<PAGE>

                                                                   EXHIBIT 10.26

                              PUT/CALL AGREEMENT
                              ------------------

PUT/CALL AGREEMENT (the "Agreement"), dated as of March 27, 2000, by and between
SUNBURST HOSPITALITY CORPORATION, a Delaware corporation ("Sunburst") and CHOICE
HOTELS INTERNATIONAL, INC., a Delaware corporation ("Choice").


                                R E C I T A L S:
                                - - - - - - - -

          A.  Sunburst or its subsidiaries (collectively, "Sunburst") is the
owner of the Assets (as hereinafter defined).

          B.  Contemporaneously with the execution and delivery of this
Agreement, Sunburst and Choice are entering into a certain second omnibus
amendment agreement (the "Omnibus Amendment") dated February 29, 2000, pursuant
to which Sunburst and Choice are amending certain provisions of the Transaction
Documents (as defined in the Omnibus Amendment).

          C.  In connection with the execution and delivery of the Omnibus
Amendment, Sunburst desires to grant to Choice the Call Option (as hereinafter
defined), Choice desires to grant to Sunburst the Put Option (as hereinafter
defined) and Choice and Sunburst desire to acquire the Call Option and Put
Option, respectively, in each case upon the terms and conditions set forth
herein.

                              A G R E E M E N T:
                              - - - - - - - - -

          NOW THEREFORE, in consideration of the mutual agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:

                                   ARTICLE I

                               PUT/CALL OPTIONS

          Section 1.1  Grant of Call Option; Exercise.  (a) Upon all of the
                       ------------------------------
terms, covenants and conditions set forth herein, Sunburst hereby grants to
Choice the exclusive option to purchase (the "Call Option") the following Assets
(collectively, the "Assets"):

          (i)  all right, title and interest of Sunburst in and to that certain
               parcel of real property located in Pittsburgh, Pennsylvania and
               more particularly described in Schedule A-1 to this Agreement
                                              ------------
               (such parcel, together with all buildings, improvements and other
               structures constituting real

                                                                               1
<PAGE>

                 property or fixtures now or from time to time hereafter
                 located on such parcel and all easements, rights and
                 appurtenances belonging or appertaining thereto, the
                 "Pennsylvania Property");

          (ii)   all right, title and interest of Sunburst in and to that
                 certain parcel of real property located in Greer, South
                 Carolina and more particularly described in Schedule A-2
                                                             ------------
                 to this Agreement (such parcel, together with all
                 buildings, improvements and other structures constituting
                 real property or fixtures now or from time to time
                 hereafter located on such parcel and all easements, rights
                 and appurtenances belonging or appertaining thereto, the
                 "South Carolina Property");

          (iii)  all right, title and interest of Sunburst in and to that
                 certain parcel of real property located in Brentwood,
                 Tennessee and more particularly described in Schedule A-3
                                                              ------------
                 to this Agreement (such parcel, together with all
                 buildings, improvements and other structures constituting
                 real property or fixtures now or from time to time
                 hereafter located on such parcel and all easements, rights
                 and appurtenances belonging or appertaining thereto, the
                 "Tennessee Property"; together with the Pennsylvania
                 Property and the South Carolina Property, collectively,
                 the "Properties");

          (iv)   all right, title and interest of Sunburst in and to all
                 tangible and intangible assets of any kind or nature
                 (other than those certain assets set forth in Schedule B-1
                                                               ------------
                 to this Agreement (such assets, the "Pennsylvania Excluded
                 Assets")) relating to or used in connection with the
                 Pennsylvania Property (such assets, the "Pennsylvania
                 Other Assets"; together with the Pennsylvania Property,
                 the "Pennsylvania Assets");

          (v)    all right, title and interest of Sunburst in and to all
                 tangible and intangible assets of any kind or nature
                 (other than those certain assets set forth in Schedule B-2
                                                               ------------
                 to this Agreement (such assets, the "South Carolina
                 Excluded Assets")) relating to or used in connection with
                 the South Carolina Property (such assets, the "South
                 Carolina Other Assets"; together with the South Carolina
                 Property, the "South Carolina Assets");

          (vi)   all right, title and interest of Sunburst in and to all
                 tangible and intangible assets of any kind or nature
                 (other than those certain assets set forth in Schedule B-3
                                                               ------------
                 to this Agreement (such assets, the "Tennessee Excluded
                 Assets"; together with the Pennsylvania Excluded Assets
                 and the South Carolina Excluded Assets, collectively, the
                 "Excluded As-

                                                                               2
<PAGE>

               sets")) relating to or used in connection with the Tennessee
               Property (such assets, the "Tennessee Other Assets"; together
               with the Tennessee property, the "Tennessee Assets");

          (b)  The Call Option may be exercised by Choice within the Call Option
Period (as hereinafter defined) with respect to any or all of the Pennsylvania
Assets, the South Carolina Assets and the Tennessee Assets, in each case, taken
as a whole. The Call Option shall be exercisable by Choice at any time during
the period (the "Call Option Period") commencing on March 24, 2000 and expiring
at 12:00 midnight New York time on June 30, 2000 by written notice delivered by
Choice to Sunburst in the manner set forth in Section 10.9 hereof prior to the
                                              ------------
expiration of the Call Option Period. Such notice shall specifically state that
Choice is exercising its Call Option with respect to the Pennsylvania Assets,
the South Carolina Assets and/or the Tennessee Assets, in each case, taken as a
whole (the Assets specifically described in such notice, the "Call Option
Assets"). In the event Choice shall fail to exercise the Call Option on or
before the expiration of the Call Option Period, the Call Option shall be null
and void and of no further force or effect.

          Section 1.2.   Grant of Put Option; Exercise. (a) Upon all of the
                         -----------------------------
terms, covenants and conditions set forth herein, Choice hereby grants to
Sunburst the exclusive option to require Choice to purchase (the "Put Option")
the Pennsylvania Assets, the South Carolina Assets and/or the Tennessee Assets
solely to the extent that Choice shall fail to exercise its Call Option with
respect to any thereof.

          (b)  The Put Option may be exercised by Sunburst within the Put Option
Period (as hereinafter defined) with respect to any or all of the Pennsylvania
Assets, the South Carolina Assets and the Tennessee Assets, in each case taken
as a whole, solely to the extent that Choice shall fail to exercise its Call
Option with respect to any thereof. The Put Option shall be exercisable by
Sunburst at any time during the period (the "Put Option Period") commencing on
July 1, 2000 and expiring at 12:00 midnight New York time on July 31, 2000, by
written notice delivered by Sunburst to Choice in the manner set forth in
Section 10.9 hereof prior to the expiration of the Put Option Period. Such
------------
notice shall specifically state that Sunburst is exercising its Put Option with
respect to the Pennsylvania Assets, the South Carolina Assets and/or the
Tennessee Assets, in each case, taken as a whole (the Assets specifically
described in such notice, the "Put Option Assets"; together with the Call Option
Assets, as applicable, the "Purchased Assets"). In the event Sunburst shall fail
to exercise the Put Option on or before the expiration of the Put Option Period,
the Put Option and this Agreement shall be null and void and of no further force
or effect. Such Put Option is subject to extension pursuant to Section 6.6
hereof.

                                                                               3
<PAGE>

                                  ARTICLE II

                                PURCHASE PRICE

          Subject to the prorations provided for in Section 6.5 of this
                                                    -----------
Agreement, the purchase price (the "Purchase Price") to be paid by Choice to
Sunburst for the Pennsylvania Assets, the South Carolina Assets and/or the
Tennessee Assets, as applicable, shall be the amount set forth in Schedule C
                                                                  ----------
hereto with respect to such Purchased Assets, in each case payable by wire
transfer of immediately available funds at closing to an account designed by
Sunburst prior to closing.

                                  ARTICLE III

                                 TITLE MATTERS

          Section 3.1.   Title Commitments.  Attached hereto as Schedules D-1,
                         -----------------                      -------------
D-2 and D-3 are the title insurance commitments (the "Title Commitments") issued
---     ---
by Commonwealth Title Insurance Company and First American Title Insurance
Company (collectively, the "Title Insurer"), showing the current state of title
of the Pennsylvania Property, the South Carolina Property and the Tennessee
Property, respectively.  Choice hereby approves the state of title as shown in
the Title Commitments, as such Title Commitments have been marked by Choice,
except for any material matters which would be disclosed by a survey.  The title
exceptions shown in the Title Commitments, excluding the exceptions marked out
thereon by Choice and any material matters which would be disclosed by a survey,
are hereinafter called the "Approved Title Exceptions."

          Section 3.2.   Title Insurance.  Choice's fee title to each of the
                         ---------------
Properties being transferred pursuant to the exercise of either the Put Option
or the Call Option (each such Property, a "Purchased Property", collectively,
the "Purchased Properties") shall be insured at closing by an American Land
Title Association ("ALTA") owner's extended coverage policy of title insurance
to be issued by the Title Insurer in the amount and containing such endorsements
as Choice may require (but such amounts not to exceed those specified in
Schedule C) (collectively, the "Title Policy"), showing title vested Choice
         -
subject only to the following exceptions (collectively, the "Permitted Title
Exceptions"):

            (i)  Liens for real property taxes and special assessments, if any,
                 to the extent not delinquent; and

            (ii) Approved Title Exceptions.

                                                                               4
<PAGE>

          Section 3.3.   Liens.   Sunburst agrees that it shall not create any
                         -----
encumbrance, lien, charge or other matter which would affect or encumber title
to any Property during the term of this Agreement. In the event that any matter
other than any Permitted Title Exception affects title to any Property prior to
closing and Choice objects thereto, Sunburst shall either: (i) promptly
discharge such matter or otherwise cause such matter to be removed as an
exception to the Title Policy issued on the Closing Date (as hereinafter
defined) with respect to such Property or (ii) pay to the Title Insurer, in
escrow, an amount sufficient to satisfy such matter and Sunburst shall proceed
with resolving such matter.

          Section 3.4.   Survey.  Within thirty (30) days after the date of this
                         ------
Agreement, Sunburst shall provide Choice with a survey for each Property (and
all improvements thereon).  Each survey shall:

               (i)   Be prepared by a surveyor or engineer licensed to perform
                     surveys in the state in which the applicable Property is
                     located;

               (ii)  indicate all improvements on the applicable Property;

               (iii) be certified by the surveyor to Choice (or its designee);
                     and

               (iv)  be sufficiently detailed for the Title Insurer to delete
                     the so-called standard survey exceptions from, and issue
                     a comprehensive endorsement (or its equivalent) to the
                     applicable Title Policy.

          Section 3.5.   UCC Search.  Sunburst, at is expense, shall provide
                         ----------
Choice with a current Uniform Commerical Code search conducted in the
appropriate state and local jurisdictions against each Property and against
Sunburst, prepared by a reputable search firm.

                                  ARTICLE IV

                                  INSPECTIONS

          For a period of 45 days after Choice's written notice of the exercise
of the Call Option, Choice shall have the right at Choice's sole cost and
expense to enter onto any Property (either through its employees or designated
agents and representatives) at reasonable times and in a reasonable manner
after giving reasonable notice to Sunburst's Vice President, Extended Stay Hotel
Operations for the purpose of making such inspections as Choice deems necessary
or appropriate in connection with this Agreement.  Sunburst shall give Choice
full and free access to all its books, contracts, leases, commitments,
documents, records and other information relating to the Assets and during such
period Sunburst shall furnish Choice

                                                                               5
<PAGE>

promptly with all financial and operating data and working papers and other
information of Sunburst relating to the Assets.


                                   ARTICLE V

                   REPRESENTATIONS, WARRANTIES AND COVENANTS

          Section 5.1.   Choice's Representations, Warranties and Covenants.  As
                         --------------------------------------------------
an inducement to Sunburst to enter into this Agreement, Choice represents,
warrants and covenants that:

               (i)   Choice is a corporation duly organized, validly existing
                     and in good standing under the laws of the State of
                     Delaware;

               (ii)  Choice has full corporate right, power and authority to
                     enter into and perform its obligations under this Agreement
                     and the other instruments and documents contemplated herein
                     to be executed and performed by it; and

               (iii) The execution and delivery of this Agreement and such other
                     instruments and documents and the consummation of the
                     transactions contemplated hereby and thereby (a) have been
                     duly authorized by all necessary action on the part of
                     Choice, (b) do not require any consent or approval of or
                     notice to any government authority or any other person, (c)
                     will not result in the breach of the certificate of
                     incorporation or by-laws of Choice or any material
                     agreement or other material instrument to which Choice is a
                     party or to which Choice or its assets are bound and (d)
                     will not conflict with or result in the breach of any law,
                     statute, regulation or requirement of any government
                     authority or any judgment, writ, injunction or decree of
                     any court or governmental agency to which Choice or its
                     assets are subject.

          Section 5.2.   Sunburst's Representations, Warranties and Covenants.
                         ----------------------------------------------------
As an inducement to Choice to enter into this Agreement, Sunburst represents,
warrants and covenants as follows:

               (i)  Sunburst is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;

                                                                               6
<PAGE>

               (ii)  Sunburst has full corporate right, power and authority to
                     enter into and perform its obligations under this Agreement
                     and the other instruments and documents contemplated herein
                     to be executed and performed by it including, without
                     limitation, those conveying its right, title and interest
                     in the Assets.

               (iii) The execution and delivery of this Agreement and such other
                     instruments and documents and the consummation of the
                     transactions contemplated hereby and thereby (a) have been
                     duly authorized by all necessary action on the part of
                     Sunburst, (b) do not require any consent or approval of or
                     notice to any governmental authority or any other person,
                     (c) will not result in the breach of the certificate of
                     incorporation or by-laws of Sunburst or any material
                     agreement or other material instrument to which Sunburst is
                     a party or to which Sunburst or its assets are bound and
                     (d) will not conflict with or result in the breach of any
                     law, statute, regulation or requirement of any government
                     authority or any judgment, writ, injunction or decree of
                     any court or governmental agency to which Sunburst or its
                     assets are subject;

               (iv)  Sunburst has not made an assignment for the benefit of
                     creditors, nor has Sunburst filed, or had filed against it,
                     any petition in bankruptcy or insolvency;

               (v)   Sunburst is not a "foreign person" within the meaning of
                     section 1445 of the United States Internal Revenue Code of
                     1986, as amended, and the regulations issued thereunder;

               (vi)  As of the Closing Date, Sunburst will have the right, power
                     and authority to sell and convey the Assets to Choice and,
                     other than this Agreement, Sunburst has not entered into
                     any agreement granting to any person any option, right of
                     first refusal or similar right with respect to the right,
                     title and interests in the Assets held by Sunburst;

               (vii) Except as set forth in Exhibit A hereto: (a) there are no
                                            ---------
                     litigation or governmental, administrative or arbitration
                     proceedings or investigations pending or, to Sunburst's
                     knowledge, threatened against Sunburst (solely as such
                     affects the Assets) or any of the Assets, (b) there are no
                     unsatisfied judgments, arbitration awards or judicial
                     orders against Sunburst or any of the Assets and (c) there
                     are no pending or, to Sunburst's knowledge, threatened
                     complaints, charges, petitions or claims against Sunburst
                     (solely as such affects the Assets) or any of the Assets;

                                                                               7
<PAGE>

               (viii)    Except as disclosed in Exhibit A, Sunburst has not
                                                ---------
                         received any written notice from any governmental
                         authority with respect to any actual or threatened
                         taking of any of the Assets or any portion thereof by
                         the exercise of the right of condemnation or eminent
                         domain;

                 (ix)    There is in full force and effect extended coverage
                         casualty insurance insuring the Assets, for full
                         replacement cost; Sunburst shall maintain such
                         insurance coverage;

                  (x)    The Assets are in good working condition, order and
                         repair, except reasonable wear and tear, and Sunburst
                         shall preserve, protect and maintain its respective
                         business and the Assets, and shall operate all aspects
                         of its business consistently with established prior
                         practice and in the ordinary course of its respective
                         business and shall refrain from engaging in
                         transactions, making alterations or additions, entering
                         into agreements (whether written or oral) or selling,
                         transferring or otherwise disposing of any of the
                         Assets otherwise than in a manner consistent with
                         established practice in the ordinary course of its
                         respective business; and

                 (xi)    Sunburst, to the best of its knowledge, is in material
                         compliance with each, and is not in material violation
                         of any law, ordinance or governmental rule or
                         regulation (including, without limitation, any and all
                         applicable Environmental Laws (as hereinafter defined),
                         and building and zoning ordinances) to which Sunburst's
                         business (solely as it affects the Assets) or the
                         Assets are subject; Sunburst has not failed to obtain
                         any license, permit, certificate or other governmental
                         authorization or inspection necessary to the ownership
                         or use of the Assets or the conduct of Sunburst's
                         business (solely as it affects the Assets); and
                         Sunburst has not received any written communication
                         that alleges that Sunburst is not in compliance with
                         any Environmental Laws or other law, ordinance or
                         governmental rule or regulation; it being understood
                         that for the purposes of this Agreement, the term
                         "Environmental Law" shall mean all applicable laws and
                         regulations of any governmental authority applicable to
                         the Assets and relating to (a) pollution or (b) the
                         protection of employee health or (c) the environment
                         (including ambient air, surface water, ground water,
                         land surface, or subsurface strata), including laws and
                         regulations relating to emissions, discharges, releases
                         or threatened releases of any chemicals, pollutants,
                         contaminants, wastes, toxic substances, hazardous
                         substances, petroleum and pretoleum products.

                                                                               8
<PAGE>

          Section 5.3.   Survival Indemnity. The truth, accuracy, and
                         ------------------
completeness of each of the representations, warranties and covenants of Choice
and of Sunburst herein set forth shall constitute a condition precedent to the
obligations of Sunburst and Choice, respectively, hereunder. The parties hereto
each agree to indemnify, defend and hold harmless the other from any claim,
demand, liability, loss or cost (including reasonable attorney's fees and costs)
which the other may sustain because of any material breach of or inaccuracy in
the respective representations, warranties and covenants of such party set forth
in this Agreement. At closing, Choice and Sunburst shall deliver to each other a
certificate which shall confirm that their respective warranties and
representations contained in this Agreement are in all material respects true
and correct as of the Closing Date. Such representations, warranties and
covenants herein set forth shall survive the Closing Date for the period of the
applicable statute of limitations.


                                  ARTICLE VI

                                    CLOSING

          Section 6.1.   Closing Date. In the event the Call Option or the Put
                         ------------
Option shall be exercised, the sale of the Purchased Assets shall be consummated
on the date (the "Closing Date") which is 60 days after either (i) the date of
the exercise of the Call Option by Choice or (ii) the date of the exercise of
the Put Option by Sunburst; provided, however, that if such 60th day shall fall
                            --------  -------
on a day which shall not constitute a Business Day (as hereinafter defined) then
the Closing Date shall occur on the immediately succeeding Business Day. The
closing of the sale of the Purchased Assets will take place at the offices of
the escrow agent, with the exact time for closing to be designated by Choice by
written notice to Sunburst.

          Section 6.2.   Sunburst's Deliveries and Instruments. On the Closing
                         -------------------------------------
Date, Sunburst shall deliver or cause to be delivered to Choice the following
items (all documents shall be duly executed and, to the extent necessary,
acknowledged by Sunburst):

          (i)  Deed. With respect to each Purchased Property, a deed in
               ----
               substantially the form attached as Exhibit B hereto executed by
                                                  ---------
               Sunburst conveying such Purchased Property to Choice (each a
               "Deed", collectively, the "Deeds"), subject only to Permitted
               Title Exceptions along with transfer tax forms or affidavits with
               respect to each such Deed in the appropriate jurisdiction;

          (ii) Bill of Sale. A duly executed bill of sale in substantially the
               ------------
               form as attached as Exhibit C hereto (the "Bill of Sale")
                                   ---------
               conveying all tangible personal property relating to the
               Purchased Properties.

                                                                               9
<PAGE>

               (iii)     Assignment. An assignment agreement executed by
                         ----------
                         Sunburst assigning to Choice all of Sunburst's rights
                         and obligations under any contracts or other
                         intangibles relating to the Purchased Properties,
                         together with copies of documentation relating thereto;

               (iv)      Title Insurance. A Title Policy for each Purchased
                         ---------------
                         Property in such form as described in Article III
                                                               -----------
                         hereof, the cost of which will be shared equally by
                         Sunburst and Choice;

               (v)       Title Affidavits. Such affidavits and other documents
                         ----------------
                         as may be reasonably requested by the Title Insurer to
                         issue each Title Policy in accordance with the terms of
                         the Title Commitments, as marked by Choice, with
                         respect to each Purchased Property.

               (vi)      Survey. To the extent not previously delivered to
                         ------
                         Choice, the Surveys in such form as described in
                         Article III hereof;
                         -----------

               (vii)     Nonforeign Affidavit. An affidavit executed by Sunburst
                         --------------------
                         confirming that Sunburst is not a foreign person within
                         the purview of 26 U.S.C. (S) 1445 and the regulations
                         issued thereunder.

               (viii)    Evidencing Authority. Such resolutions, certificates of
                         --------------------
                         good standing and incumbency certificates and other
                         evidence of authority with respect to Sunburst as may
                         be reasonably requested by Choice or the Title Insurer;

               (ix)      Certificate. A certificate of Sunburst confirming the
                         -----------
                         continued accuracy of the warranties and representation
                         made by it in this Agreement in accordance with Section
                                                                         -------
                         5.2 hereof; and
                         ---

               (x)       Additional Documents. Such additional documents as may
                         --------------------
                         be reasonably requested by Choice or the Title Insurer
                         to consummate the sale of the Purchased Assets.

Delivery of each of the foregoing shall be a condition precedent to Choice's
obligation to consummate the purchase of the Purchased Asset.

               Section 6.3.   Choice's Deliveries and Instruments. On the
                              -----------------------------------
Closing Date, Choice shall deliver or cause to be delivered to Sunburst the
following items (all documents shall be duly executed and, to the extent
necessary, acknowledged by Choice):

                                                                              10
<PAGE>

               (i)    Payment. The payment of the Purchase Price as contemplated
                      -------
                      in Article II hereof with respect to the Purchased Assets;
                         ----------

               (ii)   Assumption Agreement. An assumption agreement executed by
                      --------------------
                      Choice assuming Sunburst's obligations and duties,
                      prospectively from and after the Closing Date, under the
                      contracts and intangibles, if any, which are the subject
                      of Section 6.2(iii) hereof;
                         ----------------

               (iii)  Title Affidavits. Such affidavits and other documents as
                      ----------------
                      may be reasonably requested by the Title Insurer to issue
                      each Title Policy in accordance with the terms of the
                      Title Commitment, as marked by Choice, with respect to
                      each Purchased Property;

               (iv)   Evidence of Authority. Such resolutions, certificates of
                      ---------------------
                      good standing and incumbency certificates and other
                      evidence of authority with respect to Choice, any nominee
                      of Choice acting under this Agreement and the person or
                      persons acting on behalf of Choice or Choice's nominee as
                      might be reasonably requested by Sunburst or the Title
                      Insurer;

               (v)    Certificate. A certificate of Choice confirming the
                      -----------
                      continued accuracy of the warranties and representations
                      made by it in this Agreement in accordance with Section
                                                                      -------
                      5.3 hereof; and
                      ---

               (vi)   Additional Documents. Such additional documents as may be
                      --------------------
                      reasonably requested by Sunburst or the Title Insurer to
                      consummate the sale of the Purchased Assets to Choice.

               Section 6.4.   Possession. Subject to Choice's fulfillment of its
                              ----------
obligations under (S)6.3, Possession of the Purchased Assets shall be delivered
by Sunburst to Choice on or before the close of business on the Closing Date
free from all parties claiming rights to possession of or having claims against
the Purchased Assets other than pursuant to contractual obligations approved or
to be assumed by Choice or pursuant to this Agreement and the other documents
relating thereto. If Sunburst shall fail so to deliver possession on the Closing
Date, Sunburst shall be subject to eviction and shall be additionally liable to
Choice for damages.

               Section 6.5.   Prorations. All real estate taxes, assessments,
                              ----------
utility charges, water and sewer charges, and other items reasonably subject to
proration shall be prorated as of the Closing Date.

               Section 6.6.   Extension of Put Option Period. If the Call
                              ------------------------------
Option has been exercised and Choice or its assignee fails to close on the
Purchase Asset on the Closing Date for any reason other than Sunburst's breach
of or failure to comply with its obligations under

                                                                              11
<PAGE>

this Agreement, then the Put Option Period for such Purchased Asset shall be
extended to the later of thirty days from the Closing Date or October 31, 2000.


                                  ARTICLE VII

                                  ASSIGNMENT

Neither this Agreement nor any of the rights hereunder may be assigned for any
purpose whatsoever without the written consent of the parties hereto (which
consent shall not be unreasonably withheld or delayed); provided, however, that
                                                        --------  -------
if the Put Option or Call Option has been exercised with respect to a Purchased
Asset(s), then Choice, upon notice to Sunburst prior to the Closing Date, may
assign its right, title and interest under the following sections of this
Agreement solely with respect to such Purchased Asset(s): Article II, Article
III, Article IV, Article V, Article VI, Article VIII, Article IX and Article X;
and assignee shall assume Choice's obligations under such sections.


                                 ARTICLE VIII

                           CASUALTY AND CONDEMNATION

          Section 8.1.   Waiver.   Sunburst and Choice waive the provisions of
                         ------
all applicable laws relating to the occurrence of a casualty or condemnation
between the date hereof and the Closing Date, and Sunburst and Choice agree that
notwithstanding the occurrence of any casualty or condemnation, the transactions
contemplated by this Agreement shall be fully consummated in accordance with the
terms hereof.

          Section 8.2.   Obligation to Rebuild.   In the event of any such
                         ---------------------
casualty or condemnation, on or prior to the Closing Date, then the Closing Date
shall be delayed until such time as Sunburst has rebuilt or restored such
affected Assets to substantially the same condition of such Assets prior to the
casualty or condemnation.


                                  ARTICLE IX

                                    DEFAULT


          Section 9.1.   Choice's Default.   Choice agrees that any default by
                         ----------------
Choice hereunder or any misrepresentation by Choice hereunder, which default or
misrepresentation materially adversely affects the ability of Choice to perform
its obligations under this Agree-

                                                                              12

<PAGE>

ment or any of the other documents or instruments contemplated herein to be
executed or performed by Choice, shall each constitute a default by Choice.
Sunburst hereby agrees that the failure of Choice to consummate the transactions
contemplated hereunder as a result of any court or governmental action, law,
order or decree taken, enacted or declared after the date hereof and not
initiated or consented to by Choice prohibiting or staying the consummation of
the transaction contemplated hereunder shall not constitute a default by Choice
hereunder. If any such action is brought against Choice, Choice shall use
commercially reasonable efforts to defend such action and if any such order or
decree is declared against Choice, Choice shall use commercially reasonable
efforts to vacate or lift such order or decree.

          Section 9.2.   Sunburst's Default. Sunburst agrees that any default by
                         ------------------
Sunburst hereunder or a misrepresentation by Sunburst hereunder, which default
or misrepresentation materially adversely affects the ability of Sunburst to
perform its obligations under this Agreement or any of the other documents or
instruments contemplated herein to be executed or performed by Sunburst, shall
each constitute a default by Sunburst. Choice hereby agrees that the failure of
Sunburst to consummate the transactions contemplated hereunder as a result of
any court or governmental action, law, order or decree taken, enacted or
declared after the date hereof and not initiated or consented to by Sunburst
prohibiting or staying the consummation of the transaction contemplated
hereunder shall not constitute a default by Sunburst hereunder. If any such
action is brought against Sunburst, Sunburst shall use commercially reasonable
efforts to defend such action and if any such order or decree is declared
against Sunburst, Sunburst shall use commercially reasonable efforts to vacate
or lift such order or decree.

          Section 9.03.  Dispute Resolution. In the event either party shall
                         ------------------
default under this Agreement or any other dispute or claim shall arise
hereunder, such matter shall be resolved in accordance with the applicable
provisions of Section 1.5 of the Omnibus Amendment.
              -----------


                                   ARTICLE X

                                 MISCELLANEOUS

          Section 10.1   Entire Agreement. This Agreement, the Schedules and
                         ----------------
Exhibits annexed hereto and the Omnibus Amendment contain the entire
understanding of the parties hereto with respect to the subject matter hereof,
and no prior or contemporaneous written or oral agreement or understanding
pertaining to any such matter shall be effective for any purpose.

                                                                              13
<PAGE>

          Section 10.2.  Time of Essence. Time is of the essence with respect to
                         ---------------
each provision of the Agreement.

          Section 10.3.  Certain Fees and Expenses. Choice and Sunburst shall
                         -------------------------
pay, in good funds, their respective closing costs and all other items required
to be paid at closing, except as otherwise provided herein. The local transfer
tax, if any, shall be paid at closing by Choice. Any sales and use tax that may
accrue because of this transaction shall be paid when due by Sunburst.

          Section 10.4.  Binding Effect. The provisions of this Agreement shall
                         --------------
inure to the benefit of and be binding upon Sunburst and Choice and their
respective successors and permitted assigns.

          Section 10.5.  No Waiver. No waiver of any of the provisions of this
                         ---------
Agreement shall be deemed or shall constitute a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party making the
waiver.

          Section 10.6.  Assurance of Cooperation. The parties hereby covenant
                         ------------------------
and agree that they shall at any time prior to and after the Closing Date and
from time to time, execute, knowledge and deliver, or shall cause to be done,
executed, acknowledged and delivered all such further acts, documents and any
other items as may reasonably be required by the other party in order to carry
out fully and effectuate the transactions herein contemplated in accordance with
the provisions of this Agreement.

          Section 10.7.  Duplicate Original; Counterparts. This Agreement may be
                         --------------------------------
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterpart shall be deemed an original instrument
and all of which together shall constitute a single Agreement.

          Section 10.8.  Modification in Writing. This Agreement may not be
                         -----------------------
altered, amended, modified or changed except by an agreement in writing signed
by the parties hereto or their respective successors in interest or permitted
assigns.

          Section 10.9.  Notices. All notices or other written communications
                         -------
hereunder shall be deemed to have been properly given (i) upon delivery, if
delivered in person with receipt acknowledged by the recipient thereof, (ii)
one (1) Business Day after having been deposited for overnight delivery with any
reputable overnight courier service, or (iii) three (3) Business Days after
having been deposited in any post office or mail depositary regularly maintained
by the United States Postal Service and sent by registered or certified mail,
post-

                                                                              14
<PAGE>

age prepaid, return receipt requested, addressed to the receiving party at its
address set forth below or addressed as such party may from time to time
designate by written notice to the other parties. For purposes of this
Agreement, the term "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banks are required or authorized to close in
New York, New York. Any notice should be directed to the following addresses
and either party by notice to the other may designate additional or different
addresses for subsequent notices or communications:


                    To Sunburst:        Pam Williams, Esq.
                                        Sunburst Hospitality Corp.
                                        10770 Columbia Pike
                                        Silver Spring, MD 20901


                    With a copy to:     Kevin Hanley, Vice President
                                        Sunburst Hospitality Corp.
                                        10770 Columbia Pike
                                        Silver Spring, MD 20901


                    To Choice:          10750 Columbia Pike
                                        Silver Spring, MD 20901
                                        Attn: General Counsel


          Section 10.10.      Appurtenant Agreement. The terms, covenants,
                              ---------------------
conditions and agreements contained herein shall be a burden and appurtenant to
the Properties and shall run with the Properties.

          Section 10.11.      Headings. The headings and captions contained in
                              --------
this Agreement are solely for convenience of reference and shall not control or
affect the meaning or construction of any provision hereof.

          Section 10.12.      Governing Law; Severability. This Agreement shall
                              ---------------------------
be governed by, and shall be construed and enforced in accordance with, the laws
of the state of Maryland without regard to principles of conflicts of laws. Any
provision hereof which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
effecting the validity or enforceability of such provision in any other
jurisdiction.

                                                                              15
<PAGE>

          Section 10.13. Recording.  A memorandum of this Agreement ("Memorandum
                         ---------
of Put/Call Agreement") in the form attached hereto as Exhibit D shall be
                                                       ---------
recorded in the office of the official records of the county or counties in
which the Assets are located ("Recorder's Office"), as appropriate,
contemporaneously with the execution of this Agreement.  After the expiration of
the Put Option Period, Choice shall record a release in the Recorder's Office.

          Section 10.14. Management of Purchased Assets.  In the event Choice
                         ------------------------------
shall exercise its Call Option or Sunburst shall exercise its Put Option,
Sunburst and Choice hereby agree that Sunburst shall operate and manage the
Purchased Assets pursuant to the provisions of a Management Agreement
substantially in the form of Exhibit E annexed hereto.
                             ---------

          Section 10.15. Brokerage.  Sunburst and Choice each hereby represent
                         ---------
and warrant to the other that it has not dealt with any broker or finder or any
other person who might be entitled to a fee in connection with the purchase and
sale of the Assets and that no fee or commission is due to any broker, finder or
other person in connection with this Agreement or the sale contemplated hereby.
Sunburst and Choice each hereby indemnify the other and agree to hold the other
harmless from and against any and all claims, demands, liabilities, losses,
judgments, costs and expenses (including, without limitation, reasonable
attorneys' fees) arising directly or indirectly out of any claim for a fee or
commission due to any broker or finder arising out of facts which contravene the
warranties stated in this Section 10.15. The representations, warranties and
agreements contained in this Section 10.15 shall survive closing.
<PAGE>

          IN WITNESS WHEREOF, Sunburst and Choice have caused this Agreement to
be duly executed as of the day and year first above written.


                                            CHOICE HOTELS INTERNATIONAL, INC.,
                                             a Delaware corporation


                                            By: /s/ Michael J. DeSantis
                                                ----------------------------
                                                Name: Michael J. DeSantis
                                                Title: Senior Vice President


                                            SUNBURST HOSPITALITY CORPORATION,
                                             a Delaware corporation


                                            By: /s/ Donald J. Landry
                                                -----------------------------
                                                Name: Donald J. Landry
                                                Title: Chief Executive Officer,
                                                       President & Vice Chairman

                                                                              17