10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

ý Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For The Fiscal Year Ended December 31, 2004

or

oTransition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-11527

Hospitality Properties Trust

Maryland	04-3262075
(State Of organization)	(IRS Employer Identification No.)
400 Centre Street, Newton, Massachusetts 02458
617-964-8389
Securities registered pursuant to Section 12(b) of the Act:

Title Of Each Class	Name Of Each Exchange On Which Registered
Common Shares of Beneficial Interest	New York Stock Exchange
Series B Cumulative Redeemable Preferred Shares of Beneficial Interest	New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o

The aggregate market value of the voting shares of the registrant held by non-affiliates was $2,654 million based on the $42.30 closing price per common share on the New York Stock Exchange on June 30, 2004. For purposes of this calculation, 4,000,000 common shares of beneficial interest, $0.01 par value, held by HRPT Properties Trust, and an aggregate of 440,904 common shares held by the trustees and officers of the registrant have been included in the number of shares held by affiliates.

Number of the registrant’s Common Shares outstanding as of March 9, 2005: 67,203,228

References in this Annual Report on Form 10-K to the “Company”, “HPT”, “we”, “us” or “our” include Hospitality Properties Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is to be incorporated herein by reference from our definitive Proxy Statement for the annual meeting of shareholders scheduled for May 11, 2005, or definitive Proxy Statement.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS FORM 10-K AND INCLUDE STATEMENTS REGARDING OUR INTENT, BELIEF OR EXPECTATION, OR THE INTENT, BELIEF OR EXPECTATION OF OUR TRUSTEES AND OFFICERS WITH RESPECT TO OUR OPERATORS’ OR TENANTS’ ABILITY TO PAY RETURNS OR RENT TO US, OUR ABILITY TO PURCHASE ADDITIONAL PROPERTIES, OUR INTENT TO IMPROVE AND MODERNIZE OUR PROPERTIES, OUR ABILITY TO PAY INTEREST AND DEBT PRINCIPAL AND MAKE DISTRIBUTIONS, OUR POLICIES AND PLANS REGARDING INVESTMENTS AND FINANCINGS, OUR TAX STATUS AS A REAL ESTATE INVESTMENT TRUST, OUR ABILITY TO APPROPRIATELY BALANCE THE USE OF DEBT AND EQUITY AND TO RAISE CAPITAL AND OTHER MATTERS. HOWEVER, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. SUCH FACTORS INCLUDE, WITHOUT LIMITATION, THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS (INCLUDING PREVAILING INTEREST RATES) ON US AND OUR TENANTS, COMPLIANCE WITH AND CHANGES TO LAWS AND REGULATIONS AFFECTING THE REAL ESTATE AND HOTEL INDUSTRIES, CHANGES IN FINANCING TERMS, AND COMPETITION WITHIN THE REAL ESTATE AND HOTEL INDUSTRIES. FOR EXAMPLE: IF HOTEL ROOM DEMAND CONTINUES AT ITS CURRENT LEVEL OR DECLINES, THE OPERATING RESULTS OF OUR HOTELS MAY DECLINE; THE FINANCIAL RESULTS OF OUR OPERATORS AND TENANTS MAY DECLINE; AND OUR OPERATORS AND TENANTS MAY BE UNABLE TO PAY OUR RETURNS OR RENTS. ALSO, WE MAY BE UNABLE TO IDENTIFY PROPERTIES WHICH WE WANT TO BUY OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES OR MANAGEMENT AGREEMENT OR LEASE TERMS FOR NEW PROPERTIES. THESE UNEXPECTED RESULTS COULD OCCUR DUE TO MANY DIFFERENT REASONS, SOME OF WHICH, SUCH AS CHANGES IN OUR OPERATORS’ OR TENANTS’ COSTS OR REVENUES OR CHANGES IN CAPITAL MARKETS OR THE ECONOMY GENERALLY, ARE BEYOND OUR CONTROL. FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY THE RESULT OF ANY REVISION TO THESE FORWARD LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURANCE OF UNANTICIPATED EVENTS.

STATEMENT CONCERNING LIMITED LIABILITY

OUR AMENDED AND RESTATED DECLARATION OF TRUST, DATED AUGUST 21, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT THE NAME “HOSPITALITY PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF

HOSPITALITY PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HOSPITALITY PROPERTIES TRUST. ALL PERSONS DEALING WITH HOSPITALITY PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HOSPITALITY PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

HOSPITALITY PROPERTIES TRUST

2004 FORM 10-K ANNUAL REPORT

Table of Contents

Part I
Item 1.	Business	1
Item 2.	Properties	27
Item 3.	Legal Proceedings	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
Part II
Item 5.	Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Securities	29
Item 6.	Selected Financial Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	48
Part III
Item 10.	Directors and Executive Officers of the Registrant	49
Item 11.	Executive Compensation	*
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	49
Item 13.	Certain Relationships and Related Transactions	*
Item 14.	Principal Accountant Fees and Services	*
Part IV
Item 15.	Exhibits and Financial Statement Schedules	51

*Incorporated by reference from our Proxy Statement for the annual meeting of shareholders scheduled to be held on May 11, 2005, to be filed pursuant to Regulation 14A.

PART I

Item 1. Business

The Company. We are a real estate investment trust, or REIT, formed in 1995 under the laws of the State of Maryland to buy and own hotels. As of December 31, 2004, we owned 285 hotels with 38,489 rooms or suites located in 38 states in the United States. Our principal place of business is 400 Centre Street, Newton, Massachusetts 02458, and our telephone number is (617) 964-8389.

Our principal external growth strategy is to expand our investments in high quality hotels which generate returns to us that exceed our operating and capital costs. Our principal internal growth strategy is to participate through percentage returns and rents in increases in total sales (including gross revenues from room rentals, food and beverage sales and other services) at our hotels, and, under some of our operating agreements, increases in the operating income of our hotels.

Our investment, financing and disposition policies and business strategies are established by our board of trustees and may be changed by our board of trustees at any time without shareholder approval.

As of December 31, 2004, our hotels are operated as Courtyard by Marriott^®, Candlewood Suites^®, Residence Inn by Marriott^®, Staybridge Suites^®, AmeriSuites^®, Prime Hotels^SM, Homestead Studio Suites^®, Marriott Hotels and Resorts^®, TownePlace Suites by Marriott^® or SpringHill Suites by Marriott^®. The average age of our hotels was approximately 9.3 years at December 31, 2004.

Courtyard by Marriott^® hotels are designed to attract both business and leisure travelers. A typical Courtyard by Marriott^® hotel has 145 guest rooms. The guest rooms are larger than those in most other moderately priced hotels and predominately offer king size beds. Most Courtyard by Marriott^® hotels are situated on well landscaped grounds and typically are built with a courtyard containing a patio, pool and socializing area that may be enclosed depending upon location. Many of these hotels have lounges, meeting rooms, an exercise room, a guest laundry and a restaurant. Generally, the guest rooms are similar in size and furnishings to guest rooms in full service Marriott^® hotels. In addition, many of the same amenities as would be available in full service Marriott^® hotels are available in Courtyard by Marriott^® hotels, except that restaurants may be open only for breakfast or serve limited menus, room service may not be available and meeting and function rooms are limited in size and number. According to Marriott International, Inc., or Marriott, as of December 2004, 678 Courtyard by Marriott^® hotels were open and operating in the United States and internationally. We believe that the Courtyard by Marriott^® brand is a leading brand in the upscale, limited service segment of the United States hotel industry. We have invested a total of $813 million in 71 Courtyard by Marriott^® hotels with a total of 10,280 rooms.

Candlewood Suites^® hotels are mid-priced extended stay hotels which offer studio and one-bedroom suites designed for business travelers expecting to stay five or more nights. Candlewood Suites^® hotels compete in the mid-priced extended stay segment of the lodging industry. Each Candlewood Suites^® suite contains a fully equipped kitchen area, a combination living and work area and a sleeping area. The kitchen includes a full size microwave, full size refrigerator, stove, dishwasher and coffee maker. The living area contains a convertible sofa or recliner, 25 inch television, videocassette player and compact disc player. The work area includes a large desk and executive chair, two phone lines, voice mail and a speaker phone. Each Candlewood Suites^® suite contains a king size bed. Other amenities offered at each Candlewood Suites^® hotel include a fitness center, free guest laundry facilities and a Candlewood Cupboard^® area where guests can purchase light meals, snacks and other refreshments. According to InterContintental, the owner of the Candlewood Suites^® brand, there were 109 Candlewood Suites^® hotels open and operating across the United States as of December 2004. We have invested $590 million in 76 Candlewood Suites^® hotels with a total of 9,220 suites.

Residence Inn by Marriott^® hotels are designed to attract business, governmental and family travelers who stay several consecutive nights. Residence Inn by Marriott^® hotels generally have between 80 and 130 studio, one bedroom and two bedroom suites. Most Residence Inn by Marriott^® hotels are designed as residential style

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buildings with landscaped walkways, courtyards and recreational areas. Residence Inn by Marriott^® hotels do not have restaurants. All offer complimentary continental breakfast and a complimentary evening hospitality hour. In addition, each suite contains a fully equipped kitchen and many have fireplaces. Most Residence Inn by Marriott^® hotels also have swimming pools, exercise rooms, sports courts and guest laundries. According to Marriott, as of December 2004, 472 Residence Inn by Marriott^® hotels were open and operating in the United States, Mexico and Canada. We believe that the Residence Inn by Marriott^® brand is a leading brand in the extended stay segment of the United States hotel industry. We have invested a total of $429 million in 37 Residence Inn by Marriott^® hotels with a total of 4,695 suites.

Staybridge Suites^® hotels offer residential style studio, one-bedroom and two bedroom suites for business, governmental and family travelers. Each suite offers a fully equipped kitchen and a work area with an oversized desk, two line phones, an ergonomically designed chair and high speed internet access. Other amenities include free breakfast buffet, on site convenience store, fitness center and 24 hour business center and convenience store. According to InterContinental Hotels Group plc, or InterContinental, the owner of the Staybridge Suites^® brand, there were 78 Staybridge Suites^® hotels open and operating in the United States as of December 2004. We have invested a total of $416 million in 30 Staybridge Suites^® hotels with a total of 3,694 suites.

AmeriSuites^® hotels are all suite hotels designed to attract value oriented business travelers. AmeriSuites^® hotels compete in the all suite segment of the lodging industry with such brands as Embassy Suites^®, SpringHill Suites^® and Hampton Inn & Suites^®. Hyatt Corporation, or Hyatt, acquired the AmeriSuites^® brand in January 2005 from Prime Hospitality Corp., or Prime. Each AmeriSuites^® guest room offers an efficient space for working which includes two phones with data port, voice mail and free high speed internet access, a living area which includes a coffee maker, microwave, mini-refrigerator, sleeper sofa and 25 inch television, and a separate bedroom area with either one king or two double beds. Each AmeriSuites^® hotel has a lobby lounge where free continental breakfast is provided in the mornings and cocktails are generally available in the evening. In addition, all AmeriSuites^® hotels have meeting rooms that can accommodate up to 150 persons, fitness facilities and a pool. AmeriSuites^® hotels are generally high rise hotels of six or seven stories of masonry construction. According to Hyatt, there were 144 AmeriSuites^® hotels open and operating across the United States as of December 2004. We have invested $243 million in 24 AmeriSuites^® hotels with a total of 2,929 suites.

Prime Hotels^SM is a recently developed brand of upscale, full service hotels created by Prime. Our Prime Hotels^SM contain between 140 and 381 rooms. Amenities and services include large desks, free high speed internet access, room service and access to 24 hour telecopy and mail and package services. The meeting facilities at our Prime Hotels^SM generally can accommodate groups of between 10 and 200 people in a flexible meeting room design with audiovisual equipment. Our Prime Hotels^SM also feature a lobby lounge, a swimming pool, exercise facilities and one or more restaurants. According to Prime, there were 15 Prime Hotels^SM open and operating as of December 2004. We have invested a total of $183 million in 12 Prime Hotels^SM with a total of 2,321 rooms.

Homestead Studio Suites^® hotels are extended stay hotels designed for value oriented business travelers. Each Homestead Studio Suites^® room features a kitchen with a full size refrigerator, stovetop, microwave, coffee maker, utensils and dishes. A work area is provided with a well lit desktop and a computer data port. Complimentary local phone calls, fax service, copy service, personalized voicemail and wireless high speed internet access are also available to guests. On site laundry and other personal care items are available. According to BRE / Homestead Village LLC, or Homestead, there were 132 Homestead Studio Suites^® hotels open as of December 2004. We have invested $145 million in 18 Homestead Studio Suites^® hotels with a total of 2,399 suites.

Marriott Hotels and Resorts^®. We have invested $106 million in three Marriott Hotels and Resorts^® with a total of 1,356 guest rooms, including:

The Kauai Marriott Resort & Beach Club,a 356 room, 10 floor hotel with 50,000 square feet of meeting space, five restaurants and an on the beach lounge. The resort includes a 26,000 square foot pool, several acres of Hawaiian gardens and waterfalls, tennis courts, sauna, whirlpool, exercise and spa facilities and beauty and massage salons.

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The Marriott St. Louis Airport, a 601 room hotel located in Missouri on approximately 12 acres of land at the I-70 exit for Lambert International Airport, across the street from the airport entrance. The hotel has two nine floor towers and three low rise buildings which create a courtyard for the hotel’s pool and gardens. The property includes 20 meeting rooms totaling approximately 18,000 square feet of space, three restaurants and a concierge floor.

The Marriott Nashville Airport,a 399 room, 17 floor hotel located in Tennessee on 17 acres of land in High Ridge Business Park across I-40 from the Nashville Airport and a short drive from downtown Nashville. The property includes 14 meeting rooms totaling approximately 17,000 square feet of space, a restaurant and a concierge floor.

TownePlace Suites by Marriott^® are extended stay hotels offering studio, one bedroom and two bedroom suites for business and family travelers. TownePlace Suites by Marriott^® compete in the mid-priced extended stay segment of the lodging industry. Each suite offers a fully equipped kitchen, a bedroom and separate living and work areas. Other amenities offered include voice mail, free high speed internet access, on site business services, guest laundry facilities and a fitness center. According to Marriott, there were 117 TownePlace Suites by Marriott^® open as of December 2004. We have invested $102 million in 12 TownePlace Suites by Marriott^® with a total of 1,331 suites.

SpringHill Suites by Marriott^® are all suites hotels designed to attract value conscience business and family travelers. SpringHill Suites by Marriott^® compete in the mid-priced all suite segment of the lodging industry. Each suite offers separate sleeping, living and work areas, a mini-refrigerator, a microwave and coffee service. Other amenities offered include a pull out sofa bed, complimentary breakfast buffet, weekday newspaper, two line phones, free high speed internet access and voice mail, on site business services, guest laundry facilities and a fitness center. According to Marriott, there were 132 SpringHill Suites by Marriott^® open as of December 2004. We have invested $21 million in two SpringHill Suites by Marriott^® with a total of 264 suites.

PRINCIPAL MANAGEMENT AGREEMENT OR LEASE FEATURES

As of December 31, 2004, all of our hotels are operated by unrelated third parties. Each hotel we own is operated as part of a combination of hotels under eight agreements, as described below. The principal features of the management agreements and leases for our 285 hotels are as follows:

•Minimum Returns or Rent. All of our agreements require our managers or tenants to pay to us minimum annual returns or rent.

•Additional Returns or Rent. Most of our agreements require percentage returns or rent equal to between 5% and 10% of increases in gross hotel revenues over threshold amounts. In addition, certain of our agreements provide for additional returns to us based on increases in hotel operating income.

•Long Term. All of the agreements for our hotels expire after 2010. The weighted average term remaining for our hotel agreements (weighted by our investment) is 14.8 years as of December 31, 2004.

•Pooled Agreements. Each of our hotels is part of a combination of hotels. The manager’s or tenant’s obligations to us with respect to each hotel in a combination are subject to cross default with the obligations with respect to all the other hotels in the same combination. The smallest combination includes 18 hotels with 2,399 rooms in which we have invested $145 million; the largest combination includes 76 hotels with 9,220 rooms in which we have invested $590 million.

•Geographic Diversification. Each combination of hotels is geographically diversified. In addition, our hotels are located in the vicinity of major demand generators such as large suburban office parks, airports, medical or educational facilities or major tourist attractions.

•All or None Renewals. All manager or tenant renewal options for each combination of our hotels may only

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be exercised on an all or none basis and not for separate hotels.

•FF&E Reserves. Generally our agreements require the deposit of 5-6% of gross hotel revenues into escrows to fund periodic renovations, or FF&E reserve, in addition to minimum returns or rents. For recently built or renovated hotels, this requirement may be deferred for a two to three year period.

•Security Features. Each management agreement or lease includes various terms intended to secure the payments to us, including some or all of the following: cash security deposits which we received but do not escrow; subordination of management fees payable to the hotel operator to some or all of our return or rent and full or limited guarantees from the manager’s or tenant’s parent company. As of December 31, 2004, six of our eight hotel combination agreements, including 214 hotels, have minimum return or rent payable to us which are subject to full or limited guarantees. These hotels represent 76% of our total investments, at cost.

RECENT ACQUISITION

On December 17, 2004, we agreed to purchase 13 hotels from InterContinental for $450 million, $425 million to be paid at the time the hotels were purchased and $25 million to be paid during the three years following the closing in connection with certain improvements to the hotels. The hotels include four full service InterContinental^® hotels, four full service Crowne Plaza^® hotels, three full service Holiday Inn^® hotels and two Staybridge Suites^® hotels, and have a total of 3,946 rooms/suites and approximately 164,000 square feet of meeting rooms. The hotels are located in six states in the United States; one InterContinental hotel^® and one Staybridge Suites^® hotel are located in Toronto, Canada, and one InterContinental^® hotel is located in San Juan, Puerto Rico. On February 16, 2005, we completed the acquisition of 12 of the 13 hotels. Simultaneous with the closing, we entered into a long term management agreement for 11 of these 12 hotels and a long term lease for the InterContinental^® hotel in San Juan, Puerto Rico, which includes a casino operation and is therefore not appropriate for operation by our taxable REIT subsidiary under United States tax law. The purchase of one hotel, a full service InterContinental^® hotel in Austin, Texas, having 189 rooms/suites and an allocated purchase price of $30.5 million, was delayed and is expected to close before June 30, 2005. Changed circumstances may further delay this purchase or prevent its occurring. When the Austin, Texas hotel is purchased, the parties have agreed that it will be added to the management agreement for the 11 other hotels. The transaction is more fully described in Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of this Annual Report on Form 10-K.

INVESTMENT AND OPERATING POLICIES

We provide capital to hotel owners and operators who wish to divest their properties while remaining in the hotel business. Many other public hotel REITs seek to control the operations of hotels in which they invest and generally design their management agreements or leases to capture substantially all net operating revenues from their hotels. We do not operate any hotels. Our agreements with our unaffiliated operators and tenants are designed with the expectation that, over their terms, net operating revenues from our hotels will exceed minimum amounts due to us. We believe that these differences in operating philosophy may afford us a competitive advantage over other hotel REITs in finding high quality hotel investment opportunities on attractive terms and increase the dependability of our cash flows used to pay distributions.

Our investment objectives include increasing per share distributions and cash flow from operations from dependable and diverse sources. To achieve these objectives, we seek to operate as follows: maintain a strong capital base of shareholders’ equity; invest in high quality properties operated by unaffiliated hotel operating companies; use moderate debt leverage to fund additional investments which increase cash flow from operations because of positive spreads between our cost of investment capital and investment yields; structure investments which generate a minimum return and provide an opportunity to participate in a percentage of operating growth at our hotels; when market conditions permit, refinance debt with additional equity or long term debt; and pursue diversification so that our cash flow from operations is received from diverse properties and operators.

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In order to benefit from potential property appreciation, we prefer to own properties rather than make mortgage investments. We may invest in real estate joint ventures if we conclude that we may benefit from the participation of co-venturers or that the opportunity to participate in the investment is contingent on the use of a joint venture structure. We may invest in participating, convertible or other types of mortgages if we conclude that we may benefit from the cash flow or appreciation in the value of the mortgaged property. Convertible mortgages are similar to equity participation because they permit lenders to either participate in increasing revenues from the property or convert some or all of that mortgage into equity ownership interests. At December 31, 2004, we owned no convertible mortgages or joint venture interests.

We may not achieve some or all of our investment objectives.

Because we are a REIT, generally, we may not operate hotels. We or our tenants have entered into arrangements for operation of our hotels. As described elsewhere in this Annual Report on Form 10-K, tax law changes known as the REIT Modernization Act, or the RMA, were enacted and became effective January 1, 2001. The RMA, among other things, allows a REIT to lease hotels to a taxable REIT subsidiary if the hotel is managed by an independent third party. As of December 31, 2004, 177 of our hotels are leased to our taxable REIT subsidiaries and managed by independent third parties. Any income realized by a taxable REIT subsidiary in excess of the rent paid to us by the subsidiary will be subject to income tax at customary corporate rates. As, and if, the financial performance of the hotels operated for the account of our taxable REIT subsidiaries improves, these taxes may become material, but the anticipated taxes are not material to our consolidated financial results at this time.

ACQUISITION POLICIES

We intend to pursue growth through the acquisition of additional hotels. Generally, we prefer to purchase multiple hotels in one transaction because we believe a single agreement, cross default covenants and all or none renewal rights for multiple hotels in diverse locations enhance the credit characteristics and the security of our investments. In implementing our acquisition strategy, we consider a range of factors relating to proposed hotel purchases including: (i) historical and projected cash flows; (ii) the competitive market environment and the current or potential market position of each hotel; (iii) the availability of a qualified operator or lessee; (iv) the financial strength of the proposed operator or lessee; (v) the amount and type of financial support available from the proposed operator or lessee; (vi) the hotel’s design, physical condition and age; (vii) the estimated replacement cost and proposed acquisition price of the hotel; (viii) the price segment in which the hotel is operated; (ix) the reputation of the particular hotel management organization, if any, with which the hotel is or may become affiliated; (x) the level of services and amenities offered at the hotel; (xi) the proposed management agreement or lease terms; and (xii) the hotel brand under which the hotel operates or is expected to operate. In determining the competitive position of a hotel, we examine the proximity of the hotel to business, retail, academic and tourist attractions and transportation routes, the number and characteristics of competitive hotels within the hotel’s market area and the existence of barriers to entry within that market, including site availability and zoning restrictions. While we have historically focused on the acquisition of upscale limited service, extended stay and full service hotel properties, we consider acquisitions in all segments of the hospitality industry. An important part of our acquisition strategy is to identify and select qualified, experienced and financially stable hotel operators.

We have no policies which specifically limit the percentage of our assets which may be invested in any individual property, in any one type of property, in properties operated by or leased to any one entity or in properties operated by or leased to an affiliated group of entities.

In the past, we have considered the possibility of entering mergers or strategic combinations with other companies. No such mergers or strategic combinations are under active negotiation at this time. However, we may undertake such negotiations in the future. A principal goal of any such transaction will be to diversify our revenue sources.

DISPOSITION POLICIES

In the past we have occasionally sold a hotel or exchanged hotels which we own for different hotels. However, we have no current intention to dispose of any of our presently owned hotels, although we may do so. We

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currently anticipate that disposition decisions, if any, will be based on factors including but not limited to the following: (i) potential opportunities to increase revenues and property values by reinvesting sale proceeds; (ii) the proposed sale price; (iii) the strategic fit of the hotel with the rest of our portfolio; (iv) our operator’s or tenant’s desire to cease operation of the hotel; and (v) the existence of alternative sources, uses or needs for capital.

FINANCING POLICIES

Although there are no limitations in our organizational documents on the amount of indebtedness we may incur, our $350 million unsecured revolving credit facility and our senior note indenture and its supplements contain financial covenants which, among other things, restrict our ability to incur indebtedness and require us to maintain financial ratios and a minimum net worth. We currently intend to pursue our growth strategies while maintaining debt less than 50% of our total capitalization. We may from time to time re-evaluate and modify our financing policies in light of then current economic conditions, relative availability and costs of debt and equity capital, market values of properties, growth and acquisition opportunities and other factors, and we may increase or decrease our ratio of debt to total capitalization accordingly.

Our board of trustees may determine to obtain a replacement for our current credit facilities or to seek additional capital through equity offerings, debt financings, or retention of cash flows in excess of distributions to shareholders or a combination of these methods. Only one of our properties is encumbered by a mortgage. To the extent that the board of trustees decides to obtain additional debt financing, we may do so on an unsecured basis or a secured basis. We may seek to obtain other lines of credit or to issue securities senior to our common and/or preferred shares, including preferred shares of beneficial interest and debt securities, either of which may be convertible into common shares or be accompanied by warrants to purchase common shares, or to engage in transactions which may involve a sale or other conveyance of hotels to subsidiaries or to unaffiliated entities. We may finance acquisitions through an exchange of properties or through the issuance of additional common shares or other securities. The proceeds from any of our financings may be used to pay distributions, to provide working capital, to refinance existing indebtedness or to finance acquisitions and expansions of existing or new properties.

Manager. Our day to day operations are conducted by Reit Management & Research LLC, or RMR. RMR originates and presents investment opportunities to our board of trustees. RMR is a Delaware limited liability company beneficially owned by Barry M. Portnoy and Gerard M. Martin, who are our managing trustees. RMR has a principal place of business at 400 Centre Street, Newton, Massachusetts 02458; and its telephone number is (617) 928-1300. RMR acts as manager to HRPT Properties Trust, the holder of 4,000,000 of our common shares, and has other business interests. The directors of RMR are Gerard M. Martin, Barry M. Portnoy and David J. Hegarty. The executive officers of RMR are David J. Hegarty, President and Secretary; John G. Murray, Executive Vice President; Evrett W. Benton, Vice President; Ethan S. Bornstein, Vice President; Jennifer B. Clark, Vice President; John R. Hoadley, Vice President; Mark L. Kleifges, Vice President; David M. Lepore, Vice President; Bruce J. Mackey Jr., Vice President; John A. Mannix, Vice President; Thomas M. O’Brien, Vice President; Adam D. Portnoy, Vice President; and John C. Popeo, Vice President and Treasurer. Messrs. Murray, Kleifges and Bornstein are also our officers. Other officers of RMR also serve as officers of other companies to which RMR provides management services including HRPT.

Employees. We have no employees. Services which would otherwise be provided by employees are provided by RMR and by our managing trustees and officers. As of March 9, 2005, RMR had approximately 400 full time employees.

Competition. The hotel industry is highly competitive. Generally our hotels are located in areas that include other hotels. Increases in the number of hotels in a particular area could have a material adverse effect on the occupancy and daily room rates at our hotels located in that area. Agreements with the operators of our hotels restrict the right of each operator and its affiliates for limited periods of time to own, build, operate, franchise or manage other hotels of the same brand within various specified areas around our hotels. Under these agreements neither the operators nor their affiliates are restricted from operating other brands of hotels in the market areas of any of our hotels, and after such limited period of time, the operators and their affiliates may also compete with our hotels by opening, managing or franchising additional hotels under the same brand name in direct competition with our hotels.

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We expect to compete for hotel acquisition and financing opportunities with entities which may have substantially greater financial resources than us, including, without limitation, other REITs, hotel operating companies, banks, insurance companies, pension plans and public and private partnerships. These entities may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of hotel operators. Such competition may reduce the number of suitable hotel acquisition or financing opportunities available to us or increase the bargaining power of hotel owners seeking to sell or finance their properties.

Environmental Matters. Under various laws, owners of real estate may be required to investigate and clean up hazardous substances present at a property, and may be held liable for property damage or personal injuries that result from such hazardous substances. These laws also expose us to the possibility that we become liable to reimburse the government for damages and costs it incurs in connection with the hazardous substances. We reviewed environmental surveys of the facilities we own prior to their purchase. Based upon those surveys we do not believe that any of our properties are subject to material environmental contamination. However, no assurances can be given that environmental conditions for which we would be liable are not present in our properties or that costs we incur to remediate contamination will not have a material adverse effect on our business or financial condition.

Internet Website. Our internet website address is www.hptreit.com. Copies of our governance guidelines, code of ethics and the charters of our audit, compensation and nominating and governance committees may be obtained free of charge by writing to our Secretary, Hospitality Properties Trust, 400 Centre Street, Newton, MA 02458 or at our website. We make available, free of charge, on our website, our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, as soon as reasonably practicable after these forms are electronically filed with, or furnished to, the Securities and Exchange Commission, or the SEC. Any shareholder or other interested party who desires to communicate with our non-management trustees, individually or as a group, may do so by filling out a report on our website. Our board also provides a process for security holders to send communications to the entire board. Information about the process for sending communications to our board can be found on our website. Our website address is included several times in this Annual Report on Form 10-K as a textual reference only and the information in the website is not incorporated by reference into this Annual Report on Form 10-K.

Segment Information. We have one operating segment, hotel investments.

FEDERAL INCOME TAX CONSIDERATIONS

The following summary of federal income tax considerations is based on existing law, and is limited to investors who own our shares as investment assets rather than as inventory or as property used in a trade or business. The summary does not discuss the particular tax consequences that might be relevant to you if you are subject to special rules under federal income tax law, for example if you are:

•              a bank, life insurance company, regulated investment company, or other financial institution;

•              a broker or dealer in securities or foreign currency;

•              a person who has a functional currency other than the U.S. dollar;

•              a person who acquires our shares in connection with employment or other performance of services;

•              a person subject to alternative minimum tax;

•              a person who owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction, or conversion transaction; or

•              except as specifically described in the following summary, a tax-exempt entity or a foreign person.

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The Internal Revenue Code sections that govern federal income tax qualification and treatment of a REIT and its shareholders are complex. This presentation is a summary of applicable Internal Revenue Code provisions, related rules and regulations and administrative and judicial interpretations, all of which are subject to change, possibly with retroactive effect. The American Jobs Creation Act of 2004, or the 2004 Act, which President Bush signed into law in October 2004, made a number of significant changes to these provisions, some of which have retroactive effect; we have summarized these changes in more detail below. Future legislative, judicial, or administrative actions or decisions could also affect the accuracy of statements made in this summary. We have not received a ruling from the IRS with respect to any matter described in this summary,and we cannot assure you that the IRS or a court will agree with the statements made in this summary. In addition, this summary is not exhaustive of all possible tax consequences, and does not discuss any estate, gift, state, local, or foreign tax consequences. For all these reasons, we urge you and any prospective acquiror of our shares to consult with a tax advisor about the federal income tax and other tax consequences of the acquisition, ownership and disposition of our shares. Our intentions and beliefs described in this summary are based upon our understanding of applicable laws and regulations which are in effect as of the date of this Annual Report on Form 10-K. If new laws or regulations are enacted which impact us directly or indirectly, we may change our intentions or beliefs.

Your federal income tax consequences may differ depending on whether or not you are a “U.S. shareholder.” For purposes of this summary, a “U.S. shareholder” for federal income tax purposes is:

•              a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws;

•              an entity treated as a corporation or partnership for federal income tax purposes, that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia, unless otherwise provided by Treasury regulations;

•              an estate the income of which is subject to federal income taxation regardless of its source; or

•              a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or electing trusts in existence on August 20, 1996, to the extent provided in Treasury regulations;

whose status as a U.S. shareholder is not overridden by an applicable tax treaty. Conversely, a “non-U.S. shareholder” is a beneficial owner of our shares who is not a U.S. shareholder.

Taxation as a REIT

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing with our taxable year ending December 31,1995.Our REIT election, assuming continuing compliance with the then applicable qualification tests, continues in effect for subsequent taxable years. Although no assurance can be given, we believe that we are organized, have operated, and will continue to operate in a manner that qualifies us to be taxed under the Internal Revenue Code as a REIT.

As a REIT, we generally are not subject to federal income tax on our net income distributed as dividends to our shareholders. Distributions to our shareholders generally are included in their income as dividends to the extent of our current or accumulated earnings and profits. Our dividends are not generally entitled to the favorable 15% rate on qualified dividend income, but a portion of our dividends may be treated as capital gain dividends, all as explained below. No portion of any of our dividends is eligible for the dividends received deduction for corporate shareholders. Distributions in excess of current or accumulated earnings and profits generally are treated for federal income tax purposes as return of capital to the extent of a recipient shareholder’s basis in our shares, and will reduce this basis. Our current or accumulated earnings and profits are generally allocated first to distributions made on our preferred shares, and thereafter to distributions made on our common shares.

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Our counsel, Sullivan & Worcester LLP, has opined that we have been organized and have qualified as a REIT under the Internal Revenue Code for our 1995 through 2004 taxable years, and that our current investments and plan of operation enable us to continue to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code. Our continued qualification and taxation as a REIT will depend upon our compliance with various qualification tests imposed under the Internal Revenue Code and summarized below. While we believe that we will satisfy these tests, our counsel has not reviewed and will not review compliance with these tests on a continuing basis. If we fail to qualify as a REIT, we will be subject to federal income taxation as if we were a C corporation and our shareholders will be taxed like shareholders of C corporations. In this event, we could be subject to significant tax liabilities, and the amount of cash available for distribution to our shareholders may be reduced or eliminated.

If we qualify as a REIT and meet the tests described below, we generally will not pay federal income tax on amounts we distribute to our shareholders. However, even if we qualify as a REIT, we may be subject to federal tax in the following circumstances:

•              We will be taxed at regular corporate rates on any undistributed “real estate investment trust taxable income,” including our undistributed net capital gains.

•              If our alternative minimum taxable income exceeds our taxable income, we may be subject to the corporate alternative minimum tax on our items of tax preference.

•              If we have net income from the disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate rate, currently 35%.

•              If we have net income from prohibited transactions, including dispositions of inventory or property held primarily for sale to customers in the ordinary course of business other than foreclosure property, we will be subject to tax on this income at a 100% rate.

•              If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, but nonetheless maintain our qualification as a REIT, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% or the 95% test, with adjustments, multiplied by a fraction intended to reflect our profitability.

•              If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year, and any undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of the required distribution over the amounts actually distributed.

•              If we acquire an asset from a corporation in a transaction in which our basis in the asset is determined by reference to the basis of the asset in the hands of a present or former C corporation, and if we subsequently recognize gain on the disposition of this asset during the ten year period beginning on the date on which the asset ceased to be owned by the C corporation, then we will pay tax at the highest regular corporate tax rate, which is currently 35%, on the lesser of the excess of the fair market value of the asset over the C corporation’s basis in the asset on the date the asset ceased to be owned by the C corporation, or the gain we recognize in the disposition.

•              If we acquire a corporation, to preserve our status as a REIT we must generally distribute all of the C corporation earnings and profits inherited in that acquisition, if any, not later than the end of the taxable year of the acquisition. However, if we fail to do so, relief provisions would allow us to maintain our status as a REIT provided we distribute any subsequently discovered C corporation earnings and profits and pay an interest charge in respect of the period of delayed distribution.

•              As summarized below, REITs are permitted within limits to own stock and securities of a “taxable REIT subsidiary.” A taxable REIT subsidiary is separately taxed on its net income as a C corporation, and is subject to

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limitations on the deductibility of interest expense paid to its REIT parent. In addition, its REIT parent is subject to a 100% tax on the difference between amounts charged and redetermined rents and deductions, including excess interest.

•              If and to the extent we invest in properties in foreign jurisdictions, our income from those properties will generally be subject to tax in those jurisdictions. As noted above, we acquired twelve hotels on February 16, 2005. Two of these hotels are in Canada and one is in Puerto Rico. Our profits from these investments outside of the United States will generally be subject to tax in Canada and Puerto Rico, respectively. Through structuring and obtaining available tax exemptions, we expect to minimize the Canadian and Puerto Rican income taxes we have to pay, but there can be no assurance that we will succeed in doing so. If we continue to operate as we do, then we will distribute our taxable income to our shareholders each year and we will generally not pay federal income tax. As a result, we cannot recover the cost of foreign income taxes imposed on our foreign investments by claiming foreign tax credits against our federal income tax liability. Also, we cannot pass through to our shareholders any foreign tax credits.

If we fail to qualify or elect not to qualify as a REIT, we will be subject to federal income tax in the same manner as a C corporation. Distributions to our shareholders if we do not qualify as a REIT will not be deductible by us nor will distributions be required under the Internal Revenue Code. In that event, distributions to our shareholders will generally be taxable as ordinary dividends potentially eligible for the 15% income tax rate discussed below in “Taxation of U.S. Shareholders” and, subject to limitations in the Internal Revenue Code, will be eligible for the dividends received deduction for corporate shareholders. Also, we will generally be disqualified from qualification as a REIT for the four taxable years following disqualification. If we do not qualify as a REIT for even one year, this could result in reduction or elimination of distributions to our shareholders, or in our incurring substantial indebtedness or liquidating substantial investments in order to pay the resulting corporate-level taxes. For our 2005 taxable year and beyond, the 2004 Act provides certain relief provision under which we might avoid automatically ceasing to be a REIT for failure to meet certain REIT requirements, all as discussed in more detail below.

REIT Qualification Requirements

General Requirements. Section 856(a) of the Internal Revenue Code defines a REIT as a corporation, trust or association:

(1)           that is managed by one or more trustees or directors;

(2)           the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest;

(3)           that would be taxable, but for Sections 856 through 859 of the Internal Revenue Code, as a C corporation;

(4)           that is not a financial institution or an insurance company subject to special provisions of the Internal Revenue Code;

(5)           the beneficial ownership of which is held by 100 or more persons;

(6)           that is not “closely held” as defined under the personal holding company stock ownership test, as described below; and

(7)           that meets other tests regarding income, assets and distributions, all as described below.

Section 856(b) of the Internal Revenue Code provides that conditions (1) through (4) must be met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a pro rata part of a taxable year of less than 12 months. Section 856(h)(2) of the Internal Revenue Code provides that neither condition (5) nor (6) need be met for our first taxable year as a REIT. We believe that we have met conditions

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(1) through (7) during each of the requisite periods ending on or before December 31, 2004, and that we can continue to meet these conditions in future taxable years. There can, however, be no assurance in this regard.

By reason of condition (6), we will fail to qualify as a REIT for a taxable year if at any time during the last half of a year more than 50% in value of our outstanding shares is owned directly or indirectly by five or fewer individuals. To help comply with condition (6), our declaration of trust restricts transfers of our shares. In addition, if we comply with applicable Treasury regulations to ascertain the ownership of our shares and do not know, or by exercising reasonable diligence would not have known, that we failed condition (6), then we will be treated as having met condition (6). However, our failure to comply with these regulations for ascertaining ownership may result in a penalty of $25,000, or $50,000 for intentional violations. Accordingly, we intend to comply with these regulations, and to request annually from record holders of significant percentages of our shares information regarding the ownership of our shares. Under our declaration of trust, our shareholders are required to respond to these requests for information.

For purposes of condition (6), REIT shares held by a pension trust are treated as held directly by the pension trust’s beneficiaries in proportion to their actuarial interests in the pension trust. Consequently, five or fewer pension trusts could own more than 50% of the interests in an entity without jeopardizing that entity’s federal income tax qualification as a REIT. However, as discussed below, if a REIT is a “pension-held REIT,” each pension trust owning more than 10% of the REIT’s shares by value generally may be taxed on a portion of the dividends it receives from the REIT.

The 2004 Act provides that, for our 2005 taxable year and beyond, we will not automatically fail to be a REIT if we do not meet conditions (1) through (6), provided we can establish reasonable cause for any such failure. Each such excused failure will result in the imposition of a $50,000 penalty instead of REIT disqualification. It is impossible to state whether in all circumstances we would be entitled to the benefit of this relief provision.

Our Wholly-Owned Subsidiaries and Our Investments through Partnerships. Except in respect of taxable REIT subsidiaries as discussed below, Section 856(i) of the Internal Revenue Code provides that any corporation, 100% of whose stock is held by a REIT, is a qualified REIT subsidiary and shall not be treated as a separate corporation. The assets, liabilities and items of income, deduction and credit of a qualified REIT subsidiary are treated as the REIT’s. We believe that each of our direct and indirect wholly-owned subsidiaries, other than the taxable REIT subsidiaries discussed below, will either be a qualified REIT subsidiary within the meaning of Section 856(i) of the Internal Revenue Code, or a noncorporate entity that for federal income tax purposes is not treated as separate from its owner under regulations issued under Section 7701 of the Internal Revenue Code. Thus, except for the taxable REIT subsidiaries discussed below, in applying all the federal income tax REIT qualification requirements described in this summary, all assets, liabilities and items of income, deduction and credit of our direct and indirect wholly-owned subsidiaries are treated as ours.

We have invested and may invest in real estate through one or more limited or general partnerships or limited liability companies that are treated as partnerships for federal income tax purposes. In the case of a REIT that is a partner in a partnership, regulations under the Internal Revenue Code provide that, for purposes of the REIT qualification requirements regarding income and assets discussed below, the REIT is deemed to own its proportionate share of the assets of the partnership corresponding to the REIT’s proportionate capital interest in the partnership and is deemed to be entitled to the income of the partnership attributable to this proportionate share. In addition, for these purposes, the character of the assets and gross income of the partnership generally retain the same character in the hands of the REIT. Accordingly, our proportionate share of the assets, liabilities, and items of income of each partnership in which we are a partner is treated as ours for purposes of the income tests and asset tests discussed below. In contrast, for purposes of the distribution requirement discussed below, we must take into account as a partner our share of the partnership’s income as determined under the general federal income tax rules governing partners and partnerships under Sections 701 through 777 of the Internal Revenue Code.

Taxable REIT Subsidiaries. We are permitted to own any or all of the securities of a “taxable REIT subsidiary” as defined in Section 856(l) of the Internal Revenue Code, provided that no more than 20% of our assets, at the close of each quarter, is comprised of our investments in the stock or securities of our taxable REIT subsidiaries. Among other requirements, a taxable REIT subsidiary must:

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(1) be a non-REIT corporation for federal income tax purposes in which we directly or indirectly own shares;

(2) join with us in making a taxable REIT subsidiary election;

(3) not directly or indirectly operate or manage a lodging facility or a health care facility; and

(4) not directly or indirectly provide to any person, under a franchise, license, or otherwise, rights to any brand name under which any lodging facility or health care facility is operated, except that in limited circumstances a subfranchise, sublicense or similar right can be granted to an independent contractor to operate or manage a lodging facility.

In addition, a corporation other than a REIT in which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value will automatically be treated as a taxable REIT subsidiary. Subject to the discussion below, we believe that we and each of our taxable REIT subsidiaries have complied with, and will continue to comply with, the requirements for taxable REIT subsidiary status during all times each subsidiary’s taxable REIT subsidiary election remains in effect, and we believe that the same will be true for any taxable REIT subsidiary that we later form or acquire.

Our ownership of stock and securities in taxable REIT subsidiaries is exempt from the 10% and 5% REIT asset tests discussed below. Also, as discussed below, taxable REIT subsidiaries can perform services for our tenants without disqualifying the rents we receive from those tenants under the 75% or 95% gross income tests discussed below. Moreover, because taxable REIT subsidiaries are taxed as C corporations that are separate from us, their assets, liabilities and items of income, deduction and credit are not generally imputed to us for purposes of the REIT qualification requirements described in this summary. Therefore, taxable REIT subsidiaries can generally undertake third-party management and development activities and activities not related to real estate. Finally, while a REIT is generally limited in its ability to earn qualifying rental income from a taxable REIT subsidiary, a REIT can earn qualifying rental income from the lease of a qualified lodging facility to a taxable REIT subsidiary if an eligible independent contractor operates the facility, as discussed more fully below.

Restrictions are imposed on taxable REIT subsidiaries to ensure that they will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary may not deduct interest paid in any year to an affiliated REIT to the extent that the interest payments exceed, generally, 50% of the taxable REIT subsidiary’s adjusted taxable income for that year. However, the taxable REIT subsidiary may carry forward the disallowed interest expense to a succeeding year, and deduct the interest in that later year subject to that year’s 50% adjusted taxable income limitation. In addition, if a taxable REIT subsidiary pays interest, rent, or other amounts to its affiliated REIT in an amount that exceeds what an unrelated third party would have paid in an arm’s length transaction, then the REIT generally will be subject to an excise tax equal to 100% of the excessive portion of the payment. Finally, if in comparison to an arm’s length transaction, a tenant has overpaid rent to the REIT in exchange for underpaying the taxable REIT subsidiary for services rendered, then the REIT may be subject to an excise tax equal to 100% of the overpayment. There can be no assurance that arrangements involving our taxable REIT subsidiaries will not result in the imposition of one or more of these deduction limitations or excise taxes, but we do not believe that we are or will be subject to these impositions.

Income Tests. There are two gross income requirements for qualification as a REIT under the Internal Revenue Code:

•              At least 75% of our gross income, excluding gross income from sales or other dispositions of property held primarily for sale, must be derived from investments relating to real property, including “rents from real property” as defined under Section 856 of the Internal Revenue Code, mortgages on real property, or shares in other REITs. When we receive new capital in exchange for our shares or in a public offering of five-year or longer debt instruments, income attributable to the temporary investment of this new capital in stock or a debt instrument, if received or accrued within one year of our receipt of the new capital, is generally also qualifying income under the 75% test.

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•              At least 95% of our gross income, excluding gross income from sales or other dispositions of property held primarily for sale, must be derived from a combination of items of real property income that satisfy the 75% test described above, dividends, interest, gains from the sale or disposition of stock, securities, or real property or, for our 2004 and earlier taxable years, certain payments under interest rate swap or cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. The 95% income test has been modified for our taxable years beginning after 2004 so that gross income, except as may be provided in Treasury regulations, no longer includes income from a “hedging transaction” as defined under clauses (ii) and (iii) of Section 1221(b)(2)(A) of the Internal Revenue Code, but only to the extent that the transaction hedges indebtedness we incur to acquire or carry real estate assets. This modification to the 95% income test only applies to hedging transactions that are “clearly identified,” meaning that the transaction must be identified as a hedging transaction before the end of the day on which it is entered and the risks being hedged must be identified generally within 35 days after the date the transaction is entered.

For purposes of the 75% and 95% gross income tests outlined above, income derived from a “shared appreciation provision” in a mortgage loan is generally treated as gain recognized on the sale of the property to which it relates. Although we will use our best efforts to ensure that the income generated by our investments will be of a type which satisfies both the 75% and 95% gross income tests, there can be no assurance in this regard.

In order to qualify as “rents from real property” under Section 856 of the Internal Revenue Code, several requirements must be met:

•              The amount of rent received generally must not be based on the income or profits of any person, but may be based on receipts or sales.

•              Rents do not qualify if the REIT owns 10% or more by vote or value of the tenant, whether directly or after application of attribution rules. While we intend not to lease property to any party if rents from that property would not qualify as rents from real property, application of the 10% ownership rule is dependent upon complex attribution rules and circumstances that may be beyond our control. For example, an unaffiliated third party’s ownership directly or by attribution of 10% or more by value of our shares, as well as 10% or more by vote or value of the stock of one of our tenants, would result in that tenant’s rents not qualifying as rents from real property. Our declaration of trust disallows transfers or purported acquisitions, directly or by attribution, of our shares to the extent necessary to maintain our REIT status under the Internal Revenue Code. Nevertheless, there can be no assurance that these provisions in our declaration of trust will be effective to prevent our REIT status from being jeopardized under the 10% affiliated tenant rule. Furthermore, there can be no assurance that we will be able to monitor and enforce these restrictions, nor will our shareholders necessarily be aware of ownership of shares attributed to them under the Internal Revenue Code’s attribution rules.

•              There is a limited exception to the above prohibition on earning “rents from real property” from a 10% affiliated tenant, if the tenant is a taxable REIT subsidiary. If at least 90% of the leased space of a property is leased to tenants other than taxable REIT subsidiaries and 10% affiliated tenants, and if the taxable REIT subsidiary’s rent for space at that property is substantially comparable to the rents paid by nonaffiliated tenants for comparable space at the property, then otherwise qualifying rents paid by the taxable REIT subsidiary to the REIT will not be disqualified on account of the rule prohibiting 10% affiliated tenants.

•              There is a second exception to the above prohibition on earning “rents from real property” from a 10% affiliated tenant. For this second exception to apply, a real property interest in a “qualified lodging facility” must be leased by the REIT to its taxable REIT subsidiary, and the facility must be operated on behalf of the taxable REIT subsidiary by a person who is an “eligible independent contractor,” all as described in Section 856(d)(8)-(9) of the Internal Revenue Code. As described below, we believe our leases with our taxable REIT subsidiaries have satisfied and will satisfy these requirements.

•              In order for rents to qualify, we generally must not manage the property or furnish or render services to the tenants of the property, except through an independent contractor from whom we derive no income or, for our 2001 taxable year and thereafter, through one of our taxable REIT subsidiaries. There is an exception to this rule permitting a REIT to perform customary tenant services of the sort which a tax-exempt organization could perform

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without being considered in receipt of “unrelated business taxable income” as defined in Section 512(b)(3) of the Internal Revenue Code. In addition, a de minimis amount of noncustomary services will not disqualify income as “rents from real property” so long as the value of the impermissible services does not exceed 1% of the gross income from the property.

•              If rent attributable to personal property leased in connection with a lease of real property is 15% or less of the total rent received under the lease, then the rent attributable to personal property will qualify as “rents from real property”; if this 15% threshold is exceeded, the rent attributable to personal property will not so qualify. For our taxable years through December 31, 2000, the portion of rental income treated as attributable to personal property was determined according to the ratio of the tax basis of the personal property to the total tax basis of the real and personal property which is rented. For our 2001 taxable year and thereafter, the ratio is determined by reference to fair market values rather than tax bases.

We believe that all or substantially all our rents have qualified and will qualify as rents from real property for purposes of Section 856 of the Internal Revenue Code.

In order to qualify as mortgage interest on real property for purposes of the 75% test, interest must derive from a mortgage loan secured by real property with a fair market value, at the time the loan is made, at least equal to the amount of the loan. If the amount of the loan exceeds the fair market value of the real property, the interest will be treated as interest on a mortgage loan in a ratio equal to the ratio of the fair market value of the real property to the total amount of the mortgage loan.

Amounts payable to us under agreements relating to the Canadian hotels we acquired on February 16, 2005 may be determined by reference to Canadian dollar expenditures or revenues. Currency translation or exchange gains or losses might not count favorably toward the 75% and 95% gross income tests summarized above, and thus, in sufficient amounts, such currency gains could threaten compliance with the REIT income tests. However, because any amounts paid to us, as opposed to our taxable REIT subsidiary, under these Canadian hotel agreements will be in U.S. dollars only, we do not expect to have material amounts of currency gains in respect of our Canadian investments.

Other than sales of foreclosure property, any gain we realize on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of business will be treated as income from a prohibited transaction that is subject to a penalty tax at a 100% rate. This prohibited transaction income also may adversely affect our ability to satisfy the 75% and 95% gross income tests for federal income tax qualification as a REIT. We cannot provide assurances as to whether or not the IRS might successfully assert that one or more of our dispositions is subject to the 100% penalty tax. However, we believe that dispositions of assets that we have made or that we might make in the future will not be subject to the 100% penalty tax, because we intend to:

•              own our assets for investment with a view to long-term income production and capital appreciation;

•              engage in the business of developing, owning and operating our existing properties and acquiring, developing, owning and operating new properties; and

•              make occasional dispositions of our assets consistent with our long-term investment objectives.

For our 2004 and prior taxable years, if we failed to satisfy one or both of the 75% or 95% gross income tests, we may nevertheless qualify as a REIT for that year if:

•              our failure to meet the test was due to reasonable cause and not due to willful neglect;

•              we report the nature and amount of each item of our income included in the 75% or 95% gross income tests for that taxable year on a schedule attached to our tax return; and

•              any incorrect information on the schedule was not due to fraud with intent to evade tax.

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We have in the past attached and for our 2004 taxable year will continue to attach a schedule of gross income to our federal income tax returns, but it is impossible to state whether in all circumstances we would be entitled to the benefit of this relief provision for the 75% and 95% gross income tests. Even if this relief provision did apply, a 100% tax is imposed upon the greater of the amount by which we failed the 75% test or the 95% test, with adjustments, multiplied by a fraction intended to reflect our profitability.

The 2004 Act has modified this relief provision for failures to satisfy either or both of the 75% or the 95% gross income tests in the case of failures for our 2005 taxable year or later. Specifically, if we fail to satisfy either or both of the gross income tests for a taxable year after 2004, we may nevertheless qualify as a REIT for that year if our failure to meet the test is due to reasonable cause and not due to willful neglect and, after we identify the failure, we file a schedule describing each item of our gross income included in the 75% or 95% gross income tests for that taxable year. It is impossible to state whether in all circumstances we would be entitled to the benefit of this revised relief provision for the 75% and 95% gross income tests. Even if this relief provision did apply, a 100% tax is imposed upon the greater of the amount by which we failed the 75% test or the 95% test, multiplied by a fraction intended to reflect our profitability.

Asset Tests. At the close of each quarter of each taxable year, we must also satisfy the following asset percentage tests in order to qualify as a REIT for federal income tax purposes:

•              At least 75% of our total assets must consist of real estate assets, cash and cash items, shares in other REITs, government securities, and stock or debt instruments purchased with proceeds of a stock offering or an offering of our debt with a term of at least five years, but only for the one-year period commencing with our receipt of the offering proceeds.

•              Not more than 25% of our total assets may be represented by securities other than those securities that count favorably toward the preceding 75% asset test.

•              Of the investments included in the preceding 25% asset class, the value of any one non-REIT issuer’s securities that we own may not exceed 5% of the value of our total assets, and we may not own more than 10% of any one non-REIT issuer’s outstanding voting securities. For our 2001 taxable year and thereafter, we may not own more than 10% of the vote or value of any one non-REIT issuer’s outstanding securities, unless that issuer is our taxable REIT subsidiary or the securities are “straight debt” securities or otherwise excepted as discussed below.

•              For our 2001 taxable year and thereafter, our stock and securities in a taxable REIT subsidiary are exempted from the preceding 10% and 5% asset tests. However, no more than 20% of our total assets may be represented by stock or securities of taxable REIT subsidiaries.

When a failure to satisfy the above asset tests results from an acquisition of securities or other property during a quarter, the failure can be cured by disposition of sufficient nonqualifying assets within 30 days after the close of that quarter. In addition, for our 2005 taxable year and thereafter, the 2004 Act provides that if we fail the 5% value test or the 10% vote or value tests at the close of any quarter and do not cure such failure within 30 days after the close of that quarter, that failure will nevertheless be excused if (a) the failure is de minimis and (b) within 6 months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy the 5% value and 10% vote and value asset tests. For purposes of this relief provision, the failure will be “de minimis” if the value of the assets causing the failure does not exceed the lesser of (a) 1% of the total value of our assets at the end of the relevant quarter or (b) $10,000,000. If our failure is not de minimis, we may nevertheless qualify as a REIT if (a) we provide the IRS with a description of each asset causing the failure, (b) the failure was due to reasonable cause and not willful neglect, (c) we pay a tax equal to the greater of (i) $50,000 or (ii) the highest rate of corporate tax imposed (currently 35%) on the net income generated by the assets causing the failure during the period of the failure, and (d) within 6 months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy the 5% value and 10% vote and value asset tests.

The 2004 Act clarifies and expands, on a retroactive basis so as to be effective for our 2001 taxable year forward, an excepted securities safe harbor to the 10% value test that includes among other items (a) “straight debt”

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securities, (b) certain rental agreements in which payment is to be made in subsequent years, (c) any obligation to pay rents from real property, (d) securities issued by governmental entities that are not dependent in whole or in part on the profits of or payments from a nongovernmental entity, and (e) any security issued by another REIT.

We intend to maintain records of the value of our assets to document our compliance with the above asset tests, and to take actions as may be required to cure any failure to satisfy the tests within 30 days after the close of any quarter.

Our Relationship with Our Taxable REIT Subsidiaries. We currently own hotels that we purchased to be leased to our taxable REIT subsidiaries or which are being leased to our taxable REIT subsidiaries as a result of modifications to a prior lease that were agreed to among us, the former tenant and the manager. We may from time to time in the future lease additional hotels which we acquire in this manner.

In connection with lease defaults, we terminated occupancy of some of our hotels by defaulting tenants and immediately leased these hotels to our taxable REIT subsidiaries and entered into new third party management agreements for these hotels. We may in the future employ similar arrangements if we ever again face lease or occupancy terminations.

In transactions involving our taxable REIT subsidiaries, our intent is that the rents paid to us by the taxable REIT subsidiary qualify as “rents from real property” under the REIT gross income tests summarized above. In order for this to be the case, the manager engaged by the applicable taxable REIT subsidiary must be an “eligible independent contractor” within the meaning of Section 856(d)(9)(A) of the Internal Revenue Code, and the hotels leased to the taxable REIT subsidiary must be “qualified lodging facilities” within the meaning of Section 856(d)(9)(D) of the Internal Revenue Code. Qualified lodging facilities are defined as hotels, motels, or other establishments where more than half of the dwelling units are used on a transient basis, provided that legally authorized wagering or gambling activities are not conducted at or in connection with such facilities. Also included in the definition are the qualified lodging facility’s customary amenities and facilities.

For these purposes, a contractor qualifies as an “eligible independent contractor” if it is less than 35% affiliated with the REIT and, at the time the contractor enters into the agreement with the taxable REIT subsidiary to operate the qualified lodging facility, that contractor or any person related to that contractor is actively engaged in the trade or business of operating qualified lodging facilities for persons unrelated to the taxable REIT subsidiary or its affiliated REIT. For these purposes, an otherwise eligible independent contractor is not disqualified from that status on account of the taxable REIT subsidiary bearing the expenses for the operation of the qualified lodging facility, the taxable REIT subsidiary receiving the revenues from the operation of the qualified lodging facility, net of expenses for that operation and fees payable to the eligible independent contractor, or the REIT receiving income from the eligible independent contractor pursuant to a preexisting or otherwise grandfathered lease of another property.

In one case involving a manager whose hotel management activities for parties unrelated to us was not as extensive as those of our other managers, we received an opinion of counsel that the particular manager should qualify as an “eligible independent contractor” within the meaning of Section 856(d)(9)(A) of the Internal Revenue Code, and that, although the matter is not free from doubt, it is reasonable for us to rely on such opinion for purposes of the relief provisions under the REIT gross income tests summarized above. Accordingly, although there can be no assurance in this regard, we expect that the rental income we receive from our taxable REIT subsidiaries will qualify as “rents from real property” under the REIT gross income tests. We also took steps to qualify for the 75% and 95% gross income tests’ relief provision, including for example attaching an applicable schedule of gross income to our federal income tax returns as previously required by Section 856(c)(6) of the Internal Revenue Code. Thus, even if the IRS or a court ultimately determines that one or more of our managers failed to operate “qualified lodging facilities” for others sufficient to qualify as an eligible independent contractor, and that this failure thereby implicated our compliance with the REIT gross income tests, we expect we would qualify for the gross income tests’ relief provision and thereby preserve our qualification as a REIT.

As explained above, we will be subject to a 100% tax if the IRS successfully asserts that the rents paid by our taxable REIT subsidiary to us exceed an arm’s length rental rate. Although there is no clear precedent to

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distinguish for federal income tax purposes among leases, management contracts, partnerships, financings, and other contractual arrangements, we believe that our leases and our taxable REIT subsidiaries’ management agreements will be respected for purposes of the requirements of the Internal Revenue Code discussed above. Accordingly, we expect that the rental income from our current and future taxable REIT subsidiaries will qualify favorably as “rents from real property,” and that the 100% tax on excessive rents from a taxable REIT subsidiary will not apply.

Annual Distribution Requirements. In order to qualify for taxation as a REIT under the Internal Revenue Code, we are required to make annual distributions other than capital gain dividends to our shareholders in an amount at least equal to the excess of:

(A)          the sum of 90% of our “real estate investment trust taxable income,” as defined in Section 857 of the Internal Revenue Code, computed by excluding any net capital gain and before taking into account any dividends paid deduction for which we are eligible, and 90% of our net income after tax, if any, from property received in foreclosure, over

(B)           the sum of our qualifying noncash income, e.g., imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges.

The distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for the earlier taxable year and if paid on or before the first regular distribution payment after that declaration. If a dividend is declared in October, November, or December to shareholders of record during one of those months, and is paid during the following January, then for federal income tax purposes the dividend will be treated as having been both paid and received on December 31 of the prior taxable year. A distribution which is not pro rata within a class of our beneficial interests entitled to a distribution, or which is not consistent with the rights to distributions among our classes of beneficial interests, is a preferential distribution that is not taken into consideration for purposes of the distribution requirements, and accordingly the payment of a preferential distribution could affect our ability to meet the distribution requirements. Taking into account our distribution policies, including the dividend reinvestment plan we have adopted, we expect that we will not make any preferential distributions. The distribution requirements may be waived by the IRS if a REIT establishes that it failed to meet them by reason of distributions previously made to meet the requirements of the 4% excise tax discussed below. To the extent that we do not distribute all of our net capital gain and all of our real estate investment trust taxable income, as adjusted, we will be subject to tax on undistributed amounts.

In addition, we will be subject to a 4% excise tax to the extent we fail within a calendar year to make required distributions to our shareholders of 85% of our ordinary income and 95% of our capital gain net income plus the excess, if any, of the “grossed up required distribution” for the preceding calendar year over the amount treated as distributed for that preceding calendar year. For this purpose, the term “grossed up required distribution” for any calendar year is the sum of our taxable income for the calendar year without regard to the deduction for dividends paid and all amounts from earlier years that are not treated as having been distributed under the provision. We will be treated as having sufficient earnings and profits to treat as a dividend any distribution by us up to the amount required to be distributed in order to avoid imposition of the 4% excise tax.

Distributions we made to our shareholders during 2003 were insufficient to meet the 90% distribution requirement and to fully distribute all of our 2003 “real estate investment trust taxable income”, even after taking into account our distribution to our common shareholders on January 30, 2004 that was treated for all tax purposes as made in 2003 under the rules discussed above. We therefore elected to apply one or more of our regular, periodic 2004 distributions toward our 2003 distribution requirements and toward full distribution of our 2003 “real estate investment trust taxable income.” Distributions we made to our shareholders during 2004 were sufficient to meet the 90% distribution requirement but insufficient to fully distribute all of our 2004 “real estate investment trust taxable income”, even after taking into account our distribution to our common shareholders on January 31, 2005 that was treated for all tax purposes as made in 2004 under the rules discussed above. We therefore intend to elect to apply one or more of our regular, periodic 2005 distributions toward full distribution of our 2004 “real estate investment trust taxable income”, all in the manner described above. These “clawbacks” of 2004 and 2005 distributions, other

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than the January 2004 and January 2005 common distributions, do not relate back to our 2003 or 2004 taxable years, respectively, for purposes of the 4% excise tax; nonetheless, we owed no excise tax in respect of these taxable years.

If we do not have enough cash or other liquid assets to meet the 90% distribution requirements, we may find it necessary and desirable to arrange for new debt or equity financing to provide funds for required distributions in order to maintain our REIT status. We can provide no assurance that financing would be available for these purposes on favorable terms.

We may be able to rectify a failure to pay sufficient dividends for any year by paying “deficiency dividends” to shareholders in a later year. These deficiency dividends may be included in our deduction for dividends paid for the earlier year, but an interest charge would be imposed upon us for the delay in distribution. Although we may be able to avoid being taxed on amounts distributed as deficiency dividends, we will remain liable for the 4% excise tax discussed above.

In addition to the other distribution requirements above, to preserve our status as a REIT we are required to timely distribute C corporation earnings and profits that we inherit from acquired corporations.

Acquisition of Hotels and C Corporation. As discussed above, on February 16, 2005, we purchased 12 hotels. Nine of these hotels are located in the United States, two are located in Canada, and one is in Puerto Rico. In order to acquire the hotel in Puerto Rico, we acquired all of the outstanding stock of a C corporation that owned that hotel as its primary asset. Upon our acquisition, the acquired C corporation became our qualified REIT subsidiary under Section 856(i) of the Internal Revenue Code. Thus, after the acquisition, all assets, liabilities and items of income, deduction and credit of the acquired corporation are treated as ours for purposes of the various REIT qualification tests described above. In a stock acquisition, we are generally treated as the successor to the acquired corporation’s federal income tax attributes, such as its adjusted tax bases in its assets and its C corporation earnings and profits. However, because we made an election under Section 338(g) of the Internal Revenue Code in respect of this acquired corporation, we did not succeed to its earnings and profits, nor do we have any built-in gain in the former C corporation’s assets.

Depreciation and Federal Income Tax Treatment of Leases

Our initial tax bases in our assets will generally be our acquisition cost. We will generally depreciate our real property on a straight-line basis over 40 years and our personal property over 9 years. These depreciation schedules may vary for properties that we acquire through tax-free or carryover basis acquisitions.

We are entitled to depreciation deductions from our facilities only if we are treated for federal income tax purposes as the owner of the facilities. This means that the leases of the facilities must be classified for federal income tax purposes as true leases, rather than as sales or financing arrangements, and we believe this to be the case. In the case of sale-leaseback arrangements, the IRS could assert that we realized prepaid rental income in the year of purchase to the extent that the value of a leased property, at the time of purchase, exceeded the purchase price for that property. While we believe that the value of leased property at the time of purchase did not exceed purchase prices, because of the lack of clear precedent we cannot provide assurances as to whether the IRS might successfully assert the existence of prepaid rental income in any of our sale-leaseback transactions.

Taxation of U.S. Shareholders

The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the maximum individual federal income tax rate for long-term capital gains generally to 15% (for gains properly taken into account during the period beginning May 6, 2003, and ending for taxable years that begin after December 31, 2008) and for most corporate dividends generally to 15% (for taxable years that begin in the years 2003 through 2008). However, because we are not generally subject to federal income tax on the portion of our REIT taxable income or capital gains distributed to our shareholders, dividends on our shares generally are not eligible for the new 15% tax rate on dividends. As a result, our ordinary dividends continue to be taxed at the higher federal income tax rates applicable to

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ordinary income. However, the 15% federal income tax rate for long-term capital gains and dividends generally applies to:

(1)           your long-term capital gains, if any, recognized on the disposition of our shares;

(2)           our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a 25% federal income tax rate);

(3)           our dividends attributable to dividends, if any, received by us from non-REIT corporations such as taxable REIT subsidiaries; and

(4)           our dividends to the extent attributable to income upon which we have paid federal corporate income tax.

As long as we qualify as a REIT for federal income tax purposes, a distribution to our U.S. shareholders that we do not designate as a capital gain dividend will be treated as an ordinary income dividend to the extent of our current or accumulated earnings and profits. Distributions made out of our current or accumulated earnings and profits that we properly designate as capital gain dividends will be taxed as long-term capital gains, as discussed below, to the extent they do not exceed our actual net capital gain for the taxable year. However, corporate shareholders may be required to treat up to 20% of any capital gain dividend as ordinary income under Section 291 of the Internal Revenue Code.

In addition, we may elect to retain net capital gain income and treat it as constructively distributed. In that case:

(1)           we will be taxed at regular corporate capital gains tax rates on retained amounts;

(2)           each U.S. shareholder will be taxed on its designated proportionate share of our retained net capital gains as though that amount were distributed and designated a capital gain dividend;

(3)           each U.S. shareholder will receive a credit for its designated proportionate share of the tax that we pay;

(4)           each U.S. shareholder will increase its adjusted basis in our shares by the excess of the amount of its proportionate share of these retained net capital gains over its proportionate share of this tax that we pay; and

(5)           both we and our corporate shareholders will make commensurate adjustments in our respective earnings and profits for federal income tax purposes.

If we elect to retain our net capital gains in this fashion, we will notify our U.S. shareholders of the relevant tax information within 60 days after the close of the affected taxable year.

As discussed above, for noncorporate U.S. shareholders, long-term capital gains are generally taxed at maximum rates of 15% or 25%, depending upon the type of property disposed of and the previously claimed depreciation with respect to this property. If for any taxable year we designate capital gain dividends for U.S. shareholders, then the portion of the capital gain dividends we designate will be allocated to the holders of a particular class of shares on a percentage basis equal to the ratio of the amount of the total dividends paid or made available for the year to the holders of that class of shares to the total dividends paid or made available for the year to holders of all classes of our shares. We will similarly designate the portion of any capital gain dividend that is to be taxed to noncorporate U.S. shareholders at the maximum rates of 15% or 25% so that the designations will be proportionate among all classes of our shares.

Distributions in excess of current or accumulated earnings and profits will not be taxable to a U.S. shareholder to the extent that they do not exceed the shareholder’s adjusted tax basis in the shareholder’s shares, but will reduce the

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shareholder’s basis in those shares. To the extent that these excess distributions exceed the adjusted basis of a U.S. shareholder’s shares, they will be included in income as capital gain, with long-term gain generally taxed to noncorporate U.S. shareholders at a maximum rate of 15%. No U.S. shareholder may include on his federal income tax return any of our net operating losses or any of our capital losses.

Dividends that we declare in October, November or December of a taxable year to U.S. shareholders of record on a date in those months will be deemed to have been received by shareholders on December 31 of that taxable year, provided we actually pay these dividends during the following January. Also, items that are treated differently for regular and alternative minimum tax purposes are to be allocated between a REIT and its shareholders under Treasury regulations which are to be prescribed. It is possible that these Treasury regulations will require tax preference items to be allocated to our shareholders with respect to any accelerated depreciation or other tax preference items that we claim.

A U.S. shareholder will recognize gain or loss equal to the difference between the amount realized and the shareholder’s adjusted basis in our shares which are sold or exchanged. This gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the shareholder’s holding period in the shares exceeds one year. In addition, any loss upon a sale or exchange of our shares held for six months or less will generally be treated as a long-term capital loss to the extent of our long-term capital gain dividends during the holding period.

The 2004 Act imposes a penalty, effective for federal tax returns with due dates after October 22, 2004, for the failure to properly disclose a “reportable transaction.” A reportable transaction currently includes, among other things, a sale or exchange of our shares resulting in a tax loss in excess of (i) $10 million in any single year or $20 million in any combination of years in the case of our shares held by a C corporation or by a partnership with only C corporation partners or (ii) $2 million in any single year or $4 million in any combination of years in the case of our shares held by any other partnership or an S corporation, trust or individual, including losses that flow through pass through entities to individuals. A taxpayer discloses a reportable transaction by filing IRS Form 8886 with its federal income tax return and, in the first year of filing, a copy of Form 8886 must be sent to the IRS’s Office of Tax Shelter Analysis. The penalty for failing to disclose a reportable transaction is generally $10,000 in the case of a natural person and $50,000 in any other case.

Noncorporate U.S. shareholders who borrow funds to finance their acquisition of our shares could be limited in the amount of deductions allowed for the interest paid on the indebtedness incurred. Under Section 163(d) of the Internal Revenue Code, interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment is generally deductible only to the extent of the investor’s net investment income. A U.S. shareholder’s net investment income will include ordinary income dividend distributions received from us and, if an appropriate election is made by the shareholder, capital gain dividend distributions received from us; however, distributions treated as a nontaxable return of the shareholder’s basis will not enter into the computation of net investment income.

Taxation of Tax-Exempt Shareholders

In Revenue Ruling 66-106, the IRS ruled that amounts distributed by a REIT to a tax-exempt employees’ pension trust did not constitute “unrelated business taxable income,” even though the REIT may have financed some of its activities with acquisition indebtedness. Although revenue rulings are interpretive in nature and subject to revocation or modification by the IRS, based upon the analysis and conclusion of Revenue Ruling 66-106, our distributions made to shareholders that are tax-exempt pension plans, individual retirement accounts, or other qualifying tax-exempt entities should not constitute unrelated business taxable income, unless the shareholder has financed its acquisition of our shares with “acquisition indebtedness” within the meaning of the Internal Revenue Code.

Tax-exempt pension trusts, including so-called 401(k) plans but excluding individual retirement accounts or government pension plans, that own more than 10% by value of a “pension-held REIT” at any time during a taxable year may be required to treat a percentage of all dividends received from the pension-held REIT during the year as unrelated business taxable income. This percentage is equal to the ratio of:

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(1)the pension-held REIT’s gross income derived from the conduct of unrelated trades or businesses, determined as if the pension-held REIT were a tax-exempt pension fund, less direct expenses related to that income, to

(2)the pension-held REIT’s gross income from all sources, less direct expenses related to that income,

except that this percentage shall be deemed to be zero unless it would otherwise equal or exceed 5%. A REIT is a pension-held REIT if:

•the REIT is “predominantly held” by tax-exempt pension trusts; and

•the REIT would fail to satisfy the “closely held” ownership requirement discussed above if the stock or beneficial interests in the REIT held by tax-exempt pension trusts were viewed as held by tax-exempt pension trusts rather than by their respective beneficiaries.

A REIT is predominantly held by tax-exempt pension trusts if at least one tax-exempt pension trust owns more than 25% by value of the REIT’s stock or beneficial interests, or if one or more tax-exempt pension trusts, each owning more than 10% by value of the REIT’s stock or beneficial interests, own in the aggregate more than 50% by value of the REIT’s stock or beneficial interests. Because of the share ownership concentration restrictions in our declaration of trust, we believe that we are not and will not be a pension-held REIT. However, because our shares are publicly traded, we cannot completely control whether or not we are or will become a pension-held REIT.

Social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans exempt from federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code, respectively, are subject to different unrelated business taxable income rules, which generally will require them to characterize distributions from a REIT as unrelated business taxable income. In addition, these prospective investors should consult their own tax advisors concerning any “set aside” or reserve requirements applicable to them.

Taxation of Non-U.S. Shareholders

The rules governing the United States federal income taxation of non-U.S. shareholders are complex, and the following discussion is intended only as a summary of these rules. If you are a non-U.S. shareholder, we urge you to consult with your own tax advisor to determine the impact of United States federal, state, local, and foreign tax laws, including any tax return filing and other reporting requirements, with respect to your investment in our shares.

In general, a non-U.S. shareholder will be subject to regular United States federal income tax in the same manner as a U.S. shareholder with respect to its investment in our shares if that investment is effectively connected with the non-U.S. shareholder’s conduct of a trade or business in the United States. In addition, a corporate non-U.S. shareholder that receives income that is or is deemed effectively connected with a trade or business in the United States may also be subject to the 30% branch profits tax under Section 884 of the Internal Revenue Code, which is payable in addition to regular United States federal corporate income tax. The balance of this discussion of the United States federal income taxation of non-U.S. shareholders addresses only those non-U.S. shareholders whose investment in our shares is not effectively connected with the conduct of a trade or business in the United States.

A distribution by us to a non-U.S. shareholder that is not attributable to gain from the sale or exchange of a United States real property interest and that is not designated as a capital gain dividend will be treated as an ordinary income dividend to the extent that it is made out of current or accumulated earnings and profits. A distribution of this type will generally be subject to United States federal income tax and withholding at the rate of 30%, or at a lower rate if the non-U.S. shareholder has in the manner prescribed by the IRS demonstrated its entitlement to benefits under a tax treaty. Because we cannot determine our current and accumulated earnings and profits until the end of the taxable year, withholding at the rate of 30% or applicable lower treaty rate will generally be imposed on the gross amount of any distribution to a non-U.S. shareholder that we make and do not designate a capital gain dividend. Notwithstanding this withholding on distributions in excess of our current and accumulated earnings and profits, these distributions are a nontaxable return of capital to the extent that they do not exceed the non-U.S. shareholder’s adjusted basis in our

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shares, and the nontaxable return of capital will reduce the adjusted basis in these shares. To the extent that distributions in excess of current and accumulated earnings and profits exceed the non-U.S. shareholder’s adjusted basis in our shares, the distributions will give rise to tax liability if the non-U.S. shareholder would otherwise be subject to tax on any gain from the sale or exchange of these shares, as discussed below. A non-U.S. shareholder may seek a refund from the IRS of amounts withheld on distributions to him in excess of our current and accumulated earnings and profits.

Except as discussed below with respect to certain capital gains dividends in taxable years after 2004, for any year in which we qualify as a REIT, distributions that are attributable to gain from the sale or exchange of a United States real property interest are taxed to a non-U.S. shareholder as if these distributions were gains effectively connected with a trade or business in the United States conducted by the non-U.S. shareholder. Accordingly, a non-U.S. shareholder will be taxed on these amounts at the normal capital gain rates applicable to a U.S. shareholder, subject to any applicable alternative minimum tax and to a special alternative minimum tax in the case of nonresident alien individuals; the non-U.S. shareholder will be required to file a United States federal income tax return reporting these amounts, even if applicable withholding is imposed as described below; and corporate non-U.S. shareholders may owe the 30% branch profits tax under Section 884 of the Internal Revenue Code in respect of these amounts. We will be required to withhold from distributions to non-U.S. shareholders, and remit to the IRS, 35% of the maximum amount of any distribution that could be designated as a capital gain dividend. In addition, for purposes of this withholding rule, if we designate prior distributions as capital gain dividends, then subsequent distributions up to the amount of the designated prior distributions will be treated as capital gain dividends. The amount of any tax withheld is creditable against the non-U.S. shareholder’s United States federal income tax liability, and the non-U.S. shareholder may file for a refund from the IRS of any amount of withheld tax in excess of that tax liability. If for any taxable year we designate capital gain dividends for our shareholders, then the portion of the capital gain dividends we designate will be allocated to the holders of a particular class of shares on a percentage basis equal to the ratio of the amount of the total dividends paid or made available for the year to the holders of that class of shares to the total dividends paid or made available for the year to holders of all classes of our shares.

Tax treaties may reduce the withholding obligations on our distributions. Under some treaties, however, rates below 30% that are applicable to ordinary income dividends from United States corporations may not apply to ordinary income dividends from a REIT. You must generally use an applicable IRS Form W-8, or substantially similar form, to claim tax treaty benefits. If the amount of tax withheld by us with respect to a distribution to a non-U.S. shareholder exceeds the shareholder’s United States federal income tax liability with respect to the distribution, the non-U.S. shareholder may file for a refund of the excess from the IRS. The 35% withholding tax rate on capital gain dividends corresponds to the maximum income tax rate applicable to corporate non-U.S. shareholders but is higher than the 15% and 25% maximum rates on capital gains generally applicable to noncorporate non-U.S. shareholders. Treasury regulations also provide special rules to determine whether, for purposes of determining the applicability of a tax treaty, our distributions to a non-U.S. shareholder that is an entity should be treated as paid to the entity or to those owning an interest in that entity, and whether the entity or its owners are entitled to benefits under the tax treaty.

If our shares are not “United States real property interests” within the meaning of Section 897 of the Internal Revenue Code, a non-U.S. shareholder’s gain on sale of these shares generally will not be subject to United States federal income taxation, except that a nonresident alien individual who was in the United States for 183 days or more during the taxable year will be subject to a 30% tax on this gain. Our shares will not constitute a United States real property interest if we are a “domestically controlled REIT.” A domestically controlled REIT is a REIT in which at all times during the preceding five-year period less than 50% in value of its shares is held directly or indirectly by foreign persons. We believe that we are and will be a domestically controlled REIT and thus a non-U.S. shareholder’s gain on sale of our shares will not be subject to United States federal income taxation. However, because our shares are publicly traded, we can provide no assurance that we will be a domestically controlled REIT. If we are not a domestically controlled REIT, a non-U.S. shareholder’s gain on sale of our shares will not be subject to United States federal income taxation as a sale of a United States real property interest, if that class of shares is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market like the New York Stock Exchange, and the non-U.S. shareholder has at all times during the preceding five years owned 5% or less by value of that class of shares. If the gain on the sale of our shares were subject to United States federal income taxation, the non-U.S. shareholder will generally be subject to the same treatment as a U.S. shareholder with respect to its gain, will be

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required to file a United States federal income tax return reporting that gain, and a corporate non-U.S. shareholder might owe branch profits tax under Section 884 of the Internal Revenue Code. A purchaser of our shares from a non-U.S. shareholder will not be required to withhold on the purchase price if the purchased shares are regularly traded on an established securities market or if we are a domestically controlled REIT. Otherwise, a purchaser of our shares from a non-U.S. shareholder may be required to withhold 10% of the purchase price paid to the non-U.S. shareholder and to remit the withheld amount to the IRS.

Capital gain dividends that are received by a non-U.S. shareholder, including dividends attributable to our sales of United States real property interests, and that are deductible by us in respect of our 2005 taxable year and thereafter will be subject to the taxation and withholding regime applicable to ordinary income dividends and the branch profits tax will not apply, provided that (1) the capital gain dividends are received with respect to a class of shares that is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market like the New York Stock Exchange and (2) the foreign shareholder does not own more than 5% of that class of shares at any time during the taxable year in which the capital gain dividends are received. As such, qualifying non-U.S. shareholders will no longer be subject to withholding on capital gain dividends as though those amounts were effectively connected with a United States trade or business, and qualifying non-U.S. shareholders will no longer be required to file United States federal income tax returns or pay branch profits tax in respect of these capital gain dividends. These recharacterized dividends will still be subject to United States federal income tax and withholding as ordinary dividends, currently at a 30% tax rate as reduced by applicable treaty.

Backup Withholding and Information Reporting

Information reporting and backup withholding may apply to distributions or proceeds paid to our shareholders under the circumstances discussed below. The backup withholding rate is currently 28%. Amounts withheld under backup withholding are generally not an additional tax and may be refunded by the IRS or credited against the REIT shareholder’s federal income tax liability.

A U.S. shareholder will be subject to backup withholding when it receives distributions on our shares or proceeds upon the sale, exchange, redemption, retirement or other disposition of our shares, unless the U.S. shareholder properly executes, or has previously properly executed, under penalties of perjury an IRS Form W-9 or substantially similar form that:

•provides the U.S. shareholder’s correct taxpayer identification number; and

•certifies that the U.S. shareholder is exempt from backup withholding because it is a corporation or comes within another exempt category, it has not been notified by the IRS that it is subject to backup withholding, or it has been notified by the IRS that it is no longer subject to backup withholding.

If the U.S. shareholder has not and does not provide its correct taxpayer identification number on the IRS Form W-9 or substantially similar form, it may be subject to penalties imposed by the IRS, and the REIT or other withholding agent may have to withhold a portion of any capital gain distributions paid to it. Unless the U.S. shareholder has established on a properly executed IRS Form W-9 or substantially similar form that it is a corporation or comes within another exempt category, distributions on our shares paid to it during the calendar year, and the amount of tax withheld, if any, will be reported to it and to the IRS.

Distributions on our shares to a non-U.S. shareholder during each calendar year and the amount of tax withheld, if any, will generally be reported to the non-U.S. shareholder and to the IRS. This information reporting requirement applies regardless of whether the non-U.S. shareholder is subject to withholding on distributions on our shares or whether the withholding was reduced or eliminated by an applicable tax treaty. Also, distributions paid to a non-U.S. shareholder on our shares may be subject to backup withholding, unless the non-U.S. shareholder properly certifies its non-U.S. shareholder status on an IRS Form W-8 or substantially similar form in the manner described above. Similarly, information reporting and backup withholding will not apply to proceeds a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares, if the non-U.S. shareholder properly certifies its non-U.S. shareholder status on an IRS Form W-8 or substantially similar form. Even without

23

having executed an IRS Form W-8 or substantially similar form, however, in some cases information reporting and backup withholding will not apply to proceeds that a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares if the non-U.S. shareholder receives those proceeds through a broker’s foreign office.

Other Tax Consequences

Our tax treatment and that of our shareholders may be modified by legislative, judicial, or administrative actions at any time, which actions may be retroactive in effect. The rules dealing with federal income taxation are constantly under review by the Congress, the IRS and the Treasury Department, and statutory changes, new regulations, revisions to existing regulations, and revised interpretations of established concepts are issued frequently. Likewise, the rules regarding taxes other than federal income taxes may also be modified. No prediction can be made as to the likelihood of passage of new tax legislation or other provisions or the direct or indirect effect on us and our shareholders. Revisions to tax laws and interpretations of these laws could adversely affect the tax or other consequences of an investment in our shares. We and our shareholders may also be subject to taxation by state, local or other jurisdictions, including those in which we or our shareholders transact business or reside. These tax consequences may not be comparable to the federal income tax consequences discussed above.

ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS

General Fiduciary Obligations

Fiduciaries of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, ERISA, must consider whether:

•their investment in our shares satisfies the diversification requirements of ERISA;

•the investment is prudent in light of possible limitations on the marketability of our shares;

•they have authority to acquire our shares under the applicable governing instrument and Title I of ERISA; and

•the investment is otherwise consistent with their fiduciary responsibilities.

Trustees and other fiduciaries of an ERISA plan may incur personal liability for any loss suffered by the plan on account of a violation of their fiduciary responsibilities. In addition, these fiduciaries may be subject to a civil penalty of up to 20% of any amount recovered by the plan on account of a violation. Fiduciaries of any IRA, Roth IRA, Keogh Plan or other qualified retirement plan not subject to Title I of ERISA, referred to as “non-ERISA plans,” should consider that a plan may only make investments that are authorized by the appropriate governing instrument. Fiduciary shareholders should consult their own legal advisors if they have any concern as to whether the investment is consistent with the foregoing criteria.

Prohibited Transactions

Fiduciaries of ERISA plans and persons making the investment decision for an IRA or other non-ERISA plan should consider the application of the prohibited transaction provisions of ERISA and the Internal Revenue Code in making their investment decision. Sales and other transactions between an ERISA or non-ERISA plan, and persons related to it, are prohibited transactions. The particular facts concerning the sponsorship, operations and other investments of an ERISA plan or non-ERISA plan may cause a wide range of other persons to be treated as disqualified persons or parties in interest with respect to it. A prohibited transaction, in addition to imposing potential personal liability upon fiduciaries of ERISA plans, may also result in the imposition of an excise tax under the Internal Revenue Code or a penalty under ERISA upon the disqualified person or party in interest with respect to the plan. If the

24

disqualified person who engages in the transaction is the individual on behalf of whom an IRA or Roth IRA is maintained or his beneficiary, the IRA or Roth IRA may lose its tax-exempt status and its assets may be deemed to have been distributed to the individual in a taxable distribution on account of the prohibited transaction, but no excise tax will be imposed. Fiduciary shareholders should consult their own legal advisors as to whether the ownership of our shares involves a prohibited transaction.

“Plan Assets” Considerations

The Department of Labor, which has administrative responsibility over ERISA plans as well as non-ERISA plans, has issued a regulation defining “plan assets.” The regulation generally provides that when an ERISA or non-ERISA plan acquires a security that is an equity interest in an entity and that security is neither a “publicly offered security” nor a security issued by an investment company registered under the Investment Company Act of 1940, the ERISA plan’s or non-ERISA plan’s assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is established either that the entity is an operating company or that equity participation in the entity by benefit plan investors is not significant.

Each class of our shares (that is, our common shares and any class of preferred shares that we have issued or may issue) must be analyzed separately to ascertain whether it is a publicly offered security. The regulation defines a publicly offered security as a security that is “widely held,” “freely transferable” and either part of a class of securities registered under the Exchange Act, or sold under an effective registration statement under the Securities Act of 1933, as amended, provided the securities are registered under the Exchange Act within 120 days after the end of the fiscal year of the issuer during which the offering occurred. Each class of our outstanding shares has been registered under the Exchange Act.

The regulation provides that a security is “widely held” only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another. However, a security will not fail to be “widely held” because the number of independent investors falls below 100 subsequent to the initial public offering as a result of events beyond the issuer’s control. Our common shares and our preferred shares have been widely held and we expect our common shares and our preferred shares to continue to be widely held. We expect the same to be true of any additional class of preferred stock that we may issue, but we can give no assurance in that regard.

The regulation provides that whether a security is “freely transferable” is a factual question to be determined on the basis of all relevant facts and circumstances. The regulation further provides that, where a security is part of an offering in which the minimum investment is $10,000 or less, some restrictions on transfer ordinarily will not, alone or in combination, affect a finding that these securities are freely transferable. The restrictions on transfer enumerated in the regulation as not affecting that finding include:

•any restriction on or prohibition against any transfer or assignment which would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order;

•any requirement that advance notice of a transfer or assignment be given to the issuer and any requirement that either the transferor or transferee, or both, execute documentation setting forth representations as to compliance with any restrictions on transfer which are among those enumerated in the regulation as not affecting free transferability, including those described in the preceding clause of this sentence;

•any administrative procedure which establishes an effective date, or an event prior to which a transfer or assignment will not be effective; and

•any limitation or restriction on transfer or assignment which is not imposed by the issuer or a person acting on behalf of the issuer.

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We believe that the restrictions imposed under our declaration of trust on the transfer of shares do not result in the failure of our shares to be “freely transferable.” Furthermore, we believe that there exist no other facts or circumstances limiting the transferability of our shares which are not included among those enumerated as not affecting their free transferability under the regulation, and we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer which would not be among the enumerated permissible limitations or restrictions.

Assuming that each class of our shares will be “widely held” and that no other facts and circumstances exist which restrict transferability of these shares, we have received an opinion of our counsel, Sullivan & Worcester LLP, that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of the shares under our declaration of trust and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA plan or non-ERISA plan that invests in our shares.

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Item 2. Properties

At December 31, 2004, we had real estate investments in 285 hotels that were operated by third parties. The following table summarizes certain information about our properties as of December 31, 2004.

Location of Properties by State	Number of Properties	Undepreciated Carrying Value		Depreciated Carrying Value
		(in thousands)		(in thousands)
Alabama	4	$	32,608	$	26,505
Arizona	15	145,179		116,754
California	28	421,666		357,627
Colorado	4	36,329		30,226
Connecticut	1	7,218		6,850
Delaware	1	15,107		12,360
Florida	18	190,367		155,563
Georgia	20	195,714		161,374
Hawaii	1	44,191		39,304
Illinois	14	149,785		126,569
Indiana	3	28,625		23,073
Iowa	2	16,012		12,406
Kansas	4	26,895		21,944
Kentucky	1	5,094		3,921
Louisiana	1	30,856		24,573
Maryland	8	87,341		72,825
Massachusetts	13	148,346		122,526
Michigan	12	104,346		89,986
Minnesota	3	30,429		23,871
Missouri	6	90,131		66,559
Nebraska	1	5,951		4,912
Nevada	3	44,689		38,711
New Jersey	11	158,839		132,492
New Mexico	2	22,123		17,543
New York	4	46,019		37,539
North Carolina	16	135,202		111,427
Ohio	5	38,249		31,984
Oklahoma	2	17,416		14,027
Pennsylvania	9	102,728		80,318
Rhode Island	1	11,918		9,297
South Carolina	3	26,408		22,328
Tennessee	8	112,127		89,077
Texas	29	276,329		233,791
Utah	3	60,252		46,768
Virginia	21	219,750		177,926
Washington	6	78,261		66,405
West Virginia	1	8,550		7,122
Wisconsin	1	9,940		7,990
Total	285	$	3,180,990	$	2,624,473

At December 31, 2004, nine of our hotels were on leased land. In each case, the remaining term of the ground lease (including renewal options) is in excess of 30 years, and the ground lessors are unrelated to us. Ground rent payable under the nine ground leases is generally calculated as a percentage of hotel revenues. Seven of the nine ground leases require minimum annual rent ranging from approximately $102,406 to $255,760 per year; rent under two ground leases has been pre-paid. Generally payments of ground lease obligations are made by our manager or tenant. However, if a manager or tenant did not perform obligations under a ground lease or elected not to renew any

27

ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected hotel. Any pledge of our interests in a ground lease may also require the consent of the applicable ground lessor and its lenders. We have no current intent to make any pledge of our ground lease interests.

As described in “Item 1. Business,” on February 16, 2005, we purchased 12 hotels for $394.5 million. The hotels are located in six states in the United States (California (4), Georgia, New York, South Carolina, Tennessee and Texas), Toronto, Canada (2), and San Juan, Puerto Rico. Four of these hotels are located, in whole or in part, on leased land and are subject to ground leases. One of the hotels, the InterContinental^® Hotel in Toronto, Ontario, is wholly on leased land has a ground lease which expires in 2086 and has current minimum annual rent of approximately CAD 556,396.

Item 3. Legal Proceedings

In the ordinary course of business we are involved in litigation incidental to our business; however we are not aware of any material pending or threatened legal proceeding affecting us or any of our properties for which we might become liable or the outcome of which we expect to have a material impact on us.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Securities

Our common shares are traded on the New York Stock Exchange (symbol: HPT). The following table sets forth for the periods indicated the high and low sale prices for our common shares as reported in the New York Stock Exchange Composite Transactions reports:

2003	High		Low
First Quarter	$	35.87	$	29.41
Second Quarter	33.00		26.50
Third Quarter	35.09		29.50
Fourth Quarter	42.39		34.80

2004	High		Low
First Quarter	$	46.40	$	40.40
Second Quarter	46.86		35.56
Third Quarter	43.50		39.06
Fourth Quarter	47.35		41.87

The closing price of our common shares on the New York Stock Exchange on March 9, 2005, was $41.29 per share.

As of March 9, 2005, there were 1,132 shareholders of record, and we estimate that as of such date there were in excess of 64,000 beneficial owners of our common shares.

Information about distributions paid to common shareholders is summarized in the table below. Common share distributions are generally paid in the quarter following the quarter to which they relate.

	Distributions Per Common Share
	2003		2004
First Quarter	$	0.72	$	0.72
Second Quarter	0.72		0.72
Third Quarter	0.72		0.72
Fourth Quarter	0.72		0.72
Total	$	2.88	$	2.88

All common distributions shown in the table above have been paid. We currently intend to continue to declare and pay common share distributions on a quarterly basis. However, distributions are made at the discretion of our board of trustees and depend on our earnings, cash available for distribution, financial condition, capital market conditions, growth prospects and other factors which our board of trustees deems relevant.

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Item 6. Selected Financial Data

The following table sets forth selected financial data for the periods and dates indicated. This data should be read in conjunction with, and is qualified in its entirety by reference to, management’s discussion and analysis of financial condition and results of operations and the consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K.

	Year Ended December 31,
	2004		2003		2002		2001		2000
	(In thousands, except per share data)
Income Statement Data:
Revenues:
Hotel operating revenues	$	498,122	$	209,299	$	79,328	$	37,982	$	—
Rental income	128,472		217,253		247,488		240,290		234,377
FF&E reserve income	18,390		18,335		21,600		24,652		25,753
Interest income	384		398		290		953		2,893
Gain on lease terminations	—		107,516		—		—		—
Total revenues	645,368		552,801		348,706		303,877		263,023
Expenses:
Hotel operating expenses	333,818		145,863		50,515		24,375		—
Interest	50,393		44,536		42,424		41,312		37,682
Depreciation and amortization	114,883		104,807		96,474		91,395		84,303
General and administrative	19,386		16,800		15,491		14,839		14,767
Loss on early extinguishment of debt	—		2,582		1,600		—		—
Total expenses	518,480		314,588		206,504		171,921		136,752
Income before gain on sale of real estate	126,888		238,213		142,202		131,956		126,271
Gain on sale of real estate	203		—		—		—		—
Net income	127,091		238,213		142,202		131,956		126,271
Preferred distributions	9,674		14,780		7,572		7,125		7,125
Excess of liquidation preference over carrying value of preferred shares	2,793		—		—		—		—
Net income available for common shareholders	$	114,624	$	223,433	$	134,630	$	124,831	$	119,146
Common distributions paid	$	190,200	$	180,213	$	178,856	$	163,592	$	156,404
Weighted average common shares outstanding	66,503		62,576		62,538		58,986		56,466
Per Common Share Data:
Net income available for common shareholders	$	1.72	$	3.57	$	2.15	$	2.12	$	2.11
Distributions per common share	$	2.88	$	2.88	$	2.87	$	2.83	$	2.78
Balance Sheet Data (as of December 31):
Real estate properties, at cost	$	3,180,990	$	3,179,507	$	2,762,322	$	2,629,153	$	2,429,421
Real estate properties, net	2,624,473		2,685,208		2,336,412		2,265,824		2,157,487
Total assets	2,689,425		2,761,601		2,403,756		2,354,964		2,220,909
Debt, net of discount	697,505		826,126		473,965		464,781		464,748
Shareholders’ equity	1,685,873		1,645,528		1,645,020		1,604,519		1,482,940

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands, except per share amounts)

Overview

The following information should be read in conjunction with our consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K.

Hotel Industry Conditions

As a result of terrorism concerns, the war with Iraq and the impact of a recessionary economy, the U.S. hotel industry experienced significant declines in occupancy, revenues and profitability in 2001, 2002 and 2003. During 2004, the U.S. hotel industry benefited from an expanding economy and limited new hotel supply. For 2004, seven of our eight combinations of hotels reported increases in revenue per available room, or RevPAR; however hotel profitability generally remained below 2000 levels. All of our operating agreements and leases contain security features, such as security deposits and in certain instances, guarantees, which are intended to protect payment of owner’s priority returns and minimum rents to us. However, the effectiveness of these various security features to provide uninterrupted payments to us is not assured, particularly if the profitability of our hotels continues at the current level for an extended period. If any of our hotel operators, tenants or guarantors default in their payment obligations to us, our revenues and cash flows may decline and our ability to continue to pay dividends may be jeopardized.

Recent Developments

Agreement with Prime Hospitality Corp. On December 9, 2003, we entered into an agreement with Prime for the management of 36 of our hotels (12 former Wyndham^® hotels and 24 AmeriSuites^® hotels). This agreement was effective January 1, 2004, with respect to the 24 AmeriSuites^® hotels and was effective February 1, 2004, with respect to the 12 Prime Hotels^SM. This agreement provided that our 12 Wyndham^® hotels would be rebranded as Prime Hotels^SM and that our 24 AmeriSuites^® hotels would continue to be operated as AmeriSuites^®. This agreement provides that Prime pay us an owner’s priority return of $26,000 per year plus 50% of cash flow after payment of operating costs, payment of our priority return, funding the FF&E reserve and reimbursement of working capital and guaranty advances, if any. Prime provided a limited guarantee of our priority return of $26,000 per year. This agreement has an initial term expiring in 2018 and Prime has two consecutive renewal options for 15 years each, thereafter.

In October 2004, Prime was sold to the Blackstone Group, or Blackstone. In January 2005, Blackstone sold the AmeriSuites^® brand and transferred operating responsibility for these 36 hotels to Hyatt. We believe the transfer of operating responsibility from Prime to Hyatt was a breach of our agreement with Prime. Pursuant to a guarantee given by Prime and being honored by Blackstone and Hyatt, the minimum returns due to us have continued to be timely paid. However, as a result of the 2004 RevPAR declines at the Prime Hotels^SM, this hotel combination experienced a decline in RevPAR and the income that we realized from these hotels is less than we would have realized without such declines. We are currently having discussions with Hyatt concerning the operating plans for all 36 of these hotels with particular reference to Hyatt’s plans to improve operations at the 12 Prime Hotels^SM. If we cannot reach agreement with Hyatt regarding these matters, we may decide to assign operations for some or all of these 36 hotels to a new operator and to seek remedies which may be available to us from Hyatt, Prime and/or Blackstone.

Agreement with InterContinental. On December 17, 2004, we agreed to purchase 13 hotels from InterContinental, for $450,000. The hotels include four full service InterContinental^® hotels, four full service Crowne Plaza^® hotels, three full service Holiday Inn^® hotels and two Staybridge Suites^® hotels, and have a total of 3,946 rooms/suites and approximately 164,000 square feet of meeting rooms. The hotels are located in six states in the United States; one InterContinental hotel^® and one Staybridge Suites^® hotel are located in Toronto, Canada, and one InterContinental^® hotel is located in San Juan, Puerto Rico. The $450,000 purchase price includes $25,000 which we have agreed to pay InterContinental during the three years following the closing in connection with certain

31

improvements to the hotels. On February 16, 2005, we completed the acquisition of 12 of the 13 hotels. The purchase of one InterContinental hotel (with an allocated purchase price of $30,500) was delayed and is expected to be completed by June 30, 2005. Changed circumstances may further delay this purchase or prevent its occurring.

Simultaneously with our purchase of these hotels, we entered a long term combination management agreement for 11 of the 12 hotels and a long term lease for one hotel, the InterContinental hotel in San Juan, Puerto Rico, with subsidiaries of InterContinental. When the acquisition of the remaining hotel is completed, it will be added to the management agreement for the 11 hotels purchased on February 16, 2005. The combined annual amount payable to us for all 13 hotels as owner’s priority return under the management agreement and base rent under the lease is $37,750 in 2005, increases to $40,725 in 2006 and increases to approximately $42,000 after the full $450,000 purchase price has been paid. In addition, we are entitled to receive cash flow remaining after base and incentive management fees are paid to InterContinental at the managed hotels and, starting in 2007, a percentage of increases in gross revenues over a threshold at each of the hotels. The owner’s priority return under the management agreement and the base rent under the lease are measured and payable in U.S. dollars. Other amounts due under these agreements, with respect to the two hotels located in Canada, may be measured in Canadian dollars, but will be payable in U.S. dollars. The management agreement and the lease will each extend through 2029, and InterContinental has two all or none renewal options for 15 years each. The obligations to pay owner’s priority return under the management agreement and the base rent under the lease are supported by a limited, partial guaranty from InterContinental until the operations at these hotels reach negotiated levels. Further, the obligation to pay the owner’s priority return under the management agreement is also supported by a limited, partial guaranty from the InterContinental subsidiary tenant for the Puerto Rico hotel. The agreements also provide for a reserve for capital expenditures starting in 2007.

Management Agreements and Leases

As of December 31, 2004, each of our 285 hotels is included in one of eight combinations of hotels which is either leased to one of our wholly owned taxable REIT subsidiaries, or TRSs, and managed by an independent hotel operating company or leased to a third party. At December 31, 2004, we had 177 managed hotels and 108 leased hotels. Our consolidated income statement includes hotel operating revenues and expenses of our managed hotels, and only rental income for leased hotels. With the closing of the acquisition of 12 hotels from InterContinental on February 16, 2005, described above, we own 297 hotels of which 188 are managed and 109 leased. Additional information regarding the terms of our leases and management agreements is included in the table on pages 43 and 44.

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Results of Operations (dollar amounts in thousands, except per share amounts)

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

	For the year ended December 31,
	2004		2003		Increase (Decrease)			% Increase (Decrease)
	(amounts in dollars, except number of shares)
Hotel operating revenues	$	498,122	$	209,299	$	288,823		138.0	%
Rental income:
Minimum rent	125,669		216,125		(90,456		)	-41.9	%
Percentage rent	2,803		1,128		1,675			148.5	%
FF&E reserve income	18,390		18,335		55			0.3	%
Interest income	384		398		(14		)	-3.5	%
Gain on lease terminations	—		107,516		(107,516		)	-100.0	%
Hotel operating expenses	333,818		145,863		187,955			128.9	%
Interest expense	50,393		44,536		5,857			13.2	%
Depreciation and amortization	114,883		104,807		10,076			9.6	%
General and administrative	19,386		16,800		2,586			15.4	%
Loss on early extinguishment of debt	—		2,582		(2,582		)	-100.0	%
Net income	127,091		238,213		(111,122		)	-46.6	%
Net income available for common shareholders	114,624		223,433		(108,809		)	-48.7	%
Weighted average shares outstanding	66,503		62,576		3,927			6.3	%
Net income available for common shareholders per common share	$	1.72	$	3.57	(1.85		)	-51.8	%

The increases in hotel operating revenues and expenses were caused by the increase in the number of managed hotels in 2004 due to: (i) our July 2003 acquisition of 16 hotels and the initiation of a management agreement for these hotels; (ii) the change of 13 hotels under our agreement with Marriott from leased to managed hotels after the 2003 first quarter; (iii) the initiation of a new management agreement on December 31, 2003, for 64 hotels previously leased to Candlewood Hotel Company, or Candlewood, and for 12 hotels purchased from Candlewood on that day; (iv) the initiation of a new management agreement on January 1, 2004, for 24 hotels previously leased to Prime; (v) the initiation of management agreements and termination of leases for 27 hotels previously leased to Wyndham International, Inc., or Wyndham, in the second quarter of 2003; and (vi) the general increase in hotel revenues due to the improving lodging industry conditions during 2004.

Hotel operating revenues of our 177 managed hotels, including revenues for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $510,124 in 2004, an increase of 1.1% from hotel operating revenues of $504,714 in 2003. The increase in revenues is attributable primarily to the strengthening lodging market that has resulted in improved occupancy and average daily room rate at many of our hotels offset by lower revenues at our former Summerfield Suites by Wyndham^® and Wyndham^® hotels, which were in the process of being rebranded during 2004 as Staybridge Suites^® and Prime Hotels^SM, respectively.

Hotel operating expenses for our managed hotels, including expenses for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $351,221 in 2004, a decrease of 0.8% from hotel operating expenses of $354,033 in 2003. This decrease is due primarily to lower franchise related costs at certain of our rebranded hotels partially offset by increased wage and benefit costs.

33

Certain of our managed hotels had net operating results that were $10,595 and $6,922 less than the minimum returns due to us in 2004 and 2003, respectively. These amounts have been reflected in our consolidated statement of income as a net reduction to hotel operating expenses in each year because the minimum returns were funded by our managers.

The decrease in rental income is primarily a result of the elimination of $94,313 of minimum rent for 128 of our hotels which were previously leased to third parties but are now managed for our account by independent hotel operating companies. This decrease was partially offset by increased rental income resulting from our funding of improvements at certain of our leased hotels in 2004 and 2003 and an increase in percentage rent due to increased sales at our leased hotels in 2004 versus 2003.

FF&E reserve income represents amounts paid by our tenants into restricted accounts owned by us, the purpose of which is to accumulate funds for future capital expenditures. The terms of our leases require these amounts to be calculated as a percentage of total sales at our hotels. The increase in FF&E reserve income is primarily due to increased levels of hotel sales versus 2003 at certain of our recently modernized Courtyard by Marriott^® hotels. This increase is partially offset by six hotels under our agreement with Marriott which were changed from leased to managed hotels during 2003 and seven additional hotels under this agreement which were changed from leased to managed hotels in June 2004. The amounts which are escrowed as FF&E reserves for our managed hotels and for leased hotels where the FF&E reserve is owned by our tenants are not reported as FF&E reserve income in our consolidated statement of income.

The decrease in interest income is due to a lower average cash balance, offset to some extent by a higher average interest rate during 2004.

We recorded a $203 gain on the sale of a Summerfield Suites hotel located in Buckhead, Georgia in the 2004 second quarter.

We recorded a $107,516 gain on lease terminations in 2003 as a result of the termination of our leases with Wyndham and Candlewood.

The increase in interest expense is primarily due to higher average borrowings and a higher weighted average interest rate during 2004.

The increase in depreciation and amortization is due principally to the depreciation of 35 hotels acquired during 2003 and the impact of the purchases in 2003 and 2004 of depreciable assets with funds from FF&E reserve accounts owned by us. This is offset to some extent by the sale of one hotel in 2004 and the retirement of fully depreciated assets of $50,619 and $36,418 throughout 2004 and 2003, respectively.

The increase to general and administrative expense is due principally to the impact of additional hotel investments during 2004 and 2003 and due diligence costs of approximately $500 incurred in 2004 in connection with a failed potential acquisition.

In 2003, we recorded an expense of $2,582 to write off the unamortized deferred financing costs associated with $150,000 of senior notes we redeemed.

The decreases in net income, net income available for common shareholders and net income available for common shareholders per common share were primarily due to the gain on lease terminations recorded in 2003 and the other investment and operating activities discussed above. The decrease in net income available for common shareholders per common share was also impacted by our sale of 4.6 million common shares in February and March 2004.

Cash flow from operations was $223,118 in 2004, a 1.7% increase from $219,405 in 2003 primarily due to changes in items affecting net income discussed above. Cash used in investing activities was $2,461 in 2004, a 99.3% decrease from $371,610 in 2003, primarily due to our acquisition of 35 hotels in 2003 and proceeds from the

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sale of a hotel in 2004. Cash used in financing activities was $211,191 in 2004, compared with cash provided by financing activities of $151,296 in 2003. The significant components of the variance between periods are $192,684 of proceeds from issuance of common shares in 2004 versus none in 2003, $75,000 preferred share redemption in 2004 versus none in 2003 and $129,000 net debt repayments (principally with the common share proceeds) in 2004 versus net borrowings of $201,000 in 2003. The proceeds of the 2003 borrowings were used primarily to fund our 2003 hotel acquisitions.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

	For the year ended December 31,
	2003		2002		Increase (Decrease)			% Increase (Decrease)
	(amounts in dollars, except number of shares)
Hotel operating revenues	$	209,299	$	79,328	$	129,971		163.8	%
Rental income:
Minimum rent	216,125		245,197		(29,072		)	-11.9	%
Percentage rent	1,128		2,291		(1,163		)	-50.8	%
FF&E reserve income	18,335		21,600		(3,265		)	-15.1	%
Interest income	398		290		108			37.2	%
Gain on lease terminations	107,516		—		107,516			100.0	%
Hotel operating expenses	145,863		50,515		95,348			188.8	%
Interest expense	44,536		42,424		2,112			5.0	%
Depreciation and amortization	104,807		96,474		8,333			8.6	%
General and administrative	16,800		15,491		1,309			8.5	%
Loss on early extinguishment of debt	2,582		1,600		982			61.4	%
Net income	238,213		142,202		96,011			67.5	%
Net income available for common shareholders	223,433		134,630		88,803			66.0	%
Weighted average shares outstanding	62,576		62,538		38			0.1	%
Per common share
Net income available for common shareholders per common share	$	3.57	$	2.15	$	1.42		66.0	%

The increases in hotel operating revenues and expenses were caused by the increase in the number of managed hotels in 2003 due to: (i) the initiation of new management agreements in April and May 2003 for 27 hotels previously leased to Wyndham; (ii) our July 2003 acquisition of 16 hotels and the initiation of a management agreement for these hotels; and (iii) the 12 hotels under our agreement with Marriott, which were changed from leased to managed hotels during 2002 and 2003.

Hotel operating revenues of our 71 managed hotels, including revenues which relate to periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, at December 31, 2003, were $298,522 for 2003, a decrease of 1.9% from hotel operating revenues of $304,412 in 2002 due primarily to a 0.6% decline in RevPAR. This decrease is attributable primarily to the general slowdown of business travel in the United States and the impact of changes in management of some of our hotels resulting from tenant lease defaults.

Hotel operating expenses for our managed hotels, including expenses which relate to periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $208,890 in 2003, a 3.2% increase from hotel operating expenses of $202,502 in 2002. This increase is due primarily to higher wage and benefits costs. Our managed hotels had net operating results that were $6,922 in 2003

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and $5,822 in 2002 less than the minimum returns due to us. These amounts have been reflected in our consolidated statement of income as a net reduction to hotel operating expenses in each year because the minimum returns were funded by our managers.

The decrease in rental income is due primarily to the elimination of $29,982 of rental income in 2003 for the 27 hotels previously leased to Wyndham which began to be managed by third parties in April and May 2003, the replacement of $8,369 of rental income under our agreement with Marriott with hotel operating revenues and expenses for 12 hotels which were changed from leased to managed hotels during 2002 and 2003 and decreased percentage rent due to lower hotel sales at our leased hotels and the impact of lease defaults in 2003. These decreases were partially offset by rental income resulting from our acquisition of 21 Candlewood hotels in April 2002 and seven Candlewood hotels in July 2003, and from returns from our funding of improvements at certain of our leased hotels during 2002 and 2003.

The decrease in FF&E reserve income is due primarily to reduced levels of hotel sales attributable to the general slowdown of business travel across the United States and the lease defaults described above. Part of this decrease is also due to activities related to the 12 hotels under our agreement with Marriott which were leased and began to be managed at various times during 2002 and 2003, as discussed above.

The increase in interest income is due to a higher average cash balance, offset to some extent by a lower average interest rate during 2003.

We recorded a $107,516 gain on lease terminations in 2003, as a result of the termination of our leases with Wyndham and Candlewood.

The increase in interest expense is primarily due to higher average borrowings, partially offset by a lower weighted average interest rate during 2003.

The increase in depreciation and amortization is due principally to the impact of the depreciation of 23 hotels acquired in July of 2003 and the 21 hotels acquired in April 2002, capital improvements we funded at some of our Courtyard by Marriott^® hotels and the impact of the acquisition of depreciable assets during 2002 and 2003 purchased with funds from FF&E reserve accounts owned by us and other funds. This increase was partially offset by the retirement of fully depreciated assets of $36,418 and $29,964 throughout 2003 and 2002, respectively.

The increase in general and administrative expense is due principally to the impact of additional hotel investments during 2002 and 2003.

We recorded expenses on the early extinguishment of debt of $2,582 and $1,600, on February 18, 2003 and July 18, 2002, respectively, to write-off the unamortized deferred financing costs associated with $150,000 and $115,000, respectively, of senior notes we redeemed.

The increases in net income, net income available for common shareholders and net income available for common shareholders per common share were primarily due to the gain on lease terminations recorded in 2003, and the other investment and operating activities discussed above.

Cash flow from operations was $219,405 in 2003, a 4.3% increase from $210,245 in 2002 primarily due to the impact of changes in working capital. Cash used in investing activities was $371,610 in 2003, a 161.1% increase from $142,311 in 2002, primarily because we purchased a greater number of hotels in 2003. Cash provided by financing activities was $151,296 in 2003, a 251.9% increase over cash used in financing activities of $99,559 in 2002, primarily because of increased borrowings to fund our hotel acquisitions, offset partially by our preferred equity issuance in 2002 and increased distributions on common and preferred shares in 2003.

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Liquidity and Capital Resources

Our Operators and Tenants

As of March 9, 2005, all 297 of our hotels are operated under management agreements or leases with unrelated third party hotel operating companies. All costs of operating and maintaining our hotels are paid by the third party hotel managers as agent for us or by third party hotel tenants for their own account. These third parties derive their funding for hotel operating expenses, FF&E reserves, and returns and rents due us generally from hotel operating revenues and, to the extent that these parties fund our returns and minimum rents under their guarantees to us, from their separate resources.

We define coverage for each of our combination hotel management agreements or leases as total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E reserve contributions, divided by the aggregate minimum payments to us. More detail regarding coverage, guarantees and other security features of our nine agreements is presented in the table on pages 43 and 44. Of our eight operating agreements in place during 2004, four hotel combinations, representing 125 hotels, generated coverage of at least 1.0x during 2004. The remaining four combinations, representing 160 hotels, generated coverages of .8x to .9x in 2004.

Two hundred twenty-six (226) hotels we own in seven combinations, 79% of our total investments, at cost, are operated under management agreements or leases which are subject to full or limited guarantees. These guarantees may provide us with continued payments if combined total hotel sales less total hotel expenses and required FF&E reserve payments fail to equal or exceed amounts due to us. Our managers and tenants or their affiliates may also supplement cash flow from our hotels in order to make payments to us and preserve their rights to continue operating our hotels. Guarantee or supplemental payments to us, if any, made under any of our management agreements or leases, do not subject us to repayment obligations but, under some of our agreements, these guarantee or supplemental payments may be recovered by the third party operator or tenant from the future cash flows from our hotels after our future minimum returns and rents are paid.

As of March 9, 2005, all payments due, including those payments due under leases or operating agreements whose hotels have generated less than 1.0x coverage during 2004, are current. However, the effectiveness of our various security features to provide uninterrupted payments to us is not assured, particularly if the profitability of our hotels continues at the current level for an extended period. If any of our hotel operators, tenants or guarantors default in their payment obligations to us, our revenues and cash flows may decline.

Our Operating Liquidity and Capital Resources

Our principal source of funds for current expenses and distributions to shareholders are minimum returns from our managed hotels and minimum rents from our leased properties. We receive minimum returns and minimum rents from our managers and tenants monthly. We receive our share of the operating profits of our managed hotels in excess of minimum returns and percentage rents either monthly or quarterly. This flow of funds has historically been sufficient for us to pay our operating expenses, interest and distributions. We believe that our operating cash flow will be sufficient to meet our operating expenses, interest and distribution payments for the foreseeable future.

We maintain our status as a REIT under the Internal Revenue Code by meeting certain requirements. As a REIT, we do not expect to pay federal income taxes on the majority of our income. In 1999, federal legislation known as the REIT Modernization Act, or the RMA, was enacted and became effective on January 1, 2001. The RMA, among other things, allows a REIT to lease hotels to a TRS if the hotel is managed by an independent third party. The income realized by our TRS in excess of the rent it pays to us is subject to income tax at corporate tax rates. As, and if, the financial performance of the hotels operated for the account of our TRS improves, these taxes may become material, but the anticipated taxes are not material to our consolidated financial results at this time.

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Our Investment and Financing Liquidity and Capital Resources

Various percentages of total sales at most of our hotels are escrowed as FF&E reserves. As of December 31, 2004, there was approximately $38,945 on deposit in these escrow accounts, of which $38,511 was held directly by us and reflected on our balance sheet as restricted cash. The remaining $434 is held in an account owned by one of our tenants and is not reflected on our balance sheet; but we have security and remainder interests in the account owned by this tenant. During 2004, $29,055 was contributed to these accounts and $52,553 was spent from these accounts to renovate and refurbish our hotels.

In order to fund acquisitions and to accommodate occasional cash needs that may result from timing differences between the receipt of rents and returns and our desire or need to make distributions or pay operating expenses, we maintain a revolving credit facility with a group of commercial banks. Our credit facility matures in June 2005 and may be extended at our option to June 2006 upon our payment of an extension fee. Borrowings under the credit facility can be up to $350,000 and the credit facility includes a feature under which the maximum amount available for borrowing may be expanded to $700,000, in certain circumstances. Borrowings under our credit facility are unsecured. Funds may be drawn, repaid and redrawn until maturity, and no principal repayment is due until maturity. Interest on borrowings under the credit facility (3.8% per annum at December 31, 2004) is payable at a spread above LIBOR. As of December 31, 2004, we had $72,000 outstanding on our facility. We are currently having preliminary discussions with the lead lender of our credit facility concerning possible enlargement and extension of our credit facility.

At December 31, 2004, we had $15,894 of cash and cash equivalents and $278,000 available on our revolving credit facility. We expect to use existing cash balances, borrowings under our credit facility or other lines of credit and net proceeds of offerings of equity or debt securities to fund future property acquisitions.

As described above, on December 17, 2004, we announced our agreement to purchase 13 hotels from InterContinental for $450,000. We acquired 12 of the 13 hotels on February 16, 2005, for approximately $394,500 using proceeds from the senior notes issuance described below and borrowings under our revolving credit facility. We expect to complete the purchase of the final hotel for $30,500 by June 30, 2005, using existing cash balances or borrowings under our revolving credit facility. The $450,000 purchase price includes $25,000 which we have agreed to pay InterContinental during the next three years in connection with certain improvements to the hotels.

We expect to fund $20,484 for improvements to three of our Marriott hotel portfolios in 2005 with funds from existing cash balances or borrowings under our credit facility. Our minimum annual rent for these hotels will increase by approximately 10% of the amounts we fund, which amounts are in addition to recurring FF&E reserve funding from hotel operations.

Pursuant to our agreement with InterContinental for management of 15 Staybridge Suites^® hotels (part of a 30 hotel combination), we agreed to fund $20,000 for rebranding costs and other capital improvements. As part of this agreement, InterContinental will provide us with a $20,000 deposit to secure its obligations under the management agreement that we will not escrow. The timing of our funding to InterContinental and its funding of the deposit to us are expected to be simultaneous. As of December 31, 2004, $10,000 of these fundings have occurred and the balance is expected to occur in 2005.

Pursuant to the agreement we entered with Prime on December 9, 2003, for management of 36 hotels, we agreed to fund $25,000 for rebranding costs and other capital improvements during 2005. As of December 31, 2004, $10,000 of funding has occurred. The balance of this funding is expected to occur during 2005, although it may be delayed because of our current discussions with Hyatt as described above.

Our term debt maturities (other than our revolving credit facility) are as follows: $150,000 in 2008; $50,000 in 2010; $125,000 in 2012 and $300,000 in 2013. As of December 31, 2004, we had one mortgage note we assumed in connection with our acquisition of a hotel with a principal balance of $3,826. This mortgage note requires monthly payments of principal and interest of $32 and is expected to have a principal balance of $3,326 at

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maturity in 2011. The mortgage note is prepayable at a premium beginning on August 1, 2005. None of our other debt obligations require principal or sinking fund payments prior to their maturity date.

On December 1, 2004, a distribution of $0.5546875 per Series B preferred share was declared with respect to fourth quarter 2004 and was paid to shareholders on January 18, 2005. On December 17, 2004, a distribution of $0.72 per common share was declared with respect to fourth quarter 2004 results and was paid to shareholders on January 31, 2005, using cash on hand and borrowings under our revolving credit facility.

On February 23, 2004, we sold 4,000,000 of our common shares in a public offering at $43.93 per share. On March 8, 2004, we sold an additional 600,000 common shares of beneficial interest at $43.93 per share pursuant to an over allotment option granted to the underwriters. Net proceeds, from both these sales, after underwriting and other offering expenses, were $192,684. These proceeds were used to reduce borrowings outstanding under our revolving credit facility.

On April 12, 2004, we redeemed all of our outstanding 9 ½% Series A preferred shares at their liquidation preference of $25 per share plus accrued and unpaid distributions of $0.0792 per share. This redemption was funded with borrowings under our revolving credit facility.

On February 15, 2005, we issued $300,000 of 5.125% senior notes due 2015. Net proceeds after underwriting and other offering expenses were approximately $297,192. As described above, these proceeds were used to partially fund the acquisition of 12 hotels from InterContinental on February 16, 2005.

When amounts are outstanding on our revolving credit facility and, as the maturity dates of our credit facility and term debt approach over the longer term, we will explore alternatives for the repayment of amounts due. Such alternatives in the short term and long term may include incurring additional long term debt and issuing new equity securities. As of December 31, 2004, we had $2,086,672 available on our shelf registration. This amount was reduced by our February 2005 issuance of $300,000 of 5.125% senior notes due 2015 to $1,786,672. An effective shelf registration allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for those securities. Although there can be no assurance that we will consummate any debt or equity security offerings or other financings, we believe we will have access to various types of financing, including investment grade debt or equity securities offerings, with which to finance future acquisitions and to pay our debt and other obligations.

As of December 31, 2004, our contractual obligations were as follows:

	Payment due by period
	Total		Less than 1 year			1-3 years			3-5 years			More than 5 years
Long-Term Debt Obligations	$	700,826	$		72,060	$	137		$	150,161		$	478,468
Purchase Obligation (1)	450,000		435,000			15,000			—			—
Ground Lease Obligations (2)	19,086		1,119			2,237			2,027			13,703
Capital improvements (3)	40,484		40,484			—			—			—
Total	$	1,210,396	$	548,663		$		17,374	$		152,188	$		492,171

(1)On December 17, 2004, we announced our agreement to purchase 13 hotels from InterContinental. We acquired 12 of the hotels on February 16, 2005 for approximately $394,500.

(2)Nine of our hotels are on leased land. In each case the ground lessors are unrelated to us. Generally, payment of ground lease obligations are made by our managers or tenants. However, if a manager or tenant fails to perform obligations under a ground lease or elects not to renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected hotel.

(3)Represents amounts we expect to fund in addition to recurring FF&E reserve funding from hotel operations.

As of December 31, 2004, we had no off-balance sheet arrangements, commercial paper, derivatives, swaps, hedges, guarantees, joint ventures or partnerships. As of December 31, 2004, our secured debt obligations

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were limited to one mortgage note of $3,826 secured by a single property. None of our debt documentation requires us to provide collateral security in the event of a ratings downgrade.

Debt Covenants

Our debt obligations at December 31, 2004, were our revolving credit facility, our $625,000 of publicly issued term debt and our $3,826 mortgage note. Our public debt is governed by an indenture. This indenture and related supplements and our credit facility agreement contain a number of financial ratio covenants which generally restrict our ability to incur debts, including debts secured by mortgages on our properties in excess of calculated amounts, require us to maintain a minimum net worth, restrict our ability to make distributions under certain circumstances and require us to maintain other ratios. As of December 31, 2004, we were in compliance with all of our covenants under our indenture and its supplements and our credit facility agreement.

Neither our indenture and its supplements nor our bank credit facility contain provisions for acceleration which could be triggered by our debt ratings. However, under our credit facility agreement, our senior debt rating is used to determine the fees and interest rate applied to borrowings.

Our public debt indenture and its supplements contain cross default provisions to any other debts of $20,000 or more. Similarly, a default on our public debt indenture would be a default on our credit facility.

Related Party Transactions

RMR provides management and administrative services to us under an agreement which is subject to annual approval by our compensation committee comprised of our independent trustees. RMR is compensated at an annual rate equal to 0.7% of our average real estate investments, as defined, up to the first $250,000 of our average real estate investments and 0.5% thereafter, plus an incentive fee based upon increases in cash available for distribution per share, as defined. The incentive fee payable to RMR is paid in common shares. Aggregate fees earned by RMR during 2004 for services were $15,812. No incentive fee was payable for the year 2004. Our compensation committee has approved the renewal of the RMR agreement for its current term which will end December 31, 2005. RMR also provides the internal audit function for us and for other publicly traded companies to which it provides management or other services. We pay a pro rata share of RMR’s costs in providing that function. Our audit committee composed of our independent trustees approves the identity and salary of the individual serving as our internal audit manager, as well as the pro rata share of the costs which we pay. RMR is beneficially owned by Messrs. Martin and Portnoy who are our managing trustees. Messrs. Martin and Portnoy each have material interests in the transactions between us and RMR described above. All transactions between us and RMR are approved by our independent trustees.

Critical Accounting Policies

Our critical accounting policies are those that have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates. We believe that our judgments and assessments are consistently applied and produce financial information that fairly presents our results of operations. Our four most critical accounting policies concern our investments in hotels and are as follows:

Classification of Leases. Certain of our hotel investments are leased on a triple net basis, pursuant to non-cancelable, fixed term, operating leases. Each time we enter a new lease or materially modify an existing lease we evaluate its classification as either a capital lease or operating lease. The classification of a lease as capital or operating affects the carrying value of a property, as well as our recognition of rental payments as revenue. These evaluations require us to make estimates of, among other things, the remaining useful life and market value of a leased hotel, discount rates and future cash flows. Incorrect assumptions or estimates may result in misclassification of our leases.

Allocation of Purchase Price and Recognition of Depreciation Expense. The acquisition cost of each hotel investment is allocated to various property components such as land, buildings and improvements, and each

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component generally has a different useful life. For hotels acquired subsequent to June 1, 2001, the effective date of Statement of Financial Accounting Standards No. 141, “Business Combinations”, we allocate the value of real estate acquired among building, land, furniture, fixtures and equipment, and, if applicable, the value of in-place leases, the fair market value of above or below market leases and customer relationships. Acquisition cost allocations and the determination of the useful lives are based on our estimates or, under some circumstances, studies commissioned from independent experts. We compute related depreciation expense using the straight line method over estimated useful lives of up to 40 years for buildings and improvements, and up to 12 years for personal property. The value of intangible assets is amortized over the term of the respective lease. The allocated cost of land is not depreciated. Inappropriate allocation of acquisition costs or incorrect estimates of useful lives could result in depreciation and amortization expenses which do not appropriately reflect the allocation of our capital expenditures over future periods required by accounting principles generally accepted in the United States.

Impairment of Assets. We periodically evaluate our hotel investments for impairment indicators. These indicators may include weak or declining operating profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life or market or industry changes that could permanently reduce the value of our investments. If indicators of impairment are present, we evaluate the carrying value of the related hotel investment by comparing it to the expected future undiscounted cash flows to be generated from that hotel. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to the present value of these expected future cash flows. This analysis requires us to judge whether indicators of impairment exist and to estimate likely future cash flows. If we misjudge or estimate incorrectly or if future operating profitability, market or industry factors differ from our expectations we may record an impairment charge which is inappropriate or fail to record a charge when we should have done so, or the amount of such charges may be inaccurate.

Variable Interest Entities. In January 2003, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”, or FIN 46, that was effective for all enterprises with variable interest entities created after January 31, 2003. In December 2003, FASB issued a revised FIN 46, which provided for the deferral of the effective date of the interpretation to January 1, 2004, for variable interest entities created prior to January 31, 2003. Under FIN 46, if an entity is determined to be a variable interest entity, it must be consolidated by the primary beneficiary. The primary beneficiary is the enterprise that absorbs the majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both. Generally, expected losses and expected residual returns are the expected negative and positive variability, respectively, in the fair value of the variable interest entities’ net assets. When our TRS enters a new operating agreement or materially modifies an existing operating agreement we are required to assess if we are or continue to be the primary beneficiary. This assessment requires us to make estimates of the future cash flows of our TRS. Incorrect assumptions or estimates of, among other things, occupancy, average daily room rate and operating expenses of our hotels may result in an inaccurate determination of the primary beneficiary. The adoption of FIN 46 had no effect on our financial statements.

These policies involve significant judgments based upon our experience, including judgments about current valuations, ultimate realizable value, estimated useful lives, salvage or residual values, the ability of our tenants and operators to perform their obligations to us, and the current and likely future operating and competitive environments in which our hotels operate. In the future we may need to revise our assessments to incorporate information which is not now known, and such revisions could increase or decrease our depreciation expense related to hotels we own, result in the classification of our leases as other than operating leases or decrease the carrying values of our assets.

Property Management Agreements, Leases and Operating Statistics

As of March 9, 2005, we owned 297 hotels which are grouped into nine combinations and managed by or leased to separate affiliates of hotel operating companies including InterContinental, Marriott, Host Marriott Corporation, or Host, Barcelo Crestline Corporation, or Barcelo Crestline, Hyatt, and BRE/Homestead Village, LLC, or Homestead.

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The tables on the following pages summarize the key terms of our leases and management agreements and include statistics reported to us or derived from information reported to us by our managers and tenants. These statistics include occupancy, average daily rate, or ADR, revenue per day per available room, or RevPAR, and coverage of our owner’s priority returns or minimum rents. We consider these statistics and the management agreement or lease security features also presented in the tables on the following pages, to be important measures of our managers’ and tenants’ success in operating our hotels and their ability to continue to pay us. However, none of this third party reported information is a direct measure of our financial performance and none of it has been independently verified by us.

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Hotel Brand	Courtyard by Marriott®	Residence Inn by Marriott®	Marriott®/Residence Inn by Marriott®/ Courtyard by Marriott®/ TownePlace Suites by Marriott®/SpringHill Suites by Marriott®	Residence Inn by Marriott®/Courtyard by Marriott®/ TownePlace Suites by Marriott®/SpringHill Suites by Marriott®	Homestead Studio Suites®
Management Agreements and Property Leases
Number of Hotels:	53	18	35	19	18
Number of Rooms/Suites:	7,610	2,178	5,382	2,756	2,399
Number of States:	24	14	15	14	5
Tenant:	Subsidiary of Host Subleased to Subsidiary of Barcelo Crestline.	Subsidiary of Host Subleased to Subsidiary of Barcelo Crestline.	Our TRS.	Subsidiary of Barcelo Crestline.	Subsidiary of Homestead.
Manager:	Subsidiary of Marriott.	Subsidiary of Marriott.	Subsidiaries of Marriott.	Subsidiaries of Marriott.	Subsidiary of Homestead.
Investment (000s) (1):	$555,126	$185,695	$455,655	$274,222	$145,000
Security Deposit (000s):	$50,540	$17,220	$36,204	$28,508	$15,960
End of Current Term:	2012	2010	2019	2015	2015
Renewal Options (2):	3 for 12 years each.	1 for 10 years, 2 for 15 years each.	2 for 15 years each.	2 for 10 years each.	2 for 15 years each.
Current Annual Minimum Return/Rent (000s):	$55,401	$18,550	$47,291	$28,508	$15,960
Percentage Return/Rent (3):	5.0%	7.5%	7.0%	7.0%	10.0%
Tenant Operating Statistics
Rent/Return Coverage (4) (5):
Year ended 12/31/03:	1.0x	1.0x	0.8x	0.7x	1.1x
Year ended 12/31/04:	1.3x	1.0x	0.9x	0.9x	1.2x
Other Security Features:	HPT controlled lockbox with minimum balance maintenance requirement; subtenant and subtenant parent minimum net worth requirement.	HPT controlled lockbox with minimum balance maintenance requirement; subtenant and subtenant parent minimum net worth requirement.	Limited guarantee provided by Marriott.	Limited guarantees provided by Barcelo Crestline and Marriott.	Homestead parent guarantee and $15,960 letter of credit.

(1)Table includes investment amounts as of December 31, 2004. Amounts exclude expenditures made from FF&E reserves funded from hotel operations, but includes amounts funded by us separately from hotel operations.

(2)Renewal options may be exercised by the manager or tenant for all, but not less than all, of the hotels within each combination of hotels.

(3)Each management contract or lease provides for payment to us of a percentage of increases in total hotel sales over base year levels as additional return or rent.

(4)We define coverage as combined total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E reserve contributions (which data is provided to us by our operators or tenants), divided by the minimum returns or rent payments due to us.

(5)For the hotels managed by Marriott, the data presented is for the comparable fiscal years ended January 2, 2004, and December 31, 2004.

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Hotel Brand	Staybridge Suites®	Candlewood Suites®	InterContinental®/ Crowne Plaza®/ Holiday Inn®/ Staybridge Suites® (1)	Prime HotelsSM AmeriSuites® (7)	Total/ Range/ Average (all investments) (1)
Management Agreements and Leases
Number of Hotels:	30	76	12	36	297
Number of Rooms/Suites:	3,694	9,220	3,757	5,250	42,246
Number of States:	16	29	6 plus Ontario and Puerto Rico	19	38 plus Ontario and Puerto Rico
Tenant:	Our TRS.	Our TRS.	Our TRS and a subsidiary of InterContinental.	Our TRS.
Manager:	Subsidiary of InterContinental.	Subsidiary of InterContinental.	Subsidiaries of InterContinental.	Subsidiary of Hyatt.
Investment (000s) (1):	$415,708	$590,250	$394,500	$425,920	$3,442,076
Security Deposit (000s):	$26,872(2)	—	—	—	$175,304
End of Current Term:	2023	2028	2029	2018	2010-2029 (average 14.8 years)
Renewal Options (3):	2 for 12.5 years each.	2 for 15 years each.	2 for 15 years each	2 for 15 years each.
Current Annual Minimum Return/Rent (000s):	$36,097	$60,000	$34,869	$26,000	$322,676
Percentage Return/Rent (4):	7.5%	7.5%	7.5%	(5)	5%-10%
Tenant Operating Statistics
Rent/Return Coverage (6):
Year ended 12/31/03:	0.7x	0.8x	N/A	1.0x	0.7x – 1.1x
Year ended 12/31/04:	0.8x	0.8x	N/A	1.1x	0.8x – 1.3x
Other Security Features:	Limited guarantee provided by InterContinental.	Limited guarantee provided by InterContinental.	Limited guarantees provided by InterContinental.	Limited guarantee provided by Prime.

(1)Table includes investment amounts as of December 31, 2004, except amounts adjusted to give effect to the acquisition of 12 hotels from InterContinental on February 16, 2005. Amounts exclude one additional InterContinental^® hotel in Austin, TX with 189 rooms, which we expect to purchase from InterContinental before June 30, 2005, for approximately $30,500. Amounts exclude expenditures made from FF&E reserves funded from hotel operations, but includes amounts funded by us separately from hotel operations.

(2)Additional security deposit of $10,000 to be funded in 2005.

(3)Renewal options may be exercised by the manager or tenant for all, but not less than all, of the hotels within each combination of hotels.

(4)Each management contract or lease provides for payment to HPT of a percentage of increases in total hotel sales over base year levels as additional return or rent.

(5)Agreement provides for payment to us of 50% of cash flow after payment of operating costs, funding the capital reserve, payment of our priority return and reimbursement to Prime of working capital and guaranty advances, if any.

(6)We define coverage as combined total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E reserve contributions (which data is provided to us by our operators or tenants), divided by the minimum return or rent payments due to us. For some combinations, amounts have been calculated using data for periods prior to our ownership of certain hotels and prior to commencement of operating agreements.

(7)In December 2003, we entered into an agreement with Prime for the management of these 36 hotels, effective January 1, 2004. In October 2004, Prime was sold to Blackstone. In January 2005, Blackstone sold the AmeriSuites^® brand and transferred operating responsibility for these 36 hotels to Hyatt. See Item7., “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Recent Developments” in this Annual Report on Form 10-K for the current status of these operating arrangements.

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The following tables summarize the operating statistics, including occupancy, ADR, and RevPAR, reported to us by our hotel operators by management agreement or lease for the periods indicated for the 285 hotels we owned as of December 31, 2004:

Management Agreement/Lease	No. of Hotels	No. of Rooms/Suites	2004			2003(1)			Change
ADR
Host (no. 1)	53	7,610	$	100.38		$	95.51		5.1	%
Host (no. 2)	18	2,178	94.86			93.32			1.7	%
Marriott	35	5,382	94.71			91.19			3.9	%
Barcelo Crestline	19	2,756	92.26			88.44			4.3	%
InterContinental (no. 1)(2)  (3)	30	3,694	89.65			89.99			-0.4	%
InterContinental (no. 2)(2)  (3)	76	9,220	55.97			54.77			2.2	%
Hyatt(3)  (4)	36	5,250	73.49			70.13			4.8	%
Homestead	18	2,399	50.14			47.72			5.1	%
Total/Average	285	38,489	$	80.42		$	77.20		4.2	%
Occupancy
Host (no. 1)	53	7,610	71.3		%	64.0		%	7.3	pt
Host (no. 2)	18	2,178	79.3		%	76.6		%	2.7	pt
Marriott	35	5,382	76.3		%	73.9		%	2.4	pt
Barcelo Crestline	19	2,756	73.8		%	69.0		%	4.8	pt
InterContinental (no. 1)(2)  (3)	30	3,694	75.3		%	74.2		%	1.1	pt
InterContinental (no. 2)(2)  (3)	76	9,220	71.2		%	72.0		%	-0.8	pt
Hyatt(3)  (4)	36	5,250	61.5		%	67.9		%	-6.4	pt
Homestead	18	2,399	79.2		%	75.9		%	3.3	pt
Total/Average	285	38,489	72.1		%	70.6		%	1.5	pt
RevPAR
Host (no. 1)	53	7,610	$	71.57		$	61.13		17.1	%
Host (no. 2)	18	2,178	75.22			71.48			5.2	%
Marriott	35	5,382	72.26			67.39			7.2	%
Barcelo Crestline	19	2,756	68.09			61.02			11.6	%
InterContinental (no. 1)(2)  (3)	30	3,694	67.51			66.77			1.1	%
InterContinental (no. 2)(2)  (3)	76	9,220	39.85			39.43			1.1	%
Hyatt(3)  (4)	36	5,250	45.20			47.62			-5.1	%
Homestead	18	2,399	39.71			36.22			9.6	%
Total/Average	285	38,489	$	57.98		$	54.50		6.4	%

(1)Includes data for the calendar year indicated, except for our Marriott branded hotels, which include data for the 52 and 53 week fiscal periods ended December 31, 2004 and January 2, 2004, respectively.

(2)2003 includes data for periods prior to our ownership of certain hotels.

(3)2003 includes data for periods hotels were not operated by the 2004 manager.

(4)In December 2003, we entered into an agreement with Prime for the management of these 36 hotels, effective January 1, 2004. In October 2004, Prime was sold to Blackstone. In January 2005, Blackstone sold the AmeriSuites^® brand and transferred operating responsibility for these 36 hotels to Hyatt. See Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operaion – Recent Developments” in this Annual Report on Form 10-K for the current status of these operating arrangements.

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Seasonality

Our hotels have historically experienced seasonal differences typical of the U.S. hotel industry with higher revenues in the second and third quarters of calendar years compared with the first and fourth quarters. This seasonality is not expected to cause material fluctuations in our income because our contractual management agreements and leases require our managers and tenants to make the substantial portion of our rents and return payments to us in equal amounts throughout a year. Seasonality may affect our hotel operating revenues, but we do not expect seasonal variations to have a material impact upon our financial results of operations or upon our operators’ or tenants’ ability to meet their contractual obligations to us.

Impact of Inflation

Inflation might have both positive and negative impacts upon us. Inflation might cause the value of our real estate investments to increase. In an inflationary environment, the percentage returns and rents which we receive based upon a percentage of gross hotel revenues should increase. Offsetting these benefits, inflation might cause our costs of equity and debt capital and other operating costs to increase. An increase in our capital costs or in our operating costs will result in decreased earnings unless it is offset by increased revenues. In periods of rapid inflation, our operators’ or tenants’ operating costs may increase faster than revenues and this fact may have an adverse impact upon us if the operating income from our properties becomes insufficient to pay our returns or rents. To mitigate the adverse impact of increased operating costs at our properties, all of our operating agreements contain security features, such as security deposits and in certain instances, guarantees of our returns or rents. To mitigate the adverse impact of increased costs of debt capital in the event of material inflation, we may enter into interest rate hedge arrangements in the future. The decision to enter into these agreements will be based on the amount of our floating rate debt outstanding, our belief that material interest rate increases are likely to occur and upon requirements of our borrowing arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk (dollar amounts in thousands)

We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates is unchanged from December 31, 2003. Other than as described below, we do not foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future. As of March 9, 2005, our outstanding publicly traded debt consisted of five issues of fixed rate, senior unsecured notes:

Principal Balance			Annual Interest Rate		Annual Interest Expense		Maturity	Interest Payments Due
$	150,000		7.000	%	$	10,500	2008	Semi-Annually
50,000			9.125	%	4,563		2010	Semi-Annually
125,000			6.850	%	8,563		2012	Semi-Annually
300,000			6.750	%	20,250		2013	Semi-Annually
300,000		(1)	5.125	%	15,375		2015	Semi-Annually
$	925,000				$	59,251

(1)Issued on February 15, 2005.

No principal repayments are due under these notes until maturity. Because these notes bear interest at fixed rates, changes in market interest rates during the term of this debt will not affect our operating results. If at maturity these notes were refinanced at interest rates which are 10% higher than shown above, our per annum interest cost would increase by approximately $5,925. Changes in market interest rates also affect the fair value of our debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt while decreases in market interest rates increase the fair value of our fixed rate debt. Based on the balances outstanding at March 9, 2005, and discounted cash flow analyses, a hypothetical immediate 10% change in interest rates would change the fair value of our fixed rate debt obligations by approximately $17,615.

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Each of our fixed rate unsecured debt arrangements allows us to make repayments earlier than the stated maturity date. We are generally allowed to make prepayments only at face value plus a premium equal to a make-whole amount, as defined, generally designed to preserve a stated yield to the note holder. These prepayment rights may afford us the opportunity to mitigate the risk of refinancing at maturity at higher rates by refinancing prior to maturity. We have one mortgage payable secured by a hotel in Wichita, Kansas, with a fixed rate of 8.3% that matures on July 1, 2011. This note requires principal and interest payments through maturity pursuant to an amortization schedule and contains a provision that allows us to make repayment at a premium to face value after August 1, 2005.

Our revolving credit facility bears interest at floating rates and matures in June 2005. We can extend the maturity for one year for a fee. At December 31, 2004, we had $72,000 outstanding and $278,000 available for drawing under our revolving credit facility. Repayments under our revolving credit facility may be made at any time without penalty. We borrow in U.S. dollars and borrowings under our revolving bank credit facility are subject to interest at LIBOR plus a premium. Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically LIBOR. A change in interest rates would not affect the value of this floating rate debt but would affect our operating results. For example, the interest rate payable on our outstanding indebtedness of $72,000 at December 31, 2004, was 3.8% per annum. The following table presents the impact a 10% change in interest rates would have on floating rate interest expense as of December 31, 2004:

	Impact of Changes in Interest Rates
	Interest Rate Per Year		Outstanding Debt		Total Interest Expense Per Year
At December 31, 2004	3.8	%	$	72,000	$	2,736
10% reduction	3.4	%	$	72,000	$	2,448
10% increase	4.2	%	$	72,000	$	3,024

The foregoing table shows the impact of an immediate change in floating interest rates. If interest rates were to change gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our revolving bank credit facility or other floating rate debt.

Item 8. Financial Statements and Supplementary Data

The information required by this item is included in Item 15 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

We have no changes in or disagreements with our accountants regarding accounting and financial disclosure.

Item 9A. Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Management Report on Assessment of Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance to our management and board of trustees regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2004. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of December 31, 2004, our internal control over financial reporting is effective.

Ernst & Young LLP, the independent registered public accounting firm that audited our 2004 consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on our assessment of our internal control over financial reporting, which is included in Item 15 of this Annual Report on Form 10-K.

Item 9B. Other Information

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant

In March 2004, we adopted a code of business conduct and ethics that applies to all our representatives, including our officers and trustees and employees of RMR. Our code of business conduct and ethics is posted on our website, www.hptreit.com. A printed copy of our code of business conduct and ethics is also available free of charge to any shareholder who requests a copy. We intend to disclose any amendments or waivers to our code of business conduct and ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller (or any person performing similar functions) on our website.

The remainder of the information required by Item 10 is incorporated by reference to our definitive Proxy Statement, which will be filed not later than 120 days after the end of our fiscal year.

Item 11. Executive Compensation

The information required by Item 11 is incorporated by reference to our definitive Proxy Statement, which will be filed no later than 120 days after the end of our fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Equity Compensation Plan Information. We may grant common shares to our officers and other employees of RMR under either our 1995 Incentive Share Award Plan or our 2003 Incentive Share Award Plan, collectively referred to as the Award Plans. In addition, our independent trustees receive 500 shares per year each as part of their annual compensation for serving as our trustees and such shares may be awarded under either of these plans. The terms of grants made under these plans are determined by our trustees at the time of the grant. The following table is as of December 31, 2004.

			Number of securities
			remaining available for
	Number of securities		future issuance under
	to be issued upon	Weighted-average	equity compensation
	exercise of	exercise price of	plans (excluding
	outstanding options,	outstanding options,	securities reflected in
	warrants and rights	warrants and rights	column (a)) (1)
	(a)	(b)	(c)
Equity compensation plans approved by security holders	None.	None.	2,880,329
Equity compensation plans not approved by security holders	None.	None.	2,880,329
Total	None.	None.	2,880,329

(1)The 1995 Incentive Share Award Plan was approved by our shareholder at the time; the 2003 Incentive Share Award Plan was approved by our Board of Trustees. Pursuant to the terms of the Award Plans, in no event shall the number of shares issued under both plans combined exceed 3,128,791 and 2,880,329 represents the combined total shares available under both plans on December 31, 2004.

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Payments by us to RMR are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Related Party Transactions”. The remainder of the information required by Item 12 is incorporated by reference to our definitive Proxy Statement, which will be filed not later than 120 days after the end of our fiscal year.

Item 13. Certain Relationships and Related Transactions

The information required by Item 13 is incorporated by reference to our definitive Proxy Statement, which will be filed not later than 120 days after the end of our fiscal year.

Item 14. Principal Accountant Fees and Services

The information required by Item 14 is incorporated by reference to our definitive Proxy Statement, which will be filed not later than 120 days after the end of our fiscal year.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Index to Financial Statements and Financial Statement Schedules

The following audited consolidated financial statements and schedule of Hospitality Properties Trust are included on the pages indicated:

Reports of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheet as of December 31, 2004 and 2003	F-3
Consolidated Statement of Income for the three years ended December 31, 2004	F-4
Consolidated Statement of Shareholders’ Equity for the three years ended December 31, 2004	F-5
Consolidated Statement of Cash Flows for the three years ended December 31, 2004	F-6
Notes to Consolidated Financial Statements	F-7
Schedule III - Real Estate and Accumulated Depreciation	F-15

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

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(b) Exhibits

2.1	Amended and Restated Purchase and Sale Agreement, dated as of February 9, 2005, by and among BHR Texas, L.P., InterContinental Hotels Group Resources, Inc. (“InterContinental”), Crowne Plaza LAX, LLC, Holiday Pacific Partners Limited Partnership, 220 Bloor Street Hotel, Inc. and Staybridge Markham, Inc., as sellers, and HPT IHG-2 Properties Trust (“HPT IHG-2”), as buyer. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 10, 2005)
2.2	Amended and Restated Stock Purchase Agreement, dated as of February 9, 2005, by and between Six Continents International Holdings, B.V., as seller, and HPT IHG-2, as buyer. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 10, 2005)
3.1	Composite copy of Amended and Restated Declaration of Trust dated August 21, 1995, as amended to date. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998)
3.2	Articles Supplementary dated June 2, 1997. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997)
3.3	Articles Supplementary dated May 16, 2000. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000)
3.4	Articles Supplementary dated December 9, 2002. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002)
3.5	Composite copy of Amended and Restated Bylaws of the Company, as amended to date (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED MARCH 10, 2004)
4.1	Form of Common Share Certificate. (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-11 (FILE NO. 33-92330))
4.2	Form of temporary 8.875% Series B Cumulative Redeemable Preferred Share Certificate. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED DECEMBER 5, 2002)
4.3	Indenture, dated as of February 25, 1998, between the Company and State Street Bank and Trust Company. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997)
4.4	Supplemental Indenture No. 1, dated as of February 25, 1998, between the Company and State Street Bank and Trust Company, relating to the Company’s 7.00% Senior Notes due 2008, including form thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997)
4.5	Supplemental Indenture No. 4 dated as of July 14, 2000, between the Company and State Street Bank and Trust Company, relating to the Company’s 9.125% Senior Notes due 2010, including form thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000)
4.6	Supplemental Indenture No. 5, dated as of July 28, 2000, between the Company and State Street Bank and Trust Company, relating to the Company’s 9.125% Senior Notes due 2010, including form thereof.

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	(INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000)
4.7	Supplemental Indenture No. 6 dated as of July 8, 2002 between the Company and State Street Bank and Trust Company, including form of 6.85% Senior Notes due 2012. (INCORPORATED BY REFERENCE TO THE COMPANY’S QUARTERLY REPORT ON FORM 10- Q FOR THE QUARTER ENDED JUNE 30, 2002)
4.8	Supplemental Indenture No. 7 dated as of January 24, 2003 between the Company and U.S. Bank National Association, as successor trustee, relating to the Company’s 6 3/4% Senior Notes due 2013, including form of thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002)
4.9	Supplemental Indenture No. 8 dated as of February 15, 2005 between the Company and U.S. Bank National Association, as successor trustee, relating to the Company’s 5 1/8% Senior Notes due 2015, including form of thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 10, 2005)
4.10	Rights Agreement, dated as of May 20, 1997, between the Company and State Street Bank and Trust Company, as Rights Agent. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED MAY 29, 1997)
4.11	Appointment of Successor Rights Agent, dated as of December 13, 2004, by and between the Company and Wells Fargo Bank, National Association. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED December 13, 2004)
8.1	Opinion of Sullivan & Worcester LLP as to certain tax matters. (FILED HEREWITH)
10.1	Advisory Agreement, dated January 1, 1998, by and between REIT Management & Research, Inc. and the Company (+). (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 11, 1998)
10.2	Amendment No. 1 to Advisory Agreement, dated March 10, 2004, by and between Reit Management & Research, LLC and the Company (+). (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED MARCH 10, 2004)
10.3	The Company’s 1995 Incentive Share Award Plan (+). (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-11 (FILE NO. 33-92330))
10.4	Amendment to the Company’s 1995 Incentive Share Award Plan effective as of May 30, 2003 (+). (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003)
10.5	The Company’s 2003 Incentive Share Award Plan effective as of May 30, 2003 (+). (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003)
10.6	Form of Restricted Share Agreement (+). (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003)
10.7	Representative form of Indemnification Agreement. (+) (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2004)

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10.8	Form of Courtyard Management Agreement between HMH Courtyard Properties, Inc., d/b/a/ HMH Properties, Inc. and Courtyard Management Corporation. (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-11 (FILE NO. 33-92330))
10.9	Form of First Amendment to Courtyard Management Agreement between Courtyard Management Corporation and the Company and Consolidation Letter Agreement by and between Courtyard Management Corporation and the Company. (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-11 (FILE NO. 33-92330))
10.10	Form of Lease Agreement between the Company and HMH HPT Courtyard, Inc. (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-11 (FILE NO. 33-92330))
10.11	Amended and Restated Master Lease Agreement, dated as of December 23, 1999, by and between HPTSHC Properties Trust and Summerfield HPT Lease Company, L.P. (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999)
10.12	Master Lease Agreement, dated as of April 30, 1999, by and among the Company, HPTCY Properties Trust and HMH HPT Courtyard LLC. (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999)
10.13	Agreement to Assign, Release, Franchise and Manage, dated as of June 15, 2001, by and among HPT, HPTMI Properties Trust (“HPTMI”), HPTMI Hawaii, Inc. (“HPTMI Hawaii”), HPT TRS MI-135, Inc. (“TRS”), Marriott International, Inc. (“MI”), CR14 Tenant Corporation (“CR14”), CRTM17 Tenant Corporation (“CRTM17”), Courtyard Marriott Corporation (“Courtyard”), Marriott Hotel Services, Inc. (“Full Service Manager”), Residence Inn by Marriott, Inc. (“Residence Inn”), SpringHill SMC Corporation (“SpringHill”) and TownePlace Management Corporation, (“TownePlace”). (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.14	Form of Management Agreement by and between Courtyard and TRS. (INCORPORATED BY REFERENCE TO THE COMPANY’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001)
10.15	Pooling Agreement, dated as of June 15, 2001, by and among MI, Full Service Manager, Residence Inn, Courtyard, SpringHill, TownePlace and TRS. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.16	Amended and Restated Limited Rent Guaranty, dated as of June 15, 2001, made by MI in favor of HPTMI. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.17	Guaranty, dated as of June 15, 2001, made by MI in favor of TRS. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.18	Holdback and Security Agreement, dated as of June 15, 2001, by and among MI, St. Louis Airport, L.L.C., Nashville Airport, L.L.C., Residence Inn, Courtyard, SpringHill, TownePlace, Full Service Manager, CR14, CRTM17, TRS, HPTMI Hawaii and HPTMI. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.19	Second Amended and Restated Lease Agreement, dated April 12, 2002, by and between HPT CW Properties Trust and Candlewood Leasing No. 3, Inc. (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2002)

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10.20	Termination Agreement, dated October 27, 2003, among HPT CW Properties Trust, John G. Murray, Trustee of HPT CW MA Realty Trust, HH HPTCW II Properties LLC, the Company, Candlewood Hotel Company, Inc. and Candlewood Leasing No. 1, Inc. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED OCTOBER 27, 2003)
10.21	Management Agreement, dated as of October 27, 2003, by and between HPT TRS IHG-1, Inc. and InterContinental Hotels Group Resources, Inc. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED OCTOBER 27, 2003)
10.22	First Amendment to Management Agreement, dated as of February 16, 2005, by and between HPT TRS IHG-1 and InterContinental. (FILED HEREWITH)
10.23	Amended and Restated Consolidated Guaranty Agreement, dated as of February 16, 2005, by InterContinental Hotels Group Plc for the benefit of HPT TRS IHG-1 and the Company. (FILED HEREWITH)
10.24	Management Agreement, dated as of February 16, 2005, by and between HPT TRS IHG-2, Inc. (“HPT TRS IHG-2”) and IHG Management (Maryland) LLC. (FILED HEREWITH)
10.25	Lease Agreement, dated as of February 16, 2005, by and among HPT IHG PR, Inc. and InterContinental Hotels (Puerto Rico) Inc. (FILED HEREWITH)
10.26	Credit Agreement dated as of March 26, 2002 by and among the Company, First Union National Bank, as Administrative Agent, and the additional agents, arrangers and financial institutions a signatory thereto. (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001)
10.27	Registration Agreement, dated as of October 10, 2003, by and between the Company and HRPT Properties Trust. (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-3 FILED AS OF OCTOBER 14, 2003 (FILE NO. 333-109658))
12.1	Computation of Ratio of Earnings to Fixed Charges. (FILED HEREWITH)
12.2	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions. (FILED HEREWITH)
21.1	Subsidiaries of the Registrant. (FILED HEREWITH)
23.1	Consent of Ernst & Young LLP. (FILED HEREWITH)
23.2	Consent of Sullivan & Worcester LLP. (INCLUDED IN EXHIBIT 8.1 TO THIS ANNUAL REPORT ON FORM 10-K)
31.1	Certification Required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (FILED HEREWITH)
31.2	Certification Required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (FILED HEREWITH)
31.3	Certification Required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (FILED HEREWITH)
31.4	Certification Required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (FILED HEREWITH)

55

32.1	Certification required by 18 U.S.C. Sec. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002). (FURNISHED HEREWITH)
99.1	Amended and Restated Charter of the Compensation Committee, adopted on January 11, 2005. (FURNISHED HEREWITH)
99.2	Composite Copy of Governance Guidelines, effective January 11, 2005. (FURNISHED HEREWITH)
(+)	Management contract or compensatory plan or agreement.

56

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees and Shareholders of Hospitality Properties Trust:

We have audited the accompanying consolidated balance sheet of Hospitality Properties Trust, as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2004.  Our audits also included the financial statement schedule listed in the Index at Item 15(a).  These financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hospitality Properties Trust at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Hospitality Properties Trust’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 7, 2005 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
Boston, Massachusetts
March 7, 2005

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees and Shareholders of Hospitality Properties Trust:

We have audited management’s assessment, included in the accompanying Management Report on Assessment of Internal Control Over Financial Reporting, that Hospitality Properties Trust maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Hospitality Properties Trust’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Hospitality Properties Trust maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria.  Also, in our opinion, Hospitality Properties Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2004 consolidated financial statementsof Hospitality Properties Trust and our report dated March 7, 2005 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
Boston, Massachusetts
March 7, 2005

F-2

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED BALANCE SHEET

(dollars in thousands, except share data)

	As of December 31,
	2004			2003
Assets
Real estate properties, at cost:
Land	$	460,748		$	461,631
Buildings, improvements and equipment	2,720,242			2,717,876
	3,180,990			3,179,507
Accumulated depreciation	(556,517		)	(494,299		)
	2,624,473			2,685,208
Cash and cash equivalents	15,894			6,428
Restricted cash (FF&E escrow)	38,511			55,755
Other assets, net	10,547			14,210
	$	2,689,425		$	2,761,601
Liabilities and Shareholders’ Equity
Revolving credit facility	$	72,000		$	201,000
Senior notes, net of discounts	621,679			621,245
Mortgage payable	3,826			3,881
Security and other deposits	175,304			175,304
Dividends payable	50,300			45,063
Accounts payable and other	77,782			68,244
Due to affiliate	2,661			1,336
Total liabilities	1,003,552			1,116,073
Commitments and contingencies
Shareholders’ equity:
Preferred shares of beneficial interest, no par value, 100,000,000 shares authorized:
Series A preferred shares; 9 1/2% cumulative redeemable; none and 3,000,000 shares issued and outstanding, aggregate liquidation preference $75,000	—			72,207
Series B preferred shares; 8 7/8% cumulative redeemable; 3,450,000 shares issued and outstanding, aggregate liquidation preference $86,250	83,306			83,306
Common shares of beneficial interest; $0.01 par value; 100,000,000 shares authorized, 67,203,228 and 62,587,078 shares issued and outstanding, respectively	672			626
Additional paid-in capital	1,859,936			1,669,411
Cumulative net income	1,081,169			954,078
Cumulative preferred distributions	(51,680		)	(40,092		)
Cumulative common distributions	(1,287,530		)	(1,094,008		)
Total shareholders’ equity	1,685,873			1,645,528
	$	2,689,425		$	2,761,601

The accompanying notes are an integral part of these financial statements.

F-3

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED STATEMENT OF INCOME

(in thousands, except per share data)

	Year Ended December 31,
	2004		2003		2002
Revenues:
Hotel operating revenues	$	498,122	$	209,299	$	79,328
Rental income:
Minimum rent	125,669		216,125		245,197
Percentage rent	2,803		1,128		2,291
	128,472		217,253		247,488
FF&E reserve income	18,390		18,335		21,600
Interest income	384		398		290
Gain on lease terminations	—		107,516		—
Total revenues	645,368		552,801		348,706
Expenses:
Hotel operating expenses	333,818		145,863		50,515
Interest (including amortization of deferred financing costs of $2,744, $2,536 and $2,650, respectively)	50,393		44,536		42,424
Depreciation and amortization	114,883		104,807		96,474
General and administrative	19,386		16,800		15,491
Loss on early extinguishment of debt	—		2,582		1,600
Total expenses	518,480		314,588		206,504
Income before gain on sale of real estate	126,888		238,213		142,202
Gain on sale of real estate	203		—		—
Net income	127,091		238,213		142,202
Preferred distributions	9,674		14,780		7,572
Excess of liquidation preference over carrying value of preferred shares	2,793		—		—
Net income available for common shareholders	$	114,624	$	223,433	$	134,630
Weighted average common shares outstanding	66,503		62,576		62,538
Basic and diluted earnings per common share:
Net income available for common shareholders	$	1.72	$	3.57	$	2.15

The accompanying notes are an integral part of these financial statements.

F-4

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(in thousands, except share data)

	Preferred Shares											Common Shares						Additional Paid-in Capital			Cumulative Net Income		Total
	Series A					Series B			Cumulative Preferred Distributions						Cumulative Common Distributions
	Number of Shares		Preferred Shares			Number of Shares	Preferred Shares					Number of Shares	Common Shares
Balance at December 31, 2001	3,000,000		$	72,207		—	$	—	$	(19,356	)	62,515,940	$	625	$	(689,876	)	$	1,667,256		$	573,663	$	1,604,519
Issuance of shares, net	—		—			3,450,000	83,306		—			—	—		—			—			—		83,306
Common share grants	—		—			—	—		—			31,408	—		—			974			—		974
Net income	—		—			—	—		—			—	—		—			—			142,202		142,202
Distributions	—		—			—	—		(7,125		)	—	—		(178,856		)	—			—		(185,981		)
Balance at December 31, 2002	3,000,000		72,207			3,450,000	83,306		(26,481		)	62,547,348	625		(868,732		)	1,668,230			715,865		1,645,020
Common share grants	—		—			—	—		—			39,730	1		—			1,181			—		1,182
Net income	—		—			—	—		—			—	—		—			—			238,213		238,213
Distributions	—		—			—	—		(13,611		)	—	—		(225,276		)	—			—		(238,887		)
Balance at December 31, 2003	3,000,000		72,207			3,450,000	83,306		(40,092		)	62,587,078	626		(1,094,008		)	1,669,411			954,078		1,645,528
Issuance of shares, net	—		—			—	—		—			4,600,000	46		—			192,638			—		192,684
Common share grants	—		—			—	—		—			16,150	—		—			680			—		680
Redemption of preferred shares	(3,000,000	)	(72,207		)	—	—		—			—	—		—			(2,793		)	—		(75,000		)
Net income	—		—			—	—		—			—	—		—			—			127,091		127,091
Distributions	—		—			—	—		(11,588		)	—	—		(193,522		)	—			—		(205,110		)
Balance at December 31, 2004	—		$	—		3,450,000	$	83,306	$	(51,680	)	67,203,228	$	672	$	(1,287,530	)	$	1,859,936		$	1,081,169	$	1,685,873

The accompanying notes are an integral part of these financial statements.

F-5

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2004			2003			2002
Cash Flows From Operating Activities:
Net income	$	127,091		$	238,213		$	142,202
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	114,883			104,807			96,474
Non-cash portion of gain on lease terminations	—			(104,951		)	—
Amortization of deferred financing costs as interest	2,744			2,536			2,650
Non-cash income	(2,952		)	(6,719		)	—
FF&E reserve income and deposits	(29,522		)	(25,248		)	(25,710		)
Loss on early extinguishment of debt	—			2,582			1,600
Gain on sale of real estate	(203		)	—			—
Changes in assets and liabilities:
(Increase) decrease in other assets	2,262			(1,339		)	(762		)
Increase (decrease) in accounts payable and other	7,490			9,485			(7,222		)
Increase in due to affiliate	1,325			39			1,013
Cash provided by operating activities	223,118			219,405			210,245
Cash Flows From Investing Activities:
Real estate acquisitions and improvements	(10,211		)	(388,482		)	(148,246		)
Increase in security and other deposits	—			16,872			5,935
Proceeds from sale of real estate	7,750			—			—
Cash used in investing activities	(2,461		)	(371,610		)	(142,311		)
Cash Flows From Financing Activities:
Proceeds from issuance of common shares, net	192,684			—			—
Proceeds from issuance of preferred shares, net	—			—			83,306
Debt issuance, net of discount	—			296,997			124,106
Repayment of senior notes	—			(150,000		)	(115,000		)
Redemption of preferred shares	(75,000		)	—			—
Draws on revolving credit facility	293,000			391,000			295,000
Repayments of revolving credit facility	(422,000		)	(190,000		)	(295,000		)
Deferred finance costs paid	(2		)	(2,877		)	(5,990		)
Distributions to preferred shareholders	(11,588		)	(13,611		)	(7,125		)
Distributions to common shareholders	(188,285		)	(180,213		)	(178,856		)
Cash provided by (used in) financing activities	(211,191		)	151,296			(99,559		)
Increase (decrease) in cash and cash equivalents	9,466			(909		)	(31,625		)
Cash and cash equivalents at beginning of year	6,428			7,337			38,962
Cash and cash equivalents at end of year	$	15,894		$	6,428		$	7,337
Supplemental Information:
Cash paid for interest	$	47,612		$	34,929		$	36,079
Non-cash operating activities:
Property transferred in lease default	4,920			18,094			—
FF&E reserves retained in lease default	—			14,615			—
Security and other deposits retained in lease default	—			118,736			—
Non-cash investing and financing activities:
Property managers deposits in FF&E reserve	27,296			22,679			23,745
Purchases of fixed assets with FF&E reserve	(46,529		)	(53,337		)	(18,816		)

The accompanying notes are an integral part of these financial statements.

F-6

HOSPITALITY PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share data)

1. Organization

Hospitality Properties Trust, or HPT, we or us, is a real estate investment trust, or REIT, organized on February 7, 1995, under the laws of the State of Maryland, which invests in hotels. At December 31, 2004, HPT, directly and through subsidiaries, owned 285 properties.

The properties of HPT and its subsidiaries are operated by companies unaffiliated with HPT: Host Marriott Corporation, or Host; Marriott International, Inc., or Marriott; InterContinental Hotels Group, plc, or InterContinental; Barcelo Crestline Corporation, or Barcelo Crestline; Hyatt Corporation, or Hyatt; and BRE/Homestead Village LLC, or Homestead. Hereinafter these hotel operators are sometimes referred to as Managers and/or Lessees.

2. Summary of Significant Accounting Policies

Consolidation. These consolidated financial statements include the accounts of HPT and its subsidiaries, all of which are 100% owned directly or indirectly by HPT. All intercompany transactions and balances have been eliminated.

Real Estate Properties. Real estate properties are recorded at cost. We allocate the cost of real estate acquired among building, land, furniture, fixtures and equipment, and, if applicable, the value of in-place leases, the fair market value of above or below market leases and customer relationships. Depreciation on real estate properties is recognized on a straight line basis over estimated useful lives of up to 40 years for buildings and improvements and up to 12 years for personal property. The value of intangible assets is amortized over the term of the associated lease.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long-lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows of the related properties to determine if an impairment loss should be recognized. The amount of impairment loss is determined by comparing the historical carrying value of the asset to its estimated fair value. Estimated fair value is determined through an evaluation of recent financial performance and projected discounted cash flows of properties using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of its long-lived assets. If estimated lives are changed, the carrying values of affected assets are allocated over the remaining lives.

Cash and Cash Equivalents. Highly liquid investments with original maturities of three months or less at date of purchase are considered to be cash equivalents. The carrying amount of cash and cash equivalents is equal to its fair value.

Restricted Cash. Restricted cash consists of amounts escrowed to fund periodic renovations and improvements at our hotels.

Deferred Financing Costs. Costs incurred to borrow are capitalized and amortized over the term of the related borrowing. Deferred financing costs were $4,180 and $6,487 at December 31, 2004 and 2003, respectively, net of accumulated amortization of $6,699 and $4,389, respectively, and are included in other assets, net in the accompanying consolidated balance sheet.

Revenue Recognition. We report hotel operating revenues for managed hotels in our consolidated statement of income. Hotel operating revenues, consisting primarily of room sales and sales of food, beverage and telephone services are generally recognized when services are performed. Our rights to share in the operating results

F-7

of our managed hotels in excess of minimum returns due us are generally determined based upon annual calculations. Hotel operating income in excess of the minimum returns due to us under our management agreements is recognized when all contingencies are met and the income is earned.

We recognize rental income from operating leases on a straight line basis over the life of the lease agreements. Percentage rent is recognized when all contingencies are met and the rent is earned.

We own all the FF&E reserve escrows for hotels leased to our taxable REIT subsidiaries, or TRS. Some of our third party leases provide that FF&E reserve escrows are owned by us. One third party lease provides that the FF&E reserve escrow is owned by the tenant and we have a security and remainder interest in that escrow account. When we own the escrow account, payments by our third party tenants into the escrow are reported by us as FF&E reserve income. When we have a security and remainder interest in the escrow account, tenant deposits are not included in revenue.

Per Common Share Amounts. Per common share amounts are computed using the weighted average number of common shares outstanding during the period. We have no common share equivalents, instruments convertible into common shares or other dilutive instruments.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates.

Income Taxes. We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. As a REIT, we are generally not subject to federal income taxes on our net income provided we distribute our taxable income to our shareholders and meet certain organizational and operational requirements. Even as a REIT, we may be subject to certain state and local income and other types of taxes.

We lease our managed hotels to our wholly owned taxable REIT subsidiaries, or TRSs. Unlike our other subsidiaries, which are generally not subject to federal taxes, these subsidiaries are taxable entities. We account for income taxes of our TRSs in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes”, or SFAS 109. SFAS 109 requires us to use the asset and liability method and to establish deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

Our TRSs file one consolidated tax return. At December 31, 2004 and 2003 our TRSs had a deferred tax asset, prior to any valuation allowance, of $2,806 and $3,634, respectively, which consists primarily of net operating loss carryforwards. We have provided a 100% valuation allowance against our deferred tax asset as of December 31, 2004 and 2003 due to the uncertainty surrounding our ability to realize the future benefit of the losses. Accordingly, no provision or benefit for income taxes is reflected in the accompanying consolidated statement of income. As of December 31, 2004 our TRSs have net operating loss carryforwards for federal income tax purposes of approximately $6,316 which are available to offset future taxable income, if any, through 2024.

The characterization of the distributions paid to our common shareholders in 2004, 2003 and 2002 was 100.0%, 100.0% and 74.5% ordinary income, respectively, and 0.0%, 0.0% and 25.5% return of capital, respectively.

New Accounting Pronouncements. In January 2003, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”, or FIN 46, that was effective for all enterprises with variable interest entities created after January 31, 2003. In December 2003, FASB issued a revised FIN 46 which provided for the deferral of the effective date of the interpretation to January 1, 2004,

F-8

for variable interest entities created prior to January 31, 2003. The adoption of FIN 46 had no effect on our financial statements.

3. Shareholders’ Equity

We reserved an aggregate of 3,128,791 shares of our common shares to be issued under the terms of the 1995 Incentive Share Award Plan and the 2003 Incentive Share Award Plan, collectively referred to as the Award Plans. During the year ended December 31, 2004, we awarded 14,650 common shares to our officers and certain employees of our investment manager pursuant to these plans. In addition, our independent trustees are each awarded 500 common shares annually as part of their annual fees. The shares awarded to the trustees vest immediately. The shares awarded to our officers and certain employees of our investment manager vest in three annual installments beginning on the date of grant. At December 31, 2004, 2,880,329 of our common shares remain reserved for issuance under the Award Plans.

On February 23, 2004, we sold 4,000,000 of our common shares of beneficial interest at $43.93 per share in a public offering. As part of this offering we granted the underwriters a 30-day option to buy an additional 600,000 common shares of beneficial interest to cover over allotments which they exercised in full on March 8, 2004. Net proceeds, from both these sales, after underwriting and other offering expenses, were $192,684. We used these proceeds to reduce borrowings outstanding under our revolving credit facility.

On April 12, 2004, we redeemed all of our outstanding 9 ½% Series A preferred shares at their liquidation preference of $25 per share plus accrued and unpaid distributions of $0.0792 per share. This redemption was funded with borrowings under our revolving credit facility. Pursuant to the Securities and Exchange Commission’s clarification on Emerging Issues Task Force Topic D-42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock”, the $2,793 excess of the liquidation preference of the redeemed shares over their carrying amount was charged to additional paid in capital and deducted from net income to determine net income available to common shareholders in the calculation of earnings per share.

Each of our 3,450,000 Series B cumulative redeemable preferred shares has a distribution rate of $2.21875 per annum, payable in equal quarterly amounts, and a liquidation preference of $25 ($86,250 in aggregate). Series B preferred shares are redeemable at our option for $25 each plus accrued and unpaid distributions at any time on or after December 10, 2007.

Cash distributions paid or payable by us to our common shareholders for the years ended December 31, 2004, 2003 and 2002, were $2.88 per share, $2.88 per share and $2.87 per share, respectively.

4. Management Agreements and Leases

As of December 31, 2004, each of our 285 hotels is included in one of eight combinations of hotels and either leased to our TRSs and managed by an independent hotel operating company or leased to a third party. We do not operate hotels. At December 31, 2004, we had 177 managed hotels and 108 leased hotels. Our agreements have initial terms expiring between 2010 and 2028. Each of these agreements is for a combination or pool of between 18 and 76 of our hotels. The agreements contain renewal options for all, but not less than all, of the affected properties, and the renewal terms total 20 to 45 years. Each agreement requires the third party manager or lessee to: (i) make payments to us of minimum returns or rents; (ii) deposit a percentage of total hotel sales into reserves established for the regular refurbishment of our hotels, or FF&E reserves; and (iii) make payments to us of additional returns or rent equal to 5%-10% of increases in gross hotel revenues over threshold amounts and/or, in certain circumstances, make payments to our TRSs of additional returns based on increases in hotel operating income. Some of the third party managers or lessees have provided deposits or guarantees to secure their obligation to pay us.

F-9

As of December 31, 2004, our management agreements and leases provide for priority return payments or minimum rents to be received by us during the remaining initial terms as follows:

	Total Owner’s Priority Payments Under Management Agreements with Third Parties		Total Minimum Lease Payments from Third Parties
2005	$	169,388	$	118,420
2006	169,388		118,420
2007	169,388		118,420
2008	169,388		118,420
2009	169,388		118,420
Thereafter	2,352,272		451,564
	$	3,199,212	$	1,043,664

As of December 31, 2004, the average remaining initial terms of our leases and management agreements, weighted based on minimum rents or priority return payments from third parties, was approximately 14.8 years, and the weighted average remaining total term, including renewal options which may be exercised, was 45 years.

Upon effectiveness on January 1, 2004, of a management agreement for 36 hotels with Prime Hospitality Corp., a former manager, we settled all our outstanding claims with Prime arising from its lease default in July 2003. The balance of the retained deposits and the value of other property received from Prime pursuant to the settlement, totaling approximately $44,281, is being amortized into our income on a straight line basis over the initial 15 year term of the management contract for the affected hotels. We amortized $2,952 into income in 2004. The unamortized balance of $41,329 at December 31, 2004, is included in accounts payable and other liabilities in the accompanying consolidated balance sheet. In October 2004, Prime was sold to the Blackstone Group, or Blackstone. In January 2005, Blackstone sold the AmeriSuites^® brand and transferred operating responsibility for these hotels to Hyatt.

5. Real Estate Properties

Our real estate properties, at cost, consisted of land of $460,748, buildings and improvements of $2,356,860 and furniture, fixtures and equipment of $363,382, as of December 31, 2004; and land of $461,631, buildings and improvements of $2,352,107 and furniture, fixtures and equipment of $365,769, as of December 31, 2003. During 2003 and 2002, we purchased 35 and 21 hotels, respectively, for aggregate purchase prices of $347,007 and $145,000 excluding closing costs, respectively. We purchased no properties in 2004. As of December 31, 2004, we owned 285 hotel properties. During 2004, 2003 and 2002, we invested $8,338, $33,905 and $3,274 respectively, in our existing hotels in excess of amounts funded from FF&E reserves. As a result of these additional investments, tenant obligations to us for annual priority payments or minimum rents increased $841, $3,391 and $327 in 2004, 2003 and 2002, respectively.

At December 31, 2004, nine of our hotels were on leased land. The remaining term of each ground lease (including renewal options) is in excess of 30 years, and the ground lessors are unrelated to us. Ground rent payable under the nine ground leases is generally calculated as a percentage of hotel revenues. Seven of the nine ground leases require minimum annual rent ranging from approximately $102 to $256 per year; and minimum rent under two ground leases has been pre-paid. Under the terms of our leases and management agreements, payments of ground lease obligations are made by our managers or tenants. Future minimum annual rent payments due under the ground leases are $1,119 for 2004 through 2008, $909 for 2009 and total $13,703 for all years thereafter.

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6. Indebtedness

At December 31, 2004, our indebtedness was as follows:

	As of December 31,
	2004			2003
Senior Notes due 2008 at 7%	$	150,000		$	150,000
Senior Notes due 2010 at 9.125%	50,000			50,000
Senior Notes due 2012 at 6.85%	125,000			125,000
Senior Notes due 2013 at 6.75%	300,000			300,000
Unamortized discounts	(3,321		)	(3,755		)
Total unsecured senior notes	621,679			621,245
Unsecured revolving credit facility	72,000			201,000
Mortgage payable due 2011 at 8.3%	3,826			3,881
	$	697,505		$	826,126

All of our senior notes are prepayable at any time prior to their maturity date at par plus accrued interest plus a premium equal to a make whole amount, as defined, generally designed to preserve a stated yield to the noteholder. Interest on all of our senior notes is payable semi-annually in arrears.

We maintain a revolving credit facility with a group of commercial banks. Our credit facility matures in June 2005 and may be extended at our option to June 2006 upon our payment of an extension fee. Borrowings under the credit facility can be up to $350,000 and the credit facility includes a feature under which the maximum amount available for borrowing may be expanded to $700,000, in certain circumstances. Borrowings under our credit facility are unsecured. Funds may be drawn, repaid and redrawn until maturity, and no principal repayment is due until maturity. Interest on borrowings under the credit facility is payable at a spread above LIBOR. As of December 31, 2004, the $72,000 outstanding on our credit facility required interest at 3.8% and $278,000 was available to be drawn. During 2004, 2003 and 2002, the weighted average interest rate on the amounts outstanding under our revolving credit facility was 2.8%, 2.5% and 3.0%, respectively.

Our revolving credit agreement and note indenture and its supplements contain financial covenants which, among other things, restrict our ability to incur indebtedness and require us to maintain financial ratios and a minimum net worth. We were in compliance with these covenants during the periods presented.

As of December 31, 2004 and 2003, the estimated aggregate market values of our indebtedness were as follows:

	As of December 31,
	2004		2003
Revolving credit facility at 3.76%	$	72,000	$	201,000
Senior Notes, due 2008 at 7%	165,287		161,212
Senior Notes, due 2010 at 9.125%	62,676		58,593
Mortgage Note, due 2011 at 8.3%	4,504		3,881
Senior Notes, due 2012 at 6.85%	143,207		130,590
Senior Notes, due 2013 at 6.75%	340,760		333,082
	$	788,434	$	888,358

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7. Transactions with Affiliates

Reit Management & Research LLC, or RMR, provides management and administrative services for us. Our contract with RMR for such services continues from year to year, and currently extends to December 31, 2005. This contract is subject to the annual approval of our compensation committee comprised of our independent trustees. RMR is compensated at an annual rate equal to 0.7% of our average real estate investments, as defined, up to the first $250,000 of such investments and 0.5% thereafter plus an incentive fee based upon increases in cash available for distribution per share, as defined. Management fees, excluding incentive fees, earned for the years ended 2004, 2003 and 2002 were $15,812, $14,540 and $13,601, respectively. Incentive advisory fees are paid in restricted common shares based on a formula. Incentive advisory fees for 2004, 2003 and 2002 were $0, $0 and $938, respectively. We issued 27,577 restricted common shares in satisfaction of the 2002 incentive fees. As of December 31, 2004, RMR and its affiliates owned 446,768 of our common shares. RMR is beneficially owned by Gerard M. Martin and Barry M. Portnoy, who also serve as our managing trustees.

8. Concentration

At December 31, 2004, our 285 hotels contained 38,489 rooms and were located in 38 states in the United States, with between 5% and 13% of our hotels, by investment, in each of California, Texas, Virginia, Georgia, Florida, and New Jersey.

All of our third party operators or tenants are subsidiaries of other companies. The percentage of our priority return payments and minimum rent for each combination of hotels is shown below as of December 31, 2004.

Manager / Lessee is a	Number of	Priority Return /		% of
Subsidiary of:	Properties	Minimum Rent		Total
InterContinental (no. 2)	76	$	60,000	20	%
Host (no. 1)	53	55,401		19	%
Marriott	35	47,291		16	%
InterContinental (no. 1)	30	36,097		13	%
Barcelo Crestline	19	28,508		10	%
Hyatt (1)	36	26,000		9	%
Host (no. 2)	18	18,550		7	%
Homestead	18	15,960		6	%
Total	285	$	287,807	100	%

(1) Operating responsibility for these hotels was transferred to Hyatt in January 2005. See Note 4.

Payments due to us under some of our management agreements and leases are supported by guarantees. The guarantee provided by Marriott is limited, in the case of 35 hotels, to $50,878 ($26,449 remaining at December 31, 2004). The guarantee provided by Marriott and Barcelo Crestline is limited, in the case of 19 hotels, to $31,175 ($14,784 remaining at December 31, 2004). These guarantees expire on December 31, 2005 and June 30, 2005, respectively. The guarantee provided by Prime with respect to the 36 hotels managed by Hyatt is limited to $30,000 ($30,000 remaining at December 31, 2004). The two guarantees provided by InterContinental for 76 hotels and 30 hotels are limited to $50,000 ($50,000 remaining at December 31, 2004) and $70,000 ($61,510 remaining at December 31, 2004), respectively, and expire if and when the hotels reach negotiated financial results. The guarantee provided by Homestead expires if and when the hotels achieve negotiated financial results.

Each of our hotels is included in a combined management agreement or lease as described above. Operating results at some of our managed hotels generated net operating results that were $10,470, $6,922, and

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$5,822 less than the guaranteed owner’s priority returns in 2004, 2003 and 2002, respectively. These amounts have been paid by the guarantors and are reflected as a reduction of hotel operating expenses in our consolidated statement of income as they were funded by our managers.

9. Selected Quarterly Financial Data (Unaudited)

	2004
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	153,311	$	163,231	$	171,992	$	156,834
Net income available for common shareholders	23,054		28,835		28,793		33,942
Net income available for common shareholders per share (1)	.36		.43		.43		.51
Distributions per common share (2)	.72		.72		.72		.72

	2003
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues (3)	$	89,039	$	101,314	$	124,863	$	237,585
Net income available for common shareholders (3)	28,907		26,887		27,202		140,437
Net income available for common shareholders per share  (1) (3)	. 46		. 43		. 43		2.24
Distributions per common share (2)	.72		.72		.72		.72

(1)The sum of per common share amounts for the four quarters differs from annual per share amounts due to the required method of computing weighted average number of shares in interim periods and rounding.

(2)Amounts represent distributions declared with respect to the periods shown. Distributions are generally paid in the quarterly period following the quarterly period to which they relate.

(3)Fourth quarter 2003 includes $107,516 gain on lease terminations.

10. Subsequent Events

On February 15, 2005, we issued $300,000 of 5.125% senior notes due 2015. Net proceeds after underwriting and other offering expenses, were approximately $297,192.

On December 17, 2004, we agreed to purchase 13 hotels from InterContinental for $450,000. The hotels include four full service InterContinental^® hotels, four full service Crowne Plaza^® hotels, three full service Holiday Inn^® hotels and two Staybridge Suites^® hotels, and have a total of 3,946 rooms/suites and approximately 164,000 square feet of meeting rooms. The hotels are located in six states in the United States; one InterContinental hotel^® and one Staybridge Suites^® hotel are located in Toronto, Canada, and one InterContinental^® hotel is located in San Juan, Puerto Rico. The $450,000 purchase price includes $25,000 which we have agreed to pay InterContinental during the three years following the closing in connection with certain improvements to the hotels. On February 16, 2005, we completed the acquisition of 12 of the 13 hotels. The purchase of one InterContinental hotel (with an allocated purchase price of $30,500) was delayed and is expected to be completed by June 30, 2005.

Simultaneously with our purchase of these hotels, we entered a long term combination management agreement for 11 of the 12 hotels and a long term lease for one hotel, the InterContinental hotel in San Juan, Puerto Rico, with subsidiaries of InterContinental. When the acquisition of the remaining hotel is completed, it will be

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added to the management agreement for the 11 hotels purchased on February 16, 2005. The combined annual amount payable to us for all 13 hotels as owner’s priority return under the management agreement and base rent under the lease is $37,750 in 2005, increases to $40,725 in 2006 and increases to approximately $42,000 after the full $450,000 purchase price has been paid. In addition, we are entitled to receive cash flow remaining after base and incentive management fees are paid to InterContinental at the managed hotels and, starting in 2007, a percentage of increases in gross revenues over a threshold at each of the hotels. The owner’s priority return under the management agreement and the base rent under the lease are measured and payable in U.S. dollars. Other amounts due under these agreements, with respect to the two hotels located in Canada, may be measured in Canadian dollars, but will be payable in U.S. dollars. The management agreement and the lease will each extend through 2029, and InterContinental has two all or none renewal options for 15 years each. The obligations to pay the owner’s priority return under the management agreement and the base rent under the lease are supported by a limited, partial guaranty from InterContinental until the operations at these hotels reach negotiated levels. Further, the obligations to pay owner’s priority return under the management agreement is supported by a limited, partial guaranty from the InterContinental subsidiary tenant for the Puerto Rico hotel. The agreements also provide for a reserve for capital expenditures starting in 2007.

F-14

HOSPITALITY PROPERTIES TRUST

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2004
(dollars in millions)

			Initial Cost to Company				Costs Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period
					Buildings &						Buildings &
	Encumbrances		Land		Improvements		Improvements		Land		Improvements		Total(1)
71 Courtyards	$	—	$	127	$	589	$	40	$	127	$	629	$	756
76 Candlewood Hotels	4		86		455		—		86		455		541
37 Residence Inns	—		69		322		9		69		331		400
30 Staybridge Suites	—		76		301		4		76		305		381
24 AmeriSuites	—		25		193		2		25		195		220
18 Homestead Village	—		28		106		1		28		107		135
12 Prime Hotels	—		16		154		6		16		160		176
3 Marriott Full Service	—		14		82		—		14		82		96
12 TownePlace Suites	—		17		78		—		17		78		95
2 SpringHill Suites	—		3		15		—		3		15		18
Total (285 hotels)	$	4	$	461	$	2,295	$	62	$	461	$	2,357	$	2,818

	Accumulated Depreciation(1)			Date of Construction	Date Acquired	Life on which Depreciation in Latest Income Statement is Computed
71 Courtyards	$	(122	)	1987 through 2000	1995 through 2003	15 - 40 Years
76 Candlewood Hotels	(50		)	1996 through 2000	1997 through 2003	15 - 40 Years
37 Residence Inns	(62		)	1989 through 2001	1996 through 2001	15 - 40 Years
30 Staybridge Suites	(39		)	1989 through 2002	1998 through 2003	15 - 40 Years
24 AmeriSuites	(30		)	1992 through 2000	1997 through 2002	15 - 40 Years
18 Homestead Village	(18		)	1996 through 1998	1999	15 - 40 Years
12 Prime Hotels	(33		)	1987 through 1990	1996 through 1997	15 - 40 Years
3 Marriott Full Service	(13		)	1972 through 1995	1998 through 2001	15 - 40 Years
12 TownePlace Suites	(11		)	1997 through 2000	1998 through 2001	15 - 40 Years
2 SpringHill Suites	(2		)	1997 through 2000	2000 through 2001	15 - 40 Years
Total (285 hotels)	$	(380	)

(1) Excludes $363 of personal property classified on our consolidated balance sheet as furniture, fixtures and equipment and $177 of related accumulated depreciation.

F-15

HOSPITALITY PROPERTIES TRUST

NOTES TO SCHEDULE III
DECEMBER 31, 2004
(dollars in thousands)

(A) The change in accumulated depreciation for the period from January 1, 2002 to December 31, 2004, is as follows:

	2004			2003		2002
Balance at beginning of year	$	319,204		$	262,231	$	210,439
Additions: depreciation expense	61,623			56,973		51,792
Dispositions	(1,233		)	—		—
Balance at close of year	$	379,594		$	319,204	$	262,231

(B) The change in total cost of properties for the period from January 1, 2002 to December 31, 2004, is as follows:

	2004			2003		2002
Balance at beginning of year	$	2,813,737		$	2,462,876	$	2,331,296
Additions: hotel acquisitions and capital expenditures	12,332			350,861		131,580
Dispositions	(8,461		)	—		—
Balance at close of year	$	2,817,608		$	2,813,737	$	2,462,876

(C) The net tax basis for federal income tax purposes of our real estate properties was $2,430,429 on December 31, 2004.

F-16

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Hospitality Properties Trust
By:	/s/ John G. Murray
	John G. Murray
	President and Chief Operating Officer

Dated:March 10, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ John G. Murray	President and	March 10, 2005
John G. Murray	Chief Operating Officer
/s/ Mark L. Kleifges	Treasurer and Chief	March 10, 2005
Mark L. Kleifges	Financial Officer
/s/ Frank J. Bailey	Trustee	March 10, 2005
Frank J. Bailey
/s/ John L. Harrington	Trustee	March 10, 2005
John L. Harrington
/s/ Arthur G. Koumantzelis	Trustee	March 10, 2005
Arthur G. Koumantzelis
/s/ Gerard M. Martin	Trustee	March 10, 2005
Gerard M. Martin
/s/ Barry M. Portnoy	Trustee	March 10, 2005
Barry M. Portnoy

EX-8.1

Exhibit 8.1

March 10, 2005

Hospitality Properties Trust

400 Centre Street

Newton, Massachusetts  02458

Ladies and Gentlemen:

The following opinion is furnished to HospitalityProperties Trust, a Maryland real estate investment trust (the “Company”), to be filed with the Securities and Exchange Commission (the “SEC”) as Exhibit 8.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (the “Form 10-K”), under the Securities Exchange Act of 1934, as amended.

We have acted as counsel for the Company in connection with the preparation of the Form 10-K, and we have reviewed originals or copies, certified or otherwise identified to our satisfaction, of corporate records, certificates and statements of officers and accountants of the Company and of public officials, and such other documents as we have considered relevant and necessary in order to furnish the opinion hereinafter set forth.  In doing so, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such documents.  Specifically, and without limiting the generality of the foregoing, we have reviewed:  (i) the declaration of trust and the by-laws of the Company, each as amended and restated; and (ii) the sections of Item 1 of the Form 10-K captioned “Federal Income Tax Considerations” and “ERISA Plans, Keogh Plans and Individual Retirement Accounts.”  With respect to all questions of fact on which the opinion set forth below is based, we have assumed the accuracy and completeness of and have relied on the information set forth in the Form 10-K and in the documents incorporated therein by reference, and on representations made to us by officers of the Company.  We have not independently verified such information.

The opinion set forth below is based upon the Internal Revenue Code of 1986, as amended, the Treasury Regulations issued thereunder, published administrative interpretations thereof, and judicial decisions with respect thereto, all as of the date hereof (collectively, the

“Tax Laws”), and upon the Employee Retirement Income Security Act of 1974, as amended, the Department of Labor regulations issued thereunder, published administrative interpretations thereof, and judicial decisions with respect thereto, all as of the date hereof (collectively, the “ERISA Laws”).  No assurance can be given that the Tax Laws or the ERISA Laws will not change.  In preparing the discussions with respect to Tax Laws and ERISA Laws matters in the sections of Item 1 of the Form 10-K captioned “Federal Income Tax Considerations” and “ERISA Plans, Keogh Plans and Individual Retirement Accounts,” we have made certain assumptions and expressed certain conditions and qualifications therein, all of which assumptions, conditions and qualifications are incorporated herein by reference.  With respect to all questions of fact on which our opinion is based, we have assumed the initial and continuing truth, accuracy and completeness of: (i) the information set forth in the Form 10-K and in the documents incorporated therein by reference; and (ii) representations made to us by officers of the Company or contained in the Form 10-K in each such instance without regard to qualifications such as “to the best knowledge of” or “in the belief of”.

We have relied upon, but not independently verified, the foregoing assumptions.  If any of the foregoing assumptions are inaccurate or incomplete for any reason, or if the transactions described in the Form 10-K (or the documents incorporated therein by reference) have been consummated in a manner that is inconsistent with the manner contemplated therein, our opinion as expressed below may be adversely affected and may not be relied upon.

Based upon and subject to the foregoing, we are of the opinion that the discussions with respect to Tax Laws and ERISA Laws matters in the sections of Item 1 of the Form 10-K captioned “Federal Income Tax Considerations” and “ERISA Plans, Keogh Plans and Individual Retirement Accounts,” in all material respects are accurate and fairly summarize the Tax Laws issues and the ERISA Laws issues addressed therein, and hereby confirm that the opinions of counsel referred to in said sections represent our opinions on the subject matter thereof.

Our opinion above is limited to the matters specifically covered hereby, and we have not been asked to address, nor have we addressed, any other matters or any other transactions.  Further, we disclaim any undertaking to advise you of any subsequent changes of the matters stated, represented or assumed herein or any subsequent changes in the Tax Laws or the ERISA Laws.

2

This opinion is intended solely for the benefit and use of the Company, and is not to be used, released, quoted, or relied upon by anyone else for any purpose (other than as required by law) without our prior written consent.  We hereby consent to filing of a copy of this opinion as an exhibit to the Form 10-K, which is incorporated by reference in the Company’s Registration Statements on Form S-3 (File Nos. 333-43573, 333-89307, 333-84064 and 333-109658) under the Securities Act of 1933, as amended (the “Act”), and to the references to our firm in the Form 10-K and such Registration Statements.  In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or under the rules and regulations of the SEC promulgated thereunder.

Very truly yours,

/s/ Sullivan & Worcester LLP

SULLIVAN & WORCESTER LLP

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EX-10.22

Exhibit 10.22

FIRST AMENDMENT TO MANAGEMENT AGREEMENT

THIS FIRST AMENDMENT TO MANAGEMENT AGREEMENT (this “FIRST AMENDMENT”) is made as of February 16, 2005 by and between HPT TRS IHG-1, INC., a Maryland corporation (“OWNER”), and INTERCONTINENTAL HOTELS GROUP RESOURCES, INC., a Delaware corporation (“MANAGER”).

WHEREAS, Owner and Manager entered into that certain Management Agreement, dated as of October 27, 2003 (the “MANAGEMENT AGREEMENT”); and

WHEREAS, Owner and Manager wish to amend the Management Agreement, subject to and upon the terms and conditions hereinafter provided;

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:

1.Capitalized terms used in this First Amendment and not otherwise defined herein shall have the meaning ascribed thereto in the Management Agreement.

2.From and after the date hereof, Section 1.43 (“Guaranty”) of the Management Agreement is hereby deleted in its entirety and the following inserted in its place:

“GUARANTY” shall mean that certain Amended and Restated Consolidated Guaranty Agreement dated as of February 16, 2005 made by IHG for the benefit of, INTER ALIA, Owner, or, if applicable, the New Candlewood Guaranty (as defined in such Amended and Restated Consolidated Guaranty Agreement) as the same may be amended, supplemented or replaced from time to time excluding, however, the New Staybridge Guaranty (as defined in such Amended and Restated Consolidated Guaranty Agreement) as the same may be amended, supplemented or replaced from time to time.

3.Section 17.2 (“Remedies for Manager Default”) of the Management Agreement is hereby amended by: (i) deleting the phrase “so long as Guarantor’s obligations under Section 3 thereof has not been terminated in accordance

with the terms of the Guaranty” located in the last sentence thereof; and (ii) deleting the sixth (6th) sentence thereof in its entirety and inserting the following in its place:

Such liquidated damages shall be equal to the sum of (i) all accrued but unpaid amounts due to Owner hereunder up until the date of termination, plus (ii) the Outstanding Balance (as defined in the Guaranty), plus (iii) the outstanding balance of the Deposit.

4.All references in the Management Agreement to the Management Agreement shall be deemed to be references thereto as amended hereby.

5.As modified hereby, the Management Agreement is in full force and effect and is hereby ratified and confirmed.

6.This First Amendment may be executed in one or more counterparts, all of which counterparts shall constitute but one and the same document.

[SIGNATURE PAGE FOLLOWS.]

2

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

OWNER:
HPT TRS IHG-1, INC.
By:	/s/ John G. Murray
	John G. Murray
	Vice President
MANAGER:
INTERCONTINENTAL HOTELS
GROUP RESOURCES, INC.
By:	/s/ Robert J. Chitty
	Robert J. Chitty
	Vice President

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EX-10.23

Exhibit 10.23

AMENDED AND RESTATED CONSOLIDATED GUARANTY AGREEMENT

THIS AMENDED AND RESTATED CONSOLIDATED GUARANTY AGREEMENT (this “AGREEMENT”) is made and given as of February 16, 2005, by INTERCONTINENTAL HOTELS GROUP PLC, a corporation organized and existing under the laws of England and Wales (the “GUARANTOR”), for the benefit of HPT TRS IHG-1, INC., a Maryland corporation (together with its successors and assigns, “TRS1”), HPT TRS IHG-2, INC., a Maryland corporation (together with its successors and assigns, “TRS2”), HPT IHG PR, INC., a Puerto Rico corporation (together with its successors and assigns, “LANDLORD”), and HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust (together with its successors and assigns, “TRUST”; and Trust together with TRS1, TRS2 and Landlord, collectively, “HPT”).

W I T N E S S E T H :

WHEREAS, the Guarantor entered into a certain Guaranty Agreement dated as of July 1, 2003 as amended by a certain First Amendment to Guaranty Agreement dated as of September 18, 2003 (the “ORIGINAL STAYBRIDGE GUARANTY”); and

WHEREAS, the Guarantor entered into a certain Guaranty Agreement dated as of October 27, 2003 (the “ORIGINAL CANDLEWOOD GUARANTY”; and the Original Candlewood Guaranty together with the Original Staybridge Guaranty, collectively, the “ORIGINAL GUARANTIES”); and

WHEREAS, it is a condition precedent to Landlord entering into the PR Lease (as hereinafter defined) and TRS2 entering into the New Management Agreement (as hereinafter defined) and the consummation of certain other transactions contemplated by the Transaction Documents (as defined in the New Management Agreement) that the Guarantor enter into this Agreement; and

WHEREAS, the transactions contemplated by the Guaranteed Agreements (as hereinafter defined) and the Transaction Documents are of direct material benefit to the Guarantor;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.CERTAIN TERMS. Capitalized terms used but not defined herein have the meaning ascribed thereto in the New Management

Agreement. The following terms as used in this Agreement shall have the meanings set forth below:

“ACCOUNTING PRINCIPLES” shall mean generally accepted accounting principles, as adopted in the United States of America, consistently applied or, if the Guarantor’s principal place of business is the United Kingdom, generally accepted accounting principles, as adopted in the United Kingdom, consistently applied.

“BASE GUARANTEED AMOUNT” shall mean the sum of One Hundred Twenty Five Million Dollars ($125,000,000).

“CANDLEWOOD MANAGEMENT AGREEMENT” shall mean that certain Management Agreement, dated as of October 27, 2003, between TRS1 and Existing Manager, as the same may be amended, modified, supplemented, or otherwise altered from time to time.

“COLLATERAL AGENCY AGREEMENT” shall mean a written agreement, in form and substance reasonably acceptable to HPT, among HPT, the Guarantor and the Collateral Agent pursuant to which the Collateral Agent shall agree to hold any cash delivered to such Collateral Agent pursuant to the terms of this Agreement as collateral agent on behalf of HPT, as the same may hereafter be amended, restated, modified, supplemented, or otherwise altered. Among other things, the Collateral Agency Agreement shall provide that (a) the Collateral Agent shall look solely to the Guarantor for any amounts owed to the Collateral Agent in connection with such agreement, (b) the Collateral Agent shall not offset any amount owed to the Collateral Agent against the cash delivered to it pursuant to the Collateral Agency Agreement and this Agreement, (c) the Collateral Agent shall hold such cash as trust funds and not commingle such cash with any assets of the Collateral Agent and (d) HPT shall be entitled to apply any cash collateral held by the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment.

“COLLATERAL AGENT” shall mean a bank or other financial institution reasonably acceptable to HPT having a rating of not less than BBB-/Baa3 rating from the Rating Agencies, which bank or other financial institution is the collateral agent under the Collateral Agency Agreement as such collateral agent may be replaced in accordance with the terms of the Collateral Agency Agreement.

“COVERAGE DATE” shall mean the date which is the day after the second consecutive calendar year for which each of the

2

following conditions has been satisfied: (a) the Priority Coverage Ratio under the Candlewood Management Agreement has equaled or exceeded 1.3; (b) the Staybridge Priority Coverage Ratio has equaled or exceeded 1.3; and (c) the quotient of (i) the sum of the numerators used in calculating both the PR Rent Coverage Ratio under this Agreement and the Priority Coverage Ratio under the New Management Agreement, divided by (ii) the sum of the denominators used in calculating both the PR Rent Coverage Ratio under this Agreement and the Priority Coverage Ratio under the New Management Agreement is equal to or exceeds 1.3.

“DOLLARS” and “$” shall mean dollars in lawful currency of the United States of America.

“EXISTING MANAGER” shall mean Intercontinental Hotels Group Resources, Inc.

“GUARANTEED AGREEMENTS” shall mean the Management Agreements and the PR Lease, collectively.

“GUARANTEED OBLIGATIONS” shall mean the payment to TRS1, TRS2, Landlord and Trust, as applicable, of: (a) all of the Owner’s First Priority as and when due under the Candlewood Management Agreement determined without respect to Gross Revenue thereunder or Operating Profits thereunder; (b) all of the Owner’s First Priority as and when due under the New Management Agreement determined without respect to Gross Revenue thereunder or Operating Profits thereunder; (c) all of the Owner’s Priority as and when due under the Staybridge Management Agreement determined without respect to Gross Revenue thereunder or Operating Profits thereunder; (d) all of the Minimum Rent as and when due under the PR Lease; and (e) any and all liquidated damages due to TRS1, TRS2 or Landlord under the Guaranteed Agreements.

“MANAGEMENT AGREEMENTS” shall mean the Staybridge Management Agreement, the Candlewood Management Agreement and the New Management Agreement, collectively.

“MANAGERS” shall mean the Existing Manager and the New Manager, collectively.

“NEW CANDLEWOOD GUARANTY” shall mean a Guaranty Agreement made by the Guarantor in favor of TRS1 and HPT and otherwise in the form attached hereto as EXHIBIT A.

“NEW GUARANTIES” shall mean the New Candlewood Guaranty and the New Staybridge Guaranty, collectively.

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“NEW MANAGEMENT AGREEMENT” shall mean that certain Management Agreement dated as of the date hereof between TRS2 and New Manager, as the same may be amended, modified, supplemented, or otherwise altered.

“NEW MANAGER” shall mean IHG Management (Maryland) LLC.

“NEW PORTFOLIO COVERAGE DATE” shall mean the date which is the day after the second (2nd) consecutive calendar year for which the quotient of (i) the sum of the numerators used in calculating both the PR Rent Coverage Ratio under this Agreement and the Priority Coverage Ratio under the New Management Agreement, divided by (ii) the sum of the denominators used in calculating both the PR Rent Coverage Ratio under this Agreement and the Priority Coverage Ratio under the New Management Agreement is equal to or exceeds 1.3.

“NEW STAYBRIDGE GUARANTY” shall mean a Guaranty Agreement made by the Guarantor in favor of TRS1 and HPT and otherwise in the form attached hereto as EXHIBIT B.

“OUTSTANDING BALANCE” shall mean, from time to time, the Base Guaranteed Amount, less the excess of the aggregate amount paid by the Guarantor under SECTION 3 hereof over the sum of the aggregate of any amounts reimbursed to the Guarantor pursuant to the terms of the Management Agreements.

“PR ADDITIONAL RENT” shall have the meaning given to the term “Additional Rent” in the PR Lease.

“PR GUARANTY” shall mean that certain Guaranty Agreement of even date herewith from PR Tenant to TRS2 and Trust, as the same may hereafter be amended, restated, modified, supplemented, or otherwise altered.

“PR OPERATING COSTS” shall have the meaning given to the term “Operating Costs” in the PR Lease.

“PR RENT COVERAGE RATIO” shall mean for any period, the quotient of (a) the excess of PR Total Hotel Sales over the sum of (i) PR Operating Costs (other than PR Minimum Rent and PR Additional Rent) and (ii) an imputed reserve for Capital Expenses equal to five percent (5%) of Total Hotel Sales for such period, divided by (b) the sum of PR Minimum Rent for such period.

“PR MINIMUM RENT” shall have the meaning given to the term “Minimum Rent” in the PR Lease.

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

“PR TOTAL HOTEL SALES” shall have the meaning given to the term “Total Hotel Sales” in the PR Lease.

“PROVIDE COLLATERAL” or “PROVIDED COLLATERAL” shall mean:

(a)delivery to HPT of (i) a Satisfactory Letter of Credit or (ii) cash in an amount equal to the then Outstanding Balance; or

(b)the deposit of cash equal to the then Outstanding Balance with the Collateral Agent to be held by the Collateral Agent in accordance with the Collateral Agency Agreement provided:(i) the Collateral Agency Agreement has been executed and delivered by the parties thereto; (ii) HPT has a perfected first priority security interest in any cash delivered to the Collateral Agent; (iii) HPT has received favorable opinions of counsel, in form and substance reasonably satisfactory to HPT, with respect to such perfected first priority interest, the valid existence and good standing of the other parties to the Collateral Agency Agreement, the due execution and delivery thereof by such other parties, the enforceability of the Collateral Agency Agreement against such parties, and that any cash held by the Collateral Agent pursuant to the Collateral Agency Agreement shall not be “property of the estate” of Collateral Agent should any event described in SECTIONS 17.1(a), (b) or (c) of the New Management Agreement shall occur with respect to the Collateral Agent; or

(c)delivery to HPT of other collateral satisfactory to HPT in its good faith discretion to secure the Guaranteed Obligations;

provided, however, the Guarantor shall not be deemed to have Provided Collateral if at any time the Outstanding Balance exceeds the sum of (i) the then remaining balance drawable under the Satisfactory Letter of Credit or the balance of the cash deposited by the Guarantor hereunder, PLUS (ii) proceeds of any Satisfactory Letter of Credit or cash deposited hereunder, in either case, applied to the Guaranteed Obligations.

“RATING AGENCIES” shall mean, collectively, Standards & Poor’s Rating Services or its successors and Moody’s Investor Services, Inc. or its successors; PROVIDED, HOWEVER, if the Rating Agencies (i) cease operations without successors or (ii) cease to issue credit ratings, “Rating Agencies” shall mean a nationally recognized organization periodically issuing ratings

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of the financial strength and/or credit of United States domestic and international banking institutions reasonably agreed to by HPT and the Guarantor.

“REORGANIZATION” shall mean any merger, consolidation, reorganization, change of control or any transaction pursuant to which the Guarantor shall be or become a Subsidiary of any other Person.

“SATISFACTORY LETTER OF CREDIT” shall mean a clean irrevocable letter of credit in form and substance reasonably satisfactory to HPT in an amount equal to the Outstanding Balance issued by a bank with a credit rating of not less than A2/A (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents of such credit rating in HPT’s reasonable judgment) from the Rating Agencies, having an expiration date of not earlier than one year after the date on which it was issued and which permits for partial draws.

“SEVERANCE DATE” shall have the meaning given such term in SECTION 10 of this Agreement.

“STAYBRIDGE MANAGEMENT AGREEMENT” shall mean that certain Management Agreement, dated as of July 1, 2003, between TRS1 and Existing Manager, as the same may be amended, modified, supplemented, or otherwise altered from time to time.

“STAYBRIDGE PRIORITY COVERAGE RATIO” shall mean, for any period, the ratio of (a) the excess of Gross Revenue under the Staybridge Management Agreement for such period over the sum of the amounts distributed or applied for such period pursuant to SECTIONS 10.1(a), (b) (determined as though the Reserve Percentage thereunder for the Expansion Hotels (as defined in the Staybridge Management Agreement) was at all times five percent (5%)), (e), (g), (h), (i), (k) AND (l) of the Staybridge Management Agreement, to (b) the sum for such period of Owner’s Priority under that Agreement and Owner’s Percentage Priority under that Agreement.

“SUBSTITUTE GUARANTOR” shall mean a Person who assumes the Guarantor’s obligations hereunder in accordance with the terms of SECTION 2.7 below and is either (a) a Person who satisfies the Rating Agencies’ requirements for a single purpose bankruptcy remote entity who has Provided Collateral or (b) a Person(s) with (i) a tangible net worth determined in accordance with the Accounting Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred

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Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.REPRESENTATIONS AND COVENANTS. The Guarantor represents, warrants, covenants and agrees that:

2.1VALIDITY OF AGREEMENT. The Guarantor has duly and validly executed and delivered this Agreement; this Agreement constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors; and the execution, delivery and performance of this Agreement have been duly authorized by all requisite action of the Guarantor and such execution, delivery and performance by the Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which the Guarantor is a party or by which the Guarantor or any property or assets of the Guarantor is bound, or violate any provision of law applicable to the Guarantor, or any order, writ, injunction, judgment or decree of any court applicable to the Guarantor or any order or other public regulation of any governmental commission, bureau or administrative agency applicable to the Guarantor.

2.2PAYMENT OF EXPENSES. The Guarantor agrees, as principal obligor and not as guarantor only, to pay to HPT forthwith, upon demand, in immediately available Federal funds, all costs and expenses (including court costs and reasonable legal expenses) incurred or expended by HPT in connection with the enforcement of this Agreement, together with interest at the Interest Rate on amounts recoverable under this Agreement from the time such amounts become due until payment.

2.3REPORTS. The Guarantor shall timely deliver to HPT the Consolidated Financials required under the Guaranteed Agreements and otherwise comply with the terms of the Guaranteed Agreements applicable to it.

2.4FINANCIAL CONDITION OF GUARANTOR; STATUS OF GUARANTOR. So long as the Guarantor’s obligations under SECTION 3 below are outstanding, unless the Guarantor shall have Provided Collateral to secure its obligations hereunder:

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(a)The Guarantor shall at all times maintain a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Five Hundred Million Dollars ($500,000,000) or if there has been a Reorganization, or if the Guarantor is not the originally named Guarantor, Seven Hundred Fifty Million Dollars ($750,000,000); and

(b)The Guarantor shall not engage in any Reorganization unless following such Reorganization it has (i) a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars ($100,000,000) (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.5SECURITY.

(a)Upon the termination of the Guarantor’s obligations under SECTION 3 or if the Outstanding Balance equals zero dollars ($0), HPT will return to the Guarantor any Satisfactory Letter of Credit previously delivered to HPT or any unapplied cash collateral then being held by HPT hereunder and shall direct the Collateral Agent to return any cash being held by it under the Collateral Agency Agreement to the Guarantor.

(b)HPT shall be entitled to draw upon any Satisfactory Letter of Credit delivered to it (i) for the full amount thereof if at any time there is less than thirty (30) days until the expiry date of such Satisfactory Letter of Credit; (ii) for the full amount thereof if the bank that issued such Satisfactory Letter of Credit shall not have a credit rating of at least A/A2 (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents in HPT’s reasonable judgment) from the Rating Agencies and such satisfactory Letter of Credit shall not have been replaced within thirty (30) days with a new Satisfactory Letter of Credit delivered to HPT; or (iii) to the extent and in the amounts then due and payable hereunder, if the Guarantor shall fail to pay or perform any of its obligations under this Agreement in accordance with the terms hereof.

(c)HPT shall be entitled to apply any cash collateral held by it or the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment. Any cash collateral held by HPT shall not be commingled with its other funds, and shall be invested, at the Guarantor’s risk, in interest bearing

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investments reasonably acceptable to the Guarantor. Any interest on such cash collateral, and any losses in such investments, shall belong to IHG.

2.6LEGAL EXISTENCE. The Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. The Guarantor has appointed attorneys Alston & Bird LLP, having an address at 1201 West Peachtree Street, Atlanta, Georgia 30309-3424, Attn: Managing Partner as its agent for service of process. The Guarantor acknowledges and agrees that service of process on such agent shall constitute service of process on Guarantor with respect to any and all claims hereunder, under the Guaranteed Agreements or under any Transaction Document.

2.7SUBSTITUTE GUARANTOR. The then Guarantor (the “DEPARTING GUARANTOR”) shall be released from obligations under SECTION 3 hereof on the following terms and conditions:

(a)a Substitute Guarantor shall assume pursuant to a written instrument satisfactory to HPT all of the Guarantor’s obligations hereunder; and

(b)HPT shall receive an opinion of counsel satisfactory to HPT with respect to, among other things, the existence and good standing of the Substitute Guarantor and the due execution, delivery and enforceability of such assumption.

Upon the satisfaction of the foregoing conditions and the expiration of all applicable preference or similar periods, HPT shall deliver a release to the Departing Guarantor of its obligations under SECTION 3 hereof and the Substitute Guarantor shall be deemed the “Guarantor” hereunder. Further, if the Substitute Guarantor has Provided Collateral or has (i) a tangible net worth determined in accordance with the Accounting Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor), HPT shall return to the Departing Guarantor any letter of credit or cash delivered by the Departing Guarantor and held by HPT hereunder and shall direct the Collateral Agent to return to the Departing Guarantor any cash delivered by the Departing Guarantor and held by such Collateral Agent pursuant to the terms of the Collateral Agency Agreement.

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3.GUARANTEE.

(a)The Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which become due and payable shall be paid in full when due and payable subject to any applicable cure periods, whether upon demand, at the stated or accelerated maturity thereof or upon any mandatory or voluntary prepayment pursuant to any Guaranteed Agreement, or otherwise.

(b)This guarantee is a guarantee of payment and not of collectibility and is absolute and in no way conditional or contingent. In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, subject to any applicable cure periods, the Guarantor shall, pay or cause to be paid to HPT the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Transaction Documents) or perform or cause to be performed such obligations in accordance with the Transaction Documents. Simultaneously with the giving of any notice of default to the Managers or PR Tenant under the Guaranteed Agreements, TRS1, TRS2 or Landlord, as applicable, shall give a copy of such notice to the Guarantor. TRS1, TRS2 or Landlord, as applicable, shall accept any cure of such default by the Guarantor provided such cure is completed within the applicable cure period under the applicable Guaranteed Agreement.

4.UNENFORCEABILITY OF GUARANTEED OBLIGATIONS, ETC. If the Managers or PR Tenant are for any reason under no legal obligation to discharge any of the Guaranteed Obligations, or if any other moneys included in the Guaranteed Obligations have become unrecoverable from the Managers or PR Tenant by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Guaranteed Agreement or any limitation on the liability of the Managers or PR Tenant thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Agreement shall nevertheless remain in full force and effect in accordance with the terms set forth herein and shall be binding upon the Guarantor to the same extent as if the Guarantor at all times had been the principal debtor and obligor on all such Guaranteed Obligations.

5.ADDITIONAL GUARANTEES. This Agreement shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or

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rendered unenforceable by the invalidity of any such other guarantee or security or by any waiver, amendment, release or modification thereof.

6.CONSENTS AND WAIVERS, ETC. The Guarantor hereby acknowledges receipt of correct and complete copies of each of the Guaranteed Agreements and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance therewith, and waives, to the extent the Guarantor lawfully may do so, (a) presentment, demand for payment, and protest of nonpayment, of any of the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance under the Guaranteed Agreements or a Manager Event of Default or Manager Default under any Management Agreement or an Event of Default under the PR Lease except as expressly provided in SECTION 3, (d) notice of the terms, time and place of any private or public sale of collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against the Managers, or PR Tenant or any other guarantor of the Guaranteed Obligations, under or pursuant to the Guaranteed Agreements, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law.

7.NO IMPAIRMENT, ETC. The obligations, covenants, agreements and duties of the Guarantor under this Agreement shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to the Guarantor, or any waiver by HPT or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by the Managers, PR Tenant or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the Guaranteed Agreements or any indulgence in or the extension of the time for payment by the Managers, PR Tenant or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Guaranteed Agreements or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by the Managers, PR Tenant or any other guarantor of any other obligations under or arising out of any

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of the foregoing or the extension or renewal thereof, or the modification or amendment made with the consent of the Guarantor of any duty, agreement or obligation of the Managers, PR Tenant or any other guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all the assets of the Managers, PR Tenant or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting the Managers, PR Tenant or any other guarantor or any assets of the Managers, PR Tenant or any such other guarantor, or the release or discharge of the Managers, PR Tenant or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law.

8.REIMBURSEMENT, SUBROGATION, ETC. The Guarantor hereby covenants and agrees that the Guarantor will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against the Managers, PR Tenant or any other person with respect to the Guaranteed Obligations prior to the irrevocable payment in full of all amounts then due and owing but unpaid under the Guaranteed Agreements. Until the Guaranteed Obligations have been satisfied in full, the Guarantor shall not have any right of subrogation, and the Guarantor waives any defense it may have based upon any election of remedies by HPT which destroys the Guarantor’s subrogation rights or the Guarantor’s rights to proceed against the Managers or PR Tenant for reimbursement, including, without limitation, any loss of rights the Guarantor may suffer by reason of any rights, powers or remedies of the Managers or PR Tenant in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to HPT. Until all obligations of the Managers and PR Tenant pursuant to the Guaranteed Agreements shall have been irrevocably paid and satisfied in full, the Guarantor waives any right to enforce any remedy which HPT now has or may in the future have against the Managers, PR Tenant, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by HPT. Nothing contained in this SECTION 8 shall limit any of Guarantor’s rights under the Management Agreements.

9.DEFEASANCE; GUARANTY LIMITATIONS. The Guarantor’s obligations under SECTION 3 shall terminate upon the date on which the Guaranteed Obligations have been paid and performed in full and all other obligations of the Guarantor to HPT under this Agreement have been irrevocably satisfied in full; PROVIDED, HOWEVER, the Guarantor’s obligations under SECTION 3

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shall be subject to early termination upon the Coverage Date; PROVIDED FURTHER, HOWEVER, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Managers or PR Tenant), this Agreement, to the extent such payment is or must be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination. Notwithstanding anything contained in this Agreement to the contrary, in no event shall the Guarantor’s liability under SECTION 3 exceed the Outstanding Balance.

10.SEVERANCE. If the New Portfolio Coverage Date occurs prior to the Coverage Date, the Guarantor is not then in default of its obligations under this Agreement and the Guarantor delivers to HPT and TRS1 executed counterparts of the New Guaranties and an opinion of counsel satisfactory to Trust with respect to, among other things, the existence and good standing of the Guarantor and the due execution, delivery and enforceability of the New Guaranties, then, on the date on which the New Guaranties and such opinion are delivered (the “SEVERANCE DATE”), the Guarantor’s obligations under this Agreement shall terminate, subject to the second proviso contained in SECTION 9 above. Furthermore, if any Substitute Guarantor has succeeded to the interests of the Guarantor named herein, then the termination of such Substitute Guarantor’s obligations under this Agreement shall be further conditioned upon such Substitute Guarantor satisfying the requirements with respect to a Substitute Guarantor under each of the New Guaranties, including, without limitation, the obligation to Provide Collateral under each of the New Guaranties (if applicable). Notwithstanding the foregoing, the termination of the Guarantor’s obligations under this Agreement shall not diminish, impair or otherwise affect the Guarantor’s obligations under the New Guaranties.

11.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 by hand, by telecopier with written acknowledgment of receipt (provided a copy thereof is sent by Federal Express or similar expedited commercial carrier for delivery on the next business day), 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

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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 HPT to:

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]

if to the Guarantor to:

Intercontinental Hotels Group PLC

67 Alma Road

Windsor

Berkshire SL4 3HD

ENGLAND

Attn:  Company Secretary

Telecopier No. +44 1753 410101

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with a copy to:

Intercontinental Hotels Resources Group, Inc.

Three Ravinia Drive

Suite 100

Atlanta, Georgia 30346

Attn:  Vice President, Asset Management

[Telecopier No. 770-604-5340]

(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.

12.SUCCESSORS AND ASSIGNS. Whenever in this Agreement, any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of the Guarantor which are contained in this Agreement shall inure to the benefit of HPT’s successors and assigns, including, without limitation, such holders, whether so expressed or not.

13.APPLICABLE LAW. Except as to matters regarding the internal affairs of HPT and issues of or limitations on any personal liability of the shareholders and trustees of HPT for obligations of HPT, as to which the laws of the State of Maryland shall govern, this Agreement and any other instruments executed and delivered to evidence, complete or perfect the transactions contemplated hereby shall be interpreted, construed, applied and enforced in accordance with the laws of New York applicable to contracts between residents of New York which are to be performed entirely within New York, regardless of (i) where any such instrument is executed or delivered; or (ii) where any payment or other performance required by any such instrument is made or required to be made; or (iii) where any breach of any provision of any such instrument 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 New York; or (vii) any combination of the foregoing.

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All actions and proceedings arising out of or in any way relating to this Agreement shall be brought, heard, and determined exclusively in an otherwise appropriate federal or state court located within the State of New York. Guarantor hereby (i) submits to the exclusive jurisdiction of any New York federal or state court of otherwise competent jurisdiction for the purpose of any action or proceeding arising out of or relating to this Agreement and (ii) voluntarily and irrevocably waives, and agrees not to assert by way of motion, defense, or otherwise in any such action or proceeding, any claim or defense that it is not personally subject to the jurisdiction of such a court, that such a court lacks personal jurisdiction over Guarantor 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, Guarantor consents to service of process by registered mail, return receipt requested, or by any other manner provided by law.

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 ANY MATTER ARISING IN CONNECTION HEREWITH.

14.MODIFICATION OF AGREEMENT. No modification or waiver of any provision of this Agreement, nor any consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by HPT, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstances.

15.WAIVER OF RIGHTS BY HPT. Neither any failure nor any delay on HPT’s part in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise, or the exercise of any other right, power or privilege.

16.SEVERABILITY. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Agreement shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

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17.ENTIRE CONTRACT. This Agreement constitutes the entire agreement between 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.

18.HEADINGS; COUNTERPARTS. Headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Agreement, it shall not be necessary to produce more than one of such counterparts.

19.REMEDIES CUMULATIVE. No remedy herein conferred upon HPT is intended to be exclusive of any other remedy, and subject to the limitations set forth in SECTION 9 above, each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

20.NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND THE GUARANTOR HEREBY AGREES THAT, THE NAME “HOSPITALITY 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 OF TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TRUST. ALL PERSONS DEALING WITH TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

21.EFFECTIVE DATE. This Agreement shall be of no force or effect unless and until the Effective Date occurs.

22.PR GUARANTY OBLIGATIONS. Guarantor acknowledges and agrees that at any time there is any amount due and otherwise payable under the PR Guaranty, HPT shall be entitled to treat any payment by Guarantor as a payment by the PR Tenant under the PR Guaranty and to the extent HPT so elects such payment shall not result in a reduction in the Outstanding Balance.

23.RESTATEMENT. This Agreement consolidates, supercedes, amends and restates in their entirety the Original Staybridge Guaranty and the Original Candlewood Guaranty.

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WITNESS the execution hereof under seal as of the date above first written.

					INTERCONTINENTAL HOTELS GROUP PLC
					By:	/s/ Richard Solomon
							Richard Solomon
							Director
					By:	/s/ Steve Porters
							Steve Porters
							Director
ACKNOWLEDGED AND AGREED:
HPT TRS IHG-1, INC.
By:			/s/ John G. Murray
John G. Murray
Vice President
HPT TRS IHG-2, INC.
By:		/s/ John G. Murray
John G. Murray
Vice President
HPT IHG PR, INC.
By:				/s/ John G. Murray
John G. Murray
President
HOSPITALITY PROPERTIES TRUST
By:	/s/ John G. Murray
John G. Murray
President

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EXHIBIT A

NEW CANDLEWOOD GUARANTY

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT (this “AGREEMENT”) is made and given as of                      , 20    , by INTERCONTINENTAL HOTELS GROUP PLC, a corporation organized and existing under the laws of England and Wales (the “GUARANTOR”), for the benefit of HPT TRS IHG-1, INC., a Maryland corporation (together with its successors and assigns, the “TENANT”), and HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust (together with its successors and assigns, “TRUST”; and Trust together with the Tenant, “HPT”).

W I T N E S S E T H :

WHEREAS, on February     , 2005, the Guarantor delivered to HPT that certain Amended and Restated Consolidated Guaranty Agreement (the “CONSOLIDATED GUARANTY”); and

WHEREAS, the New Portfolio Coverage Date (as such term is defined in the Consolidated Guaranty) has occurred and the Guarantor wishes to terminate its obligations the Consolidated Guaranty in accordance with Section 10 of the Consolidated Guaranty; and

WHEREAS, Section 10 of the Consolidated Guaranty requires, among other things, that the Guarantor deliver this Guaranty Agreement to HPT in order to terminate its obligations under the Consolidated Guaranty as aforesaid; and

WHEREAS, the termination of its obligations under the Consolidated Guaranty as aforesaid constitute a direct material benefit to the Guarantor;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.CERTAIN TERMS. Capitalized terms used and not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Management Agreement (as

hereinafter defined). The following terms as used in this Agreement shall have the meanings set forth below:

“ACCOUNTING PRINCIPLES” shall mean generally accepted accounting principles, as adopted in the United States of America, consistently applied or, if the Guarantor’s principal place of business is the United Kingdom, generally accepted accounting principles, as adopted in the United Kingdom, consistently applied.

“COLLATERAL AGENCY AGREEMENT” shall mean a written agreement, in form and substance reasonably acceptable to HPT, among HPT, the Guarantor and the Collateral Agent pursuant to which the Collateral Agent shall agree to hold any cash delivered to such Collateral Agent pursuant to the terms of this Agreement as collateral agent on behalf of HPT, as the same may be amended, restated, supplemented or otherwise modified from time to time with the consent of the parties thereto. Among other things, the Collateral Agency Agreement shall provide that (a) the Collateral Agent shall look solely to the Guarantor for any amounts owed to the Collateral Agent in connection with such agreement, (b) the Collateral Agent shall not offset any amount owed to the Collateral Agent against the cash delivered to it pursuant to the Collateral Agency Agreement and this Agreement, (c) the Collateral Agent shall hold such cash as trust funds and not commingle such cash with any assets of the Collateral Agent and (d) HPT shall be entitled to apply any cash collateral held by the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment.

“COLLATERAL AGENT” shall mean a bank or other financial institution reasonably acceptable to HPT having a rating of not less than BBB-/Baa3 rating from the Rating Agencies, which bank or other financial institution is the collateral agent under the Collateral Agency Agreement as such collateral agent may be replaced in accordance with the terms of the Collateral Agency Agreement.

“COVERAGE DATE” shall mean the date which is the day after the second (2nd) consecutive calendar year for which the Priority Coverage Ratio is equal to or exceeds 1.3.

“GUARANTEED OBLIGATIONS” shall mean the payment to Tenant of (a) all of the Owner’s First Priority as and when due under the Management Agreement determined without respect to Gross Revenue or Operating Profits and (b) any and all liquidated damages due to Tenant under the Management Agreement.

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“MANAGEMENT AGREEMENT” shall mean [that certain Amended and Restated Management Agreement, dated as of January     , 2005, between TRS1 and Manager] with respect to certain hotels being operated under the “Candlewood” brand] [that certain Management Agreement, dated as of October 27, 2003, between TRS1 and Manager], as the same may be amended, modified, supplemented, or otherwise altered from time to time.

“MANAGER” shall mean Intercontinental Hotels Group Resources, Inc.

“OUTSTANDING BALANCE” shall mean, from time to time, Fifty Million Dollars ($50,000,000), less the excess of the aggregate amount paid by the Guarantor under SECTION 3 hereof over the aggregate of any amounts reimbursed to the Guarantor pursuant to the terms of the Management Agreement.

“PROVIDE COLLATERAL” or “PROVIDED COLLATERAL” shall mean:

(a)delivery to HPT of (i) a Satisfactory Letter of Credit or (ii) cash in an amount equal to the then Outstanding Balance; or

(b)the deposit of cash equal to the then Outstanding Balance with the Collateral Agent to be held by the Collateral Agent in accordance with the Collateral Agency Agreement provided:(i) the Collateral Agency Agreement has been executed and delivered by the parties thereto; (ii) HPT has a perfected first priority security interest in any cash delivered to the Collateral Agent; (iii) HPT has received favorable opinions of counsel, in form and substance reasonably satisfactory to HPT, with respect to such perfected first priority interest, the valid existence and good standing of the other parties to the Collateral Agency Agreement, the due execution and delivery thereof by such other parties, the enforceability of the Collateral Agency Agreement against such parties, and that any cash held by the Collateral Agent pursuant to the Collateral Agency Agreement shall not be “property of the estate” of Collateral Agent should any event described in SECTIONS 17.1(a), (b) or (c) of the Management Agreement shall occur with respect to the Collateral Agent; or

(c)delivery to HPT of other collateral satisfactory to HPT in its good faith discretion to secure the Guaranteed Obligations;

provided, however, the Guarantor shall not be deemed to have Provided Collateral if at any time the Outstanding Balance

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exceeds the sum of (i) the then remaining balance drawable under the Satisfactory Letter of Credit or the balance of the cash deposited by the Guarantor hereunder, PLUS (ii) proceeds of any Satisfactory Letter of Credit or cash deposited hereunder, in either case, applied to the Guaranteed Obligations.

“RATING AGENCIES” shall mean, collectively, Standard’s & Poor’s Rating Services or its successor and Moody’s Investor Services, Inc. or its successors; PROVIDED, HOWEVER, if the Rating Agencies (i) cease operations without successors or (ii) cease to issue credit ratings, “Rating Agencies” shall mean a nationally recognized organization periodically issuing ratings of the financial strength and/or credit of United States domestic and international banking institutions reasonably agreed to by HPT and the Guarantor.

“REORGANIZATION” shall mean any merger, consolidation, reorganization, change of control or any transaction pursuant to which the Guarantor shall be or become a Subsidiary of any other Person.

“SATISFACTORY LETTER OF CREDIT” shall mean a clean irrevocable letter of credit in form and substance reasonably satisfactory to HPT in an amount equal to the Outstanding Balance issued by a bank with a credit rating of not less than A2/A (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents of such credit rating in HPT’s reasonable judgment) from the Rating Agencies, having an expiration date of not earlier than one year after the date on which it was issued and which permits for partial draws.

“SUBSTITUTE GUARANTOR” shall mean a Person who assumes the Guarantor’s obligations hereunder in accordance with the terms of SECTION 2.7 below and is either (a) a Person who satisfies the Rating Agencies’ requirements for a single purpose bankruptcy remote entity who has Provided Collateral or (b) a Person(s) with (i) a tangible net worth determined in accordance with the Accounting Principles not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.REPRESENTATIONS AND COVENANTS. The Guarantor represents, warrants, covenants and agrees that:

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2.1VALIDITY OF AGREEMENT. The Guarantor has duly and validly executed and delivered this Agreement; this Agreement constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors; and the execution, delivery and performance of this Agreement have been duly authorized by all requisite action of the Guarantor and such execution, delivery and performance by the Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which the Guarantor is a party or by which the Guarantor or any property or assets of the Guarantor is bound, or violate any provision of law applicable to the Guarantor, or any order, writ, injunction, judgement or decree of any court applicable to the Guarantor or any order or other public regulation of any governmental commission, bureau or administrative agency applicable to the Guarantor.

2.2PAYMENT OF EXPENSES. The Guarantor agrees, as principal obligor and not as guarantor only, to pay to HPT forthwith, upon demand, in immediately available Federal funds, all costs and expenses (including court costs and reasonable legal expenses) incurred or expended by HPT in connection with the enforcement of this Agreement, together with interest at the Interest Rate on amounts recoverable under this Agreement from the time such amounts become due until payment.

2.3REPORTS. The Guarantor shall timely deliver to HPT the Consolidated Financials required under the Management Agreement and otherwise comply with the terms of the Management Agreement applicable to it.

2.4FINANCIAL CONDITION OF GUARANTOR; STATUS OF GUARANTOR. So long as the Guarantor’s obligations under SECTION 3 below are outstanding, unless the Guarantor shall have Provided Collateral to secure its obligations hereunder:

(a)The Guarantor shall at all times maintain a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Five Hundred Million Dollars ($500,000,000) or if there has been a Reorganization, or if the Guarantor is not the originally named Guarantor, Seven Hundred Fifty Million Dollars ($750,000,000); and

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(b)The Guarantor shall not engage in any Reorganization unless following such Reorganization it has (i) a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars ($100,000,000) (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.5SECURITY. Upon the termination of the Guarantor’s obligations under SECTION 3 or if the excess of aggregate amount paid by the Guarantor under SECTION 3 over the aggregate of any amounts reimbursed to it pursuant to the terms of the Management Agreement equals not less than Fifty Million dollars ($50,000,000), HPT will return to the Guarantor any Satisfactory Letter of Credit previously delivered to HPT or any unapplied cash collateral then being held by HPT hereunder and shall direct the Collateral Agent to return any cash being held by it under the Collateral Agency Agreement to the Guarantor. HPT shall be entitled to draw upon any Satisfactory Letter of Credit delivered to it (a) for the full amount thereof if at any time there is less than thirty (30) days until the expiry date of such Satisfactory Letter of Credit; (b) for the full amount thereof if the bank that issued such Satisfactory Letter of Credit shall not have a credit rating of at least A/A2 (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents in HPT’s reasonable judgment) from the Rating Agencies and such satisfactory Letter of Credit shall not have been replaced within thirty (30) days with a new Satisfactory Letter of Credit delivered to HPT; or (c) to the extent and in the amounts then due and payable hereunder, if the Guarantor shall fail to pay or perform any of its obligations under this Guaranty in accordance with the terms hereof. HPT shall be entitled to apply any cash collateral held by it or the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment. Any cash collateral held by HPT shall not be commingled with its other funds, and shall be invested, at the Guarantor’s risk, in interest bearing investments reasonably acceptable to the Guarantor. Any interest on such cash collateral, and any losses in such investments, shall belong to IHG.

2.6LEGAL EXISTENCE. The Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. The Guarantor has appointed attorneys Alston & Bird LLP, having an address at 1201

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West Peachtree Street, Atlanta, Georgia 30309-3424, Attn: Managing Partner as its agent for service of process. The Guarantor acknowledges and agrees that service of process on such agent shall constitute service of process on Guarantor with respect to any and all claims hereunder or under any other Transaction Document.

2.7SUBSTITUTE GUARANTOR. The then Guarantor (the “DEPARTING GUARANTOR”) shall be released from obligations under SECTION 3 hereof on the following terms and conditions:

(a)a Substitute Guarantor shall assume pursuant to a written instrument satisfactory to HPT all of the Guarantor’s obligations hereunder; and

(b)HPT shall receive an opinion of counsel satisfactory to HPT with respect to, among other things, the existence and good standing of the Substitute Guarantor and the due execution, delivery and enforceability of such assumption.

Upon the satisfaction of the foregoing conditions and the expiration of all applicable preference or similar periods, HPT shall deliver a release to the Departing Guarantor of its obligations hereunder and the Substitute Guarantor shall be deemed the “Guarantor” hereunder. Further, if the Substitute Guarantor has Provided Collateral or has (i) a tangible net worth determined in accordance with the Accounting Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor), HPT shall return to the Departing Guarantor any letter of credit or cash delivered by the Departing Guarantor and held by HPT hereunder and shall direct the Collateral Agent to return to the Departing Guarantor any cash delivered by the Departing Guarantor and held by such Collateral Agent pursuant to the terms of the Collateral Agency Agreement.

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3.GUARANTEE.

(a)The Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which become due and payable during the term of the Management Agreement shall be paid in full when due and payable subject to any applicable cure periods, whether upon demand, at the stated or accelerated maturity thereof or upon any mandatory or voluntary prepayment pursuant to any Transaction Document, or otherwise.

(b)This guarantee is a guarantee of payment and not of collectibility and is absolute and in no way conditional or contingent. In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, subject to any applicable cure periods, the Guarantor shall, pay or cause to be paid to HPT the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Transaction Documents) or perform or cause to be performed such obligations in accordance with the Transaction Documents. Simultaneously with the giving of any notice of default to the Manager under the Management Agreement, Tenant shall give a copy of such notice to the Guarantor. Tenant shall accept any cure of such default by the Guarantor provided such cure is completed within the applicable cure period under the Management Agreement.

4.UNENFORCEABILITY OF GUARANTEED OBLIGATIONS, ETC. If the Manager is for any reason under no legal obligation to discharge any of the Guaranteed Obligations, or if any other moneys included in the Guaranteed Obligations have become unrecoverable from the Manager by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Transaction Document or any limitation on the liability of the Manager thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Agreement shall nevertheless remain in full force and effect in accordance with the terms set forth herein and shall be binding upon the Guarantor to the same extent as if the Guarantor at all times had been the principal debtor on all such Guaranteed Obligations.

5.ADDITIONAL GUARANTEES. This Agreement shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other

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guarantee or security or by any waiver, amendment, release or modification thereof.

6.CONSENTS AND WAIVERS, ETC. The Guarantor hereby acknowledges receipt of correct and complete copies of each of the Transaction Documents and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance therewith, and waives, to the extent the Guarantor lawfully may do so, (a) presentment, demand for payment, and protest of nonpayment, of any of the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance or a Manager Event of Default under any of the Guaranteed Obligations or the Transaction Documents, except as expressly provided in SECTION 3, (d) notice of the terms, time and place of any private or public sale of collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against the Manager or any other guarantor of the Guaranteed Obligations, under or pursuant to the Transaction Documents, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law.

7.NO IMPAIRMENT, ETC. The obligations, covenants, agreements and duties of the Guarantor under this Agreement shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to the Guarantor, or any waiver by HPT or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by the Manager or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the Transaction Documents or any indulgence in or the extension of the time for payment by the Manager or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Transaction Documents or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by the Manager or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal thereof, or the modification or amendment made with the consent of the Guarantor of any duty, agreement or obligation of the Manager or any other

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guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all the assets of the Manager or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting the Manager or any other guarantor or any assets of the Manager or any such other guarantor, or the release or discharge of the Manager or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law.

8.REIMBURSEMENT, SUBROGATION, ETC. The Guarantor hereby covenants and agrees that the Guarantor will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against the Manager or any other person with respect to the Guaranteed Obligations prior to the irrevocable payment in full of all amounts then due and owing but unpaid under the Management Agreement, and until the Guaranteed Obligations have been satisfied in full, the Guarantor shall not have any right of subrogation, and the Guarantor waives any defense it may have based upon any election of remedies by HPT which destroys the Guarantor’s subrogation rights or the Guarantor’s rights to proceed against the Manager for reimbursement, including, without limitation, any loss of rights the Guarantor may suffer by reason of any rights, powers or remedies of the Manager in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to HPT. Until all obligations of the Manager pursuant to the Transaction Documents shall have been irrevocably paid and satisfied in full, the Guarantor waives any right to enforce any remedy which HPT now has or may in the future have against the Manager, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by HPT. Nothing contained in this SECTION 8 shall limit any of Guarantor’s rights under the Management Agreement.

9.DEFEASANCE; GUARANTY LIMITATIONS. The Guarantor’s obligations under SECTION 3 shall terminate upon the first to occur of (a) the date on which the Guaranteed Obligations have been paid and performed in full and all other obligations of the Guarantor to HPT under this Agreement have been irrevocably satisfied in full and (b) the Coverage Date; PROVIDED, HOWEVER, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Manager), this Agreement, to the extent such payment is or must

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be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination. Notwithstanding anything contained in this Agreement to the contrary, in no event shall the Guarantor’s liability under SECTION 3 hereof exceed the sum of Fifty Million Dollars ($50,000,000) less (ii) the aggregate amount paid by the Guarantor under SECTION 3 in excess of the aggregate of any amounts reimbursed to it pursuant to the terms of the Management Agreement.

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 by hand, by telecopier with written acknowledgment of receipt (provided a copy thereof is sent by Federal Express or similar expedited commercial carrier for delivery on the next business day), 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 HPT to:

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]

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if to the Guarantor to:

Intercontinental Hotels Group PLC

67 Alma Road

Windsor

Berkshire SL4 3HD

ENGLAND

Attn: Company Secretary

Telecopier No. +44 1753 410101

with a copy to:

Intercontinental Hotels Resources Group, Inc.

Three Ravinia Drive

Suite 100

Atlanta, Georgia 30346

Attn:  Vice President, Asset Management

[Telecopier No. 770-604-5340]

(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.

11.SUCCESSORS AND ASSIGNS. Whenever in this Agreement, any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of the Guarantor which are contained in this Agreement shall inure to the benefit of HPT’s successors and assigns, including, without limitation, such holders, whether so expressed or not.

12.APPLICABLE LAW. Except as to matters regarding the internal affairs of HPT and issues of or limitations on any personal liability of the shareholders and trustees of HPT for obligations of HPT, as to which the laws of the State of Maryland shall govern, this Agreement and any other instruments executed and delivered to evidence, complete or perfect the transactions contemplated hereby shall be interpreted, construed, applied and enforced in accordance with the laws of New York applicable to contracts between residents of New York which are to be performed entirely within New York, regardless of (i) where any such instrument is executed or delivered; or (ii) where any payment or other performance required by any such

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instrument is made or required to be made; or (iii) where any breach of any provision of any such instrument 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 Massachusetts; or (vii) any combination of the foregoing.

All actions and proceedings arising out of or in any way relating to this Agreement shall be brought, heard, and determined exclusively in an otherwise appropriate federal or state court located within the State of New York. Guarantor hereby (i) submits to the exclusive jurisdiction of any New York federal or state court of otherwise competent jurisdiction for the purpose of any action or proceeding arising out of or relating to this Agreement and (ii) voluntarily and irrevocably waives, and agrees not to assert by way of motion, defense, or otherwise in any such action or proceeding, any claim or defense that it is not personally subject to the jurisdiction of such a court, that such a court lacks personal jurisdiction over Guarantor 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, Guarantor consents to service of process by registered mail, return receipt requested, or by any other manner provided by law.

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 ANY MATTER ARISING IN CONNECTION HEREWITH.

13.MODIFICATION OF AGREEMENT. No modification or waiver of any provision of this Agreement, nor any consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by HPT, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstances.

14.WAIVER OF RIGHTS BY HPT. Neither any failure nor any delay on HPT’s part in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or

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further exercise, or the exercise of any other right, power or privilege.

15.SEVERABILITY. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Agreement shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

16.ENTIRE CONTRACT. This Agreement constitutes the entire agreement between 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.

17.HEADINGS; COUNTERPARTS. Headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Agreement, it shall not be necessary to produce more than one of such counterparts.

18.REMEDIES CUMULATIVE. No remedy herein conferred upon HPT is intended to be exclusive of any other remedy, and subject to the limitations set forth in SECTION 9 above, each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

19.NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND THE GUARANTOR HEREBY AGREES THAT, THE NAME “HOSPITALITY 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 OF TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TRUST. ALL PERSONS DEALING WITH TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

20.EFFECTIVE DATE. This Agreement shall be of no force or effect unless and until the Effective Date occurs.

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WITNESS the execution hereof under seal as of the date above first written.

		INTERCONTINENTAL HOTELS GROUP PLC
		By:
			Its:
		By:
			Its:
ACKNOWLEDGED AND AGREED:
HPT TRS IHG-1, INC.
By:
	Its:
HOSPITALITY PROPERTIES TRUST
By:
	Its:

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EXHIBIT B

NEW STAYBRIDGE GUARANTY

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT (this “AGREEMENT”) is made and given as of                      , 20    , by INTERCONTINENTAL HOTELS GROUP PLC, a corporation organized and existing under the laws of England and Wales (the “GUARANTOR”), for the benefit of HPT TRS IHG-1, INC., a Maryland corporation (together with its successors and assigns, the “TENANT”), and HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust (together with its successors and assigns, “Trust”; and Trust together with the Tenant, “HPT”).

W I T N E S S E T H :

WHEREAS, on February     , 2005, the Guarantor delivered to HPT that certain Amended and Restated Consolidated Guaranty Agreement (the “CONSOLIDATED GUARANTY”); and

WHEREAS, the New Portfolio Coverage Date (as such term is defined in the Consolidated Guaranty) has occurred and the Guarantor wishes to terminate its obligations the Consolidated Guaranty in accordance with Section 10 of the Consolidated Guaranty; and

WHEREAS, Section 10 of the Consolidated Guaranty requires, among other things, that the Guarantor deliver this Guaranty Agreement to HPT in order to terminate its obligations under the Consolidated Guaranty as aforesaid; and

WHEREAS, the termination of its obligations under the Consolidated Guaranty as aforesaid constitutes a direct material benefit to the Guarantor;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.CERTAIN TERMS. Capitalized terms used and not otherwise defined in this Agreement shall have the meanings

ascribed to such terms in the Management Agreement. The following terms as used in this Agreement shall have the meanings set forth below:

“ACCOUNTING PRINCIPLES” shall mean generally accepted accounting principles, as adopted in the United States of America, consistently applied or, if the Guarantor’s principal place of business is the United Kingdom, generally accepted accounting principles, as adopted in the United Kingdom, consistently applied.

“COLLATERAL AGENCY AGREEMENT” shall mean a written agreement, in form and substance reasonably acceptable to HPT, among HPT, the Guarantor and the Collateral Agent pursuant to which the Collateral Agent shall agree to hold any cash delivered to such Collateral Agent pursuant to the terms of this Agreement as collateral agent on behalf of HPT, as the same may be amended, restated, supplemented or otherwise modified from time to time with the consent of the parties thereto. Among other things, the Collateral Agency Agreement shall provide that (a) the Collateral Agent shall look solely to the Guarantor for any amounts owed to the Collateral Agent in connection with such agreement, (b) the Collateral Agent shall not offset any amount owed to the Collateral Agent against the cash delivered to it pursuant to the Collateral Agency Agreement and this Agreement, (c) the Collateral Agent shall hold such cash as trust funds and not commingle such cash with any assets of the Collateral Agent and (d) HPT shall be entitled to apply any cash collateral held by the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment.

“COLLATERAL AGENT” shall mean a bank or other financial institution reasonably acceptable to HPT having a rating of not less than BBB-/Baa3 rating from the Rating Agencies, which bank or other financial institution is the collateral agent under the Collateral Agency Agreement as such collateral agent may be replaced in accordance with the terms of the Collateral Agency Agreement.

“COVERAGE DATE” shall mean the date which is the day after the second (2nd) consecutive calendar year for which the Priority Coverage Ratio is equal to or exceeds 1.3.

“GUARANTEED OBLIGATIONS” shall mean the payment to Tenant of (a) all of the Owner’s Priority as and when due under the Management Agreement determined without respect to Gross Revenue or Operating Profits and (b) any and all liquidated damages due to Tenant under the Management Agreement.

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“MANAGEMENT AGREEMENT” shall mean [that certain Amended and Restated Management Agreement, dated as of January     . 2005], between TRS1 and Manager, with respect to certain hotels being operated under the “Staybridge” brand] [that certain Management Agreement, dated as of July 1, 2003, between TRS1 and Manager] as the same may be amended, modified, supplemented, or otherwise altered from time to time.

“MANAGER” shall mean Intercontinental Hotels Group Resources, Inc.

“OUTSTANDING BALANCE” shall mean, from time to time, the Seventy Million Dollars ($70,000,000) less the excess of the aggregate amount paid by the Guarantor under SECTION 3 hereof over the aggregate amount reimbursed to the Guarantor pursuant to SECTION 10.1(l) of the Management Agreement.

“PROVIDE COLLATERAL” or “PROVIDED COLLATERAL” shall mean:

(a)delivery to HPT of (i) a Satisfactory Letter of Credit or (ii) cash in an amount equal to the then Outstanding Balance; or

(b)the deposit of cash equal to the then Outstanding Balance with the Collateral Agent to be held by the Collateral Agent in accordance with the Collateral Agency Agreement provided:(i) the Collateral Agency Agreement has been executed and delivered by the parties thereto; (ii) HPT has a perfected first priority security interest in any cash delivered to the Collateral Agent; (iii) HPT has received favorable opinions of counsel, in form and substance reasonably satisfactory to HPT, with respect to such perfected first priority interest, the valid existence and good standing of the other parties to the Collateral Agency Agreement, the due execution and delivery thereof by such other parties, the enforceability of the Collateral Agency Agreement against such parties, and that any cash held by the Collateral Agent pursuant to the Collateral Agency Agreement shall not be “property of the estate” of Collateral Agent should any event described in SECTIONS 17.1(a), (b) or (c) of the Management Agreement shall occur with respect to the Collateral Agent; or

(c)delivery to HPT of other collateral satisfactory to HPT in its good faith discretion to secure the Guaranteed Obligations;

provided, however, the Guarantor shall not be deemed to have Provided Collateral if at any time the Outstanding Balance exceeds the sum of (i) the then remaining balance drawable under

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the Satisfactory Letter of Credit or the balance of the cash deposited by the Guarantor hereunder, PLUS (ii) proceeds of any Satisfactory Letter of Credit or cash deposited hereunder, in either case, applied to the Guaranteed Obligations.

“PRIORITY COVERAGE RATIO” shall mean, for any period, the ratio of (a) the excess of Gross Revenue for such period over the sum of the amounts distributed or applied for such period pursuant to SECTIONS 10.1(a), (b), (e), (g), (h), (i), (k) AND (l) of the Management Agreement, to (b) the sum for such period of Owner’s Priority and Owner’s Percentage Priority.

“RATING AGENCIES” shall mean, collectively, Standard’s & Poor’s Rating Services or its successor and Moody’s Investor Services, Inc. or its successors; PROVIDED, HOWEVER, if the Rating Agencies (i) cease operations without successors or (ii) cease to issue credit ratings, “Rating Agencies” shall mean a nationally recognized organization periodically issuing ratings of the financial strength and/or credit of United States domestic and international banking institutions reasonably agreed to by HPT and the Guarantor.

“REORGANIZATION” shall mean any merger, consolidation, reorganization, change of control or any transaction pursuant to which the Guarantor shall be or become a Subsidiary of any other Person.

“SATISFACTORY LETTER OF CREDIT” shall mean a clean irrevocable letter of credit in form and substance reasonably satisfactory to HPT in an amount equal to the Outstanding Balance issued by a bank with a credit rating of not less than A2/A (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents of such credit rating in HPT’s reasonable judgment) from the Rating Agencies, having an expiration date of not earlier than one year after the date on which it was issued and which permits for partial draws.

“SUBSTITUTE GUARANTOR” shall mean a Person who assumes the Guarantor’s obligations hereunder in accordance with the terms of SECTION 2.7 below and is either (a) a Person who satisfies the Rating Agencies’ requirements for a single purpose bankruptcy remote entity who has Provided Collateral or (b) a Person(s) with (i) a tangible net worth determined in accordance with the Accounting Principles not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by,

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against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.REPRESENTATIONS AND COVENANTS. The Guarantor represents, warrants, covenants and agrees that:

2.1VALIDITY OF AGREEMENT. The Guarantor has duly and validly executed and delivered this Agreement; this Agreement constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors; and the execution, delivery and performance of this Agreement have been duly authorized by all requisite action of the Guarantor and such execution, delivery and performance by the Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which the Guarantor is a party or by which the Guarantor or any property or assets of the Guarantor is bound, or violate any provision of law applicable to the Guarantor, or any order, writ, injunction, judgement or decree of any court applicable to the Guarantor or any order or other public regulation of any governmental commission, bureau or administrative agency applicable to the Guarantor.

2.2PAYMENT OF EXPENSES. The Guarantor agrees, as principal obligor and not as guarantor only, to pay to HPT forthwith, upon demand, in immediately available Federal funds, all costs and expenses (including court costs and reasonable legal expenses) incurred or expended by HPT in connection with the enforcement of this Agreement, together with interest at the Interest Rate on amounts recoverable under this Agreement from the time such amounts become due until payment.

2.3REPORTS. The Guarantor shall timely deliver to HPT the Consolidated Financials required under the Management Agreement and otherwise comply with the terms of the Management Agreement applicable to it.

2.4FINANCIAL CONDITION OF GUARANTOR; STATUS OF GUARANTOR. So long as the Guarantor’s obligations under SECTION 3 below are outstanding, unless the Guarantor shall have Provided Collateral to secure its obligations hereunder:

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(a)The Guarantor shall at all times maintain a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Five Hundred Million Dollars ($500,000,000) or if there has been a Reorganization, or if the Guarantor is not the originally named Guarantor, Seven Hundred Fifty Million Dollars ($750,000,000); and

(b)The Guarantor shall not engage in any Reorganization unless following such Reorganization it has (i) a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars ($100,000,000) (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.5SECURITY. Upon the termination of the Guarantor’s obligations under SECTION 3 or if the excess of aggregate amount paid by the Guarantor under SECTION 3 over the aggregate amount reimbursed to it pursuant to Section 10.1(l) of the Management Agreement equals not less than Fifty Million dollars ($50,000,000), HPT will return to the Guarantor any Satisfactory Letter of Credit previously delivered to HPT or any unapplied cash collateral then being held by HPT hereunder and shall direct the Collateral Agent to return any cash being held by it under the Collateral Agency Agreement to the Guarantor. HPT shall be entitled to draw upon any Satisfactory Letter of Credit delivered to it (a) for the full amount thereof if at any time there is less than thirty (30) days until the expiry date of such Satisfactory Letter of Credit; (b) for the full amount thereof if the bank that issued such Satisfactory Letter of Credit shall not have a credit rating of at least A/A2 (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents in HPT’s reasonable judgment) from the Rating Agencies and such satisfactory Letter of Credit shall not have been replaced within thirty (30) days with a new Satisfactory Letter of Credit delivered to HPT; or (c) to the extent and in the amounts then due and payable hereunder, if the Guarantor shall fail to pay or perform any of its obligations under this Guaranty in accordance with the terms hereof. HPT shall be entitled to apply any cash collateral held by it or the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment. Any cash collateral held by HPT shall not be commingled with its other funds, and shall be invested, at the Guarantor’s risk, in interest bearing investments reasonably acceptable to the

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Guarantor. Any interest on such cash collateral, and any losses in such investments, shall belong to IHG.

2.6LEGAL EXISTENCE. The Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. The Guarantor has appointed attorneys Alston & Bird LLP, having an address at 1201 West Peachtree Street, Atlanta, Georgia 30309-3424, Attn: Managing Partner as its agent for service of process. Managing Partner as its agent for service of process. The Guarantor acknowledges and agrees that service of process on such agent shall constitute service of process on Guarantor with respect to any and all claims hereunder or under any other Transaction Document.

2.7SUBSTITUTE GUARANTOR. The then Guarantor (the “DEPARTING GUARANTOR”) shall be released from obligations under SECTION 3 hereof on the following terms and conditions:

(a)a Substitute Guarantor shall assume pursuant to a written instrument satisfactory to HPT all of the Guarantor’s obligations hereunder; and

(b)HPT shall receive an opinion of counsel satisfactory to HPT with respect to, among other things, the existence and good standing of the Substitute Guarantor and the due execution, delivery and enforceability of such assumption.

Upon the satisfaction of the foregoing conditions and the expiration of all applicable preference or similar periods, HPT shall deliver a release to the Departing Guarantor of its obligations hereunder and the Substitute Guarantor shall be deemed the “Guarantor” hereunder. Further, if the Substitute Guarantor has Provided Collateral or has (i) a tangible net worth determined in accordance with the Accounting Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor), HPT shall return to the Departing Guarantor any letter of credit or cash delivered by the Departing Guarantor and held by HPT hereunder and shall direct the Collateral Agent to return to the Departing Guarantor any cash delivered by the Departing Guarantor and held by such Collateral Agent pursuant to the terms of the Collateral Agency Agreement.

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3.GUARANTEE.

(a)The Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which become due and payable during the term of the Management Agreement shall be paid in full when due and payable subject to any applicable cure periods, whether upon demand, at the stated or accelerated maturity thereof or upon any mandatory or voluntary prepayment pursuant to any Transaction Document, or otherwise.

(b)This guarantee is a guarantee of payment and not of collectibility and is absolute and in no way conditional or contingent. In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, subject to any applicable cure periods, the Guarantor shall, pay or cause to be paid to HPT the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Transaction Documents) or perform or cause to be performed such obligations in accordance with the Transaction Documents. Simultaneously with the giving of any notice of default to the Manager under the Management Agreement, Tenant shall give a copy of such notice to the Guarantor. Tenant shall accept any cure of such default by the Guarantor provided such cure is completed within the applicable cure period under the Management Agreement.

4.UNENFORCEABILITY OF GUARANTEED OBLIGATIONS, ETC. If the Manager is for any reason under no legal obligation to discharge any of the Guaranteed Obligations, or if any other moneys included in the Guaranteed Obligations have become unrecoverable from the Manager by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Transaction Document or any limitation on the liability of the Manager thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Agreement shall nevertheless remain in full force and effect in accordance with the terms set forth herein and shall be binding upon the Guarantor to the same extent as if the Guarantor at all times had been the principal debtor on all such Guaranteed Obligations.

5.ADDITIONAL GUARANTEES. This Agreement shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other

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guarantee or security or by any waiver, amendment, release or modification thereof.

6.CONSENTS AND WAIVERS, ETC. The Guarantor hereby acknowledges receipt of correct and complete copies of each of the Transaction Documents and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance therewith, and waives, to the extent the Guarantor lawfully may do so, (a) presentment, demand for payment, and protest of nonpayment, of any of the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance or a Manager Event of Default under any of the Guaranteed Obligations or the Transaction Documents, except as expressly provided in SECTION 3, (d) notice of the terms, time and place of any private or public sale of collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against the Manager or any other guarantor of the Guaranteed Obligations, under or pursuant to the Transaction Documents, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law.

7.NO IMPAIRMENT, ETC. The obligations, covenants, agreements and duties of the Guarantor under this Agreement shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to the Guarantor, or any waiver by HPT or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by the Manager or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the Transaction Documents or any indulgence in or the extension of the time for payment by the Manager or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Transaction Documents or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by the Manager or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal thereof, or the modification or amendment made with the consent of the Guarantor of any duty, agreement or obligation of the Manager or any other

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guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all the assets of the Manager or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting the Manager or any other guarantor or any assets of the Manager or any such other guarantor, or the release or discharge of the Manager or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law.

8.REIMBURSEMENT, SUBROGATION, ETC. The Guarantor hereby covenants and agrees that the Guarantor will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against the Manager or any other person with respect to the Guaranteed Obligations prior to the irrevocable payment in full of all amounts then due and owing but unpaid under the Management Agreement, and until the Guaranteed Obligations have been satisfied in full, the Guarantor shall not have any right of subrogation, and the Guarantor waives any defense it may have based upon any election of remedies by HPT which destroys the Guarantor’s subrogation rights or the Guarantor’s rights to proceed against the Manager for reimbursement, including, without limitation, any loss of rights the Guarantor may suffer by reason of any rights, powers or remedies of the Manager in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to HPT. Until all obligations of the Manager pursuant to the Transaction Documents shall have been irrevocably paid and satisfied in full, the Guarantor waives any right to enforce any remedy which HPT now has or may in the future have against the Manager, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by HPT. Nothing contained in this SECTION 8 shall limit the Guarantor’s rights under SECTION 10.1(l) of the Management Agreement.

9.DEFEASANCE; GUARANTY LIMITATIONS. The Guarantor’s obligations under SECTION 3 shall terminate upon the first to occur of (a) the date on which the Guaranteed Obligations have been paid and performed in full and all other obligations of the Guarantor to HPT under this Agreement have been irrevocably satisfied in full and (b) the Coverage Date; PROVIDED, HOWEVER, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Manager), this Agreement, to the extent such payment is or must

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be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination. Notwithstanding anything contained in this Agreement to the contrary, the Guarantor’s liability under SECTION 3 hereof in the aggregate shall not exceed (a) for the period ending on December 31, 2005, (i) Fifty Million Dollars ($50,000,000) with respect to the portion of Owner’s Priority attributable to the Original Hotels and (ii) an additional Sixteen Million Dollars ($16,000,000) with respect to the portion of Owner’s Priority attributable to the Expansion Hotels, and (b) thereafter, Seventy Million Dollars ($70,000,000) with respect to the entire amount of Owner’s Priority; PROVIDED, HOWEVER, such liability shall be reduced by any advances made by Manager under Section 10.3 of the Management Agreement which Manager elects to be deemed advances hereunder pursuant to said Section and such liability shall be increased by any reimbursements made to the Guarantor pursuant to Section 10.1(l) of the Management Agreement.

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 by hand, by telecopier with written acknowledgment of receipt (provided a copy thereof is sent by Federal Express or similar expedited commercial carrier for delivery on the next business day), 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.

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(c)All such notices shall be addressed,

if to HPT to:

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]

if to the Guarantor to:

Intercontinental Hotels Group PLC

67 Alma Road

Windsor

Berkshire SL4 3HD

ENGLAND

Attn: Company Secretary

Telecopier No. +44 1753 410101

with a copy to:

Intercontinental Hotels Group, Inc.

Three Ravinia Drive

Suite 100

Atlanta, Georgia 30346

Attn:  Vice President, Asset Management

[Telecopier No. 770-604-5340]

(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.

11.SUCCESSORS AND ASSIGNS. Whenever in this Agreement, any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of

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the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of the Guarantor which are contained in this Agreement shall inure to the benefit of HPT’s successors and assigns, including, without limitation, such holders, whether so expressed or not.

12.APPLICABLE LAW. Except as to matters regarding the internal affairs of HPT and issues of or limitations on any personal liability of the shareholders and trustees of HPT for obligations of HPT, as to which the laws of the State of Maryland shall govern, this Agreement and any other instruments executed and delivered to evidence, complete or perfect the transactions contemplated hereby shall be interpreted, construed, applied and enforced in accordance with the laws of New York applicable to contracts between residents of New York which are to be performed entirely within New York, regardless of (i) where any such instrument is executed or delivered; or (ii) where any payment or other performance required by any such instrument is made or required to be made; or (iii) where any breach of any provision of any such instrument 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 Massachusetts; or (vii) any combination of the foregoing.

All actions and proceedings arising out of or in any way relating to this Agreement shall be brought, heard, and determined exclusively in an otherwise appropriate federal or state court located within the State of New York. Guarantor hereby (i) submits to the exclusive jurisdiction of any New York federal or state court of otherwise competent jurisdiction for the purpose of any action or proceeding arising out of or relating to this Agreement and (ii) voluntarily and irrevocably waives, and agrees not to assert by way of motion, defense, or otherwise in any such action or proceeding, any claim or defense that it is not personally subject to the jurisdiction of such a court, that such a court lacks personal jurisdiction over Guarantor 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, Guarantor consents to service of process by registered mail, return receipt requested, or by any other manner provided by law.

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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 ANY MATTER ARISING IN CONNECTION HEREWITH.

13.MODIFICATION OF AGREEMENT. No modification or waiver of any provision of this Agreement, nor any consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by HPT, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstances.

14.WAIVER OF RIGHTS BY HPT. Neither any failure nor any delay on HPT’s part in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise, or the exercise of any other right, power or privilege.

15.SEVERABILITY. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Agreement shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

16.ENTIRE CONTRACT. This Agreement constitutes the entire agreement between 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.

17.HEADINGS; COUNTERPARTS. Headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Agreement, it shall not be necessary to produce more than one of such counterparts.

18.REMEDIES CUMULATIVE. No remedy herein conferred upon HPT is intended to be exclusive of any other remedy, and subject to the limitations set forth in SECTION 9 above, each and every remedy shall be cumulative and shall be in addition to every

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other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

19.NONLIABILITY OF TRUSTEES. THE DECLARATION OF TRUST ESTABLISHING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND THE GUARANTOR HEREBY AGREES THAT, THE NAME “HOSPITALITY 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 OF TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TRUST. ALL PERSONS DEALING WITH TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

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WITNESS the execution hereof under seal as of the date above first written.

		INTERCONTINENTAL HOTELS GROUP PLC
		By:
			Its:
ACKNOWLEDGED AND AGREED:
HPT TRS IHG-1, INC.
By:
	Its:
HOSPITALITY PROPERTIES TRUST
By:
	Its:

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EX-10.24

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

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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

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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

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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

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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

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24.24	Currency
24.25	Independent Covenants

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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

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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

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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

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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

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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.

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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

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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

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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

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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.

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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.

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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.

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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;

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(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

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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.

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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.

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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.

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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.

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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).

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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

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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

2.1ENGAGEMENT 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

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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.

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(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

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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.

2.2ADDITIONAL 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.

2.3USE 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.

2.4RIGHT 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.

2.5NO 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)

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(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.

2.6CONDITION 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.

2.7NON-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

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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

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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).

2.8NO 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

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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

3.1TERM. 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.

3.2RENEWAL 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

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(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.

3.3OWNER’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

4.1COVENANTS 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.

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4.2NON-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.

4.3FINANCING.

(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;

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(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)

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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

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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.

4.4SALE 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.

4.5SALE 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.

4.6THE 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.

4.7RESTRICTED 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

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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

5.1WORKING 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

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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.

5.2RESERVE 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

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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.

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(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,

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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.

5.3ADDITIONAL 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.

5.4OWNERSHIP 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.

5.5NO 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.

5.6POOLED 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.

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ARTICLE 6

BRAND STANDARDS AND MANAGER’S CONTROL

6.1BRAND 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.

6.2MANAGER’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.

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

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ARTICLE 7

OPERATION OF THE HOTEL

7.1PERMITS. 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.

7.2EQUIPMENT 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.

7.3PERSONNEL.

(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

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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.

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(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.

7.4SALES, 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;

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(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.

7.5RESERVATION 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;

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(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.

7.6MAINTENANCE 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.

7.7MATERIAL 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

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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.

7.8LIENS; 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

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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.

7.9REAL 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.

7.10GST 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.

7.11CONTEST. 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

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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.

7.12PRIVACY. 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

8.1ACCOUNTING 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

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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

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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.

8.2YEARLY 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

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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

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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.

8.3BANK 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.

8.4CONSOLIDATED 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

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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

9.1MANAGEMENT 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

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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.

9.2SYSTEM 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

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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

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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

10.1DISBURSEMENT 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

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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

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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.

10.2RESIDUAL 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.

10.3OWNER’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

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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.

10.4OWNER’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.

10.5OWNER’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.

10.6NO 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.

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10.7CALCULATION 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.

10.8AMOUNTS 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.

10.9ALLOCATION 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.

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

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ARTICLE 11

CERTAIN OTHER SERVICES

11.1OPTIONAL 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.

11.2PURCHASING. 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

12.1SIGNS. 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.

12.2SYSTEM 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.

12.3SYSTEM 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.

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(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.

12.4OTHER 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.

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ARTICLE 13

INSURANCE

13.1INSURANCE 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;

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(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.

13.2INSURANCE 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

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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.

13.3INSURANCE 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,

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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.

13.4INSURANCE 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.

13.5MANAGER’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

14.1INDEMNIFICATION. 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.

14.2WAIVER 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

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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.

14.3SURVIVAL. 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

15.1TERMINATION.

(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:

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(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.

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15.2RESTORATION.

(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).

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ARTICLE 16

CONDEMNATION

16.1TOTAL 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

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(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.

16.2PARTIAL 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.

16.3TEMPORARY 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.

16.4ANAHEIM 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

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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.

16.5EFFECT 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

17.1MANAGER 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

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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.

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(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.

17.2REMEDIES 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

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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.

17.3OWNER 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.

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

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(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

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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

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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

18.1PROCEDURE.

(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.

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	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.

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ARTICLE 19

RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS

19.1RELATIONSHIP. 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.

19.2FURTHER 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

21.1ASSIGNMENT.

(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

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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

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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.

21.2BINDING 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

22.1MEMORANDUM 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

23.1OPERATION 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.

23.2EXTENSION 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,

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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

24.1TRADE 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

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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.

24.2ENVIRONMENTAL 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

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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.

24.3AUTHORIZATION. 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.

24.4SEVERABILITY. 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

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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.

24.5MERGER. 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.

24.6FORMALITIES. 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.

24.7CONSENT 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.

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(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.

24.8PERFORMANCE 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.

24.9ATTORNEYS’ 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.

24.10SECTION 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.

24.11DOCUMENTS. 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.

24.12NO 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.

24.13NO 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

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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.

24.14REIT 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.

24.15FURTHER 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;

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(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.;

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(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.

24.16ADVERSE 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

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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.

24.17ADVERSE 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

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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.

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(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.

24.18COMMERCIAL 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

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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.

24.19NONLIABILITY 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.

24.20ARBITRATION.

(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

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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

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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.

24.21ESTOPPEL 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.

24.22CONFIDENTIALITY.

(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

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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.

24.23HOTEL 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.

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24.24CURRENCY.

(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.

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

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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

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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

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HH HPTCW II PROPERTIES LLC
By:	/s/ John G. Murray
		John G. Murray
		President

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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.

EX-10.25

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

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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

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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

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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

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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

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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.

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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,

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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.

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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

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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.

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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

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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

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(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

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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

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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

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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.

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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

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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.

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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

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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

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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

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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

2.1PROPERTY. 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”);

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(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.

2.2CONDITION 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.

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

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2.4EXTENDED 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

3.1RENT. 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

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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.

3.1.1MINIMUM 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.

3.1.2ADDITIONAL 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

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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

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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.

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

3.1.3ADDITIONAL 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

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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.

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(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.

3.1.4REIMBURSEMENT 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.

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

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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.

3.3NET 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.

3.4NO 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

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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.

3.5WAIVER. 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

4.1PERMITTED 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.

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4.1.2NECESSARY 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.

4.1.3LAWFUL 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.

4.2COMPLIANCE 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.

4.3ENVIRONMENTAL MATTERS.

4.3.1RESTRICTION 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

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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.

4.3.2INDEMNIFICATION 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

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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.

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

ARTICLE 5

MAINTENANCE AND REPAIRS

5.1MAINTENANCE AND REPAIR.

5.1.1TENANT’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

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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.

5.1.2FF&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

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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

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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

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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.

5.1.3LANDLORD’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.

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(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).

5.1.4NONRESPONSIBILITY 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.

5.2TENANT’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.

5.3AT END OF TERM.

5.3.1YIELD 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

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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

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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.

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(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.

5.3.2PURCHASE 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.

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

5.4TENANT 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.

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ARTICLE 6

IMPROVEMENTS, ETC.

6.1MATERIAL 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.

6.2EMERGENCY 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.

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6.3NO 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

7.1LIENS. 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.

7.2LANDLORD’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.

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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.

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ARTICLE 9

INSURANCE AND INDEMNIFICATION

9.1GENERAL 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

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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.

9.2REPLACEMENT 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.

9.3WAIVER 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

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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.

9.4FORM 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.

9.5BLANKET 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

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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.

9.6NO 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.

9.7INDEMNIFICATION 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

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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

10.1INSURANCE 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.

10.2DAMAGE OR DESTRUCTION.

10.2.1DAMAGE 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

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

10.2.2PARTIAL 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.

10.2.3INSUFFICIENT 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.

10.2.4DISBURSEMENT 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

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(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.

10.3DAMAGE 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)

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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.

10.4TENANT’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.

10.5RESTORATION 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.

10.6NO 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.

10.7WAIVER. 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.

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ARTICLE 11

CONDEMNATION

11.1TOTAL 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.

11.2PARTIAL 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

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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.

11.3ABATEMENT 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.

11.4TEMPORARY 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

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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.

11.5CONDEMNATION 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.

11.6ALLOCATION 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

12.1EVENTS 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

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(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

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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.

12.2REMEDIES.  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

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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

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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.

12.3WAIVER. 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.

12.4APPLICATION 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.

12.5LANDLORD’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.

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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

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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

15.1SUBLETTING 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

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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.

15.2REQUIRED 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

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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.

15.3PERMITTED 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

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to the date on which Tenant proposes to enter into any sublease or concession, Tenant shall provide a copy thereof to Landlord.

15.4SUBLEASE 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.

15.5PERMITTED 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.

15.6SALE 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

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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

18.1GRANT 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,

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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.

18.2EXERCISE 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.

18.3PERMITTED ENCUMBRANCES.  Any agreements entered into in accordance with SECTION 18.1 shall be deemed a Permitted Encumbrance.

ARTICLE 19

HOTEL MORTGAGES

19.1LANDLORD 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

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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

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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.

19.2NOTICE 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

20.1LIMITATION 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

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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.

20.2NO 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.

20.3REMEDIES 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.

20.4SEVERABILITY.  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.

20.5ACCEPTANCE OF SURRENDER.  No surrender to Landlord of this Agreement or of the Property or any part thereof, or of any

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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.

20.6NO 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.

20.7CONVEYANCE 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.

20.8QUIET 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.

20.9RECORDATION OF LEASE.  This Agreement shall be recorded in the form of a Deed of Lease, a memorandum of lease

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or such other abbreviated form as may be recordable at the Puerto Rico Registry of Property.

20.10NOTICES.

(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]

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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.

20.11TRADE 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

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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.

20.12CONSTRUCTION.  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.

20.13COUNTERPARTS; 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.

20.14APPLICABLE 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

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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.

20.15RIGHT 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.

20.16NONRECOURSE. 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.

20.17ATTORNEYS’ FEES.  If any lawsuit or arbitration or other legal proceeding arises in connection with the

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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.

20.18SECURITIES 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.

20.19ARBITRATION.

(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

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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.

20.20TAX 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

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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.

20.21COOPERATION.  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.

20.22PRIVATE 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.

20.23AFFILIATED 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 17^th 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 16^th 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

EX-12.1

EXHIBIT 12.1

Hospitality Properties Trust

Computation of Ratio of Earnings to Fixed Charges

(in thousands, except ratio amounts)

	Year Ended December 31,
	2004			2003			2002			2001			2000
Net income	$	127,091		$	238,213		$	142,202		$	131,956		$	126,271
Fixed charges	50,393			44,536			42,424			41,312			37,682
Adjusted earnings	$	177,484		$	282,749		$	184,626		$	173,268		$	163,953
Fixed charges:
Interest on indebtedness and amortization of deferred finance costs	$	50,393		$	44,536		$	42,424		$	41,312		$	37,682
Ratio of earnings to fixed charges	3.52		x	6.35		x	4.35		x	4.19		x	4.35		x

EX-12.2

EXHIBIT 12.2

Hospitality Properties Trust

Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions

(in thousands, except ratio amounts)

	Year Ended December 31,
	2004			2003			2002			2001			2000
Net income	$	127,091		$	238,213		$	142,202		$	131,956		$	126,271
Fixed charges	50,393			44,536			42,424			41,312			37,682
Adjusted earnings	$	177,484		$	282,749		$	184,626		$	173,268		$	163,953
Fixed charges and preferred distributions:
Interest on indebtedness and amortization of deferred finance costs	$	50,393		$	44,536		$	42,424		$	41,312		$	37,382
Preferred distributions	9,674			14,780			7,572			7,125			7,125
Total combined fixed charges and preferred distributions	$	60,067		$	59,316		$	49,996		$	48,437		$	44,807
Ratio of earnings to combined fixed charges and preferred distributions	2.95		x	4.77		x	3.69		x	3.58		x	3.66		x

EX-21.1

EXHIBIT 21.1

HOSPITALITY PROPERTIES TRUST

SUBSIDIARIES OF THE REGISTRANT

Name	State of Formation, Organization or Incorporation
Candlewood Jersey City – Urban Renewal, L.L.C.	New Jersey
HH HPT Suite Properties LLC	Delaware
HH HPTCW II Properties LLC	Delaware
HH HPTCY Properties LLC	Delaware
HH HPTMI III Properties LLC	Delaware
HH HPTRI Properties LLC	Delaware
HH HPTWN Properties LLC	Delaware
HPT CW MA Realty Trust	Massachusetts
HPT CW Overland Park LLC	Maryland
HPT CW Properties Trust	Maryland
HPT HSD Properties Trust	Maryland
HPT IHG Canada Corporation	New Brunswick
HPT IHG Canada Properties Trust	Delaware
HPT IHG GA Properties LLC	Maryland
HPT IHG PR, Inc.	Puerto Rico
HPT IHG Properties Trust	Maryland
HPT IHG-2 Properties Trust	Maryland
HPTLA Properties Trust	Maryland
HPT Smokey Mountain LLC	Delaware
HPT Suite Properties Trust	Maryland
HPT TRS IHG-1, Inc.	Maryland
HPT TRS IHG-2, Inc.	Maryland
HPT TRS MI-135, Inc.	Delaware
HPT TRS SPES II, Inc.	Maryland
HPT TRS, Inc.	Delaware
HPTCY Properties Trust	Maryland
HPTMI Hawaii, Inc.	Delaware
HPTMI II Properties Trust	Maryland
HPTMI Properties Trust	Maryland
HPTRI Properties Trust	Maryland
HPTSHC Properties Trust	Maryland
HPTSY Properties Trust	Maryland
HPTWN Properties Trust	Maryland

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-84064, 333-43573, 333-89307 and 333-109658) of Hospitality Properties Trust and in the related Prospectuses of our reports dated March 7, 2005, with respect to the consolidated financial statements and schedule of Hospitality Properties Trust, Hospitality Properties Trust management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Hospitality Properties Trust, included in the 2004 Annual Report (Form 10-K) for the year ended December 31, 2004.

	/s/ Ernst & Young LLP
Boston, Massachusetts
March 7, 2005

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, Barry M. Portnoy, certify that:

1.I have reviewed this annual report on Form 10-K of Hospitality Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2005	/s/ Barry M. Portnoy
	Barry M. Portnoy
	Managing Trustee

EX-31.2

EXHIBIT 31.2

Certification PURSUANT TO EXCHANGE ACT RULES 13a-14(A) AND 15d-14(A)

I, Gerard M. Martin, certify that:

1.I have reviewed this annual report on Form 10-K of Hospitality Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2005	/s/ Gerard M. Martin
	Gerard M. Martin
	Managing Trustee

EX-31.3

EXHIBIT 31.3

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, John G. Murray, certify that:

1.I have reviewed this annual report on Form 10-K of Hospitality Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2005	/s/ John G. Murray
	John G. Murray
	President and Chief Operating Officer

EX-31.4

EXHIBIT 31.4

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

I, Mark L. Kleifges, certify that:

1.I have reviewed this annual report on Form 10-K of Hospitality Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2005	/s/ Mark L. Kleifges
	Mark L. Kleifges
	Treasurer and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Sec. 1350

(Section 906 of the Sarbanes – Oxley Act of 2002)

In connection with the filing by Hospitality Properties Trust (the “Company”) of the Annual Report on Form 10-K for the year ending December 31, 2004 (the “Report”), each of the undersigned hereby certifies, to the best of his knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Barry M. Portnoy	/s/ John G. Murray
Barry M. Portnoy	John G. Murray
Managing Trustee	President and Chief
	Operating Officer
/s/ Gerard M. Martin	/s/ Mark L. Kleifges
Gerard M. Martin	Mark L. Kleifges
Managing Trustee	Treasurer and Chief
	Financial Officer

EX-99.1

Exhibit 99.1

HOSPITALITY PROPERTIES TRUST

CHARTER OF THE COMPENSATION COMMITTEE

Adopted January 11, 2005

I.  PURPOSE

The primary purpose and function of the Compensation Committee (the “Committee”) is to discharge the responsibilities of the Board of Trustees (the “Board”), or to assist the Board in discharging its responsibilities related to: (i) the review and approval of the advisory, management and administrative service agreement(s) of the Company; (ii) the evaluation of performance by the advisor, manager, and service provider under such advisory, management and administration agreement(s); (iii) the evaluation of the compensation paid under such advisory, management and administration agreement(s); (iv) the evaluation of services provided by the individual who serves as President of the Company; (v) the evaluation of compensation paid by the Company directly, if any, to any individual who serves as President or other executive officers; (vi) the evaluation of the services provided by the person serving as the director of internal audit for the Company; (vii) the review of compensation of the person serving as the director of internal audit for the Company; and (viii) the approval, evaluation and administration of all equity compensation plans of the Company.

The Committee is also responsible for producing an annual report on executive officer compensation for inclusion in the Company’s annual proxy statement in accordance with applicable rules and regulations.

II.  COMPOSITION

The Committee shall be comprised of three or more trustees as determined by the Board, each of whom shall meet the independence and experience requirements of the Rules of the New York Stock Exchange, subject to applicable exceptions permitted thereunder, and any other applicable laws and regulations.  In addition, all members of the Committee must qualify as “non-employee” trustees within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and must meet the “outside director” requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

The members of the Committee shall be elected by the Board or an authorized committee thereof, and vacancies on the Committee shall be filled as provided in the Bylaws.  Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

III.  RESPONSIBILITIES AND DUTIES

The following are activities of the Committee designed to promote the fulfillment of its functions as described in this Charter (these functions are set forth as a guide with the understanding that the Committee may diverge from this guide as appropriate given the circumstances):

1.The Committee shall annually review the terms of the Company’s advisory, management and administration agreement(s), evaluate the performance of parties under such agreement(s), and determine and approve extensions of, and/or changes to, such agreement(s).

2.The Committee shall annually consider goals and objectives relevant to compensation, if any, paid directly by the Company to its President, evaluate the performance of its President in light of those goals and objectives, and determine and approve compensation paid directly by the Company, if any, to its President based on this evaluation.

3.The Committeeshallannually make recommendations to the Board with respect to the compensation, if any, paid directly by the Company to executive officers other than the President and with respect to the Company’s

incentive share award plans and any other incentive compensation and equity based plans that are subject to the Board’s approval.

4.The Committee shall annually evaluate the performance of the person serving as the director of internal audit for the Company and determine his (her) compensation.

5.The Committee shall not approve any new arrangement or material modification to any existing arrangement in which the Company, directly or indirectly, extends or maintains credit, arranges for the extension of credit or renews an extension of credit, in the form of a personal loan to any trustee or executive officer of the Company.

6.The Committee shall produce a report on executive officer compensation as required by the Securities and Exchange Commission to be included in the Company’s annual proxy statement.

7.The Committee shall have the sole authority to retain and terminate any compensation consultant to be used to assist in the performance of its duties and shall have sole authority to approve fees and other retention terms of any such consultant.  The Committee shall also have authority to obtain advice and assistance from internal or external legal, accounting or other advisors in connection with its responsibilities and duties under this Charter.

8.The Committee shall make regular reports to the Board.

9.The Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.  The Committee shall annually review its own performance.

10.The Committee shall perform such other duties as the Board may assign to it from time to time.

IV.  GENERAL PROVISIONS

It is expected that the Committee will meet at least one time a year or more frequently as the circumstances require.  Meetings of the Committee shall be called and held, and the Committee may act by written consent in lieu of a meeting, as provided in the Bylaws.

The Committee is by this Charter delegated the powers of the Board necessary to carry out its purposes, responsibilities and duties provided in this Charter or reasonably related to those purposes, responsibilities and duties.

The Committee may form and delegate authority to subcommittees of one or more members when appropriate.  Any subcommittee shall be subject to this Charter.  The decisions of any subcommittees to which authority is delegated under this paragraph shall be presented to the full Committee at its next regularly scheduled meeting.

2

EX-99.2

Exhibit 99.2

HOSPITALITY PROPERTIES TRUST

GOVERNANCE GUIDELINES

Adopted March 10, 2004

As Amended January 11, 2005

The following Governance Guidelines (the “Guidelines”) have been adopted by the Board of Trustees (the “Board”) of Hospitality Properties Trust (the “Company”), with the recommendation of the Nominating and Governance Committee of the Board, to assist the Board in the exercise of its responsibilities.  These Guidelines reflect the Board’s commitment to monitor the effectiveness of policy and decision making both at the Board and management level.  These Guidelines are in addition to and are not intended to change or interpret any Federal or state law or regulation, the declaration of trust or Bylaws of the Company.  The Guidelines are subject to modification by the Board.

I. GENERAL QUALIFICATIONS STANDARDS FOR THE BOARD

Size of the Board.

The size and composition of the Board should be appropriate for effective deliberation of issues relevant to the Company’s businesses and related interests, and shall be determined in accordance with the Company’s Bylaws and applicable law.

Nomination and Selection of Trustees.

The Board as a whole will be responsible for developing and approving criteria for candidates for Board membership.  The Nominating and Governance Committee will be responsible for seeking candidates to become Board members, consistent with criteria approved by the Board, and for recommending candidates to the entire Board for selection for nomination as Board members.  The Board as a whole will be responsible for nominating individuals for election to the Board by the shareholders and for filling vacancies on the Board that may occur between annual meetings of the shareholders, but may not nominate any individual who has not been recommended by the Nominating and Governance Committee.

Nominees for trustee will be selected on the basis of their integrity, experience, achievements, judgment, intelligence, personal character, ability to make independent analytical inquiries, willingness to devote adequate time to Board duties, and likelihood that they will be able to serve on the Board for a sustained period.  In connection with the selection of nominees for trustee, due consideration will be given to the Board’s overall balance of diversity of perspectives, backgrounds and experiences.  The Nominating and Governance Committee will consider any suggestions offered by other trustees or shareholders (if made in accordance with the Nominating and Governance Committee Charter and the Bylaws) with respect to potential trustees.

Independence.

A majority of the trustees shall meet the New York Stock Exchange listing standards for independence.  The full Board will make affirmative determinations of the independence of each trustee.  Such determinations shall be made using the standards and processes approved and adopted from time to time by the full Board.  Such determinations, as well as the standards and processes applied in making them, may be disclosed to shareholders in accordance with the requirements of the New York Stock Exchange.

Limit on the Number of Other Board Memberships.

Trustees are expected to devote sufficient time to fulfill their responsibilities as trustees of the Company.  Accordingly, trustees may serve on the Board of other public companies, but shall limit such service to that reasonable number of companies which would not conflict with his or her responsibilities as a trustee of the Company.  No trustee who is a member of the Board’s Audit Committee shall sit on the audit committees

of more than three public companies (excluding investment management companies) without the Board first determining that such simultaneous service would not impair the ability of such trustee to effectively serve on the Board’s Audit Committee, and the Company shall disclose any such determination in its annual proxy statement.

Trustee Term Limits.

The Board does not favor term limits, due to the valuable expertise and knowledge that experienced Board members can bring to the Company, but the Board believes that it is important to monitor overall Board performance.

II. TRUSTEE RESPONSIBILITIES

The Board is elected by and accountable to the shareholders and is responsible for the strategic direction, oversight and control of the Company.  In carrying out its responsibilities, the Board will exercise sound, informed and independent business judgment.  The Board recognizes that to do so requires individual preparation by each trustee and group deliberation by the Board.  The Board’s responsibilities include both decision-making and oversight.

Among other things, the Board’s decision-making responsibilities include:

•review and approval of the Company’s mission, strategies, objectives and policies, as developed by management;

•the selection of nominees for Board membership;

•the selection and, through the Compensation Committee, evaluation of the Company’s President;

•the approval of material investments or divestitures, strategic transactions, and other significant transactions that are not in the ordinary course of the Company’s business; and

•the evaluation of the performance of the Board.

Among other things, the Board’s oversight responsibilities include monitoring:

•the Company’s compliance with legal requirements and ethical standards;

•the performance of the Company;

•the development of leaders and sound succession plans;

•the performance and effectiveness of the Company’s officers and its investment manager (to the extent not overseen by the Compensation Committee); and

•the Company’s financial reporting and disclosure processes and internal controls.

Among other things, the Board expects each trustee to:

•understand the Company’s business;

•regularly attend meetings of the Board and of the applicable committees and the Company’s annual meeting of shareholders;

•review and understand the materials provided in advance of meetings and any other materials provided to the Board from time to time;

•actively, objectively and constructively participate in meetings and the strategic decision-making process;

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•share his or her perspective, background, experience, knowledge and insights as they relate to the matters before the Board and its committees; and

•be reasonably available when requested to advise management on specific issues not requiring the attention of the full Board but where an individual trustee’s insights might be helpful to management.

III. BOARD MEETINGS AND COMMUNICATIONS

Meetings.

The Board generally meets at least four times a year, on dates selected and upon notice as provided by the Bylaws.

Agenda.

The Managing Trustees shall set the agenda for Board meetings.  Committee Chairs shall set the agenda for committee meetings.  Trustees and committee members may suggest agenda items and may raise other matters at meetings.  Whenever reasonably possible, agenda and other information and materials that are important to the Board’s understanding of the business to be conducted at a Board or committee meeting should be distributed to the trustees prior to the meeting, in order to provide ample time for review beforehand.

Executive Sessions of Non-Management Trustees.

The non-management trustees (within the meaning of the rules of the NYSE) generally should meet at least once a year in regularly scheduled executive sessions.  In the event the non-management trustees include any trustee which is not an independent trustee (within the meaning of rules of the NYSE), the independent trustees will, in addition, meet at least once in each year in an executive session.  The presiding trustee for purposes of leading non-management trustees sessions or independent trustees sessions will be the Chair of the Audit Committee unless the non-management trustees or independent trustees, as applicable, determine otherwise.

Communications with Board.

Security holders or other interested parties may communicate to the non-management trustees, the Board or individual trustees via submissions through the Company’s website or toll-free hot-line or written submissions.  Any communications addressed to the Board, individual trustees or other committees of the Board shall be received by the director of internal audit, then delivered by the director of internal audit to the appropriate party or parties promptly following the receipt of such communications, and such communications shall not be screened prior to review by the appropriate party.  The director of internal audit shall provide a copy of any written communications to the Audit Committee.

IV. BOARD COMMITTEES

Audit, Nominating and Governance and Compensation Committees.

The Board shall at all times have an Audit Committee, a Nominating and Governance Committee and a Compensation Committee.  These committees shall be composed entirely of independent trustees.  The duties and responsibilities for each of these committees shall be outlined in committee charters which shall be approved by the Board.  Each of these committees shall operate in accordance with applicable law, its charter, and the applicable rules of the Securities and Exchange Commission and the New York Stock Exchange.  Normally, each of these standing committees will report on its meetings and activities at the next regularly scheduled meeting of the full Board.

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Other Committees.

The Board may also establish such other committees as it deems appropriate and delegate to those committees any authority permitted by applicable law and the Company’s Bylaws as the Board sees fit, other than the responsibilities delegated to the existing committees in their charters or reserved to the full Board.  All standing Board committees shall be chaired by independent trustees.  Ad hoc pricing committees of the Board established in connection with offerings of securities will ordinarily consist of the Company’s managing trustees.

Assignment and Rotation of Committee Members.

The Board shall be responsible for the assignment of Board members to various standing committees.  The Board shall be responsible for appointing the members to the standing committees on an annual basis.  The Board may elect the chair for each committee or may delegate such election to the committee.  The Board shall annually review the responsibilities and membership for each standing committee.  Standing committee chairs should be rotated if rotation is likely to increase committee performance or facilitate committee work.

V. TRUSTEE ACCESS TO MANAGEMENT AND INDEPENDENT ADVISORS

Access to the Company’s Management.

Each trustee shall have complete access to the Company’s management and to the management of the Company’s investment manager.  The Company’s management and the management of the Company’s investment manager will make itself available to answer the trustees’ questions about the Company between meetings at reasonable times.

Independent Advisors.

The Board and Board committees may engage and consult with financial, legal, or other independent advisors as they may deem necessary, at the Company’s expense, without consulting or obtaining the approval of any officer of the Company in advance.

VI. TRUSTEE COMPENSATION

Each year the Board shall review the compensation paid to the members of the Board and determine both the amount of trustee compensation that should be paid and the allocation of that compensation between equity-based awards and cash.  Trustees who are employees of the Company or any of its subsidiaries or affiliates or the Company’s investment manager shall not receive any compensation for their services as trustees.

The Board believes it is important to align the interests of trustees with those of the shareholders and for trustees to hold equity ownership positions in the Company.  Accordingly, the Board believes that a portion of each independent trustee’s compensation should be paid in shares or other forms of compensation that correlate with the market value of the Company.  In determining the amount and composition of the compensation of the Company’s trustees, the compensation of trustees of other comparable enterprises, both with respect to size and industry, will be considered.

VII. TRUSTEE ORIENTATION AND CONTINUING EDUCATION

Trustee Orientation.

Materials and briefings are provided to new trustees, on an individual basis, to permit them to become familiar with the Company’s business, industry and governance practices.

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Continuing Education.

Each trustee is expected to maintain the necessary level of expertise to perform his or her responsibilities as a trustee.

VIII. MANAGEMENT AND ADVISOR EVALUATION AND SUCCESSION

Evaluation of Management.

The Compensation Committee shall develop and implement an annual process for evaluating the performance of the Company’s President and the investment manager.

Management Succession Planning.

The Nominating and Governance Committee should make an annual report to the Board on succession planning in the event of an emergency or the retirement, resignation or removal of the President, Treasurer, the managing trustees or the investment manager.  In the event of a succession, the entire Board will work with the Nominating and Governance Committee to nominate and evaluate potential successors.

IX.  RELATED PARTY TRANSACTIONS.

Neither the Company nor any of its subsidiaries shall enter into any transaction in which any managing trustee or executive officer, or any member of the immediate family of any managing trustee or executive officer, has or will have a direct or indirect material interest, unless that transaction has been disclosed or made known to the Board and the Board authorizes, approves, or ratifies the transaction by the affirmative vote of a majority of the disinterested trustees, even if the disinterested trustees constitute less than a quorum.

X. ANNUAL PERFORMANCE EVALUATION OF THE BOARD

Self-Evaluation by the Board.

Each year, the Board will conduct a self-evaluation to determine whether it and its committees are functioning effectively.  The Nominating and Governance Committee shall be responsible for overseeing the process for such evaluation.  The full Board will discuss the evaluation report to determine what, if any, action could improve Board and committee performance.

Evaluation of the Governance Guidelines.

The Board recognizes that these Guidelines must continue to evolve to meet the changing needs of the Company and its shareholders and changing requirements.  The Board, upon the recommendations of the Nominating and Governance Committee, after reviewing and reassessing the adequacy of these Guidelines, will determine whether any changes are appropriate.

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