Common use of Repairs, Maintenance and Equipment Replacements to be Paid from Reserve Clause in Contracts

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, a reserve account in the name of Owner (the “Reserve”) shall be established by Manager, in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, renewals and additions to the FF&E at the Hotel; and 2. Routine Capital Expenditures. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective Date, Manager shall transfer into the Reserve an amount equal to two percent (2%) of Gross Revenues for such period; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Period, Manager shall transfer into the Reserve an amount equal to four percent (4%) of Gross Revenues for each such Accounting Period; commencing with the beginning of the twenty-seventh (27th) full Accounting Period and for all Accounting Periods thereafter, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting Period. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager shall from time to time make such (1) replacements and renewals to the FF&E of the Hotel, and (2) Routine Capital Expenditures, as may be agreed upon by Owner and Manager and as may be required by the Franchise Agreement. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x) proceeds from the disposition of FF&E, nor (y) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B above, nor (b) be included in Gross Revenues. D. All repairs, alterations, improvements, renewals or replacements made pursuant to this Article V, and all amounts kept in the Reserve, shall be the property of Owner, subject to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in the Annual Operating Projection approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage or destruction to the Hotel or persons or property thereon due to force majeure or other comparable emergency, Manager may make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such damage or destruction. E. Notwithstanding anything contained herein to the contrary, at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Fee. F. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency as provided in Section 5.02.D.), Manager shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent and approval.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, a A reserve account in the name and under the control of Owner (the “Reserve”) shall be established by Manager, Manager in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, renewals and additions to the FF&E at the Hotel; and 2. Routine Capital Expenditures. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective Date, Manager shall transfer into deposit funds in the Reserve an amount equal to two percent (2%) as provided in Item 3 of Gross Revenues for such period; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Period, Manager shall transfer into the Reserve an amount equal to four percent (4%) of Gross Revenues for each such Accounting Period; commencing with the beginning of the twenty-seventh (27th) full Accounting Period and for all Accounting Periods thereafter, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting PeriodSchedule 1. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager shall from time to time make such (1) replacements and renewals to the FF&E of the Hotel, and (2) Routine Capital Expenditures, as may be provided for in the approved Annual Operating Projection, as may be agreed upon by Owner and Manager and or as may be required by the Franchise Agreement. Except as may be required by the Franchise Agreement, no expenditures will be made in excess of the balance of the Reserve without the approval of Owner. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x) proceeds from the disposition of FF&E, nor (y) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B above, nor (b) be included in Gross Revenues. Withdrawals by Manager from the Reserve may be made in accordance with the approved Annual Operating Projection only by representatives of Manager whose signatures have been authorized by Manager with the concurrence of Owner. D. All repairs, alterations, improvements, renewals or replacements made pursuant to this Article V, and all amounts kept in the Reserve, shall be the property of Owner, subject to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in the approved Annual Operating Projection approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included or is necessary in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism an emergency to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage protect or destruction to preserve the Hotel or persons the health and safety of Hotel employees, guests or property thereon due customers. If Owner elects to force majeure use Manager’s construction management services for construction projects in connection with any Routine Capital Expenditures or other comparable emergencynon-emergency alterations or improvements, Owner will pay Manager such construction management fee as may make such repairs, replacements or improvements to be agreed upon by the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such damage or destructionparties. E. Notwithstanding anything contained herein to the contrary, at Owner’s option upon the mutual agreement of Owner and Manager, the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. If Owner does not so fund such amounts within thirty (30) days after Owner is required to do so under this Agreement, Manager shall have the right after prior written notice to Owner (without affecting Manager’s other remedies under this Agreement) to withdraw from future distributions of funds otherwise due to Owner an amount equal to such amount required to be so funded by Owner. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Fee. F. Unless otherwise expressly covered by this Article V (including without limitation V, except in the case of emergency as provided in Section 5.02.D.)an emergency, Manager shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent and approval.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, a Manager shall establish an escrow reserve account in the name of Owner (the “Reserve”) shall be established by Manager), in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, replacements and renewals and additions related to the FF&E at the HotelInn; and 2. Routine Capital Expendituresroutine or non-major repairs and maintenance to the Buildings which are normally capitalized (as opposed to expensed) under generally accepted accounting principles, such as exterior and interior repainting; resurfacing building walls, floors, roofs and parking areas; and replacing folding walls and the like. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective Datefirst Fiscal Year, Manager shall transfer into the Reserve an amount equal to two one percent (21%) of Gross Revenues for such periodFiscal Year; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Periodsecond Fiscal Year, Manager shall transfer into the Reserve an amount equal to four three percent (43%) of Gross Revenues for each such Accounting PeriodFiscal Year; commencing with the beginning of the twenty-seventh (27th) full Accounting Period third Fiscal Year and for all Accounting Periods Fiscal Years thereafter, subject to the provisions of Section 5.02.E below, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each of such Accounting PeriodFiscal Years. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager shall from time to time make such (1) replacements and renewals to the FF&E of the HotelInn, and (2) Routine Capital Expendituresrepairs to each Building of the nature described in Section 5.02.A.2, as may it deems necessary, up to the balance in the Reserve. No expenditures will be agreed upon by Owner and Manager and as may be required by made in excess of said balance without the Franchise Agreementapproval of Owner. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel Inn shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x1) proceeds from the disposition of FF&E, nor (y2) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B above, nor (b) be included in Gross Revenues. D. All repairs, alterations, improvements, Manager shall prepare an estimate (“Repairs and Equipment Estimate”) of the expenditures necessary for (1) replacements and renewals or replacements made pursuant to this Article Vthe FF&E of the Inn, and all amounts kept (2) repairs to each Building of the nature described in Section 5.02.A.2, during the ensuing Fiscal Year and shall deliver the Repairs and Equipment Estimate to Owner at the same time it submits the Annual Operating Projection described in Section 4.05. The Repairs and Equipment Estimate shall also indicate the estimated time schedule for making such replacements and renewals. E. As the Inn ages, these percentages may not be sufficient to keep the Reserve at the levels necessary to make the replacements and renewals to the FF&E of the Inn, or to make the repairs to the Buildings of the nature described in Section 5.02.A.2, which are required to maintain the Inn in accordance with Manager’s standards therefor. If the Repairs and Equipment Estimate prepared in good faith by Manager exceeds the available funds in the Reserve, Owner shall: 1. agree in writing to increase the annual percentage in Section 5.02.B to provide the additional funds required, or 2. make a lump sum contribution to the Reserve in the necessary amount; such amount shall be the property of Owner, subject fully repaid without interest to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in the Annual Operating Projection approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage or destruction to the Hotel or persons or property thereon due to force majeure or other comparable emergency, Manager may make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such damage or destruction. E. Notwithstanding anything contained herein to the contrary, at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues in equal installments over the period of the next sixty-five (65) Accounting Periods, and such installment repayments shall be distributed Deductions. A failure or refusal by Owner to either agree in cash writing to increase the annual percentage required in accordance with Section 5.02.E.1 above, or to provide the additional funds required in accordance with Section 5.02.E.2 above, within sixty (60) days after Manager’s request therefor shall entitle Manager to notify Owner along with the remainder in writing that it will terminate this Agreement and this Agreement shall terminate as of the date that is one hundred eighty (180) days after the date of Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records receipt of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management FeeManager’s notice. F. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency as provided in Section 5.02.D.), Manager shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent and approval.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, a reserve account in the name of Owner (the “Reserve”) shall be established by Manager, in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, renewals and additions to the FF&E at the Hotel; and 2. Routine Capital Expenditures. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective Date, Manager shall transfer into the Reserve an amount equal to two percent (2%) of Gross Revenues for such period; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Period, Manager shall transfer into the Reserve an amount equal to four percent (4%) of Gross Revenues for each such Accounting Period; commencing with the beginning of the twenty-seventh (27th) full Accounting Period and for all Accounting Periods thereafter, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting Period. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager shall from time to time make such (1) replacements and renewals to the FF&E of the Hotel, and (2) Routine Capital Expenditures, as may be agreed upon by Owner and Manager and as may be required by the Franchise Agreement. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x) proceeds from the disposition of FF&E, nor (y) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B above, nor (b) be included in Gross Revenues. D. All repairs, alterations, improvements, renewals or replacements made pursuant to this Article V, and all amounts kept in the Reserve, shall be the property of Owner, subject to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in the Annual Operating Projection approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage or destruction to the Hotel or persons or property thereon due to force majeure or other comparable emergency, Manager may make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such damage or destruction. E. Notwithstanding anything contained herein to the contrary, at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Fee. F. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency as provided in Section 5.02.D.), Manager shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent and approval.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, a reserve account in the name of Owner (the “Reserve”) shall be established by Manager, in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, renewals and additions to the FF&E at the Hotel; and 2. Routine Capital Expenditures. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective DateTerm, Manager shall transfer into the Reserve an amount equal to two percent (2%the amount(s) of Gross Revenues for such period; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Period, Manager shall transfer into the Reserve an amount equal to four percent (4%) of Gross Revenues for each such Accounting Period; commencing with the beginning of the twenty-seventh (27th) full Accounting Period and for all Accounting Periods thereafter, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting Periodspecified in Schedule 1. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager at Owner’s expense shall from time to time make such (1) replacements and renewals to the FF&E of the Hotel, and (2) Routine Capital Expenditures, as may be agreed upon by Owner and Manager and as may be required by the Franchise Agreement. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel shall be added to the Reserve. The Reserve will be kept in an interest-bearing accountaccount to the extent not prohibited by any lenders, and any interest which accrues thereon shall be retained in the Reserve. Neither (x) proceeds from the disposition of FF&E, nor (y) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B above, nor (b) be included in Gross Revenues. If and lender requires advance payment of capital items from borrower, Owner will advance these funds and will be subsequently reimbursed from the Reserve fund. D. All repairs, alterations, improvements, renewals or replacements made pursuant to this Article V, and all amounts kept in the Reserve, shall be the property of Owner, subject to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in the Annual Operating Capital Spending Projection approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Capital Spending Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage or destruction to the Hotel or persons or property thereon due to force majeure or other comparable emergency, Manager may at Owner’s expense make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such injury, damage or destruction. E. Notwithstanding anything contained herein to the contrary, at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Fee. F. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency as provided in Section 5.02.D.), Manager shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent and approval.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, a reserve account in the name of Owner (the “Reserve”) shall be established by Manager, in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, renewals and additions to the FF&E at the Hotel; and 2. Routine Capital Expenditures. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective DateTerm, Manager shall transfer into the Reserve an amount equal to two percent (2%the amount(s) of Gross Revenues for such period; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Period, Manager shall transfer into the Reserve an amount equal to four percent (4%) of Gross Revenues for each such Accounting Period; commencing with the beginning of the twenty-seventh (27th) full Accounting Period and for all Accounting Periods thereafter, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting Periodspecified in Schedule 1. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager at Owner’s expense shall from time to time make such (1) replacements and renewals to the FF&E of the Hotel, and (2) Routine Capital Expenditures, as may be agreed upon by Owner and Manager and as may be required by the Franchise Agreement. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x) proceeds from the disposition of FF&E, nor (y) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B above, nor (b) be included in Gross Revenues. D. All repairs, alterations, improvements, renewals or replacements made pursuant to this Article V, and all amounts kept in the Reserve, shall be the property of Owner, subject to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in the Annual Operating Projection approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage or destruction to the Hotel or persons or property thereon due to force majeure or other comparable emergency, Manager may at Owner’s expense make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such injury, damage or destruction. E. Notwithstanding anything contained herein to the contrary, at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Fee. F. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency as provided in Section 5.02.D.), Manager shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent and approval.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, a reserve account in the name of Owner (the “Reserve”) shall be established by Manager, in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, renewals and additions to the FF&E at the Hotel; and 2. Routine Capital Expenditures. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective Date, Manager shall transfer into the Reserve an amount equal to two percent (2%) a percentage of the Gross Revenues for such period; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Period, Manager shall transfer into the Reserve an amount equal to four percent (4%) of Gross Revenues for each such Accounting Period; commencing with the beginning of the twenty-seventh (27th) full Accounting Period and for all Accounting Periods thereafter, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting Periodas provided in Schedule 1. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager shall from time to time make such (1) replacements and renewals to the FF&E of the Hotel, and (2) Routine Capital Expenditures, as may be agreed upon by Owner and Manager and as may be required by the Franchise Agreement. Except as may be required by the Franchise Agreement, no expenditures will be made in excess of the balance of the Reserve without the approval of Owner. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x) proceeds from the disposition of FF&E, nor (y) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B above, nor (b) be included in Gross Revenues. Withdrawals by Manager from the Reserve may be made in accordance with the approved Annual Operating Projection only by representatives of Manager whose signatures have been authorized by Manager with the concurrence of Owner. D. All repairs, alterations, improvements, renewals or replacements made pursuant to this Article V, and all amounts kept in the Reserve, shall be the property of Owner, subject to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in the Annual Operating Projection approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage or destruction to the Hotel or persons or property thereon due to force majeure or other comparable emergency, Manager may make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such damage or destruction. E. Notwithstanding anything contained herein to the contrary, at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Fee. F. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency as provided in Section 5.02.D.), Manager shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent and approval.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, Manager shall establish a reserve account in the name of Owner (the “"Reserve”) shall be established by Manager"), in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, renewals and additions to the FF&E at the HotelInn; and 2. Routine Capital Expenditures. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective Date, Manager shall transfer into the Reserve an amount equal to two three percent (23%) of Gross Revenues for such period; during the period from the beginning of the fourteenth (1414th) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Period, Manager shall transfer into the Reserve an amount equal to four percent (4%) of Gross Revenues for each such Accounting Period; commencing with the beginning of the twenty-seventh (27th) full Accounting Period and for all Accounting Periods thereafter, subject to the provisions of Section 5.02.E., below, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting Period. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager shall from time to time make such (1) replacements and renewals to the FF&E of the HotelInn, and (2) Routine Capital Expenditures, as may it deems necessary, up to the balance in the Reserve. No expenditures will be agreed upon by Owner and Manager and as may be required by made in excess of said balance without the Franchise Agreementapproval of Owner. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel Inn shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x1) proceeds from the disposition of FF&E, nor (y2) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B 5.02.B. above, nor (b) be included in Gross Revenues. D. All repairs, alterations, improvements, renewals or replacements made pursuant to this Article V, Manager shall prepare an estimate ("Repairs and all amounts kept in Equipment Estimate") of the Reserve, shall be the property of Owner, subject to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended expenditures necessary for (1) replacements, renewals and additions to the FF&EFF&E of the Inn, and (2) Routine Capital Expenditures during the ensuing Fiscal Year and shall deliver the Repairs and Equipment Estimate to Owner at the same time it submits the Annual Operating Projection described in Section 4.04. The Repairs and Equipment Estimate shall also indicate the estimated time schedule for making such replacements, renewals and expenditures. Owner shall have thirty (30) days after receipt to review and comment on such Repairs and Equipment Estimate. Manager shall consider in good faith Owner's comments regarding the Repairs and Equipment Estimate, provided that Owner's comments are consistent with maintaining System Standards and acknowledging that FF&E replacements occur at regular cycles for soft goods and case goods, which cycles are incorporated in System Standards. Owner shall have the right to approve any individual expenditure in the Repair and Equipment Estimate of $10,000 (as adjusted by the GDP Deflator) or more, and in the event Owner disapproves any such individual expenditure, Owner will provide Manager in writing with the specific reasons for its disapproval within such thirty (30) day period; provided, however, Owner shall not withhold its approval of any Routine Capital Expenditures or any replacements, renewals and additions to the FF&E that are required, in Manager's reasonable judgment, to keep the Inn in a first-class condition at least in accordance with System Standards or otherwise required for any other capital expenditures unless each such expenditure is included the continued safe and orderly operation of the Inn. Thereafter, in the Annual Operating Projection approved by thirty (30) day period following Manager's receipt of Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost 's disapproval of such improvements. Notwithstanding individual expenditure, the foregoingparties will attempt to resolve in good faith Owner's objections and if one or more of Owner's objections have not been resolved as of the end of such thirty (30) day period, in case of threatened damage or destruction such dispute shall be referred to the Hotel or persons or property thereon due to force majeure or other comparable emergency, Manager may make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such damage or destruction. E. Notwithstanding anything contained herein to the contrary, at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Fee. F. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency Expert as provided in Section 5.02.D.)11.21. FF&E Leases shall be subject to Section 1.08. E. As the Inn ages, these percentages may not be sufficient to keep the Reserve at the levels necessary to make the replacements, renewals and additions to the FF&E of the Inn, or to make the Routine Capital Expenditures which are required to maintain the Inn in accordance with the System Standards therefor. If the Repairs and Equipment Estimate prepared in good faith by Manager exceeds the available funds in the Reserve, Owner shall: 1. agree in writing to increase temporarily the annual percentage in Section 5.02.B. to provide the additional funds required, or 2. make a lump sum contribution to the Reserve in the necessary amount; such amount (plus interest at the Prime Rate plus one percent (1%) per annum) shall not make any capital expenditure or improvement without first obtaining be fully repaid to Owner from Gross Revenues in equal installments over the period of the next sixty-five (65) Accounting Periods, and such installment repayments shall be Deductions. If Owner fails to elect one of the above alternatives within sixty (60) days after Manager's request therefor, Owner shall be deemed to have elected the alternative set forth in Section 5.02.E.1. above. If Owner elects the alternative set forth in Section 5.02.E.2. above and fails to provide the additional funds required thereunder within sixty (60) days after Owner’s prior written consent and approval's receipt of Manager's request for additional funding, such failure shall constitute an Event of Default by Owner.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option and request, a Manager shall establish an escrow reserve account in the name of Owner (the “Reserve”) shall be established by Manager), in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, replacements and renewals and additions related to the FF&E at the HotelInn; and 2. Routine Capital Expendituresroutine or non-major repairs and maintenance to the Buildings which are normally capitalized (as opposed to expensed) under generally accepted accounting principles, such as exterior and interior repainting; resurfacing building walls, floors, roofs and parking areas; and replacing folding walls and the like. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective Datefirst Fiscal Year, Manager shall transfer into the Reserve an amount equal to two one percent (21%) of Gross Revenues for such periodFiscal Year; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Periodsecond Fiscal Year, Manager shall transfer into the Reserve an amount equal to four three percent (43%) of Gross Revenues for each such Accounting PeriodFiscal Year; commencing with the beginning of the twenty-seventh (27th) full Accounting Period third Fiscal Year and for all Accounting Periods Fiscal Years thereafter; subject to the provisions of subsection E below, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting PeriodFiscal Years. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereof. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager shall from time to time make such (1) replacements and renewals to the FF&E of the HotelInn, and (2) Routine Capital Expendituresrepairs to each Building of the nature described in Section 5.02.A.2, as may it deems necessary, up to the balance in the Reserve. No expenditures will be agreed upon by Owner and Manager and as may be required by made in excess of said balance without the Franchise Agreementapproval of Owner. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel Inn shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x1) proceeds from the disposition of FF&E, nor (y2) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B subsection B above, nor (b) be included in Gross Revenues. D. All repairs, alterations, improvements, Manager shall prepare an estimate (“Repairs and Equipment Estimate”) of the expenditures necessary for (1) replacements and renewals or replacements made pursuant to this Article Vthe FF&E of the Inn, and all amounts kept (2) repairs to each Building of the nature described in Section 5.02.A.2, during the Reserve, ensuing Fiscal Year and shall be deliver the property of Owner, subject Repairs and Equipment Estimate to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to Owner at the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in same time it submits the Annual Operating Projection approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage or destruction to the Hotel or persons or property thereon due to force majeure or other comparable emergency, Manager may make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such damage or destruction. E. Notwithstanding anything contained herein to the contrary, at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall be included in the Operating Profit, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund the same only when required under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Fee. F. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency as provided described in Section 5.02.D.), Manager 4.05. The Repairs and Equipment Estimate shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent also indicate the estimated time schedule for making such replacements and approvalrenewals.

Repairs, Maintenance and Equipment Replacements to be Paid from Reserve. A. At Owner’s option Owner shall establish and request, maintain a reserve account in the name of Owner (the “Reserve”) shall be established by Manager), in a bank or similar institution reasonably acceptable to both Manager and Owner, to cover the cost of: 1. Replacements, renewals and additions to the FF&E at the Hotel; and 2. Routine Capital Expenditures. B. During the period from the Effective Date to the expiration of the thirteenth (13th) full Accounting Period after the Effective Date, Manager shall transfer into the Reserve an amount equal to two percent (2%) a percentage of the Gross Revenues for such period; during the period from the beginning of the fourteenth (14) full Accounting Period to the expiration of the twenty-sixth (26th) full Accounting Period, Manager shall transfer into the Reserve an amount equal to four percent (4%) of Gross Revenues for each such Accounting Period; commencing with the beginning of the twenty-seventh (27th) full Accounting Period and for all Accounting Periods thereafter, Manager shall transfer into the Reserve an amount equal to five percent (5%) of Gross Revenues for each such Accounting Periodas provided in Schedule 1. Transfers into the Reserve shall be made at the time of each interim accounting described in Section 4.01 hereofAccounting Period Statement. All amounts transferred to the Reserve shall be deducted from Gross Revenues in determining Operating Profit a Deduction and shall be deposited in the special Reserve account described in Section 5.02.A. C. Subject to the availability of adequate funds, Manager shall from time to time make such (1) replacements and renewals to the FF&E of the Hotel, and (2) Routine Capital Expenditures, as may be agreed upon by Owner and Manager and or as may be required by the Franchise Agreement. Except as may be required by the Franchise Agreement, no expenditures will be made in excess of the balance of the Reserve without the approval of Owner. At the end of each Fiscal Year, any amounts remaining in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel shall be added to the Reserve. The Reserve will be kept in an interest-bearing account, and any interest which accrues thereon shall be retained in the Reserve. Neither (x) proceeds from the disposition of FF&E, nor (y) interest which accrues on amounts held in the Reserve, shall (a) result in any reduction in the required contributions to the Reserve set forth in Section 5.02.B above, nor (b) be included in Gross Revenues. Upon request by Manager, within five (5) Business days after Manager’s request therefor, Owner shall release funds from the Reserve to Manager based on Manager’s submission of vendor invoices supporting such request. D. 1. All repairs, alterations, improvements, renewals or replacements made pursuant to this Article V, and all amounts kept in the Reserve, shall be the property of Owner, subject to Manager’s rights to apply such funds as otherwise provided in this Agreement. In addition and notwithstanding anything contained herein to the contrary, no funds shall be expended for replacements, renewals and additions to the FF&E, for Routine Capital Expenditures or for any other capital expenditures unless each such expenditure is included in the Annual Operating Projection approved by Owner or is otherwise approved by Owner. In the event that Owner requests that Manager perform capital improvements that are not included in the Annual Operating Projection, Manager will perform such improvements provided that Owner and Manager have theretofore agreed upon a mutually satisfactory funding mechanism to pay for the cost of such improvements. Notwithstanding the foregoing, in case of threatened damage or destruction to the Hotel or persons or property thereon due to force majeure Force Majeure or other comparable emergency, Manager may make such repairs, replacements or improvements to the Hotel as Manager reasonably deems necessary to avoid and/or minimize any such damage or destructiondestruction without Owner’s prior consent. E. D. Notwithstanding anything contained herein to the contrary, at all times that Owner is owned or controlled by Apple REIT Ten, Inc., at Owner’s option the amounts that would otherwise be deposited into the Reserve pursuant to this Section 5.02 shall may be included commingled with other funds of Owner or its Affiliates and held in a reserve account in the Operating Profitname of Owner or its Affiliate. Further, not deducted from Gross Revenues and shall be distributed in cash to Owner along with the remainder of the Owner’s Priority. In such case, Manager shall accrue such amounts as a reserve on the accounting records of the Hotel, and Owner shall fund release such funds to Manager in accordance with the same only when required provisions of Section 5.02.C hereof. All amounts transferred to the reserve under this Agreement to cover the appropriate costs actually incurred. However, such accrued and unfunded reserves Section 5.02.D shall be deducted from Gross Revenues for purposes of calculating the Incentive Management Feea Deduction. F. E. Unless otherwise expressly covered by this Article V (including without limitation in case of emergency as provided in Section 5.02.D.), Manager shall not make any capital expenditure or improvement without first obtaining Owner’s prior written consent and approval.