Document:

Exhibit 10.16

 

HOTEL MANAGEMENT AGREEMENT

 

By and Between 

 

JUSTICE OPERATING COMPANY LLC 

and

 

INTERSTATE MANAGEMENT COMPANY, LLC 

 

HILTON SAN FRANCISCO FINANCIAL DISTRICT 

 

FEBRUARY 1, 2017

 

     

     

    

  

TABLE
OF CONTENTS

 

	Article I The Hotel	1
	Article II Operating Term	1
	Article III Appointment and Engagement of Operator	2
	Article IV Hotel Employees	8
	Article V Agency; Provision of Funds	11
	Article VI Centralized Services; Information Technology	11
	Article VII Working Capital and Bank Accounts	13
	Article VIII Books, Records and Statements; Annual Plan	14
	Article IX Management Fees and Payments to Operator and Owner	20
	Article X Intentionally reserved	21
	Article XI FF&E Reserve	21
	Article XII Insurance	22
	Article XIII Property Taxes	25
	Article XIV Repairs and Maintenance and Capital Expenditures	25
	Article XV Owner Covenants and Representations	26
	Article XVI Damage or Destruction; Condemnation	26
	Article XVII Events of Default	27
	Article XVIII Termination of Agreement	29
	Article XIX Assignment	33
	Article XX Notices	34
	Article XXI Subordination; Estoppels; Recognition	35
	Article XXII Indemnification	35
	Article XXIII Miscellaneous	37
	Definition Annex	 

 

	Exhibit A 	Centralized Services	 
	 	 	 
	Exhibit B 	Pro Forma Approved Annual Plan	 
	 	 	 
	Exhibit C 	Form of Daily Cash Management Excel Spreadsheet	 
	 	 	 
	Exhibit D 	Centralized Accounting Services	 

 

     

     

    

  

HOTEL MANAGEMENT AGREEMENT

 

THIS HOTEL MANAGEMENT
AGREEMENT (this “Agreement”) is entered into on this 1st day of February, 2017 (the “Commencement
Date”), between JUSTICE OPERATING COMPANY LLC, a Delaware limited liability company (the “Owner”) and INTERSTATE
MANAGEMENT COMPANY, LLC, a Delaware limited liability company (the “Operator”).

 

RECITALS

 

A.       Owner
is the owner of the hotel known as the Hilton San Francisco Financial District located at 750 Kearny Street, San Francisco, CA
94108 (the “Hotel”); and

 

B.        Owner
and Operator desire to evidence their agreement with respect to the operation, direction, management, and supervision of the Hotel
as more particularly set forth below.

 

NOW, THEREFORE,
for and in consideration of the premises, and other good and valuable consideration, Owner and Operator agree as follows:

 

ARTICLE I

 

THE HOTEL

 

1.1.          Owner
and Operator acknowledge that the Hotel consists of and contains the Building, together with the parcel of land on which the Building
is located, the Installations, the FF&E, the Operating Equipment, the Operating Supplies and fitness facilities and any parking
areas or other facilities located on such land, including, without limitation, the Chinese Cultural Center premises, and the spa
premises. Operator and Owner agree that while the operation and management of any parking areas will be included in the definition
of the Hotel and therefore shall be managed by Operator pursuant to the terms of this Agreement, Owner hereby reserves the right
to have all or any portion of such parking areas managed by any person or entity other than Operator (the “Owner Parking Facility
Rights”) and as result thereof such parking areas shall no longer be included as part of the Hotel for purposes of Operator’s
management thereof. In addition, Operator agrees that Owner shall have the right to repurpose various portions of the Hotel at
any time during the Operating Term.

 

ARTICLE II 

 

OPERATING TERM

 

2.1.         This
Agreement shall have an initial term commencing on the Takeover Date and expiring on the tenth (10th) anniversary of the Takeover
Date (the “Initial Term”), unless sooner terminated in accordance with the provisions of this Agreement or unless extended
as provided by the terms of this Agreement or as otherwise provided by the written agreement of Owner and Operator. This Agreement
shall automatically renew for the applicable Renewal Term unless either party gives the other party written notice of termination
no less than ninety (90) days before the end of the Initial Term or the then applicable Renewal Term (such date, the “Renewal
Termination Date”); provided that no such renewal shall be effective if an Operator Event of Default is ongoing on either
the Renewal Termination Date or the commencement date of any such Renewal Term.

 

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ARTICLE III

 

APPOINTMENT AND ENGAGEMENT OF OPERATOR

 

3.1.          Subject
to the terms of this Agreement, Owner hereby engages Operator as its agent and exclusive operator of the Hotel during the Operating
Term and Operator hereby accepts such engagement.

 

3.2.          Subject
to (a) Operator being provided with sufficient funds in accordance with the terms of this Agreement and (b) the terms of the then
applicable Approved Annual Plan, Operator shall operate the Hotel and all of its facilities and activities (i) in such a manner
to meet the Standard at all times throughout the Operating Term and (ii) in compliance in all material respects with the Legal
Requirements. Operator shall also operate and manage the Hotel for Owner in a commercially reasonable, business-like, prudent and
professional manner.

 

3.3.          Operator
acknowledges and agrees that (a) Owner has an office in the Building and intends to oversee actively the operation of the Hotel,
(b) if Owner exercises its Owner Parking Facility Rights, the success of the operation of such parking areas by a person or entity
other than Operator will be partially dependent upon the operations and success of the Hotel and (c) Owner may engage an asset
manager for the purpose of overseeing Operator’s management of the Hotel. Operator will consult regularly (at least monthly or
as otherwise reasonably requested by Owner) with Owner to provide Owner with a status report of the Hotel operations and discuss
any other matters concerning the operation or condition of the Hotel, including, without limitation, any policies or procedures
affecting any aspect of the Hotel’s (i) physical components, (ii) operations, (iii) financial performance and/or (iv) relative
performance in the marketplace. In furtherance of the foregoing, Operator shall, and shall instruct its executive staff, to provide
Owner with access to real-time information concerning the Hotel, which shall be in addition to the periodic reports on the operation
of the Hotel required elsewhere in this Agreement. Operator shall take into account Owner’s recommendations and the impact of decisions
made by Operator on the anticipated operating and financial performance of the Hotel. Operator shall in all events consult with
Owner before implementing any material changes in policies and procedures relating to the Hotel (and, if another provision of this
Agreement requires approval for such changes, obtain Owner’s approval). Owner shall consult directly with the Vice President of
Operations or such other corporate employee of Operator as Owner may reasonably request, and shall not contact any Hotel Employee,
regarding the operations of the Hotel, other than the General Manager, the Director of Sales and Marketing and the Director of
Finance. Notwithstanding the foregoing, but subject to Section 3.5, nothing in this Section 3.3 shall negate the authority granted
to Operator under this Agreement and all Hotel Employees will be directed by Operator as employer.

 

3.4.          Subject
to the terms of this Agreement, Operator shall have control and discretion in all aspects of the operation, direction, management
and supervision of the Hotel. Specifically, during the Operating Term, Operator, as agent and for the account of Owner, shall in
accordance with and subject to the then applicable Approved Annual Plan and the other applicable provisions of this Agreement (including
Section 3.2), and only to the extent Owner has provided sufficient funds therefor, either through Hotel operations or directly
from Owner:

 

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		A.	Determine Hotel policies including but not limited to (i)
credit policies (including entering into agreements with credit card organizations), (ii) terms of admittance, (iii) charges for
rooms, (iv) food and beverage policies, (v) Employment Policies, and (vi) entertainment policies;

 

		B.	Recruit, train, direct, supervise, employ and dismiss the
Hotel Employees for the operation of the Hotel, and in connection therewith establish and maintain an affirmative action plan
for the Hotel to the extent required for Operator and/or the Hotel to maintain its status as a federal contractor;

 

		C.	Develop and implement advertising, marketing, promotion, publicity and similar programs for the
Hotel;

 

		D.	(i) Negotiate and enter into Leases, collect the rent under such Leases and otherwise administer
the Leases and (ii) negotiate and enter into contracts for the provision of services to the Hotel;

 

		E.	Upon receipt of all necessary information from Owner, apply for, process and take all necessary
steps to procure and keep in effect in Owner’s name (or, if required by the licensing authority, in Operator’s name or both) all
licenses and permits and the sales tax registration(s) required for the operation of the Hotel;

 

		F.	Provide purchasing services for routine replacements and renewals of FF&E, Operating Equipment
and Operating Supplies necessary for the operation of the Hotel; non-routine purchases of such items may be provided pursuant to
a separate written agreement on terms and conditions set forth therein (including a separate fee); provided, however, to the extent
that Owner purchases any of the FF&E, Operating Equipment or Operating Supplies used in connection with the operation of the
Hotel, Owner will provide to Operator sufficient information for Operator to maintain accurate books and records regarding sales
tax accruals and pay such accruals out of Total Revenues from the Hotel, and Owner agrees to fully cooperate with Operator in the
event of any related tax audit;

 

		G.	Provide routine accounting services as required in the
ordinary course of business;

 

		H.	Comply with all applicable laws, ordinances, regulations, rulings and orders of governmental authorities
affecting or issued in connection with the Hotel, as well as with orders and requirements of any board of fire underwriters or
any other body which may exercise similar functions. Owner agrees to promptly deliver to Operator any notice of violation thereof
received with respect thereto;

 

		I.	Cause all needed ordinary repairs and maintenance to the Hotel in accordance with the Standard,
the Franchise Agreement any Mortgage and any applicable Legal Requirements, and supervise such repairs and maintenance;

 

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		J.	Subject to Section 3.6 below, operate the Hotel in accordance with (i) the Major Agreements,
(ii) any agreement related to the operation of the Hotel which was entered into prior to the date hereof provided a copy of such
agreement has been delivered to Operator or is then in the actual or construction possession or control of Operator, and (iii)
any agreement related to the operation of the Hotel which (y) Operator enters into on behalf of Owner or (z) Owner has entered
into at Operator’s request; and

 

		K.	Provide such other services as are required under the terms of this Agreement or as are customarily
performed without additional fee by management companies of similar properties in the area of the Hotel.

 

3.5.          Notwithstanding
the foregoing or anything to the contrary in this Agreement and other than as expressly provided in the then applicable Approved
Annual Plan, Operator shall not, without Owner’s approval:

 

		A.	enter into any service or other arrangement (or series of related contracts or arrangements) if
(i) the contract or other arrangement would or are reasonably anticipated to, exceed $10,000 in the aggregate, (ii) the term of
such contract or arrangement is in excess of one (1) year (and in no event beyond the Initial Term), or (iii) the contract or other
arrangement is not terminable by Owner or Operator without payment or penalty upon not less than thirty (30) days notice. Operator
shall nevertheless promptly report to Owner the execution of each such contract having a liability to the Hotel in excess of $5,000;

 

		B.	enter into any agreement creating a voluntary lien or encumbrance affecting any portion of the
Hotel;

 

		C.	enter into any Lease or enter into any lease for the use of any item of FF&E or other property;

 

		D.	borrow any money, guaranty the debts of any third person or execute any credit documents or incur
any obligation in the name of, or on behalf of Owner or the “Hotel”, except in the ordinary course of business and consistent
with the Approved Annual Plan;

 

		E.	incur any liabilities or obligations to third parties which are unrelated to the operation, maintenance
and security of the Hotel which create any contractual obligation upon the Owner or the Hotel;

 

		F.	settle any (i) condemnation awards with respect any portion of the Hotel regardless of amount or
(ii) casualty insurance claims with respect to the Hotel or Owner which involve, or which may be reasonably estimated to involve
(x) amounts in excess of $10,000, or (y) any admission of liability on the part of the Hotel or Owner;

 

		G.	employ any professional firm out of the ordinary course
of business;

 

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		H.	prosecute or settle any tax claims or appeals;

 

		I.	except as approved in advance and in writing by Owner (in the Approved Annual Plan or otherwise),
or as expressly permitted in this Agreement (including Article VI), purchase any goods, supplies and services from itself or any
Affiliate of Operator, or enter into any other transaction with an Affiliate of Operator;

 

		J.	provide complimentary rooms or services to (i) any guests
other than in connection with (A) settling guest satisfaction issues provided that in Operator’s reasonable and prudent judgment,
it is in the best interest of Owner and the Hotel and (B) group sales agreements, provided that (y) in Operator’s reasonable and
prudent judgment, it is in the best interest of Owner and (z) such complimentary rooms or services are normal and customary practices
with respect to group sales agreements in the San Francisco market, taking into account the size of the group, the value of the
group sales agreement and the length of stay, and (ii) any other person as expressly provided in, and subject to, the terms of
Section 4.3;

 

		K.	acquire on behalf of Owner any land or any interest therein;

 

		L.	acquire any personal property or capital assets (either
by purchase or lease) of or from the Hotel or any interest therein;

 

		M.	participate in any condemnation proceeding relating to
the Hotel or any portion thereof, provided that Operator may assert a claim and file such necessary documents with respect to
the assertion of such claim in any such proceeding, subject to consultation with Owner and further provided that Operator shall
not assert any claims or take any substantive or procedural positions adverse to Owner’s interests in such proceeding;

 

		N.	sell, transfer or otherwise dispose of all or any portion of the Hotel except for dispositions
of FF&E to the extent expressly permitted herein or expressly provided for in the then applicable Approved Annual Plan;

 

		O.	perform any alterations to the Hotel or any portion thereof except to the extent Operator’s performance
of any such alternation shall be expressly provided for in the then applicable Approved Annual Plan;

 

		P.	institute or defend any legal proceedings with respect to the Hotel; provided that, Operator may,
without Owner’s consent (i) institute claims for collection of bad debts after reasonably determining that it is in the best interest
of Owner and/or the Hotel, (ii) defend employment-related claims (provided that Owner’s approval shall be required for settlement
of any employment claim requiring payment of Owner’s funds or admission of liability on the part of the Hotel or Owner), (iii)
defend and/or settle claims involving amounts less than $10,000 and (iv) defend insured claims (provided that Owner’s consent shall
be required for settlement of any insured claim requiring payment by Owner of more than $5,000 or admission of liability of the
Hotel or Owner);

 

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		Q.	lease or rent any one or more of the Hotel’s ballroom, conference room, and banquet room for periods
in excess of twenty-one (21) days or the Hotel’s bar or restaurant for periods in excess of five (5) consecutive days;

 

		R.	take any other action which, under the terms of this Agreement, is prohibited or requires the approval
of Owner.

 

For the purposes of Section 3.5(Q), Operator
shall request Owner’s approval in writing, which request shall be accompanied by such information as is reasonably necessary to
enable Owner to make an informed decision. In the event Owner fails to notify Operator in writing of its approval or disapproval
within a twenty-four (24) hour period, such failure shall be conclusively deemed to be Owner’s approval of same. For all other
purposes of this Section 3.5, Operator shall request Owner’s approval in writing, which request shall be accompanied by
such information as is reasonably necessary to enable Owner to make an informed decision. In the event Owner fails to notify Operator
in writing of its approval or disapproval within five (5) business days, Operator shall deliver to Owner of a second notice following
such original five (5) business day period, indicating in ALL CAPITAL TYPE that Owner’s failure to deliver its objection as provided
in this Section 3.5 in the next five (5) business days shall result in Owner’s deemed approval of the item set forth in
the request and Owner’s failure to respond within said five (5) business day period shall be conclusively deemed to be Owner’s
approval of same.

 

3.6.          Operator’s
obligations with respect to any Major Agreement shall be limited to the extent (a) complete and accurate copies thereof, or summaries
of the relevant provisions thereof, have been delivered to Operator, or are then in the actual or constructive possession or control
of Operator or the Hotel’s general manager, and (b) the provisions thereof and/or compliance with such provisions by Operator (i)
are applicable to the day to day operation, maintenance and non-capital repair and replacement of the Hotel or any portion thereof
(including cash management), (ii) do not require contribution of capital from the Operator, (iii) do not materially increase Operator’s
obligations hereunder or materially decrease Operator’s other rights hereunder, (iv) do not limit or purport to limit any corporate
activity or transaction with respect to Operator or its affiliates or any other activity, transfer, transaction, property or other
matter involving Operator or its affiliates other than at the site of the Hotel except to the extent set forth in Article XIX of
this Agreement or otherwise agreed to by Operator in a subordination agreement and (iv) are otherwise contemplated to be within
the scope of Operator’s duties under this Agreement. Owner acknowledges and agrees that any failure of Operator or the Hotel to
comply with the provisions of any Major Agreement that is a direct result of (A) the condition of the Hotel and/or the failure
of the Hotel to comply with the provisions of such Major Agreement, prior to the Takeover Date, (B) construction activities at
the Hotel, (C) latent defects in the design and/or construction of the Hotel, (D) written instructions from Owner to operate the
Hotel in breach of its obligations under such Major Agreement and/or (E) Owner’s failure to approve any matter requested by Operator
that is necessary to comply with the applicable Major Agreement, shall not be deemed a breach by Operator of its obligations under
this Agreement.

 

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3.7.          Operator
agrees to pay to Owner a contribution (the “Key Money Contribution”) in the form of a loan in the amount of two million
dollars ($2,000,000) within seven (7) days after the Takeover Date. The Key Money Contribution shall be amortized in equal monthly
amounts over an eight (8) year period commencing on the second (2nd) anniversary of the Takeover Date. If this Agreement is terminated
for any reason prior to the tenth (10th) anniversary of the Takeover Date, then Owner shall pay to Operator, concurrent with the
effective date of termination of this Agreement the unamortized portion of the Key Money Contribution (the “Unamortized Key
Money”). Repayment of the Unamortized Key Money shall not be considered a waiver by Owner of any right to seek any and all
damages against Operator if Owner terminates this Agreement due to an Event of Default by Operator.

 

3.8.          Notwithstanding
anything in the foregoing to the contrary, in connection with the Franchise Agreement, Operator (a) shall work closely with Owner
and Franchisor to cause Owner and the Hotel to comply with the Franchise Agreement, (b) is authorized to communicate with Franchisor
(provided Operator provides Owner with 24 hours’ notice prior to any communication other than day-to-day operational matters)
in order that Owner may participate in such communications), purchase supplies and services as may be required by the Franchise
Agreement, (c) promptly provide Owner with the results of any reports, inspections, or other matters provided to Operator by Franchisor
with regard to the Hotel, and (d) promptly advise Owner of notice of default by Owner or the Hotel received from Franchisor.

 

3.9.          Operator
agrees to perform the following obligations in all material respects in connection with the transition of operation of the Hotel
that will occur on the Takeover Date:

 

		A.	Operator shall honor any reservations for Hotel guest rooms
and other Hotel facilities on or after the Takeover Date which have been made by guests or customers before the Takeover Date
with the current operator of the Hotel or Owner. Owner shall cause to be transferred to Operator any guest and customer deposits
held by the current operator of the Hotel with respect to those reservations;

 

		B.	Operator shall assume responsibility for guest tray ledger transferred by the current operator
of the Hotel and the care and protection of the contents of safe deposit boxes and any luggage, parcels, packages, faxes, messenger
and overnight courier packages and mail of guests held by the current Hotel operator or Owner on the Takeover Date;

 

		C.	Operator shall accept as agent for Owner and perform the obligations being assumed by Owner from
and after the Takeover Date under space leases, concession and license agreements, equipment leases and service contracts of the
current Hotel operator or lessee;

 

		D.	Operator shall assist Owner with the transfer of existing permits, to the extent transferable,
and in applying for and obtaining all other necessary permits for the lawful operation of the Hotel from and after the Takeover
Date;

 

		E.	If requested by Owner, Operator shall acquire from the existing hotel operator, Owner or their
Affiliates and lawfully transfer into its name or one of its Affiliates acceptable to Owner the liquor license for the sale of
alcoholic beverages at the Hotel and the liquor inventory of the Hotel; and

 

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		F.	Operator shall otherwise assist and cooperate with Owner in the orderly and smooth transition of
operation of the Hotel from the current operator to Operator on the Takeover Date.

 

ARTICLE IV 

 

HOTEL EMPLOYEES

 

4.1.

 

		A.	All Hotel Employees shall be employees of Operator. Operator shall comply with all applicable Legal
Requirements, Union Agreements, including, without limitation, worker’s compensation, social security, unemployment insurance,
hours or labor, wages, working conditions, and other employer-employee related subjects respecting the Hotel Employees. To the
extent possible, Operator shall use local labor in the operation of the Hotel. Notwithstanding anything to the contrary herein,
upon commencement of management of the Hotel, Operator agrees to offer employment to a sufficient number of former employees of
the Hotel who desire employment by Operator on sufficient terms and conditions to avoid the notification requirements of the WARN
Act and similar state law requirements. The Operator may not knowingly hire any individuals for employment at the Hotel who are
related to the officers, directors or shareholders of Operator without Owner’s prior approval. Operator shall use its reasonable
efforts to design, promote and implement employment practices which emphasize the continuity of management (including but not limited
to the executive staff), minimize training and moving costs and reduce personnel turnover and shall consider the objective of minimizing
Operating Expenses when making staffing, employee transfer and staff reduction decisions.

 

		B.	Owner shall have the right to consult with Operator with respect to the hiring, initially and with
respect to any replacement of, the Hotel’s General Manager, Director of Sales and Marketing, Director of Finance, Director of Human
Resources, Director of Food and Beverage, Director of Catering, Chief Engineer and Executive Chef (the “Core Executive Staff”).
Owner shall have the right to approve, which approval shall not be unreasonably withheld, delayed or conditioned, the hiring or
replacement of the Core Executive Staff within five (5) business days after written request from Operator, which request shall
be accompanied by such information as is reasonably necessary to enable Owner to make an informed decision. In the event Owner
fails to notify Operator in writing of its approval or disapproval within such five (5) business day period, Operator shall deliver
to Owner of a second notice following such original five (5) business day period, indicating in ALL CAPITAL TYPE that Owner’s failure
to deliver its objection as provided in this Section 4.1 in the next five (5) business days shall result in Owner’s deemed
approval of the item set forth in the request and Owner’s failure to respond within said five (5) business day period shall be
conclusively deemed to be Owner’s approval of same. All compensation (including, without limitation, all wages, costs of payroll
and similar taxes, employee benefits, relocation expenses, fringe benefits, bonuses and severance payments) of the Hotel Employees
(“Employee Expenses”) shall be an Operating Expense and shall be borne by Owner and paid or reimbursed to Operator out
of the Agency Account or if the amounts therein are insufficient by Owner upon demand therefor by Operator. Owner acknowledges
and agrees that Operator shall have the right to institute compensation, employee benefit, severance payment and bonus policies
and programs for the Hotel Employees so long as such policies are reasonable and customary in the industry for similar positions
in comparable hotels, provided, Owner shall have the right to approve such policies and programs in the aggregate within each Approved
Annual Plan. The aggregate amount of Employee Expenses, including, without limitation, Employee Expenses for Core Executive Staff
and department heads, shall be subject to Owner’s approval as part of the Proposed Annual Plan review and approval process, or
otherwise approved by Owner. If this Agreement is terminated in the middle of any Fiscal Year, Owner shall pay a pro-rata portion
of any Hotel Employee’s bonus that accrued during the Operating Term. Notwithstanding anything here in the contrary, the parties
hereby agree that Owner’s liability to pay for (or reimburse Operator for) any severance obligations relating to any member
of the Core Executive Staff shall be limited to an amount equal to the ratio, expressed as a percentage, of (a) such person’s tenure
as a member of the Core Executive Staff at the Hotel to (b) such person tenure as an employee of Operator and its Affiliates.

 

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4.2.         Operator
shall comply with all applicable laws with respect to pension, medical, health, life insurance, retirement, welfare and similar
employee benefits in the name of Operator, and may, enroll the Hotel Employees in additional retirement, health and welfare employee
benefit plans substantially similar to corresponding plans implemented in other hotels with similar service levels managed by Operator
and in accordance with industry standards. Such plans may be, at Operator’s option, joint plans for the benefit of employees at
more than one hospitality property owned, leased or managed by Operator or its Affiliates, subject to the provisions of applicable
laws. Employer contributions to such plans (including any withdrawal liability incurred upon termination of this Agreement) and
reasonable administrative fees which Operator may expend in connection therewith shall be the responsibility of Owner and shall
be an Operating Expense; provided that, other than withdrawal liability, such employer contributions shall be subject to the then-applicable
Annual Plan. Operator agrees to request an annual estimate of withdrawal liability from any applicable Union. The administrative
expenses of any joint plans will be equitably apportioned by Operator among properties covered by such plan, based on the Hotel’s
payroll expense as it relates to the total expense of such joint plan. Operator shall not recognize any labor union for purposes
of representing Hotel Employees, except (i) any currently recognized by the employer prior to the Takeover Date and (ii) pursuant
to a lawful final order of the National Labor Relations Board. Operator shall negotiate for the mutual best interests of Owner
and Operator with any labor unions representing Hotel Employees, but any collective bargaining agreement or labor contract resulting
therefrom will be executed by Operator as the employer with the prior approval of Owner, which approval shall not be unreasonably
withheld or delayed. It is understood that, with respect to any labor negotiations applicable to the Hotel, Operator shall consult
with Owner in advance of, and during the course of, negotiations with any labor union. Operator shall receive input from Owner
in connection with the negotiation of collective bargaining agreements and Operator shall reflect such input in such negotiations.
Operator agrees that, with respect to any collective bargaining agreement negotiations, Operator will review with Owner all economic
terms of any collective bargaining agreement proposal before making or agreeing to such proposed economic terms. Operator shall
not enter into any multiemployer bargaining arrangement applicable to the Hotel and other hotel properties not owned or managed
by Operator without Owner’s prior written approval, which approval shall not be unreasonably withheld or delayed. If a collective
bargaining agreement is in place for the Hotel Employees immediately prior to the termination of this Agreement, Operator may request
that Owner, in connection with such termination, seek an assessment regarding the amount of withdrawal liability incurred under
any related benefit plan, if any. At Operator’s option, Owner shall post a bond or establish an escrow account to cover the costs
of such withdrawal liability relating to the termination of this Agreement. Owner hereby acknowledges and agrees that (a) any employee
benefit plan withdrawal liability and (b) compliance with the provisions of the WARN Act upon any disposition of the Hotel, upon
any termination of this Agreement or upon the occurrence of any other event giving rise to the application of the WARN Act are
the responsibility and obligation of Owner, and Owner shall use commercially reasonably efforts to (i) cause the succeeding employer
to hire a sufficient number of employees at the Hotel to avoid the occurrence of a “closing” under the WARN Act or (ii)
provide Operator with sufficient notice of termination to allow Operator to comply with the WARN Act and avoid any liability thereunder,
and Owner hereby agrees to indemnify, defend and hold Operator harmless in connection with any employee benefit plan withdrawal
liability or any breach or claimed breach of the WARN Act in connection with any such disposition, termination or other occurrence,
to the extent set forth in Section 22.2.

 

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4.3.          Operator,
in its reasonable discretion, but always in accordance with the system-wide policies and procedures of Operator (which shall limit
accommodations to space projected to be available and not reserved or occupied by members of the public), may, as an Operating
Expense of the Hotel, (a) provide lodging for Operator’s executive employees visiting the Hotel in connection with the performance
of Operator’s services and allow them the use of Hotel facilities and (b) provide the General Manager of the Hotel and other Core
Executive Staff temporary living quarters within the Hotel and the use of all Hotel facilities for up to thirty (30) days, in either
case without charge, as the case may be, subject to the Approved Annual Plan.

 

4.4.          Operator
shall not be liable for any failure of the Hotel to comply prior to the Commencement Date with any Employment Laws.

 

4.5.          Operator
shall make available from time to time, and for the period of time reasonably required, its Senior Vice President of Operations
for the purpose of providing services in connection with the operation or control of the Hotel, including, without limitation,
for the purpose of improving the operations of the Hotel or supervising the operation of the Hotel to ensure that the Standard
is achieved and maintained.

 

4.6.          Operator
may, in its discretion, transfer one or more employees of Operator (or any of its Affiliates) to perform operational services at
the Hotel on a temporary basis whenever it determines that circumstances have made it impractical for Operator to hire a qualified
permanent employee, in which event such employee of Operator (or its Affiliate) shall be provided with room and food at the Hotel
free or charge for a reasonable temporary period.

 

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ARTICLE V

 

AGENCY; PROVISION OF FUNDS

 

5.1.          In
the performance of its duties as Operator of the Hotel, Operator shall act solely as agent of, and for the account of, Owner. Nothing
in this Agreement shall constitute or be construed to be or create a partnership or joint venture between Owner and Operator. Except
as otherwise provided in this Agreement, (a) all debts and liabilities to third persons incurred by Operator in the course of its
operation and management of the Hotel in accordance with the provisions of this Agreement shall be the debts and liabilities of
Owner only and (b) Operator shall not be liable for any such obligations by reason of its management, supervision, direction and
operation of the Hotel as agent for Owner. Operator may so inform third parties with whom it deals on behalf of Owner and may take
any other reasonable steps to carry out the intent of this paragraph.

 

5.2.          Operator
shall in no event be required (a) to advance any of its funds (whether by waiver or deferral of its management fees or otherwise)
for the operation of the Hotel or (b) to incur any liability unless Owner shall have furnished Operator with funds necessary for
the discharge thereof prior to incurring such liability. Operator shall not be deemed to be in default of its obligations under
this Agreement to the extent it is unable to perform any obligation due to the lack of available funds from the operation of the
Hotel or as otherwise provided by Owner.

 

ARTICLE VI

 

CENTRALIZED SERVICES; INFORMATION TECHNOLOGY

 

6.1.
         Operator may, subject to the then applicable Approved Annual
Plan, provide or cause its Affiliated companies to provide for the Hotel and its guests the Centralized Services. The current
list of Centralized Services offered by Operator is attached to this Agreement as Exhibit A (other than the Centralized
Accounting Services, which are as separately defined in this Agreement), and will be modified on an annual basis in
connection with the review and approval of the Approved Annual Plan. Subject to the provisions of the applicable Approved
Annual Plan, Operator or such of Operator’s Affiliated companies as provide Centralized Services shall be entitled to
be reimbursed for the Hotel’s share of the total costs that are reasonably incurred in providing such Centralized
Services on a system-wide basis to hotels and motels managed by Operator or its Affiliates which costs may include, without
limitation, salaries (including payroll taxes and employee benefits) of employees of Operator and its Affiliates, costs of
all equipment employed in the provision of such services and a reasonable charge for overhead. The Hotel’s share of
such costs shall be determined in an equitable manner by Operator (which shall be reasonably satisfactory to Owner) and
substantiated to Owner after each Fiscal Year, shall be an Operating Expense of the Hotel and shall be paid or reimbursed to
Operator out of the Agency Account, or if the amounts therein are insufficient such costs shall be borne and paid by Owner in
accordance with Section 7.1. Operator shall maintain and make available to Owner invoices or other evidence supporting all of
the charges for Centralized Services. Notwithstanding the foregoing, Operator’s fee for providing Centralized
Accounting Services shall be the Centralized Accounting Services Fee. Owner acknowledges and agrees that (a) Operator has
disclosed to Owner the types of Centralized Services Operator currently makes available to properties which it operates,
including those that require mandatory participation by the Hotel, (b) the Hotel is likely to receive substantial benefit
from its participation in such  Centralized Services, (c) Operator is not obligated to provide such Centralized Services
under Article III of this Agreement, but will offer such Centralized Services to the Hotel so long as Operator
continues to offer them to other similar hotels operated by Operator or its Affiliates, and (d) the receipt by Operator of
the Centralized Accounting Services Fee does not breach any fiduciary or other duty which Operator may have to Owner.

 

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6.2.          Operator
shall arrange for the procurement, as an Operating Expense, of all operating supplies, inventory, and/or services necessary for
the normal and ordinary course of operation of the Hotel. Owner acknowledges and agrees that Operator, subject to the Major Agreements
and the Approved Annual Plan, may enter into certain Multi-Property Programs pursuant to which Operator or affiliates of Operator
may receive rebates or other volume- based incentive compensation from participating vendors or suppliers of goods or services
under such Multi-Property Programs (“Operator Rebates”). Owner acknowledges and agrees that (i) Operator has disclosed
to Owner the types of Multi-Property Programs Operator currently makes available to properties which it operates and (ii) the Hotel
is likely to receive a benefit from its participation in such Multi-Property Programs, which the Hotel could not obtain on its
own. The receipt by Operator of any Operator Rebates does not breach any fiduciary or other duty which Operator may have to Owner.
Owner may opt-in or-out of the Multi-Property Programs during the Annual Plan approval process each year.

 

6.3.          Operator
may, subject to the then applicable Approved Annual Plan, provide certain information technology services, including, but not limited
to: (a) de-centralized accounting support services, (b) Operator’s IT Central Support Services (support desk and e-mail services),
(c) Operator’s IT Delphi System Support (centralized sales and catering software application), (d) use of certain Microsoft software
applications at the Hotel, and (e) Virtual Private Network Connectivity and Support (connection to Operator’s software applications
via secure internet connection) (the “IT Services”). For purposes of the Virtual Private Network, Operator may install
hardware at the Hotel, which hardware shall be Owner’s property (installation in connection with Operator’s initial takeover of
management of the Hotel shall be at no cost to Owner pursuant to Section 9.8; installations after 2017 shall be as provided in
the Approved Annual Plan). In addition, Operator shall make all necessary business process changes from time to time, including,
without limitation, necessary changes to information technology equipment and software to (i) comply with the operating standards
required by the Major Agreements, (ii) make reasonable adaptations to changing technology, (iii) be otherwise consistent with the
Standard, and (iv) achieve and sustain compliance on an on-going basis with the then current Payment Card Industry Data Security
Standards and other applicable information security and operating rules and regulations of the credit card associations, and applicable
data protection and privacy laws and regulations. A list of the IT Services (and the current estimated costs therefor) is included
in Exhibit A, subject to change in connection with the then applicable Approved Annual Plan review and approval process
for each Fiscal Year.

 

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6.4.          To the extent requested by Owner, Operator
may provide project management services in connection with the procurement and installation of information technology for the Hotel
during the Operating Term on terms and conditions (including separate fees for such services) mutually  agreed upon by Owner
and Operator.

 

ARTICLE VII 

 

WORKING CAPITAL AND BANK
ACCOUNTS

 

7.1.          Commencing
immediately prior to the Takeover Date, Owner will provide Operator with the Minimum Working Capital for the Hotel. Owner shall
at all times provide, either from Total Revenues or from other funds of Owner, sufficient funds as reasonably determined by Operator
to constitute normal working capital for the uninterrupted and efficient operation of the Hotel (but which, in no event, shall
be an amount less than the Minimum Working Capital), in accordance with this Agreement, and to maintain the Standard as required
herein (but without negating Operator’s obligation to obtain Owner’s consent to exceed budget amounts if required under Section
8.6). Operator agrees that in determining the required working capital, Operator shall take into account the anticipated Operating
Expenses and anticipated Total Revenues of the Hotel for the applicable rolling thirty (30) day period. In furtherance thereof,
Operator shall provide to Owner monthly cash flow forecasts covering the next ninety (90) days of the Hotel’s financial needs as
part of Operator’s Monthly Cash Flow Forecast. Operator shall manage accounts receivable and inventories as would a prudent operator
of a hotel similar to the Hotel and consistent with its operation of its other hotels.

 

Within fourteen (14) days following Operator’s
notice to Owner that additional funds are required to pay payroll expenses and other necessary Operating Expenses, Owner shall
provide such funds necessary to pay such Operating Expenses. Any such failure to provide such funding within the required time
period shall constitute a breach under Section 17.1(A) of this Agreement. Operator may, but shall not be required to, fund
such expenses, and in such event, Operator may, in addition to all other rights, repay itself as soon as any funds are available.

 

7.2.          All
funds received by Operator in the operation of the Hotel, including working capital furnished by Owner, shall be deposited in an
Agency Account in such federally insured financial institution as may be selected by Operator and reasonably approved by Owner
and approved by any Mortgagee. Such funds shall not be commingled with Operator’s other funds. To the extent funds are currently
available in the Agency Account, Operator shall pay all Operating Expenses and Fixed Charges on behalf of Owner from the Agency
Account. Upon Owner’s written request and direction, Operator shall pay on behalf of Owner from the Agency Account (but only to
the extent that such funds are available in the Agency Account following the payment of all Operating Expenses and Fixed Charges),
such other Owner Expenses as may be requested by Owner; provided, however, Operator will not be required to pay such Owner Expenses
until Operator receives Owner’s Expense Notice. Owner agrees to provide Owner’s Expense Notice at least thirty (30) days prior
to the date on which the first payment by Operator is due, and such Owner’s Expense Notice shall only be revocable upon thirty
(30) days prior written notice from Owner.

 

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7.3.          In
addition to the Agency Account established pursuant to Section 7.2, the FF&E Reserve Account shall be established at
the same institution for a reserve for replacements, substitutions and additions to the FF&E. Such funds shall not be commingled
with Operator’s other funds.

 

7.4.          The
Agency Account and the FF&E Reserve Account, shall be opened and maintained at all times in the name of Operator as agent for
Owner doing business as the “Hilton San Francisco Financial District” and shall be under the control of Operator. Notwithstanding
the foregoing, checks or other documents of withdrawal may be signed only by authorized representatives of Operator, provided that
such representatives shall be bonded or otherwise insured in a manner reasonably satisfactory to Owner. Owner shall have read-only
access to the Agency Account and FF&E Reserve Account. The premiums for bonding or other insurance shall be an Operating Expense
except for premiums for bonding off-site executive employees of Operator. Operator shall prepare all bank reconciliations and do
all necessary accounting with respect to the Agency Account and the FF&E Reserve Account. Owner may review such bank reconciliations
in detail at any time.

 

7.5.          The
provisions of this Article VII and any other provisions of this Agreement regarding cash management or the handling of Hotel
funds (including any reserves) are subject to, and Operator shall comply with, any requirements regarding cash management and handling
of all or any portion of Total Revenues and other Hotel funds including with respect to any reserves and any lock box or similar
arrangements, of any Mortgagee, and within ten (10) days after being requested in writing to do so, Operator will join in any commercially
reasonable agreement, acknowledgement or consent with respect thereto required by any Mortgagee. Nothing in this Section 7.5 shall
negate or reduce Owner’s obligations to provide sufficient funds for operation in accordance with the other provisions of this
Agreement.

 

ARTICLE VIII

 

BOOKS, RECORDS AND STATEMENTS; ANNUAL PLAN

 

8.1.          Operator
shall keep full and accurate books of account and other records reflecting all transactions of the Hotel and the results of the
operation of the Hotel in accordance with GAAP and the Uniform System with such exceptions as may be required by the provisions
of this Agreement; provided, however, that Operator may, with prior written notice to Owner, make such modifications to the methodology
in the Uniform System as are consistent with Operator’s standard practice in accounting for its operations under management contracts
generally, so long as such modifications (a) do not affect the determination of the Basic Fee, the Incentive Fee, Total Revenues,
Operating Expenses or Fixed Charges, (b) are consistent with good hotel accounting practices and the requirements of this Agreement,
and (c) do not impair Owner’s ability to comply with any requirement of any laws applicable to Owner and/or the Hotel. All financial
books and records for the Hotel, including, without limitation, all books of account, invoices, financial reports and analyses,
financial statements and bank account statements, shall be uploaded to an appropriate remote electronic storage system utilized
by Operator’s accounting department (the “Electronic Storage System”). Operator shall provide Owner with the necessary
information for Owner to create and establish its own user name and password for the Electronic Storage System in order to allow
Owner to have remote read-only access to all data on the Electronic Storage System without interruption on a 24-hour basis throughout
the Operating Term. In addition, Operator shall prepare and provide to Owner a daily cash management excel spreadsheet in substantially
the form attached hereto as Exhibit C, subject to updates to the form as reasonably requested by Owner from time to time.
Notwithstanding the foregoing, all physical books and records (including those which may be kept in Operator’s home office or other
suitable location pursuant to the adoption of a central billing system or other centralized service, but excluding employment records
other than employee census information), shall be available to Owner and its representatives during normal business hours and at
all other reasonable times, upon reasonable prior notice by Owner and its agents, for examination, audit, inspection and transcription.
Promptly upon Owner’s written request, Operator shall deliver a copy of such books and records to Owner. All books and records
including, without limitation, books of account, guest records and front office records (but excluding any employment records other
than employee census information), shall be the property of Owner and shall not be removed from the Hotel without Owner’s prior
written approval, except that (i) such books and records shall be uploaded to the Electronic Storage System and (ii) Operator shall
have the right to make copies of such records and have access to the records after termination of this Agreement. Operator shall
be prohibited from using any of the guest records for the Hotel in the management, operation, advertising, marketing or promotion
of any other hotel, condominium, condo-hotel, timeshare, resort property or other transient hospitality product, provided that
Operator may use guest records in connection with its national group sales program and in accordance with the programs available
pursuant to the Franchise Agreement.

 

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8.2.

 

		A.	Operator shall deliver to Owner in electronic format weekly
“flash” reports.

 

		B.	Operator shall deliver to Owner in electronic format within fifteen (15) days after the end of
each month, the Monthly Reports covering operations for the prior month and the year-to-date through the prior month. On or before
two (2) business days after the delivery of any internal financial and operation reports concerning the Hotel, including, without
limitation, month end “flash” reports, Operator shall deliver to Owner a copy of the report.

 

		C.	Within twenty (20) days after the end of each calendar quarter, Operator shall deliver to Owner
unaudited financial statements and reports for such quarter (the “Quarterly Operating Statements”), providing the same
information as contained in the Monthly Reports, but adjusted to reflect the applicable portion of the Fiscal Year.

 

		D.	Within fifteen (15) days after the end of each Fiscal Year, Operator shall deliver to Owner an
unaudited annual accounting (the “Annual Operating Statement”). The Annual Operating Statement shall provide the same
information as contained in the Monthly Reports, but adjusted to reflect the entire Fiscal Year and shall show the results of operations
of the Hotel during the Fiscal Year and a computation of Total Revenues, Operating Expenses, and Distributable Cash, if any, and
any other information necessary to make the computations required hereby or which may be reasonably requested by Owner, all for
such Fiscal Year. Subject to the reconciliation set forth in Section 8.3 below, the Annual Operating Statement for any Fiscal Year
shall be controlling over the interim accountings for such year.

 

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		E.	The Monthly Reports, the Quarterly Operating Statements
and the Annual Operating Statement shall each be prepared in accordance with the Uniform System and/or GAAP unless otherwise set
forth in this Agreement. Any financial statements included in the Monthly Reports, the Quarterly Operating Statements or the Annual
Operating Statement must be accompanied by a certificate of Operator’s designated accounting officer certifying that such statements
were prepared under such officer’s supervision and that such statements were true and correct as of the date prepared.

 

8.3.          Operator
shall provide reasonable assistance to an accounting firm selected by Owner in order to permit such accounting firm to deliver
to Owner annual audited financial statements of Owner for the immediately preceding Fiscal Year. At Owner’s request and for an
additional fee, Operator shall provide the SAS-70 (SSAE- SOC 16) audit to Owner. The fee to Owner shall be determined by allocating
pro-rata the total fee incurred by Operator for such audit among the owners of all hotels operated by Operator or its Affiliates
that request such audit. If any audit discloses any discrepancies from the Annual Operating Statement, Owner shall notify Operator
thereon within sixty (60) days after delivery of the audited Annual Operating Statement. Except for any such discrepancies of which
Owner notifies Operator based upon the audit on or before expiration of the sixty (60) day period after delivery of the audited
Annual Operating Statement, at the end of such sixty (60) day period, the Annual Operating Statement shall be deemed to be final
and binding upon the parties absent any intentional misrepresentation or concealment of information with respect to the operation
of the Hotel by Operator. Any adjustments to the Basic Fee or Incentive Fee or any other amounts paid under this Agreement required
because of the results of such audit shall be made by the parties within ten (10) business days of Operator’s receipt of written
notice from Owner regarding any discrepancies disclosed by the audit. The cost of any audit of the Annual Operating Statement shall
be an Operating Expense. For the avoidance of doubt, when determining whether there has been an overpayment of the Basic Fee and/or
the Incentive Fee and/or any other amounts paid under this Agreement for any Fiscal Year, such determination shall be based on
such fees that have been paid for such Fiscal Year and the calculation by Operator of those fees to be paid by Owner pursuant to
the Annual Operating Statement for such Fiscal Year.

 

8.4.          With
respect to the first (1st) Fiscal Year, the Approved Annual Plan shall be the pro forma Approved Annual Plan attached
hereto as Exhibit B. With respect to each other Fiscal Year, on or before each November 15 during the Operating Term, Operator
shall submit to Owner for Owner’s approval, a proposed Annual Plan for the Hotel (the “Proposed Annual Plan”), which
shall include for the ensuing Fiscal Year, the following proposed budgets and programs:

 

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		A.	A proposed operating budget (the “Proposed Operating Budget”) on a monthly and
                                                              yearly basis with detailed departmental schedules for each line item and the assumptions underlying the same, including,
                                                              without limitation: (a) projected occupancy and average room rates by month broken down by room segment; (b) projected Total
                                                              Revenues; (c) proposed Hotel room rates and charges for other services; (d) projected Operating Expenses of the Hotel; (e)
                                                              proposed staff scheduling and compensation (including, without limitation, any bonuses or other incentive compensation for
                                                              Hotel Employees); (f) a narrative comparison of budgeted revenue and expense levels to the previous Fiscal Year’s
                                                              estimated and accrual results, highlighting material changes for the upcoming Fiscal Year, (g) anticipated depreciation and
                                                              amortization of fixed assets at the Hotel; (h) annual debt service with respect to the Hotel; (i) projected contributions by,
                                                              and distributions to, Owner as a result of Hotel operations; (j) an estimate of working capital balance required to be
                                                              maintained, as of the end of each month; (k) projected amount of reductions for accounts receivable; and (l) all other items
                                                              reasonably requested by Owner in order to provide the projected cash flow for the Hotel during such upcoming calendar
                                                              year;

 

		B.	A proposed capital budget (“Proposed Capital Budget”) setting forth Operator’s estimate
of the capital expenditures to be made respecting the Hotel for both of the following:

 

(I)       major
repairs, alternations, improvements, renewals and replacements (which repairs, alterations, improvements and renewals are not
routine maintenance, repairs and alterations referred to in Section 8.4(C)) to the structural, mechanical, electrical,
heating, ventilating, air conditioning, plumbing and vertical transportation elements of the Hotel building (“Major Capital
Expenditures”); and

 

(II)       non-routine
repairs and maintenance to the Building which are normally capitalized under GAAP, such as exterior and interior repainting, resurfacing
building walls, floors, roofs and parking areas, and replacing folding walls and the like, but which are not Major Capital Expenditures.

 

		C.	A proposed budget (the “Proposed FF&E Budget”) setting forth Operator’s estimate
of the FF&E expenditures to be made and the sources of funds for the replacements and renewals to the Hotel’s FF&E.

 

		D.	A market overview of local competitive properties of the Hotel including narrative descriptions
of (i) local competitive properties of the Hotel (including the Competitive Set) including narrative descriptions and allocable
costs of (x) such hotel’s national or regional or business segment marketing plans, (y) local marketing, and (z) sales initiatives,
(ii) the Hotel’s target market and the Hotel’s relative position in such market, and (iii) the proposed room rate structures and
occupancy for the target market.

 

		E.	A marketing plan for the Hotel including narrative descriptions and allocable costs of (i)
Operator’s national or regional or business segment marketing plans, (ii) local
Hotel marketing, and (iii) intended sales initiatives.

 

		F.	A staffing plan describing the general staffing needs for the operation and management of the Hotel.

 

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The budget components of the Proposed
Annual Plan shall be prepared in accordance with the Uniform System to the extent applicable and shall otherwise be prepared in
accordance with Operator’s standard financial reporting and budgeting practices. Owner shall make the final determination respecting
the approval of the Proposed Annual Plan. Owner shall notify Operator in writing of its approval or disapproval of the Proposed
Annual Plan not later than thirty (30) days after Owner’s receipt of the Proposed Annual Plan and, if Owner disapproves of the
Proposed Annual Plan, Owner shall state in such notice the reasons therefor with reasonable particularity. In the event Owner fails
to notify Operator in writing of its approval or disapproval of the Proposed Annual Budget within five (5) days of Operator’s delivery
to Owner of a second notice following such thirty (30) day period, indicating in ALL CAPITAL TYPE that Owner’s failure to deliver
its objection(s) to the Proposed Annual Plan as provided in this Section 8.4 in the next five (5) days shall result in the
Proposed Annual Plan becoming the Approved Annual Plan for the Fiscal Year to which it relates, then such Proposed Annual Plan
shall be deemed approved by Owner and shall be deemed the Approved Annual Plan for the Fiscal Year to which it relates.

 

If any item or items contained in
the Proposed Annual Plan are disapproved by Owner in writing, Operator shall submit to Owner a new Proposed Annual Plan or appropriate
portion thereof within fifteen (15) days following Operator’s receipt of Owner’s written notice of disapproval. If any item contained
in the revised Proposed Annual Plan is then disapproved by Owner in writing within fifteen (15) days thereafter, Operator shall
submit to Owner a further revised Proposed Annual Plan or appropriate portion thereof within fifteen (15) days following Operator’s
receipt of Owner’s written notice of disapproval of the revised Proposed Annual Plan.

 

8.5.          In
the event Operator and Owner are unable to agree on the Proposed Annual Plan (including all revised versions thereof) prior to
January 31st of the Fiscal Year to which such Proposed Annual Plan relates, the dispute shall be resolved by an independent internationally
recognized hotel consultant, selected and retained jointly by Owner and Operator, which consultant (a) shall have not fewer than
ten (10) years of experience in the hotel business; (b) shall not be an Affiliate or a person who has any past, present, or currently
contemplated future business or personal relationship with either Owner or Operator; and (c) whose compensation is not fixed based
upon the results of the issue at dispute (the “Industry Expert”). Until the Proposed Annual Plan is approved in writing
by Owner, Operator shall (i) operate the Hotel in accordance with those items of the Proposed Annual Plan which are not in dispute,
and (ii) with regard to such items that are in dispute, Operator shall operate the Hotel consistent with the most recent Approved
Annual Plan until such dispute is resolved, except for, or as modified by, (x) an adjustment to the disputed items so as to increase
(but not decrease) disputed expense items by the same percentage as any percentage increase in the CPI, from the CPI in effect
on the first day of the first month of the Fiscal Year applicable to such last Approved Annual Plan to the CPI in effect on the
first day of the first month of the Fiscal Year applicable to the disputed Proposed Annual Plan, (y) Necessary Expenses which shall
be paid as required, and (z) Emergency Expenses which shall be paid as required. Upon the Owner’s approval of the Proposed Annual
Plan or the resolution of any dispute in connection therewith, the Proposed Annual Plan shall be deemed to be the “Approved
Annual Plan”, the Proposed Operating Budget shall be deemed to be the “Operating Budget”, the Proposed Capital Budget
shall be deemed to be the “Capital Budget”, and the Proposed FF&E Budget shall be deemed to be the “FF&E
Budget”.

 

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8.6.          Upon
approval of the Proposed Annual Plan by Owner, Operator shall use diligent and commercially reasonable efforts to operate the Hotel
substantially in accordance with the Approved Annual Plan. Operator shall not, without Owner’s prior written approval, which approval
may be withheld in Owner’s sole and absolute discretion, materially deviate from the then applicable Approved Annual Plan or:

 

		A.	Incur any expense for any line-item in the Operating Budget
which causes (i) the aggregate expenditures for such line item to exceed the budgeted amount by the greater of (x) 10% or (y)
$10,000 or (ii) the Operating Budget to be exceeded by more than 10% in the aggregate, in each case for the applicable fiscal
period set forth in the Operating Budget, provided that Operator may at Owner’s cost and expense, without Owner’s approval pay
any (1) Necessary Expenses, and/or (2) Emergency Expenses.

 

		B.	Incur any expense for any line-item in the Capital Budget which causes (i) the aggregate expenditures
for such departmental category to exceed the budgeted amount by the greater of (x) 10% or (y) $10,000 or (ii) the Capital Budget
to be exceeded by more than 5% in the aggregate, in each case for the applicable fiscal period set forth in the Capital Budget,
provided that Operator may, without Owner’s approval, pay any Emergency Expenses which are capital in nature up to a cap of $50,000
in any Fiscal Year.

 

8.7.          Subject
to Operator’s obligation to operate the Hotel in Owner’s best interest, if Operating Expenses increase as a result of (a) occupancy
(based on guests paying the then market room rates), or (b) the volume of the overall business of the Hotel (“Business Opportunities”)
that were not contemplated in the Approved Annual Plan, permitted Operating Expenses shall be equitably adjusted upward to reflect
the increased Operating Expenses for the period of time that the Business Opportunities exist (“Opportunity Costs”).
Any dispute with respect to the Business Opportunities or Opportunity Costs shall be resolved by an Industry Expert.

 

8.8.          In
entering into this Agreement, each of Operator and Owner acknowledges that neither Operator nor Owner has made any representation
to the other regarding projected earnings, the possibility of future success or any other similar matter respecting the Hotel,
and that Operator and Owner understand that no guarantee is made to the other as to any specific amount of income to be received
by Operator or Owner or as to the future financial success of the Hotel. Operator is not warranting or guaranteeing in any respect
that the actual operating results of the Hotel during the period covered by the then applicable Approved Annual Plan will not materially
vary from the then applicable Approved Annual Plan.

 

8.8.         Any
reference to compliance with the Approved Annual Plan or subject to the Approved Annual Plan or similar phrases in this Agreement
shall include all variances to the Annual Plan expressly permitted pursuant to the terms of Section 8.6.

 

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ARTICLE IX

 

MANAGEMENT FEES

AND PAYMENTS TO OPERATOR
AND OWNER

 

9.1.          Owner
shall pay to Operator, on a monthly basis, a Basic Fee equal to one and seven-tenths percent (1.70%) of Total Revenues for services
rendered under this Agreement commencing on the Takeover Date and continuing through the remainder of the Operating Term.

 

9.2.          In
addition to the Basic Fee, Owner shall pay to Operator, on a monthly basis, a fee equal to two thousand five hundred ($2,500) per
month (the “Centralized Accounting Services Fee”), or a pro-rata percentage for any partial month, commencing on the
Takeover Date and continuing through the remainder of the Operating Term and for three (3) months after the termination of this
Agreement. The Centralized Accounting Services Fee shall be increased (but not decreased) annually on the first day of each succeeding
Fiscal Year by the same percentage as any percentage increase in the CPI from the first day of the prior Fiscal Year through the
first day of such succeeding Fiscal Year.

 

9.3.          Beginning
on the first (1st) anniversary of the Takeover Date (i.e., beginning on the commencement of the second Fiscal Year) and in addition
to the Basic Fee and the Centralized Accounting Services Fee, Operator shall be entitled to an Incentive Fee for each Fiscal Year
(or any partial Fiscal Year at the beginning or at the end of the Operating Term) equal to ten percent (10%) of the amount by which
Gross Operating Profit in the current Fiscal Year (or the pro-rated portion thereof) exceeds the previous Fiscal Year’s Gross Operating
Profit or the pro-rated portion thereof). The Incentive Fee will be due and payable to Operator on an annual basis within thirty
(30) days following Owner’s receipt, review and approval of the Annual Operating Statement for the applicable Fiscal Year in accordance
with Sections 8.2 and 8.3.

 

9.4.          In
each month during the Operating Term, Operator shall be paid out of the Agency Account the following payments for the preceding
month: (a) the Basic Fee, (b) the Centralized Accounting Services Fee, (c) any expenses for Centralized Services, and (d) any expense
reimbursements due to Operator, as determined from the monthly income and expense statement, which expense reimbursement for avoidance
of doubt shall not include Operator’s Expenses. Such payment shall, be due and made upon delivery of the income and expense statement
for such month and shall be deducted by Operator out of the Agency Account.

 

9.5.          On
or before the twentieth (20th) day following the last day of each calendar quarter (or such other fiscal period as Owner and Operator
may determine) of each Fiscal Year during the Operating Term, after (a) payment of Operating Expenses, Fixed Charges and, to the
extent the same are to be paid by Operator under this Agreement, Owner Expenses, (b) deposits to the FF&E Reserve Account in
accordance with the FF&E Budget, (c) any required payment to Operator pursuant to Section 9.6 below and (d) retention
of working capital sufficient in the reasonable opinion of Operator to assure the uninterrupted and efficient operation of the
Hotel as required under Section 7.1 above, all remaining funds in the Agency Account shall be paid to Owner (such funds,
“Distributable Cash”).

 

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9.6.          At
the end of each Fiscal Year and following receipt and approval by Owner of the Annual Operating Statement, an adjustment to the
Basic Fee and Incentive Fee will be made, if necessary in accordance with Section 8.3 above.

 

9.7.          Owner
shall be liable for and shall pay Operator for any applicable sales, use, excise consumption or similar taxes that are payable
to any taxing jurisdiction with respect to any fees, reimbursements or other amounts due to Operator under this Agreement to ensure
that the net amount of such fees, reimbursements or other amounts received by Operator shall be equal to the full amount that Operator
would have otherwise received if no such taxes applied to such amounts. This Section 9.7 does not apply to federal or state
income taxes payable by Operator as a result of its gross or net income relating to any fees collected under this Agreement.

 

9.8.          Operator
shall not charge a fee to or require reimbursement of any expense from Owner relating to standard Operator transition or start-up
expenses (including costs for Payment Card Industry (PCI) compliance) incurred by Operator strictly related to Operator’s commencement
of management of the Hotel on the Takeover Date, until the total of such fees and expenses exceeds one hundred fifty thousand dollars
($150,000), at which point Owner shall be fully liable for such fees and costs. For the avoidance of doubt, Owner is liable for
any transition costs relating to the liquor license or other licenses held for the Hotel.

 

ARTICLE X

 

INTENTIONALLY RESERVED

 

ARTICLE XI

 

FF&E RESERVE

 

11.1.        During
each Fiscal Year there shall be allocated and paid on a monthly basis to the FF&E Reserve Account from Total Revenues an amount
equal to four percent (4%) of Total Revenues for such Fiscal Year. Notwithstanding the foregoing, Operator agrees that to the extent
a Mortgagee requires Owner to cause a portion of Total Revenues to be maintained in a separate FF&E reserve account or equivalent
thereof (“Lender Reserve Account”), the sums held in the Lender Reserve Account will be included in determining the amount
of Total Revenues necessary to be deposited in the FF&E Reserve Account in accordance with the terms hereof.

 

11.2.        All
funds in the FF&E Reserve Account, together with any interest earned thereon shall be used solely for purposes of replacing,
substituting, adding to or refurbishing the FF&E in accordance with the applicable portion of the Approved Annual Plan. Any
funds remaining in the FF&E Reserve Account at the end of a Fiscal Year shall be carried forward to the next Fiscal Year.

 

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ARTICLE XII 

 

INSURANCE

 

12.1.        The
following insurance with respect to the Hotel, to the extent such insurance is commercially
 available, shall be obtained by Operator and maintained throughout the Operating Term at Owner’s sole cost and
expense provided, however, Owner may elect, at the beginning of the Operating Term or no more than once per year during the
Operating Term, so long as such election is at least sixty (60) days prior to any then-current policy renewal, to provide
such insurance upon written notice to Operator and delivery of certificates of insurance acceptable to Operator:

 

		A.	insurance covering the Building, the Installations and
the FF&E on an special peril broad form basis, against such risks as are customarily covered by such insurance (including,
without limitation, boiler and machinery insurance, but excluding damage resulting from earthquake, war, and nuclear energy),
in aggregate amounts which shall be not less than the full replacement cost of the Building, the Installations and the FF&E
(exclusive of foundations, footings and land);

 

		B.	commercial general liability insurance with a combined single limit of not less than $1,000,000
for each occurrence and $2,000,000 per location aggregate including the following coverages: (i) bodily injury including sickness
and disease, (ii) death, (iii) property damage, (iv) assault and battery, (v) mental anguish as a result of bodily injury, (vi)
sexual assault, (vii) personal and advertising injury including false arrest, false imprisonment, unlawful detention, malicious
prosecution, libel, slander or violation of the right of privacy, (viii) wrongful entry or eviction, (ix) liquor liability (if
the Hotel sells, serves or furnishes alcoholic beverages) and host liquor liability if the sale or service of alcohol is provided
by a third party, (x) innkeeper’s liability, (xi) contractual liability, (xii) independent contractors, (xiii) premises and operation,
(xiv) products and completed operations, and (xv) pollution coverage for liability arising out of heat, smoke or fumes from a hostile
fire vapor or soot produced by or originating from equipment that it utilized by HVAC equipment and bacteria, fungi, carbon monoxide
or pool chemicals.;

 

		C.	umbrella excess liability insurance with a $50,000,000 per occurrence and per location limit applying
on an excess and follow form basis over the commercial general liability and auto liability insurance coverages;

 

		D.	business interruption insurance
                                         covering loss of income for a minimum period of eighteen (18) months resulting from interruption
                                         of business resulting from physical damage caused by the occurrence of any of the risks
                                         affecting the Hotel insured against under “special perils” policy referred
                                         to in Sections 12.1 (A), (E) and (F);

 

		E.	if the Hotel is located within an area designated “high hazard flood zone” pursuant to
the Federal Emergency Management Agency, as the same may be amended from time to time, flood insurance in such amount as Owner
may reasonably require;

 

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		F.	business automobile liability insurance with limits of
$1,000,000 insuring against damage due to bodily injury, death of any person or property damage arising out of the ownership,
maintenance or use of any motor vehicles, whether owned, non-owned, hired or leased, in connection with Hotel operations and garage-keeper’s
liability if the Operator provides parking services for guest vehicles;

 

		G.	earthquake insurance if the Hotel is located in an “earthquake zone” as determined by
the U.S. Geological Survey in reasonable amount for a hotel of this type in the geographic area; and

 

		H.	Such other or additional insurance as may be (i) required under the provisions of any applicable
Major Agreement (provided Operator has been given detailed written notice of such requirements) or (ii) requested by Owner in writing
and customarily carried by prudent operators of similar service level hotels in the geographic area of the Hotel.

 

12.2.        Operator
shall obtain the following insurance with respect to the Hotel employees and shall maintain such insurance during the Operating
Term of this Agreement at Owner’s sole cost and expense:

 

		A.	worker’s compensation insurance not less than amounts prescribed by applicable state law and employers
liability coverage having a minimum per occurrence limit of $1,000,000 per accident/disease;

 

		B.	crime insurance, in such amounts and with such deductibles that are commercially available and
economically feasible, covering Operator’s employees at the Hotel (other than executive employees of Operator) or in job classifications
normally insured in other hotels it manages in the United States or otherwise required by law; and

 

		C.	Employment Insurance with reasonable limits and commercially available and economically feasible
deductibles.

 

12.3.        All
insurance policies shall name Operator as the insured party and shall name as additional insureds Owner and such other parties
as may be required by the terms of the Major Agreements as appropriate. Owner understands that coverage afforded the Owner as an
additional insured is solely for liability arising out of Operator’s activities performed by Operator by or on behalf of Owner
and that it may be necessary for Owner to purchase separate policies to cover Owner activities not performed by or on behalf of
Operator. In the event that Owner shall obtain any insurance as required under Section 12.1 of this Agreement, other than
through the program established by Operator, such insurance policy shall name Operator, Interstate Hotels & Resorts, Inc.,
its subsidiaries and employees as an additional insured by endorsement and Owner’s coverage will be primary and noncontributory
to coverage carried by the Operator.

 

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12.4.       All
insurance policies shall be in such form and with such companies having an A.M. Best’s Rating of A- XV or better and provided Owner
has given Operator detailed written notice of such requirements, shall comply with the requirements of any Major Agreement. Insurance
may be provided under blanket or master policies covering one or more other hotels operated by Operator or owned by Owner. The
portion of the premium for any blanket or master policy which is allocated to the Hotel as an Operating Expense or Fixed Charge
shall be determined in an equitable manner by Operator and reasonably approved by Owner and paid out of the Agency Account or,
if the funds therein are insufficient, by Owner upon demand therefor by Operator. Such amount shall be determined by a suitable
and customary formula applying the specific hotel exposures against appropriate rates to determine the premium allocation for the
Hotel.

 

12.5.       All
insurance policies shall specify that they cannot be canceled or materially modified on less than twenty (20) days prior written
notice to both Owner and Operator and any additional insureds (or such longer period as may be required under a Major Agreement,
provided that Operator has been advised in writing of such period) and shall provide that claims shall be paid notwithstanding
any act or negligence of Owner, or Operator unilaterally or on behalf of Owner, including without limitation their respective agents
or employees.

 

12.6.       All
insurance policies shall provide, to the extent customarily obtainable from the insurance company providing such insurance, that
the insurance company will have no right of subrogation against Owner, Operator any party to a Major Agreement or any of their
respective agents, employees, partners, members, officers, directors or beneficial owners.

 

12.7.       Owner
and Operator hereby release one another from any and all liability, to the extent of the waivers of subrogation obtained under
Section 12.6, associated with any damage, loss or liability with respect to which property insurance coverage is provided
pursuant to this Article or otherwise.

 

12.8.       The
proceeds of any insurance claim (other than proceeds payable to third parties under the terms of the applicable policy) shall be
paid into the Agency Account to the extent of Owner’s interest therein unless otherwise required by the terms of a Major Agreement.

 

12.9.       Operator
shall have the right to pay for, or reimburse itself for, insurance required under this Article XII out of the Agency Account.
Notwithstanding anything to the contrary set forth in this Agreement, Operator shall have no obligation to obtain or maintain any
insurance set forth in this Article if funds from Total Revenues or funds otherwise provided by Owner are not made available to
Operator to purchase the same.

 

12.10.       Subject
to the provisions of the Approved Annual Plan, Operator may act, directly or indirectly, in a brokerage capacity with respect to
the insurance required under this Article or as a direct insurer or reinsurer with respect to the same.

 

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ARTICLE XIII

PROPERTY TAXES

 

13.1.       If
requested by Owner and provided that funds from Total Revenues or funds otherwise provided by Owner are available, Operator shall
(a) pay or shall cause to be paid all Property Taxes on behalf of Owner not less than ten (10) days prior to the applicable due
dates and (b) furnish to Owner, before the respective dates on which Property Taxes will become delinquent, proof of payment thereof,
in accordance with applicable laws and in form satisfactory to Owner, Operator shall promptly furnish Owner with proof of payment
of Property Taxes.

 

13.2.       Owner
may initiate a Tax Contest, and if requested by Owner, Operator agrees to cooperate with Owner in a Tax Contest and execute any
documents or pleadings required for such purpose, provided that the facts set forth in such documents or pleadings are accurate
and that such cooperation or execution does not impose any liability on Operator. All costs and expenses incurred by Owner and
Operator in connection with a Tax Contest shall be Fixed Charges.

 

ARTICLE XIV

 

REPAIRS AND MAINTENANCE AND CAPITAL EXPENDITURES

 

14.1.       Subject
to the then applicable Approved Annual Plan and Owner’s provision of the required working capital pursuant to Section 7.1,
Operator shall from time to time make such repairs and maintenance (other than Major Capital Expenditures) as are required to maintain
the Hotel in a manner to allow the Hotel to meet the physical elements of the Standard.

 

14.2.       Owner
shall maintain the Hotel in accordance with the Standard and shall approve, in the Proposed Annual Plan or an amendment to any
Approved Annual Plan, any Major Capital Expenditures proposed by Operator which are required to maintain the Hotel in accordance
with the Standard. Operator shall not make any Major Capital Expenditure without Owner’s prior written approval even if such Major
Capital Expenditure is contemplated in the then applicable Approved Annual Plan and Operator shall provide details and documentation
requested by Owner in connection therewith in order for Owner to make such approval determination. Notwithstanding anything herein
to the contrary, Owner may, at its option, make any Major Capital Expenditure without the consent of Operator.

 

14.3.       If
Owner directly performs or contracts for repair, maintenance, refurbishing, construction or renovations at the Hotel, Owner must
coordinate, and require its contractors and subcontractors to coordinate, with Operator including, but not limited to, causing
any Owner employees, contractors or subcontractors to comply with safety and security rules of the Hotel and communicate on a regular
basis the activities being performed at the Hotel to assure the health, safety and efficient operation of the Hotel and its guests
and employees. Owner shall use commercially reasonably efforts to comply with all laws, obtain all necessary permits and shall
provide Operator copies of any permits prior to commencement of any such activities.

 

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ARTICLE XV

 

OWNER COVENANTS AND REPRESENTATIONS

 

15.1.       Owner
represents, warrants and covenants that it holds good and marketable fee title to the Hotel and that it will maintain good and
marketable fee title to the Hotel free of any and all liens, encumbrances or other charges except for easements or encumbrances
that do not adversely affect the operation of the Hotel, mortgages or liens for taxes, assessment levies or other public charges
not yet due or payable.

 

15.2.       Owner
represents, warrants and covenants that neither it, nor any of its Affiliates (or any of their respective principals, partners
or funding sources), is, nor will become (a) a person designated by the U.S. Department of Treasury’s Office of Foreign Asset Control
as a “specially designated national or blocked person” or similar status, (b) a person described in Section 1 of U.S.
Executive Order 13224 issued on September 23, 2001; (c) a person otherwise identified by a government or legal authority as a person
with whom Owner or Operator is prohibited from transacting business; (d) directly or indirectly owned or controlled by the government
of any country that is subject to an embargo by the United States government; or (e) a person acting on behalf of a government
of any country that is subject to an embargo by the United States government. Owner agrees that it will notify Operator in writing
immediately upon the occurrence of any event which would render the foregoing representations and warranties contained in this
Section 15.2 incorrect.

 

15.3.       Owner
represents, warrants and covenants: (a) that it is familiar with the FCPA, and the purposes of the FCPA, and in particular, the
FCPA’s prohibition of the payment or the gift of any item of value, either directly or indirectly, by a company organized under
the laws of the United States of America, or any of its states, to an official of a foreign government for the purpose of influencing
an act or decision in such person’s official capacity, or inducing such person to use influence with the foreign government to
assist a company in obtaining or retaining business for, with, or in that foreign country or directing business to any person or
company or obtaining an improper advantage, and (b) that it has not taken, and during the Operating Term of this Agreement it will
not take, any action that would constitute a violation of the FCPA or any similar law.

 

15.4.       Owner
represents, warrants and covenants that to its knowledge it is in compliance in all material respects with all Major Agreements,
that Owner has not received any written notice of breach of any of currently effective Major Agreements and that Owner will continue
to comply in all material respects with all Major Agreements during the Operating Term of this Agreement. Owner agrees to promptly
provide to Operator copies of any written notice of default or breach received under any Major Agreement.

 

ARTICLE XVI 

 

DAMAGE OR DESTRUCTION; CONDEMNATION

 

16.1.        If
the Hotel is damaged by fire or other casualty, Operator shall promptly notify Owner. This Agreement shall remain in full force
and effect subsequent to such casualty provided that either party may terminate this Agreement upon thirty days’ prior written
notice to the other party if (a) Owner shall elect to close the Hotel as a result of such casualty (except on a temporary basis
for repairs or restoration) or (b) Owner shall determine in good faith not to proceed with the restoration of the Hotel; provided
further, Operator may terminate this Agreement upon thirty days’ prior written notice to Owner if forty percent (40%) or more of
the rooms in the Hotel are unavailable for rental for a period of one hundred eighty (180) days or more as a result of such casualty.

 

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16.2.       If
all or any portion of the Hotel becomes the subject of a condemnation proceeding or if Operator learns that any such proceeding
may be commenced, Operator shall promptly notify Owner upon Operator’s receipt of written notice thereof. Either party may terminate
this Agreement on thirty (30) days’ notice to the other party if (a) all or substantially all of the Hotel is taken through condemnation
or (b) less than all or substantially all of the Hotel is taken, but, in the reasonable judgment of the party giving the termination
notice, the Hotel cannot, after giving effect to any restoration as might be reasonably accomplished through available funds from
the condemnation award, be profitably operated in accordance with the Standard.

 

16.3.       Any
condemnation award or similar compensation shall be the property of Owner, provided that Operator shall have the right to bring
a separate proceeding against the condemning authority for any damages and expenses specifically incurred by Operator as a result
of such condemnation.

 

ARTICLE XVII 

 

EVENTS OF DEFAULT

 

17.1.       Each of the following
shall constitute an event of default (“Event of Default”):

 

		A.	If Owner shall fail to provide funding in accordance with Section 7.1, and such default
continues for a period of five (5) business days after written notice from the Operator;

 

		B.	In addition to the Event of Default described in Section
                                         17.(a) above, if either party shall be in default in the payment of any amount required
                                         to be paid under the terms of this Agreement, and such default continues for a period
                                         of ten (10) days after written notice from the other party;

 

		C.	If either party is in Material Default hereunder (with the exception of any such failure constituting
an Event of Default under any other subsection of this Section 17.1), and such Material Default continues for a period of
fifteen (15) days after written notice from the other party; provided that in case of a Material Default that poses an imminent
threat to the health and safety of the Hotel Employees or guests, the non-defaulting party may terminate this Agreement upon written
notice if such default is not cured within three (3) business days following receipt of written notice thereof from the non-defaulting
party;

  

		D.	If either party shall (i) make an assignment for the benefit of creditors, (ii) institute any proceeding
seeking relief under any federal or state bankruptcy or insolvency laws, (iii) institute any proceeding seeking the appointment
of a receiver, trustee, custodian or similar official for its business or assets or (iv) consent to the institution against it
of any Involuntary Proceeding;

 

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		E.	If an Involuntary Proceeding shall be commenced against either party and shall remain undismissed
for a period of sixty (60) days;

 

		F.	If Owner violates Sections 15.2 or 15.33 hereof, in which case Operator may terminate
this Agreement immediately;

 

		G.	An assignment by Operator in violation of the provisions of Article XIX;

 

		H.	The failure of Operator to deliver to Owner on or before three (3) business days after the date
when due any financial report or statement required to be delivered to Owner under this Agreement, and such failure continues for
a period of three (3) business days after written notice thereof from Owner;

 

		I.	The failure of Operator to execute and deliver any commercially reasonable instrument requested
by Owner to effectuate or evidence the subordination of Operator’s rights hereunder or any estoppels certificate under Article
XXI of this Agreement; provided that Operator shall have five (5) business days after the receipt of written notice of such
default to cure; or

 

		J.	If any act is committed by corporate executive personnel of Operator which constitutes fraud, theft,
embezzlement or any gross misdemeanor or greater crime or any similar criminal act involving dishonesty (which, for the avoidance
of doubt, would include any acts committed which constitute fraud, theft, embezzlement or any gross misdemeanor or greater crime
or any similar criminal act involving dishonesty of Operator’s corporate executive personnel in the supervision and training of
all Hotel Employees) in the course of performing his or her duties on behalf of Operator with respect to the Hotel; provided, however,
that if, and only if, any of the foregoing acts or events are committed (a) by corporate executive personnel of Operator who are
not corporate executives of Operator with the responsibilities of an executive vice president or higher and (b) without the actual
prior knowledge of any person who controls Operator, such act or event committed by such corporate executive may be cured by Operator
if, within ten (10) Business Days after being notified in writing of the occurrence of such act or event, Operator makes full restitution
to Owner of any and all damages caused by, or resulting from, such act or event (less any portion of such damages which has been
recovered) and promptly takes all appropriate actions necessary to remediate the situation and protect the interests of Owner and
the Hotel.

 

		K.	If, because of any wrongful act or omission on the part of Operator, (A) a written notice of default
shall be issued under the Franchise Agreement which may, if uncured, permit the Franchise Agreement to be terminated (a “Franchise
Agreement Default”) and (B) Operator fails to take corrective action to cure such default within any applicable notice or
grace period or otherwise within sufficient time to avoid such termination (for the avoidance of doubt, a wrongful act or omission
on the part of Operator shall not include an act or omission which was due to Owner’s failure to provide sufficient funds in accordance
with the terms of this Agreement).

 

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 17.2.       Unless otherwise stated in Section 17.1 hereof, if any event of default shall occur, the non-defaulting party may terminate this Agreement on five (5) days prior written notice to the defaulting party.

 

17.3.       The
right of termination set forth in Section 17.2 shall not be in substitution for, but shall be in addition to, any and all
rights and remedies for breach of contract available in law or at equity.

 

17.4.       Neither
party shall be deemed to be in default of its obligations under this Agreement if, and to the extent that, such party is unable
to perform such obligation as a direct result of earthquakes, hurricanes, floods, fires, or other casualties, strike or other labor
unrest not involving Hotel Employees, takings, war, terrorist acts, riot or other civil commotion (which shall not include the
inability of such party to meet its financial obligations or an adverse change in general economic or market conditions, unless
such adverse change is the result of one of the foregoing events). The foregoing list of events and circumstances is exclusive
and not merely a list of examples.

 

17.5.       Each
of the parties hereto irrevocably waives any right such party may have against the other party hereto at law, in equity or otherwise
to any consequential damages, punitive damages or exemplary damages.

 

ARTICLE XVIII 

 

TERMINATION OF AGREEMENT

 

18.1.       Provided
Owner gives Operator forty-five (45) days’ prior written notice, Owner may terminate this Agreement effective as of and conditioned
upon the closing of the sale of the Hotel to a bona fide third-party purchaser who is not an Affiliate of Owner without any termination
fee or penalty being due to Operator (other than amounts accrued prior to the effective date of termination as set forth in Section
18.9).

 

18.2.       Beginning
on the second (2nd) anniversary of the Takeover Date and upon at least sixty (60) days’ written notice to Operator, Owner may terminate
this Agreement, without cause and without any termination fee or penalty being due to Operator (other than amounts accrued prior
to the effective date of termination as set forth in Section 18.9).

 

18.3.

 

		A.	Beginning on the second (2nd) anniversary of the Takeover Date (such that the first “testing
year” commencing on the first day of the third year after the Takeover Date) and upon at least sixty (60) days’ written notice
to Operator, Owner may terminate this Agreement without any termination fee or penalty being due to Operator (other than amounts
accrued prior to the effective date of termination as set forth in Section 18.9), in the event that the operations of the
Hotel fail both of the following performance tests in any Fiscal Year, which shall be deemed a “Performance Failure”:

 

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		(I)	the Gross Operating Profit for any Fiscal Year is less than ninety percent (90%) of the Gross Operating
Profit set forth in the Approved Annual Plan for such Fiscal Year (without regard to any amendments or changes to such Approved
Annual Plan, whether Owner’s approval thereof is either required or obtained), and

 

		(II)	the RevPAR Index is less than 90% (the “RevPAR Test”).

 

In the event of a Performance Failure,
Owner only shall be permitted to exercise its termination right under this Section 18.3 during the ninety (90) day period
following Owner’s receipt of the Monthly Reports (as described in Section 8.2) for the last month of the Fiscal Year in
which such Performance Failure occurred. Notwithstanding the foregoing, if within thirty (30) days after receipt of the notice
to terminate due to a Performance Failure, Operator pays Owner an amount equal to the difference between (x) actual Gross Operating
Profit and (y) budgeted Gross Operating Profit set forth in the Approved Annual Plan for the Fiscal Year that gave rise to the
Performance Failure under this Section 18.3, then such Performance Failure shall be deemed fully cured by Operator, such
that the notice to terminate due to a Performance Failure is automatically deemed rescinded and no basis for a Performance Failure
shall be deemed to exist; provided that Operator may only cure a Performance Failure twice during the Operating Term.

 

		B.	Notwithstanding anything to the contrary contained in this Agreement, if at any time after
                                                              the Takeover Date: (i) a hotel in the then existing Competitive Set is no longer operating at a level substantially
                                                              equivalent to the higher of (x) the Standard; or (y) as of the date hereof, (ii) information with respect to a hotel in the
                                                              then existing Competitive Set is no longer available through the Smith Travel Research; and/or (iii) a material change to a
                                                              hotel in the then existing Competitive Set occurs, including the cessation of operation of a hotel or a change to the
                                                              standards of operation of a hotel, then either party may request that the other party consent to the removal and replacement
                                                              of such hotel in the Competitive Set.

 

		C.	In the event that the removal of a hotel from the Competitive Set is requested by either party
and the other party consents to such removal, Owner and Operator, each acting reasonably, shall endeavor to agree upon one or more
replacement hotels to be included in the Competitive Set that consist of hotels in the Hotel’s immediate market area that are most
comparable to the Hotel in quality, price and market position (with due consideration given to location, age, quality, size, amenities,
amount of meeting space and business mix); provided that: (i) any replacement hotel must have been in operation for at least five
full years; (ii) the Competitive Set includes at least four hotels and no more than six hotels, and (iii) a single hotel in the
Competitive Set does not account for more than 30% of the total guest rooms of all hotels included in the Competitive Set (the
“Replacement Hotel Requirements”). If the parties are unable to reach agreement as to: (x) whether a hotel should be
removed from the Competitive Set, and/or (y) which hotels are to be included in the Competitive Set, either party may submit the
matter to the Industry Expert for resolution.

 

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		D.	In connection with the removal of a hotel from the Competitive Set or the selection of a replacement
hotel or hotels for the Competitive Set, either party may also request that the RevPAR Test be modified to account for the changes
to the Competitive Set. If the parties are unable to reach agreement as to a modification of the RevPAR Test, either party may
request that the Industry Expert resolve such dispute, concurrently with the resolution of whether a hotel should be removed from
the Competitive Set and/or which hotels are to be included in the Competitive Set.

 

		E.	In the event a hotel or hotels are removed from the Competitive Set pursuant to the procedure set
forth in this Section 18.3, and the parties determine that the immediate market area does not include a replacement hotel
which meets the Replacement Hotel Requirements, either party may propose: (i) a replacement hotel which does not meet the Replacement
Hotel Requirements for the other party’s consideration; and (ii) in connection with such proposal, a modification to the RevPAR
Test to account for the changes to the Competitive Set that result from the addition of a hotel which does not meet the Replacement
Hotel Requirements. If the parties are unable to reach agreement as to: (x) the inclusion of a hotel which does not meet the Replacement
Hotel Requirements, and/or (y) a modification to the RevPAR Test in connection therewith, either party may submit the matter to
the Industry Expert for resolution.

 

		F.	The Competitive Set shall be reviewed and amended as requested under this Section 18.3 and
as part of the approval of the then applicable Proposed Annual Plan.

 

18.4.       Operator
and Owner agree that upon termination, there may be certain adjustments to the final accounting for which information may not be
available at the time of the final accounting and the parties agree to readjust such amounts and make the required cash adjustments
when such information becomes available; provided, however, but subject to the provisions of Article XXII hereof, all accounts
shall be deemed final one (1) year after termination of the Agreement.

 

18.5.       No
later than ninety (90) days following the termination of this Agreement Operator shall transfer to Owner all remaining amounts
in the Agency Account and the FF&E Reserve Account.

 

18.6.       Following
termination of this Agreement, Operator shall transfer to Owner all books and records (excluding employment records other than
(i) employee census information and (ii) union employee records that must remain at the Hotel) with respect to the Hotel following
termination of this Agreement.

 

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18.7.       
To the extent permitted by applicable laws, upon termination of this Agreement for any reason Operator shall use reasonable efforts
to assist Owner in assigning any contracts, permits or licenses (including restaurant and liquor licenses) to Owner or the subsequent
manager or owner and. shall use reasonable efforts to obtain all consents necessary
therefor; provided that (a) Owner shall give Operator sufficient time to effect such transfers; (b) Owner shall cooperate and require
that the new manager and/or owner to cooperate, with Operator with respect to such transfers; (c) Owner shall pay or reimburse
any costs or expenses, including reasonable attorney fees, incurred by Operator in connection with these efforts.

 

18.8.

 

		A.	All intellectual technology or intellectual property, including any software or systems, used on
a system wide basis at Operator’s properties shall remain the exclusive property of Operator (“Operator IP”). Upon termination
of this Agreement for any reason Operator shall have the right to remove such Operator IP, and remove Owner’s access to any proprietary
systems related to such Operator IP without compensation to Owner. Owner assumes all liability if Owner uses illegally licensed
software that constitutes Operator IP. Notwithstanding the foregoing, upon termination of this Agreement for any reason, Operator
shall provide to Owner a copy of all data and information relating to the operation of the Hotel during the twelve (12) months
immediately preceding the termination date and the right to copy such data and information, but not the Operator IP itself.

 

		B.	Operator shall cause any intellectual technology or intellectual property, including any software
or systems, specific to the Hotel itself, (“Owner IP”) to be in the name of Owner in order that such Owner IP shall be
owned, licensed and proprietary to Owner. The Owner IP shall remain the exclusive property of Owner and upon termination, Operator
shall have no right to remove such Owner IP or remove Owner’s access to any system related to such Owner IP. Operator assumes all
liability if Operator uses illegally licensed software that constitutes Owner IP.

 

		C.	All hardware or other software equipment installed at the Hotel (excluding leased equipment) shall
remain the exclusive property of Owner and upon termination, Operator shall have no right to remove such non-leased hardware or
equipment.

 

18.9.        If
this Agreement is terminated for any reason, a Termination Reserve shall be established to (i) reimburse Operator for all costs
and expenses incurred by Operator in terminating its employees at the Hotel (such as severance pay, unemployment compensation,
employment relocation, earned and accrued vacation pay, bonus accruals, estimated tax payments and any other employee liability
costs arising out of termination of employment of Operator’s employees at the Hotel), but specifically excluding withdrawal liability
from any applicable Union (which is addressed in Section 4.2 of this Agreement); (ii) pay outstanding accounts payable for liabilities
and obligations incurred during the Operating Term; and (iii) make any required adjustments as described in Section 18.4 hereof.
On or before the effective date of termination, Operator shall provide Owner an estimate of such costs and expenses, based on known
liabilities with reasonable evidence to substantiate this estimate for review and mutual reasonable approval by the parties.

 

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18.10.       Upon
termination of this Agreement for any reason during, or at the end of, the Operating Term of this Agreement, (a) Operator and Owner
agree to sign any documents reasonably necessary to effect such termination or change in management for the Hotel, (b) Owner shall
pay to Operator all Basic Fees, Centralized Services Fees, Incentive Fees, reimbursable expenses and other amounts due under this
Agreement through the effective date of termination, including, if applicable, the Unamortized Key Money in accordance with Section
3.7, and (c) Operator shall pay to Owner any amounts due and owing to Owner under this Agreement. For avoidance of doubt, the
Unamortized Key Money shall not be payable if this Agreement is terminated as a result of an Operator Event of Default.

 

18.11.       Upon
termination of this Agreement for any reason, subject to Owner performing its obligations with respect to the termination, Operator
shall peaceably and quietly surrender and deliver up to Owner possession of the Hotel in accordance with its obligations contained
herein, with the specific intent to effectuate a smooth transition of management of the Hotel to Owner or a third party so as to
minimize any potential disturbance of guests.

 

ARTICLE XIX 

 

ASSIGNMENT

 

19.1.       Operator
shall not assign or pledge this Agreement without the prior written consent of Owner; provided that, Operator may, without the
consent of Owner, assign this Agreement to (a) any entity controlling, controlled by or under common control with Operator (control
being deemed to mean the ownership of fifty percent (50%) or more of the stock or other beneficial interest in such entity and/or
the irrevocable power to direct the day-to-day and long-term operations and policies of such entity); (b) any entity which is the
successor by merger, consolidation or reorganization of Operator or Operator’s general partner, managing member or parent corporation
or (c) the purchaser of all or substantially all of the hotel management business of Operator or Operator’s general partner, managing
member or parent corporation. Should Operator assign this Agreement under subsection (a), (b) or (c) above, Owner agrees to attorn
to the assignee. Nothing in this Agreement shall prohibit or be deemed to prohibit any pledge by Operator of the Basic Fee, Incentive
Fee or any other amounts received by Operator under this Agreement to any institutional lender as collateral security for debt
of Operator and/or Operator’s Affiliates.

 

19.2.       Owner
shall not assign this Agreement without the prior written consent of Operator; provided that, Owner may assign this Agreement without
Operator’s consent to any person or entity acquiring Owner’s fee interest in the Hotel as of the effective date of such acquisition
if (a) Owner provides Operator with thirty (30) days prior written notice of such assignment, and (b) such assignee agrees in writing
to be bound by this Agreement and assumes in writing all of Owner’s obligations under this Agreement from and after the effective
date of such assignment. Nothing in this Agreement shall prohibit or be deemed to prohibit any mortgage, charge, pledge or other
encumbrance of all or any part of Owner’s right, title and interest in the Hotel to any institutional lender as collateral security
for debt of Owner and/or Owner’s Affiliates, subject to the terms of Article XXI.

 

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19.3.       Upon
any permitted assignment of this Agreement and the assumption of this Agreement by the assignee, the assignor shall not be relieved
of any obligation or liability under this Agreement arising after the effective date of the assignment unless (a) such assignee
assumes liabilities that arose prior to the effective date of the assignment (which, in the case of Owner, shall include any obligation
to repay the Unamortized Key Money) or (b) the non-assigning party receives other written assurance with respect to such liabilities
reasonably acceptable to such non-assigning party, in which case of either (a) or (b) the assigning party shall be automatically
released from any and all liability arising from, or relating to, this Agreement and the ownership and operation of the Hotel (including
without limitation, in the case of Owner, any obligations with respect to the Unamortized Key Money).

 

ARTICLE XX

 

NOTICES

 

20.1.       Any
notice, statement or demand required to be given under this Agreement shall be in writing, sent by certified mail, postage prepaid,
return receipt requested, or by facsimile transmission, receipt electronically or verbally confirmed, or by nationally-recognized
overnight courier, receipt confirmed, addressed if to:

 

	 	Owner:	Justice Operating Company LLC
	 	 	10940 Wilshire Boulevard, Suite 2150
	 	 	Los Angeles, CA 90024
	 	 	Attention: David Gonzalez
	 	 	Facsimile No.: (310) 496-1605
	 	 	Email: dgonzalez@intgla.com
	 	 	 
	 	with a copy to:	Justice Operating Company LLC
	 	 	10940 Wilshire Boulevard, Suite 2150
	 	 	Los Angeles, CA 90024
	 	 	Attention: John Winfield
	 	 	Facsimile No.: (310) 889-2525
	 	 	Email: jwinfield@intgla.com
	 	 	 
	 	and Operator:	Interstate Management Company, LLC
	 	 	c/o Interstate Hotels & Resorts, Inc.
	 	 	4501 N. Fairfax Drive, Suite 500
	 	 	Arlington, VA 22203
	 	 	Attention: Executive Vice President and General Counsel
	 	 	Facsimile No.: (703) 387-3389

 

or to such other addresses as Operator
and Owner shall designate in the manner provided in this Section 20.1. Any notice or other communication shall be deemed
given (a) on the date three (3) business days after it shall have been mailed, if sent by certified mail, (b) on the business day
it shall have been sent by facsimile transmission (unless sent on a non-business day or after business hours in which event it
shall be deemed given on the following business day), or (c) on the date received if it shall have been given to a nationally-recognized
overnight courier service.

 

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ARTICLE XXI 

 

SUBORDINATION; ESTOPPELS; RECOGNITION

 

21.1.       Operator
agrees that its rights under this Agreement are subject and subordinate to any Mortgage now, or hereafter in effect, as well as
with respect to any security agreements, pledge agreements or other secured financing documents encumbering any direct or indirect
interests in the Hotel or the Owner itself (collectively, the “Lenders’ Liens”); provided that such Lenders’ Liens are
held by Institutional Lenders, and further provided that, such subordination shall not be deemed a waiver or forbearance from (a)
receiving from Owner, on a current basis and as and when due, any and all fees and expenses due to it under this Agreement prior
to an event of default under any such mortgage or deed of trust or (b) exercising any right Operator may have to terminate this
Agreement pursuant to Article 17 above, subject to granting reasonable cure rights to such Institutional Lender. Operator further
agrees to execute and deliver within ten (10) days after written request therefor any document or certificate containing customary
and reasonable terms confirming subordination and attornment, as Owner or any holder of any such Lenders’ Liens may reasonably
request.

 

21.2.       Owner
and Operator agree that from time to time upon the request of the other party or a party to a Major Agreement, it shall execute
and deliver within ten (10) days after the request a certificate confirming that this Agreement is in full force and effect, stating
whether this Agreement has been modified and supplying such other information as the requesting party may reasonably require.

 

ARTICLE XXII 

 

INDEMNIFICATION

 

22.1.       To
the fullest extent permitted by law, Operator hereby agrees to indemnify, defend and hold Owner and its Affiliates (and each of
their respective agents, principals, contractors, shareholders, partners, members, officers, directors and employees, and each
of their respective successors and assigns (individually, an “Owner Indemnitee” and collectively, “Owner Indemnitees”))
harmless from and against any and all liabilities, losses, claims, damages, costs and expenses (including, but not limited to,
reasonable attorneys’ fees and expenses) that may be incurred by or asserted against any Owner Indemnitee and that arise from or
relates to (a) the fraud, willful misconduct or gross negligence of the off-site employees of Operator, General Manager or Director
of Finance, (b) the breach by Operator of any provision of this Agreement caused by the fraud, willful misconduct or gross negligence
of the off-site employees of Operator, General Manager or Director of Finance, or (c) any action taken by Operator, General Manager
or Director of Finance which is beyond the scope of Operator’s authority under this Agreement (the “Operator Indemnity Obligations”);
provided that, Operator shall not be obligated with regard to the foregoing for the Hotel’s Director of Finance if the Director
of Finance (i) was the Hotel’s Director of Finance (or equivalent position) immediately prior to the Takeover Date and (ii) less
than six (6) months have elapsed since the Takeover Date. Owner shall promptly provide Operator with written notice of any claim
or suit brought against any Owner’s Indemnitee by a third party which might result in such indemnification. Owner shall cooperate
with the Operator or its counsel in the preparation and conduct of any defense to any such claim or suit.

 

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22.2.       To
the fullest extent permitted by law, Owner hereby agrees to indemnify, defend and hold Operator and its affiliates (and each of
their respective agents, principals, contractors, shareholders, partners, members, officers, directors and employees, and each
of their respective successors and assigns (individually, an “Operator Indmenitee” and collectively, “Operator
Indemnitees”)) harmless from and against all liabilities, losses, claims (including, but not limited to Employment Claims)
damages, costs and expenses (including, but not limited to, reasonable attorneys’ fees and expenses; and any additional
tax as set forth in Section 9.7 and interest and penalties thereon) that may be incurred by or asserted against any Operator Indemnitee
and that arise from or relates to (a) the performance of Operator’s services in accordance with this Agreement, (b) any
act or omission (whether or not willful, tortious, or negligent) of Owner or any third party, (c) any liabilities arising from
a tax audit with respect to the Hotel whether conducted during or after the Operating Term, (d) Owner’s failure to promptly
remove any Hazardous Materials on any portion of the Hotel or its surrounding site or otherwise remedy the problem in accordance
with all laws, rules and regulations of any governmental authority or (e) or any other occurrence related to the Hotel and/or
Operator’s duties under this Agreement whether arising before, during or after the Operating Term (the “Owner Indemnity
Obligations”). Operator shall promptly provide Owner with written notice of any claim or suit brought against it by a third
party which might result in such indemnification. Operator shall cooperate with the Owner or its counsel in the preparation and
conduct of any defense to any such claim or suit. IT IS EXPRESSLY AGREED AND UNDERSTOOD THAT THIS AGREEMENT INCLUDES INDEMNIFICATION
PROVISIONS WHICH, IN CIRCUMSTANCES OTHER THAN AS PROVIDED FOR IN SECTION 22.1, COULD INCLUDE AN INDEMNIFICATION BY OWNER OF OPERATOR
FROM CLAIMS OR LOSSES ARISING AS A RESULT OF OPERATOR’S OWN NEGLIGENCE OR THE NEGLIGENCE OF OPERATOR’S EMPLOYEES WHETHER
OR NOT SUCH NEGLIGENCE IS PASSIVE OR ACTIVE. It is agreed that none of the Operator Indemnitees shall have any right to indemnity
with respect to any Owner Indemnity Obligations if such Owner Indemnity Obligations result from, were caused by or otherwise constitute
an Operator Indemnity Obligation for which Operator is required to indemnify the Owner Indemnitees in accordance with Section
22.1.

 

    	36

     

    

 

22.3.       If
any action, lawsuit or other proceeding shall be brought against any Indemnified Party hereunder arising out of or based upon any
of the matters for which such party is indemnified under this Agreement, such Indemnified Party shall promptly notify the Obligor
in writing (which may be in the form of email) thereof and, except in the case of an Employment Claim (which shall be defended
by Operator subject to the indemnity set forth in Section 22.2). Obligor shall promptly assume the defense thereof (including
without limitation the employment of counsel selected by Obligor) unless otherwise agreed to in writing by the parties as provided
herein, such defense to be subject to the prior written consent of the Indemnified Party, which consent shall not be unreasonably
withheld (provided, however, by way of illustration and not limitation, it shall be reasonable for the Indemnified Party to deny
consent to any settlement that requires the Indemnified Party to admit guilt or liability). The Indemnified Party shall cooperate
with the Obligor in the defense of any such action, lawsuit or proceeding, on the condition that the Obligor shall reimburse
the Indemnified Party for any out-of-pocket costs and expenses incurred in connection therewith. Subject to the terms of this Agreement,
the Obligor shall have the right to negotiate settlement or consent to the entry of judgment with respect to the matters indemnified
hereunder; provided, however, that if any such settlement or consent judgment contemplates any action or restraint on the part
of the Indemnified Party, then such settlement or consent judgment shall require the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld. In addition to the foregoing, the Indemnified Party shall have the right (at
its own expense) to employ separate counsel in any such action and to participate in the defense thereof. An Indemnified Party
may settle any action on its own behalf (i.e., with respect to its own liability and with no requirement of Obligor to admit guilt
or liability) only with the prior written consent of Obligor, which consent shall not be unreasonably withheld (provided, however,
by way of illustration and not limitation, it shall be reasonable for Obligor to deny consent to any settlement that requires Obligor
to expend funds in an amount Obligor reasonably determines is inappropriate so long as the Indemnified Party remains adequately
protected at all times). In the event that Obligor fails to use reasonable efforts to defend or compromise any action, lawsuit
or other proceeding for which an Indemnified Party is indemnified hereunder or as the parties may agree, the Indemnified Party
may, at Obligor’s expense and without limiting Obligor’s liability under the applicable indemnity, assume the defense of such action
and the Obligor shall pay the charges and expenses of such attorneys and other persons on a current basis within thirty (30) days
of submission of invoices or bills therefor. In the event the Obligor is Owner and Owner neglects or refuses to pay such charges,
Operator may pay such charges out of the Agency Account and deduct such charges from any amounts due Owner, or add such charges
to any amounts due Operator from Owner under this Agreement. If Operator is the Obligor and Operator neglects or refuses to pay
such charges, the amount of such charges shall be deducted from any amounts due Operator under this Agreement.

 

22.4.        The provisions of this Article shall
survive the termination of this Agreement with respect to acts, omissions and occurrences arising during the Operating Term.

 

ARTICLE XXIII 

 

MISCELLANEOUS

 

23.1.       Owner
and Operator shall execute and deliver all other appropriate supplemental agreements and other instruments, and take any other
action necessary to make this Agreement fully and legally effective, binding, and enforceable as between them and as against third
parties; provided, however, that neither party shall be required to execute any other document or instrument or perform any other
action that would materially increase its liability or decrease its rights under this Agreement.

 

23.2.       This
Agreement constitutes the entire agreement between the parties relating to the subject matter hereof, superseding all prior agreements
or undertakings, oral or written. Owner acknowledges that in entering into this Agreement, Owner has not relied on any projection
of earnings, statements as to the possibility of future success, or other similar matter which may have been prepared by Operator.

 

    	37

     

    

 

23.3       The.
headings of the titles to the articles of this Agreement are inserted for convenience only and are not intended to affect the meaning
of any of the provisions hereof.

 

23.4.       A
waiver of any of the terms and conditions of this Agreement may be made only in writing and shall not be deemed a waiver of such
terms and conditions on any future occasion.

 

23.5.       This
Agreement shall be binding upon and inure to the benefit of Owner and Operator and their respective successors and permitted assigns.

 

23.6.       This
Agreement shall be construed, both as to its validity and as to the performance of the parties, in accordance with the laws of
the state of California without reference to its conflict of laws provisions.

 

23.7.       This
Agreement may be executed in any number of counterparts each of which shall, when executed, be deemed to be an original and all
of which shall be deemed to be one and the same instrument. Signatures on this Agreement delivered by facsimile shall be deemed
to be original signatures for all purposes of this Agreement.

 

23.8.

 

(a)       The
parties shall first attempt in good faith to resolve disputes informally prior to pursuing formal dispute resolution under Section
23.8(b). Upon receiving notice of any claim or dispute, the parties shall first meet in good faith at a mutually agreeable time
and location to discuss the dispute and attempt to settle the matter without resort to formal dispute resolution. This meeting
shall proceed in advance of further arbitration or other legal proceedings, provided that either party may initiate arbitration
or other legal proceedings as necessary in order to avoid the expiration of any statutes of limitation, statutes of repose, or
similar time limitations. In such event, the arbitration or legal proceeding shall be stayed pending completion of the informal
meeting.

 

(b)       Except
as provided in Section 8.5, all disputes and claims related to or arising out of the Agreement shall be resolved by arbitration
conducted through any nationally recognized arbitration provider, in accordance with the Commercial Arbitration Rules and Mediation
Procedures of the American Arbitration Association then currently in effect. The arbitrator shall be independent and impartial,
and shall be a judge or lawyer with at least ten (10) years of experience handling claims related to the hospitality industry,
unless otherwise agreed to by the parties. All arbitration proceedings shall be held in San Francisco, California unless otherwise
agreed to by the parties. Any arbitration arising out of or relating to this Agreement may include, by consolidation or joinder
or in any other manner, other persons substantially involved in a common question of fact or law whose presence is required if
complete relief is to be accorded in arbitration. Consent to arbitration involving an additional person or entity shall not constitute
consent to arbitration of a claim not described therein or with a person or entity not named or described therein. This agreement
to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof. The award of the
arbitrators may be entered as a judgment in any court of competent jurisdiction.

 

    	38

     

    

 

(c)       The parties shall
equally share all costs and expenses related to payment of arbitrators or filing fees or other similar expenses assessed by arbitration
institutions.

 

(d)       WAIVER OF JURY TRIAL. EACH
PARTY TO THIS AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY DISPUTE BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OR
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE PARTIES.

 

23.9.       If
any provision of this Agreement or its application to any party or circumstances is determined by any court of competent jurisdiction
to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person
or circumstances, other than those as to which it is so determined invalid or unenforceable, will not be affected thereby, and
each provision hereof will be valid and will be enforced to the fullest extent permitted by law.

 

23.10.       Owner or Owner’s
agent shall have the continuing right during the term of this Agreement upon reasonable prior notice and at reasonable times to
inspect the Hotel.

 

23.11.       Time shall be
of the essence in the performance of the obligations of the parties under this Agreement.

 

23.12.       This Agreement
may not be modified, amended, surrendered or changed, except by a written document signed by Owner and Operator agreeing to be
bound thereby.

 

23.13.       Notwithstanding
anything herein to the contrary, if Owner’s approval or consent is required under this Agreement, Operator shall request such approval
or consent in writing and Owner shall deliver its response to such request in writing. For the avoidance of doubt, as used in this
Section 23.13 “in writing” shall include email communications.

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

    	39

     

    

 

IN WITNESS WHEREOF, Operator
and Owner have duly executed this Agreement the day and year first above written.

 

	 	JUSTICE OPERATING COMPANY, LLC,
	 	a Delaware limited liability company
	 	 	 
	 	By: 	Justice Mezzanine Company, LLC, a Delaware limited liability company, its sole Member

 

	 	By: 	Justice Investors, LP, a California Limited partnership, its sole Member

 

	 	By: 	Portsmouth Square, Inc., 
	 	 	its sole General Partner

 

	 	By: 	/s/ John V.
    Winfield
	 	Name:	John V. Winfield
	 	Its:	President

 

    	40

     

    

 

	 	INTERSTATE MANAGEMENT COMPANY, LLC

 

	 	By:	Interstate Operating Company, L.P., member

 

	 	By:	Interstate Hotels & Resorts, Inc., general partner

 

	 	By:	/s/ Monica L. Bernstein
	 	Name:	Monica L. Bernstein 
	 	Title:	Vice president of LegaI

 

 

    	41

     

    

 

DEFINITION ANNEX

 

“Affiliate” or “Affiliated”
- shall mean any person which, directly or indirectly, controls, is controlled by or is under common control with, such person.
The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control
with”), as used with respect to any person, means the possession, directly or indirectly, or the power to direct or cause
the direction of the management and policies of such person, whether through the ownership of voting securities or by contract
or otherwise, including, without limitation, control exists when a person is a managing member, managing partner, trustee, president
and/or chief executive officer of a person and/or of an Affiliate of such person. A “person” shall mean an individual,
corporation, partnership, limited liability company, limited partnership and/or trust. A natural person is an Affiliate to another
natural person if he or she is a spouse, parent or lineal descendent of the other person.

 

“Agency Account” -
shall mean, collectively, one or more accounts bearing the name of the Hotel where all funds received by Operator in the
operation of the Hotel are deposited.

 

“Agreement” - shall mean the Hotel Management
Agreement.

 

“Annual Operating Statement” - has the meaning
set forth in Section 8.2(D).

 

“Approved Annual Plan” -
shall mean the then applicable Proposed Annual Plan approved in accordance with the provisions of Section 8.5.

 

“Basic Fee” - shall mean the base management
fee paid by Owner to pursuant to Section 9.1.

 

“Building” - shall mean
a building with 543 guest rooms (with the potential of 19 additional rooms), restaurant(s), lounge(s), conference and meeting rooms
and a 5-level underground parking garage.

 

“Capital Budget” - has the meaning set forth
in Section 8.5.

 

“Centralized Accounting Services”
- shall mean services provided to create, maintain and verify financial statements by the general ledger group in Operator’s
shared services center along with providing sales and use tax services and filing, as set forth in Exhibit D.

 

“Centralized Accounting Services Fee” - has
the meaning set forth in Section 9.2.

 

“Centralized Services” -
shall mean the Centralized Accounting Services and any and each of the purchasing services, other group benefits and services,
revenue management services, on-site sales training, associate satisfaction surveys, Operator’s national training program and other
training, as are made available generally to similar properties managed by Operator.

 

“Competitive Set” -
shall mean the hotels within the Hotel’s market area that are most closely comparable to the Hotel in quality, price and
market (with due consideration given to age, quality, size, location, amenities, amount of meeting space and business mix). The
initial Competitive Set shall be determined by the parties within thirty (30) days after the Commencement Date, provided that
if the parties disagree as to whether any hotel should be included and/or excluded from the Competitive Set and the parties cannot
reach a resolution within such thirty (30) day period, then such dispute shall be resolved by the Industry Expert.

 

    	1

     

    

 

“Commencement Date” -
shall mean the date of this Agreement as set forth in the introductory paragraph hereto.

 

“Comparable Aggregate Cost Test” - has the
meaning set forth in Section 6.2.

 

“Core Executive Staff” - has the meaning set forth in Section 4.1(B).

 

“CPI” - shall mean the
Consumer Price Index - All Urban Consumers (U.S. City Average) (1982-1984 =100), or any successor index thereto appropriately adjusted.

 

“Distributable Cash” - has the meaning set
forth in Section 9.5.

 

“Electronic Storage System” - has the meaning
set forth in Section 8.1.

 

“Emergency Expenses” -
shall mean expenses, regardless of amount, which in Operator’s good faith judgment are immediately necessary to protect the physical
integrity or lawful operation of the Hotel or the health or safety of its occupants.

 

“Employee Expenses” - has the meaning set forth
in Section 4.1(B).

 

“Employment Claim” - shall
mean any claim based upon a violation or alleged violation of the Employment Laws.

 

“Employment Insurance” - shall mean Employment
Practices Liability Insurance.

 

“Employment Laws” -
shall mean any federal, state, local and foreign statutes, laws, ordinances, regulations, rules, permits, judgments, orders and
decrees affecting labor union activities, civil rights or employment in the United States, including, without limitation, the
Civil Rights Act of 1870, 42 U.S.C. §1981, the Civil Rights Acts of 1871, 42 U.S.C. §1983 the Fair Labor Standards Act,
29 U.S.C. §201, et seq., the Civil Rights Act of 1964, 42 U.S.C. §2000e, et seq., as amended, the Age
Discrimination in Employment Act of 1967, 29 U.S.C. §621, et seq., the Rehabilitation Act, 29 U.S.C. §701, et
seq., the Americans With Disabilities Act of 1990, 29 U.S.C. §706,42 U.S.C. §12101, et seq., the Employee
Retirement Income Security Act of 1974,29 U.S.C. § 301, et seq., the Equal Pay Act, 29 U.S.C. §201, et seq.,
the National Labor Relations Act, 29 U.S.C. §151, et seq., and any regulations promulgated pursuant to such statutes
(as amended from time to time, and together with any similar laws now or hereafter enacted).

 

“Employment Policies” -
shall mean the policies, procedures and programs for the Hotel relating to the employment of Hotel Employees, including wage, benefits
and severance policies. The Employment Policies shall be reasonably designed to effect compliance with the Employment Laws and
shall be consistent with industry standards from time to time for reputable hotel management companies.

 

“Event of Default” - has the meaning set forth
in Section 17.1.

 

    	2

     

    

 

“FCPA” - shall mean the United States Foreign
Corrupt Practices Act, 15 U.S.C. §§ 778dd-2.

 

“FF&E” - shall mean
the furniture, furnishings, wall coverings, floor coverings, window treatments, fixtures and hotel equipment and vehicles.

 

“FF&E Budget” - has the meaning set forth
in Section 8.5.

 

“FF&E Reserve Account”
- shall mean an account established for a reserve for replacements, substitutions and additions to the FF&E.

 

“Fiscal Year” - shall
mean each twelve (12) consecutive calendar month period or partial twelve (12) consecutive calendar month period within the Term
commencing on January 1st (or, with respect to the first year of the Term, the Commencement Date) and ending on December 31st
(or, with respect to the last year of the Term, the expiration or earlier termination of the Term) unless Owner and Operator otherwise
agree.

 

“Fixed Charges” - shall
mean the cost of the following items relating to the Hotel or its facilities which are properly attributable under the Uniform
System to the period in question:

 

		(i)	Property Taxes;

 

		(ii)	Insurance premiums (or the allocable portion thereof in the case of blanket policies) for all insurance maintained under Section
12.1; and

 

		(iii)	The Basic Fee.

 

“Franchise Agreement” -
shall mean the franchise or license agreement from time to time issued to owner with respect to the operation of the Hotel, if
any. Presently, “Franchise Agreement” means the Franchise License Agreement having an effective date of November 24,
2004 between Hilton Inns, Inc., as Franchisor, and Owner, as franchisee, as the same has been and may be modified and amended.

 

“Franchisor” - shall mean
any issuer of a franchise or license agreement with respect to the operation of the Hotel from time to time. Presently, the Franchisor
is Hilton Inns, Inc.

 

“GAAP” - shall mean generally accepted accounting
principles in the United States.

 

“Gross Operating Profit” -
shall mean the amount, if any, by which Total Revenues exceed Operating Expenses.

 

“Hotel” - shall mean
the hotel known as Hilton San Francisco Financial District located at 750 Kearny Street, San Francisco, CA 94108.

 

“Hotel Employees” - shall mean the on-site
staff of the Hotel.

 

“Hotel Purchases” - has the meaning set forth
in Section 6.2.

 

“Incentive Fee” - shall
mean the incentive management fee paid by Owner to Operator pursuant to Section 9.3.

 

    	3

     

    

 

“Indemnified Party” -
shall mean any Owner Indemnitee or Operator Indemnitee, as the context requires.

 

“Industry Expert” - has the meaning set forth
in Section 8.5.

 

“Initial Term” - has the meaning set forth
in Section 2.1.

 

“Installations” - shall
mean the mechanical systems and built-in installations of the Building including, but not limited to, heating, ventilation, air
conditioning, electrical and plumbing systems, elevators and escalators, and built-in laundry, refrigeration and kitchen equipment.

 

“Institutional Lender” -
shall mean a foreign or domestic commercial bank, trust company, savings bank, savings and loan association, life insurance company,
real estate investment trust, pension trust, pension plan or pension fund, a public or privately-held fund engaged in real estate
and/or corporate lending, or any other financial institution commonly known as an institutional lender (or any Affiliate thereof);
provided further that such entity shall not be an Affiliate of Owner.

 

“Involuntary Proceeding” -
shall mean any of the following instituted against a party by any other person or entity: (i) assignment for the benefit of creditors,
(ii) proceeding seeking relief under any federal or state bankruptcy or insolvency laws, or (iii) proceeding seeking the appointment
of a receiver, trustee, custodian or similar official for such party’s business or assets.

 

“IT Services” - has the meaning set forth in
Section 6.3.

 

“Key Money Contribution” - has the meaning
set forth in Section 3.8.

 

“Leases” - shall mean
the leases, licenses and concession agreements for or any other arrangement granting any rights to occupy or use any portion of
the Hotel for any purpose, including, without limitation, for retail space, office space, kiosk space and lobby space at the Hotel
(including without limitation, car rental counters and gift shops) and commercial space, if any, that is adjacent to or otherwise
part of the Hotel (including without limitation, rooftop antennas), provided, however, “Leases” shall not include any
guest room rentals or banquet or conference space rentals consistent with the then applicable Approved Annual Plan or in the ordinary
course of business.

 

“Legal Requirements” -
shall mean (a) all federal, state, county, city and local laws, ordinances, statutes, regulations and orders relating to the Hotel
now or hereafter in effect, including, but not limited to, environmental laws and (b) all terms, conditions, requirements and provisions
of all permits.

 

“Lender Reserve Account” - has the meaning
set forth in Section 11.1.

 

“Lenders’ Liens” - has the meaning set forth in Section 21.1.

 

“Major Agreements” - shall
mean any Mortgage, any Franchise Agreement and the Union Agreements.

 

    	4

     

    

 

“Major Capital Expenditures” - has the meaning
set forth in Section 8.4(B).

 

“Material Default” - shall
mean any breach or failure by either Owner or Operator to comply with any of its covenants and agreements contained in this Agreement,
other than any such breach or failure that in the context hereof is minor, immaterial or insubstantial and not reasonably likely
to prejudice any other party or any part of the Hotel in any material way.

 

“Minimum Working Capital”
- shall mean an amount equal to (i) from the Takeover Date to July 31, 2017, four hundred thousand dollars ($400,000), and
(ii) from August 1, 2017 through the remainder of the Operating Term, eight hundred thousand dollars ($800,000).

 

“Monthly Cash Flow Forecast”
- shall mean a monthly cash flow forecast for the Hotel with projections for the next 90-day period.

 

“Monthly Reports” - shall
mean, collectively, with respect to each month during the Operating Term (a) a balance sheet as of the last day of such
month; (b) a source and use of funds statement for such month; (c) an income and expense statement for such month, including departmental
details; (d) Monthly Cash Flow Forecast; (e) a comparison of the monthly, quarterly and year-to-date actual revenues and expenses
with the then applicable Approved Annual Plan as well as a periodic and year-to-date comparison of such actual revenues and expenses
with those of the prior Fiscal Year; (f) a calculation and computation of Operator’s Basic Fee and Incentive Fee and any expense
reimbursement to Operator or its Affiliates; (g) a calculation and computation of the distribution of Distributable Cash; (d) a
reserve reconciliation showing an acquisition and disposal report of all FF&E, the Capital Budget and the FF&E Budget and
any expenditures year-to-date; (h) the applicable STAR Report for the Hotel; (i) any QA Scoring Guide reports issued by the Franchisor
and (j) such other reports or information as reasonably required by Owner. The Monthly Reports for the last month of a Fiscal Year
shall include year-end unaudited financial statements.

 

“Mortgage” - shall mean
(a) any existing and future mortgage or deed of trust or similar security instrument that, from time to time, encumbers the Hotel
or any portion thereof to secure any indebtedness of Owner or any holder of a direct or indirect equity interest in Owner or any
other obligations secured by the Hotel or any portion thereof or (b) any existing and future pledge agreement, security agreement
or similar instrument that, from time to time, encumbers the direct or indirect equity interests of any person or entity that directly
or indirectly owns all, or any portion of, the Owner, provided that in the case of both (a) and (b), such security instruments
relate to the financing of the Hotel.

 

“Mortgagee” - shall mean the mortgagee or beneficiary
under any Mortgage.

 

“Necessary Expenses” -
shall mean expenses, regardless of amount, that are necessary for the continued operation of the Hotel in accordance with the requirements
of any Major Agreement and the operational standards set forth in this Agreement and which are not within the reasonable
control of Operator (including, but not limited to, those for insurance, taxes, utility charges and debt service).

 

“Obligor” - shall mean the party required
to provide indemnification under this Agreement.

 

    	5

     

    

 

“Operating Budget” -has the meaning set forth
in Section 8.5.

 

“Operating Equipment” -
shall mean the chinaware, glassware, silverware, linens, and other items of a similar nature.

 

“Operating Expenses” -
shall mean all costs and expenses of maintaining, conducting and supervising the operation of the Hotel and all of its facilities
which are properly attributable under the Uniform System to the period in question.

 

		A.	Operating Expenses shall include, without limitation:

 

		(i)	The cost of all Operating Equipment and Operating Supplies;

 

		(ii)	Salaries and wages of Hotel Employees, including costs
of payroll taxes, employee benefits and severance payments. The salaries or wages of off-site employees of Operator or its Affiliates
shall not be Operating Expenses, provided that if it becomes necessary for an off-site employee of Operator or an Affiliate to
temporarily perform services at the Hotel of a nature normally performed by Hotel Employees, his or her salary (including payroll
taxes and employee benefits) for such period only as well as his or her traveling expenses shall be Operating Expenses and reimbursed
to Operator;

 

		(iii)	The cost of all other goods and services obtained in connection
with the operation of the Hotel including, without limitation, heat and utilities, laundry, landscaping and exterminating services
and office supplies;

 

		(iv)	The cost of all non-capital repairs to and maintenance
of the Hotel;

 

		(v)	Insurance premiums (or the allocable portion thereof in
the case of blanket policies) for all insurance maintained under Section 12.2 and losses incurred on any self-insured risks
(including deductibles);

 

		(vi)	All taxes, assessments, permit fees, inspection fees, and
water and sewer charges and other charges (other than income or franchise taxes) payable by or assessed against Owner with respect
to the operation of the Hotel, excluding Property Taxes;

 

		(vii)	Legal fees and fees of any independent certified public
accountant for services directly related to the operation of the Hotel and its facilities;

 

		(viii)	All expenses for advertising the Hotel and all expenses
of sales promotion and public relations activities;

 

    	6

     

    

 

		(ix)	All out-of-pocket expenses and disbursements reasonably
incurred by Operator, pursuant to, in the course of, and directly related to, the management and operation of the Hotel under
this Agreement, which fees, expenses and disbursements shall be paid out of the Agency Account or paid or reimbursed by Owner
to Operator upon demand. Without limiting the generality of the foregoing, such charges may include all reasonable travel, telephone,
telegram, facsimile, air express and other incidental expenses and any fees or expenditures required for Operator to operate the
Hotel in the given jurisdiction, but, except as otherwise provided in this Agreement, shall not include any of the regular expenses
of the central offices maintained by Operator, other than offices maintained at the Hotel exclusively for the management of the
Hotel. Operator shall maintain and make available to Owner invoices or other evidence supporting such charges;

 

		(x)	The Centralized Accounting Services Fee and any fees or
tax levied on those charges by the local jurisdiction;

 

		(xi)	Periodic payments made in the ordinary course of business
under any applicable franchise agreement;

 

		(xii)	Any other item specified as an Operating Expense in this
Agreement and

 

		(xiii)	Any other cost or charge classified as an Operating Expense
or an Administrative and General Expense under the Uniform System unless specifically excluded under the provisions of this Agreement.

 

		B.	Operating Expenses shall not include:

 

		(i)	Amortization and depreciation;

 

		(ii)	The making of or the repayment of any loans or any interest
thereon;

 

		(iii)	The costs of any alterations, additions or improvements
which for Federal income tax purposes or under the Uniform System or GAAP must be capitalized and amortized over the life of such
alteration addition or improvement;

 

		(iv)	Payments on account of any equipment lease that is to be
capitalized under GAAP;

 

		(v)	Payments under any ground lease, space lease or easement
agreement;

 

		(vi)	Payments into or out of the FF&E Reserve Account;

 

		(vii)	Operator’s Expenses; or

 

		(viii)	Any item defined as a Fixed Charge.

 

“Operating Supplies”
- shall mean the stock and inventories of paper supplies, cleaning materials and similar consumable items and food and beverage.

 

    	7

     

    

 

“Operating Term” - shall mean the Initial Term
and any Renewal Term(s).

 

“Operator” - shall have the meaning set forth
in the preamble.

 

“Operator’s Expenses” - shall mean:

 

		A.	Except to the extent set forth in Section 6.1, all costs, expenses, salaries, wages or other
                                                                  compensation of any corporate, regional or other headquarters/corporate level employees of Operator, except to the extent
                                                                  such employees are regularly employed full time at the Hotel by Operator;

 

		B.	Any expenses of Operator’s principal or branch offices;

 

		C.	Any part of Operator’s capital expenses;

 

		D.	Except to the extent set forth in Section 6.1, Operator’s overhead or general expenses,
                                                                  including but not limited to telex, duplicating, stationery and postage expenses incurred at Operator’s principal or
                                                                  branch offices, except as may be expressly assumed by Owner pursuant to the terms of this Agreement;

 

		E.	Except to the extent set forth in Section 6.1, all costs and expenses of providing
                                                                  centralized data processing and accounting services to the Hotel;

 

		F.	Any expenses for advertising or promotional materials that feature Operator’s name or
                                                                  activities but which do not promote the Hotel, unless and to the extent approved in advance by Owner to be an Operating
                                                                  Expense;

 

		G.	Any travel expenses of Operator’s corporate, regional or headquarters office employees for a
                                                                  period that are (i) in excess of the amount shown on the Approved Annual Plan for Operator’s travel expenses for such
                                                                  period (or otherwise approved by Owner) (ii) are not reasonable and necessary travel expenses incurred while engaged
                                                                  in the performance of this Agreement, (iii) in the case of air travel, exceed the coach or economy fare reasonably
                                                                  available under the circumstances for the flight in question; provided, however, that for purposes of including
                                                                  travel expenses in Operating Expenses, all expenses incurred on any trip which includes visits to more than one property
                                                                  managed by Operator or its Affiliates or is otherwise for purposes related to the Hotel and other properties managed
                                                                  by Operator or its Affiliates shall be equitably allocated among all the properties visited or benefited; and

 

		H.	Any cost for which Operator is liable under Article XXII or any other provision of
                                                                  this Agreement.

 

“Operator Indemnitee” - shall have the meaning
set forth in Section 22.1.

 

“Operator IP” - shall have the meaning set
forth in Section 18.8.A).

 

“Owner” - shall have the meaning set forth
in the preamble.

 

    	8

     

    

 

“Owner Expenses” - shall
mean fixed expenses (e.g., debt service, ground lease payments, capital costs, etc.) that Owner requests Operator to pay on behalf
of Owner from the Agency Account.

 

“Owner Indemnitee” - shall have the meaning
set forth in Section 22.1.

 

“Owner IP” - shall have the meaning set forth
in Section 18.8.B).

 

“Owner Parking Facility Rights” - has the meaning
set forth in Section 1.1.

 

“Owner’s Expense Notice” -
shall mean Owner’s written request and direction (including copies of any material agreements) for Operator to pay Owner Expenses.

 

“Performance Failure” - has the meaning set
forth in Section 18.3(A).

 

“Procuring Party” - has the meaning set forth
in Section 6.2.

 

“Property Taxes” - shall
mean real estate taxes, assessments, personal property taxes and any other ad valorem taxes imposed on or levied in connection
with the Hotel, the Installations and the FF&E.

 

“Proposed Annual Plan” - has the meaning set
forth in Section 8.4.

 

“Proposed Capital Budget” - has the meaning
set forth in Section 8.4(B).

 

“Proposed FF&E Budget” - has the meaning
set forth in Section 8.4(C).

 

“Proposed Operating Budget” - has the meaning
set forth in Section 8.4(A).

 

“QA Scoring Guide” - shall
mean the Hilton Worldwide Quality Assurance Evaluation and the equivalent of the same for any successor of Hilton
as the Franchisor.

 

“Quarterly Operating Statements” - has the
meaning set forth in Section 8.2(C).

 

“Renewal Term” - shall
mean additional successive terms of one (1) year each, not to exceed five (5) years in the aggregate.

 

“Renewal Termination Date” - has the meaning
set forth in Section 2.1.

 

“Replacement Hotel Requirements” - has the
meaning set forth in Section 18.3(C).

 

“RevPAR” - shall have the meaning set
forth in the Uniform System.

 

“RevPAR Index” - shall mean
the ratio, expressed as a percentage, of (a) the RevPAR of the Hotel to (b) the average RevPAR of the Competitive Set.

 

“RevPAR Test” - shall have that meaning set
forth in Section 18.3(A)(1).

 

    	9

     

    

 

“Standard” - shall mean
the physical and operational standard of operation that (a) is equal to or greater than the standard of operation of those hotels
comprising the Competitive Set, (b) provides for operation of the Hotel on a seven-day-a-week, twenty-four-hour-a-day basis, with,
adequate, staffing to. provide first-class staffing and food, beverage, housekeeping, banquet, security personnel, bellmen and
porter services at a level that is equal to, or higher, than those applied at the hotels comprising the Competitive Set, (c) consistently
meets the then applicable requirements set forth in the Franchise Agreement, and (d) is intended to maximize the present value
of the Hotel.

 

“Takeover Date” - shall
mean the date Operator commences management of the Hotel, which date shall be confirmed by the parties and memorialized by a separate
writing executed by both Owner and Operator within five (5) business days following the Takeover Date.

 

“Tax Contest” - shall mean contesting the validity
or amount of any Property Tax.

 

“Total Revenues” - shall mean:

 

		A.	All income, revenue, receipts and proceeds resulting directly or indirectly from the operation
of the Hotel and all of its facilities (net of refunds and credits to guests and other items deemed “Allowances” under
the Uniform System) which are properly attributable under the Uniform System to the period in question. Subject to subsection (B)
below, Total Revenues shall include, without limitation, all amounts derived from:

 

		(i)	The rentals of rooms, banquet facilities and conference
facilities;

 

		(ii)	The sale of food and beverage whether sold in a bar, lounge or restaurant, delivered to a
                                                              guest room, sold through an in-room facility or vending machines, provided in meeting or banquet rooms or sold through
                                                              catering operations, including for any events held off-site of Hotel premises;

 

		(iii)	Charges for admittance to or the use of any parking facilities, recreational facilities or
                                                               any entertainment events at the Hotel;

 

		(iv)	Rentals paid under Leases, including, without limitation, any Leases for the Chinese Cultural
                                                              Center, the spa premises, any parking areas, any telecommunications, rooftop antennas or billboards;

 

		(v)	Charges for other Hotel services or amenities, including, without limitation, telephone
                                                             service, in-room movies, laundry services and spa services; and

 

		(vi)	The gross revenue amount on which the proceeds of business interruption or similar insurance
                                                              are determined, with respect to any period for which such proceeds are received.

 

		B.	Total Revenues shall not include:

 

    	10

     

    

 

		(i)	Sales or use taxes or similar governmental impositions
collected by Owner or Operator;

 

		(ii)	Proceeds of insurance except as set forth in subsection
(A) above;

 

		(iii)	Proceeds of the sale or condemnation of the Hotel, any interest therein or any other asset of
                                                               Owner not sold in the ordinary course of business, or the proceeds of any loans or financings;

 

		(iv)	Capital contributed by Owner to the Hotel; and

 

		(v)	The receipts of. any tenant, licensee or concessionaire
under a Lease.

 

“Unamortized Key Money” - has the meaning set
forth in Section 3.8.

 

“Uniform System” - shall
mean the “Uniform System of Accounts” (Eleventh Revised Edition 2014, as further revised from time to time) as adopted
by the American Hotel and Motel Association of the United States and Canada.

 

“Union” - shall mean the
Bartenders and Service employees Culinary Local 2; Stationary Engineers Local 39; Front Desk, Accounting, Reservations Teamsters
Local 856 and any other labor unions at any time representing Hotel Employees.

 

“Union Agreement” - shall
mean any collective bargaining agreement or other agreement entered into by Operator or Owner with any Union with respect to employees
of the Hotel, which has been approved by Owner.

 

“WARN Act” - shall mean
the Worker Adjustment and Retraining Notification Act and/or any similar state or local laws (together with all rules and regulations
promulgated thereunder and including, without limitation, any such state or local laws).

 

    	11

     

    

 

EXHIBIT A

 

Centralized Services

 

    	1

     

    

 

INTERSTATE HOTELS & RESORTS

Breakdown of Reimbursable Costs by
Category per month

 

Changeback/Reimbursement
Category

 

	TOTAL CHARGEBACKS/ REIMBURSEMENTS	 	$	13,226	 

 

	Sales & Marketing	 	$	2,701	 

 

Revenue Management Services, Top Performers Annual Sales Stars
of Excellence, Group Sales - Meetings Made Simple (MMS), Smith Travel Research Reports, E-Commerce, Intersate Summer Sales Training

 

	Information Technology	 	$	6,528	 

 

IT Central Support Services, IHR1 Business Intelligence Portal,
E-Mail/lway, Lync, Lawson, PCI Compliance, Help Desk Managed Services, Network Management Services, Firewall Management, Penetration
and Phishing Testing, BlackLine

 

	Human Resources	 	$	3,997	 

 

Workday (HRIS), I-9 Management, Job Marketing, Sourcing and
Placement Service, Pre-Hire Assessments, Management Training and College internships, Associate Engagement Survey, Employee Assistance
Program, Affirmative Action Plan, Employee Communication, Service Anniversary Program, Core Compliance Training, Preventing Workplace
Harassment, Leadership and Skills Development, Wage & Hour / FLSA Training, Foreign Corrupt Practices (FCPA), ECPAT Human Trafficking
Awareness, California Legal and Litigation Training, Crisis Communications

 

    	2

     

    

 

EXHIBIT B

 

Pro Forma Approved Annual Plan

 

    	1

     

    

 

 

    	2

     

    
 

    	 	3	 

     

    

 

 

 

    	4

     

     

 

    	5

     

     

 

    	6

     

     

EXHIBIT C

 

Form of Daily
Cash Management Excel Spreadsheet

 

    	1

     

     

 

    	2

     

     

 

    	3

     

     

 

    	4

     

     

 

    	5

     

     

 

    	6

     

     

 

    	7

     

     

 

    	8

     

     

 

    	9

     

     

 

    	10

     

     

 

    	11

     

     

 

    	12

     

    
 

	Subgroup: [53.010] Accounts Receivable - Trade	 	 		 
	 	 	GUEST LEDGER	 	 	449,400.28	 
	 	 	CITY LEDGER 1-30 DAYS	 	 	296,972.36	 
	 	 	CITY LEDGER 31-60 DAYS	 	 	14,551.76	 
	 	 	CITY LEDGER 61-90 DAYS	 	 	 	 
	 	 	CITY LEDGER 91-120 DAYS	 	 	 	 
	 	 	CITY LEDGER OVER 120 DAYS	 	 	12,000.00	 
	 	 	A/R MISCELLANEOUS	 	 	14,110.33	 
	Subtotal [53.010] Accounts Receivable - Trade	 	 	787,034.73	 
	 	 	 	 	 	 	 
	Subgroup: [53.020] Allowance for Doubtful Accounts	 	 	 	 
	 	 	ALLOW FOR DOUBTFUL ACCOUNTS	 	 	(60,862.64	)
	Subtotal [53.020] Allowance for  Doubtful Accounts	 	 	(60,862.64	)
	Subgroup: [53.030] Other Receivables	 	 	 	 
	 	 	EMPLOYEE ADVANCES	 	 	14,307.00	 
	Subtotal [53.030] Other Receivables	 	 	14,307.00	 
	 	 	 	 	 
	Total [53] Accounts Receivable	 	 	740,479.09	 

 

    	13

     

    

 

EXHIBIT D

 

Centralized Accounting Services

 

Centralized Accounting Services include the following:

 

Property Accounting Services

		·	Accounts
Receivable

		o	Billing and Collection

		·	Accounts
Payable

		o	Market Basket purchase orders

		·	Treasury

		o	General Cashier

		·	House
banks

		·	Daily
Deposits

		·	Over/Short
reconciliation

		o	Daily Cash report

		·	Payroll

		o	Time clock edits and processing

		o	Processing of vacation, sick time

		·	General
Ledger

		o	Journal Entry support

		·	Forecasting

		·	Budgeting

		·	Reporting

 

Shared Accounting Services

		·	Accounts
Payable

		o	Set up of vendors

		o	Invoice auditing

		o	Printing and Processing

		·	Treasury

		o	Credit Card Processor review

		o	Bank Reconciliations

		·	Payroll

		o	Processing of weekly payroll

		o	Quarterly tax filings

		o	Annual tax filings

		o	W-2s and year-end
reporting

		·	General
Ledger

		o	Journal Entries

		o	Reconciliation of E-Daily to PMS, Income Journal

		o	City Ledger Review

		o	Guest Ledger Review

		o	Advance Deposit Review

		o	Inventory validation and reconciliation

		o	Franchise Fees payment and reconciliation

		o	Management Fee payment and reconciliation

		o	Accruals

		o	Financial Statements preparation

		·	Sales
& Use Tax

		o	Preparation of Returns

		o	Filing of Returns including payment

		o	Coordination for audits.

 

    	1Exhibit 10.1

 

SOGOU INC.

 

2010 SHARE INCENTIVE PLAN

 

(as amended and restated on August 22, 2014)

 

1.                       Purposes of this Plan

 

This 2010 Share Incentive Plan (this “Plan”) is intended to provide incentives: (a) to the directors, officers, employees, consultants and advisors of Sogou Inc., a company incorporated under the laws of the Cayman Islands (the “Company”), and any present or future parents or subsidiaries or variable interest entities (“VIEs”) of the Company by providing them with opportunities to (i) acquire Ordinary Shares of the Company pursuant to options (“Options”) granted hereunder, (ii) to receive Restricted Share Unit awards (“RSU”), and (iii) to make direct purchases of Ordinary Shares of the Company, subject to vesting (“Restricted Shares”). In addition to Options, RSUs, and Restricted Shares, other Awards involving Ordinary Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based upon or settled in, Ordinary Shares, including (without limitation) unrestricted Shares, performance units, share appreciation rights, dividend equivalents, and convertible debentures, may be granted or sold under this Plan.

 

2.                       Definitions

 

“Applicable Laws” means laws of the Company’s jurisdictions of incorporation and operation and requirements relating to the granting or sale of equity incentives and the administration of equity share incentive plans under the laws of any country or other jurisdiction where Awards are issued or sold under this Plan, and under the rules of any securities exchange on which the Company’s Ordinary Shares are listed, including, without limitation, the reporting and registration requirements under Circular 75 issued by SAFE on October 21, 2005, as supplemented from time to time, and any other applicable SAFE rules and regulations.

 

“Award” means an Option, RSU, Restricted Share, or other share-based award or right granted or sold pursuant to the terms of this Plan.

 

“Award Agreement” means a written or electronic document or agreement setting forth the terms and conditions of a specific Award.

 

“Board” means the Board of Directors of the Company.

 

“Compensation Committee” means the full Board or a Compensation Committee appointed by the Board, which Compensation Committee will be constituted to comply with Applicable Laws and which will administer this Plan in accordance with Section 4 below.

 

“Company” means Sogou Inc., a company incorporated under the laws of the Cayman Islands.

 

“Consultant” means any person who is engaged by the Company or any Parent or Subsidiary or VIE to render consulting or advisory services to such entity, but is not an employee of the Company or any Parent or Subsidiary or VIE.

 

“Director” means a member of the Board.

 

“Disability” means any total and permanent disability which prevents a Service Provider from continuing in such capacity.

 

“Employee” means any person employed by the Company or any Parent or Subsidiary or VIE of the Company. A person will not cease to be an Employee solely by virtue of also being a Director of the Company. A Service Provider will not cease to be an Employee in the case of:

 

(i) any leave of absence approved by the Company; or

 

(ii) transfers between locations of the Company or between the Company, any Parent, any Subsidiary, any VIE, or any successor to the Company or any Parent, Subsidiary, or VIE.

 

 

“Exchange” means NASDAQ, the New York Stock Exchange or any other internationally recognized stock exchange of similar prestige and liquidity.

 

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended and in effect on any given date.

 

“Fair Market Value” as of any given date means, unless otherwise defined in an Award Agreement, if the Ordinary Shares are listed on an Exchange, the closing price for the Ordinary Shares on such exchange, or if Shares were not traded on such exchange on such given date, then on the next preceding date on which Shares were traded, all as reported in The Wall Street Journal or such other resource as the Compensation Committee deems reliable. If the Ordinary Shares are listed on an Exchange, in the event that an Award is granted on any given date prior to the time that trading has ended on the applicable exchange on such date, Fair Market Value may be determined as of the date preceding such grant. If the Ordinary Shares are not listed on an Exchange, Fair Market Value shall be determined by the Compensation Committee in its good faith discretion, using such methods of appraisal and valuation as it deems appropriate, including without limitation the Fair Market Value of any class of Ordinary Shares of the Company, with economic rights comparable to those of the applicable class, that is listed on an Exchange.

 

“Holder” means the holder of an outstanding Award granted or issued under this Plan.

 

“Memorandum and Articles of Association” means the Memorandum and Articles of Association of the Company, as amended and effective from time to time.

 

“Option” means an option granted pursuant to this Plan to purchase Ordinary Shares.

 

“Ordinary Shares” means the Class A Ordinary Shares in the capital of the Company, having the rights, restrictions, privileges and preferences set forth in the Memorandum and Articles of Association of the Company.

 

“Outside Director” means a member of the Board who is not an Employee or Consultant.

 

“Parent” means any entity which holds directly or indirectly more than fifty percent of the voting equity of the Company.

 

“Plan” means this 2010 Share Incentive Plan, as amended from time to time.

 

“Restricted Share” means an Ordinary Share issued subject to forfeiture or repurchase by the Company until vested.

 

“Restricted Share Unit” or “RSU” means a grant of a hypothetical number of Ordinary Shares, to be settled upon vesting in either Ordinary Shares or cash, as determined by the Compensation Committee.

 

“Service Provider” means an Employee, Director, or Consultant.

 

“Share” means an Ordinary Share.

 

“Subsidiary” means any entity in which the Company holds directly or indirectly more than fifty percent of the voting equity.

 

“Tax Law” means the relevant tax legislation of an applicable jurisdiction, as amended from time to time and in effect on any given date.

 

“Underlying Shares” means the Ordinary Shares subject to Options or issuable upon vesting and settlement of RSUs.

 

“U.S. Incentive Stock Options” means Options intended to qualify as incentive stock options within the meaning of Section 422 of the U.S. Internal Revenue Code.

 

“U.S. Internal Revenue Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time and in effect on any given date.

 

“U.S. Non-Qualified Stock Option” means an Option not intended to qualify as a U.S. Incentive Stock Option.

 

“VIE” means a variable interest entity of the Company.

 

Except where otherwise indicated by the context, the masculine gender will include the feminine gender, and the definition of any term herein in the singular also will include the plural.

 

2

 

3.                       Shares Subject to this Plan

 

(a) Number of Shares Available

 

Subject to the provisions of Section 3(b) and Section 10 of this Plan, the maximum number of Ordinary Shares that may be subject to Awards granted and sold under this Plan is 41,500,000. At all times during the term of this Plan and while any Awards are outstanding, the Company will retain as authorized and/or unissued Ordinary Shares at least the number of Shares from time to time required under the provisions of this Plan, or otherwise assure itself of its ability to perform its obligations hereunder.

 

(b) Treatment of Expired, Unvested Shares

 

If an Award which expires or terminates for any reason or becomes unexercisable without having been exercised or settled in full in Ordinary Shares, the unpurchased Shares that were subject thereto or RSUs which have not been settled will become available for future grant or sale under this Plan. Shares that have actually been issued under this Plan will not be returned to this Plan and will not become available for future distribution under this Plan, except that if Restricted Shares are repurchased by the Company at their original purchase price and cancelled, such Shares will become available for future grant under this Plan.

 

4.                       Administration of this Plan

 

(a) Compensation Committee

 

This Plan will be administered by the Compensation Committee. If the Company has any class of equity security registered under Section 12 of the Exchange Act, and the Company is not a “foreign private issuer” as that term is defined in Rule 3b-4 under the Exchange Act, with the result that the Company’s executive officers and directors become subject to Section 16 of the Exchange Act, this Plan generally will be administered so as to cause transactions in securities issued or to be issued under this Plan to be afforded the exemptions from Section 16(b) of the Exchange Act provided by Rule 16b-3 under the Exchange Act or any similar successor statute or rules.

 

(b) Powers of the Compensation Committee

 

Subject to the provisions of this Plan and, in the case of the Compensation Committee, the specific duties delegated by the Board to the Compensation Committee, and subject to the approval of any relevant authorities, the Compensation Committee will have the authority in its discretion:

 

(i) to determine the Fair Market Value;

 

(ii) to determine the types of Awards to be granted.

 

(iii) to select the Service Providers to whom Awards may from time to time be made;

 

(iv) to determine the number of Shares or RSUs to be covered by each Award granted;

 

(v) to approve forms of Award Agreement;

 

(vi) to determine the terms and conditions of any Award, including whether the vesting of Awards will be time-based, performance-based, milestone-based, or otherwise. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of restrictions, and any restriction or limitation regarding any Award or Shares relating thereto, based in each case on such factors as the Compensation Committee may determine; provided, that in no event may any Option or comparable Award granted under this Plan be amended, other than pursuant to Section 10, to decrease the exercise price thereof or otherwise be subject to any action that would be treated, for accounting purposes, as a “repricing” of such Option, unless such amendment, cancellation, or action is approved by the Company’s shareholders;

 

(vii) to determine whether and under what circumstances an RSU may be settled in cash instead of Ordinary Shares;

 

(viii) to prescribe and amend provisions relating to this Plan, including provisions relating to sub-plans established for the purpose of qualifying for preferred tax treatment under applicable Tax Law;

 

3

 

(ix) to allow holders of Options or other Awards to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or other Award that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld will be determined on the date that the amount of tax to be withheld is to be determined. All elections by Holders to have Shares withheld for this purpose will be made in such form and under such conditions as the Compensation Committee may deem necessary or advisable; and

 

(x) to construe and interpret the terms of this Plan and Awards granted pursuant to this Plan.

 

(c) Effect of Compensation Committee’s Decisions

 

All decisions, determinations and interpretations of the Compensation Committee under this Plan will be final and binding on all recipients and, if applicable, transferees of Awards under this Plan.

 

5.                       Eligibility

 

(a) Service Providers

 

Awards may be granted to Service Providers; provided, however, that U.S. Incentive Stock Options may be granted only to Employees of the Company, a Parent, a Subsidiary or a VIE and generally will be granted only to persons who are, or are expected to be, subject to tax on income under the U.S. Internal Revenue Code.

 

(b) No Right to Continued Employment

 

Neither this Plan nor any Award will confer upon any recipient or other holder of an Award any right with respect to continuing such recipient’s or holder’s relationship as a Service Provider with the Company, nor will it interfere in any way with his or her right or the Company’s right to terminate such relationship at any time, with or without cause.

 

6.                       Term of Options and RSUs

 

The term of each Option, RSU or other Award will be stated in the Award Agreement. Notwithstanding the foregoing, with respect to U.S. Incentive Stock Options the term will be no more than ten (10) years from the date of grant thereof and with respect to U.S. Incentive Stock Options granted to a Holder who, at the time the Option is granted, owns shares representing more than ten percent of the voting power of all classes of shares of the Company or any Parent or Subsidiary or VIE, the term of such U.S. Incentive Stock Option will be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.

 

7.                       Option Exercise Price, Restricted Share Purchase Price, and Form of Consideration

 

(a) Exercise Price of Options and Purchase Price of Restricted Shares

 

The exercise price for Shares to be issued upon exercise of an Option and the purchase price of Restricted Shares will be such price as is determined by the Compensation Committee, provided that with respect to a U.S. Incentive Stock Option, the exercise price for Shares to be issued upon exercise of such option will not be less than the Fair Market Value on the date of grant or issue. With respect to a U.S. Incentive Stock Option granted to an person who, at the time the U.S. Incentive Stock Option is granted, owns shares representing more than ten percent of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price will not be less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant.

 

(b) Form of Consideration

 

The consideration to be paid for Shares to be issued upon exercise of an Option and for Restricted Shares, including the method of payment, will be determined by the Compensation Committee. Such consideration may consist of:

 

(i) cash,

 

(ii) check payable to the order of the Company,

 

(iii) promissory note; provided, however, that consideration in the form of a promissory note will not be acceptable if it would constitute a personal loan to an executive officer or director of the Company prohibited by Section 402 of the U.S. Sarbanes-Oxley Act of 2002,

 

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(iv) other Shares which (x) have been owned by the grantee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option is exercised or the aggregate purchase price of Restricted Shares being purchased,

 

(v) consideration received by the Company for the exercise of Options under a cashless exercise program implemented or approved by the Company in connection with this Plan, or

 

(vi) any combination of the foregoing methods of payment.

 

In making its determination as to the type of consideration to accept, the Compensation Committee will consider if acceptance of such consideration may be reasonably expected to benefit the Company.

 

8.                       Vesting of Awards

 

(a) Vesting Generally

 

Any Options granted hereunder will become vested and exercisable, any RSUs granted hereunder will vest and be settled, and any Restricted Shares issued hereunder will vest and no longer be subject to forfeiture, according to the terms hereof at such times and under such conditions as determined by the Compensation Committee and set forth in the Award Agreement. Except in the case of an Award granted to Outside Directors and Consultants, unless the Compensation Committee determines otherwise, subject to approval of the full Board, as set forth in the Award Agreement, Options will vest and become exercisable, RSUs will vest and be settled, Restricted Shares will vest and no longer be subject to forfeiture, and other Awards will vest, in four equal annual installments beginning on the first anniversary of the date of grant or issuance of the Award or of such other vesting commencement date prior to the date of grant or issuance of the Award as specified by the Compensation Committee in its sole discretion.

 

(b) Settlement of RSUs

 

RSUs that will be settled upon vesting, subject to the terms of the Award Agreement, either by delivery to the holder of the number of Shares that equals the number of RSUs that then become vested or by the payment to the holder of cash equal to the then Fair Market Value of that number of Shares. It is contemplated that in most cases the Award Agreement will specify that settlement will be made in Shares rather than in cash.

 

(c) Exercise of Options

 

An Option will be deemed exercised when the Company receives:

 

(i) written or electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Option, and

 

(ii) full payment for the Shares with respect to which the Option is exercised.

 

Full payment may consist of any consideration and method of payment authorized by the Compensation Committee and permitted by the Award Agreement and this Plan. Shares issued upon exercise of an Option will be issued in the name of the Holder or, if requested by the Holder, in the name of the Holder and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 10 below.

 

Exercise of an Option in any manner will result in a decrease in the number of Shares thereafter available, both for purposes of this Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

 

To the extent the aggregate Fair Market Value of Shares subject to U.S. Incentive Stock Options which become exercisable for the first time by a Holder during any calendar year (under all plans of the Company or any Parent or Subsidiary or VIE) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, will be treated as Non-Qualified Stock Options. For this purpose, U.S. Incentive Stock Options will be taken into account in the order in which they were granted, and the Fair Market Value of the Shares will be determined as of the grant date of the relevant Option.

 

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(d) Termination of Relationship as Service Provider of Holder of Options

 

If a Holder of Options ceases to be a Service Provider, such Holder may exercise his or her Options within such period of time as is specified in the Award Agreement to the extent that the Options are vested on the date of termination (but in no event later than the expiration of the term of the Options as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Options will remain exercisable for three (3) months following the Holder’s termination. If, on the date of termination, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Options will revert to this Plan. If, after termination, the Holder does not exercise his or her Options within the time specified by the Compensation Committee, the Options will terminate, and the Shares covered by such Options will revert to this Plan.

 

Notwithstanding the foregoing, if employment or services of a Holder of Options are terminated by the Company or any Parent, Subsidiary or VIE of the Company for Cause (as defined below), the Option (whether vested or not) shall terminate on the date of termination of employment or services.

 

For purposes of the Option, “Cause” means that the Holder:

 

(1) has been negligent in the discharge of his or her duties to the Company or any Parent, Subsidiary or VIE of the Company, has refused to perform stated or assigned duties or is incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties;

 

(2) has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or use of inside information, customer lists, trade secrets or other confidential information; has breached a fiduciary duty, or willfully and materially violated any other duty, law, rule, regulation or policy of the Company or any Parent, Subsidiary or VIE of the Company; or has been convicted of a felony or misdemeanor (other than minor traffic violations or similar offenses);

 

(3) has materially breached any of the provisions of any agreement with the Company or any Parent, Subsidiary or VIE of the Company; or

 

(4) has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Company or any Parent, Subsidiary or VIE of the Company; has improperly induced a vendor or customer to break or terminate any contract with the Company or any Parent, Subsidiary or VIE of the Company; or has induced a principal for whom the Company or any Parent, Subsidiary or VIE of the Company acts as agent to terminate such agency relationship.

 

(e) Disability of Holder of Options

 

If a Holder of Options ceases to be a Service Provider as a result of the Holder’s Disability, the Holder may exercise his or her Options within such period of time as is specified in the Award Agreement to the extent the Options are vested on the date of termination (but in no event later than the expiration of the term of such Options as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Options will remain exercisable for twelve (12) months following the Holder’s termination.

 

If the Disability is not a “disability” as such term is defined in Section 22(e)(3) of the U.S. Internal Revenue Code, in the case of U.S. Incentive Stock Options, such U.S. Incentive Stock Options will automatically convert to U.S. Non-Qualified Stock Options on the day three (3) months and one day following the date such Holder ceased to be a Service Provider as a result of the Holder’s Disability. If, on the date of termination, the Holder is not vested as to all of his Options, the Shares covered by the unvested Options will revert to this Plan. If, after termination, the Holder does not exercise his or her Options within the time specified herein, the Options will terminate, and the Shares covered by such Options will revert to this Plan.

 

(f) Death of Holder of Options or RSUs

 

If a Holder of Options dies while a Service Provider, the Options may be exercised within such period of time as is specified in the Award Agreement to the extent that the Options are vested on the date of death (but in no event later than the expiration of the term of such Options as set forth in the Award Agreement) by the Holder’s estate or by a person who acquires the right to exercise the Options by bequest or inheritance. In the absence of a specified time in the Award Agreement, the Options will remain exercisable for twelve (12) months following the Holder’s termination. If, at the time of death, the Holder is not vested as to all of his or her Options, the Shares covered by the unvested Options will immediately revert to this Plan. If the Options are not so exercised within the time specified herein, the Options will terminate, and the Shares covered by such Options will revert to this Plan.

 

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(g) Buyout Provisions

 

The Compensation Committee may at any time offer to buy out any Awards previously granted for a payment in cash or Shares, based on such terms and conditions as the Compensation Committee may establish.

 

9.                       Awards

 

(a) Rights to Receive or Purchase

 

Awards may be issued either alone, in addition to, or in tandem with other Awards granted under this Plan and/or cash awards made outside of this Plan. After the Compensation Committee determines that it will offer Awards under this Plan, it will advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person will be entitled to receive or purchase, the price to be paid, if any, and the time within which such person must accept such offer.

 

(b) Repurchase Option; Forfeiture of Non-vested Shares

 

Unless the Compensation Committee determines otherwise, the Award Agreement will grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the Holder’s service with the Company for any reason (including death or Disability) in the event that the Holder purchased or otherwise received Shares under the Award Agreement and such Shares are non-vested. The purchase price for Shares repurchased pursuant to the Award Agreement will be the original price paid by the Holder and may be paid, at the Compensation Committee’s option, by cancellation of any indebtedness of the Holder to the Company. The repurchase option will lapse at such rate as the Compensation Committee may determine. Except with respect to Shares purchased by Outside Directors and Consultants, unless set forth expressly in the Award Agreement, the repurchase option will in no case lapse at a rate of less than twenty-five percent per year over four years from the date of receipt or purchase. Unless the Compensation Committee determines otherwise, the Award Agreement will provide for the forfeiture of the non-vested Shares underlying an Award upon the voluntary or involuntary termination of the Holder’s service with the Company for any reason (including death or Disability).

 

(c) Other Provisions

 

The Award Agreement will contain such other terms, provisions and conditions not inconsistent with this Plan as may be determined by the Compensation Committee in its sole discretion.

 

(d) Rights as a Shareholder

 

Once an Award is exercised, the Holder will have rights equivalent to those of a shareholder and will be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Award is exercised, except as provided in Section 10 below.

 

10.                Adjustments Upon Changes in Capitalization or Asset Sale

 

(a) Changes in Capitalization

 

Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under this Plan but as to which Awards have yet been granted or which have been returned to this Plan upon cancellation or expiration of an Award, as well as the price per Share covered by each such outstanding Award, will be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a reclassification of the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company. The conversion of any convertible securities of the Company will not be deemed to have been “effected without receipt of consideration.” Such adjustment will be made by the Compensation Committee, whose determination in that respect will be final and binding. Except as expressly provided herein, no issuance by the Company of equity shares of any class, or securities convertible into equity shares of any class, will affect, and no adjustment by reason thereof will be made with respect to, the number or price of Shares subject to an Award.

 

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(b) Adjustments for Share Splits and Share Dividends

 

If the Company at any time increases or decreases the number of its outstanding Shares, or changes in any way the rights and privileges of such Shares by means of the payment of a share dividend or any other distribution upon such Shares, or through a share split, subdivision, consolidation, combination, reclassification or recapitalization involving the Shares, then in relation to the Shares that are affected by one or more of the above events, the numbers, rights and privileges of the following will be increased, decreased or changed in like manner as if such Shares had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (i) the number of Shares as to which Awards may be made under this Plan: and (ii) the Shares included in each outstanding Award made hereunder.

 

(c) Dissolution or Liquidation

 

In the event of the proposed dissolution or liquidation of the Company, the Compensation Committee will notify each Holder as soon as practicable prior to the effective date of such proposed transaction. The Compensation Committee in its discretion may provide for a Holder to have the right to exercise his or her Options until fifteen (15) days prior to such transaction as to all of the Underlying Shares covered thereby, including Shares as to which the Options would not otherwise be exercisable. In addition, the Compensation Committee may provide that any Company repurchase option applicable to any Shares purchased pursuant to an Award will lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.

 

(d) Consolidation or Asset Sale

 

If the Company is to be consolidated with or acquired by another person or entity in a sale of all or substantially all of the Company’s assets or stock or otherwise (an “Acquisition”), the committee or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”) may in its sole discretion, take one or more of the following actions with respect to outstanding Options, Shares acquired upon exercise of any Option, outstanding RSUs, or unvested Restricted Shares: (i) make appropriate provision for the continuation of such Awards by substituting on an equitable basis for the Underlying Shares the consideration payable with respect to the outstanding Shares in connection with the Acquisition; (ii) accelerate the date of exercise of such Options, vesting and settlement of RSUs, or vesting of Restricted Shares, or of any installment of any such Options, RSUs or Restricted Shares; (iii) upon written notice to the participants, provide that all Options must be exercised, to the extent then exercisable, within a specified number of days of the date of such notice, at the end of which period the Options, including those which are not then exercisable, shall terminate; (iv) terminate all Options or RSUs in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such Options or RSUs (to the extent then exercisable) over the exercise price thereof (if any); or (v) in the event of a Share sale, require that the participant sell to the purchaser to whom such Shares sale is to be made, all Shares previously issued to such participant upon exercise of any Option, pursuant to any RSU, or as Restricted Shares at a price equal to the portion of the net consideration from such sale which is attributable to such Shares. Nothing contained herein will be deemed to require the Company to take, or refrain from taking, any one or more of the foregoing actions.

 

(e) No Fractional Shares

 

If any adjustment or substitution provided for in this Section 10 results in the creation of a fractional Share under any Option, the Company will, in lieu of issuing such fractional Share, pay to the Holder a cash sum in the amount equal to the product of such fraction multiplied by the Fair Market Value of a Share on the date the fractional Share otherwise would have been issued.

 

(f) Determination by the Compensation Committee

 

Adjustments under this Section 10 will be made by the Compensation Committee whose determinations with regard thereto will be final and binding upon all parties.

 

11.                Time of Granting of Award

 

The date of grant of an Award will be the date on which the Compensation Committee approves the grant of such Award, or such other date as is determined by the Compensation Committee; provided that such other date will not be prior to the date of the Compensation Committee’s approval of the grant of such Award; provided, further, that the foregoing will not prohibit the Compensation Committee from determining, in its discretion, to specify a vesting commencement date prior to the date of the grant; and provided, further, that no grant of an Award will be binding upon the Company until it has been communicated to the Service Provider. Notice of the determination will be given to each Service Provider to whom an Award is so granted within a reasonable time after the date of such grant.

 

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12.                Non-Transferability of Awards

 

Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than as provided in the Award Agreement, this Plan, by will or by the laws of succession and may be exercised, during the lifetime of the Holder, only by the Holder.

 

13.                Conditions Regarding Issuance of Shares

 

(a) Legal Compliance

 

Shares will not be issued pursuant to the exercise of Options, the settlement of RSUs, or the purchase of Restricted Shares unless the issuance and delivery of such Shares will comply with Applicable Laws, and the issuance of Shares will be subject to confirmation from legal counsel for the Company as to such compliance.

 

(b) Investment Representations

 

The Compensation Committee may require the person receiving Shares upon exercise of Options, settlement of RSUs, or purchase of Restricted Shares to represent and warrant, as a condition to such receipt, that the Shares are being purchased only for investment and not with a view to the distribution of such Shares.

 

(c) Inability to Obtain Authority

 

The inability of the Company to obtain authority from any regulatory body having jurisdiction will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority has not been obtained.

 

(d) Withholding

 

The Company’s obligations to deliver Shares upon the exercise of an Award will be subject to the Holder’s satisfaction of all applicable Tax Law, including withholding requirements, of all applicable jurisdictions.

 

14.                Amendment and Termination of this Plan

 

(a) Amendment and Termination

 

The Board may at any time amend, suspend or terminate this Plan.

 

(b) Shareholder Approval

 

The Board will obtain shareholder approval of any Plan amendment to the extent necessary or desirable to comply with Applicable Laws.

 

(c) Effect of Amendment or Termination

 

Except as may be required by Applicable Law, no amendment, suspension or termination of this Plan will impair the rights of any Holder, unless agreed otherwise in writing between the Holder and the Compensation Committee. Termination of this Plan will not affect the Compensation Committee’s ability to exercise the powers granted to it hereunder with respect to Awards granted under this Plan prior to the date of such termination.

 

15.                Effectiveness and Term of Plan

 

This Plan will become effective upon its adoption by the Board and approval by the Company’s shareholders. It will continue in effect, with regard to the making of Awards, for a term of ten (10) years unless sooner terminated under Section 14 above and with regard to the terms of an Award Agreement, for such longer term as may be required to give effect to that Award Agreement for a term of ten (10) years unless sooner terminated under Section 14 above.

 

·  Approved by the Board of Directors on October 20, 2010; amendment and restatement approved by the Board of Directors on June 18, 2013 and August 22, 2014.

 

·  Approved by the Company’s shareholders on October 20, 2010; amendment and restatement approved by the Company’s shareholders on June 18, 2013 and August 22, 2014.

 

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