Exhibit 10.49

Burbank Downtown, CA (Residence Inn)

PURCHASE CONTRACT

between

FIRST STREET HOTELS, LLC (“SELLER”)

AND

APPLE EIGHT HOSPITALITY OWNERSHIP, INC. (“BUYER”)

Dated: April 3, 2008

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TABLE OF CONTENTS

 

     Page No.

ARTICLE I

  

DEFINED TERMS

   1

1.1

  

Definitions

   1

ARTICLE II

  

PURCHASE AND SALE; PURCHASE PRICE; PAYMENT; EARNEST MONEY DEPOSIT

   6

2.1

  

Purchase and Sale

   6

2.2

  

Intentionally Omitted

   6

2.3

  

Purchase Price

   6

2.4

  

Allocation

   6

2.5

  

Payment

   7

2.6

  

Earnest Money Deposit

   7

ARTICLE III

  

REVIEW PERIOD

   7

3.1

  

Review Period

   7

3.2

  

Due Diligence Examination

   8

3.3

  

Restoration

   8

3.4

  

Seller Exhibits

   8

ARTICLE IV

  

SURVEY AND TITLE APPROVAL

   9

4.1

  

Survey

   9

4.2

  

Title

   9

4.3

  

Survey or Title Objections

   9

ARTICLE V

  

ASSUMPTION OF MANAGEMENT AGREEMENT

   10

ARTICLE VI

  

BROKERS

   11

ARTICLE VII

  

REPRESENTATIONS, WARRANTIES AND COVENANTS

   11

7.1

  

Seller’s Representations, Warranties and Covenants

   11

7.2

  

Buyer’s Representations, Warranties and Covenants

   15

7.3

  

Survival

   16

ARTICLE VIII

  

ADDITIONAL COVENANTS

   16

8.1

  

Subsequent Developments

   16

8.2

  

Operations

   17

8.3

  

Third Party Consents

   18

8.4

  

Employees

   18

 

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8.5

  

Estoppel Certificates

   18

8.6

  

Access to Financial Information

   19

8.7

  

Bulk Sales

   19

8.8

  

Indemnification

   19

8.9

  

Escrow Funds

   21

8.10

  

Liquor Licenses

   22

ARTICLE IX

  

CONDITIONS FOR CLOSING

   22

9.1

  

Buyer’s Conditions for Closing

   22

9.2

  

Seller’s Conditions for Closing

   23

ARTICLE X

  

CLOSING AND CONVEYANCE

   23

10.1

  

Closing

   23

10.2

  

Deliveries of Seller

   24

10.3

  

Buyer’s Deliveries

   25

ARTICLE XI

  

COSTS

   26

11.1

  

Seller’s Costs

   26

11.2

  

Buyer’s Costs

   26

ARTICLE XII

  

ADJUSTMENTS

   27

12.1

  

Adjustments

   27

12.2

  

Reconciliation and Final Payment

   28

12.3

  

Employees

   28

ARTICLE XIII

  

CASUALTY AND CONDEMNATION

   29

13.1

  

Risk of Loss; Notice

   29

13.2

  

Buyer’s Termination Right

   29

13.3

  

Procedure for Closing

   29

ARTICLE XIV

  

DEFAULT REMEDIES

   30

14.1

  

Buyer Default

   30

14.2

  

Seller Default

   31

14.3

  

Attorney’s Fees

   31

ARTICLE XV

  

NOTICES

   31

ARTICLE XVI

  

MISCELLANEOUS

   32

16.1

  

Performance

   32

16.2

  

Binding Effect; Assignment

   32

16.3

  

Entire Agreement

   32

 

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16.4

  

Governing Law

   33

16.5

  

Captions

   33

16.6

  

Confidentiality

   33

16.7

  

Closing Documents

   33

16.8

  

Counterparts

   33

16.9

  

Severability

   33

16.10

  

Interpretation

   33

16.11

  

(Intentionally Omitted)

   33

16.12

  

Further Acts

   33

16.13

  

Joint and Several Obligations

   34

ARTICLE XVII

  

OCEANSIDE CONTRACT

   34

SCHEDULES:

 

Schedule 2.4

   Allocation

EXHIBITS:

  

Exhibit A

   Legal Description

Exhibit B

   List of FF&E

Exhibit C

   Document Inventory

Exhibit D

   List of Hotel Contracts

Exhibit E

   Consents and Approvals

Exhibit F

   Environmental Reports

Exhibit G

   Claims or Litigation Pending

Exhibit H

   Escrow Agreement

 

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PURCHASE CONTRACT

This PURCHASE CONTRACT (this “Contract”) is made and entered into as of
                    , 2008, by and between FIRST STREET HOTELS, LLC, a Delaware
limited liability company ( “Seller”) with a principal office at c/o R. D. Olson
Development, 2955 Main Street, 3rd Floor, Irvine, California 92614, and APPLE
EIGHT HOSPITALITY OWNERSHIP, INC., a Virginia corporation, with its principal
office at 814 East Main Street, Richmond, Virginia 23219, or its affiliates or
assigns (“Buyer”).

RECITALS

A. Seller is the fee simple owner of that certain hotel property commonly known
as the Residence Inn Burbank located at 321 South First Street, Burbank,
California 91502 (the “Hotel”) identified in on Exhibit A attached hereto and
incorporated by reference.

B. Buyer is desirous of purchasing the Hotel from Seller, and Seller is desirous
of selling the Hotel to Buyer, for the purchase price and upon terms and
conditions hereinafter set forth.

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

ARTICLE I

DEFINED TERMS

1.1 Definitions. The following capitalized terms when used in this Contract
shall have the meanings set forth below unless the context otherwise requires:

“Additional Deposit” shall mean $200,000.

“Affiliate” shall mean, with respect to Seller or Buyer, any other person or
entity directly or indirectly controlling (including but not limited to all
directors and officers), controlled by or under direct or indirect common
control with Seller or Buyer, as applicable. For purposes of the foregoing, a
person or entity shall be deemed to control another person or entity if it
possesses, directly or indirectly, the power to direct or cause direction of the
management and policies of such other person or entity, whether through the
ownership of voting securities, by contract or otherwise.

“Appurtenances” shall mean all rights, titles, and interests of Seller
appurtenant to the Land and Improvements, including, but not limited to, (i) all
easements, rights of way, rights of ingress and egress, tenements,
hereditaments, privileges, and appurtenances in any way belonging to the Land or
Improvements, (ii) any land lying in the bed of any alley, highway, street, road
or avenue, open or proposed, in front of or abutting or adjoining the Land,
(iii) any strips or gores of real estate adjacent to the Land, and (iv) the use
of all alleys, easements and rights-of-way, if any, abutting, adjacent,
contiguous to or adjoining the Land.

 

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“Brand” shall mean Residence Inn by Marriott, the hotel brand or franchise under
which the Hotel operates.

“Business Day” shall mean any day other than a Saturday, Sunday or legal holiday
in the State of California.

“Closing” shall mean the closing of the purchase and sale of the Property
pursuant to this Contract.

“Closing Date” shall have the meaning set forth in Section 10.1.

“Contracts, Plans and Specs” shall mean all current construction and other
contracts, plans, drawings, specifications, surveys, soil reports, engineering
reports, inspection reports, and other technical descriptions and reports in
Seller’s possession or control.

“Deed” shall have the meaning set forth in Section 10.2(a).

“Deposits” shall mean, to the extent assignable, all prepaid rents and deposits
(including, without limitation, any reserves for replacement of FF&E and for
capital repairs and/or improvements), refundable security deposits and rental
deposits, and all other deposits for advance reservations, banquets or future
services, made in connection with the use or occupancy of the Improvements;
provided, however, that to the extent Seller has not received or does not hold
all of the prepaid rents and/or deposits attributable to the Leases related to
the Property, Buyer shall be entitled to a credit against the cash portion of
the Purchase Price allocable to the Property in an amount equal to the amount of
the prepaid rents and/or deposits attributable to the Leases transferred at the
Closing of such Property, and provided further, that “Deposits” shall exclude
(i) reserves for real property taxes and insurance, in each case, to the extent
pro rated on the settlement statement such that Buyer receives a credit for
(a) taxes and premiums in respect of any period prior to Closing and (b) the
amount of deductibles and other self-insurance and all other potential
liabilities and claims in respect of any period prior to Closing, and
(ii) utility deposits.

“Due Diligence Examination” shall have the meaning set forth in Section 3.2.

“Earnest Money Deposit” shall have the meaning set forth in Section 2.6(a).

“Environmental Requirements” shall have the meaning set forth in Section 7.1(f)

“Escrow Agent” shall have the meaning set forth in Section 2.6(a).

“Escrow Agreement” shall have the meaning set forth in Section 2.6(b).

“Exception Documents” shall have the meaning set forth in Section 4.2.

“Existing Management Agreement” shall mean that certain management agreement
between the Seller and the Manager for the operation and management of the
Hotel.

“FF&E” shall mean all tangible personal property and fixtures of any kind (other
than personal property (i) owned by guests of the Hotel or (ii) leased by Seller
pursuant to an FF&E

 

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Lease) attached to, or located upon and used in connection with the ownership,
maintenance, use or operation of the Land or Improvements as of the date hereof
(or acquired by Seller and so employed prior to Closing), including, but not
limited to, all furniture, fixtures, equipment, signs and related personal
property; all heating, lighting, plumbing, drainage, electrical, air
conditioning, and other mechanical fixtures and equipment and systems; all
elevators, and related motors and electrical equipment and systems; all hot
water heaters, furnaces, heating controls, motors and equipment, all shelving
and partitions, all ventilating equipment, and all disposal equipment; all spa,
health club and fitness equipment; all equipment used in connection with the use
and/or maintenance of the guestrooms, restaurants, lounges, business centers,
meeting rooms, swimming pools, indoor and/or outdoor sports facilities and other
common areas and recreational areas; all carpet, drapes, beds, furniture,
televisions and other furnishings; all stoves, ovens, freezers, refrigerators,
dishwashers, disposals, kitchen equipment and utensils, tables, chairs, plates
and other dishes, glasses, silverware, serving pieces and other restaurant and
bar equipment, apparatus and utensils. A current list of FF&E is attached hereto
as Exhibit B, or will be attached hereto no later than ten (10) days prior to
the expiration of the Review Period.

“FF&E Leases” shall mean all leases of any FF&E and other contracts permitting
the use of any FF&E at the Improvements that are assumed by Buyer.

“Financial Statements” shall have the meaning set forth in Section 3.1(b).

“Hotel Contracts” shall have the meaning set forth in Section 10.2(d).

“Improvements” shall mean all buildings, structures, fixtures, parking areas and
other improvements to the Land, and all related facilities.

“Indemnified Party” shall have the meaning set forth in Section 8.8(c)(i).

“Indemnifying Party” shall have the meaning set forth in Section 8.8(c)(i).

“Initial Deposit” shall have the meaning set forth in Section 2.6(a).

“Land” shall mean, collectively, a fee simple absolute interest in the real
property more fully described in Exhibit A, which is attached hereto and
incorporated herein by reference, together with all rights of Seller thereto
(including without limitation all air rights and development rights), alleys,
streets, strips, gores, waters, privileges, appurtenances, advantages and
easements belonging thereto or in any way appertaining thereto.

“Leases” shall mean all leases, franchises, licenses, occupancy agreements,
“trade-out” agreements, advance bookings, convention reservations, or other
agreements demising space in, providing for the use or occupancy of, or
otherwise similarly affecting or relating to the use or occupancy of, the
Improvements or Land, together with all amendments, modifications, renewals and
extensions thereof, and all guaranties by third parties of the obligations of
the tenants, licensees, franchisees, concessionaires or other entities
thereunder.

“Legal Action” shall have the meaning set forth in Section 8.8(c)(ii).

 

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“Licenses” shall mean all permits, licenses, franchises, utility reservations,
certificates of occupancy, and other documents issued by any federal, state, or
municipal authority or by any private party related to the development,
construction, use, occupancy, operation or maintenance of the Hotel, including,
without limitation, all licenses, approvals and rights (including any and all
existing waivers of any brand standard) necessary or appropriate for the
operation of the Hotel under the Brand.

“Liquor Licenses” shall have the meaning set forth in Section 8.10.

“Manager” shall mean Residence Inn by Marriott, LLC.

“Other Property” shall have the meaning set forth in Section 16.14.

“Pending Claims” shall have the meaning set forth in Section 7.1(e).

“Permitted Exceptions” shall have the meaning set forth in Section 4.3.

“Personal Property” shall mean, collectively, all of the Property other than the
Real Property.

“PIP” shall mean a product improvement plan for any Hotel, as required by the
Manager under the Existing Management Agreement, if any.

“Post-Closing Agreement” shall have the meaning set forth in Section 8.9.

“Property” shall mean, collectively, (i) all of the following with respect to
the Hotel: the Land, Improvements, Appurtenances, FF&E, Supplies, Leases,
Deposits, Records, Service Contracts, Warranties, Licenses, FF&E Leases,
Contracts, Plans and Specs, Tradenames, Utility Reservations, as well as all
other real, personal or intangible property of Seller related to any of the
foregoing and (ii) any and all of the following that relate to or affect in any
way the design, construction, ownership, use, occupancy, leasing, maintenance,
service or operation of the Real Property, FF&E, Supplies, Leases, Deposits or
Records: Service Contracts, Warranties, Licenses, Tradenames, Contracts, Plans
and Specs and FF&E Lease.

“Purchase Price” shall have the meaning set forth in Section 2.2.

“Real Property” shall mean, collectively, all Land, Improvements and
Appurtenances with respect to the Hotel.

“Records” shall mean all books, records, promotional material, tenant data,
guest history information (other than any such information owned exclusively by
the Manager), marketing and leasing material and forms (including but not
limited to any such records, data, information, material and forms in the form
of computerized files located at the Hotel), market studies prepared in
connection with Seller’s current annual plan and other materials, information,
data, legal or other documents or records (including, without limitation, all
documentation relating to any litigation or other proceedings (excepting
therefrom those subject to attorney-client or work product privilege or other
privileges that may be asserted in litigation, and Seller’s proprietary reports
prepared by Buyer including without limitation, proprietary development
determinations,

 

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tax or profitability evaluations or proformas), all zoning and/or land use
notices, relating to or affecting the Property) owned by Seller and/or in
Seller’s possession or control, or to which Seller has access or may obtain from
the Manager, that are used in or relating to the Property and/or the operation
of the Hotel, including the Land, the Improvements or the FF&E, and contracts
related to the development and construction of the Hotel and a list of the
general contractors, architects and engineers providing goods and/or services in
connection with the construction of the Hotel, all construction warranties and
guaranties in effect at Closing and copies of the final plans and specifications
for the Hotel.

“Release” shall have the meaning set forth in Section 7.1(f).

“Review Period” shall have the meaning set forth in Section 3.1.

“SEC” shall have the meaning set forth in Section 8.6.

“Seller Liens” shall have the meaning set forth in Section 4.3.

“Seller Parties” shall have the meaning set forth in Section 7.1(e).

“Service Contracts” shall mean contracts or agreements, such as maintenance,
supply, service or utility contracts.

“Supplies” shall mean all merchandise, supplies, inventory and other items used
for the operation and maintenance of guest rooms, restaurants, lounges, swimming
pools, health clubs, spas, business centers, meeting rooms and other common
areas and recreational areas located within or relating to the Improvements,
including, without limitation, all food and beverage (alcoholic and
non-alcoholic) inventory, office supplies and stationery, advertising and
promotional materials, china, glasses, silver/flatware, towels, linen and
bedding (all of which shall be 2-par level for all suites or rooms in the
Hotel), guest cleaning, paper and other supplies, upholstery material, carpets,
rugs, furniture, engineers’ supplies, paint and painters’ supplies, employee
uniforms, and all cleaning and maintenance supplies, including those used in
connection with the swimming pools, indoor and/or outdoor sports facilities,
health clubs, spas, fitness centers, restaurants, business centers, meeting
rooms and other common areas and recreational areas.

“Survey” shall have the meaning set forth in Section 4.1.

“Third Party Consents” shall have the meaning set forth in Section 8.3.

“Title Commitment” shall have the meaning set forth in Section 4.2.

“Title Company” shall have the meaning set forth in Section 4.2.

“Title Policy” shall have the meaning set forth in Section 4.2.

“Title Review Period” shall have the meaning set forth in Section 4.3.

 

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“Tradenames” shall mean all telephone exchanges and numbers, trade names, trade
styles, trade marks, and other identifying material, and all variations thereof,
together with all related goodwill (it being understood and agreed that the name
of the hotel chain to which the Hotel is affiliated by franchise, license or
management agreement is a protected name or registered service mark of such
hotel chain and cannot be transferred to Buyer by this Contract, provided that
all such franchise, license, management and other agreements granting a right to
use the name of such hotel chain or any other trademark or trade name and all
waivers of any brand standard shall be assigned to Buyer.

“Utility Reservations” shall mean Seller’s interest in the right to receive
immediately on and after Closing and continuously consume thereafter water
service, sanitary and storm sewer service, electrical service, gas service and
telephone service on and for the Land and Improvements in capacities that are
adequate continuously to use and operate the Improvements for the purposes for
which they were intended, including, but not limited to (i) any right to the
present and future use of wastewater, drainage, water and other utility
facilities to the extent such use benefits the Real Property, (ii) any
reservations of or commitments covering any such use in the future, and
(iii) any wastewater capacity reservations relating to the Real Property. Buyer
shall be responsible for any requests or documents to transfer the Utility
Reservations, at Buyer’s sole cost and expense.

“Warranties” shall mean all warranties, guaranties, indemnities and claims for
the benefit of Seller with respect to the Hotel, the Property or any portion
thereof, including, without limitation, all warranties and guaranties of the
development, construction, completion, installation, equipping and furnishing of
the Hotel, and all indemnities, bonds and claims of Seller related thereto.

ARTICLE II

PURCHASE AND SALE; PURCHASE PRICE; PAYMENT;

EARNEST MONEY DEPOSIT

2.1 Purchase and Sale. Seller agrees to sell and convey to Buyer or its
Affiliates and/or assigns, and Buyer or its assigns agrees to purchase from
Seller, the Property, in consideration of the Purchase Price and upon the terms
and conditions hereof. All of the Property shall be conveyed, assigned, and
transferred to Buyer at Closing, free and clear of all mortgages, liens,
encumbrances, licenses, franchises (other than any hotel franchises assumed by
Buyer), concession agreements, security interests, prior assignments or
conveyances, conditions, restrictions, rights-of-way, easements, encroachments,
claims and other matters affecting title or possession, except for the Permitted
Exceptions.

2.2 Intentionally Deleted.

2.3 Purchase Price. Buyer agrees to pay, and Seller agrees to accept, as
consideration for the conveyance of the Property, subject to the adjustments
provided for in this Contract, the amount of Fifty Million Five Hundred Thousand
and No/100 Dollars ($50,500,000.00) (the “Purchase Price”).

 

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2.4 Allocation. Buyer and Seller agree to the allocation of the Purchase Price
among Real Property, tangible Personal Property and intangible property related
to the Property as shown on Schedule 2.4 attached hereto.

2.5 Payment. The portion of the Purchase Price, less the Earnest Money Deposit
and interest earned thereon, if any, less the Escrow Funds, shall be paid to
Seller in cash, certified funds or wire transfer, at the Closing of the
Property.

2.6 Earnest Money Deposit.

(a) Within three (3) Business Days after the full execution and delivery of this
Contract, Buyer shall deposit the sum of Two Hundred Thousand and No/100 Dollars
($200,000.00) in cash, certified bank check or by wire transfer of immediately
available funds (the “Initial Deposit”) with the Title Company, as escrow agent
(“Escrow Agent”), which sum shall be held by Escrow Agent as earnest money. If,
pursuant to the provisions of Section 3.1 of this Contract, Buyer elects to
terminate this Contract at any time prior to the expiration of the Review
Period, then the Escrow Agent shall return the Earnest Money Deposit to Buyer
promptly upon written notice to that effect from Buyer. If Buyer does not elect
to terminate this Contract on or before the expiration of the Review Period,
Buyer shall, within three (3) Business Days after the expiration of the Review
Period deposit the Additional Deposit with the Escrow Agent. The Initial Deposit
and the Additional Deposit, and all interest accrued thereon, shall hereinafter
be referred to as the “Earnest Money Deposit.”

(b) The Earnest Money Deposit shall be held by Escrow Agent subject to the terms
and conditions of an Escrow Agreement dated as of the date of this Contract
entered into by Seller, Buyer and Escrow Agent (the “Escrow Agreement”). The
Earnest Money Deposit shall be held in an interest-bearing account in a
federally insured bank or savings institution reasonably acceptable to Seller
and Buyer, with all interest to accrue to the benefit of the party entitled to
receive it and to be reportable by such party for income tax purposes.

ARTICLE III

REVIEW PERIOD

3.1 Review Period. Buyer shall have a period through 6:00 p.m. California Time
on the date that is thirty (30) days after the date of this Contract, unless a
longer period of time is otherwise provided for in this Contract and except as
otherwise agreed to by Buyer and Seller (the “Review Period”), to evaluate the
legal, title, survey, construction, physical condition, structural, mechanical,
environmental, economic, permit status, franchise status, financial and other
documents and information related to the Property. Within two (2) Business Days
following the date of this Contract, Seller, at Seller’s sole cost and expense,
will deliver to Buyer for Buyer’s review, to the extent not previously delivered
to Buyer, true, correct and complete copies of the documents requested by Buyer
as set forth on Exhibit C (the “Document Inventory”) which are in Seller’s
possession or readily available at nominal cost to Seller.

Seller shall, upon request of Buyer, make available to Buyer and Buyer’s
representatives and agents, for inspection and copying during normal business
hours, Records located at Seller’s corporate offices, and Seller agrees to
provide Buyer copies of all other reasonably requested

 

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information that is relevant to the management, operation, use, occupancy or
leasing of or title to the applicable Hotel and the plans specifications for
development of the Hotel. At any time during the Review Period, Buyer may, in
its sole and absolute discretion, elect not to proceed with the purchase of the
Property for any reason whatsoever by giving written notice thereof to Seller,
in which event: (i) the Earnest Money Deposit shall be promptly returned by
Escrow Agent to Buyer together with all accrued interest, if any, (ii) this
Contract shall be terminated automatically, (iii) all materials supplied by
Seller to Buyer shall be returned promptly to Seller, and (iv) both parties will
be relieved of all other rights, obligations and liabilities hereunder, except
for the parties’ obligations pursuant to Sections 3.3 and 16.6 below. All
Records or items on the Document Inventory to be given to Buyer by Seller will
be delivered as an accommodation to Buyer and without any representation or
warranty as to the accuracy, enforceability, or assignability of any of the
Records, all of which Buyer relies on at its own risk.

3.2 Due Diligence Examination. At any time during the Review Period, and
thereafter through Closing of the Property, Buyer and/or its representatives and
agents shall have the right to enter upon the Property at all reasonable times
for the purposes of reviewing all Records and other data, documents and/or
information relating to the Property and conducting such surveys, appraisals,
engineering tests, soil tests (including, without limitation, Phase I and Phase
II environmental site assessments), inspections of construction and other
inspections and other studies as Buyer deems reasonable and necessary or
appropriate to evaluate the Property, subject to providing reasonable advance
notice to Seller unless otherwise agreed to by Buyer and Seller (the “Due
Diligence Examination”). Buyer and/or its representatives and agents will
maintain, and provide to Seller evidence of commercial general liability
insurance by policy or umbrella in an amount no less than Two Million Dollars
($2,000,000) per occurrence and Five Million Dollars ($5,000,000) annual
aggregate and on terms reasonably satisfactory to Seller covering any accident
or damage arising in connection with the presence of Buyer and/or its
representatives and agents on the Property, and deliver a certificate of
insurance, which names Seller and its agents, representatives and employees as
additional insureds thereunder confirming such coverage to Seller prior to entry
upon the Property. Seller shall have the right to have its representative
present during Buyer’s physical inspections of its Property, provided that
failure of Seller to do so shall not prevent Buyer from exercising its due
diligence, review and inspection rights hereunder. Buyer agrees to exercise
reasonable care when visiting the Property, in a manner which shall not
materially adversely affect the operation of the Property.

3.3 Restoration. Buyer covenants and agrees not to damage or destroy any portion
of the Property in conducting its examinations and studies of the Property
during the Due Diligence Examination and, if closing does not occur, shall
repair any portion of the Property damaged by the conduct of Buyer, its agents
or employees, to substantially the condition such portion(s) of the Property
were in immediately prior to such examinations or studies.

3.4 Seller Exhibits. Buyer shall have until the end of the Review Period to
review and approve the information on Exhibits B, C, D, E and F. In the event
Buyer does not approve any such Exhibit or the information contained therein,
Buyer shall be entitled to terminate this Contract by notice to Seller and the
Earnest Money Deposit shall be returned to Buyer with all interest thereon and
both parties shall be relieved of all rights, obligations and liabilities
hereunder except for the parties’ obligations pursuant to Sections 3.3 and 16.6.

 

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ARTICLE IV

SURVEY AND TITLE APPROVAL

4.1 Survey. Seller has delivered to Buyer true, correct and complete copies of
the most recent surveys of the Real Property in Seller’s possession or control.
Seller shall order an update of the survey or a new survey (such updated or new
surveys being referred to as the “Survey”), in either case such that it shall be
an ALTA as-built survey, the cost of which shall be paid by Buyer at Closing.

4.2 Title. Seller has delivered to Buyer its existing title insurance policy,
including copies of all documents referred to therein, for its Real Property.
Buyer’s obligations under this Contract are conditioned upon Buyer being able to
obtain, at Buyer’s cost, (i) a Commitment for Title Insurance (each, a “Title
Commitment”) issued by LandAmerica American Title Company, Attn: Debby Moore,
2505 N. Plano Road, Ste. 3100, Richardson, Texas 75082 (the “Title Company”),
for the most recent standard form of owner’s policy of title insurance in the
state in which the Real Property is located, covering the Real Property, setting
forth the current status of the title to the Real Property, showing all liens,
claims, encumbrances, easements, rights of way, encroachments, reservations,
restrictions and any other matters affecting the Real Property and pursuant to
which the Title Company agrees to issue to Buyer at Closing an Owner’s Policy of
Title Insurance on the most recent form of ALTA (where available) owner’s policy
available in the state in which the Land is located, with extended coverage and,
to the extent applicable and available in such state, comprehensive, access,
single tax parcel, contiguity, Fairway and such other endorsements as may be
required by Buyer (collectively, the “Title Policy”); and (ii) true, complete,
legible and, where applicable, recorded copies of all documents and instruments
(the “Exception Documents”) referred to or identified in the Title Commitment,
including, but not limited to, all deeds, lien instruments, leases, plats,
surveys, reservations, restrictions, and easements affecting the Real Property.
If requested by Seller, Buyer shall promptly provide Seller with a copy of the
Title Commitment issued by the Title Company.

4.3 Survey or Title Objections. If Buyer discovers any title or survey matter
which is objectionable to Buyer, Buyer may provide Seller with written notice of
its objection to same within five (5) days prior to the expiration of the Review
Period (the “Title Review Period”). If Buyer fails to so object in writing to
any such matter set forth in the Survey or Title Commitment, it shall be
conclusively assumed that Buyer has approved same. If Buyer disapproves any
condition of title, survey or other matters by written objection to Seller on or
before the expiration of the Title Review Period, Seller shall elect either to
attempt to cure or not cure any such item by written notice sent to Buyer within
five (5) days after its receipt of notice from Buyer, and if Seller commits in
writing to attempt to cure any such item, then Seller shall be given until the
Closing Date to cure any such defect. In the event Seller shall fail to cure a
defect which Seller has committed in writing to cure prior to Closing, or if a
new title defect arises after the date of Buyer’s Title Commitment or Survey, as
applicable, but prior to Closing, then Buyer may elect, in Buyer’s sole and
absolute discretion: (i) to waive such objection and proceed to Closing, or
(ii) to terminate this Contract and receive a return of the Earnest Money
Deposit, and any interest thereon. The items shown on the Title Commitment which
are not objected to by Buyer as set forth above (other than exceptions and title
defects arising after the title review period and other than those standard
exceptions which are ordinarily and customarily

 

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omitted in the state in which the applicable Hotel is located, so long as Seller
provides the appropriate owner’s affidavit, gap indemnity or other documentation
reasonably required by the Title Company for such omission) are hereinafter
referred to as the “Permitted Exceptions.” In no event shall Permitted
Exceptions include liens, or documents evidencing liens, securing any
indebtedness, any mechanics’ or materialmen’s liens or any claims or potential
claims therefor covering the Property or any portion thereof (“Seller Liens”),
each of which shall be paid in full by Seller and released at Closing.

ARTICLE V

MANAGEMENT AGREEMENT

At or prior to the Closing, Seller shall assign and Buyer shall assume the
Existing Management Agreement, and Seller shall be solely responsible for all
claims and liabilities arising thereunder on, prior to or following the Closing
Date. As a condition to Closing, Buyer shall assume the Existing Management
Agreement with the Manager effective as of the Closing Date, which assumption
agreement (the “Assumption of Management Agreement”) shall contain terms and
conditions acceptable to Buyer (including, without limitation, such terms and
conditions as may be required to accommodate Buyer’s and/or Buyer’s Affiliates’
REIT structure), or Buyer shall enter into a new management agreement with
Manager, if required by Manager, pursuant to the terms of the Existing
Management Agreement. Seller shall use best efforts to promptly provide all
information required by the Manager in connection with Buyer’s assumption of the
Existing Management Agreement, and Seller and Buyer shall diligently pursue
obtaining each the same. Seller shall be responsible for any key money
repayment, if any, required by Existing Manager as of the Closing Date. Any key
money repayment due as a result of the termination of the Existing Management
Agreement following the Closing Date or a new management agreement between Buyer
and Manager shall be the responsibility of Buyer. Notwithstanding an assumption
of the Existing Management Agreement by Buyer or a new management agreement
between Buyer and Manager and the definition of the Restricted Trade Area
therein, R. D. Olson Development, or assignee thereof, shall be allowed the
right to develop a Residence Inn hotel operating under the “Residence Inn by
Marriott” trade name as a member of the Residence Inn system in the City of
Glendale, California (the “Glendale Hotel”) prior to the expiration of the time
period prohibiting the development of such hotel pursuant to the Existing
Management Agreement. The parties shall cooperate to obtain the consent of the
Manager in connection with any amendment to the Existing Management Agreement
regarding such development right or provide for such development right in any
new management agreement. Seller on behalf of itself and its Affiliates,
including, without limitation R.D. Olson Development and its Affiliates), hereby
grants Buyer a right of first refusal to purchase the Glendale Hotel (or the
equity interests in the owner of the Glendale Hotel) at the same price, and upon
the same terms, as any offer received by Seller or its Affiliate that Seller or
its Affiliate is willing to accept (the “Right of First Refusal”). Specifically,
Seller shall notify Owner in writing of any offer received by Seller or Seller’s
Affiliate that Seller’s Affiliate desires to accept, and such notification shall
include a copy of the purchase agreement (the “Offer”). Thereafter, Buyer or its
Affiliate shall have a period of thirty (30) days to accept the Offer. If Buyer
either rejects the Offer or fails to affirmatively accept the Offer within such
thirty (30) day period, then the Right of First Refusal shall automatically and
forever terminate. If Buyer or its Affiliate timely accepts the Offer, then
Buyer or its Affiliate will purchase the Glendale Hotel on the same terms and
conditions as set forth in the Offer, and Owner’s (or it Affiliate’s) failure to
do so shall cause

 

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the Right of First Refusal to automatically terminate. Under no circumstances
shall the Right of First Refusal apply to (i) a lease of retail or “shop” space
within the Glendale Hotel, (ii) a condemnation of all or a portion of the
Glendale Hotel, (iii) the granting of easements and rights-of-way, (iv) any
mortgage of the Glendale Hotel, (v) any foreclosure sale, deed-in-lieu of
foreclosure or similar disposition by any mortgagee of the Glendale Hotel. This
section shall survive Closing but shall be of no force and effect if Closing
does not occur.

ARTICLE VI

BROKERS

Seller and Buyer each represents and warrants to the other that it has not
engaged any broker, finder or other party in connection with the transaction
contemplated by this Contract. Buyer and Seller each agree to save and hold the
other harmless from any and all losses, damages, liabilities, costs and expenses
(including, without limitation, attorneys’ fees) involving claims made by any
other agent, broker, or other person by or through the acts of Buyer or Seller,
respectively, in connection with this transaction.

ARTICLE VII

REPRESENTATIONS, WARRANTIES AND COVENANTS

7.1 Seller’s Representations, Warranties and Covenants. Seller hereby
represents, warrants and covenants to Buyer as follows:

(a) Authority; No Conflicts. Seller is a limited liability company duly formed,
validly existing and in good standing in the State of California. Seller has
obtained all necessary consents to enter into and perform this Contract and is
fully authorized to enter into and perform this Contract and to complete the
transactions contemplated by this Contract. No consent or approval of any
person, entity or governmental authority is required for the execution, delivery
or performance by Seller of this Contract, except as set forth in Exhibit E, and
this Contract is hereby binding and enforceable against Seller. Neither the
execution nor the performance of, or compliance with, this Contract by Seller
has resulted, or will result, in any violation of, or default under, or
acceleration of, any obligation under any existing corporate charter,
certificate of incorporation, bylaw, articles of organization, limited liability
company agreement or regulations, partnership agreement or other organizational
documents and under any, mortgage indenture, lien agreement, promissory note,
contract, or permit, or any judgment, decree, order, restrictive covenant,
statute, rule or regulation, applicable to Seller or to the Hotel.

(b) FIRPTA. Seller is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those items are defined in the Internal Revenue Code
and Income Tax Regulations).

(c) Bankruptcy. Neither Seller nor, to Seller’s knowledge, any of its partners
or members, is insolvent or the subject of any bankruptcy proceeding,
receivership proceeding or other insolvency, dissolution, reorganization or
similar proceeding.

(d) Property Agreements. A complete list of all FF&E Leases, Service Contracts
and Leases (other than those entered into by the Manager on its own behalf) used
in or

 

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otherwise relating to the operation and business of the Hotel is attached hereto
as Exhibit D-1, and, to Seller’s knowledge, a complete list of all other FF&E
Leases, Service Contracts and Leases used in or otherwise relating to the
operation and business of the Hotel is attached hereto as Exhibit D-2. The
assets constituting the Property to be conveyed to Buyer hereunder constitute
all of the property and assets of Seller used in connection with the operation
and business of the Hotel. There are no leases, license agreements, leasing
agent’s agreements, equipment leases, building service agreements, maintenance
contracts, suppliers contracts, warranty contracts, operating agreements, or
other agreements (i) to which Seller is a party or an assignee, or (ii) to
Seller’s knowledge, binding upon the Hotel, relating to the ownership,
occupancy, operation, management or maintenance of the Real Property, FF&E,
Supplies or Tradenames, except for those Service Contracts, Leases, Warranties
and FF&E Leases disclosed on Exhibit D or to be delivered to Buyer pursuant to
Section 3.1. The Service Contracts, Leases, Warranties and FF&E Leases disclosed
on Exhibit D or to be delivered to Buyer pursuant to Section 3.1 are in full
force and effect, and no default has occurred and is continuing thereunder and
no circumstances exist which, with the giving of notice, the lapse of time or
both, would constitute such a default. No party has any right or option to
acquire the Hotel or any portion thereof, other than Buyer.

(e) Pending Claims. To Seller’s knowledge, there are no: (i) claims, demands,
litigation, proceedings or governmental investigations pending or threatened
against Seller, the Manager or any Affiliate of any of them (collectively,
“Seller Parties”) or related to the business or assets of the Hotel, except as
set forth on Exhibit G attached hereto and incorporated herein by reference,
(ii) special assessments or extraordinary taxes except as set forth in the Title
Commitment or (iii) pending or threatened condemnation or eminent domain
proceedings which would affect the Property or any part thereof. To Seller’s
knowledge, there are no: pending arbitration proceedings or unsatisfied
arbitration awards, or judicial proceedings or orders respecting awards, which
might become a lien on the Property or any portion thereof, pending unfair labor
practice charges or complaints, unsatisfied unfair labor practice orders or
judicial proceedings or orders with respect thereto, pending charges or
complaints with or by city, state or federal civil or human rights agencies,
unremedied orders by such agencies or judicial proceedings or orders with
respect to obligations under city, state or federal civil or human rights or
antidiscrimination laws or executive orders affecting the Hotel, or other
pending, actual or, to Seller’s knowledge, threatened litigation claims,
charges, complaints, petitions or unsatisfied orders by or before any
administrative agency or court which affect the Hotel or might become a lien on
the Hotel (collectively, the “Pending Claims”).

(f) Environmental. With respect to environmental matters for the period of
Seller’s ownership of the Land, and to Seller’s knowledge for the period prior
to Seller first acquiring the Land, and except as disclosed in the reports and
documents set forth on Exhibit F attached hereto and incorporated herein by
reference: (i) there has been no Release or threat of Release of Hazardous
Materials in, on, under, to, from or in the area of the Real Property, , (ii) no
portion of the Property is being used for the treatment, storage, disposal or
other handling of Hazardous Materials or machinery containing Hazardous
Materials other than standard amounts of cleaning supplies and chlorine for the
swimming pool, all of which are stored on the Property in strict accordance with
applicable Environmental Requirements and do not exceed limits permitted under
applicable laws, including without limitation Environmental Requirements, (iii)

 

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no underground storage tanks are currently located on or in the Real Property or
any portion thereof, (iv) no environmental investigation, administrative order,
notification, consent order, litigation, claim, judgment or settlement with
respect to the Property or any portion thereof is pending or threatened,
(v) there is not currently and, to Seller’s knowledge, never has been any mold,
fungal or other microbial growth in or on the Real Property, or existing
conditions within buildings, structures or mechanical equipment serving such
buildings or structures, that could reasonably be expected to result in material
liability or material costs or expenses to remediate the mold, fungal or
microbial growth, or to remedy such conditions that could reasonably be expected
to result in such growth, and (vi) except as disclosed on Exhibit F, there are
no reports or other documentation regarding the environmental condition of the
Real Property in the possession of Seller or Seller’s Affiliates, consultants,
contractors or agents. As used in this Contract: “Hazardous Materials” means
(1) “hazardous wastes” as defined by the Resource Conservation and Recovery Act
of 1976, as amended from time to time (“RCRA”), (2) “hazardous substances” as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. 9601 et seq.), as amended by the Superfund Amendment and
Reauthorization Act of 1986 and as otherwise amended from time to time
(“CERCLA”); (3) “toxic substances” as defined by the Toxic Substances Control
Act, as amended from time to time (“TSCA”), (4) “hazardous materials” as defined
by the Hazardous Materials Transportation Act, as amended from time to time
(“HMTA”), (5) asbestos, oil or other petroleum products, radioactive materials,
urea formaldehyde foam insulation, radon gas and transformers or other equipment
that contains dielectric fluid containing polychlorinated biphenyls and (6) any
substance whose presence is detrimental or hazardous to health or the
environment, including, without limitation, microbial or fungal matter or mold,
or is otherwise regulated by federal, state and local environmental laws
(including, without limitation, RCRA, CERCLA, TSCA, HMTA), rules, regulations
and orders, regulating, relating to or imposing liability or standards of
conduct concerning any Hazardous Materials or environmental, health or safety
compliance (collectively, “Environmental Requirements”). As used in this
Contract: “Release” means spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing.

(g) Title and Liens. Except for the FF&E subject to the FF&E Leases and any
applicable Permitted Exceptions, Seller has good and marketable title to the
Personal Property, free and clear of all liens, claims, encumbrances or other
rights whatsoever (other than the Seller Liens to be released at Closing), and
there are no other liens, claims, encumbrances or other rights pending or of
which any Seller Party has received notice or which are otherwise known to any
Seller Party related to any other Personal Property.

(h) Utilities. All appropriate utilities, including sanitary and storm sewers,
water, gas, telephone, cable and electricity, are, to Seller’s knowledge,
currently sufficient and available to service the Hotel and all installation,
connection or “tap-on”, usage and similar fees have been paid.

(i) Licenses, Permits and Approvals. Seller has not received any written notice,
and Seller has no knowledge that the Property fails to comply with all
applicable licenses, permits and approvals and federal, state or local statutes,
laws, ordinances, rules, regulations, requirements and codes including, without
limitation, those regarding zoning, land use, building,

 

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fire, health, safety, environmental, subdivision, water quality, sanitation
controls and the Americans with Disabilities Act, and similar rules and
regulations relating and/or applicable to the ownership, use and operation of
the Property as it is now operated. Seller has received all licenses, permits
and approvals required or needed for the lawful conduct, occupancy and operation
of the business of the Hotel, and each license and permit is in full force and
effect, and will be received and in full force and effect as of the Closing. No
licenses, permits or approvals necessary for the lawful conduct, occupancy or
operation of the business of the Hotel, to Seller’s knowledge requires any
approval of a governmental authority for transfer of the Property except as set
forth in Exhibit E.

(j) Financial Statements. Seller has delivered copies of all prior and current
(i) Financial Statements for the Hotel, (ii) operating statements prepared by
the Manager for the Hotel, and (iii) monthly financial statements prepared by
the Manager for the Hotel. Each of such statements is, to Seller’s knowledge,
complete and accurate in all material respects and, except in the case of
budgets prepared in advance of the applicable operating period to which such
budgets relate, fairly presents the results of operations of the Hotel for the
respective periods represented thereby. Seller has relied upon the Financial
Statements in connection with its ownership and operation of the Hotel, and
there are no independent audits or financial statements prepared by third
parties relating to the operation of the Hotel other than the Financial
Statements prepared by or on behalf of the Manager, all of which have been
provided to Buyer.

(k) Employees. To Seller’s knowledge, all employees employed at the Hotel are
the employees of the Manager. There are, to Seller’s knowledge, no (i) unions
organized at the Hotel, (ii) union organizing attempts, strikes, organized work
stoppages or slow downs, or any other labor disputes pending or threatened with
respect to any of the employees at the Hotel, or (iii) collective bargaining or
other labor agreements to which Seller or the Manager or the Hotel is bound with
respect to any employees employed at the Hotel.

(l) Operations. The Hotel has at all times been operated by Manager in
accordance with all applicable laws, rules, regulations, ordinances and codes.

(m) Existing Management Agreement. Seller has furnished to Buyer true and
complete copies of the Existing Management Agreement, which constitutes the
entire agreement of the parties with respect to the subject matter thereof and
which have not been amended or supplemented in any respect. There are no other
management agreements, franchise agreements, license agreements or similar
agreements for the operation or management of the Hotel or relating to the
Brand, to which Seller is a party or which are binding upon the Property, except
for the Existing Management Agreement. To Seller’s knowledge, the Improvements
comply with, and the Hotel is being operated in accordance with, all
requirements of such Existing Management Agreement and all other requirements of
the Manager, including all “brand standard” requirements of the Manager. The
Existing Management Agreement is in full force and effect, and shall remain in
full force and effect until the termination of the Existing Management Agreement
at Closing if Buyer and Manager execute a new management agreement as provided
in Article V hereof. To Seller’s knowledge, no default has occurred and is
continuing under the Existing Management Agreement, and no circumstances exist
which, with the giving of notice, the lapse of time or both, would constitute
such a default.

 

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(n) Construction of Hotel.

(i) The Hotel has been constructed in a good and workmanlike manner without
encroachments and in accordance in all material respects with all building
permits and certificates of occupancy therefor and all applicable zoning,
platting, subdivision, health, safety and similar laws, rules, regulations,
ordinances and codes.

(ii) The Personal Property is in good condition and operating order.

(iii) Necessary easements for ingress and egress, drainage, signage and
utilities serving the Hotel have either been dedicated to the public, conveyed
to the appropriate utility or will be conveyed to Buyer along with the Property.

7.2 Buyer’s Representations, Warranties and Covenants. Buyer represents,
warrants and covenants:

(a) Authority. Buyer is a corporation duly formed, validly existing and in good
standing in the Commonwealth of Virginia. Buyer has received or will have
received by the applicable Closing Date all necessary authorization of the Board
of Directors of Buyer to complete the transactions contemplated by this
Contract. No other consent or approval of any person, entity or governmental
authority is required for the execution, delivery or performance by Buyer of
this Contract, and this Contract is hereby binding and enforceable against
Buyer.

(b) Bankruptcy. Buyer is not insolvent nor the subject of any bankruptcy
proceeding, receivership proceeding or other insolvency, dissolution,
reorganization or similar proceeding.

(c) Non-Contravention. The execution and delivery of this Contract and the
instruments and documents referenced in this Contract by Buyer and the
consummation by Buyer of the transactions contemplated hereby will not violate
any judgment, order, injunction, decree, regulation or ruling of any court or
governmental entity or conflict with, result in a breach of, or constitute a
default under the organizational documents of Buyer, any note or other evidence
of indebtedness, any mortgage, deed of trust or indenture, or any lease or other
material agreement or instrument to which Buyer is a party or by which it is
bound.

(d) Consents. No consent, waiver, approval or authorization is required from any
person (that has not already been obtained) in connection with the execution and
delivery of this Contract and the instruments and documents referenced in this
Contract by Buyer or the performance by Buyer of the transactions contemplated
hereby.

(e) Bankruptcy. Buyer has not (i) commenced a voluntary case, or had entered
against it a petition, for relief under any federal bankruptcy act or any
similar petition, order or decree under any federal or state law or statute
relative to bankruptcy, insolvency or

 

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other relief for debtors, (ii) caused, suffered or consented to the appointment
of a receiver, trustee, administrator, conservator, liquidator or similar
official in any federal, state or foreign judicial or non-judicial proceeding,
to hold, administer and/or liquidate all or substantially all of its property,
or (iii) made an assignment for the benefit of creditors.

(f) Brokerage. There are no claims for brokerage commissions, finders’ fees, or
similar compensation in connection with this Contract based on any arrangement
or agreement entered into by Buyer and binding upon Seller other than as
disclosed in this Contract. Buyer has not paid or given, and will not pay or
give, any other third person any money or other consideration for obtaining this
Contract, other than the normal cost of conducting business and the cost of
professional services such as architects, engineers, consultants and attorneys.

(g) No Adverse Conditions. There are no adverse conditions or circumstances, no
pending or, to the best of Buyer’s knowledge, threatened litigation, no
governmental action, nor any other condition which could materially affect the
ability of Buyer to carry out its obligations hereunder and the Existing
Management Agreement.

(h) Information Accurate. All reports, documents, instruments, information and
forms of evidence delivered by or on behalf of Buyer to Seller concerning or
related to this Contract and the transactions contemplated hereby are, to the
best of Buyer’s knowledge, accurate, correct and sufficiently complete at the
time of submission to give Seller true and accurate knowledge of the subject
matter, and do not contain any misrepresentations or material omissions.

(i) No Contingent Obligations. Buyer has no contingent obligations or any other
contracts the performance or nonperformance of which could affect the ability of
Buyer to carry out its obligations hereunder or under the Existing Management
Agreement.

(j) No Legal Proceedings. There are no legal proceedings either pending or, to
the best of Buyer’s knowledge, threatened, to which Buyer is or may be made a
party, or the Property, is or may become subject, which has not been fully
disclosed in the documents submitted to Seller and which could materially affect
the ability of Buyer to carry out its obligations hereunder or under the
Existing Management Agreement.

7.3 Survival. All of the representations and warranties are true, correct and
complete in all material respects as of the date hereof and the statements set
forth therein (without qualification or limitation as to a party’s knowledge
thereof except as expressly provided for in this Article VII) shall be true,
correct and complete in all material respects as of the Closing Date. All of the
representations and warranties made herein shall survive Closing for a period of
two (2) years and shall not be deemed to merge into or be waived by the Deed or
any other closing documents.

ARTICLE VIII

ADDITIONAL COVENANTS

8.1 Subsequent Developments. After the date of this Contract and until the
Closing Date, Seller shall use best efforts to keep Buyer fully informed of all
subsequent developments of which Seller has knowledge (“Subsequent
Developments”) which would cause any of Seller’s representations or warranties
contained in this Contract to be no longer accurate in any material respect.

 

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8.2 Operations. From and after the date hereof through the Closing on the
Property, Seller shall comply with the Existing Management Agreement and keep
the same in full force and effect and shall perform and comply with all of the
following subject to and in accordance with the terms of such agreements:

(a) Continue to maintain the Property generally in accordance with past
practices of Seller and pursuant to and in compliance with the Existing
Management Agreement, including, without limitation, (i) using reasonable
efforts to keep available the services of all present employees at the Hotel and
to preserve its relations with guests, suppliers and other parties doing
business with Seller with respect to the Hotel, (ii) accepting booking contracts
for the use of the Hotel’s facilities retaining such bookings in accordance with
the terms of the Existing Management Agreement, (iii) maintaining the current
level of advertising and other promotional activities for the Hotel’s
facilities, (iv) maintaining the present level of insurance with respect to the
Hotel in full force and effect until the Closing Date for the Hotel and
(v) remaining in compliance in all material respects with all current Licenses;

(b) Keep, observe, and perform in all material respects all its obligations
under and pursuant to the Leases, the Service Contracts, the FF&E Leases, the
Existing Management Agreement, the Contracts, Plans and Specs, the Warranties
and all other applicable contractual arrangements relating to the Hotel;

(c) Not cause or permit the removal of FF&E from the Hotel except for the
purpose of discarding worn and valueless items that have been replaced with FF&E
of equal or better quality; timely make all repairs, maintenance, and
replacements to keep all FF&E and all other Personal Property and all Real
Property in good operating condition; keep and maintain the Hotel in a good
state of repair and condition, reasonable and ordinary wear and tear excepted;
and not commit waste of any portion of the Hotel;

(d) Maintain the levels and quality of the Personal Property generally at the
levels and quality existing on the date hereof and keep merchandise, supplies
and inventory adequately stocked, consistent with good business practice, as if
the sale of the Hotel hereunder were not to occur, including, without
limitation, maintaining linens and bath towels at least at a 2-par level for all
suites or rooms of the Hotel;

(e) Advise Buyer promptly of any litigation, arbitration, or administrative
hearing before any court or governmental agency concerning or affecting the
Hotel which is instituted or threatened after the date of this Contract or if
any representation or warranty contained in this Contract shall become false;

(f) Not take, or purposefully omit to take, any action that would have the
effect of violating any of the representations, warranties, covenants or
agreements of Seller contained in this Contract;

 

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(g) Pay or cause to be paid all taxes, assessments and other impositions levied
or assessed on the Hotel or any part thereof prior to the delinquency date, and
comply with all federal, state, and municipal laws, ordinances, regulations and
orders relating to the Hotel;

(h) Not sell or assign, or enter into any agreement to sell or assign, or create
or permit to exist any lien or encumbrance (other than a Permitted Exception)
on, the Property or any portion thereof; and

(i) Not allow any permit, receipt, license, franchise or right currently in
existence with respect to the operation, use, occupancy or maintenance of the
Hotel to expire, be canceled or otherwise terminated.

Seller shall promptly furnish to Buyer copies of all new, amended or extended
FF&E Leases, Service Contracts, Leases and other contracts or agreements (other
than routine hotel room bookings and other agreements entered into in the
ordinary course of business) relating to the Hotel and entered into by the
Manager prior to Closing; provided, however, that in the case of any of the
foregoing entered into by the Manager on its own behalf, only to the extent
Seller has knowledge thereof or a copy of which is obtainable from the Manager.
Buyer shall have the right to extend the Review Period for a period of five
(5) Business Days in order to review any of the foregoing which are material in
nature and that are not received by Buyer at least five (5) Business Days prior
to the expiration of the Review Period. Seller shall not, without first
obtaining the written approval of Buyer, which approval shall not be
unreasonably withheld, enter into any new FF&E Leases, Service Contracts, Leases
or other contracts or agreements related to the Hotel (other than routine hotel
room bookings), or extend any existing such agreements, unless such agreements
(x) can be terminated, without penalty, upon thirty (30) days’ prior notice or
(y) will expire prior to the Closing Date.

8.3 Third Party Consents. Prior to the Closing Date, Seller shall, at its
expense, (i) obtain any and all third party consents and approvals (x) required
in order to transfer the Hotel to Buyer, or (y) which, if not obtained, would
materially adversely affect the operation of the Hotel, including, without
limitation, all consents and approvals referred to on Exhibit E and (ii) use
best efforts to obtain all other third party consents and approvals (all of such
consents and approvals in (i) and (ii) above being referred to collectively as,
the “Third Party Consents”).

8.4 Employees. Subject to the approval of the Manager, Buyer and its employees,
representatives and agents shall have the right to communicate with the Hotel
staff and the Manager’s staff, including without limitation the general manager,
the director of sales, the engineering staff and other key management employees
of the Hotel, at any time before Closing. Buyer shall not interfere with the
operations of the Hotel while engaging in such communication in a manner that
materially adversely affects the operation of any Property or the Existing
Management Agreement.

8.5 Estoppel Certificates. Seller shall obtain from (i) each tenant under any
Lease affecting the Hotel (but not from current or prospective occupants of
hotel rooms and suites within the Hotel) and (ii) each lessor under any FF&E
Lease for the Hotel identified by Buyer as a material FF&E Lease, the estoppel
certificates substantially in the forms provided by Buyer to Seller during the
Review Period, and deliver to Buyer not less than five (5) days before the
Closing.

 

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8.6 Access to Financial Information. Buyer’s representatives shall have access
to, and Seller and its Affiliates shall cooperate with Buyer and furnish upon
request, all financial and other information relating to the Hotel’s operations
to the extent necessary to enable Buyer’s representatives to prepare audited
financial statements in conformity with Regulation S-X of the Securities and
Exchange Commission (the “SEC”) and other applicable rules and regulations of
the SEC and to enable them to prepare a registration statement, report or
disclosure statement for filing with the SEC on behalf of Buyer or its
Affiliates, whether before or after Closing and regardless of whether such
information is included in the Records to be transferred to Buyer hereunder.
Seller shall also provide to Buyer’s representative a signed representation
letter in form and substance reasonably acceptable to Seller sufficient to
enable an independent public accountant to render an opinion on the financial
statements related to the Hotel. Buyer will reimburse Seller for costs
reasonably incurred by Seller to comply with the requirements of this Section
and the preceding sentence to the extent that Seller is required to incur costs
furnishing information or costs not in the ordinary course of business for third
parties to provide such representation letters. The provisions of this Section
shall survive Closing or termination of this Contract.

8.7 Bulk Sales. At Seller’s risk and expense, Seller shall take all steps
necessary to comply with the requirements of a transferor under all bulk
transfer laws, if any, that are applicable to the transactions contemplated by
this Contract.

8.8 Indemnification. If the transactions contemplated by this Contract are
consummated as provided herein:

(a) Indemnification of Buyer. Without in any way limiting or diminishing the
warranties, representations or agreements herein contained or the rights or
remedies available to Buyer for a breach hereof, Seller hereby agrees to
indemnify, defend and hold harmless Buyer and its respective designees,
successors and assigns from and against all losses, judgments, liabilities,
claims, damages or expenses (including reasonable attorneys’ fees) of every
kind, nature and description in existence before, on or after Closing, whether
known or unknown, absolute or continent, joint or several, arising out of or
relating to:

(i) any claim made or asserted against Buyer or any of the Property by a
creditor of Seller, including any claims based on or alleging a violation of any
bulk sales act or other similar laws;

(ii) the breach of any representation, warranty, covenant or agreement of Seller
contained in this Contract;

(iii) any liability or obligation of Seller not expressly assumed by Buyer
pursuant to this Contract;

(iv) any claim made or asserted by an employee of Seller arising out of Seller’s
decision to sell the Property; and

 

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(v) the conduct and operation by or on behalf of Seller of its Hotel or the
ownership, use or operation of its Property prior to Closing.

(b) Indemnification of Seller. Without in any way limiting or diminishing the
warranties, representations or agreements herein contained or the rights or
remedies available to Seller for a breach hereof, Buyer hereby agrees, with
respect to this Contract, to indemnify, defend and hold harmless Seller from and
against all losses, judgments, liabilities, claims, damages or expenses
(including reasonable attorneys’ fees) of every kind, nature and description in
existence before, on or after Closing, whether known or unknown, absolute or
contingent, joint or several, arising out of or relating to:

(i) the breach of any representation, warranty, covenant or agreement of Buyer
contained in this Contract;

(ii) the conduct and operation by Buyer of its business at the Hotel after the
Closing; and

(iii) any liability or obligation of Buyer expressly assumed by Buyer at
Closing.

(c) Indemnification Procedure for Claims of Third Parties. Indemnification, with
respect to claims resulting from the assertion of liability by those not parties
to this Contract (including governmental claims for penalties, fines and
assessments), shall be subject to the following terms and conditions:

(i) The party seeking indemnification (the “Indemnified Party”) shall give
prompt written notice to the party or parties from which it is seeking
indemnification (the “Indemnifying Party”) of any assertion of liability by a
third party which might give rise to a claim for indemnification based on the
foregoing provisions of this Section 8.8, which notice shall state the nature
and basis of the assertion and the amount thereof, to the extent known;
provided, however, that no delay on the part of the Indemnified Party in giving
notice shall relieve the Indemnifying Party of any obligation to indemnify
unless (and then solely to the extent that) the Indemnifying Party is prejudiced
by such delay.

(ii) If in any action, suit or proceeding (a “Legal Action”) the relief sought
is solely the payment of money damages, and if the Indemnifying Party
specifically agrees in writing to indemnify such Indemnified Party with respect
thereto and demonstrates to the reasonable satisfaction of such Indemnified
Party its financial ability to do so, the Indemnifying Party shall have the
right, commencing thirty (30) days after such notice, at its option, to elect to
settle, compromise or defend, pursuant to this paragraph, by its own counsel and
at its own expense, any such Legal Action involving such Indemnified Party’s
asserted liability. If the Indemnifying Party does not undertake to settle,
compromise or defend any such Legal Action, such settlement, compromise or
defense shall be conducted in the sole discretion of such Indemnified Party, but
such Indemnified Party shall provide the Indemnifying Party with such
information concerning such settlement, compromise or defense as the
Indemnifying Party may reasonably

 

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request from time to time. If the Indemnifying Party undertakes to settle,
compromise or defend any such asserted liability, it shall notify such
Indemnified Party in writing of its intention to do so within thirty (30) days
of notice from such Indemnified Party provided above.

(iii) Notwithstanding the provisions of the previous subsection of this
Contract, until the Indemnifying Party shall have assumed the defense of the
Legal Action, the defense shall be handled by the Indemnified Party.
Furthermore, (x) if the Indemnified Party shall have reasonably concluded that
there are likely to be defenses available to it that are different from or in
addition to those available to the Indemnifying Party; (y) if the Legal Action
involves other than money damages and seeks injunctive or other equitable
relief; or (z) if a judgment against Buyer, as the Indemnified Party, in the
Legal Action will, in the good faith opinion of Buyer, establish a custom or
precedent which will be adverse to the best interest of the continuing business
of the Hotel, the Indemnifying Party, shall not be entitled to assume the
defense of the Legal Action and the defense shall be handled by the Indemnified
Party, provided that, in the case of clause (z), the Indemnifying Party shall
have the right to approve legal counsel selected by the Indemnified Party, such
approval not to be unreasonably withheld, delayed or conditioned. If the defense
of the Legal Action is handled by the Indemnified Party under the provisions of
this subsection, the Indemnifying Party shall pay all legal and other expenses
reasonably incurred by the Indemnified Party in conducting such defense.

(iv) In any Legal Action initiated by a third party and defended by the
Indemnified Party (w) the Indemnified Party shall have the right to be
represented by advisory counsel and accountants, at its own expense, (x) the
Indemnifying Party shall keep the Indemnified Party fully informed as to the
status of such Legal Action at all stages thereof, whether or not the
Indemnified Party is represented by its own counsel, (y) the Indemnifying Party
shall make available to the Indemnified Party and its attorneys, accounts and
other representatives, all books and records of Seller relating to such Legal
Action and (z) the parties shall render to each other such assistance as may be
reasonably required in order to ensure the proper and adequate defense of such
Legal Action.

(v) In any Legal Action initiated by a third party and defended by the
Indemnifying Party, the Indemnifying Party shall not make settlement of any
claim without the written consent of the Indemnified Party, which consent shall
not be unreasonably withheld. Without limiting the generality of the foregoing,
it shall not be deemed unreasonable to withhold consent to a settlement
involving injunctive or other equitable relief against Buyer or its respective
assets, employees, Affiliates or business, or relief which Buyer reasonably
believes could establish a custom or precedent which will be adverse to the best
interests of its continuing business.

8.9 Escrow Funds. To provide for the timely payment of any post-closing claims
by Buyer against Seller hereunder, at Closing, Seller shall deposit an amount
equal to Two Hundred Thousand and No/100 Dollars ($200,000.00) (the “Escrow
Funds”) which shall be withheld from the Purchase Price payable to Seller and
shall be deposited for a period of one (1) year in an escrow account with the
Title Company pursuant to an escrow agreement reasonably satisfactory

 

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in form and substance to Buyer and Seller (the “Post-Closing Agreement”), which
escrow and Post-Closing Agreement shall be established and entered into at
Closing and shall be a condition to Buyer’s obligations under this Contract. If
no claims have been asserted by Buyer against Seller, or all such claims have
been satisfied, within such 1-year period, the Escrow Funds deposited by Seller
shall be released to Seller.

8.10 Liquor Licenses. Seller shall cooperate with Buyer in arranging for the
transfer of the existing alcoholic beverage licenses (collectively, the “Liquor
Licenses”), if any in Seller’s name, provided that such transfer and cooperation
(i) shall be at no cost or expense to Seller, (ii) shall not expose Seller to
any continuing liability with respect to the operation of the Hotel or the sale
of alcoholic beverages therefrom after Closing, and (iii) shall not obligate
Seller to postpone the Closing.

ARTICLE IX

CONDITIONS FOR CLOSING

9.1 Buyer’s Conditions for Closing. Unless otherwise waived in writing, and
without prejudice to Buyer’s right to cancel this Contract during the Review
Period, the duties and obligations of Buyer to proceed to Closing under the
terms and provisions of this Contract are and shall be expressly subject to
strict compliance with, and satisfaction or waiver of, each of the conditions
and contingencies set forth in this Section 9.1, each of which shall be deemed
material to this Contract. In the event of the failure of any of the conditions
set forth in this Section 9.1 or of any other condition to Buyer’s obligations
provided for in this Contract, which condition is not waived in writing by
Buyer, Buyer shall have the right at its option to declare this Contract
terminated, in which case the Earnest Money Deposit and any interest thereon
shall be immediately returned to Buyer and each of the parties shall be relieved
from further liability to the other, except as otherwise expressly provided
herein, with respect to this Contract.

(a) All of Seller’s representations and warranties contained in or made pursuant
to this Contract shall be true and correct in all material respects as if made
again on the Closing Date.

(b) Buyer shall have received all of the instruments and conveyances listed in
Section 10.2.

(c) Seller shall have performed, observed and complied in all material respects
with all of the covenants, agreements, closing requirements and conditions
required by this Contract to be performed, observed and complied with by Seller,
as and when required hereunder.

(d) All Liquor Licenses in the name of Manager shall be in full force and effect
and shall remain in full force and effect following Closing, and Buyer shall
have received satisfactory evidence thereof.

(e) Third Party Consents in form and substance satisfactory to Buyer shall have
been obtained and furnished to Buyer.

 

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(f) The Escrow Funds shall have been deposited in the escrow account pursuant to
the Post-Closing Agreement and the parties thereto shall have entered into the
Post-Closing Agreement.

(g) Buyer and the Manager shall have executed and delivered the Assumption of
Management Agreement, or Buyer shall have entered into a new management
agreement with Manager, if required by Manager, in any case upon terms and
conditions acceptable to Buyer in its reasonable discretion (including, without
limitation, such terms and conditions as may be required to accommodate Buyer’s
and/or Buyer’s Affiliates’ REIT structure).

9.2 Seller’s Conditions for Closing. Unless otherwise waived in writing, and
without prejudice to Seller’s right to cancel this Contract during the Review
Period, the duties and obligations of Seller to proceed to Closing under the
terms and provisions of this Contract are and shall be expressly subject to
strict compliance with, and satisfaction or waiver of, each of the conditions
and contingencies set forth in this Section 9.2, each of which shall be deemed
material to this Contract. In the event of the failure of any of the conditions
set forth in this Section 9.2, which condition is not waived in writing by
Seller, Seller shall have the right at its option to declare this Contract
terminated and null and void, in which case the remaining Earnest Money Deposit
and any interest thereon shall be immediately returned to Buyer and each of the
parties shall be relieved from further liability to the other, except as
otherwise expressly provided herein.

(a) All of Buyer’s representations and warranties contained in or made pursuant
to this Contract shall be true and correct in all material respects as if made
again on the Closing Date.

(b) Seller shall have received all of the money, instruments and conveyances
listed in Section 10.3.

(c) Buyer shall have performed, observed and complied in all material respects
with all of the covenants, agreements, closing requirements and conditions
required by this Contract to be performed, observed and complied with by Buyer,
as and when required hereunder.

(d) Seller have received the waiver of all rights to purchase the Property held
by third parties, including without limitation, options, rights of first
refusal, rights of repurchase, and rights of first opportunity, and shall have
received the approval to the transfer of the Property to Buyer from any
applicable third party holding approval rights as to the transfer of the
Property; provided, however, this condition to closing shall be satisfied or
waived by Seller on or before the expiration of the Review Period and shall be
of no further force and effect following the expiration of the Review Period.

ARTICLE X

CLOSING AND CONVEYANCE

10.1 Closing. Unless otherwise agreed by Buyer and Seller, the Closing on the
Property shall occur on May 7, 2008 provided that all conditions to Closing by
Buyer hereunder have been satisfied. The date on which the Closing is to occur
as provided in this Section 10.1,

 

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or such other date as may be agreed upon by Buyer and Seller, is referred to in
this Contract as the “Closing Date” for the Property. The Closing shall be held
at 10:00 a.m. at the offices of the Title Company, or as otherwise determined by
Buyer and Seller.

10.2 Deliveries of Seller. At Closing, Seller shall deliver to Buyer the
following, and, as appropriate, all instruments shall be properly executed and
conveyance instruments to be acknowledged in recordable form (the terms,
provisions and conditions of all instruments not attached hereto as Exhibits
shall be mutually agreed upon by Buyer and Seller prior to such Closing):

(a) Deed. A Grant Deed conveying to Buyer fee simple title to the Real Property,
subject only to the Permitted Exceptions (the “Deed”).

(b) Bills of Sale. Bills of sale to Buyer and/or its designated Lessee,
conveying title to the tangible Personal Property (other than the alcoholic
beverage inventories, which, at Buyer’s election, shall be transferred by Seller
to the Manager as holder of the Liquor Licenses required for operation of the
Hotel).

(c) Existing Management Agreement. The termination of the Existing Management
Agreement, if Buyer and Manager enter into a new Management Agreement,
otherwise, if Buyer and Manager enter into the Assumption of Management
Agreement, then Seller shall execute whatever documents are required of Manager
to evidence the termination of the Existing Management Agreement vis-à-vis
Seller and Manager.

(d) General Assignments. Assignments of all of Seller’s right, title and
interest in and to all FF&E Leases, Service Contracts and Leases identified on
Exhibit D hereto (the “Hotel Contracts”). The assignment shall also be a general
assignment and shall provide for the assignment of all of Seller’s right, title
and interest in all Records, Warranties, Licenses, Tradenames, Contracts, Plans
and Specs and all other intangible Personal Property applicable to the Hotel.

(e) FIRPTA; 1099. A FIRPTA Affidavit or Transferor’s Certificate of Non-Foreign
Status as required by Section 1445 of the Internal Revenue Code and an IRS Form
1099.

(f) Title Company Documents. All affidavits, gap indemnity agreements and other
documents reasonably required by the Title Company. At Buyer’s sole expense,
Buyer shall have obtained an irrevocable commitment directly from the Title
Company (or in the event the Title Company is not willing to issue said
irrevocable commitment, then from such other national title company as may be
selected by either Buyer or Seller) for issuance of an Owner’s Policy of Title
Insurance to Buyer insuring good and marketable fee simple absolute title to the
Real Property constituting part of the Property, subject only to the Permitted
Exceptions in the amount of the Purchase Price.

(g) Possession; Estoppel Certificates. Possession of the Property, subject only
to rights of guests in possession and tenants pursuant to written leases
included in the Leases, and estoppel certificates from tenants under Leases and
the lessors under FF&E Leases in form and substance reasonably acceptable to
Buyer.

 

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(h) Vehicle Titles. The necessary certificates of titles duly endorsed for
transfer together with any required affidavits and other documentation necessary
for the transfer of title or assignment of leases from Seller to Buyer of any
motor vehicles used in connection with the Hotel’s operations.

(i) Authority Documents. Certified copy of resolutions of the Board of Directors
of Seller authorizing the sale of the Property contemplated by this Contract,
and/or other evidence reasonably satisfactory to Buyer and the Title Company
that the person or persons executing the closing documents on behalf of Seller
have full right, power and authority to do so, along with a certificate of good
standing of Seller from the State in which the Property is located.

(j) Miscellaneous. Such other instruments as are contemplated by this Contract
to be executed or delivered by Seller, reasonably required by Buyer or the Title
Company, or customarily executed in the jurisdiction in which the Hotel is
located, to effectuate the conveyance of property similar to the Hotel, with the
effect that, after the Closing, Buyer will have succeeded to all of the rights,
titles, and interests of Seller related to the Hotel and Seller will no longer
have any rights, titles, or interests in and to the Hotel.

(k) Plans, Keys, Records, Etc. To the extent not previously delivered to and in
the possession of Buyer, all Contracts, Plans and Specs, all keys for the Hotel
(which keys shall be properly tagged for identification), all Records,
including, without limitation, all Warranties, Licenses, Leases, FF&E Leases and
Service Contracts for the Hotel.

(l) Closing Statements. Seller’s Closing Statement, and a certificate confirming
the truth of Seller’s representations and warranties hereunder as of the Closing
Date.

10.3 Buyer’s Deliveries. At Closing of the Hotel, Buyer shall deliver the
following:

(a) Purchase Price. The balance of the Purchase Price, adjusted for the
adjustments provided for in Section 12.1, below, and less any sums to be
deducted therefrom as provided in Section 2.4.

(b) Authority Documents. Certified copy of resolutions of the Board of Directors
of Buyer authorizing the purchase of the Hotel contemplated by this Contract,
and/or other evidence satisfactory to Seller and the Title Company that the
person or persons executing the closing documents on behalf of Buyer have full
right, power and authority to do so.

(c) Miscellaneous. Such other instruments as are contemplated by this Contract
to be executed or delivered by Buyer, reasonably required by Seller or the Title
Company, or customarily executed in the jurisdiction in which the Hotel is
located, to effectuate the conveyance of property similar to the Hotel, with the
effect that, after the Closing, Buyer will have succeeded to all of the rights,
titles, and interests of Seller related to the Hotel and Seller will no longer
have any rights, titles, or interests in and to the Hotel.

(d) Closing Statements. Buyer’s Closing Statement, and a certificate confirming
the truth of Buyer’s representations and warranties hereunder as of the Closing
Date.

 

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ARTICLE XI

COSTS

All Closing costs shall be paid as set forth below:

11.1 Seller’s Costs. In connection with the sale of the Property contemplated
under this Contract, Seller shall be responsible for all transfer and
recordation taxes, including, without limitation, all transfer, mansion, sales,
use or bulk transfer taxes or like taxes on or in connection with the transfer
of the Personal Property constituting part of the Property pursuant to the Bill
of Sale, in each case except as otherwise provided in Section 12, and all
accrued taxes of Seller prior to Closing and income, sales and use taxes and
other such taxes of Seller attributable to the sale of the Property to Buyer.
Seller shall be responsible for x) one-half of the Escrow Agent’s escrow fee,
(y) the transfer taxes associated with the transaction, and (z) any additional
costs and charges customarily charged to Sellers in accordance with common
escrow practices in the county in which the Property is located, other than
those costs and charges specifically required to be paid by Buyer hereunder.
Seller shall be responsible for the key money reimbursements, if any, related to
the termination or assumption by Buyer of the Existing Management Agreement as
provided in Article V. Seller shall also be responsible for any fees for the
performance of the property improvement plan (PIP) review and report by the
Manager and the cost of completing the PIP items, as well as costs and expenses
of its attorneys, accountants, appraisers and other professionals, consultants
and representatives. If there is a PIP required by the Manager, the cost of
completion shall be credited by Seller to Buyer at Closing. Any FF&E escrows
held by Lender or Manager shall be credited to Buyer at Closing without Buyer
having to fund same. Seller shall also be responsible for payment of all
prepayment penalties and other amounts payable in connection with the pay-off of
any liens and/or indebtedness encumbering the Property.

11.2 Buyer’s Costs. In connection with the purchase of the Property contemplated
under this Contract, Buyer shall be responsible for the costs and expenses of
its attorneys, accountants and other professionals, consultants and
representatives. Buyer shall pay (x) one-half of the Escrow Agent’s escrow fee,
(y) costs and expenses of preparation of the title insurance commitment and the
issuance of the title insurance policy contemplated by Article IV or additional
endorsements Buyer requests in accordance with Article IV, and (z) any
additional costs and charges customarily charged to buyers in accordance with
common escrow practices in the county in which the Property is located, other
than those costs and charges specifically required to be paid by Seller
hereunder. In addition to the foregoing, Buyer shall be responsible for all
costs relating to the preparation of or any work related to any ALTA or other
surveys that may be required for issuance of the Title Policy. Buyer shall also
be responsible for the costs and expenses in connection with the assignment of
the Existing Management Agreement, or the costs and expenses in connection with
a new management agreement with Manager, if required by Manager, pursuant to the
terms of the Existing Management Agreement. Buyer shall be responsible for the
key money reimbursements, if any, related to the termination or assumption by
Buyer of the Existing Management Agreement as provided in Article V. Buyer shall
also be responsible for the costs and expenses in connection with the
preparation of any environmental report, any update to the survey and the per
page recording charges and clerk’s fee for the Deed (if applicable).

 

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ARTICLE XII

ADJUSTMENTS

12.1 Adjustments. Unless otherwise provided herein, at Closing, adjustments
between the parties shall be made as of 12:01 a.m. on the Closing Date (the
“Cutoff Time”), with the income and expenses accrued prior to the Closing Date
being allocated to Seller and the income and expenses accruing on and after the
Closing Date being allocated to Buyer, all as set forth below. All of such
adjustments and allocations shall be made in cash at Closing and shall be
collected through and/or adjusted in accordance with the terms of the Existing
Management Agreement. Except as otherwise expressly provided herein, all
apportionments and adjustments shall be made on an accrual basis in accordance
with generally accepted accounting principles. Buyer and Seller shall request
that the Manager determine the apportionments, allocations, prorations and
adjustments as of the Cutoff Time.

(a) Taxes. All real estate taxes, personal property taxes, or any other taxes
and special assessments (special or otherwise) of any nature upon the Property
levied, assessed or pending for the calendar year in which the Closing occurs
(including the period prior to Closing, regardless of when due and payable)
shall be prorated as of the Cutoff Time and, if no tax bills or assessment
statements for such calendar year are available, such amounts shall be estimated
on the basis of the best available information for such taxes and assessments
that will be due and payable on the Hotel for the calendar year in which Closing
occurs.

(b) Utilities. All suppliers of utilities shall be instructed to read meters or
otherwise determine the charges owing as of the Closing Date for services prior
thereto, which charges shall be allocated to Seller. Charges accruing after
Closing shall be allocated to Buyer. If elected by Seller, Seller shall be given
credit, and Buyer shall be charged, for any utility deposits transferred to and
received by Buyer at Closing.

(c) Income/Charges. All rents, income and charges receivable or payable under
any Leases and Hotel Contracts applicable to the Property, and any deposits,
prepayments and receipts thereunder, shall be prorated between Buyer and Seller
as of the Cutoff Time.

(d) Accounts. All working capital accounts, reserve accounts and escrow accounts
(including all FF&E accounts, all PIP accounts, Manager escrows, but excluding
amounts held in tax and insurance escrow accounts and utility deposits to the
extent excluded from the definition of Deposits) shall become the property of
Buyer, without additional charge to Buyer and without Buyer being required to
fund the same.

(e) Guest Ledger. Subject to (f) below, all accounts receivable of registered
guests at the Hotel who have not checked out and were occupying rooms as of the
Cutoff Time, shall be prorated as provided herein.

(f) Room Rentals. All receipts from guest room rentals and other suite revenues
for the night in which the Cutoff Time occurs shall belong to Seller, but Seller
shall provide Buyer credit at Closing equal to the reasonable expenses to be
incurred by Buyer to clean such guests’ rooms.

 

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(g) Advance Deposits. All prepaid rentals, room rental deposits, and all other
deposits for advance registration, banquets or future services to be provided on
and after the Closing Date shall be credited to Buyer.

(h) Accounts Receivable. To the extent not apportioned at Closing and subject to
(e) and (f) above, all accounts receivable and credit card claims as of the
Cutoff Time shall remain the property of Seller, and Seller and Buyer agree that
the monies received from debtors owing such accounts receivable balances after
Closing, unless otherwise provided in the Existing Management Agreement, shall
be applied as expressly provided in such remittance, or if not specified then to
the Seller’s outstanding invoices to such account debtors in chronological order
beginning with the oldest invoices, and thereafter, to Buyer’s account.

(i) Accounts Payable. To the extent not apportioned at Closing, any
indebtedness, accounts payable, liabilities or obligations of any kind or nature
related to Seller or the Property for the periods prior to and including the
Closing Date shall be retained by Seller and promptly allocated to Seller and
evidence thereof shall be provided to Buyer, and Buyer shall not be or become
liable therefor, except as expressly assumed by Buyer pursuant to this Contract,
and invoices received in the ordinary course of business prior to Closing shall
be allocated to Seller at Closing.

(j) Restaurants, Bars, Machines, Other Income. All monies received in connection
with bar, restaurant, banquet and similar and other services at the Hotel (other
than amounts due from any guest and included in room rentals) prior to the close
of business for each such operation for the night in which the Cutoff Time
occurs shall belong to Seller, and all other receipts and revenues (not
previously described in this Section 12.1) from the operation of any department
of the Hotel shall be prorated between Seller and Buyer at Closing.

12.2 Reconciliation and Final Payment. Seller and Buyer shall reasonably
cooperate after Closing to make a final determination of the allocations and
prorations required under this Contract within ninety (90) days after the
Closing Date. Upon the final reconciliation of the allocations and prorations
under this Section, the party which owes the other party any sums hereunder
shall pay such party such sums within ten (10) days after the reconciliation of
such sums. The obligations to calculate such prorations, make such
reconciliations and pay any such sums shall survive the Closing.

12.3 Employees. None of the employees of the Hotel shall become employees of
Buyer, as of the Closing Date; instead, such employees shall remain employees of
the Manager. Seller shall not give notice under any applicable federal or state
plant closing or similar act, including, if applicable, the Worker Adjustment
and Retraining Notification Provisions of 29 U.S.C., Section 2102, the parties
having agreed that a mass layoff, as that term is defined in 29 U.S.C.,
2101(a)(3), will not have occurred. Any liability for payment of all wages,
salaries and benefits, including, without limitation, accrued vacation pay, sick
leave, bonuses, pension benefits, COBRA rights, and other benefits accrued or
earned by and due to employees at the Hotel through the Cutoff Time, together
with F.I.C.A., unemployment and other taxes and benefits due with respect to
such employees for such period, shall be charged to Seller, in accordance with
the Existing Management Agreement, for the purposes of the adjustments to be
made as of the Cutoff Time. All liability for wages, salaries and benefits of
the employees

 

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accruing in respect of and attributable to the period from and after Closing
shall be charged to Buyer, in accordance with the Existing Management Agreement.
To the extent applicable, all such allocations and charges shall be adjusted in
accordance with the provisions of the Existing Management Agreement.

ARTICLE XIII

CASUALTY AND CONDEMNATION

13.1 Risk of Loss; Notice. Prior to Closing and the delivery of possession of
the Property to Buyer in accordance with this Contract, all risk of loss to the
Property (whether by casualty, condemnation or otherwise) shall be borne by
Seller. In the event that (a) any loss or damage to the Hotel shall occur prior
to the Closing Date as a result of fire or other casualty, or (b) Seller
receives notice that a governmental authority has initiated or threatened to
initiate a condemnation proceeding affecting the Hotel, Seller shall give Buyer
immediate written notice of such loss, damage or condemnation proceeding (which
notice shall include a certification of (i) the amounts of insurance coverages
in effect with respect to the loss or damage and (ii) if known, the amount of
the award to be received in such condemnation).

13.2 Buyer’s Termination Right. If, prior to Closing and the delivery of
possession of the Property to Buyer in accordance with this Contract, (a) any
condemnation proceeding shall be pending against a substantial portion of the
Hotel or (b) there is any substantial casualty loss or damage to the Hotel,
Buyer shall have the option to terminate this Contract, provided Buyer delivers
written notice to Seller of its election within twenty (20) days after the date
Seller has delivered Buyer written notice of any such loss, damage or
condemnation as provided above, and in such event, the Earnest Money Deposit,
and any interest thereon, shall be delivered to Buyer and thereafter, except as
expressly set forth herein, no party shall have any further obligation or
liability to the other under this Contract. In the context of condemnation,
“substantial” shall mean condemnation of such portion of a Hotel (or access
thereto) as could, in Buyer’s reasonable judgment, render use of the remainder
impractical or unfeasible for the uses herein contemplated, and, in the context
of casualty loss or damage, “substantial” shall mean a loss or damage in excess
of One Hundred Thousand and No/100 Dollars ($100,000.00) in value.

13.3 Procedure for Closing. If Buyer shall not timely elect to terminate this
Contract under Section 13.2 above, or if the loss, damage or condemnation is not
substantial, each applicable Seller agrees to pay to Buyer at the Closing all
insurance proceeds or condemnation awards which Seller has received as a result
of the same, plus an amount equal to the insurance deductible, and assign to
Buyer all insurance proceeds and condemnation awards payable as a result of the
same, in which event the Closing shall occur without Seller replacing or
repairing such damage. In the case of damage or casualty, at Buyer’s election,
Seller shall repair and restore the Property to its condition immediately prior
to such damage or casualty and shall assign to Buyer all excess insurance
proceeds subject to rights of any mortgagee holding a first priority security
interest in the Real Property.

 

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ARTICLE XIV

DEFAULT REMEDIES

14.1 Buyer’s Default. SUBJECT TO ARTICLE XVII, IN THE EVENT THAT BUYER FAILS TO
COMPLETE THE PURCHASE OF THE PROPERTY FOR ANY REASON OTHER THAN (A) A DEFAULT BY
SELLER AFTER THE EXPIRATION OF A FIVE (5) DAY CURE PERIOD FOLLOWING WRITTEN
NOTICE FROM SELLER (PROVIDED NO NOTICE SHALL EXTEND THE TIME FOR CLOSING)
(B) THE EXISTENCE OF A PENDING DEFAULT, (C) THE FAILURE OF ANY CONDITION TO
BUYER’S OBLIGATION TO CLOSE THIS TRANSACTION WHICH IS EXPRESSLY SET FORTH
HEREIN, OR (D) THE TERMINATION OF THIS AGREEMENT BY BUYER PURSUANT TO A
TERMINATION RIGHT EXPRESSLY SET FORTH HEREIN OR OTHERWISE PROVIDED BY LAW,
SELLER SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT AND IN SUCH EVENT THE
DEPOSIT, IF ANY HELD BY TITLE COMPANY (TOGETHER WITH ALL INTEREST ACCRUED
THEREON) SHALL BE DELIVERED TO SELLER BY TITLE COMPANY UPON WRITTEN DEMAND AND
THE DEPOSIT, IF ANY, RELEASED TO SELLER SHALL BE RETAINED BY SELLER, AND SUCH
DEPOSITS (TOGETHER WITH ALL INTEREST ACCRUED THEREON) SHALL BE RETAINED BY
SELLER AS LIQUIDATED DAMAGES WITH RESPECT TO SUCH DEFAULT. THEREAFTER, BOTH
PARTIES SHALL BE RELIEVED OF AND RELEASED FROM ANY FURTHER LIABILITY HEREUNDER,
EXCEPT FOR THE INDEMNIFICATION OBLIGATIONS EXPRESSLY SET FORTH IN ANY SECTION OF
THIS AGREEMENT, WHICH OBLIGATIONS SHALL BE PERFORMABLE AND OWING IN ADDITION TO
ANY SUMS RETAINED HEREUNDER BY SELLER AS LIQUIDATED DAMAGES, AND EXCEPT THAT
SELLER SHALL ALSO HAVE THE RIGHT TO COLLECT FROM BUYER ALL COSTS AND EXPENSES
(INCLUDING WITHOUT LIMITATION, ATTORNEY FEES AND EXPENSES) INCURRED BY SELLER IN
THE EVENT BUYER DISPUTES SELLER’S RIGHT TO RECEIVE AND RETAIN THE FULL AMOUNT OF
THE DEPOSIT (TOGETHER WITH ALL INTEREST ACCRUED THEREON), WHICH SUMS SHALL BE
PAYABLE BY BUYER TO SELLER IN ADDITION TO ANY SUMS RETAINED HEREUNDER BY SELLER
AS LIQUIDATED DAMAGES. SELLER AND BUYER AGREE THAT IT WOULD BE EXTREMELY
DIFFICULT AND IMPRACTICABLE TO FIX ACTUAL DAMAGES TO SELLER AS A RESULT OF A
DEFAULT BY BUYER AND THAT THEY HAVE AGREED THE DEPOSIT IS A FAIR AND REASONABLE
AMOUNT TO BE RETAINED BY SELLER AS AGREED AND LIQUIDATED DAMAGES IN LIGHT OF
SELLER’S REMOVAL OF THE PROPERTY FROM THE MARKET AND THE COSTS INCURRED BY
SELLER AND THAT RETENTION OF THE DEPOSIT (TOGETHER WITH ALL INTEREST ACCRUED
THEREON) BY SELLER SHALL NOT CONSTITUTE A PENALTY OR FORFEITURE. WITHOUT
LIMITING THE FOREGOING, THIS SECTION 14.1 SHALL NOT PROHIBIT SELLER FROM
BRINGING AN ACTION AGAINST BUYER FOR BREACH OF ANY OF THE CONFIDENTIALITY OR
NONDISCLOSURE PROVISIONS CONTAINED IN THIS AGREEMENT.

INITIALS:

                    /                      [Initials of Buyer and Seller]

 

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14.2 Seller’s Default. SUBJECT TO ARTICLE XVII, IF BUYER TENDERS PERFORMANCE OF
ALL OF ITS OBLIGATIONS IN ACCORDANCE WITH THIS AGREEMENT AND SELLER REFUSES OR
FAILS TO CONVEY THE PROPERTY AS HEREIN PROVIDED FOR ANY REASON OTHER THAN (A) A
DEFAULT BY BUYER AFTER THE EXPIRATION OF A FIVE (5) DAY CURE PERIOD FOLLOWING
WRITTEN NOTICE FROM BUYER, (B) THE EXISTENCE OF A PENDING DEFAULT, (C) THE
FAILURE OF A CONDITION TO SELLER’S OBLIGATION TO CLOSE THIS TRANSACTION WHICH IS
EXPRESSLY SET FORTH HEREIN, OR (D) ANY OTHER PROVISION OF THIS AGREEMENT THAT
EXPRESSLY PERMITS SELLER TO TERMINATE THIS AGREEMENT OR OTHERWISE RELIEVES
SELLER OF THE OBLIGATION TO CONVEY THE PROPERTY, BUYER SHALL ELECT AS ITS SOLE
REMEDY HEREUNDER EITHER TO TERMINATE THIS AGREEMENT AND RECOVER THE DEPOSIT, IN
WHICH CASE BUYER SHALL ALSO BE ENTITLED TO RECOVER ITS ACTUAL OUT-OF-POCKET
EXPENSES IN CONNECTION WITH THE PROPOSED ACQUISITION OF THE PROPERTY (INCLUDING,
WITHOUT LIMITATION, DUE DILIGENCE AND NEGOTIATIONS WITH SELLER AND LENDERS, IF
APPLICABLE), NOT TO EXCEED THE SUM OF ONE HUNDRED THOUSAND DOLLARS ($100,000),
OR TO ENFORCE, SELLER’S OBLIGATIONS UNDER THIS AGREEMENT TO CONVEY THE PROPERTY
BY AN ACTION FOR SPECIFIC PERFORMANCE, PROVIDED THAT NO SUCH ACTION IN SPECIFIC
PERFORMANCE SHALL SEEK TO REQUIRE SELLER TO DO ANY OF THE FOLLOWING: (A) CHANGE
THE CONDITION OF THE PROPERTY OR RESTORE THE SAME AFTER ANY FIRE OR OTHER
CASUALTY; (B) EXPEND MONEY OR POST A BOND TO REMOVE A TITLE ENCUMBRANCE OR
DEFECT (OTHER THAN A SELLER’S MONETARY LIEN) OR CORRECT ANY MATTER SHOWN ON A
SURVEY OF THE PROPERTY; OR (C) SECURE ANY PERMIT, APPROVAL, OR CONSENT WITH
RESPECT TO THE PROPERTY OR SELLER’S CONVEYANCE OF THE PROPERTY.

INITIALS:

                    /                      [Initials of Buyer and Seller]

14.3 Attorney’s Fees. Anything to the contrary herein notwithstanding, if it
shall be necessary for either the Buyer or Seller to employ an attorney to
enforce its rights pursuant to this Contract because of the default of the other
party, and the non-defaulting party is successful in enforcing such rights, then
the defaulting party shall reimburse the non-defaulting party for the
non-defaulting party’s reasonable attorneys’ fees, costs and expenses.

ARTICLE XV

NOTICES

All notices required herein shall be deemed to have been validly given, as
applicable: (i) if given by telecopy, when the telecopy is transmitted to the
party’s telecopy number specified below and confirmation of complete receipt is
received by the transmitting party during normal business hours or on the next
Business Day if not confirmed during normal business hours, (ii) if hand
delivered to a party against receipted copy, when the copy of the notice is
receipted or rejected, (iii) if given by certified mail, return receipt
requested, postage prepaid, two (2) Business Days after it is posted with the
U.S. Postal Service at the address of the party specified below or (iv) on the
next delivery day after such notices are sent by recognized and reputable
commercial overnight delivery service marked for next day delivery, return
receipt requested or similarly acknowledged:

 

31

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If to Buyer:   

Apple Eight Hospitality Ownership, Inc.

814 E. Main Street

Richmond, Virginia 23219

Attention: Sam Reynolds

Fax No.: (804) 344-8129

with a copy to:   

Apple Eight Hospitality Ownership, Inc.

814 E. Main Street

Richmond, Virginia 23219

Attention: Legal Dept.

Fax No.: (804) 344-8129

If to Seller:   

First Street Hotels, LLC

c/o R D Olson Development

2955 Main Street, 3rd Floor

Irvine, CA 92614

Attention: Robert D. Olson

Fax No.: (949) 271-1080

with a copy to:   

Scott S. Pollard, Attorney at Law

4141 MacArthur Blvd., Suite 140

Newport Beach, CA 92660

Fax No.: (949) 261-6616

Addresses may be changed by the parties hereto by written notice in accordance
with this Section.

ARTICLE XVI

MISCELLANEOUS

16.1 Performance. Time is of the essence in the performance and satisfaction of
each and every obligation and condition of this Contract.

16.2 Binding Effect; Assignment. This Contract shall be binding upon and shall
inure to the benefit of each of the parties hereto, their respective successors
and assigns.

16.3 Entire Agreement. This Contract and the Exhibits constitute the sole and
entire agreement between Buyer and Seller with respect to the subject matter
hereof. No modification of this Contract shall be binding unless signed by both
Buyer and Seller.

 

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16.4 Governing Law. The validity, construction, interpretation and performance
of this Contract shall in all ways be governed and determined in accordance with
the laws of the State of California (without regard to conflicts of law
principles).

16.5 Captions. The captions used in this Contract have been inserted only for
purposes of convenience and the same shall not be construed or interpreted so as
to limit or define the intent or the scope of any part of this Contract.

16.6 Confidentiality. Except as either party may reasonably determine is
required by law (including without limitation laws and regulations applicable to
Buyer or its Affiliates who may be public companies) prior to Closing, Buyer and
Seller shall not disclose the existence of this Contract or their respective
intentions to purchase and sell the Property or generate or participate in any
publicity or press release regarding this transaction, except to Buyer’s and
Seller’s legal counsel and lender, Buyer’s consultants, investors and agents,
the Manager and the Title Company and except as necessitated by Buyer’s Due
Diligence Examination and/or shadow management, unless both Buyer and Seller
agree in writing and as necessary to effectuate the transactions contemplated
hereby.

16.7 Closing Documents. To the extent any Closing documents are not attached
hereto at the time of execution of this Contract, Buyer and Seller shall
negotiate in good faith with respect to the form and content of such Closing
documents prior to Closing.

16.8 Counterparts. This Contract may be executed in counterparts by the parties
hereto, and by facsimile signature, and each shall be considered an original and
all of which shall constitute one and the same agreement.

16.9 Severability. If any provision of this Contract shall, for any reason, be
adjudged by any court of competent jurisdiction to be invalid or unenforceable,
such judgment shall not affect, impair or invalidate the remainder of this
Contract but shall be confined in its operation to the provision or provisions
hereof directly involved in the controversy in which such judgment shall have
been rendered, and this Contract shall be construed as if such provision had
never existed, unless such construction would operate as an undue hardship on
Seller or Buyer or would constitute a substantial deviation from the general
intent of the parties as reflected in this Contract.

16.10 Interpretation. For purposes of construing the provisions of this
Contract, the singular shall be deemed to include the plural and vice versa and
the use of any gender shall include the use of any other gender, as the context
may require.

16.11 (Intentionally Omitted)

16.12 Further Acts. In addition to the acts, deeds, instruments and agreements
recited herein and contemplated to be performed, executed and delivered by Buyer
and Seller, Buyer and Seller shall perform, execute and deliver or cause to be
performed, executed and delivered at the Closing or after the Closing, any and
all further acts, deeds, instruments and agreements and provide such further
assurances as the other party or the Title Company may reasonably require to
consummate the transaction contemplated hereunder.

 

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16.13 Joint and Several Obligations. If Seller consists of more than one person
or entity, each such person or entity shall be jointly and severally liable with
respect to the obligations of Seller under this Contract.

ARTICLE XVII

OCEANSIDE CONTRACT

Concurrently with the execution of this Contract, Buyer is entering into a
purchase contract (the “Oceanside Contract”) with Ocean Ranch Hotels, LLC, a
California limited liability company (the “Oceanside Seller”) for the purchase
of the Residence Inn San Diego Oceanside hotel located at 3603 Ocean Ranch
Blvd., Oceanside, California 92056. Buyer and Seller acknowledge and agree that
the closings under this Contract and the Oceanside Contract must occur
simultaneously, that a default by either party under this Contract that remains
uncured in accordance with the terms of this Contract shall entitle the
non-defaulting party to terminate the Oceanside Contract on notice to the other,
and that a default by either party under the Oceanside Contract shall entitle
the non-defaulting party to terminate this Contract on notice to the other. In
addition, in the event of any occurrence or exercise of any right which results
in the termination of the Oceanside Contract prior to Closing, either party
shall have the right to terminate this Contract upon notice to the other, in
which event, unless such termination resulted from Buyer’s default, the Deposit
shall be paid to Buyer. Notwithstanding the foregoing, in the event of
termination of this Contract and the Burbank Contract as a result of Buyer’s
default under one, but not both, of such Contracts, the selling party shall only
be entitled to retain the Deposit for the Contract under which Buyer shall have
defaulted. Notwithstanding the foregoing, in the event of a default by Seller,
under one, but not both, of such Contracts, Buyer shall be entitled to either
(i) terminate both this Contract and the Oceanside Contract, or (ii) pursue
specific performance of both this Contract and the Oceanside Contract.

[Signatures Begin on Following Page]

 

34

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IN WITNESS WHEREOF, this Contract has been executed, to be effective as of the
date first above written, by the Buyer and Seller.

 

SELLER:

FIRST STREET HOTELS, LLC,

a Delaware limited liability company

By:  

/s/ Robert D. Olson

Name:   Robert D. Olson, designated representative of R. D. Olson Investments
II, LLC Title:   Managing Member By:  

/s/ Joseph M. Martelli

Name:   Joseph M. Martelli, designated representative of Joseph M. Martelli and
Lisa Gayle Martelli, Trustees of the Martelli Living Trust dated June 14, 1990
Title:   Managing Member BUYER:

APPLE EIGHT HOSPITALITY OWNERSHIP,

INC., a Virginia corporation

By:  

/s/ Justin G. Knight

Name:   Justin G. Knight Title:   President

 

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EXHIBIT “A”

LEGAL DESCRIPTION OF LAND

(ATTACHED HERETO)

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The land situated in the City of Burbank, County of Los Angeles, State
of California, and is described as follows:

PARCEL ONE:

LOTS 1, 2, 4 AND 6 AND THAT PORTION OF LOT 8 IN BLOCK 70 OF THE TOWN OF BURBANK,
IN THE CITY OF BURBANK, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 17 PAGES 19 TO 22 INCLUSIVE OF MISCELLANEOUS RECORDS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST EASTERLY CORNER OF SAID LOT 8; THENCE ALONG THE
NORTHEASTERLY LINE OF SAID LOT, NORTH 48 DEGREES 41’ 51” WEST, TO THE MOST
NORTHERLY CORNER OF SAID LOT 8; THENCE SOUTH 00 DEGREES 23’ 13” EAST 19.70 FEET;
THENCE SOUTHEASTERLY IN A DIRECT LINE TO A POINT IN THE SOUTHEASTERLY LINE OF
SAID LOT, DISTANT THEREON, 23.36 FEET SOUTHWESTERLY FROM SAID MOST EASTERLY
CORNER; THENCE NORTHEASTERLY ALONG SAID SOUTHEASTERLY LINE 23.36 FEET TO THE
POINT OF BEGINNING.

EXCEPT FROM THAT PORTION OF LOT 8, ALL MINERALS, OILS, GASES AND OTHER
HYDROCARBONS BY WHATSOEVER NAME KNOWN, THAT MAY BE WITHIN OR UNDER THE PARCEL OF
LAND HEREINABOVE DESCRIBED WITHOUT, HOWEVER, THE RIGHT TO DRILL, DIG OR MINE
THROUGH THE SURFACE THEREOF, AS RESERVED BY THE STATE OF CALIFORNIA, IN DEED
RECORDED OCTOBER 21, 1960 AS INSTRUMENT NO. 4193.

ALSO EXCEPT THOSE PORTIONS OF LOTS 1 AND 2 OF BLOCK 70 OF SAID TOWN OF BURBANK,
WHICH LIE NORTHEASTERLY OF A LINE THAT IS PARALLEL WITH AND 46 FEET
SOUTHWESTERLY OF THE CENTERLINE OF FIRST STREET, 80 FEET WIDE, AS SHOWN ON THE
MAP OF SAID TOWN OF BURBANK, AND THAT PORTION OF SAID LOT 1 WHICH IS
SOUTHWESTERLY OF SAID PARALLEL LINE AND WHICH LIES EXTERNAL TO A CURVE CONCAVE
WESTERLY, HAVING A RADIUS OF 15.00 FEET AND TANGENT TO SAID PARALLEL LINE AND
TANGENT TO THE SOUTHEASTERLY LINE OF SAID LOT 1.

SAID LAND IS ALSO SHOWN IN RECORD OF SURVEY MAP AS FILED IN BOOK 167 PAGE 76 OF
RECORD OF SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

PARCEL TWO:

LOT 3 IN BLOCK 70 OF TOWN OF BURBANK, IN THE CITY OF BURBANK, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGE 19 OF
MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

SAID LAND IS ALSO SHOWN IN RECORD OF SURVEY MAP AS FILED IN BOOK 167 PAGE 76 OF
RECORD OF SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

PARCEL THREE:

LOT 5 IN BLOCK 70 OF TOWN OF BURBANK, IN THE CITY OF BURBANK, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17 PAGES 19 ET SEQ. OF
MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 

2

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SAID LAND IS ALSO SHOWN IN RECORD OF SURVEY MAP AS FILED IN BOOK 167 PAGE 76 OF
RECORD OF SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

PARCEL FOUR:

THE NORTHERLY 42 FEET OF LOT 7 IN BLOCK 70 OF TOWN OF BURBANK, IN THE CITY OF
BURBANK, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 17 PAGES 19 ET SEQ., OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

EXCEPT THAT PORTION, DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE SOUTHEASTERLY LINE OF SAID LOT 7, DISTANT
SOUTHWESTERLY 16.16 FEET FROM THE MOST EASTERLY CORNER OF SAID LOT; THENCE ALONG
SAID SOUTHEASTERLY LINE, SOUTH 41 DEGREES 14’ 42” WEST, A DISTANCE OF 25.84 FEET
TO THE MOST SOUTHERLY CORNER OF THE NORTHEASTERLY 42 FEET OF SAID LOT; THENCE
ALONG THE SOUTHWESTERLY LINE OF SAID NORTHEASTERLY 42.00 FEET, NORTH 48 DEGREES
41’ 43” WEST, A DISTANCE OF 155 FEET TO THE NORTHWESTERLY LINE OF SAID LOT ;
THENCE ALONG SAID NORTHWESTERLY LINE, NORTH 41 DEGREES 14’ 42” EAST, A DISTANCE
OF 17.68 FEET; THENCE SOUTH 45 DEGREES 12’ 50” EAST, A DISTANCE OF 145.22 FEET;
THENCE NORTH 71 DEGREES 53’ 12” EAST, A DISTANCE OF 19.72 FEET TO THE POINT OF
BEGINNING.

SAID LAND IS ALSO SHOWN IN RECORD OF SURVEY MAP AS FILED IN BOOK 167 PAGE 76 OF
RECORD OF SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

PARCEL FIVE:

THAT CERTAIN PORTION OF FRONTAGE ROAD IN THE CITY OF BURBANK, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS NOW LOCATED AND CONSTRUCTED, NORTHEASTERLY OF
THE GOLDEN STATE FREEWAY UPON, OVER AND ACROSS THOSE PORTIONS OF LOTS 7, 8, 9
AND 10 AND THAT PORTION OF AN ALLEY 15.00 FEET WIDE IN BLOCK 70, AND THAT
PORTION OF TUJUNGA AVENUE, 60.00 FEET WIDE OF THE TOWN OF BURBANK, AS SHOWN ON
MAP RECORDED IN BOOK 17 PAGES 19 ET SEQ., OF MISCELLANEOUS RECORDS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS WHOLE AS FOLLOWS:

BEGINNING AT A POINT IN THE SOUTHEASTERLY LINE OF SAID LOT 7 IN BLOCK 70,
DISTANT THEREON SOUTH 41 DEGREES 14’ 42” WEST 16.16 FEET FROM THE MOST EASTERLY
CORNER OF SAID LOT 7; THENCE CONTINUING ALONG THE SOUTHEASTERLY LINES OF SAID
LOTS 7 AND 9 IN BLOCK 70, SOUTH 41 DEGREES 14’ 42” WEST 83.84 FEET TO THE
SOUTHERLY CORNER OF SAID LOT 9; THENCE ALONG THE SOUTHWESTERLY LINE OF PARCEL 3
IN STATE HIGHWAY RELINQUISHMENT NO. 226, RECORDED
JUNE 3, 1963 AS INSTRUMENT NO. 3993, IN BOOK D-2050 PAGE 565 OF OFFICIAL RECORDS
OF SAID COUNTY, NORTH 20 DEGREES 29’ 27” EAST 22.08 FEET; THENCE NORTH 45
DEGREES 12’ 50” WEST 331.14 FEET; THENCE NORTH 67

 

3

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DEGREES 39’ 42” WEST 18.20 FEET, MORE OR LESS, TO THE NORTHWESTERLY LINE OF THE
SOUTHEASTERLY HALF OF SAID TUJUNGA AVENUE; THENCE LEAVING SAID SOUTHWESTERLY
LINE AND ALONG SAID NORTHWESTERLY LINE NORTH 41 DEGREES 16’ 20” EAST 209.11
FEET, MORE OR LESS, TO THE NORTHEASTERLY PROLONGATION OF THE SOUTHWESTERLY LINE
OF THE NORTHEASTERLY 6.00 FEET OF SAID BLOCK 70; THENCE ALONG SAID NORTHWESTERLY
PROLONGATION SOUTH 48 DEGREES 41’ 51” EAST 30.00 FEET TO THE SOUTHEASTERLY LINE
OF SAID TUJUNGA AVENUE; THENCE ALONG SAID SOUTHEASTERLY LINE SOUTH 41 DEGREES
16’ 20” WEST 144.00 FEET TO THE MOST NORTHERLY CORNER OF SAID LOT 8 IN BLOCK 70;
THENCE SOUTH 0 DEGREES 23’ 13” EAST 19.70 FEET TO A LINE PARALLEL WITH AND
DISTANT NORTHEASTERLY 46.00 FEET, MEASURED AT RIGHT ANGLES FROM THE ABOVE
DESCRIBED COURSE, HAVING A LENGTH OF 331.14 FEET; THENCE ALONG SAID PARALLEL
LINE SOUTH 45 DEGREES 12’ 50” EAST 142.38 FEET TO THE NORTHWESTERLY LINE OF SAID
15.00 FOOT ALLEY; THENCE ALONG SAID LAST MENTIONED NORTHWESTERLY LINE NORTH 41
DEGREES 16’ 20” EAST 167.36 FEET TO THE SAID SOUTHWESTERLY LINE OF THE
NORTHEASTERLY 6.00 FEET OF BLOCK 70; THENCE ALONG SAID SOUTHWESTERLY LINE SOUTH
48 DEGREES 41’ 51” EAST 15.00 FEET TO THE SOUTHEASTERLY LINE OF SAID ALLEY;
THENCE ALONG SAID LAST MENTIONED LINE SOUTH 41 DEGREES 16’ 20” WEST 168.32 FEET,
MORE OR LESS, TO THE ABOVE MENTIONED PARALLEL LINE; THENCE CONTINUING ALONG SAID
PARALLEL LINE SOUTH 45 DEGREES 12’ 50” EAST 145.22 FEET, MORE OR LESS, TO A
POINT THAT IS SOUTH 45 DEGREES 12’ 50” EAST 302.96 FEET FROM THE NORTHWESTERLY
TERMINUS OF SAID PARALLEL LINE; THENCE NORTH 71 DEGREES 53’ 12” EAST 19.72 FEET
TO THE POINT OF BEGINNING.

SAID LAND IS ALSO SHOWN IN RECORD OF SURVEY MAP AS FILED IN BOOK 167 PAGE 76 OF
RECORD OF SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

APN: 2453-018-018

 

4

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EXHIBIT B

LIST OF FF&E

Per the list provided by Seller under Exhibit C.

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EXHIBIT C

DOCUMENT INVENTORY

PROPERTY NAME:

Date Opened:

 

Due Diligence:

       

Date Sent

  

Comments

Financial and Marketing Documents:          1    Y-T-D Operating Statements   
      P&L’s by month       2    2008 Budget (Operating)          2008 Budget
(Capital Expenditures)       3    STAR Report       4    2008 Marketing Plan   
   5    Monthly Occupancy & Average Daily/Week/Package Rates       6    Schedule
of Advance Deposits of Advance Reservations and Bookings (Top 20 Accounts)      
Tax and Insurance Documents:          7    Real Estate Tax Bills         
Personal Property Tax Bills       8    Notices of Current Tax Assessments or
Increases       9    Schedule of Insurance Coverage and Claims       10   
Personal Property List (e.g., FF&E, office equipment)       11    Inventory of
Supplies (e.g., chinaware, glassware, paper goods, office supplies, unopened
food and beverage inventory)       12    Copies of Service Contracts and
Equipment Leases       13    Copies of Space Leases (e.g., gift shop, health
club/spa)       14    Lease Files       15    Schedule of Security Deposits for
Space Leases (if applicable)       16    Copies and Schedules of all Warranties
and Guaranties      

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Management Agreements, Permits and Licenses:          17    Management Agreement
(assignment or termination)       18          19    Loan Docs       20    Most
current Franchise Property Improvement Plan or QA Assessment, if any       21   
Copies of all Licenses, Permits, and Approvals, including Liquor License      
22    Schedule of Employees       23    Most Recent Property Payroll       24   
Copy of Employment Contracts, if any       Facility Reports/Audits:          25
   Plans & Specs (electronically if available)       26    Appraisal       27   
Structural Engineering Audit       28    Environment Audit (Phase I)       29   
Property Condition Report       30    Schedule of Utility Providers and Utility
Deposits       31    Copies of Utility Bills (previous 3 months)       32   
Evidence of Zoning       33    Certificate of Occupancy       Title and Survey
Matters:          34    Title Insurance Commitment, Title Search or Title
Certificate       35    Copies of Title Exceptions       36    ALTA Survey      
New Management Company Information          37    Hotel Books and Records      
   Guest Registers          Employee Records          Rental and Reservation
Records (including advance reservations and bookings)          Customer Lists   
      Frequent Guest List      

 

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EXHIBIT D

LIST OF HOTEL CONTRACTS

EXHIBIT D-1 - Seller’s Hotel Contracts

Expect as otherwise provided by Seller in connection with the checklist set
forth in Exhibit C, there are none to Seller’s knowledge other than Manager
arranged contracts.

EXHIBIT D-2 - Other Hotel Contracts

Leases:

Xerox - copier

Alamo - van

Service Agreements:

ADT - monitoring and maintenance for CCTV system

Innovus - ATM machine

Charter - cable

Ecolab - pest, pool, cleaning

Simplex Grinnell - fire system monitoring

iBahn - lobby PCs

Masters - landscaping

Muzak - voice messaging and scent service agreement

Orange Cleaners - dry cleaning agreement

Southland Disposal - waste management

StayOnline - internet

ThyssenKrupp - elevator

Utilities:

Burbank Water and Power (water, sewer and electric)

Southern California Gas (gas)

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EXHIBIT E

CONSENTS AND APPROVALS

A. Consents Under Hotel Contracts: Consent required under Marriott management
agreement

B. Consents Under Other Contracts: Other than any consent required pursuant to a
recorded instrument, none to the knowledge of Seller.

C. Governmental Approvals and Consents: None to the knowledge of Seller

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EXHIBIT F

ENVIRONMENTAL REPORTS

Phase I Environmental Assessment

Prepared by SCS Engineers, Long Beach CA

August 13, 1999

Geotechnical Engineering Investigation

Geotechnologies, Inc., Glendale, CA

December 29, 2005

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EXHIBIT G

CLAIMS OR LITIGATION PENDING

Punchlist items to be completed by contractor and subcontractors

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EXHIBIT H

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this “Agreement”) made the      day of                 ,
2008 by and among FIRST STREET HOTELS, LLC, a Delaware limited liability company
(“Seller”), APPLE EIGHT HOSPITALITY OWNERSHIP, INC. a Virginia corporation, or
its assigns (“Buyer”), and LANDAMERICA AMERICAN TITLE COMPANY (“Escrow Agent”).

RECITALS

WHEREAS, pursuant to the provisions of Section 2.6 of that certain Purchase
Contract dated                 , 2008 (the “Contract”) between Seller and Buyer
(the “Parties”), the Parties have requested Escrow Agent to hold in escrow in
accordance with the provisions, upon the terms, and subject to the conditions,
of this Agreement, the Earnest Money Deposit as defined in the Contract (the
“Deposit”); and

WHEREAS, the Deposit shall be delivered to Escrow Agent in accordance with the
terms of the Contract and this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the Parties hereto agree as follows:

1. Seller and Buyer hereby appoint Escrow Agent to serve as escrow agent
hereunder, and the Escrow Agent agrees to act as escrow agent hereunder in
accordance with the provisions, upon the terms and subject to the conditions of
this Agreement. The Escrow Agent hereby acknowledges receipt of the Deposit.
Escrow Agent shall invest the Deposit as directed by Buyer.

2. Subject to the rights and obligations to transfer, deliver or otherwise
dispose of the Deposit, Escrow Agent shall keep the Deposit in Escrow Agent’s
possession pursuant to this Agreement.

3. A. Buyer shall be entitled to an immediate return of the Deposit at any time
prior to the expiration of the Review Period (as defined in Section 3.1 of the
Contract) by providing written notice to Escrow Agent stating that Buyer has
elected to terminate the Contract pursuant to Section 3.1.

B. If at any time after the expiration of the Review Period, Buyer claims
entitlement to all or any portion of the Deposit, Buyer shall give written
notice to Escrow Agent stating that Seller has defaulted in the performance of
its obligations under the Contract beyond the applicable grace period, if any,
or that Buyer is otherwise entitled to the return of the Deposit or applicable
portion thereof and shall direct Escrow Agent to return the Deposit or
applicable portion thereof to Buyer (the “Buyer’s Notice”). Escrow Agent shall
promptly deliver a copy of Buyer’s Notice to Seller. Seller shall have three
(3) business days after receipt

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of the copy of Buyer’s Notice to deliver written notice to Escrow Agent and
Buyer objecting to the release of the Deposit or applicable portion thereof to
Buyer (“Seller’s Objection Notice”). If Escrow Agent does not receive a timely
Seller’s Objection Notice, Escrow Agent shall release the Deposit or applicable
portion thereof to Buyer. If Escrow Agent does receive a timely Seller’s
Objection Notice, Escrow Agent shall release the Deposit or applicable portion
thereof only upon receipt of, and in accordance with, written instructions
signed by Seller and Buyer, or the final order of a court of competent
jurisdiction.

C. If, at any time after the expiration of the Review Period, Seller claims
entitlement to the Deposit or applicable portion thereof, Seller shall give
written notice to Escrow Agent stating that Buyer has defaulted in the
performance of its obligations under the Contract, and shall direct Escrow Agent
to release the Deposit or applicable portion thereof to Seller (the “Seller’s
Notice”). Escrow Agent shall promptly deliver a copy of Seller’s Notice to
Buyer. Buyer shall have three (3) business days after receipt of the copy of
Seller’s Notice to deliver written notice to Escrow Agent and Seller objecting
to the release of the Deposit or applicable portion thereof to Seller (“Buyer’s
Objection Notice”). If Escrow Agent does not receive a timely Buyer’s Objection
Notice, Escrow Agent shall release the Deposit or applicable portion thereof to
Seller. If Escrow Agent does receive a timely Seller’s Objection Notice, Escrow
Agent shall release the Deposit or applicable portion thereof only upon receipt
of, and in accordance with, written instructions signed by Buyer and Seller, or
the final order of a court of competent jurisdiction.

4. In the performance of its duties hereunder, Escrow Agent shall be entitled to
rely upon any document, instrument or signature purporting to be genuine and
purporting to be signed by and of the Parties or their successors unless Escrow
Agent has actual knowledge to the contrary. Escrow Agent may assume that any
person purporting to give any notice or instructions in accordance with the
provisions hereof has been duly authorized to do so.

5. A. Escrow Agent shall not be liable for any error of judgment, or any action
taken or omitted to be taken hereunder, except in the case of Escrow Agent’s
willful, bad faith misconduct or negligence, nor shall Escrow Agent be liable
for the conduct or misconduct of any employee, agent or attorney thereof. Escrow
Agent shall be entitled to consult with counsel of its choosing and shall not be
liable for any action suffered or omitted in accordance with the advice of such
counsel.

B. In addition to the indemnities provided below, Escrow Agent shall not be
liable for, and each of the Parties jointly and severally hereby indemnify and
agree to save harmless and reimburse Escrow Agent from and against all loss,
cost, liability, damage and expense, including outside counsel fees in
connection with its acceptance of, or the performance of its duties and
obligations under, this Agreement, including the costs and expenses of defending
against any claim arising hereunder unless the same are caused by the willful,
bad faith misconduct or negligence of Escrow Agent.

C. Escrow Agent shall not be bound or in any way affected by any notice of any
modification or cancellation of this Agreement, or of any fact or circumstance
affecting or alleged to affect rights or liabilities hereunder other than as is
herein set forth, or affecting or alleged to affect the rights and liabilities
of any other person, unless notice of the

 

-ii-

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same is delivered to Escrow Agent in writing, signed by the proper parties to
Escrow Agent’s satisfaction and, in the case of modification, unless such
modification shall be approved by Escrow Agent in writing.

6. A. Escrow Agent and any successor escrow agent, as the case may be, may
resign his or its duties and be discharged from all obligations hereunder at any
time upon giving five (5) days’ prior written notice to each of the Parties
hereto. The Parties hereto will thereupon jointly designate a successor escrow
agent hereunder within said five (5) day period to whom the Deposit shall be
delivered. In default of such a joint designation of a successor escrow agent,
Escrow Agent shall retain the Deposit as custodian thereof until otherwise
directed by the Parties hereto, jointly, or until the Deposit is released in
accordance with clause (B) below, in each case, without liability or
responsibility.

B. Anything in this Agreement to the contrary notwithstanding, (i) Escrow Agent,
on notice to the Parties hereto, may take such other steps as the Escrow Agent
may elect in order to terminate its duties as Escrow Agent hereunder, including,
but not limited to, the deposit of the Deposit with a court of competent
jurisdiction in the State of California and the commencement of an action of
interpleaders, and (ii) in the event of litigation between any of the Parties
with respect to the Deposit, Escrow Agent may deposit the Deposit with the court
in which said litigation is pending and, in any such event, Escrow Agent shall
be relieved and discharged from any liability or responsibility to the Parties
hereto. Escrow Agent shall not be under any obligation to take any legal action
in connection with this Agreement or its enforcement or to appear in, prosecute
or defend any action or legal proceeding which, in the opinion of Escrow Agent,
would or might involve Escrow Agent in any cost, expense, loss, damage or
liability, unless and as often as requested, Escrow Agent shall be furnished
with security and indemnity satisfactory to Escrow Agent against all such costs,
expenses (including attorney’s fees), losses, damages and liabilities.

7. All notices required herein shall be deemed to have been validly given, as
applicable: (i) if given by telecopy, when the telecopy is transmitted to the
party’s telecopy number specified below and confirmation of complete receipt is
received by the transmitting party during normal business hours or on the next
business day if not confirmed during normal business hours, (ii) if hand
delivered to a party against receipted copy, when the copy of the notice is
receipted or rejected, (iii) if given by certified mail, return receipt
requested, postage prepaid, two (2) business days after it is posted with the
U.S. Postal Service at the address of the party specified below or (iv) on the
next delivery day after such notices are sent by recognized and reputable
commercial overnight delivery service marked for next day delivery, return
receipt requested or similarly acknowledged:

 

-iii-

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  (i) If addressed to Seller, to:

First Street Hotels, LLC

c/o R D Olson Development

2955 Main Street, 3rd Floor

Irvine, CA 92614

Attention: Robert D. Olson

Fax No.: (949) 271-1080

with a copy to:

Scott S. Pollard, Attorney at Law

4141 MacArthur Blvd., Suite 140

Newport Beach, CA 92660

Fax No.: (949) 261-6616

 

  (ii) If addressed to Buyer, to:

Apple Eight Hospitality Ownership, Inc.

814 E. Main Street

Richmond, Virginia 23219

Attn: Sam Reynolds

Fax No.: (804) 344-8129

with a copy to:

Apple Eight Hospitality Ownership, Inc.

814 E. Main Street

Richmond, Virginia 23219

Attn: Legal Dept.

Fax No.: (804) 727-6349

 

  (iii) If addressed to Escrow Agent, to:

LandAmerica Dallas National Division

2505 N. Plano Road, Ste. 3100

Richardson, Texas 75082

Attn: Debby Moore

Fax No.: (214) 570-0210

or such other address or addresses as may be expressly designated by any party
by notice given in accordance with the foregoing provisions and actually
received by the party to whom addressed.

 

-iv-

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8. This Agreement may be executed in any number of counterparts each of which
shall be deemed an original and all of which, together, shall constitute one and
the same Agreement.

9. The covenants, conditions and agreements contained in this Agreement shall
bind and inure to the benefit of each of the Parties hereto and their respective
successors and assigns.

 

-v-

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IN WITNESS WHEREOF the Parties have executed this Agreement as of the day and
year first above written.

 

SELLER: FIRST STREET HOTELS, LLC By:  

 

Name:  

 

Title:  

 

By:  

 

Name:  

 

Title:  

 

BUYER: APPLE EIGHT HOSPITALITY OWNERSHIP, INC. By:  

 

Name:  

 

Title:  

 

ESCROW AGENT: LANDAMERICA AMERICAN TITLE COMPANY By:  

 

Name:  

 

Title:  

 

 

-vi-

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SCHEDULE 2.4

Allocation

Total Real Property $40,124,431 (Land Portion is $14,500,000.00)

Personal and Intangible Property $10,375,569

Total Purchase Price $50,500,000.00

 

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