Brand Standards.

 

(iv)                              If
Manager proposes in writing such funding for the purpose of one or more
particular Capital Replacements and Owner does not approve of the same in
writing within twenty (20) Business Days after such proposal is given to Owner,
Manager shall have the right, but not the obligation, to either provide the
proposed funding itself or, if such Capital Replacements are set forth in the
Capital Replacements Budget or are required to comply with the Operating
Standards, applicable Brand Standards, Insurance Requirements or Legal
Requirements and at the time of the giving of such proposal to Owner, the funds
in the Reserve Account shall be insufficient for such Capital Replacements,
require Owner to provide (or cause Purchaser to provide) the proposed funding.
If Owner or Purchaser provides such funding, the Owner’s First Priority will be
adjusted as provided in the definition of that term.

 

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

 

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

 

(f)                                    Unless
and until the Affiliates of the Manager which sold the Hotels to Purchaser and
the stock of the owner of the PR Property to an Affiliate of Owner have
expended $25,000,000 (net of any applicable GST that is refundable) of their
own funds to make Capital Replacements at the Pooled FF&E Hotels,

 

37

 

Owner shall have no obligation to make or to cause Purchaser to make
any advances to the Reserve Account.

 

(g)                                 Notwithstanding
anything contained herein to the contrary, if Owner advises Manager that in
Owner’s opinion, the fair market value of all personal property of Purchaser
at, about or which forms a part of a Hotel is equal to or exceeds thirteen and
one half percent (13.5%) of the fair market value of all property of Purchaser
pertaining to such Hotel (including all such personal property, the Building
and the underlying land or ground lease), Manager and its Affiliates shall not
use funds from the Reserve Accounts or which are required to be expended
pursuant to the Purchase Agreement to purchase additional personal property for
use at, about or as part of such Hotel without Owner’s prior written consent, which
consent may be granted or withheld in Owner’s sole and absolute judgment.

 

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

 

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

 

5.5                                 NO
ADDITIONAL CONTRIBUTIONS. Except as otherwise expressly provided in this
Agreement, neither Owner nor Purchaser shall, under any circumstances, be
required to, or provide funds to, build or rebuild any improvement at the Hotel,
or make any repairs, replacements, alterations, restorations or renewals of any
nature or description to the Hotel, whether ordinary or extraordinary, structural
or nonstructural, foreseen or unforeseen.

 

5.6                                 POOLED
RESERVES. It is understood and agreed that so long as the PR Property is a
Pooled FF&E Hotel, funds deposited in the Reserve Account pursuant to this
Agreement and the FF&E Reserve under PR Lease shall be maintained and used
on a consolidated basis such that all amounts to be deposited in the Reserve
Account and the FF&E Reserve shall be deposited in a single account and Manager
and PR Tenant may apply any funds therein to any of the Pooled FF&E Hotels
in accordance with the terms of this Agreement and PR Lease.

 

38

 

ARTICLE 6

 

BRAND STANDARDS AND MANAGER’S
CONTROL

 

6.1                                 BRAND
STANDARDS. Manager shall operate each Hotel as a Staybridge Suites,
InterContinental, Crowne Plaza or Holiday Inn, as applicable, hotel in accordance
with the terms of this Agreement, the applicable Brand Standards and the
Operating Standards. Manager and its Affiliates which own the applicable System
Marks and Brand Standards reserve the right to revise and amend such System
Marks or Brand Standards from time to time on a non-discriminatory basis. Owner
also agrees that the Hotels will be required to participate in applicable Brand-wide
or area programs that are implemented after the date hereof from time to time
by Manager or its Affiliates with respect to the applicable Brand. The allocable
cost of participation in such programs (to the extent not duplicative of the
services for which the Management Fee is being paid) shall be Operating Costs
of the Hotel to the extent the same are consistent in all material respects
with the amounts for the same included in the applicable Yearly Budget.

 

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

 

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

 

39

 

ARTICLE 7

 

OPERATION OF THE HOTEL

 

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

 

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

 

7.3                                 PERSONNEL.

 

(a)                                  All
personnel employed at the Hotels will be employees of Manager or its
Affiliates. Manager will hire, supervise, direct, discharge and determine the
compensation, other benefits and terms of employment of all personnel working
in the Hotels; PROVIDED, HOWEVER, Manager shall make no final decision with
respect to hiring the general manager for any Hotel without first consulting
with Owner. Subject to the foregoing proviso, Manager, in the exercise of
reasonable discretion and business judgment, will be the sole judge of the
fitness and qualifications of such personnel and is vested with absolute discretion
in the hiring, supervising, directing, discharging and determining the
compensation, other benefits and terms of employment of such personnel. In such
discretion, Manager may elect to staff certain functions at offsite or regional
locations, or to provide employee benefits on an applicable Brand-wide or other
multi-location basis and shall equitably allocate the employee costs among the
hotels participating in such staffing or benefits. Subject to Manager’s rights
to apply Gross Revenues to Operating Costs, the Manager shall be

 

40

 

responsible for (i) the payment of all compensation owing to its
employees, (ii) the provision of any benefits, statutory or otherwise, earned,
incurred or accrued by any of its employees, and (iii) the payment or the
deduction from the compensation and/or benefits of its employees, as the case
may be, and the remittance to the appropriate Government Agencies of such sums
as may be required to be paid by an employer or withheld from the employees’
compensation and/or benefits under the provision of any Legal Requirements.
Owner shall not interfere with the performance of employment duties of, or give
orders or instructions to, any personnel employed at the Hotel. Except as
otherwise provided herein, Operating Costs will include all expenses, costs or
charges which are allocable to the Term and are related to or incidental to any
on-site personnel employed in the operation of the Hotels (including, without limitation,
salaries, wages, other compensation, benefit contributions and premiums, net of
amounts paid by Hotel employees; stop-loss insurance premiums; group health
plan benefit payments in excess of contribution and premium amounts paid by
Hotel employees; pay for vacation, holidays, sick leave and other leaves of
absence; workers’ compensation premiums; workers compensation benefit payments
paid by Manager; reasonable and customary administrative fees and taxes; and
severance benefits applicable under Manager’s then current human resources
policies).

 

(b)                                 Manager
shall comply with all Legal Requirements pertaining to labor relations, the
personnel employed by it pursuant to this Agreement and their employment.
Manager shall not enter into any written employment agreements with any person
which purport to bind the Owner without obtaining Owner’s consent, which
consent may be withheld in Owner’s sole and absolute discretion. If either Manager
or Owner shall be required, pursuant to any such Legal Requirement, to recognize
a labor union or to enter into collective bargaining with a labor union, the
party so required shall promptly notify the other. The terms of this SECTION 7.3(b)
shall survive the expiration or earlier termination of this Agreement. Manager
shall be the “successor employer” under any collective bargaining agreements
applicable to the Hotels as of the Closing and under applicable Legal
Requirements.

 

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

 

41

 

(d)                                 To
the extent consistent with the applicable Yearly Budget, Operating Costs may include
up to the following amounts per Fiscal Year, for travel related expenses of
Manager’s senior operational personnel in connection with their visits to such
Hotel:

 

	
  Hotel Type

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Staybridge
  Hotels

  	
   

  	
  $

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Intercontinental
  Hotels

  	
   

  	
  $

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Crowne Plaza

  	
   

  	
  $

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Holiday Inn
  Hotels

  	
   

  	
  $

  	
  5,000

  	
   

  
							

 

Said amounts shall be adjusted every January 1
starting in 2006 to reflect the percentage change in the Consumer Price Index
since the prior January 1. Any amounts in excess of the foregoing shall be
Manager’s sole responsibility and shall not be an Operating Cost.

 

(e)                                  With
respect to Hotels located in Ontario, Canada, the Manager shall register, if
not already registered, with the Workplace Safety and Insurance Board (“WSIB”).
Immediately prior to the commencement of the Term and at 60-day intervals
thereafter, Manager shall request, in writing, to the WSIB the necessary
specific clearance certificate to be issued by the WSIB to Manager and Owner
confirming that Manager’s WSIB account is in good standing. Manager shall, at
all times, accurately disclose all information required by the WSIB and shall pay
all amounts owing with respect to Workplace Safety and Insurance coverage for
its employees within the time period specified by the WSIB.

 

7.4                                 SALES,
MARKETING AND ADVERTISING. Manager shall and/or shall cause one or more of its
Affiliates to:

 

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

 

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

 

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

 

42

 

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

 

(e)                                  include the Hotels in
the applicable loyalty programs, including, without limitation, inclusion of
the Hotels in promotional materials distributed to participants of such
program;

 

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

 

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

 

7.5                                 RESERVATION AND
COMMUNICATION SERVICES. The Hotels shall be included as participating
hotels on the Reservation System operated by Manager, its Affiliates or agent(s)
for the benefit of Staybridge Suites, InterContinental, Crowne Plaza or Holiday
Inn, as applicable, hotels from and after the Effective Date. Manager will
provide (or will cause its Affiliates to provide) the following services to the
Hotels through the Reservation System:

 

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

 

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

 

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

 

43

 

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

 

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

 

7.6                                 MAINTENANCE
AND REPAIRS. Subject to the terms hereof, Manager shall promptly make or
cause to be made all repairs, replacements, corrections, maintenance,
alterations, improvements, renovations, installations, renewals and additions
(collectively, “REPAIRS”) of every kind and nature, whether interior or
exterior, structural or nonstructural, ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
commencement of the Term (concealed or otherwise) necessary or appropriate to
maintain the Hotels (including all private roadways, sidewalks and curbs
located thereon) for which Owner, Purchaser or a Hotel has responsibility in
good order and repair, reasonable wear and tear excepted (whether or not the
need for such Repairs occurs as a result of Owner’s or Manager’s use, any prior
use, Insurance Requirements, the elements or the age of the Hotels, or any
portion thereof), and in conformity with Legal Requirements (including, without
limitation, retaining all construction lien holdbacks under the CONSTRUCTION
LIEN ACT (Ontario) and releasing such holdbacks only when all liens have expired
or been discharged or vacated, all notices have been withdrawn, and the time
period for filing any liens has expired), applicable Brand Standards and the
Operating Standards. All Repairs shall be made in a good, workmanlike manner,
consistent with Manager’s and industry standards for like hotels in like
locales, in accordance with all applicable Legal Requirements and Insurance
Requirements. To the extent such Repairs cannot be performed by Manager’s
on-site staff, Manager shall entitled to cause such repairs to be performed by
third parties or, subject to Owner’s prior approval, Affiliates of Manager
acting under separate technical services agreements pursuant to SECTION 11.1.

 

7.7                                 MATERIAL
REPAIRS.

 

(a)                                  Except as set forth
in SECTION 7.7(b), prior to making any Material Repair, Manager shall
submit, to Owner in writing, a proposal setting forth, in reasonable detail,
the proposed Material Repair and shall provide to Owner such plans and
specifications, and such permits, licenses, contracts and such other information
concerning the same as Owner may reasonably

 

44

 

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

 

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

 

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

 

7.8                                 LIENS;
CREDIT. Manager shall use commercially reasonable efforts to prevent any liens
from being filed against any Hotel which arise from any Repairs in or to such
Hotels. Manager shall use commercially reasonable efforts to cause the

 

45

 

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

 

7.9                                 REAL
ESTATE AND PERSONAL PROPERTY TAXES. Manager shall pay as Operating Costs
on behalf of Owner, prior to delinquency, all taxes and assessments which may
become a lien on, or are assessed against, any Hotel or any component thereof
and which may be due and payable for the Term, unless payment thereof is being
contested by Manager, as hereinafter provided, enforcement is stayed and the
amount so contested is escrowed or guaranteed in a form satisfactory to Owner.
Owner shall, promptly after receipt thereof by Owner, give Manager copies of
all notices as to all such taxes and assessments.

 

7.10                           GST AND
RST. The parties acknowledge that the Owner is the supplier of hotel
services and that the Manager acts as the Owner’s agent in making supplies to
the public of hotel services. The Owner authorizes Manager to prepare and file
GST and RST returns on behalf of the Owner, in the Owner’s name, and using the
Owner’s GST or RST registration number or vendor permit number as the case may
be. Manager shall apply Working Capital to the payment of GST payable by Owner
with respect to items which Manager pays on Owner’s behalf and shall cooperate
with Owner to make the Working Capital available to Owner to pay GST payable by
Owner with respect to items which Manager does not pay on Owner’s behalf,
including without limitation rent paid under the Lease. Owner shall provide
Manager with details of any GST or RST collected or paid by it directly which
detail is not otherwise available to Manager. Manager acknowledges that
pursuant to the Lease, all amounts in the Reserve Account and all goods or
services purchased with such funds belong to Purchaser. Accordingly, GST paid
from the funds in the Reserve Account shall not be reflected on Owner’s GST
returns.

 

7.11                           CONTEST.
Manager shall have the right in Manager’s or Owner’s name to contest or protest
any tax or assessment or proposed assessment which may become a lien on, or be
assessed

 

46

 

against, any Hotel or any component thereof due and for the Term or any
Legal Requirement payable by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) such contest shall not cause
Purchaser or Owner to be in default under any Authorized Mortgage, (b) no part
of a Hotel nor any Gross Revenues therefrom shall be in any immediate danger of
sale, forfeiture, attachment or loss, and (c) Owner and Purchaser are not
exposed to any risk for criminal or civil liability. The reasonable cost and
expenses of such contest or protest shall be Operating Costs.

 

7.12                           PRIVACY.
Manager shall conduct the business of the Hotels in compliance in all material
respects with all applicable Legal Requirements governing privacy and the
protection of personal information (including, inter alia, the personal
information of patrons and employees of the Hotels), including the Personal
Information Protection and Electronic Documents Act (Canada). The Manager shall
implement a written privacy policy which governs the collection, use and
disclosure of personal information and shall comply in all material respects
with such policy.

 

ARTICLE 8

 

FISCAL MATTERS

 

8.1                                 ACCOUNTING
MATTERS.

 

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

 

(b)                                 On or before the
twenty-fifth (25th) day after the end of each Fiscal Month, Manager shall
furnish (or shall cause its Affiliates to furnish) Owner with a detailed
operating statement setting forth the results of operations at the Hotels with
respect to such month and year-to-date showing for each Hotel and for all of
the FF&E Pooled Hotels, Gross Revenues, Rooms Revenues, revenue per
available room, occupancy percentage and

 

47

 

average daily rate, Operating Costs, Operating Profit, the applications
and distributions thereof and any Owner’s Percentage Priority together with an
Officer’s Certificate. Such statements may be provided electronically to Owner.

 

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

 

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

 

48

 

or (ii) distributions of Owner’s First Priority be subject to
adjustment.

 

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

 

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

 

(g)                                 The terms of SECTIONS
8.1(a), 8.1(d) and 8.1(f) and any provisions regarding dispute resolution set
forth in this SECTION 8.1 shall survive the expiration or earlier
termination of the Term.

 

8.2                                 YEARLY
BUDGETS.

 

(a)                                  Not less than sixty
(60) days prior to the first day of each Fiscal Year after the 2005 Fiscal
Year, Manager shall submit to Owner for Owner’s approval a proposed Yearly
Budget for each Hotel including a proposed Capital Replacements Budget for each
Hotel for the ensuing full or partial Fiscal Year, as

 

49

 

the case may be. If Owner fails to disapprove of a proposed Yearly
Budget within thirty (30) days after the submission thereof to Owner for its
approval, the same shall be deemed approved. Together with each such Capital
Replacements Budget, Manager shall provide to Owner a proposed three-year
capital forecast for such Hotel for Owner’s review and approval. Manager will,
from time to time not less often than quarterly, issue periodic forecasts of
operating performance to Owner reflecting any significant unanticipated
changes, variables or events or describing significant additional unanticipated
items of income or expense. Manager will provide Owner with the material data
and information utilized in preparing the Yearly Budgets and the Capital
Replacements Budgets or any revisions thereof. Manager will not be deemed to
have made any guaranty, warranty or representation whatsoever in connection
with the Yearly Budgets and the Capital Replacements Budgets, except that the
proposed Yearly Budgets, including the Capital Replacements Budgets, reflect
Manager’s best professional estimates of the matters they describe. Manager
shall use its reasonable efforts, subject to the Operating Standards, to
operate and manage the Hotels in accordance with their Yearly Budgets. The
Yearly Budgets for the Hotels for the 2005 Fiscal Year shall be those most
recently delivered by Manager to Owner on or before the Effective Date.

 

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

 

(c)                                  In the event Owner
and Manager are not able to resolve the disputed or objectionable matters
raised by Owner in regard to a Yearly Budget prior to the commencement of the
applicable Fiscal Year, either voluntarily or by means of Arbitration, Manager
is authorized to operate the Hotel in accordance with the proposed Yearly
Budget; PROVIDED, HOWEVER, that as for disputed budget items, Manager may not
expend more than the previous year’s budgeted amount for such item (if any),
increased by a percentage equal to the increase in (i) the Consumer Price Index

 

50

 

during the last year, with respect to the non-Canadian Hotels and (ii)
the Canadian Consumer Price Index during the last year, with respect to the
Canadian Hotels, unless such expenditure is of the type contemplated under SECTION 7.7(b)
or is for an expense (such as real estate taxes, insurance premiums or
utilities) which are beyond the Manager’s reasonable control; PROVIDED FURTHER,
HOWEVER, Manager shall not expend on account of Capital Replacements in any
period for any Hotel an amount in excess of five percent (5%) of such Hotel’s
Gross Revenues for such period other than pursuant to an approved Capital
Replacements Budget or with the prior written consent of Owner or in connection
with the up to $25,000,000 required to be expended by Manager’s Affiliates
pursuant to Section 5.2.1 of the Purchase Agreement. For purposes of this
section, “increase in the Consumer Price Index during the last year” shall mean
the percentage increase in the Consumer Price Index for the twelve (12) month
period ending immediately prior to the date of submission of the disputed
proposed Yearly Budget, and “increase in the Canadian Consumer Price Index
during the last year” shall mean the percentage increase in the Canadian
Consumer Price Index for the twelve (12) month period ending immediately prior
to the date of submission of the disputed proposed Yearly Budget.

 

8.3                                 BANK
ACCOUNTS.

 

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

 

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

 

8.4                                 CONSOLIDATED
FINANCIALS. Each Ultimate Parent of Manager and each Guarantor shall
furnish to Owner within ten (10) days after the filing by such Ultimate Parent
or any Guarantor of any material filing with respect to the securities of such
Ultimate Parent or such Guarantor or any financial statement with any governmental
agency, quasi-governmental

 

51

 

agency or stock exchange, a copy of the same; PROVIDED, HOWEVER, if a
Guarantor or Ultimate Parent of Manager is not required to file interim and
annual financial statements with the Securities and Exchange Commission or its
equivalent in the United Kingdom such Guarantor or Ultimate Parent shall
furnish the following statements to Owner:

 

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

 

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

 

ARTICLE 9

 

FEES TO MANAGER

 

9.1                                 MANAGEMENT
FEES.

 

(a)                                  As consideration for
the management and operation of the Hotels by Manager, Manager shall earn the
following fees, which fees shall be payable as provided in SECTION 10.1.

 

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

 

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

 

(b)                                 So long as the PR Property
shall be a Pooled FF&E Hotel, Owner shall be entitled to offset against the
Management Fees any amounts then due and owing to Owner or any of its
Affiliates under the PR Lease or the PR Indemnity, and Manager

 

52

 

shall not pay itself any amount which Owner is so entitled to offset.

 

(c)                                  The parties
acknowledge that services performed by the Manager hereunder in connection with
a Canadian Hotel constitute one or more “taxable supplies” for GST purposes. As
a result, GST is applicable and must be charged and collected from Owner by
Manager in addition to and calculated on the Base Management Fee, the Incentive
Management Fee, and that part of the Operating Costs incurred by the Manager
and reimbursed in connection with this Agreement.

 

9.2                                 SYSTEM
FEES. Manager shall pay, as Operating Costs on behalf of Owner, usual
and customary system fees and assessments on an area-wide basis for the systems
of hotels comprising the applicable Brand which currently include:

 

(a)                                  with respect to the
Staybridge Brand, (i) a reservation and marketing fee of three percent (3.0%)
of Rooms Revenue, (ii) a Priority Club Fee of four and three-quarters percent
(4.75%) of all qualifying folio revenue at a Hotel to Priority Club (i.e., the
loyalty program of the Brands) members, (iii) a Technology Fee equal to $10.80
per guest room per month, (iv) an e-mail service fee equal to $15.00 per e-mail
user per month and (v) an accounting fee of $15.00 per month per guest room;

 

(b)                                 with respect to the
InterContinental Brand, (i) a reservation and marketing fee of three percent
(3.0%) of Rooms Revenue, (ii) a Priority Club Fee of four and three-quarters
percent (4.75%) of all qualifying folio revenue at a Hotel to Priority Club
members, (iii) a Technology Fee equal to $10.80 per guest room per month, (iv)
an e-mail service fee equal to $15.00 per e-mail user per month and (v) an
accounting fee of $15.00 per guest room per month;

 

(c)                                  with respect to the
Crowne Plaza Brand, (i) a reservation and marketing fee of three percent (3.0%)
of Rooms Revenue, (ii) a Priority Club Fee of four and three-quarters percent
(4.75%) of all qualifying folio revenue at a Hotel to Priority Club members,
(iii) a Technology Fee equal to $10.80 per guest room per month, (iv) an e-mail
service fee equal to $15.00 per e-mail user per month and (v) an accounting fee
of $15.00 per guest room per month; and

 

(d)                                 with respect to the
Holiday Inn Brand, (i) a reservation and marketing fee of three percent (3.0%)
of Rooms Revenue, (ii) a Priority Club Fee of four and three-quarters

 

53

 

percent (4.75%) of all qualifying folio revenue at a Hotel to Priority
Club members, (iii) a Technology Fee equal to $10.80 per guest room per month,
(iv) an e-mail service fee equal to $15.00 per e-mail user per month and (v) an
accounting fee of $15.00 per guest room per month.

 

Each of the foregoing System Fees and other fees shall be adjusted from
time to time to reflect the Hotels’ equitable portion of the Manager’s and/or
its Affiliates’ actual out-of-pocket costs for providing the services to which
such fees pertain and only in accordance with changes generally applicable to
the Brand in question. Not less frequently than annually, Manager shall provide
to Owner financial statements with respect to all fees comparable to the System
Fees collected by Manager and/or its Affiliates and the applications thereof;
PROVIDED, HOWEVER, Manager shall not be obligated to provide such statements
with respect to the accounting fee, the Technology Fee or the e-mail service
fees until such time as it has in place the means of producing such statements.
Manager covenants, warrants and represents that (i) each hotel in the
applicable Brand (other than the Intercontinental Brand) pays, and shall at all
times pay, the same System Fees for such services and all such System Fees
collected by Manager and/or its Affiliates are, and will be, applied to the
cost of providing such services to all hotels in such Brand, (ii) the e-mail
service fees and the accounting fees being charged under this Agreement are no
higher than the amounts being charged for such services in at least fifty (50%)
of the other hotels in the U.S. and Canada which are being managed by Manager
or its Affiliates under management agreements dated after January 1, 2000
(exclusive of any other management agreements with Owner or its Affiliates) and
the percentages of any increases in such fees charged under this Agreement
shall not be higher than the comparable percentages of increases charged to
such other hotels under such other management agreements and (iii) the System
Fees being charged under this Agreement for the Intercontinental Brand are no
higher than the amounts being charged in at least fifty (50%) of the other
Intercontinental Brand hotels in the U.S. and Canada which are being managed by
Manager or its Affiliates under management agreements dated on or after January 1,
2000 (exclusive of any other management agreements with Owner or its Affiliates)
and the percentages of any increases in such fees charged under this Agreement
shall not be higher than the comparable percentages of increases charged to
such other hotels under such other management agreements. Other than with
respect to the System Fees for the InterContinental Hotels, Manager or its
Affiliates shall not make any profits from the System Fees

 

54

 

except to the extent that such profit for any year shall be applied to
the cost of providing such services in the subsequent year or future years;
PROVIDED, HOWEVER, Manager and its Affiliates shall not retain any such profits
for an unreasonable period of time. Any disputes under this SECTION 9.2
shall be resolved by Arbitration.

 

All System Fees and e-mail service fees and accounting fees described
above shall accrue monthly, when billed, but in no event shall any such fees
accrue prior to the end of the month for which they are incurred.

 

ARTICLE 10

 

DISBURSEMENTS

 

10.1                           DISBURSEMENT
OF FUNDS. As and when received by Manager or the Hotels, all Gross
Revenues from all of the Hotels shall be deposited into the Bank Accounts and,
subject to the terms of SECTIONS 8.1 AND 10.6, applied in the following order
of priority to the extent available:

 

(a)                                  First, to pay all
Operating Costs;

 

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

 

(c)                                  Third, to Owner, all
accrued but unpaid Owner’s First Priority for the Fiscal Year to which such
Gross Revenues pertain (net of amounts theretofore paid from Gross Revenues by
Manager on behalf of Owner on account of debt service due under an Authorized
Mortgage as provided in SECTION 4.3(c));

 

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

 

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

 

(f)                                    Sixth, to Manager,
interest at the Interest Rate (determined as of the date of the applicable
advance) on any

 

55

 

outstanding amounts advanced by Manager pursuant to SECTION 15.2(c);

 

(g)                                 Seventh, to Manager,
any accrued but unpaid Base Management Fee for the Fiscal Year to which such
Gross Revenues pertain but not for any other period;

 

(h)                                 Eighth, to Owner, all
accrued but unpaid Owner’s Second Priority for the Fiscal Year to which such
Gross Revenues pertain but not for any other period (and, without duplication
for amounts netted under SECTION 10.1(c), net of amounts theretofore paid
from Gross Revenues by Manager on behalf of Owner on account of debt service
due under an Authorized Mortgage as provided in SECTION 4.3(c));

 

(i)                                     Ninth, (commencing
in 2007) to Owner, all accrued but unpaid Owner’s Percentage Priority for all
of the Hotels;

 

(j)                                     Tenth, to
reimburse Owner for any advances made by Owner to Working Capital;

 

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

 

(l)                                     Twelfth, prior to
the Severance Date, provided the Guarantor is not in default of any of its
obligations under the Guaranty, to reimburse the Guarantor for any unreimbursed
payments made by it on account of the Guaranteed Obligations under the
Guaranty; PROVIDED, HOWEVER, if the Guarantor shall have Provided Collateral
(as defined in the Guaranty) under the Guaranty, then the amount to be
reimbursed to the Guarantor under this SECTION 10.1(l) shall be disbursed
to Owner, to be held by Owner as collateral for the Guarantor’s obligations
under the Guaranty until the Outstanding Balance under the Guaranty is equal to
zero dollars ($0); PROVIDED FURTHER, however, that any amounts which would
otherwise be reimbursed to the Guarantor shall first be applied to any amount
due under the PR Guaranty;

 

(m)                               Thirteenth, to reimburse
Owner for any advances made by Owner or Purchaser to the Reserve Account
pursuant to SECTION 5.2(c)(iii);

 

(n)                                 Fourteenth, to
reimburse Manager for (i) outstanding advances made by Manager pursuant to SECTION 15.2(c)
to the extent then due and payable and (ii) other contributions made by

 

56

 

it to the Reserve Account other than pursuant to SECTION 5.2(d) or
SECTION 5.2(f);

 

(o)                                 Fifteenth, to Owner,
all accrued and unpaid Owner’s First Priority for prior periods;

 

(p)                                 Sixteenth, to pay
Manager accrued but unpaid Base Management Fees for prior periods;

 

(q)                                 Seventeenth, to Owner,
all accrued and unpaid Owner’s Second Priority for prior periods; and

 

(r)                                    Eighteenth, to
Manager, the Incentive Management Fee.

 

10.2                           RESIDUAL
DISTRIBUTION. Simultaneously with the making of each payment of the
Incentive Management Fee, the then remaining Gross Revenues will be disbursed
to Owner. Except as herein provided, Manager shall have no responsibility to
incur Operating Costs or undertake any Capital Replacement except to the extent
Manager is reasonably assured that funds to pay such Operating Costs and for
such Capital Replacements will be timely available.

 

10.3                           OWNER’S
FIRST PRIORITY. Owner’s First Priority shall be due and payable in
advance in equal monthly installments on the first day of each Fiscal Month,
pro-rated for any partial month, regardless of any inadequacy of Gross Revenues
or Operating Profits. If any installment of Owner’s First Priority is not paid
when due, the same shall accrue interest at the Interest Rate. (Such interest
shall be payable on demand, shall not be an Operating Cost, and shall be paid
by Manager.) Appropriate adjustments shall be made to reflect any change in
Owner’s First Priority on account of advances made pursuant to SECTIONS 5.2(c)
or 15.2 by Owner or Purchaser when such advances are made, provided any additional
amounts of Owner’s First Priority due by reason of any such advance for the
month in which such advance is made shall not be due and payable until the
first Business Day of the month next after the date as of which such change occurs.
As installments of Owner’s First Priority are to be paid in advance, Manager
may advance amounts due on account of a monthly installment of Owner’s First
Priority for a Fiscal Month and reimburse itself from Operating Profits for
such Fiscal Month the amounts so advanced; PROVIDED, HOWEVER, if Operating Profits
of all of the Hotels for such Fiscal Month in excess of the amount to be contributed
to the Reserve Account pursuant to SECTION 5.2 are insufficient to make
such reimbursements, the amount of such insufficiency shall be deemed an advance
under the PR Guaranty to the extent any amount

 

57

 

is owed thereunder and then an advance to Working Capital, and Manager
shall be entitled to the reimbursement thereof only pursuant to SECTION 10.1(k);
PROVIDED, HOWEVER, unless such advance is deemed an advance under the PR Guaranty,
by notice given to Owner within thirty (30) days after the end of such Fiscal
Month, Manager may elect to deem the amount of such insufficiency an advance
under the Guaranty (and not an advance to Working Capital). If Manager shall so
make such election, the amount of such insufficiency shall be reimbursed to the
Guarantor as provided in SECTION 10.1(l). If Owner fails to receive any
installment of Owner’s First Priority as and when due, Owner may terminate this
Agreement on not less than thirty (30) days’ notice; PROVIDED, HOWEVER, such
notice shall be void AB INITIO if such installment together with any interest
accrued thereon is paid to Owner prior to the thirtieth (30th) day after such
notice is given.

 

10.4                           OWNER’S PERCENTAGE PRIORITY.
Owner’s Percentage Priority shall be calculated on a Hotel-by-Hotel basis, and
shall accrue and be payable in monthly installments to the extent that Gross
Revenues year-to-date at any Hotel exceed Gross Revenues for such Hotel for the
corresponding period in its Base Year. The installment of Owner’s Percentage
Priority for all of the Hotels for each Fiscal Month shall be due and payable
on the twenty fifth (25th) day of the following month. Owner’s Percentage
Priority with respect to any Hotel located in Canada shall be calculated in
Canadian dollars but shall be paid to Owner in United States dollars in
accordance with SECTION 24.24.

 

10.5                           OWNER’S
SECOND PRIORITY. Owner’s Second Priority shall accrue in equal monthly
installments on the first day of each Fiscal Month, pro-rated for any partial
month, and shall be paid as provided in SECTION 10.1; PROVIDED, HOWEVER,
all accrued and unpaid Owner’s Second Priority shall be due and payable upon
the expiration or earlier termination of the Term. Appropriate adjustments shall
be made to reflect any change in Owner’s Second Priority on account of advances
made by Owner or Purchaser pursuant to SECTIONS 5.2(c)(ii) when such advances
are made, provided any additional amounts of Owner’s Second Priority due by
reason of any such advance for the month in which such advance is made shall
not be due and payable until the first Business Day of the month next after the
date as of which such change occurs.

 

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

 

58

 

10.7                           CALCULATION OF INTERIM
DISBURSEMENTS. Other than as described in SECTIONS 5.2 or 10.3, the
priority order for disbursement of Gross Revenues set forth in SECTION 10.1
shall be determined on an annual basis in accordance with SECTION 8.1;
PROVIDED, HOWEVER, there shall be interim monthly disbursements to which the
following shall apply:

 

(a)                                  Each month during a
Fiscal Year, the disbursements of Gross Revenues will be made on a cumulative,
year-to-date basis based on Manager’s monthly statements delivered pursuant to SECTION 8.1(b)
as if that year-to-date period represented a full Fiscal Year.

 

(b)                                 If a statement
delivered pursuant to SECTION 8.1(b) reflects any overpayment (other than
with respect to Owner’s First Priority or amounts to be contributed to the Reserve
Account), the party which received such overpayment shall deposit the same in
the Bank Accounts (or remit the same to Manager for such deposit) and the same
shall then be dispersed in the order specified in SECTION 10.1.

 

10.8                           AMOUNTS
OUTSTANDING AT END OF TERM. Unless this Agreement is wrongfully
terminated by Owner, then upon the expiration or earlier termination of this
Agreement, Manager shall have no claim against Owner, Purchaser or the Hotels
for amounts owed to it under this Agreement which have not been paid by reason
of the inadequacy of Gross Revenues or Operating Profits.

 

10.9                           ALLOCATION
OF OWNER’S FIXED PRIORITY. Owner’s Fixed Priority shall initially be
allocated among the Hotels as set forth in EXHIBIT C. Upon any increase to
Owner’s Fixed Priority by reason of any advance made pursuant to SECTION 5.2(c)
or SECTION 15.2, such increase shall be allocated to each Hotel to the
extent such advance was made for such Hotel. In the event of an adjustment to
Owner’s First Priority or Owner’s Second Priority pursuant to SECTIONS 2.7 or
24.17, such adjustment shall be allocated among the remaining Hotels in
proportion to their allocated share of Owner’s First Priority immediately prior
to such adjustment.

 

10.10                     SURVIVAL.
The terms of this ARTICLE 10 shall survive the expiration or earlier
termination of the Term.

 

59

 

ARTICLE 11

 

CERTAIN OTHER SERVICES

 

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

 

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

 

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ARTICLE 12

 

SIGNS AND SERVICE MARKS

 

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

 

12.2                           SYSTEM
MARKS. It is understood and agreed by Owner that the names Staybridge
Suites, InterContinental, Crowne Plaza and Holiday Inn and all System Marks are
the exclusive property of Manager or its Affiliates. Owner agrees and acknowledges
the exclusive right of ownership of Manager and its Affiliates to the System
Marks and the Reservation Systems. Except for any rights expressly granted to
Owner in this Agreement, Owner hereby disclaims any right or interest therein,
regardless of the legal protection afforded thereto. Except for any rights
expressly granted to Owner in this Agreement, in the event of termination or cancellation
of this Agreement, whether as a result of a default by Manager or otherwise,
Owner shall not hold itself out as, or operate the Hotels as, Staybridge
Suites, InterContinental, Crowne Plaza and Holiday Inn, as applicable, hotels,
and will immediately cease using such names and all other System Marks in
connection with the name or operation of each Hotel as of the Expiration Date.
Promptly after the Expiration Date (or such later date on which Manager shall
cease to operate the Hotels) and the expiration of any right granted to Owner
to use the System Marks, subject to the terms of SECTION 17.4, Owner shall
remove all signs, furnishings, printed material, emblems, slogans or other
distinguishing characteristics which are now or hereafter may be connected or
identified with an applicable Brand or Reservation System. Owner shall not use
any System Marks or any part, combination or variation thereof in the name of
any partnership, corporation or other business entity, nor allow the use thereof
by others.

 

12.3                           SYSTEM
MARK LITIGATION.

 

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

 

61

 

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

 

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

 

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

 

12.4                           OTHER INTELLECTUAL PROPERTY PROVISIONS.
Owner acknowledges that Manager or Manager’s Affiliates are or may become the
owner or licensee of certain intellectual property including: (a) software for
use at one or more facilities managed by Manager or Manager’s Affiliates and
all source and object code versions thereof and all related documentation, flow
charts, user manuals, listing and service/operator manuals and any
enhancements, modifications or substitutions thereof; and (b) operating
methods, procedures and policies and (c) upgrades and improvements to the
foregoing (as the same may be upgraded or improved, collectively, “INTELLECTUAL
PROPERTY”). Manager shall utilize the Intellectual Property to the extent
necessary or appropriate in connection with the operation of the Hotels for the
purpose of carrying out its obligations hereunder. Subject to the terms of
SECTIONS 6.1 AND 24.1, such use shall be strictly on a non-exclusive basis and
neither such use nor anything contained in this Agreement shall confer any
proprietary or other rights in the Intellectual Property on Owner or any third
parties.

 

62

 

ARTICLE 13

 

INSURANCE

 

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

 

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

 

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

 

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

 

63

 

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

 

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

 

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

 

(g)                                 Such additional
insurance as may be required, from time to time by (i) any Legal Requirement,
(ii) any holder of an Authorized Mortgage or (iii) which is otherwise
reasonably required upon advance notice given to Manager in accordance with the
terms hereof.

 

13.2                           INSURANCE
POLICIES.

 

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

 

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

 

(c)                                  The insurance herein
required may be brought within the coverage of a so-called blanket policy or
policies of

 

64

 

insurance carried and maintained by Owner or Manager, provided that
such blanket policies fulfill the requirements contained herein.

 

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

 

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

 

(f)                                    All such policies
shall provide Owner, Manager and any holder of an Authorized Mortgage if
required by the same, thirty (30) days’ prior written notice of any material
change or cancellation of such policy and the property insurance policies shall
provide for a waiver of subrogation, to the extent available.

 

13.3                           INSURANCE
CERTIFICATES. Manager shall deliver to Owner, Purchaser and any holder
of an Authorized Mortgage, certificates of insurance with respect to all
policies so procured by it and, in the case of insurance policies about to
expire, shall deliver certificates with respect to the renewal thereof. In the
event Manager shall fail to effect such insurance as herein required, to pay the
premiums therefor, or to deliver, within fifteen (15) days of a request therefor,
such certificates, Owner shall have the right, but not the obligation, to
acquire such insurance and pay the premiums therefor, which amounts shall be payable
to Owner, upon demand,

 

65

 

as an Operating Cost, together with interest accrued thereon at the
Interest Rate (which interest shall not be an Operating Cost, but shall be paid
by Manager) from the date such payment is made until (but excluding) the date repaid.

 

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

 

13.5                           MANAGER’S
INSURANCE PROGRAM.

 

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

 

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

 

ARTICLE 14

 

INDEMNIFICATION AND WAIVER OF
SUBROGATION

 

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

 

14.2                           WAIVER
OF SUBROGATION. To the fullest extent permitted by law, each of Owner
and Manager hereby waives any and all rights of subrogation and right of
recovery or cause of action, and agrees to release the other and Purchaser from
liability for loss or damage to property to the extent such loss or damage is
covered by valid and collectible insurance in

 

66

 

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

 

14.3                           SURVIVAL.
The terms of this ARTICLE 14 shall survive the expiration or earlier
termination of this Agreement.

 

ARTICLE 15

 

DAMAGE TO AND DESTRUCTION OF
THE HOTEL

 

15.1                           TERMINATION.

 

(a)                                  If during the Term
any Hotel shall be totally or partially destroyed and the Hotel is thereby
rendered Unsuitable for Its Permitted Use, (i) Manager may terminate this
Agreement with respect to such Hotel on sixty (60) days’ written notice to
Owner, or (ii) Owner may terminate this Agreement with respect to such Hotel on
not less than sixty (60) days’ written notice to Manager, whereupon, this
Agreement, with respect to such Hotel, shall terminate and Owner or Purchaser
shall be entitled to retain the insurance proceeds payable on account of such
damage.

 

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

 

(c)                                  Upon any termination
under this ARTICLE 15 or Article 16, Owner’s First Priority and Owner’s
Second Priority shall be reduced as follows:

 

67

 

(i)                                     Such
reduction to Owner’s First Priority shall be in an amount such that after
giving effect to such reduction the ratio of Owner’s First Priority to the NOI
of the Hotels (other than the Hotel with respect to which this Agreement has
been so terminated) for the most recently ended full twelve (12) calendar
months prior to the date of the casualty or Condemnation shall equal the ratio
of Owner’s First Priority before such reduction to the NOI of all the Hotels
(including, the Hotel with respect to which this Agreement has been terminated)
for such 12-month period; and

 

(ii)                                  Such
reduction to Owner’s Second Priority shall be in an amount such that after
giving effect to such reduction the ratio of Owner’s Second Priority to the NOI
of the Hotels (other than the Hotel with respect to which this Agreement has
been so terminated) for the most recently ended full twelve (12) calendar
months prior to the date of the casualty or Condemnation shall equal the ratio
of Owner’s Second Priority before such reduction to the NOI of all the Hotels
(including, the Hotel with respect to which this Agreement has been terminated)
for such 12-month period.

 

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

 

68

 

15.2                           RESTORATION.

 

(a)                                  If during the Term
any Hotel is damaged or destroyed by fire, casualty or other cause but is not
rendered Unsuitable for Its Permitted Use or if neither Owner nor Manager
terminates this Agreement pursuant to SECTION 15.1, Owner shall make the
net proceeds of insurance received in connection with such casualty (excluding
the proceeds of business interruption or similar insurance which are a portion
of Gross Revenues) and any other amount Owner elects to contribute toward
restoration available to Manager for restoration of such Hotel subject to
customary terms applicable to advances and construction loans (to the extent
applicable) and the terms of the Lease and any Authorized Mortgage, and Owner
shall make, or shall cause there to be made, all Repairs necessary to restore
such Hotel to substantially the same condition as existed prior to such
casualty. If Owner elects to retain Manager’s services in connection with such
Repairs, the terms of SECTION 11.1 shall apply.

 

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

 

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

 

69

 

ARTICLE 16

 

CONDEMNATION

 

16.1                           TOTAL
CONDEMNATION. If either (x) the whole of a Hotel shall be taken by
Condemnation, or (y) a Condemnation of less than the whole of a Hotel renders
such Hotel Unsuitable for Its Permitted Use, this Agreement shall terminate
with respect to such Hotel and Owner and Purchaser shall seek the Award for
their interests in such Hotel as provided in the Lease, which Award shall
belong solely to them. In addition, Manager shall have the right to initiate or
participate in such proceedings as it deems advisable to recover any damages to
which Manager may be entitled; PROVIDED, HOWEVER, that Manager shall be
entitled to retain the award or compensation it may obtain through such
proceedings which are conducted separately from those of Owner and Purchaser
only if such award or compensation does not reduce the award or compensation
otherwise available to Owner and Purchaser. If this Agreement is so terminated
with respect to a Hotel, Owner and Purchaser shall make reasonable efforts to
use the Award to acquire a Replacement Property proposed by Manager to which
this Agreement shall be extended; PROVIDED, HOWEVER:

 

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

 

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

 

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

 

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

 

70

 

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

 

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

 

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

 

16.3                           TEMPORARY
CONDEMNATION. In the event of any temporary Condemnation of a Hotel or
Owner’s interest therein, this Agreement shall continue in full force and
effect. The entire amount of any Award made for such temporary Condemnation
allocable to the Term, whether paid by way of damages, rent or otherwise, shall
constitute Gross Revenues. For purposes of this Agreement, a Condemnation shall
be deemed to be temporary if the period of such Condemnation is not expected
to, and does not, exceed twelve (12) months.

 

16.4                           ANAHEIM
TAKING. Notwithstanding anything contained herein to the contrary, the
terms of SECTIONS 15.2(c) and 16.3 shall not apply to any Anaheim Condemnation.
Rather, if an Anaheim Condemnation occurs and this Agreement is not terminated
with respect to the affected Hotel(s), subject to the requirements of SECTION 7.7,
Manager, in conformity with Legal Requirements, the Operating Standards and
Insurance Requirements, promptly shall commence and continue diligently to
restore the untaken portion of such Hotel(s) so that any such Hotel shall
constitute a complete architectural unit of the same general character and
condition (as nearly as may be possible under the circumstances) as existed
immediately prior to such

 

71

 

Condemnation (including adequate parking facilities) in all material
respects pursuant to a plan for such eventuality approved in advance and in
writing by Owner, which approval shall not be unreasonably withheld. Owner
shall make the Award for such Anaheim Condemnation available to Manager to pay
the cost of such restoration subject to customary terms applicable to advances
of construction loans (to the extent applicable). In the event that the Award
is insufficient to cover the full cost of the restoration, Manager shall be
entitled to apply funds from the Reserve Account to pay such costs.

 

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

 

ARTICLE 17

 

DEFAULT AND TERMINATION

 

17.1                           MANAGER EVENTS OF DEFAULT.
Each of the following shall constitute a “MANAGER EVENT OF DEFAULT”:

 

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

 

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

 

(c)                                  The entering of an order,
judgment or decree by any court of competent jurisdiction, on the application
of a creditor, adjudicating Manager, the Canadian Manager, PR Tenant or the
Guarantor as bankrupt or insolvent or approving a petition seeking
reorganization or appointing a receiver, trustee, or liquidator of all or a
substantial part of Manager’s, the Canadian Manager’s, PR Tenant’s or the

 

72

 

Guarantor’s assets, and such order, judgment or decree’s continuing
unstayed and in effect for an aggregate of sixty (60) days (whether or not
consecutive).

 

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

 

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

 

(f)                                    The material
failure of Manager, the sellers under the Purchase Agreement or the PR Stock
Agreement, IHG or any Affiliate of any of them to perform, keep or fulfill any
of the other covenants, undertakings, obligations or conditions set forth in
any of the Other Documents on or before the date required for the same, which
failure continues for a period of thirty (30) days after receipt of written
notice demanding such cure; PROVIDED, however, if such failure is susceptible
of cure, but such cure cannot be accomplished within said thirty (30) day
period, said thirty (30) days shall be extended for so long as is reasonably
necessary to effect such cure provided that such cure is commenced within
thirty (30) days after such notice is given and is thereafter diligently
pursued to completion.

 

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

 

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

 

73

 

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

 

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

 

(k)                                  The occurrence of an
Event of Default under the PR Lease.

 

(l)                                     The failure of the
Canadian Manager to be an Affiliate of Manager.

 

17.2                           REMEDIES
FOR MANAGER DEFAULTS. So long as a Manager Event of Default shall be
outstanding, Owner shall have (in addition to its other rights and remedies at
law, in equity or otherwise) the right to terminate this Agreement. Upon such
termination, or if this Agreement is terminated pursuant to SECTIONS 5.1 or
10.3, Owner shall be entitled to liquidated damages. Owner’s right to receive
liquidated damages has been agreed to due to the uncertainty, difficulty and/or
impossibility of ascertaining the actual damages suffered by Owner. Further, if
not for Owner’s right to receive such liquidated damages, Purchaser would not
have entered into the Purchase Agreement, Purchaser would not have acquired the
Hotels and Owner would not have entered into the Lease. MANAGER HEREBY
ACKNOWLEDGES AND AGREES THAT SUCH LIQUIDATED DAMAGES ARE NOT A PENALTY, BUT ARE
TO COMPENSATE OWNER AND ITS AFFILIATES FOR THE EXPENSE AND LOST EARNINGS WHICH
MAY RESULT FROM ARRANGING SUBSTITUTE MANAGEMENT FOR THE HOTELS AS WELL AS TO
COMPENSATE FOR THE RENT OWNER MUST PAY UNDER THE LEASE AND THE PRICE PAID FOR
THE HOTELS BY OWNER’S AFFILIATE. Such liquidated damages shall be equal to all
accrued but unpaid amounts due to Owner hereunder up until the date of
termination, plus the Outstanding Balance, as defined in the Guaranty. Owner
shall be entitled to interest, at the Interest Rate, on such liquidated damages
from

 

74

 

the date of such termination until the date of payment of such damages
and interest. Except with respect to Owner’s rights and remedies for any breach
or violations by Manager of the terms of SECTION 17.4, Owner shall look
solely to any collateral hereafter pledged securing Manager’s obligations
hereunder for satisfaction of any claim of Owner against Manager hereunder;
PROVIDED, HOWEVER, nothing contained herein is intended to, nor shall it limit
or reduce the obligations of the Guarantor under the Guaranty, the guarantor
under the PR Guaranty or limit Owner’s rights with respect to either of them.

 

17.3                           OWNER
EVENTS OF DEFAULT AND REMEDIES FOR OWNER DEFAULTS. In the event any
representation or warranty made by Owner in this Agreement proves to be untrue
when made in any material respect or Owner fails to perform any of its
obligations hereunder, then Manager shall have the right to institute forthwith
any and all proceedings permitted by law or equity (provided they are not
specifically barred under the terms of this Agreement), including, without
limitation, actions for specific performance and/or damages; PROVIDED, HOWEVER,
except as may be expressly provided in this Agreement, Manager shall have no
right to terminate this Agreement by reason of such a failure by Owner or
otherwise. Manager shall be entitled to terminate this Agreement in the event
of a violation of the terms of SECTION 4.7 by Purchaser or Owner. Except
as otherwise specifically provided in this Agreement, Manager hereby waives all
rights arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law, (a) to modify without the agreement of Owner,
surrender or terminate this Agreement or quit or surrender any Hotel or any
portion thereof, or (b) to obtain (i) any abatement, reduction, suspension or
deferment of the sums allocable or otherwise payable to Owner or other
obligations to be performed by Manager hereunder or (ii) any increase in any
amounts payable to Manager hereunder. In the event Owner wrongfully terminates
this Agreement or Manager terminates this Agreement pursuant to a right to do
so as a result of Owner’s breach, then, subject to Manager’s mitigation
obligations and any other limitation on remedies set forth herein, Manager
shall be entitled to recover as part of its damages for such wrongful
termination an amount equal to the damages suffered by Manager on account of
terminating the employment of on-site employees of the Hotels as a result of
such wrongful termination.

 

17.4                           POST TERMINATION OBLIGATIONS.
Upon expiration or earlier termination of this Agreement for any reason, Owner
and Manager shall proceed as follows:

 

75

 

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

 

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

 

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

 

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

 

(e)                                  Manager will assign
to Owner or its designee any assignable licenses and permits pertaining to the
Hotels and will otherwise reasonably cooperate with Owner as may be

 

76

 

necessary for the transfer of any and all Hotel licenses and permits to
Owner or Owner’s designee.

 

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

 

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

 

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

 

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

 

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

 

(k)                                  If requested by Owner
prior to such expiration or earlier termination of this Agreement in whole or
in part, Manager shall continue to manage under the applicable Brand any

 

77

 

affected Hotels designated by Owner after such expiration or earlier
termination for up to one (1) year, on such reasonable terms (which shall
include an agreement to reimburse Manager for its reasonable out-of-pocket
costs and expenses, and reasonable administrative costs and a management fee of
seven and one-half percent (7.5%) of Gross Revenues with respect to the
Staybridge Hotels and the Holiday Inn Hotels and a management fee of three
percent (3%) of Gross Revenues with respect to the InterContinental Hotels and
the Crowne Plaza Hotels) as Owner and Manager shall reasonably agree.

 

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

 

ARTICLE 18

 

NOTICES

 

18.1                           PROCEDURE.

 

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

 

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

 

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

 

If to Owner:  
HPT TRS IHG-2, INC.

 

78

 

	
   

  	
   

  	
  c/o Hospitality Properties Trust

  
	
   

  	
   

  	
  400 Centre Street

  
	
   

  	
   

  	
  Newton, Massachusetts 02458

  
	
   

  	
   

  	
  Attn: President

  
	
   

  	
   

  	
  Facsimile: 617-969-5730

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Sullivan & Worcester LLP

  
	
   

  	
   

  	
  One Post Office Square

  
	
   

  	
   

  	
  Boston, Massachusetts 02109

  
	
   

  	
   

  	
  Attn: Warren M. Heilbronner, Esq.

  
	
   

  	
   

  	
  Facsimile: 617-338-2880

  
	
   

  	
   

  	
   

  
	
  If to
  Manager: 

  	
   

  	
  IHG Management (Maryland) LLC

  
	
   

  	
   

  	
  c/o Intercontinental Hotels Group
  Resources, Inc.

  
	
   

  	
   

  	
  8844 Columbia 100 Parkway

  
	
   

  	
   

  	
  Columbia, Maryland 21045

  
	
   

  	
   

  	
  Attn: Vice President of Operations

  
	
   

  	
   

  	
  Facsimile: 410-964-9249

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  InterContinental Hotels Group

  
	
   

  	
   

  	
  Resources, Inc.

  
	
   

  	
   

  	
  c/o Six Continents Hotels, Inc.

  
	
   

  	
   

  	
  Three Ravinia Drive, Suite 100

  
	
   

  	
   

  	
  Atlanta, Georgia 30346

  
	
   

  	
   

  	
  Attn: General Counsel - Operations

  
	
   

  	
   

  	
  Facsimile: 770-604-5802

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Alston & Bird LLP

  
	
   

  	
   

  	
  One Atlantic Center

  
	
   

  	
   

  	
  1201 West Peachtree Street

  
	
   

  	
   

  	
  Atlanta, Georgia 30309

  
	
   

  	
   

  	
  Attn: Timothy Pakenham, Esq.

  
	
   

  	
   

  	
  Facsimile: 404-253-8885

  

 

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

 

79

 

ARTICLE 19

 

RELATIONSHIP, AUTHORITY AND
FURTHER ACTIONS

 

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

 

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

 

ARTICLE 20

 

APPLICABLE LAW

 

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

 

ARTICLE 21

 

SUCCESSORS AND ASSIGNS

 

21.1                           ASSIGNMENT.

 

(a)                                  Except as expressly
provided below, Manager shall not assign, mortgage, pledge, hypothecate or
otherwise transfer its interest in all or any portion of this Agreement or any rights

 

80

 

arising under this Agreement or suffer or permit such interests or
rights to be assigned, transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the management of the Hotels by anyone other than
Manager or Owner. For purposes of this SECTION 21.1, an assignment of this
Agreement shall be deemed to include any transaction which results in Manager
no longer being an Affiliate of Guarantor or pursuant to which all or
substantially all of Manager’s assets are transferred to any Person who is not
an Affiliate of Guarantor.

 

(b)                                 Manager shall have the
right, without Owner’s consent, but subject to the applicable assignee or
Affiliate satisfying the requirements of SECTION 24.15, to (i) assign
Manager’s interest in this Agreement (A) to IHG or any Affiliate of IHG, (B) in
connection with a merger, corporate restructuring or consolidation of IHG or a
sale of all or substantially all of the assets of IHG and (C) in connection
with a sale of all or substantially all of the assets (including associated
management agreements) owned by IHG and its Affiliates relating to the Brands
and (ii) engage its Affiliates as sub-managers with respect to the separate
Brands of Hotels. At Owner’s election, Manager shall assign this Agreement to
any Person who is not an Affiliate of IHG that acquires all or substantially
all of the assets of IHG relating to the Brands and shall cause such Person to
assume all of Manager’s obligations thereafter accruing hereunder.
Notwithstanding anything herein to the contrary, Manager shall neither,
directly or indirectly, assign this Agreement to any Person, nor engage any
sub-manager, who is or is an Affiliate of a Specially Designated or Blocked Person.

 

Manager also shall have the right, without
Owner’s consent, but subject to the applicable Affiliate satisfying the
requirements of SECTION 24.15, to assign to a Canadian Affiliate (the “Canadian
Manager”) under an Assignment and Assumption of Management Agreement in the
form attached hereto as EXHIBIT E, the rights and obligations of the Manager
under this Agreement that relate to services to be performed by the Manager in
respect of all (but not less than all) of the Canadian Hotels excluding those
services which are performed centrally outside of Canada such as those
performed pursuant to SECTION 7.5 and those services for which the System
Fees or other fees referred to in SECTION 9.2 are to be paid (excluding
such excluded services, the “Canadian Services”), provided that the Canadian
Manager agrees to assume and be bound by the obligations of

 

81

 

Manager hereunder as they relate to the Canadian Services. As a result
of any such assignment:

 

(i)                                     the
Canadian Manager shall provide the Canadian Services to the Owner in accordance
with this Agreement;

 

(ii)                                  there
shall be payable to the Canadian Manager as consideration for the Canadian
Services, a portion of the amounts otherwise payable or reimbursable to Manager
under this Agreement, as follows:

 

(A)                              the portion of the
Operating Costs incurred by the Canadian Manager in providing the Canadian
Services;

 

(B)                                the portion of the Base
Management Fee for each period equal to the fraction that the Gross Revenues of
the Canadian Hotels for such period is of the Gross Revenues of the Hotels for
such period, which fee shall be payable to the Canadian Manager concurrently
with the remaining portion of the Base Management Fee payable to the Manager;

 

(C)                                the portion of the
Incentive Management Fee for each period equal to the fraction that the NOI of
the Canadian Hotels for such period is of the NOI of the Hotels for such period,
which fee shall be paid to the Canadian Manager concurrently with the remaining
portion of the Incentive Management Fee payable to the Manager;

 

PROVIDED, HOWEVER, notwithstanding anything
contained in this SECTION 21.1(b)(ii) to the contrary, Owner shall not be
obligated to make any of the foregoing calculations or to cause any such
amounts to be paid directly to the Canadian Manager, it being acknowledged and
agreed that Manager shall be responsible for performing all such calculations
and remitting all such applicable amounts to the Canadian Manager and Manager
shall provide Owner with the details of such calculations and remittances if
Owner so requests;

 

(iii)                               no
portion of the System Fees or other fees referred to in SECTION 9.2 shall
be payable in respect of Canadian Services; and

 

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(iv)                              Manager
shall not be released from any of its obligations under this Agreement and
shall at all times remain liable for the performance of the Canadian Services
and all other obligations of Manager hereunder.

 

The Canadian Manager shall at all times be an
Affiliate of Manager.

 

The parties hereto acknowledge and agree that
this Agreement is intended to constitute, and shall constitute, a single
transaction notwithstanding any such assignment to the Canadian Manager.

 

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

 

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

 

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

 

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“InterContinental”, “Crowne Plaza” or “Holiday Inn”, as applicable,
shall be deemed to refer to the trade name of the system of hotels to which the
Hotels are to be so converted.

 

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

 

ARTICLE 22

 

RECORDING

 

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

 

ARTICLE 23

 

FORCE MAJEURE

 

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

 

23.2                           EXTENSION
OF TIME. Owner and Manager agree that, with respect to any obligation,
other than the payment of money, to be performed by a party during the Term,
neither party will be liable for failure so to perform when prevented by any
occurrence beyond the reasonable control of such party, herein referred to as a
“force majeure” including, without limitation,

 

84

 

occurrences such as strike, lockout, breakdown, accident, order or
regulation of or by any Government Agency, failure of supply or inability, by
the exercise of reasonable diligence, to obtain supplies, parts or employees
necessary to perform such obligation, or war or other emergency. The time
within which such obligation must be performed will be extended for a period of
time equivalent to the number of days of delay from such cause.

 

ARTICLE 24

 

GENERAL PROVISIONS

 

24.1                           TRADE
AREA RESTRICTION.

 

(a)                                  Notwithstanding
anything to the contrary in this Agreement, neither Manager nor any Affiliate
shall acquire, own, manage, operate or open any hotel as a “Staybridge Suite”
or “Holiday Inn” hotel nor shall Manager or any Affiliate authorize a third
party to operate or open any hotel as a “Staybridge Suite” or “Holiday Inn”
hotel that is within the Restricted Area of any Hotel operated under the same
name during its Restricted Period, unless such hotel (i) is owned or leased by
Owner or its Affiliate; (ii) is owned, operated, managed, franchised or under
development on the Effective Date and has been specifically identified in
writing at or prior to the time of the execution of the Purchase Agreement or
replaces any such hotel, provided such replacement hotel does not have more
than ten percent (10%) more guest rooms than the original hotel which it
replaces; or (iii) is part of an acquisition by IHG or its Affiliates of an interest
(including an interest as a franchisor) in a chain or group of not less than
ten (10) comparable hotels (such acquisition to occur in a single transaction
or a series of related transactions). The terms of this SECTION 24.1(a)
shall apply only to “Staybridge Suites” and “Holiday Inn” hotels and shall not
in any way restrict the ownership, management, franchising or operation of
other brands or flags of any hotels owned or operated by Manager or its
Affiliates within the Restricted Area.

 

(b)                                 Notwithstanding
anything to the contrary in this Agreement, neither Manager nor any Affiliate
shall acquire, own, manage, operate or open any hotel as an “InterContinental”
or “Crowne Plaza” hotel nor shall Manager or any Affiliate authorize a third
party to operate or open any hotel as an “InterContinental” or “Crowne Plaza”
hotel that is within the Restricted Area of any Hotel operated under the same
name during its Restricted Period, unless such hotel (i) is owned or leased

 

85

 

by Owner or its Affiliate; (ii) is owned, operated, managed, franchised
or under development on the Effective Date and has been specifically approved
by Owner in writing at or prior to the time of the execution of the Purchase
Agreement or replaces any such hotel, provided such replacement hotel is not
first opened after such time and does not have more than ten percent (10%) more
guest rooms than the original hotel which it replaces; or (iii) is part of an
acquisition by IHG or its Affiliates of an interest (including an interest as a
franchisor) in a chain or group of not less than five (5) comparable full
service hotels (such acquisition to occur in a single transaction or a series
of related transactions). The terms of this SECTION 24.1(b) shall apply
only to “InterContinental” and “Crowne Plaza” hotels and shall not in any way
restrict the ownership, management, franchising or operation of other brands or
flags of any hotels owned or operated by Manager or its Affiliates within the
Restricted Area.

 

24.2                           ENVIRONMENTAL
MATTERS.

 

(a)                                  Manager shall not
store, release, discharge, spill upon, dispose of or transfer to or from any Hotel
any Hazardous Substance, except for those which are customarily used at other
hotels like the Hotels and are in compliance with all Legal Requirements.
Manager shall maintain the Hotels at all times free of any Hazardous Substance
(except for those which are customarily used at other hotels like the Hotels
and are in compliance with all Legal Requirements). Manager (i) upon receipt of
notice or knowledge thereof shall promptly notify Purchaser and Owner in
writing of any material change in the nature or extent of Hazardous Substances
at any Hotel, (ii) shall file and transmit to Purchaser and Owner a copy of any
Community Right to Know or similar report which is required to be filed with
respect to any Hotel pursuant to the Emergency Planning and Community Right to
Know Act, 42 U.S.C. Section 11001 ET SEQ. or any other Legal Requirements,
(iii) shall transmit to Purchaser and Owner copies of any citations, orders,
notices or other governmental communications received by Manager with respect
to Hazardous Substances or alleged violations of Legal Requirements relating to
the protection of the environment or human health or safety (collectively, “ENVIRONMENTAL
NOTICE”), which Environmental Notice requires a written response or any action
to be taken and/or if such Environmental Notice gives notice of and/or presents
a material risk of any material violation of any Legal Requirement and/or
presents a material risk of any material cost, expense, loss or

 

86

 

damage, (iv) shall observe and comply with all Legal Requirements
relating to the use, storage, maintenance and disposal of Hazardous Substances
and all orders or directives from any official, court or agency of competent jurisdiction
relating to the use, storage or maintenance or requiring the removal,
treatment, containment or other disposition of Hazardous Substances, and (v)
shall pay or otherwise dispose of any fine, charge or imposition related to any
of the foregoing.

 

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

 

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

 

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

 

24.4                           SEVERABILITY.
If any provision of this Agreement shall be held or deemed to be, or shall in
fact be, invalid, inoperative or unenforceable as applied to any particular
case in any jurisdiction or jurisdictions, or in all jurisdictions or in all
cases, because of the conflict of any provision with any

 

87

 

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

 

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

 

24.6                           FORMALITIES.
Any amendment or modification of this Agreement must be in writing signed by
all parties hereto. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original.

 

24.7                           CONSENT
TO JURISDICTION; NO JURY TRIAL.

 

(a)                                  Except as provided in
SECTION 24.20, all actions and proceedings arising out of or in any way
relating to this Agreement shall be brought, heard, and determined exclusively
in an otherwise appropriate federal or state court located within the State of
Maryland. Except as provided in SECTION 24.20, the parties hereby (a)
submit to the exclusive jurisdiction of any Maryland federal or state court of
otherwise competent jurisdiction for the purpose of any action or proceeding
arising out of or relating to this Agreement and (b) voluntarily and
irrevocably waive, and agree not to assert by way of motion, defense, or otherwise
in any such action or proceeding, any claim or defense that they are not
personally subject to the jurisdiction of such a court, that such a court lacks
personal jurisdiction over any party or the matter, that the action or proceeding
has been brought in an inconvenient or improper forum, that the venue of the
action or proceeding is improper, or that this Agreement may not be enforced in
or by such a court. To the maximum extent permitted by applicable law, each
party consents to service of process by registered mail, return receipt
requested, or by any other manner provided by law.

 

88

 

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

 

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

 

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

 

24.10                     SECTION AND
OTHER HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.

 

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

 

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

 

24.13                     NO POLITICAL CONTRIBUTIONS.
Notwithstanding anything contained in this Agreement to the contrary, no money
or property of the Hotels shall be paid or used or offered, nor shall Owner or
Manager directly or indirectly use or offer, consent or agree to use or offer,
any money or property of the Hotels (i) in aid of any political party,
committee or organization, (ii) in aid of any corporation, joint stock or other
association organized or maintained for political purposes, (iii) in aid of any
candidate for political office or

 

89

 

nomination for such office, (iv) in connection with any election, (v)
for any political purpose whatever, or (vi) for the reimbursement or
indemnification of any person for any money or property so used.

 

24.14                     REIT
QUALIFICATION.

 

(a)                                  Manager shall take
all commercially reasonable actions reasonably requested by Owner or Purchaser
for the purpose of qualifying Purchaser’s rental income from Owner under the
Lease as “rents from real property” pursuant to Sections 856(d)(2),
856(d)(8)(B) and 856(d)(9) of the Code. Manager shall not be liable if such
reasonably requested actions, once implemented, fail to have the desired result
of qualifying Purchaser’s rental income from Owner under the Lease as “rents
from real property” pursuant to Sections 856(d)(2), 856(d)(8)(B) and 856(d)(9)
of the Code. This Section 24.14 shall not apply in situations where an
Adverse Regulatory Event has occurred; instead, Section 24.16 shall apply
in such an instance.

 

(b)                                 In the event Owner or
Purchaser wish to invoke the terms of Section 24.14(a), Owner or Purchaser
(as appropriate) shall contact Manager and the parties shall meet with each
other to discuss the relevant issues and to develop a plan for implementing
such reasonably requested actions.

 

(c)                                  Any additional
out-of-pocket costs or expenses incurred by Manager in complying with such a
request shall be borne by Owner (and shall not be an Operating Cost). Owner
shall reimburse Manager for such expense or cost promptly, but not later than
five (5) Business Days after such expense or cost is incurred.

 

24.15                     FURTHER
COMPLIANCE WITH SECTION 856(d) OF THE CODE. Commencing with the
Effective Date and continuing throughout the Term, the Manager shall qualify as
an “eligible independent contractor” as defined in Section 856(d)(9)(A) of
the Code. To that end:

 

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

 

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

 

90

 

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

 

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

 

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

 

(e)                                  Manager, without the
prior consent of Owner, which consent shall not be unreasonably withheld, shall
not permit or suffer:

 

(i)                                     the
Manager to fail to be a limited liability company under state law taxable under
the Code as a disregarded entity of InterContinental Hotels Group Resources,
Inc.;

 

91

 

(ii)                                  InterContinental
Hotels Group Resources, Inc. to fail to be a corporation under state law and
taxable under the Code as an association; or

 

(iii)                               a
direct or indirect subsidiary of InterContinental Hotels Group Resources, Inc.
to become a lessee of property owned by Purchaser or any of its Affiliates.

 

(f)                                    Without the prior
consent of Owner, which consent shall not be unreasonably withheld, the
Canadian Manager and Manager shall not permit:

 

(i)                                     the
Canadian Manager to fail to be a corporation under Canadian provincial law
taxable under the Code as an association;

 

(ii)                                  a
direct or indirect subsidiary of the Canadian Manager to become a lessee of
property owned by Purchaser or any of its Affiliates; or

 

(iii)                               The
Canadian Manager or Manager, for so long as Purchaser or Owner or any Affiliate
as to Purchaser or Owner shall seek to qualify as a “real estate investment
trust” under the Code, to be reorganized, restructured, combined, merged or
amalgamated with any Affiliate (as to Manager or the Canadian Manager) in such
manner that any such Affiliate would, or in Purchaser’s or Owner’s reasonable
judgment could, be expected to adversely affect (including, e.g., by
application of any Person’s actual “disregarded entity” status under the Code)
the status that both Manager and the Canadian Manager have as a Code Section 856(d)(9)(A)
“eligible independent contractor” at a Code Section 856(d)(9)(D) “qualified
lodging facility” owned or leased by Purchaser or Owner.

 

24.16                     ADVERSE
REGULATORY EVENT.

 

(a)                                  In the event of an
Adverse Regulatory Event arising from or in connection with this Agreement,
Owner and Manager shall work together in good faith to amend this Agreement to
eliminate the impact of such Adverse Regulatory Event; PROVIDED, HOWEVER,
Manager shall have no obligation to materially reduce its rights or materially
increase its obligation under this Agreement, all taken as a whole, or to bear
any out-of-pocket costs or expenses under this SECTION 24.16. Manager
shall not be liable if any such amendment, once operative, fails to have

 

92

 

the desired result of eliminating the impact of an Adverse Regulatory
Event.

 

(b)                                 For purposes of this
Agreement, the term “Adverse Regulatory Event” means any time that a new law,
statute, ordinance, code, rule or regulation (but not an administrative or
judicial ruling) imposes, or could impose in Owner’s or Purchaser’s reasonable
opinion, any material threat to HPT’s status as a “real estate investment trust”
under the Code or to the treatment of amounts paid to Purchaser under the Lease
as “rents from real property” under Section 856(d) of the Code.

 

(c)                                  Owner or Purchaser
shall promptly inform Manager of any Adverse Regulatory Event of which it is
aware and which it believes likely to impair compliance of any of the Hotels
with respect to the aforementioned sections of the Code.

 

24.17                     ADVERSE
CANADIAN EVENT. If, as a result of the adoption of, making of or change to any
tax law, tax regulation, tax treaty or official directive or the interpretation
or application thereof by any court or by any Government Agency charged with
the administration thereof or the compliance with any guideline or request of
any Government Agency (whether or not having the force of law) Owner and
Purchaser determine in good faith that it is no longer consistent with their
business goals to continue to own the Canadian Hotels, then, subject to the
terms and conditions of SECTION 4.7, Owner and Purchaser may sell all of
their interest in the Canadian Hotels (either on a pooled basis or
individually). The following shall apply each time Owner and Purchaser desire
to sell a Canadian Hotel under this SECTION 24.17:

 

(a)                                  Owner and Purchaser
shall first offer to sell such Canadian Hotel(s) to Manager, without
representation or warranty, for such purchase price as Owner and Purchaser shall
specify in a written notice given to Manager. In the event that Manager shall
fail to accept or reject such offer within ten (10) Business Days after receipt
of such notice, such offer shall be deemed to be rejected by Manager.

 

(b)                                 If Manager accepts an
offer made with respect to any Canadian Hotel pursuant to this SECTION 24.17,
then effective as of the date of such sale, the following shall apply: (i)
Purchaser shall deliver to Manager with respect to such Transferred Hotel(s) a
deed with covenants against grantor’s acts; (ii) Manager shall deliver to
Purchaser the purchase price specified in the offer; (iii) the Term shall
terminate with respect to such Transferred Hotel(s); (iv) no further Owner’s

 

93

 

Percentage Priority shall accrue with respect to the Gross Revenues of
such Transferred Hotel(s) which accrue after such termination; (v) the Owner’s
First Priority shall be reduced by an amount equal to eight and one half
percent (8.5%) of the net (after taking into account any costs paid by Manager)
proceeds of sale received by Owner or Purchaser; and (vi) the Owner’s Second
Priority shall be reduced by one percent (1.0%) of such net proceeds.

 

(c)                                  If Manager rejects or
is deemed to have rejected any offer made with respect to any Canadian Hotel(s)
pursuant to this SECTION 24.17, then Owner and Purchaser shall have the
right, for a period of one (1) year from the date on which such offer is
rejected or deemed rejected, to sell such Canadian Hotel(s) to any third party
purchaser on such terms and conditions as Owner and Purchaser shall determine
in their sole discretion; PROVIDED, HOWEVER, in no event shall the purchase
price with respect to such Canadian Hotel(s) be less than ninety-five percent
(95%) of the purchase price offered to Manager under this SECTION 24.17.
If Owner and Purchaser fail to consummate the sale of such Canadian Hotel(s)
within one (1) year from the date on which their offer is rejected or deemed
rejected, then Owner and Purchaser shall be obligated again to first offer such
Canadian Hotel(s) to Manager in accordance with this SECTION 24.17 prior
to selling it to any third party. If Owner and Purchaser sell such Canadian
Hotel(s) to any third party in accordance with this SECTION 24.17, then
the following shall apply:

 

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

 

(ii)                                  Simultaneously
with such termination, Manager and the transferee of such Transferred Hotel(s)
or any tenant under a new lease with respect to such Transferred Hotel(s)
(which new lease shall have a term equal to the then unexpired term of the
Lease and shall impose no greater liability, responsibility, or obligation on
Manager than the Lease) shall enter into a new management agreement (a “NEW
MANAGEMENT AGREEMENT”) with Manager on substantially the same terms as this
Agreement except as otherwise provided herein for a term equal to the unexpired
portion of the Term of this Agreement.

 

94

 

(iii)                               Manager,
Owner, Purchaser and the transferee (or its tenant), acting reasonably, shall
allocate amounts in the Reserve Account and the Working Capital between such
Transferred Hotel(s) and the other Hotels. The parties shall also make
reasonable allocations with respect to Owner’s Fixed Priority, and any
outstanding advances made by Owner, Manager or their respective Affiliates.
Only for purposes of allocating Owner’s Fixed Priority between the Transferred
Hotel(s) and the other Hotels, the allocation of Owner’s First Priority and
Owner’s Second Priority for each Hotel shall be proportional to the NOI of such
Hotel(s) for the then most recently ended thirty-six (36) months relative to
the NOI of all the other Hotels for such period. Amounts which are allocated to
the Transferred Hotel(s) shall be transferred to the transferee thereof to be
held by Manager or such transferee (or its tenant) pursuant to the New
Management Agreement.

 

(iv)                              Following
such sale or transfer, Owner, its Affiliates and the Hotels which are not
Transferred Hotel(s) shall have no responsibilities with respect to amounts that
are so transferred and the transferee, its tenant and their Affiliates and the
Transferred Hotel(s) shall have no responsibility with respect to amounts which
are not so transferred.

 

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

 

(vi)                              Owner
shall be responsible to cause its Affiliates, any new tenant and the transferee
to execute and deliver the documents contemplated by this SECTION 24.17 to
be executed and delivered by them.

 

24.18                     COMMERCIAL
LEASES. Manager shall not enter into any sublease with respect to any Hotel (or
any part thereof) unless the same has been approved by Purchaser in its sole
and absolute discretion; PROVIDED, HOWEVER, Manager may sublease or grant
concessions or licenses to shops or any other space at a Hotel subject to the
following terms and conditions: (a) subleases and concessions are for
newsstand, gift shop, parking garage, heath club, restaurant, bar or commissary
purposes or similar concessions; (b) such subleases and concessions do not have
a term in excess of the lesser of five (5) years or the remaining Term under
this Agreement; (c) such subleases and concessions do not demise, (i) in the
aggregate, in excess of

 

95

 

Five Thousand (5,000) square feet of any Hotel, or (ii) for any single
sublease, in excess of One Thousand (1,000) square feet of any Hotel; (d) any
such sublease, license or concession to an Affiliate of a Manager shall be on
terms consistent with those that would be reached through arms-length
negotiation; (e) for so long as Purchaser or any Affiliate of Purchaser shall
seek to qualify as a real estate investment trust under the Code, anything
contained in this Agreement to the contrary notwithstanding, Manager shall not
sublet or otherwise enter into any agreement with respect to a Hotel on any
basis such that in the opinion of the Owner the rental or other fees to be paid
by any sublessee thereunder would be based, in whole or in part, on either (i)
the income or profits derived by the business activities of such sublessee, or
(ii) any other formula such that any portion of such sublease rental would fail
to qualify as “rents from real property” within the meaning of Section 865(d)
of the Code or any similar or successor provision thereto; (f) such lease or
concession will not violate or affect any Legal Requirement or Insurance
Requirement; (g) Manager shall obtain or cause the subtenant to obtain such
additional insurance coverage applicable to the activities to be conducted in
such subleased space as Owner and any mortgagee under an Authorized Mortgage
may reasonably require; and (h) not less than twenty (20) days prior to the date
on which Manager proposes to enter into any sublease or concession, Manager
shall provide a copy thereof to Owner.

 

24.19                     NONLIABILITY
OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING HPT IHG-2 PROPERTIES TRUST,
A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (COLLECTIVELY, THE “DECLARATION”),
IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT, AND MANAGER HEREBY AGREES THAT, THE NAME “HPT IHG-2
PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY
OR SEVERALLY, FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION
OF, OR CLAIM AGAINST, SUCH ENTITY. ALL PERSONS DEALING WITH SUCH ENTITY, IN ANY
WAY, SHALL LOOK ONLY TO THE ASSETS OF SUCH ENTITY FOR THE SATISFACTION OF ANY
OBLIGATION.

 

24.20                     ARBITRATION.

 

(a)                                  Whenever in this
Agreement it is provided that a dispute is to be resolved by an Arbitration,
such dispute shall be finally resolved pursuant to an arbitration before a
panel of three (3) arbitrators who will conduct the arbitration

 

96

 

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

 

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

 

97

 

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

 

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

 

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

 

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

 

24.22                     CONFIDENTIALITY.

 

(a)                                  The parties hereto
agree that the matters set forth in this Agreement and the information provided
pursuant to the terms hereof are strictly confidential and each party will make

 

98

 

every effort to ensure that the information is not disclosed to any
outside person or entities (including the press) without the prior written
consent of the other party except as may be required by law and as may be
reasonably necessary to obtain licenses, permits, and other public approvals
necessary for the refurbishment or operation of the Hotels, or in connection
with financing, proposed financing, sale or proposed sale or as may be required
pursuant to any ground lease of the Hotels.

 

(b)                                 No reference to
Manager or to any of its Affiliates will be made in any prospectus, private
placement memorandum, offering circular or offering documentation related
thereto (collectively referred to as the “PROSPECTUS”), issued by Owner or any
of its Affiliates, which is designated to interest potential investors in a
Hotel, unless Manager has previously received a copy of all such references.
However, regardless of whether Manager does or does not so receive a copy of
all such references, neither Manager nor any of its Affiliates will be deemed a
sponsor of the offering described in the Prospectus, nor will it have any
responsibility for the Prospectus, and the Prospectus will so state. Unless
Manager agrees in advance, the Prospectus will not include any trademark, symbols,
logos or designs of Manager or any of its Affiliates.

 

(c)                                  Notwithstanding
anything to the contrary contained in this Agreement, the parties (and each
employee, representative, or other agent of the parties) may disclose to any
and all persons, without limitation of any kind, the tax treatment and tax
structure of the transaction, and all materials of any kind (including opinions
or other tax analyses) that are provided to the taxpayer relating to such tax
treatment and tax structure; PROVIDED, HOWEVER, that neither party (nor any
employee, representative or other agent thereof) may disclose any information
that is not necessary to understanding the tax treatment and tax structure of
the transaction (including the identity of the parties and any information that
could lead another to determine the identity of the parties), or any other
information to the extent that such disclosure could result in a violation of
any federal or state securities law.

 

24.23                     HOTEL
WARRANTIES. Manager shall be entitled to, and shall, enforce in the name of
Owner, its Affiliates or any of Manager’s Affiliates, any warranties held by
Owner or such Affiliates with respect to the Hotels or any portion thereof.

 

99

 

24.24                     CURRENCY.

 

(a)                                  Except as otherwise
specifically provided herein, each reference herein to any dollar amount is a
reference to such amount of United States dollars. All remittances to Owner
hereunder shall be in United States dollars. To the extent that any amount to
be so remitted to Owner or transferred to the Reserve Account is held by
Manager in another currency, Manager shall exchange such currency to United
States dollars, at the best rates then commercially reasonably available to
Manager at the time of such exchange for such purpose, and all costs of such
exchange shall be an Operating Cost. Manager shall bear no risk or
responsibility and makes herein no covenant of protection to Owner in respect
of exchange rate movements which may work adversely to the interests of Owner
hereunder.

 

(b)                                 All revenues and
expenses of the Hotels which are denominated in a currency other than United
States dollars shall be recorded and reported both in United States dollars and
in the currency(ies) in which such amounts are earned or expended. Such other
currency(ies) shall be converted to United States dollars using a reasonable
method consistent with the Accounting Principles then employed by Manager and
its Affiliates when accounting for foreign currencies.

 

24.25                     INDEPENDENT
COVENANTS. The obligations of each party hereunder shall be separate and
independent covenants and agreements.

 

100

 

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

 

	
   

  	
  OWNER:

  
	
   

  	
   

  
	
   

  	
  HPT TRS IHG-2, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MANAGER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IHG MANAGEMENT (MARYLAND) LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  Robert J. Chitty

  	
   

  
	
   

  	
   

  	
  Robert J. Chitty

  	
   

  
	
   

  	
   

  	
  Vice President

  	
   

  

 

101

 

Each of the parties comprising Purchaser in consideration of good and
valuable consideration, joins in the foregoing Agreement to evidence its
agreement to be bound by the terms of SECTIONS 4.1 through and including 4.7
and ARTICLES 15 and 16 thereof, in each case to the extent applicable to it,
subject to the terms of SECTION 24.19.

 

	
   

  	
  PURCHASER:

  
	
   

  	
  HPT IHG-2 PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HPT IHG GA PROPERTIES LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HPT IHG CANADA PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  President

  	
   

  

 

102

 

	
   

  	
  HH HPTCW II PROPERTIES LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John G. Murray

  	
   

  
	
   

  	
   

  	
  John G. Murray

  	
   

  
	
   

  	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
						

 

103

 

The following exhibits have been omitted and will be supplementally
furnished to the Securities and Exchange Commission upon request:

 

	
  Exhibits

  	
   

  	
  Document

  
	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  The Sites – Legal Description of Land

  
	
   

  	
   

  	
   

  
	
  C

  	
   

  	
  Allocation of Owner’s Fixed Priority

  
	
   

  	
   

  	
   

  
	
  D

  	
   

  	
  Restricted Area

  
	
   

  	
   

  	
   

  
	
  E

  	
   

  	
  Assignment and Assumption of Management
  Agreement between IHG Management (Maryland) LLC and InterContinental Hotels
  Group (Canada), Inc.

  

 

Exhibit B has been reserved and was not used in the document.Exhibit
10.25

 

LEASE AGREEMENT

 

Dated as of February 16,
2005

 

By and Between

 

HPT IHG PR, INC.,

AS LANDLORD,

 

AND

 

INTERCONTINENTAL HOTELS (PUERTO
RICO) INC.,

AS TENANT

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1  DEFINITIONS

  
	
  1.1

  	
   

  	
  Additional Charges

  	
   

  	
   

  	 

	
  1.2

  	
   

  	
  Additional Rent

  	
   

  	
   

  	 

	
  1.3

  	
   

  	
  Affiliate or Affiliated Person

  	
   

  	
   

  	 

	
  1.4

  	
   

  	
  Agreed Upon Procedure Letter

  	
   

  	
   

  	 

	
  1.5

  	
   

  	
  Agreement

  	
   

  	
   

  	 

	
  1.6

  	
   

  	
  Applicable Law

  	
   

  	
   

  	 

	
  1.7

  	
   

  	
  Applicable Percentage

  	
   

  	
   

  	 

	
  1.8

  	
   

  	
  Arbitration

  	
   

  	
   

  	 

	
  1.9

  	
   

  	
  Award

  	
   

  	
   

  	 

	
  1.10

  	
   

  	
  Base Total Hotel Sales

  	
   

  	
   

  	 

	
  1.11

  	
   

  	
  Base Year

  	
   

  	
   

  	 

	
  1.12

  	
   

  	
  Business Day

  	
   

  	
   

  	 

	
  1.13

  	
   

  	
  Capital Addition

  	
   

  	
   

  	 

	
  1.14

  	
   

  	
  Capital Expenditure

  	
   

  	
   

  	 

	
  1.15

  	
   

  	
  Capital Replacements

  	
   

  	
   

  	 

	
  1.16

  	
   

  	
  Claim

  	
   

  	
   

  	 

	
  1.17

  	
   

  	
  Code

  	
   

  	
   

  	 

	
  1.18

  	
   

  	
  Commencement Date

  	
   

  	
   

  	 

	
  1.19

  	
   

  	
  Condemnation

  	
   

  	
   

  	 

	
  1.20

  	
   

  	
  Condemnor

  	
   

  	
   

  	 

	
  1.21

  	
   

  	
  Consumer Price Index

  	
   

  	
   

  	 

	
  1.22

  	
   

  	
  Debt Service Coverage Ratio

  	
   

  	
   

  	 

	
  1.23

  	
   

  	
  Default

  	
   

  	
   

  	 

	
  1.24

  	
   

  	
  Disbursement Rate

  	
   

  	
   

  	 

	
  1.25

  	
   

  	
  Easement Agreement

  	
   

  	
   

  	 

	
  1.26

  	
   

  	
  Entity

  	
   

  	
   

  	 

	
  1.27

  	
   

  	
  Environment

  	
   

  	
   

  	 

	
  1.28

  	
   

  	
  Environmental Laws

  	
   

  	
   

  	 

	
  1.29

  	
   

  	
  Event of Default

  	
   

  	
   

  	 

	
  1.30

  	
   

  	
  Excess Total Hotel Sales

  	
   

  	
   

  	 

	
  1.31

  	
   

  	
  Expiration Date

  	
   

  	
   

  	 

	
  1.32

  	
   

  	
  Extended Terms

  	
   

  	
   

  	 

	
  1.33

  	
   

  	
  FF&E Estimate

  	
   

  	
   

  	 

	
  1.34

  	
   

  	
  FF&E Reserve

  	
   

  	
   

  	 

	
  1.35

  	
   

  	
  Financial Officer’s Certificate

  	
   

  	
   

  	 

	
  1.36

  	
   

  	
  Fiscal Month

  	
   

  	
   

  	 

	
  1.37

  	
   

  	
  Fiscal Year

  	
   

  	
   

  	 

	
  1.38

  	
   

  	
  Fixed Term

  	
   

  	
   

  	 

	
  1.39

  	
   

  	
  Fixtures

  	
   

  	
   

  	 

	
  1.40

  	
   

  	
  GAAP

  	
   

  	
   

  	 

	
  1.41

  	
   

  	
  Government Agencies

  	
   

  	
   

  	 

	
  1.42

  	
   

  	
  Guarantor

  	
   

  	
   

  	 

	
  1.43

  	
   

  	
  Guaranty

  	
   

  	
   

  	 

 

i

 

	
  1.44

  	
   

  	
  Hazardous Substances

  	
   

  	
   

  
	
  1.45

  	
   

  	
  Hotel

  	
   

  	
   

  
	
  1.46

  	
   

  	
  Hotel Mortgage

  	
   

  	
   

  
	
  1.47

  	
   

  	
  Hotel Mortgagee

  	
   

  	
   

  
	
  1.48

  	
   

  	
  IHG

  	
   

  	
   

  
	
  1.49

  	
   

  	
  Impositions

  	
   

  	
   

  
	
  1.50

  	
   

  	
  Insurance Requirements

  	
   

  	
   

  
	
  1.51

  	
   

  	
  Interest Rate

  	
   

  	
   

  
	
  1.52

  	
   

  	
  Land

  	
   

  	
   

  
	
  1.53

  	
   

  	
  Landlord

  	
   

  	
   

  
	
  1.54

  	
   

  	
  Landlord Liens

  	
   

  	
   

  
	
  1.55

  	
   

  	
  Landlords Taxes

  	
   

  	
   

  
	
  1.56

  	
   

  	
  Lease year

  	
   

  	
   

  
	
  1.57

  	
   

  	
  Leased Improvements

  	
   

  	
   

  
	
  1.58

  	
   

  	
  Leased Intangible Property

  	
   

  	
   

  
	
  1.59

  	
   

  	
  Leased Personal Property

  	
   

  	
   

  
	
  1.60

  	
   

  	
  Lien

  	
   

  	
   

  
	
  1.61

  	
   

  	
  Managed Hotels

  	
   

  	
   

  
	
  1.62

  	
   

  	
  Material Repair

  	
   

  	
   

  
	
  1.63

  	
   

  	
  Minimum Rent

  	
   

  	
   

  
	
  1.64

  	
   

  	
  New Management Agreement

  	
   

  	
   

  
	
  1.65

  	
   

  	
  NOI

  	
   

  	
   

  
	
  1.66

  	
   

  	
  Notice

  	
   

  	
   

  
	
  1.67

  	
   

  	
  Officers Certificate

  	
   

  	
   

  
	
  1.68

  	
   

  	
  Operating Costs

  	
   

  	
   

  
	
  1.69

  	
   

  	
  Parent

  	
   

  	
   

  
	
  1.70

  	
   

  	
  Permitted Encumbrances

  	
   

  	
   

  
	
  1.71

  	
   

  	
  Permitted Use

  	
   

  	
   

  
	
  1.72

  	
   

  	
  Person

  	
   

  	
   

  
	
  1.73

  	
   

  	
  Pledged Hotels

  	
   

  	
   

  
	
  1.74

  	
   

  	
  Pooled FF&E Hotel

  	
   

  	
   

  
	
  1.75

  	
   

  	
  Portfolio Manager

  	
   

  	
   

  
	
  1.76

  	
   

  	
  Portfolio Purchaser

  	
   

  	
   

  
	
  1.77

  	
   

  	
  Portfolio Owner

  	
   

  	
   

  
	
  1.78

  	
   

  	
  Property

  	
   

  	
   

  
	
  1.79

  	
   

  	
  Purchase Agreement

  	
   

  	
   

  
	
  1.80

  	
   

  	
  Records

  	
   

  	
   

  
	
  1.81

  	
   

  	
  Rent

  	
   

  	
   

  
	
  1.82

  	
   

  	
  Repairs

  	
   

  	
   

  
	
  1.83

  	
   

  	
  SEC

  	
   

  	
   

  
	
  1.84

  	
   

  	
  Specially Designated or Blocked Person

  	
   

  	
   

  
	
  1.85

  	
   

  	
  State

  	
   

  	
   

  
	
  1.86

  	
   

  	
  Subsidiary

  	
   

  	
   

  
	
  1.87

  	
   

  	
  Successor Landlord

  	
   

  	
   

  

 

ii

 

	
  1.88

  	
   

  	
  System Fees

  	
   

  	
   

  
	
  1.89

  	
   

  	
  Tax Exemption Decree

  	
   

  	
   

  
	
  1.90

  	
   

  	
  Tenant

  	
   

  	
   

  
	
  1.91

  	
   

  	
  Tenant Management Agreement

  	
   

  	
   

  
	
  1.92

  	
   

  	
  Tenant Manager

  	
   

  	
   

  
	
  1.93

  	
   

  	
  Tenant's Personal Property

  	
   

  	
   

  
	
  1.94

  	
   

  	
  Term

  	
   

  	
   

  
	
  1.95

  	
   

  	
  Total Hotel Sales

  	
   

  	
   

  
	
  1.96

  	
   

  	
  Uniform System of Accounts

  	
   

  	
   

  
	
  1.97

  	
   

  	
  Unsuitable for its Permitted Use

  	
   

  	
   

  
	
  1.98

  	
   

  	
  Work

  	
   

  	
   

  
	
  ARTICLE 2  PROPERTY AND TERM

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Property

  	
   

  	
   

  
	
  2.2

  	
   

  	
  Condition of Property

  	
   

  	
   

  
	
  2.3

  	
   

  	
  Fixed Term

  	
   

  	
   

  
	
  2.4

  	
   

  	
  Extended Term

  	
   

  	
   

  
	
  ARTICLE 3  RENT

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Rent

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Late Payment of Rent, Etc

  	
   

  	
   

  
	
  3.3

  	
   

  	
  Net Lease

  	
   

  	
   

  
	
  3.4

  	
   

  	
  No Termination, Abatement, Etc

  	
   

  	
   

  
	
  3.5

  	
   

  	
  Waiver

  	
   

  	
   

  
	
  ARTICLE 4  USE OF THE PROPERTY

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Permitted Use

  	
   

  	
   

  
	
  4.2

  	
   

  	
  Compliance with Legal/Insurance
  Requirements, Etc

  	
   

  	
   

  
	
  4.3

  	
   

  	
  Environmental Matters

  	
   

  	
   

  
	
  ARTICLE 5  MAINTENANCE AND REPAIRS

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Maintenance and Repair

  	
   

  	
   

  
	
  5.2

  	
   

  	
  Tenant’s Personal Property

  	
   

  	
   

  
	
  5.3

  	
   

  	
  At End Of Term

  	
   

  	
   

  
	
  5.4

  	
   

  	
  Tenant Management Agreement

  	
   

  	
   

  
	
  ARTICLE 6  IMPROVEMENTS, ETC

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Material Repairs

  	
   

  	
   

  
	
  6.2

  	
   

  	
  Emergency Expenditures

  	
   

  	
   

  
	
  6.3

  	
   

  	
  No Tie-In

  	
   

  	
   

  
	
  ARTICLE 7  LIENS

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Liens

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Landlord’s Lien

  	
   

  	
   

  
	
  ARTICLE 8  PERMITTED CONTESTS

  	
   

  	
   

  
	
  ARTICLE 9  INSURANCE AND INDEMNIFICATION

  	
   

  	
   

  
	
  9.1

  	
   

  	
  General Insurance Requirements

  	
   

  	
   

  
	
  9.2

  	
   

  	
  Replacement Cost

  	
   

  	
   

  
	
  9.3

  	
   

  	
  Waiver of Subrogation

  	
   

  	
   

  
	
  9.4

  	
   

  	
  Form Satisfactory, Etc

  	
   

  	
   

  
	
  9.5

  	
   

  	
  Blanket Policy

  	
   

  	
   

  

 

iii

 

	
  9.6

  	
   

  	
  No Separate Insurance

  	
   

  	
   

  
	
  9.7

  	
   

  	
  Indemnification of Landlord

  	
   

  	
   

  
	
  ARTICLE 10  CASUALTY

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Insurance Proceeds

  	
   

  	
   

  
	
  10.2

  	
   

  	
  Damage or Destruction

  	
   

  	
   

  
	
  10.3

  	
   

  	
  Damage Near End of Term

  	
   

  	
   

  
	
  10.4

  	
   

  	
  Tenant’s Property

  	
   

  	
   

  
	
  10.5

  	
   

  	
  Restoration of Tenant’s Property

  	
   

  	
   

  
	
  10.6

  	
   

  	
  No Abatement of Rent

  	
   

  	
   

  
	
  10.7

  	
   

  	
  Waiver

  	
   

  	
   

  
	
  ARTICLE 11  CONDEMNATION

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Total Condemnation, Etc

  	
   

  	
   

  
	
  11.2

  	
   

  	
  Partial Condemnation

  	
   

  	
   

  
	
  11.3

  	
   

  	
  Abatement of Rent

  	
   

  	
   

  
	
  11.4

  	
   

  	
  Temporary Condemnation

  	
   

  	
   

  
	
  11.5

  	
   

  	
  Condemnation Near End of Term

  	
   

  	
   

  
	
  11.6

  	
   

  	
  Allocation of Award

  	
   

  	
   

  
	
  ARTICLE 12  DEFAULTS AND REMEDIES

  	
   

  	
   

  
	
  12.1

  	
   

  	
  Events of Default

  	
   

  	
   

  
	
  12.2

  	
   

  	
  Remedies

  	
   

  	
   

  
	
  12.3

  	
   

  	
  Waiver

  	
   

  	
   

  
	
  12.4

  	
   

  	
  Application of Funds

  	
   

  	
   

  
	
  12.5

  	
   

  	
  Landlord’s Right to Cure Tenant’s Default.

  	
   

  	
   

  
	
  ARTICLE 13  HOLDING OVER

  	
   

  	
   

  
	
  ARTICLE 14  LANDLORD’S DEFAULT

  	
   

  	
   

  
	
  ARTICLE 15  SUBLETTING AND ASSIGNMENT.

  	
   

  	
   

  
	
  15.1

  	
   

  	
  Subletting and Assignment

  	
   

  	
   

  
	
  15.2

  	
   

  	
  Required Sublease Provisions

  	
   

  	
   

  
	
  15.3

  	
   

  	
  Permitted Sublease

  	
   

  	
   

  
	
  15.4

  	
   

  	
  Sublease Limitation

  	
   

  	
   

  
	
  15.5

  	
   

  	
  Permitted Assignments

  	
   

  	
   

  
	
  15.6

  	
   

  	
  Sale by Landlord

  	
   

  	
   

  
	
  ARTICLE 16  ESTOPPEL CERTIFICATES

  	
   

  	
   

  
	
  ARTICLE 17  LANDLORD’S RIGHT TO INSPECT

  	
   

  	
   

  
	
  ARTICLE 18  EASEMENTS

  	
   

  	
   

  
	
  18.1

  	
   

  	
  Grant of Easements

  	
   

  	
   

  
	
  18.2

  	
   

  	
  Exercise of Rights by Tenant

  	
   

  	
   

  
	
  18.3

  	
   

  	
  Permitted Encumbrances

  	
   

  	
   

  
	
  ARTICLE 19  HOTEL MORTGAGES

  	
   

  	
   

  
	
  19.1

  	
   

  	
  Landlord May Grant Liens

  	
   

  	
   

  
	
  19.2

  	
   

  	
  Notice to Mortgagee and Superior Landlord

  	
   

  	
   

  
	
  ARTICLE 20  MISCELLANEOUS

  	
   

  	
   

  
	
  20.1

  	
   

  	
  Limitation on Payment of Rent

  	
   

  	
   

  
	
  20.2

  	
   

  	
  No Waiver

  	
   

  	
   

  

 

iv

 

	
  20.3

  	
   

  	
  Remedies Cumulative

  	
   

  	
   

  
	
  20.4

  	
   

  	
  Severability

  	
   

  	
   

  
	
  20.5

  	
   

  	
  Acceptance of Surrender

  	
   

  	
   

  
	
  20.6

  	
   

  	
  No Merger of Title

  	
   

  	
   

  
	
  20.7

  	
   

  	
  Conveyance by Landlord

  	
   

  	
   

  
	
  20.8

  	
   

  	
  Quiet Enjoyment

  	
   

  	
   

  
	
  20.9

  	
   

  	
  Recordation of Lease

  	
   

  	
   

  
	
  20.10

  	
   

  	
  Notices

  	
   

  	
   

  
	
  20.11

  	
   

  	
  Trade Area Restriction

  	
   

  	
   

  
	
  20.12

  	
   

  	
  Construction

  	
   

  	
   

  
	
  20.13

  	
   

  	
  Counterparts; Headings

  	
   

  	
   

  
	
  20.14

  	
   

  	
  Applicable Law, Etc

  	
   

  	
   

  
	
  20.15

  	
   

  	
  Right to Make Agreement

  	
   

  	
   

  
	
  20.16

  	
   

  	
  Nonrecourse

  	
   

  	
   

  
	
  20.17

  	
   

  	
  Attorneys’ Fees

  	
   

  	
   

  
	
  20.18

  	
   

  	
  Securities Filings

  	
   

  	
   

  
	
  20.19

  	
   

  	
  Arbitration

  	
   

  	
   

  
	
  20.20

  	
   

  	
  Tax Exemption Decree

  	
   

  	
   

  
	
  20.21

  	
   

  	
  Cooperation

  	
   

  	
   

  
	
  20.22

  	
   

  	
  Private Letter Ruling

  	
   

  	
   

  
	
  20.23

  	
   

  	
  Affiliated Manager

  	
   

  	
   

  
	
  20.24

  	
   

  	
  Enforceability Not Affected by Leased Real Property

  	
   

  	
   

  

 

v

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT is entered into as of
this 16th day of February, 2005, by and between HPT IHG PR, INC., a Puerto Rico
corporation, as landlord (“LANDLORD”), and INTERCONTINENTAL HOTELS (PUERTO
RICO) INC., a Puerto Rico corporation, as tenant (“TENANT”).

 

WITNESSETH:

 

WHEREAS, Landlord owns or leases the Property
(this and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in ARTICLE 1); and

 

WHEREAS, Landlord wishes to lease the
Property to Tenant and Tenant wishes to lease the Property from Landlord, all
subject to and upon the terms and conditions herein set forth;

 

NOW, THEREFORE, in consideration of the
mutual covenants herein contained and other good and valuable consideration,
the mutual receipt and legal sufficiency of which are hereby acknowledged,
Landlord and Tenant hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, (i) the
terms defined in this Article shall have the meanings assigned to them in
this Article and include the plural as well as the singular, (ii) all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in accordance with GAAP, (iii) all references in this Agreement to
designated “Articles,” “Sections” and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Agreement, and (iv) the words
“herein,” “hereof,” “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision.

 

1.1                                 “ADDITIONAL
CHARGES” shall have the meaning given such term in SECTION 3.1.3 (a).

 

1.2                                 “ADDITIONAL
RENT” shall have the meaning given such term in SECTION 3.1.2 (a).

 

 

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

 

1.4                                 “AGREED
UPON PROCEDURE LETTER” shall mean a letter from Ernst & Young or another
firm of independent certified public accountants (the “auditor”) selected by
Tenant and approved by Landlord (which approval shall not be unreasonably
withheld or delayed) which letter shall, subject to the limitations and
conditions imposed by the auditor, address the following components and such
other reasonable matters as Landlord and the auditor shall reasonably agree: 

 

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

 

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

 

(c)                                  That
auditor has verified the mathematical accuracy of the Officer’s Certificate
delivered with such Agreed Upon Procedure Letter.

 

(d)                                 That
auditor has recomputed the annual calculation of System Fees, contributions to
the FF&E Reserve, expenditures from the FF&E Reserve, and the
Additional Rent.

 

(e)                                  That
auditor has confirmed that the Hotel is subjected to audit procedures by Tenant’s
internal audit department, if any, and reviewed work papers provided in
connection therewith. If auditor has performed hotel level audit procedures at
the Hotel, auditor shall so state and list the procedures performed and results
obtained. In any event at least three of the Pooled FF&E Hotels shall be
subjected to audit procedures each Fiscal Year by either internal audit or the
auditor. 

 

2

 

1.5                                 “AGREEMENT”
shall mean this Lease Agreement, including the Exhibits attached hereto, as it
and they may be amended from time to time as herein provided.

 

1.6                                 “APPLICABLE
LAW” shall mean all federal, State, county, municipal, local and other governmental
statutes, laws, rules, orders, regulations, by-laws, ordinances, judgments,
decrees and injunctions affecting the Property, Landlord, or Tenant or the
maintenance, construction, alteration or operation of the Property, whether now
or hereafter enacted or in existence, including, without limitation, (a)
Environmental Laws, (b) all permits, licenses, authorizations, certificates and
regulations necessary to operate the Property for its Permitted Use, (c) all
covenants, agreements, ground leases, restrictions and encumbrances contained
in any instruments at any time in force affecting the Property, including those
which may (i) require material repairs, modifications or alterations in or to
the Property or (ii) in any way materially and adversely affect the use and
enjoyment thereof, but excluding any requirements arising as a result of
Landlord’s status as a real estate investment trust, (d) the Tax Exemption
Decree, the Puerto Rico Tourism Development Act of 1993 and the regulations
thereunder, (e) the outcome of any arbitration, or (f) any collective
bargaining agreement or other agreement or legal requirement pertaining to any
union representing employees of the Hotel.

 

1.7                                 “APPLICABLE
PERCENTAGE” shall mean the following percentages for the corresponding periods:

 

	
  Year

  	
   

  	
  Rate

  	
   

  
	
  2005

  	
   

  	
  0

  	
  %

  
	
  2006

  	
   

  	
  0

  	
  %

  
	
  2007

  	
   

  	
  3.0

  	
  %

  
	
  2008

  	
   

  	
  3.5

  	
  %

  
	
  2009

  	
   

  	
  4.0

  	
  %

  
	
  2010

  	
   

  	
  4.5

  	
  %

  
	
  Thereafter

  	
   

  	
  5.0

  	
  %

  

 

1.8                                 “ARBITRATION”
shall mean an arbitration conducted in accordance with the terms of SECTION 20.19.

 

1.9                                 “AWARD”
shall mean all compensation, sums or other value awarded, paid or received by
virtue of a total or partial Condemnation of any of the Property (after
deduction of all reasonable legal fees and other reasonable costs and expenses,

 

3

 

including, without limitation, expert witness fees, incurred by
Landlord in connection with obtaining any such award).

 

1.10                           “BASE
TOTAL HOTEL SALES” shall mean Total Hotel Sales for the Base Year.

 

1.11                           “BASE
YEAR” shall mean the 2006 Fiscal Year; PROVIDED, HOWEVER, if there shall occur
a casualty, Condemnation or other force majeure event with respect to the Hotel
which causes a material decline in Total Hotel Sales for the Hotel or a force
majeure event in Canada, the United States or Caribbean region or in any
relevant market that results in a ten percent (10%) annual decline in REVPAR
for the Upscale segment or other appropriate segment, as determined by Smith
Travel Research, in Canada, the United States or Caribbean region or in the
relevant market, which, in either case, causes a material decline in Total
Hotel Sales for the Hotel for the 2006 Fiscal Year, the Base Year shall be
adjusted to be the first full Fiscal Year of operation of the Hotel after the
resolution of any such casualty, Condemnation or force majeure event and the
return of the Hotel to its substantially normal status. 

 

1.12                           “BUSINESS
DAY” shall mean any day other than Saturday, Sunday, or any other day on which
banking institutions in The Commonwealth of Massachusetts or the State of New
York are authorized by law or executive action to close.

 

1.13                           “CAPITAL
ADDITION” shall mean any renovation, repair or improvement to the Property (or
portion thereof), the cost of which constitutes a Capital Expenditure.

 

1.14                           “CAPITAL
EXPENDITURE” shall mean any expenditure treated as capital in nature in
accordance with GAAP.

 

1.15                           “CAPITAL
REPLACEMENTS” shall mean, collectively, replacements and renewals to the
FF&E and Capital Additions.

 

1.16                           “CLAIM”
shall mean any claim, charge, lien, attachment, levy or encumbrance.

 

1.17                           “CODE”
shall mean the Internal Revenue Code of 1986 and, to the extent applicable, the
Treasury Regulations promulgated thereunder, each as from time to time amended,
and any reference to any statutory or regulatory provision shall be deemed to
be a reference to any successor statutory or regulatory provision. 

 

4

 

1.18                           “COMMENCEMENT
DATE” shall mean the date of this Agreement.

 

1.19                           “CONDEMNATION”
shall mean (a) the exercise of any governmental power with respect to the
Property, whether by legal proceedings or otherwise, by a Condemnor of its
power of condemnation, (b) a voluntary sale or transfer of the Property by
Landlord to any Condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending, or (c) a taking or voluntary
conveyance of all or part of the Property, or any interest therein, or right
accruing thereto or use thereof, as the result or in settlement of any condemnation
or other eminent domain proceeding affecting such Property, whether or not the
same shall have actually been commenced.

 

1.20                           “CONDEMNOR”
shall mean any public or quasi-public Person, having the power of Condemnation.

 

1.21                           “CONSUMER
PRICE INDEX” shall mean the Consumer Price Index for all Urban Consumers, U.S.
City Average, published by the United States Bureau of Labor Statistics or if
such index is no longer published, such other index as is published in
substitution thereof.

 

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

 

1.23                           “DEFAULT”
shall mean any event or condition which with the giving of notice and/or lapse
of time would ripen into an Event of Default.

 

1.24                           “DISBURSEMENT
RATE” shall mean a per annum rate equal to the greater of (x) nine (9%) percent
and (y) the sum of the rate for fifteen (15) year U.S. Treasury Obligations, as
published in THE WALL STREET JOURNAL, plus three hundred eighty (380) basis
points.

 

1.25                           “EASEMENT
AGREEMENT” shall mean any conditions, covenants and restrictions, easements,
declarations, licenses and other agreements which are Permitted Encumbrances
and such

 

5

 

other agreements as may be granted in accordance with SECTION 19.1.

 

1.26                           “ENTITY”
shall mean any corporation, general or limited partnership, limited liability
company or partnership, stock company or association, joint venture,
association, company, trust, bank, trust company, land trust, business trust,
cooperative, any government or agency, authority or political subdivision thereof
or any other entity.

 

1.27                           “ENVIRONMENT”
shall mean soil, surface waters, ground waters, land, biota, sediments, surface
or subsurface strata and ambient air.

 

1.28                           “ENVIRONMENTAL
LAWS” shall mean all applicable laws, statutes, regulations, rules, ordinances,
codes, licenses, permits and orders, from time to time in existence, of all
courts of competent jurisdiction and Government Agencies, and all applicable
judicial and administrative and regulatory decrees, judgments and orders,
including common law rulings and determinations, relating to injury to, or the
protection of, real or personal property or human health or the Environment,
including, without limitation, all valid and lawful requirements of courts and
other Government Agencies pertaining to reporting, licensing, permitting,
investigation, remediation and removal of underground improvements (including,
without limitation, treatment or storage tanks, or water, gas or oil wells), or
emissions, discharges, releases or threatened releases of Hazardous Substances,
chemical substances, pesticides, petroleum or petroleum products, pollutants,
contaminants or hazardous or toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, into the Environment, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, underground improvements
(including, without limitation, treatment or storage tanks, or water, gas or
oil wells), or pollutants, contaminants or hazardous or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature.

 

1.29                           “EVENT
OF DEFAULT” shall have the meaning given such term in SECTION 12.1.

 

1.30                           “EXCESS
TOTAL HOTEL SALES” shall mean with respect to any Lease Year, or portion
thereof, the amount of Total Hotel Sales for such Property for such Lease Year,
or portion thereof, in excess of Base Total Hotel Sales for the equivalent
period in the Base Year.

 

6

 

1.31                           “EXPIRATION
DATE” shall mean the date on which the Term shall expire.

 

1.32                           “EXTENDED
TERMS” shall have the meaning given such term in SECTION 2.4.

 

1.33                           “FF&E
ESTIMATE” shall have the meaning given such term in SECTION 5.1.2 (c).

 

1.34                           “FF&E
RESERVE” shall mean an interest-bearing account established for funds to be
held in reserve for Capital Replacements in Landlord’s name at a bank selected
by Landlord.

 

1.35                           “FINANCIAL
OFFICER’S CERTIFICATE” shall mean, as to any Person, a certificate of the chief
executive officer, chief financial officer or chief accounting officer (or such
officers’ authorized designee) of such Person, duly authorized, accompanying
the financial statements required to be delivered by such Person pursuant to
SECTIONS 3.1.2 or 5.3, in which such officer shall certify (a) that such
statements have been properly prepared in accordance with GAAP and are true,
correct and complete in all material respects and fairly present the
consolidated financial condition of such Person at and as of the dates thereof
and the results of its and their operations for the periods covered thereby,
and (b) in the event that the certifying party is an officer of Tenant and the
certificate is being given in such capacity, certify that no Event of Default
has occurred and is continuing hereunder.

 

1.36                           “FISCAL
MONTH” shall mean each calendar month in the Term or each partial calendar
month in the Term.

 

1.37                           “FISCAL
YEAR” shall mean each calendar year in the Term and each partial calendar year
in the Term.

 

1.38                           “FIXED
TERM” shall have the meaning given such term in SECTION 2.3.

 

1.39                           “FIXTURES”
shall have the meaning given such term in SECTION 2.1(d).

 

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

 

1.41                           “GOVERNMENT
AGENCIES” shall mean any court, agency, authority, board (including, without
limitation, environmental protection, planning and zoning, and the Puerto Rico
Tourism

 

7

 

Company), bureau, commission, department, office or instrumentality of
any nature whatsoever of any governmental or quasi-governmental unit of the
United States, or any State, municipality, county or any political subdivision
of any of the foregoing, whether now or hereafter in existence, having
jurisdiction over Tenant or the Property or any portion thereof or the Hotel
operated thereon.

 

1.42                           “GUARANTOR”
shall have the meaning given to the term “Guarantor” under the Guaranty.

 

1.43                           “GUARANTY”
shall mean the Guaranty Agreement of even date herewith made by IHG for the
benefit of, INTER ALIA, Landlord, as the same may be amended, supplemented or
replaced from time to time.

 

1.44                           “HAZARDOUS
SUBSTANCES” shall mean any substance:

 

(a)                                  the
presence of which requires or may hereafter require notification, investigation
or remediation under Applicable Law; or

 

(b)                                 which
is or becomes defined as a “hazardous waste,” “hazardous material” or “hazardous
substance” or “pollutant” or “contaminant” under Applicable Law including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and the
regulations promulgated thereunder; or

 

(c)                                  which
is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by
any Government Agencies; or

 

(d)                                 the
presence of which on the Property, or any portion thereof, causes or materially
threatens to cause an unlawful nuisance upon the Property, or any portion
thereof, or to adjacent properties or poses or materially threatens to pose a
hazard to the Property, or any portion thereof, or to the health or safety of
persons; or

 

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

 

8

 

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

 

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

 

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

 

1.45                           “HOTEL”
shall mean the hotel being operated on the Property.

 

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

 

1.47                           “HOTEL
MORTGAGEE” shall mean the holder of the Hotel Mortgage.

 

1.48                           “IHG”
shall mean InterContinental Hotels Group PLC, its successors and assigns.

 

1.49                           “IMPOSITIONS”
shall mean collectively, all taxes (including, without limitation, all taxes
imposed under the laws of any State, as such laws may be amended from time to
time, and all ad valorem, sales and use, or similar taxes as the same relate to
or are imposed upon Landlord (or its shareholders), Tenant or the business
conducted upon the Property), assessments (including, without limitation, all
assessments for public improvements or benefit, whether or not commenced or
completed prior to the date hereof), water, sewer or other rents and charges,
excises, tax levies, fees (including, without limitation, license, volume of
business taxes, permit, inspection, authorization and similar fees), and all
other governmental charges, in each case whether general or special, ordinary
or extraordinary, or foreseen or unforeseen, of every character in respect of
the Property or the business conducted

 

9

 

thereon by Tenant (including all interest and penalties thereon due to
any failure in payment by Tenant), which at any time prior to, during or in
respect of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon (a) Landlord’s interest in the Property, (b) the Property or any
part thereof or any rent therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with the Property or the leasing or
use of the Property or any part thereof by Tenant; PROVIDED, HOWEVER, the term “Impositions”
shall not include (i) Landlord’s Taxes or (ii) any construction license tax or
excise tax attributable to items to be used in or with respect to Capital
Replacements which shall be a part of the cost of Capital Replacements.

 

1.50                           “INSURANCE
REQUIREMENTS” shall mean all terms of any insurance policy required by this
Agreement and all requirements of the issuer of any such policy and all orders,
rules and regulations and any other requirements of the National Board of Fire
Underwriters (or any other body exercising similar functions) binding upon
Landlord, Tenant or the Property.

 

1.51                           “INTEREST
RATE” shall mean a rate, not to exceed the maximum legal interest rate, equal
to the greater of (i) twelve percent (12%) per annum and (ii) two and one-half
percent (2.5%) per annum in excess of the Disbursement Rate determined as of
the first day that interest accrues on any amount to which such Interest Rate
is to be applied.

 

1.52                           “LAND”
shall have the meaning given such term in SECTION 2.1(a).

 

1.53                           “LANDLORD”
shall have the meaning given such term in the preambles to this Agreement and
shall also include its permitted successors and assigns.

 

1.54                           “LANDLORD
LIENS” shall mean liens on or against the Property or any payment of Rent (a)
which result from any act of, or any Claim against, Landlord or any owner of a
direct or indirect interest in the Property, or which result from any violation
by Landlord of any terms of this Agreement or the Purchase Agreement, or (b)
which result from liens in favor of any taxing authority by reason of any tax
owed by Landlord or any fee owner of a direct or indirect interest in the
Property; PROVIDED, HOWEVER, that “LANDLORD LIENS” shall not include any lien
resulting from any tax for which Tenant is obligated to pay or indemnify
Landlord against until such time as Tenant shall

 

10

 

have already paid to or on behalf of Landlord the tax or the required
indemnity with respect to the same.

 

1.55                           “LANDLORD’S
TAXES” shall mean any of the following, collectively, (a) any tax based on net
income imposed on Landlord or its shareholders, (b) any gross or net revenue
tax of Landlord or its shareholders, (c) any transfer fee or other tax imposed
with respect to the sale, exchange or other disposition by Landlord of the
Property or the proceeds thereof, (d) any single business tax, gross receipts
tax (including, without limitation, the Puerto Rico municipal license tax),
transaction privilege, rent, franchise, capital stock or similar taxes as the
same relate to or are imposed upon Landlord or its shareholders, (e) any
interest or penalties imposed on Landlord as a result of the failure of Landlord
to file any return or report timely and in the form prescribed by law or to pay
any tax or imposition, except to the extent such failure is a result of a
breach by Tenant of its obligations pursuant to SECTION 3.1.3, (f) any impositions
that are enacted or adopted by their express terms as a substitute for any tax
that would not have been payable by Tenant pursuant to the terms of this
Agreement or (g) any impositions imposed as a result of a breach of covenant or
representation by Landlord in any agreement governing Landlord’s conduct or
operation or as a result of the gross negligence or willful misconduct of
Landlord; PROVIDED, HOWEVER, the term Landlord Taxes shall not include any
construction license tax or excise tax attributable to items to be used in or
with respect to Capital Replacements which shall be a part of the cost of
Capital Replacements.

 

1.56                           “LEASE
YEAR” shall mean any Fiscal Year or portion thereof, commencing with the 2005
Fiscal Year, during the Term.

 

1.57                           “LEASED
IMPROVEMENTS” shall have the meaning given such term in SECTION 2.1(b).

 

1.58                           “LEASED
INTANGIBLE PROPERTY” shall mean the following items of intangible property: all
hotel licensing agreements and other service contracts, equipment leases,
booking agreements and other arrangements or agreements affecting the
ownership, repair, maintenance, management, leasing or operation of the
Property to which Landlord is a party; all books, records and files relating to
the leasing, maintenance, management or operation of the Property belonging to
Landlord; all transferable or assignable permits, certificates of occupancy,
operating permits, sign permits, development rights and approvals, certificates,
licenses, warranties and guarantees, rights to deposits, trade names, service
marks, telephone

 

11

 

exchange numbers identified with the Property, and all other
transferable intangible property, miscellaneous rights, benefits and privileges
of any kind or character belonging to Landlord with respect to the Property
other than liquor licenses; provided, however, that “Leased Intangible Property”
shall not include items that are acquired by Tenant on and after the date
hereof or owned by Tenant before the date hereof, in either case to the extent
not conveyed to Landlord.

 

1.59                           “LEASED
PERSONAL PROPERTY” shall have the meaning given such term in SECTION 2.1(e).

 

1.60                           “LIEN”
shall mean any mortgage, security interest, pledge, collateral assignment, or
other encumbrance, lien or charge of any kind, or any transfer of property or
assets for the purpose of subjecting the same to the payment of indebtedness or
performance of any other obligation in priority to payment of its general
creditors.

 

1.61                           “MANAGED
HOTELS” has the meaning given to the term “Hotels” in the New Management
Agreement.

 

1.62                           “MATERIAL
REPAIR” shall mean a repair the cost of which exceeds $250,000; PROVIDED,
HOWEVER, on January 1 of each year starting in 2006, said $250,000 shall
be adjusted to reflect the percentage change in the Consumer Price Index since
the prior January 1.

 

1.63                           “MINIMUM
RENT” shall mean (i) for the period prior to January 1, 2006, an annual
amount equal to Five Million Eight Hundred Twelve Thousand Five Hundred Dollars
($5,812,500), and (ii) for the period after January 1, 2006, an annual
amount equal to Six Million One Hundred Thirty-One Thousand Two Hundred Fifty
Dollars ($6,131,250).

 

1.64                           “NEW
MANAGEMENT AGREEMENT” has the meaning given such term in the Guaranty.

 

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

 

12

 

1.66                           “NOTICE”
shall mean a notice given in accordance with SECTION 20.10.

 

1.67                           “OFFICER’S
CERTIFICATE” shall mean a certificate signed by an officer or other duly
authorized individual of the certifying Entity duly authorized by the board of
directors or other governing body of the certifying Entity.

 

1.68                           “OPERATING
COSTS” shall mean, collectively, all reasonable and customary costs and
expenses of the Hotel that are normally charged as an operating expense under
GAAP including, without limitation or duplication:

 

(a)                                  the
cost of Inventories (as defined under the Uniform System of Accounts), wages,
salaries and employee fringe benefits, advertising and promotional expenses,
the cost of personnel training programs, utility and energy costs, operating
licenses and permits, maintenance costs, and equipment rentals;

 

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

 

(c)                                  premiums
for insurance required under this Agreement;

 

(d)                                 the
System Fees;

 

(e)                                  real
estate and personal property taxes and expenses;

 

(f)                                    audit,
legal and accounting fees and expenses except to the extent Tenant is to
reimburse Landlord therefor pursuant to SECTION 3.1.2 (f);

 

(g)                                 rent
or lease payments under ground leases or for equipment used at the Hotel in the
operation thereof; and

 

(h)                                 Minimum
Rent, Additional Rent and Additional Charges.

 

Except as expressly provided herein,
Operating Costs shall not include any fees or charges payable to Tenant, Tenant
Manager or any of their Affiliates or any items corresponding to

 

13

 

exclusions from Total Hotel Sales (e.g., sales taxes) or items
otherwise expressly excluded from Operating Costs.

 

1.69                           “PARENT”
shall mean, with respect to any Person, any Person which owns directly, or
indirectly through one or more Subsidiaries or Affiliated Persons, fifty
percent (50%) or more of the voting or beneficial interest in, or otherwise has
the right or power (whether by contract, through ownership of securities or
otherwise) to control, such Person.

 

1.70                           “PERMITTED
ENCUMBRANCES” shall mean all rights, restrictions, and easements of record set
forth on Schedule B to the applicable owner’s or leasehold title insurance
policy issued to Landlord or its Affiliate in connection with the transactions
contemplated by the Purchase Agreement with respect to such Property, plus any
other encumbrances as may be “Permitted Encumbrances” under the Purchase
Agreement or as may have been consented to in writing by Landlord and Tenant
from time to time.

 

1.71                           “PERMITTED
USE” shall mean, with respect to the Property, any use of such Property
permitted pursuant to SECTION 4.1.1.

 

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

 

1.73                           “PLEDGED
HOTELS” shall mean, with respect to any loan or other debt secured by a Hotel
Mortgage, collectively, the hotels which secure such loan or other debt.

 

1.74                           “POOLED
FF&E HOTEL” shall mean the Property and, so long as Landlord and Portfolio
Purchaser are Affiliates of each other, the Managed Hotels, collectively.

 

1.75                           “PORTFOLIO
MANAGER” shall have the meaning given to the term “Manager” in the New
Management Agreement and shall include the “Canadian Manager” thereunder.

 

1.76                           “PORTFOLIO
PURCHASER” shall have the meaning given to the term “Purchaser” in the New
Management Agreement.

 

1.77                           “PORTFOLIO
OWNER” shall have the meaning given to the term “Owner” under the New
Management Agreement.

 

14

 

1.78                           “PROPERTY”
shall have the meaning given such term in SECTION 2.1.

 

1.79                           “PURCHASE
AGREEMENT” shall mean that certain Amended and Restated Stock Purchase
Agreement pursuant to which an Affiliate of Landlord acquired the stock of the
corporation that owns the Hotel from an Affiliate of Tenant.

 

1.80                           “RECORDS”
shall have the meaning given such term in SECTION 7.2.

 

1.81                           “RENT”
shall mean, collectively, the Minimum Rent, Additional Rent and Additional
Charges.

 

1.82                           “REPAIRS”
shall have the meaning given such term in SECTION 5.1.1.

 

1.83                           “SEC”
shall mean the United States Securities and Exchange Commission.

 

1.84                           “SPECIALLY
DESIGNATED OR BLOCKED PERSON” shall mean (i) a Person designated by the US
Department of Treasury’s Office of Foreign Assets Control from time to time as
a “specially designated national or blocked person” or similar status, (ii) a
Person described in Section 1 of the US Executive Order 13224, issued September 23,
2001, or (iii) a Person otherwise identified by Government Agencies as a person
or entity with which Landlord or Tenant is prohibited from transacting
business. As of the Commencement Date, a list of such designations and the text
of the Executive Order are published at: www.ustreas.gov/offices/enforcement/ofac.

 

1.85                           “STATE”
shall mean the Commonwealth of Puerto Rico.

 

1.86                           “SUBSIDIARY”
shall mean, with respect to any Person, any Entity (a) in which such Person
owns directly, or indirectly through one or more Subsidiaries, twenty percent
(20%) or more of the voting or beneficial interest or (b) which such Person
otherwise has the right or power to control (whether by contract, through
ownership of securities or otherwise).

 

1.87                           “SUCCESSOR
LANDLORD” shall have the meaning given such term in SECTION 19.1.

 

1.88                           “SYSTEM
FEES” shall mean a reservation and marketing fee of three percent (3.0%) of
rooms revenue, (ii) a Priority Club Fee of four and three-quarters percent
(4.75%) of all qualifying folio revenue at a Hotel to Priority Club (i.e., the

 

15

 

loyalty program of the “INTERCONTINENTAL” brand) members, (iii) a
Technology Fee equal to $10.80 per guest room per month, (iv) an e-mail service
fee equal to $15.00 per e-mail user per month and (v) an accounting fee of
$15.00 per month per guest room, which fees shall be subject to increases on
the terms and conditions that the corresponding fees under the New Management
Agreement are subject to increase thereunder.

 

1.89                           “TAX
EXEMPTION DECREE” shall mean the concession dated December 15, 2004 and
issued by the Puerto Rico Tourism Company to Landlord (or its predecessor in
name), as the same may be amended, replaced, renewed, split, bifurcated and/or
supplemented from time to time.

 

1.90                           “TENANT”
shall have the meaning given such term in the preambles to this Agreement and
shall also include its permitted successors and assigns.

 

1.91                           “TENANT
MANAGEMENT AGREEMENT” shall mean any management agreement entered into by
Tenant with respect to all or any portion of the Property, together with all
amendments, modifications and supplements thereto.

 

1.92                           “TENANT
MANAGER” shall mean any manager under a Tenant Management Agreement.

 

1.93                           “TENANT’S
PERSONAL PROPERTY” shall mean all motor vehicles and consumable inventory and
supplies, furniture, furnishings, movable walls and partitions, equipment and
machinery and all other tangible personal property of Tenant, if any, acquired
by Tenant on and after the date hereof or owned by Tenant before the date
hereof (in each case, if not conveyed to Landlord), and located at the Property
or used in Tenant’s business at the Property and all modifications,
replacements, alterations and additions to such personal property installed at
the expense of Tenant, other than any items included within the definition of
Fixtures or Leased Personal Property or which are to be paid for with amounts
in the FF&E Reserve.

 

1.94                           “TERM”
shall mean, collectively, the Fixed Term and the Extended Terms, to the extent
properly exercised pursuant to the provisions of SECTION 2.4, unless
sooner terminated pursuant to the provisions of this Agreement.

 

1.95                           “TOTAL
HOTEL SALES” shall mean for any period all revenues and receipts of any nature
derived directly or indirectly from the Hotel or from the use or operation
thereof, including, without limitation, room sales; food and beverage

 

16

 

sales; gaming revenues determined in accordance with industry
standards; telephone, telegraph, fax and internet revenues; rental or other
payments from lessees, sublessees, concessionaires and others occupying or
using space or rendering services at the Hotel (but not the gross receipts of
such lessees, sublessees or concessionaires); and the actual cash proceeds of
business interruption, use, occupancy or similar insurance; PROVIDED, HOWEVER,
that Total Hotel Sales shall not include the following (and there shall be
appropriate deductions made in determining Total Hotel Sales for): gratuities
or service charges in the nature of a gratuity added to a customer’s bill;
federal, State or municipal excise, value added, sales or use taxes, room
taxes, or any other taxes collected directly from patrons or guests or included
as part of the sales price of any goods or services; the State’s share of slot
machine revenue at the Hotel; interest received or accrued with respect to the
funds in the FF&E Reserve; any refunds, rebates, discounts and credits of a
similar nature, given, paid or returned in the course of obtaining Total Hotel
Sales or components thereof; insurance proceeds (other than proceeds from
business interruption or other loss of income insurance); condemnation proceeds
(other than for a temporary taking); credits or refunds made to customers,
guests or patrons; sums and credits received by Landlord for lost or damaged
merchandise; proceeds from the sale or other disposition of the Hotel, any part
thereof, of FF&E or any other assets of the Hotel; or proceeds of any
financing or re-financing; and any other matters specifically excluded from
Total Hotel Sales pursuant to this Agreement.

 

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

 

1.97                           “UNSUITABLE
FOR ITS PERMITTED USE” shall mean a state or condition of the Hotel such that
(a) following any damage or destruction to the Hotel, the Hotel cannot be
operated in the good faith judgment of Tenant or Landlord on a commercially
practicable basis and it cannot reasonably be expected to be restored to
substantially the same condition as existed immediately before such damage or
destruction and otherwise as required under SECTION 10.2.4 hereof, within
twelve (12) months following such damage or destruction or such shorter period
of time as to which business interruption insurance is available to cover Rent
and other costs related to the Hotel

 

17

 

following such damage or destruction, or (b) as the result of a partial
taking by Condemnation, the Hotel cannot be operated, in the good faith
judgment of Tenant or Landlord, on a commercially practicable basis in light of
then existing circumstances.

 

1.98                           “WORK”
shall have the meaning given such term in SECTION 10.2.4.

 

ARTICLE 2

 

PROPERTY AND TERM

 

2.1                                 PROPERTY.
Upon and subject to the terms and conditions hereinafter set forth, Landlord
leases to Tenant and Tenant leases from Landlord all of Landlord’s right, title
and interest in and to all of the following, collectively, the “PROPERTY”):

 

(a)                                  those
certain tracts, pieces and parcels of land, as more particularly described in
EXHIBIT A attached hereto and made a part hereof (the “LAND”);

 

(b)                                 all
buildings, structures and other improvements of every kind including, but not
limited to, alleyways and connecting tunnels, sidewalks, utility pipes,
conduits and lines (on-site and off-site), parking areas and roadways
appurtenant to such buildings and structures presently situated upon the Land
(collectively, the “LEASED IMPROVEMENTS”);

 

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

 

(d)                                 all
equipment, machinery, fixtures, and other items of property, now or hereafter
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning systems
and apparatus, sprinkler systems and fire and theft protection equipment, all
of which, to the maximum extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically excluding
all items included within the category of Tenant’s Personal Property
(collectively, the “FIXTURES”);

 

18

 

(e)                                  all
machinery, equipment, furniture, furnishings, moveable walls or partitions,
computers or trade fixtures or other personal property of any kind or
description used or useful in Tenant’s business on or in the Leased
Improvements, and located on or in the Leased Improvements, and all modifications,
replacements, alterations and additions to such personal property, except
items, if any, included within the category of Fixtures, but specifically
excluding all items included within the category of Tenant’s Personal Property
(collectively, the “LEASED PERSONAL PROPERTY”);

 

(f)                                    all
of the Leased Intangible Property; and

 

(g)                                 any
and all leases of space in the Leased Improvements.

 

2.2                                 CONDITION
OF PROPERTY. Tenant acknowledges receipt and delivery of possession of the
Property and Tenant accepts the Property in its “as is” condition, subject to
the rights of parties in possession, the existing state of title, including all
covenants, conditions, restrictions, reservations, mineral leases, easements
and other matters of record or that are visible or apparent on the Property,
all Applicable Law, and such other matters which would be disclosed by an
inspection of the Property and the record title thereto or by an accurate
survey thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE PROPERTY AND ALL OF
THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD’S AGENTS OR
EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD
IN RESPECT OF THE CONDITION OF THE PROPERTY. LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY
TENANT. Tenant knowingly and expressly waives the warranties against latent and
hidden defects implied by the Civil Code of Puerto Rico upon lessors of real
property with respect to the lease of real property, including, but not limited
to warranties for hidden defects implied under Articles 1363(2) and 1373 of the
Civil Code of Puerto Rico.

 

2.3                                 FIXED
TERM. The initial term of this Agreement (the “FIXED TERM”) shall commence on
the Commencement Date and shall expire December 31, 2029.

 

19

 

2.4                                 EXTENDED
TERM. Provided the term of the New Management Agreement is simultaneously
extended in accordance with the terms of the New Management Agreement, the Term
may be extended, at Tenant’s option, for up to two (2) consecutive periods
(collectively, the “EXTENDED TERMS”) of fifteen (15) years each pursuant to a
written notice to Landlord given at least two (2) years prior to the then
Expiration Date. If Tenant fails to give notice of its election not to exercise
either of its options to extend the Term on or before the date which is the day
prior to the date that is two (2) years prior to the then Expiration Date or if
the Portfolio Manager fails to give notice of its election not to exercise
either of its options to extend the term of the New Management Agreement on or
before the date which is the day prior to the date that is two (2) years prior
to the then Expiration Date, Tenant shall be deemed to have exercised the
applicable extension option.

 

Each Extended Term shall commence on the day
succeeding the expiration of the Fixed Term or the preceding Extended Term, as
the case may be. All of the terms, covenants and provisions of this Agreement
shall apply to each such Extended Term, except that Tenant shall have no right
to extend the Term beyond the expiration of the Extended Terms. If Tenant shall
give Notice that it elects not to extend the Term in accordance with this SECTION 2.4,
this Agreement shall automatically terminate at the end of the Term then in
effect and Tenant shall have no further option to extend the Term of this
Agreement. Otherwise, the extension of this Agreement shall be automatically
effected without the execution of any additional documents; it being understood
and agreed, however, that Tenant and Landlord shall execute such documents and
agreements as either party shall reasonably require to evidence the same.

 

If Tenant gives notice of its election not to
extend the Term or if the Portfolio Manager gives notice of its election not to
extend the term of the New Management Agreement, or if Tenant shall have no
further right to extend the Term, then at any time during the last two years of
the Term, Landlord may terminate this Agreement and the Term on not less than
thirty (30) days’ prior written notice.

 

ARTICLE 3

 

RENT

 

3.1                                 RENT.
Tenant shall pay, in lawful money of the United States of America which shall
be legal tender for the payment of public and private debts, without offset,
abatement, demand or

 

20

 

deduction (unless otherwise expressly provided in this Agreement),
Minimum Rent and Additional Rent to Landlord and Additional Charges to the
party to whom such Additional Charges are payable, during the Term. All
payments to Landlord shall be made by wire transfer of immediately available
federal funds or by other means acceptable to Landlord in its sole discretion.
Rent for any partial Fiscal Month shall be prorated on a per diem basis.

 

3.1.1                        MINIMUM RENT.

 

(a)                                  PAYMENTS.
Minimum Rent shall be paid in advance on the first Business Day of each Fiscal
Month; PROVIDED, HOWEVER, that the first payment of Minimum Rent shall be
payable on the Commencement Date (and, if applicable, such payment shall be
prorated as provided in the last sentence of the first paragraph of SECTION 3.1).

 

(b)                                 ADJUSTMENTS
OF MINIMUM RENT FOLLOWING DISBURSEMENTS UNDER SECTIONS 5.1.3 (b), 10.2.3 or
11.2. Effective on the date of each disbursement to pay for the cost of any
repairs, maintenance, renovations or replacements pursuant to SECTIONS 5.1.3
(b), 10.2.3 or 11.2, the annual Minimum Rent shall be increased by a PER ANNUM
amount equal to the Disbursement Rate times the amount so disbursed. If any
such disbursement is made during any month on a day other than the first
Business Day of a Fiscal Month, Tenant shall pay to Landlord on the first
Business Day of the immediately following Fiscal Month (in addition to the
amount of Minimum Rent payable with respect to such Fiscal Month, as adjusted
pursuant to this paragraph (b)) the amount by which Minimum Rent for the
preceding Fiscal Month, as adjusted for such disbursement on a per diem basis, exceeded
the amount of Minimum Rent paid by Tenant for such preceding Fiscal Month.

 

3.1.2                        ADDITIONAL RENT.

 

(a)                                  AMOUNT.
Tenant shall pay additional rent (“ADDITIONAL RENT”) with respect to the
Property with respect to each Lease Year beginning with the 2007 Lease Year, in
an amount, not less than zero, equal to seven and one-half percent (7.5%) of
Excess Total Hotel Sales for such Property.

 

(b)                                 FISCAL
MONTH INSTALLMENTS. Installments of Additional Rent for each Lease Year or
portion thereof

 

21

 

shall be calculated and paid with respect to
each Fiscal Month in arrears on the twenty-fifth day of the succeeding Fiscal
Month, based on Total Hotel Sales for the year-to-date as of the last day of
the preceding month and the Total Hotel Sales for the year-to-date for the
corresponding period during the Base Year. On or before the twenty-fifth (25th)
day after the end of each Fiscal Month, Tenant shall furnish Landlord with
detailed operating statements setting forth the results of operations at the
Hotel with respect to such month and year-to-date showing Total Hotel Sales, rooms
revenues, revenue per available room, occupancy percentage and average daily
rate, Operating Costs, deposits to, and expenditures from, the FF&E Reserve
and Additional Rent together with a Financial Officer’s Certificate. Such
statements may be provided electronically to Landlord.

 

(c)                                  YEAR
END STATEMENTS. Not less than ten (10) days prior to the date on which Landlord
or any of its Affiliates are required to file audited financial statements with
the SEC (but in all events on or before February 15 of each year), Tenant
shall deliver to Landlord a Financial Officer’s Certificate setting forth for
the prior Lease Year Total Hotel Sales, Operating Costs, the calculation of
Additional Rent and deposits to, and expenditures from, the FF&E Reserve
together with an Agreed Upon Procedure Letter with respect thereto. The cost of
obtaining such letter shall be an Operating Cost.

 

(d)                                 RECONCILIATION.
If any amounts due to Landlord as shown in a Financial Officer’s Certificate or
audit provided pursuant to SECTIONS 3.1.2 (f) or 5.3 exceed the amounts
previously paid with respect thereto to Landlord, Tenant shall pay such excess
to Landlord at such time as the Financial Officer’s Certificate or audit is
delivered, together with interest at the Interest Rate from the date due. (Any
such interest which accrues after the day that is ten (10) Business Days after
the date on which such Financial Officer’s Certificate is delivered or is due
and any such interest which results from Tenant’s willful understatement of
amounts due to Landlord shall not be Operating Costs.) If Additional Rent due
as shown in a Financial Officer’s Certificate or audit is less than the amount previously
paid with respect thereto to Landlord, Landlord shall be entitled to retain the
same but Tenant shall be credited such overpayment against the next installment
of Additional Rent. In no event shall (i) any

 

22

 

amount previously deposited in the FF&E
Reserve be withdrawn therefrom or (ii) the amount of Minimum Rent be subject to
adjustment pursuant to this SECTION 3.1.2 (d).

 

(e)                                  ADDITIONAL
INFORMATION. In addition, Tenant shall provide Landlord with information
relating to the Hotel, Tenant and its Affiliates that (i) may be required in
order for Landlord or its Affiliates to prepare financial statements in
accordance with GAAP or to comply with Applicable Law including, without
limitation, any applicable tax or securities laws and regulations and the SEC’s
interpretation thereof, (ii) may be required for Landlord or any of its
Affiliates to prepare tax returns, or (iii) is of the type that Tenant or its
Affiliated Persons customarily prepares for other hotel owners or itself.

 

(f)                                    AUDIT.
At Landlord’s election and at Landlord’s cost except as otherwise provided
herein, a certified audit of the Hotel’s operations may be performed annually,
and after the Expiration Date, by a nationally recognized, independent
certified public accounting firm appointed by Landlord. In the event that
Landlord elects to have such an audit performed, Landlord must give notice of
its election within twelve (12) months after its receipt of the applicable
year-end Financial Officer’s Certificate corresponding to such Lease Year and
given pursuant to SECTION 3.1.2 (c). Any dispute concerning the
correctness of an audit shall be settled by Arbitration. Tenant shall pay the
cost of any audit revealing an understatement of Additional Rent by more than
three percent (3%) in the aggregate, and such cost shall not be an Operating
Cost. In the event that either no notice of audit is given within said twelve
(12) months, or no audit is in fact commenced within eighteen (18) months after
receipt of such year-end Financial Officer’s Certificate, such operating
statement will constitute the final statement for that Fiscal Year, deemed to
have been approved by Landlord.

 

(g)                                 In
the event that this Agreement is terminated by Landlord pursuant to SECTION 12.1,
then all of Tenant’s Personal Property shall immediately and automatically be
transferred to Landlord and become, without the requirement of any action or
undertaking by any party, Landlord’s sole property and shall remain upon the
Property and/or the Hotel and be surrendered with the Property and/or the Hotel
without disturbance, molestation or injury.

 

23

 

(h)                                 SURVIVAL.
The terms of this SECTION 3.1.2 shall survive the expiration or earlier
termination of the Term.

 

3.1.3                        ADDITIONAL CHARGES. In addition
to the Minimum Rent and Additional Rent payable hereunder, Tenant shall pay, or
cause to be paid, to the appropriate parties and discharge as and when due and
payable the following (collectively, “ADDITIONAL CHARGES”):

 

(a)                                  IMPOSITIONS.
Subject to ARTICLE 8 relating to permitted contests, all Impositions
before any fine, penalty, interest or cost (other than any opportunity cost as
a result of a failure to take advantage of any discount for early payment) may
be added for non-payment, such payments to be made directly to the taxing
authorities (or other payees) where feasible, and shall promptly, upon request,
furnish to Landlord copies of official receipts or other reasonably
satisfactory proof evidencing such payments. If any such Imposition may, at the
option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Tenant may
exercise the option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any fine,
penalty, premium, further interest or cost may be added thereto. Where Tenant’s
direct payment of Impositions (and the filings therefor) are not feasible, Landlord
shall cooperate with Tenant to effect the payment of such Impositions (and make
the filings therefor), it being understood that the amount of any such
Imposition remains Tenant’s responsibility and Landlord is only cooperating to
assist in remitting such amount; Tenant, at its expense, shall to the extent
required or permitted by Applicable Law, prepare and file all other tax returns
and reports in respect of any other Imposition as may be required. Landlord
shall, at its expense and to the extent required or permitted by Applicable
Law, prepare and duly and timely file all tax returns and pay all taxes due in
respect of Landlord’s Taxes (other than those with respect to Impositions) as
may be required by Government Agencies, so as to avoid the imposition of any
fine, penalty, interest or cost (other than any opportunity cost as a result of
a failure to take advantage of any discount for early payment). Provided no
Event of Default shall have occurred and be continuing, notwithstanding any provision

 

24

 

of this agreement or any other agreement
including, without limitation, the Purchase Agreement, to the contrary, if any
refund shall be due from any taxing authority in respect of any Imposition paid
by Tenant, the same shall be paid over to or retained by Tenant. Landlord and
Tenant shall, upon request of the other, provide such data as is maintained by
the party to whom the request is made with respect to the Property as may be necessary
to prepare any required returns and reports. In the event Government Agencies
classify the Property covered by this Agreement as personal property, Tenant
shall file all personal property tax returns in such jurisdictions where it may
legally so file. Each party shall, to the extent it possesses the same, provide
the other, upon request, with cost and depreciation records necessary for
filing returns for the Property so classified as personal property. Where
Landlord is legally required to file personal property tax returns for property
covered by this Agreement, Landlord shall provide Tenant with copies of
assessment notices in sufficient time for Tenant to file a protest. All
Impositions assessed against such personal property shall be (irrespective of
whether Landlord or Tenant shall file the relevant return) paid by Tenant not
later than the last date on which the same may be made without interest or
penalty, subject to the provisions of ARTICLE 8. Landlord and Tenant
shall, upon the other’s request, consult with each other in order to avoid the
imposition of withholding taxes upon either party, the Property or otherwise concerning
the operation thereof.

 

Landlord shall
give prompt Notice to Tenant of all Impositions payable by Tenant hereunder of
which Landlord at any time has knowledge; PROVIDED, HOWEVER, that Landlord’s
failure to give any such notice shall in no way diminish Tenant’s obligation
hereunder to pay such Impositions. To the extent Landlord is legally required
to file a tax return for an Imposition and Tenant is not permitted under
Applicable Law to make such filing, Landlord shall provide Tenant with a copy
of the return in sufficient time for Tenant to pay the Imposition; PROVIDED,
HOWEVER, that Landlord’s failure to provide such copy shall in no way diminish
Tenant’s obligation hereunder to pay such Impositions.

 

(b)                                 UTILITY
CHARGES. All charges for electricity, power, gas, oil, water and other
utilities used in connection with the Property.

 

25

 

 

(c)                                  INSURANCE
PREMIUMS. All premiums for the insurance coverage required to be maintained
pursuant to ARTICLE 9.

 

(d)                                 OTHER
CHARGES. All other amounts, liabilities and obligations, including, without
limitation, all amounts payable under any equipment leases and all agreements
to indemnify Landlord under SECTIONS 4.3.2 and 9.7.

 

(e)                                  TAX
EXEMPTION DECREE EXPENDITURES. Notwithstanding any provision of this Agreement
or any other agreement including, without limitation, the Purchase Agreement,
to the contrary, any amounts required to be expended or invested under any of
the Tax Exemption Decree, the Puerto Rico Tourism Development Act of 1993 or
the regulations thereunder on (i) promotion, publicity, marketing for the
Hotel; (ii) compliance with adequate safety, health, sanitation and protection
standards for guests at the Hotel; (iii) personnel training and retraining;
(iv) handicapped facilities for the Hotel; (v) conservation, improvement and
maintenance of the Hotel and of the environmental and aesthetic infrastructure;
or (vi) any similar purposes or activity. If the Tax Exemption Decree, the
Puerto Rico Tourism Development Act of 1993 or the regulations thereunder
preclude Tenant from complying with the terms of the foregoing, then Landlord
and Tenant shall negotiate in good faith an amendment to this Agreement to deal
with such eventuality with the intent that SECTION 3.3 be given full
effect and that all Rents and other amounts payable by Tenant hereunder qualify
as “rents from real property” within the meaning of Section 856(d) of the
Code. Nothing contained in this SECTION 3.1.3 (e) is intended to, nor
shall, limit Tenant’s rights under SECTIONS 5.1.2 OR 5.1.3.

 

3.1.4                        REIMBURSEMENT FOR ADDITIONAL
CHARGES. If Tenant pays or causes to be paid property taxes or similar or other
Additional Charges attributable to periods after the end of the Term, whether
upon expiration or sooner termination of this Agreement (other than termination
by reason of an Event of Default), Tenant may, within a reasonable time after
the end of the Term, provide Notice to Landlord of its estimate of such
amounts. Landlord shall promptly reimburse Tenant for all payments of such
taxes and other similar Additional Charges that are attributable to any period
after the Term of this Agreement.

 

3.2                                 LATE
PAYMENT OF RENT, ETC. If any installment of Minimum Rent shall not be paid
within twenty-five (25) days

 

26

 

after its due date or if any Additional Rent or Additional Charges (but
only as to those Additional Charges which are payable directly to Landlord)
shall not be paid within ten (10) days after its due date, Tenant shall pay
Landlord, on demand, as Additional Charges, a late charge (to the extent
permitted by law) computed at the Interest Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof.

 

In the event of any failure by Tenant to pay
any Additional Charges when due, Tenant shall promptly pay and discharge, as
Additional Charges, every fine, penalty, interest and cost which is added for
non-payment or late payment of such items. Landlord shall have all legal,
equitable and contractual rights, powers and remedies provided either in this
Agreement or by statute or otherwise in the case of non-payment of the
Additional Charges as in the case of non-payment of the Minimum Rent and
Additional Rent.

 

3.3                                 NET
LEASE. The Rent shall be absolutely net to Landlord so that this Agreement
shall yield to Landlord the full amount of the installments or amounts of the
Rent throughout the Term, subject to any other provisions of this Agreement
which expressly provide otherwise including any provisions for adjustment or
abatement of such Rent.

 

3.4                                 NO
TERMINATION, ABATEMENT, ETC. Except as otherwise specifically provided in this
Agreement, each of Landlord and Tenant, to the maximum extent permitted by law,
shall remain bound by this Agreement in accordance with its terms and shall not
take any action without the consent of the other to modify, surrender or
terminate this Agreement. In addition, except as otherwise expressly provided
in this Agreement, Tenant shall not seek, or be entitled to, any abatement,
deduction, deferment or reduction of the Rent, or set-off against the Rent, nor
shall the respective obligations of Landlord and Tenant be otherwise affected
by reason of: (a) any damage to or destruction of the Property or any portion
thereof from whatever cause or any Condemnation; (b) the lawful or unlawful
prohibition of, or restriction upon, Tenant’s use of the Property, or any
portion thereof, or the interference with such use by any Person or by reason
of eviction by paramount title; (c) any claim which Tenant may have against
Landlord by reason of any default or breach of any warranty by Landlord under
this Agreement or any other agreement between Landlord and Tenant, or to which
Landlord and Tenant are parties; (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Landlord

 

27

 

or any assignee or transferee of Landlord; or (e) any other cause
whether similar or dissimilar to any of the foregoing, except as otherwise
specifically provided in this Agreement.

 

3.5                                 WAIVER.
Tenant hereby waives all rights arising from any occurrence whatsoever, which
may now or hereafter be conferred upon it by law (a) to modify, surrender or
terminate this Agreement or quit or surrender the Property or any portion
thereof, or (b) which would entitle Tenant to any abatement, reduction,
suspension or deferment of the Rent or other sums payable or other obligations
to be performed by Tenant hereunder. The obligations of Tenant hereunder shall
be separate and independent covenants and agreements, and the Rent and all
other sums payable by Tenant hereunder shall continue to be payable in all
events unless the obligations to pay the same shall be terminated pursuant to
the express provisions of this Agreement.

 

ARTICLE 4

 

USE OF THE PROPERTY

 

4.1                                 PERMITTED
USE.

 

4.1.1 PERMITTED USE. Tenant shall, at all
times during the Term, subject to temporary periods for the repair of damage
caused by casualty or Condemnation, continuously use and operate the Property
as full service luxury resort hotel and casino and any uses incidental thereto.
Tenant shall not use or permit to be used the Property or any portion thereof
for any other use without the prior written consent of Landlord, which approval
shall not be unreasonably withheld, delayed or conditioned. Tenant shall not
change the brand of the Hotel without Landlord’s prior written consent, it
being agreed that, on the Commencement Date, the Hotel shall be operated under
the “INTERCONTINENTAL” brand. No use shall be made or permitted to be made of
the Property and no acts shall be done thereon which will cause the
cancellation of any insurance policy covering such Property or any part thereof
(unless another adequate policy is available), nor shall Tenant sell or
otherwise provide or permit to be kept, used or sold in or about the Property
any article which may be prohibited by law or by the standard form of fire
insurance policies, or any other insurance policies required to be carried
hereunder, or fire underwriter’s regulations. Tenant shall, at its sole cost,
comply with all Insurance Requirements.

 

28

 

4.1.2                        NECESSARY APPROVALS. Tenant
shall proceed with all due diligence and exercise reasonable efforts to obtain
and maintain all approvals necessary to use and operate, for its Permitted Use,
the Property and the Hotel located thereon under Applicable Law.

 

4.1.3                        LAWFUL USE, ETC. Tenant shall
not use or suffer or permit the use of the Property or Tenant’s Personal
Property, if any, for any unlawful purpose. Tenant shall not, and shall direct
the Tenant Manager not to, commit or suffer to be committed any waste on the
Property, or in the Hotel, nor shall Tenant cause or permit any unlawful
nuisance thereon or therein. Tenant shall not, and shall direct the Tenant
Manager not to, suffer nor permit the Property, or any portion thereof, to be
used in such a manner as (i) may materially and adversely impair Landlord’s
title thereto or to any portion thereof, or (ii) may reasonably allow a claim
or claims for adverse usage or adverse possession by the public, as such, or of
implied dedication of the Property or any portion thereof.

 

4.2                                 COMPLIANCE
WITH LEGAL/INSURANCE REQUIREMENTS, ETC. Subject to the provisions of ARTICLE 8
and SECTION 5.1.3 (b), Tenant, at its sole expense, shall (i) comply with
all Applicable Law and Insurance Requirements in respect of the use, operation,
maintenance, repair, alteration and restoration of the Property and with the
terms of any ground lease, sublease or parking lease affecting the Property,
(ii) perform all obligations of the landlord under any sublease affecting the
Property and (iii) procure, maintain and comply with all licenses, permits and
other authorizations and agreements required for any use of the Property and
Tenant’s Personal Property, if any, then being made, and for the proper
erection, installation, operation and maintenance of the Property or any part
thereof.

 

4.3                                 ENVIRONMENTAL
MATTERS.

 

4.3.1                        RESTRICTION ON USE, ETC. During
the Term and any other time that Tenant shall be in possession of the Property,
Tenant shall not store on, release or spill upon, dispose of or transfer to or
from the Property any Hazardous Substance. During the Term and any other time
that Tenant shall be in possession of the Property, Tenant shall maintain (and
shall direct the Tenant Manager to maintain) the Property at all times free of
any Hazardous Substance except for those which are customarily used at other
hotels like the Hotel and are in compliance with all Environmental Laws. Tenant
shall promptly: (a) upon receipt of notice or knowledge and shall direct the

 

29

 

Tenant Manager upon receipt of notice or knowledge promptly to, notify
Landlord in writing of any material change in the nature or extent of Hazardous
Substances at the Property, (b) transmit to Landlord a copy of any report which
is required to be filed with respect to the Property pursuant to the Emergency Planning
and Community Right-to-Know Act or any other Environmental Law, (c) transmit to
Landlord copies of any citations, orders, notices or other governmental
communications received by Tenant or its agents or representatives with respect
to Hazardous Substances or violations or alleged violations of Environmental
Law (collectively, an “ENVIRONMENTAL NOTICE”), which Environmental Notice
requires a written response or any action to be taken and/or if such Environmental
Notice gives notice of and/or presents a material risk of any material
violation of any Environmental Law and/or presents a material risk of any
material cost, expense, loss or damage, (d) subject to the provisions of ARTICLE 8,
observe and comply with all Environmental Laws relating to the use, storage,
maintenance and disposal of Hazardous Substances and all orders or directives
from any official, court or agency of competent jurisdiction relating to the
use, storage or maintenance or requiring the removal, treatment, containment or
other disposition of Hazardous Substances, and (e) pay or otherwise dispose of
any fine, charge or Imposition related to Hazardous Substances or violations of
Environmental Law.

 

If, at any time prior to the termination of
this Agreement, Hazardous Substances (other than those permitted under this
Agreement) are discovered on the Property, Tenant shall take all actions and
incur any and all expenses, as are required by any Governmental Agency and by
Environmental Law, (i) to clean up and remove from and about the Property all
Hazardous Substances thereon, (ii) to contain and prevent any further
discharge, release or threat of discharge or release of Hazardous Substances on
or about the Property and (iii) to use good faith efforts to eliminate any
further discharge, release or threat of discharge or release of Hazardous
Substances on or about the Property.

 

4.3.2                        INDEMNIFICATION OF LANDLORD.
Tenant shall protect, indemnify and hold harmless Landlord and each Hotel
Mortgagee, their trustees, officers, agents, employees and beneficiaries, and
any of their respective successors or assigns with respect to this Agreement
(collectively, the “INDEMNITEES” and, individually, an “INDEMNITEE”) for, from
and against any and all debts, liens, claims, obligations, liabilities,
sanctions, losses, causes of action, administrative orders or

 

30

 

notices, costs, fines, penalties or expenses (including, without
limitation, reasonable attorney’s and technical consultant’s fees and expenses)
imposed upon, incurred by or asserted against any Indemnitee resulting from,
either directly or indirectly, the presence during the Term (or any other time
Tenant shall be in possession of the Property) in, upon, over or under the
Land, soil, surface water or ground water of the Property or any properties
surrounding the Property of any Hazardous Substances in violation of any
Environmental Law or otherwise. Tenant’s duty herein includes, but is not
limited to, costs associated with personal injury or property damage claims as
a result of the presence prior to the expiration or sooner termination of the
Term and the surrender of the Property to Landlord in accordance with the terms
of this Agreement of Hazardous Substances in, upon, over or under the Land,
soil, surface water or ground water of the Property in violation of any
Environmental Law or otherwise. Upon Notice from Landlord or any other of the
Indemnitees, Tenant shall undertake the defense, at Tenant’s sole cost and
expense, of any indemnification duties set forth herein, in which event Tenant
shall not be liable for payment of any duplicative attorneys’ fees incurred by
any Indemnitee.

 

Tenant shall, upon demand, pay to Landlord,
as an Additional Charge, any cost, expense, loss or damage (including, without
limitation, reasonable attorneys’ fees) incurred by Landlord and arising from a
failure of Tenant to observe and perform the requirements of this SECTION 4.3,
which amounts shall bear interest from the date incurred until paid by Tenant
to Landlord at the Interest Rate.

 

4.3.3                        SURVIVAL. The provisions of
this SECTION 4.3 shall survive the expiration or sooner termination of
this Agreement.

 

ARTICLE 5

 

MAINTENANCE AND REPAIRS

 

5.1                                 MAINTENANCE
AND REPAIR.

 

5.1.1                        TENANT’S GENERAL OBLIGATIONS.
Subject to SECTION 6.1 hereof, Tenant shall, at its sole cost and expense
(except as expressly provided in SECTION 5.1.3 (b)), keep the Property and
all private roadways, sidewalks and curbs appurtenant thereto (and Tenant’s
Personal Property) in good order and repair, reasonable wear and tear excepted
(whether or not the need for such repairs occurs as a result of Tenant’s

 

31

 

use, any prior use, Insurance Requirements, the elements or the age of
the Property or Tenant’s Personal Property or any portion thereof), and shall promptly
make all repairs, corrections, maintenance, alterations, improvements, renovations,
installations, renewals and additions (collectively, “REPAIRS”) thereto of
every kind and nature, whether interior or exterior, structural or nonstructural,
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term (concealed or
otherwise). All Repairs shall be made in a good, workmanlike manner, consistent
with industry standards for like hotels and casinos in like locales, in
accordance with all applicable federal, State, territorial and local statutes,
ordinances, codes, rules and regulations relating to any such work. Tenant
shall not take or omit to take any action, the taking or omission of which
would materially and adversely impair the value or the usefulness of the Property
or any material part thereof for its Permitted Use.

 

Any and all alterations, additions, improvements, and fixtures which
may be made or installed by either the Landlord or the Tenant upon the Property
and/or the Hotel and which in any manner are attached to the floors, walls or
ceilings (including, without limitation, any linoleum or other floor covering
of similar character which may be cemented or otherwise adhesively affixed to
the floor, and any electrical, plumbing, heating, ventilating and/or air
conditioning system and equipment), shall, upon the termination or expiration
of this Agreement, immediately and automatically be transferred to Landlord and
become, without the requirement of any action or undertaking by any party,
Landlord’s sole property and shall remain upon the Property and/or the Hotel
and be surrendered with the Property and/or the Hotel as a part thereof without
disturbance, molestation or injury.

 

5.1.2                        FF&E
RESERVE.

 

(a)                                  The FF&E Reserve,
all amounts deposited therein, and all Capital Replacements shall belong to
Landlord.

 

(b)                                 Beginning
on February 25, 2007 and on the twenty-fifth day of every month
thereafter, Tenant shall transfer into the FF&E Reserve an amount equal to
the Applicable Percentage of Total Hotel Sales for the prior month.

 

(c)                                  Not
less than sixty (60) days prior to the first day of each Fiscal Year after the
2005 Fiscal Year, Tenant shall submit to Landlord for Landlord’s approval a
proposed estimate of expenditures from the FF&E Reserve for the

 

32

 

ensuing full or partial Fiscal Year, as the
case may be (the “FF&E ESTIMATE”). If Landlord fails to disapprove of a
proposed FF&E Estimate within thirty (30) days after the submission thereof
to Landlord for its approval, the same shall be deemed approved. Together with
each such FF&E Estimate, Tenant shall provide to Landlord a proposed
five-year capital plan for the Hotel for Landlord’s review and approval. Tenant
will provide Landlord with the material data and information utilized in
preparing the FF&E Estimates or any revisions thereof. Tenant will not be
deemed to have made any guaranty, warranty or representation whatsoever in
connection with the FF&E Estimates, except that the proposed FF&E
Estimates reflect Tenant’s best professional estimates of the matters they
describe. The FF&E Estimate for the 2005 Fiscal Year shall have been
delivered by Tenant to Landlord on or before the Commencement Date.

 

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

 

(e)                                  All
expenditures from the FF&E Reserve shall be (as to both the amount of each
such expenditure and the timing thereof) both reasonable and necessary, given
the objective that the Hotel will be maintained and operated to a standard
comparable to competitive hotels. All amounts from the FF&E Reserve shall
be paid to Persons who are not Affiliated Persons of Tenant without markup or
allocated internal costs by Tenant or its Affiliated Persons except that Tenant
may use Affiliated Persons to provide goods and services if Landlord has
granted its prior written approval thereof.

 

(f)                                    Tenant
shall, consistent with the FF&E Estimate approved by Landlord, from time to
time make expenditures from the FF&E Reserve to pay for Capital
Replacements made during the Term. Tenant shall not materially deviate from the
FF&E Estimate approved by Landlord without the prior approval of Landlord,
except in the case of emergency where

 

33

 

immediate action is necessary to prevent
imminent harm to person or property. Notwithstanding anything in this Agreement
to the contrary, no additional cost or expense shall be incurred or paid in connection
with any Capital Replacements made during the last two (2) years of the Term to
the extent attributable solely to complying with the InterContinental brand standards.

 

(g)                                 Any
amounts remaining in the FF&E Reserve at the close of each Lease Year will
be carried forward and retained in the FF&E Reserve. Any and all portions
of the Hotel which are scrapped or removed in connection with the making of any
major or non-major repairs, renovations, additions, alterations, improvements,
removals or replacements shall be disposed of by Tenant and any net proceeds
thereof shall be deposited in the FF&E Reserve and not included in Total
Hotel Sales. In addition, any proceeds from the sale of FF&E no longer
necessary to the operation of the Hotel shall be added to the FF&E Reserve.

 

(h)                                 Subject
to the terms of SECTION 5.1.2 (j), Tenant shall be the only party entitled
to withdraw funds from the FF&E Reserve until a Default shall occur.

 

(i)                                     Upon
the expiration or earlier termination of the Term, Tenant shall disburse to
Landlord, or as Landlord shall direct, all amounts remaining in the FF&E
Reserve after payments of all expenses on account of Capital Replacements
appropriately incurred by Tenant during the Term.

 

(j)                                     So
long as the Managed Hotels are Pooled FF&E Hotels, it is understood and
agreed that funds deposited in the FF&E Reserve pursuant to this Agreement
and the Reserve Account under New Management Agreement shall be maintained and
used on a consolidated basis such that all amounts to be deposited in the
FF&E Reserve and such Reserve Account shall be deposited in a single
account and Portfolio Manager and Tenant may apply any funds therein to any of
the Pooled FF&E Hotels in accordance with the terms of this Agreement and
the New Management Agreement.

 

(k)                                  Notwithstanding
anything contained herein to the contrary, if Landlord advises Tenant that in
Landlord’s opinion, the fair market value of all personal property of Landlord
at, about or which forms a part of the Property is equal to or exceeds thirteen
and one half percent (13.5%) of the fair market value of the Property, Tenant
and its

 

34

 

Affiliates shall not use funds from the
FF&E Reserve or which are required to be expended pursuant to any purchase
agreement to purchase additional personal property for use at, about or as part
of the Property without Landlord’s prior written consent, which consent may be
granted or withheld in Landlord’s sole and absolute judgment.

 

5.1.3                        LANDLORD’S
OBLIGATIONS.

 

(a)                                  Except
as otherwise expressly provided in this Agreement, Landlord shall not, under
any circumstances, be required to build or rebuild any improvement on the
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Property, whether ordinary or
extraordinary, structural or nonstructural, foreseen or unforeseen, or to make
any expenditure whatsoever with respect thereto, or to maintain the Property in
any way. Except as otherwise expressly provided in this Agreement, Tenant
hereby waives, to the maximum extent permitted by law, the right to make
repairs at the expense of Landlord pursuant to any law in effect on the date
hereof or hereafter enacted. Landlord shall have the right to give, record and post,
as appropriate, notices of nonresponsibility under any mechanic’s lien laws now
or hereafter existing.

 

(b)                                 Subject
to the terms of SECTION 5.1.3 (c), if funds in the FF&E Reserve shall
be insufficient for necessary and permitted expenditures thereof and the amount
of such expenditures exceeds the amount on deposit in the FF&E Reserve,
Tenant may, at its election, give Landlord Notice thereof, which Notice shall
set forth, in reasonable detail, the nature of the required Capital
Replacement, the estimated cost thereof and such other information with respect
thereto as Landlord may reasonably require. Provided that no Default shall have
occurred and be continuing and Tenant shall otherwise comply with the
applicable provisions of ARTICLE 6, Landlord shall, within twenty (20)
Business Days after such Notice, subject to and in accordance with the
applicable provisions of ARTICLE 6, disburse such required funds to Tenant
for deposit in the FF&E Reserve and, upon such disbursement, the Minimum
Rent shall be adjusted as provided in SECTION 3.1.1 (b). Tenant shall
include a good faith projection of funds required pursuant to this SECTION 5.1.3
(b) in the FF&E Estimate.

 

35

 

(c)                                  Unless
and until the Affiliates of Portfolio Manager which sold the Pooled FF&E
Hotels to the Portfolio Purchaser and the stock of Landlord to the Portfolio
Purchaser have expended $25,000,000 (net of any applicable value added tax that
is refundable) of their own funds to make Capital Replacements at the Pooled
FF&E Hotels, Landlord shall have no obligation to make or to cause its
Affiliates to make any advances to the FF&E Reserve pursuant to SECTION 5.1.3
(b).

 

5.1.4                        NONRESPONSIBILITY OF LANDLORD,
ETC. All materialmen, contractors, artisans, mechanics and laborers and other
persons contracting with Tenant with respect to the Property, or any part
thereof, are hereby charged with notice that liens on the Property or on
Landlord’s interest therein are expressly prohibited and that they must look
solely to Tenant to secure payment for any work done or material furnished to
Tenant or for any other purpose during the term of this Agreement.

 

Nothing contained in this Agreement shall be
deemed or construed in any way as constituting the consent or request of
Landlord, express or implied, by inference or otherwise, to any contractor,
subcontractor, laborer or materialmen for the performance of any labor or the
furnishing of any materials for any alteration, addition, improvement or repair
to the Property or any part thereof or as giving Tenant any right, power or
authority to contract for or permit the rendering of any services or the
furnishing of any materials that would give rise to the filing of any lien
against the Property or any part thereof nor to subject Landlord’s estate in
the Property or any part thereof to liability under any mechanic’s lien law of
any State in any way, it being expressly understood Landlord’s estate shall not
be subject to any such liability.

 

5.2                                 TENANT’S
PERSONAL PROPERTY. Tenant shall provide and maintain throughout the Term all
such Tenant’s Personal Property as shall be necessary in order to operate in
compliance with all Applicable Laws and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the Permitted Use.

 

5.3                                 AT
END OF TERM.

 

5.3.1                        YIELD UP.
Upon the expiration or sooner termination of this Agreement:

 

(a)                                  Tenant
shall vacate and surrender the Property to Landlord in substantially the same
condition in which the

 

36

 

Property was in on the Commencement Date,
except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of this Agreement, reasonable wear and tear (and
casualty damage and Condemnation, in the event that this Agreement is
terminated following a casualty or Condemnation in accordance with ARTICLE 10
or ARTICLE 11) excepted.

 

(b)                                 Within
sixty (60) days following the effective date of such expiration or earlier
termination, Tenant will submit to Landlord an audited final accounting of
Total Hotel Sales, Additional Rent and deposits to and withdrawals from the
FF&E Reserve and all accounts between Landlord and Tenant through the
effective date of such expiration or earlier termination, the cost of which
audit shall be shared equally by Tenant and Landlord and shall not be an
Operating Cost and shall be performed by Ernst & Young or another
accounting firm selected by Tenant and approved by Landlord. Said final
accounting shall be accompanied by a Financial Officer’s Certificate and will
promptly be submitted by Tenant to Landlord for its approval. Landlord shall
not unreasonably withhold or delay its approval of the final accounting and any
such disapproval shall contain reasonably detailed explanation for disapproval.
Within thirty (30) days after delivery of such final accounting, the parties
will make appropriate adjustments to any amounts previously paid or due under
this Agreement.

 

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

 

(d)                                 On
the effective date of such expiration or earlier termination, Tenant will
deliver (and cause Tenant Manager to deliver) any and all keys or other access
devices of the Property to Landlord.

 

(e)                                  On
the effective date of such expiration or earlier termination, Tenant will
assign to Landlord or its designee, and Landlord or such designee will assume,
all booking, reservation, service and operating contracts

 

37

 

relating exclusively to the occupancy or
operation of the Hotel and entered into in the ordinary course of business by
Tenant. Landlord agrees to indemnify and hold Tenant harmless from liability or
other obligations under any such agreements relating to acts or occurrences,
including Landlord’s or such designee’s failure to perform, on or after the
effective date of such assignment.

 

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

 

(g)                                 Tenant
shall release and transfer to Landlord any funds of Landlord which are held or
controlled by Tenant or Tenant Manager.

 

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

 

(i)                                     Tenant
shall transfer (and shall cause Tenant Manager to transfer) to Landlord the
telephone numbers used in connection with the operation of the Hotel (but not
the InterContinental brand generally).

 

(j)                                     Tenant
shall, and shall cause Tenant Manager to, cooperate with Landlord’s or its
designee’s efforts to engage employees of the Hotel.

 

38

 

(k)                                  If
requested by Landlord prior to such expiration or earlier termination of this
Agreement, Tenant shall (or shall cause Tenant Manager to) continue to manage
under the InterContinental brand after such expiration or earlier termination
for up to one (1) year, on such reasonable terms (which shall include an
agreement to reimburse Tenant (or Tenant Manager, as the case may be) for its
reasonable out-of-pocket costs and expenses, and reasonable administrative
costs and a management fee of three percent (3%) of Total Hotel Sales) with
respect to which Landlord and Tenant shall reasonably agree.

 

5.3.2                        PURCHASE RIGHTS. Subject to SECTION 3.1.2
(g) and SECTION 5.1.1, Landlord shall have the option, to be exercised
within thirty (30) days after the expiration or termination of this Agreement,
to purchase Tenant’s Personal Property for an amount equal to the then net
market value thereof (which shall be (i) the current replacement cost thereof
as determined by agreement of the parties or, (ii) in the absence of such
agreement, an amount determined by appraisal, less accumulated depreciation on
Tenant’s books pertaining thereto), subject to, and with appropriate price
adjustments for, all equipment leases, conditional sale contracts, UCC-1
financing statements and other encumbrances to which such personal property is
subject.

 

5.3.3                        SURVIVAL. The provisions of
this SECTION 5.3 shall survive the expiration or earlier termination of
this Agreement.

 

5.4                                 TENANT
MANAGEMENT AGREEMENT. Tenant shall not, without Landlord’s prior written
consent (which consent shall not be unreasonably withheld, delayed or
conditioned), enter into, or amend or modify the provisions of any Tenant Management
Agreement. Any Tenant Management Agreement shall be subordinate to this
Agreement and shall provide, INTER ALIA, (a) that all amounts due from Tenant
to the Tenant Manager shall be subordinate to all amounts due from Tenant to
Landlord (provided that, as long as no Event of Default has occurred and is continuing,
Tenant may pay all amounts due to a Tenant Manager pursuant to a Tenant
Management Agreement) and (b) for termination thereof, at Landlord’s option,
upon the termination of this Agreement. Tenant shall not take any action, grant
any consent or permit any action under any Tenant Management Agreement which
might have a material adverse effect on Landlord, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld, delayed
or conditioned.

 

39

 

ARTICLE 6

 

IMPROVEMENTS, ETC.

 

6.1                                 MATERIAL
REPAIRS. Except as set forth in SECTION 6.2, prior to making any Material
Repair, Tenant shall submit, to Landlord in writing, a proposal setting forth,
in reasonable detail, the proposed Material Repair and shall provide to
Landlord such plans and specifications, and such permits, licenses, contracts
and such other information concerning the same as Landlord may reasonably
request. Landlord shall have twenty (20) Business Days to approve or disapprove
all materials submitted to Landlord, in connection with any such proposal;
provided, however, (i) Landlord may not withhold its approval of a Material
Repair with respect to such items as are (A) required in order for the Hotel to
comply with applicable InterContinental brand standards consistently applied to
InterContinental hotels generally (except during the last two (2) years of the
Term) or the requirements of this Agreement; or (B) required by reason of or
under any Insurance Requirement or Applicable Law, or otherwise required for
the continued safe and orderly operation of the Hotel and (ii) Landlord’s
approval shall not be required with respect to the cost of any proposed Material
Repair if the same is set forth as a separate line item in the then applicable
approved FF&E Estimate. If Landlord fails to disapprove of such Material
Repair within such twenty (20) Business Days, Landlord shall be deemed to have
approved same.

 

6.2                                 EMERGENCY
EXPENDITURES. In the event that a condition should exist in or about the Hotel
of an emergency nature or in violation of Applicable Law or any Insurance
Requirements, including structural conditions, which requires immediate repair
necessary to prevent imminent danger or damage to persons or property, Tenant
is hereby authorized to take all steps and to make all expenditures necessary
to repair and correct any such condition, regardless of whether provisions have
been made in the applicable FF&E Estimate for any such expenditures or if
sufficient funds exist in the FF&E Reserve. Upon the occurrence of such an
event or condition, Tenant will communicate to Landlord all available
information regarding such event or condition as soon as reasonably possible
and will take reasonable steps to obtain Landlord’s approval before incurring
such expenses. Expenditures under this SECTION 6.2 shall be paid from the
FF&E Reserve to the extent such expenditure is properly considered a
Capital Replacement.

 

40

 

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

 

ARTICLE 7

 

LIENS

 

7.1                                 LIENS.
Subject to ARTICLE 8, Tenant shall not, directly or indirectly, create or
allow to remain and shall promptly discharge, at its expense, any lien,
encumbrance, attachment, title retention agreement or claim upon the Property
or Tenant’s leasehold interest therein or any attachment, levy, claim or
encumbrance in respect of the Rent, other than (a) Permitted Encumbrances, (b)
restrictions, liens and other encumbrances which are consented to in writing by
Landlord, (c) liens for those taxes of Landlord which Tenant is not required to
pay hereunder, (d) subleases permitted by ARTICLE 15, (e) liens for
Impositions so long as the same are not yet due and payable, (f) liens of mechanics,
laborers, materialmen, suppliers or vendors incurred in the ordinary course of
business that are not yet due and payable, (g) the Hotel Mortgage or other
liens which are the responsibility of Landlord pursuant to the provisions of ARTICLE 19
and (h) Landlord Liens and any other voluntary liens created by Landlord.

 

7.2                                 LANDLORD’S
LIEN. In addition to any statutory landlord’s lien and in order to secure
payment of the Rent and all other sums payable hereunder by Tenant, and to
secure payment of any loss, cost or damage which Landlord may suffer by reason
of Tenant’s breach of this Agreement, Tenant hereby grants unto Landlord, to
the maximum extent permitted by Applicable Law, a security interest in and an
express contractual lien upon Tenant’s Personal Property (except motor vehicles
and liquor and casino licenses and permits), and Tenant’s interest in all
ledger sheets, files, records, documents and instruments (including, without limitation,
computer programs, tapes and related electronic data processing) relating to
the operation of the Hotel (the “RECORDS”) and all proceeds therefrom, subject
to any Permitted Encumbrances; and such Tenant’s Personal Property shall not be
removed from the Property at any time when a Default has occurred and is
continuing.

 

41

 

Upon Landlord’s request, Tenant shall execute
and deliver to Landlord financing statements in form sufficient to perfect the
security interest of Landlord in Tenant’s Personal Property and the proceeds
thereof in accordance with Applicable Law. During the continuance of a Default,
Tenant hereby grants Landlord an irrevocable limited power of attorney, coupled
with an interest, to execute all such financing statements in Tenant’s name,
place and stead. The security interest herein granted is in addition to any
statutory lien for the Rent.

 

ARTICLE 8

 

PERMITTED CONTESTS

 

Tenant shall have the right to contest the
amount or validity of any Imposition or Applicable Law concerning the Property
by appropriate legal proceedings, conducted in good faith and with due
diligence, provided that (a) the foregoing shall in no way be construed as
relieving, modifying or extending Tenant’s obligation to pay any Claims as
finally determined, (b) such contest shall not cause Landlord or Tenant to be
in default under any mortgage or deed of trust encumbering the Property or any
interest therein or result in or reasonably be expected to result in a lien
attaching to the Property, (c) no part of the Property nor any Rent therefrom
shall be in any immediate danger of sale, forfeiture, attachment or loss, (d)
Tenant shall indemnify and hold harmless Landlord from and against any cost,
claim, damage, penalty or reasonable expense, including reasonable attorneys’
fees, incurred by Landlord in connection therewith or as a result thereof and
(e) Landlord is not exposed to any risk for criminal or civil liability.
Landlord agrees to join in any such proceedings if required legally to
prosecute such contest, provided that Landlord shall not thereby be subjected
to any liability therefor (including, without limitation, for the payment of
any costs or expenses in connection therewith). If Tenant shall fail (x) to pay
or cause to be paid any Claims when finally determined, (y) to provide
reasonable security therefor or (z) to prosecute or cause to be prosecuted any
such contest diligently and in good faith, Landlord may, upon reasonable notice
to Tenant (which notice shall not be required if Landlord shall reasonably
determine that the same is not practicable), pay such charges, together with
interest and penalties due with respect thereto, and Tenant shall reimburse
Landlord therefor, upon demand, as Additional Charges.

 

42

 

ARTICLE 9

 

INSURANCE AND INDEMNIFICATION

 

9.1                                 GENERAL
INSURANCE REQUIREMENTS. Tenant shall, at all times during the Term and at any
other time Tenant shall be in possession of the Property, keep the Property,
and all property located therein or thereon, insured against the risks and in
the amounts as follows and shall maintain, with respect to the Property, the
following insurance:

 

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

 

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

 

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

 

(d)                                 Flood
insurance (if the Hotel is located in whole or in part within an area
identified as an area having

 

43

 

special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968, as amended, or the Flood Disaster Protection Act of 1973, as amended (or
any successor acts thereto)) and insurance against such other hazards and in
such amounts as may be available under the National Flood Insurance Program and
customary for comparable properties in the area;

 

(e)                                  Worker’s
compensation insurance coverage provided by the Puerto Rico State Insurance
Fund for all persons employed by Tenant at the Hotel with statutory limits and
otherwise with limits of and provisions in accordance with the requirements of
applicable local, territorial, State and federal law.

 

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

 

(g)                                 Such
additional insurance as may be required, from time to time by (i) Applicable
Law, (ii) any Hotel Mortgagee or (iii) which is otherwise reasonably required
upon advance notice to Tenant given in accordance with the terms hereof.

 

9.2                                 REPLACEMENT
COST. “REPLACEMENT COST” as used herein, shall mean the actual replacement cost
of the property requiring replacement from time to time, including an increased
cost of construction endorsement, less exclusions provided in the standard form
of fire insurance policy. In the event either party believes that the then full
replacement cost has increased or decreased at any time during the Term, such
party, at its own cost, shall have the right to have such full replacement cost
redetermined by an independent accredited appraiser approved by the other,
which approval shall not be unreasonably withheld or delayed. The party
desiring to have the full replacement cost so redetermined shall forthwith, on
receipt of such determination by such appraiser, give Notice thereof to the
other. The determination of such appraiser shall be final and binding on the
parties hereto until any subsequent determination under this SECTION 9.2,
and Tenant shall forthwith conform the amount of the insurance carried to the
amount so determined by the appraiser.

 

9.3                                 WAIVER
OF SUBROGATION. Landlord and Tenant agree that (insofar as and to the extent
that such agreement may be effective without invalidating or making it
impossible to secure insurance coverage from responsible insurance companies
doing business in the State) with respect to any property loss which

 

44

 

is covered by insurance then being carried by Landlord or Tenant,
respectively, the party carrying such insurance and suffering said loss
releases the other of and from any and all claims with respect to such loss;
and they further agree that their respective insurance companies shall have no
right of subrogation against the other on account thereof, even though extra
premium may result therefrom. In the event that any extra premium is payable by
Tenant as a result of this provision, Landlord shall not be liable for
reimbursement to Tenant for such extra premium.

 

9.4                                 FORM
SATISFACTORY, ETC. All insurance policies and endorsements required pursuant to
this ARTICLE 9 shall be fully paid for, nonassessable and be issued by
insurance carriers authorized to do business in the State, having a general
policy holder’s rating of no less than B++ in Best’s latest rating guide. All
such policies described in SECTIONS 9.1(a) through (d) shall include no
deductible in excess of Two Hundred Fifty Thousand Dollars ($250,000) and, with
the exception of the insurance described in SECTIONS 9.1(e), shall name Landlord
and the Hotel Mortgagee as additional insureds, as their interests may appear.
All loss adjustments shall be payable as provided in ARTICLE 10, except that
losses under SECTIONS 9.1(c) and 9.1(e) shall be payable directly to the party
entitled thereto. Tenant shall cause all insurance premiums to be paid and shall
deliver policies or certificates thereof to Landlord prior to their effective
date (and, with respect to any renewal policy, prior to the expiration of the
existing policy). All such policies shall provide Landlord (and the Hotel Mortgagee
if required by the same) thirty (30) days prior written notice of any material
change or cancellation of such policy. In the event Tenant shall fail to effect
such insurance as herein required, to pay the premiums therefor or to deliver
such policies or certificates to Landlord or the Hotel Mortgagee at the times
required, Landlord shall have the right, upon Notice to Tenant, but not the
obligation, to acquire such insurance and pay the premiums therefor, which amounts
shall be payable to Landlord, upon demand, as Additional Charges, together with
interest accrued thereon at the Interest Rate from the date such payment is
made until the date repaid.

 

9.5                                 BLANKET
POLICY. Notwithstanding anything to the contrary contained in this ARTICLE 9,
Tenant’s obligation to maintain the insurance herein required may be brought
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Tenant, provided, that (a) the coverage thereby
afforded will not be reduced or diminished from

 

45

 

that which would exist under a separate policy meeting all other
requirements of this Agreement, and (b) the requirements of this ARTICLE 9
are otherwise satisfied.

 

9.6                                 NO
SEPARATE INSURANCE. Tenant shall not take out separate insurance, concurrent in
form or contributing in the event of loss with that required by this ARTICLE 9,
or increase the amount of any existing insurance by securing an additional
policy or additional policies, unless all parties having an insurable interest
in the subject matter of such insurance, including Landlord and all Hotel
Mortgagees, are included therein as additional insureds and the loss is payable
under such insurance in the same manner as losses are payable under this Agreement.
In the event Tenant shall take out any such separate insurance or increase any
of the amounts of the then existing insurance, Tenant shall give Landlord
prompt Notice thereof.

 

9.7                                 INDEMNIFICATION
OF LANDLORD. Notwithstanding the existence of any insurance provided for herein
and without regard to the policy limits of any such insurance, Tenant shall
protect, indemnify and hold harmless Landlord for, from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and reasonable expenses (including, without limitation, reasonable attorneys’
fees), to the maximum extent permitted by law, imposed upon or incurred by or
asserted against Landlord by reason of (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Property or
adjoining sidewalks or rights of way, (b) any past, present or future use,
misuse, non-use, condition, management, maintenance or repair by Tenant or
anyone claiming under Tenant of the Property or Tenant’s Personal Property or
any litigation, proceeding or claim by governmental entities or other third
parties to which Landlord is made a party or participant relating to the
Property or Tenant’s Personal Property or such use, misuse, non-use, condition,
management, maintenance, or repair thereof including, failure to perform
obligations (other than Condemnation proceedings to which Landlord is made a
party), (c) any Impositions that are the obligations of Tenant to pay pursuant
to the applicable provisions of this Agreement (except if and to the extent
such Imposition results from Landlord’s willful failure to comply with the
terms of SECTION 20.20), (d) any failure on the part of Tenant or anyone
claiming under Tenant to perform or comply with any of the terms of this
Agreement. Tenant, at its expense, shall contest, resist and defend (x) any such
claim, action or proceeding asserted or instituted against

 

46

 

Landlord or may compromise or otherwise dispose of the same, with
Landlord’s prior written consent (which consent may not be unreasonably
withheld, delayed or conditioned), (y) the termination or non-renewal of any
ground, underlying or parking lease due to any act or omission of Tenant and
(z) the loss or non-renewal of the Tax Exemption Decree due to any act or
omission of Tenant. The obligations of Tenant under this SECTION 9.7 are
in addition to the obligations set forth in SECTION 4.3 and shall survive
the expiration or sooner termination of this Agreement.

 

ARTICLE 10

 

CASUALTY

 

10.1                           INSURANCE
PROCEEDS. Except as provided in the last clause of this sentence, all proceeds
payable by reason of any loss or damage to the Property, or any portion
thereof, and insured under any policy of insurance required by ARTICLE 9
(other than the proceeds of any business interruption insurance) shall be paid
directly to Landlord (subject to the provisions of SECTION 10.2) and all loss
adjustments with respect to losses payable to Landlord shall require the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
delayed or conditioned. If Tenant is required to reconstruct or repair the
Property as provided herein, such proceeds shall be paid out by Landlord from
time to time for the reasonable costs of reconstruction or repair of such Property
necessitated by such damage or destruction, subject to and in accordance with
the provisions of SECTION 10.2.4. Provided no Default or Event of Default
has occurred and is continuing, any excess proceeds of insurance remaining
after the completion of the restoration shall be paid to Tenant. In the event
that the provisions of SECTION 10.2.1 are applicable, the insurance proceeds
shall be retained by the party entitled thereto pursuant to SECTION 10.2.1.

 

10.2                           DAMAGE
OR DESTRUCTION.

 

10.2.1                  DAMAGE OR DESTRUCTION OF PROPERTY.
If, during the Term, the Property shall be totally or partially destroyed and
the Hotel located thereon is thereby rendered Unsuitable for Its Permitted Use,
(i) Tenant may, by the giving of Notice thereof to Landlord, within sixty (60)
days after the date of such casualty, terminate this Agreement or (ii) Landlord
may terminate this Agreement on not less than sixty days’ written notice to
Tenant. If this Agreement is terminated by reason of or in connection with any
casualty, the insurance proceeds shall

 

47

 

be allocated equitably by agreement of Landlord and Tenant, or, if
Landlord and Tenant fail to agree within a reasonable time, by Arbitration.

 

10.2.2                  PARTIAL DAMAGE OR DESTRUCTION. If,
during the Term, the Property shall be totally or partially destroyed but the
Hotel is not rendered Unsuitable for Its Permitted Use, Tenant shall promptly
restore the Hotel as provided in SECTION 10.2.4 unless this Agreement is
terminated as to the Hotel as provided in SECTION 10.2.3.

 

10.2.3                  INSUFFICIENT INSURANCE PROCEEDS. If
this Agreement is not otherwise terminated pursuant to this ARTICLE 10 and
the cost of the repair or restoration of the Property exceeds the amount of net
insurance proceeds received by Landlord and Tenant on account of such casualty,
Tenant shall give Landlord Notice thereof which notice shall set forth in
reasonable detail the nature of such deficiency and whether Tenant shall pay
and assume the amount of such deficiency (Tenant having no obligation to do so,
except that, if Tenant shall elect to make such funds available, the same shall
become an irrevocable obligation of Tenant pursuant to this Agreement). In the
event Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at Landlord’s
sole election by Notice to Tenant, given within sixty (60) days after Tenant’s
notice of the deficiency, to elect to make available for application to the
cost of repair or restoration the amount of such deficiency; PROVIDED, HOWEVER,
in such event, upon any disbursement by Landlord thereof, the Minimum Rent
shall be adjusted as provided in SECTION 3.1.1 (b). In the event that
neither Landlord nor Tenant shall elect to make such deficiency available for
restoration, either Landlord or Tenant may terminate this Agreement by Notice
to the other, whereupon, this Agreement shall terminate and insurance proceeds
shall be distributed as provided in SECTION 10.2.1. It is expressly
understood and agreed, however, that, notwithstanding anything in this
Agreement to the contrary, Tenant shall be strictly liable and solely
responsible for the amount of any deductible and shall, upon any insurable
loss, pay over the amount of such deductible to Landlord at the time and in the
manner herein provided for payment of the applicable proceeds to Landlord.

 

10.2.4                  DISBURSEMENT OF PROCEEDS. In the
event Tenant is required to restore the Property pursuant to SECTION 10.2
and this Agreement is not terminated as to the Property pursuant to this ARTICLE 10,
Tenant shall commence promptly and continue diligently to perform the repair
and restoration of the Property

 

48

 

(hereinafter called the “WORK”), so as to restore the Property in
material compliance with Applicable Law and so that such Property shall be, to
the extent practicable, substantially equivalent in value and general utility
to its general utility and value immediately prior to such damage or
destruction. Subject to the terms hereof, Landlord shall advance the insurance
proceeds and any additional amounts payable by Landlord pursuant to SECTION 10.2.3
or otherwise deposited with Landlord to Tenant regularly during the repair and restoration
period so as to permit payment for the cost of any such restoration and repair.
Any such advances shall be made not more than monthly within ten (10) Business
Days after Tenant submits to Landlord a written requisition and substantiation
therefor on AIA Forms G702 and G703 (or on such other form or forms as may be
reasonably acceptable to Landlord). Landlord may, at its option, condition
advancement of such insurance proceeds and other amounts on (i) the absence of
any Event of Default, (ii) its approval of plans and specifications of an
architect satisfactory to Landlord (which approval shall not be unreasonably
withheld, delayed or conditioned), (iii) general contractors’ estimates, (iv)
architect’s certificates, (v) unconditional lien waivers of general contractors,
if available, (vi) evidence of approval by all governmental authorities and
other regulatory bodies whose approval is required, (vii) if Tenant has elected
to advance deficiency funds pursuant to SECTION 10.2.3, Tenant depositing
the amount thereof with Landlord and (viii) such other certificates as Landlord
may, from time to time, reasonably require.

 

Landlord’s obligation to disburse insurance
proceeds under this ARTICLE 10 during the last two (2) years of the Term
(including any automatic renewals thereof) shall be subject to the release of
such proceeds by the Hotel Mortgagee to Landlord. If the Hotel Mortgagee shall
be unwilling to disburse insurance proceeds in accordance with the terms of
this Agreement, Tenant shall have the right, by the giving of Notice thereof to
Landlord within ten (10) Business Days after Tenant learns of such
unwillingness, to treat the Property as rendered Unsuitable for Its Permitted
Use for purposes of SECTION 10.2.1. Tenant’s obligation to restore the
Property pursuant to this ARTICLE 10 shall be subject to the release of
available insurance proceeds by the applicable Hotel Mortgagee to Landlord or
directly to Tenant.

 

10.3                           DAMAGE
NEAR END OF TERM. Notwithstanding any provisions of SECTIONS 10.1 or 10.2 to
the contrary, if damage to or destruction of the Property occurs during the
last two (2)

 

49

 

years of the Term (including any automatic Extended Terms) and if such
damage or destruction cannot reasonably be expected to be fully repaired and
restored prior to the date that is twelve (12) months prior to the end of the
Term, the provisions of SECTION 10.2.1 shall apply as if such Property had
been totally or partially destroyed and the Hotel thereon rendered Unsuitable
for Its Permitted Use.

 

10.4                           TENANT’S
PROPERTY. All insurance proceeds payable by reason of any loss of or damage to
any of Tenant’s Personal Property shall be paid to Tenant and, to the extent
necessary to repair or replace Tenant’s Personal Property in accordance with SECTION 10.5,
Tenant shall hold such proceeds in trust to pay the cost of repairing or
replacing damaged Tenant’s Personal Property. 

 

10.5                           RESTORATION
OF TENANT’S PROPERTY. If Tenant is required to restore the Property as
hereinabove provided and this Agreement is not terminated as to such Property
pursuant to the terms of ARTICLE 10, Tenant shall either (a) restore all
alterations and improvements made by Tenant and Tenant’s Personal Property, or
(b) replace such alterations and improvements and Tenant’s Personal Property
with improvements or items of the same or better quality and utility in the
operation of such Property.

 

10.6                           NO
ABATEMENT OF RENT. Except as expressly provided herein, this Agreement shall
remain in full force and effect and Tenant’s obligation to make all payments of
Rent and to pay all other charges as and when required under this Agreement
shall remain unabated during the Term notwithstanding any damage involving the
Property (provided that Landlord shall credit against such payments any amounts
paid to Landlord as a consequence of such damage under any business
interruption insurance obtained by Tenant hereunder). The provisions of this ARTICLE 10
shall be considered an express agreement governing any cause of damage or
destruction to the Property and, to the maximum extent permitted by law, no
local or State statute, laws, rules, regulation or ordinance in effect during
the Term which provide for such a contingency shall have any application in
such case.

 

10.7                           WAIVER.
Tenant hereby waives any statutory rights of termination which may arise by
reason of any damage or destruction of the Property, or any portion thereof.

 

50

 

 

ARTICLE 11

 

CONDEMNATION

 

11.1                           TOTAL
CONDEMNATION, ETC.  If either (i) the
whole of the Property shall be taken by Condemnation or (ii) a Condemnation of
less than the whole of the Property renders the Property Unsuitable for Its
Permitted Use, this Agreement shall terminate, and Tenant and Landlord shall
seek the Award for their interests as provided in SECTION 11.6.

 

11.2                           PARTIAL
CONDEMNATION.  In the event of a
Condemnation of less than the whole of the Property such that such Property is
still suitable for its Permitted Use, Tenant shall commence promptly and
continue diligently to restore the untaken portion of the applicable Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as
may be possible under the circumstances) as such Leased Improvements existing
immediately prior to such Condemnation, in material compliance with all
Applicable Law, subject to and unless this Agreement is terminated pursuant to
the provisions of this SECTION 11.2. If the cost of the repair or
restoration of the affected Property exceeds the amount of the Award, Tenant
shall give Landlord Notice thereof which notice shall set forth in reasonable
detail the nature of such deficiency and whether Tenant shall pay and assume
the amount of such deficiency (Tenant having no obligation to do so, except
that if Tenant shall elect to make such funds available, the same shall become
an irrevocable obligation of Tenant pursuant to this Agreement). In the event
Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at Landlord’s
sole election by Notice to Tenant given within sixty (60) days after Tenant’s
Notice of the deficiency, to elect to make available for application to the
cost of repair or restoration the amount of such deficiency; PROVIDED, HOWEVER,
in such event, upon any disbursement by Landlord thereof, the Minimum Rent
shall be adjusted as provided in SECTION 3.1.1 (b). In the event that
neither Landlord nor Tenant shall elect to make such deficiency available for
restoration, either Landlord or Tenant may terminate this Agreement and the
entire Award shall be allocated as set forth in SECTION 11.6.

 

Subject to the terms hereof, Landlord shall
contribute to the cost of restoration that part of the Award necessary to
complete such repair or restoration, together with severance and other damages
awarded for the taken Leased Improvements and any

 

 

51

 

other amounts deposited with or payable by Landlord, to Tenant
regularly during the restoration period so as to permit payment for the cost of
such repair or restoration. Landlord may, at its option, condition advancement
of such Award and other amounts on (i) the absence of any Event of Default,
(ii) its approval of plans and specifications of an architect satisfactory to
Landlord (which approval shall not be unreasonably withheld, delayed or
conditioned), (iii) general contractors’ estimates, (iv) architect’s
certificates, (v) unconditional lien waivers of general contractors, if
available, (vi) evidence of approval by all governmental authorities and other
regulatory bodies whose approval is required, (vii) if Tenant has elected to
advance deficiency funds pursuant to the preceding paragraph, Tenant depositing
the amount thereof with Landlord and (viii) such other certificates as Landlord
may, from time to time, reasonably require. Landlord’s obligation under this SECTION 11.2
to disburse the Award and such other amounts shall be subject to (x) the
collection thereof by Landlord and (y) during the last two (2) years of the
Term (including any exercised renewals thereof), the release of such Award by
the applicable Hotel Mortgagee. If the Hotel Mortgagee shall be unwilling to
disburse Award proceeds in accordance with the terms of this Agreement, Tenant
shall have the right, by the giving of Notice thereof to Landlord within ten
(10) Business Days after Tenant learns of such unwillingness, to treat the
Property as rendered Unsuitable for Its Permitted Use for purposes of SECTION 11.1.
Tenant’s obligation to restore the Property shall be subject to the release of
the Award by the applicable Hotel Mortgagee to Landlord or directly to Tenant.

 

11.3                           ABATEMENT
OF RENT.  Other than as specifically
provided in this Agreement, this Agreement shall remain in full force and
effect and Tenant’s obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall remain unabated
during the Term notwithstanding any Condemnation involving the Property, or any
portion thereof. The provisions of this ARTICLE 11 shall be considered an
express agreement governing any Condemnation involving the Property and, to the
maximum extent permitted by law, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such a
contingency shall have any application in such case.

 

11.4                           TEMPORARY
CONDEMNATION.  In the event of any
temporary Condemnation of the Property or Tenant’s interest therein, this
Agreement shall continue in full force and effect and Tenant shall continue to
pay, in the manner and on the terms herein

 

52

 

specified, the full amount of the Rent. Tenant shall continue to
perform and observe all of the other terms and conditions of this Agreement on
the part of the Tenant to be performed and observed. Provided no Event of
Default has occurred and is continuing, the entire amount of any Award made for
such temporary Condemnation allocable to the Term, whether paid by way of
damages, rent or otherwise, shall be paid to Tenant. Tenant shall, promptly
upon the termination of any such period of temporary Condemnation, at its sole
cost and expense, restore the Property to the condition that existed
immediately prior to such Condemnation, in material compliance with Applicable
Law, unless such period of temporary Condemnation shall extend beyond the
expiration of the Term, in which event Tenant shall not be required to make
such restoration.

 

11.5                           CONDEMNATION
NEAR END OF TERM.  Notwithstanding any
provisions of SECTIONS 11.2 or 11.3 to the contrary, if Condemnation of the
Property occurs during the last two (2) years of the Term (including any
automatic Extended Terms) and if restoration cannot reasonably be expected to
be completed prior to the date that is twelve (12) months prior to the end of
the Term, the provisions of SECTION 11.1 shall apply as if such Property
had been totally or partially taken and the Hotel thereon rendered Unsuitable
for Its Permitted Use.

 

11.6                           ALLOCATION
OF AWARD.  Except as provided in SECTION 11.4,
in any Condemnation proceedings, Landlord and Tenant shall each seek its own
Award in conformity herewith, at its own expense.

 

ARTICLE 12

 

DEFAULTS AND REMEDIES

 

12.1                           EVENTS
OF DEFAULT.  The occurrence of any one or
more of the following events shall constitute an “EVENT OF DEFAULT” hereunder:

 

(a)                                  Subject
to any applicable notice or cure provisions, Tenant’s failure to make any
payment of the Minimum Rent, Additional Rent or Additional Charges due to
Landlord or Tenant’s failure to pay any other Additional Charges or any other
sum (including, but not limited to, funding of the FF&E Reserve) payable
hereunder which has a material effect on the operation of the Property; or

 

(b)                                 Tenant’s
failure to maintain the insurance coverages required under ARTICLE 9; or

 

53

 

(c)                                  Tenant’s
default in the due observance or performance of any of the terms, covenants or
agreements contained herein to be performed or observed by it (other than as
specified in clauses (a) and (b) above) and such default shall continue for a
period of thirty (30) days after Notice thereof from Landlord to Tenant;
PROVIDED, HOWEVER, that if such default is susceptible of cure but such cure
cannot be accomplished with due diligence within such period of time and if, in
addition, Tenant commences to cure or cause to be cured such default within
thirty (30) days after Notice thereof from Landlord and thereafter prosecutes
the curing of such default with all due diligence, such period of time shall be
extended to such period of time (not to exceed an additional one (1) year in
the aggregate) as may be necessary to cure such default with all due diligence;
or

 

(d)                                 Tenant’s
initiation or maintenance of any claim or action against Landlord in respect of
the condition of the Property; or

 

(e)                                  The
termination of the New Management Agreement pursuant to Section 5.1 or Section 10.3
thereof; or

 

(f)                                    The
occurrence of a Manager Event of Default under the New Management Agreement.

 

So long as an Event of Default shall be
outstanding, Landlord, in addition to all other remedies available to it, may
terminate this Agreement by giving Notice thereof to Tenant and upon the
expiration of the time, if any, fixed in such Notice, this Agreement shall
terminate and all rights of Tenant under this Agreement with respect thereto
shall cease. Landlord shall have and may exercise all rights and remedies
available at law and in equity to Landlord as a result of Tenant’s breach of
this Agreement.

 

Upon the occurrence of an Event of Default,
Landlord may, in addition to any other remedies provided herein, enter upon the
Property or any portion thereof and take possession of any and all of Tenant’s
Personal Property, if any, and the Records, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such taking
of possession by Landlord) and sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or any portion of
Tenant’s Personal Property, if any, unless otherwise prohibited by law. Unless

 

54

 

otherwise provided by law and without intending to exclude any other
manner of giving Tenant reasonable notice, the requirement of reasonable Notice
shall be met if such Notice is given at least ten (10) days before the date of
sale. The proceeds from any such disposition, less all expenses incurred in
connection with the taking of possession, holding and selling of such property
(including, reasonable attorneys’ fees), shall be applied as a credit against
the indebtedness which is secured by the security interest granted in SECTION 7.2.
Any surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.

 

12.2                           REMEDIES.
 None of (a) the termination of this
Agreement pursuant to SECTION 12.1, (b) the repossession of the Property
or any portion thereof, (c) the failure of Landlord to re-let the Property or
any portion thereof, nor (d) the reletting of all or any of portion of the
Property, shall relieve Tenant of its accrued liability or obligations which by
their terms survive hereunder, all of which shall survive any such termination,
repossession or re-letting. In the event of any such termination, Tenant shall
forthwith pay to Landlord all Rent due and payable with respect to the Property
through and including the date of such termination. Thereafter, Tenant, until
the end of what would have been the Term of this Agreement in the absence of
such termination, and whether or not the Property or any portion thereof shall
have been re-let, shall be liable to Landlord for, and shall pay to Landlord,
as current damages, the Rent (Additional Rent to be reasonably calculated by
Landlord based on historical Total Hotel Sales) and other charges which would
be payable hereunder for the remainder of the Term had such termination not
occurred, less the net proceeds, if any, of any re-letting of the Property,
after deducting all reasonable expenses in connection with such reletting,
including, without limitation, all repossession costs, brokerage commissions,
legal expenses, attorneys’ fees, advertising, expenses of employees, alteration
costs and expenses of preparation for such reletting. Tenant shall pay such
current damages to Landlord monthly on the days on which the Minimum Rent would
have been payable hereunder if this Agreement had not been so terminated.

 

Upon such termination, whether or not
Landlord shall have collected any such current damages, Landlord shall be
entitled to liquidated damages. Landlord’s right to receive liquidated damages
has been agreed to due to the uncertainty, difficulty and/or impossibility of
ascertaining the actual damages suffered

 

55

 

by Landlord. Further, if not for Landlord’s right to receive such
liquidated damages, Landlord’s Affiliated Person would not have entered into
the Purchase Agreement and Landlord would not have entered into this Agreement.
TENANT HEREBY ACKNOWLEDGES AND AGREES THAT SUCH LIQUIDATED DAMAGES ARE NOT A
PENALTY, BUT ARE TO COMPENSATE LANDLORD AND ITS AFFILIATES FOR THE EXPENSE AND
LOST EARNINGS WHICH MAY RESULT FROM ARRANGING SUBSTITUTE MANAGEMENT AND/OR
TENANCY FOR THE HOTEL AS WELL AS TO COMPENSATE FOR PRICE PAID FOR THE HOTEL BY
LANDLORD’S AFFILIATED PERSON. Such liquidated damages shall be equal to all
accrued but unpaid amounts due to Landlord hereunder up until the date of
termination, plus the Outstanding Balance (as defined in the Guaranty).
Landlord shall be entitled to interest, at the Interest Rate, on such
liquidated damages from the date of such termination until the date of payment
of such damages and interest. Except with respect to Landlord’s rights and remedies
for any breach or violations by Tenant of the terms of SECTION 5.3 and ARTICLE 13,
Landlord shall look solely to any collateral hereafter pledged securing Tenant’s
obligations hereunder for satisfaction of any claim of Landlord against Tenant
hereunder; PROVIDED, HOWEVER, nothing contained herein is intended to, nor
shall, limit or reduce the obligations of the Guarantor under the Guaranty or
limit Landlord’s rights with respect thereto.

 

In case of any Event of Default, re-entry,
expiration and dispossession by summary proceedings or otherwise, Landlord may
(a) relet the Property or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may at Landlord’s option, be
equal to, less than or exceed the period which would otherwise have constituted
the balance of the Term and may grant concessions or free rent to the extent
that Landlord considers advisable and necessary to relet the same, and (b) may
make such reasonable alterations, repairs and decorations in the Property or
any portion thereof as Landlord, in its sole and absolute discretion, considers
advisable and necessary for the purpose of reletting the Property; and the
making of such alterations, repairs and decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Landlord
shall in no event be liable in any way whatsoever for any failure to relet all
or any portion of the Property, or, in the event that the Property is relet,
for failure to collect the rent under such reletting. To the maximum extent
permitted by law, Tenant hereby expressly waives any and all rights of
redemption granted under any present or future laws in the event of Tenant
being evicted or dispossessed, or in the event of Landlord obtaining possession
of the Property, by reason of the occurrence and continuation of

 

56

 

an Event of Default hereunder. Landlord covenants and agrees, in the
event of any termination of this Agreement as a result of an Event of Default,
to use reasonable efforts to mitigate its damages.

 

12.3                           WAIVER.
To the maximum extent permitted by Applicable Law, each of the parties hereto
waives its rights to trial by jury with respect to this Agreement or matters
arising in connection herewith. FURTHER TO THE FOREGOING, IF THIS AGREEMENT IS
TERMINATED PURSUANT TO SECTIONS 12.1 OR 12.2, TENANT WAIVES, TO THE EXTENT
PERMITTED BY LAW, (i) ANY RIGHT TO A TRIAL BY JURY IN THE EVENT OF SUMMARY
PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN THIS ARTICLE 12, AND (ii)
THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING PROPERTY FROM
LIABILITY FOR RENT OR FOR DEBT.

 

12.4                           APPLICATION
OF FUNDS.  Any payments received by
Landlord under any of the provisions of this Agreement during the existence or
continuance of any Event of Default (and any payment made to Landlord rather
than Tenant due to the existence of any Event of Default) shall be applied to
Tenant’s current and past due obligations under this Agreement in such order as
Landlord may determine or as may be prescribed by the laws of the State.

 

12.5                           LANDLORD’S
RIGHT TO CURE TENANT’S DEFAULT.  If an
Event of Default shall have occurred and be continuing, Landlord, after Notice
to Tenant (which Notice shall not be required if Landlord shall reasonably
determine immediate action is necessary to protect person or property), without
waiving or releasing any obligation of Tenant and without waiving or releasing
any Event of Default, may (but shall not be obligated to), at any time thereafter,
make such payment or perform such act for the account and at the expense of
Tenant, and may, to the maximum extent permitted by law, enter upon the
Property or any portion thereof for such purpose and take all such action
thereon as, in Landlord’s sole and absolute discretion, may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of Tenant. All
reasonable costs and expenses (including, without limitation, reasonable
attorneys’ fees) incurred by Landlord in connection therewith, together with
interest thereon (to the extent permitted by law) at the Interest Rate from the
date such sums are paid by Landlord until repaid, shall be paid by Tenant to
Landlord, on demand.

 

57

 

ARTICLE 13

 

HOLDING OVER

 

Any holding over by Tenant after the
expiration or sooner termination of this Agreement shall be treated as a daily
tenancy at sufferance at a rate equal to two (2) times the Minimum Rent and
other charges herein provided (prorated on a daily basis). Tenant shall also
pay to Landlord all damages (direct or indirect) sustained by reason of any
such holding over. Otherwise, such holding over shall be on the terms and
conditions set forth in this Agreement, to the extent applicable. Nothing
contained herein shall constitute the consent, express or implied, of Landlord
to the holding over of Tenant after the expiration or earlier termination of
this Agreement.

 

ARTICLE 14

 

LANDLORD’S DEFAULT

 

If Landlord shall default in the performance or
observance of any of its covenants or obligations set forth in this Agreement
or any obligation of Landlord, if any, under any agreement affecting the
Property, the performance of which is not Tenant’s obligation pursuant to this
Agreement, and any such default shall continue for a period of five (5)
Business Days after Notice thereof with respect to monetary defaults and twenty
(20) Business Days after Notice thereof with respect to non-monetary defaults
from Tenant to Landlord and any applicable Hotel Mortgagee, or such additional
period as may be reasonably required to correct the same provided Landlord is
proceeding with due diligence to correct the same, then Tenant may declare the
occurrence of a “Landlord Default” by a second Notice to Landlord and to the
Hotel Mortgagee and Tenant shall have the right to institute forthwith any and
all proceedings permitted by law or equity (provided they are not specifically
barred under the terms of this Agreement), including, without limitation,
actions for specific performance and/or damages; provided, however, except as
may be expressly provided in this Agreement, Tenant shall have no right to
terminate this Agreement for any default by Landlord hereunder and no right,
for any such default, to offset or counterclaim against any Rent or other
charges due hereunder. In the event Landlord wrongfully terminates this
Agreement or if Tenant terminates this Agreement pursuant to any right to do so
contained herein as a result of Landlord’s breach, then, subject to Tenant’s
mitigation obligations, Tenant shall be entitled to recover as

 

58

 

part of its damages for such wrongful termination an amount equal to
the damages suffered by Tenant on account of terminating the employment of
on-site employees of the Hotel in connection therewith.

 

If Landlord shall in good faith dispute the
occurrence of any Landlord Default and Landlord, before the expiration of the
applicable cure period, shall give Notice thereof to Tenant, setting forth, in
reasonable detail, the basis therefor, no Landlord Default shall be deemed to
have occurred and Landlord shall have no obligation with respect thereto until
final adverse, determination thereof.

 

ARTICLE 15

 

SUBLETTING AND ASSIGNMENT

 

15.1                           SUBLETTING
AND ASSIGNMENT.  Except as provided in
SECTIONS 15.3 and 15.5, Tenant shall not, without Landlord’s prior written
consent (which consent may be given or withheld in Landlord’s sole and absolute
discretion), assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer this Agreement or sublease (which term shall be deemed to include the
granting of concessions, licenses and the like but shall not be deemed to
include the lodging of hotel guests consistent with the Permitted Use), all or
any part of the Property or suffer or permit this Agreement or the leasehold
estate created hereby or any other rights arising under this Agreement to be
assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in whole
or in part, whether voluntarily, involuntarily or by operation of law, or
permit the use or operation of the Property by anyone other than Tenant, or the
Property to be offered or advertised for assignment or subletting. For purposes
of this SECTION 15.1, an assignment of this Agreement shall be deemed to
include any transaction which results in Tenant no longer being an Affiliated
Person of Guarantor or pursuant to which all or substantially all of Tenant’s
assets are transferred to any Person who is not an Affiliated Person of Guarantor.

 

If this Agreement is assigned or if the
Property or any part thereof are sublet (or occupied by anybody other than
Tenant and its employees or hotel guests), then Landlord may collect the rents
from such assignee, subtenant or occupant, as the case may be, and apply the
net amount collected to the Rent herein reserved, but no such collection shall
be deemed a waiver of the provisions set forth in this SECTION 15.1, the
acceptance by Landlord of such assignee, subtenant or occupant, as the case may
be, as a tenant, or a release of Tenant from the future

 

59

 

performance by Tenant of its covenants, agreements or obligations
contained in this Agreement.

 

No subletting or assignment shall in any way
impair the continuing primary liability of Tenant hereunder (unless Landlord
and Tenant expressly otherwise agree that Tenant shall be released from all
obligations hereunder), and no consent to any subletting or assignment in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in this SECTION 15.1. No assignment, subletting or occupancy shall affect
any Permitted Use; any subletting, assignment or other transfer of Tenant’s
interest under this Agreement in contravention of this SECTION 15.1 shall
be voidable at Landlord’s option.

 

15.2                           REQUIRED
SUBLEASE PROVISIONS.  Any sublease of all
or any portion of the Property entered into on or after the date hereof shall
provide (a) that it is subject and subordinate to this Agreement and to the
matters to which this Agreement is or shall be subject or subordinate; (b) that
in the event of termination of this Agreement or reentry or dispossession of
Tenant by Landlord under this Agreement, Landlord may, at its option, terminate
such sublease or take over all of the right, title and interest of Tenant, as
sublessor under such sublease, and such subtenant shall, at Landlord’s option,
attorn to Landlord pursuant to the then executory provisions of such sublease,
except that neither Landlord nor the Hotel Mortgagee, as holder of a mortgage
or as Landlord under this Agreement, if such mortgagee succeeds to that
position, shall (i) be liable for any act or omission of Tenant under such
sublease, (ii) be subject to any credit, counterclaim, offset or defense which
theretofore accrued to such subtenant against Tenant, (iii) be bound by any
previous modification of such sublease not consented to in writing by Landlord
or by any previous prepayment of more than one (1) month’s rent, (iv) be bound
by any covenant of Tenant to undertake or complete any construction of the
Property or any portion thereof, (v) be required to account for any security
deposit of the subtenant other than any security deposit actually delivered to
Landlord by Tenant, (vi) be bound by any obligation to make any payment to such
subtenant or grant any credits, except for services, repairs, maintenance and
restoration provided for under the sublease that are performed after the date
of such attornment, (vii) be responsible for any monies owing by Tenant to the
credit of such subtenant unless actually delivered to Landlord by Tenant, or
(viii) be required to remove any Person occupying any portion of the Property;
and (c) in the event that such subtenant receives

 

60

 

a written Notice from Landlord or the Hotel Mortgagee stating that an
Event of Default has occurred and is continuing, such subtenant shall
thereafter be obligated to pay all rentals accruing under such sublease
directly to the party giving such Notice or as such party may direct. All
rentals received from such subtenant by Landlord or the Hotel Mortgagee, as the
case may be, shall be credited against the amounts owing by Tenant under this
Agreement and such sublease shall provide that the subtenant thereunder shall,
at the request of Landlord, execute a suitable instrument in confirmation of
such agreement to attorn. An original counterpart of each such sublease or any
assignment hereof, duly executed by Tenant and such subtenant or assignee, as
the case may be, in form and substance reasonably satisfactory to Landlord,
shall be delivered promptly to Landlord and (a) in the case of an assignment,
the assignee shall assume in writing and agree to keep and perform all of the
terms of this Agreement on the part of Tenant to be kept and performed and
shall be, and become, jointly and severally liable with Tenant for the
performance thereof and (b) in case of either an assignment or subletting,
Tenant shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the performance and observance of all of
the covenants and conditions to be performed by Tenant hereunder.

 

The provisions of this SECTION 15.2
shall not be deemed a waiver of the provisions set forth in the first paragraph
of SECTION 15.1.

 

15.3                           PERMITTED
SUBLEASE.  Notwithstanding the foregoing,
including, without limitation, SECTION 15.2, but subject to the provisions
of SECTION 15.4 and any other express conditions or limitations set forth
herein, Tenant may, in each instance after Notice to Landlord, sublease space
at the Property for newsstand, car rental agency, business services office,
gift shop, parking garage, health club, restaurant, bar or commissary purposes
or other concessions in furtherance of the Permitted Use, so long as such
subleases (a) do not have a term in excess of the shorter of five (5) years or
the remaining Term, (b) do not demise, (i) in the aggregate, in excess of Five
Thousand (5,000) square feet of the Hotel, or (ii) for any single sublease, in
excess of One Thousand (1,000) square feet of the Hotel, (c) will not violate
or affect any Applicable Law or any Insurance Requirement, (d) Tenant shall
provide such additional insurance coverage applicable to the activities to be
conducted in such subleased space as Landlord and the Hotel Mortgagee may
reasonably require, and (e) not less than twenty (20) days prior

 

61

 

to the date on which Tenant proposes to enter into any sublease or
concession, Tenant shall provide a copy thereof to Landlord.

 

15.4                           SUBLEASE
LIMITATION.  For so long as Landlord or
any Affiliated Person as to Landlord shall seek to qualify as a “real estate
investment trust” under the Code, anything contained in this Agreement to the
contrary notwithstanding, Tenant shall not sublet or otherwise enter into any
agreement with respect to the Hotel on any basis such that in the opinion of
the Landlord the rental or other fees to be paid by any sublessee thereunder
would be based, in whole or in part, on either (i) the income or profits
derived by the business activities of such sublessee, or (ii) any other formula
such that any portion of such sublease rental would fail to qualify as “rents
from real property” within the meaning of Section 856(d) of the Code, or
any similar or successor provision thereto.

 

15.5                           PERMITTED
ASSIGNMENTS.  Tenant shall have the
right, without Landlord’s consent but subject to SECTION 20.23, to assign
its interest in this Agreement (a) to IHG or any Affiliate of IHG, (b) in
connection with a merger, corporate restructuring or consolidation of IHG or a
sale of all or substantially all of the assets of IHG and (c) in connection
with a sale of all or substantially all of the assets (including associated
management agreements) owned by IHG and its Affiliates relating to the
InterContinental brand. At Landlord’s election, Tenant shall assign this
Agreement to any Person who is not an Affiliate of IHG that acquires all or
substantially all of the assets of IHG relating to the InterContinental brand
and shall cause such Person to assume all of Tenant’s obligations thereafter
accruing hereunder.

 

15.6                           SALE
BY LANDLORD.  Landlord shall not sell or
otherwise transfer the Property other than to an Affiliated Person of Landlord
or in connection with a sale or transfer of all the Managed Hotels permitted
pursuant to the terms of the New Management Agreement.

 

ARTICLE 16

 

ESTOPPEL CERTIFICATES

 

At any time and from time to time, but not
more than a reasonable amount of times per year, upon not less than ten (10)
Business Days prior Notice by either party, the party receiving such Notice
shall furnish to the other an Officer’s Certificate certifying that this
Agreement is unmodified and in full force

 

62

 

and effect (or that this Agreement is in full force and effect as
modified and setting forth the modifications), the date to which the Rent has
been paid, that no Default or an Event of Default has occurred and is
continuing or, if a Default or an Event of Default shall exist, specifying in
reasonable detail the nature thereof, and the steps being taken to remedy the
same, and such additional information as the requesting party may reasonably
request. Any such certificate furnished pursuant to this ARTICLE 16 may be
relied upon by the requesting party, its lenders and any prospective purchaser
or mortgagee of the Property or the leasehold estate created hereby.

 

ARTICLE 17

 

LANDLORD’S RIGHT TO INSPECT

 

Tenant shall permit Landlord and its
authorized representatives to inspect the Property during usual business hours
upon not less than twenty-four (24) hours’ Notice and to make such repairs as
Landlord is permitted or required to make pursuant to the terms of this
Agreement, provided that any inspection or repair by Landlord or its
representatives will not unreasonably interfere with Tenant’s use and operation
of the Property and further provided that in the event of an emergency, as
determined by Landlord in its reasonable discretion, prior Notice shall not be
necessary.

 

ARTICLE 18

 

EASEMENTS

 

18.1                           GRANT
OF EASEMENTS.  Provided no Event of
Default has occurred and is continuing, Landlord will join in granting and, if
necessary, modifying or abandoning such rights-of-way, easements and other
interests as may be reasonably requested by Tenant for ingress and egress, and
electric, telephone, gas, water, sewer and other utilities so long as:

 

(a)                                  the
instrument creating, modifying or abandoning any such easement, right-of-way or
other interest is satisfactory to and approved by Landlord (which approval
shall not be unreasonably withheld, delayed or conditioned); and

 

(b)                                 Landlord
receives an Officer’s Certificate from Tenant stating (i) that such grant,
modification or abandonment is not detrimental to the proper conduct of
business on such Property, (ii) the consideration, if any,

 

63

 

being paid for such grant, modification or
abandonment (which consideration shall be paid by Tenant), (iii) that such
grant, modification or abandonment does not impair the use or value of such
Property for the Permitted Use, and (iv) that, for as long as this Agreement
shall be in effect, Tenant will perform all obligations, if any, of Landlord
under any such instrument.

 

18.2                           EXERCISE
OF RIGHTS BY TENANT.  So long as no Event
of Default has occurred and is continuing, Tenant shall have the right to
exercise all rights of Landlord under the Easement Agreements and, in
connection therewith, Landlord shall execute and promptly return to Tenant such
documents as Tenant shall reasonably request. Tenant shall perform all
obligations of Landlord under the Easement Agreements.

 

18.3                           PERMITTED
ENCUMBRANCES.  Any agreements entered
into in accordance with SECTION 18.1 shall be deemed a Permitted
Encumbrance.

 

ARTICLE 19

 

HOTEL MORTGAGES

 

19.1                           LANDLORD
MAY GRANT LIENS.  Landlord shall be
entitled to encumber the Hotel and the Property with one or more Hotel
Mortgages which are expressly subordinate to this Agreement and/or with one or
more Hotel Mortgages in accordance with the following terms and conditions:

 

(a)                                  The
loan or other debt secured by such Hotel Mortgage shall not be
cross-collateralized with other property or hotels which are not managed or
franchised by Tenant, IHG or their respective Affiliated Persons;

 

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

 

(c)                                  as
of the date of the granting of such Hotel Mortgage, the Debt Service Coverage
Ratio associated with such loan or debt secured thereby shall not be less than
(i) 1.4 if fewer than four (4) Pooled FF&E Hotels secure

 

64

 

such loan or other debt or (ii) 1.3 if four
(4) or more Pooled FF&E Hotels secure such loan or other debt; and

 

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

 

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

 

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

 

(iii)                               Tenant
shall attorn to the holder or the purchaser at any such foreclosure or the
grantee of any such deed (each, a “SUCCESSOR LANDLORD”);

 

(iv)                              in
the event of such attornment, the terms of this Agreement binding on Landlord
and Tenant shall continue in full force and effect as a direct agreement
between such Successor Landlord and Tenant, upon all the terms, conditions and
covenants set forth herein, except that the Successor Landlord shall not be (A)
bound by any payment of Rent in advance of when due; (B) bound by any amendment
or modification of this Agreement made after the date that Tenant first had
written notice of such Hotel Mortgage without the consent of the holder
thereof; (C) liable in any way to Tenant for any act or omission, neglect or
default on the part of Landlord under this Agreement; (D) obligated to perform
any work or improvements to be done by Landlord or to make any advances except
for those advances to be made pursuant to SECTION 5.1.3 (b) from and after
the date on which such Successor Landlord acquired the Hotel; or (E) subject to
any counterclaim or setoff which theretofore accrued to Tenant against
Landlord;

 

(v)                                 in
the event of a casualty or Condemnation affecting the Hotel which does not
result in the

 

65

 

termination of this Agreement with respect to
the Hotel, the net insurance proceeds or Award shall be applied to the
restoration of the Hotel as herein provided;

 

(vi)                              such
other terms as are customary for similar agreements; and

 

(vii)                           if the
Portfolio Owner exercises its right under the New Management Agreement to cause
the Pledged Hotels which are Managed Hotels to be managed pursuant to a
separate management agreement pursuant to the terms of Section 4.3(b) of
the New Management Agreement, the parties shall make appropriate allocations in
the FF&E Reserve and any outstanding advances made by Landlord, Tenant or
their respective Affiliated Person so that the obligations allocable to the
Pooled FF&E Hotels subject to a Hotel Mortgage shall not be due from the
other Pooled FF&E Hotels and VICE VERSA. Without the consent of Tenant, the
holder of any Hotel Mortgage shall have the right to elect to be subject and
subordinate to this Agreement, such subordination to be effective upon such
terms and conditions as such holder may direct which are not inconsistent with
the provisions hereof.

 

Tenant shall be entitled to pay any overdue
regularly scheduled payments of interest and principal on any Hotel Mortgage
encumbering the Hotel and offset amounts so paid against the Rent due
hereunder.

 

19.2                           NOTICE
TO MORTGAGEE AND SUPERIOR LANDLORD.  Subsequent to the receipt by Tenant of Notice
from Landlord as to the identity of the Hotel Mortgagee, no Notice from Tenant
to Landlord as to a default by Landlord under this Agreement shall be effective
with respect to the Hotel Mortgagee unless and until a copy of the same is
given to the Hotel Mortgagee at the address set forth in the above described
Notice, and the curing of any of Landlord’s defaults within the applicable
notice and cure periods set forth in ARTICLE 14 by the Hotel Mortgagee
shall be treated as performance by Landlord.

 

ARTICLE 20

 

MISCELLANEOUS

 

20.1                           LIMITATION
ON PAYMENT OF RENT.  All agreements
between Landlord and Tenant herein are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration of Rent, or
otherwise, shall the Rent or any other

 

66

 

amounts payable to Landlord under this Agreement exceed the maximum
amount permissible under Applicable Law, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment
of any provision of this Agreement, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, or if from any circumstances Landlord should ever receive as fulfillment
of such provision such an excessive amount, then, IPSO FACTO, the amount which
would be excessive shall be applied to the reduction of the installment(s) of
Minimum Rent next due and not to the payment of such excessive amount. This
provision shall control every other provision of this Agreement and any other
agreements between Landlord and Tenant.

 

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

 

20.3                           REMEDIES
CUMULATIVE.  To the maximum extent
permitted by law, each legal, equitable or contractual right, power and remedy
of Landlord or Tenant, now or hereafter provided either in this Agreement or by
statute or otherwise, shall be cumulative and concurrent and shall be in
addition to every other right, power and remedy and the exercise or beginning
of the exercise by Landlord or Tenant (as applicable) of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Landlord of any or all of such other rights, powers and
remedies.

 

20.4                           SEVERABILITY.
 Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this Agreement, but rather the effect thereof shall be confined to
the clause, sentence, paragraph, section or provision so held to be
invalid, illegal or ineffective, and this Agreement shall be construed as if
such invalid, illegal or ineffective provisions had never been contained
therein.

 

20.5                           ACCEPTANCE
OF SURRENDER.  No surrender to Landlord
of this Agreement or of the Property or any part thereof, or of any

 

67

 

interest therein, shall be valid or effective unless agreed to and
accepted in writing by Landlord and no act by Landlord or any representative or
agent of Landlord, other than such a written acceptance by Landlord, shall
constitute an acceptance of any such surrender.

 

20.6                           NO
MERGER OF TITLE.  It is expressly
acknowledged and agreed that it is the intent of the parties that there shall
be no merger of this Agreement or of the leasehold estate created hereby by
reason of the fact that the same Person may acquire, own or hold, directly or
indirectly, this Agreement or the leasehold estate created hereby and the fee
estate or ground landlord’s interest in the Property.

 

20.7                           CONVEYANCE
BY LANDLORD.  If Landlord or any
successor owner of all or any portion of the Property shall convey all or any
portion of the Property in accordance with the terms hereof other than as
security for a debt, and the grantee or transferee of such of the Property
shall expressly assume all obligations of Landlord hereunder arising or
accruing from and after the date of such conveyance or transfer, Landlord or
such successor owner, as the case may be, shall thereupon be released from all
future liabilities and obligations of Landlord under this Agreement with
respect to such of the Property arising or accruing from and after the date of
such conveyance or other transfer and all such future liabilities and
obligations shall thereupon be binding upon the new owner.

 

20.8                           QUIET
ENJOYMENT.  Upon Tenant’s payment of the
Rent reserved herein, Tenant shall peaceably and quietly have, hold and enjoy
the Property for the Term, free of hindrance or molestation by Landlord or
anyone claiming by, through or under Landlord, but subject to (a) any Hotel
Mortgage or otherwise permitted to be created by Landlord hereunder, (b) all
Permitted Encumbrances, (c) liens as to obligations of Landlord that are either
not yet due or which are being contested in good faith and by proper
proceedings, provided the same do not materially interfere with Tenant’s
ability to operate the Hotel and (d) liens that have been consented to in
writing by Tenant. Except as otherwise provided in this Agreement, no failure
by Landlord to comply with the foregoing covenant shall give Tenant any right
to cancel or terminate this Agreement or abate, reduce or make a deduction from
or offset against the Rent or any other sum payable under this Agreement or to
fail to perform any other obligation of Tenant hereunder.

 

20.9                           RECORDATION
OF LEASE.  This Agreement shall be
recorded in the form of a Deed of Lease, a memorandum of lease

 

68

 

or such other abbreviated form as may be recordable at the Puerto Rico
Registry of Property.

 

20.10                     NOTICES.

 

(a)                                  Any
and all notices, demands, consents, approvals, offers, elections and other
communications required or permitted under this Agreement shall be deemed
adequately given if in writing and the same shall be delivered either in hand,
by telecopier with written acknowledgment of receipt, or by mail or Federal
Express or similar expedited commercial carrier, addressed to the recipient of
the notice, postpaid and registered or certified with return receipt requested
(if by mail), or with all freight charges prepaid (if by Federal Express or
similar carrier).

 

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

 

(c)                                  All
such notices shall be addressed, if to Landlord:

 

c/o Hospitality Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attn: Mr. John G. Murray

[Telecopier No. (617) 969-5730]

 

with a copy to:

 

Sullivan & Worcester LLP

One Post Office Square

Boston, Massachusetts 02109

Attn: Warren M. Heilbronner, Esq.

[Telecopier No. (617) 338-2880]

 

69

 

if to Tenant to:

 

c/o InterContinental Hotels Group

Three Ravinia Drive, Suite 100

Atlanta, Georgia  30346

Attn: Robert Chitty

[Facsimile: (770) 604-5321]

 

with a copy
to:                 InterContinental
Hotels Group

Resources, Inc.

c/o Six Continents Hotels, Inc.

Three Ravinia Drive, Suite 100

Atlanta, Georgia 30346

Attn: General Counsel -  Operations

Facsimile: 770-604-5802

 

with a copy
to:                 Alston & Bird
LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, Georgia 30309

Attn: Timothy Pakenham, Esq.

Facsimile: 404-253-8885

 

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

 

20.11                     TRADE AREA
RESTRICTION.  Notwithstanding anything to
the contrary in this Agreement, prior to the fifth (5th) anniversary of the
Commencement Date, neither Tenant nor any Affiliated Person as to Tenant will
acquire, own, manage, operate or open any hotel as an “InterContinental” hotel
nor shall Tenant or any such Affiliated Person authorize a third party to
operate or open any hotel as an “InterContinental” hotel within the restricted
area depicted on EXHIBIT B unless such hotel (i) is owned or leased by Landlord
or its Affiliate, (ii) is owned, operated, managed, franchised or under
development on the Commencement Date and has been specifically approved by
Landlord in writing at or prior to the time of the execution of the Purchase
Agreement or replaces any such hotel, provided such replacement hotel is not
first opened after such time and does not have more than ten percent (10%) more
guest

 

70

 

rooms than the original hotel which it replaces, or (iii) is part of an
acquisition by Tenant or its Affiliates of an interest (including an interest
as a franchisor) in a chain or group of not less than five (5) comparable full
service hotels (such acquisition to occur in a single transaction or a series
of related transactions). The terms of this SECTION 20.11 shall apply only
to “InterContinental” hotels and shall not in any way restrict the ownership,
management, franchising or operation of other brands or flags of any hotels
owned or operated by Tenant or its Affiliates within the State.

 

20.12                     CONSTRUCTION.
 Anything contained in this Agreement to
the contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Property shall survive such termination or
expiration. In no event shall Landlord be liable for any consequential damages
suffered by Tenant as the result of a breach of this Agreement by Landlord.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
to be charged. All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Each term or provision of this Agreement to be
performed by Tenant shall be construed as an independent covenant and
condition. Time is of the essence with respect to the provisions of this
Agreement. Except as otherwise set forth in this Agreement, any obligations of
Tenant (including without limitation, any monetary, repair and indemnification
obligations) and Landlord shall survive the expiration or sooner termination of
this Agreement.

 

20.13                     COUNTERPARTS;
HEADINGS.  This Agreement may be executed
in two or more counterparts, each of which shall constitute an original, but
which, when taken together, shall constitute but one instrument and shall
become effective as of the date hereof when copies hereof, which when taken together
bear the signatures of each of the parties hereto, shall have been signed.
Headings in this Agreement are for purposes of reference only and shall not
limit or affect the meaning of the provisions hereof.

 

20.14                     APPLICABLE
LAW, ETC.  This Agreement shall be
interpreted, construed, applied and enforced in accordance with the laws of the
Commonwealth of Puerto Rico applicable to contracts between residents of Puerto
Rico which are to be performed entirely within Puerto Rico, regardless of (i)
where this Agreement is executed or delivered; or (ii) where any

 

71

 

payment or other performance required by this Agreement is made or
required to be made; or (iii) where any breach of any provision of this Agreement
occurs, or any cause of action otherwise accrues; or (iv) where any action or
other proceeding is instituted or pending; or (v) the nationality, citizenship,
domicile, principal place of business, or jurisdiction of organization or
domestication of any party; or (vi) whether the laws of the forum jurisdiction
otherwise would apply the laws of a jurisdiction other than Puerto Rico; or
(vii) any combination of the foregoing. Notwithstanding the foregoing, the laws
of the State shall apply to the perfection and priority of liens upon and the
disposition of the Property.

 

To the maximum extent permitted by Applicable
Law, any action to enforce, arising out of, or relating in any way to, any of
the provisions of this Agreement may be brought and prosecuted in such court or
courts located in the Commonwealth of Puerto Rico as is provided by law; and
the parties consent to the jurisdiction of said court or courts located in the
Commonwealth of Puerto Rico and to service of process by registered mail,
return receipt requested, or by any other manner provided by law.

 

20.15                     RIGHT TO MAKE
AGREEMENT.  Each party warrants, with
respect to itself, that neither the execution of this Agreement, nor the
consummation of any transaction contemplated hereby, shall violate any
provision of any law, or any judgment, writ, injunction, order or decree of any
court or governmental authority having jurisdiction over it; nor result in or
constitute a breach or default under any indenture, contract, other commitment
or restriction to which it is a party or by which it is bound; nor require any
consent, vote or approval which has not been given or taken, or at the time of
the transaction involved shall not have been given or taken. Each party
covenants that it has and will continue to have, throughout the term of this
Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.

 

20.16                     NONRECOURSE.
Nothing contained in this Agreement shall be construed to impose any
liabilities or obligations on Tenant’s or Landlord’s shareholders, officers,
directors, agents or employees (or any shareholders, officers, directors,
agents or employees of any of the foregoing) for the performance of the
obligations of Landlord or Tenant hereunder.

 

20.17                     ATTORNEYS’
FEES.  If any lawsuit or arbitration or
other legal proceeding arises in connection with the

 

72

 

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

 

20.18                     SECURITIES
FILINGS. Tenant shall cooperate with Landlord in connection with the
preparation of any documents Landlord or a Landlord Affiliated Party files
under the United States Securities Act of 1933 or the United States Securities
Exchange Act of 1934 and shall use commercially reasonable efforts to provide
Landlord with financial statements and other financial information that
Landlord requests relating to periods prior to the Commencement Date and to
obtain consents from Tenant’s independent accountants in connection therewith.

 

20.19                     ARBITRATION.

 

(a)                                  Whenever
in this Agreement it is provided that a dispute is to be resolved by an
Arbitration, such dispute shall be finally resolved pursuant to an arbitration
before a panel of three (3) arbitrators who will conduct the arbitration
proceeding in accordance with the provisions of this Agreement and the rules of
the American Arbitration Association. Unless otherwise mutually agreed by
Tenant and Landlord, the arbitration proceedings will be conducted in New York,
New York. All arbitrators appointed by or on behalf of either party shall be
independent persons with recognized expertise in the operation of hotels of
similar size and class as the Hotel with not less than five (5) years’
experience in the hotel industry. The party desiring arbitration will give
Notice to that effect to the other party, specifying in such Notice the name,
address and professional qualifications of the person designated as arbitrator
on its behalf. Within fifteen (15) days after service of such Notice, the other
party will give Notice to the party desiring such arbitration specifying the
name, address and professional qualifications of the person designated to act
as arbitrator on its behalf. The two arbitrators will, within fifteen (15) days
thereafter, select a third, neutral arbitrator. As soon as possible after the
selection of the third arbitrator, and no later than fifteen (15) days
thereafter, the parties will submit their positions on each disputed item in
writing to the three arbitrators. The decision of the arbitrators so chosen
shall be given within a period of twenty (20) days after the appointment of
such third arbitrator. The

 

73

 

arbitrators must, by majority vote, agree
upon and approve the substantive position of either Tenant or Landlord with
respect to each disputed item, and are not authorized to agree upon or impose
any other substantive position which has not been presented to the arbitrators
by Tenant or Landlord. It is the intention of the parties that the arbitrators
rule only on the substantive positions submitted to them by the parties and the
arbitrators are not authorized to render rulings which are a compromise as to
any such substantive position. A decision in which any two (2) arbitrators so
appointed and acting hereunder concur in writing with respect to each disputed
item shall in all cases be binding and conclusive upon Tenant or Landlord and a
copy of said decision shall be forwarded to the parties. The parties will
request that the arbitrators assess the costs and expenses of the Arbitration
and their fees against the parties based on a finding as to which parties
substantive positions were not upheld. Otherwise the fees and expenses of the
arbitration will be treated as an Operating Cost and paid by Tenant unless
otherwise determined by the arbitrators.

 

(b)                                 If
the party receiving a request for Arbitration fails to appoint its arbitrator
within the time above specified, or if the two arbitrators so selected cannot
agree on the selection of the third arbitrator within the time above specified,
then either party, on behalf of both parties, may request such appointment of
such second or third arbitrator, as the case may be, by application to any
judge of any court in New York County, New York of competent jurisdiction upon
ten (10) days’ prior Notice to the other party of such intent.

 

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

 

20.20                     TAX EXEMPTION
DECREE.  Without limiting Tenant’s
obligations hereunder or at law with respect to the Tax Exemption Decree,
Landlord shall use commercially reasonable efforts not to violate the
requirements of the Tax Exemption Decree imposed on Landlord. Except as
contemplated in the Purchase Agreement, neither Tenant nor Landlord shall amend,
modify or otherwise alter the Tax Exemption Decree without the consent of the
other, which consent shall not be unreasonably withheld. Tenant and Landlord
shall each comply with any

 

74

 

reasonable request made by the other to execute and deliver any
document which may be necessary or convenient (i) to maintain the Tax Exemption
Decree in full force and effect, (ii) to give effect to the terms of SECTION 3.1.3
(e) and allocate as much as practicable the responsibility for the obligations
described in such Section to Tenant’s portion of the Tax Exemption Decree,
and (iii) so that the Tax Exemption Decree does not impose any obligation or
other term upon Landlord which (after giving effect to the terms of this Agreement)
would adversely affect the qualification of the Rent and other amounts payable
by Tenant hereunder as “rents from real property” within the meaning of Section 856(d)
of the Code. Tenant shall be and remain an “exempt business” as defined in Section 2(m)
of the Puerto Rico Tourism Development Act of 1993.

 

20.21                     COOPERATION.  Landlord and Tenant agree, upon request of the
other, to use commercially reasonable efforts to (a) obtain any certificate or
other document from any Governmental Agency (including, but not limited to, tax
exemptions or concessions under the Tax Exemption Decree) as may be necessary
to mitigate, reduce or eliminate any Imposition or Landlord Tax that could be
imposed and (b) mitigate the effects of the expiration or termination of the
Tax Exemption Decree not due to the fault of the requesting party.

 

20.22                     PRIVATE
LETTER RULING.  As soon as practicable
after the date hereof, Landlord shall apply to the Internal Revenue Service for
a private letter ruling to the effect that the Additional Rent reserved
hereunder qualifies as “rents from real property” within the meaning of Section 856(d)
of the Code. If Landlord does not obtain a favorable letter ruling to such
effect within six (6) months after the date hereof, then Landlord and Tenant
shall renegotiate, in good faith, the provisions hereof relating to Additional
Rent so that the same qualifies as “rents from real property” within the
meaning of Section 856(d) of the Code with the intent that Landlord
receive approximately the same level of overall Additional Rent as would have
obtained if the Additional Rent provisions were not renegotiated.

 

20.23                     AFFILIATED
MANAGER.  For so long as Landlord or any
Affiliated Person as to Landlord shall seek to qualify as a “real estate
investment trust” under the Code, Tenant: (i) shall remain taxable under the
Code as an association taxable as a corporation; (ii) shall not become a direct
or indirect subsidiary of InterContinental Hotels Group Resources, Inc. or of
any Portfolio Manager; (iii) shall not permit either InterContinental Hotels
Groups Resources, Inc. or any Portfolio

 

75

 

 

Manager to become its direct or indirect subsidiary; and (iv) shall not
be reorganized, restructured, combined, merged or amalgamated with any
Affiliated Person (as to Tenant) in such manner that any such Affiliated Person
would, or in Landlord’s judgment could be expected to, adversely affect
(including, e.g., by application of any Person’s actual “disregarded entity”
status under the Code) any status such Affiliated Person (as to Tenant) may
have as a Code Section 856(d)(9)(A) “eligible independent contractor” at a
Code Section 856(d)(9)(D) “qualified lodging facility” owned or leased by
Landlord (or any Affiliated Person as to Landlord).

 

20.24       Enforceability
Not Affected By Leased Real
Property.  In the event that Landlord’s leasehold
interest in any portion of the Property described under the heading “Leased
Real Property” on Exhibit A expires, is determined to be ineffective or
otherwise terminates, Landlord and Tenant agree that the obligations of Tenant
hereunder shall not be affected, including without limitation, the obligation
of Tenant to pay Minimum Rent, Additional Rent, Additional Charges and such
other amounts required hereunder and this Lease shall continue in full force
and effect as if such leasehold interest was still valid and existing, nor
shall any such expiration or termination give rise to any defense, right of
set-off or similar remedies.

 

[Signature page follows]

 

76

 

IN WITNESS WHEREOF, the parties have executed
this Agreement as a sealed instrument as of the date above first written.

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  HPT IHG PR, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John G.
  Murray

  	
   

  
	
   

  	
   

  	
  John G.
  Murray

  	
   

  
	
   

  	
   

  	
  President

  	
   

  

 

COMMONWEALTH OF MASSACHUSETTS

COUNTY OF MIDDLESEX

 

On this 17th day of February, 2005, before me,
the undersigned notary public, personally appeared John G. Murray, President of
HPT IHG PR, INC., a Puerto Rico corporation, proved to me through satisfactory
evidence of identification, which was known to me (state form of
identification), to be the person whose name is signed on the preceding or
attached document, and acknowledged to me that he signed it voluntarily for its
stated purpose.

 

	
   

  	
  /s/ Camille Balletto

  	
   

  
	
   

  	
  (affix official signature and seal of

  
	
   

  	
  notary)

  

 

 

	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  INTERCONTINENTAL HOTELS (PUERTO

  
	
   

  	
  RICO) INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert
  J. Chitty

  	
   

  
	
   

  	
   

  	
  Robert J.
  Chitty

  	
   

  
	
   

  	
   

  	
  Vice
  President

  	
   

  

 

STATE OF GEORGIA

COUNTY OF DEKALB

 

On this 16th day of February, 2005, before me,
the undersigned notary public, personally appeared Robert J. Chitty, Vice President
of INTERCONTINENTAL HOTELS (PUERTO RICO) INC., a Puerto Rico corporation,
proved to me through satisfactory evidence of identification, which was personally
known to me (state form of identification), to be the person whose name is
signed on the preceding or attached document, and acknowledged to me that he
signed it voluntarily for its stated purpose.

 

 

	
   

  	
  /s/ Laurie W. Travis

  	
   

  
	
   

  	
  (affix official signature and seal of

  
	
   

  	
  notary)

  

 

 

The following exhibits have been omitted and will be supplementally furnished
to the Securities and Exchange Commission upon request:

 

	
  Exhibits

  	
   

  	
  Document

  
	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  The Land

  
	
  B

  	
   

  	
  Trade Area
  Restriction

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