EXECUTION VERSION ACQUISITION AGREEMENT

1.1

Definitions

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(a)

Liens for current real estate taxes and assessments not yet due and payable or Liens for income and similar taxes that are being contested in good faith and for which Fairmont has made adequate provision in accordance with GAAP;

(b)

inchoate mechanics' and materialmen's Liens for construction in progress;

(c)

to the extent such Liens would not reasonably be expected to have a Material Adverse Effect on Fairmont, (i) workmen's, repairmen's, warehousemen's and carriers' Liens arising in the ordinary course of business of Fairmont or such subsidiary consistent with past practice, (ii) all matters of record, whether or not registered, which do not individually or in the aggregate render title to any real estate asset invalid or unmarketable, and (iii) all Liens and other imperfections of title and encumbrances which would not reasonably be expected to materially interfere with the conduct of the business of Fairmont or such subsidiary;

(d)

rights reserved to or vested in any Governmental Entity by the terms of any lease, licence, franchise, grant or permit, or by any statutory provision, to terminate the same, to take action which results in an expropriation or condemnation, or to require annual or other payments as a condition to the continuance thereof;

(e)

deposits of cash or securities in connection with any appeal, review or contestation of any Lien or any matter giving rise to an Lien described in (a) or (c) above and for which adequate reserves have been provided for in the books of such person in accordance with GAAP;

(f)

the provisions of applicable Law including zoning, land use and building restrictions, by-laws, regulations and ordinances of federal, state, provincial, municipal or other governmental bodies or regulatory authorities, including municipal by-laws and regulations, airport zoning regulations, restrictive covenants and other land use limitations, public or private, by-laws and regulations and other similar Liens or privileges in respect of real property which in the aggregate do not materially impair the use of such property by such person in the operation of its business, and which are not violated in any material respect by existing or proposed structures or land use;

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(g)

Permits, reservations, water course, right of access or user licenses, easements, rights of way, restrictions, building schemes, licenses, restrictive covenants and servitudes, rights of access or user, airport zoning regulations and other similar rights in land (including licenses, easements, rights of way, servitudes and rights in the nature of easements for walkways, sidewalks, public ways, sewers, drains, gas, soil, steam and water mains or pipelines, electrical lights and power, telephone, television and cable conduits, poles, wires or cables) granted to, reserved or taken by any person which would not materially impair the use of the real property to which they relate and any rights reserved or vested in any Governmental Entity or public or private utility or railway company by the terms of any lease, licence, franchise, grant, agreement or permit, subdivision, development, servicing, encroachment, site plan or other similar agreement with any Governmental Entity or public or private utility or railway company that would not materially impair the use of the real property to which they relate;

(h)

purchase money security interests securing Indebtedness in the ordinary course of business;

(i)

security given by such person to a public utility or any Governmental Entity, when required by such utility or Governmental Entity in connection with the operations of such person, in the ordinary course of its business;

(j)

the reservations, limitations, exceptions, provisos and conditions, if any, expressed in the original grant from the Crown, including the reservation being mines and minerals in the Crown or in any other person;

(k)

encroachments by any real property over adjoining lands or easements, or rights of way and encroachments over any of the real property by improvements of adjoining land owners or agreements relating to any of the foregoing;

(l)

guest rental and license arrangements, residency agreements and customer contracts and all other leases, agreements to lease, agreements in the nature of a lease and occupancy agreements;

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1.2

Interpretation Not Affected by Headings

1.3

Number and Gender

1.4

Date for Any Action

1.5

Currency

1.6

Accounting Matters

1.7

Knowledge

1.8

Schedules

Schedule A

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Plan of Arrangement

Schedule B

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Special Resolution of the Fairmont Shareholders

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Schedule C

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Regulatory Approvals

2.1

Implementation Steps by Fairmont

(a)

subject to the terms of this Agreement, as soon as reasonably practicable, apply in a manner reasonably acceptable to Purchaser under Section 192 of the CBCA for the Interim Order;

(b)

subject to terms of this Agreement and in accordance with the Interim Order, as soon as reasonably practicable, convene and hold the Fairmont Meeting for the purpose of considering the Arrangement Resolution;

(c)

subject to Section 7.1 and Section 7.3(1)(b), not postpone or adjourn (other than a postponement or adjournment not exceeding five business days required to obtained the Required Vote) or cancel the Fairmont Meeting without Purchaser’s prior written consent except as required for quorum purposes, to comply with requirements of applicable Law (including any disclosure obligations under Canadian or U.S. Laws provided that Fairmont uses all reasonable efforts to comply with such Laws in a timely manner), by the Court or by the Fairmont Shareholders;

(d)

subject to compliance with fiduciary duties, use commercially reasonable efforts to solicit from the Fairmont Shareholders proxies in favour of the approval of the Arrangement Resolution;

(e)

subject to compliance with fiduciary duties and obtaining such approvals as are required by the Interim Order, proceed with and diligently pursue the application to the Court for the Final Order; and

(f)

subject to obtaining the Final Order and in accordance with Section 2.3, send to the Director, for endorsement and filing by the Director, the Articles of Arrangement and such other documents as may be required in connection therewith under the CBCA to give effect to the Arrangement.

2.2

Interim Order

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(a)

for the class of persons to whom notice is to be provided in respect of the Arrangement and the Fairmont Meeting and for the manner in which such notice is to be provided;

(b)

that, subject to the approval of the Court, the requisite approval for the Arrangement Resolution shall be 66²/3 % of the votes cast on the Arrangement Resolution by holders of Fairmont Shares, present in person or by proxy at the Fairmont Meeting, each Fairmont Share entitling the holder thereof to one vote on the Arrangement Resolution (such approval described in this Section 2.2(b), the “Required Vote”);

(c)

that the terms, restrictions and conditions of the by-laws and articles of Fairmont, including quorum requirements and all other matters, shall apply in respect of the Fairmont Meeting;

(d)

for the grant of the Dissent Rights; and

(e)

for the notice requirements with respect to the presentation of the application to the Court for a Final Order.

2.3

Articles of Arrangement; Closing

2.4

Circular

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2.5

Preparation of Filings

(1)

Purchaser and Fairmont shall co-operate in the preparation of any application for the Regulatory Approvals and any other orders, registrations, consents, filings, rulings, exemptions, no-action letters and approvals and the preparation of any documents reasonably deemed by either of the Parties to be necessary to discharge its respective obligations or otherwise advisable under applicable Laws in connection with the Arrangement and this Agreement as promptly as practicable hereafter.

(2)

Purchaser and Fairmont shall co-operate in the preparation, filing and mailing of the Fairmont Circular. Fairmont shall provide Purchaser with a reasonable opportunity to review and comment on the Fairmont Circular, including by providing on a timely basis any information required to be supplied by Purchaser, prior to its mailing to Fairmont Shareholders and filing in accordance with the Interim Order and applicable Laws. Purchaser acknowledges that whether or not such comments are appropriate or any revisions will be made as a result thereof to Fairmont Circular will be determined solely by Fairmont acting reasonably.

(3)

Fairmont shall ensure that the Fairmont Circular complies with the Interim Order and all applicable Laws and, without limiting the generality of the foregoing, that the Fairmont Circular does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are made (other than with respect to any information relating to and provided by Purchaser).

(4)

Purchaser shall ensure that the information to be supplied by it for inclusion in the Fairmont Circular will, at the time of the mailing of the Fairmont Circular, not contain any material misstatement, untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

(5)

Each of Fairmont and Purchaser shall promptly notify the other if at any time before the Effective Time it becomes aware that the Fairmont Circular, an application for a Regulatory Approval or any other order, registration, consent, ruling, exemption, no-action letter or approval, any registration statement or any circular or other filing under applicable Laws contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are made, or that otherwise requires an amendment or supplement to the Fairmont Circular, such application, registration statement, circular or filing, and the Parties shall co-operate in the preparation of such amendment or supplement as required.

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2.6

Shareholder Communications

3.1

Representations and Warranties

(a)

Board Approval. As of the date hereof, the Board of Directors of Fairmont, after consultation with its financial and legal advisors, has determined unanimously that the Arrangement is fair to the Fairmont Shareholders (other than Purchaser) and is in the best interests of Fairmont and has resolved unanimously to recommend to the Fairmont Shareholders that they vote their Fairmont Shares in favour of the Arrangement. The Board of Directors of Fairmont has unanimously approved the Arrangement and the execution and performance of this Agreement. The Special Committee and the Board of Directors of Fairmont have received Fairness Opinions from UBS Securities LLC, Avington International and Scotia Capital Inc (collectively, the “Financial Advisors”). Promptly following receipt of the written Fairness Opinions, Fairmont shall provide a complete copy of the Fairness Opinions to Purchaser.

(b)

Organization and Qualification. Fairmont and each of its subsidiaries is a corporation duly incorporated, continued or amalgamated or an entity duly created and validly existing under the laws of its jurisdiction of incorporation, continuance, amalgamation or creation and has the requisite corporate or other power and authority to own its assets as now owned and to carry on its business as it is now being conducted. Fairmont and each

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(c)

Authority Relative to this Agreement. Fairmont has the requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and, subject to the Required Vote, the consummation by Fairmont of the transactions contemplated by this Agreement have been duly authorized by the Board of Directors of Fairmont, and no other corporate proceedings on the part of Fairmont are necessary to authorize the execution and delivery by it of this Agreement or any agreement ancillary hereto and the consummation by it of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Fairmont and constitutes a legal, valid and binding obligation of Fairmont enforceable against Fairmont in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

(d)

No Violations. Neither the execution and delivery of this Agreement by Fairmont nor the consummation of the Arrangement by Fairmont nor compliance by Fairmont with any of the provisions hereof will: (1) violate, conflict with, or result in a breach of any provision of, require any consent, approval or notice under, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default), result in granting to a third party a right to reduce rentals, fees or other payments to Fairmont or one of its subsidiaries, or result in granting to a third party a right of first refusal, first opportunity, or other right or option to acquire properties or assets of Fairmont or one of its subsidiaries, or grant to a third party a right to force Fairmont or one of its subsidiaries to purchase one or more assets, or result in a right of termination or acceleration under,

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(e)

Capitalization. The authorized share capital of Fairmont consists of an unlimited number of Fairmont Shares, an unlimited number of First Preferred Shares and an unlimited number of Second Preferred Shares. As of the close of business on January 27, 2006, there are issued and outstanding 72,217,835 Fairmont Shares; since such date, Fairmont has not issued any shares (except upon exercise of Fairmont Options or conversion of Fairmont Convertible Notes) and there has not been any split, combination or reclassification of Fairmont Shares, and, as of the date hereof, there are outstanding no other shares of any class or series in the capital of Fairmont. As of the close of business on January 27, 2006, an aggregate of up to 3,309,613 Fairmont Shares are issuable upon the exercise of the Fairmont Options, an aggregate of up to 7,156,107 Fairmont Shares are issuable upon the exercise of the conversion rights attaching to the Fairmont Convertible Notes and, except as set forth above, there are no options, warrants or other rights, shareholder rights plans (other than the Shareholder Rights Plan), agreements or commitments of any character whatsoever requiring or which may require the issuance, sale or transfer by Fairmont of any shares of Fairmont (including Fairmont Shares) or any securities convertible into, or exchangeable or exercisable for, or otherwise evidencing a right to acquire, any shares of Fairmont (including Fairmont Shares). All outstanding Fairmont Shares have been duly authorized and validly issued, are fully paid and non-assessable, and all Fairmont Shares issuable upon the exercise of rights under the Fairmont Options and the exercise of conversion rights attaching to the Fairmont Convertible Notes in accordance with their respective terms have been duly authorized and, upon issuance, will be validly issued as

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(f)

Shareholder Rights Plan. The Data Room contains a correct and complete copy of the Shareholders Rights Plan, including all exhibits thereto. Fairmont has taken all necessary action so that neither of the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) cause the Rights (as defined in the Shareholders Rights Plan) to become exercisable, (ii) cause any person to become an Acquiring Person (as defined in the Shareholders Rights Plan) or (iii) give rise to a Separation Time or a Flip-in Event (each as defined in the Shareholders Rights Plan).

(g)

Reporting Status and Securities Laws Matters. Fairmont is (x) a “reporting issuer” and not on the list of reporting issuers in default under the applicable Canadian provincial and territorial Securities Laws and (y) a “foreign private issuer” as defined in Rule 405 of the United States

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(h)

Ownership of Subsidiaries. Folder 1.01 in the Data Room includes complete and accurate lists and/or charts of all subsidiaries owned, directly or indirectly, by Fairmont, each of which is wholly-owned except as otherwise noted in such list. All of the outstanding shares of capital stock and other ownership interests in Fairmont’s subsidiaries are duly authorized, validly issued, fully paid and non-assessable and all such shares and other ownership interests held directly or indirectly by Fairmont are, except pursuant to restrictions on transfer contained in constituting documents or pursuant to existing financing arrangements involving Fairmont or its subsidiaries (which transfer restrictions have been disclosed to Purchaser in the Data Room), owned free and clear of all Liens, and there are no outstanding options, rights, entitlements, understandings or commitments (contingent or otherwise) regarding the right to acquire any such shares of capital stock or other ownership interests in or real properties of any of Fairmont's subsidiaries. There are no outstanding contractual or other obligations of any subsidiaries of Fairmont to (i) repurchase, redeem or otherwise acquire any of its securities or with respect to the voting or disposition of any outstanding securities of any subsidiaries of Fairmont, (ii) make any investment in or, except in the ordinary course of business consistent with past practice, provide any funds to (whether in the form of a loan, capital contribution or otherwise) any person, other than a wholly-owned subsidiary of Fairmont or (iii) provide any guarantee with respect to any subsidiary of Fairmont or any other person in excess of $5,000,000 in the aggregate, other than any replacement guarantee which does not increase the amount of the guarantee being replaced. Folder 18.05 in the Data Room contains a list of all joint ventures in which Fairmont or one of its subsidiaries is a participant and of which Fairmont or one of its subsidiaries owns, directly or indirectly, any capital stock or other equity interest or any other securities convertible or exchangeable into or exercisable for capital stock or other equity interests (such capital stock or equity interests, the “JV Interests”). All JV Interests are owned free and clear of all Liens, and

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(i)

Legacy. As of the date hereof, Fairmont owns, free and clear of all Liens, 9,393,142 Units and 14,700,000 Voting Certificates in Legacy Hotel Real Estate Investment Trust, a trust formed under the laws of Alberta, Canada (“Legacy”).

(j)

Reports. The documents comprising Fairmont’s Public Disclosure Record (1) did not at the time filed with Securities Authorities or, as applicable, the time of becoming effective, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading and (2) included all documents required to be filed in accordance with Securities Laws with the Securities Authorities and the Exchanges and complied in all material respects with Securities Laws. Fairmont has timely filed with the Securities Authorities all forms, reports, schedules, statements and other documents required to be filed by Fairmont with the Securities Authorities since December 31, 2003 where the failure to timely file would reasonably be expected to have a Material Adverse Effect on Fairmont.

(k)

Fairmont Financial Statements. Fairmont’s audited consolidated financial statements as at and for the fiscal years ended December 31, 2004 and 2003 (including the notes thereto and related management’s discussion and analysis (“MD&A”)) and Fairmont’s unaudited financial statements as at and for the nine months ended September 30, 2005 (including the notes thereto and related MD&A) (collectively, the “Fairmont Financial Statements”) and all financial statements of Fairmont and its subsidiaries included or incorporated by reference in information circulars, forms, reports, statements, prospectuses and other documents since December 31, 2003 were prepared in accordance with GAAP consistently applied (except (A) as otherwise indicated in such financial statements and the notes thereto or, in the case of audited statements, in the related report of Fairmont’s independent auditors, or (B) in the case of unaudited interim consolidated financial statements, are subject to normal period-end adjustments and may omit notes which are not required by applicable Laws in the unaudited statements) and fairly present in all material respects the consolidated financial position, results of operations and changes in financial position of Fairmont and its subsidiaries as of the dates thereof and for the periods indicated therein (subject, in the case of any unaudited interim consolidated financial statements, to normal period-end adjustments) and reflect reserves required by GAAP in respect of all material contingent liabilities, if any, of Fairmont and its subsidiaries on a consolidated basis. There has been no material change in Fairmont’s accounting policies, except as described in the notes to the Fairmont

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(l)

▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. Fairmont and, to Fairmont’s knowledge, each of its officers and directors are in compliance with and have complied in all material respects with the applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the Exchange Act.

(m)

Absence of Certain Changes. Since September 30, 2005, (i) Fairmont and each of its subsidiaries have conducted their business in the ordinary course of business consistent with past practice, except for the transactions contemplated by this Agreement and the process undertaken by Fairmont relating to the solicitations of interest for an acquisition of Fairmont or similar strategic transaction, (ii) there has not been a Material Adverse Effect on Fairmont and (iii) neither Fairmont nor any of its subsidiaries has taken any action which, if taken after the date of this Agreement, would be prohibited by Sections 5.1(b) or 5.1(d) (other than subparagraphs (iv), (v) and (vi) of Section 5.1(d)).

(n)

Litigation. There are no claims, actions, suits, demands, arbitrations, charges, indictments, hearings or other civil, criminal, administrative or investigative proceedings, or other investigations or examinations known to Fairmont (collectively, “Legal Actions”) pending or, to the knowledge of Fairmont, threatened, affecting Fairmont or any of its subsidiaries or affecting any of their respective property or assets at law or in equity before or by any Governmental Entity or against any director, officer or employee of Fairmont or any of its subsidiaries, which Legal Actions would reasonably be expected to have a Material Adverse Effect on Fairmont. Neither Fairmont nor any of its subsidiaries nor their respective assets or properties is subject to any outstanding judgment, order, writ, injunction or decree that has had or would reasonably be expected to have a Material Adverse Effect on Fairmont.

(o)

Taxes. Fairmont and each of its subsidiaries has duly and timely filed all material Returns required to be filed by it prior to the date hereof, other than those which have been administratively waived, and all such Returns are complete and correct in all material respects. Each of them has paid on a timely basis all Taxes which are due and payable, all assessments and reassessments, and all other Taxes due and payable by it on or before the date hereof, other than those which are being or have been contested in good faith and in respect of which, in the reasonable opinion of Fairmont, adequate reserves in accordance with GAAP have been provided in the most recently published Fairmont consolidated financial statements.

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(p)

Property.

(i)

Each parcel of real property currently owned by Fairmont or any of its subsidiaries (collectively, the “Owned Real Properties”) is disclosed in the Data Room. Fairmont or its applicable subsidiary set forth in the Data Room owns good and marketable fee simple title (except that for Owned Real Properties located within the Province of Québec, owns absolute ownership and for Owned Real Properties located in Mexico, owns good legal title) to the Owned Real Properties, free and clear of all Liens, other than the Permitted Liens. To the knowledge of Fairmont, none of the Owned Real Properties is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of Fairmont, has any such condemnation, expropriation or taking been proposed. To the knowledge of Fairmont, neither Fairmont nor any of its subsidiaries is in violation of any covenants or not in compliance with any conditions, restrictions or Permitted Liens affecting any Owned Real Properties which violations or non-compliances would reasonably be expected to have a Material Adverse Effect on Fairmont.

(ii)

Each hotel property currently leased (including hotel properties subject to ground leases) or subleased by Fairmont or any of its wholly-owned subsidiaries from a third party other than Fairmont or any of its subsidiaries (collectively, the “Leased Properties” and together with the Owned Real Properties, the “Properties”) is listed in the Data Room identifying the name of the entity (i.e., Fairmont or its subsidiary) holding such leasehold interest ( and the documents under which such leasehold interests are held, collectively, the “Lease Documents”). Fairmont or its applicable subsidiary holds good and valid leasehold interests in the Leased Properties (emphyteutic or superficiary rights for Leased Properties located within the Province of Québec), free and clear of all Liens other than Permitted Liens and the Lease Documents. Each of the Lease Documents is valid, binding and in full force

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(iii)

Each of Fairmont and its subsidiaries has good and sufficient title to such other real property interests, licenses, easements and rights of way permitting the use of land or premises by Fairmont and its subsidiaries, necessary to permit the operation of its current businesses, as they are now being conducted, except for such failure of title in respect of such other real property interests, licenses, easements and rights of way as would not reasonably be expected to have a Material Adverse Effect on Fairmont.

(iv)

There are no management, franchise, license or other agreements providing for the management of any substantial portion of any Property by any party other than Fairmont or any of its subsidiaries.

(q)

Personal Property. Fairmont and its subsidiaries have good title to, or a valid and enforceable leasehold interest in, all personal property owned, used or held for use by them, except as would not reasonably be expected to have a Material Adverse Effect on Fairmont. Neither Fairmont's nor any of its subsidiaries' ownership of or leasehold interest in any such personal property is subject to any Liens, except for Liens that would not reasonably be expected to have a Material Adverse Effect on Fairmont.

(r)

Contracts.

(i)

Folders 3, 4, 5, 6, 7, 8, 10, 16 and 23 in the Data Room contain complete copies of the following Contracts as of the date hereof:

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(A)

any lease of real property by Fairmont or any of its subsidiaries, as tenant, with third parties providing for annual rentals of $1,000,000 or more;

(B)

any Contract under which Fairmont or any of its subsidiaries is obliged to make payments on an annual basis in excess of $2,500,000 in the aggregate;

(C)

any partnership, limited liability company agreement, joint venture, alliance agreement or other similar agreement or arrangement relating to the formation, creation, operation, management, business or control of any partnership or joint venture which is not a wholly-owned subsidiary of Fairmont (other than any such agreement or arrangement relating to the operation or business of a Property in the ordinary course and which is not material with respect to such Property), and any agreement between Fairmont or any subsidiary thereof and Legacy or any subsidiary thereof;

(D)

any Contract (other than among wholly-owned subsidiaries) under which Indebtedness for borrowed money in excess of $5,000,000 is outstanding or may be incurred or pursuant to which any property or asset of Fairmont or any of its subsidiaries is mortgaged, pledged or otherwise subject to a Lien (other than a Permitted Lien), or any Contract restricting the incurrence of Indebtedness by Fairmont or any wholly-owned subsidiary or the incurrence of Liens (other than Permitted Liens) on any Properties or securities of wholly-owned subsidiaries or restricting the payment of dividends or the transfer of any Owned Real Property;

(E)

any Contract that purports to limit in any material respect the right of Fairmont or any of its subsidiaries (i) to engage in any line of business, or (ii) to compete with any person or operate in any location;

(F)

any Contract providing for the sale or exchange of, or option to sell or exchange, any Property with a fair market value in excess of $5,000,000, or for the purchase or exchange of, or option to purchase or exchange, any Property with a fair market value in excess of $5,000,000 entered into in the past 12 months or in respect of which the applicable transaction has not been consummated;

(G)

any Contract entered into in the past 12 months or in respect of which the applicable transaction has not yet been consummated for the acquisition or disposition, directly or indirectly (by merger or otherwise), of assets (other than Contracts referenced in clause (F)

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(H)

each management agreement pursuant to which Fairmont or any of its subsidiaries manages or operates any real property on behalf of any third party owner, other than Fairmont or any of its subsidiaries and each franchise or other agreement pursuant to which Fairmont or any of its subsidiaries grants any rights to a third party (other than Fairmont or any of its wholly-owned subsidiaries) to operate any real property utilizing any of the Intellectual Property Rights, other than agreements incidental to the operation of a particular hotel property in the ordinary course of business;

(I)

any standstill or similar Contract currently restricting Fairmont or any of its subsidiaries to offer to purchase or purchase the assets or equity securities of another person;

(J)

any Contract (other than Contracts referenced in clauses (A) through (J) of this Section 3.1(r)(i)) which has been filed by Fairmont with Securities Authorities and forming part of Fairmont’s Public Disclosure Record (the Contracts described in clauses (A) through (J), together with all exhibits and schedules thereto being, the “Material Contracts”).

(ii)

Except as would not reasonably be expected to have a Material Adverse Effect on Fairmont, none of Fairmont, its subsidiaries or, to the knowledge of Fairmont, any of the other parties thereto, is in breach or violation of, or default (in each case, with or without notice or lapse of time or both) under, any Contract and none of Fairmont or any of its subsidiaries has received or given any notice of default under any such agreement which remains uncured, and, to the knowledge of Fairmont, there exists no state of facts which after notice or lapse of time or both would constitute a default or breach of such Contract where such breach would reasonably be expected to have a Material Adverse Effect on Fairmont.

(s)

Permits. Fairmont and each of its subsidiaries has obtained and is in compliance with all Permits required by applicable Laws necessary to conduct its current businesses as they are now being conducted, other than where the absence of such Permits or the failure to comply would not reasonably be expected to have a Material Adverse Effect on Fairmont.

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(t)

Pension and Employee Benefits

(i)

Fairmont and each of its subsidiaries has complied, in all material respects, with the terms of all agreements, health, welfare, supplemental unemployment benefit, bonus, profit sharing, deferred compensation, stock purchase, stock compensation, disability, pension or retirement plans and other employee or director compensation or benefit plans, policies or arrangements which are maintained by or binding upon Fairmont or such subsidiary or in respect of which Fairmont or any of its subsidiaries has any actual or potential liability (including the DSU Plan and the Fairmont Stock Option Plans) (collectively, the “Fairmont Plans”) and with all applicable Laws relating thereto.

(ii)

All of the Fairmont Plans are and have been established, registered, qualified and, in all material respects, administered in accordance with all applicable Laws, and in accordance with their terms and the terms of agreements between Fairmont and/or any of its subsidiaries, as the case may be, and their respective employees and former employees who are members of the Fairmont Plans.

(iii)

All current obligations of Fairmont or any of its subsidiaries regarding the Fairmont Plans have been satisfied except as would not reasonably be expected to have a Material Adverse Effect on Fairmont and no Taxes are owing or exigible under any of the Fairmont Plans. All contributions or premiums required to be made by Fairmont or any of its subsidiaries, as the case may be, under the terms of each Fairmont Plan or by applicable Laws have been made in a timely fashion in accordance with applicable Laws and the terms of the Fairmont Plans except as would not reasonably be expected to have a Material Adverse Effect on Fairmont.

(iv)

Each Fairmont Plan is insured or funded as may be required by applicable Law and in good standing with such Governmental Entities as may be applicable and, as of the date hereof, no currently outstanding notice of under-funding, non-compliance, failure to be in good standing or otherwise has been received by Fairmont or any of its subsidiaries from any such Governmental Entities. No Fairmont Plan provides any non-pension post-retirement or post-employment benefits. The actuarial reports contained in Folder 10.10 in the Data Room describe the funding status of the Fairmont Plans that are pension plans as at the respective dates of such reports. Fairmont would not incur any material withdrawal liability from withdrawing from any multiemployer plan (within the meaning of Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended. Fairmont has an effective reservation of rights for each non-

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(v)

To the knowledge of Fairmont, no Fairmont Plan is subject to any pending investigation, examination or other proceeding, action or claim initiated by any Governmental Entity, or by any other party (other than routine claims for benefits), and there exists no state of facts which after notice or lapse of time or both would reasonably be expected to give rise to any such investigation, examination or other proceeding, action or claim or to affect the registration or qualification of any Fairmont Plan required to be registered or qualified.

(vi)

Neither the execution and delivery of this Agreement by Fairmont nor consummation of the Arrangement nor compliance by Fairmont with any of the provisions hereof, shall result in any payment (including severance, unemployment compensation, bonuses or otherwise) becoming due to any director or employee of Fairmont or any of its subsidiaries or result in any increase or acceleration of contributions, liabilities or benefits, or acceleration of vesting, under any Fairmont Plan or restriction held in connection with a Fairmont Plan.

(u)

Compliance with Laws. Fairmont and its subsidiaries, have complied with and are not in violation of any applicable Laws, other than non-compliance or violations which would not reasonably be expected to have a Material Adverse Effect on Fairmont.

(v)

Intellectual Property. (i) Fairmont and its subsidiaries own all right, title and interest in and to, or are validly licensed (and are not in material breach of such licenses) all patents, trade-marks, trade names, service marks, copyrights, know-how trade secrets, software, technology, and all other intellectual property and proprietary rights that are material to the conduct of the business, as presently conducted, of Fairmont and its subsidiaries taken as a whole (collectively, the “Intellectual Property Rights”); (ii) all such Intellectual Property Rights are sufficient for conducting the business, as presently conducted, of Fairmont and its subsidiaries taken as a whole; (iii) to the knowledge of Fairmont, all such Intellectual Property Rights are valid and enforceable and do not infringe in any material way upon any third parties’ intellectual property and proprietary rights and no event will occur as a result of the transactions contemplated hereby that would render invalid or unenforceable any such Intellectual Property Rights; (iv) to the knowledge of Fairmont, no third party is infringing upon such Intellectual Property Rights in any material respect; (v) all hardware, software and firmware, processed data, technology infrastructure and other computer systems used in connection

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(w)

Insurance. Fairmont and its subsidiaries maintain policies or binders of insurance as are listed in the Data Room and Fairmont is in compliance in all material respects with all requirements with respect thereto.

(x)

Environment.

(i)

Except as would not reasonably be expected to have a Material Adverse Effect on Fairmont (with respect to any matters relating to businesses transferred by Fairmont in connection with the plan of arrangement described in the management proxy circular of Canadian Pacific Limited dated August 3, 2001, such Material Adverse Effect being determined considering the availability and scope of any indemnification obligation of any person in favour of Fairmont), there is not any presence or Release of any Hazardous Substances (except in compliance with applicable Environmental Laws) on, at, in, under or from any of the immovable or real properties (including the workplace environment) currently or to Fairmont’s knowledge, previously owned, leased or operated by Fairmont and its subsidiaries.

(ii)

Except as would not reasonably be expected to have a Material Adverse Effect on Fairmont, there are no pending claims, or to the knowledge of Fairmont threatened claims, against Fairmont and its subsidiaries arising out of any Environmental Laws.

(iii)

No Lien in favour of a Governmental Entity arising under Environmental Laws is pending or, to the knowledge of Fairmont, threatened, affecting Fairmont and its subsidiaries or any real or personal property of Fairmont and its subsidiaries, except as would not reasonably be expected to have a Material Adverse Effect on Fairmont.

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(iv)

Fairmont has made available to Purchaser copies of all material environmental assessments, reports, audits and other documents in its possession that relate to the current or past environmental condition of any real property currently or formerly owned, leased or used by Fairmont and its subsidiaries in the last two years.

(y)

Employment Agreements and Collective Agreements. Fairmont is not a party to or bound or governed by:

(i)

except for the Contracts with those individuals set forth in Folder 10.02 in the Data Room, any employment, retention or change of control agreement with any officer or senior employee or any written or oral agreement, arrangement or understanding providing for retention, severance or termination payments to any officer or senior employee of Fairmont;

(ii)

except for the Contracts set forth in Folders  3 and 4 in the Data Room, any collective bargaining or union agreement, any actual or, to the knowledge of Fairmont, threatened application for certification or bargaining rights in respect of Fairmont or any of its subsidiaries;

(iii)

any material labour dispute, strike or lock-out relating to or involving any employees of Fairmont or any of its subsidiaries that would reasonably be expected to have a Material Adverse Effect on Fairmont;

(iv)

any actual or, to the knowledge of Fairmont, threatened claim arising out of or in connection with employment by Fairmont or any of its subsidiaries or the termination thereof, other than such claims as in the aggregate do not have a Material Adverse Effect on Fairmont; or

(v)

except for the Contracts with those individuals set forth in Folders 10.02.07.03 and 10.02.07.05 in the Data Room, any Fairmont employment, retention or change of control agreement with any officer or senior employee or any written or oral agreement, arrangement or understanding providing for retention, severance or termination payments to any officer or senior employee of Fairmont that would, to the extent subject to United States Tax Laws, not be deductible pursuant to Sections 162 or 280G of the Internal Revenue Code of 1986, as amended, (the

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(z)

Vote Required.

(i)

The only vote of holders of securities of Fairmont necessary (under the Fairmont Organizational Documents, the CBCA, other applicable Laws or otherwise) to approve the Arrangement is, subject to any requirements of the Interim Order, the Required Vote.

(ii)

There are no stockholders agreements, registration rights agreements, voting trusts, proxies or similar agreements, arrangements or commitments to which Fairmont or any of its subsidiaries is a party or to the knowledge of Fairmont with respect to any shares of capital stock or other equity interests of Fairmont or any of its subsidiaries or any other Contract relating to disposition, voting or dividends with respect to any equity securities of Fairmont or of any of its subsidiaries.

(aa)

CP Tax Arrangement Confirmation. Fairmont has received, and has provided a true and correct copy to Purchaser of, the CP Tax Arrangement Confirmation.

(bb)

Brokers. Except for the Financial Advisors, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission from, or to the reimbursement of any of its expenses by, Fairmont in connection with this Agreement or the Arrangement. Fairmont has provided to Purchaser a correct and complete copy of all agreements relating to the arrangements between it and each of the Financial Advisors which are in effect at the date hereof and agrees not to amend the terms of any such agreements relating to the payment of fees and expenses without the prior written approval of Purchaser, which consent may be withheld in the sole discretion of Purchaser.

3.2

Disclaimer of Additional Representations and Warranties

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3.3

Effect of Disclosures

3.4

Survival of Representations and Warranties

4.1

Representations and Warranties

(a)

Authority Relative to this Agreement. Purchaser has the requisite corporate authority to enter into this Agreement and to carry out its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation by Purchaser of the transactions contemplated by this Agreement have been duly authorized by the Board of Directors and sole shareholder of Purchaser, and no other corporate proceedings on the part of Purchaser are necessary to authorize the execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated thereby. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser enforceable against it in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

(b)

No Violations. Neither the execution and delivery of this Agreement by Purchaser nor the consummation of the Arrangement by Purchaser nor compliance by Purchaser with any of the provisions hereof will violate, conflict with, or result in a breach of any material provision of, require any consent, approval or notice under, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under (A) the articles of incorporation or Laws governing Purchaser or

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(c)

Financing. Concurrently with the execution and delivery hereof, Purchaser has delivered to Fairmont copies of (a) an executed commitment letter addressed to Purchaser from Colony Capital Acquisitions, LLC and Kingdom 5-KR-189, Ltd. to provide equity financing in an aggregate amount of $1,384.6 million (the “Equity Funding Letter”), (b) a guarantee by Kingdom Hotels International and Colony Investors VII, L.P. of the Purchaser's obligations hereunder in an aggregate amount of up to $75 million (the “Sponsor Guarantees”), and (c) an executed commitment letter (the “Commitment Letter”) from JPMorgan Chase Bank, N.A. (“JPM”) pursuant to which JPM has committed to provide Purchaser and certain existing or future subsidiaries of Purchaser with financing in an aggregate amount of $2,675 million (such financing or any alternative financing in the same amount, the “Debt Financing” and together with the financing referred to in clause (a) being collectively referred to as the “Financing”). Each of the Equity Funding Letter and Sponsor Guarantees, in the form so delivered, is a legal, valid and binding obligation of the parties thereto, and solely in the case of the Sponsor Guarantees, enforceable by Fairmont in accordance with its terms and is in full force and effect as of the date hereof. As of the date hereof, the Commitment Letter is in full force and effect and is a legal, valid and binding obligation of Purchaser, and to the knowledge of Purchaser, the other parties thereto. No event has occurred which, with or without notice, lapse of time or both, would constitute a default on the part of Purchaser under any of the Equity Funding Letter, the Sponsor Guarantees or the Commitment Letter. Purchaser has no reason to believe that it will be unable to satisfy on a timely basis any term or condition of closing to be satisfied by it contained in the Equity Funding Letter or the Commitment Letter. Purchaser shall have at the Closing and at the Effective Time proceeds in connection with the Financing sufficient to consummate the Arrangement upon the terms contemplated by this Agreement.

(d)

Investment Canada. The Purchaser is not a Canadian within the meaning of the Investment Canada Act (Canada).

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4.2

Survival of Representations and Warranties

4.3

Disclaimer of Additional Representations and Warranties

5.1

Covenants of Fairmont Regarding the Conduct of Business

(a)

the business of Fairmont and its subsidiaries shall be conducted only, and Fairmont and its subsidiaries shall not take any action except, in the usual and ordinary course of business, and Fairmont shall use all commercially reasonable efforts to maintain and preserve its and its subsidiaries’ business organization, assets, properties employees, goodwill and business relationships;

(b)

Fairmont shall not, and shall not permit any of its subsidiaries to, directly or indirectly: (i) amend its articles, charter or by-laws or other comparable organizational documents; (ii) declare, set aside or pay any dividend or other distribution or payment (whether in cash, shares or property) in respect of the Fairmont Shares owned by any person or the securities of any subsidiary owned by a person other than Fairmont other than, in the case of Fairmont, the regularly scheduled semi-annual cash dividends consistent with past practice and, in the case of any subsidiary wholly-

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(c)

Fairmont shall promptly notify Purchaser in writing of (i) any circumstance or development that, to the knowledge of Fairmont, is or would reasonably be expected to constitute a Material Adverse Effect on Fairmont or Purchaser or any change in any material fact set forth in the Data Room, or in the Fairmont Public Disclosure Record and (ii) the occurrence of any loss, breakage or damage to a hotel property owned or managed by Fairmont or any of its subsidiaries in excess of $5,000,000 (irrespective of insurance or third party proceeds which have been or may be received in connection with such loss, breakage or damage);

(d)

Fairmont shall not, and shall not permit any of its subsidiaries to, directly or indirectly, except in the ordinary course of business consistent with past practice: (i) sell, pledge, lease, license, dispose of or encumber any assets (including the capital stock of any subsidiary) of Fairmont or of any subsidiary; (ii) except for the transactions set out in the Data Room, acquire (by merger, amalgamation, consolidation or acquisition of shares or assets or otherwise) any corporation, partnership or other business organization or division thereof or any property or asset, or make any investment either by the purchase of securities, contributions of capital (other than to wholly-owned subsidiaries), property transfer, or purchase

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(e)

except as disclosed in the Data Room, Fairmont shall not, and shall not permit any of its subsidiaries to, directly or indirectly, (i) enter into, amend or voluntarily terminate any Contract with respect to the purchase or sale or development or management of any hotel or property, (ii) enter into, or amend in any material respect, any Contract or series of Contracts resulting in a new Contract or series of related new Contracts or modifications to an existing Contract or series of related existing Contracts outside of the ordinary course of business, that would result in any Contract having a term in excess of 12 months and which is not terminable by Fairmont or its subsidiaries upon notice of 90 days or less from the date of the relevant Contract or modification of Contract or impose payment or other obligations on Fairmont or any of its subsidiaries in excess of $5,000,000, (iii) enter into any Contract that would limit or otherwise restrict Fairmont or any of its subsidiaries or any of their successors, or that would, after the Effective Time, limit or otherwise restrict Purchaser or any of its subsidiaries or any of their successors, from engaging or competing in any line of business or in any geographic area in any material respect or (iv) terminate, cancel or amend in any material respect any Material Contract other than in the usual and ordinary course of business consistent with past practice;

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(f)

other than as is necessary to comply with applicable Laws or Contracts, or in accordance with its short term incentive plan as in effect on the date hereof and contained in the Data Room, neither Fairmont nor any of its subsidiaries (i) shall grant to any officer or director of Fairmont or any of its subsidiaries an increase in compensation in any form, (ii) grant any general salary increase, (iii) take any action with respect to the grant of any severance or termination pay not in accordance with existing policies disclosed in the Data Room, (iv) enter into any employment agreement with any officer or director of Fairmont or any of its subsidiaries, (v) increase any benefits payable under its current severance or termination pay policies, or (vi) adopt or materially amend or make any contribution to any Fairmont Plan or other bonus, profit sharing, option, pension, retirement, deferred compensation, insurance, incentive compensation, compensation or other similar plan, agreement, trust, fund or arrangement for the benefit of directors, officers or employees or former directors, officers, employees of Fairmont or any of its subsidiaries, except in clauses (i), (ii), (iv) and (v) in the usual and ordinary course of business consistent with past practice;

(g)

Fairmont shall not, and not permit any of subsidiaries to, make any loan, advances or capital contributions to, or investments in, any other person other than to wholly-owned subsidiaries or make any loans to any officer, or director of Fairmont or any of its subsidiaries;

(h)

Fairmont shall not, and not permit any of subsidiaries to, waive, release, assign, settle or compromise (i) any material Legal Actions or any material claim or material Liability other than in the usual and ordinary course of business consistent with past practice or (ii) any Legal Action that is brought by any current, former or purported holder of any securities of Fairmont in its capacity as such and that (A) requires any payment to such security holders by Fairmont or any subsidiary or (B) adversely affects in any material respect the ability of Fairmont and the subsidiaries to conduct their business in a manner consistent with past practice; and

(i)

Fairmont shall use its commercially reasonable efforts to cause the current insurance (or re-insurance) policies maintained by Fairmont or any of its subsidiaries, including directors’ and officers’ insurance, not to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies underwritten by insurance or re-insurance companies of nationally recognized standing having comparable deductions and providing coverage equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect; provided that none of Fairmont or any of its subsidiaries shall obtain or renew any insurance (or re-insurance) policy for a term exceeding 12 months.

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5.2

Pre-Acquisition Reorganizations

5.3

Covenants of Fairmont Regarding the Arrangement

(a)

subject to compliance with fiduciary duties, use all commercially reasonable efforts to obtain the Required Vote;

(b)

use all commercially reasonable efforts to obtain all necessary waivers, consents and approvals required to be obtained by Fairmont or a subsidiary in connection with the Arrangement from other parties to the Contracts, including from any ground lessors. Notwithstanding anything to the contrary in this Agreement, in connection with obtaining any approval or consent from any person (other than a Governmental Entity) with respect to any transaction contemplated by this Agreement, (i) without the prior written consent of Purchaser which shall not be unreasonably withheld, none of Fairmont or any of its subsidiaries shall pay or commit to pay to such person whose approval or consent is being solicited any cash or other consideration, make any commitment or incur any liability or other obligation due to such person and (ii) none of

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(c)

use its commercially reasonable efforts to effect all necessary registrations, filings and submissions of information required by Governmental Entities from Fairmont or any of its subsidiaries relating to the Arrangement;

(d)

apply for and use all commercially reasonable efforts to obtain all Regulatory Approvals relating to Fairmont or any of its subsidiaries which are typically applied for by an offeree and, in doing so, keep Purchaser reasonably informed as to the status of the proceedings related to obtaining the Regulatory Approvals, including providing Purchaser with copies of all related applications and notifications (other than confidential information contained in such applications and notifications), in draft form, in order for Purchaser to provide its comments thereon;

(e)

defend all lawsuits or other legal, regulatory or other proceedings against Fairmont challenging or affecting this Agreement or the consummation of the transactions contemplated hereby;

(f)

take all actions required under the Indenture, including the giving of any notices to the trustees or the holders of the Fairmont Convertible Notes and the execution of any supplemental indenture, (i) in connection with the consummation of the transactions contemplated by this Agreement and any offer that may be required to be made to the holders of the Fairmont Convertible Notes under the terms of the Indenture in connection therewith and (ii) to ensure that the treatment of the Fairmont Convertible Notes contemplated by Section 3.1(e)(iii) is achieved; and

(g)

use all commercially reasonable efforts to enter into a new lease with respect to the Jasper, Alberta Property in the ordinary course of business substantially in accordance with the lease terms disclosed in the Data Room.

5.4

Covenants of Purchaser Regarding the Performance of Obligations

(a)

apply for and use all commercially reasonable efforts to obtain all Regulatory Approvals relating to Purchaser or any of Purchaser’s

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(b)

use its commercially reasonable efforts to effect all necessary registrations, filings and submissions of information required by Governmental Entities from Fairmont or any of its subsidiaries relating to the Arrangement;

(c)

defend all lawsuits or other legal, regulatory or other proceedings against Purchaser challenging or affecting this Agreement or the consummation of the transactions contemplated hereby;

(d)

make available to Fairmont, on a timely basis after consummation of the Arrangement, sufficient funds to permit Fairmont to meet its obligations under the Indenture with respect to the conversion or any required repurchase of Fairmont Convertible Notes;

(e)

Purchaser shall cause its affiliates to vote (or cause to be voted) all Fairmont Shares held by each of them in favour of the Arrangement and transactions contemplated hereby; and

(f)

designate one person from whom Fairmont may seek approval to undertake any actions not permitted to be taken under Section 5.1 and shall ensure that such person shall respond, on behalf of Purchaser, to Fairmont’s requests in an expeditious manner.

5.5

Mutual Covenants

(a)

it shall, and shall cause its subsidiaries to, use commercially reasonable efforts to satisfy (or cause the satisfaction of) the conditions precedent to its obligations hereunder as set forth in Article VI to the extent the same is within its control and to take, or cause to be taken, all other action and to do, or cause to be done, all other things necessary, proper or advisable under all applicable Laws to consummate the Arrangement, including using its commercially reasonable efforts to: (i) obtain all Regulatory Approvals required to be obtained by it; (ii) effect all necessary registrations, filings and submissions of information requested by Governmental Entities required to be effected by it in connection with the Arrangement; (iii) oppose, lift or rescind any injunction or restraining

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(b)

it shall not take any action, refrain from taking any commercially reasonable action, or permit any action to be taken or not taken, which is inconsistent with this Agreement or which would reasonably be expected to significantly impede the consummation of the Arrangement except as permitted by this Agreement.

5.6

Employment Agreements/Benefit Plans

(a)

Purchaser acknowledges that the Arrangement shall constitute a change-of-control transaction under certain of Fairmont’s employee benefit plans and under certain change of control agreements and employment agreements, as provided in the Data Room or as disclosed in Fairmont’s Public Disclosure Record, and that following the Arrangement, Purchaser shall cause Fairmont to honour its obligations thereunder, including by paying to the individuals granted benefits under such plans or party to such agreements, in each case, such amounts as are disclosed in Folder 10.02 of the Data Room, and by paying at the Effective Time to those individuals granted deferred share units (“Units”) thereunder the value of the Units so granted calculated by multiplying the number of Units granted by the price per Fairmont Share to be paid to Fairmont Shareholders at the Effective Time.

(b)

Purchaser acknowledges that in the ordinary course of business in February, 2006, the Board of Directors of Fairmont would consider and, if thought fit, approve, bonuses to eligible employees of Fairmont pursuant to the short term incentive plan of Fairmont which has been disclosed in Folder 10.02.03 in the Data Room up to the aggregate amount previously disclosed in writing to Purchaser. Purchaser acknowledges that nothing in this Agreement shall prevent the Board of Directors or the CEO of Fairmont from approving and paying such bonuses, in the ordinary course of business and consistent with past practice, to those eligible employees selected by the Board of Directors up to the aggregate amount previously disclosed in writing to Purchaser.

(c)

Purchaser acknowledges that subject to receipt of all appropriate regulatory approvals, and pursuant to the provisions of the Fairmont Stock Option Plans, Fairmont shall facilitate as necessary the acceleration of the vesting of any unvested Fairmont Options as may be necessary or

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(d)

Purchaser acknowledges that pursuant to the Directors’ Deferred Share Units Plan (the “DSU Plan”) of Fairmont, members of the Board of Directors of Fairmont (other than ▇▇. ▇▇▇▇) have been granted deferred share units (“DSUs”). Pursuant to the DSU Plan, a director may give notice to Fairmont within a certain time period after ceasing to be a director requiring Fairmont to pay amounts calculated under the DSU Plan with respect to the DSUs granted to the director. The Purchaser agrees that following the Arrangement it shall make available to Fairmont any financing required in order to make payment of such amounts to the directors of Fairmont.

6.1

Mutual Condition Precedents  

(a)

the Arrangement shall have been approved at the Fairmont Meeting by not less than the Required Vote;

(b)

the Interim Order and the Final Order shall each have been obtained in form and on terms reasonably satisfactory to each of Fairmont and Purchaser, and shall not have been set aside or modified in a manner unacceptable to such parties, acting reasonably, on appeal or otherwise;

(c)

all Regulatory Approvals shall have been obtained or concluded or, in the case of waiting or suspensory periods, expired or been terminated;

(d)

no Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that restrains, enjoins or otherwise prohibits consummation of the Arrangement or the other transactions contemplated by this Agreement; and

(e)

this Agreement shall not have been terminated in accordance with its terms.

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6.2

Additional Conditions Precedent to the Obligations of Purchaser

(a)

all covenants of Fairmont under this Agreement to be performed on or before the Effective Time shall have been duly performed by Fairmont in all material respects, and Purchaser shall have received a certificate of Fairmont addressed to Purchaser and dated the Effective Time, signed on behalf of Fairmont by two senior executive officers of Fairmont (on Fairmont’s behalf and without personal liability), confirming the same as at the Effective Time;

(b)

the representations and warranties of Fairmont set forth in this Agreement shall be true and correct in all respects, without regard to any materiality or Material Adverse Effect qualifications contained in them as of the Effective Time, as though made on and as of the Effective Time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), unless the failure or failures of all such representations and warranties to be so true and correct in all respects would not reasonably be expected to have a Material Adverse Effect on Fairmont. In addition, the representations and warranties set forth in Section 3.1(e) shall be true and correct in all material respects. Purchaser shall have received a certificate of Fairmont addressed to Purchaser and dated the Effective Time, signed on behalf of Fairmont by two senior executive officers of Fairmont (on Fairmont’s behalf and without personal liability), confirming the above as at the Effective Time; and

(c)

between the date hereof and the Effective Time, there shall not have occurred a Material Adverse Effect with respect to Fairmont.

6.3

Additional Conditions Precedent to the Obligations of Fairmont

(a)

all covenants of Purchaser under this Agreement to be performed on or before the Effective Time shall have been duly performed by Purchaser in all material respects, and Fairmont shall have received a certificate of Purchaser addressed to Fairmont and dated the Effective Time, signed on behalf of Purchaser by two senior executive officers of Purchaser (on Purchaser’s behalf and without personal liability), confirming the same as of the Effective Time; and

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(b)

the representations and warranties of each of Purchaser set forth in this Agreement shall be true and correct in all respects, without regard to any materiality or Material Adverse Effect qualifications contained in them, as of the Effective Time, as though made on and as of the Effective Time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), unless the failure or failures of all such representations and warranties to be so true and correct in all respects would not reasonably be expected to have a Purchaser Material Adverse Effect. Fairmont shall have received a certificate of Purchaser addressed to Fairmont and dated the Effective Time, signed on behalf of Purchaser by two senior executive officers of Purchaser (on Purchaser’s behalf and without personal liability), confirming the above as of the Effective Time.

7.1

Notice and Cure Provisions

(1)

Each Party will give prompt notice to the other of the occurrence, or failure to occur, at any time from the date hereof until the earlier to occur of the termination of this Agreement and the Effective Time of any event or state of facts which occurrence or failure would, or would be likely to:

(a)

cause any of the representations or warranties of either Party contained herein to be untrue or inaccurate in any material respect on the date hereof or at the Effective Time; or

(b)

result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by either Party hereunder prior to the Effective Time.

(2)

No Party may elect not to complete the transactions contemplated hereby pursuant to the conditions set forth herein or any termination right arising therefrom and no payments are payable as a result of such election pursuant to Section 7.4 unless forthwith and in any event prior to the Effective Time, the Party intending to rely thereon has delivered a written notice to the other Party specifying in reasonable detail all breaches of covenants, representations and warranties or other matters which the Party delivering such notice is asserting as the basis for the non-fulfillment or the applicable condition or termination right, as the case may be. If any such notice is delivered, provided that a Party is proceeding diligently to cure such matter and such matter is capable of being cured (except matters arising out of the failure to make appropriate disclosure in the Data Room), no Party may terminate this Agreement until the expiration of a period of 15 business days from such notice, if such matter has not been cured by such date. If such notice has been delivered prior to the date of the Fairmont Meeting, such meeting shall, unless the Parties agree otherwise, be postponed or adjourned until the expiry of

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(3)

Each party hereto shall promptly notify the other party of (i) any communication from any person alleging that the consent of such person (or another person) is or may be required in connection with the transactions contemplated by this Agreement (and the response thereto from such party, its subsidiaries or its representatives), (ii) any material communication from any Governmental Entity in connection with the transactions contemplated by this Agreement (and the response thereto from such party, its subsidiaries or its representatives), and (iii) any material Legal Actions threatened or commenced against or otherwise affecting such party or any of its subsidiaries that are related to the transactions contemplated by the Agreement.

7.2

Non-Solicitation

(1)

Except as otherwise provided in Article VII, Fairmont shall not, directly or indirectly, through any officer, director, employee, representative or agent of Fairmont or any of its subsidiaries, (i) solicit, initiate, knowingly facilitate or knowingly encourage (including by way of furnishing information or entering into any form of agreement, arrangement or understanding) the initiation of any inquiries or proposals regarding an Acquisition Proposal, (ii) participate in any substantive discussions or negotiations with any person (other than Purchaser and its affiliates) regarding an Acquisition Proposal, (iii) withdraw, amend or modify in a manner adverse to Purchaser, the approval of the Board of Directors of Fairmont of the Arrangement, (iv) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any Acquisition Proposal, or (v) accept or enter into any agreement, understanding, arrangement or Contract in respect of an Acquisition Proposal (other than a confidentiality agreement permitted by Section 7.2(4)); provided, however, that prior to the date the Required Vote is obtained, nothing contained in this Agreement shall prevent the Board of Directors of Fairmont from entering into an agreement (subject to compliance with Section 8.2(4)(a)) or engaging in discussions or negotiations or furnishing information to (subject to compliance with Section 7.2(4)) with any person who has made an unsolicited bona fide, written Acquisition Proposal that:

(a)

did not result from a breach of this Section 7.2;

(b)

involves not less than 50.01% of the outstanding Fairmont Shares (excluding any Fairmont Shares held by such person or its affiliates) or 50.01 % of the consolidated assets of Fairmont and its subsidiaries taken as a whole;

(c)

in respect of which the Board of Directors of Fairmont determines in good faith after consultation with its financial advisors and its outside counsel

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(2)

Fairmont shall, and shall cause the officers, directors, employees, representatives and agents of Fairmont and its subsidiaries to, immediately terminate any existing solicitations, discussions or negotiations with any person (other than Purchaser) that has made, indicated any interest to make or may reasonably be expected to make, an Acquisition Proposal. Purchaser acknowledges that standstill agreements entered into by Fairmont with other parties relating to a potential Acquisition Proposal may terminate in accordance with the terms thereof upon Fairmont entering into this Agreement. Fairmont agrees not to release any third party from any such agreement which does not so terminate except, in the case of any such standstill agreement or provisions in any such confidentiality and standstill agreement, the Board of Directors of Fairmont determines that such third party has made or is reasonably likely to make a Superior Proposal. Fairmont shall promptly request the return or destruction of all information provided to any third party which, at any time since January 1, 2005, has entered into a confidentiality agreement with Fairmont relating to a potential Acquisition Proposal to the extent that such information has not previously been returned or destroyed, and shall use all commercially reasonable efforts to ensure that such requests are honoured in accordance with the terms of such agreement.

(3)

Fairmont shall promptly (and in any event within 24 hours of receipt by Fairmont) notify Purchaser, at first orally and thereafter in writing, of any Acquisition Proposal or inquiry received after the date hereof (whether or not relating to any Acquisition Proposal or inquiry received prior to the date hereof) that could reasonably be expected to lead to an Acquisition Proposal, in each case received after the date hereof, of which any of its directors or, officers are or become aware, or any amendments to the foregoing, or any request for non-public information relating to Fairmont or any of its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of Fairmont or any of its subsidiaries by any person that informs Fairmont or such subsidiary that it is considering making, or has made, an Acquisition Proposal and any amendment thereto and a description of the material terms and conditions of any such Acquisition Proposal or inquiry. Fairmont shall keep Purchaser informed of any change to the material terms of any such Acquisition Proposal or inquiry.

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(4)

If Fairmont receives a request for material non-public information from a person who proposes an unsolicited bona fide Acquisition Proposal where Fairmont is not in breach of Section 7.2(1) and the Board of Directors of Fairmont determines in good faith after consultation with its financial advisors and its outside counsel that such proposal would be reasonably likely, if consummated, to lead to a Superior Proposal, then, and only in such case, the Board of Directors of Fairmont may, subject to the execution by such person of a confidentiality agreement having terms not less favourable to Fairmont than the Confidentiality Agreements, provide such person with access in accordance with subsection (1) to information regarding Fairmont, provided that Purchaser is promptly provided with a list and copies of all information provided to such person not previously provided to Purchaser and is promptly provided with access to information similar to that which was provided to such person.

(5)

Nothing contained in this Section 7.2 shall prohibit the Board of Directors of Fairmont from making any disclosure to Fairmont’s Shareholders prior to the Effective Time if, in the good faith judgment of the Board of Directors of Fairmont, after consultation with outside counsel, such disclosure is necessary for the Board of Directors to act in a manner consistent with its fiduciary duties or is otherwise required under applicable Law, including its obligations under Rule 14e-2 under the Exchange Act.

7.3

Right to Match

(1)

Subject to Section 7.3(2), Fairmont covenants that it will not accept, approve, recommend or enter into any agreement, understanding, arrangement or Contract in respect of a Superior Proposal (other than a confidentiality agreement permitted by Section 7.2(4)) unless:

(a)

Fairmont has complied with its obligations under Section 7.2 and the other provisions of this Article VII and has provided Purchaser with a copy of the Superior Proposal; and

(b)

a period (the “Response Period”) of three business days shall have elapsed from the date on which Purchaser received written notice from the Board of Directors of Fairmont that the Board of Directors of Fairmont determined, subject only to compliance with this Section 7.3, to accept, approve, recommend or enter into a binding agreement to proceed with the Superior Proposal. In the event that Fairmont provides Purchaser with the notice contemplated in this Section on a date that is less than five business days prior to the Fairmont Meeting, Fairmont shall be entitled to adjourn the Fairmont Meeting to a date that is not more than 5 business days after the date of such notice.

(2)

During the Response Period, Purchaser will have the right, but not the obligation, to offer to amend the terms of this Agreement. The Board of Directors of Fairmont will review any such proposal by Purchaser to amend the terms of this

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(3)

Each successive amendment to any Acquisition Proposal that results in an increase in, or modification of, the consideration (or value of such consideration) to be received by the holders of Fairmont Shares shall constitute a new Acquisition Proposal for the purposes of this Section 7.3 and Purchaser shall be afforded a new Response Period in respect of each such Acquisition Proposal.

7.4

Agreement as to Damages

(1)

Notwithstanding any other provision relating to the payment of fees or expenses, including the payment of brokerage fees, Fairmont shall pay, or cause to be paid, to Purchaser by wire transfer of immediately available funds an amount equal to $115 million (the “Termination Fee”) less any amounts actually paid by Fairmont to Purchaser pursuant to Section 7.4(2), if any:

(a)

if Purchaser shall have terminated this Agreement pursuant to Section 8.2(3)(a) or Section 8.2(3)(c), in which case payment shall be made within two business days of such termination;

(b)

if Fairmont shall have terminated this Agreement pursuant to Section 8.2(4)(a), in which case payment shall be made before or concurrently with such termination and shall be a condition to the effectiveness of such termination;

(c)

if (A) after the date hereof, a bona fide Acquisition Proposal shall have been made or proposed to Fairmont or otherwise publicly announced, or a person has publicly announced an intention to do so (which has not been withdrawn), it being agreed that any amendment to the Offer to Purchase for Cash, dated as of December 9, 2005, by Icahn Partners LP and Icahn Partners Master Fund LP, changing the offer price or the number of Fairmont Shares sought for purchase shall constitute a new Acquisition Proposal for purposes of this clause (A), (B) this Agreement is terminated by either Purchaser or Fairmont pursuant to Section 8.2(2)(a) or Section 8.2(2)(b) or by Purchaser pursuant to Section 8.2(3)(b), (C) within 12

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(d)

if (A) after the date hereof, any person or group of persons acting in concert (other than Purchaser and its affiliates) shall have become the beneficial owner of 20% or more of the outstanding Fairmont Shares, (B) this Agreement is terminated by either Purchaser or Fairmont pursuant to Section 8.2(2)(a) or Section 8.2(2)(b) or by Purchaser pursuant to Section 8.2(3)(b), (C) within 12 months following the date of such termination, Fairmont enters into a Contract providing for the implementation of an Acquisition Proposal, and (D) Fairmont shall consummate such Acquisition Proposal, whether or not amended prior to its consummation, in which case payment shall be made within two business days of the date on which Fairmont consummates such Acquisition Proposal. For purposes of the foregoing clause (C) only, references in the definition of the term “Acquisition Proposal” to the phrase “20% or more” shall be deemed to be replaced by the phrase “more than 50%”.

(2)

Subject to Section 7.4(1)(c) and notwithstanding Section 7.5, Fairmont shall pay, or cause to be paid, to Purchaser by wire transfer of immediately available funds (i) subject to clause (ii) below, if applicable, the reasonable documented expenses of Purchaser and its affiliates incurred in connection with the transactions contemplated hereby not to exceed $10,000,000 if Purchaser shall have terminated this Agreement pursuant to Section 8.2(3)(b) and (ii) the reasonable documented expenses of Purchaser and its affiliates incurred in connection with the transactions contemplated hereby, if (A) this Agreement is terminated (other than pursuant to Section 8.2(4)(b) or 8.2(2)(c)) and (B) after the date hereof, any person or group of persons acting in concert (other than Purchaser and its affiliates) shall have become the beneficial owner of 20% or more of the outstanding Fairmont Shares, in either case, such payment shall be made within two business days of such termination. Such payment is made subject to any other Purchaser’s rights in case of a willful breach by Fairmont of its covenants hereunder.

(3)

In no event shall Fairmont be required to pay under Section 7.4(1) and 7.4(2), in the aggregate, an amount in excess of the Termination Fee.

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(4)

As used in this Section 7.4 and in Section 8.2(3)(a), the term “beneficial owner” shall have the meaning ascribed to such term in Section 13d-3 promulgated under the Securities Exchange Act of 1934, as amended.

7.5

Fees and Expenses

7.6

Liquidated Damages, Injunctive Relief and No Liability of Others

7.7

Access to Information; Confidentiality

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7.8

Insurance and Indemnification

(1)

Purchaser will, or will cause Fairmont and its subsidiaries to, maintain in effect without any reduction in scope or coverage for six years from the Effective Time customary policies of directors’ and officers’ liability insurance providing protection comparable to the protection provided by the policies maintained by Fairmont and its subsidiaries which are in effect immediately prior to the Effective Time and providing protection in respect of claims arising from facts or events which occurred on or prior to the Effective Time; provided, however, that prior to the Effective Time Fairmont may, in the alternative, purchase run off directors’ and officers’ liability insurance for a period of up to six years from the Effective Time provided that the premiums will not exceed 250% of the premiums currently charged to Fairmont for directors’ and officer’s liability insurance.

(2)

Purchaser agrees that it shall directly honour all rights to indemnification or exculpation now existing in favour of present and former officers and directors of Fairmont and its subsidiaries, which shall survive the completion of the Arrangement and shall continue in full force and effect for a period of not less than six years from the Effective Time.

(3)

The provisions of this Section 7.8 are intended for the benefit of, and shall be enforceable by, each insured or indemnified person, his or her heirs and his or her legal representatives and, for such purpose, Fairmont hereby confirms that it is acting as agent and trustee on their behalf.

7.9

Exchange De-Listing  

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7.10

Takeover Statutes  

7.11

Tax Matters

(1)

prepare and timely file all material Tax Returns required to be filed by them on or before the Effective Time (“Post-Signing Returns”) in a manner consistent, in all material respects, with past practice, except as otherwise required by applicable Laws;

(2)

fully and timely pay all Taxes due and payable in respect of such Post-Signing Returns that are so filed; and

(3)

properly reserve (and reflect such reserve in their books and records and financial statements), for all Taxes payable by them for which no Post-Signing Return is due prior to the Effective Time in a manner consistent with past practice.

7.12

Rights Plan

7.13

Financing

(1)

Purchaser shall use its commercially reasonable efforts to arrange the Debt Financing as promptly as practicable after the date hereof, including using commercially reasonable efforts to (i) negotiate definitive agreements with respect thereto on terms and conditions contained therein and (ii) to satisfy all conditions applicable to Purchaser in such definitive agreements that are within its control. In the event any portion of the Debt Financing becomes unavailable, Purchaser shall use its commercially reasonable efforts to arrange to obtain any such portion from alternative sources as promptly as practicable. Purchaser shall give Fairmont prompt notice of any material breach by any party of the Commitment Letter or any termination of the Commitment Letter. Purchaser

- 52 -

(2)

Fairmont agrees to provide, shall cause its subsidiaries to provide and shall use its commercially reasonable efforts to have its and their representatives (including counsel, financial advisors and auditors) provide, all reasonable cooperation in connection with the arrangement of the Debt Financing or any other financing transactions contemplated by Purchaser in connection with the consummation of the transaction contemplated hereby, as may be reasonably requested by Purchaser (provided that such requested cooperation does not unreasonably interfere with the ongoing operations of Fairmont and its subsidiaries), including (i) participation in meetings, drafting sessions and due diligence sessions, (ii) furnishing Purchaser and its financing sources with financial and other pertinent information regarding Fairmont as may be reasonably requested by Purchaser, (iii) assisting Purchaser and its financing sources in the preparation of (A) an offering document for any debt raised to complete the Arrangement and (B) materials for rating agency presentations, (iv) assisting Purchaser and its financing sources attending to matters relating to title, (v) reasonably cooperating with the marketing efforts of Purchaser and its financing sources for any debt raised by Purchaser to complete the Arrangement, (vi) forming new direct or indirect subsidiaries, and (vii) having officers execute, without personal liability, any reasonably necessary officers’ certificates or management representation letters to Fairmont’s accountants to issue unqualified reports with respect to the financial statements to be included in any offering documents; provided that none of Fairmont or any subsidiary shall be required to pay any commitment or other similar fee or incur any other liability in connection with the Debt Financing prior to the Effective Time. Purchaser shall, promptly upon request by Fairmont, reimburse Fairmont for all reasonable out-of-pocket costs (including legal fees) incurred by Fairmont or its subsidiaries and their respective advisers, agents and representatives in connection with such cooperation.

(3)

All non-public or otherwise confidential information regarding Fairmont obtained by Purchaser or its representatives pursuant to paragraph (2) above shall be kept confidential in accordance with the Confidentiality Agreements except if it is contained in an offering document.

7.14

Resignations

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8.1

Term

8.2

Termination

(1)

Termination By Mutual Consent. This Agreement maybe terminated at any time prior to the Effective Time by mutual written consent of Purchaser and Fairmont.

(2)

Termination By Either Purchaser or Fairmont. This Agreement may be terminated by either Purchaser or Fairmont at any time prior to the Effective Time:

(a)

on or after the Outside Date, if the Effective Time has not occurred on or prior to the Outside Date, except that the right to terminate this Agreement under this clause (a) shall not be available to any party to this Agreement whose failure to fulfill any of its obligations has been a principal cause of, or resulted in, the failure of the Effective Time to occur by such date;

(b)

if the Required Vote is not obtained at the Fairmont Meeting (or any adjournment or postponement thereof); or

(c)

if any Law makes the consummation of the Arrangement or the transactions contemplated by this Agreement illegal or otherwise prohibited, and such Law has become final and nonappealable.

(3)

Termination By Purchaser. This Agreement may be terminated by Purchaser at any time prior to the Effective Time:

(a)

if (i) the Board of Directors of Fairmont shall have withdrawn, amended or modified in a manner adverse to Purchaser its approval or recommendation of the Arrangement, (ii) the Board of Directors of Fairmont shall have approved or recommended an Acquisition Proposal, (iii) Fairmont shall have entered into a binding written agreement in respect of an Acquisition Proposal (other than a confidentiality agreement permitted by Section 7.2(4)), (iv) except as contemplated by Section 7.3, Fairmont or the Board of Directors of Fairmont publicly announces its intention to do any of the foregoing, or (v) any person (other than Purchaser or any of its affiliates) shall have become the beneficial owner

- 54 -

(b)

subject to compliance with Section 7.1, if Purchaser is not in material breach of its obligations under this Agreement and Fairmont breaches any of its representations, warranties, covenants or agreements contained in this Agreement, which breach would give rise to the failure of a condition set forth in Section 6.2(a), Section 6.2(b) or Section 6.2(b); or

(c)

if the Fairmont Meeting is cancelled, adjourned or postponed except as expressly permitted by this Agreement or agreed to by Purchaser in writing.

(4)

Termination By Fairmont. This Agreement may be terminated by Fairmont at any time prior to the Effective Time:

(a)

if the Board of Directors of Fairmont approves, and authorizes Fairmont to enter into, an agreement providing for the implementation of a Superior Proposal, but only so long as:

(i)

the Required Vote has not yet been obtained;

(ii)

Fairmont has not breached any of its obligations under Section 7.2 or 7.3 with respect to the Superior Proposal or any proposal by the person making such Superior Proposal;

(iii)

the Board of Directors of Fairmont has determined in good faith, after consultation with its Financial Advisors, that such definitive agreement constitutes a Superior Proposal;

(iv)

Fairmont pays to Purchaser the Termination Fee in accordance with Section 7.4 simultaneously with such termination (any purported termination pursuant to this Section 8.2(4)(a) being void and of no force or effect unless Fairmont shall have made such payment); or

(b)

subject to compliance with Section 7.1, if Fairmont is not in material breach of its obligations under this Agreement and Purchaser breaches any of its representations, warranties, covenants or agreements contained in this Agreement, which breach would give rise to the failure of a condition set forth in Section 6.3(a) or Section 6.3(b).

(5)

Effect of Termination. If this Agreement is terminated in accordance with the foregoing provisions of this Section, this Agreement shall forthwith become void and of no further force or effect and no Party shall have any further obligations hereunder except as provided in Sections 7.4, 7.5, 7.6, 7.7 and this Section 8.2(5) and the Confidentiality Agreements and as otherwise expressly contemplated hereby, and provided that neither the termination of this Agreement nor anything

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8.3

Amendment

(a)

change the time for performance of any of the obligations or acts of the Parties;

(b)

waive any inaccuracies or modify any representation or warranty contained herein or in any document delivered pursuant hereto;

(c)

waive compliance with or modify any of the covenants herein contained and waive or modify performance of any of the obligations of the Parties; and/or

(d)

waive compliance with or modify any conditions precedent herein contained.

8.4

Waiver

9.1

Notices

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E-mail:

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9.2

Governing Law; Waiver of Jury Trial

9.3

Injunctive Relief

9.4

Time of Essence

9.5

Entire Agreement, Binding Effect and Assignment

9.6

Severability

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9.7

No Third Party Beneficiaries

9.8

Rules of Construction

9.9

Counterparts, Execution

- 61 -

3128012 Nova Scotia Limited

By:

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By:

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FAIRMONT HOTELS & RESORTS INC.

By:

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By:

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1.1

Definitions

A-1

A-2

1.2

Sections and Headings

1.3

Number, Gender and Persons

A-3

1.4

Date of Any Action

1.5

Time

Time shall be of the essence in every matter or action contemplated hereunder.

2.1

Binding Effect

3.1

Arrangement

(a)

the Fairmont Shares held by holders who have exercised rights of dissent with respect to such shares pursuant to and in the manner set forth in Section 190 of the CBCA (“Dissent Rights”) which remain valid immediately before the Effective Date will be deemed to have been transferred to the Purchaser and be cancelled and cease to be outstanding and such holders will cease to have any rights as shareholders other than the right to be paid the fair value of their Fairmont Shares as set out in Section 4.1;

(b)

all Fairmont Shares outstanding immediately prior to the Effective Time held by holders of Fairmont Shares other than (i) Fairmont Shares held by a holder who has exercised its Dissent Rights and is entitled to be paid the fair value of its Fairmont Shares (as determined in accordance with Section 4.1), and (ii) Fairmont Shares held by Kingdom, shall be transferred by the holder to Purchaser (free and clear of any Liens), for US$45.00 per Fairmont Share;

(c)

with respect to each Fairmont Share transferred to Purchaser pursuant to Section 3.1(a) and 3.1(b):

(i)

the holder of each such Fairmont Share shall cease to be the holder of such Fairmont Share and such holder's name shall be removed from the register of Fairmont Shares with respect to such Fairmont Shares as of the Effective Time; and

A-4

(ii)

Purchaser shall be deemed to be the transferee of such Fairmont Share (free and clear of any Liens) and shall be entered in the register of Fairmont Shares as the holder thereof as at the Effective Time;

(d)

all of the Fairmont Options granted and outstanding immediately prior to the Effective Time shall, without any further action on behalf of any holder of Fairmont Options, be transferred by the holders thereof to Fairmont without any act or formality on its or their part in exchange for a cash amount equal to the excess, if any, of (i) the product of the number of Fairmont Shares underlying Fairmont Options held by such holder and US$45.00 over (ii) the aggregate exercise price payable under such Fairmont Options by the holder to acquire the Fairmont Shares underlying such Fairmont Options;

(e)

with respect to each Fairmont Option, the holder of such Fairmont Option shall cease to be the holder of such Fairmont Option and such holder’s name shall be removed from the registers of Fairmont Options with respect to such Fairmont Options as the holder thereof as at the Effective Time;

(f)

the Fairmont Stock Option Plans shall be cancelled;

(g)

all outstanding Fairmont Shares held by Kingdom shall be transferred by the holder thereof, directly or indirectly, to Purchaser (free and clear of any Liens);

(h)

with respect to each Fairmont Share transferred to Purchaser pursuant to Section 3.1(g):

(i)

the holder of each such Fairmont Share shall cease to be the holder of such Fairmont Share and such holder's name shall be removed from the register of Fairmont Shares with respect to such Fairmont Shares as of the Effective Time; and

(ii)

Purchaser shall be deemed to be the transferee of such Fairmont Share (free and clear of any Liens) and shall be entered in the register of Fairmont Shares as the holder thereof as at the Effective Time;

(i)

the Shareholder Rights Plan shall be cancelled;

(j)

notwithstanding the terms of the DSU Plan, all DSUs shall be cancelled and terminated by Fairmont and each holder thereof shall be entitled to receive from Fairmont, in exchange therefor, US$45.00 per DSU;

(k)

with respect to each DSU, the holder of such DSU shall cease to be the holder of such DSU and such holder’s name shall be removed from the register of DSUs with respect to such DSUs as the holder thereof as at the Effective Time; and

(l)

the DSU Plan shall be cancelled.

A-5

3.2

Adjustments to Consideration

4.1

Rights of Dissent

(a)

are ultimately determined to be entitled to be paid fair value for their Fairmont Shares shall be deemed to have transferred such Fairmont Shares to Purchaser; or

(b)

are ultimately determined not to be entitled, for any reason, to be paid fair value for their Fairmont Shares shall be deemed to have participated in the Arrangement on the same basis as a non-dissenting holder of Fairmont Shares;

5.1

Payment of Consideration

(a)

At or promptly after the Effective Time, Purchaser shall deposit with the Depositary, for the benefit of the holders of Fairmont Shares and Fairmont Options (on behalf of Fairmont), cash in the aggregate amount equal to the net payments contemplated by Sections 3.1(b) and 3.1(d), respectively.

(b)

Upon surrender to the Depositary for cancellation of a certificate which immediately prior to the Effective Time represented Fairmont Shares that were exchanged under the Arrangement, together with a duly completed Letter of Transmittal and with such other documents and instruments as would have been

A-6

(c)

Subject to Section 5.3, Purchaser shall cause the Depositary, as soon as practicable following the later of the Effective Date and the date of deposit with the Depositary of the documentation as provided in Section 5.1(b), to:

(i)

forward or cause to be forwarded by first class mail (postage paid) to the holder at the address specified in the Letter of Transmittal; or

(ii)

if requested by the holder in the Letter of Transmittal, make available at the Depositary for pick-up by the holder; or

(iii)

if the Letter of Transmittal neither specifies an address nor contains a request as described in Section 5.1(c)(ii), forward or cause to be forwarded by first class mail (postage paid) to the holder at the address of such holder as shown on the share register maintained by Fairmont as at the Effective Time;

(d)

As soon as practicable following the Effective Date, Purchaser shall cause the Depository to deliver, on behalf of Fairmont, to each holder of Fairmont Options as reflected on the registers maintained by or on behalf of Fairmont in respect of Fairmont Options, a cheque or other form of payment agreed to by the holder representing the net cash payment, if any, payable to such holder of Fairmont Options in accordance with the provisions hereof.

(e)

No holder of Fairmont Shares shall be entitled to receive any consideration with respect to the Fairmont Shares, other than net cash payment, if any, which they are entitled to receive in accordance with Section 3.1(b) and, for greater certainty, no holder will be entitled to receive any interest, dividends, premium or other payment in connection therewith.

(f)

Until such time as a former holder of the Fairmont Shares complies with the provisions of Section 5.1(b) the net cash payment, if any, to which such holder is entitled shall, subject to Section 5.3, be paid to the Depositary to be held in trust for such holder for delivery to the holder, without interest, upon deposit with the Depositary of the documentation as provided in Section 5.1(b).

(g)

Until surrendered as contemplated by this Section 5.1, each certificate which immediately prior to the Effective Time represented Fairmont Shares that were exchanged shall be deemed at all times after the Effective Time to represent only

A-7

5.2

Lost Certificates

5.3

Extinction of Rights

5.4

Withholding Rights

A-8

6.1

Amendments to Plan of Arrangement

(a)

Fairmont reserves the right to amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the Effective Date, provided that each such amendment, modification and/or supplement must be (i) set out in writing, (ii) approved by Purchaser, (iii) filed with the Court and, if made following the Fairmont Meeting, approved by the Court and (iv) communicated to holders of Fairmont Shares if and as required by the Court.

(b)

Any amendment, modification or supplement to this Plan of Arrangement may be proposed by Fairmont at any time prior to the Fairmont Meeting (provided that Purchaser shall have consented thereto) with or without any other prior notice or communication, and if so proposed and accepted by the Persons voting at the Fairmont Meeting (other than as may be required under the Interim Order), shall become part of this Plan of Arrangement for all purposes.

(c)

Any amendment, modification or supplement to this Plan of Arrangement that is approved by the Court following the Fairmont Meeting shall be effective only if (i) it is consented to by each of Fairmont and (ii) if required by the Court, it is consented to by holders of the Fairmont Shares voting in the manner directed by the Court.Any amendment, modification or supplement to this Plan of Arrangement may be made following the Effective Date unilaterally by Purchaser, provided that it concerns a matter which, in the reasonable opinion of Purchaser, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the financial or economic interests of any holder of Fairmont Shares.

A-9

1.

The arrangement (the “Arrangement”) under Section 192 of the Canada Business Corporations Act (the “CBCA”) involving Fairmont Hotel & Resorts Inc. (“Fairmont”), as more particularly described and set forth in the Management Information Circular (the “Circular”) of Fairmont accompanying the notice of this meeting (as the Arrangement may be modified or amended), is hereby authorized, approved and adopted.

2.

The plan of arrangement, as it may be or have been amended, (the "Plan of Arrangement") involving Fairmont, the full text of which is set out in Schedule A to the Acquisition Agreement dated as of January 29, 2006, between Purchaser and Fairmont (the "Acquisition Agreement"), is hereby approved and adopted.

3.

The Acquisition Agreement, the actions of the directors of Fairmont in approving the Arrangement and the actions of the officers of Fairmont in executing and delivering the Acquisition Agreement and any amendments thereto are hereby ratified and approved.

4.

Notwithstanding that this resolution has been passed (and the Arrangement adopted) by the shareholders of Fairmont or that the Arrangement has been approved by the Ontario Superior Court of Justice, the directors of Fairmont are hereby authorized and empowered (i) to amend the Acquisition Agreement, or the Plan Arrangement to the extent permitted by the Acquisition Agreement, and (ii) subject to the terms of the Acquisition Agreement, not to proceed with the Arrangement.

5.

Any officer or director of Fairmont is hereby authorized and directed for and on behalf of Fairmont to execute and deliver articles of arrangement and such other documents as are necessary or desirable to the Director under the CBCA in accordance with the Acquisition Agreement.

6.

Any officer or director of Fairmont is hereby authorized and directed for and on behalf of Fairmont to execute or cause to be executed and to deliver or cause to be delivered, all such other documents and instruments and to perform or cause to be performed all such other acts and things as in such person's opinion may be necessary or desirable to give full effect to the foregoing resolution and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such document, agreement or instrument or the doing of any such act or thing.

•

Expiration of the applicable waiting period related to merger pre-notification under Part IX of the Competition Act or earlier termination or waiver thereof in accordance with the Competition Act and the Commissioner of Competition will have advised Purchaser in writing (which advice will not have been rescinded or amended) that there are not sufficient grounds to initiate proceedings before the Competition Tribunal under the merger provisions of the Competition Act in respect of the Arrangement, or the Commissioner will have issued an advance ruling certificate in respect of the Arrangement pursuant to Section 102 of the Competition Act.

•

Determination (or deemed determination) by the applicable minister designated for purposes of the Investment Canada Act that the Arrangement is likely to be of “net benefit to Canada” for purposes of such Act.

•

Approvals of the Canadian Securities Administrators as required.

•

Expiration of all applicable waiting periods under the HSR Act or earlier termination thereof, including any voluntary agreed extensions.

•

Compliance with any applicable requirements of United States federal securities laws.

•

The Purchaser shall have made the required filing pursuant to the Mexican Federal Law on Economic Competition with the competent competition authority in Mexico in respect of the purchase of the Fairmont Shares by the Purchaser and such authority shall have issued a written ruling clearing such transaction.

ARTICLE I INTERPRETATION

1

1.1

Definitions

1

1.2

Interpretation Not Affected by Headings

11

1.3

Number and Gender

11

1.4

Date for Any action

11

1.5

Currency

11

1.6

Accounting Matters

11

1.7

Knowledge

11

1.8

Schedules

11

ARTICLE II THE ACQUISITION

12

2.1

Implementation Steps by Fairmont

12

2.2

Interim Order

12

2.3

Articles of Arrangement; closing

13

2.4

Circular

13

2.5

Preparation of Filings

14

2.6

Shareholder Communications

15

ARTICLE III REPRESENTATIONS AND WARRANTIES OF FAIRMONT

15

3.1

Representations and Warranties

15

3.2

Disclaimer of Additional Representations and Warranties

30

3.3

Effect of disclosures

31

3.4

Survival of Representations and Warranties

31

ARTICLE IV REPRESENTATIONS AND WARRANTS OF PURCHASER

4.1

Representations and Warranties

31

4.2

Survival of Representations and Warranties

33

4.3

Disclaimer of Additional Representations and Warranties

33

ARTICLE V. COVENANTS OF FAIRMONT AND PURCHASER

33

5.1

Covenants fo Fairmont Regarding the Conduct of Business

33

5.2

Pre-Acquisition Reorganizations

37

5,3

Covenants of Fairmont Regarding the Arrangement

37

5.4

Covenants of Purchaser Regarding the Performance of Obligations

38

5.5

Mututal Covenants

39

5.6

Employment Agreements/Benefits Plans

40

ARTICLE VI CONDITIONS

41

6.1

Mutual Condition Precedents

41

6.2

Additional Conditions Precedent to the Obligations of Purchaser

42

6.3

Additional Conditions Precedent to the Obligations of Fairmont

42

ARTICLE VII ADDITIONAL AGREEMENTS

43

7.1

Notice and Cure Provisions

43

7.2

Non-Solicitation

44

7.3

Right to Match

46

7.4

Agreement as to Damages

47

7.5

Fees and Expenses

49

7.6

Liquidated Damages, Injunctive Relief and No Liability of Others

49

7.7

Access to Information; Confidentiality

49

7.8

Insurance and Indemnification

50

7.9

Exchange De-Listing

50

7.10

Takeover Statutes

51

7.11

Tax Matters

51

7.12

Rights Plan

51

7.13

Financing

51

7.14

Resignations

52

ARTICLE VIII TERM, TERMINATION, AMENDMENT AND WAIVER

53

8.1

Term

53

8.2

Termination

53

8.3

Amendment

55

8.4

Waiver

55

ARTICLE IX GENERAL PROVISIONS

55

9.1

Notices

55

9.2

Governing Law; Waiver of Jury Trial

59

9.3

Injunctive Relief

59

9.4

Time of Essence

59

9.5

Entire Agreement, Binding Effect and Assignment

59

9.6

Severability

59

9.7

No Third Party Beneficiaries

60

9.8

Rules of Construction

60

9.9

Counterparts, Execution

60