DAILY GRILL RESTAURANT MANAGEMENT AGREEMENT


     DAILY GRILL RESTAURANT  MANAGEMENT AGREEMENT (this "Agreement") made as of
the  30th  day  of  July,  1998  between  Hotel  Restaurants  Properties,   Inc.
("Operator"),  a California corporation,  Grill Concepts, Inc. ("Affiliate"),  a
Delaware  corporation,  and CapStar  Georgetown  Company,  L.L.C.  ("Owner"),  a
Delaware limited liability company. Owner and Operator acknowledge that Operator
is affiliated with Affiliate.

                                    RECITALS

     A. Owner is the owner of a  full-service  hotel (the "Hotel") known as the
Georgetown Inn located at 1310 Wisconsin Avenue, N.W., Washington, D.C. 20007;

     B. Operator and/or Affiliate own and operate, among other restaurants,  The
Daily Grill restaurant chain ("Daily Grill"), and have substantial experience in
the management and operation of such restaurants;

     D. Operator and/or Affiliate own the uniform  restaurant  operating system,
necessary for the  establishment  and operation of Daily Grill  restaurants with
distinctive  features,  equipment,   equipment  design,  menus,  food  formulas,
inventories,  manuals,  training Systems, and accounting systems  (collectively,
the "Operating  System") which restaurant and Operating System are identified by
the  service  and  trademarks  "Daily  Grill"  and  related  words  and  symbols
(collectively,  "Existing  Marks")  identifying the Daily Grill  restaurants and
their goods and services;

     E. Subject to the terms and  conditions  set forth in this  Agreement,  (i)
Owner wishes to retain  Operator  (either  directly and/or  indirectly  through
Affiliate) to act as manager in connection  with certain of Hotel's  restaurant,
bar,  room  service,  and  limited  banquet  food  service  operations  as  more
specifically  described herein (the "Managed  Outlet") and (ii) Operator desires
to accept such retention; and

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

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

                                    ARTICLE I
                               THE MANAGED OUTLET


     1.1.  Owner  and  Operator   acknowledge  that  the  Managed  Outlet  means
collectively the Hotel's restaurant, bar, room service operation, and associated
kitchen area that are  approximately  5,000 square feet and more fully described
in Exhibit "A" hereto including, without limitation:

     A. The  non-structural  portions of the restaurant in the Hotel,  including
the interior walls, ceiling and floor (the "Restaurant");

<PAGE>

     B.  Mechanical  systems and built-in  installations  (the  "Installations")
serving the Restaurant exclusively or primarily,  including, but not limited to,
heating,  ventilation,  air  conditioning,   electrical  and  plumbing  systems,
elevators and lifts, and built-in refrigeration and kitchen equipment;

     C. Restaurant  furniture,  furnishings,  wall coverings,  floor  coverings,
window treatments, fixtures and other equipment (the "FF&E");

     D. Chinaware,  glassware,  silverware, linens, and other items of a similar
nature used in the operation of the Managed Outlet (the "Operating  Equipment");
and

     E. Stock and inventories of paper supplies,  cleaning materials and similar
consumable  items and food and  beverage  used in the  operation  of the Managed
Outlet (the "Operating Supplies").

                                   ARTICLE II
                                 OPERATING TERM

     2.1. This Agreement  shall have a term  consisting of (i) a start-up period
("Start-up  Period")  commencmg  on July 1,  1998  (the  "Effective  Date")  and
ternninating  on the later to occur of (x) December 31, 1998 and (y) the date on
which the Managed Outlet opens for business to the public,  and (b) an operating
term (the "Operating  Term";  the "Start-up  Period and the Operating Term being
sometimes   collectively   referred  to  as  the  "Term")  commencing  upon  the
termination  of the Start-up  Period and  expiring on December 31, 2020,  unless
sooner  terminated in accordance with the provisions of this Agreement or unless
extended by the written  agreement  of Owner and  Operator.  During the Start-up
Period,  all the terms and conditions of this Agreement  other than as set forth
in Section 10.2 shall apply.

                                   ARTICLE III
                          GENERAL SERVICES BY OPERATOR

     3.1. During the Operating Term (and, as applicable,  the Start-up  Period),
Operator,  as agent and for the account of Owner,  shall in accordance with the
Budgets (as defined in Section 9.4) and the other applicable  provisions of this
Agreement and subject to the availability of funds:

     A. Provide first class  breakfast,  lunch and dinner to the Managed  Outlet
comparable  to other  Daily Grill  operations  from 6:30am to at least 11 :0Opm,
seven (7) days each week,  three hundred  sixty-five (365) days a year. The menu
and pricing for the Managed Outlet and banquets  shall be at a price  comparable
to other Daily Grill locations and subject to the prior  reasonable  approval of
Hotel Operator.

     B. Provide  first class food and beverage  service for banquet and catering
events at  Operator's  standard menu pricing,  subject to the  reasonable  prior
approval of Hotel  Operator,  for any events  scheduled  by the Hotel.  Operator
shall add a fixed fifteen percent (15%) service charge to all banquet checks.



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<PAGE>


     C. Provide first class room service  operations  for  breakfast,  lunch and
dinner during the hours when the Restaurant is open for business, seven (7) days
each week, three hundred  sixty-five (365) days a year. Room service menu prices
shall not be greater than fifteen  percent  (15%) above the prices on the dining
room menu  without  the prior  written  consent of Owner.  A fixed  gratuity  of
fifteen percent (15%) or a reasonable delivery charge (at Operator's discretion,
subject to the approval of Owner, such approval not to be unreasonably withheld)
may be charged on all room service  orders and will be clearly  indicated on the
Hotel guest check.

     D. Recruit,  train,  direct,  supervise,  employ and dismiss  on-site staff
("Managed  Outlet  Employees") for the operation of the Managed  Outlet,  and at
Operator's  expense  provide such  corporate  supervisory  personnel as it deems
necessary at its corporate offices to oversee management of the Managed Outlet.

     E. Develop and implement advertising,  marketing,  promotion, publicity and
other  similar  programs  for the  Managed  Outlet,  in  accordance  with  this
Agreement and the Budgets or as otherwise approved by Owner.

     F.  Negotiate and enter into contracts for the provision of services to the
Managed Outlet; provided,  however, that any contract for an amount in excess of
$25,000 per year; which has a term in excess of two years, with any affiliate of
Operator  or  affiliate,  which  would  result in a lien or  encumbrance  on the
Restaurant  or Hotel or which is not  terminable  on thirty days' or less notice
without  payment of penalty or premium shall require the prior written  approval
of Owner.

     G. Apply for,  process and take all necessary  steps to procure and keep in
effect  in  Owner's  name  (and/or,  if  required  by the  applicable  licensing
authority,  in Owner's and/or Operator's name) all licenses and permits required
for the operation of the Managed Outlet.

     H. Purchase all FF&E,  Operating Equipment and Operating Supplies necessary
for the operation of the Managed Outlet.

     I. Provide  routine  accounting and purchasing  services as required in the
ordinary course of business of the Managed Outlet.

     J.  Maintain the  Restaurant  in first class  condition and state of repair
comparable  with other Daily Grills as of the date hereof and in compliance with
all applicable laws, ordinances, regulations, rulings and orders of governmental
authorities and the requirements of all permits and licenses,  including without
limitation liquor licenses.

     K.  Represent   Owner  in  connection   with  the  making  of  any  capital
improvements to the Restaurant or the renovation, refurbishment, refixturing and
reequipping of the Restaurant,  including without limitation the Initial Remodel
(as defined in Exhibit C to this Agreement),  and to that end and subject to the
prior  written  approval  of Owner in each  instance  negotiate and enter into
agreements for architectural,  engineering. testing, consulting and construction
services.

     L.  Provide  such other  services  as are required  under the terms of this
Agreement or as are customarily  performed by restaurant management companies of
similar restaurants in the area of the Hotel.


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<PAGE>

     3.2.  The parties  acknowledge  and agree that to in order to position  the
Managed Outlet to function in an orderly and  appropriate  manner from and after
the  commencement  of the  Operating  Term,  Operator  shall during the Start-Up
Period  perform the  services  set forth in Sections  3.1 A through 3.1 L to the
extent necessary or desirable to prepare and organize the Managed Outlet for its
opening  (collectively,  "Pre-Opening  Services"),  including without limitation
preparing for Owner's  approval an operating budget and a capital budget for the
Managed Outlet during the Start-Up Period (the "Initial Budgets"), including but
not limited to FF&E expenditures and the Initial Remodel,  which Initial Budgets
shall be  initially  prepared and  delivered  to Owner for Owner's  review on or
prior to the Effective  Date. The Initial  Budgets and plans and  specifications
for the Initial  Remodel shall be prepared by Operator and delivered to Owner no
later than August 15, 1998.

     3.3  Operator  will  discharge  its  duties  under this  Agreement  using a
standard of diligence  customary  for operators of similar  properties  with the
objective  of  maximizing  Total  Revenues  (as  hereinafter  defined)  and  Net
Operating  Income (as hereinafter  defined)  consistent with the requirements of
the Budgets.

                                   ARTICLE IV
                     GENERAL OPERATION OF THE MANAGED OUTLET

     4.1.  Owner hereby  engages  Operator as the operator of the Managed Outlet
during the Start-Up  Period and the Operating  Tenn, and Operator hereby accepts
such  engagement.  Subject  to the terms of this  Agreement  and the  applicable
Budgets, Operator shall have control and discretion in the operation, direction,
management and supervision of the Managed Outlet.

     4.2.  Operator  shall  operate the Managed  Outlet in the same manner as is
customary and usual in Operator's  other Daily Grill  restaurants as of the date
hereof and otherwise in confonmity with the operation of the Hotel.

     4.3 Operator will be available to consult with and advise Owner, at Owner's
reasonable request,  concerning all policies and procedures affecting all phases
of the conduct of business at the Managed  Outlet.  Operator shall in all events
consult with and obtain the approval of Owner before  implementing  any material
changes in policies and procedures relating to the Managed Outlet.

     4.4 Subject to the availability of parking spaces at the Hotel, Owner shall
provide Operator with up to two (2) hour valet parking per Restaurant guest at a
discounted  monthly rate equal to the lesser of: (a) $1.50 per hour  utilized by
Operator,  and (b) $2500 per month.  Restaurant  guests will pay posted  parking
rates for any excess parking time over the two (2) hour discounted period. These
rates shall increase each year by an amount equal to the annual increase (not to
exceed three  percent (3%) in any calendar  year) in the  Consunier  Price Index
(CPI) for urban consumers in the Washington.  D.C.  metropolitan area throughout
the Term of this Agreement.  The foregoing parking expenditures made by Operator
shall be included as Operating Expenses.


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<PAGE>


                                    ARTICLE V
                             AGENCY; HOTEL EMPLOYEES

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

     5.2. Notwithstanding anything contained in Section 5.1 to the contrary, all
Managed  Outlet  Employees  other than  salaried  employees  such as the General
Manager,  Assistant Managers, Chef and Sous Chefs (such salaried employees being
hereinafter  referred to as "Operator's  Employees") shall be employees of Owner
("Owner's  Employees"),  and all  Operator's  Employees  shall be  employees  of
Operator.  Owner shall pay all wages and benefits of Owner's Employees  directly
and Operator  shall  reimburse  Owner for such  amounts from the Agency  Account
within  three (3) days after  receipt of an invoice  with  respect  thereto from
Owner. All compensation of both Owner's Employees and Operator's Employees shall
be an Operating Expense (as defined in Section 11.2).

     5.3. (a) Operator,  with Owner's prior approval,  may enroll the Operator's
Employees in pension,  medical and health,  life insurance and similar  employee
benefit plans substantially  similar to corresponding plans implemented in other
Daily Grills and first class  restaurants  in the area of the Hotel.  Such plans
may, with Owner's prior approval, be joint plans for the benefit of employees at
more than one facility owned, leased or managed by Operator,  Affiliate or their
respective  affiliates.  Employer  contributions  to such plans  (including  any
withdrawal liability incurred upon termination of this Agreement) and reasonable
administrative  fees which Operator may expend in connection  therewith shall be
the   responsibility   of  Owner  and  shall  be  an  Operating   Expense.   The
administrative  expenses of any joint  plans will be  equitably  apportioned  by
Operator among properties covered by such plan.

     (b) Owner may enroll the Owner's Employees in pension,  medical and health,
life  insurance  and similar  employee  benefit plans  substantially  similar to
corresponding  plans  implemented in the Hotel and other hotels owned or managed
by Owner or its  affiliates.  Such plans may be joint  plans for the  benefit of
emplovees  at more than one  facility  owned,  leased or managed by Owner or its
affiliates.  Employer  contributions  to such plans  (including  any  withdrawal
liability   incurred  upon   termination  of  this   Agreement)  and  reasonable
administrative  fees which Owner may expend in connection  therewith shall be an
Operating  Expense and reimbursed to Owner by Operator out of the Agency Account
within  three (3) days after  receipt of an invoice  with  respect  thereto from
Owner.  The  administrative  expenses  of any  joint  plans  will  be  equitably
apportioned by Owner among properties covered by such plan.

     5.4. Owner shall provide  Operator with a ma\imum of sixty (60) room nights
(including  only room, tax and parking  charges,  and which may be either at the
Hotel,  another hotel in the Washington D.C. area managed by affiliates of Owner
and reasonably convenient to the Hotel, or another hotel in the Washington. D.C.
area similar to any of the  foregoing  and  reasonably  convenient to the Hotel)
during the first 12 months of the Term,  for the  purpose of housing  Operator's
representatives  who are responsible for supervising the construction,  opening,
and training of employees of the Managed  Outlet.  After the end of such period,
Hotel  shall  provide  twenty  (20) room nights  (including  only room,  tax and
parking  charges,  and which may be either at the  Hotel,  another  hotel in the
Washington D.C. area managed by affiliates of Owner and reasonably convenient to
the Hotel, or another hotel in the  Washington,  D.C. area similar to any of the
foregoing and reasonably  convenient to the Hotel) during each twelve (12) month
period for the purpose of enabling such  representatives  to monitor  continuing
employee training and supervision.


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<PAGE>

     5.5.  Operator shall not be liable for any failure of the Managed Outlet to
comply prior to the Effective  Date with all federal,  state,  local and foreign
statutes, laws, ordinances,  regulations,  rules, permits, judgments, orders and
decrees  affecting  labor union  activities,  civil rights or  employment in the
United States, including,  without limitation,  the Civil Rights Act of 1870, 42
U.S.C.  Sec. 1981,  the Civil Rights Acts of 1871, 42 U.S.C.  Sec. 1983 the Fair
Labor Standards Act, 29 U.S.C. Sec. 201, et. seq., the Civil Rights Act of 1964,
42 U.S.C. Sec. 2000e, et. seq., as amended, the Age Discrimination in Employment
Act of 1967, 29 U.S.C. Sec. 621, the Rehabilitation Act, 29 U.S.C. Sec. 701, et.
seq., the Americans With  Disabilities Act of 1990, 29 U.S.C. Sec. 706,42 U.S.C.
Sec. 12101, the Employee  Retirement  Income Security Act of 1974,29 U.S.C. Sec.
301,  et. seg. , the Equal Pay Act, 29 U.S.C.  Sec.  201, et seq.,  the National
Labor  Relations  Act,  29  U.S.C.  Sec.  151,  et.  seq.,  and any  regulations
promulgated  pursuant to such  statutes  (collectively,  as amended from time to
time,  and  together  with  any  similar  laws  now or  hereafter  enacted,  the
"Employment Laws").

     5.6.  Operator  shall from time to time  develop  and  implement  policies,
procedures and programs for the Managed Outlet  (collectively,  the "Employment
Policies")  reasonably  designed to effect  compliance with the Employment Laws.
The Employment Policies shall be consistent with industry standards from time to
time for reputable hotel management companies.

     5.7. At Owner's request,  Operator shall periodically make  recommendations
to Owner with respect to the  desirability of maintaining  Employment  Practices
Liability  Insurance  ("Employment  Insurance")  for the  benefit  of Owner  and
Operator.  If Owner shall purchase,  or shall approve the purchase of Employment
Insurance,  the premium for such insurance (or an allocable  amount in the event
that  more than one  hotel is  covered  by such  policy)  shall be an  Operating
Expense.


                                   ARTICLE VI
                               PROVISION OF FUNDS

     6.1. In performing  its services under this  Agreement,  Operator shall act
solely as agent and for the account of Owner. Operator shall not be deemed to be
in default of its obligations under this Agreement to the extent it is unable to
perform any obligation due to the lack of available  funds from the operation of
the Managed Outlet or as otherwise provided by Owner.

     6.2.  Operator  shall in no event be  required  to advance any of its funds
(whether by waiver or  deferral of its  management  fees or  otherwise)  for the
operation of the Managed Outlet.



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<PAGE>

                                   ARTICLE VII
                               DAILY GRILL LICENSE

     7.1 In addition to the definitions set forth  elsewhere  herein,  the terms
set forth in this Article VII will have the meanings set forth herein:

          A. "License  Rights" mean,  collectively,  the Operating  System,  the
     Existing Marks, and the Marks defined below.

          B.  "Marks"  mean,  collectively,  the  Existing  Marks and such other
     tradenames,  service  marks,  logo types,  trade symbols,  emblems,  signs,
     logos, insignias,  trademarks,  designs, patents and copyrights as Operator
     or Affiliate owns or may hereafter acquire,  develop, or adopt or designate
     for use in conjunction with the Operating System.

     7.2. Upon the terms and  conditions  set forth herein,  Operator  grants to
Owner,  and Owner accepts from Operator,  the right,  license,  and privilege of
utilizing the License Rights during the Term, solely and only in connection with
operation of the Managed Outlet and the Hotel and (with  reference to any use of
the License Rights not in the ordinary  course of business of the Hotel) only in
such manner as Operator  approves in writing.  Owner will not make or  authorize
any direct or indirect use of any of the License  Rights other than  directly in
connection  with  operation  of the  Managed  Outlet  and the  Hotel,  and (with
reference  to any  use of the  License  Rights  not in the  ordinary  course  of
business of the Hotel) only in such manner as Operator approves in writing.  The
Operator  hereby  approves the use by Owner in the Hotel of signs,  pictures and
posters  advertising  the presence of the Managed  Outlet in the Hotel,  and the
inclusion in Hotel  advertising  and  promotional  materials of reference to the
Managed Outlet, provided such advertising and promotional material is in keeping
with the quality of a Daily Grill and has been  approved in advance by Operator,
which  approval  shall not be  unreasonably  withheld  or  delayed.  The license
granted  hereby shall be effective  only during the Tenn of this  Agreement  and
shall  automatieally  end on the  expiration  or  earlier  termination  of  this
Agreement.

     7.3.  Owner  acknowledges  and agrees that the License  Rights shall at all
times during the Term be the sole and exclusive  property of Operator.  Operator
expressly  retains and reserves all rights in and to each of the License Rights,
subject  only to the rights  specifically  granted  to Owner in this  Agreement.
Owner  further  acknowledges  and agrees that it has been granted the use of the
License Rights solely for the duration of the Term and only in conjunction with
the Managed  Outlet and the Hotel,  and that this  Agreement  is not intended as
Operator's  transfer  or sale to Hotel  of any of the  License  Rights.  Nothing
contained in this Agreement shall be construed to prevent Operator from granting
any other  licenses for the use of any or all of the License Rights at any other
location,  except  Operator  shall not  license or operate  any new Daily  Grill
restaurant  within  two (2) miles of the  Hotel,  or from  utilizing  any of the
License Rights in any manner whatsoever,  provided, however, that Operator shall
not use the  License  Rights  in such a way as could  materially  and  adversely
affect  Owner or the Hotel.  Owner  acknowledges  that it will not  acquire  any
rights  whatsoever  in any of  Operator's  goodwill  and/or  proprietary  marks,
including  any of the License  Rights.  as a result of the Hotel's use  thereof,
except as specifically set forth herein.  Owner agrees that it shall not, during
the Term or thereafter,  take any actions that encumber the Operator's ownership
of its proprietary marks, including the License Rights or the validity thereof.

     7.4 Owner agrees at all times during the Term to use the License  Rights
only in conjunction with the Hotel and in the manner provided herein.


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<PAGE>

                                  ARTICLE VIII
                        WORKING CAPITAL AND BANK ACCOUNTS

     8.1.  Owner  will  provide  Operator  with a  sufficient  amount of initial
working  capital  for  the  Managed  Outlet,  as  determined  in the  reasonable
discretion  of  Owner  (the  "Initial  Working  Capital").   Thereafter,   funds
sufficient in amount to constitute  normal working capital for the uninterrupted
and efficient  operation of the Managed  Outlet shall be  maintained  from Total
Revenues  or  otherwise  provided  by Owner in an amount  at least  equal to the
working  capital  specified in the most recent Cash Flow Forecast (as defined in
Section 9.4).

     8.2. All funds received by Operator in the operation of the Managed Outlet,
including  working capital  furnished by Owner,  shall be deposited in a special
account  or  accounts  bearing  the  name of the  Managed  Outlet  (the  "Agency
Account") in such federally  insured bank,  savings and loan or trust company as
may be selected by Operator and reasonably  approved by Owner. Any successor or
substitute bank, savings and loan or trust company shall be selected in the same
manner.  From the Agency  Account,  Operator  shall pay all Operating  Expenses,
Fixed Charges,  the Hotel  Priority  Return (as  hereinafter  defined) and other
amounts  required to be paid by Operator on Owner's behalf under this Agreement.
In addition to the Agency  Account,  an account shall be established at the same
institution for a reserve for  replacements,  substitutions and additions to the
FF&E (the "FF&E Reserve Account").

     8.3. The Agency  Account and the FF&E Reserve  Account shall be in the name
of  Operator  as agent for Owner and  shall be under the  control  of  Operator.
Checks or other documents of withdrawal shall be signed only by  representatives
of Operator,  provided  that such  representatives  shall be bonded or otherwise
insured in a manner  reasonably  satisfactory to Owner. The premiums for bonding
or other insurance shall be an Operating Expense except for premiums for bonding
off-site executive employees of Operator.  Upon the expiration or termination of
this Agreement all remaining  amounts in the Agency Account and the FF&E Reserve
Account shall be transferred to Owner.

                                   ARTICLE IX
                     BOOKS, RECORDS AND STATEMENTS; BUDGETS


     9.1.  Operator  shall keep full and  accurate  books of  account  and other
records  reflecting  the  results  of the  operation  of the  Managed  Outlet in
accordance  with GAAP,  or in such other  format  proposed  by Operator as Owner
shall approve in its sole discretion. Except for the books and records which may
be kept in Operator's  home office or other  suitable  location  pursuant to the
adoption of a central billing system or other centralized  service, the books of
account and all other  records  relating to or  reflecting  the operation of the
Managed  Outlet  shall be kept at the Managed  Outlet and shall be  available to
Owner and its  representatives  at all reasonable times for examination.  audit,
inspection  and  transcription.  All of such  books  and  records  shall  be the
property of Owner. Upon any termination of this Agreement, all of such books and
records shall  thereafter be available to Operator at all  reasonable  times for
inspection,  audit,  examination  and  transcription  for a period  of three (3)
years.


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<PAGE>


     9.2.  Operator shall deliver to Owner within twenty (20) days after the end
of each month the following iterns (collectively, the "Monthly Reports"):

          A. An executive  summary  noting  highlights  of  operations  for such
     month;

          B. A  source  and use of funds  statement  (which  statement  shall be
     required  within  twenty (20) days after the end of each  calendar  quarter
     only);

          C. An income and expense statement for such month;

          D. A  twelve-month  summary and forecast of operations for the current
     fiscal year utilizing (i) actual  year-to-date figures,  (ii) forecasts for
     the next 30, 60 and 90 day  periods  and  (iii)  budgeted  amounts  for the
     balance of the fiscal year;

          E. A  twelve-month  summary and  forecast of cash flow for the current
     fiscal year utilizing (i) actual year-to-date  figures,  (ii) forecasts for
     the next 30, 60 and 90 day  periods  and  (iii)  budgeted  amounts  for the
     balance of the fiscal year;

          F. A summary of year-to-date capital expenditures and budgeted amounts
     for the balance of the year; and

          G. Such other monthly  reports as Owner may reasonably  request and as
     are customarily  provided by managers of similar  restaurant  facilities in
     the area of the Hotel.

The Monthly  Reports  shall be prepared  in  accordance  with the GAAP and shall
otherwise be prepared in accordance with Operator's standard financial reporting
and budgeting  practices.  Owner agrees that the Monthly Reports may be prepared
on a consistent basis for periods other than one month (an "Operator's Reporting
Period"),  but  only on the  condition  that  the end of each  calendar  quarter
coincides with the end of an Operator's Reporting Period.

     9.3.  Year-end  financial  statements for the Managed  Outlet  (including a
balance  sheet,  income  statement  and  statement of sources and uses of funds)
shall be prepared and certified by an independent  certified  public  accountant
selected by Operator  and  approved by Owner.  Operator  shall  cooperate in all
respects with such accountant in the preparation of such statements.

     9.4. On or before each December 1 during the Operating Term, Operator shall
submit to Owner for the next fiscal year the following items (collectively,  the
"Budgets"):

          A. An  operating  budget (the  "Operating  Budget")  setting  forth in
     reasonable  line-item  detail the projected income from and expenses of all
     aspects of the operations of the Managed Outlet;

          B. A capital budget (the "Capital Budget") setting forth in reasonable
     line-item detail proposed capital projects and expenditures for the Managed
     Outlet including but not limited to FF&E expenditures;

          C. A cash flow  forecast  (the "Cash Flow  Forecast")  on a monthly
     basis; and



                                       9
<PAGE>

          D. Such other reports or projections  as Owner may reasonably  request
     and  as  are  customarily  provided  by  managers  of  similar  restaurant
     facilities in the area of the Hotel.

The  Budgets  shall be  prepared  in  accordance  with the  Operator's  standard
financial  reporting and budgeting  practices  consistent with other Daily Grill
operations;  provided,  however,  that  Operator  shall  from  time to time upon
Owner's request make such reasonable  modifications  thereto as may be necessary
to allow Owner (i) to satisfy  mortgagee  requirements,  if any, (ii) to satisfy
reporting  requirements  imposed on Owner by applicable  law or (iii) to prepare
Owner's own  financial  statements  in  accordance  with the "Uniform  System of
Accounts" (Eighth Revised Edition 1986, as further revised from time to time) as
adopted by the American  Hotel and Motel  Association  of the United  States and
Canada ("Uniform System").

     9.5.  Upon  approval  of the  Budgets by Owner,  Operator  shall  cause the
Managed  Outlet to be operated  substantially  in  accordance  with the Budgets.
Operator shall not, without Owner's prior approval:

          A. Incur any expense for any line-item in the  Operating  Budget which
     causes the aggregate expenditures for such line-item to exceed the budgeted
     amount by the greater of (i) 10% or (ii) $5,000 or more for the  applicable
     fiscal  period set forth in the  Operating  Budget,  provided that Operator
     may,  without  Owner's  approval,  (i) pay  any  expenses  (the  "Necessary
     Expenses")  regardless  of amount,  which are  necessary  for the continued
     operation  of the Managed  Outlet and which are not within the  reasonable
     control  of  Operator  (including,  but not  limited  to,  those for taxes,
     utility charges and debt service) and (ii) pay any expenses (the "Emergency
     Expenses")  regardless of amount which,  in Operator's good faith judgment,
     are  immediately  necessary  to protect the  physical  integrity or lawful
     operation of the Managed  Outlet or the health or safety of its  occupants;
     or

          B. Incur any expense for any  line-item  in the Capital  Budget  which
     causes the aggregate expenditures for such line-item to exceed the budgeted
     amount by the greater of (i) 10% or (ii) $5,000 more provided that Operator
     may, without Owner's approval, pay any Emergency Expenses which are capital
     in nature.

Nothing in this  Section 9.5 shall be deemed in any way to limit the  provisions
of Article VI above.

     9.6.  If the  Budgets  (or any  component  of the  Budgets),  have not been
approved by Owner prior to any applicable  fiscal year,  then, until approval of
the  Budgets (or such  components)  by Owner,  Operator  shall cause the Managed
Outlet to be operated  substantially  in  accordance  with the such prior year's
Budgets except for, or as modified by, (a) those  components of such Budgets for
the applicable  fiscal year approved by Owner,  b) the Necessary  Expenses which
shall be paid as required and (c) the Emergency  Expenses which shall be paid as
required.


                                       10
<PAGE>

                                    ARTICLE X
                                 MANAGEMENT FEES
                       AND PAYMENTS TO OPERATOR AND OWNER

     10.1.  Operator shall pay to Owner, in  consideration  of the Hotel Capital
Contribution (as defined in Exhibit C) and in consideration of the loss to Owner
caused  by the  period  of time the  existing  restaurant  is to be  closed  for
business with the public while it is being  converted to a "Daily Grill" outlet,
on a  monthly  basis on or prior to the tenth (10th day of each  month  from and
after the Effective Date through the end of the Start-up  Period, a fee equal to
$10,000 per month (the "Start-Up Fee"), which fee shall in no event be less than
$60,000.

     10.2.  Owner shall pay to Operator,  on a monthly  basis from and after the
commencement of the Operating  Term, for services  rendered under this Agreement
during the  Operating  Term,  but only with  respect to periods  with respect to
which Owner has received its full Hotel Priority  Return, a management fee (the
"Basic Fee") equal to the lesser of (i) an amount equal to Total  Revenues  with
respect to such period multiplied by eight percent (8%) and (ii) an amount equal
to Net  Operating  Thcome  Before  Basic Fee (as  hereinafter  defined)  for the
applicable  period.  If there is not sufficient cash flow from operations of the
Managed  Outlet for  Operator  to be paid the Basic Fee at the end of any month,
the amount of the deficiency  shall accrue without  interest and, subject to the
provisions of Section 3 of Exhibit B of this  Agreement,  be repaid in the first
period or periods  when there is available  cash flow after  payment of the then
current  Operating  Expenses and Fixed Charges.  As part of the adjustment to be
made pursuant to Section 10.6 below,  if Net  Operating  Income Before Basic Fee
with  respect to any  calendar  year during the Term is greater than or equal to
eight percent (8%) of Total  Revenues with respect to such calendar  year,  then
Owner shall pay to Operator the amount,  if any, by which eight  percent (8%) of
Total  Revenues with respect to such  calendar year exceeds the aggregate  Basic
Fee otherwise  paid or payable to Operator  with respect to such calendar  year,
which  amount,  if any,  shall from and after its payment be part of  Operator's
Basic Fee and further provided that Owner may offset against any such amount any
Second Tier Payback (as hereinafter defined) then due and owing from Operator.

     10.3.  In  addition  to the Basic Fee,  Owner  shall pay to  Operator on an
annual basis an incentive  management fee (the  "Incentive  Fee")  determined in
accordance with Exhibit B to this Agreement.

     10.4. In each month during the Operating  Term,  Operator shall be paid out
of the Agency Account the Basic Fee for the preceding  month, as determined from
the monthly income and expense statement,  such payment to be made upon delivery
of the income and expense  statement for such month showing the  computation  of
Total Revenues and the Basic Fee for such month.

     10.5. On or before the twentieth  (2Oth) day following the last day of each
calendar  quarter  (or such  other  fiscal  period  as Owner and  Operator  may
determine) of each fiscal year during the Operating  Term,  after (a) payment of
Operating  Expenses and other amounts  required to be paid under this Agreement,
(b) deposits to the FF&E Reserve  Account in accordance  with the Budget and (c)
retention  of  working  capital  sufficient  to  assure  the  uninterrupted  and
efficient  operation of the Managed Outlet, in accordance with the most recently
approved Cash Flow  Forecast,  all funds in the Agency  Account shall be paid to
Owner.

     10.6. At the end of each fiscal year and following  receipt by Owner of the
annual audit set forth in Section 9.3, an adjustment will be made, if necessary,
based on the audit so that Operator  shall have received the accurate  Basic Fee
and  Incentive  Fee for such fiscal year.  Within thirty (30) days of receipt by
Owner and Operator of such audit,  Operator shall either (a) place in the Agency
Account or remit to Owner, as appropriate,  any excess amounts Operator may have
received  for such  fees  during  such  calendar  year or (b) be paid out of the
Agency Account or by Owner,  as  appropriate,  any deficiency in the amounts due
Operator for the Basic Fee and the Incentive Fee.


                                       11
<PAGE>

     10.7 With respect to any month in which there is outstanding any Additional
Hotel  Capital  Contribution  (as defined in Exhibit C) which has not been fully
repaid to Owner,  Operator shall pay to Owner (i) out of any aggregate Basic Fee
and/or Incentive Fee otherwise due to Operator hereunder but only for so long as
any Second Tier Additional Hotel Capital  Contribution (as defined in Exhibit C)
shall remain outstanding,  in whole or partial repayment, as the case may be, of
the Second Tier Additional  Hotel Capital  Contribution,  an amount (the "Second
Tier  Payback"),  if any,  equal to the  lesser  of (x) the  total  Second  Tier
Additional  Hotel Capital  Contribution  then  outstanding and (y) the aggregate
Basic Fee and  Incentive Fee due to Operator with respect to such month and (ii)
after the Second Tier Additional  Hotel Capital  Contribution has been repaid in
full,  in whole or  partial  repayment,  as the case may be, of the  First  Tier
Additional  Hotel Capital  Contribution  (as defined in Exhibit C), and prior to
the payment of the Basic Fee or any  Incentive  Fee due Operator but after Owner
has received the Hotel Priority Return, an amount (the "First Tier Payback"; the
First Tier  Payback  and the Second Tier  Payback  being  hereinafter  sometimes
individually or collectively referred to as a "Capital Payback"),  if any, equal
to (i)  the  lesser  of (x)  the  total  First  Tier  Additional  Hotel  Capital
Contribution then outstanding and (y) Net Operating Income Before Basic Fee with
respect to such month,  which First Tier Payback shall be paid out of the Agency
Account.  Any Capital Payback shall be paid to Owner by Operator within ten (10)
days after the delivery to Operator by Owner of a reasonably  detailed statement
setting forth the Capital Payback payable with respect to such month. At the end
of each fiscal year and following receipt by Owner of the annual audit set forth
in Section 9.3, an adjustment will be made, if necessary,  based on the audit so
that Owner shall have  received  the  accurate  Capital  Payback for such fiscal
year.  Within  thirty (30) days of receipt by Owner and  Operator of such audit,
Operator  shall  either  (a) place in the Agency  Account or remit to Owner,  as
appropriate,  any excess  amounts  Operator may have  received on account of its
Fees during such  calendar  year or (b) be paid out of the Agency  Account or by
Owner, as appropriate,  any deficiency in the amounts due Operator for the Basic
Fee and the Incentive Fee.

                                   ARTICLE XI
                               CERTAIN DEFINITIONS

     11.1.  A. The term  "Total  Revenues"  shall mean all  income,  revenue and
proceeds  resulting  from the  operation  of the  Managed  Outlet and all of its
facilities  (net of rebates,  refunds and  overcharges of revenues not known at
the time of sale but adjusted at a later date) which are  properly  attributable
under the Uniform  System to the period in question.  Subject to Section 11. lB,
Total Revenues shall include, without limitation, all amounts derived from.

          (i) The rentals of banquet or other facilities of the Managed Outlet;

          (ii) The sale of food and beverage  whether  sold in a bar,  lounge or
     restaurant,  delivered to a guest room, sold through an in-room facility or
     vending  machines,  provided  in meeting or banquet  rooms or sold  through
     catering operations;

          (iii) Charges for other Managed Outlet services or amenities; and



                                       12
<PAGE>

          (iv) The gross income upon which the proceeds of business interruption
     or similar insurance are calculated.

B.   Total Revenues shall not include:

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

     (ii) Tips, service charges and other gratuities  received by Managed Outlet
Employees;

     (iii) Proceeds of insurance except as set forth in Section 11.0 lA;

     (iv)  Proceeds  of the sale or  condemnation  of the  Hotel,  any  interest
therein or any other asset, or the proceeds of any loans or financings;

     (v) Capital contributed to Owner or the Managed Outlet;

     (vi) The  repayment  of any loans or interest  thereon  made by Owner other
than in the ordinary course of Hotel operations;

     (vii)  amounts  attributed  to  complimentary  meals  served or provided to
employees of the Managed Outlet; and

     (viii) the amount of any Capital Payback.

     11.2. A. The term "Operating Expenses" shall mean all costs and expenses of
maintaining,  conducting and supervising the operation of the Managed Outlet and
all of its facilities which are properly  attributable  under the Uniform System
to the period in question. Operating Expenses shall include, without limitation:

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

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

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

     (iv) The cost of all repairs to and maintenance of the Managed Outlet;



                                       13
<PAGE>
 
     (v)  Insurance  premiums (or the allocable  portion  thereof in the case of
blanket  policies) for all insurance  maintained  under Article XIII (other than
insurance  against  physical  damage to the Hotel) and  losses  incurred  on any
self-insured risks (including deductibles);

     (vi) All taxes,  assessments,  permit fees,  inspection fees, and water and
sewer charges and other charges  (other than income or franchise  taxes) payable
by or  assessed  against  Owner with  respect to the  operation  of the  Managed
Outlet, excluding Property Taxes (as defined in Section 11.4);

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

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

     (ix) All out-of-pocket  expenses and disbursements  reasonably  incurred by
Operator, pursuant to, in the course of; and directly related to, the management
and operation of the Managed Outlet under this Agreement.  Without  limiting the
generality of the  foregoing,  such charges may include all  reasonable  travel,
telephone,  telegram, facsimile, air express and other incidental expenses, but,
except as  otherwise  provided in this  Agreement,  shall not include any of the
regular  expenses of the central  offices  maintained  by  Operator,  other than
offices  maintained  at the  Managed  Outlet for the  management  of the Managed
Outlet.  Operator  shall  maintain and make available to Owner invoices or other
evidence supporting such charges;

     (x) The Basic Fee;

     (xi) Payments under any applicable franchise agreement;

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

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

B.   Operating Expenses shall not include:

     (i) Amortization and depreciation;

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

     (iii) The costs of any  alterations.  additions  or  improvements which for
Federal income tax purposes must be  capitalized  and amortized over the life of
such alteration addition or improvement:

     (iv) Payments into the FF&E Reserve Account;

     (v) Any item defined as a Fixed Charge in Section 11.4; or

     (vi) the amount of any Second Tier Payback.



                                       14
<PAGE>
    
     11.3 "Hotel  Priority  Return" shall mean an imputed annual return to Owner
prorated  on a  monthly  basis  equal  to the  (A)  the  Initial  Hotel  Capital
Contribution (as defined in Exhibit C) plus the then current outstanding balance
of the  Additional  Hotel Capital  Contribution  multiplied by (B) eight percent
(8%). The Hotel Priority Return shall be paid to Owner on a monthly basis out of
Net Operating Income Before Priority Return.

     11.4 "Fixed Charges" shall mean the cost of the following items relating to
the Hotel or the  Managed  Outlet  which  are  properly  attributable  under the
Uniform System to the period in question:

          (i) 5.5% of the real estate  taxes on the  Building,  an amount  Owner
     represents to Operator would currently equal $8,000, assessments,  personal
     property  taxes  and any other ad  valorem  taxes  imposed  on or levied in
     connection with the Managed Outlet (collectively, "Property Taxes");

          (ii) Insurance against physical damage to the Hotel; and

          (iii) Rental payments or payments for purchase options under leases of
     equipment which are capital leases under the Uniform System;

          (iv) the Hotel Priority Return; and

          (v) any First Tier Payback.

     11.5. "Net Operating  Income" for any period shall mean the amount, if any,
by which Total Revenues for such period exceed the sum of (a) Operating Expenses
and (b) Fixed Charges for such period.

     11.6. "Net Operating Income Before Basic Fee" for any period shall mean the
amount,  if any, by which Total  Revenues for such period  exceed the sum of (a)
Operating Expenses for such period (excluding the Basic Fee payable with respect
to such period) and (b) Fixed Charges for such period.

     11.7. "Net Operating  Income Before  Priority  Return" for any period shall
mean the amount,  if any, by which Total Revenues for such period exceed the sum
of (a) Operating  Expenses for such period (excluding the Basic Fee payable with
respect to such  period) and (b) Fixed  Charges for such period  (excluding  any
amounts referenced in clauses 11.4 (iv) and (v) above).

     11.8.  "Fiscal year" shall mean each calendar year or partial calendar year
within the Operating Term unless Owner and Operator otherwise agree.

                                   ARTICLE XII
                                  FF&E RESERVE

     12.1.  During  each  fiscal  year there  shall be  allocated  and paid on a
monthly  basis to the FF&E Reserve  Account  from Total  Revenues or other funds
provided by Owner such amount as is reflected in the applicable  Budget for such
fiscal year.


                                       15
<PAGE>

 
     12.2.  All funds in the FF&E Reserve  Account,  together  with any interest
earned  thereon and the  proceeds of any sale of FF&E (which  proceeds  shall be
deposited  in the FF&E  Reserve  Account)  shall be used solely for  purposes of
replacing or  refurbishing  the FF&E in accordance with the applicable  Capital
Budget.


                                  ARTICLE XIII
                                    INSURANCE

     13.1.  Operator  shall arrange for and maintain the following  insurance in
connection  with the Managed  Outlet,  the cost of which  shall be an  Operating
Expense:

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

          B.  Commercial  general  liability  insurance  (including  broad  form
     endorsement and coverage against  liability arising out of the ownership or
     operation of motor  vehicles) with a combined single limit of not less than
     $25,000,000 for each  occurrence for liability for (i) bodily injury,  (ii)
     death, (iii) property damage,  (iv) assault and battery,  (v) false arrest,
     detention or imprisonment or malicious  prosecution,  (vi) libel,  slander,
     defamation or violation of the right of privacy,  (vii)  wrongful  entry or
     eviction, or (viii) liquor law or dram shop liability;

          C. Worker's  compensation  insurance or insurance  required by similar
     employee  benefit acts having a minimum per  occurrence  limit as Owner may
     deem advisable  against all claims which may be brought for personal injury
     or death of  Managed  Outlet  Employees,  but in any  event  not less  than
     amounts prescribed by applicable state law;

          D. Fidelity bonds, in such amounts and with such  deductibles as Owner
     may require,  covering  Operator's  employees at the Managed  Outlet (other
     than executive  employees of Operator) or in job  classifications  normally
     bonded in other  restaurants  it manages in the United  States or otherwise
     required by law;

          E.  Business  interruption  insurance  covering  loss of income  for a
     minimum period of six (6) months  resulting ftom  interruption  of business
     caused  by  the  occurrence  of  any of the  risks  insured  against  under
     "all-risk" policy referred to in Section 15.1A;

          F. If elected by Owner  pursuant  to  Section  5.5 of this  Agreement,
     Employment   Insurance  with  reasonable  limits  and  deductibles  to  be
     determined by Owner;

          G. If the Hotel is located  within an area  designated  "flood  prone"
     pursuant to the National Flood Insurance Act of 1968 and the Flood Disaster
     Protection Act of 1973, as the same mav be amended from time to time flood
     insurance in such amount as Owner may reasonably require; and




                                       16
<PAGE>

          H. Such other or additional insurance as may be (i) required under the
     provisions  of any  applicable  mortgage,  deed of trust,  ground  lease or
     franchise agreement (collectively,  "Major Agreements") or (ii) customarily
     carried by prudent  operators of first-class  restaurants in the geographic
     area of the Managed Outlet.

     13.2.  All  insurance  policies  shall name Owner as the insured  party and
shall name as  additional  insureds  Operator  and such other  parties as may be
required by the terms of the Major Agreements as appropriate.

     13.3. All insurance  policies shall be in such form and with such companies
as  shall  be  reasonably  satisfactory  to  Owner  and  shall  comply  with the
requirements of any Major Agreement.  Insurance may (at Owner's election or with
Owner's prior  approval) be provided under blanket or master  policies  covering
one or more other  restaurants  operated  by  Operator  or owned by Owner.  The
portion of the premium for any blanket or master po1icy which is  allocated  to
the Managed  Outlet as an Operating  Expense or Fixed Charge shall be determined
in an equitable manner by Operator and reasonably approved by Owner.

     13.4.  All insurance policies shall specify that they cannot be canceled or
modified on less than twenty  (20) days prior  written  notice to both Owner and
Operator and any additional  insureds (or such longer period as may be required
under  a  Major   Agreement)  and  shall  provide  that  claims  shall  be  paid
notwithstanding  any act or negligence of Owner or Operator or their  respective
agents or employees.

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

     13.6.  Owner and  Operator  hereby  release  one  another  from any and all
liability  associated  with any damage,  loss or liability with respect to which
property insurance coverage is provided pursuant to this Article or otherwise.

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


                                   ARTICLE XIV
                                 PROPERTY TAXES

     14.1.  Owner  shall pay all  Property  Taxes  with  respect  to the  Hotel,
including  the Managed  Outlet,  a percentage  of which as agreed in each Budget
shall be  allocated  to the  Managed  Outlet and shall be a Fixed  Charge as set
forth in Section 11.4(ii).

     14.2.  Owner may contest the validity or amount of any Property Tax (a "Tax
Contest"),  and  Operator  agrees to  cooperate  with Owner in a Tax Contest and
execute any documents or pleadings required for such purpose,  provided that the
facts  set forth in such  documents  or  pleadings  are  accurate  and that such
cooperation  or execution  does not impose any liability on Operator.  All costs
and  expenses  incurred by Owner and Operator in  connection  with a Tax Contest
shall be Operating Expenses.


                                       17
<PAGE>

                                   ARTICLE XV
                       DAMAGE OR DESTRUCTION; CONDEMNATION

     15.1. If the Managed Outlet is damaged by fire or other casualty,  Operator
shall  promptly  notify Owner.  This  Agreement  shall remain in full force and
effect subsequent to such casualty provided that either party may terminate this
Agreement  upon thirty  days prior  notice to the other party if (a) Owner shall
elect to close the  Managed  Outlet as a result of such  casualty  (except  on a
temporary basis for repairs or restoration) or (b) Owner shall determine in good
faith not to proceed  with the  restoration  of the Managed  Outlet and provided
further that Operator may terminate this Agreement upon thirty days prior notice
to Owner if the Managed Outlet cannot be opened for business with the public for
a period of six months or more as a result of such casualty.

     15.2. If all or any portion of the Managed  Outlet becomes the subject of a
condemnation  proceeding or if Operator  learns that any such  proceeding may be
commenced, Operator shall promptly notify Owner. Either party may terminate this
Agreement  on  thirty  (30)  days  notice  to the  other  party  if  (a)  all or
substantially  all of the Managed Outlet is taken through  condemnation or (b)
less than all or substantially  all of the Managed Outlet is taken,  but, in the
reasonable  judgment of the party  giving the  termination  notice,  the Managed
Outlet  cannot,  after giving effect to any  restoration  as might be reasonably
accomplished  through available funds from the condemnation award, be profitably
operated as a first-class restaurant.

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


                                   ARTICLE XVI
                                EVENTS OF DEFAULT

     16.1. The following shall constitute events of default:

          A. If either  party  shall be in default in the  payment of any amount
     required  to be paid under the terms of this  Agreement,  and such  default
     continues  for a period  often (10)  after  written  notice  from the other
     party;

          B. If either party shall be in material  default in the performance of
     its other obligations under this Agreement,  and such default continues for
     a period of thirty (30) days after  written  notice  from the other  party,
     provided  that if such  default  cannot by its nature  reasonably  be cured
     within such thirty day period.  an event of default  shall not occur if and
     so long as the defatilting party promptly  commences and diligently pursues
     the curing of such default;

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


                                       18
<PAGE>

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

     16.2. If any event of default  shall occur,  the  non-defaulting  party may
terminate this Agreement on five (5) days prior notice to the defaulting party.

     16.3.  The right of  termination  set forth in Section 16.2 shall not be in
substitution  for,  but shall be in addition to, any and all rights and remedies
for breach of contract available in law or at equity.

     16.4.  Neither  party  shall be deemed to be in default of its  obligations
under this  Agreement  if and to the extent that such party is unable to perform
such  obligation as a result of fire or other  casualty,  act of God,  strike or
other  labor  unrest,  unavailability  of  materials,  war,  riot or other civil
cornmotion  or any other cause beyond the control of such party (which shall not
include the inability of such party to meet its financial obligations).


                                  ARTICLE XVII
                                   TERMINATION

     17.1.  Operator  shall have the right to terminate this Agreement as of (i)
January 1, 2004,  (ii) provided that Operator did not previously  terminate this
Agreement,  January 1, 2009 and (iii)  provided that Operator did not previously
terminate  this  Agreement,  January 1, 2014,  subject to  providing  Owner with
irrevocable  written notice  thereof  delivered not more than one hundred eighty
(180)  days'  and not less  than  ninety  (90)  days'  prior  to the  applicable
termination date, time being of the essence.

     17.2.  Operator shall have the right, but not the obligation,  to terminate
this Agreement upon sixty (60) days' prior written notice to Owner,  such notice
to be delivered within ten (10) after the delivery of the annual report for such
Reference Year (as hereinafter  defined) prepared pursuant to Section 9.3 above,
if as of December 31st of any year durrng the Operating Term  subsequent to the
first year of the Operating  Term (a "Reference  Year"),  Total Revenues for the
Managed Outlet are less than $2,000,000 for the preceding twelve months.

     17.3 Owner shall have the right, but not the obligation,  to terminate this
Agreement upon sixty (60) days' prior written notice to Operator (a "Termination
Notice'), such Termination Notice to be delivered within ten (10) days after the
delivery of the annual report for such Reference Year (as  hereinafter  defined)
prepared  pursuant to Section  9.3 above,  if Owner did not  receive  the full
Hotel Priority, Return with respect to such Reference Year;  provided,  however,
that such Termination  Notice shall be of no force or effect if (i) prior to the
expiration of such ten day period  Operator  delivers to Owner a written  notice
stating that  Operator  will pay to Owner within thirty (30) days an amount (the
"Shortfall Payment",)  equal  to the  full  Hotel  Prioritv  Return  for  such
Reference  Year less any  amounts  received  by Owner on account of such  Hotel
Priority  Return with respect to such Reference Year and (ii) within thirty (30)
days thereafter Operator actually pays the Shortfall Payment to Owner.


                                       19
<PAGE>
                                  ARTICLE XVIII
                                   ASSIGNMENT

     18.1 Operator  shall not assign,  pledge or encumber this  Agreement or its
interest in this  Agreement,  voluntarily  or by operation  of law,  without the
prior  consent of Owner,  provided  that  Operator  may,  without the consent of
Owner,  assign this Agreement to Affiliate if Affiliate  agrees in writing to be
bound by all of the  obligations  of Operator under this Agreement and to assume
all of Operator's  obligations under this Agreement from and after the effective
date of such assignment.

     18.2.  Owner shall not assign this  Agreement  without the prior consent of
Operator,  provided  that Owner may assign  this  Agreement  without  Operator's
consent to any person or entity (i) acquiring  Owner's fee interest in the Hotel
or (ii) to whom Owner leases the Hotel, including without limitation the Managed
Outlet, provided that in either case such assignee agrees in writing to be bound
by this Agreement and to assume all of Owner's  obligations under this Agreement
(other than any obligation Owner may specifically  agree to retain in connection
with such assignment) from and after the effective date of such assignment.

     18.3. Upon any permitted assignment of this Agreement and the assumption of
this Agreement by the assignee, the assignor shall be relieved of any obligation
or  liability  under this  Agreement  arising  after the  effective  date of the
assignment.


                                   ARTICLE XIX
                                     NOTICES

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

            Owner:            1010 Wisconsin Avenue        
                              Washington, D.C. 20007      
                              Attention: Mr. Paul Whetsell
                              Facsimile No.: (202)965-4445
                              

            and Operator:     Hotel Restaurant Properties, Inc.
                              11661 San Vicente Boulevard
                              Suite 404
                              Los Angeles, California 90049
                              Attn:  Keith M. Wolff President

or to such other  addresses as Operator and Owner shall  designate in the manner
provided in this Section 19.1. Any notice or other communication shall be deemed
given (a) on the date three (3) business days after it shall have been mailed if
sent by  certified  mail,  (b) on the  business  dav it shall  have been sent by
facsimile  transmission  (unless sent on a  non-business  day or after  business
hours in which event it shall be deemed given on the following business day), or
(c) on the date received if it shall have been given to a  nationally-recognized
overnight courier service.


                                       20
<PAGE>
                                   ARTICLE XX
                                    ESTOPPELS

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


                                   ARTICLE XXI
                                 INDEMNIFICATION

     21.1.   Operator  shall indemnify  and  hold  Owner  (and  Owner's  agents,
principals,  shareholders, partners, members, officers, directors and employees)
harmless from and against all liabilities,  losses, claims,  damages, costs and
expenses  (including,  but  not  limited  to,  reasonable  attorneys'  fees  and
expenses)  that may be incurred  by or asserted  against any such party and that
arise  from  (a)  the  fraud,  wilful  misconduct  or  gross  negligence  of the
executive,  managerial  or off-site  employees  of  Operator,  (b) the breach by
Operator of any provision of this  Agreement or (c) any action taken by Operator
which is beyond the scope of Operator's  authority under this  Agreement.  Owner
shall promptly provide Operator with written notice of any claim or suit brought
against it by a third  party  which  might  result in such  indemnification  and
Operator  shall have the option of defending  any claim or suit brought  against
the Owner with  counsel  selected by Operator and reasonably  approved by Owner.
Owner shall  cooperate with the Operator or its counsel in the  preparation  and
conduct of any defense to any such claim or suit.

     21.2.  Except as provided in Section  21.1, Owner shall  indemnify and hold
Operator (and Operators agents,  principals,  shareholders,  partners,  members,
officers,  directors and employees)  harmless from and against all  liabilities,
losses,  claims,  damages,  costs and expenses  (including,  but not limited to,
reasonable  attonleys'  fees and  expenses)  that may be incurred by or asserted
against such party and that arise from or in connection with (a) the performance
of Operator's services under this Agreement, (b) any act or omission (whether or
not wilful,  tortious,  or  negligent) of Owner or any third party or (c) or any
other occurrence related to the Managed Outlet whether arising before, during or
after the Term. Operator shall promptly provide Owner with written notice of any
claim or suit  brought  against it by a third party  which might  result in such
indemnification  and Owner  shall have the option of defending any claim or suit
brought  against   Operator  with  counsel  selected  by  Owner  and  reasonably
satisfactory to Operator. Operator shall cooperate with the Owner or its counsel
in the preparation and conduct of any defense to any such claim or suit.

     21.3.  Supplementing the provisions of Sections 21.1 and 21.2, if any claim
shall be made against Owner and/or  Operator  which is based upon a violation or
alleged violation of the Employment Laws (an "Employment Claim"), the Employment
Claim shall fall within  Operator's  indemnification  obligations  under Section
21.1 only if it is based upon (a) the wilful  misconduct or gross  negligence of
Operator's  executive or managerial employees (including such wilfril misconduct
or gross negligence as may arise in the hiring,  supervision or dismissal of any
Hotel Employee) or (b) Operator's breach of its obligations under Section 5.6.


                                       21
<PAGE>

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

                                  ARTICLE XXII
                                  MISCELLANEOUS

     22.1.  Owner and Operator  shall execute and deliver all other  appropriate
supplemental  agreements  and  other  instruments,  and  take any  other  action
necessary  to make this  Agreement  fully and legally  effective,  binding,  and
enforceable as between them and as against third parties.

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

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

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

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

     22.6. This Agreement shall be construed,  both as to its validity and as to
the  performance of the parties,  in accordance with the laws of the District of
Columbia.  All  disputes  among the parties  hereto shall be resolved by binding
arbitration  pursuant to the then  existing  rules of the  American  Arbitration
Association  applicable  to such  dispute.  The  prevailing  party  in any  such
arbitration  shall be entitled  to  reimbursement  from the losing  party of its
reasonable attorneys' fees and expenses incurred in connection therewith.

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


                              CAPSTAR GEORGETOWN COMPANY, L.L.C.


                              By:CapStar Management Company II, L.P., member

                              By:CapStar General Corp. general partner

                              By:/s/ Larry Shupnick
                                 -----------------------------------
                              Name: Larry Shupnick
                              Title: Senior

                              HOTEL RESTAURANT PROPERTIES, INC.

                              By: /s/ Keith M. Wolff
                                 ------------------------------
                              Name: Keith M. Wolff
                              Title: President

                              GRILL CONCEPTS, INC.
                         
                              By: /s/ Robert L. Spivak
                                 ------------------------------
                              Name: Robert L. Spivak
                              Title: President