0 valutazioniIl 0% ha trovato utile questo documento (0 voti)
14 visualizzazioni78 pagine
OBJECTION to DEBTORS' MOTION for the ENTRY of INTERIM and FINAL ORDERS AUTHORIZING, BUT not DIRECTING, the Debtors to CONTINUE to HONOR certain PREPETITION OBLIGATIONS. Midland loan Services, Inc. Represents 1. Midland pursuant to the Servicing Agreement services and administers that certain secured loan in the amount of not less than $825,402,542 plus interest, costs and fees
OBJECTION to DEBTORS' MOTION for the ENTRY of INTERIM and FINAL ORDERS AUTHORIZING, BUT not DIRECTING, the Debtors to CONTINUE to HONOR certain PREPETITION OBLIGATIONS. Midland loan Services, Inc. Represents 1. Midland pursuant to the Servicing Agreement services and administers that certain secured loan in the amount of not less than $825,402,542 plus interest, costs and fees
Copyright:
Attribution Non-Commercial (BY-NC)
Formati disponibili
Scarica in formato PDF, TXT o leggi online su Scribd
OBJECTION to DEBTORS' MOTION for the ENTRY of INTERIM and FINAL ORDERS AUTHORIZING, BUT not DIRECTING, the Debtors to CONTINUE to HONOR certain PREPETITION OBLIGATIONS. Midland loan Services, Inc. Represents 1. Midland pursuant to the Servicing Agreement services and administers that certain secured loan in the amount of not less than $825,402,542 plus interest, costs and fees
Copyright:
Attribution Non-Commercial (BY-NC)
Formati disponibili
Scarica in formato PDF, TXT o leggi online su Scribd
OBJECTION TO DEBTORS MOTION FOR THE ENTRY OF INTERIM
AND FINAL ORDERS AUTHORIZING, BUT NOT DIRECTING,
THE DEBTORS TO CONTINUE TO HONOR CERTAIN PREPETITION OBLIGATIONS INCURRED PURSUANT TO HOTEL MANAGEMENT AND SHARED SERVICES AGREEMENTS Page 1of 5 F-283394
HAYNES AND BOONE, LLP 1221 Avenue of the Americas, 26th Floor New York, New York 10020 Telephone: (212) 659-7300 Facsimile: (212) 884-8211 Lenard M. Parkins (NY Bar # 4579124) John D. Penn (pro hac vice pending) Mark Elmore (pro hac vice pending)
Attorneys for Midland Loan Services, Inc.
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In re: ) Chapter 11 ) INNKEEPERS USA TRUST, et al., ) Case No. 10-13800 (SCC) ) Debtors. ) Joint Administration Requested )
OBJECTION TO DEBTORS MOTION FOR THE ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING, BUT NOT DIRECTING, THE DEBTORS TO CONTINUE TO HONOR CERTAIN PREPETITION OBLIGATIONS INCURRED PURSUANT TO HOTEL MANAGEMENT AND SHARED SERVICES AGREEMENTS
Now Comes Midland Loan Services, Inc. (Midland) and in support of its Objection, represents 1. Midland pursuant to the Servicing Agreement services and administers that certain secured loan in the amount of not less than $825,402,542 plus interest, costs and fees (the Fixed Rate Mortgage Loan) 1 owed by certain of the Debtors. The Fixed Rate Mortgage Loan
1 The Fixed Rate Mortgage Loan was made pursuant to that certain loan agreement dated as of June 29, 2007 (as amended, the Fixed Rate Mortgage Loan Agreement), and is evidenced by (i) a certain Replacement Note A-1 and (ii) a certain Replacement Note A- 2, each dated as of August 9, 2007, and each in the original principal amount of
OBJECTION TO DEBTORS MOTION FOR THE ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING, BUT NOT DIRECTING, THE DEBTORS TO CONTINUE TO HONOR CERTAIN PREPETITION OBLIGATIONS INCURRED PURSUANT TO HOTEL MANAGEMENT AND SHARED SERVICES AGREEMENTS Page 2of 5 F-283394 is secured by forty-five (45) hotels and other property, including property constituting Midlands cash collateral generated from the hotel operations. 2 Midland is the largest secured creditor of the Debtors. Its debt is larger than all the debt (whether on a stand-alone or combined basis) existing in the Debtors other collateral pools. The Midland Debtors defaulted under the Fixed Rate Mortgage Loan Agreement on April 9, 2010 for non-payment of interest, and Midland became special servicer under the loan on April 19, 2010. 2. Midland objects to the Motion on a number of grounds, including that Island Hospitality, Inc. (Island) the hotel management company, has contractually agreed with the Debtors and the lender that it is not entitled to receive payments during any period of time that any amount due and owing to the Lender under the Note and the Loan Agreement is not paid when due. See Conditional Assignment of Management Agreement, paragraph 7 and Letter to Island dated May 11, 2010, attached hereto as Exhibits A & B, respectively. The agreement includes a subordination agreement (see paragraph 6) whereby Islands Management Agreement (and its rights thereunder) is subordinate to Midlands liens. This Court is compelled to recognize such a subordination agreement under 11 U.S.C. 510. None of the above provisions have been waived by Midland. Neither Island nor the Midland Debtors have requested a waiver
$412,701, 271. Replacement Note A-1 was assigned to LaSalle Bank National Association as trustee for the holders of the LB-UBS Commercial Mortgage Trust 2007- C6. Bank of America, N.A. is the successor-in-interest to LaSalle Bank National Association (the Fixed Rate Trustee). Replacement Note A-1 is currently held by the Fixed Rate Trustee. Replacement Note A-2 was assigned to and is currently held by the trustee for the holders of the LB-UBS Commercial Mortgage Trust 2007-C7. 2 The Fixed Rate Mortgage Loan is secured by cross-collateralized and cross-defaulted first priority mortgages, liens and security interests on forty-five (45) hotel properties and their contents and assets related thereto (collectively, the Midland Properties) and the other collateral, including all cash collateral as such term has meaning under section 363 of the Bankruptcy Code, generated by the Midland Debtors hotel and business operations with respect to the Midland Properties, as set forth in the Fixed Rate Mortgage Loan Agreement.
OBJECTION TO DEBTORS MOTION FOR THE ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING, BUT NOT DIRECTING, THE DEBTORS TO CONTINUE TO HONOR CERTAIN PREPETITION OBLIGATIONS INCURRED PURSUANT TO HOTEL MANAGEMENT AND SHARED SERVICES AGREEMENTS Page 3of 5 F-283394 of such provisions nor have they inquired as to the terms upon which a waiver might be granted and the provisions remain in full force and effect. 3. Presumably, the Debtors propose to fund part of the payments to Island from Midlands cash collateral. Based on the Conditional Assignment, Island is not entitled to any payment from or attributable to the Midland Properties. It is also possible that Island has similar agreements with other secured lenders. 4. Paragraph 10 of the Conditional Assignment notes that any Rents and other income and proceeds from the Properties (including, without limitation, credit card receivables) are to be deposited directly into an Eligible Account controlled by the Lender. It also includes Islands agreement to deposit any Rents received by [Island] into such account (or such other account as) Lender may specify in writing. If the Debtors seek the approval for Island to perform all of its obligations under the Management Agreement, Island must perform that obligation as well. 5. As discussed in Midlands Objection to Motion to Use Cash Collateral and Ronald Greenspans Declaration filed in support thereof, Midlands cash collateral was diverted by the Debtors in the Spring of this year. Midland had made numerous requests of the Debtors for the documentation used to effectuate the diversion and none has been produced. One fact Midland does know is that, when the lockboxes were restored in May 2010, Island signed that documentation. It is Midlands belief, therefore, that Island was actively involved in the initial diversion of Midlands cash collateral in derogation of its obligations under the Conditional
OBJECTION TO DEBTORS MOTION FOR THE ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING, BUT NOT DIRECTING, THE DEBTORS TO CONTINUE TO HONOR CERTAIN PREPETITION OBLIGATIONS INCURRED PURSUANT TO HOTEL MANAGEMENT AND SHARED SERVICES AGREEMENTS Page 4of 5 F-283394 Assignment, including its duty to notify Midland (or the Master Servicer) of a breach of the Conditional Assignment of which it had knowledge. Local Rule 9013-1(a) 6. This Objection includes citations to the applicable rules and statutory authorities as support and a discussion of their application to this Objection. Accordingly, Midland submits that this Objection satisfies Rule 9013-1(a) of the Local Rules for the Southern District of New York and respectfully requests the waiver of the need to file a supporting memorandum of law.
OBJECTION TO DEBTORS MOTION FOR THE ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING, BUT NOT DIRECTING, THE DEBTORS TO CONTINUE TO HONOR CERTAIN PREPETITION OBLIGATIONS INCURRED PURSUANT TO HOTEL MANAGEMENT AND SHARED SERVICES AGREEMENTS Page 5of 5 F-283394 Wherefore, Premises considered, Midland prays that upon hearing the Motion, that the Court will deny the same and grant Midland such other and further relief to which it might show itself justly entitled. Dated: July 19, 2010 New York, New York By: /s/ Lenard M. Parkins Lenard M. Parkins (NY Bar # 4579124) John D. Penn (pro hac vice pending) Mark Elmore (pro hac vice pending) HAYNES AND BOONE, LLP 1221 Avenue of the Americas, 26th Floor New York, NY 10020 Telephone: 212.659.7300 Facsimile: 212.918.8989
ATTORNEYS FOR MIDLAND LOAN SERVICES, INC.
EXHIBIT A CONDITIONAL ASSIGNMENT OF MANAGEMENT AGREEMENT THIS CONDITIONAL ASSIGNMENT OF MANAGEMENT AGREEMENT (this "Assignment") is made as of the 29th day of June, 2007, by EACH OF THE PERSONS SET FORTH IN SCHEDULE I ATTACHED HERETO, each a Delaware limited liability company, each having an address at c/o Apollo Investment Corporation, 9 West Sih Street, New York, New York 10019 (each individually and collectively, as the context requires, "Borrower") and GRAND PRIX FIXED LESSEE LLC, a Delaware limited liability company, having an address at c/o Apollo Investment Corporation, 9 West sih Street, New York, New York 10019 ("Operator") to LEHMAN ALI INC., a Delaware corporation, having an address at 399 Park Avenue, New York, New York 10022 (together with its successors and assigns, "Lender"), and is acknowledged and consented to by ISLAND HOSPITALITY MANAGEMENT, INC., a Florida corporation, having its principal place of business at 50 Cocoanut Row, Suite 200, Palm Beach, Florida 33480 ("Manager"). RECITALS: A. Lender has advanced a loan to Borrower (the "Loan") pursuant to that certain Loan Agreement of even date herewith among Borrower, Operator and Lender (such Loan Agreement, as same may be amended, supplemented, restated or otherwise modified from time to time, is hereinafter referred to as the "Loan Agreement"). B. The Loan is secured by, among other things, the Security Instruments (as defined in the Loan Agreement) which grant Lender a first lien encu.mbering the real properties more particularly described therein (said real properties being referred to ac. the "Land"; the Land, together with all structures, buildings and improvements now or hereafter located on the Land, "Properties") and is further evidenced by the Note (as defined in the Loan Agreement). C. Borrower and Operator are affiliated entities. Pursuant to certain operating leases (collectively, the "Operating Leases"), Borrower leases each Property to Operator, which in tum operates the Properties on Borrower's behal D. Pursuant to the Management Agreement described on Exhibit A attached hereto (the "Management Agreement"), Operator employed Manager exclusively to operate and manage the Properties and Manager is entitled to certain rights thereunder, including without limitation the right to payment of certain management fees payable thereunder (the "Management Fees"). As set forth herein, in the event any Operating Lease is terminated (other than in connection with the exercise of Lender's rights under the Loan Documents) Manager has agreed to recognize Borrower as the successor to Operator under the Management Agreement with respect to the related Property(ies). E. Lender requires as a condition to the making of the Loan that Borrower and Operator conditionally assign the Management Agreement (and their respective rights hereunder) and that Manager subordinate its interest under the Management Agreement in lien and payment to the Note, the Loan Agreement, the Security Instruments and the other Loan Documents as set forth below. 13698113.2.BUSINESS Return to Index F. All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Loan Agreement. AGREEMENT: For good and valuable consideration the parties hereto agree as follows: 1. Assignment ofManagement Agreement. As additional collateral security for the Loan, and subject to the terms and conditions of this Assignment, Borrower and Operator each hereby conditionally transfer, set over and assigns to Lender all of Borrower's and Operator's respective right, title and interest in and to the Management Agreement, said transfer and assignment to automatically become a present, unconditional assignment, at Lender's option, upon the occurrence of an Event of Default which continues beyond any applicable grace or cure period. 2. Borrower, Operator and Manager's Covenants. Borrower, Operator and Manager hereby covenant with Lender that during the term of this Assignment: (a) Borrower, Operator and/or Manager shall not transfer the responsibility for the management of the Properties to any other Person except in accordance with the Loan Agreement; (b) Borrower, Operator and/or Manager shall not modify or amend any of the material terms or provisions of the Management Agreement or surrender or terminate the Management Agreement except in accordance with the terms thereof and in accordance with the Loan Agreement; and (c) Borrower, Operator or Manager, as the case may be, shall, in the manner provided for in this Assignment, give notice to Lender of any notice received that Borrower, Operator or Manager, as the case may be, intends to terminate or surrender the Management Agreement or that Manager is otherwise discontinuing jts management of any of the Properties. 3. Termination. This Assignment and all of Lender's right, title and interest hereunder with respect to the Management Agreement shall terminate upon the earlier of (a) repayment in full of the Loan or (b) a Defeasance Event with respect to the Properties. Additionally, upon the release of any Individual Property from the lien of the applicable Security Instrument, the Management Agreement shall be deemed amended to release such Individual Property from the terms thereof and this Assignment shall automatically terminate with respect solely to such Individual Property upon the occurrence of such release. Upon any such release, the terms of the Management Agreement and this Assignment shall otherwise remain unmodified and in full force and effect (and at the request of any party hereto the applicable parties shall execute such documentation as is reasonably necessary to evidence such amendment to the Management Agreement). Furthermore, in connection with such release Operator and Manager shall enter into a separate replacement management agreement with respect to the Individual Property released, which agreement shall be on terms and conditions similar to the Management Agreement (with a term equal to the remaining balance of the term of the Management Agreement), provided that in the event Operator shall have provided Manager with at least 30 days prior written notice of its intent to terminate the Management Agreement with respect to such Individual Property, Operator shall be under no obligation to Manager to enter into any such replacement management agreement. 4. Estoppel. Manager represents and warrants to the best of its knowledge and belief with respect to the Management Agreement that as of the date hereof (a) the Management 2 Agreement is in full force and effect and has not been modified, amended or assigned other than pursuant to this Assignment, (b) none of Borrower, Operator or Manager are in default under any of the terms, covenants or provisions of the Management Agreement and there exists no event which, but for the passage of time or the giving of notice or both, would constitute an event of default under the Management Agreement, (c) none of Borrower, Operator or Manager have commenced any action or given or received any notice for the purpose of terminating the Management Agreement and (d) the Management Fees and all other sums due and payable to Manager under the Management Agreement have been paid in full except such amounts as are scheduled for payment in the next thirty (30) days. 5. Agreement by Borrower, Operator and Manager; Lender's Right to Replace Manager. Borrower, Operator and Manager hereby agree that if (a) Manager shall become insolvent or a debtor in any bankruptcy or insolvency proceeding, (b) there exists an Event of Default, or (c) there exists a default by Manager under the Management Agreement during the term of this Assignment that continues beyond any applicable notice and cure periods thereunder, then in any such event, at the option of Lender exercised by written notice to Borrower, Operator and Manager, Lender may exercise its rights under this Assignment and may immediately terminate the Management Agreement and require Manager to transfer its responsibility for the management of the Properties to a Qualified Manager pursuant to a Replacement Management Agreement. 6. Subordination of Management Agreement. The Management Agreement and any and all liens, rights and interests (whether choate or inchoate and including, without limitation, all mechanic's and materialmen's liens under applicable law) owed, claimed or held, by Manager in and to each Property, are and shall be in all respects subordinate and inferior to the liens and security interests created or to be created for the benefit of Lender, and securing the repayment of the Note and the obligations under the Loan Agreement, including, without limitation, those created under the Security Instruments and filed or to be filed of record in the public records maintained for the recording of mortgages in the jurisdiction where each Property is located, and all renewals, extensions, increases, supplements, amendments, modifications or replacements thereof. 7. Subordination of Management Fees. Borrower, Operator and Manager hereby agree that Manager shall not be entitled to receive any fee, commission or other amount payable to Manager under the Management Agreement (including, without limitation, any base management fees and performance-based incentive management fees) for and during any period of time that any amount due and owing Lender under the Note and the Loan Agreement is not paid when due; provided, however, that (i) Manager has been notified that such amounts have not been paid, (ii) Manager shall not be obligated to return or refund to Lender any fee, commission or other amount already received by Manager, and to which Manager was entitled under this Assignment; and (iii) subject to the provisions of Section 13 hereof, Manager shall be entitled to cease management of the properties and terminate the Management Agreement (as well as seek other available remedies) in the event that it is not paid the Management Fees due thereunder. 8. Consent and Agreement by Manager. Manager hereby acknowledges and consents to this Assignment and the terms and provisions of Section 5.1.18 ofthe Loan Agreement, a copy of which Manager acknowledges receiving. Manager agrees that it will act in conformity with the provisions of this Assignment and Section 5 .1.18 of the Loan Agreement and Lender's 3 rights hereunder or otherwise related to the Management Agreement. In the event that the responsibility for the management of any Property is transferred from Manager in accordance with the provisions hereof, Manager shall, and hereby agrees to, fully cooperate in transferring its responsibility to a new Qualified Manager and effectuate such transfer no later than thirty (30) days from the date the Management Agreement is terminated. Further, Manager hereby agrees that it shall, in the manner provided for in this Assignment, give Lender notice and an opportunity to cure any default or termination event in accordance with the provisions of Section 13 hereof. 9. Further Assurances. Manager further agrees to (a) execute such affidavits and certificates as Lender shall reasonably require to further evidence the agreements herein contained, (b) on request from Lender, furnish Lender with copies of such information as Borrower and Operator are entitled to receive under the Management Agreement and (c) cooperate with Lender's representative in any inspection of all or any portion of each Property. Manager hereby acknowledges that some, or all, permits, licenses and authorizations necessary for the use, operation and maintenance of the Properties (the "Permits") may be held by, or on behalf of, Manager. By executing this Assignment, Manager (i) agrees that it is holding or providing all such Permits for the benefit of Borrower and Operator and (ii) hereby agrees that as security for the repayment of the Debt by Borrower in accordance with the Loan Agreement, to the extent permitted by applicable law, Manager hereby grants to Lender a security interest in and to the Permits. Moreover, Manager hereby agrees that, upon an uncured Event of Default, it will assign the Permits to Lender if such Permits are assignable. If in connection with a foreclosure, deed in lieu of foreclosure or other exercise of Lender's remedies, Lender or its designee is unable to obtain one or Permits with respect to any or all of the Properties (any such Property, a "Permit Issue Property"), Lender may (without limitation of the provisions of Section 14 hereof) upon written notice to Manager require Manager to attorn to Lender under the Management Agreement with respect to any such Permit Issue Property (it being agreed that Lender may terminate the Management Agreement with respect to the balance of the Properties in accordance with the terms hereof). The attornment described in the preceding sentence, shall be in accordance with the provisions of Section 14 hereof, provided that Lender shall thereafter have the right to terminate the Management Agreement with respect to any Permit Issue Property upon not less than 30 days notice to Manager following receipt by Lender or its designee of the related Permit(s) or a determination that the same are not necessary for the operation of the applicable Permit Issue Property(ies) (in which event the Management Agreement and Manager's rights thereunder shall terminate on the date set forth in such notice). 10. Assignment ofProceeds. Manager acknowledges that, as further security for the Note, (a) Borrower and Operator have executed and delivered to Lender certain Loan Documents, assigning to Lender, among other things, all of Borrower's and Operator's right, title and interest in and to all of the revenues of the Properties and (b) pursuant to the terms of the Loan Agreement, Borrower and Operator have agreed that any Rents and other income and proceeds from the Properties (including, without limitation, credit card receivables) are to be deposited directly into an Eligible Account controlled by Lender. Manager further agrees to deposit any Rents received by Manager into such account (or such other account as) Lender may specify in writing. 11. Manager Not Entitled to Rents. Manager acknowledges and agrees that it is collecting and processing the Rents solely as the agent for Borrower and Operator and Manager has 4 no right to, or title in, the Rents. Notwithstanding anything to the contrary in the Management Agreement, Manager acknowledges and agrees that the Rents are the sole property of Borrower and Operator, encumbered by the lien of the Security Instruments and the other Loan Documents in favor of Lender. In any bankruptcy, insolvency or similar proceeding, Manager, or any trustee acting on behalf of Manager, waives any claim to the Rents other than as such Rents may be used to pay the fees and compensation of Manager pursuant to the terms and conditions of the Management Agreement. 12. Manager's Rights. Notwithstanding anything to the contrary contained herein, the parties hereto hereby agree that Manager (a) shall have no responsibility for the payment of any Operating Expenses (as defined in the Management Agreement) or similar costs (provided that Manager shall be responsible for the performance of certain obligations under the Management Agreement), and to the extent that any such costs have been advanced by Manager (including without limitation wages and payroll costs), Operator shall promptly reimburse the same to Manager pursuant to the Management Agreement; and (b) may (subject to the provisions of Section 13 hereof) terminate the Management Agreement in the event that Management Fees due thereunder are not fully paid as required thereby. 13. Notice and Cure. (a) Management Agreement Defaults; Termination Events. (1) Manager shall provide Lender with notice of any event of a default by Operator in the performance or observance of any of the terms and conditions of the Management Agreement or in the instance in which any event which would otherwise entitle Manager to terminate the Management Agreement shall arise (any such t;vent, a "termination event"), in accordance with Section 16 of this Agreement (the "First Notice"); which notice shall be provided simultaneous with any notice provided to Operator under the Management Agreement. In addition, in the event that any such default or termination event is not cured within the applicable cure period set forth in the Management Agreement, and Manager intends to exercise its remedy of terminating the Management Agreement in connection therewith, Manager shall send a second notice (the "Second Notice") to Lender in accordance with Section 16 hereof, stating Manager's intention to terminate the Management Agreement. Manager shall forbear from taking any action to terminate the Management Agreement for a period of thirty (30) days after the service of the First Notice, and for an additional period of sixty (60) days after the service of the Second Notice (if such Second Notice is required, as set forth above). Furthermore, Manager shall not terminate the Management Agreement in the event Lender shall (within the initial thirty (30) day time period set forth in the preceding sentence) have commenced and thereafter shall diligently pursue the cure of any such default. (2) No notice given by Manager to Operator shall be effective as a notice under the Management Agreement unless the applicable duplicate notice to Lender which is required under the immediately preceding paragraph (a) (either the First Notice or the Second Notice, as the case may be) is given to Lender in accordance with this Agreement. It is understood that any failure by Manager to give such a duplicate notice (either the First Notice or the Second Notice, as the case may be) to Lender shall not be a default by Manager either under this Agreement or under the Management Agreement, but rather shall operate only to void the 5 effectiveness of any such notice by Manager to Operator, as the case may be, under the Management Agreement. (3) Manager agrees to accept performance by Lender with the same force and effect as if same were performed by Operator, as the case may be, in accordance with the provisions and within the cure periods prescribed in the Management Agreement. Except as specifically limited in the foregoing paragraphs, nothing herein shall preclude Manager from exercising any of its rights or remedies against Operator with respect to any default by Operator under the Management Agreement. (b) Loan Defaults. Lender shall provide Manager with copies of any notices of any Event ofDefault under the Loan Documents in accordance with the provisions of Section 16 of this Agreement; which notice shall be provided simultaneous with (and by the same means as) any notice provided to Borrower or Operator under the Loan Documents. The failure to so provide such notice shall not preclude Lender from exercising any of its rights or remedies against Borrower and/or Operator with respect to any such Event of Default under the Loan Documents. 14. Attornment. (a) Manager hereby acknowledges that pursuant to the terms of the Loan Agreement and the Security Instruments, Lender or any purchaser at a foreclosure sale, deed in lieu of foreclosure or other similar transfer, as applicable, is granted certain rights to terminate any of the Operating Leases prior to or in connection with a foreclosure, deed in lieu of foreclosure or other similar transfer. In the event Lender or such as applicable, elects to terminate one or more Operating Leases either in connection with a foreclosure or as otherwise permitted at1.d does not then elect to terminate the Management Agreement pursuant to the provisions of Section 5 hereof, Manager shalJ attorn to Lender or such purchaser as "Lessee" under the Management Agreement, for the balance of the remaining term thereof (and any renewals thereof which may be effected in accordance with the Management Agreement) or until the Management Agreement is sooner terminated in accordance with the terms hereof or thereof, with the same force and effect as if Lender or such purchaser were the "Lessee" lmder the Management Agreement. Nothing contained in this Agreement shall be construed to obligate the Lender or any such purchaser to cure any default by Operator under the Management Agreement occurring prior to any date on which Lender or such purchaser shall succeed to the rights of "Lessee" under the Management Agreement. In addition, Lender and any such purchaser shall in no event (a) be liable to the Manager for any act or omission of any prior "Lessee" under the Management Agreement, (b) be subject to any offset or defense which the Manager might have against any prior "Lessee" under the Management Agreement, or (c) be liable to the Manager for any liability or obligation of any prior "Lessee" under the Management Agreement occurring prior to the date that the Lender or any such purchaser succeeds to the interest of"Lessee" under the Management Agreement. (b) In the event any Operating Lease is terminated by Borrower or Operating Lessee (as opposed to a termination of any Operating Lease by Lender in connection with Lender's exercise of its rights under the Loan Documents) other than in connection with a transfer of the Property to a new owner as contemplated in Section 3 hereof, Manager shall recognize and attorn to Borrower as Operator's successor under the Management Agreement as the same relates to the 6 applicable Property(ies), and all references herein with respect to such Property(ies) to Operator shall be deemed to refer to Borrower. None of the foregoing shall in any way alter, limit, modify or impair Lender's lien on the Properties and Lender's rights and the remedies hereunder and under any of the other Loan Documents; nor shall any of the foregoing be deemed a consent by Lender to the termination of any Operating Lease (it being understood and agreed that neither Borrower nor Operator is permitted to terminate any Operating Lease absent Lender's consent to be granted or withheld in accordance with the terms of the Loan Documents). 15. Governing Law. This Assignment shall be governed, construed, applied and enforced in accordance with Section 10.3 of the Loan Agreement. 16. Notices. All notices required or permitted hereunder shall be given and shall become effective as provided in Section 10.6 of the Loan Agreement. All notices to Manager shall be addressed as follows: Island Hospitality Management, Inc. 50 Cocoanut Row Palm Beach, FloridaJ3480 Attention: Roger Pollak Facsimile No.: (561) 804-0903 17. No Oral Change. This Assignment, and any provisions hereof, may not be modified, amended, waived, e x t e n d e ~ , changed, discharged or terminated orally or by any act or failure to act on the part of Manager, Borrower, Operator or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 18. Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of Manager, Borrower, Operator and Lender and their respective successors and assigns forever. 19. Inapplicable Provisions. If any term, covenant ur condition of this Assignment is held to be invalid, illegal or unenforceable in any respect, this Assignment shall be construed without such provision. 20. Headings, etc. The headings and captions of various paragraphs of this Assignment are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent ofthe provisions hereof. 21. WANER OF TRIAL BY JURY. EACH BORROWER, OPERATOR AND MANAGER HEREBY WANES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THIS ASSIGNMENT, THE NOTE, THE SECURITY INSTRUMENTS OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF 7 LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH. 22. Submission to Jurisdiction. With respect to any claim or action arising hereunder, each Borrower, Operator and Manager (a) irrevocably submits to the nonexclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York, New York, and appellate courts from any thereof, and (b) irrevocably waives any objection which it may have at any time to the laying on venue of any suit, action or proceeding arising out of or relating to this Assignment brought in any such court, irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 23. Duplicate Originals; Counterparts. This Assignment may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Assignment may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Assignment. The failure of any party hereto to execute this Assignment, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. 24. Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. 25. Secondary M a r k ~ t . Lender may sell, transfer and deliver the Note and assign the Loan Agreement, the Security Instruments, this Assignment and the other Loan Documents to one or more Investors in a Secondary Market Transaction. In connection with such Secondary Market Transaction, Lender may retain or assign responsibility for servicing the Loan, including the Note, the Loan Agreement, the Security Instruments, this Assignment and the other Loan Documents, or may delegate some or all of such responsibility and/or obligations to a Servicer including, but not limited to, any subservicer or master servicer, on behalf of the Investors. All references to Lender herein shall refer to and include any such Servicer to the extent applicable. 26. Miscellaneous. (a) Wherever pursuant to this Assignment (i) Lender exercises any right given to it to approve or disapprove, (ii) any arrangement or term is to be satisfactory to Lender, or (iii) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. (b) Wherever pursuant to this Assignment it is provided that Borrower and Operator pay any costs and expenses, such costs and expenses shall include, but not be limited to, reasonable legal fees and disbursements ofLender. 27. Joint and Several Liability. If Borrower consists of more than one Person, each Borrower shall be jointly and severally liable for the obligations of all Borrowers under this 8 Agreement. If Operator consists of more than one Person, each Operators shall be jointly and severally liable for the obligations of all Operators under this Agreement. [NO FURTHER TEXT ON THIS PAGE] 9 IN WITNESS WHEREOF the undersigned have executed this Conditional Assignment of Management Agreement as of the date and year first written above. BORROWER: GRAND PRIX BELMONT LLC GRAND PRIX CAMPBELL/SAN JOSE LLC GRAND PRIX EL SEGUNDO LLC GRAND PRIX FREMONT LLC GRAND PRIX MOUNTAIN VIEW LLC GRAND PRIX SAN JOSE LLC GRAND PRIX SAN MATEO LLC GRAND PRIX SILl I LLC GRAND PRIX SILl II LLC GRAND PRIX DENVER LLC GRAND PRIX ENGLEWOOD/DENVER SOUTH LLC GRAND PRIX SHELTON LLC GRAND PRIX WINDSOR LLC GRAND PRIX ALTAMONTE LLC GRAND PRIX FT. LAUDERDALE LLC GRAND PRIX NAPLES LLC GRAND PRIX ATLANTA LLC GRAND PRIX ATLANTA (PEACHTREE CORNERS) LLC GRAND PRIX LOMBARD LLC GRAND PRIX CHICAGO LLC GRAND PRIX SCHAUMBURG LLC GRAND PRIX WESTCHESTER LLC GRAND PRIX LEXINGTON LLC GRAND PRIX LOUISVILLE (RI) LLC GRAND PRIX COLUMBIA LLC GRAND PRIX GAITHERSBURG LLC GRAND PRIX GERMANTOWN LLC GRAND PRIX PORTLAND LLC GRAND PRIX LIVONIA LLC GRAND PRIX CHERRY HILL LLC GRAND PRIX MT. LAUREL LLC GRAND PRIX SADDLE RIVER LLC GRAND PRIX ISLANDIA LLC GRAND PRIX BINGHAMTON LLC GRAND PRIX HORSHAM LLC GRAND PRIX WILLOW GROVE LLC GRAND PRIX ADDISON (RI) LLC GRAND PRIX ARLINGTON LLC GRAND PRIX LAS COLINAS LLC GRAND PRIX RICHMOND LLC GRAND PRIX RICHMOND (NORTHWEST) LLC GRAND PRIX BELLEVUE LLC [Signature Page to Fixed Portfolio Conditional Assignment of Management Agreement] GRAND PRIX BOTHELL LLC GRAND PRIX LYNNWOOD LLC GRAND PRIX TUKWILA LLC, each a Delaware limited liability co any OPERATOR: GRAND PRIX FIXED LESSEE LLC a Delaware [SIGNATURES CONTINUE ON FOLLOWING PAGE] [Signature Page to Fixed Portfolio Conditional Assignment of Management Agreement] LENDER: [SIGNATURES CONTINUE ON FOLLOWING PAGE] [Signature Page to Fixed Portfolio Conditional Assignment of Management Agreement] MANAGER: ISLAND HOSPITALITY MANAGEMENT, INC., a Florida corporation By: a,.__-- [Signature Page to Fixed Portfolio Conditional Assigrunent ofManagement Agreement] 13698113.2.BUSINESS EXHIBIT A MANAGEMENT AGREEMENT HOTEL MANAGEMENT AGREEMENT THIS HOTEL MANAGEMENT AGREEMENT ("Agreement") is made and entered into this 2 ~ day of June 2007, by and between Grand Prix Fixed Lessee, LLC ("Lessee"), with a principal place of business at % Apollo Investment Corporation, 9 West 57th Street, New York, New York 10019, and Island Hospitality Management, Inc. ("Manager"), a Florida corporation with a principal place of business at 50 Cocoanut Way, Suite 100, Palm Beach, Florida 33480. PRELIMINARY STATEMENT A. Lessee is the lessee of the Hotel described in Schedule I. B. Manager is an independent contractor engaged in the management of hotels throughout the United States, and Manager is experienced in the various phases of hotel opetatiotl.S. C. Lessee desires to utilize the services and experience of Manager in connection with the operation of the Hotel, and Manager desires to render such services, all upon the terms and conditions hereinafter set forth. 1. APPOINTMENT AND TERM. 1.01 Appointment. Lessee hereby appoints Manager as manager of the Hotel with the obligation to direct, supervise, manage and operate the Hotel on the terms set forth herein. Lessee will not employ any other manager to manage the Hotel during the Term (as defined below); provided however Lessee shall have the right to appoint and directly pay all expenses (which shall not be deemed Operating Expenses) relating to a third party asset manager to provide asset management services to the Lessee or Grand Acquisition Trust, a Maryland real estate investment trust (the "REIT"). 1.02 Term. The term of this Agreement (the "Term") will commence at 12:01 A.M. on the date identified on Schedule I (the "Commencement Date") and terminate at 11:59 on the expiration date identified on Schedule I (the "Expiration Date"). Notwithstanding the foregoing, either party shall have the right to terminate this Agreement at any time upon thirty (30) days' prior written notice to other party. However, in the event that Manager exercises its right to terminate this Agreement in accordance with the foregoing, Lessee shall have the option of requiring the Manager to continue providing management services for up to one hundred eighty (180) days under the same fee structure as was in place immediately prior to the date notice of termination is delivered. 1.03 Management Authority. Manager shall have the sole and exclusive right and obligation to manage and operate the Hotel pursuant to the terms of this Agreementt and Manager agrees that it shall manage and ~ P a g e 1, operate the Hotel as a first class hotel in accordance with the standards of Franchisor, taking into account the size, location, and character of the Hotel. 2. HOTEL OPERATIONS. 2.01. Hotel Management Services. Manager shall provide the following management services throughout the Term of this Agreement subject to the availability of sufficient funds . therefor from Lessee, as the same are required by the terms of this Agreement. (A)Manager will manage the Hotel in accordance with its standards and policies for the operation of comparable facilities, including the standards and policies of Franchisor. Manager will perform.those activities typically performed by management companies operating comparable facilities, including those activities contained on Schedule II. (B) Manager shall have the right to establish all prices, price schedules, rates and rate schedules, rents, lease charges, an4 concession charges, all within the parameters of the approved Annual Plan. The Manager sfuill have the right to administer leases, license and concession agreements for all public space at the Hotel, including all stores, office space and lobby space. All such leases, licenses or concessions shall be in Lessee's name and may be. executed by Manager on Lessee's behalf; provided, however, any such lease, license or concession for a term in excess of one (1) year shall be approved by Lessee, which approval shall not be unreasonably conditioned, withheld or delayed. Manager shall have the right and the obligation to negotiate and enter into, on behalf of the Lessee, service contracts and licenses required in the ordinary course of business in operating the Hotel, provided, however, any contract for a term in excess of one (1) year shall be approved by Lessee, which approval shall not be unreasonably conditioned, withheld or. delayed. Upon termination of this Management Agreement, Manager shall assign any such service contracts and licenses to Lessee or the successor manager, who shall agree to assume responsibility for said items. Manager shall sign such documents as are reasonably necessary to effectuate the assignment and assumption, but Lessee shall be responsible for the cost of transferring any licenses and/or permits to Lessee or the successor manager. Notwithstanding the foregoing, upon termination of this Management Agreement, if Manager wishes to assign any national service contract, the Lessee or successor manager will only be obligated to assume such national contract if Lessee had previously reviewed and approved such national service contract. (C) Manager will keep the Hotel and all private roadways, sidewalks and curbs appurtenant thereto that are under Manager's control, including windows and plate glass, parking lots, HV AC, mechanical, electrical and plumbing systems and equipment (including conduit and ductwork), and non,load bearing interior walls, in good order and repair, except for ordinary wear and tear (whether or not the need for such repairs occurred as a result of Manager's use, any prior use, the elements or the age of the Hotel or portion thereof), and, except as otherwise provided in the provisions of this Agreement regarding hazard insurance, condemnation proceeds and Capital Replacements, with reasonable promptness, make all necessary and appropriate maintenance, repairs, replacements, and improvements thereto of every kind and nature; whether interior or exterior, ordinary or extraordinary, foreseen or unforeseen or arising by reason of a condition existing prior to the commencement of the Term of this Agreement (concealed or otherwise), or required by any governmental agency having jurisdiction over the Hotel in such manner as to minimize current and future Capital Replacements. The cost of all such maintenance and repairs shall be deemed an Operating Expense. All repairs shall, to the extent reasonably achievable, be at least equivalent in quality to the original work. Manager will not take or omit to take any action, the taking or omission of which might materially impair the value or the usefulness of the Hotel or any part thereof for its Primary !:ntended Use. (D) Manager shall regularly and consistently perform and shall maintain precise records of an ongoing preventative maintenance program, the cost of which shall be deemed an Operating Expense. Such preventative maintenance program shall be performed as frequently as is necessary to maintain the subject equipment or the. Hotel in a first class condition. Manager shall maintain the Hotel (interior and exterior), including all public and back of the house areas, at a high level of cleanliness in accordance with the Brand Standards of Franchisor. 2.02 Employees. (A)Manager, subject to Lessee's approval, will select a general manager and director of sales for the Hotel. Manager will select all other department heads for the Hotel and all personnel which Manager determines to be necessary for the operation of the Hotel (collectively "Employees"). All Employees will be employed at Lessee's cost and expense, but will be employees of Manager; provided that wages and related expenses will be deemed Operating Expenses and will be set forth in the approved Annual Plan. Manager aggress that neither the general manager nor the lead salesperson at the Hotel may be transferred to another hotel or similar property owned, leased or managed by the Manager which is not owned or leased by an Affiliate,. Parent or Subsidiary of the Lessee and the REIT, unless such transfer is first approved by Lessee. (B) Subject to the approved Annual Plan, all decisions with regard to the terms of employment, including but not limited to compensation, bonuses, fringe benefits, discharge, and replacement of all Employees, will be made and implemented directly by Manager or through the general manager, department heads or any of their designees under the supervision of Manager. (C) Manager will enroll the Employees in Manager's employee benefits program (the "Benefits Program"). Manager will administer the Benefits Program in the same manner that it administers the Benefits Program at the other hotels it operates. The Hotel will be charged as an Operating Expense the cost of such Benefits Program under the same formula used to calculate the cost charged to other Hotels Manager operates and. such costs shall be set forth in the approved Annual Plan. (D)Managet will respond to organizational efforts by unions and in negonanng and implementing union agreements. With respect to Manager's employees, Manager will control the terms of any union agreements and will not be required to take actions which will unreasonably increase Manager's liabilities hereunder. Upon termination of this Agreement, Lessee will assume Manager's obligations under any such union agreements with respect to the Hotel. (E) Manager shall pay from its own funds, and not from Gross Revenues, for any employment practices claim which (1) is a substantial violation of the standards of responsible labor relations as generally practiced by prudent operators of similar hotel properties in the general geographic area of the hotel or (2) is not the isolated act of an individual employee, but rather the direct result of corporate policies of Manager which either encourage or fail to discourage such conduct. Manager shall indemnify, defend, and hold harmless Lessee from and against any fines or judgments arising out of such conduct, and all litigation expenses (including reasonable attorneys' fees) incurred in connection with such a claim. 3. ANNUAL PLAN. 3.01 Preparation and Submission. Lessee and Manager acknowledge that the budgeting process is a critical factor to the successful operation of the . Hotel and also a key communication link between the parties. Manager will submit to Lessee, for its approval, not later than the dates indicated below the proposed annual plan for the Hotel (the "Annual Plan"), as well as a marketing plan. Manager shall submit to Lessee by no later than twenty (20) days after the Commencement Date of this Agreement for the first partial Operating Year and by no later than November 1 of each following Operating Year a draft of any and all marketing plans. Lessee acknowledges that the marketing plan for the first partial Operating Year shall not be a new plan but shall be a copy of the marketing plan in effect as of the Commencement Date. Manager shall submit to Lessee by no later than thirty (30) days after the Commencement Date of this Agreement for the first partial Operating Year and by no later than December 1 of each following Operating Year, a statement of the estimated Gross Revenues, Operating Expenses and Gross Operating Profit for the next Operating Year, including Manager's good faith reasonable assumptions as to payroll costs, room rates and occupancies, which will reflect the estimated results of the operation during each month of the Operating Year (the "Preliminary Operating Budget"). By no later than February 1 of each following Operating Year, Manager shall submit a revised and trued statement which takes into account Hotel operations for the prior month of December (the "Final Operating Budget"). The Annual Plan for each Operating Year shall include Manager's recommended outlays for the renovation and improvement of the Hotel, including the acquisition of fixed assets such furnishings, fixtures and equipment. In preparing all budgets and forecasts and the estimated profit and loss statements comprising the Annual Plan, Manager will use its good faith reasonable judgment and will base its estimates upon the most recent and reliable information available taking into account the location of the Hotel and Manager's experience in hotel operations. Manager expressly disclaims any warranty of or representations as to results of operations of the Hotel. 3.02 Lessee's Approval. Within thirty (30) days following submission of any components of the Annual Plan to Lessee, Lessee shall give Manager written notice either: (a) that Lessee approves such component of the Annual Plan; or (b) indicating with reasonable specificity the respects in which Lessee objects to such component of the Annual Plan; provided, however, that Lessee's approval rights shall not apply with respect to budget items required by law such as impositions (subject to the right of the Lessee to contest such impositions or other items). In the latter event, Lessee and Manager shall act promptly, reasonably and in good faith to seek to resolve Lessee's objections. In the event that Lessee and Manager fail to reach agreement with respect to any material component of the Operating Budget or Annual Plan within thirty (30) days after receipt of Lessee's written notice, Manager and Lessee shall refer any disputed Operating Budget matter to arbitration using procedures set forth in Section 15.02 below and each party shall endeavor to cause such arbitration to be completed as quickly as possible, but in any event not later than six (6) months following referral to arbitration. Pending the results of such arbitration or the earlier agreement of the parties, (i) as to any matters in the Final Operating Budget or Annual Plan which have not been agreed upon, the Hotel will be operated in a manner reflecting the prior Operating Year's actual results adjusted by multiplying said number by the number obtained by dividing the average CPI for the twelve months ended on September 30 of the most recently completed Operating Year by the average CPI for the twelve months ended on September 30 of the prior Operating year, until a new Operating Budget is adopted. In the event Lessee fails to deliver the notice set forth in this section, within the required time period, the component of the Annual Plan at issue shall be deemed approved. 3.03 Compliance with Annual Plan. Manager will use good faith reasonable efforts to comply with and operate the Hotel in accordance with the approved Annual Plan and will not incur any material additional expense or change materially the manner of operation of the Hotel without the written approval of Lessee unless an emergency occurs as provided in Section 3.05. 3.04 Agreement Limitations. Except as provided in Section 2.01, Manager will not enter into any commitment on behalf of Lessee requiring payments of amounts in excess of the amount set forth on Schedule I or requiring performance over a time period in excess of the period set forth on Schedule I without the prior written approval of Lessee, which shall not be unreasonably conditioned, withheld or delayed. Manager shall make no payments to Affiliates as Operating Expenses hereunder unless expressly set forth in the Operating Budget or otherwiSe expressly agreed to in writing by Lessee in advance, in either case, after full written disclosure by Manager to Lessee of the affiliation, competitive pricing and any other related information requested by Lessee. Manager may provide Hotel rooms at the Hotel on a complimentary basis without charge or other consideration to employees of Manager or its Affiliates visiting the Hotel from outside the area in which the Hotel is located to the extent such practice does not materially decrease profitability; provided, however, Manager shall not provide such rooms as compensation to parties providing materials or services to the Manager or an Affiliate of Manager and shall nor provide such complimentary rooms to its employees if the Hotel is more than 95% occupied (unless such employees are visiting the Hotel in furtherance of the management services contemplated by this Agreement). 3.05 Emergencies. The limitations of Section 3.04 do not apply to emergency repairs or emergency actions. For the purposes of this Section 3.05, an emergency means an unforeseen circumstance (including any unforeseen or unknown legal requirements, provided that such requirements would be reasonably unforeseeable or unknown to a prudent, experienced management company simUarly situated to Manager and possessing a high degree of management experience) that in the opinion of Manager requires immediate action which cannot be delayed in order tO tn.i.nirnize injury to the Hotel or injury to any person or property, provided that Manager shall give Lessee. immediate notice of any such emergency action. 4. HOTEL ACCOUNTS; MAINTENANCE OF MlNIMUM BALANCE. 4.01 Hotel Bank Accounts. Manager will select all banks with which the Hotel will conduct its various banking affairs, subject however, to Lessee's approval, which shall not be unreasonably conditioned, ~ t h h e l d or delayed. Manager will have no liability for any loss to Lessee as a result of any bank insolvency or failure or as a result of any negligence or misconduct of the Bank or its employees. All funds received in the operation of the Hotel will be deposited into one or more special accounts bearing the name of the Hotel (the "Hotel Accounts") in the banks so selected. Subject to the provisions of Section 7, all amounts in the Hotel Accounts are the property of Lessee. The Lessee's funds will not be co,mingled with funds of the Manager or funds of other Hotels managed by Manager which are not owned by affiliates of Lessee. Moreover, Lessee's funds will not be commingled with the funds of other Hotels owned by Lessee in the event that such commingling is forbidden by Lessee's lender, provided, however, that in the event that such prohibition causes Manager to incur material, recurring costs in connection with keeping such funds separate, . then such costs shall be charged to the Hotel as an Operating Expense. 4.02 Minimum Balance. Upon establishment of the Hotel Accounts, the sum set forth on Schedule I and designated as the Minimum Balance (the "Minimum Balance") will be deposited in the Hotel Accounts by Lessee and will be maintained by Lessee throughout the Term. Any additional funds necessary to maintain the Minimum Balance will be funded by Lessee no later than one (1) business day following receipt of a notice to that effect from Manager. 5. BOOKS AND RECORDS. 5.01. Maintenance of Books and Records. Manager will keep complete and adequate books of account and such other records as are necessary to reflect the results of the operation of the Hotel on a calendar year basis. Manager will keep the books and records for the Hotel in all material respects in accordance with GAAP or the Uniform System of Accounts, on an accrual basis. 5.02 Location; Examination and Inspection. , Page 6, Except for the books and records which may be kept in Manager's home office or other suitable location pursuant to the adoption of a central billing system or other centralized service, the books of account and all other records relating to or reflecting the operation of the Hotel will be the property of Lessee and will be kept at the Hotel. All books and records will be available to Lessee and its representatives upon reasonable request for examination, inspection and transcription. 5.03 Lessee to Receive all Books and Records Upon Termination. Upon any termination of this Agreement, all original books and records will be turned over to Lessee forthwith so as to ensure the orderly continuance of the operation of the Hotel, provided, however, Manager will at its expense be entitled to retain copies of the same. 5.04 Reports to Lessee. (A)Manager will deliver not later than the fifteenth (15th) day of each month: (i) a profit and loss statement in the form of that set forth in Schedule III showing the results of operation of the Hotel for the prior month and the year to date, with a comparison to the budgets contained in the then current Annual Plan and to prior year results; (ii) a current balance sheet; (iii) forecasts of occupancy, average daily rate (" ADR") and revenue pet available room ("REVP AR") for that month; and (iv) other reports similar to those produced by Manager or its Affiliates for hotels they manage. In addition Manager will provide Lessee with quarterly forecasts for Gross Revenues, Operating Expenses, and Gross Operating Profit for the remainder of the Operating Year. (B) Costs of a certified audit or any other reports by an independent certified public accountant selected by Lessee, if and when requested by Lessee, will be an expense borne by Lessee and shall not be deemed an Operating Expense. (C) At Lessee's request, Manager will further deliver financial reports required by third parties. All reasonable costs in producing these reports will be borne by Lessee and will be coordinated by Manager and shall not be deemed an Operating Expense. (D)At Lessee's request, Manager shall meet with Lessee via conference call or in person to discuss the operating results of the Hotel on a quarterly basis and will comply with all reasonable requests to meet with Lessee to discuss other issues. 5.05 Final Accounting. Upon termination of this Agreement for any reason, Manager will promptly deliver to Lessee, but will be permitted to retain copies of, the following: (A) A final accounting, reflecting the balance of income and expenses of the Hotel as of the date of termination; (B) Any balance or moneys in the Hotel Accounts, or elsewhere, held by Manager with respect to the Hotel (after payment or reservation with respect to all committed obligations), which balance will be distributed in accordance with the formula set forth in Section 6.01; and (C) All books and records of the Hotel (including data stored as electronic computer files), and all contracts, bookings, reservations, leases, receipts for deposits, unpaid bills, and other records, papers or documents which pertain to the Hotel, and duplicate copies of the personnel records ofEmployees (subject to applicable legal 5.06 Form of Reports. All reports will be in Manager's customary detail and form and will be transmitted electronically to Lessee. 6. MANAGEMENT FEES AND EXPENSES. 6.01 Management Fees. (A) Base Management Fee. In consideration of the services to be performed during the Term by Manager, Lessee shall pay Manager a periodic base management fee ("Base Management Fee") in the amount of two and one .. half percent (2.5%) of Gross Revenues for each month. Each such periodic fee shall be paid to Manager (or retained by Manager as provided below) at such time as the final monthly report for such month is submitted to Lessee pursuant to Section 5.04. (B) Incentive Management Fee. In addition to the Base Management Fee and in consideration of the services to be performed during the Term, Lessee shall pay Manager for each Year (or partial Year), an incentive fee ("Incentive Management Fee"), at the times and in the amounts designated on Schedule I. 6. 02 Costs and Expenses of the Hotel. In addition to the Management Fees set forth above, Lessee will reimburse Manager 1 on a monthly basis (unless otherwise provided), concurrently with the payment of the Base Management Fee, for all costs and expenses .incurred by Manager for Lessee's account in the ordinary course of business in accordance with the approved Annual Plan under the terms and provisions of this Agreement and will include, but not be limited to the following: (A)The salaries and wages, including costs of payroll taxes, bonuses, retirement plan contributions, fringe benefits, and related payroll items incurred with respect to Manager's employees assigned to the Hotel; 1 Salaries and wages to be paid pursuant to 6.02(A) shall not be deemed a reimbursement to Manager, per se but shall instead be deemed direct payments to Hotel employees by Lessee. (B) Expenses for shared services and purchases (equitably allocated to each hotel benefiting from the shared services or purchases in a manner consistent with Manager's allocation policy uniformly applied to all hotels which it manages) and reflected in the Annual Plan; (C) All reasonable travel expenses, meals and customary out of pocket expenses (i.e., telephone, fax and postage) for Manager's home office personnel to the extent directly allocable to the Hotel and not to other business for such home office personnel and the salaries of such personnel for such time as such personnel are located at the Hotel and are performing exclusive full time services for the benefit of the Hotel; (D) The Accounting Fee described on Schedule I. The reimbursement shall be paid out of Gross Revenues no later than the date of the payment of the Base Management Fee for any month. Manager shall retain the Base Management Fee each month, from Gross Revenues. 6.03 Purchasing, Rebates and Discounts. (A) Manager acknowledges _and understands that there will be active oversight by Lessee with respect to purchasing. Manager will have the right to purchase operating supplies and equipment necessary to operate all managed hotels. These costs will be in the approved Operating Budgets of each hotel. Lessee retains the right to review all national contracts that Manager may have with regards to the purchasing of operating supplies and equipment and may from time to time ask to have any or all of these contracts with competitive vendors of Lessee's choice, provided that any fees incurred in breaking such national contracts will be passed along to Lessee as an operating expense (provided such national contracts had been previously approved by Lessee; and further provided that such national contracts existing as of the Effective Date are hereby deemed approved by Lessee). (B) Lessee will have the unilateral right to choose specific vendors for the purchasing of capital and PIP items, provided that all such vendors and capital items comply with the Brand Standards of Franchisor. Subject to the foregoing, Manager shall use these vendors with regard to such activities and shall cooperate with such vendors in completing the projects in which they are involved. It is understood that Manager may suggest national vendors for capital or PIP projects. These_ vendors may be part of the competitive bidding system, but Lessee retains the unilateral right of choice with regards to such vendors (subject to the first sentence of this paragraph). (C) It is further understood that all rebates, or other concessions, that derive from any purchasing performed on behalf of Lessee by Manager in the course of the management of Lessee's properties for operating supplies and equipment, capital or PIP or any other expenditure where such consideration is given shall be returned to Lessee or such consideration will be used to lower the cost of the purchased items. Any such consideration must be reported and approved by Lessee and shall be allocated on a basis among all hotels managed by Manager which benefited from such rebates or concessions. 7. DISBURSEMENTS. 9 7.01. Priority of Payments. All Gross Revenues will be deposited in the Hotel Accounts as and when received. Manager is authorized to and will disburse on a current basis, on behalf of Lessee, funds from the Hotel Accounts (to the extent available) in the following order of priority: (A) Payment of payroll and payroll taxes and other employment costs identified in Section 6.02(A), including any sales and use taxes imposed on such costs; (B) Payment of all remaining sales and use taxes, including sales and use taxes on fees and reimbursements to Manager; (C) Payment of all other Operating Expenses; (D)Payment of the cost of the insurance required under Section 8 and rents under any Operating Leases; (E) Amounts in the Hotel Accounts which are in excess of the Minimum Balance. Lessee is solely responsible for and shall pay from its own funds any and all real and personal property taxes, other impositions and mortgage debt service payments for the Hotel. 8. INSURANCE. 8.01. Maintenance oflnsurance. Lessee shall at all times keep the Hotel insured with the kinds and amounts of insurance described in Section 8.03 below and in accordance with any mortgage and the Franchise Agreement with the exception of workers' compensation insurance and employment practices liability insurance, provided for in Sections 8.03(H) and 8.030), respectively. This insurance shall be written by qualified, solvent companies which can legally write insurance in the state in which the Hotel is located. The policies must name Lessee and Manager as parties insured, as their interest may appear, with minimum deductibles custmnary in the industry, but in any event, not greater than $25,000. Losses shall be payable to Lessee except as provided in Section 8.03(D). Subject to Section 8.11 below, any loss adjustment with respect to the insurance coverage set forth in items (A), (B) and (C) of Section 8.03 below shall be made by Lessee acting in its sole and absolute discretion. Evidence of insurance shall be deposited with Manager prior to the Commencement Date. 8.02. Lessee's Methods of Obtaining Insurance. At its option, Lessee may procure and maintain the insurance by (i) undertaking the procuring of insurance directly in its own name and behalf or (ii) agreeing to coverage under Manager's blanket policies in accordance with Manager's proposal at a price established by .. Page 10 .. Manager. Upon and in the event of the selection of Manager's insurance policy, such policy shall be deemed acceptable to the Lessee. 8.03. Coverage. The policies shall include: (A) Building insurance of risks on the "Special Form" or "All Risk Form" in an amount not less than 100% of the then full replacement cost thereof (as defined in Section 8.05 below) or such other amount which is acceptable to Lessee and Manager, and personal property insurance on the "Special Form" or "All Risk Fonn" iil the full amount of the replacement cost thereof; (B) Earthquake and, if the Hotel is in the lQO,year floodplain, flood insurance in reasonable and adequate amounts as reasonably determined by Lessee; (C) Insurance fot loss or damage (direct and indirect) from steam boilers, pressure vessels or similar apparatus, now or hereafter installed in the Hotel, in the minimum amount of$5,000,000 or in such greater amounts as are then customary or as may be reasonably determined by Lessee from time to time; (D) Loss of income and business interruption insurance on the "Special Form" or "All Risk Form", in such amounts as Lessee and Manager shall mutually agree, which business interruption proceeds, shall be paid into the Hotel Accounts and distributed in accordance with the formula set forth in Section 7.01; (E) Commercial general liability insurance, with amounts not less than $40,000,000 covering each of the following: bodily injury, death, or property damage liability per occurrence, personal and advertising injury, general aggregate, products and completed operations, and liquor law or "dram shop" liability, if liquor or alcoholic beverages are served at the Hotel, with respect to Lessee and Manager; (F) Insurance covering such other hazards and in such amounts as may be customary for comparable properties in the area of the Hotel and is available from insurance companies, insurance pools or other appropriate companies authorized to do business in the state in which the Hotel is located at rates which ate economically practicable in relation to the risks covered as may be reasonably determined by Lessee; (G) Fidelity bonds with limits and deductibles as may be reasonably determined by Lessee, covering Manager's employees in job classifications normally bonded under prudent hotel management practices in the United States or otherwise required by law; (H) Workers' compensation insurance coverage for all persons employed by Manager at the Hotel. Such workers' compensation insurance shall be in accordance with the requirements of applicable local, state and federal law, and shall always be procured and maintained by Manager (provided that the costs thereof shall be deemed an Operating Expense); , Page 11, (I) Vehicle liability insurance for owned, and hired vehicles, in the amount of $15,000,000; Q) Employment practices liability insurance in an amount not less than $2,000,000.00, which shall always be procured and maintained by Manager; (K) Such other insurance as Lessee and Manager may reasonably determine for facilities such as the Hotel and the operation thereof, or as Franchisor may require; and (L) Crime Coverage in the amount of $500,000, Guest Property and Safe Deposit Liability in the aggregate amount of $25,000 ($1,000 per guest}, and Innkeeper's Liability in the amount of $25,000. 8.04 Responsibility for Premiums. All premiums (other than premiums for insurance) shall be reflected in the approved Annual Plan, paid out of Gross Revenues pursuant to Section 7.01 and deemed an Operating Expense. Premiums for property insurance shall be borne and paid directly by Lessee and shall not be deemed an Operating Expense. 8.05 Replacement Cost. The term "full replacement cost" as used herein shall mean the actual replacement cost of the Hotel requiring replacement from time to time including an increased cost of construction endorsement, if available, and the cost of debris removal. In the event either party believes that full replacement cost (the cost less such exclusions) has increased or decreased at any time during the Term of this Agreement, it shall have the right to have such full replacement cost 8.06 Waiver of Subrogation and Indemnities. All insurance policies carried by Lessee or Manager covering the Hotel, including, without limitation, contents, fire and casualty insurance, shall expressly waive any right of subrogation on the part of the insurer against the other patty. The parties hereto agree that their policies will include such waiver clause or endorsement so long as the same are obtainable without extra cost, and in the event of such an extra charge the other party, at its election, may pay the same, but shall not be obligated to do so. 8.07 Form Satisfactory, etc. All of the policies of insurance referred to in this Section 8 shall be written in a form, with deductibles and by insurance companies reasonably satisfactory to the party to whom the benefit of the insurance runs in accordance with the terms of this Agreement. Lessee shall deliver such policies or certificates thereof to Manager prior to their effective date (and, with respect to any renewal policy, thirty (30) days prior to the expiration of the existing policy), and in the e:vent of the failure of Lessee to effect such insurance as herein called for) or to deliver such policies or 12, certificates thereof to Manager at the times required, Manager shall be entitled, but shall have no obligation, to effect such insurance, the premiums for which will be paid in accordance with Section 8.04. Each insurer mentioned in this Section 8 shall agree, by endorsement of the policy or policies issued by it, or by independent instrument, that it will give to Lessee and Manager thirty (30) days' written notice before the policy or policies in question shall be materially altered, allowed to expire or canceled. 8.08 Increases in Limits. If either Lessee or Manager at any time deems the limits of the personal injury or property damage under the comprehensive ptiblic liability insurance then carried to be either excessive or insufficient, Lessee and Manager shall endeavor in good faith to agree on the proper and reasonable limits for such insurance to be carried and such insurance shall thereafter be carried with the limits thus agreed on until further changed pursUaJ:?.t to the provisions of this Section. 8.09 Blanket Policy. Notwithstanding anything to the contrary contained in this Section 8, Lessee may bring the insurance provided for herein within the coverage of a so,called blanket policy or policies of insurance carried and maintained by Lessee; provided, however, that the coverage afforded to Lessee and Manager will not be reduced or diminished or otherwise be different from that which would exist under a separate policy meeting all other requirements of this Agreement by reason of the use of such blanket policy of insurance, and provided further that the requirements of this Section 8 are otherwise satisfied. 8.10 Separate Insurance. Lessee shall not on Lessee's own initiative or pursuant to the request or requirement of any third party, take out separate insurance concurrent in form ot contributing in the event of loss with that required in this Section to be furnished, or increase the amount of any then existing insurance by securing an additional policy or additional policies, unless all parties having an insurable interest in the subject matter of the insurance, including in all cases Manager, are included therein as additional insured, and the loss is payable under such additional separate . insurance in the same manner as losses are payable under this Agreement. Lessee shall immediately notify Manager that Lessee has obtained any such separate insurance or of the increasing of any of the amounts of the then existing insurance. 8.11 Reports on Insurance Claims. Manager, with the assistance of Lessee, shall promptly investigate and make a complete and timely written report to the appropriate insurance company as to all accidents, claims for damage relating to the ownership, operation, and maintenance of the Hotel, any damage or destruction to the Hotel and the estimated cost of repair thereof and shall prepare any and all reports required by any insurance company in connection therewith. All such reports shall be timely filed with the insurance company as required under the terms of the insurance policy involved, and a final copy of such report shall be furnished to Lessee. Manager shall not adjust, settle, or , Page 13, compromise any insurance loss1 or execute proofs of such loss with respect to any casualty or other event without the prior written consent of Lessee. 8.12 Deductibles to be Operating Expenses. Any Deductibles paid toward insurance claims shall be deemed Operating Expenses. 9. INDEMNITIES. 9.01. Indemnification of Manager. Lessee will defend, indemnify and hold Manager harmless from and against any and all actions, suits, claims, penalties, losses, liabilities, damages and expenses, including attorney's fees, arising out of Manager's performing the services to be performed by Manager in accordance with the terms of this Agreement, including liabilities under statutes requiring notice as a prerequisite to the discharge of employees if Lessee tetminates this Agreement, except claims based upon Manager's gross negligence or willful misconduct or actions beyond the authority granted to Manager by this Agreement. 9.02. Indemnification of Lessee. Manager will defend, indemnify, and hold Lessee harmless from and against any and all claims to the extent such claims arise on account of Manager's gross negligence, willful misconduct, or action beyond the authority granted to Manager by this Agreement. 9.03 Indemnified Parties. The indemnities. contained in this Section 9 will run to the benefit of both Manager and Lessee, and the directors, officers, partners, agents and employees of Lessee and Manager and of their Affiliates. 10. CONDE:MNATION. 10.01 Definitions. (A)"Condemnation" means a Taking resulting from (1) the exercise of any governmental power, whether by legal proceedings or otherwise, by a Condemnor, and (2) a voluntary sale or transfer by Lessee and/or its Lessor or other related entity to any Condemnor, either under threat of condemnation or while legai proceedings for condemnation are pending. (B) j'Date of Taking" means the date the Condemnor has the right to possession of the property being condemned. (C) "Award" means all compensation, sums or anything of value awarded paid or received on a total or partial Condemnation. (D)"Condemnor" means any public or quasi"'public authority, or private corporation or individual, having the power of Condemnation. (E) "Taking" means a taking or voluntary conveyance during the term of this Agreement of all or a part of the Hotel, or any interest therein, or right accruing thereto or use thereof, as the result of, or in settlement of, any Condemnation or other eminent domain proceeding affecting the Hotel whether or not the same shall hav:e actually been commenced. 10.02 Parties' Rights and Obligations. If during the Term there is any Condemnation of all or any part of the Hotel, the rights and obligations of Lessee and Manager shall be determined by this Section 10. 10.03 Total Taking. If title to the fee of the whole of the Hotel is condemned by any Condemnor, this Agreement shall cease and terminate as of the Date of Taking by the Condemnor. If title to the fee of less than the whole of the Hotel is so taken or condemned, which nevertheless renders the Hotel Unsuitable or Uneconomic for its Primary Intended Use, Lessee and Manager shall each have the option, by notice to the other, at any time prior to the Date of Taking, to tenninate this Agreement as of the Date of Taking. Upon such date, if such notice has been given, this Agreement shall thereupon cease and terminate. If this Agreement terminates pursuant to this Section 10.03, Manager will comply with the provisions of Section 5.05, and Lessee shall be solely entitled to any Award, subject to Manager's right to seek an award from the condemning authority for its loss of business interest only, if such separate claim is permitted. In the event the Condemnor does award Manager for such loss, Manager shall only be entitled to retain that portion of the Award which is necessary to compensate Manager for its lost management fee. Manager shall promptly remit any additional amount to Lessee. In the event any jurisdiction would permit both Manager and Lessee to seek an award for their loss of business interests (respectively), this section shall not prohibit Lessee from making a separate claim therefor. 10.04. Partial Taking. If title to less than the whole .of the Hotel is condemned, and the Hotel is still suitable for its Primary Intended Use, and not Uneconomic for its Primary Intended Use, or if Manager or Lessee is entitled but neither elects to terminate this Agreement as provided in Section 10.03 above, Lessee at its cost shall with all reasonable dispatch, but only to the extent of any condemnation awards available to Lessee, restore the untaken portion of the Hotel so that it constitutes 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 the Condemnation. If the Award is not adequate to restore the Hotel to that condition, each of Lessee and Manager shall have the right to terminate this Agreement, without in any way affecting any other management agreements in effect between Lessee and Manager, by giving notice to the other. Upon the date set forth in such notice, this Agreement shall thereupon cease and terminate, Manager will comply with the provisions of Section 5.05, and Lessee shall be solely entitled to any Award, subject to Manager's right to seek an award from the Condemnor for its loss of , Page 15, business interest only, if such separate claim is permitted. In the event the Condemnor does award Manager for such loss, Manager shall only be entitled to retain that portion of the Award which is necessary to compensate Manager for its lost Management Fees. Manager shall promptly remit any additional amount to Lessee. In the event any jurisdiction would permit both Manager and Lessee to seek an award for their loss of business interests (respectively), this section shall not prohibit Lessee from making a separate claim therefor. 10.05 Temporary Taking. If the whole or any part of the Hotel is condemned by any Condemnor for its temporary use or occupancy, which nevertheless renders the Hotel Unsuitable or Uneconomic for its Primary Intended Use, Lessee and Manager shall each have the option, by notice to the other, at any time prior to the Date ofT aking, to terminate this Agreement as of the Date of Taking. Upon such date, if such notice has been given, this Agreement shall thereupon cease and terminate. If this Agreement terminates pursuant to this Section 10.05, Manager will comply with the provisions of Section 5.05, and Lessee shall be solely entitled to any Award, subject to Manager's right to seek an award from the Condemnor for its loss of business interest only, if such separate claim is permitted. In the event the Condemnor does award Manager for such loss, Manager shall only be entitled to retain that portion of its condemnation award which is necessary to compensate Manager for its lost Management Fees. Manager shall promptly remit any additional amount to Lessee. In the event any jurisdiction would permit both Manager and. Lessee to seek an award for their loss of business interests (respectively), this section shall not prohibit Lessee from making a separate claim therefor. If, however, the whole or any part of the Hotel is condemned by any Condemnor for its temporary use or occupancy, and the Hotel is still suitable for its Primary Intended Use; and not Uneconomic for its Primary Intended Use, this Agreement shall not terminate by reason thereof. Except only- to the extent that Manager may be prevented from so doing pursuant to the terms of the order of the Condemnor, Manager shall continue to perform and observe all of the other terms, covenants, conditions and obligations hereof on the part of the Manager to be performed and observed, as though such Condemnation had not occurred. Lessee covenants that upon the termination of any such period of temporary use or occupancy it will, at its sole cost and expense, restore the Hotel as nearly as may be reasonably possible to the condition in which the same was immediately prior to such Condemnation, but only to the extent of the Award available to Lessee, unless such period of temporary use of occupancy extends beyond the expiration of the Term, in which case Lessee shall not be required to make such restoration. 10.04. Award Proceeds. In the event of any Condemnation as in this Section described, the amount of any Award made for such Condemnation and available to Lessee, to the extent required to make all payments required under Section 7.01 herein, shall be deposited in the Hotel Accounts and disbursed by Manager, with the balance to be retained by Lessee. ll.CASUALTY. 11.01. Insurance Proceeds. .. Page 16 .. Subject to the provisions of Section 8.03 (D) with respect to loss of income .insurance and Section 11.05 below and the terms of any mortgage, all proceeds payable by reason of any loss or damage to the Hotel, or any portion thereof, insured under any policy of insurance required by Section 8.03(A) through (C) and (F) above shall be settled or compromised by and paid to Lessee and held in trust by Lessee in an interest,..bearing account, shall be made available, if applicable, for reconstruction or repair, as the case may be, of any damage to or destruction of the Hotel, or any portion thereof, and, if applicable, shall be paid out by Lessee from time to time for the reasonable costs of such reconstruction or repair upon terms specified in this Agreement and such other reasonable terms and conditions specified by Lessee consistent with the disbursement procedures for a construction loan of similar size and scope. Any excess proceeds of insurance remaining after the completion of the restoration or reconstruction of the Hotel shall be paid to Lessee. If neither Lessee nor Manager is required or elects to repair and restore, and this Agreement is terminated as described in Section 11.02 below, all such insurance proceeds shall be retained by Lessee. All salvage resulting from any risk covered by insurance shall belong to Lessee. 11.02. Reconstruction ,.. Damage or Destruction Covered by Insurance. (A)Except as provided in Section 11.05 below, if during the Term the Hotel is totally or substantially destroyed by a risk covered by the insurance described in Section 8 above and the Hotel thereby is rendered Unsuitable for its Primary Intended Use, Lessee shall, at Lessee's option, either (1) restore the Hotel to substantially the same condition as existed immediately before the damage or destruction and otherwise in accordance with the terms of this Agreement, but only to the extent of insurance proceeds available to Lessee, or (2) terminate this Agreement by written notice thereof to Manager. If Lessee elects restoration of the Hotel, the insurance proceeds shall be paid out by Lessee from time to time for the reasonable costs of such restoration upon satisfaction of reasonable terms and conditions, and any excess proceeds remaining after such restoration shall be paid to Lessee. (B) Except as provided in Section 11.05 below, if during the Term the Hotel is partially destroyed by a risk covered by the insurance described in Section 8 above, but the Hotel is not thereby rendered Unsuitable for its Primary Intended Use, Lessee (with the cooperation of the Manager) shall restore the Hotel to substantially the same condition as existed immediately before the damage or destruction and otherwise in accordance with the terms of this Agreement, but only to the extent of insurance proceeds available to Lessee. Such damage or destruction shall not terminate this However, if, under this Section, Lessee cannot within a reasonable time obtain all necessary government approvals, including building permits, licenses and conditional use permits, after diligent efforts to do so, to perform all required repair and restoration work and to operate the Hotel for its Primary Intended Use in substantially the same manner as that existing immediately prior to such damage or destruction and otherwise in accordance with the terms of this Agreement, Lessee may (a) give Manager written notice of termination of this Agreement or (b) restore the Hotel using the proceeds of insurance. If Lessee restores the Hotel, the insurance proceeds shall be paid out by Lessee from time to time for the reasonable costs of such restoration, and any excess proceeds remaining after such restoration shall be paid to Lessee. ,.. Page 17, 11.03 Reconstruction , Damage or Destruction not Covered by Insurance. Except as provided in Section 11.06 below, if during the Term the Hotel is totally or substantially destroyed by a risk not covered by the insurance described in Section 8 above, whether or not such damage or destruction renders the Hotel Unsuitable for its Primary Intended Use, Lessee at its option shall either (a) restore the Hotel to substantially the same condition it was in immediately before such damage or destruction and such damage or destruction shall not terminate this Agreement, or (b) terminate this Agreement. If Lessee terminates this Agreement, Manager will comply with the provisions of Section 5.05. 11.04. Abatement. Any damage or destruction due to casualty notwithstanding, this Agreement shall remain in full force and effect provided that the obligation of Manager to make payments and to pay all other charges required hereunder shall abate during the period required for the applicable repair and restoration. 11.05. Damage Near End of Tenn. Notwithstanding any provisions of Section 11.02 or 11.03 appearing to the contrary, if damage to or destruction of the Hotel rendering it unsuitable for its Primary Intended Use occurs during the last 4 months of the Term, then Lessee shall have the right to terminate this Agreement by giving written notice to Manager within thirty (30) days after the date of damage or destruction, whereupon. 12.DEFAULT. 12.01. Events of Default by Manager. If any one or more of the following events (individually, an "Event of Default") occurs: (A) If Manager fails to observe or perform any term, covenant or condition of this Agreement and such failure is not cured by Manager within a period of thirty (30) days after receipt by Manager of notice thereof from Lessee, unless such failure cannot with due diligence be cured within a period of thirty (30) days, in which case Manager shall have an additional reasonable period of time to cure such breach provided Manager proceeds promptly and with due diligence to cure the failure and diligently completes the curing thereof; or (B) If Manager shall file a petition in bankruptcy or reorganization for an arrangement pursuant to any federal or state bankruptcy law or any similar federal or state law, or shall be adjudicated a bankrupt or shall make an assignment for the benefit of creditors or a shall admit in writing its inability to pay its debts generally as they become due, or if a petition or answer proposing the adjudication of Manager as a bankrupt or its reorganization pursuant to any federal or state bankruptcy law or any similar federal or state law shall be filed in any court and Manager shall be adjudicated a bankrupt and such adjudication shall not be vacated or set aside or stayed , Page 18, within sixty (60) days after the entry of an order in respect thereof, or if a receiver of the Manager or of the whole or substantially all of the assets of the Manager shall be appointed in any proceedings brought by the Manager or if any such receiver, trustee or liquidator shall be appointed in any proceeding brought against Manager shall not be vacated or set aside or stayed within sixty (60) days after such appointment; or (C) If Manager is liquidated or dissolved, or beginS proceedings toward such liquidation or dissolution, or, if Manager in any manner, permits the sale or divestiture of substantially all of its assets; or (D) If the interest of Manager in this Agreement or any part thereof or any ownership interest in Manager is voluntarily or involuntarily transferred, assigned, conveyed, levied upon or attached in any proceeding, except (i) where Manager is contesting such lien or attachment in good faith in accordance with the express terms of this Agreement, and (ii) as otherwise expressly permitted herein; (E) If, except as a result of a total or substantial Condemnation or Casualty that renders the Hotel unsuitable for its Primary Intended Use, Manager (without the consent of Lessee) voluntarily ceases operations of the Hotel for a period in excess of twenty,four (24) hours; or (F) If an event of default has been declared by the Franchisor under the Franchise Agreement with respect to the Hotel as a result of any action or failure to act by Manager (other than a failure resulting from Lessee's failure to provide adequate funds for the operation and maintenance of the Hotel) and Manager has failed, within thirty (30) days thereafter, to cure s ~ c h default by curing the underlying default under the Franchise Agreement and paying all costs and expenses associated therewith, provided, however, that if Manager is in good faith disputing an assertion of default by the Franchisor or is proceeding diligently to cure such default, the thirty (30) day period shall be extended for such reasonable period of time as Manager continues during this period to dispute such default in good faith or diligently proceeds to cure such default; or THEN, and in any such event, Lessee may exercise one or more remedies available to it herein or at law or in equity, including but not limited to its right to terminate this Agreement. 12.02 Lessee Default. If Lessee fails to observe or perform any term, covenant or condition of this Agreement or the Franchise Agreement (including without limitation the obligation to provide funds required for the operation and maintenance of the Hotel) and such failure is not cured by Lessee within a period of thirty (30) days after receipt by Lessee of notice thereof from Manager, unless such failure cannot with due diligence be cured within a periOd of thirty (30) days, in which case it shall not be deemed an "Lessee Default" if Lessee proceeds promptly and with due diligence to cure the failure and diligently completes the curing thereof, then Manager may exercise one or more remedies available to it herein or at law or in equity, including, but not limited to its right to terminate this Agreement. 12.03 Unavoidable Delay. ., Page 19, No Event of Default under Section 12.01 (A) or Lessee Default under Section 12.02 (other than a failure to make a payment of money) shall be deemed to exist during any time the curing thereof is prevented by an Unavoidable Delay, provided that upon the cessation of such Unavoidable Delay, Lessee or Manager, as the case may be, remedies Event of Default or Lessee's Default without further delay. 13. DEFINITIONS. 13.01. "Affiliate" means, with regard to any entity, (a) any entity that, directly or indirectly, controls or is controlled by or is under common control with such entity, (b) any other entity that owns, beneficially, directly or indirectly, more than fifty percent (50%) of the outstanding capital stock, shares or equity interests of such entity, or (c) any officer, director, partner or trustee of such entity or any entity controlling, controlled by or under common control with such entity (excluding trustees and Persons serving in similar capacities who are not otherwise an Affiliate of such entity). 13.02. "Annual Plan" has the meaning contained in Section 3.01. 13.03. "Commencement Date" means the date contained on Schedule I. 13.04. "CPI'' means the "Consumer Price Index" published by the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, All Items for Urban. 1 3 ~ 0 5 "Employees" has the meaning contained in Section 2.02. 13.06 "Excluded Revenues" means (i) gratuities, ot payments in the nature of gratuities, which Manager is obligated to pay over to employees; (ii) sales taxes, excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist taxes or other similar taxes, (ill) proceeds from the sale or refinancing of the Hotel, (iv) abatement of taxes, and (v) proceeds of insurance, except business interruption insurance. 13.07 "Franchise Agreement" means the franchise agreement of even date herewith between Lessee and Franchisor relating to the Hotel. 13.08 "Franchisor" means the hotel franchise company licensing the use of the Hotel name, if any. 13.09 "Franchise Costs" means expenditures for compliance with the requirements of the Franchise Agreement, including without limitation payment of franchise fees, marketing contributions, and reservation system fees, but excluding the cost of compliance with Franchisor's operating standards requiring Capital Replacements. 13.10 "GAAP" means U.S. genera,lly accepted accounting principles. 13.11 Intentionally omitted. , Page 20, 13.12 "Gross Revenues" means all revenues of the Hotel and all its uses ofevery nature and kind regardless of source 1 excluding Excluded Revenues. By way of illustration but not limitation, Gross Revenues will include: (A) The amount received as payment for the use and occupancy of all guest rental units; (B) The amount received as payment for the use and occupancy of all meeting rooms, banquet function rooms, and public areas; (C) All revenues derived from the sale of food and other edibles in restaurants, lounges, meeting rooms, banquets, guest rooms and any other location at the Hotel; (D)All revenues derived from the sale of liquor, beverages, and other potables in restaurants, lounges, meeting rooms, banquets, guest rooms, and any other location at the Hotel; (E) All revenues derived from the use of telephones or Internet Service in guest rooms or in public areas; (F) All revenues derived from leases, site licenses, subleases, concessions, vending, valet services, swimming pool memberships, banquet extras, movies or income of a similar or related nature; and (G) Proceeds of business interruption insurance. 13.13 "Hotel" means the hotel described on Schedule I. 13.14 "Hotel Account(s)" has the meaning contained in Section 4.01. 13.14A "Hotel EBITDA" means House Profit less Ground Rent, Property Taxes, Property Insurance, and Third Party Promotes, as exemplified in Schedule N. 13.14B "House Profit" means Gross Operating Income less Undistributed Operating Expenses, as exemplified in Schedule IV. 13.15 "Manager" means Island Hospitality Management, Inc., or its successor. 13.16 "Operating Equipment" means all china, glassware, linens, silverware, uniforms and similar items used in, or held in storage for use in (or if the context so dictates, required in connection with), the operation of the Hotel. 13.17 "Operating Expenses" means any and all amounts paid or expenses incurred in connection with the operation of the Hotel, as determined in accordance with GAAP or the Uniform System of Accounts for Hotels, excluding taxes . (other than the sales and use and payroll taxes described below), interest, principal, and other payments on any debt or other obligation for borrowed money, including debt service on any mortgage debt, and non,cash items , Page 21, such as depreciation (which excluded items shall be paid directly by Lessee). By way of illustration but not limitation, Operating Expenses include: (A)Salaries, wages, payroll taxes, bonuses and employee benefits and payroll processing fees. (B) Legal, accounting and other professional fees. (C) Fees for licenses and permits. (D) Costs of Operating Supplies including sales and use taxes imposed thereon. (E) Costs of Operating Equipment including sales and use taxes imposed thereon. (F) Franchise Costs. (G) Department expenses not otherwise itemized above directly related to rooms, food, beverage, telephone, and other segregated outlets. (H) Expenses not attributed to a specific department in the ordinary course and not otherwise itemized above including administrative and general; advertising, sales and promotion; heat, light and power; and repairs and maintenance (but not of Capital Replacements). (I) Base Management Fee. Operating Expenses shall not include any items which are deemed to be capital expenditures under GAAP or the Uniform System of Accounts. Lessee and Manager agree to mutually develop in good faith a capital expenditure policy for the Hotel. 13.18 "Operating Leases" means leases of personal property and equipment which, if not leased, would be purchased and classified as Capital Replacements. 13.19 "Operating Supplies" means consumable items used in or held in storage for use in (or if the context so dictates, required in connection with), the operation of the Hotel, including but not limited to food and beverages, fuel, soap, cleaning material, matches, stationery and other similar items. 13.20 "Operating Year" means each twelve month period commencing on the first day of January (except for the first year, which will commence on the Commencement Date), and ending on the subsequent December 31 (except for the last year which will end on the date of termination, whether by expiration of the term of the Agreement or otherwise). 13.21 "Lessee" means the entity identified on Schedule I or its successors. 13.22 "Unavoidable Delays" means delays due to strikes, lock,outs, labor unrest, inability to procure materials, power failure, acts of God, governmental restrictions, enemy action (including terrorist activities), civil commotion, fire, unavoidable casualty or other similar causes beyond the , Page 22 ~ control of the party responsible for performing an obligation hereunder, provided that lack of funds shall not be deemed a cause beyond the control of either party hereto unless such lack of funds is caused by the failure of the other party hereto to perform any obligations of such party under this Agreement or any guaranty of this Agreement. 13.23 '*Uneconomic for its Primary Intended Use, means a state or condition of the Hotel such that, in the good faith judgment of Lessee and Manager, reasonably exercised, the Hotel cannot be operated on a commercially practicable basis for hotel purposes and such other uses as may be necessary or incidental thereto, taking into account, among other relevant factors, the number of usable rooms and projected revenues and. expenses. 13.24 "Uniform System ofAccounts" means the Uniform System of Accounts for Hotel (Eighth Revised Edition, 1986) as revised from time to time; but not any subsequent revisions unless approved by both Lessee and Manager in writing. 13.25 "Unsuitable for its Primary Intended Use'' means a state or condition of the Hotel such that, in the good faith judgment of Lessee and Manager, reasonably exercised, due to casualty damage or loss through Condemnation, the Hotel cannot function as an integrated hotel facility consistent with standards applicable to a well maintained and operated hotel. 14. GENERAl PROVISIONS. 14.01 Estoppel Certificates. Lessee and Manager each, upon at least ten (10) days' notice, will execute and deliver to the other, and to any third party having, or about to have, a bona fide interest in the Hotel, a written certificate stating that this Agreement is unmodified and in full force and effect, or if not, stating the details of any modification, and stating that as modified it is in full force and effect, the date to which payments have been paid, and whether there is any existing default on the part of the other. 1 4 ~ 0 2 . Arbitration. All disputes hereunder shall be subject to arbitration pursuant to the provisions of this Section. The party initiating arbitration (the "Claimant") shall do so by giving written notice (the "Demand,) to the other party (the "Respondent") of its intention to arbitrate, which Demand shall contain a statement setting forth the nature of the dispute, the amount in dispute, if any, and the remedy sought. The arbitration panel shall apply the substantive law of the State of Florida and the location of the arbitration shall be Palm Beach County. The American Arbitration Association ("AAA") shall give each party a list of at least fifteen (15) arbitrators technically competent and experienced in the field of knowledge in controversy no later than twenty (20) days after the Demand. Each party may strike up to three (3) names from the list. The parties shall then endeavor in good faith to agree on a panel of three (3) from the remaining list. In the event the parties are unable to agree on a panel, then no later than ten (10) days following the Demand each party shall select one (1) arbitrator-from the list. Within five (5) days thereafter the third panelist shall be selected by agreement of the first two so selected. , Page 23, (A)Matters involving less than $250,000.00. Any matter subject to arbitration pursuant to this section and involving less than $250,000.00 in controversy shall be conducted in accordance with the rules of the AAA and shall not be subject to judicial review for any cause other than denial of due process oflaw. (B) Matters Involving $250,000.00 or More. Any matter subject to arbitration pursuant to this section and involving $250,000 or more in controversy shall be subject to the following: (1) Each party shall be entitled to discovery consisting of document production requests, interrogatories and depositions of fact and expert witnesses. The parties shall also exchange expert reports in a form to be determined by the panel. Limitations on such discovery shall be at the discretion of the panel; (2) No later than thirty (30) days prior to commencement of testimony, each party shall provide to the other a list of witnesses it expects to call, a list of exhibits it intends to introduce and a statement of issues to be resolved; (3) The panel shall have the authority to resolve issues on motion in accordance with the standards applicable to motions for summary judgment in courts within the district in which the hearing is to be conducted; ( 4) The arbitrators shall apply the applicable rules of evidence to the proceeding, except to the extent otherwise stipulated in writing by the parties; (5) The arbitrators shall prepare in writing their findings of fact, conclusions of law and award; and (6) The arbitrators shall not have the power to commit errors of law or legal reasoning, and the award shall be reviewable and subject to modification, reversal or remand concerning such errors by a court of competent jurisdiction. (C) Fees and Costs. All costs of arbitration shall be paid by the losing party, including any and all attorney's fees. (D) Enforcement of Award. Subject to the provisions of paragraph 6 above, the award rendered by the arbiter or arbiters shall be final and binding upon the parties; and judgment may be entered and enforced in any court having competent jurisdiction. 14.03 No Partnership or Joint Venture. Nothing contained in this Agreement will be construed to be or create a partnership or joint venture between Lessee, any affiliate of Lessee, its successors or assigns, on the one part, and Manager, any affiliate of Manager, its successors and assigns, on the other part. Manager shall be deemed to be an independent contractor of Lessee for purposes of this Agreement. Manager shall not be Lessee's fiduciary, nor shall Manager owe Lessee a fiduciary duty. ~ P a g e 24 ~ 14.04 Modifications and Charges. This Agreement cannot be changed or modified except by another agreement in writing signed by the party sought to be charged therewith, or by its duly authorized agent. 14.05 Entire Agreement. This Agreement constitutes all of the understandings and agreements of whatsoever nature or kind existing between the parties with respect to Manager's management of the Hotel and supersedes any and all prior understandings and agreements, written or oral. 14.06. Headings. The Section headings contained herein are for convenience or reference only and are not intended to define, limit or describe the scope or intent of any provisions of this Agreement. 14.07. Survival of Covenants. Any covenant, term or provision Qf this Agreement which, in order to be effective, must survive the termination of this Agreement, will survive any such termination. 14.08. Waivers. No failure by Manager or Lessee to insist upon the strict performance of any covenant, agreement, term or condition of this Agreement, or to exercise any right or remedy consequent upon the breach of this Agreement will constitute a waiver of any breach or any subsequent breach of the covenant, agreement, term or conditions. No covenant, agreement, term or condition of this Agreement and no breach of this Agreement will be waived, altered or modified, except by written instrument. No waiver of any breach will affect or alter this Agreement, but each and every covenant, agreement, term and condition of this Agreement will continue in full force and effect with respect to any other then existing or subsequent breach. 14.9. Applicable Law. To the extent legally permissible, this Agreement will be construed and interpreted by, and be governed by, the laws of the state where the Hotel is located. 14.10 Notices. Except as otherwise provided in this Agreement, all notices required or permitted to be given hereunder, or which are to be given with respect to this Agreement, will be in writing sent by registered or certified mail, postage prepaid, return receipt requested, by a reputable overnight delivery service such as Federal Express, or by facsimile transmission, provided that a simultaneous copy of the faxed notice is sent via overnight delivery, addressed to the party to be so notified as set forth on Schedule I. Any notice will be deemed delivered when received or , Page 25 .. receipt rejected. Notices may also be delivered by hand, or by special courier, if, in either case, receipt is acknowledged by the addressee. Any notice delivered by hand, or by special courier, will be deemed delivered when received. Either party may at any time change the addresses for notices by written notice to the other party. 14.11. Binding Effect. This Agreement will be binding upon and will inure to the benefit of the successors in interest and the assigns of the parties hereto, provided that no assignment, transfer, sale, pledge, encumbrance, mortgage, lease or sublease by or through Manager or by or through Lessee, as the case may be, in violation of the provisions of this Agreement, will vest any rights relative to this Agreement in the assignee, transferee, purchaser, secured party 1 mortgagee, pledgee, lessee, sublessee or occupant, or will diminish, reduce or release the obligations of the parties hereto. 14.12. Confidentiality. Manager and Lessee agree that the contents of this Agreement will not be disclosed to any other individual or entity (except as directed by law or judicial order), provided, either party may disclose the contents of this Agreement to (i) its Affiliates, its partners and limited partners, and/or shareholders and directors, attorneys, accountants and investment bankers, (ii) individuals or entities providing, or proposing to provide, financing to Lessee, and (iii) the Securities and Exchange Co:i:ntnission ("SEC") if and to the extent required by applicable SEC rules. 14.13. Conflicts. In the event of any conflicts between the terms of this Agreement and the Franchise Agreement, the terms of this Agreement shall control. 14.14. Third Party Beneficiary. None of the obligations of this Agreement of either party will run to or be enforceable by any party other than the party to this Agreement or its assignee pursuant to the terms of this Agreement. Lessee is expressly authorized to assign its rights under this Agreement to any mortgagee of the Hotel. 14.15 Subordination. This Agreement shall be subordinate to any mortgage encumbering the Hotel, and Manager agrees to enter into such subordination agreements, and to execute and deliver such estoppel certificates, as lender may require from time to time, which shall include all reasonable provisions required by the lender, including, without limitation, Manager's acknowledgment that its real estate interest in and to the Hotel, if any, created by this Agreement is subordinate to any mortgage encumbering such Hotel. 14.16 Time of the Essence. ~ P a g e 26 ~ Time is of the essence of this Agreement. 14.17 EIC Qualification. Manager (or a person who is a "related person" within the meaning of Section 856(d){9) (F) of the Internal Revenue Code of 1986, as amended (the "Code"), (a "Related Person") with respect to the Manager shall be actively engaged in the trade or business of operating "qualified lodging facilities" (defined below) FOR ONE OR MORE PERSONS WHO ARE NOT RELATED PERSONS WITH RESPECT' TO THE LESSEE AND THE REIT (defined below) ("Unrelated Persons")). In order to meet this requirement, Manager agrees that it {or a Related Person with respect to Manager (i) shall derive at least 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 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" with the meaning of such Code Section. Notwithstanding the foregoing, the parties agree that Lessee's sole remedy for Manager's failure to qualify as an "eligible independent contractor" at any time shall be a termination of this Agreement and that Manager shall have no further liability to Lessee or its affiliates whatsoever for such failure. For purposes of this Agreement, the "REIT'' refers to Grand Prix Acquisition Trust, a Maryland real estate investment trust. A "qualified lodging facility" is defmed 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 entities unrelated to the Lessee. Manager shall periodically provide to Lessee, on request, such information as Lessee may reasonably require with respect to Manager's ongoing obligation to remain qualified as an EIC in accordance with the foregoing paragraph. 14.18 Cooperation with Liquor License. To the extent permitted by law, upon any sale of the Hotel to a third party, Manager shall endeavor to provide an interim liquor licenses for up to 180 days to the purchaser of the Hotel (or to a third party designated by such purchaser), provided that Manager may condition such provision on its receipt of market standard fees and a commercially reasonable indemnity from such purchaser with respect to such claims as may arise in connection with the purchaser's sale of liquor from Hotel premises. Manager's foregoing obligation to provide an interim liquor license upon any sale of the Hotel shall continue regardless of whether Manager or Lessee terminates this Agreement. ~ P a g e 27, 14.19 Cooperation with other Manager shall provide Lessee with reasonable assistance and cooperation in connection with Lessee's negotiations with Franchisor, any current or prospective lender for the Hotel, or any government agency with jurisdiction over the Hotel and its operations, provided that Manager's material costs incurred in connection with such assistance and cooperation shall be billed to the Hotel as an Operating Expense. Moreover, Manager shall not undertake any actions that would impair Lessee's relationships with such parties. 14.20 Counterparts. This Agreement may be signed in one or more counterparts, which, when taken together, constitute the entire Agreement. 14.21 Removal of Hotels from Loan. In the event that a property listed on Schedule A is released from the lien of that certain Loan Agreement, dated as of June 29, 2007 ("Fixed Rate Loan Agreement"), by and among the entities party hereto and Lehman ALI, Inc. ("Lender"), the parties will amend the Schedules to this Agreement to remove all references to the applicable property and simultaneously therewith, the Lessee will enter into a new management agreement with the Manager regarding the management of the applicable property, which new management agreement shall be, in aU respects, substantially the same as this Agreement. IN WI1NESS WHEREOF, the parties hereto have executed or caused this Agreement to be executed, all as of the day and year specified on Schedule I. Island Hospitality Management, Inc. Grand Prix Fixed Lessee, LLC By: Name:
Nam ? Title: Title: Vice President and Assistant Secretary 28., SCHEDULE I Terms af Agreement 1. DATE OF AGREEMENT: The 2 ~ day of June 2007. 2. DESCRIPTION OF HOTEL: See Schedule I ~ A. 3. COMMENCEMENT DATE (Section 1.02): June 29, 2007. 4. EXPIRATION DATE (Section 1.02): Twelve (12) months from the Commencement Date, provided however, that either party may terminate this Agreement at any time upon thirty (30) days' prior written notice to the other party in accordance with (and subject to) Section 1.02 of the Agreement. Notwithstanding the foregoing, the expiration date for this Agreement with respect to the Residence Inn Denver Downtown, located at 2777 Zuni St. Denver, CO 80211, and the Residence Inn Denver South, located at 6565 S. Yosemite St., Greenwood Village, CO 80111, shall be twenty,four (24) months from the Commencement Date; provided however, that either party may terminate this Agreement with respect to these two properties at any time upon thirty (30) days' prior written notice to the other party in accordance with (and subject to) Section 1.02 of the Agreement. 5. AGREEMENT LIMITATIONS (Section3.04): Maximum Amo\lnt: Fifty Thousand Dollars ($50,000) Time Period: One (1) Year 6. MINIMUM BALANCE (Section4.02): Fifty Thousand Dollars ($50,000) 7. ACCOUNTING FEE: $750 per month 8. BASE MANAGEMENT FEE: Two and One HalfPercent (2.5%) of Gross Revenues. 9. INCENTIVE MANAGEMENT FEE: Manager will receive an incentive management fee ("IMF") based upon actual Hotel EBITDA (in the aggregate) for the fiscal years ending December 31, 2007 and December 31, 2008 vs. projected EBITDA as provided to Apollo by Lehman Brothers for those same periods. The Incentive Fee shall be equal to twenty percent (20%) of the amount by which EBITDA exceeds budget by five percent (5%); but in no case will the two and one,half percent (2.5%) Base Management Fee and the IMF together be greater than four percent (4%) of total gross revenues. For each Operating Year beginning with Operating Year ending December 31, 2009, Lessee and Manager will agree on a projected EBITDA for purposes of future IMF calculations. Incentive Fees will be calculated on a pooled basis across the entire portfolio, but excluding the Montvale, Valencia, and Atlantic City Hotels. To the extent assets are sold, the Property EBITDA Budgets will be reduced accordingly. 10. NOTICES (Section 14.10): Notices to Lessee: Grand Prix Fixed Lessee, LLC % .Apollo Investment Corporation 9 West 57th Street NewYork,NewYork 10019 .Attention: .Aaron Sack Facsimile: (212) 515-3450 Notices to Manager: Island Hospitality Management, Inc. 50 Cocoanut Way Suite 100 Palm Beach, Florida 33480 .Attention: Roger Pollack Facsimile: (561) 804-0903 SCHEDULE I. A Fixed Rate Porifolio Fixed; P r o ~ e r t y Name Ci!I State Rooms Residence Inn Silicon Valley I Sunnyvale CA 231 Residence Inn Silicon Valley ll Sunnyvale CA 247 Residence Inn San Mateo San Mateo CA 159 Residence Inn Tukwila Seattle WA 144 Residence Inn Mountain View Mountain View CA 112 Residence Inn Bellevue Bellevue WA 120 Residence Inn Lynnwood Lynnwood WA 120 Residence Inn Denver Downtown Denver co 156 Residence Inn San Jose Campbell CA 80 Residence Inn Cherry Hill Cherry Hill NJ 96 Residf;llce Inn Denver South Englewood co 128 Residence Inn Shelton Shelton CT 96 Residence Inn Altamonte Springs Altamonte Springs FL 128 Residence Inn Lexington North Lexington KY 80 Residence Inn Fremont Fremont CA 80 Residence Inn Binghamton Vestal NY 72 Residence Inn Wmdsor Wmdsor CT 96 Residence Inn Rithinortd Richmond VA 80 Residence Inn Louisville Louisville KY 96 Residence Inn Saddle River Saddle River NJ 174 Residence Inn Gaithersburg Gaithersburg MD 132 Residence Inn Ohare Rosemont Rosemont IL 192 Residence Inn San Jose South San Jose CA 150 Residence Inn Bothell Bothell WA 120 Residence Inn Atlanta Downtown Atlanta GA 160 Residence Inn Addison Addison TX 150 Residence Inn Arlington Arlington TX 114 Residence Inn Richmond NW Richmond VA 104 Residence Inn Livonia Livonia MI 112 Residence Inn Peachtree Comers Norcross GA 120 Residence Inn Portland Scarborough :ME 78 Hampton Inn Willow Grove Willow Grove PA 150 Hampton Inn Germantown Germantown MD 178 Hampton Inn Westchester Westchester IL 112 Hampton Inn Lombard Lombard IL 128 Hrunpton Inn Schaumburg Schaumburg IL 128 Hampton Inn Islandia Islandia NY 120 Hampton Inn Columbia Columbia MD 83 Hampton Inn Naples Naples FL 107 Courtyard Fort Lauderdale Fort Lauderdale FL 136 Towneplace Suites Horsham Horsham PA 95 Summerfield Suites Belmont Belmont CA 132 Summerfield Suites El Segundo El Segundo CA 122 Summerfield Suites Las Colinas Irving TX 148 Summerfield Suites Mount Law:el Mount Laurel NJ 116 Total; 5,682 SCHEDULEll Management Services Included in Management Fee PROPERTY LEVEL 1. Establish staffing requirements; 2. Establish employment policies such as hiring policies, terms of employment, wage scales, and vacation and benefit packages; 3. Select key employees and department heads; 4. Provide property level training; 5. Establish rates and charges for the goods and services to be sold by the Hotel; 6. Implement sales and marketing strategies; 7. Supervise property operations; and - 8. Negotiate and sign purchase orders and service agreements. HOME OFFICE 1. Provide a regional director of operations to supervise property activities; 2. Provide human resources management; 3. Provide management information systems; 4. Make available Manager's legal staff to provide assistance in day,to,day property operations; 5. Negotiate national vending contracts; 6. Purchase all Operating Supplies and Operating Equipment; 7. Pay all expenses incurred in the operation of the Hotel; 8. Maintain the Hotel in good order, repair, and condition; 9. Prepare a schedule of suggested insurance coverage and administer the purchase of insurance, if requested by Lessee; and 10. Implement Manager's standard administrative, accounting, budgeting, marketing, and operational policies and practices. ACCOUNTING SERVICES 1. Prepare sales and use tax returns; 2. Process accounts payable; 3 Prepare monthly and yearly financial statements; 4. Provide cash management services; and 5. Process payroll and related payroll items. SCHEDULE ill A Sample Statement of Profit and Loss - Full SeTIIic;e Hotels 678335.03-New York Server2A MSW- Draft June 20, 2007 - 12:34 PM SCHEDULEillB Sample Statement of Profit and Loss - Umited Service Hotels 678335.03-New York Server 2A MSW- Draft June 20, 2007- 12:34 PM SCHEDULE IV EBITDA Pro-Forma Model Innkeepers Properties - All Continuing Operations R.oomlle\'mlle Rooms Available 1tGams Sold
A\'VIp DailY Rate I.e\' Par SaLes & Ill(;OJDe R.oGm Revenue Telephoue RevaLue, OtheHow:l Revemu! Foodk Be1tm;e Totll Room Eltpeme Expel1&es Other &pmses Food & llJtpensei Total C'S & Dtparimtllbl Expenses Gr'Mi OpmtiJI: tTadistrlbuled Qptr2tiq E.xppus 'Fotll Ulililiet lmumlce Mmlotl Temlilialian FHS MmiDtt Royalty Fees Ba54! M&Tlllgellll!l:r f'ee 3.0% AccDilllliDg Fees House Profit GR I PT llinur Grov:ud Rent Property Tues lusmDce- Tolal G'R I PT tlasur l'TDpertv EBITDA Caknlation HOI15t Profit Less: TIIO!lllti\'1! Mlmage:JDeBS: Fee Le5': Net Income to lesSN (pie TRS-"Imlsactioas m 2004) Less: GR i PT r Jmur Less: Thircl-PII\_V Promote Pnputy EBITDA Plus: Bl!le Mmaog-emem: Fee Plus: Illcmtive Fee Plus: Net Jilcome to Ltsste T.RS-Trmsactina,s iJ Property EBITDA Before llp.t Fees $333,966,184 }.670,063 2;767,122 75,4!!>11 Sl20.69 591.00
(4,310,770) (l9,447,SS17) (310,,973) Sls.t,ffi,823 ll,BU,729 4,310,770 0 $17t,8lli,:U1 Sl59,006,592 I MSW Draft 20, 2007 - 12:34 PM SCHEDULEV 20072008 EBITDA Oventiew as Provided by Lehman Brothers . Asset Cit Slate R011ms 2tt1 lOl8 Boston Bulfineh Hctol Boston MA 80 2.182,4111 Courtyard Atlalltic City AllandcClty NJ 2()t 76*.462 1776.223 Calinyard Fort Lauckrdale' Ft l.auderdale R. I.Sil,976 Courtyard Mon!Yalll Montvele NJ 190 3,148,690 Dcubli!Ttee Wilshiag10n DC Wa.'lbingtou DC 10$ 2.9:16.749 3,333,7'!6 Embusy Soilos Valencio Vnlencla CA 150 696.992 2.647.8711 Four PoiniSFt. Waltoo Beach Ft Watron R. :;!f6 3.061r566 HamiJion Inn Albany Albany NY 126 696,4>4 Hamptoa Inn Columbia Columbia MD 83 UY.!CL614. 1.094.684 &miJIOII JnnOel'llllla!OWD Germantown MD 178 2.(X;7,-H3 Hamp1011 Jnu Wandis lsliioola NY 120 1,341.611 Hamptoll Tnn l.oolbaro Lombanl IL 128 1.110.087 1.433;884 Hampron lim Louisville Louinitk! KY 173 1.9SI,S'l8 2.062.92:.2 Han1p1011lna Naples .Napl"' R. 107 995.711 1;069",034 Hampton Inn Schaumburg Scf:laumburg n. 128 1.101.524 U68.1Sl Homptoo Jnu Tullahasa!e Tallrsbaol;ee R. 93 1.()4.';,379 1.117.24:5 8CSI W esll!nl West l'llm Beech West Palm Bead> R. 135 66l; 112 132.456 Hall1pl00 lnn Westehmer IL lt2 1,32.';,193 1."'2,916 Haniptoo Inn Willow Gnwe WlllowC!rtml PA ISI.l :!.486.017 Hamp!oo Inn W obum Woburn MA 99 6:!6,446 6&4,621 Hilton ADDboim Anabeiln CA 231 3.579.&38 3,92:5.224 HiltonOnlllrio 0Jlt8ri<> CA 31il 4.i23.276. 4,Hl.M4 Hmnowood Sui1es San Antonio Sm Anl<lnio 'IX 146 2.S3i,'ll1 2,703.832 lrm Addison Dalla 'IX ISO 1,7J.l426 1,il38,71S Residence Inn AltllDlOIIIO Springs Alt11111iiDie Spriago R. 128' 1.169.0:!0 1.262.384 RaideniE Inn Aim CA 2()1 4.19$,6..'16 Rcsidenoo lnn Artingtlln Atlih@lon 1X 114 1,441,&71 Residence bin Atlilllta DtlWDIOWD Ali aula GA. 1&0 2,299,385 2,461,.540 Resideneulnn BeUevue WA 120 2,8)9,649 3,144.329 lun Biaghmntoo Binghamton NY 12 1.(1;8;411 1,117,082 Inn Bothell Bolhi!U WA 120 1.992.921 2.248.911 Residena: lnn Cheny Hill OlerryHill NJ 96 l.l87;641 M90.ll2 Residence Inn CblUmbus East Columbus OH 80 664,480 Residence lrm Denver Downrown Denver co 156 1.931,281> 2070.()29 Residence Inn Den.,;r Sooth Enpwood co 12& 1.276,&7& 1,370.<>78 Residence Inn East 4nsipg E. Umsinj; Ml 6{) 4%,706 Residence Inn Fort Wa}'IIC FOnW:f!JVl IN 80 944;693 Rl!sidena! Inn mlnOnt Fremont CA 80 7W,403 871,129 Residence Inn Gaithersburg Guithmbutg MD 132 2.735.232 3J08.47J Residence Ian Orud Rapids Grand Rapidt MI 96 789,();\() 8:>3,#J Residena! Inn Harrisburg Hlnisbw-g PA 80 1,3!7,124 1.417.853 Residence Inn llidianapolil Nonb IN 88 615..001 ti69.51S Residen.cc 11m l..e!;inJIOII Noeth l.eJdng.toa KY 80 1.139,992 1,215.843 678335.03-New York Server 2A MSW - Draft June 20, 2007- 12:34 PM A.wr City stale a .... Ml7 2008 ilelidence Inn Uvonia livonia MI 112 I,.M0.710 Raidonce lao l..ouisYillo l.Ouil'fillo KY 96- 893.948 Reoidenao Inn L}'nrrwOod Lyouwood WA 120 2,486,844 2778,162 Railloooe lnaMOUDI:lin View- 1\fOUDiaiJI View CA 112 2,720,500 .HJ99.fl37 RaideJKe Inn Obare.IRmemilllt Ro.emont n. 192 2,498,642 2.884.703 Raidellli! Ina Outorio Ootaio CA 2,977,1'94 3.172.990 Raidelltl!l !no Pelli:ltree C<>roe111 (Norcross) Peacbtiee OA ilO 1,105.&32 1,190,943 Raideoce Inn Pol1llllld Pcrtlaud J.m 7S 921,876 Resideooe Inn Riebmond Richmood VA 80 9!17.313 1.060,272 Reoideace Inn Ridlmcind NW Richmood VA 1.394.573 1.491.699 Raideaoe Inn Saddle River Saddle River NJ 114 4.285.393 4.S40.061 Residence Inn San Diego Sanllqo CA 193 5,961.102 6.181,01} Raidonoe Inn SaD J<ille SanJOsil CA sa ),385,03S t609.87S Raidonge Ina San Jose Sou1h SBD lose CA 2.132.!114 Raiikn"" Inn Sao }.fllleo San Mateo CA 160 !783,.105 :t.2l3.942 Qmiden"" Inn Sbelton SIJe11Bn cr 96 1;212.598 1.304.331 Reoidenoe Inn Silicon Valley I Sllllll)'Y8Ie CA . 231 4,$29.590 5.181.229 Reoidence Inn Silicon
CA 247 4.(i9S.o20 5.3S9,9S9 Raideaoe Inn Troy Omti'UI Troy Ml 152 1,436./S:l L504.385 Residoaco Inn Troy Sot11heasl Troy Ml 96 410,966 426.:!49 Residl!nco Inn TukwOu Tukwila WA 144 J,ll!!l,86ll 3.535.483 Reoidella! Inn Tys!lDS Comor Ty""ns C<lee' VA 121 3.394.708 Reoidenao Inn Wicl!ita East Wichili: KS 64 586,583 Reoidenoe Ina Windsor Windinr cr 96 1,029,701 Shell!lon Roc:l<vllle Rockville MD 155 1.498.463 Addison Addi1011 1X 132 1,0!3.271 1,102.2.91 Summerfield SuiteJ Belmout Bel mom CA 132 J.Oit.062 3.'1#,983 Sumlili!rfiold Suites El Segulldo ElSegundo CA
2,68S,45' Summerfield Suites Cclinas LasColiaas n: 148 2,124.607 2268.82:2 Summerfield Suites Moan1 Laurel "Mtl.Jiurel NJ 1'16 l,3.'i6.069 1.459,2!56, SuJui..,Suiloa Tinhlll Falls NJ !Ill 2CJ7,160 247.l7i) TowaepliiCe Horsham Hinllam PA 9S 843,093 Weotin Morrislown Morri810Wn NJ "224 3.192.294 3.733,949 Tolll F.BITDA 10.058 l40,.t:U. 770 159.006.591 DeJs Courtyard Atltunic; Oty AtlamieClty NJ :21)1 764.462 '2,17fi,123 fwrty.mlllfonM!Io Montville NJ 190 2.53t.!il0 3,248;690 Embilssy Suites Valencia Valencia CA 150 696.992 2!>47.878 Total EBI11M Extludin# Devdopmonls 9.514 136.440.806 150.333,801 NQII!: Hotel EBITDA as providl!d by I.ehm.811 Brolhr:n whidl ia price to any im:entlvc IIWI""'melll fee ud aSIUIIII!s a 3.0% &aagemont ke:. 678335.03-New York Server 2A MSW- Draft June 20, 2007- 12:34 PM SCHEDULE I BORROWER Borrower Property Grand Prix Belmont LLC Summerfield Suites, Belmont, CA Grand Prix Campbell/San Jose LLC Residence Inn, Campbell, CA Grand Prix El Segundo LLC Summerfield Suites, El Segundo, CA Grand Prix Fremont LLC Residence Inn, Fremont, CA Grand Prix Mountain View LLC Residence Inn, Mountain View, CA Grand Prix San Jose LLC Residence Inn San Jose South, San Jose, CA Grand Prix San Mateo LLC Residence Inn, San Mateo, CA Grand Prix Sili I LLC Residence Inn Silicon Valley I, Sunnyvale, CA Grand Prix Sili II LLC Residence Inn Silicon Valley II, Sunnyvale, CA Grand Prix Denver LLC Residence Inn Denver Downtown, Denver, CO Grand Prix Englewood/Denver South LLC Residence Inn Denver South, Englewood, CO Grand Prix Shelton LLC Residence Inn, Shelton, CT Grand Prix Windsor LLC Residence Inn, Windsor, CT Grand Prix Altamonte LLC Residence Inn, Altamonte Springs, FL Grand Prix Ft. Lauderdale LLC Courtyard, Fort Lauderdale, FL Grand Prix Naples LLC Hampton Inn, Naples, FL Grand Prix Atlanta LLC Residence Inn Atlanta Downtown, Atlanta, GA Grand Prix Atlanta (Peachtree Comers) LLC Residence Inn Peachtree Comers, Norcross, GA Grand Prix Lombard LLC Hampton Inn, Lombard, IL Grand Prix Chicago LLC Residence Inn Chicago (Rosemont/O'Hare), Rosemont, IL Grand Prix Schaumburg LLC Hampton Inn, Schaumburg, IL Grand Prix Westchester LLC Hampton Inn, Westchester, IL Grand Prix Lexington LLC Residence Inn Lexington North, Lexington, KY Grand Prix Louisville (RI) LLC Residence Inn, Louisville, KY Grand Prix Columbia LLC Hampton Inn, Columbia, MD Grand Prix Gaithersburg LLC Residence Inn, Gaithersburg, MD Grand Prix Germantown LLC Hampton Inn, Germantown, MD Grand Prix Portland LLC Residence Inn Portland, Portland, ME Grand Prix Livonia LLC Residence Inn, Livonia, MI Grand Prix Cherry Hill LLC Residence Inn, Cherry Hill, NJ Grand Prix Mt. Laurel LLC Summerfield Suites, Mount Laurel, NJ Grand Prix Saddle River LLC Residence Inn, Saddle River, NJ Grand Prix Islandia LLC Hampton Inn, Islandia, NY Grand Prix Binghamton LLC Residence Inn Binghamton, Vestal, NY Grand Prix Horsham LLC Townplace Suites, Horsham, P A Grand Prix Willow Grove LLC Hampton Inn, Willow Grove, P A Grand Prix Addison (RI) LLC Residence Inn, Addison, TX Grand Prix Arlington LLC Residence Inn, Arlington, TX Grand Prix Las Colinas LLC Summerfield Suites Las Colinas, Las Colinas, 13698113.2.BUSINESS TX Grand Prix Richmond LLC Residence Inn, Richmond, VA Grand Prix Richmond (Northwest) LLC Residence Inn Richmond NW, Richmond, VA Grand Prix Bellevue LLC Residence Inn, Bellevue, W A Grand Prix Bothell LLC Residence Inn, Bothell, W A Grand Prix Lynnwood LLC Residence Inn, Lynwood, W A Grand Prix Tukwila LLC Residence Inn Tukwila, Tukwila, W A S-1
EXHIBIT B May 11, 2010 Via Facsimile (561- 804-0903) and Federal Express Island Hospitality Management, Inc. 50 Cocoanut Row Palm Beach, Florida 33480 Attention: Roger Pollack Re: Conditional Assignment of Management Agreement dated as of June 29, 2007 (the "Conditional Assignment") by Grand Prix Belmont LLC, Grand Prix Campbell/San Jose LLC, Grand Prix El Segundo LLC, Grand Prix Fremont LLC, Grand Prix Mountain View LLC, Grand Prix San Jose LLC, Grand Prix San Mateo LLC, Grand Prix Sili I LLC, Grand Prix Sili II LLC, Grand Prix Denver LLC, Grand Prix Englewood/Denver South LLC, Grand Prix Shelton LLC, Grand Prix Windsor LLC, Grand Prix Altamonte LLC, Grand Prix Ft. Lauderdale LLC, Grand Prix Naples LLC, Grand Prix Atlanta LLC, Grand Prix Atlanta (Peachtree Comers) LLC, Grand Prix Lombard LLC, Grand Prix Chicago LLC, Grand Prix Schaumburg LLC, Grand Prix Westchester LLC, Grand Prix Lexington LLC, Grand Prix Louisville (RI) LLC, Grand Prix Columbia LLC, Grand Prix Gaithersburg LLC, Grand Prix Germantown LLC, Grand Prix Portland LLC, Grand Prix Livonia LLC, Grand Prix Cherry Hill LLC, Grand Prix Mt. Laurel LLC, Grand Prix Saddle River LLC, Grand Prix Islandia LLC, Grand Prix Binghamton LLC, Grand Prix Horsham LLC, Grand Prix Willow Grove LLC, Grand Prix Addison (RI) LLC, Grand Prix Arlington LLC, Grand Prix Las Colinas LLC, Grand Prix Richmond LLC, Grand Prix Richmond (Northwest) LLC, Grand Prix Bellevue LLC, Grand Prix Bothell LLC, Grand Prix Lynnwood LLC, and Grand Prix Tukwila LLC (jointly and severally, together with their successors and permitted assigns, "Borrowers"), and Grand Prix Fixed Lessee LLC (together with its successors and permitted assigns, "Operator") to and for the benefit of Lehman Ali Inc. ("Original Lender" and together with its successors and/or assigns, "Lender"), and acknowledged and consented to by Island Hospitality Management, Inc. ("Manager"), in connection with a mortgage loan from Lender to Borrowers in the original principal amount of $825,402,542 (the "Loan") pursuant to the terms of that certain Loan Agreement, dated as of June 29, 2007, by and between Borrowers, Original Lender, Operator, and Grand Prix Holdings LLC (as modified by that certain First Amendment to Loan Agreement dated as of August 9, 2007 and as may be further modified, amended, supplemented, or restated from time to time, the "Loan Agreement") Dear Mr. Pollack, Reference is made to the Conditional Assignment. Midland Loan Services, Inc. ("Midland") is the special servicer for the Loan. Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Conditional Assignment. In accordance with the provisions of the Conditional Assignment, you are hereby advised that (a) by letter dated April 22, 2010 (the "Default Letter"), Midland notified Borrowers that an event of default had occurred under the Loan Agreement (the "Event of Default") as a result of Borrowers' failure to pay the Monthly Debt Service Payment Amount (as defined in the Loan Agreement) that was due on April 9, NY-44403.2 Island Hospitality Management, Inc. May 11, 2010 Page 2 2010, (b) by letter dated May 4, 2010 (the "Acceleration Letter"), Midland notified Borrowers that the Debt (as defined in the Loan Agreement) was accelerated and immediately due and payable, and (c) as of the date hereof, the Event of Default remains uncured. Enclosed please find copies of the Default Letter and the Acceleration Letter. If you have any questions, you are welcome to contact me at 913-253-9612. Sincerely Enclosures NY-44403.2 MIDLAND LOAN SERVICES, INC. April22, 2010 VIA FACSIMILE AND FEDERAL F:XPRESS The Parties Listed on Schedule A hereto Gentlemen: Re: Loan in the principal sum of $825,402,542 made by Lehman Ali Inc. to Grand Prix Belmont LLC, Grand Prix Campbdi/San Jose LLC, Grand Prix El Segundo LLC, Grand Prix Fremont LLC, Grand Prix Mountain View LLC. Crand Prix San Jose LLC, Grand Prix San Mateo LL(', Grand Prix Sili I LLC. Grand Prix Sili II LLC, (!rand Prix Denver LLC, Grand Prix Englewood/Denver South LLC, Grand Prix Shelton LLC. Grand Prix Windsor LI ,C, Grand Prix Altamonte LLC. Grand Prix Ft. Lauderdale LLC, Clrand Prix Naples LLC. Grand Prix Atlanta LLC, Grand Prix Atlanta (Peachtree Corners) LLC. Clrand Prix Lombard LLC, Grand Prix Chicago LLC, Grand Prix Schaumburg LLC, Grand Prix Westchester LLC, Grand Prix Lexington LLC, Grand Prix Louisville (RJ) LLC, Grand Prix Columbia LLC, Grand Prix Gaithersburg LLC, Grand Prix Germantown LLC, Grand Prix Portland LLC, Grand Prix Livonia LLC, Grand Prix Cherry Hill LLC. Grand Prix Mt. Laurel LLC, Grand Prix Saddle River LLC, Grand Prix Islandia LLC, Grand Prix Binghamton Ul'. Grand Prix Horsham LLC. Grand Prix Willow Grove LLC, Cirand Prix Addison (Rl) LLC, Grand Prix Arlington LLC', GranJ Prix Las Colinas LLC, Grand Prix Richmond LLC. Grand Prix Richmond (Northwest) LLC. Grand Prix Bellevue LLC, Grand Prix Bothell LLC, Grand Prix Lynnwood LLC, C!rand Pnx Tukwila LLC (jointly and severally, together with their successors aml permitted assigns as borrower under the Loan Documents (as defined hncin). the "Borrower") Reference is made to a Joan in the principal sum of $825,402,542 (the "Loan") made by Lehman Ali Inc. ("Original Lender" and together with its successors and/or assigns ("Lender"). to Borrower pursuant to the tenl1S of that certain Loan Agreement by and between Rorrowcr, Original Lender, Grand Prix Fixed Lessee LLC and Grand Prix l-loldings LLC, dated as of June 20. 2007, as modif1ed by that certain First Amendment to Loan Agreement dated as of Membtr of The PNC Financial Service Group (DPNC REAL ESTATE vvww pn( com August 9, 2007 (the "Loan Agreement"). Original Lender's interest in Note A-I was assigned to LB-UBS Commercial Mortgage Trust 2007-C6 and Original Lender's interest in Note /\-2 was assigned to LB-UBS Commercial Mortgage Trust 2007-C7. Midland Loan Services, Inc. ("Midland") is the special scrvicer for the Loan. Capitalized tenns used and not otherwise defined herein shall have the meanings given to such terms in the Loan Agreement. Please be advised that Borrower has failed to pay the Monthly Debt Service Payment Amount that was due on April 9, 2010 pursuant to Section 2.2.1 of the Loan Agreement. Pursuant to Subsection 8.1 (a)(i) of the Loan Agreement, such failure constitutes an Event of Default under the Loan. In addition, we received notices from Marriot International, Inc. dated March 16, 2010 stating that a default under the Franchise Agreements for certain of the Residence Inn by Marriott Properties has occurred as a result of the failure to complete certain work and other requirements set forth in the applicable Property Improvement Plan /\ddcndums and that if such defaults arc not cured within 90 days of such notice, the applicable Franchise Agreements will terminate on June 14, 2010. Failure to cure such defaults within this cure period will constitute an Event of Default under the Loan pursuant to Section 8.1 (a)(xiii) of the Loan Agreement. Please provide a detailed explanation of the steps that arc being taken to cure the defaults under these Franchise Agreements as soon as possible. Lender shall have and hereby reserves the right to exercise the rights, powers and remedies available to it under the Loan Documents or at law or in equity in response to the above described Default and Event of Default in such manner and at such times as Lender in its sole and absolute discretion deems appropriate, including, without limitation, the right to accderatc the Debt, the right to impose late charges and the right to impose interest at the Default Rate under the Loan Documents. Neither anything contained herein nor any discussions or negotiations which Midland or Lender may have with Borrower, Operating Lessee, Apollo, Guarantor or any other obligor shall be construed as a waiver of the Default or Event of Default described above or any other Defaults or Events of Default which heretofore have occurred or which continue to exist under the Loan Documents. No delay by Lender or Midland in the pursuit of Lender's rights and remedies pursuant to the Loan Documents, applicable law or equity shall constitlJte a waiver ol' any such rights or remedies and Lender expressly reserves the right to pursue all such rights and remedies with respect to the Default and Event of Default described above and any other existing Defaults or Events of Default, and with respect to any future Defaults or future Events of Default, in such manner and at such times us Lender in its sole discretion deems appropriate. Neither Lender's nor Midland's acceptance of any partial payments under the Loan Documents shall be deemed to be (i) a modification or waiver of any of the terms or provisions of the Loan Documents, (ii) a waiver of any rights, remedies or recourse available to Lender under the Loan Documents or at law or in equity. at any time or from time to time. and Lender expressly reserves all such right:; and remedies, or of any Default or Event of Default which may now or hcrcafler exist under the Loan Documents, (iii) an accord and satisfaction with respect to all or part of the Loan or (iv) a rescission or this or any other notices given by I ,cndcr or Midland. Very truly yours, MIDLAND LOAN SERVICES, INC B y : ~ ~ - - - - . Name. r 1 ,. Kevin C. Donahue 11 c. Senior Vico President Servicing Officer Schedule A BORROWERS AND OPERATING LESSEE: Grand Prix Belmont LLC Grand Prix Campbell/San Jose LLC Grand Prix El Segundo LLC Grand Prix Fremont LLC Grand Prix Mountain View LLC Grand Prix San Jose LLC Grand Prix San Mateo LLC Grand Prix Sili J LLC Grand Prix Sili II LLC Grand Prix Denver LLC Grand Prix Englewood/Denver South LLC Grand Prix Shelton LLC Grand Prix Windsor LLC Grand Prix Altamonte LLC Grund Prix Ft. Lauderdale LLC Grand I'Tix Naples LLC Grand Prix Atlanta LLC Grand Prix Atlanta (Peachtree Corners) LLC C:Trand Prix Lombard LLC Grand Prix Chicago LLC Grand Prix Schaumburg LLC Grand Prix Westchester LLC Grand Prix Lexington LLC Grand Prix Louisville (RI) LLC Grand Prix Columbia LLC Grand Prix Gaithersburg LLC Grand Prix Germantown LLC ()rand Prix Portland LLC Grand Prix Livonia LLC Grant! Prix Cherry Hill LLC Grant! Prix MI. Laurel LLC Grand Prix Saddle River LLC Grand Prix Islandia LLC Grand Prix Binghamton LLC Grand Prix Horsham LLC Grand Prix Willow Grove LLC Grand Prix Addison (RI) LLC Grand Prix Arlington LLC Grand Prix Las Colinas LLC Grand Prix Richmond LLC Grand Prix Richmond (Northwest) Ll .C Clrand Prix 13ellevuc LLC Grand Prix Bothell LLC Grand Prix Lynnwood LLC Grand Prix Tukwila LLC Grand Prix Fixed Lessee LLC c/o Apollo Investment Corporation 9 West 5t 11 Street New York, New York 10019 Attention: Aaron N. Sack Facsimile No.: (212) 515-3443 With a copy to: c/o Apollo Investment Corporation 9 West 57'h Street New York, New York 10019 Attention: Justin M. Korval Facsimile No.: (212) 515-3442 With a copy to: Innkeepers USA 340 Royal Poinciana Way Suite 306 Palm Beach, Florida 33480 Attention: Dennis Craven and Mark Murphy Facsimile No.: (561) 650-0958 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York I 0036-6522 Attention: NeilL. Rock, btj. Facsimile No.: (917) 777-37S7 GUARANTOR: Grand Prix Holdings LLC c/o Apollo Investment Corporation 9 West 5i 11 Street New York, New York 10019 Attention: Aaron N. Sack Facsimile No.: (212) 513-3443 With a copy to: Apollo Investment Corporation 9 West 5 7' 11 S tree! New York, New York 10019 Attention: Justin M. Korval Facsimile No.: (212) 515-3442 With a copy to: Innkeepers USA 340 Royal Poinciana Way Suite 306 Palm Beach, FL 33480 Attention: Dennis Craven & Mark Murphy Fucsimi le No.: (561) 650-0958 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York. New York 10036 Attention: Neil L. Rock, Esq. Facsimile No.: (917) 777-37'8,7 GUARANTOR: Apollo Investment Corporation 9 West 5i" Street New York, New York 10019 Attention: Aaron N. Sack FacsimilcNo.: (212)515-3443 With a copy to: Apollo Investment Corporation 9 West 57'h Street New York, New York 10019 Attention: Justin M. Korval Facsimile No.: (212) 515-3442 With a copy to: Innkeepers USA 340 Royal Poinciana Way Suite 306 Palm Beach, Florida 33480 Attention: Dennis Craven and Mark Murphy Facsimile No.: (561) 650-0958 With a copy to: Skadden. Arps. Slate, Meagher & flom LI .P Four Times S<.juare New York, New York 10036-6522 Attention: NeilL. Rock, Esq. Facsimile No.: (917) 777-3787 BOTTOM GUARANTORS: William J. Hamrick c/o TMH Hotels, Inc. 8100 East 22n<l Street, Bldg. 1800 Wichita. KS 67226 Telephone: (316) 262-2841 ext. 101 Residence Hotel Limited Partnership, a Limited Partnership of San Mateo Residence Associates, L.P. San Mateo Residence Associates, L.P. Attn: Kevin Jantzen Consolidated Holdings 8621 E. 21st St. North, Suite 200 Wichita, KS 67206 Telephone: (.ll 6) 631-1332 .lack DeBoer, a partner of Kentwood Residence Associates Kentwood Residence Associates Attn: Kevin Jantzen Consolidated Holdings 8621 E. 21 51 St. North, Suite 200 Wichita, KS 67206 Telephone: (316) 631-1332 John Bemis, a partner of Kentwood Residence Associates Kentwood Residence Associates Attn: Kevin Jantz.cn Consolidated Holdings 8621 E. 21st St. North, Suite 200 Wichita, KS 67206 Telephone: (316)631-1332 Jack DeBoer, a partner of East Lansing Residence Associates East Lansing Residence Associates Attn: Roy Baker 8100 E. 22nu Street N. Building 500 Wichita, KS 6 7226 Telephone: (316) 681-5107 John Bemis. a partner of East Lansing Residence Associates East Lansing Residence Associates Attn: Roy Baker 8100 E. 22"d Street N. Building 500 Wichita, KS 67226 Telephone: (316) 681-5 I 07 MIDLAND LOAN SERVICES, INC. May4, 2010 VIA FACSIMILE AND FEDERAL EXPRESS The Parties Listed on Schedule A hereto Gentlemen: Re: Loan in the principal sum of $825,402,542 (the "Loan") made by Lehman Ali Inc. ("Original Lender" and together with its successors and/or assigns ("Lender") to Grand Prix Belmont LLC, Grand Prix Campbell/San Jose LLC, Grand Prix El Segundo LLC, Grand Prix Fremont LLC, Grand Prix Mountain View LLC, Grand Prix San Jose LLC, Grand Prix San Mateo LLC, Grand Prix Sili I LLC, Grand Prix Sili II LLC, Grand Prix Denver LLC, Grand Prix Englewood/Denver South LLC, Grand Prix Shelton LLC, Grand Prix Windsor LLC, Grand Prix Altamonte LLC, Grand Prix Ft. Lauderdale LLC, Grand Prix Naples LLC, Grand Prix Atlanta LLC, Grand Prix Atlanta (Peachtree Comers) LLC, Grand Prix Lombard LLC, Grand Prix Chicago LLC, Grand Prix Schaumburg LLC, Grand Prix Westchester LLC, Grand Prix Lexington LLC, Grand Prix Louisville (RI) LLC, Grand Prix Columbia LLC, Grand Prix Gaithersburg LLC, Grand Prix Germantown LLC, Grand Prix Portland LLC, Grand Prix Livonia LLC, Grand Prix Cherry Hill LLC, Grand Prix Mt. Laurel LLC, Grand Prix Saddle River LLC, Grand Prix Islandia LLC, Grand Prix Binghamton LLC, Grand Prix Horsham LLC, Grand Prix Willow Grove LLC, Grand Prix Addison (RI) LLC, Grand Prix Arlington LLC, Grand Prix Las Colinas LLC, Grand Prix Richmond LLC, Grand Prix Richmond (Northwest) LLC, Grand Prix Bellevue LLC, Grand Prix Bothell LLC, Grand Prix Lynnwood LLC, Grand Prix Tukwila LLC Uointly and severally, together with their successors and permitted assigns as borrower under the Loan Documents (as defined herein), the "Borrower") pursuant to the tem1s of that certain Loan Agreement by and between Borrower, Original Lender, Grand Prix Fixed Lessee LLC and Grand Prix Holdings LLC, dated as of June 29, 2007, as modified by that certain First Amendment to Loan Agreement dated as of August 9, 2007 (the "Loan Agreement"). Reference is made to the Loan and the Loan Agreement. Midland Loan Services, Inc. ("Midland") is the special servicer for the Loan. Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Loan Agreement. Member of The PNC Financial Services Group PO Box 25970 Shawnee M1ss1on i<anses 1>6725-5970 www.pnc.com ~ P N C REAL ESTATE Reference is also made to that certain letter to you from the undersigned, dated as of April 22, 2010 (the "April 22nd Letter"), pursuant to which, among other things, you were notified that an Event of Default had occurred as a result of Borrower's failure to pay the Monthly Debt Service Payment Amount that was due on April 9, 20 I 0. As of the date hereof, such Event of Default remains uncured. As such, the Debt is hereby accelerated and demand is made for immediate payment in full of the Debt. Lender shall have and hereby reserves the right to exercise the rights, powers and remedies available to it under the Loan Documents or at law or in equity in response to the above described Event of Default in such manner and at such times as Lender in its sole and absolute discretion deems appropriate, including, without limitation, the right to impose late charges and the right to impose interest at the Default Rate under the Loan Documents. Neither this letter nor anything contained herein shall be construed as a waiver of the Default described in the April 22nd Letter or any other Defaults or Events of Default which heretofore have occurred or which continue to exist under the Loan Documents. Very truly yours, By: ~ ~ Name: Kevm . Semon Title: Vice President Schedule A BORROWERS AND OPERATING LESSEE: Grand Prix Belmont LLC Grand Prix CampbelVSan Jose LLC Grand Prix El Segundo LLC Grand Prix Fremont LLC Grand Prix Mountain View LLC Grand Prix San Jose LLC Grand Prix San Mateo LLC Grand Prix Sili I LLC Grand Prix Sili Il LLC Grand Prix Denver LLC Grand Prix Englewood/Denver South LLC Grand Prix Shelton LLC Grand Prix Windsor LLC Grand Prix Altamonte LLC Grand Prix Ft. Lauderdale LLC Grand Prix Naples LLC Grand Prix Atlanta LLC Grand Prix Atlanta (Peachtree Corners) LLC Grand Prix Lombard LLC Grand Prix Chicago LLC Grand Prix Schaumburg LLC Grand Prix Westchester LLC Grand Prix Lexington LLC Grand Prix Louisville (RI) LLC Grand Prix Columbia LLC Grand Prix Gaithersburg LLC Grand Prix Germantown LLC Grand Prix Portland LLC Grand Prix Livonia LLC Grand Prix Cherry Hill LLC Grand Prix Mt. Laurel LLC Grand Prix Saddle River LLC Grand Prix Islandia LLC Grand Prix Binghamton LLC Grand Prix Horsham LLC Grand Prix Willow Grove LLC Grand Prix Addison (RI) LLC Grand Prix Arlington LLC Grand Prix Las Colinas LLC Grand Prix Richmond LLC Grand Prix Richmond (Northwest) LLC Grand Prix Bellevue LLC Grand Prix Bothell LLC Grand Prix Lynnwood LLC Grand Prix Tukwila LLC Grand Prix Fixed Lessee LLC c/o Apollo Investment Corporation 9 West 5ih Street New York, New York 10019 Attention: Aaron N. Sack Facsimile No.: (212) 515-3443 With a copy to: c/o Apollo Investment Corporation 9 West 5ih Street New York, New York 10019 Attention: Justin M. Karval Facsimile No.: (212) 515-3442 With a copy to: Innkeepers USA 340 Royal Poinciana Way Suite 306 Palm Beach, Florida 33480 Attention: Dennis Craven and Mark Murphy Facsimile No.: (561) 650-0958 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036-6522 Attention: Neil L. Rock, Esq. Facsimile No.: (917) 777-3787 GUARANTOR: Grand Prix Holdings LLC c/o Apollo Investment Corporation 9 West 5ih Street New York, New York 10019 Attention: Aaron N. Sack Facsimile No.: (212) 513-3443 With a copy to: Apollo Investment Corporation 9 West 5ih Street New York, New York 10019 Attention: Justin M. Korval Facsimile No.: (212) 515-3442 With a copy to: Innkeepers USA 340 Royal Poinciana Way Suite 306 Palm Beach, FL 33480 Attention: Dennis Craven & Mark Murphy Facsimile No.: (561) 650-0958 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Neil L. Rock, Esq. Facsimile No.: (917) 777-3787 GUARANTOR: Apollo Investment Corporation 9 West 5ih Street New York, New York 10019 Attention: Aaron N. Sack Facsimile No.: (212) 515-3443 With a copy to: Apollo Investment Corporation 9 West 5ih Street New York, New York 10019 Attention: Justin M. Korval Facsimile No.: (212) 515-3442 With a copy to: Innkeepers USA 340 Royal Poinciana Way Suite 306 Palm Beach, Florida 33480 Attention: Dennis Craven and Mark Murphy Facsimile No.: (561) 650-0958 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York I 0036-6522 Attention: NeilL. Rock, Esq. Facsimile No.: (917) 777-3787 BOTTOM GUARANTORS: William J. Hamrick c/o TMH Hotels, Inc. 8100 East 22nd Street, Bldg. 1800 Wichita, KS 67226 Telephone: (316) 262-2841 ext. 10 I Residence Hotel Limited Partnership, a Limited Partnership of San Mateo Residence Associates, L.P. San Mateo Residence Associates, L.P. Attn: Kevin Jantzen Consolidated Holdings 8621 E. 21st St. North, Suite 200 Wichita, KS 67206 Telephone: (316) 631-1332 Jack DeBoer, a partner of Kentwood Residence Associates Kentwood Residence Associates Attn: Kevin Jantzen Consolidated Holdings 8621 E. 21st St. North, Suite 200 Wichita, KS 67206 Telephone: (316) 631-1332 John Bemis, a partner of Kentwood Residence Associates Kentwood Residence Associates Attn: Kevin Jantzen Consolidated Holdings 8621 E. 21st St. North, Suite 200 Wichita, KS 67206 Telephone: (316) 631-1332 Jack DeBoer, a partner of East Lansing Residence Associates East Lansing Residence Associates Attn: Roy Baker 8100 E. 22"d Street N. Building 500 Wichita, KS 67226 Telephone: (316) 681-5107 John Bemis, a partner of East Lansing Residence Associates East Lansing Residence Associates Attn: Roy Baker 8100 E. 22nd Street N. Building 500 Wichita, KS 67226 Telephone: (316) 681-5107