Agreement On Franchise

AGREEMENT ON MANAGEMENT AND FRANCHISE-RELATED MATTERS


AGREEMENT dated June 20, 1997 among Summerfield Suites Management Company, L.P., a Kansas limited partnership ("Franchisor'), Summerfield Suites Lease Company, L.P., a Kansas limited partnership ("Franchisee"), and Innkeepers USA Limited Partnership, a Virginia limited partnership (collectively, the "Partnership").


W I T N E S S E T H


WHEREAS, the partnership is controlled by Innkeepers USA Trust, a Maryland real estate investment trust (the "REIT"); and


WHEREAS, the Partnership or its designee proposes to acquire pursuant to Contribution Agreements dated June 2, 1997 (each, a "Contribution Agreement" and collectively, the "Contribution Agreements") the Summerfield Suites, Sierra Suites and Sunrise Suites hotel properties described in Exhibit A hereto from partnerships affiliated with Franchisor and Franchisee (the "Contributing Partnerships"); and


WHEREAS, the Partnership or its affiliates may in the future acquire and lease to Franchisee or affiliates of Franchisee additional Summerfield Suites and Sierra Suites hotels (collectively with the hotels acquired from the Contributing Partnerships, the "Hotels"); and


WHEREAS, Franchisor holds all rights necessary to franchise the use of the name and concept for "Summerfield Suites" and "Sierra Suites" hotel franchise brands; and


WHEREAS, Franchisor has entered into franchise agreements with Franchisee dated June 20, 1997, in the form attached hereto as Exhibit B and may enter into franchise agreements with respect to Hotels acquired by the Partnership or its affiliates in the future (each, a "Franchise Agreement" and collectively, the "Franchise Agreements"); and


WHEREAS, upon the Partnership's (or its designee's) acquisition of the Hotels, the Partnership (or its designee) ("Lessor") proposes to lease the Hotels to Franchisee (or an affiliate of Franchisee ("Lessee") pursuant to lease agreements (collectively, the "Leases") which give Franchisee or an affiliate of Franchisee the right to lease and operate the Hotels; and


WHEREAS, Franchisee will enter into management contracts with Franchisor; and


WHEREAS, it is a condition to the Partnership's (or its designee's) agreement to acquire the Hotels from the Contributing Partnerships and lease the Hotels to Franchisee pursuant to the 2


Leases and a Lease Master Agreement (the "Lease Master Agreement") that the parties shall have entered into this Agreement; and


WHEREAS, Franchisor and Franchisee will obtain material benefits from the Partnership's acquisition of the Hotels from affiliates of Franchisor and Franchisee pursuant to the Contribution Agreements and lease of the Hotels to Franchisee pursuant to the Leases; and


NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:


1. Franchise Agreement. Franchisor and Franchisee represent and warrant to the Partnership that (i) Exhibit B is a true, correct and complete form of each of the Franchise Agreements, (ii) Franchisee has all rights and duties as franchisee/licensee under each Franchise Agreement and is not in default under any Franchise Agreement and there is no event or state of facts that with the passage of time or notice of default would constitute a default under the Franchise Agreement or a violation of Franchisor's standards manual, and (iii) there are no agreements or undertakings, oral or otherwise, between Franchisor and Franchisee with regard to the franchises created by the Franchise Agreement. During the term of the Leases, Franchisor and Franchisee will not amend, modify or terminate any Franchise Agreement related to a Hotel subject to a Lease (except in the event of a default by Franchisee under a Franchise Agreement) without the prior written consent of the Partnership. To the extent that any provision of the Lease is inconsistent with any terms or provisions of this Agreement, the terms and provisions of this Agreement shall control.


2. Boards. For so long as the Partnership and its affiliates collectively own at least 10% of the hotels open and operating within the Summerfield Suites and Sierra Suites franchise brands (in each case, a "Controlled Brand") and during the term of the Leases (and for so long as the Franchise Agreements remain in full force and effect), a designee of the Partnership shall be a member of Franchisor's marketing association board and franchisee association board for such Controlled Brands.


3. Comfort Letters. Upon the request of the Partnership from time to time, Franchisor and Franchisee promptly will provide customary assurances and comfort letters to the Partnership's or the REIT's lenders, underwriters or similar parties and their counsel with respect to the Franchise Agreements being in full force and effect, there being no default under the Franchise Agreements, the existence and binding effect of this Agreement, and such other matters as the Partnership may reasonably request.


4. Changes to Franchise. For so long as the Partnership owns at least 75% of the hotels open and operating within a Controlled Brand, Franchisor shall not make any material changes to the form, terms or provisions of the franchise agreement for such Controlled Brand or materially change the Controlled Brand concept or standards without the prior written consent of the Partnership. Without limiting the generality of the foregoing, the Partnership shall have the right to approve any change to the prominent trade name of "Summerfield Suites" or "Sierra


-2- 3


Suites" (other than the addition of a "tag line"). Any change to the prominent trade name shall be without cost to the Partnership and Franchisor agrees to pay or to reimburse the Partnership, upon request, for any third-party costs or expenses in connection with any such change, including, without limitation, costs associated with any signage or logo changes and other capital improvements not currently contemplated by the Franchise Agreements.


5. Capital Improvements. Unless the Partnership and the Franchisee otherwise agree in writing, Franchisor and Franchisee agree with the Partnership that the capital improvements schedule set forth on Exhibit C hereto (the "5/10/15 Year Re-Do Schedule") shall be imposed on Franchisee as a part of Franchisee's obligations pursuant to the Franchise Agreements for the Hotels and Franchisee agrees with Franchisor and the Partnership to cause the items set forth on the 5/10/15 Year Re-Do Schedule to be performed at the Hotels by the dates and in the manner described in the 5/10/15 Year Re-Do Schedule.


6. Relationship with Franchise. Franchisor hereby agrees with the Partnership that Franchisor will enforce the terms of the Franchise Agreements against Franchisee in good faith and on an arms'-length basis.


7. Transfer. Franchisor represents that on the Closing Date, the owners of Franchisor are as described in Exhibit D ("Owners"). For so long as the Partnership owns at least 75% of the open and operating hotels of a Controlled Brand, Franchisor shall not permit any merger, sale of its stock or sale, transfer or conveyance of all or substantially all of the assets of Franchisor, or the sale, transfer of conveyance of the Franchise Agreements (a "Transfer"), if, as a result thereof, Franchisor or the surviving entity would cease to be controlled by the Owners without (i) at least 30 days' prior written notice to the Partnership describing in reasonable detail the proposed transaction and (ii) the Partnership's prior written consent. Notwithstanding the foregoing, the Partnership shall consent to the Transfer if (i) the party proposed to acquire control of Franchisor or its assets (the "Transferee") assumes, pursuant to an assumption document reasonably satisfactory to the Partnership, all of the obligations and covenants of Franchisor pursuant to this Agreement, (ii) the T ...