Document:

Exhibit 10.3

  
 Exhibit 10.3 
  
 ASSIGNMENT, ASSUMPTION AND AMENDMENT 
 OF MANAGEMENT AGREEMENT

  
 (Redmond, Washington) 
  
 THIS ASSIGNMENT, ASSUMPTION AND AMENDMENT OF MANAGEMENT AGREEMENT (the “Agreement”) is dated as of January 17, 2003 and made effective as of the 3rd day of January, 2003 (the “Effective Date”), by and among REDINN HOTEL, L.P.,
a Texas limited partnership (“Assignor”), AHM-SPE I, INC., a Virginia corporation (“Assignee”), and RESIDENCE INN BY MARRIOTT, INC., a Delaware corporation (the “Manager”).

  
 RECITALS: 
  
 A.    Manager and Assignor entered into that certain Management Agreement dated as of January 28, 1998 (the “Management Agreement”), pursuant to which
Manager operates and manages a certain Residence Inn by Marriott hotel located at 7575 164th Avenue,
N.E., Redmond, Washington (the “Inn”). 
  
 B.    Pursuant to that certain
Purchase Contract (the “Sale Agreement”) dated December 3, 2002, between Assignor as Seller, and Apple Suites Realty Group, Inc., a Virginia corporation (the “Purchaser”), as Purchaser, AHT Redmond,
Inc., a Virginia corporation (“New Owner”), as Purchaser’s assignee under the Sale Agreement, has acquired, or is about to acquire, the Inn from Assignor. 
  
 C.    Immediately upon New Owner’s acquisition of the Inn from Assignor, New Owner will enter into that certain Hotel Lease Agreement, effective as
of even date therewith (the “Operating Lease”), whereby New Owner will lease the Inn to Assignee, and New Owner will also enter into that certain Owner Agreement of even date therewith (the “Owner
Agreement”) among New Owner, Assignee and Manager. 
  
 D.    Pursuant to the Sale
Agreement, and upon the closing of the sale of the Inn from Assignor to New Owner, Assignor is to assign all of its right, title and interest under the Management Agreement to Assignee, and Assignee has agreed to accept such assignment, and assume
all obligations of Assignor under the Management Agreement, on the terms and conditions set forth below. 
  
 E.    Assignor has requested Manager to consent to the assignment of the Management Agreement from Assignor to Assignee, and Manager is willing to consent to such assignment, conditioned on the acceptance
of the terms and conditions set forth below and as set forth in the Owner Agreement and the execution of this Agreement, the Owner Agreement, and a certain Release (the “Release”) of even date herewith to be executed by
Assignor, New Owner and Assignee. 

  
 AGREEMENTS: 
  
 NOW THEREFORE, in consideration of the foregoing and as an inducement for Manager’s granting its consent to the assignment of the Management Agreement to Assignee as
herein provided, the payment of $10.00 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 
  
 1.    Incorporation of Recitals.  The Recitals set forth above are true and correct and are hereby incorporated herein by this
reference. 
  
 2.    Assignment.  Assignor hereby sells, assigns, delegates,
conveys, grants and sets over unto Assignee all of the Assignor’s right, title and interest in and to the Management Agreement. 
  
 3.    Assumption.  Assignee hereby accepts the assignment set forth in Section 2 hereof, and hereby covenants and agrees, for the benefit of Assignor and Manager, to perform and
keep all of the terms, conditions, covenants, agreements, liabilities and obligations to be performed by the Assignor as “Owner” pursuant to the Management Agreement and hereby assumes all of the obligations, covenants and agreements to be
performed by “Owner” under the Management Agreement, arising from and after the Effective Date; provided, however, that notwithstanding the foregoing, Assignee also hereby assumes all obligations for Inn operating expenses and liabilities
arising under the Management Agreement prior to the Effective Date to the extent that such Inn operating expenses and liabilities are made the obligations of Assignee under this Agreement. 
  
 4.    Release as of Effective Date.  In consideration of the assignment set forth in Section 2 hereof and the assumption by
Assignee set forth in Section 3 hereof, Manager hereby releases Assignor from those obligations, covenants and agreements of “Owner” under the Management Agreement arising from and after the Effective Date, which such obligations,
covenants and agreements shall be, from and after the Effective Date, the obligations, covenants and agreements of Assignee. 
  
 5.    Consent to Assignment.  Manager hereby consents to the assignment of the Management Agreement by Assignor to Assignee, and the assumption thereof by Assignee, subject and pursuant to the
terms and conditions hereof, and the terms and conditions of the Owner Agreement and the Release. 
  
 6.    Manager’s Right of First Negotiation and Right to Terminate.  Manager hereby confirms that it has waived its right of first negotiation under Section 10.02.B of the Management Agreement
and has waived its right to terminate the Management Agreement under Section 10.02.B.2.b of the Management Agreement, in connection with the transaction under the Sale Agreement and Operating Lease only, and subject to the full execution of this
Agreement, the Owner Agreement and the Release, all of even date herewith. 

 
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 7.    Representations by Manager.  Manager
represents and warrants that (i) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all requisite corporate actions on the part of Manager,
none of which actions have been modified or rescinded, and all of which actions are in full force and effect, (ii) this Agreement constitutes a valid and binding obligation of Manager, enforceable against Manager in accordance with its terms, (iii)
Manager has not assigned its interest under the Management Agreement and currently manages and operates the Inn pursuant thereto, (iv) the Management Agreement is in full force and effect, represents the entire agreement of Manager and the Assignor
with respect to the Inn, and has not been modified, supplemented or amended in any respect, (v) to Manager’s knowledge as of December 20, 2002, no event has occurred and is continuing which entitles Manager to terminate the Management
Agreement, (vi) to Manager’s knowledge as of December 20, 2002, no Event of Default has occurred and is continuing under the Management Agreement and, to Manager’s knowledge as of December 20, 2002, no circumstances exist which, with the
giving of notice, the lapse of time, or both, would constitute an Event of Default or otherwise entitle Manager to terminate the Management Agreement, (vii) all management fees due and payable to Manager under the Management Agreement, including the
Base Management Fee, Residence Inn System Fee and Incentive Management Fee, if any, have been paid through November 29, 2002, subject to any year-end and related adjustments as contemplated under the Management Agreement, and (viii) as of the
Effective Date, the current balance of the Reserve established by Manager under Section 5.02 of the Management Agreement is $907,016.23. The phrase “to Manager’s knowledge” used herein in this Section 7 shall be limited to mean
the actual knowledge of (i) Rick Tupper, General Manager of the Inn, and (ii) Christopher Feeney, Vice President for Global Asset Management, Lodging Finance and Business Development for Marriott International, Inc., without any independent
investigation or inquiry therein. 
  
 8.    Representations by the
Assignor.  The Assignor represents and warrants that (i) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all requisite
limited partnership actions on the part of the Assignor, none of which actions have been modified or rescinded, and all of which actions are in full force and effect, (ii) this Agreement constitutes a valid and binding obligation of the Assignor,
enforceable against the Assignor in accordance with its terms, (iii) Assignor has not assigned its interest under the Management Agreement, (iv) the Management Agreement is in full force and effect, represents the entire agreement of Manager and the
Assignor with respect to the Inn, and has not been modified, supplemented or amended in any respect, (v) to the knowledge of Assignor, no event has occurred and is continuing which entitles Assignor or Manager to terminate the Management Agreement,
(vi) no Event of Default has occurred and is continuing under the Management Agreement and, to the knowledge of Assignor, no circumstances exist which, with the giving of notice, the lapse of time, or both, would constitute an Event of Default or
otherwise entitle Assignor or Manager to terminate the Management Agreement, (vii) all management fees due and payable to Manager under the Management Agreement, including the Base Management Fee, Residence Inn System Fee and Incentive Management
Fee, if any, have been paid through November 29, 2002, subject to any year-end and related adjustments as contemplated under the Management Agreement, and 

 
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 (viii) as of the Effective Date, the current balance of the Reserve established by Manager under Section 5.02 of the Management Agreement is
$907,016.23. 
  
 9.    Representations by the Assignee.  The Assignee
represents and warrants that (i) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all requisite corporate actions on the part of the
Assignee, none of which actions have been modified or rescinded, and all of which actions are in full force and effect, and (ii) this Agreement constitutes a valid and binding obligation of the Assignee, enforceable against the Assignee in
accordance with its terms. 
  
 10.    Manager’s Accounting Obligations. 

 
 (a)    Assignor, Assignee, and New Owner hereby acknowledge and agree that notwithstanding anything to the
contrary in the Sale Agreement, Manager shall have no obligation to provide accounting, bookkeeping, or other assistance to Assignor, Assignee, New Owner or Purchaser in allocating pre-assignment and/or post-assignment revenues and expenses among
Assignee, Assignor and New Owner (or any affiliate thereof); accordingly, Manager shall not be required to provide any documentation or reports concerning revenues or expenses other than the customary Accounting Period statement and customary
year-end statement required under the Management Agreement. Notwithstanding the foregoing, Manager agrees to provide Assignor and Assignee commercially reasonable cooperation and assistance in responding to any request related to the final
allocation and accounting of pre-assignment and post-assignment revenues and expenses. 
  
 (b)    The parties agree that, notwithstanding anything to the contrary herein, on and after the Effective Date, Manager may, in accordance with the Management Agreement and the terms hereof, pay all expenses and
liabilities of the Inn from funds in the Inn’s operating account (including without limitation Working Capital) regardless of whether such expenses and liabilities relate in whole or in part to the period of time prior to the Effective Date.
The parties further agree that in no event shall Manager be responsible for satisfying any Inn liability or expense from Manager’s own funds, except for specific payment obligations of Manager, if any, expressly set forth in the Management
Agreement. Assignee acknowledges that on the Effective Date there is no Working Capital provided by Owner and held by Manager in respect of the Inn; Assignee shall be obligated to pay to Manager Working Capital in such amount as Manager determines
necessary within thirty (30) days of its receipt of Manager’s notice requesting same, in accordance with the provisions of the Management Agreement. 
  
 11.    Accounting Periods Distributions. 
  
 (a)    Each party to this Agreement hereby acknowledges and agrees that Manager shall remit, less any amounts owed to Manager under the Management Agreement, the distribution (if any) due and payable to
“Owner” under Article 5.02 of the Management Agreement as follows: (i) to Assignor for owner distributions relating to Fiscal Year 2002 and (ii) to Assignee for owner distributions relating to Fiscal Year 2003 and for thereafter for so
long as Assignee is Owner under the Management Agreement. 

 
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 (b)    With respect to invoices and other requests for
payments of Inn operating expenses and liabilities relating to the period of time prior to the Effective Date that are received by Manager on or after the Effective Date, Manager shall be entitled to pay such unpaid amount or amounts as a Deduction
out of Gross Revenues under the Management Agreement, whether received or attributed to the period before or the period on or after the Effective Date. 
  
 (c)    Funds in the Reserve as of the Effective Date shall be retained by Manager and held by Manager as such under the terms of the Management Agreement. In the event Manager
receives after the Effective Date invoices and other requests for payment of FF&E expenses relating to the period of time prior to the Effective Date, Manager shall be entitled to (i) pay such unpaid amount or amounts from funds in the Reserve
in accordance with the Management Agreement, and (ii) to the extent that such unpaid amounts exceed the amount of funds in the Reserve, Assignee shall be obligated to pay such deficiency in accordance with the provisions of the Management Agreement
applicable to shortages in the Reserve. 
  
 (d)    Any adjustments as between or among Assignor,
Assignee, or New Owner in respect of the funds and accounts to be retained by Manager as aforesaid shall be the responsibility of Assignor, Assignee, and/or New Owner, in conjunction with the settlement of the transfer of the Inn under the Sale
Agreement. 
  
 (e)    Notwithstanding anything contained in this Agreement to the contrary,
Assignor, Assignee and New Owner agree that if Manager pays expenses and liabilities of the Inn attributable to the period before the Effective Date from Gross Revenues relating to the period on or after the Effective Date other than payments made
from the Reserve for replacing or repairing FF&E, Assignor shall reimburse Assignee for all such amounts paid by Manager pursuant to Section 12.2 of the Sale Agreement, or if any such expenses are paid thereafter, promptly after demand by
Assignee therefor. 
  
 12.    Insurance and Sales & Use Tax. 
  
 (a)    Manager will establish an escrow fund (“Escrow”) out of Gross Revenues attributable to the period
prior to the Effective Date in an amount that Manager reasonably believes will be necessary to (i) pay for claims under general liability, worker’s compensation and employer’s liability insurance that accrue before the Effective Date, and
(ii) pay any and all sales and use taxes due in respect of the period of time prior to the Effective Date. Manager has estimated that approximately Four Thousand Eight Hundred and 00/100 Dollars ($4,800.00) will be sufficient to fund the Escrow and
will determine the exact amount of funds to be held in the Escrow no later than fourteen (14) days after the Effective Date. Assignor and Assignee understand and agree that monies that are put into the Escrow shall be treated as Deductions from
Gross Revenues (related to the period prior to the Effective Date) under the Management Agreement. 
  
 (b)    To the extent any funds remain in the Escrow on the date that is two years after the Effective Date, Manager will remit such excess funds to Assignor within fifteen (15) days. To the extent there are
insufficient funds in the Escrow to reimburse Manager for all expenses relating to the Escrow (“Escrow Shortfall”), Assignor or Assignor’s successor-in-interest (other 

 
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 than Assignee or New Owner) shall, within fifteen (15) days of a written request from Manager, pay to Manager an amount equal to the Escrow
Shortfall. The parties agree that Manager may commingle funds in the Escrow and use the respective escrowed funds for any of the aforementioned purposes. 
  
 13.    Amendments to Management Agreement.  The parties hereto do hereby covenant and agree to the following amendments to the Management Agreement to be effective
as of the Effective Date: 
  
 (a)    Additional Definitions.  The Management
Agreement is hereby amended to add the following additional defined terms to Section 12.01: 
  
 “Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of this definition, the term
“control” (including the terms “controlling,” “controlled by” and “under common control with”) of a Person means the possession, directly or indirectly, of the power: (i) to vote more than fifty percent (50%)
of the voting stock of such Person; or (ii) to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting stock, by contract or otherwise. 
  
 “Person” means an individual (and the heirs, executors, administrators, or other legal representatives of an individual),
a partnership, a corporation, limited liability company, a government or any department or agency thereof, a trustee, a trust and any unincorporated organization. 
  
 (b)    Definition of “Sale of the Inn”.  The parties agree to modify the definition of Sale of the Inn in Section 12.01 by
inserting the following language at the end thereof: 
  
 For purposes of this Agreement, a Sale of the Inn shall not
be deemed or construed to include (i) any transfer, conversion or exchange of publicly-held or publicly-traded securities of Owner’s ultimate parent entity, Apple Hospitality Two, Inc., a Virginia corporation (“Apple Two”), by
operation of law or otherwise, or any issuance of additional securities of Apple Two; or (ii) any sale, assignment, transfer or other disposition of the Inn by Owner to an Affiliate of Owner, provided that, a subsequent sale, assignment, transfer,
lease, sublease or other disposition of the Inn by, or a change in “controlling interest” of, such Affiliate would constitute a “Sale of the Inn”; provided, if Manager believes (and so states in writing to Owner), that, in the
case of clause (i) above, such transfer, conversion, exchange, or issuance will cause the controlling interest in the stock of Apple Two to be held by an individual or entity to which a Sale of the Inn is prohibited pursuant to Section 10.02.A
hereof, or, in the case of clause (ii) above, the Affiliate of Owner is an individual or entity to which a Sale of the Inn is prohibited pursuant to Section 10.02.A hereof, then Manager shall have the right to terminate this Agreement by providing
written notice to Owner and such 

 
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 termination shall be in accordance with the terms and conditions of Section 11.11 herein and, in connection with such
termination, Owner shall pay to Manager, within ten (10) days of Manager’s request therefor, as compensation for Manager’s lost revenue and expenses and not as a penalty, an amount as calculated pursuant to Section 11.11.H of this
Agreement, provided that if Owner fails to pay such amount to Manager within the time period set forth above, then Manager shall have all of the rights and remedies specified in Section 11.11.H. Notwithstanding the foregoing, Manager shall not be
entitled to a fee in the amount as calculated pursuant to Section 11.11.H of this Agreement if (a) Manager elects to terminate this Agreement in connection with a transfer, conversion, exchange, or issuance of securities pursuant to clause (i) above
solely because the prospective transferee falls within the criteria established under Section 10.02.A(3) and (b) neither the prospective transferee, nor any of its Affiliates, has an ownership interest (other than that of a mere passive investor
with a non-controlling interest) in (x) a brand of hotels totaling at least ten (10) hotels or (y) in a group of hotels totaling at least ten (10) hotels that are not affiliated with a brand but that are marketed and operated as a collective group.

  
 (c)    Independent Contractor.  The parties agree to the following: (i) that
the word “agent” in both the first line of Section 1.01 and the first line of Section 1.02.B.6 of the Management Agreement is deleted, and the word “representative” is substituted therefor; (ii) that the phrase
“Notwithstanding the agency relationship created by this Agreement” in the first line of Section 11.03.B is deleted; (iii) that the word “Agency” in the heading of Section 11.03 is deleted and the word “Relationship” is
substituted therefor; and (iv) that Section 11.03.A of the Management Agreement is deleted in its entirety, and in lieu thereof, the following is substituted: 
  
 In the performance of this Agreement, Manager shall act solely as an independent contractor. Neither this Agreement nor any agreements, instruments, documents, or transactions contemplated hereby shall
in any respect be interpreted, deemed or construed as making Manager a partner, joint venturer with, or agent of, Owner. Owner and Manager agree that neither party will make any contrary assertion, claim or counterclaim in any action, suit,
arbitration or other legal proceedings involving Owner and Manager. 

 
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 (d)    Notices.  The parties agree to revise
the applicable notice addresses in the Management Agreement. Therefore, the second paragraph of Section 11.07 of the Management Agreement is deleted in its entirety, and in lieu thereof, the following is substituted: 
  
 
	 To Owner:
 	 	 AHM-SPE I, INC.
 
	  	 	 10 South Third Street
 
	  	 	 Richmond, Virginia 23219
 
	  	 	 Attn:  Glade M. Knight, President
 
	  	 	 F ax:  (804) 344-8129
 

 
  
 (e)    Affiliate
Transactions.  The Management Agreement is hereby amended to add the following as Section 11.19: 
  
 Section 11.19    Affiliates 
  
 Manager shall be entitled to contract with
companies that are Affiliates (or companies in which Manager has an ownership interest if such interest is not sufficient to make such a company an Affiliate) to provide goods and/or services to the Inn; provided that the prices and/or terms for
such goods and/or services are competitive. Additionally, Manager may contract for the purchase of goods and services for the Inn with third parties that have other contractual relationships with Manager, Marriott and their Affiliates, so long as
the prices and terms are competitive. In determining, pursuant to the foregoing, whether such prices and/or terms are competitive, they will be compared to the prices and/or terms which would be available from reputable and qualified parties for
goods and/or services of similar quality, and the goods and/or services which are being purchased shall be grouped in reasonable categories, rather than being compared item by item. The prices paid may include overhead and the allowance of a
reasonable return to Manager’s Affiliates (or companies in which Manager has an ownership interest if such interest is not sufficient to make such a company an Affiliate). Owner acknowledges and agrees that, with respect to any purchases of
goods or services pursuant to this Section 11.19 and subject to the foregoing qualification that prices and/or terms are competitive, Manager’s Affiliates may retain for their own benefit any allowances, credits, rebates, commissions and
discounts received with respect to any such purchases. 
  
 (f)    Waiver of Jury Trial and
Consequential and Punitive Damages.  The Management Agreement is hereby amended to add the following as Section 11.20: 
  
 Section 11.20    Waiver of Jury Trial and Consequential and Punitive Damages 

 
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 Owner and Manager each hereby absolutely, irrevocably and unconditionally waive
trial by jury and the right to claim or receive consequential, incidental, special or punitive damages in any litigation, action, claim, suit or proceeding, at law or in equity, arising out of, pertaining to or in any way associated with the
covenants, undertakings, representations or warranties set forth herein, the relationships of the parties hereto, whether as “Owner” or “Manager” or otherwise, this Agreement or any other agreement, instrument or document entered
into in connection herewith, or any actions or omissions in connection with any of the foregoing. 
  
 14.    Indemnification. 
  
 (a)    Assignor shall
indemnify, defend and hold Assignee, New Owner, and Purchaser, and their affiliates, successors and assigns, harmless from and against any and all claims, liabilities, damages and expenses (including, without limitation, attorneys’ fees and
expenses) arising out of (i) the failure or alleged failure of Assignor to perform and comply with all of the terms, conditions, covenants, agreements, liabilities and obligations required to have been performed or complied with by “Owner”
under the Management Agreement prior to the Effective Date, (ii) any act or omission of Assignor under the Management Agreement prior to the Effective Date, (iii) the failure or alleged failure of Assignor to perform and comply with all of its
obligations under this Agreement. 
  
 (b)    Assignee shall indemnify, defend and hold Assignor,
and their affiliates, successors, and assigns, harmless from and against any and all claims, liabilities, damages and expenses (including, without limitation, attorneys’ fees and expenses) arising out of (i) the failure or alleged failure of
Assignee to perform and comply with all of the terms, conditions, covenants, agreements, liabilities and obligations required to have been performed or complied with by “Owner” under the Management Agreement on or after the Effective Date,
(ii) any act or omission of Assignee under the Management Agreement on or after the Effective Date, (iii) the failure or alleged failure of Assignee to perform and comply with all of its obligations under this Agreement. 
  
 (c)    To the extent any claim is brought by Assignor or Assignee under the foregoing indemnification provisions, the
procedures for asserting such a claim shall be governed by the provisions of Section 8.11(c) of the Sale Agreement without regard to whether such claim results from liability asserted by a third party. The right to recover in connection with any
such claim shall survive the closing of the sale of the Inn, shall not be limited to any funds escrowed under the Sale Agreement or to the period of time during which any such escrow is required to be maintained. 
  
 15.    Miscellaneous 
  
 (a)    Ratification; Conflict in Terms.  All of the terms and conditions of the Management Agreement, as amended hereby, are hereby ratified and affirmed and the

 
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 Management Agreement, as amended hereby, shall continue in full force and effect. In the event of a conflict between the terms hereof and the
terms of the Management Agreement, the terms hereof shall control. 
  
 (b)    Counterparts.  This Agreement may be executed in counterparts, all of which, when taken together, shall constitute a single and enforceable agreement. The executed counterparts may be
delivered by facsimile transmission, and such delivery shall be effective to bind the party so delivering its executed counterpart upon such party’s receipt of an executed counterpart, either by facsimile transmission or otherwise, from the
other party. Each party agrees to provide hard copy originals of its executed counterparts to the other party promptly following the exchange of facsimile copies as aforesaid. 
  
 (c)    Binding on Successors and Assigns.  The terms and conditions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. 
  
 (d)    No Oral
Modification.  The provisions of this Agreement may not be modified, amended, waived, discharged or terminated except by a written document signed by all of the parties hereto. 
  
 (e)    Defined Terms.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Management
Agreement, as amended hereby. 
  
 (f)    Headings.  Headings and Captions of
Sections herein are inserted only for convenience and are in no way to be construed to interpret the meaning of or serve as a limitation on the scope of the particular terms or provisions of the Sections to which they refer. 
  
 (g)    Governing Law.  This Agreement shall be governed by and construed under the laws of the State
of Washington, without giving effect to the principles thereof governing conflicts of laws. 
  
 [REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW ON NEXT PAGE.] 

 
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IN WITNESS
WHEREOF, the parties hereto have duly executed this Agreement under seal as of the date first written above. 
 

	
	  ASSIGNOR:

	
	  REDINN HOTEL, L.P.

	
	  By:
	  	  Redinn Associates, L.L.C., a Texas limited liability company, its General
Partner

	
	  	  	  By:
	  	   
  /s/    TOM MASTOR

	  	  [SEAL]

	  	  	  Name:
	  	  Tom Mastor
	  	  
	  	  	  Title:
	  	  Vice President
	  	  
	
	  ASSIGNEE:

	
	  AHM-SPE I, INC.

	
	  	  	  By:
	  	   
  /s/    GLADE M. KNIGHT

	  	  [SEAL]

	  	  	  Name:
	  	  Glade M. Knight
	  	  
	  	  	  Title:
	  	  President
	  	  

 
[SIGNATURES CONTINUED ON FOLLOWING PAGE] 
 

- 11 - 

 

	  MANAGER:
	  	  
	
	  RESIDENCE INN BY MARRIOTT, INC.,
  a Delaware corporation
	  	  
	
	  By:
	  	  /s/    CHRISTOPHER
FEENEY

	  	  [SEAL]

	  	  	  Name:  Christopher Feeney
	  	  
	  	  	  Title:    Authorized Signatory
	  	  

 
[SIGNATURES CONTINUED ON FOLLOWING PAGE] 
 

- 12 - 

 
THE UNDERSIGNED HAS JOINED
HEREIN FOR THE PURPOSE OF EVIDENCING ITS AGREEMENT TO PERFORM AND BE BOUND BY THE TERMS OF THIS AGREEMENT THAT ARE APPLICABLE TO NEW OWNER: 
 

	  AHT REDMOND, INC.,
  a Virginia corporation
	  	  
	
	  By:
	  	   
  /s/    GLADE M. KNIGHT

	  	  [SEAL]

	  Name:
	  	  Glade M. Knight
	  	  
	  Title:
	  	  President
	  	  

 

- 13 -Exhibit 10.4

 Exhibit 10.4 
  
 OWNER AGREEMENT 
 (Redmond, Washington) 
  
 THIS OWNER AGREEMENT (“Agreement”) dated as of January 17, 2003 and made effective as of the 3rd day of January, 2003 (the
“Effective Date”), by and among AHT REDMOND, INC., a Virginia corporation, with a mailing address of 10 South Third Street, Richmond, Virginia 23219 (“Lessor”); AHM-SPE I, INC., a
Virginia corporation, with a mailing address of 10 South Third Street, Richmond, Virginia 23219 (“Lessee”); and RESIDENCE INN BY MARRIOTT, INC., a Delaware corporation, with a mailing address of 10400 Fernwood Road,
Bethesda, MD 20817 (“Manager”). 
  
 RECITALS: 
  
 WHEREAS, pursuant to that certain Purchase Contract (the “Sale Agreement”) dated as of December 3, 2002,
between Redinn Hotel, L.P., a Texas limited partnership, as Seller (“Seller”), and Apple Suites Realty Group, Inc., a Virginia corporation, as Buyer (“Buyer”), Lessor, as Buyer’s assignee under
the Sale Agreement, has acquired, or is about to acquire, fee simple title to the Residence Inn by Marriott hotel, located in Redmond, Washington, as more particularly described on Exhibit A attached to this Agreement and incorporated
herein (“Inn”). 
  
 WHEREAS, upon Lessor’s acquisition of the Inn, Lessor has
leased the Inn to Lessee, and Lessee has leased the Inn from Lessor, pursuant to that certain lease attached hereto as Exhibit B (the “Lease”). 
  
 WHEREAS, Manager has operated and managed the Inn pursuant to that certain Inn Management Agreement bearing an effective date as of January 28, 1988, as assigned,
assumed and amended pursuant to that certain Assignment, Assumption and Amendment Agreement of even date herewith by and among Seller, Lessee and Manager (said Management Agreement, as so assigned, assumed and amended, hereinafter the
“Management Agreement”). 
  
 WHEREAS, Manager has consented to the sale and transfer
of the Inn and the assignment by Seller to Lessee of the Management Agreement, subject to, among other things: (i) Lessor guarantying the obligations of Lessee under the Management Agreement; (ii) Lessor agreeing to grant certain protections to
Manager in the event the Lease is terminated for any reason; and (iii) Lessee meeting certain criteria, the satisfaction of which is confirmed by the execution of this Agreement. 
  
 NOW, THEREFORE, for the mutual covenants and considerations herein contained and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending to be legally bound agree as follows: 
  
 1.    Definitions.  Capitalized terms not specifically defined herein shall have the meaning given to them in the Management Agreement. 

  
 2.    Lessor Consideration.  Lessor
hereby acknowledges that: (i) Lessor derives and expects to derive benefits from this Agreement, and (ii) Lessor has determined that Lessor’s execution, delivery and performance of this Agreement directly benefit Lessor, are within the
corporate purposes of Lessor, and are in the best interest of Lessor. 
  
 3.    Acknowledgement of Lease.  Manager hereby acknowledges and consents to the lease of the Inn from Lessor to Lessee pursuant to the Lease in the form attached hereto as Exhibit
B. The Lease shall not be construed to impose any additional obligations or liabilities upon Manager, and shall not be construed to modify or amend any of the rights and duties of the parties under the Management Agreement. To the extent
that any of the provisions of the Management Agreement impose a greater or inconsistent obligation on Lessee than the corresponding provisions of the Lease, then Lessee shall be obligated to comply with, and to take all actions necessary to prevent
breaches or defaults by Lessee under, the relevant provisions of the Management Agreement. 
  
 Manager acknowledges
that Lessor and Lessee have, pursuant to the terms of the Lease, agreed that Lessor shall pay, among other things (i) land and building taxes and assessments applicable to the Inn, (ii) premiums and charges for the casualty insurancecoverages
specified in the Management Agreement, (iii) expenditures for capital replacements, (iv) expenditures for maintenance and repair of underground utilities and structural elements of the Inn and (v) the payments of principal, interest and other sums
payable under any Mortgage. Notwithstanding the foregoing, it is understood and agreed by Lessor and Lessee that Manager shall have no duty, obligation or liability to Lessor or Lessee (i) to make any determination as to whether any expense paid or
payable by Manager under the Management Agreement is a cost to be paid by Lessor under the Lease (“Lessor Cost”) or a cost to be paid by Lessee under the Lease (“Lessee Cost”), or (ii) to pay costs identified as
Lessor Costs out of funds which can be identified as belonging to Lessor, or pay Lessee Costs out of funds which can be identified as belonging to Lessee; it being the intent of the parties to this Agreement that (x) Lessee and Lessor shall look
only to each other and not to Manager with respect to moneys that may be owed one to the other under the Lease and (y) Manager need only look to Lessee to pay and satisfy all of the obligations of “Owner” under the Management Agreement.

  
 4.    Lessor and Lessee Representations and Warranties.  Lessor and
Lessee each hereby represents and warrants that Apple Hospitality Two, Inc., a Virginia corporation (“Apple Two”), currently holds, directly or indirectly, a one-hundred percent controlling interest in both Lessor and Lessee.

  
 5.    Termination of the Lease.  The parties agree that the
Management Agreement and the rights and benefits of Manager thereunder shall not be terminated or disturbed in any respect except in accordance with the terms of the Management Agreement, and not as a result of any termination of the Lease.
Accordingly, if the Lease is terminated for any reason, including, without limitation, expiration of the term thereof or the “rejection” thereof following Bankruptcy (as defined below) of Lessee (collectively, a “Lease
Termination”), Lessor: (a) shall recognize Manager’s rights under the Management Agreement, (b) agrees that Manager shall not be named by Lessor or any affiliate of Lessor as a party in any eviction or other possessory action or
proceeding, and that Manager shall not be disturbed in its right to manage the Inn pursuant to the 

 
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 Management Agreement by Lessor or any affiliate of Lessor, and (c) shall at the time of or prior to such Lease Termination either (i) elect
not to take either of the actions described in clause (c)(ii) below, in which case all of “Lessee’s” rights, benefits, privileges and obligations under the Management Agreement with respect to periods after the Lease Termination shall
be assumed directly by Lessor, or (ii) cause an “Approved Lessee” (as defined below) to (x) succeed to and assume Lessee’s rights and obligations under the Lease, the Management Agreement, and this Agreement, or (y) enter into a new
lease with an Approved Lessee in substantially the same form as the Lease, and cause such Approved Lessee to assume the rights and obligations of the Lessee under the Management Agreement and this Agreement, the intent being that the relationship
between any successor Lessee, Lessor and Manager be under the same terms and conditions as the relationship between Lessee, Lessor and Manager hereunder and under the Management Agreement and the Lease. Any successor to Lessee under clause (c)(ii)
above shall be subject to Manager’s prior written approval, which approval shall not be withheld or delayed if such successor to Lessee is (i) a direct or indirect wholly-owned subsidiary of Apple Two, or (ii) a person or entity to whom a Sale
of the Inn is permitted under the Management Agreement (an “Approved Lessee”). 
  
 6.    Guaranty.  Lessor shall be liable for the complete and satisfactory payment and performance of each and every obligation of Lessee as “Owner” under the Management Agreement
(the “Guarantied Obligations”). Lessor hereby absolutely, irrevocably, and unconditionally guaranties that the Guarantied Obligations which are monetary obligations shall be paid when due and payable and that the Guarantied
Obligations which are performance obligations shall be fully performed at the times and in the manner such performance is required by the Management Agreement. This guaranty is an absolute, irrevocable, and unconditional guaranty of payment and
performance and the liability of Lessor hereunder shall be absolute and unconditional irrespective of: (i) any lack of validity, irregularity or enforceability of the Management Agreement or this Agreement; (ii) any change in the time, manner, place
or any other term or condition of payments due under the Management Agreement or this Agreement, or any other amendment or waiver of, or consent to, any departure from the Management Agreement or this Agreement; (iii) any failure of Manager to
enforce the provisions of the Management Agreement or this Agreement against Lessee; or (iv) any other circumstances which might otherwise constitute a defense available to, or a discharge of, any of the Guarantied Obligations (other than because,
or to the extent, the same have been previously discharged in accordance with the terms of the Management Agreement). If all or any part of the Guarantied Obligations shall not have been paid when due and payable or performed at the time performance
is required, Lessor (without first requiring the Manager to proceed against Lessee or any other party or any other security) shall pay or cause to be paid to Manager the amount thereof as is then due and payable and unpaid (including interest and
other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Management Agreement) or perform or cause to be performed such obligations in accordance with the Management Agreement, within ten
(10) business days after receipt of written notice from the Manager of the failure by Lessee to make such payment or render such performance; provided, however, that, notwithstanding the foregoing, Lessor shall have the right, in connection with a
demand by Manager for payment or performance by Lessor of the Guaranteed Obligations, to assert any defenses or claim of Lessee under the Management Agreement with respect to such Guaranteed Obligations. If for any reason Lessor fails to perform or
cause to be 

 
 3 

 performed such obligations, Manager shall have the right to exercise any and all of the remedies available at law or in equity and Lessor hereby
agrees to pay any and all reasonable expenses (including counsel fees and expenses) incurred by Manager in enforcing its rights under this Agreement. The guaranty contained in this Agreement: (i) is a continuing guaranty and shall remain in full
force and effect until the indefeasible satisfaction and discharge in full of Lessee’s obligations as “Owner” under the Management Agreement and Lessor’s and Lessee’s obligations under this Agreement, and (ii) shall continue
to be effective or shall be reinstated, as the case may be, if at any time any payment under the Management Agreement or this Agreement becomes unrecoverable from Lessor or Lessee by operation of law or for any other reason or must otherwise be
returned by Manager upon the insolvency, bankruptcy or reorganization of Lessor or Lessee. 
  
 7.    Obligation to Terminate Lease Upon Lessee Default under Management Agreement.  Upon receiving a written request from Manager to do so (and provided that Manager has sent to Lessor a
notice as described in Section 6 above with respect to the applicable Default), Lessor shall terminate the Lease if a Default by Lessee has occurred, after the expiration of any applicable cure period for the Default therein, under the Management
Agreement. In terminating the Lease pursuant to this Section 7, Lessor shall issue its notice of termination to Lessee promptly following its receipt of Manager’s request therefor. Lessor shall thereafter promptly initiate, and thereafter
diligently and continuously prosecute, such actions as may be required to confirm such Lease termination and repossess the Inn, including, without limitation, instituting such legal action as may be necessary to accomplish same. Upon Lessor’s
termination of the Lease in accordance with this Section 7, Lessor shall thereupon be obligated to comply with the provisions of Section 5 applicable upon a Lease Termination. 
  
 8.    Agreements Relating to Tenancy.  In order to address the fact that Lessee’s interest in the Inn is leasehold, and to
address certain other related matters, the parties agree to the following modifications of the Management Agreement, to be effective for so long as Lessee’s interest in the Inn is held through tenancy or subtenancy title as that of Lessee:

  
 A.    Subject to the terms of the Management Agreement, Lessor and Lessee covenant and agree,
and Manager acknowledges, that: (i) Lessor holds, and shall have, keep and maintain throughout the term of the Management Agreement, good and marketable fee title to the Inn; and (ii) Lessee holds, and shall have, keep and maintain throughout the
term of the Management Agreement, leasehold title to the Inn, in each case free and clear of any and all liens, encumbrances or other charges, except to the extent specifically permitted under the Management Agreement. 
  
 B.    Modifying the provisions of Section 10.02 of the Management Agreement, Lessor and Lessee agree that the term
“Sale of the Inn” shall also mean and include (i) any sale, assignment, transfer or other disposition of Lessor’s title to the Inn or Site and/or of a controlling interest in Lessor, to the same extent as if Lessor were the
“Owner” under the Management Agreement, (ii) any assignment of the Lease by Lessee, and (iii) any sublease of the Inn, or any substantial portion thereof, by Lessee. Lessor and Lessee agree that, inter alia, an agreement in form and
substance similar to this Agreement will be required from any assignee of the Lease or sublessee of the Inn in order to ensure that Manager will incur no greater risk of loss, liability or 

 
 4 

 cost in respect of, and no greater risk of termination of, the Management Agreement as a result of such sale, lease, sublease, assignment or
transfer.  
  
 C.    If Lessor hereafter encumbers all or any portion of the Inn with a
Mortgage (“Fee Mortgage”), the provisions related to a First Mortgage under Sections 8.01 and 8.02 of the Management Agreement shall be applicable to the Fee Mortgage (i) to account for the fact that Lessor (rather than
Lessee) has encumbered the Inn with such Fee Mortgage, and (ii) to provide that the parties’ rights and obligations under the non-disturbance provisions in Section 8.02, as applicable, apply to both the Management Agreement and this Agreement.

  
 9.    Additional Lessor Obligations.  Lessor agrees, where
applicable, upon request by Manager, not to unreasonably withhold, condition or delay the prompt signing, without charge, of applications for licenses, permits or other instruments necessary for operation of the Inn, which applications shall be
prepared by Manager as necessary from time to time. 
  
 10.    Certain Provisions Regarding
Bankruptcy.  In the event the Lease shall be rejected (“Rejection”) on behalf of Lessor under Section 365 of the United States Bankruptcy Code (“Code”) or any other applicable law or
authority in connection with a bankruptcy or other such proceeding under the Code or other applicable law or authority (“Bankruptcy”), Lessee shall promptly notify Manager in writing of such Rejection and Lessee shall, as
directed by Manager, either treat the Lease as terminated by such Rejection or retain its rights under the Lease as permitted by the Code or other applicable law or authority. In the event the Management Agreement is terminated as a result of
Rejection on behalf of Lessee, the Management Agreement will remain effective with respect to Lessor, and Lessor shall, if directed by Manager (but only to the extent such right may be exercised under the Code or other applicable law and authority),
terminate the Lease, subject to the provisions of Section 5 hereof. Lessor and Lessee each agree that it will not join in any involuntary petition against the other under the Code or any other similar federal or state law providing for debtor
relief, without the consent of Manager. 
  
 11.    Term.  The term
of this Agreement shall commence on the Effective Date and shall run concurrently with the term of the Management Agreement. 
  
 12.    Required Assignment.  In connection with any Sale of the Inn which includes a transfer of Lessor’s and/or Lessee’s title in the Inn, Lessor and Lessee agree that the
successors to their respective titles in the Inn shall also assume their respective rights and obligations under this Agreement from and after the effective date of such Sale of the Inn and shall cause such successor(s) to assume such rights and
obligations pursuant to an assumption of this Agreement reasonably acceptable to Manager. 
  
 13.    Notices.  All notices and other communications provided for hereunder shall be in writing, and shall be sent or delivered by the methods as required under the Management Agreement
and to the addresses for Lessee and Manager as provided in the Management Agreement and to Lessor at the following address: 

 
 5 

  
 AHT Redmond, Inc. 
 10 South Third Street 
 Richmond, Virginia
23219 
 Attn:    Glade M. Knight, President 
 Fax:      (804) 344-8129 
  
 Lessor may change its address for
notice hereunder by providing notice of such change to both Lessee and Manager in the manner required under the Management Agreement. 
  
 14.    Eligible Independent Contractor.  Manager agrees that, as of the Effective Date, it is an eligible independent contractor under Section 856(d) of the Internal Revenue Code,
and further agrees that it shall maintain such status to the extent it is able to do so, acknowledging that events outside of Manager’s control may result in an overlap of ownership between Manager and Lessor or Lessee which could affect
Manager’s independent contractor status. Lessor, Manager and Lessee agree to cooperate in good faith to ensure that Manager retains such status. This covenant shall apply for so long as the Inn is owned by Lessor and leased to Lessee (or
another direct or indirect wholly-owned subsidiary of Apple Two pursuant to a permitted assignment). 
  
 15.    Miscellaneous. 
  
 A.    Modification of this Agreement.  No amendment, modification, alteration or waiver of any provision of this Agreement shall be effective unless it is in writing and signed by the party
against whom enforcement of such amendment is sought, and no waiver of any provision of this Agreement by any party hereto, and no consent to any departure therefrom by any party hereto, shall be effective unless it is in writing and signed by the
party against whom enforcement of such waiver or consent is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 
  

B.    No Waiver.  No failure by any party hereto to exercise, and no delay in exercising, any right under the Management
Agreement or this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right. 
  
 C.    Remedies Cumulative.  The rights and remedies of any party hereto provided in the
Management Agreement and this Agreement are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law or equity. 
  
 D.    Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland. 
  
 E.    Severability.  The invalidity, illegality or unenforceability of any one or more
phrases, sentences, clauses or sections contained in this Agreement shall not affect the validity, legality or enforceability of the remaining portions of this Agreement. 

 
 6 

  
 F.    Entire Agreement.  This
Agreement, together with the Management Agreement and the Lease, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof.

  
 G.    Successors and Assigns.  The parties hereto shall not assign or
transfer or permit the assignment or transfer of this Agreement without the prior written consent of the other parties hereto, except that Lessee and Manager shall each have the right and obligation to assign its respective interest in this
Agreement to any party to which its respective interest in the Management Agreement may be assigned under the terms of the Management Agreement, and Lessor shall have the right and obligation to assign its interest in this Agreement to any party to
which its interest in the Inn may be assigned, subject to the requirements of the Management Agreement. 
  
 H.    Captions.  The captions and headings of the sections and subsections of this Agreement are for purposes of convenience and reference only and shall not limit or otherwise affect the
meaning hereof. 
  
 I.    Time of the Essence.  Time shall be of the
essence in the performance of this Agreement. 
  
 J.    Incorporation of
Recitals.  The recitals hereto are incorporated herein as part of this Agreement. 
  
 K.    Counterparts.  This Assignment may be executed in counterparts, each of which, taken together with the others, shall constitute the original. The executed counterparts may be
delivered by facsimile transmission and such delivery shall be effective to bind the party so delivering its executed counterpart upon such party’s receipt of an executed counterpart, either by facsimile transmission or otherwise, from the
other party. Each party agrees to provide hard copy originals of its executed counterparts to the other party promptly following the exchange of facsimile copies as aforesaid. 
  
 [SIGNATURES FOLLOW ON NEXT PAGE] 

 
 7 

 
IN WITNESS
WHEREOF, the parties hereto have duly executed this Agreement under seal as of the date first written above. 
 

	  LESSOR:

	
	  AHT REDMOND, INC.,
  a Virginia corporation
	  	  
	
	  By:
	  	   
          /s/    GLADE M. KNIGHT

	  	  [SEAL]

	  	  	  Name:  Glade M. Knight
  Title:    President
	  	  

 
 

	
	  LESSEE:

	
	  AHM-SPE I, INC.,
  a Virginia corporation
	  	  
	
	  By:
	  	          /s/    GLADE M.
KNIGHT  

	  	  [SEAL]

	  	  	  Name:  Glade M. Knight
  Title:    President
	  	  

 

8 

 

	  MANAGER:

	
	  RESIDENCE INN BY MARRIOTT, INC.,
  a Delaware corporation
	  	  
	
	  By:
	  	          /s/    CHRISTOPHER
FEENEY

	  	  [SEAL]

	  	  	  Name:  Christopher Feeney
  Title:    Authorized Signatory
	  	  

 

9

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