Does Best Western grant an exclusive territory to all members, and if not, what are the exceptions?

h our affiliates; and have between 10 and more than 34 years of experience in the hotel industry.

ITEM 12

TERRITORY

Member Market Area ("MMA")

We grant Members a license to operate the Property at a specified location (the "Site") during the term of the Membership Agreement. If your membership application relates to the right to convert an existing hotel to a System Hotel, you will already have the location for your Property.

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. If you are a "Qualified Hotel," you will receive an exclusive territory with respect to System Hotels. This means that neither we nor any of our affiliates will open, or allow to open, a System Hotel within a circular area around the Site, whose radius is measured from the center of the main entrance of the lobby and is of a length determined by the MMA Radius Chart below (the "MMA Area").

A "Qualified Hotel" is a System Hotel that:

• (1) Is current on all dues, fees and assessments and has not been 60 days past due on any of its dues, fees, or assessments twice within the last 12 months;
• (2) Its most recent three quality assurance scores, or such lesser number of scores if the Property has not yet received three quality assurance scores, average at least 50 points higher than the passing level as defined in the Regulatory Documents;
• (3) Is not past due in meeting any conditions or requirements which would constitute grounds for cancelling the Membership Agreement; and
• (4) Is not a BW Signature Collection® hotel, a BW Premier Collection® hotel or a SureStay Collection by Best Western® hotel.

MMA Radius Chart

MMA radius protections are as follows:

| Primary Market | Secondary Market | Tertiary Market | |---|---|---| | .25 Miles | 1.25 Miles | 3 Miles | ^"Primary Markets" are markets with more than 80 hotels, 8,000 hotel rooms or a metropolitan statistical area ("MSA") with a population greater than 400,000.

If a System Hotel applicant would be within the MMA radius protection of an existing System Hotel, the Board may alter the MMA radius protection to equitably account for obstacles or barriers (e.g., mountains, lakes and major airports) that materially affect travel time or travel distance between a System Hotel and a System Hotel applicant, although the existing System Hotel could request an Impact Analysis as described below.

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^"Secondary Markets" are markets with greater than 50 but less than 80 hotels or MSA population less than 400,000 but greater than 100,000.

^"Tertiary Markets" are all other markets, typically with a MSA population less than 100,000.

MMA Radius Rules 1 through 9

With regard to applying the above MMA radius protections to a Qualified Hotel, System Hotels are divided into the following color-coded categories ("Category" or "Categories") for purposes of applying Rules 1 through 9:

• Rule 1: System Hotels in the same Category will have full MMA radius protection with respect to System Hotels in the same Category. For example, a Best Western System Hotel will have full MMA radius protection from a Best Western or SureStay System Hotel as both are in the same "blue" Category.
• Rule 2: System Hotels in the blue and green Categories will have one-half of the MMA radius protection with respect to System Hotels in the other color Category (i.e., blue or green, respectively). For example, a Best Western Plus System Hotel (green Category) will have one half the MMA radius protection from a Best Western System Hotel (blue Category) and vice versa.
• Rule 3: System Hotels in the blue and green Categories will not have any MMA radius protection from System Hotels in the orange and red Categories. For example, a Vīb System Hotel could be placed next to a Best Western System Hotel, although the Best Western System Hotel may request an Impact Analysis as described in the section below.
• Rule 4: System Hotels in the orange and red Categories do not have MMA radius protection against any hotel in a different color Category, although they may request an Impact Analysis as described in the section below.
• Rule 5: Despite Rules 1, 2 and 3 above, if you operate a Best Western branded System Hotel: (i) in a tertiary market; (ii) with a city population of less than 15,000; and (iii) fewer than 5 hotels that

are listed in Smith Travel Research in the city, you will have full MMA radius protection from all System Hotels in every color Category.

Rule 6: If a Best Western branded System Hotel converts to a SureStay branded System Hotel, the MMA radius protection will not apply to the SureStay branded System Hotel, which will instead have any protections granted to it as a SureStay branded System Hotel.

Rule 7: BW Signature Collection, BW Premier Collection and SureStay System Hotels do not have MMA radius protection or the right to request an Impact Analysis; but, Best Western hotels have the protection as noted above (same color categories) and have full Impact Analysis rights.

Rule 8**:** An Aiden Membership Application will only be approved by the Board if it meets the following criteria:

• 1. A third-party designer has cultivated an imaginative and innovative hotel design;
• 1. The hotel will include a creative food and beverage element; and
• 1. The hotel is located within an Upscale or primarily urban area or competitive set.

In addition, if an application is in a Member's impact radius, it requires a favorable vote of 6 Directors.

Rule 9**:** An @HOME by Best Western Membership Application will only be approved by the Board if it meets the following criteria:

• 1. New construction or substantially similar design to the @HOME prototype;
• 1. 100% extended stay rooms with kitchens in every room; and
• 1. No complimentary or paid for breakfast.

In addition, if an application is in a Member's impact radius, it requires a favorable vote of 6 Directors.

If we develop a new hotel brand after the Effective Date, such new hotel brand shall be added to the Category containing hotels of the most similar chain segment as determined by STR, Inc. and the MMA radius protection and Impact Analysis rights for such Category shall apply with respect to such new hotel brand.

In certain instances as described in the Rules set forth above, you will not receive an exclusive territory with respect to System Hotels of certain Best Western Identifying Marks.

Source: Item 12 — Territory (FDD pages 77–84)