SEPARATION AGREEMENT AND GENERAL RELEASE


         THIS  AGREEMENT  is made and  entered  by and  between  Robert J. Morse
("Employee")  and Homestead  Village  Incorporated  (together with is directors,
officers,   shareholders  and  other   affiliates,   collectively   referred  to
hereinafter as "Employer").
         WHEREAS, Employee has been employed by the Employer; and
         WHEREAS,  the  parties  have  engaged in  discussions  resulting  in an
amicable and mutually satisfactory  separation of Employee's employment with the
Employer.
         NOW,  THEREFORE,  in consideration of the mutual covenants and promises
set forth below, the parties hereby agree as follows:
         1.  Employee  hereby  resigns as an officer of Employer.  The effective
date of Employee's  separation of employment with Employer shall be the close of
business on May 11, 1999 (the "Separation Date").
         2.  Employee  acknowledges  and agrees that he has  received all unpaid
salary  through and including the Separation  Date.  Employer shall pay Employee
the aggregate amount of Nine Hundred Fifty Thousand Dollars  ($950,000.00)  (the
"Separation  Amount"),  which shall be paid in twelve  equal  amounts of Seventy
Nine Thousand One Hundred  Sixty Six Dollars and Sixty Seven Cents  ($79,166.67)
on the fifteenth of each month commencing June 15, 1999 and ending May 15, 2000;
provided  that the first  payment of the  Separation  Amount shall be Sixty Nine
Thousand  Nine  Hundred  Thirty Five Dollars and Ninety  Cents  ($69,935.90)  to
reflect  the receipt of a salary  payment of Nine  Thousand  Two Hundred  Thirty
Dollars and Seventy  Seven Cents  ($9,230.77)  for the period May 12 through May
22,  1999.  All payments  under this  Agreement  shall be subject to  applicable
deductions for state and federal taxes.
         3. Employee  agrees that payments under this Agreement  shall be deemed
to include any amounts due Employee for accrued and unused vacation  through the
Separation Date.
         4. Employer shall  maintain  Employee's  telephone  voice mailbox until
         September 30, 1999.
         5. Upon the date this Agreement becomes    binding upon   Employee   in
accordance with Paragraphs 23 and 24, the Stock Purchase Agreement,  dated March
31, 1998, and the loan evidenced by the Secured Promissory Note, dated March 31,
1998,  shall be amended to provide that the purchase price for the 31,250 shares
of Common  Stock of  Employer  purchased  by Employee  under the Stock  Purchase
Agreement shall be reduced to $2.375 per share,  and the principal amount of the
Secured  Promissory  Note shall be adjusted to  $74,218.75.  It is intended that
this purchase price adjustment  qualify under Section  108(e)(5) of the Internal
Revenue Code.  In addition to the  foregoing,  Employer  agrees that for the tax
year 1999,  Employer shall cause the accounting firm of Arthur Andersen,  LLP to
prepare and file Employee's income tax return which income tax return shall take
the position  that  Employee has incurred no taxable  income  consequences  as a
result  of the  adjustment  in  the  outstanding  principal  under  the  Secured
Promissory Note, and Employer shall pay all fees charged by Arthur Andersen, LLP
for so preparing  and filing such income tax return of Employee.  The content of
such income tax return shall be subject to Employee's review and approval.

<PAGE>

         6. Employee's  continuous  service under  Employer's  401(k) plan shall
cease as of the Separation Date.  Within four (4) to six (6) weeks of Employee's
written  request  and  pursuant  to the  terms of the  plan,  Employee  shall be
entitled to a distribution of all the contributions to Employee's 401(k) account
made by Employee, plus earnings thereon, or a transfer of such amount to another
plan  at  Employee's  request.  All  distributions  will  be net  of  applicable
withholding  taxes, if any. Any options granted  Employee under Employer's stock
option plan shall expire on the ninetieth day after the Separation Date.
         7.  Employer  shall  extend to Employee  the right to  continue  health
insurance for up to eighteen (18) months,  as may be required by and pursuant to
the terms and conditions of the Consolidated  Omnibus Budget  Reconciliation Act
of 1986. Employer will provide coverage to Employee at Employer's expense to the
extent of any COBRA premium for the first twelve months.  Employee shall pay the
COBRA  premium and other  expenses of such health  insurance  for any  remaining
period of coverage.
         8. At the election of Employee,  Employer  shall provide  Employee with
professional  tax and legal  services,  selected by Employee in Employee's  sole
discretion,  for a  review  of this  Agreement  prior  to its  effectiveness  in
accordance with Paragraphs 23 and 24, and shall provide outplacement services of
an  experienced  firm  selected by Employer  and  acceptable  to Employee in the
Atlanta,   Georgia  area,  provided  that  the  cost  of  such  tax,  legal  and
outplacement  services shall not exceed in the aggregate  $25,000,  and such tax
and legal services shall not extend beyond the effective date of this Agreement,
and such outplacement services shall not extend beyond May 31, 2000.
         9. In  consideration  of the  promises  contained  in  this  Agreement,
Employee and Employer hereby mutually agree to do the following:
                  a. Except for a claim based upon a breach of this Agreement or
         the Secured Promissory Note, as amended by this Agreement, Employee and
         Employer hereby release and forever discharge the other (including,  in
         the case of Employer,  its related and affiliated entities, and each of
         their  officers,  directors,  shareholders,   representatives,  agents,
         employees and insurers (Employee, Employer and said related parties are
         hereinafter  collectively and individually  "the  Releasees")) from any
         and all rights, claims,  demands, debts, dues, sums of money, accounts,
         attorneys' fees, complaints, judgements, executions, actions and causes
         of action of any nature whatsoever,  cognizable at law or equity, which
         Employee and Employer have or claim,  or might  hereafter have or claim
         against the Releasees  based upon or arising out of any matter or thing
         whatsoever,  from the  beginning of the world  through the date of this
         Agreement,  including but not limited to any rights, claims, complaints
         or actions or causes of action  which were or could have been  asserted
         by  Employee  or  Employer  arising  out of or  related  to  Employee's
         employment by the Employer or  Employee's  resignation  therefrom,  the
         purchase (or sale to Employer) of any Employer  securities by Employee,
         or under any local,  state,  or federal  law  dealing  with  employment
         discrimination  including,  without limitation,  Title VII of the Civil
         Rights Act of 1964,  the Age  Discrimination  in Employment Act and the
         Americans with Disabilities Act. Notwithstanding the foregoing, no such
         release  shall  be  applicable  to any  existing  indemnity  rights  of
         Employee as an officer or employee of Employer  through the  Separation
         Date,   including   those   under   Employer's   Amended   Articles  of
         Incorporation  ,  Employer's  Bylaws,  the  Indemnification   Agreement
         entered  into as of January 8, 1998,  between  Employer and Employee or
         any insurance  rights in favor of Employee  including the Directors and
         Officers  Liability  Policy of Employer  dated  November 1, 1998,  with
         Reliance National.
                  b.  Employee  shall  promptly  submit to  Employer  an expense
         account report accounting for all business expenses charged by Employee
         to Employer  and all  advances  received,  and repay  Employer  for all
         advances  and all  non-business  related  items  charged by Employee to
         Employer,  if any.  Employee  hereby  agrees  that  such  advances  and
         non-business  related  expenses  may,  at the  option of  Employer,  be
         deducted by Employer  from any of its  payments to Employee  under this
         Agreement.

<PAGE>

          10. In  consideration  of the promises  contained  in this  Agreement,
Employee agrees to each of the following:
                  a. Except as may be required by the lawful order of a court or
         agency of competent  jurisdiction,  Employee  agrees to keep secret and
         confidential   indefinitely  all  non-public   information   concerning
         Employer or any affiliate thereof which was acquired by or disclosed to
         Employee during the course of Employee's employment with Employer,  and
         not to disclose the same,  either directly or indirectly,  to any other
         person, firm or business entity or to use it in any way.
                  b. For a period of one (1) year  from the date this  Agreement
         is signed by Employee, Employee covenants and agrees that Employee will
         not,   whether  for  Employee  or  for  any  other  person,   business,
         partnership,   association,  firm,  company  or  corporation,  initiate
         contact  with,  solicit,  divert or take away any of the  employees  of
         Employer or any affiliate  thereof who were  employees of Employer from
         time  to  time  during  Employee's  employment  with  Employer  or  any
         affiliate  thereof  and are  employees  of Employer at the time of such
         initiation,   solicitation   or  diversion.
         11.  Employee   agrees  to  immediately  turn  over to   Employer  all
notes,  offering  materials,  slide  shows,  investment  summaries,   memoranda,
records,  documents  and all  other  information,  no  matter  how  produced  or
reproduced,  kept by Employee or in Employee's possession or control, used in or
pertaining to the business of Employer, it being hereby acknowledged that all of
said items are the sole and exclusive property of the Employer.
         12.  Except as may be required to the  contrary by an order issued by a
court of competent jurisdiction and except for any communication with members of
Employee's  immediate family and any attorney or accountant  rendering advice to
Employee in connection  with this  Agreement,  Employee  shall not,  directly or
indirectly,  discuss or communicate the facts of this  Agreement,  or any of its
terms and provisions with any third party.
         13. Employer agrees not to contest  Employee's  claim for  unemployment
benefits.
         14. From and after the date of presentment of this Agreement, neither
party shall,  directly or  indirectly,  take any action which is in fact,  or is
intended to be,  contrary to the  material  interests  of the other party or any
affiliate of the other party,  nor will either party disparage or make negative,
derogatory  or  defamatory  statements  about the other  party,  its related and
affiliated entities, its directors, officers, employees, shareholders, agents or
representative,  or any of them, to any other person or business entity,  except
as may be required by legal process or court order.
         15.  Nothing  in  this  Agreement  shall  be  deemed  an  admission  of
wrongdoing or any kind of liability by either party.
         16. In the event  Employee  engages in a material  breach of any of the
terms or provisions of this  Agreement,  then Employer shall provide to Employee
written  notice of such  claimed  breach by Employee,  and  Employee  shall have
thirty (30) days from receipt of such written  notice from Employer to cease any
such conduct which Employer claims to be a material breach. If Employee fails to
cure such breach  within such  thirty  (30) day period,  then all of  Employee's
obligations  shall remain and shall be enforceable,  but Employer's  obligations
under this Agreement shall immediately terminate, including, without limitation,
all remaining monetary obligations of Employer to Employee which are outstanding
at the time of said breach. Similarly, Employee shall be relieved of any further
obligation under this Agreement if Employer materially breaches its covenants in
this Agreement.
         17. This  Agreement  shall be binding  upon and inure to the benefit of
both parties, their successor and assigns, and any affiliated or related entity,
as well as  Employee's  heirs,  assigns,  administrators,  executors  and  legal
representatives.

<PAGE>

         18.  This  instrument  constitutes  the entire  Agreement  between  the
parties,  and may not be modified or amended in any way except by a  subsequent,
written agreement between the parties.
         19. If any term or provision of this  Agreement  shall be determined by
any court of competent  jurisdiction to be invalid,  illegal or unenforceable in
whole or in part,  and such  determination  shall  become  final,  such  term or
provision  shall be deemed to be  severed  or  limited,  but only to the  extent
required  to  render  the  remaining  terms  and  provisions  of this  Agreement
enforceable.  This  Agreement  as thus  amended  shall be enforced so as to give
effect to the intention of the parties insofar as this is possible. In addition,
the parties hereby expressly empower a court of competent jurisdiction to modify
any term or provision of this  Agreement to the extent  necessary to comply with
existing law and to enforce this Agreement as modified.
         20. This  Agreement  shall be construed in accordance  with the laws of
         the State of Georgia.
         21. The language used in this Agreement  shall  be deemed  to  be   the
language  chosen by the parties  hereto to express their mutual  intent,  and no
rule of strict construction shall be applied against any person.
         22.      This Agreement may be signed in multiple counterparts, each of
which shall be deemed to be an original for all purposes.
         23.  Employee  may revoke  this  Agreement  within  twenty-one  days of
Employee's signing it. If Employee revokes this Agreement, Employee shall return
any benefits  Employee has received and all other  provisions of this  Agreement
shall not be effective or enforceable.  Revocation, along with a cashier's check
for any benefits  Employee may have received  hereunder,  should be delivered to
Employer's  offices at 2100 RiverEdge  Parkway,  Atlanta,  Georgia 30328,  Attn:
Chief Executive Officer. For such revocation to be effective, the notice and the
cashier's  check must be received  no later than 5:00 p.m.  on the  twenty-first
calendar day after Employee signs this Agreement.
         24. EMPLOYEE  AFFIRMS THAT EMPLOYEE HAS BEEN GIVEN A PERIOD OF AT LEAST
TWENTY-EIGHT DAYS WITHIN WHICH TO CONSIDER THIS AGREEMENT, AND THAT EMPLOYEE HAS
CAREFULLY  READ AND  REVIEWED  ALL THE TERMS AND  CONDITIONS  CONTAINED  IN THIS
AGREEMENT AND FULLY  UNDERSTANDS  THIS  AGREEMENT TO BE A RELEASE OF ALL CLAIMS,
KNOWN OR  UNKNOWN,  PRESENT OR FUTURE,  THAT  EMPLOYEE  HAS OR MAY HAVE  AGAINST
EMPLOYER  ARISING OUT OF EMPLOYEE'S  EMPLOYMENT BY EMPLOYER OR ITS  TERMINATION.
EMPLOYEE ALSO AFFIRMS THAT EMPLOYEE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY
PRIOR TO EXECUTING  THIS  AGREEMENT AND THAT  EMPLOYEE HAS, IN FACT,  BEEN GIVEN
FULL OPPORTUNITY TO REVIEW THIS AGREEMENT WITH COUNSEL,  AND THAT EMPLOYEE SIGNS
IT  VOLUNTARILY  OF HIS OWN  VOLITION,  WITHOUT  DURESS  OR  COERCION.  EMPLOYEE
REPRESENTS THAT EMPLOYEE IS SIGNING THIS AGREEMENT  BECAUSE OF THE  COMPENSATION
TO  BE  PAID  BY  EMPLOYER  UNDER  THIS  AGREEMENT   WHICH  EXCEEDS   SEPARATION
COMPENSATION GENERALLY AVAILABLE UNDER EMPLOYER'S POLICIES.


<PAGE>


         IN WITNESS  THEREOF,  the parties have executed  this  Agreement on the
date(s) set forth below.

                                      HOMESTEAD VILLAGE INCORPORATED


                                      By


                                      Title


                                      Date




                                      ROBERT J. MORSE




                                      (Signature)


                                      Date



<PAGE>


State of                                             )
                                      ) ss
County of                                            )

     On ____________________, 1999,  ____________________   personally  appeared
before me,

         _____    who is personally known to me
         _____    whose identity I proved on the basis of ____________________
         _____    whose identity I proved on the oath/affirmation of
         ____________________, a credible witness

to be the signer of the above instrument, and he/she acknowledged  that  he/she
signed it.



                                  Notary Public

                                  My Commission expires





State of                                             )
                                      ) ss
County of                                            )

     On ____________________, 1999, ____________________   personally  appeared
before me,

         _____    who is personally known to me
         _____    whose identity I proved on the basis of ____________________
         _____    whose identity I proved on the oath/affirmation of
          ____________________, a credible witness

to be the signer of the above instrument, and he/she acknowledged  that  he/she
signed it.



                                  Notary Public

                                  My Commission expires