EXHIBIT 10.4

                                                                   [Mississippi]

                              MANAGEMENT AGREEMENT

         This  Management  Agreement  (as the same may be  amended,  modified or
supplemented from time to time, this "Agreement") is made and entered into as of
the  22nd  day  of  December,  1999  ("Effective  Date")  between  Apple  Suites
Management, Inc., a Virginia corporation, whose address is 306 East Main Street,
Richmond,   Virginia  23219  ("Owner")  and  Promus  Hotels,  Inc.,  a  Delaware
corporation,  whose  address is 755 Crossover  Lane,  Memphis,  Tennessee  38117
("Manager").

                                    ARTICLE 1

                                    THE HOTEL

         Section 1.01.  The Hotel.  The subject  matter of this Agreement is the
management of the "Hotel",  as defined in the Homewood Suites License  Agreement
attached  hereto as Exhibit  "A"  (hereinafter  collectively  referred to as the
"License  Agreement"),  by Manager.  The Hotel is owned in fee by Apple  Suites,
Inc., a Virginia  corporation  ("Fee  Owner") and leased to Owner  pursuant to a
lease between Fee Owner and Owner with a commencement date of even date herewith
covering the Hotel (hereinafter the "Percentage  Lease").  The License Agreement
shall  exclusively  govern Owner's right to use the Homewood Suites "System" (as
defined in the License Agreement) in the operation of the Hotel. Fee Owner shall
have no right to use the Homewood  Suites "System" except as expressly set forth
in the License  Agreement.  Owner hereby expressly  acknowledges that neither it
nor Fee Owner shall derive any rights in or to the use of the "Homewood  Suites"
name or the Homewood Suites "System" from this Agreement.

                                    ARTICLE 2

                                      TERM

         Section 2.01.  Term.  The term shall commence on the Effective Date and
continue for the term of years from the Effective  Date set forth on Exhibit "B"
("Term").

                                    ARTICLE 3

                              MANAGER'S OBLIGATIONS

         Section 3.01. Manager's Obligations.  Manager shall, on behalf of Owner
and at Owner's expense,  direct the operation of the Hotel pursuant to the terms
of this  Agreement  and the  License  Agreement.  Manager  shall be  exclusively
responsible for


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directing the day-to-day  activities of the Hotel and  establishing all policies
and procedures  relating to the management and operation of the Hotel. Except as
specifically  otherwise provided, all cost(s) and expense(s) incurred by Manager
in association  with the  performance of the  obligations  hereinafter set forth
shall be,  regardless of the  designation of a portion  thereof as Fee Ownership
Costs (as herein  defined),  operating costs and shall  accordingly be paid from
the Bank Account(s) as hereinafter  defined in Section 3.01(iv) below.  Manager,
during the Term, shall have the following obligations:

         (i)      Costs of Fee Owner  and  Owner.  Pursuant  to the terms of the
                  Percentage  Lease,  Manager  understands  that Fee  Owner  has
                  agreed to pay,  among  other  things  (i) land,  building  and
                  personal  property  taxes and  assessments  applicable  to the
                  Hotel,  (ii)  premiums and charges for the casualty  insurance
                  coverages  specified on Exhibit "D",  (iii)  expenditures  for
                  capital  replacements,  (iv)  expenditures for maintenance and
                  repair of underground utilities and structural elements of the
                  Hotel and (v) the  payments of  principal,  interest and other
                  sums payable under the  Acquisition  Loan (as herein  defined)
                  (collectively,  "Fee  Ownership  Costs").  To the extent  this
                  Agreement  obligates or authorizes Manager to pay any such Fee
                  Ownership Costs, Manager shall pay such Fee Ownership Costs on
                  behalf  of Fee  Owner  to the  extent  of  funds  in the  Bank
                  Account(s)  (as herein  defined) in the order of priority  set
                  forth in Exhibit B or the Reserve Fund (as herein defined) and
                  Fee Owner and Owner shall make such  adjustments  and payments
                  to each  other as may be  necessary  from time to time to take
                  into account any such payments by Manager.  Manager shall have
                  no duty,  obligation or liability to Fee Owner or Owner (i) to
                  make any  determination  as to whether any expense required to
                  be paid by Manager hereunder is a Fee Ownership Cost or a cost
                  of Owner,  (ii) to make any  determination as to whether funds
                  in the Bank Account(s) or the Reserve Fund belong to Fee Owner
                  or Owner or (iii) to require that Fee Ownership  Costs be paid
                  from funds which can be  identified as belonging to Fee Owner,
                  or that other costs and expenses  required to be paid by Owner
                  be paid from funds which can be  identified  as  belonging  to
                  Owner;  it being the intent of the  parties to this  Agreement
                  that (i) Owner and Fee Owner shall look only to each other and
                  not to Manager  with respect to moneys that may be owed one to
                  the other as a consequence of Manager's performance under this
                  Agreement  and (ii)  Manager  need  only  look to Owner to pay
                  operating  costs,   including,   without   limitation,   those
                  designated herein as Fee Ownership Costs;

         (ii)     Personnel.  Manager shall be the sole judge of the fitness and
                  qualification  of all  personnel  working at the Hotel ("Hotel
                  Personnel")  and  shall  have the sole and  absolute  right to
                  hire, supervise, order, instruct,  discharge and determine the
                  compensation,  benefits and terms of  employment  of all Hotel
                  Personnel.  All Hotel Personnel shall be employees of Manager.
                  Manager shall also have the right to use employees of Manager,
                  Manager's parent and subsidiary and affiliated companies,  not
                  located  at  the  Hotel  to  provide  services  to  the  Hotel
                  ("Off-Site Personnel") and the right to have


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<PAGE>

                  the general manager of the hotel serve as the regional manager
                  for other  hotels  managed by  Manager.  All  expenses,  costs
                  (including,  but  not  limited  to,  salaries,   benefits  and
                  severance  pay),  liabilities  and claims which are related to
                  Hotel  Personnel  and  Off-Site  Personnel  shall be operating
                  costs; provided,  however, with respect to any moving expenses
                  for any Hotel  Personnel  who has not been an  employee at the
                  Hotel for at least  twelve (12)  months,  only that portion of
                  such moving  expenses  equal to Owner's Share (as  hereinafter
                  defined)  shall  constitute  operating  costs and the  balance
                  shall be paid by Manager and/or such  employee.  Manager shall
                  also  have the  right to have  Off-Site  Personnel  performing
                  regional or area duties relating to the Hotel and other hotels
                  managed by Manager  lodged at the Hotel from time to time free
                  of charge. "Owner's Share" shall mean a fraction having twelve
                  (12) as its  denominator  and the  number  of  months  or part
                  thereof such person has been one of the Hotel Personnel as its
                  numerator.  All  expenses  for  Off-Site  Personnel  shall  be
                  included  as a  separate  category  or item  of the  Operating
                  Budgets or shall otherwise be approved by Owner.

                  Manager  agrees that it will consult with Owner  regarding the
                  hiring,  transferring,  or terminating of the general  manager
                  and  director of sales for the Hotel.  Owner shall be afforded
                  an opportunity to review the resumes of, and to interview, the
                  candidates  for  these  positions,  all  within  a time  frame
                  established  by Manager,  which shall be reasonable  under the
                  circumstances  in  question.  Manager and Owner shall  consult
                  with each other  concerning  such decisions and Manager agrees
                  to give serious  consideration  to the views of Owner prior to
                  Manager's  making a final  decision  with  respect to any such
                  individual;

         (iii)    Hotel  Policies.  Manager  shall  determine the terms of guest
                  admittance  to the Hotel,  establish  room  rates,  and use of
                  rooms for commercial purposes;

         (iv)     Bank Accounts. Manager shall open and operate the Hotel's bank
                  accounts.  All sums  received  from the operation of the Hotel
                  and all items paid by Manager  arising by virtue of  Manager's
                  operation  of the Hotel  shall pass  through  bank  account(s)
                  established  by  Manager  in  Owner's  name at such  banks  as
                  Manager and Owner shall  mutually  agree ("Bank  Account(s)");
                  only Manager's  designees  shall be exclusively  authorized to
                  operate and draw from the Bank  Account(s).  Each fiscal month
                  Manager,  on behalf of Owner,  shall  disburse  funds from the
                  Bank  Account(s)  in the order of  priority  and to the extent
                  available in accordance  with the priority  schedule set forth
                  on Exhibit "B";

         (v)      Operating Budgets. Manager has submitted to Owner, for Owner's
                  approval,  a proposed operating budget for the ensuing full or
                  partial fiscal year, as the case may be ("Operating  Budget").
                  Hereafter,  Manager shall,  not less than forty-five (45) days
                  prior to the commencement of each full


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<PAGE>

                  fiscal year, submit to Owner, for Owner's approval, a proposed
                  Operating  Budget for the ensuing full or partial fiscal year,
                  as the case may be. Each Operating Budget shall be accompanied
                  by, and shall  include,  a business plan which shall  describe
                  business  objectives  and strategies for the period covered by
                  the Operating Budget. The business plan shall include, without
                  limitation,  an analysis of the market area in which the Hotel
                  competes,  a  comparison  of the Hotel and its  business  with
                  competitive  hotels,  an analysis of  categories  of potential
                  guests,  and a description  of sales and marketing  activities
                  designed to achieve and implement  identified  objectives  and
                  strategies.  Fee  Owner  shall  have no right to  approve  any
                  Operating Budget.

                  Owner's   approval  of  the  Operating  Budget  shall  not  be
                  unreasonably  withheld  and  shall be  deemed  given  unless a
                  specific  written  objection  thereto is delivered by Owner to
                  Manager within fifteen (15) days after submission. Owner shall
                  review the Operating  Budget on a  line-by-line  basis.  To be
                  effective,  any notice which disapproves a proposed  Operating
                  Budget must contain specific  objections in reasonable  detail
                  to individual line items.

                  If the  initial  Operating  Budget  contains  disputed  budget
                  item(s),  said item(s) shall be deemed adopted until Owner and
                  Manager have resolved the item(s)  objected to by Owner or the
                  Accountant(s)  (hereinafter  defined  in Section  10.02)  have
                  resolved  the  item(s)  objected to by Owner.  Thereafter,  if
                  Owner disapproves or raises objections to a proposed Operating
                  Budget in the  manner  and  within  the time  period  provided
                  therefor,  and Owner and  Manager  are unable to  resolve  the
                  disputed or objectionable  matters submitted by Owner prior to
                  the commencement of the applicable fiscal year, the undisputed
                  portions of the proposed  Operating  Budget shall be deemed to
                  be  adopted  and  approved  and the  corresponding  line  item
                  contained in the  Operating  Budget for the  preceding  fiscal
                  year  shall be  adjusted  as set  forth  herein  and  shall be
                  substituted  in lieu of the  disputed  items  in the  proposed
                  Operating Budget.  Those line items which are in dispute shall
                  be  determined  by  increasing  the  preceding  fiscal  year's
                  corresponding  line items by an amount  determined  by Manager
                  which does not exceed the  Consumer  Price Index for All Urban
                  Consumers  published by the Bureau of Labor  Statistics of the
                  United  States  Department of Labor,  U.S.  City Average,  all
                  items  (1984-1986=100) for the fiscal year prior to the fiscal
                  year with respect to which the  adjustment to the line item is
                  being  calculated  or  any  successor  or  replacement   index
                  thereto. The resulting Operating Budget obtained in accordance
                  with  the  preceding  sentence  shall  be  deemed  to  be  the
                  Operating  Budget in effect  until  such time as  Manager  and
                  Owner have resolved the items objected to by Owner.

                  Manager shall revise the  Operating  Budget from time to time,
                  as necessary,  to reflect any unpredicted significant changes,
                  variables  or


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<PAGE>

                  events or to include  significant,  additional,  unanticipated
                  items  of  income  or  expense.  Any  such  revision  shall be
                  submitted to Owner for approval,  which  approval shall not be
                  unreasonably withheld,  delayed or conditioned.  Manager shall
                  be permitted to reallocate  part or all of the amount budgeted
                  with respect to any line item to another line item and to make
                  such other  modifications  to the Operating  Budget as Manager
                  deems  necessary,  provided,  however,  that  Manager  may not
                  reallocate  from one  Department  to another  without  Owner's
                  consent,  which shall not be unreasonably withheld or delayed.
                  The term  "Department"  shall mean and refer to those  general
                  divisional  categories  shown in the  Operating  Budget (e.g.,
                  Guest Services Department or Administration  Department),  but
                  shall  not  mean  or  refer  to  subcategories   (e.g.,  linen
                  replacement or uniforms)  appearing in a divisional  category.
                  In addition,  in the event actual  Adjusted Gross Revenues (as
                  defined in Exhibit  "C" hereto)  for any  calendar  period are
                  greater than those provided for in the Operating  Budget,  the
                  amounts   approved   in  the   Operating   Budget   for  suite
                  maintenance,  guest  services,  food and beverage,  telephone,
                  utilities,  marketing and hotel repair and maintenance for any
                  calendar month shall be  automatically  deemed to be increased
                  to an amount that bears the same  relationship  (ratio) to the
                  amounts  budgeted  for such  items as  actual  Adjusted  Gross
                  Revenue for such month bears to the projected  Adjusted  Gross
                  Revenue for such month.  Owner acknowledges that the Operating
                  Budget is  intended  only to be a  reasonable  estimate of the
                  Hotel's  income and  expenses  for the  ensuing  fiscal  year.
                  Manager  shall  not be  deemed  to have  made  any  guarantee,
                  warranty or  representation  whatsoever in connection with the
                  Operating Budget;

         (vi)     Operating Statement.  Manager shall prepare and furnish Owner,
                  on or before the  twentieth  (20th)  day of the  fiscal  month
                  immediately  following  the  close of a fiscal  month,  with a
                  detailed operating  statement setting forth the results of the
                  Hotel's  operations.  Within ninety (90) days after the end of
                  each fiscal year,  Manager shall furnish Owner with a detailed
                  operating  statement  setting forth the results of the Hotel's
                  operations for the fiscal year;

         (vii)    Capital Budgets.  Manager shall, not less than forty-five (45)
                  days prior to the commencement of each fiscal year,  submit to
                  Owner, for Owner's  approval,  a recommended  "Capital Budget"
                  for the ensuing full or partial  fiscal year,  as the case may
                  be, for  furnishings,  equipment,  and ordinary  Hotel capital
                  replacement items as shall be required to operate the Hotel in
                  accordance  with  the  standards  referred  to in the  License
                  Agreement.  Manager, to the extent it is able to do so without
                  compromising  compliance with the minimum  standards  required
                  under  the terms of the  License  Agreement,  shall  take into
                  consideration,  among  other  factors,  the  amount  of  funds
                  available  to  pay  for  the  proposed  capital  expenditures.
                  Manager shall also identify for Owner those  projects that are
                  required  to  meet  the  minimum   standards  of  the  License
                  Agreement and give  priority


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<PAGE>

                  to such  items.  Owner and  Manager  shall meet to discuss the
                  proposed  Capital  Budget and Owner  shall be required to make
                  specific  written  objections to a proposed  Capital Budget in
                  the  manner  and within  the same time  periods  specified  in
                  Section  3.01(v) with respect to an  Operating  Budget.  Owner
                  agrees not to unreasonably  withhold or delay its consent.  If
                  Owner does not approve the  Capital  Budget,  Manager (i) with
                  respect to Capital  Improvements (as herein defined)  required
                  to meet the minimum standards of the License  Agreement,  will
                  be entitled  to spend such  amounts as are  necessary  to meet
                  such  minimum  standards  and (ii) with  respect  to any other
                  Capital  Improvements,  will only  spend  such  amounts as are
                  approved by Owner, acting reasonably,  provided, however, that
                  in any event  Manager  shall be  entitled  to spend up to five
                  percent (5%) of Gross Revenue for capital  expenditures  after
                  the date hereof until the disputed Capital Budget item(s) have
                  been resolved in accordance with Section 10.02.1(e).  Manager,
                  at Owner's  expense,  shall be responsible for supervising the
                  design,   installation  and  construction  of  alterations  or
                  additions  to, or  rebuilding  or  renovation  of,  the Hotel,
                  including  any  additions to Hotel  furnishings  and equipment
                  (collectively,  "Capital Improvements").  Owner shall have the
                  right to approve and inspect the installation and construction
                  of Capital  Improvements and any mortgagee having a first lien
                  on Owner's  leasehold estate in the Hotel ("Owner's  Leasehold
                  Mortgagee")  or a first lien on Fee  Owner's fee estate in the
                  Hotel (the "Fee Owner's  Mortgagee") shall also have any right
                  of approval or inspection of the installation and construction
                  of the  Capital  Improvements  to the  extent set forth in the
                  mortgage, deed of trust or other loan documents (collectively,
                  the "Mortgage  Documents")  (but only if and to the extent the
                  Manager  has  been   provided  with  copies  of  the  Mortgage
                  Documents).  Fee Owner shall not have the right to approve any
                  Capital Budget.

                  After a Capital  Budget has been adopted,  it shall be subject
                  to  review  and  modification  in  the  event  unpredicted  or
                  unanticipated  capital  expenditures  are required  during any
                  calendar   year.   Manager   and  Owner   each  agree  not  to
                  unreasonably  withhold  or delay  its  consent  to a  proposed
                  modification  of a  Capital  Budget.  Any  amendment  that  is
                  mutually  agreed upon shall be set forth in writing and signed
                  by both  parties.  It is  acknowledged  by Owner that  capital
                  expenditures  required as a result of an  emergency  situation
                  shall not reduce  amounts  available  pursuant  to the Capital
                  Budget or  otherwise  hereunder,  other  than to the  extent a
                  Capital   Budget   item  is   subsumed   within  the   capital
                  expenditures  required  as a result of the  occurrence  of the
                  emergency;

         (viii)   General Maintenance  Non-Capital  Replacements.  Manager shall
                  supervise  the   maintenance,   repair  and   replacement   of
                  non-capital replacements;



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<PAGE>

         (ix)     Operating  Equipment.  Manager  shall  select and purchase all
                  operating  equipment  for the Hotel such as linens,  utensils,
                  uniforms and other similar items,  provided,  however, that if
                  Owner determines that it can purchase operating equipment of a
                  quality at least equal to that which Manager generally uses at
                  a price  lower than the price  obtained  by  Manager,  Manager
                  shall  purchase  such  operating  equipment  from  the  vendor
                  designated by Owner;

         (x)      Operating  Supplies.  Manager  shall  select and  purchase all
                  operating  supplies  for the  Hotel  such as food,  beverages,
                  fuel, soap,  cleansing items,  stationery and other consumable
                  items, provided, however, that if Owner determines that it can
                  purchase  operating  supplies  of a quality at least  equal to
                  that which  Manager  generally  uses at a price lower than the
                  price  obtained  by  Manager,   Manager  shall  purchase  such
                  operating supplies from the vendor designated by Owner;

         (xi)     Accounting  Standards.  Manager  shall  maintain the books and
                  records  reflecting  the operations of the Hotel in accordance
                  with the  accounting  practices of Manager in conformity  with
                  generally accepted accounting  practices  consistently applied
                  and shall  adopt and  follow  the  fiscal  accounting  periods
                  utilized  by  Manager in its normal  course of  business.  The
                  Hotel level generated  accounting records reflecting  detailed
                  day-to-day  transactions of the Hotel's  operations,  shall be
                  kept by Manager at the Hotel or at Manager's  regional offices
                  or  corporate  headquarters,  or at  such  other  location  as
                  Manager shall  reasonably  determine.  Manager shall receive a
                  monthly  fee for  accounting  services  provided  to the Hotel
                  ("Accounting Fee"). The current Accounting Fee is set forth on
                  Exhibit "B". The  Accounting  Fee shall be adjusted by Manager
                  from  time  to time  and set  forth  in the  annual  Operating
                  Budget;

         (xii)    Marketing and Advertising. Manager shall advertise and promote
                  the  Hotel  in  coordination  with  the  sales  and  marketing
                  programs of Manager and other Homewood Suites hotels.  Manager
                  may  participate  in  sales  and  promotional   campaigns  and
                  activities   involving   complimentary   rooms.   Manager,  in
                  marketing and advertising  the Hotel,  shall have the right to
                  use marketing and advertising services of employees of Manager
                  and its parent and  affiliated  companies  not  located at the
                  Hotel.  Manager may charge the Hotel for  personnel  and other
                  costs  and  expenses  incurred  in  providing  such  services;
                  provided  that (i)  Manager's  allocation  of such  costs  and
                  expenses among hotels, including the Hotel, shall be pro rated
                  among all hotels  owned or  managed  by  Manager  and (ii) the
                  annual  allocation  of such  costs and  expenses  to the Hotel
                  shall not exceed $10,000.00.  Such costs and expenses shall be
                  reflected in the budgets and operating  statements required to
                  be prepared and submitted by Manager under this Agreement;



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         (xiii)   Permits and  Licenses.  Manager  shall obtain and maintain the
                  various permits and licenses  required or permitted to be held
                  in its name that are  necessary  to enable  Manager to operate
                  the Hotel in accordance  with the terms of this  Agreement and
                  the License Agreement,  provided,  however, that Manager shall
                  only hold liquor licenses and alcoholic  beverage  licenses if
                  required by the laws of the jurisdiction in which the Hotel is
                  located.  In addition,  Manager  shall upon request  cooperate
                  with and assist  Owner in  obtaining  the various  permits and
                  licenses that are required to be held in the name of either or
                  both of Owner  and Fee  Owner  that are  necessary  to  enable
                  Manager to operate  the Hotel.  Manager,  at Owner's  cost and
                  expense,  shall  use all  reasonable  efforts,  to the  extent
                  within its control, to comply with the terms and conditions of
                  all licenses and permits  issued with respect to the Hotel and
                  the  business  conducted  at  the  Hotel,  including,  without
                  limitation, the terms and conditions of the License Agreement;

         (xiv)    Owner  Meetings.  The Hotel's  general manager shall meet with
                  Owner's  Representative  as  hereinafter  defined  in  Section
                  4.01(viii)  quarterly  to review and discuss the  previous and
                  future month's operating statement, cash flow, budget, capital
                  expenditures,  important  personnel  matters  and the  general
                  concerns of Owner and Manager.  In addition,  a representative
                  of   Manager's   corporate   staff  shall  meet  with  Owner's
                  Representative  quarterly  to review and discuss the  previous
                  and future quarter's operating  statement,  cash flow, budget,
                  capital  expenditures,  important  personnel  matters  and the
                  general  concerns of Owner and  Manager.  Except to the extent
                  otherwise  mutually  agreed  upon by Owner  and  Manager,  the
                  quarterly  meetings  described  in this clause  (xiv) shall be
                  held at the Hotel;

         (xv)     Insurance.  Manager shall procure and maintain  throughout the
                  Term the insurance coverages set forth on Exhibit "D";

         (xvi)    Compliance  with Law.  Manager,  at Owner's  cost and expense,
                  shall use all  reasonable  efforts  to  comply  with all laws,
                  ordinances, regulations and requirements of any federal, state
                  or municipal  government  that are  applicable  to the use and
                  operation  of the  Hotel,  as  well  as with  all  orders  and
                  requirements  of the local fire  department,  of which Manager
                  has knowledge;  provided,  however,  that Owner shall have the
                  right to contest by proper legal proceedings,  the validity of
                  any such law, ordinance, rule, regulation,  order, decision or
                  requirement  and  may  postpone  compliance  therewith  to the
                  extent  and  in  the  manner   provided  by  law  until  final
                  determination of any such proceedings.  Manager promptly shall
                  notify  Owner in writing of all notices of legal  requirements
                  applicable to the Hotel that are received by Manager;

         (xvii)   Satisfaction of Obligations.  Manager agrees to pay, when due,
                  all  amounts  due under  any  equipment  leases  and all other
                  contracts  and   agreements   relating  to  the  operation  or
                  maintenance  of the Hotel,  and, if


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<PAGE>

                  requested  by Owner,  any Mortgage  Documents  relating to the
                  loan  from  Owner's  Leasehold  Mortgagee  ("Owner's  Mortgage
                  Documents"),  but solely from and to the extent that funds are
                  available in the Bank  Account(s),  and to comply,  at Owner's
                  cost and expense,  with all other  covenants  and  obligations
                  contained in the equipment  leases and all utility  contracts,
                  concession agreements,  and service and maintenance contracts,
                  and, if requested by Owner,  Owner's Mortgage Documents to the
                  extent  that  compliance  therewith  is within the  reasonable
                  control of Manager by reason of its  management  and operation
                  of the Hotel pursuant to this  Agreement;  provided,  however,
                  Manager shall have no obligation to comply with any provisions
                  in the Mortgage  Documents  that  conflict with its rights and
                  obligations  under  this  Agreement.  Manager  shall  have  no
                  obligation  to perform or comply with any  obligations  of (i)
                  Fee  Owner or Owner  under  the  Percentage  Lease or (ii) Fee
                  Owner under any Mortgage  Documents  relating to the loan from
                  Fee  Owner's  Mortgagee  (other  than any right to  approve or
                  inspect Capital Improvements contemplated by Section 3.01(vii)
                  above);

         (xviii)  Requests  for   Information.   Manager  shall  respond,   with
                  reasonable promptness,  to any information requests by Owner's
                  Leasehold   Mortgagee  in  accordance  with  Owner's  Mortgage
                  Documents,  to the extent such  information  is required to be
                  furnished by Manager to Owner pursuant to this Agreement.  Any
                  additional   information  or  reports   requested  by  Owner's
                  Leasehold Mortgagee shall be provided by Manager only if Owner
                  so  directs  Manager  in  writing  and,  to  the  extent  such
                  information or reports are not being prepared for Owner in the
                  ordinary course of business pursuant to this Agreement,  Owner
                  agrees  to pay  the  reasonable  expenses  of  preparing  such
                  information and reports;

         (xix)    Tax and  Insurance  Accruals.  If requested by Owner,  Manager
                  shall  accrue  and set aside on a  monthly  basis  funds  from
                  Adjusted Gross Revenues if available in the priority set forth
                  on  Exhibit  B for  the  payment  of  real  estate  taxes  and
                  insurance premiums,  and such accruals shall be deposited in a
                  separate  account  and not  commingled  with  other  operating
                  accounts for Hotel operations  generally,  provided,  however,
                  that to the extent such accruals  exceed the amount  necessary
                  to pay the actual  amount of real estate  taxes and  insurance
                  premiums,  such excess shall be available for operating costs,
                  ownership  costs,   Owner's  Basic  Return,  the  Subordinated
                  Management  Fee and the others  items set forth on, and in the
                  priority  set forth on,  Exhibit  B. If such  accruals  do not
                  exceed the actual  amounts due in respect of real estate taxes
                  and insurance premiums but Owner and Manager agree in writing,
                  the tax and  insurance  accruals  on deposit  may be used from
                  time to time to pay operating costs if Adjusted Gross Revenues
                  are not otherwise sufficient to pay such operating costs.



                                       9
<PAGE>

                                    ARTICLE 4

                               OWNER'S OBLIGATIONS

         Section 4.01.  Owner's  Obligations.  During the Term, Owner shall have
the obligations set forth below:

         (i)      License  Agreement.  Owner shall comply with all the terms and
                  conditions of the License Agreement  (specifically  including,
                  but not limited  to,  Licensee's  obligation  to pay the fees,
                  charges and  contributions  set forth in paragraphs 3.c. and 7
                  of the License  Agreement)  and keep the License  Agreement in
                  full force and effect  from the  Effective  Date  through  the
                  remainder  of the Term.  Nothing  in this  Agreement  shall be
                  interpreted  in a manner which would  relieve  Owner of any of
                  its obligations under the License Agreement;

         (ii)     Licenses and Permits.  Owner shall obtain and  maintain,  with
                  Manager's   assistance  and   cooperation,   all  governmental
                  permissions,  licenses  and  permits  required  to be  held in
                  Owner's  and/or Fee Owner's name that are  necessary to enable
                  Manager to operate the Hotel in  accordance  with the terms of
                  this Agreement and the License Agreement;

         (iii)    Insurance.  Owner shall  procure and maintain  throughout  the
                  Term the insurance coverages set forth on Exhibit "E";

         (iv)     Intentionally Omitted;

         (v)      Operating  Funds.  Owner shall provide all funds  necessary to
                  enable  Manager to manage and operate the Hotel in  accordance
                  with the terms of this  Agreement  and the License  Agreement,
                  regardless  of the  designation  of a portion of the operating
                  costs as Fee  Ownership  Costs.  Owner  agrees to  deliver  to
                  Manager for deposit into the Bank  Account(s) on the Effective
                  Date the amount specified on Exhibit "B" which amount shall be
                  the  "Minimum  Balance" to be  maintained  by Owner during the
                  first  year of the  Hotel's  operation.  The  Minimum  Balance
                  thereafter  shall be no less than the Hotel's  operating costs
                  for the  preceding  fiscal  month.  The Minimum  Balance shall
                  serve as working  capital  for the Hotel's  operations.  Owner
                  agrees, upon Manager's written request, to immediately furnish
                  Manager with sufficient funds to make up any deficiency in the
                  Minimum Balance;

         (vi)     Capital Funds.  Owner shall expend such amounts for renovation
                  programs,  furnishings,  equipment and ordinary  Hotel capital
                  replacement  items as are  required  from  time to time to (a)
                  maintain  the Hotel in good order and repair,  (b) comply with
                  the standards  referred to in the License  Agreement,  and (c)
                  comply with governmental  regulations and orders.  Owner shall
                  cooperate  fully  with  Manager  in  establishing  appropriate


                                       10
<PAGE>

                  procedures  and  timetables  for  Owner to  undertake  capital
                  replacement projects.

                  It is recognized that  expenditures  for capital  replacements
                  are incapable of precise  calculation  in advance.  Therefore,
                  five  percent (5%) of Gross  Revenues  each year shall be paid
                  over in cash in each calendar  month after the Effective  Date
                  into a  Reserve  Fund  (as  hereinafter  defined)  to pay  for
                  capital  replacements.  In lieu of  funding  monthly  into the
                  Reserve  Fund as  contemplated  above,  Owner  shall  have the
                  right,  but not the  obligation,  to deposit  into the Reserve
                  Fund,  on or about the  commencement  of each  year,  the full
                  amount  set  forth  in  the  Capital  Budget.   Manager  shall
                  establish a reserve for capital  replacements  on the books of
                  account for the Hotel and the cash  amounts  required for such
                  reserve shall be placed into an interest-bearing  account (the
                  "Reserve Fund") established in the Hotel's name at the bank at
                  which the Bank  Account(s)  are  established,  with  Manager's
                  designees  being  the  only  authorized  signatories  on  said
                  account.  All amounts on deposit in the Reserve  Fund shall be
                  Owner's.  Any expenditures for capital replacements during any
                  calendar year which have been included in an approved  Capital
                  Budget may be made without  Owner's or Fee Owner's  additional
                  approval  and,  to the  extent  available,  shall  be  made by
                  Manager from the Reserve Fund (including  accrued interest and
                  unused  accumulations  from prior calendar years). Any amounts
                  remaining  in the Reserve  Fund at the close of each  calendar
                  year shall be carried forward and retained in the Reserve Fund
                  until fully used as herein provided. To the extent the Reserve
                  Fund is insufficient at a particular time or to the extent the
                  Reserve Fund plus  anticipated  contributions  for the ensuing
                  calendar year is less than the budgeted expenditures set forth
                  in the approved  Capital Budget for the ensuing  calendar year
                  then in either such event,  Manager  shall give Owner  written
                  notice thereof at least sixty (60) days before the anticipated
                  date  such  funds  will be  needed.  Owner  shall  supply  the
                  necessary  funds  by  deposit  to the  Reserve  Fund at  least
                  fifteen (15) days before the anticipated  date such funds will
                  be needed.  All  proceeds  from the sale of  capital  items no
                  longer  needed  for  the  operation  of  the  Hotel  shall  be
                  deposited to the Reserve Fund.  Sale of such items shall be at
                  the  discretion of Manager,  and  conducted in a  commercially
                  reasonable  manner.  Manager  shall not dispose of any capital
                  item or group of capital items having a value in excess of ten
                  thousand  dollars  ($10,000)  without  Owner's  prior  written
                  consent  unless the  replacement of such capital item or group
                  of  capital  items  has been  contemplated  in the  applicable
                  Capital  Budget.  Manager  also shall  obtain  the  consent of
                  Owner's Leasehold  Mortgagee when required for any disposition
                  of  capital  items  otherwise  prohibited  under  the terms of
                  Owner's Mortgage  Documents,  provided,  however,  that to the
                  extent a capital  item is being  replaced  because the same is
                  defective  or  obsolete  or with an item of equal  or  greater
                  value no such consent need be obtained from Owner's  Leasehold
                  Mortgagee.  Upon  termination  of this  Agreement for whatever
                  reason or upon sale of the  Hotel,  Manager's  right


                                       11
<PAGE>

                  to  expend  any  unused  portion  of the  Reserve  Fund  shall
                  terminate  and the  balance  of the fund shall be paid over to
                  Owner, less any sums then due Manager.

                  To the extent any  expenditure  under  this  Section  4.01(vi)
                  shall exceed twenty thousand dollars ($20,000),  Manager shall
                  first solicit bids from at least three different reputable and
                  qualified  third parties,  and the lowest of the bidders shall
                  be  selected  unless  acceptance  of a  higher  bid  has  been
                  approved  by Owner in  writing  or unless  Manager  provides a
                  reasonably  detailed  explanation  for its  selection of a bid
                  higher than the lowest of the bidders;

         (vii)    Payments to Manager.  Owner shall  promptly pay to Manager all
                  amounts due Manager under this Agreement;

         (viii)   Owner's  Representative.  Owner shall appoint a representative
                  to represent  Owner in all matters  relating to this Agreement
                  and/or the Hotel ("Owner's  Representative").  Owner's initial
                  Owner's  Representative  shall  be  the  individual  named  on
                  Exhibit "B".  Manager shall have the right to deal solely with
                  the Owner's  Representative  on all such matters.  Manager may
                  rely  upon   statements   and   representations   of   Owner's
                  Representative as being from and binding upon Owner. Owner may
                  change  its  Owner's  Representative  from  time  to  time  by
                  providing written notice to Manager in the manner provided for
                  herein. Owner shall cause the Owner's Representative to attend
                  all quarterly meetings referred to in Section 3.01(xiv);

         (ix)     Owner's  Audits.  Owner  shall  have  the  right  to have  its
                  independent  accounting  firm examine the books and records of
                  the Hotel at any reasonable time upon  forty-eight  (48) hours
                  notice to Manager;

         (x)      Right of  Inspection  and  Review.  Owner,  Owner's  Leasehold
                  Mortgagee,  Fee  Owner  and Fee  Owner's  Mortgagee  and their
                  respective   accountants,    attorneys,   agents   and   other
                  representatives  and  invitees,  shall have the right to enter
                  upon any  part of the  Hotel at all  reasonable  times  during
                  normal  business  hours and during the term of this  Agreement
                  upon  reasonable  prior  notice to Manager  for the purpose of
                  examining  or  inspecting  the  Hotel,  showing  the  Hotel to
                  prospective purchasers or mortgagees,  or auditing,  examining
                  or making  extracts of books and records of the Hotel,  or for
                  any other purpose which Owner,  in its reasonable  discretion,
                  shall deem necessary or advisable,  but the same shall be done
                  with as  little  disruption  to the  business  of the Hotel as
                  under the circumstances is reasonable; and

         (xi)     Quiet and Peaceable Operation. Owner shall ensure that Manager
                  is  able  to  peaceably  and  quietly  operate  the  Hotel  in
                  accordance  with  the  terms  of  this  Agreement,  free  from
                  molestation, eviction and disturbance by Owner


                                       12
<PAGE>

                  or by any other  person or  persons  claiming  by,  through or
                  under  Owner.   Owner  shall   undertake   and  prosecute  all
                  reasonable  and  appropriate  actions,  judicial or otherwise,
                  required  to assure  such quiet and  peaceable  operations  by
                  Manager.

                                    ARTICLE 5

                                 MANAGEMENT FEE

         Section  5.01.  Management  Fee. On the first day of each fiscal  month
after the Effective Date,  Manager is authorized by Owner to pay itself from the
Bank  Account(s)  the  Management  Fees  calculated  in the  manner set forth on
Exhibit "C".

                                    ARTICLE 6

                              CLAIMS AND LIABILITY

         Section 6.01.  Claims and Liability.  Owner and Manager  mutually agree
for  the  benefit  of each  other  to look  only  to the  appropriate  insurance
coverages in effect  pursuant to this Agreement in the event any demand,  claim,
action,  damage,  loss,  liability  or  expense  occurs as a result of injury to
person or damage to property regardless whether any such demand,  claim, action,
damage,  loss,  liability or expense is caused or contributed  to, by or results
from the  negligence  of Owner or  Manager  or their  subsidiaries,  affiliates,
employees, directors, officers, agents or independent contractors and regardless
whether the injury to person or damage to property occurs in and about the Hotel
or elsewhere as a result of the performance of this Agreement.  Nevertheless, in
the event the  insurance  proceeds  are  insufficient  or there is no  insurance
coverage to satisfy the demand,  claim,  action,  loss, liability or expense and
the same did not arise out of the gross  negligence  or  willful  misconduct  of
Manager,  Owner  agrees,  at its expense,  to indemnify and hold Manager and its
subsidiaries,  affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability.

         Section 6.02. Survival.  The provisions of this Article 6 shall survive
any  cancellation,  termination or expiration of this Agreement and shall remain
in full force and effect until such time as the applicable statute of limitation
shall cut off all demands,  claims,  actions,  damages,  losses,  liabilities or
expenses which are the subject of the provisions of this Article 6.

                                    ARTICLE 7

                         CLOSURE, EMERGENCIES AND DELAYS

         Section 7.01.  Events of Force Majeure.  If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease operation
of the Hotel in order to protect the Hotel and/or the health, safety and welfare
of the guests


                                       13
<PAGE>

and/or  employees  of the Hotel for  reasons  beyond the  reasonable  control of
Manager,  such as, but not limited to, acts of war,  insurrection,  civil strife
and commotion,  labor unrest,  governmental  regulations and orders, shortage or
lack of adequate supplies or lack of skilled or unskilled employees,  contagious
illness,  catastrophic  events or acts of God, which shall not include Manager's
computer systems and software not being able to accurately process date data and
information,   including,  but  not  limited  to,  calculating,   comparing  and
sequencing from, into and between the twentieth  century,  the year 2000 and the
twenty-first  century  ("Force  Majeure"),  then in such event or similar events
Manager may close and cease operation of all or any part of the Hotel, reopening
and  commencing  operation  when  Manager  deems  that such may be done  without
jeopardy to the Hotel, its guests and employees.

         Manager and Owner agree,  except as otherwise provided herein, that the
time within  which a party is required to perform an  obligation  and  Manager's
right to manage the Hotel under this Agreement shall be extended for a period of
time equivalent to the period of delay caused by an event of Force Majeure.

         Section 7.02. Emergencies. If a condition of an emergency nature should
exist which requires that  immediate  repairs be made for the  preservation  and
protection  of the Hotel,  its guests or  employees,  or to assure the continued
operation of the Hotel,  Manager is  authorized  to take all actions and to make
all  expenditures  necessary  to repair and correct such  condition,  regardless
whether  provisions  have been made in the applicable  budget for such emergency
expenditures. Expenditures made by Manager in connection with an emergency shall
be paid, in Manager's sole discretion,  out of the Bank Account(s).  Owner shall
immediately  replenish such funds paid from the Bank  Account(s).  Manager shall
endeavor to communicate  with Owner prior to making any  expenditures to correct
an emergency  condition,  but in any event shall promptly notify Owner after the
emergency expenditures have been made.

                                    ARTICLE 8

                            CONDEMNATION AND CASUALTY

         Section  8.01.  Condemnation.  If the  Hotel is  taken  in any  eminent
domain,   expropriation,   condemnation,   compulsory   acquisition  or  similar
proceeding  by  a  competent  authority,   this  Agreement  shall  automatically
terminate as of the date of taking or  condemnation.  Any  compensation  for the
taking or  condemnation of the physical  facility  comprising the Hotel shall be
paid to Owner. Manager,  however, with the full cooperation of Owner, shall have
the  right to file a claim  with  the  appropriate  authorities  for the loss of
Management  Fee income for the remainder of the Term and any  extension  thereof
because  of the  condemnation  or  taking.  If only a portion of the Hotel is so
taken and the taking does not make it  unreasonable  or imprudent,  in Manager's
and Owner's opinion, to operate the remainder as a hotel of the type immediately
preceding such taking,  this Agreement  shall not  terminate.  Any  compensation
shall be used,  however, in whole or in part, to render the Hotel a complete and
satisfactory  architectural unit as a hotel of the same type and class as it was
immediately preceding such taking or condemnation.



                                       14
<PAGE>

         Section 8.02. Casualty. In the event of a fire or other casualty, Owner
shall comply with the terms of the License  Agreement and this  Agreement  shall
remain in full force and effect so long as the License Agreement remains in full
force and effect.

                                    ARTICLE 9

                               TERMINATION RIGHTS

         Section  9.01.   Bankruptcy  and   Dissolution.   If  either  party  is
voluntarily  or  involuntarily  dissolved or declared  bankrupt,  insolvent,  or
commits an act of bankruptcy,  or if a company enters into  liquidation  whether
compulsory  or  voluntary  otherwise  than for the  purpose of  amalgamation  or
reconstruction,  or compounds  with its creditors,  or has a receiver  appointed
over all or any part of its assets, or passes title in lieu of foreclosure,  the
other party may terminate this Agreement  immediately upon serving notice to the
other party, without liability on the part of the terminating party.

         Section  9.02.  Manager's  Termination  Right Upon the  Termination  of
License  Agreement.  If the  License  Agreement  is  terminated  for any reason,
Manager may terminate this Agreement  immediately  upon serving notice to Owner,
without  liability  on the  part  of  Manager.  Upon  such  termination,  unless
specifically provided otherwise herein, Manager shall be entitled to receive the
Sale  Termination  Fee  calculated  in the  manner  set  forth on  Exhibit  "B".
Notwithstanding  anything  contained  herein,  Manager  shall not be entitled to
receive the Sale Termination Fee if the License Agreement is terminated  because
of Manager's failure to perform its obligations  hereunder and Manager's failure
was not caused by the failure of Owner to perform its obligations hereunder.

         Section 9.03. (a) Owner's Default. The following shall, at the election
of Manager,  constitute  events of default by Owner under this  Agreement  (each
such event being referred to herein as an "Owner's Default"):

         (i)      The failure of Owner to pay any amount to Manager provided for
                  herein for a period of ten (10) days after  written  notice by
                  Manager of such failure to pay.

         (ii)     Failure  of Owner to keep or  perform  any  duty,  obligation,
                  covenant or  agreement  of Owner under this  Agreement  (other
                  than the  obligation  to pay that is the subject of  paragraph
                  (i) above) and such failure  continues  for a period of thirty
                  (30)  days  after  receipt  of  written  notice  thereof  from
                  Manager; provided,  however, if such failure cannot reasonably
                  be remedied or  corrected  within such thirty (30) day period,
                  then such  thirty (30) day period  shall be extended  for such
                  additional  period as may be reasonably  required to cure such
                  default  but only if Owner  promptly  commences  to cure  such
                  default and  continues  thereafter  with all due  diligence to
                  complete such a cure to the satisfaction of Manager.



                                       15
<PAGE>

         (iii)    The occurrence of a default under or other  termination of the
                  Percentage Lease.

         (iv)     Failure of Fee Owner to keep or perform any duty,  obligation,
                  covenant or agreement of Fee Owner under the "Comfort  Letter"
                  of even date  herewith from Manager to Fee Owner agreed to and
                  accepted by Fee Owner (the "Comfort  Letter")  relating to the
                  Hotel and such failure  continues  for a period of thirty (30)
                  days after  receipt of written  notice  thereof from  Manager;
                  provided,  however,  if  such  failure  cannot  reasonably  be
                  remedied or corrected within such thirty (30) day period, then
                  such  thirty  (30)  day  period  shall  be  extended  for such
                  additional  period as may be reasonably  required to cure such
                  default, but only if Fee Owner promptly commences to cure such
                  default and  continues  thereafter  with all due  diligence to
                  complete such a cure to the satisfaction of Manager.

         (v)      The  occurrence  of an "Event of  Default"  (as defined in the
                  Acquisition  Mortgage Documents (as herein defined)) under the
                  Acquisition Mortgage Documents.

         On the occurrence of any Owner's Default,  Manager shall have the right
to  terminate  this  Agreement  by written  notice to Owner,  in addition to its
rights to seek damages or other remedies available to it at law or in equity.

         (b) Manager  Default.  The following  shall,  at the election of Owner,
constitute an event of default by Manager under this Agreement (such event being
referred  to herein as the  "Manager  Default"):  Failure  of Manager to keep or
perform  any duty,  obligation,  covenant  or  agreement  of Manager  under this
Agreement and such failure shall continue for a period of thirty (30) days after
receipt of written notice thereof from Owner; provided, however, if such failure
cannot  reasonably be remedied or corrected  within such thirty (30) day period,
then such thirty (30) day period shall be extended for such additional period as
may be reasonably  required to cure such default  provided that Manager promptly
commences to cure such default and continues  thereafter  with all due diligence
to complete such cure to the  satisfaction of Owner.  Upon the occurrence of the
Manager  Default,  Owner shall have the right to  terminate  this  Agreement  by
written  notice to Manager,  in  addition to its right to seek  damages or other
remedies available to it at law or in equity.

         Section 9.04. Owner's -- Termination  Rights. (a) Provided Owner is not
in default  under this  Agreement  at the time of  delivery  of the  Termination
Notice (as defined herein) or on the Termination Date (as defined herein), Owner
shall have the right,  after the tenth  anniversary  of the  Effective  Date, to
terminate this Agreement by giving  written notice (a  "Termination  Notice") to
Manager setting forth an effective  termination date which shall be the last day
of a month (the  "Termination  Date")  and which  shall be not less than six (6)
months  nor more than  twelve  (12)  months  after the date of such  Termination
Notice and shall in no event be prior to the tenth  anniversary of the Effective
Date. If Owner terminates this Agreement  pursuant to this Section  9.04(a),  in
addition  to payment of all other fees and  reimbursable  sums due to Manager on
the


                                       16
<PAGE>

Termination  Date,  Manager  shall  have the right to receive  the  Cancellation
Termination  Fee  calculated  in the  manner  set  forth on  Exhibit  "B".  Such
termination  shall be effective so long as on or before the Termination Date (x)
Owner  pays  to  Manager  the  Cancellation  Termination  Fee  and  all  amounts
determined by Owner and Manager, each acting reasonably and in good faith, to be
due and owing to Manager  pursuant to the terms and provisions of this Agreement
and (y) all sums then  outstanding  under the  Acquisition  Loan shall have been
paid in full.

         (b) (i) Provided  Owner is not in default under this  Agreement,  Owner
shall have the right to terminate this Agreement if, beginning in the first full
calendar  year  of  Hotel  operations,  Manager  fails  to  achieve,  in any two
consecutive  calendar years, a Gross Operating  Profit (as herein defined) which
is at least eighty-five  percent (85%) of the amount set forth in the respective
annual Operating Budget for Gross Operating Profit ("Budgeted  GOP");  provided,
however,  that, if within sixty (60) days of receipt of a notice from Owner that
Owner intends to terminate this Agreement  pursuant to this Section  9.04(b)(i),
Manager  pays in  cash to  Owner  the  difference  between  the  achieved  Gross
Operating  Profit and  eighty-five  percent  (85%) of the  Budgeted  GOP for the
second of the two consecutive calendar years in which shortfalls occurred,  then
Owner shall not be entitled to terminate this Agreement. If Owner is entitled to
and elects to  terminate  this  Agreement,  Owner shall give  written  notice to
Manager  within  ninety  (90) days  following  delivery  to Owner of the  annual
financial  statements  for the calendar  year. If such notice is not provided by
Owner to Manager  within such  ninety (90) day period,  Owner shall be deemed to
have waived its right  hereunder to terminate this Agreement with respect to the
calendar year as to which the failure occurred. In the event Owner has the right
to  terminate  with  respect to a calendar  year but waives such right,  Owner's
right to  terminate  shall  carry  forward and shall be  applicable  to the next
succeeding  calendar year if Manager fails to achieve  eighty-five percent (85%)
of Budgeted GOP for the next succeeding year, subject to Manager's right to cure
for such calendar year. For purposes of this section,  the term "Gross Operating
Profit" shall mean the amount,  if any, by which Adjusted Gross Revenues for any
calendar year exceed operating costs for such calendar year.

         (ii) The  provisions  of  clause  (b)(i)  above  shall not apply in any
calendar  year in which the  operation  of the Hotel,  or the use of the Hotel's
facilities,  are  significantly  disrupted  by casualty  loss,  strike,  eminent
domain, or other events of Force Majeure that are beyond the reasonable  control
of Manager,  or major  repairs to or  refurbishment  of the Hotel.  In the event
Owner  exercises the right of termination  contemplated  in clause (b)(i) above,
(a) Owner shall have no obligation to pay any  termination  fee or other damages
to Manager as a  consequence  of such  termination,  except  that Owner shall be
liable to  Manager  and shall pay  immediately  upon such  termination  all fees
earned  and other  amounts  and  expenses  payable  or  reimbursable  to Manager
pursuant to this  Agreement  and (b) the  exercise  of the right of  termination
shall only be valid if on or prior to the termination  date all sums outstanding
under the Acquisition Loan shall have been paid in full.

         Section 9.05. Manager's Right to Terminate Upon Sale. If there is to be
a "Change in Ownership" as defined in the License Agreement and the new owner of
the


                                       17
<PAGE>

Hotel has not received a Homewood Suites License  Agreement for the operation of
the Hotel (for purposes of this Section 9.05,  said agreement  shall be referred
to as the "License Agreement"),  Manager shall have the right upon giving notice
to Owner to terminate this Agreement on the date the Change of Ownership occurs.
If there is a Change of  Ownership  and the new owner of the  Hotel  receives  a
License Agreement, but does not enter into an assumption agreement,  pursuant to
which the new owner assumes all of Owner's obligations  hereunder,  with Manager
prior to the date the Change of Ownership occurs,  Manager shall have the right,
upon giving notice to Owner,  to terminate this Agreement on the date the Change
of Ownership  occurs.  If Manager  terminates  this  Agreement  pursuant to this
Section 9.05 (in addition to payment of all other fees and reimbursable sums due
to Manager to the date of termination),  Manager shall have the right to receive
the Sale Termination Fee calculated in the manner set forth on Exhibit "B". If a
Change of Ownership  occurs,  and the new owner obtains a License  Agreement and
the new owner and Manager enter into an assumption  agreement  pursuant to which
this  Agreement  remains in full force and effect,  Manager  shall not receive a
Termination  Fee and references in this Agreement to License  Agreement shall be
to the License Agreement with such new owner.

         Section  9.06.  Delays.  Notwithstanding  any other  provision  of this
Agreement, if any event of the type described in Article 7 or 8 occurs after the
Effective Date and Manager is unable to operate the Hotel for a period of ninety
(90) days, Manager shall have the option to terminate this Agreement upon thirty
(30) days'  prior  written  notice to Owner,  without  liability  on the part of
Manager,  its  parent  or  their  subsidiaries  or  affiliates.  Under  any such
circumstances, the Acquisition Loan shall be repaid in full.

         Section 9.07.  Employment  Solicitation  Restriction Upon  Termination.
Owner and its affiliates and subsidiaries and their successors  hereby agree not
to solicit  the  employment  of the Hotel  general  manager,  assistant  general
manager  or  director  of sales at any time  during  the term of this  Agreement
without Manager's prior written approval.  Furthermore, Owner and its affiliates
and subsidiaries and successors agree not to employ the Hotel's general manager,
assistant  general  manager  or  director  of sales for a period of twelve  (12)
months after the termination or expiration of this Agreement,  without Manager's
prior written approval.

         Section 9.08. Transition Upon Termination. Upon any termination of this
Agreement,  all fees and  payments  due to Manager as of the  effective  date of
termination,  including all accrued and unpaid fees and reimbursable charges and
expenses,  shall be paid to Manager within ten (10) days after delivery to Owner
of an itemized statement of such fees and payments. Manager shall be entitled to
exercise  the right of setoff  provided in Section  11.16 hereof with respect to
such fees,  charges and expenses.  Manager shall deliver to Owner, or such other
person or persons as Owner may designate, copies of all books and records of the
Hotel and all funds in the possession of Manager  belonging to Owner or received
by Manager pursuant to the terms of this Agreement,  and shall assign,  transfer
or convey to such person or persons all service  contracts and personal property
relating to or used in the operation and  maintenance  of the Hotel,  except any
personal property which is owned by Manager. Manager also shall, for a period of
thirty (30) days


                                       18
<PAGE>

after such expiration or termination,  make itself available to consult with and
advise  Owner or such  other  person or  persons  regarding  the  operation  and
maintenance of the Hotel at a consultation fee to be agreed upon between Manager
and Owner.

                                   ARTICLE 10

                         APPLICABLE LAW AND ARBITRATION

         Section  10.01.  Applicable  Law.  The  interpretation,   validity  and
performance  of  this  Agreement   shall  be  governed  by  the  procedural  and
substantive  laws of the state of  Tennessee  and any and all  disputes,  except
those  specifically  referred to below,  shall be brought and maintained  within
that state. If any judicial  authority holds or declares that the law of another
jurisdiction is applicable,  this Agreement shall remain  enforceable  under the
laws of that jurisdiction.

         Section 10.02. Arbitration of Financial Matters.

                  Subsection 10.02.1. Matters to be Submitted to Arbitration. In
         the case of a dispute  with  respect to any of the  following  matters,
         either  party may submit  such  matter to  arbitration  which  shall be
         conducted by the  Accountants  (as  hereinafter  defined in  Subsection
         10.02.2):  (a) computation of the Management  Fees; (b)  reimbursements
         due  to  Manager  under  the  provisions  of  Section  11.15;  (c)  any
         adjustment  in the  Minimum  Balance  under the  provisions  of Section
         4.01(v);  (d) any adjustment in dollar  amounts of insurance  coverages
         required to be maintained;  and (e) any dispute concerning the approval
         of an Operating Budget.

                  All disputes  concerning  the above matters shall be submitted
         to the Accountants. The decision of the Accountants with respect to any
         matters  submitted  to them  under  this  Subsection  10.02.1  shall be
         binding on both parties hereto.

                  Subsection 10.02.2.  The Accountants.  The "Accountants" shall
         be one of three (3) firms of certified public accountants of recognized
         national  standing in the hotel industry.  Until otherwise agreed to by
         the  parties,  the  three (3) firms  shall be  Arthur  Andersen  & Co.,
         PriceWaterhouseCoopers, and Ernst & Young, notwithstanding any existing
         relationships  which may exist between Owner and such accounting  firms
         or Manager and such accounting  firms. The party desiring to submit any
         matter to arbitration  under Subsection  10.02.1 shall do so by written
         notice to the other party, which notice shall set forth the items to be
         arbitrated  and such party's  choice of one of the three (3) accounting
         firms.  The party  receiving such notice shall within fifteen (15) days
         after receipt of such notice either  approve such choice,  or designate
         one of the remaining two (2) firms by written  notice back to the first
         party, and the first party shall within fifteen (15) days after receipt
         of such notice either  approve such choice or  disapprove  the same. If
         both parties  shall have  approved one of the three (3) firms under the
         preceding  sentence,  then such firm shall be the "Accountants" for the
         purposes of arbitrating


                                       19
<PAGE>

         the dispute;  if the parties are unable to agree on an accounting firm,
         then the third firm, which was not designated by either party, shall be
         the "Accountants"  for such purpose.  The Accountants shall be required
         to render a decision in  accordance  with the  procedures  described in
         Subsection  10.02.3  within  fifteen (15) days after being  notified of
         their selection.  The fees and expenses of the Accountants will be paid
         by the non-prevailing party.

                  Subsection 10.02.3. Procedures. In all arbitration proceedings
         submitted  to the  Accountants,  the  Accountants  shall be required to
         agree upon and approve the substantive  position  advocated by Owner or
         Manager with respect to each disputed  item.  Any decision  rendered by
         the Accountants  that does not reflect the position  advocated by Owner
         or  Manager  shall be beyond  the  scope of  authority  granted  to the
         Accountants and,  consequently,  may be overturned by either party. All
         proceedings by the  Accountants  shall be conducted in accordance  with
         the Uniform  Arbitration  Act,  except to the extent the  provisions of
         such act are modified by this Agreement or the mutual  agreement of the
         parties.  Unless otherwise agreed, all arbitration proceedings shall be
         conducted at the Hotel.

         Section 10.03.  Performance During Disputes. It is mutually agreed that
during any kind of  controversy,  claim,  disagreement  or dispute,  including a
dispute as to the validity of this Agreement, Manager shall remain in possession
of the Hotel as Manager;  and Owner and Manager shall continue their performance
of the provisions of this Agreement and its exhibits.  Manager shall be entitled
to injunctive relief from a civil court or other competent authority to maintain
possession  in  the  event  of  a  threatened   eviction   during  any  dispute,
controversy, claim or disagreement arising out of this Agreement.

                                   ARTICLE 11

                               GENERAL PROVISIONS

         Section 11.01.  Authorization.  Owner and Manager represent and warrant
to each other that their respective  corporations  have full power and authority
to execute this  Agreement and to be bound by and perform the terms  hereof.  On
request, each party shall furnish the other evidence of such authority.

         Section 11.02.  Relationship.  Manager and Owner shall not be construed
as joint  venturers  or partners of each other by reason of this  Agreement  and
neither  shall have the power to bind or obligate  the other except as set forth
in this Agreement.

         Section 11.03.  Manager's  Contractual  Authority in the Performance of
this  Agreement.  Manager is authorized  to make,  enter into and perform in the
name of and for the account of Owner any contracts  deemed  necessary by Manager
to perform its  obligations  under this  Agreement.  In exercising its authority
hereunder, Manager shall be entitled to execute and enter into contracts without
the specific  approval of Owner and Fee Owner so long as each such  contract (i)
requires expenditures or otherwise establishes liability of twenty-five thousand
dollars  ($25,000)  or less and (ii) has a term


                                       20
<PAGE>

(excluding  options in favor of  Manager  and Owner to renew) of one (1) year or
less or can be cancelled  without  penalty upon sixty (60) days' notice or less,
provided, however, that any contract entered into pursuant to the last paragraph
of  Section  4.01(vi)  shall  be  governed  by the  provisions  of said  Section
4.01(vi).  Any contract  that does not satisfy the  conditions  set forth in the
preceding  sentence  shall require the prior approval in each instance of Owner,
regardless  whether such  expenditure  is authorized  in an  applicable  budget,
unless the form of the contract proposed to be entered into has been approved in
advance by Owner.  Owner agrees to promptly  respond to any request for approval
and  further  agrees  that its  consent  shall not be  unreasonably  withheld or
delayed.  Manager shall be authorized to enter into contracts with affiliates of
Manager,  but only so long as Owner  shall have  approved in advance the cost of
the service or product to be provided.

         Section 11.04. Further Actions.  Owner and Manager agree to execute all
contracts,  agreements and documents and to take all actions necessary to comply
with the provisions of this Agreement and the intent hereof.

         Section  11.05.  Successors and Assigns.  Owner's  consent shall not be
required for Manager to assign any of its rights,  interests or  obligations  as
Manager  hereunder to any parent,  subsidiary  or affiliate of Manager or Promus
Hotel  Corporation,  provided that any such  assignee  agrees to be bound by the
terms and conditions of this Agreement and provided, further, that such assignee
has  received  an  assignment  of all  or  substantially  all of the  management
agreements entered into by Manager with respect to other Homewood Suites hotels.
The  acquisition  of Manager or its parent  company by a third  party  shall not
constitute an assignment of this Agreement by Manager and this  Agreement  shall
remain in full  force and effect  between  Owner and  Manager.  Except as herein
provided,  Manager shall not assign any of its obligations hereunder without the
prior  written  consent of Owner,  which shall not be  unreasonably  withheld or
delayed.  Owner shall be deemed to have  consented to such an assignment of this
Agreement  if Owner has not notified  Manager in writing to the contrary  within
fifteen (15) days after Owner has received Manager's request for Owner's consent
to an assignment.  Manager shall have the right to pledge or assign its right to
receive the  Management  Fees  hereunder  without the prior  written  consent of
Owner.

         Owner  shall have the right to assign this  Agreement  to the person or
entity which has obtained (i) leasehold  title to the Hotel in  accordance  with
the Comfort Letter and (ii) a Homewood  Suites License  Agreement for the Hotel.
Except as  hereinabove  provided,  Owner shall not have the right to assign this
Agreement.

         Section 11.06.  Notices. All notices or other  communications  provided
for in this  Agreement  shall be in writing and shall be either hand  delivered,
delivered  by  certified  mail,  postage  prepaid,   return  receipt  requested,
delivered by an overnight  delivery  service,  or delivered by facsimile machine
(with an executed original sent the same day by an overnight  delivery service),
addressed as set forth on Exhibit "B".  Notices shall be deemed delivered on the
date that is four (4)  calendar  days after the notice is  deposited in the U.S.
mail (not  counting  the mailing  date) if sent by certified  mail,  or, if hand
delivered,  on the date the hand  delivery is made, or if delivered by facsimile
machine, on the date the transmission is made. If given by an overnight


                                       21
<PAGE>

delivery service,  the notice shall be deemed delivered on the next business day
following  the date that the notice is  deposited  with the  overnight  delivery
service.  The addresses  given above may be changed by any party by notice given
in the manner provided herein.

         Section  11.07.  Documents.  Owner shall furnish  Manager copies of all
leases, title documents,  property tax receipts and bills, insurance statements,
all financing  documents  (including notes and mortgages)  relating to the Hotel
and such other documents pertaining to the Hotel as Manager shall request.

         Section 11.08. Defense. Manager shall defend and/or settle any claim or
legal  action  brought  against  Manager  or  Owner,  individually,  jointly  or
severally in connection  with the  operation of the Hotel.  Manager shall retain
and  supervise  legal  counsel,   accountants  and  such  other   professionals,
consultants and specialists as Manager deems appropriate to defend and/or settle
any such claim or cause of  action.  Owner  shall have the right to  participate
actively in the defense of any such claim or cause of action in which Owner is a
named defendant. Owner's approval shall be required with respect to any proposed
settlement  of any claim or cause of action in which  Owner is a named  party or
that is not covered by insurance  (excluding any deductible  amount specified in
the applicable policy of insurance).  Manager shall confer with Owner concerning
any  settlement  proposal that Manager is considering  accepting,  regardless of
whether Owner is a named party,  but Owner's  approval  shall not be required if
Owner is not a named  party and the  settlement  is  covered by  insurance.  All
liabilities,  costs, and expenses,  including attorneys' fees and disbursements,
incurred in defending  and/or  settling any such claim or legal action which are
not covered by insurance shall be paid by Owner.

         Section  11.09.  Waivers.  No  failure  or delay by Manager or Owner to
insist upon the strict performance of any covenant, agreement, term or condition
of this Agreement, or to exercise any right or remedy consequent upon the breach
thereof,  shall constitute a waiver of any such breach or any subsequent  breach
of such covenant, agreement, term or condition. No covenant, agreement, term, or
condition of this  Agreement and no breach  thereof shall be waived,  altered or
modified except by written  instrument.  No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this  Agreement  shall  continue in full force and effect with respect to any
other then existing or subsequent breach thereof.

         Section  11.10.   Changes.  Any  change  to  or  modification  of  this
Agreement,  including, without limitation, any change in the application of this
Agreement to the Hotel,  must be evidenced by a written  document signed by both
parties hereto.

         Section 11.11.  Captions. The captions for each Article and Section are
intended for convenience only.

         Section 11.12. Severability.  If any of the terms and provisions hereof
shall be held invalid or  unenforceable,  such  invalidity  or  unenforceability
shall not affect any of the other terms or provisions hereof.  If, however,  any
material part of a party's rights under this Agreement shall be declared invalid
or  unenforceable   (specifically  including  Manager's  right  to  receive  its
Management Fees), the party whose rights have been


                                       22
<PAGE>

declared  invalid  or  unenforceable  shall have the  option to  terminate  this
Agreement  upon thirty (30) days'  written  notice to the other  party,  without
liability on the part of the terminating party.

         Section 11.13.  Interest. Any amount payable to Manager or Owner by the
other which has not been paid when due shall  accrue  interest at the lesser of:
(a) the highest legal limit in the state in which the Hotel is located,  (b) the
highest legal limit in the state of Tennessee, or (c) two percentage points (2%)
over the published  base rate of interest  charged by Citibank,  N.A., New York,
New York, to borrowers on ninety (90) day  unsecured  commercial  loans,  as the
same may be changed from time to time.

         Section  11.14.  Reimbursement.  The  performance  by  Manager  of  its
responsibilities  under this  Agreement  are  conditioned  upon Owner  providing
sufficient  funds to Manager on a timely basis to enable  Manager to perform its
obligations hereunder.  Nevertheless,  Manager shall be entitled, at its option,
after first providing not less than ten (10) days' prior written notice to Owner
specifying  the  obligations  to be  satisfied  and the  amount  of  money to be
advanced,  to advance funds or contribute  property,  on behalf of the Owner, to
satisfy  obligations of Owner in connection  with the Hotel and this  Agreement.
Manager shall keep  appropriate  records to document all  reimbursable  expenses
paid by Manager,  which records shall be made  available for inspection by Owner
or its agents upon request. Owner agrees to reimburse Manager with interest upon
demand for money paid or property  contributed by Manager to satisfy obligations
of Owner in  connection  with the Hotel and this  Agreement.  Interest  shall be
calculated  at the rate set  forth in  Section  11.13  from the date  Owner  was
obligated to remit the funds or contribute the property for the  satisfaction of
such obligation to the date reimbursement is made.

         Section  11.15.  Travel and  Out-of-Pocket  Expenses.  Manager shall be
reimbursed for all  reasonable  travel and  out-of-pocket  expenses of Manager's
employees  reasonably  incurred in the performance of this Agreement,  provided,
however,  that travel and  out-of-pocket  expenses  of officers of Manager,  its
parent and affiliates  shall not be  reimbursable  by Owner.  Manager shall have
sole  discretion,  which shall not be unreasonably  exercised,  to determine the
necessity for such travel or other expenses.

         Section  11.16.  Set  off.  Without  prejudice  to  Manager's  right to
terminate this Agreement  pursuant to the provisions of this Agreement,  Manager
may at any time and without  notice to Owner set off or transfer any sum or sums
held by Manager or other  affiliate  of Promus  Hotels,  Inc. to the order or on
behalf of Owner or Fee Owner or  standing to the credit of Owner or Fee Owner in
the Bank Account(s) in or towards  satisfaction of any of Owner's liabilities to
Manager in respect of all sums due to Manager under the terms of this Agreement.

         Section 11.17. Third Party  Beneficiary.  This Agreement is exclusively
for the  benefit of the  parties  hereto and it may not be enforced by any party
other than the parties to this Agreement and shall not give rise to liability to
any third party other than the authorized  successors and assigns of the parties
hereto.



                                       23
<PAGE>

         Section 11.18.  Brokerage.  Manager and Owner  represent and warrant to
each other that neither has sought the services of a broker,  finder or agent in
this transaction,  and neither has employed, nor authorized, any other person to
act in such capacity. Manager and Owner each hereby agrees to indemnify and hold
the other harmless from and against any and all claims, loss, liability,  damage
or expenses (including  reasonable  attorneys' fees) suffered or incurred by the
other  party as a result of a claim  brought  by a person or entity  engaged  or
claiming to be engaged as a finder, broker or agent by the indemnifying party.

         Section 11.19. Survival of Covenants.  Any covenant,  term or provision
of this Agreement which, in order to be effective,  must survive the termination
of this Agreement, shall survive any such termination.

         Section 11.20. Estoppel Certificate. Manager and Owner agree to furnish
to the other party, from time to time upon request,  an estoppel  certificate in
such reasonable  form as the requesting  party may request stating whether there
have been any defaults  under this Agreement  known to the party  furnishing the
estoppel  certificate and such other information relating to the Hotel as may be
reasonably requested.

         Section  11.21.  Other  Agreements.  Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall be
deemed to modify any other  agreement  between Owner and Manager with respect to
the Hotel or any other  property.  This  Agreement,  together  with the  Comfort
Letter,  contains the entire agreement  between Owner and Manager  regarding the
management of the Hotel.

         Section 11.22.  Periods of Time.  Whenever any  determination  is to be
made or action is to be taken on a date  specified  in this  Agreement,  if such
date shall fall on a  Saturday,  Sunday or legal  holiday  under the laws of the
states of Tennessee and Virginia and/or the state in which the Hotel is located,
then in such event said date  shall be  extended  to the next day which is not a
Saturday, Sunday or legal holiday.

         Section 11.23.  Preparation of Agreement.  This Agreement  shall not be
construed more strongly  against  either party  regardless of who is responsible
for its preparation.

         Section 11.24.  Exhibits. All exhibits attached hereto are incorporated
herein by reference  and made a part hereof as if fully  rewritten or reproduced
herein.

         Section  11.25.  Attorneys'  Fees and Other Costs.  The parties to this
Agreement  shall bear their own attorneys'  fees in relation to negotiating  and
drafting this Agreement. Should Owner or Manager engage in litigation to enforce
their respective  rights pursuant to this Agreement,  the prevailing party shall
have the right to indemnity by the  non-prevailing  party for an amount equal to
the prevailing  party's  reasonable  attorneys'  fees,  court costs and expenses
arising therefrom.

         Section  11.26.  Agreement  Not an  Interest  in  Real  Property.  This
Agreement  is not,  and shall not be deemed at any time to be or to  create,  an
interest in real estate or a


                                       24
<PAGE>

lien or other  encumbrance of any kind whatsoever  against the Hotel or the land
on which it is erected.

         Section 11.27.  Acquisition Loan;  Agency Coupled With an Interest;  No
Termination While the Acquisition Loan Remains  Outstanding.  In accordance with
the Purchase Agreement (as herein defined), that certain Agreement of Sale dated
August 6, 1999 by and among Hampton Inns, Inc., Promus Hotels Florida,  Inc. and
Promus  Hotels,  Inc.,  as sellers,  and Fee Owner,  as buyer,  and that certain
Agreement of Sale dated October 5, 1999 between  Hampton Inns,  Inc., as seller,
and Fee  Owner,  as buyer  (as the same  have been  amended,  collectively,  the
"Existing Purchase Agreement"),  Promus Hotels, Inc. (in its capacity as lender,
the  "Acquisition  Lender") has loaned to Fee Owner the sum of $68,569,500  (the
"Acquisition  Loan") as purchase  money  financing  for the  acquisition  of the
properties (the  "Properties")  conveyed pursuant to the Purchase  Agreement and
the Existing Purchase Agreement. The Acquisition Loan is evidenced by (i) a note
of Fee Owner dated September 20, 1999 in the amount of $26,625,000,  (ii) a note
of Fee Owner dated October 5, 1999 in the amount of $7,350,000,  (iii) a note of
Fee Owner dated November 29, 1999 in the amount of  $30,210,000  and (iv) a note
of Fee Owner of even date  herewith in the amount of  $4,384,500  and is secured
by, among other things, mortgage(s),  deed(s) of trust or deed(s) to secure debt
dated  September  20, 1999,  October 5, 1999,  November 29, 1999 or of even date
herewith from Fee Owner or its  wholly-owned  subsidiary which encumbers some or
all of the Properties, which may include the Hotel (the documents evidencing and
securing the Acquisition  Loan herein referred to as the  "Acquisition  Mortgage
Documents").  Owner and  Manager  specifically  acknowledge  and agree  that (i)
Acquisition  Lender has been induced,  in part, to make the Acquisition  Loan to
Fee Owner  based  upon  Owner's  agreement  to enter  into this  Agreement  with
Manager,  (ii)  Acquisition  Lender  required Owner to enter into this Agreement
with Manager as a condition to making the Acquisition  Loan so that (inter alia)
Manager could  facilitate  the repayment of the  Acquisition  Loan in accordance
with its terms by managing and operating the Hotel in accordance  with the terms
of this Agreement, and (iii) it is the parties' intention that Owner's retention
of Manager to  operate  the Hotel  pursuant  to the terms of this  Agreement  is
intended to, and shall,  create an "agency coupled with an interest" in favor of
Manager, which agency shall be irrevocable unless and until the Acquisition Loan
is  repaid  in full.  Manager  shall be  entitled  to the  legal  and  equitable
protections  that the status of an agent  coupled  with an  interest  confers on
Manager for so long as the Acquisition  Loan remains  outstanding.  Accordingly,
(x) no  purported  termination  of  this  Agreement  by  Owner  for  any  reason
whatsoever (including, without limitation, any purported termination pursuant to
Article 8 or Article 9) shall be effective unless and until the Acquisition Loan
shall have been repaid in full,  and (y) Manager shall have the right and option
to extend the Term of this Agreement indefinitely for so long as the Acquisition
Loan remains  outstanding.  The  provisions  of this  Section  shall take effect
notwithstanding anything to the contrary set forth in this Agreement.

         Section 11.28. Counterparts.  This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original.


                                       25
<PAGE>

         The parties have  respectively  caused this Agreement to be executed as
of the respective dates shown below.

                                           OWNER:

  /s/ Tina R. Hansen                       APPLE SUITES MANAGEMENT,
---------------------------                INC., a Virginia corporation
Witness:

                                           By  /s/ Glade M. Knight
                                             -------------------------------
                                              Name: Glade M. Knight
                                              Title:    President

                                              Date: 12/22/99

                                           MANAGER:

  /s/ Glenda Long                          PROMUS HOTELS, INC.
---------------------------
Witness:

                                           By  /s/ Joseph P. Pidkowicz
                                             -------------------------------
                                              Joseph P. Pidkowicz
                                              Vice President

                                              Date: 12/16/99


<PAGE>

                                   EXHIBIT "A"

                                LICENSE AGREEMENT















                                       A-1


<PAGE>


                                   EXHIBIT "B"

                               DEAL SPECIFIC TERMS

TERM:                                 Fifteen (15) years from the Effective Date

INITIAL MINIMUM BALANCE
FOR THE BANK ACCOUNT(S)  :            $75,000

INITIAL OWNER'S REPRESENTATIVE:       Doug Schepker

DISBURSEMENT PRIORITY SCHEDULE:

         Each fiscal month  Manager,  on behalf of Owner,  shall  disburse funds
from the Bank  Account(s) in the  following  order of priority and to the extent
available:

         (a)      all fees,  assessments  and charges due and payable  under the
                  License Agreement when issued;

         (b)      the  Management  Fee,  but  excluding,   to  the  extent  then
                  applicable, the Subordinated Management Fee;

         (c)      all reimbursable expenses due Manager;

         (d)      all other Hotel  operating  costs (herein and in the Agreement
                  referred to as "operating  costs"), as such costs and expenses
                  are  defined  under the  accounting  practices  of  Manager in
                  conformity  with  generally  accepted   accounting   practices
                  consistently applied,  specifically including, but not limited
                  to,  (i)  the  cost  of  operating   equipment  and  operating
                  supplies,   wages,  salaries  and  employee  fringe  benefits,
                  advertising  and promotional  expenses,  the cost of personnel
                  training  programs,   utility  and  energy  costs,   operating
                  licenses  and  permits,  grounds and  landscaping  maintenance
                  costs  and  equipment   rentals  approved  by  Manager  as  an
                  operating cost; (ii) all expenditures made for maintenance and
                  repairs  to keep  the  Hotel  in good  condition  and  repair,
                  specifically  excluding expenditures for Capital Replacements;
                  and (iii)  premiums  and  charges on the  insurance  coverages
                  specified in Exhibit "D" incurred  after the  Effective  Date.
                  There shall be excluded from the operating  costs of the Hotel
                  the  following,  which shall be ownership  costs of the Hotel:
                  (i)  depreciation  of the  Hotel,  furnishings,  fixtures  and
                  equipment;  (ii) rental pursuant to a ground lease, if any, or
                  the Percentage  Lease or any other lease payments;  (iii) debt
                  service   (interest   and   principal)   on  any   mortgage(s)
                  encumbering  Owner's leasehold interest in, and/or Fee Owner's
                  fee  interest  in,  the  Hotel;   (iv)   property   taxes  and
                  assessments;  (v) expenditures for Capital Replacements;  (vi)
                  audit,  legal and other  professional  or special fees;  (vii)
                  premiums  for  insurance


                                      B-1
<PAGE>

                  coverages specified in Exhibit "E"; (viii)  administrative and
                  general  expenses  and   disbursements  of  Owner,   including
                  compensation  of employees of Owner;  (ix) Federal,  State and
                  local  Franchise and Income Taxes;  (x)  amortization  of bond
                  discounts  and  mortgage  expenses;  (xi)  deposits  into  the
                  Reserve  Fund or amounts held  pursuant to Section  3.01(xix);
                  and (xiii)  such other costs or  expenses  which are  normally
                  treated as ownership  costs under the accounting  practices of
                  Manager  in  conformity  with  generally  accepted  accounting
                  practices consistently applied;

         (e)      the  following  ownership  costs,  disbursed in the  following
                  order of priority and to the extent available:

                  (i)      an amount  (annualized) to satisfy land, building and
                           personal property taxes and assessments;

                  (ii)     an amount  (annualized)  to satisfy the  premiums for
                           the  insurance  required  to be  obtained by Owner in
                           accordance with Exhibit "E";

                  (iii)    the  amount  to be  deposited  in  the  Reserve  Fund
                           pursuant to Section 4.01(d); and

                  (iv)     any   ground   lease   payments,   but   specifically
                           excluding, except as specifically itemized above, any
                           sums  payable by Owner to Fee Owner  pursuant  to the
                           Percentage Lease;

         (f)      Owner's Basic Return;

         (g)      the Subordinated Management Fee;

         (h)      payments of  principal,  interest and other sums payable under
                  the Acquisition Loan;

         (i)      any payments  not  specifically  contemplated  above which are
                  required  to be paid by Owner  to Fee  Owner  pursuant  to the
                  Percentage Lease; and

         (j)      except as provided  above,  debt service upon any  mortgage(s)
                  encumbering the Hotel and any capital lease payments.

         After the  disbursements set forth above, any excess funds remaining in
the Bank  Account(s)  over the Minimum Balance shall be distributed to Owner. If
after making the disbursements  set forth above,  there shall be a deficiency in
the  Minimum  Balance,  Owner  shall  immediately  provide  such funds as may be
required to maintain the Minimum Balance in the Bank Account(s).



                                      B-2
<PAGE>

                  NOTICES:

                  Owner:                    Apple Suites Management, Inc.
                                            306 East Main Street
                                            Richmond, Virginia 23219
                                            Fax:     804/782-9302
                                            Attention:   Mr. Glade M. Knight

                                                     with a copy to:

                                            Jenkens & Gilchrist
                                            1445 Ross Avenue, Suite 3200
                                            Dallas, Texas 75202-2799
                                            Fax:     214/855-4300
                                            Attention:   Thomas E. Davis, Esq.

                  Manager:                  Promus Hotels, Inc.
                                            755 Crossover Lane
                                            Memphis, Tennessee 38117
                                            Fax:     901/374-5050
                                            Attention:   Corporate Secretary

                                                     with a copy to:

                                            Dewey Ballantine LLP
                                            1301 Avenue of the Americas
                                            New York, New York 10019-6092
                                            Fax:     212/259-6333
                                            Attention:   Graham R. Hone, Esq.

SALE TERMINATION FEE:

         The "Sale  Termination  Fee" shall be: (i) if the  termination  of this
Agreement occurs on or before the second  anniversary of the Effective Date, the
sum of $449,143;  (ii) if the  termination  of this  Agreement  occurs after the
second  anniversary  of the  Effective  Date but on or before  the tenth  (10th)
anniversary  of the Effective  Date, an amount equal to the product of (x) three
(3) times (y) the quotient of the aggregate of the Management Fees earned during
the preceding  twenty-four  (24) month period  divided by two (2);  (iii) if the
termination of this Agreement  occurs after the tenth (10th)  anniversary of the
Effective  Date  but on or  before  the  fourteenth  (14th)  anniversary  of the
Effective  Date,  an amount equal to the product of (x) one and  one-half  (1.5)
times (y) the  aggregate  of the  Management  Fees earned  during the  preceding
twenty-four month period divided by two (2); and (iv) if the termination of this
Agreement occurs after the fourteenth (14th)  anniversary of the Effective Date,
an amount  equal to the  product of (x) the  aggregate  of the  Management  Fees
earned during the preceding  twenty-four  (24) month period  divided by 24 times
(y) the number of full calendar months remaining in the Term.



                                      B-3
<PAGE>

CANCELLATION TERMINATION FEE:

         The "Cancellation  Termination Fee" shall be: (i) if the termination of
this Agreement  occurs after the tenth (10th)  anniversary of the Effective Date
but on or before the fourteenth  (14th)  anniversary  of the Effective  Date, an
amount  equal to the  product  of (x) two (2)  times  (y) the  aggregate  of the
Management Fees earned during the preceding  twenty-four month period divided by
two  (2);  and  (ii) if the  termination  of this  Agreement  occurs  after  the
fourteenth  (14th)  anniversary  of the  Effective  Date, an amount equal to the
product of (x) the aggregate of the Management  Fees earned during the preceding
twenty-four  (24)  month  period  divided  by 24 times  (y) the  number  of full
calendar months remaining in the Term.

ACCOUNTING FEE:   $1,000/month


                                      B-4
<PAGE>

                                   EXHIBIT "C"

                                 MANAGEMENT FEES

         The  "Management  Fee"  shall  mean and  refer  to a fee  equal to four
percent (4%) of Adjusted Gross Revenues (as hereinafter defined) with respect to
each fiscal month during the term of this Agreement, provided, however, that for
the first two years of the term of this  Agreement  a portion of the  Management
Fee equal to one percent (1%) of Adjusted  Gross  Revenues  (such  portion,  the
"Subordinated Management Fee") shall be subordinated to Owner's Basic Return (as
hereinafter  defined).  Manager  and Owner  agree  that,  in light of  Manager's
agreement to  subordinate  the  Subordinated  Management  Fee, the  Subordinated
Management  Fee,  while payable  monthly to the extent  proceeds are  available,
shall be adjusted annually and paid, to the extent Adjusted Gross Revenues after
payment of Owner's Basic Return are available therefor,  within thirty (30) days
of Manager's delivery of the operating  statements  required pursuant to Section
3.01(vi) of the Agreement.  Any Subordinated Management Fee not so paid pursuant
to the provisions of the immediately  preceding sentence shall not thereafter be
payable by Owner.

         The term "Gross  Revenues"  shall be defined as all revenues and income
of any nature derived  directly or indirectly  from the Hotel or from the use or
operation thereof,  whether on or off the Site, including total room sales, food
and beverage sales, if any,  laundry,  telephone,  telegraph and telex revenues,
other income, rental or other payments from lessees,  sublessees,  licensees and
concessionaires  (but  not  the  gross  receipts  of such  lessees,  sublessees,
licensees or concessionaires)  and the proceeds of business  interruption,  use,
occupancy or similar insurance.

         The term "Adjusted  Gross  Revenues" shall be defined as Gross Revenues
less the following revenues actually received by the Hotel and included in Gross
Revenues: (i) any gratuities or service charges added to a customer's bill; (ii)
any credits or refunds made to customers,  guests or patrons; (iii) any sums and
credits received by Owner for lost or damaged merchandise; (iv) any sales taxes,
excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist
taxes or charges;  (v) any proceeds  from the sale or other  disposition  of the
Hotel,  furnishings  and  equipment or other capital  assets;  (vi) any fire and
extended coverage insurance proceeds;  (vii) any condemnation awards; (viii) any
proceeds of financing or refinancing of the Hotel;  and (ix) any interest on the
Bank Account(s).

         The term  "Owner's  Investment"  shall mean the sum of (x) the purchase
price for the Hotel  ("Purchase  Price") as set forth in the  Agreement  of Sale
dated  November 22, 1999 by and between Fee Owner,  as buyer,  and Hampton Inns,
Inc.,  Promus  Hotels  Florida,  Inc.  and Promus  Hotels,  Inc. as sellers (the
"Purchase Agreement") plus (y) all reasonable costs and expenses incurred by Fee
Owner in connection  with  performing  its due diligence in connection  with the
Purchase  Agreement and consummating  the purchase  contemplated by the Purchase
Agreement,  including,  without  limitation,  title and survey fees and charges,
real estate transfer taxes and reasonable attorneys' fees and


                                      C-1
<PAGE>

charges, which shall be deemed to include any such reasonable costs and expenses
incurred or advanced by Cornerstone Realty Income Trust, Inc. or Glade M. Knight
for the benefit of Apple  Suites,  Inc. or Owner and  reimbursed to it or him by
any of Apple Suites,  Inc. or Owner and which are specifically  allocable to the
Hotel or if not  specifically  allocable  allocated on a pro rata basis based on
the  purchase  prices  set  forth in the  Existing  Purchase  Agreement  and the
Purchase  Agreement,  including  the  purchase  price  of any  other  properties
acquired by Fee Owner or its directly or  indirectly  wholly-owned  affiliate(s)
from Manager or its directly or indirectly wholly-owned affiliate(s) pursuant to
the  Purchase  Agreement  after the date hereof but on or prior to December  31,
1999, but specifically excluding fees and charges paid to Apple Suites Advisors,
Inc., Apple Suites Realty Group,  Inc. or any other affiliate of Glade M. Knight
or any fees and charges paid in connection  with offering of common stock in Fee
Owner plus (z) amounts advanced by any of Apple Suites, Inc. or Owner in respect
of the PIP (as defined in the License Agreement) and in respect of Hotel capital
replacement items which are in excess of amounts required to be deposited in the
Reserve Fund from Gross Revenues.

         The term  "Owner's  Basic  Return"  shall mean for the first and second
years, eleven percent (11%) of Owner's Investment.

         Attached  hereto and made a part hereof,  as Exhibit C-1, is an example
of the calculation of, and payment of, the Management Fee (less the Subordinated
Management Fee), the Owner's Basic Return and the Subordinated Management Fee.


                                      C-2
<PAGE>

                                  EXHIBIT "C-1"

                                 MANAGEMENT FEE


















                                      C-1-1
<PAGE>

                                   EXHIBIT "D"

                                    INSURANCE

         In accordance with Section 3.01(xv),  Manager shall, on behalf of Owner
and at Owner's expense,  procure the insurance  coverages  hereinafter set forth
and ensure that they are in full force and effect as of the  Effective  Date and
that they remain in full force and effect throughout the Term of this Agreement.
All  cost(s)  and  expense(s)  incurred by Manager in  procuring  the  following
insurance  coverages  shall be  operating  costs and shall be paid from the Bank
Account(s):

<TABLE>
<CAPTION>
Coverages:                                                        Amounts of Insurance
----------                                                        --------------------
<S>                                                               <C>
         Comprehensive General Liability                          $10,000,000 per location

              Including -
              Premises - Operations
              Products/Completed Operations
              Contractual
              Personal Injury
              Liquor Liability/Dram Shop (if applicable)
              Elevators and Escalators

         Automotive Liability                                     $10,000,000

              Owned Vehicles
              Non-Owned Vehicles
              Uninsured Motorist where Required by Statute

         Automobile Physical Damage (Optional)

              Comprehensive                                       (To Value if insured)
              Collision

         Workers' Compensation                                    Statutory

         Employer's Liability                                     $1,000,000

         Fidelity (Employee Dishonesty)                           As required

         Money and Securities                                     As required
</TABLE>

         All  insurance  coverages  provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is  located;  and (ii) that are of good
reputation and of sound and


                                      D-1
<PAGE>

adequate financial responsibility, having a Bests Rating of B+ VI, or better, or
a comparable rating if Bests ceases to publish its ratings or materially changes
its rating standards or procedures.

         Manager shall deliver to Owner duly executed  certificates of insurance
with respect to all of the policies of insurance  procured,  including existing,
additional and renewal policies.

         Each policy of insurance  maintained  in  accordance  with this Exhibit
"D," to the extent  obtainable,  shall specify that such  policies  shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.

         Except as otherwise  provided in the Agreement,  Manager and Owner each
waives,  releases and discharges the other from all claims or demands which each
may have or acquire  against the other,  or against each  other's  subsidiaries,
affiliates,  directors, officers, agents, employees,  independent contractors or
partners,  with respect to any claims for any losses,  damages,  liabilities  or
expenses (including  attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property  or  business  arising out of
the ownership,  management,  operation and maintenance of the Hotel,  regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or  independent  contractors.  Each  policy of  insurance  maintained  in
accordance  with this Exhibit "D" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.

         All policies of insurance  provided for under this Exhibit "D" shall be
carried  in the name of the  Manager.  Owner's  interest  and that of any  other
applicable  party will be included  in the  coverage  by an  additional  insured
endorsement.

         All such  policies  of  insurance  shall be written on an  "occurrence"
basis, with no per location aggregate limitation.

         Either Manager or Owner,  by notice to the other,  shall have the right
to require that the minimum amount of insurance to be maintained with respect to
the Hotel under this Exhibit "D" be increased to make such insurance  comparable
with prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.

         Owner hereby authorizes Manager to utilize the services of and/or place
the  insurance  set  forth  in this  Exhibit  "D"  with  (i) any  subsidiary  or
affiliated  company of Promus Hotels,  Inc. in the insurance business as Manager
deems  appropriate;  or  (ii)  a  third  party  insurance  carrier  meeting  the
specifications set forth above.


                                      D-2
<PAGE>

                                   EXHIBIT "E"

                                    INSURANCE

         In accordance with Section 4.01(iii),  Owner agrees, at its expense, to
procure and maintain the following insurance  coverages,  as reasonably adjusted
from time to time, throughout the Term of this Agreement:

<TABLE>
<CAPTION>
Coverages:                                                    Amounts of Insurance
----------                                                    --------------------
<S>                                                           <C>
         Builders Risk                                        Completed value of the Hotel

              All  risk  for  term  of the  initial  and  any  subsequent  Hotel
              construction and renovation.

         Real and Personal Property                           100% replacement value of building and contents

              Blanket Coverage
              Replacement Cost - all risk
              Boiler Machinery - written on a comprehensive form

         Business Interruption                                Calculated yearly based on estimated Hotel revenues

              Blanket  Coverage for the perils  insured  against  under Real and
              Personal  Property  in  this  Exhibit  "E".  This  coverage  shall
              specifically cover Manager's loss of Management Fees. The business
              interruption  insurance shall be for a twelve (12) month indemnity
              period.

         Owner's Protective Liability                         $10,000,000

              All risks from construction and renovation  occurring prior to the
              Opening Date and all risks from Hotel  construction and renovation
              projects  costing more than $250,000  occurring  after the Opening
              Date.
</TABLE>

         All  insurance  coverages  provided for under this Exhibit "E" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is  located;  and (ii) that are of good
reputation and of sound and adequate  financial  responsibility,  having a Bests
Rating of B+ VI, or better,  or a  comparable  rating if Bests ceases to publish
its ratings or materially changes its rating standards or procedures.

         Owner shall  deliver to Manager  duplicate  copies of either  insurance
policies or certificates of insurance (at Manager's  option) with respect to all
of the  policies of  insurance  procured,  including  existing,  additional  and
renewal policies, and in the case of insurance nearing expiration, shall deliver
duplicate  copies of the insurance  policies or


<PAGE>

certificates  of insurance  with respect to the renewal  policies to Manager not
less than thirty (30) days prior to the respective dates of expiration.

         Each policy of insurance  maintained  in  accordance  with this Exhibit
"E," to the extent  obtainable,  shall specify that such  policies  shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.

         Except as otherwise provided in this Agreement,  Manager and Owner each
waives,  releases and discharges the other from all claims or demands which each
may have or acquire  against the other,  or against each  other's  subsidiaries,
affiliates,  directors, officers, agents, employees,  independent contractors or
partners,  with respect to any claims for any losses,  damages,  liabilities  or
expenses (including  attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property  or  business  arising out of
the ownership,  management,  operation and maintenance of the Hotel,  regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or  independent  contractors.  Each  policy of  insurance  maintained  in
accordance  with this Exhibit "E" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.

         All policies of insurance  provided for under this Exhibit "E" shall be
carried in the name of the Owner and  Manager,  and losses  thereunder  shall be
payable to the parties as their respective  interests may appear.  All liability
policies  shall  name  the  Owner  and  Manager,  and in each  case any of their
affiliated or subsidiary  companies which they may specify, and their respective
directors,   officers,  agents,  employees  and  partners  as  additional  named
insureds.

         All such  policies  of  insurance  shall be written on an  "occurrence"
basis.

         Either Manager or Owner,  by notice to the other,  shall have the right
to require the minimum amount of insurance to be maintained  with respect to the
Hotel under this Exhibit "E" be increased to make such insurance comparable with
prudent  industry  standards  and to reflect  increases in liability  exposures,
taking into account the size and location of the Hotel.