Common use of APPOINTMENT AND ENGAGEMENT OF OPERATOR Clause in Contracts

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: 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; (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; 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. xxxxxx 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; 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); 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. 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”).

APPOINTMENT AND ENGAGEMENT OF OPERATOR. 3.1. Subject to the terms of this Agreement, Owner hereby engages Operator as its agent and the exclusive operator of the Hotel Hotels 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 the applicable Budgets, Operator shall have control and discretion in all aspects of the operation, direction, management and supervision of the Hotels. Such control and discretion of Operator shall include, without limitation, the determination of credit policies (b) including entering into agreements with credit card organizations), terms of admittance, charges for rooms, food and beverage policies, employee wage, benefits and severance policies, entertainment and amusement policies, leasing, licensing and granting of concessions for commercial space at the Hotels, and all phases of advertising, promotion and publicity relating to the Hotels. Notwithstanding the foregoing, Operator acknowledges that the contracts with credit card vendors listed on Exhibit C attached hereto are required to remain in effect following the Commencement Date pursuant to the terms of the then applicable Approved Annual Plansuch contracts, and that Operator will not terminate such agreements (other than as permitted under the terms of such agreements) without Owner’s prior written consent. 3.3. Operator shall operate the operate, manage and maintain each Hotel and all of its facilities and activities in a diligent and careful manner in accordance with the following standards (ithe “Hotel Standard”) in order to maintain the condition and character of such Hotel and with the primary goal of maximizing the Gross Operating Profit (as defined herein) of such Hotel: (a) in a manner that is equal to meet or better than the Standard at all times throughout operation of similar hotels in the Operating Term area of such Hotel and other similar hotels operated by Operator, to the extent consistent with the Budgets and such Hotel’s facilities; and (iib) in compliance in all material respects accordance with the Legal Requirementsstandards imposed by the hotel franchise agreement, if any, applicable to such Hotel (a “Franchise Agreement”). 3.4. Operator shall also operate make its senior executives available to meet with Owner at least once each quarter and, in addition, at Owner’s reasonable request, consult with and manage the Hotel for advise Owner in a commercially reasonable, business-like, prudent concerning all policies 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 procedures affecting all phases of the Hotel, (b) if Owner exercises its Owner Parking Facility Rights, conduct of business at 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 HotelHotels. Operator shall in all events consult with Owner before implementing any material changes in policies and procedures relating to the Hotels. Operator shall make the Key Hotel Personnel (and, if another provision as defined in Section 4.7) for each Hotel available through the General Manager of this Agreement requires approval for such changes, obtain Hotel to meet with Owner at least once per month and at additional times (including by teleconference) from time to time upon Owner’s approval)reasonable request, to review the operations of the Hotel and current matters of import, and in each instance, Owner shall give Operator adequate advance notice, in no event to be less than three (3) days advance notice. Operator shall in all events meet with Owner before implementing any material changes in policies and procedures relating to any Hotel. 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 other Hotel Employee, 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 employerHotels. 3.43.5. Subject to During 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 Budgets (as defined in Section 8.4) and the other applicable provisions of this Agreement (including Section 3.2)Agreement, and only to the extent Owner has provided sufficient funds therefor, either through Hotel Hotels operations or directly from Owner: 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 on-site staff (the “Hotel Employees Employees”) for the operation of the HotelHotels, and in connection therewith establish and maintain an affirmative action plan for the Hotels; provided, however, no employment agreement for any Hotel Employee shall contain an automatic renewal provision without the prior written consent of the Owner specifically referring to the extent required for Operator and/or the Hotel to maintain its status as a federal contractorsuch renewal provision; C. B. Develop and implement advertising, marketing, promotion, publicity and other similar programs for the HotelHotels; (i) Negotiate and enter into leases, licenses and concession agreements for stores, office space and lobby space at the Hotels (including without limitation, car rental counters and gift shops) and commercial space, if any, that is adjacent to or otherwise part of the Hotels (including without limitation, rooftop antennas) (collectively, the “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 HotelHotels; provided that, Operator shall not, without Owner’s consent, enter into any such Leases or contracts for terms in excess of one (1) year, unless such Lease or contract may be terminated without cause and without payment of any penalty on no less than sixty (60) days’ notice; E. D. 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 HotelHotels; F. Provide purchasing services for routine replacements E. Pursuant to a separate written agreement on terms and renewals of conditions set forth therein, Operator’s affiliate will purchase all 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)Hotels; provided, however, to the extent that Owner purchases may purchase any of the FF&E, Operating Equipment or Operating Supplies used in connection with the operation of the HotelHotels, as an operating or capital expense, as appropriate, of the Hotels, in which case 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. At the request of Owner, and Owner agrees to fully cooperate Operator shall put out for competitive bid the purchase of FF&E, Operating Equipment or Operating Supplies used in connection with Operator the operation of the Hotels as contemplated in the event of any related tax auditthis Section E; G. F. Provide routine accounting and purchasing services as required in the ordinary course of business; H. G. 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. , so long as Owner agrees to promptly deliver delivers to Operator any notice of violation thereof received with respect theretoby Owner; I. Cause H. Subject to the Budgets, cause all needed ordinary repairs and maintenance to the Hotel in accordance with the Standard, the Franchise Agreement any Mortgage and any applicable Legal Requirementsof which Operator is aware to be made, and supervise such unless otherwise set forth in the Budgets, any expense for repairs and maintenancemaintenance that exceeds Five Thousand Dollars ($5,000) shall require Owner’s prior approval and shall be put out for a minimum of three (3) competitive bids unless otherwise approved by Owner. Notwithstanding the foregoing, such prior approval and bids shall not be required for ;any expenses regardless of amount which, in Operator’s reasonable judgment, are immediately necessary to prevent immediate material damage to a Hotel or the health or safety of its occupants (“Emergency Expenses”); provided that, Operator shall make good faith attempts to contact and notify Owner of the need for such Emergency Expenses prior to incurring them and in all events shall notify Owner within twenty-four (24) hours after Operator becomes aware of such emergency; J. I. Subject to Section 3.6 below, use commercially reasonable efforts to operate the Hotel Hotels in accordance with any mortgage or deed of trust on the Hotels and/or Franchise Agreement (i) the collectively, “Major Agreements”); provided, however, Operator shall have no responsibility for causing the payment of any Fixed Charges or Owner Expenses (ii) any as defined in Section 7.2), unless expressly set forth in this Agreement; J. At the direction of Owner, in its sole discretion and pursuant to a separate written agreement related between Owner and Operator (or its affiliates), provide project coordination services to the operation of Owner and its general contractor to aid in any construction or remodeling at the Hotel which was entered into prior Hotels; K. Use good faith efforts to identify, and provide recommendations to Owner regarding 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 use of, any vendor relationships established by Operator, in order to implement potential cost savings and (iii) any agreement related to operational efficiencies for the operation of the Hotel which (y) Operator enters into on behalf of Owner or (z) Owner has entered into at Operator’s requestHotels; and K. L. 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 areas 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. xxxxxx 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; 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); 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 sameHotels. 3.6. Notwithstanding any other provision of this Agreement to the contrary, Operator’s obligations with respect to any Major Agreement shall be limited to the extent (ai) complete and accurate copies thereof, or and/or summaries of the relevant provisions thereof, thereof have been delivered to Operator, or are then Operator sufficiently in the actual or constructive possession or control of advance to allow Operator or the Hotel’s general manager, to perform such obligations and (bii) the provisions thereof and/or compliance with such provisions by Operator (i1) are applicable to the day to day-to-day operation, maintenance and non-capital repair and replacement of the Hotel Hotels or any portion thereof (including cash management)thereof, (ii2) do not require contribution of capital from the or payments of Operator’s own funds, (iii3) do not materially increase Operator’s obligations hereunder or materially decrease Operator’s other rights hereunder, provided however, that Operator acknowledges and agrees that standards, expectations, responsibilities and limitations prescribed by franchisors are not deemed to materially increase Operator’s obligations or materially decrease its rights hereunder (iv4) 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 sites 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 Hotels, and (iv5) are otherwise contemplated to be within the scope of Operator’s duties under this Agreement. Owner acknowledges and agrees agrees, without limiting the foregoing, that any failure of Operator or the Hotel Hotels to comply with the provisions of any Major Agreement that is a direct result arising out of (A) the condition of the Hotel Hotels, and/or the failure of the Hotel Hotels to comply with the provisions of such Major Agreement, prior to Operator’s assuming the Takeover Dateday-to-day management thereof, (B) construction activities at the HotelHotels, (C) latent defects inherent limitations in the design and/or construction of, location of and/or parking at the HotelHotels, (D) written instructions from Owner to operate the any Hotel in breach of its obligations under such a manner inconsistent with the Major Agreement Agreements and/or (E) Owner’s failure to approve any matter requested by Operator that is in Operator’s reasonable good faith business judgment as necessary or appropriate to comply achieve compliance with the applicable any Major Agreement, shall not be deemed a breach by Operator of its obligations under this Agreement. 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 entitled to rely on the second (2nd) anniversary copies 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”)Franchise Agreements provided by Owner.

APPOINTMENT AND ENGAGEMENT OF OPERATOR. 3.1. Subject to the terms of this Agreement, Owner hereby engages Operator as its agent and the exclusive operator of the Hotel during the Operating Term as agent for and on behalf of Owner, 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 (including without limitation, the limitations of Article XXIII below) and (b) the terms of the then applicable Approved Annual PlanBudgets, Operator shall have control and discretion in the operation, direction, management and supervision of the Hotel including, without limitation, the determination of credit policies (including entering into agreements with credit card organizations), terms of admittance, charges for rooms, food and beverage policies, employee wage, benefits and severance policies, entertainment and amusement policies, leasing, licensing and granting of concessions for commercial space at the Hotel, and all phases of advertising, promotion and publicity relating to the Hotel. 3.3. Operator shall manage and operate the Hotel and all of its facilities and activities (i) in such a manner to meet consistent with past practices of 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 previous Manager of the Hotel, (b) if but in all events in accordance with the standards and specifications set forth in any applicable franchise agreement as directed by Owner, so long as Owner exercises its Owner Parking Facility Rightsprovides sufficient capital to enable Operator to operate the Hotel in good standing under such franchise agreement, and in accordance with the success of the operation of such parking areas by a person or entity other than Budgets. 3.4. Operator will be partially dependent upon the operations available to consult with and success advise Owner, at Owner’s reasonable request, concerning all policies and procedures affecting all phases of the Hotel and (c) Owner may engage an asset manager for the purpose conduct of overseeing Operator’s management of business at the Hotel. Operator will consult regularly (at least monthly or as otherwise reasonably requested by Owner) with Owner Subject to provide Owner with a status report the terms of the Hotel operations and discuss any other matters concerning the operation or condition of the HotelMaster Agreement, 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 obtain Owner’s prior written approval before implementing any material changes in policies and procedures relating to the Hotel, such approval not to be unreasonably withheld or delayed. 3.5. Operator shall maintain and make available to Owner upon request invoices or other evidence reasonably acceptable to Owner supporting all Operating Expenses described in Section 10.2A(ix) hereof. 3.6. Operator shall not enter into any “barter” arrangements with respect to any Hotel (andfacilities or services, if another provision or enter into equipment leases, whether or not the same would be characterized as a capital lease under the Uniform System, without the prior written approval of this Agreement requires approval for such changes, obtain Owner’s approval). 3.7. Owner shall consult directly with have the Vice President of Operations right to close the Hotel from time to time on a temporary basis to perform such renovations or such other corporate employee of Operator work in the Hotel as Owner may reasonably requestdetermine in its sole discretion. During any such period of closure Operator shall provide the services set forth in Section 3.8 below, to the extent applicable during such period and shall not contact Owner shall, in lieu of any Hotel Employeemanagement fee, 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 pay to Operator under this Agreement and all Hotel Employees will be directed by reasonable compensation for such services as Operator as employermay actually render. 3.43.8. Subject to During 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 Budgets (as defined in Section 8.4) and the other applicable provisions of this Agreement (including Section 3.2)Agreement, and only to the extent Owner has provided sufficient funds therefor, either through Hotel operations or directly from Owner: 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 all personnel employed at or by the Hotel Employees (the “Hotel Employees”) for the operation of the Hotel, and in connection therewith therewith, if one does not already exist for the Hotel, establish and maintain an affirmative action plan for the Hotel Hotel; provided, however, and subject to the extent required terms of the Master Agreement, Operator will not make any change in the General Manager, Director of Finance and/or Director of Hotel Sales for Operator and/or the Hotel without the prior written consent of Owner, such consent not to maintain its status as a federal contractorbe unreasonably withheld or delayed; C. B. Develop and implement advertising, marketing, promotion, publicity and other similar programs for the Hotel; (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; 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. xxxxxx 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; 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); 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. 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”).

APPOINTMENT AND ENGAGEMENT OF OPERATOR. 3.1. Subject to the terms of this Agreement, Owner hereby engages Operator as its agent and the 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 the same manner as is customary and usual in the operation of similar hotels in the area of the Hotel to meet the Standard at all times throughout the Operating Term and (ii) in compliance in all material respects extent consistent with the Legal Requirements. Operator shall also operate Budgets and manage the Hotel for Owner in a commercially reasonable, business-like, prudent and professional mannerHotel’s facilities. 3.3. Operator acknowledges will be available to consult with and agrees that (a) Owner has an office in the Building advise Owner, at Owner’s reasonable request, concerning all policies and intends to oversee actively the operation procedures affecting all phases of the Hotel, (b) if Owner exercises its Owner Parking Facility Rights, the success conduct 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 (business 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)Hotel. Owner shall consult directly with the Vice President of Operations or such other corporate employee of Operator as Owner the parties may reasonably requestagree, 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 AgreementAgreement and the applicable Budgets, 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 Budgets and the other applicable provisions of this Agreement (including Section 3.2)Agreement, and only to the extent Owner has provided sufficient funds therefor, either through Hotel operations or directly from Owner: A. (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 and amusement policies; B. (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 equal opportunity action plan for the Hotel to the extent required for Operator and/or the Hotel to maintain its status as a federal contractorHotel; C. (c) Develop and implement advertising, marketing, promotion, publicity and similar programs for the Hotel; (i) Negotiate and enter into Leases, collect the rent under such Leases and otherwise administer the Leases Leases; provided, however, Operator shall obtain Owner’s prior written approval before entering into any Lease and such approval shall not be unreasonably withheld, delayed or conditioned, (ii) negotiate and enter into contracts for the provision of services to the Hotel, and (iii) terminate any such contracts that Operator deems unfavorable to the operation of the Hotel (at the cost of Owner); E. (e) Upon receipt of all necessary information from OwnerOwner and to the extent legally permissible, 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. (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 and use tax accruals and pay such accruals out of Total Operating Revenues from the Hotel, and Owner agrees to fully cooperate with Operator in the event of any related tax audit; G. (g) Provide routine accounting services as required in the ordinary course of business; H. (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. , so long as Owner agrees to promptly deliver delivers to Operator any notice of violation thereof received with respect theretoby Owner; I. (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 Requirementsof which Operator is aware to be made, and supervise such repairs and maintenance; J. (j) Subject to Section 3.6 3.5 below, use commercially reasonable efforts to operate the Hotel in accordance with (i) the any and all Major Agreements; provided, however, Operator shall have no responsibility for causing the payment of any Non-Operating Income and Expenses or Owner Expenses, unless expressly set forth in this Agreement; (iik) Use commercially reasonable efforts to cooperate with Owner, at Owner’s sole cost and expense, in securing and maintaining at all times during the Term all licenses, permits, approvals, certificates, registrations and other authorizations required, granted or issued by any agreement related government or other political subdivision, agency or instrumentality thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (“Required Approvals”); all Required Approvals shall be in the name of Owner unless legal requirements (e.g., relating to the sale of alcohol) require that Operator be the licensee or co-licensee, in which event Operator shall obtain and maintain any such Required Approvals provided that Owner (at its sole cost and expense) cooperates with Operator in connection with same and reimburses Operator for all Out-of-Pocket Expense incurred by Operator in obtaining such Required Approvals; and (l) Operator shall be responsible for the filing, prosecution and defense of all legal proceedings arising out of the operation of the Hotel and Operator may settle any insurance Claim; provided, however, that any such settlement which was entered into prior results in uninsured liability to the date hereof provided a copy of such agreement has been delivered to Operator Owner 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 in excess of Five Thousand Dollars (y$5,000) Operator enters into on behalf shall require the approval of Owner or Owner. (zm) 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 any other provision of this Agreement to the contrary in this Agreement and other than as expressly provided in the then applicable Approved Annual Plancontrary, 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. xxxxxx 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; 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); 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 (ai) complete and accurate copies thereof, or summaries of the relevant provisions thereof, have been delivered to Operator, or are then Operator sufficiently in the actual or constructive possession or control of advance to allow Operator or the Hotel’s general manager, to perform such obligations and (bii) the provisions thereof and/or compliance with such provisions by Operator (i1) are applicable to the day to day-to-day operation, maintenance and non-capital repair and replacement of the Hotel or any portion thereof (including cash management)thereof, (ii2) do not require contribution of capital from the by Operator, (iii3) do not materially increase Operator’s obligations hereunder or materially decrease Operator’s other rights hereunder, (iv4) 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 Hotel, and (iv5) are otherwise contemplated to be within the scope of Operator’s duties under this Agreement. Owner acknowledges and agrees agrees, without limiting the foregoing, that any failure of Operator or the Hotel to comply with the provisions of any Major Agreement that is a direct result arising out 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 Operator’s assuming the Takeover Dateday-to-day management thereof, (B) construction activities at the Hotel, (C) latent defects inherent limitations in the design and/or construction of, location of and/or parking at the Hotel, (D) written instructions from Owner to operate the Hotel in breach of its obligations under such a manner inconsistent with the Major Agreement Agreements, and/or (E) Owner’s failure to approve any matter requested by Operator that is in Operator’s reasonable good faith business judgment as necessary or appropriate to comply achieve compliance with the applicable any Major Agreement, shall not be deemed a breach by Operator of its obligations under this Agreement. 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”).

APPOINTMENT AND ENGAGEMENT OF OPERATOR. 3.1. Subject to the terms of this Agreement, Owner hereby engages Operator as its agent and the exclusive operator of the Hotel during the Operating Term and Operator hereby accepts such engagement. Provided that Operator remains responsible for the full performance of its obligations hereunder, Owner consents to the delegation and performance of any or all of Operator’s rights and obligations hereunder to a reputable and experienced hotel management company (the “Sub-Manager,” if any), in Operator’s reasonable discretion, and Owner agrees that Crestline Hotels & Resorts, LLC; Interstate Management Company, LLC; management companies affiliated with Hilton Hotels & Resorts; XxXxxxxx Hotel Management, Inc.; and InnVentures IVI, L.P. all constitute reputable and experienced hotel management companies. In the event that Operator’s contract with any Sub-Manager expires prior to the term of this Agreement and Operator wishes to replace one Sub-Manager with another, Owner agrees to make such changes to this Agreement as may be necessary to conform this agreement with such replacement agreement, provided that none of the principal economic terms of this Agreement are changed in a manner that negatively affects Owner. 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 the same manner as is customary and usual in the operation of similar hotels in the area of the Hotel to meet the Standard at all times throughout the Operating Term and (ii) in compliance in all material respects extent consistent with the Legal Requirements. Operator shall also operate Budgets and manage the Hotel for Owner in a commercially reasonable, business-like, prudent and professional mannerHotel’s facilities. 3.3. Operator acknowledges will be available to consult with and agrees that (a) Owner has an office in the Building advise Owner, at Owner’s reasonable request, concerning all policies and intends to oversee actively the operation procedures affecting all phases of the Hotel, (b) if Owner exercises its Owner Parking Facility Rights, the success conduct 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 (business 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)Hotel. Owner shall consult directly with the Vice President of Operations or such other corporate employee of Operator as Owner the parties may reasonably requestagree, and/or with the general manager of the Hotel, and shall not contact any other 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 AgreementAgreement and the applicable Budgets, 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 Budgets and the other applicable provisions of this Agreement (including Section 3.2)Agreement, and only to the extent Owner has provided sufficient funds therefor, either through Hotel operations or directly from Owner: 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 and amusement 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 contractorHotel; C. Develop and implement advertising, marketing, promotion, publicity and similar programs for the Hotel; (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 HotelHotel (provided, however, that Operator will obtain Owner’s consent prior to entering into any contracts or Leases involving the payment or receipt of $15,000 or more in any calendar year, and/or that are for a term exceeding one (1) year (unless terminable at will on notice of 30 days or less); 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. , so long as Owner agrees to promptly deliver delivers to Operator any notice of violation thereof received with respect theretoby Owner; 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 Requirementsof which Operator is aware to be made, and supervise such repairs and maintenance; J. Subject to Section 3.6 3.5 below, use commercially reasonable efforts to operate the Hotel in accordance with (i) the any and all Major Agreements; provided, (ii) however, Operator shall have no responsibility for causing the payment of 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 Fixed Charges or is then Owner Expenses, unless expressly set forth 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 requestthis Agreement; 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 any other provision of this Agreement to the contrary in this Agreement and other than as expressly provided in the then applicable Approved Annual Plancontrary, 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. xxxxxx 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; 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); 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 (ai) complete and accurate copies thereof, or summaries of the relevant provisions thereof, have been delivered to Operator, or are then Operator sufficiently in the actual or constructive possession or control of advance to allow Operator or the Hotel’s general manager, to perform such obligations and (bii) the provisions thereof and/or compliance with such provisions by Operator (i1) are applicable to the day to day-to-day operation, maintenance and non-capital non‑capital repair and replacement of the Hotel or any portion thereof (including cash management)thereof, (ii2) do not require contribution of capital from the Operatorcapital, (iii3) do not materially increase Operator’s obligations hereunder or materially decrease Operator’s other rights hereunder, (iv4) 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 Hotel, and (iv5) are otherwise contemplated to be within the scope of Operator’s duties under this Agreement. Owner acknowledges and agrees agrees, without limiting the foregoing, that any failure of Operator or the Hotel to comply with the provisions of any Major Agreement that is a direct result arising out 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 Operator’s assuming the Takeover Dateday-to-day management thereof, (B) construction activities at the Hotel, (C) latent defects inherent limitations in the design and/or construction of, location of and/or parking at the Hotel, (D) written instructions from Owner to operate the Hotel in breach of its obligations under such a manner inconsistent with the Major Agreement Agreements and/or (E) Owner’s failure to approve any matter requested by Operator that is in Operator’s reasonable good faith business judgment as necessary or appropriate to comply achieve compliance with the applicable any Major Agreement, shall not be deemed a breach by Operator of its obligations under this Agreement. 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”).