<PAGE>
                                                                    EXHIBIT 10.2




                                      HOTEL

                              MANAGEMENT AGREEMENT

                                 By and Between



                        BARCLAY HOSPITALITY SERVICES INC.



                                       and



                      ALLIANCE HOSPITALITY MANAGEMENT, LLC











                                      Dated

                                  July 1, 2003



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                                TABLE OF CONTENTS

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ARTICLE I  DEFINITIONS..................................................................1
         Section 1.01.  Definitions.....................................................1

ARTICLE II  TERM OF AGREEMENT...........................................................9
         Section 2.01.  Term............................................................9

ARTICLE III  ENGAGEMENT OF MANAGER AND OPERATION OF THE HOTEL...........................9
         Section 3.01.  Engagement of Operator to Manage Hotel..........................9
         Section 3.02.  Contract Commencement Date......................................9
         Section 3.03.  Operator as Agent..............................................10
         Section 3.04.  Operator's Status..............................................10
         Section 3.05.  Representations by Operator; Engagement of Operator............11
         Section 3.06.  Standards of Operation.........................................11
         Section 3.07.  Reservations Services..........................................12
         Section 3.08.  Marketing......................................................12
         Section 3.09.  Consultations Between Lessee and Operator......................13
         Section 3.10.  Duties of Operator.............................................13
         Section 3.11.  Authority of Operator..........................................15
         Section 3.12.  Employees......................................................15
         Section 3.13.  Litigation.....................................................16
         Section 3.14.  Lessee's Right of Inspection and Review........................16

ARTICLE IV  INDEPENDENT CONTRACTOR.....................................................16
         Section 4.01.  Operator Status................................................16
         Section 4.02.  Employees......................................................16
         Section 4.03.  Reimbursement of Employee Expenses.............................17
         Section 4.04.  Employee Benefit Plans.........................................17
         Section 4.05.  Execution of Agreements........................................18

ARTICLE V  INDEMNIFICATION.............................................................18
         Section 5.01.  Indemnification by Operator....................................18
         Section 5.02.  Limitations on Indemnification.................................19
         Section 5.03.  Indemnification by Lessee......................................19
         Section 5.04.  Survival of Indemnity..........................................20
         Section 5.05.  Employment Claim...............................................20
         Section 5.06.  Environmental Matters..........................................20

ARTICLE VI  BUDGETS AND POLICY MEETINGS................................................21
         Section 6.01.  Budgets........................................................21
         Section 6.02.  Budget Meetings................................................22
         Section 6.03.  Approval by Lessee Required....................................22

ARTICLE VII  OPERATING EXPENSES........................................................22
         Section 7.01.  Payment of Operating Expenses..................................22
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         Section 7.02.  Operating Expenses Not an Obligation of Operator...............23

ARTICLE VIII  BANK ACCOUNTS............................................................23
         Section 8.01.  Bank Accounts..................................................23
         Section 8.02.  Authorized Signatures..........................................24
         Section 8.03.  Investment of Hotel Cash.......................................25
         Section 8.04.  Payroll........................................................25
         Section 8.05.  Security Deposits..............................................25

ARTICLE IX  BOOKS, RECORDS AND STATEMENTS..............................................25
         Section 9.01.  Books and Records..............................................25
         Section 9.02.  Statements.....................................................26
         Section 9.03.  Initial Accounting Records.....................................27

ARTICLE X  OPERATOR'S FEE AND TRANSFERS TO LESSEE......................................27
         Section 10.01.  Payment of Operator's Basic Fee...............................27
         Section 10.02.  Payment of Operator's Incentive Fee...........................27
         Section 10.03.  Distribution of Cash..........................................27
         Section 10.04.  Adjustments to Allocations....................................27
         Section 10.05.  Arbitration...................................................28
         Section 10.06.  Required Capital..............................................28

ARTICLE XI  REPAIRS AND MAINTENANCE....................................................28

ARTICLE XII  INSURANCE.................................................................29
         Section 12.01.  General.......................................................29
         Section 12.02.  Required Coverage.............................................29
         Section 12.03.  Employment Insurance..........................................29
         Section 12.04.  Approval of Companies and Cost by Owner and Lessee............29
         Section 12.05.  Maintenance of Coverages......................................30
         Section 12.06.  Waiver of Subrogation.........................................30
         Section 12.07.  Blanket Coverage and Self-Insurance...........................30
         Section 12.08.  Adequacy of Insurance.........................................30
         Section 12.09.  Exclusions....................................................30

ARTICLE XIII  PROPERTY TAXES, LOCAL TAXES, LEVIES AND OTHER ASSESSMENTS................31
         Section 13.01.  Property Taxes................................................31
         Section 13.02.  Lessee's Right to Contest.....................................31

ARTICLE XIV  DAMAGE OR DESTRUCTION - CONDEMNATION......................................31
         Section 14.01.  Damage........................................................31
         Section 14.02.  Condemnation..................................................31

ARTICLE XV  USE OF NAME................................................................31

ARTICLE XVI  OWNER'S RIGHT TO SELL.....................................................32
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                                       ii
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ARTICLE XVII  DEFAULT AND REMEDIES.....................................................32
         Section 17.01.  Events of Default- Remedies...................................32
         Section 17.02.  Rights Not Exclusive..........................................33

ARTICLE XVIII  NOTICES.................................................................34
         Section 18.01.  Notices.......................................................34

ARTICLE XIX  ASSIGNMENT................................................................35
         Section 19.01.  No Assignment by Operator.....................................35
         Section 19.02.  Assignment by Lessee..........................................36

ARTICLE XX  SUBORDINATION..............................................................38
         Section 20.01.  Subordination To First Mortgage...............................38
         Section 20.02.  Foreclosure...................................................38

ARTICLE XXI  TERMINATION...............................................................38
         Section 21.01.  Transition Procedures.........................................38
         Section 21.02.  Licenses......................................................38
         Section 21.03.  Leases, Concessions and Agreements............................38
         Section 21.04.  Books and Records.............................................39
         Section 21.05.  Remittance....................................................39
         Section 21.06.  Other Transfers and Deliveries................................39
         Section 21.07.  Confidential Information......................................39
         Section 21.08.  Employees of Hotels...........................................40
         Section 21.09.  Further Assurances............................................40

ARTICLE XXII  MISCELLANEOUS............................................................40
         Section 22.01.  Further Documentation.........................................40
         Section 22.02.  Captions......................................................40
         Section 22.03.  Successors and Assigns........................................40
         Section 22.04.  Competitive Market Area.......................................41
         Section 22.05.  Assumption of Post Termination Obligations....................41
         Section 22.06.  Entire Agreement..............................................41
         Section 22.07.  Governing Law.................................................41
         Section 22.08.  No Political Contributions....................................41
         Section 22.09.  Lessee Reimbursement Upon Certain Terminations................41
         Section 22.10.  Management of Other Hotels....................................42
         Section 22.11.  Rebate Transactions...........................................42
         Section 22.12.  Non-Recourse to Noble.........................................43
         Section 22.13.  No Third Party Beneficiaries..................................43
         Section 22.14.  Estoppel Certificate..........................................43
         Section 22.15.  Counterparts..................................................43
         Section 22.16.  Purchase of Furniture, Fixtures and Equipment.................43
         Section 22.17.  Requirement to Cooperate......................................43
         Section 22.18.  Document Retention Policy.....................................43
         Section 22.19.  Sarbanes-Oxley Act of 2002....................................43
         Section 22.20.  Contracts and Affiliates......................................43
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                                      iii

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         Section 22.21.  Special Provisions............................................44

         EXHIBIT A -- Hotels and Owners
         EXHIBIT B -- Franchise Agreements
         EXHIBIT C -- Intentionally Deleted
         EXHIBIT D -- REIT Hotels
         EXHIBIT E -- Insurance
</Table>


                                       iv
<PAGE>


                           HOTEL MANAGEMENT AGREEMENT

         This HOTEL MANAGEMENT AGREEMENT is made and entered into as of July 1,
2003, by and among BARCLAY HOSPITALITY SERVICES INC., a North Carolina
corporation ("Lessee"), and Alliance Hospitality Management, LLC, a Georgia
limited liability company ("Operator"), with reference to the following facts:

                                    RECITALS:

         A. Lessee leases from WINN Limited Partnership and its affiliates
described on Exhibit A (each, an "Owner" and collectively, the "Owners") the
hotel properties described in Exhibit A (each, a "Hotel" and collectively, the
"Hotels") pursuant to one or more Lease Agreements (each, a "Lease");

         B. Lessee desires to engage Operator to operate and manage the Hotels
in accordance with the terms of this Agreement;

         C. Operator desires to supply the services and to operate the Hotels in
accordance with the terms of this Agreement;

         D. The parties desire that this Agreement represent an individual hotel
management agreement for each Hotel described in Exhibit A, as it may be amended
from time.

         NOW, THEREFORE, for and in consideration of the mutual covenants,
conditions, stipulations, agreements and obligations hereinafter set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, Lessee and Operator covenant and
agree as follows:

                                      TERMS

                                    ARTICLE I

                                   DEFINITIONS

Section 1.01. Definitions.

         (a) As used herein, the following terms shall have the indicated
meanings:

                  (1) "AAA" means the American Arbitration Association.

                  (2) "Accounting Period" shall mean each of twelve (12)
accounting periods of one (1) calendar month occurring each Fiscal Year.

                  (3) "Affiliate" shall mean (a) any person that, directly or
indirectly, controls or is controlled by or is under common control with such
person, (b) any person that owns, beneficially, directly or indirectly, ten
percent (10%) or more of the outstanding capital stock, shares or equity
interests of such person, or (c) any officer, director, employee, partner or
trustee of such person or any person controlling, controlled by, or under common
control with such


<PAGE>

person. For purposes of this definition, the term "control" means the power to
direct or cause the direction of management and policies, through the ownership
of voting rights, by contract or otherwise.

                  (4) "Agreement" shall mean this Hotel Management Agreement and
all amendments, modifications, supplements, consolidations, extensions and
revisions to this Hotel Management Agreement approved by Lessee and Operator.

                  (5) "Annual Business Plan" means the detailed annual business
plan for the operation of the Hotel for each Fiscal Year prepared by Operator
pursuant to Section 3.10(l) of this Agreement.

                  (6) "Approved Budget" shall mean the Hotel Operating Budget
prepared annually by Operator, and pursuant to Section 6.01 of this Agreement,
approved in writing by Lessee.

                  (7) "Books and Records" shall have the meaning set for in
Section 9.01(a).

                  (8) "Code" shall have the meaning set forth in Section 3.04.

                  (9) "Concentration Account" shall have the meaning set forth
in Section 8.01(b).

                  (10) "Contract Commencement Date" means the date hereof in the
case of the Hotels listed on Exhibit A and a date agreed upon by the parties in
the case of other Hotels.

                  (11) "CPI" shall mean the Consumer Price Index - Seasonably
Adjusted U.S. City Average for All Items for All Wage Earners and Clerical
Earners (1982-1984 = 100), published monthly in the Monthly Labor Review by the
Bureau of Labor Statistics of the United States Department of Labor (the
"CPI-W"). If the CPI-W is discontinued, CPI shall mean the Consumer Price Index
- Seasonably Adjusted U.S. City Average for All Items for All Urban Consumers
(1982 - 1984 = 100) (the "CPI-U"). If both the CPI-W and CPI-U are discontinued,
comparable statistics on the purchasing power of the consumer dollar published
the Bureau of Labor Statistics or any other agency of the United States
government shall be used.

                  (12) "Deposit Account" shall have the meaning set forth in
Section 8.01(a).

                  (13) "Disbursement Account" shall have the meaning set forth
in Section 8.01(c).

                  (14) "Employment Claim" shall mean set forth in Section 5.05.

                  (15) "Employment Laws" shall have the meaning set forth in
Section 4.02(c).

                  (16) "Environmental Activity" shall have the meaning set forth
in Section 5.06(a).

                                       2
<PAGE>


                  (17) "Environmental Laws" shall mean: (i) the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Sections 9601
et seq.), as amended; (ii) the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as
amended; (iii) the Emergency Planning and Community Right to Know Act (42 U.S.C.
Sections 11001 et seq.), as amended; (iv) the Clean Air Act (42 U.S.C. Sections
7401 et seq.), as amended; (v) the Clean Water Act (33 U.S.C. Sections 1251 et
seq.), as amended; (vi) the Toxic Substances Control Act (15 U.S.C. Sections
2601 et seq.), as amended; (vii) the Hazardous Materials Transportation Act (49
U.S.C. Sections 1801 et seq.), as amended; (viii) the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. Sections 136 et seq.), as amended; (ix)
the Safe Drinking Water Act (42 U.S.C. Sections 300f et seq.), as amended; (x)
any state, county, municipal or local statutes, laws or ordinances similar or
analogous to the federal statutes listed in parts (i) - (ix) of this definition;
(xi) any rules, regulations, guidelines, directives, orders or the like adopted
pursuant to or to implement the statutes, laws, ordinances and amendments listed
in parts (i) - (x) of this definition; and (xii) any other law, statute,
ordinance, amendment, rule, regulation, or order relating to environmental
matters or Hazardous Materials.

                  (18) "Environmental Activity" shall mean any past, present or
future storage, holding, existence, release, threatened release, emission,
discharge, generation, processing, use, abatement, disposition, handling,
transportation or reporting of any Hazardous Substance in violation of any
applicable Environmental Laws at, from, under, into or on the Hotel, or
otherwise relating to the Hotel or the current or former ownership, use,
operation or occupancy thereof, or the threat of any such activity.

                  (19) "Event(s) of Default" shall mean one or more of the
events or occurrences listed in Section 17.01 of this Agreement.

                  (20) "FF&E" means all furniture, furnishings, equipment,
fixtures, apparatus and other personal property used in, or held in storage for
use in, the operation of the Hotel, other than Operating Equipment, Operating
Supplies and fixtures attached to and forming part of the Hotel.

                  (21) "First Mortgage" shall mean collectively any mortgage or
deed of trust hereafter, from time to time, encumbering in a first lien position
all or any portion of a Property, together with all other instruments evidencing
or securing payment of the indebtedness secured by such mortgage or deed of
trust and all amendments, modifications, supplements, extensions, and revisions
of such mortgage, deed of trust and other instruments.

                  (22) "Fiscal Year" shall mean the twelve (12) month calendar
year ending December 31, except that the first Fiscal Year and the last Fiscal
Year of the term of this Agreement may not be full calendar years.

                  (23) "Franchisors" shall mean the franchisors under the
Franchisor Agreements.

                  (24) "Franchisor Agreements" shall mean the franchise license
agreements held by Lessee with respect to each of the Hotels as set forth in
Exhibit B as it may be amended from time to time.


                                       3
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                  (25) "Gross Hotel Income" shall mean all income and proceeds
of sales of every kind (whether in cash or on credit and computed on an accrual
basis) received by Operator for the use, occupancy or enjoyment of the Hotel or
for the sale of any goods, services or other items sold on or provided from the
Hotel in the ordinary course of the Hotel operation including, without
limitation, all income received from tenants, transient guests, lessees (other
than communications equipment lessees or service providers), licensees and
concessionaires and other services to the Hotel guests, and the proceeds from
business interruption insurance, but excluding the following: (i) any excise,
sales or use taxes or similar government charges collected directly from patrons
or guests, or as a part of the sales price of any goods, services or displays,
such as gross receipts, admission, cabaret or similar or equivalent taxes; (ii)
receipts from condemnation awards or sales in lieu of or under threat of
condemnation; (iii) proceeds of insurance (other than business interruption
insurance); (iv) other allowances and deductions as provided by the Uniform
System in determining the sum contemplated by this definition, by whatever name,
it may be called; (v) adjustments made pursuant to Section 10.04; (vi) proceeds
of sales whether dispositions of capital assets, furniture and equipment or
operating equipment (other than sales of inventory in the ordinary course of
business); (vii) gross receipts received by lessees, licensees or
concessionaires of the Hotel; (viii) consideration received at the Hotel for
hotel accommodations, goods and services to be provided at other hotels although
arranged by, for or on behalf of, Operator; (ix) gratuities collected for the
benefit of employees; (x) proceeds of any financing; (xi) working capital
provided by Lessee; (xii) any funds provided by Lessee to Operator whether for
Operating Expenses or otherwise; and (xiii) other income or proceeds resulting
other than from the use or occupancy of the Hotel, or any part thereof, or other
than from the sale of goods, services or other items sold on or provided from
the Hotel in the ordinary course of business.

                  (26) "Gross Operating Loss" shall mean for any Accounting
Period the amount by which Operating Expenses exceed Gross Hotel Income.

                  (27) "Gross Operating Profit" shall mean Gross Hotel Income
less Operating Expenses.

                  (28) "Group Services" means services provided to all Hotels.

                  (29) "Hazardous Substance" shall mean any chemical, substance,
waste, material, equipment or fixture defined as or deemed hazardous, toxic, a
pollutant, a containment, or otherwise regulated under any Environmental Law,
including, but not limited to, petroleum and petroleum products, waste oil,
halogenated and non-halogenated solvents, PCBs, and asbestos and asbestos
containing materials.

                  (30) "Holder" shall mean the holder of any First Mortgage and
the indebtedness secured thereby, and such holder's successors and assigns.

                  (31) "Hotel Capital Budget" shall mean the budget relating to
capital expenditures at a Hotel which shall be prepared and administered by
Owner as described in Section 6.01.


                                       4
<PAGE>

                  (32) "Hotel Operating Budget" shall mean the operating budget
relating to the operation of a Hotel for each Fiscal Year prepared by Operator
and submitted to Lessee for approval pursuant to Section 6.01.

                  (33) "Hotel Operating Equipment" shall mean linens, chinaware,
glassware, uniforms, utensils and other items of similar nature as Operator
shall reasonably determine to be appropriate.

                  (34) "Hotel Operating Supplies" shall mean the initial
inventories of paper supplies, cleaning materials and similar consumable items.

                  (35) "Hotel Standards" shall mean the standards established by
the respective Franchisors of the Hotels from time to time.

                  (36) "Hotels" shall mean the hotel properties described in
Exhibit A hereto, as it may be amended from time to time by mutual agreement of
Lessee and Operator to add hotel properties or to delete hotel properties as a
result of termination of this Agreement with respect to one or more hotel
properties pursuant to the termination provisions set forth in Section 2.01 of
this Agreement. "Hotel" shall mean any hotel set forth on Exhibit A as it may be
amended from time to time.

                  (37) "Independent CPA" shall mean the firm of independent
public accountants having hotel experience which is selected by Lessee from time
to time.

                  (38) "Land" shall mean the real property described in Exhibit
A to the Lease.

                  (39) "Lease" shall mean collectively the leases between
Barclay Hospitality Services Inc. and WINN Limited Partnership and those between
Winston SPE LLC and Barclay Hospitality Services Inc., all acquired by Lessee
pursuant to a Leasehold Acquisition Agreement, dated as of June 28, 2002 from
Capstar Winston Company, LLC together with the leases acquired by Lessee from
Bristol W Tenant Company with respect to the Hampton Inn in Las Vegas and the
Hilton Garden Inn in Windsor, Connecticut.

                  (40) "Lessee" shall mean Barclay Hospitality Services Inc., a
North Carolina corporation and its successors and assigns.

                  (41) "Marketing Plan" shall mean the marketing plan prepared
by Operator and approved by Lessee for each Hotel for each Fiscal Year pursuant
to Section 3.04(b).

                  (42) "Noble" shall mean Noble Investment Group, Ltd., a North
Carolina corporation, or any successor in interest thereto.

                  (43) "Operating Expenses" shall mean all reasonable costs and
expenses of maintaining, conducting and supervising the operation of the
Property, subject to the limitations set forth in an Approved Budget, incurred
pursuant to this Agreement or as otherwise specifically provided herein which
are properly attributable to the period under consideration under Lessee's
system of accounting, including without limitation:


                                       5
<PAGE>

                           (i) the cost of all food and beverages sold or
consumed and of all Hotel Operating Equipment and Hotel Operating Supplies;

                           (ii) salaries and wages of Hotel personnel, including
costs of payroll taxes and employee benefits and all other expenses not
otherwise specifically referred to in this Section which are referred to as
"Administrative and General Expenses" in the Uniform System. Except as herein
otherwise expressly provided with respect to employees regularly employed at the
Hotel, the salaries or wages of other employees or executives of Operator, or
any Affiliate shall in no event be Operating Expenses;

                           (iii) the cost of all other goods and services
obtained by Operator in connection with its operation of the Property including,
without limitation, heat and utilities, office supplies and all services
performed by third parties, including leasing expenses in connection with
telephone and data processing equipment and such other equipment as Owner shall
designate;

                           (iv) the cost of repairs to and maintenance of the
Property to keep the Property in good condition;

                           (v) insurance premiums for all insurance maintained
by Lessee or Operator as provided in Article XII with respect to the Property,
including without limitation, property damage insurance, public liability
insurance, workers' compensation insurance or insurance required by similar
employee benefits acts and such business interruption or other insurance as may
be provided for protection against claim, liabilities and losses arising from
the use and operation of the Hotel and losses incurred with respect to
deductibles applicable to the foregoing types of insurance;

                           (vi) all taxes, assessments and other charges (other
than federal, state or local income taxes and franchise taxes or the equivalent)
payable by or assessed against Operator or Lessee with respect to the operation
of the Hotel and water and sewer charges;

                           (vii) legal fees;

                           (viii) the costs and expenses of technical
consultants and specialized operational experts for specialized services in
connection with non- recurring work on operational, functional, decorating,
design or construction problems and activities, including the reasonable fees of
Operator or any Affiliate in connection therewith, provided that such employment
of Operator or such Affiliate is approved in advance by Lessee;

                           (ix) all expenses for marketing the Hotel, including
all expenses of advertising, sales promotion and public relations activities;

                           (x) the Operator's Expenses;

                           (xi) the Operator's Basic Fee;


                                       6
<PAGE>

                           (xii) ad valorem taxes, personal property taxes,
utility taxes and other taxes (as those terms are defined in the Uniform System)
and municipal, county and state license and permit fees;

                           (xiii) all fees, assessments and charges due and
payable under the franchise license agreement for the Hotel;

                           (xiv) reasonable reserves for uncollectible accounts
receivable;

                           (xv) credit card fees, travel agent commissions and
other third party reservation fees and charges;

                           (xvi) all parking charges and other expenses
associated with revenues received by the Hotels related to parking operations,
including valet services; and

                           (xvii) common expenses charges.

Operating Expenses shall not include (a) depreciation and amortization except as
otherwise provided in this Agreement; (b) the cost of any other things specified
herein to be done or provided at Lessee's or Operator's sole expense; (c) debt
service on any Mortgage; (d) any Operator's Incentive Fee; (e) capital repairs
and other expenditures which are normally treated as capital expenditures under
the Uniform System or generally accepted accounting principles; (f) other
recurring or non-recurring ownership costs such as partnership administration
and costs of changes to business and liquor licenses.

                  (44) "Operating Term" shall mean, with respect to any Hotel,
the term of this Agreement as set forth in Section 2.01.

                  (45) "Operator" shall mean Alliance Hospitality Management
LLC, a [Georgia] limited liability company.

                  (46) "Operator Centralized Services" shall have the meaning
set forth in Section 21.12.

                  (47) "Operator Indemnitees" shall have the meaning set forth
in Section 17.1 of this Agreement.

                  (48) "Operator Investment" shall mean the required investment
(capital contribution) in Operator under the Operating Agreement for Alliance
Hospitality Management LLC

                  (49) "Operator Paid Amounts" shall have the meaning set forth
in Section 8.01(c).

                  (50) "Operator's Basic Fee" shall mean a fee to equal to two
and one-quarter percent (2.25%) of Gross Hotel Income for each Fiscal Year of
the Operating Term, which is payable and subject to adjustment as set forth in
Section 10.01.


                                       7
<PAGE>

                  (51) "Operator's Expenses" shall mean the out-of-pocket
expenses and disbursements which are reasonably and necessarily incurred by
Operator in the performance of its obligations under this Agreement, all of
which expenses shall have been set forth in the Approved Budget. Operator's
Expenses may include reasonable travel, business entertainment, telephone,
telegram, postage, air express and other incidental expenses, but shall not
include, except as herein otherwise expressly provided, the salaries and wages
of employees or executives of Operator or of any Affiliate performing services
or work in connection with the operation of a Hotel; provided that traveling and
other direct expenses incurred by them in connection with the management of a
Hotel, including living expenses incurred during travel, shall be considered
Operator's Expenses to the extent that they have been identified by category and
included in the Approved Budget.

                  (52) "Operator's Incentive Fee" shall mean a fee to be
established by agreement between Operator and Lessee pursuant to Section 10.02.

                  (53) "Owners" shall mean the entities described on Exhibit A
as it may be amended from time to time as the owners of the Hotels. "Owner"
shall mean any entity described on Exhibit A as it may be amended from time to
time.

                  (54) "Owner Indemnitees" shall have the meaning set forth in
Section 17.2 of this Agreement.

                  (55) "Property" shall mean the Land, the Hotels, all real and
personal property now or hereafter situated upon the Land and all appurtenant
rights and easements thereto.

                  (56) "Rebates" shall have the meaning set forth in Section
21.11.

                  (57) "REIT" shall mean Winston Hotels, Inc. and its successors
and assigns.

                  (58) "REIT Hotels" shall mean, initially, the hotels owned by
Affiliates of the REIT which will be managed by Operator effective on or about
July 1, 2003, as set forth on Exhibit D and any additional hotels owned by the
REIT or its Affiliates and managed by Operator from time to time in the future.

                  (59) "Sale of a Hotel" shall have the meaning set forth in
Article XVI.

                  (60) "Space Lease" shall mean any lease for space at a Hotel.

                  (61) "Termination Date" shall mean the date that this
Agreement terminates, whether pursuant to the expiration of the term or
otherwise.

                  (62) "Termination Fee" shall have the meaning set forth in
Section 22.09 of this Agreement.

                  (63) "Uniform System" shall mean the "Uniform System of
Accounts for Hotels" (9th Revised Edition, 1996), as published by the American
Hotel and Motel Association, as it may be amended from time to time, with such
exceptions as may be required by the


                                       8
<PAGE>


provisions of this Agreement (including without limitation the definitions of
Gross Hotel Income, Gross Operating Profit and Operating Expenses).

                  (64) "Unrelated Person" shall have the meaning set forth in
Section 22.11.

         (b) Terms with initial capital letters which appear within the
foregoing definitions are defined in this Article I or as indicated in this
Agreement.

                                   ARTICLE II

                                TERM OF AGREEMENT

Section 2.01. Term.

         (a) The term of this Agreement (the "Operating Term") shall commence at
12:01 AM on the Contract Commencement Date and shall terminate at 11:59 PM on
June 30, 2008, subject to earlier termination as to one or more Hotels at any
time as set forth below.

         (b) This Agreement may be terminated by Lessee without a fee (except
the Termination Fee, if applicable) as to one or more Hotels at any time and
from time to time by delivery of written notice to Operator not less than ninety
(90) days prior to the effective date of termination which notice shall set
forth (i) the effective date of termination, and (ii) the Hotel or Hotels with
respect to which this Agreement is being terminated. Termination by Lessee
pursuant to this Section 2.01(b) shall be subject to the provisions of Section
22.09 of this Agreement. Subject to the provisions of 22.21(g), this Agreement
may be terminated by Operator at any time by delivery of written notice to the
Lessee not less than six (6) months prior to the effective date of termination
which notice shall set forth the effective date of termination. Notwithstanding
the foregoing, in the event Lessee (i) transfers its rights under this Agreement
to an entity that is not an Affiliate of Lessee or (ii) a change of control
whereby a current Affiliate no longer controls Lessee, then Operator shall have
the right to terminate this Agreement upon thirty (30) days written notice to
Lessee.

                                  ARTICLE III

                ENGAGEMENT OF MANAGER AND OPERATION OF THE HOTEL

Section 3.01. Engagement of Operator to Manage Hotel. Lessee hereby grants to
Operator the sole and exclusive right, and hereby appoints Operator as Lessee's
sole and exclusive agent, subject to the terms of this Agreement, to operate,
direct, manage and supervise the Hotels without interference from Lessee, and
Operator hereby undertakes and agrees to perform, as the agent of and for the
account of Lessee, all of the services required hereunder and to comply with all
of the provisions of this Agreement.

Section 3.02. Contract Commencement Date. Subject to the provisions contained in
Article IV below, Operator shall assume operation, direction, management and
supervision of each Hotel at 12:01 A.M. on the Contract Commencement Date.


                                       9
<PAGE>


Section 3.03. Operator as Agent. Operator, and all employees of Operator working
at each Hotel, shall act solely on behalf of and as agent for Lessee and not on
its own behalf. All employees working at a Hotel shall be employees of Operator
and Operator shall have no authority to hire employees for Lessee. Nothing
contained in this Agreement shall be construed as creating, between the parties
hereto or with any third party, a partnership, joint venture or any relationship
other than agency. Any and all debts, obligations and other liabilities incurred
by Operator in connection with a Hotel, shall be incurred on behalf of Lessee,
and Operator shall not be liable for payment therefor; provided, Operator and
its employees and agents shall not incur debts or other liabilities on behalf of
Lessor unless the same are (i) reasonable, (ii) necessary or reasonably prudent
for operation of a Hotel, or (iii) within the approved Operating Budget or
otherwise specifically approved in writing by Lessee.

Section 3.04. Operator's Status. From the Contract Commencement Date to the
Termination Date, Operator shall qualify as an "eligible independent contractor"
as defined in Section 856(d)(9) of the Internal Revenue Code of 1986, as amended
(the "Code"). To that end, Operator shall satisfy the following requirements:

         (a) Operator shall not permit wagering activities to be conducted at or
in connection with a Hotel by any person who is engaged in the business of
accepting wagers and who is legally authorized to engage in such business at or
in connection with a Hotel;

         (b) Operator shall not own, directly or indirectly (within the meaning
of Section 856(d)(5) of the Code), more than 35% of the shares of Winston
Hotels, Inc. ("Winston");

         (c) No more than 35% of the ownership interest in Operator's assets or
net profits shall be owned, directly or indirectly, by one or more persons
owning 35% or more of the outstanding stock of Winston; and

         (d) Operator shall be (or shall, within the definition of Section
856(d)(9)(F), be related to a person ("Related Company") that is) actively
engaged in the trade or business of operating "qualified lodging facilities"
(defined below) for a person who is not a "related person" within the meaning of
Section 856(d)(9)(F) of the Code with respect to Winston or Lessee ("Unrelated
Persons"). In order to meet this requirement, Operator agrees that it (or any
related person) (i) shall derive at least 10% of both its revenue and profit
from operating "qualified lodging facilities" for Unrelated Persons and (ii)
shall comply with any regulations or other administrative guidance under Section
856(d)(9) of the Code with respect to the amount of hotel management business
with Unrelated Persons that is necessary to qualify as an "eligible independent
contractor" with the meaning of such Code Section. Operator shall notify Lessee
immediately if an event occurs (for example, if Operator receives a notice of a
sale of a "qualified lodging facility") that would cause or would be likely to
cause it or any Related Company to cease operating any "qualified lodging
facility" for any Unrelated Persons that it or any Related Company operates as
of the date of this Agreement. Operator shall report quarterly to Lessee (i) the
percentage of Lessee's and its Related Company's revenue and profit derived from
operating "qualified lodging facilities" for Unrelated Persons and (ii) the
number of "qualified lodging facilities" it and its Related Company operates for
Unrelated Persons. As of the date of this Agreement, the Related Company is
Noble.


                                       10
<PAGE>


         (e) A "qualified lodging facility" is defined in Section 856(d)(9)(D)
of the Code and means a "lodging facility" (defined below), unless wagering
activities are conducted at or in connection with such facility by any person
who is engaged in the business of accepting wagers and who is legally authorized
to engage in such business at or in connection with such facility. A "lodging
facility" is a hotel, motel or other establishment more than one-half of the
dwelling units in which are used on a transient basis, and includes customary
amenities and facilities operated as part of, or associated with, the lodging
facility so long as such amenities and facilities are customary for other
properties of a comparable size and class owned by other owners unrelated to
Winston.

         (f) Operator shall not sublet a Hotel or enter into any similar
arrangement on any basis such that the rental or other amounts to be paid by the
sublessee thereunder would be based, in whole or in part, on either (i) the net
income or profits derived by the business activities of the sublessee, or (ii)
any other formula such that any portion of the rent would fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the Code, or
any similar or successor provision thereto.

Section 3.05. Representations by Operator; Engagement of Operator. Operator
hereby represents that Operator (i) is experienced and capable and will remain
experienced and capable in the management and operation of hotels throughout the
United States and (ii) has reviewed and understands the terms and provisions of
the Lease and the Franchisor Agreements and the Hotel Standards. In reliance on
the foregoing representations, Lessee hereby engages Operator to manage and
operate the Hotels during the Operating Term and Operator agrees to manage and
operate the Hotels during the Operating Term, in accordance with this Agreement.
Lessee and Operator acknowledge that it is the intention of the parties that the
Hotels be operated in a profitable manner in accordance with the Hotel Operating
Budget and the Hotel Capital Budget.

Section 3.06. Standards of Operation. Operator agrees to diligently and
efficiently operate each Hotel and all of its facilities and activities (i) at
all times substantially in accordance with the Hotel Standards; (ii)
substantially consistent with the terms of the Lease and Lessee's obligations
thereunder; (iii) in the manner set forth in Section 3.10(i); (iv) in compliance
with this Agreement, and in material compliance with all easements, covenants
and restrictions affecting the Property and all applicable governmental laws
rules, regulations, ordinances, orders and requirements; (v) in accordance with
the terms and conditions of any financing; and (vi) in accordance with the
requirements of any carrier having insurance on the Hotels or any part thereof.
Operator shall also obtain and keep in force any and all licenses or permits
necessary for the operation of the Hotels (provided that liquor licenses shall
be obtained and held in Operator's name unless not allowed by law, in which case
they will be in the name of Lessee). The cost of obtaining and keeping in force
any such licenses or permits (including the liquor license, if any) and in
complying with governmental laws, rules, regulations, ordinances, orders and
requirements shall be Operating Expenses. Notwithstanding any other provision of
this Agreement to the contrary, Operator's obligations with respect to the Lease
(and any amendments thereto), any ground lease, any franchise agreement with
respect to which Operator is expected to comply and the Hotel Standards mandated
thereunder, and to any such financing (collectively, "Major Agreements") shall
be conditioned upon (i) true and complete copies of the relevant provisions
thereof have been delivered to Operator sufficiently in advance to allow
Operator to perform such obligations and (ii) the provisions thereof and/or
compliance with such

                                       11
<PAGE>


provisions by Operator (1) being applicable to the day-to-day operation,
maintenance and non-capital repair and replacement of the Hotel or any portion
thereof, (2) not requiring contribution of capital or payments of Operator's own
funds, (3) not materially increasing Operator's obligations hereunder or
materially decreasing Operator's other rights hereunder, (4) not limiting or
purporting to limit any corporate activity or transaction with respect to
Operator or its Affiliates or any other activity, transfer, transaction,
property or other matter involving Operator or its Affiliates other than at the
site of the Hotel, and (5) otherwise being within the scope of Operator's duties
under this Agreement. Lessee acknowledges and agrees, without limiting the
foregoing, that any failure of Operator or the Hotel to comply with the
provisions of Major Agreements arising out of (A) construction activities at the
Hotel, (B) inherent limitations in the design and/or construction of, location
of and/or parking at the Hotel and/or (C) Lessee's written instructions to
Operator, shall not be deemed a breach by Operator of its obligations under this
Agreement. Notwithstanding anything to the contrary set forth in this Agreement,
Operator shall not be in breach of any obligation which it may otherwise have
under this Agreement so long as Operator is acting in accordance with the
Approved Budget and Operator's failure to perform such obligation results from
Lessee's failure to provide adequate funding in accordance with the terms of
this Agreement.

Section 3.07. Reservations Services. Operator shall sell, represent and promote
the Hotels through the respective Franchisors' sales and reservations systems
and will encourage the use of the Hotels by all recognized sources of hotel
business.

Section 3.08. Marketing. Forty-five (45) days prior to the beginning of each
Fiscal Year and in conjunction with preparation of the Hotel Operating Budget
for the forthcoming Fiscal Year, Operator shall deliver to Lessee a proposed
marketing plan for each Hotel for such Fiscal Year which shall be consistent
with the Hotel Operating Budget. Operator shall review the marketing plan with
Lessee and upon Lessee's written approval it shall represent the approved
marketing plan (the "Marketing Plan") for the succeeding Fiscal Year and shall
be implemented by Operator. The sums expended for advertising and marketing each
Fiscal Year shall be an Operating Expense to the extent they are (i) set forth
in the Approved Budget and the Marketing Plan for such Fiscal Year and (ii)
actually expended for advertising or marketing the Hotel either exclusively or
in conjunction with the advertising or marketing of the Franchisor.

(a) Operator shall arrange, contract for and carry out such advertising and
promotion of a Hotel, as Operator shall deem advisable and consistent with the
Approved Budget. Funds for advertising and promotion of a Hotel may be expended
exclusively for or with respect to a Hotel or in conjunction with the
advertising or promotion of other properties managed by Operator, and in either
case may be administered at or through Operator's regional or home office.
Operator will make every effort to ensure that the Hotels shall receive an
equitable share of the benefit of the cooperative advertising and promotion
reasonably commensurate with its contribution to the costs thereof. The costs
thereof shall be equitably allocated by Operator between the Hotels and other
participating hotels. Upon Lessee's request, Operator shall provide reasonable
documentation to support such allocations.

         (b) Operator, in its discretion, may cause the Hotel to participate in
sales and promotional campaigns and activities involving complimentary rooms,
food and beverages where such is customary in the travel industry or in the
Operator's practice and policy.


                                       12
<PAGE>


Section 3.09. Consultations Between Lessee and Operator. When requested by
Lessee, Operator shall, from time to time, render advice and assistance to
Lessee and Owner in the negotiation and prosecution of all claims for the
reduction of real estate or other taxes or assessments affecting a Hotel and for
any award for taking by condemnation or eminent domain affecting a Hotel.

Section 3.10. Duties of Operator. On and after the Contract Commencement Date,
the Operator shall (i) direct, supervise, manage and operate the Hotels in all
aspects in an efficient and economical manner consistent with hotels of a
comparable size, class and level of service having similar facilities and (ii)
determine and administer the programs and policies to be followed in connection
therewith, all in accordance with the provisions of this Agreement, on the
condition that Operator shall not be obligated to advance any of its own funds
in connection with such duties. Without limiting the generality of the
foregoing, Operator shall perform each of the following functions:

         (a) Recruit, employ, relocate, pay, supervise and discharge all
employees and personnel necessary for the operation of the Hotels (included in
the foregoing shall be the determination of all personnel policies).

         (b) Establish all prices, rates and charges for guest rooms, meeting
rooms, commercial space (including all stores, office space and lobby space),
food, beverage, and other salable or rentable items comprising the Hotels and
their business.

         (c) Negotiate and enter into, on behalf of Lessee, service contracts
required in the ordinary course of business in operating the Hotels including,
without limitation, contracts for electricity, gas, telephone, cable, cleaning,
vermin extermination, elevator and boiler maintenance, and other services which
Operator deems advisable, on the condition that Operator shall not enter into
any service contract contemplated by this subsection that is not cancelable by
Lessee on a maximum of thirty (30) days prior notice and no penalty without the
prior written consent of Lessee, which consent shall not be unreasonably
withheld.

         (d) Negotiate and enter into, on behalf of Lessee, concession
agreements, leases, licenses and similar contracts for use by concessionaires,
tenants, licensees and other intended users of the facilities at the Hotels, on
the condition that Operator shall not enter into any agreement, lease, license
or contract contemplated by this subsection that is not cancelable by Lessee on
a maximum of thirty (30) days prior written notice and no penalty without the
prior written consent of Lessee, which consent shall not be unreasonably
withheld.

         (e) To the extent within the control of Operator, obtain and keep in
full force and effect, either in its own name on behalf of Lessee or in Lessee's
name, as may be required by applicable laws, any and all new, renewal and
additional licenses and permits necessary to enable Operator to operate the
Hotels in accordance with applicable laws including, without limitation, those
licenses and permits necessary for the sale of alcoholic beverages to be
consumed on premises or sold in unopened containers at (i) the Hotels, (ii) any
restaurant and lounge located within the Hotels, and (iii) any other usual and
customary locations where alcoholic beverages are sold within the Hotels.


                                       13
<PAGE>


         (f) Accord rooms to persons to whom such privileges are customarily
accorded in the industry, including, without limitation, (i) employees of
Operator's parent company, pursuant to its personnel policies and subject to
space availability, and (ii) such employees of Lessee as Lessee may from time to
time designate.

         (g) Establish and revise, as necessary, administrative policies and
procedures including, without limitation, policies and procedures for the
control of revenue and expenditures, for the purchase of Operating Equipment,
Operating Supplies and services, for the control of credit, and for the
scheduling of maintenance.

         (h) Procure, or arrange for the procurement of, as agent for Lessee,
all replacement Operating Equipment and Operating Supplies necessary to maintain
and operate the Hotels properly in the ordinary course of business.

         (i) Make or install, or cause to be made or installed, in the name of
Lessee, all normal capital repairs, decorations, renewals, revisions,
alterations, rebuilds, replacements, additions, and improvements in and to the
Hotels buildings and FF&E, in the ordinary course of business, that Operator
deems necessary or appropriate for the proper operation and maintenance of the
Hotels, on the condition that such items are contemplated by the Annual Business
Plan for such Fiscal Year in which such action is taken.

         (j) Arrange and contract for all advertising and promotion of the Hotel
which Operator in its reasonable discretion deems necessary or appropriate for
the operation of the Hotel.

         (k) Open and maintain the Disbursement Account as required by this
Agreement.

         (l) Prepare and deliver to Lessee the Annual Business Plans and
Financial Statements, and such other information as required by this Agreement.

         (m) Plan, execute and supervise repairs and maintenance at the Hotels,
but all related capital expenditures in the aggregate in excess of $500 may be
implemented by Lessee.

         (n) Provide the Group Services.

         (o) Procure and maintain insurance in accordance with Article XII.

         (p) Keep Lessee advised as to all major policy matters affecting the
Hotels or a Hotel.

         (q) To the extent within the control of Operator, operate the Hotels in
compliance with any applicable Franchisor Agreements and any applicable
Mortgages. Operator shall notify Lessee within five (5) business days of any
notice of violations of any applicable Franchisor Agreements or any applicable
Mortgages received by Operator.

         (r) Conduct such other operations from time to time as may be required
under this Agreement.


                                       14
<PAGE>


                  All expenditures and obligations undertaken by Operator in
performing these functions, including without limitation (a), (b), (c), (d),
(e), (f), (h), (i), (j), (m), (o), and (q), shall be within the approved
Operating Budget unless otherwise approved in writing by Lessee.

Section 3.11. Authority of Operator. Except as otherwise specifically set forth
in this Agreement, (i) the management and operation of the Hotel shall be under
the exclusive supervision and control of Operator which shall be responsible for
the proper and efficient operation of the Hotels, and (ii) Operator shall have
reasonable discretion and control, free from unreasonable interference,
interruption or disturbance, in all matters relating to management and operation
of the Hotels.

Section 3.12.     Employees.

         (a) Except as otherwise set forth in this Agreement, Operator shall
have complete discretion and control over all personnel matters at the Hotels
including, without limitation, decisions regarding hiring, promoting,
transferring, compensating, supervising, terminating, directing and training all
employees at the Hotels, and, generally, establishing and maintaining all
policies relating to employment. All such personnel matters shall be handled in
a manner consistent with the Annual Business Plan and approved Operating Budget.
Lessee shall not directly exercise any authority over or interfere with any
personnel employed at the Hotels except that Operator shall not hire or fire any
regional general manager, general manager, director of sales or marketing, or
chief engineer (or in each case equivalent employees) without the prior consent
of Lessee, which consent shall not be unreasonably withheld. (b) Lessee shall
reimburse Operator for the monthly salary, payroll taxes and fringe benefits
under the Operator's Benefit Plans of all personnel employed by Operator and
located full time at the Hotels. Lessee acknowledges that it has reviewed and
approved Operator's Benefit Plans. Lessee shall also reimburse Operator for all
out-of-pocket costs and expenses incurred when the general manager and/or
department heads of the Hotels attend meetings, functions, training sessions or
conventions deemed advisable by Operator including, without limitation, travel,
program and materials costs.

         (c) Since the general manager of a Hotel (and, if consent has been
given by Lessee, other employees of a Hotel) may need to reside temporarily at
the Hotels and be available full-time to perform properly the duties of his
employment, he may receive at Operator's discretion, and in accordance with
Operator's personnel policies, free of charge and in addition to his salary,
free room and board and reimbursement for any expenses which he may reasonably
incur in the performance of his duties. The general manager shall not, without
the prior consent of Lessee, have any supervisory or other authority over
another hotel, property or other matter.

         (d) Lessee agrees that it shall not directly or indirectly hire,
employ, retain, contract or in any manner become associated with, any present or
previous employee of Operator who served as general manager, assistant general
manager, controller or director of sales and marketing at a Hotel or Operator's
corporate level employees at any time for a period of one year following
termination of this Agreement.


                                       15
<PAGE>


Section 3.13. Litigation. Without Lessee's prior written consent, Operator may
initiate, settle or otherwise dispose of litigation relating to a Hotel where
the claim asserted is less than or equal to $5,000. Operator shall not initiate,
settle or otherwise dispose of litigation relating to a Hotel in excess of
$5,000 per claim payable by Lessee without Lessee's prior written consent.
Notwithstanding the foregoing, nothing shall limit Operator's ability to defend,
settle or otherwise dispose of litigation against Operator in its individual
capacity and not as an agent of Lessee.

Section 3.14. Lessee's Right of Inspection and Review. Operator shall permit
Lessee and its duly authorized agents and representatives, upon reasonable
notice, the right to enter upon any part of a Hotel at all reasonable times for
the purpose of examining or inspecting a Hotel, its records, or operation or any
other purpose which Lessee, in its reasonable discretion, shall deem advisable.

                                   ARTICLE IV

                             INDEPENDENT CONTRACTOR

Section 4.01. Operator Status. In the performance of its duties in the
administration, management and operation of the Hotels, Operator shall act
solely as an independent contractor. Nothing herein shall constitute or be
construed to be or create a partnership or joint venture between Lessee and
Operator, or be construed to create a lease by Operator of the Hotels or its
facilities. It is expressly covenanted that this Agreement is no more than an
agreement for the rendering of services by Operator on behalf of Lessee in the
operation and management of the Hotels only.

Section 4.02. Employees.

         (a) Each Hotel employee shall be the employee of Operator and not of
Lessee, and every person performing services in connection with this Agreement
shall be acting as the employee of Operator. All such personnel shall be on the
payroll of Operator, but their salaries and other related expenses, in amounts
not to exceed those sums allocated to such salaries and expenses in the Approved
Budget shall be an Operating Expense.

         (b) Operator shall provide evidence to Lessee of statutory Worker's
Compensation Insurance and Employer's Liability Insurance, with waiver of
subrogation endorsements in favor of Lessee and Owner, for each such employee.
The insurance coverages (including, without limitation, the carrier, policy
limits of each and waiver of subrogation endorsements) must be in form,
substance and amount satisfactory to Lessee in all respects.

         (c) The general hiring policies and the discharge of employees at the
Hotels shall in all respects comply with all "Equal Employment Opportunity" laws
and regulations, and Operator agrees that all laws, regulations and ordinances
regarding the employment and payment of persons engaged in the operation of each
Hotel (the "Employment Laws") will be complied with in all material respects.


                                       16
<PAGE>


         (d) Lessee shall have the right to participate in any negotiations with
labor unions representing such employees at the Hotels, and Operator shall not
sign any union contracts covering such employees at the Hotels which have not
been previously approved in writing by Lessee.

Section 4.03. Reimbursement of Employee Expenses.

         (a) All costs of every nature pertaining to all employees at the Hotels
arising out of the employer-employee relationship, including, without
limitation, salaries, benefits, bonuses, relocation costs, employment-related
legal costs, costs incurred in connection with governmental laws and
regulations, insurance rules, and such other expenses as Operator, in its
reasonable discretion, may deem appropriate shall be an Operating Cost of the
Hotels to the extent set forth in the Approved Budget and Lessee shall
reimburse, indemnify and hold harmless Operator from all costs, expenses,
liabilities and claims incurred in connection therewith.

         (b) Subject to the prior written approval of Lessee, Operator may use
employees of Operator who are not assigned to the Hotels to perform special
services for the Hotels, and the cost of their salaries, payroll taxes and
employee benefits shall be reimbursed to Operator as an Operating Expense to the
extent such costs are set forth in the Approved Budget or otherwise approved by
Lessee.

         (c) Within limits set forth in the Approved Budget, employees of
Operator other than those regularly employed at the Hotels shall be entitled to
free room and board and the free use of all hotel facilities at such times as
they visit the Hotels in connection with the management of the Hotels or are
assigned temporarily to the Hotels to perform services for the Hotels. Likewise,
employees regularly employed at the Hotel shall be entitled to free room and
board and the free use of all hotel facilities in all other Hotels at such times
as they visit other Hotels in connection with the management of such other
Hotels or are assigned temporarily to such other Hotels to perform services for
such other Hotels.

         (d) Owner and Lessee shall be entitled to free room and board and the
free use of all hotel facilities for their employees and other persons
designated by Owner and Lessee.

Section 4.04. Employee Benefit Plans. Operator may enroll the Operator's
employees at the Hotels in pension, medical and health, life insurance and
employee benefit plans which are joint plans for the benefit of employees at
more than one of the Hotels. Employer contributions to such plans, reasonable
administrative fees, at cost, which may be expended in connection therewith, and
reasonable expenses for such plans will all be an Operating Expense to the
extent such costs are provided for in the Approved Budget. The administration
expenses of any joint plans will be equitably apportioned among the various
Hotels and any other hotels operated by Operator or its affiliates. In addition,
Operator may provide lodging, food and beverage privileges to employees of
Operator in accordance with the employee benefit operating policy applicable to
all Hotels. All costs for the benefits, services and privileges referenced in
Section 4.03(c) and this Section 4.04 will be Operating Expenses only to the
extent the same are provided for in the Approved Budget, otherwise all such
costs shall be borne solely by Operator without reimbursement by Lessee.


                                       17
<PAGE>


Section 4.05. Execution of Agreements.

         (a) Except as provided in Section 4.05(b), Operator shall execute as
agent of Lessee all leases and other agreements relating to equipment and/or
services provided to each Hotel, all of which, unless otherwise approved in
writing in advance by Lessee, shall be cancelable upon not more than thirty (30)
days' written notice by Operator or Lessee without the payment of a penalty or
fee. Notwithstanding the foregoing, without the prior written approval of
Lessee, Operator shall not enter into any agreement (i) which provides for the
payment of sums not authorized by Lessee in an Approved Budget, (ii) which would
give rise to a lien upon all or any part of the Property, (iii) which would
result in liability to Lessee for sums other than as set forth in the applicable
Approved Budget, (iv) to lease any retail space in the Hotels, (v) relating to
alterations to the exterior, interior or structural design of the Hotels, (vi)
which requires the payment of more than $50,000 for the term of the agreement,
or (vii) which is not cancelable by Lessee upon 30 days' notice or less.

         (b) Subject to Lessee's prior approval of the same, Operator shall
execute, as agent for Lessee, (i) all leases, as sub-lessor, of retail space in
the Hotels, and (ii) equipment rental and/or lease agreements which cannot be
terminated upon thirty (30) days notice or less without the payment of a penalty
or fee. Operator shall exercise its best efforts to obtain in each equipment
agreement a right on the part of the lessee of such equipment to terminate the
same on thirty (30) days notice or less without the payment of a penalty fee.
Notwithstanding anything in this Section 4.05 to the contrary, Lessee reserves
the right, exercisable at Lessee's option, to execute any lease or other
agreement relating to equipment and/or services being provided to the Hotels.

                                   ARTICLE V

                                 INDEMNIFICATION

Section 5.01. Indemnification by Operator. Operator shall indemnify and hold
Lessee (and Lessee'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, willful misconduct or
gross negligence of the Operator, its employees or agents, (b) the breach by
Operator of any provision of this Agreement (including without limitation, any
claims of harassment or alleged harassment of any employee by Operator or any
employee or agent of Operator) or (c) any action taken by Operator which is
beyond the scope of Operator's authority under this Agreement. Lessee 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 Lessee with counsel selected by Operator and reasonably approved by Lessee.
Lessee shall cooperate with the Operator or its counsel in the preparation and
conduct of any defense to any such claim or suit and shall have the right to
reasonably participate in such defense. Lessee shall have the right to be
represented by its own counsel at Lessee's expense, unless there is a conflict
in having counsel represent both Lessee and Operator, in which case Operator
shall pay all reasonable costs and expenses for Lessee's counsel.


                                       18
<PAGE>


Section 5.02. Limitations on Indemnification.

         (a) Limits. None of the indemnifications set forth in Section 5.01
shall be applicable to (1) liability solely resulting from the design or
construction of a Hotel, (2) liability to Lessee resulting from Lessee's gross
negligence, fraud or willful misconduct or arising from Lessee's breach of any
of the provisions of this Agreement, or (3) that portion of a liability which is
covered and paid for by insurance maintained for a Hotel. The standard of
performance of which Operator is to be responsible under this Agreement shall be
that, reasonably and diligently exercised, of a professional hotel operator
having the knowledge, experience and expertise which Operator represents to
Lessee that Operator has. Notwithstanding any other provision of this Agreement,
Operator shall not be obligated to indemnify or hold Lessee harmless against the
amount of claims or liabilities which are payable as Operating Expenses (i) as a
deductible under applicable insurance which exceeds the lesser of the amount of
the claim or five thousand dollars ($5,000) (adjusted each Fiscal Year by the
percentage increase in the CPI over the twelve (12) month period immediately
preceding the start of the Fiscal Year in question) or (ii) as amounts due under
contracts for performance thereof excluding payments for breach thereof, or,
which are covered and paid for by insurance which Lessee is required to provide
and maintain under this Agreement, whether or not such insurance is actually in
place (unless the failure of such insurance to be in place is the result of a
breach by Operator of its obligations under this Agreement).

         (b) Defense of Claims. If a claim for liabilities is to be made by any
party entitled to indemnification under this Article V ("Liabilities"), the
party entitled to such indemnification shall give written notice to the other as
soon as practicable after the party entitled to indemnification becomes aware of
any fact, condition or event which may give rise to Liabilities for which
indemnification may be sought under this Article V. If any action, suit or
proceeding alleging a claim for Liabilities is filed against any party entitled
to the benefit of indemnity hereunder, written notice thereof shall be given to
the other party as promptly as practicable. After such notice, the indemnifying
party shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such action, suit or proceeding, (ii) to employ and engage
attorneys and experts of its own choice to handle and defend the same, and (iii)
with the indemnified party's consent, which shall not be unreasonably
conditioned, delayed or withheld, to settle such action, suit or proceeding, all
at indemnifying party's sole risk and expense, provided, in each instance, that
the indemnifying party and its counsel shall proceed with diligence and in good
faith with respect thereto; provided, however, that any such settlement shall
include, among other things, an absolute and unconditional release of the
indemnified party from all Liabilities. The indemnified party shall cooperate in
all reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such action, suit or proceeding and any
appeal arising therefrom; provided, however, that the indemnified party may, at
its own cost, participate in the investigation, trial and defense of such
action, suit or proceeding and any appeal arising therefrom.

Section 5.03. Indemnification by Lessee. Except as provided in Section 5.01,
Lessee shall indemnify and hold Operator (and Operator's agents, principals,
shareholders, partners, members, managers, 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 such party and that arise
from or


                                       19
<PAGE>


in connection with (a) the performance by the Operator or its Affiliates of its
services under this Agreement, including, without limitation, any and all
obligations incurred relating to any agreements with third parties entered into
by Operator or Lessee in connection with the management or operation of the
Hotels and in accordance with this Agreement (b) any act or omission (whether or
not willful, tortious, or negligent) of Lessee or any third party (c) any other
occurrence related to the Hotels or the Operator's duties under this Agreement,
which arise before, during or after the Operating Term or (d) any liability or
obligation arising from the compensation, benefits, or employment of anyone whom
the Operator or any of its affiliates hires to perform services in accordance
with this Agreement (whether as an employee, as an independent contractor, or in
another capacity), which arise before, during or after the Operating Term,
including but not limited to any liability that relates to cash or deferred
compensation, retirement benefits, health and other welfare benefits, fringe
benefits, equity-related or incentive compensation, vacation, leave, worker
protection and plant closure (such as the Worker Adjustment Retraining and
Notification Act), immigration, wage and hour, employment taxes or withholding,
labor relations, or employment discrimination (whether or not the liability
arises under any local, state, federal, or foreign law or under any plan,
program, arrangement, or contract). Operator shall promptly provide Lessee with
written notice of any claim or suit brought against it by a third party which
might result in such indemnification and Lessee shall have the option of
defending any claim or suit brought against Operator with counsel selected by
Lessee and reasonably satisfactory to Operator. Operator shall cooperate with
the Lessee or its counsel in the preparation and conduct of any defense to any
such claim or suit and shall have the right to reasonably participate in such
defense.

Section 5.04. Survival of Indemnity. The provisions of this Article V shall
survive the expiration or sooner termination of this Agreement with respect to
matters arising out of facts or circumstances occurring during the period prior
to such expiration or termination for a period not to exceed 3 years from any
such expiration or termination, provided, however, that in addition to the
foregoing, with respect to agreements with third parties entered into by
Operator in connection with management of the Hotels from which Operator is not
released, the provisions of Section 5.03(a) shall survive the expiration or
sooner termination of this Agreement with respect to matters arising out of
facts or circumstances occurring during the period from and after any such
expiration or termination for so long as Operator is liable under any such
agreement plus for a period not to exceed 3 years from any such expiration or
termination unless in whole or part due to the negligence or willfull misconduct
of Operator in which case the indemnification shall not apply.

Section 5.05. Employment Claim. Supplementing the provisions of Sections 5.01
and 5.03, if any claim shall be made against Lessee 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 5.01 only if it is based upon (a) the
willful misconduct or negligence of Operator's employees at the level of hotel
general manager or above or (b) Operator's breach of its obligations under
Section 4.02(c), and shall otherwise fall within Lessee's indemnification
obligations under Section 5.03.

Section 5.06. Environmental Matters.


                                       20
<PAGE>


         (a) Operator shall (i) perform its obligations under this Agreement in
compliance with all Environmental Laws in effect from time to time during the
Operating Term, (ii) promptly notify Lessee in writing of (A) any written notice
received by Operator with respect to any Environmental Activity or (B) any other
Environmental Activity of which Operator has actual knowledge and (iii)
cooperate with Lessee, at Lessee's cost (except that Operator shall bear the
cost of such cooperation to the extent that such Environmental Activity is a
result of Operator's failure to comply with its covenants under clauses (i) or
(ii) above), and in all reasonable respects, in connection with any and all
remediation of Environmental Activities undertaken by Lessee in compliance with
applicable Environmental Laws. Notwithstanding the foregoing, Lessee and
Operator acknowledge and agree that Lessee shall be responsible for reporting to
applicable governmental agencies any Environmental Activities subject to
reporting pursuant to applicable Environmental Law and shall undertake any and
all remediation or other work required under any Environmental Law or in
connection with any Environmental Activity pursuant to contracts between Lessee
and a contractor or consultant qualified to perform such work.

         (b) Except as specifically set forth to the contrary in Sections 5.01,
5.02, 5.03 and 5.06(a) above, Lessee shall (i) be solely responsible for the
compliance of the Hotels with all Environmental Laws and (ii) indemnify and hold
Operator and its Affiliates (and Operator's and Operator's Affiliates' 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 such party and that arise
from or in connection with any past, present or future Environmental Activity or
other non-compliance of the Hotel with any Environmental Law. The provisions of
this Section 5.06(b) shall survive the expiration or earlier termination of this
Agreement.

                                   ARTICLE VI

                           BUDGETS AND POLICY MEETINGS

Section 6.01. Budgets.

         (a) Lessee will cause Owner to prepare an annual capital budget for
each Fiscal Year for each Hotel (the "Hotel Capital Budget") at least forty-five
(45) days prior to commencement of the Fiscal Year and Lessee will provide
Operator with a copy of the Hotel Capital Budget. If requested by Lessee,
Operator will assist Owner in preparation of the Hotel Capital Budget. The Hotel
Capital Budget will set forth all projected capital improvements and all
projected expenditures for replacements, substitutions and additions to Hotel
FF&E for such Fiscal Year, which budget shall also be month-to-month as well as
annual. At least forty-five (45) days prior to the commencement of each Fiscal
Year, Operator shall submit to Lessee an annual forecast for the operation of
each Hotel for the forthcoming Fiscal Year containing detailed revenue
projections and budgets of Operating Expenses (the "Hotel Operating Budget").
The Hotel Operating Budget shall be month-to-month as well as annual and shall
be in the form designated by Lessee. Additionally, before the commencement of
each Fiscal Year, Operator shall submit to Lessee daily budgeted occupancy,
average daily rate and Revenue per Available Room statistics for each hotel. The
Hotel Operating Budget and the daily budgeted hotel operating


                                       21
<PAGE>


statistics shall contain Operator's reasonable good faith estimates of the
amounts set forth therein but Operator shall not be deemed to have made a
guarantee as to any amounts in the Hotel Operating Budget. At the same time,
Operator shall also present the Marketing Plan. Owner shall be responsible for
implementing the Hotel Capital Budget and may, in Owner's sole discretion,
increase, decrease, delete or modify (a "Modification") in any respect any
capital expenditure in the Hotel Capital Budget, provided, however, Operator
shall not be liable to Lessee for quality of service issues or defaults under
brand requirements that are directly and solely related to a Modification.

         (b) Operator shall review the Hotel Operating Budget with Lessee, and
upon Lessee's written approval of the Budget it shall constitute the Approved
Budget for the succeeding Fiscal Year and shall be implemented by Operator.

         (c) Operator may reallocate all or part of the amount budgeted to any
line item to another line item within the same department.

         (d) Lessee hereby acknowledges that the Hotel Operating Budget is
intended to be the best estimate at the time of its preparation and merely a
forecast of the Hotel's income and expenses for the ensuing Fiscal Year and that
Operator shall not be deemed to have made a guarantee or warranty to Lessee in
connection with the Hotel Operating Budget.

Section 6.02. Budget Meetings. At each budget meeting and at any additional
meetings during a Fiscal Year reasonably called by Lessee or Operator, and in no
event less than quarterly as required under Section 10.01 (b), Operator shall
consult with Lessee on matters of policy concerning management, sales, room
rates, wage scales, personnel, general overall operating procedures, economics
and operation and other matters affecting the operation of the Hotels.

Section 6.03. Approval by Lessee Required. Any request by Operator to make any
expenditure or incur any obligations which causes or likely will cause total
annual operating expenses at a Hotel to exceed 105% of the total annual
operating expenses for said Hotel as set forth in the Approved Budget or which
falls into any category of expenditures which in the opinion of Lessee or its
counsel they would prefer to have the prior approval of Lessee, shall be
submitted to Lessee in writing with an explanation of and accompanied by
supporting information for the request. Operator shall not make any such
expenditure or incur any such obligation without Lessee's prior written consent,
except (i) as is necessary, in Operator's reasonable discretion, for the
immediate emergency protection of life or property, or (ii) unless such
expenditure or obligation is offset by an equal or greater amount of related
revenue. Lessee shall endeavor to respond to any such request within fifteen
(15) days of the receipt thereof; provided, however, Lessee shall have no
obligation to agree to any such request and no liability for failing to respond.

                                  ARTICLE VII

                               OPERATING EXPENSES

Section 7.01. Payment of Operating Expenses.


                                       22
<PAGE>


         (a) In performing its authorized duties hereunder, Operator shall
promptly pay all Operating Expenses, except that if requested by Lessee certain
Operating Expenses shall be paid by Operator directly to Lessee for payment by
Lessee to the appropriate lender, taxing authority, insurer or other party so
identified by Lessee to Operator.

         (b) Subject to Article V, all Operating Expenses or other expenses
incurred by Operator in performing its authorized duties shall be reimbursed or
borne by Lessee; provided that such Operating Expenses or other expenses are
incurred pursuant to and within the limits set forth in an Approved Budget or
pursuant to other written authorization by Lessee. To the extent the funds
necessary therefor are not generated by the operation of the respective Hotel,
they shall be supplied by Lessee to Operator in the manner provided in Article
VIII.

Section 7.02. Operating Expenses Not an Obligation of Operator. Except as may be
otherwise specifically provided in Article V of this Agreement, Operator shall
in no event be required to advance any of its own funds for Operating Expenses
of the Hotels, nor to incur any liability in connection therewith unless Lessee
shall have furnished Operator with funds as required of Lessee under the terms
of this Agreement. However, if Lessee has provided funds required of Lessee
hereunder, Operator shall advance such funds and all other funds necessary to
pay expenses incurred by Operator in performing its duties and obligations
hereunder.

                                  ARTICLE VIII

                                  BANK ACCOUNTS

Section 8.01. Bank Accounts. The following special accounts shall be established
in connection with the operation of the Hotels:

         (a) Deposit Account. All Gross Hotel Income in the form of cash (other
than cash needed to maintain a petty cash fund and General Manager checking
account at a Hotel not to exceed $4,000, unless authorized by Lessee), credit
card receipts and checks received by Operator in the operation of a Hotel shall
be deposited in a special account or accounts bearing the name of the Hotel (the
"Deposit Account"), in such federally insured banks, savings and loans or trust
companies as may be designated from time to time by Lessee and reasonably
approved by Operator. The Deposit Account shall be in the name of Operator as
agent for Lessee and shall be under the control of Operator. Amounts in the
Deposit Account shall not be commingled with other funds of Operator or funds
from other properties owned, leased or managed by Operator, other than
properties managed by Operator for Lessee or Affiliates of Lessee designated by
Lessee. All amounts deposited into the Deposit Account shall be paid into the
Concentration Account (as hereinafter defined) as set forth in Section 8.01(b).

         (b) Concentration Account. Operator shall establish, in the name of
Operator as agent for Lessee, a master account or accounts in such federally
insured banks, savings and loans or trust companies as may be designated from
time to time by Lessee (the "Concentration Account"). All amounts deposited into
the Deposit Account shall be paid into the Concentration Account on a daily
basis, or on such other basis as may be determined by Lessee from time to time
upon written notice to Operator. Amounts in the Concentration Account may be
commingled with funds from other properties owned or leased by Lessee, at
Lessee's discretion.


                                       23
<PAGE>


Operator shall be responsible for transferring all excess cash to Lessee on a
daily basis to an account to be identified to Operator by Lessee, after
retention of sufficient working capital, including, but not limited to, funds
for items which are excluded from the definition of Gross Hotel Income.

         (c) Disbursement Account. Operator shall establish, in Operator's name
as agent for Lessee and under the control of Operator as hereinafter set forth,
a special account or accounts in such federally insured banks, savings and loans
or trust companies as may be designated from time to time by Lessee (the
"Disbursement Account"). Lessee shall deposit into the Disbursement Account
sufficient working capital on an as-needed basis to pay all Operating Expenses
and other amounts which are the responsibility of Operator to pay under this
Agreement (including without limitation any fixed charges and debt service,
ground rent and capital costs with respect to the Hotels which Lessee may have
designated Operator to pay from the Disbursement Account) (collectively,
"Operator Paid Amounts"). From the Disbursement Account, Operator shall pay all
Operating Expenses and other Operator Paid Amounts required to be paid by
Operator on Lessee's behalf under this Agreement (to the extent, in each case,
such amounts are permitted or required to be paid under this Agreement and such
funds are available in the Disbursement Account). Interest on the Disbursement
Account shall accrue to the benefit of Lessee but shall be available to pay any
Operator Paid Amounts. Checks or other documents of withdrawal from the
Disbursement Account shall be signed only by representatives of Operator,
provided that such representatives shall be bonded or otherwise insured in a
manner reasonably satisfactory to Lessee. The identity of such authorized
representatives shall be disclosed to Lessee from time to time. 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 Disbursement Account
shall be transferred to Lessee.

Section 8.02. Authorized Signatures. The Deposit, Concentration and Disbursement
Accounts shall be under the control of Operator, without prejudice, however, to
Operator's obligation to account to Lessee as and when provided for herein.
Checks or other documents of withdrawal shall be signed only by the individual
representatives of Operator approved in writing by Lessee and duly recognized
for such purpose by the bank or banks in which the referenced accounts are
maintained. Any account under this Agreement in which the Operator is authorized
to make withdrawals or write checks or otherwise use the account shall have
authorized signatures limited exclusively to the President of Operator and any
other employee or officer of Operator for whom prior written consent of the
Lessee has been obtained. Operator shall supply Lessee with fidelity bonds or
other insurance insuring the fidelity of authorized signatories to such
accounts, unless said bonds or other insurance shall have been placed by Lessee
and delivered directly by the bonding or insurance company to Lessee. The cost
of such fidelity bonds or other insurance shall be an Operating Expense and
subject to Lessee's approval. Neither Lessee nor Operator shall be responsible
for any losses occasioned by the failure or insolvency of the bank or banks in
which the referenced accounts are maintained. Upon expiration or termination of
this Agreement and the payment to Operator of all amounts due Operator hereunder
upon such expiration or termination, as provided in this Agreement, all
remaining amounts in the referenced accounts shall be transferred forthwith to
Lessee, or made freely available to Lessee.


                                       24
<PAGE>

Section 8.03. Investment of Hotel Cash. Operator shall invest Disbursement
Account balances in a cash management program approved in writing by Lessee and
which provides for Lessee to receive the benefit of interest income or the
reduction of bank charges thereon.

Section 8.04. Payroll. If and to the extent that there are insufficient funds in
the Concentration Account to pay compensation due to Hotel employees (including
all related payroll and withholding taxes) Lessee shall deposit such funds in
the Concentration Account within two (2) business days after written notice from
Operator.

Section 8.05. Security Deposits. Any security deposit held under a Space Lease
shall be held in a separate account if required by law or the terms of such
Space Lease or if otherwise required by Lessee.

                                   ARTICLE IX

                          BOOKS, RECORDS AND STATEMENTS

Section 9.01. Books and Records.

         (a) Operator shall keep full and adequate books of account and other
records (collectively, the "Books and Records") as are necessary to reflect all
pre-opening expenses, fees, costs and the results of the operation of each Hotel
on an accrual basis, all substantially in accordance with the Uniform System. In
maintaining the Books and Records for a Hotel, Operator shall use the standard
practices it follows with respect to similar facilities managed by Operator.
Operator may perform accounting services at the Hotel, Operator's parent company
corporate office, or such other location where Operator performs centralized
accounting services. Operator reserves the right to enter into a contract with a
qualified independent third party for payroll and other accounting services if
Operator reasonably determines that it would be more cost efficient to do so and
it is consistent with the approved Operating Budget. Except for such Books and
Records as Operator may elect to keep at its parent company corporate office or
other suitable location, Operator shall keep the Books and Records at the Hotel
and make them available to Lessee and its representatives at all reasonable
times for examination, audit, inspection and transcription.

         (b) Operator's obligation under this Article IX is contingent upon
Lessee providing acceptable accounting hardware and software to Operator.
Operator shall use its accounting software and the Lessee shall provide it
property based management systems, but these systems must be coordinated to
function with the Lessee's existing systems. If Operator reasonably determines
that the current accounting equipment or property based management software at
the Hotels is inadequate to perform the required accounting and management
functions, Operator shall so notify Lessee and recommend such necessary hardware
and software for purchase or lease by Lessee. In making its determination of the
adequacy of software and hardware Operator shall make reasonable efforts to use
off the shelf software such as Excel and Word and existing hardware. Lessee, or
Operator on Lessee's behalf, shall purchase or lease to the extent consistent
with the approved Operating Budget such necessary hardware and software within
thirty (30) days after Operator delivers such notice.


                                       25
<PAGE>


         (c) All Books and Records including, without limitation, books of
accounts, guest records and front office records, but excluding personnel files
and payroll records, shall at all times be the property of Lessee. Upon
termination of this Agreement, all Books and Records, except for personnel files
and payroll records, shall be turned over to Lessee to ensure the orderly
continuation of the operation of the Hotels, on the condition that the Books and
Records shall thereafter be available to Operator and its representatives at all
reasonable times by appointment for inspection, audit, examination and
transcription.

         (d) Lessee acknowledges and agrees that any books and records of Noble
or any Affiliate of Noble other than Operator shall not be deemed to be books
and records of the Hotels or of the Operator.

Section 9.02. Statements.

         (a) Operator shall deliver to Lessee by the tenth (10th) business day
of each month, a monthly report of the state of the business and affairs of the
operation of the Hotels for the immediately preceding month and for the Fiscal
Year to date. Such reports shall include at least (i) a balance sheet as of the
last day of the month preceding the report, (ii) a profit and loss statement,
comparing current month and Fiscal Year-to-date profit, loss, and operating
expenses to the Approved Budget and the prior year and comparing current month
and Fiscal Year-to-date average daily rate and occupancy to the Approved Budget
and the prior year, (iii) a statement which details the computation of all fees
payable to Operator for the month, (iv) the balance of all bank accounts, (v) an
adjusting statement showing the actual cash position of the Hotels for the month
and Fiscal Year-to-date, (vi) sources and uses statements, (vii) a forecasted
cash flow statement for the next ninety (90) days and year, and (viii) such
other reports as Lessee may reasonably require. Additionally, Operator shall
deliver to Lessee for each month by the end of the following month a narrative
discussing any of the aforementioned reports and variances from the Approved
Budget; without thereby implying Lessee's approval of such variance, except for
such variance as may have been specifically approved in writing by Lessee.

         (b) Such reports and statements (i) shall be in form and in detail
satisfactory to Lessee, (ii) shall be taken from the books and records
maintained by Operator in the manner hereinabove specified, (iii) shall follow
the general form set forth in the Uniform System, and (iv) shall be accompanied
by copies of all paid receipts for the month, if requested by Lessee.

         (c) Within fifteen (15) days after the end of each Fiscal Year deliver
a preliminary financial statement followed by a final financial statement thirty
(30) days after the end of the Fiscal Year. Operator shall, if requested by
Lessee, deliver to Lessee a draft profit and loss statement prepared by the
Independent CPA, showing the results of operations of Operator and/or the Hotels
during such Fiscal Year including, but not limited to, the Gross Hotel Income,
if any, for such Fiscal Year. Further, Operator shall, if requested by Lessee
pursuant to a legitimate documented request made to Lessee by a third party not
an Affiliate of Lessee (to include, but not limited to, a request of the U.S.
Securities or Exchange Commission, other federal or state regulatory bodies or
agencies, or any court of competent jurisdiction), provide for an audit of its
books and records by the Independent CPA, with the costs of any such requested
audit to be borne by Lessee. Any disputes as to the contents of any such
statement or any


                                       26
<PAGE>


accounting matter hereunder shall be determined by the Independent CPA, whose
decisions shall be final and conclusive on Operator and Lessee.

         (d) In addition, Operator shall deliver to Lessee, upon receipt by
Operator, copies of (i) each STAR report from Smith Travel Research; (ii) each
Guest Satisfaction report; (iii) each New Competition report; (iv) each
Franchisor inspection report; and (v) such other reports or information in such
form as may be reasonably requested by Lessee.

Section 9.03. Initial Accounting Records. Lessee shall provide Operator with
opening balance sheet entries for Operator's use within ten (10) days after the
Contract Commencement Date. Operator shall not be responsible for any
reconstruction of accounting records prior to the Contract Commencement Date.
Lessee acknowledges that Operator has no knowledge of and cannot certify the
accuracy of any historical financial information provided to Operator by Lessee.

                                   ARTICLE X

                     OPERATOR'S FEE AND TRANSFERS TO LESSEE

Section 10.01. Payment of Operator's Basic Fee.

         (a) On the first (1st) day of each month during the Operating Term,
Operator shall be paid out of the Disbursement Account the Operator's Basic Fee
for that month, based upon Gross Hotel Income for the immediately prior month,
as determined from the books and records referred to in Article IX. Operator's
Expenses, if any, shall be paid as invoiced for services and materials rendered.

         (b) The Operator and Lessee shall meet at least quarterly to review the
Operator's Basic Fee (and to adjust it to the extent appropriate to provide fair
and reasonable compensation and profit to the Operator) and review Operating
Expenses. The Operator and Lessee at such meetings shall adjust the Approved
Budget and proposed capital expenditures to reflect market conditions.

Section 10.02. Payment of Operator's Incentive Fee. On the 60th day following
the end of each Fiscal Year, Lessee shall pay to Operator, the Operator's
Incentive Fee, if any, for such Fiscal Year. "Operator's Incentive Fee" for any
Fiscal Year shall be an amount determined by Lessee and Operator prior to
commencement of the Fiscal Year and shall generally be based upon the financial
performance of all of the Hotels, in the aggregate. The formula for calculating
and determining Operator's Incentive Fee, if any, for each Fiscal Year shall be
agreed to by Operator and Lessee in connection with the Approved Budget and in
any event prior to commencement of each Fiscal Year.

Section 10.03. Distribution of Cash. Excess cash will be distributed to Lessee
on a daily basis in accordance with Section 8.01(b).

Section 10.04. Adjustments to Allocations. If at the time calculations are made
to determine amounts to be allocated or distributed in accordance with Sections
10.01, 10.02 and 10.03, or if at the end of each Fiscal Year and following
receipt by Lessee of the annual audit, if any, it is


                                       27
<PAGE>


determined that any amounts have been allocated or distributed in excess of the
amounts properly allocable or distributable pursuant to Sections 10.01, 10.02
and 10.03, an adjustment will be made based on said calculations or audit, if
necessary, so that the proper allocations and distributions will have been made.
Such calculations or annual audit shall set forth the proper calculations,
allocations and distributions required to implement such an adjustment. Within
thirty (30) days of receipt by Lessee of such audit and/or of Operator's
calculations if agreed to by Lessee relating to such an adjustment, Lessee or
Operator, as the case may be, shall deposit in the Disbursement Account any
excess amounts which may have been distributed to them.

Section 10.05. Arbitration.

         (a) In the event of a dispute, controversy or difference between
Operator and Lessee over the calculation of the amount of the Operator's
Incentive Fee for any Fiscal Year (but not whether there will be one or the
formula to be used, if any, as set forth in 10.05 (c)), at the request of either
party, the parties shall submit such dispute, controversy or difference to
arbitration by the American Arbitration Association under its then prevailing
rules, except as modified by this Section 10.05. The arbitration tribunal shall
be comprised of three (3) arbitrators each of whom shall have at least five (5)
years' experience in hotel operation, management or ownership, one to be
appointed by each of Lessee and Operator and the third to be appointed by the
American Arbitration Association.

         (b) Prior to the commencement of arbitration hearings, the arbitrator
shall provide an oath or undertaking of impartiality. The arbitration shall be
conducted in Raleigh, North Carolina in accordance with Title 9 of the U.S. Code
(the Federal Arbitration Act) and the Commercial Arbitration Rules of the
American Arbitration Association and the arbitration session shall be held not
later than twenty (20) days after the final selection of the arbitrator. The
costs of arbitration shall be allocated by the arbitrator to be paid by the
non-prevailing party. Judgment on the award rendered by the arbitrator in
accordance with this Section 10.05 may be entered in any court having
jurisdiction thereof.

         (c) Notwithstanding the foregoing, in no event shall the arbitrator
determine or otherwise designate the formula for calculating the amount of the
Operator's Incentive Fee for any Fiscal Year, which shall be determined solely
by agreement of the parties prior to the commencement of each Fiscal Year. The
sole function of any arbitration under this Section 10.05 shall be to calculate
any disputed amount of Operator's Incentive Fee pursuant to the formula agreed
by the parties.

Section 10.06. Required Capital. The Operator shall make the Operator Investment
required under the Operating Agreement for the Operator.

                                   ARTICLE XI

                             REPAIRS AND MAINTENANCE

         Subject to the provisions of the Approved Budget, Operator shall from
time to time make such expenditures for repairs and maintenance as are necessary
to keep the Hotels in good operating condition. If any repairs or maintenance
shall be made necessary by any condition


                                       28
<PAGE>


against the occurrence of which Operator, Lessee or Owner has received the
guaranty or warranty of any contractor for the building of the Hotels or of any
supplier of labor or materials for the construction of the Hotels, then Operator
shall, on Lessee's or Owner's request, cooperate with Lessee and Owner in
invoking such guarantees or warranties. Notwithstanding the Approved Budget,
Owner or Lessee may from time to time at its expense make such alterations,
additions, or improvements (including structural changes or repairs) in or to
the Hotels as Owner or Lessee, in its sole discretion, deems to be desirable.

                                   ARTICLE XII

                                    INSURANCE

Section 12.01. General. Owner and Lessee shall maintain insurance policies with
respect to the Hotels as set forth in the Lease. Operator agrees to cooperate
with Lessee and Owner in obtaining any such insurance.

Section 12.02. Required Coverage. If not already obtained by Owner or Lessee,
Operator shall procure and maintain, subject to Lessee's prior right to place
property and casualty insurance, at a minimum the insurance policies with
coverage limits and deductibles, all as provided in Exhibit E to this Agreement,
to the extent applicable to the Hotels. If allowed by the insurance company
providing the insurance without additional cost to Lessee or Operator, Noble
shall be listed as an "additional insured" on (i) the employment practices
liability insurance, if obtained, (ii) the commercial general liability
insurance, (iii) the workmen's compensation insurance, and (iv) the business
automobile liability insurance.

Section 12.03. Employment Insurance. Operator shall, as an Operating Expense,
provide and maintain (i) workers' compensation insurance with respect to all
Hotel employees in such amounts as may be required by applicable law, (ii) crime
insurance in connection with all operations, business and affairs arising out of
or in connection with the Hotels, including coverage on persons employed by
Operator in an amount specified by Lessee and (iii) employment practices
liability insurance in commercially reasonable amounts and deductibles; provided
that the cost of such insurance shall be reasonable and shall have been included
in the Approved Budget in amounts designated by Lessee.

Section 12.04. Approval of Companies and Cost by Owner and Lessee.

         (a) All insurance shall be with such insurance company or companies as
may be selected by Owner or Lessee. Comprehensive general liability insurance
and such other liability insurance as may be obtained or afforded shall be in
the name of Owner and Lessee, and shall name Operator as an additional named
insured as respects liability arising from the operation, maintenance and use of
the Hotels and operations incidental thereto.

         (b) In the event that Operator is able to obtain any or all of the
aforesaid insurance at lower cost than is obtainable by Lessee, Operator will
give written notice thereof to Lessee, which notice shall include the types and
amounts of such insurance, the premiums therefor, and the name or names of the
insurance companies proposed to issue such insurance, and Operator, at Lessee's
option, and as an Operating Expense, shall obtain such insurance.


                                       29
<PAGE>


Section 12.05. Maintenance of Coverages. Lessee shall hold all insurance
policies obtained hereunder, and certificates of such policies, if any, shall be
delivered to Operator. Should Lessee fail to supply Operator with certificates
of any required insurance, Operator shall notify Lessee in writing of such
failure. If Lessee's failure to supply either (i) such certificates or (ii) a
statement to the effect that Lessee will self-insure as to insurance coverages
for which a certificate is being requested shall continue for a period of
fifteen (15) days after Lessee's receipt of such notice, then Operator shall
have the sole remedy of providing such insurance certificate as an Operating
Expense and delivering to Lessee the original of such certificates.

Section 12.06. Waiver of Subrogation. Lessee shall, to the extent obtainable
from carriers and to the extent that endorsement forms are approved by the
Insurance Commissioner (or comparable office or department) of the State in
which the hotel is located, have all policies of property insurance provide that
the insurance companies will have no rights to subrogation against Lessee or
Operator or the agents or employees thereof. Lessee shall advise Operator in the
event such waivers of subrogation are not available.

Section 12.07. Blanket Coverage and Self-Insurance. Owner and Lessee shall not
have the right to self-insure against all hazards, perils, risks and liabilities
referred to in this Article XII, but reserve the right to provide any insurance
referenced in this Article XII by one or more so-called "blanket" or "umbrella"
policies of insurance. Operator further acknowledges that the insurance coverage
of the Hotels may be part of the general insurance plan of Owner or Lessee or of
any of their affiliates. Owner or Lessee may elect to obtain any of the
insurance coverages set forth in this Article XII with a "deductible loss"
clause providing for per occurrence deductibles. The payment of any deductible
losses shall be an Operating Expense.

Section 12.08. Adequacy of Insurance. Except as provided in Article VII, neither
Lessee nor Operator assumes any risks in connection with the inadequacy of any
insurance required under this Article XII. Lessee or Operator, as the case may
be, shall give the other a copy of each policy of insurance obtained pursuant to
this Article XII and if either believes any policy does not satisfy the
provisions of this Agreement, such party shall so advise the other in writing
and specify the deficiencies, in which event the obtaining party shall attempt
to have such deficiencies remedied. Neither Lessee nor Operator shall have any
obligation to remedy any purported deficiencies if the insurance coverages (or
lack thereof) provided are consistent with the insurance coverages required by
this Agreement to be carried by Lessee or Operator, as the case may be.

Section 12.09. Exclusions. Except as provided in Article V, all costs and
expenses of repairing any uninsured casualty (and all costs and expenses of
repairing an insured casualty in excess of the available insurance proceeds) and
all costs and expenses of satisfying any uninsured claim (and all costs and
expenses of satisfying any insured claim in excess of available insurance
proceeds) shall be an Operating Expense if the same can be expensed for tax and
accounting purposes, otherwise such costs and expenses shall be capitalized.


                                       30
<PAGE>


                                  ARTICLE XIII

            PROPERTY TAXES, LOCAL TAXES, LEVIES AND OTHER ASSESSMENTS

Section 13.01. Property Taxes. At Lessee's request, Operator shall pay from the
Disbursement Account prior to the dates the same become delinquent, with the
right upon Lessee's request to pay the same in installments to the extent
permitted by law, all personal property taxes. Owner shall pay all real estate
taxes with respect to the Property and all betterment assessments levied against
the Property or any of its component parts.

Section 13.02. Lessee's Right to Contest. Notwithstanding the foregoing, Lessee,
as an Operating Expense, or Owner may contest the validity or the amount of any
such tax or assessment. Operator agrees to cooperate with Lessee and Owner and
execute any documents or pleadings required for such purpose, provided that
Operator is satisfied that the facts set forth in such documents or pleadings
are accurate and that such execution or cooperation does not impose any
unreasonable obligations on Operator, and Lessee agrees to reimburse Operator as
an Operating Expense for all expenses occasioned to Operator by any such
contest, provided that such expenses shall be approved in writing by Lessee
prior to the time that they are incurred. Any such expenses so approved shall
not be considered an Operating Expense for purposes of determining Operator's
Incentive Fee.

                                  ARTICLE XIV

                      DAMAGE OR DESTRUCTION - CONDEMNATION

Section 14.01. Damage. If at any time during the Operating Term any Hotel or any
portion thereof should be damaged or destroyed, Owner and Lessee shall have the
respective rights and obligations set forth in the Lease with respect to damage
or destruction. In the event such Hotel is not repaired, rebuilt or replaced,
Lessee may terminate this Agreement as to such Hotel by written notice to
Operator, effective as of the date sent.

Section 14.02. Condemnation. If at any time during the Operating Term the whole
or any part of a Property shall be taken or condemned in any eminent domain,
condemnation, compulsory acquisition or like proceeding or sale in lieu thereof
by any competent authority, or if such a portion thereof shall be taken or
condemned as to make it imprudent or unreasonable to use the remaining portion
as a hotel of the type and class immediately preceding such taking or
condemnation, then this Agreement shall terminate as it relates to the Hotel
situated on such Property as of the date of such taking or condemnation and
Operator shall have no right to the award from the taking or condemning
authority in any such proceeding.

                                   ARTICLE XV

                                   USE OF NAME

         During the term of this Agreement, each Hotel shall at all times be
known by such name as from time to time may be selected by Lessee.


                                       31
<PAGE>

                                  ARTICLE XVI

                              OWNER'S RIGHT TO SELL

         At any time during the Operating Term, Owner may sell or otherwise
dispose of one or more Hotels or lease all or substantially all of the Hotels
(hereinafter collectively referred to as "Sale of a Hotel"), to any other
person, partnership, firm or corporation (hereinafter referred to as the
"Purchaser"). In such event, Lessee may notify Operator in writing no less than
thirty (30) days prior to any such Sale of a Hotel and this Agreement shall
terminate with respect to such Hotels upon the closing of the Sale of the Hotel
with no fee payable to Operator other than the Termination Fee, if applicable.

                                  ARTICLE XVII

                              DEFAULT AND REMEDIES

Section 17.01. Events of Default- Remedies.

         (a) The following shall constitute Events of Default:

                  (1) The failure of Operator to diligently and efficiently
operate a Hotel in accordance with the provisions of this Agreement (other than
as a direct result of Lessee's failure to provide adequate funding in accordance
with the terms of this Agreement);

                  (2) The failure of Operator to pay any amount to Lessee
provided for herein for a period of five (5) days after written notice by Lessee
of failure to pay such sum when payable;

                  (3) The failure of Lessee to pay any amount to Operator
provided for herein for a period of five (5) days after written notice by
Operator of failure to pay such sum when payable;

                  (4) The filing of a voluntary petition in suspension of
payments, bankruptcy or insolvency by either Lessee or Operator;

                  (5) The consent to an involuntary petition in bankruptcy or
the failure to vacate within sixty (60) days from the date of entry thereof any
order approving an involuntary petition by or against either Lessee or Operator;

                  (6) The entering of an order, judgment or decree by any court
of competent jurisdiction, on the application of a creditor, adjudicating Lessee
or Operator a bankrupt or insolvent or appointing a judicial receiver, trustee
or liquidator of all or a substantial part of such party's assets, and such
order, judgment or decree shall continue unstayed and in effect for a period of
one hundred twenty (120) consecutive days;

                  (7) The failure of either Lessee or Operator to perform, keep
or fulfill any of the other covenants, undertakings, obligations or conditions
set forth in this Agreement, and the continuance of any such default for a
period of thirty (30) days after written notice of such


                                       32
<PAGE>


failure (other than as a direct result of Lessee's failure to provide adequate
funding in accordance with the terms of this Agreement); or

                  (8) Subject to the provisions of Section 3.02, loss of the
franchise license for a Hotel as a result of any action, or failure to act, on
the part of Operator (other than as a result of Lessee's failure to provide
adequate funding in accordance with the terms of this Agreement).

                  (9) Failure of the Operator to receive the Operator Investment
prior to commencement of the term of this Agreement.

         (b) Except as is otherwise stated in Section 17.01(b) if an Event of
Default with respect to one or more Hotels shall occur under Section 17.01(a)(1)
or (8), the nondefaulting party may give to the defaulting party notice of its
intention to terminate this Agreement with respect to such Hotel(s) after the
expiration of a period of thirty (30) days from such date of notice and, upon
the expiration of such period, this Agreement shall expire. If an Event of
Default shall occur under Section 17.01(a)(2), (3), (4), (5), (6) or (7), the
nondefaulting party may give to the defaulting party notice of its intention to
terminate this Agreement with respect to any or all of the Hotels subject to
this Agreement and if such default has not been cured after the expiration of
any cure period explicitly stated herein, this Agreement shall expire. If,
however, with respect to the Events of Default referred to in Section
17.01(a)(4), (5), (6) and (7) above, unless a specific right of termination is
specified elsewhere in this Agreement for the breach in question, upon receipt
of such notice, the defaulting party shall promptly and with all due diligence
cure the default or take and continue action to cure such default within ten
(10) days. If such default shall not be capable of being cured within such ten
(10) day period, then provided the defaulting party diligently pursues the cure
of such default, such party shall have an additional sixty (60) days to cure any
such default unless otherwise extended by Lessee and after such additional cure
period if such default has not been cured, then this Agreement shall expire. The
procedure set forth in the preceding two sentences shall not be available for
the curing of any default under Section 17.01(a)(2) or (3).

Section 17.02. Rights Not Exclusive.

         (a) The rights granted under this Article XVII shall not be in
substitution for, but shall be, except as otherwise provided in this Agreement,
in addition to any and all rights and remedies for breach of contract granted by
applicable provisions of law; provided, however, upon any termination of this
Agreement by Operator or Lessee as provided in this Agreement, Operator shall be
entitled to recover only such sums as are owing to Operator under this Agreement
on the date of any such termination and the Termination Fee, if applicable, and
in no event will Operator have any claim or cause of action for "future
profits," damages resulting from termination or otherwise under this Agreement.

         (b) No failure of Operator or Lessee to insist upon the strict
performance of any covenant, agreement, term or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof, shall
constitute a waiver of any such breach or any subsequent breach of such
covenant, agreement, term or condition. No covenant, agreement, term or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument signed by both Lessee and Operator. No
waiver of any breach shall affect or


                                       33
<PAGE>


alter this Agreement but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.

         (c) In the event that Operator shall be in default of this Agreement
under Section 17.01(a) and such Event of Default remains uncured as required
under Section 17.01(b) and Lessee exercises its rights to terminate, Lessee
shall not be subject to the requirements of Section 22.09; however, in the event
that Lessee shall be in default of this Agreement under Section 17.01(a) and
such Event of Default remains uncured as required under Section 17.01(b) and
Operator terminates this Agreement, Lessee shall be fully subject to the
requirements of Section 22.09.

         (d) Notwithstanding anything herein to the contrary, Lessee's remedy
with respect to Operator's breach of the provisions of Section 22.11 or a breach
of the provisions of Section 19.01 shall be limited to termination of this
Agreement; provided, however, that in the event of a breach by Operator of the
provisions of Section 22.11 or a breach of the provisions of Section 19.01,
Lessee may terminate this Agreement immediately upon notice to Operator without
reference to any cure or notice provisions set forth in this Agreement.


                                 ARTICLE XVIII

                                     NOTICES

Section 18.01. Notices.

         (a) Any notice, statement or demand required to be given under this
Agreement shall be in writing and shall be delivered by certified or registered
mail, postage prepaid, return receipt requested, or by overnight delivery with
proof of delivery, addressed to the parties hereto at their respective addresses
listed below:

                  (1) Notices to Lessee shall be addressed:

                           Barclay Hospitality Services Inc.
                           2626 Glenwood Avenue
                           Suite 200
                           Raleigh, NC  27608
                           Attention: Joseph V. Green and Brent V. West
                           Facsimile: (919) 510-5251

                           With a copy to:

                           Thomas F. Kaufman
                           Hunton & Williams
                           1900 K Street, NW
                           Washington DC 20006
                           Facsimile  (202) 778-2201


                                       34
<PAGE>

                  (2) Notices to Operator shall be addressed:

                           Alliance Hospitality Management LLC
                           2626 Glenwood Avenue
                           Suite 225
                           Raleigh, NC  27608
                           Attention: Dale Turner
                           Facsimile: (919)

                           With copies to:

                           Noble Investment Group, Ltd.
                           1100 Monarch Tower
                           3424 Peachtree Road, NE
                           Atlanta, GA  30326
                           Attention:  Mit Shah
                           Facsimile:  (404) 262-9244

                           With a copy to:

                           Craig Wagner, Esq.
                           Wagner, Johnston & Rosenthal
                           3340 Peachtree Road, NE
                           Suite 1200
                           Atlanta, GA  30326-1044
                           Facsimile:  (404) 261-6779


         (b) All notices, statements, demands and requests shall be effective
three (3) days after being deposited in the United States mail or one day after
being sent by overnight delivery. However, the time period in which a response
to any such notice, statement, demand or request must be given shall commence to
run from date of receipt by the addressee thereof as shown on the return receipt
of the notice, statement, demand or request, but in all events not later than
the tenth (10th) day after it shall have been mailed as required herein.

         (c) By giving to the other party at least thirty (30) days written
notice thereof, either party shall have the right from time to time and at any
time during the Operating Term to change their respective addresses for notices,
statements, demands and requests, provided such new address shall be within the
United States of America.

                                  ARTICLE XIX

                                   ASSIGNMENT

Section 19.01. No Assignment by Operator.


                                       35
<PAGE>


         (a) Notwithstanding anything to the contrary set forth in this
Agreement, and subject to the provisions of Section 19.01(b) and Section
17.02(d), without the prior written consent of Lessee, Operator shall have no
right to transfer or assign any of its interests, rights or obligations under
this Agreement voluntarily, by operation of law, through a change in control of
Operator, through a transfer of beneficial interests in Operator, directly or
indirectly, or otherwise. Lessee may withhold its consent under this Section
19.01 (a) for any reason in its sole and absolute discretion.

         (b) Operator shall give Lessee not less than thirty (30) days prior
written notice of any event which would result in any change in Noble's
ownership of the equity interests in Operator. If, within thirty (30) days
following receipt of such notice Lessee does not consent to the occurrence of
such event, and such event occurs, Lessee may terminate this Agreement as to one
or more Hotels, effective upon occurrence of the event, without any liability to
Operator pursuant to Section 22.09. Notwithstanding the foregoing, Noble may
transfer or assign all or a portion of its equity interests in Operator to an
Affiliate of Noble provided that (i) Operator and Noble shall notify Lessee of
the proposed transfer or assignment not less than thirty (30) days prior to the
proposed transfer or assignment and (ii) Lessee shall have determined, in its
reasonable discretion, that the proposed transfer or assignment to such
Affiliate of Noble shall not cause Operator to fail to qualify as an "eligible
independent contractor" as defined in Section 856(d)(9) of the Code with respect
to the management of the Hotels.

Section 19.02. Assignment by Lessee.

         (a) Lessee may transfer or assign its rights and obligations under this
Agreement without the consent of Operator but shall deliver to Operator written
notice of such transfer or assignment not less than thirty (30) days prior to
the effective date thereof; provided however, that Operator shall have the
right, within thirty (30) days following receipt of such notice to terminate
this Agreement as to all of the Hotels and in such event shall be entitled to
reimbursement in accordance with Section 22.09.

         (b) Any transfer or assignment of this Agreement by Lessee shall
include an express assumption by the transferee or assignee of Lessee's
obligations hereunder, including those set forth in Section 22.09.

         (c) In the event of a "change in control" of Lessee, Operator shall
have the right, upon not less than thirty (30) days notice to terminate this
Agreement as to all of the Hotels and shall be entitled to reimbursement in
accordance with Section 22.09. For purposes of this Section 19.02(c), a "change
in control" of Lessee shall be deemed to have occurred if, at any time during
the Operating Term, any of the following events occurs:

                  (i) any "person", as that term is used in Section 13(d) and
         Section 14(d)(2) of the Securities Exchange Act of 1934, as amended
         (the "Exchange Act"), becomes, is discovered to be, or files a report
         on Schedule 13D or 14D-1 (or any successor schedule, form or report)
         disclosing that such person is, a beneficial owner (as defined in Rule
         13d-3 under the Exchange Act or any successor rule or regulation),
         directly or indirectly, of securities of Winston Hotels, Inc.
         representing 50% or more of


                                       36
<PAGE>


         the combined voting power of the then outstanding securities of Winston
         Hotels, Inc. entitled to vote generally in the election of directors;

                  (ii) individuals who, as of the date hereof, constitute the
         Board of Directors cease for any reason to constitute at least a
         majority of the Board of Directors of Winston Hotels, Inc., unless any
         such change is approved by the vote of at least 80% of the members of
         the Board of Directors of Winston Hotels, Inc. in office immediately
         prior to such cessation;

                  (iii) Winston Hotels, Inc. is merged, consolidated or
         reorganized into or with another corporation or other legal person, or
         securities of Winston Hotels, Inc. are exchanged for securities of
         another corporation or other legal person, and immediately after such
         merger, consolidation, reorganization or exchange less than a majority
         of the combined voting power of the then-outstanding securities of such
         corporation or person immediately after such transaction are held,
         directly or indirectly, in the aggregate by the holders of securities
         entitled to vote generally in the election of directors of Winston
         Hotels, Inc. immediately prior to such transaction;

                  (iv) Winston Hotels, Inc. in any transaction or series of
         related transactions, sells all or substantially all of its assets to
         any other corporation or other legal person and less than a majority of
         the combined voting power of the then-outstanding securities of such
         corporation or person immediately after such sale or sales are held,
         directly or indirectly, in the aggregate by the holders of securities
         entitled to vote generally in the election of directors of Winston
         Hotels, Inc. immediately prior to such sale;

                  (v) Winston Hotels, Inc. and its affiliates shall sell or
         transfer (in a single transaction or series of related transactions) to
         a non-affiliate business operations or assets that generated at least
         two-thirds of the consolidated revenues (determined on the basis of the
         four most recently completed fiscal quarters for which reports have
         been filed under the Exchange Act) of Winston Hotels, Inc. and its
         subsidiaries immediately prior thereto;

                  (vi) Winston Hotels, Inc. files a report or proxy statement
         with the Securities and Exchange Commission pursuant to the Exchange
         Act disclosing in response to Form 8-K (or any successor, form or
         report or item therein) that a change in control of Winston Hotels,
         Inc. has occurred; or

                  (vii) any other transaction or series of related transactions
         occur that have substantially the effect of the transactions specified
         in any of the preceding clauses in this sentence.


                                       37
<PAGE>


                                   ARTICLE XX

                                  SUBORDINATION

Section 20.01. Subordination To First Mortgage. Operator hereby agrees that this
Agreement, including, but not limited to Operator's Basic Fee, Operator's
Incentive Fee, the Termination Fee pursuant to Section 22.09(a), and the
Enhanced Termination Fee pursuant to Section 22.09(b) shall in all respects be
and is hereby expressly made subordinate and inferior to the liens, security
interest and/or terms of any First Mortgage and to the promissory note and other
indebtedness secured or to be secured thereby and to all other instruments
evidencing or securing or to evidence or secure said indebtedness, and all
amendments, modifications, supplements, consolidations, extensions and revisions
of such note and other instruments. Upon a termination of a related operating
lease for a Hotel or termination of the Lessee's rights thereunder (or any right
to possession of the Hotel for any reason), any Holder may terminate this
Agreement with respect to the related Hotel without liability of any such Holder
to pay any amounts due or to become due to Operator and Operator shall look
solely to the Lessee for any payments due hereunder. Operator shall execute any
and all subordination agreements, estoppel certificates and other documents
requested by Lessee or Owner and/or any Holder to further evidence the
subordination of this Agreement as contained in this Section 20.01 and
Operator's rights hereunder to any such First Mortgage. Notwithstanding any
right that Operator may have to terminate this Agreement, in the event the
Lessee is in default hereunder, provided the Operator continues to get paid, the
Operator will continue to perform under the terms of this Agreement for a period
not to exceed ninety (90) days.

Section 20.02. Foreclosure. Prior to termination of this Agreement by
foreclosure under the First Mortgage or by acquisition of the property to be
covered by the First Mortgage by deed in lieu of foreclosure, Operator shall
have the right to enjoy all rights and privileges conferred upon it pursuant to
this Agreement and Operator shall incur no liability to the Holder for acting
pursuant to the terms of this Agreement.

                                  ARTICLE XXI

                                   TERMINATION

Section 21.01. Transition Procedures. Operator shall do the following (and the
provisions of this Article 21 shall survive the expiration or termination of
this Agreement until they have been fully performed) and, in general shall
cooperate in good faith to effect an orderly transition of the management of the
Hotels.

Section 21.02. Licenses. Operator shall exercise commercially reasonable efforts
to assist Lessee or its designee in obtaining replacement licenses, permits and
approvals, including, but not limited to, liquor licenses, and execute all
documents and instruments reasonably necessary to transfer (if transferable) to
Lessee or its designee all governmental permits and licenses held by Operator in
operating the Hotels

Section 21.03. Leases, Concessions and Agreements. On the Termination Date,
Operator shall assign and deliver to Lessee or its designee, and Lessee or its
designee as the case may be, shall


                                       38
<PAGE>

assume, the leases, concession agreements and commercial or other agreements in
effect with respect to any of the Hotels being terminated which were previously
entered into by Operator pursuant to its authority provided for in the
Management Agreement and which are then in Operator's, rather than Lessee's,
name. Lessee shall use commercially reasonable efforts to obtain a release of
Operator for any obligations accruing after the date of the Termination

Section 21.04. Books and Records. On the Termination Date, all Books and Records
for the Hotels kept by Operator, and, subject to Operator obtaining any consents
which Operator deems required by law, which consents Operator agrees to use its
best efforts to obtain, all personnel files regarding persons employed at the
Hotels, shall be delivered promptly to Lessee or its designee, but such books
and records shall thereafter be available to Operator at all reasonable times
for inspection, audit, examination and transcription for a period of one (1)
year and Operator may retain (on a confidential basis) copies or computer
records thereof.

Section 21.05. Remittance. On the Termination Date, Operator shall remit to
Lessee or its designee all funds remaining in Operator's possession or control
which are the property of Lessee, if any, after payment of all accrued Operating
Expenses and other amounts due Operator and after deducting the costs of any
scheduled repair, replacement or refurbishment of FF&E with respect to which
funds have been provided specifically for such purposes.

Section 21.06. Other Transfers and Deliveries.

         (a) On the Termination Date, Operator shall assign, transfer and
deliver to Lessee or its designee (i) keys to all portions of the Hotels or any
lockboxes, equipment or security devices maintain therein, and (ii) all other
items of property, information and materials relating to Operator's discharge of
its obligations under this Agreement.

         (b) At the election of Lessee, Operator shall continue its performance
hereunder under any license, permit or approval for the period specified by
Lessee, not to exceed three (3) months, provided that Operator is paid all costs
and reimbursements for such licenses, permits or approvals.

Section 21.07. Confidential Information. Each party agrees that neither it nor
its Affiliates shall disclose to any third party or use to the detriment of the
other party or its Affiliates any information (in any form or medium) which is
confidential or proprietary to the other party or its Affiliates, which in the
case of Lessee shall include but not be limited to confidential or proprietary
information related to the Hotels, customer lists, contracts, or pricing
information, and shall hold any and all such information in strict confidence,
for the sole and exclusive benefit of the other party and its Affiliates. In the
event of a breach or a threatened breach by a party of this Section 21.07, the
non-breaching party shall be entitled to an injunction restraining the party
breaching or threatening to breach from violating the terms of this Section
21.07. Nothing in this Section 21.07 shall be construed or prohibiting the
non-breaching party from pursuing any other available remedies for such breaches
or threatened breaches, including recovery of damages from the other party.
Information shall not be considered confidential or proprietary if such
information (x) is available to the public at the time of disclosure, otherwise
than as a result of a breach of this Agreement, or (y) is disclosed pursuant to
a lawful order of any instrumentality of the United States or any of the several
states, but only to the extent of such order. On the

                                       39
<PAGE>


Termination Date, each party shall deliver promptly to the other party any and
all copies, records, notes, or other written, printed, or tangible materials
pertaining to, or generated through the use of, confidential or proprietary
information relating to the other party or its Affiliates or, at the direction
of the other party, shall destroy such items. The provisions of this Section
21.07 shall survive this Agreement. Notwithstanding any other express or implied
agreement to the contrary, the parties agree and acknowledge that each of them
and each of their employees, representatives, and other agents may disclose to
any and all persons, without limitation of any kind, the tax treatment and tax
structure of the transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to any of them relating to such tax
treatment and tax structure, except to the extent that confidentiality is
reasonably necessary to comply with U.S. federal or state securities laws. For
purposes of this paragraph, the terms "tax treatment" and "tax structure" have
the meanings specified in Treasury Regulation section 1.6011-4(c).

Section 21.08. Employees of Hotels. Operator agrees that Lessee or its designee,
at their sole option, may hire any of the employees, including the general
managers, currently working at any of the Hotels as of the date of this
Agreement. Operator further agrees not to transfer any of the employees
currently working at any of the Hotels to any other hotels owned and/or managed
by Operator unless Operator has been notified by Lessee or its designee that
they do not intend to hire such employee.

Section 21.09. Further Assurances. Lessee and Operator hereby agree to cooperate
in good faith with the other party and to execute and deliver such other
agreements, documents or instruments as may be reasonably necessary or desirable
in connection with the transactions contemplated by this Agreement effecting the
transfer of the operational control of the Hotels resulting therefrom. Lessee
and Operator each hereby further agree to use their commercially reasonable
efforts to obtain consents and waivers from third parties, including
franchisors, suppliers, vendors, employees, lessors, lessees, lenders, trustees,
rating agencies and other third parties necessary to effect the transactions
contemplated by this Agreement.

                                  ARTICLE XXII

                                  MISCELLANEOUS

Section 22.01. Further Documentation. Lessee and Operator shall execute and
deliver all appropriate supplemental agreements and other instruments, and take
any other action reasonably necessary to make this Agreement fully and legally
effective, binding, and enforceable in accordance with the terms hereof as
between them and as against third parties.

Section 22.02. Captions. 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.

Section 22.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Lessee, its successors and/or assigns, and subject to
the provisions of Article XIX, shall be binding upon and inure to the benefit of
Operator, its permitted successors and assigns.


                                       40
<PAGE>


Section 22.04. Competitive Market Area. Operator hereby agrees, for the benefit
of Lessee, its successors and assigns, that Operator will not own, operate,
lease or otherwise have an interest in, directly or indirectly, in any hotel in
the competitive set of a Hotel and within a five (5) mile radius of such Hotel
during the Operating Term unless expressly permitted by Lessee. The foregoing
restriction shall apply to Operator and its Affiliates but shall not apply to
Noble. Notwithstanding the foregoing, Operator hereby represents and warrants to
Lessee that there are no agreements or other restrictions which prohibit, limit
or otherwise restrict in any manner Operator, its officers, governors, members
or Affiliates from entering into this Agreement or performing Operator's
obligations under this Agreement.

Section 22.05. Assumption of Post Termination Obligations. In the event of
termination of this Agreement, Lessee shall be responsible for assuming
obligations under contracts entered into by Operator in accordance with the
provisions of Section 4.05. Operator hereby agrees to indemnify and to hold
Lessee harmless from and against any liability in connection with any contracts,
agreements or obligations not entered into in accordance with the provisions of
Section 4.05.

Section 22.06. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties relating to the subject matter hereof, superseding all prior
agreements or undertakings, oral or written. Lessee and Operator hereby
represent each to the other, that in entering into this Agreement neither has
relied on any projection of earnings, statements as to possibility of future
success or other similar matters or the costs or future financial success of any
Hotel.

Section 22.07. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of North Carolina.

Section 22.08. No Political Contributions. Any provision hereof to the contrary
notwithstanding, no money or property of the Hotels shall be paid or used or
offered, nor shall Lessee or Operator directly or indirectly pay or use or
offer, consent or agree to pay or use or offer any money or property of the
Hotels, for or in aid of any political party, committee or organization, or for
or in aid of, any corporation, joint stock or other association organized or
maintained for political purposes, or for, or in aid or, any candidate for
political office or for nomination for such office, or in connection with any
election including referendum for constitutional amendment, or for any political
purpose whatever, or for lobbying in connection with legislation or regulation
thereunder, or for the reimbursement for indemnification of any person for money
or property so used.

Section 22.09. Lessee Reimbursement Upon Certain Terminations.

         (a) Termination Fee. Upon the termination of this Agreement for all or
substantially all of the Hotels the Operator shall be entitled to receive a
termination fee ("Termination Fee") equal to $200,000 plus termination benefits
actually paid to key employees of Operator, that are agreed to in writing by the
Lessee; provided that Operator shall not be entitled to the Termination Fee if
(i) Operator terminates this Agreement on less than six (6) months prior written
notice to Lessee or (ii) if Operator is terminated based upon a material fraud;
further, provided, Operator hereby agrees that, in the event Operator is
entitled to the Termination Fee, Operator shall transfer to Lessee all FF&E and
software used in connection with the operation and management



                                       41
<PAGE>

of the Hotels that is not already owned by Lessee. The Termination Fee may be
reduced by any sums owed to Lessee by Operator hereunder and shall be paid by
Lessee to Operator upon execution of a mutually acceptable termination
agreement.


         (b) Enhanced Termination Fee. In the event that this Agreement is
terminated by Lessee prior to July 1, 2005 ("Enhanced Termination Date"), then
Lessee agrees to pay to Operator an additional amount of money equivalent to
$160,000.00 minus all amounts that have been distributed to the members or are
available to be distributed to the members under the operating agreement of
Operator.

         (c) Arbitration Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration
administered by the AAA in accordance with its applicable rules; provided that
either Lessee or Operator can within sixty (60) days of the commencement of the
arbitration stay such arbitration by commencing and diligently prosecuting
litigation when the amount being sought reasonably is expected to exceed in the
aggregate $250,000. The arbitration shall allow discovery consistent with the
discovery rules under the Federal Rules of Civil Procedure. The arbitration
shall be conducted by a single arbitrator or a panel of three arbitrators with
at least ten years experience in the hotel industry, appointed in accordance
with the rules of the AAA or as otherwise agreed in writing by Operator and
Lessee at the time of such dispute. The prevailing party shall be awarded
reasonable costs and expenses, including without limitation, attorneys' fees.
The award of the arbitrator(s) shall be final and binding upon the parties, and
any judgment on the award rendered by the arbitrator(s) may be entered in any
court have jurisdiction thereof. The arbitration shall otherwise be conducted in
accordance with Section 10.05(b).

Section 22.10. Management of Other Hotels. During the Operating Term, unless
otherwise approved by the REIT in writing, Operator and its Affiliates (other
than Noble) will not manage hotels other than REIT Hotels, if, as a result of
such management, Operator's revenues for any Fiscal Year would increase by 30%
or more over Operator's budgeted revenues for the Fiscal Year (as reflected in
Operator's operating budget at the beginning of the Fiscal Year).

Section 22.11. Rebate Transactions. Subject to the provisions of this Section
22.11, Operator may enter into multi-property purchasing, maintenance or service
contracts with respect to one or more Hotels pursuant to which Operator or
Affiliates of Operator receive rebates, cash incentives, administration fees,
concessions, profit participations, stock or stock options, investment rights or
similar payments or economic consideration from or in, as applicable, vendors or
suppliers of goods or services (collectively, "Rebates", and such purchasing,
maintenance or service contracts, "Operator Centralized Services"); provided,
however, that (i) prior to entering into any such Operator Centralized Services,
Operator shall promptly disclose to Lessee in writing the fact of and the
estimated amount of such Rebates, (ii) the charges and other amounts incurred in
connection with any such Operator Centralized Services (when taken as a whole
for all Hotels to which such Operator Centralized Services are being provided)
shall not exceed prevailing market rates with respect to such services and (iii)
Lessee shall have approved such Operator Centralized Services in writing in
advance (which approval may be withheld or granted in Lessee's sole discretion).
In the event that Operator enters into any Operator Centralized Services in
accordance with the provisions of this Section 22.11, then any Rebates


                                       42
<PAGE>


accruing to Operator or to any Affiliate of Operator shall accrue to Operator or
such Affiliate, and Lessee shall have no, and hereby waives any, claim thereto,
except to the extent agreed to in writing among Lessee, Operator and such
Affiliate, which such agreement may be, at Lessee's election, a condition
precedent to the granting of its consent under clause (iii) above.

Section 22.12. Non-Recourse to Noble. Neither Noble nor any officer, director,
employee, shareholder, member or partner of Noble or any Affiliate of Noble
shall have any personal or other liability hereunder and no assets of Noble or
any Affiliate of Noble (other than Operator) shall be subject to levy,
attachment, or satisfaction for any claim arising under or in connection with
this Agreement by Lessee or Owner.

Section 22.13. No Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors and permitted assigns, and the parties do not intend to
confer third-party beneficiary rights upon any other party, provided, however,
Noble is hereby made a third party beneficiary to the provisions herein that
explicitly refer to Noble.

Section 22.14. Estoppel Certificate. Lessee and Operator shall, upon request of
the other party, each deliver an estoppel certificate relating to this Agreement
in form and substance reasonably satisfactory to the requesting party.

Section 22.15. Counterparts. This Agreement may be executed simultaneously in
various counterparts, each of which shall deemed an original, and all of which
together shall constitute one and the same instrument

Section 22.16. Purchase of Furniture, Fixtures and Equipment. In the event of
the liquidation and/or dissolution of Operator, Lessee or its designee shall
have the right, but not the obligation, to purchase from Operator, all or any
part of Operator's office furniture, fixtures and equipment at a price equal to
Operator's net book value for such assets.

Section 22.17. Requirement to Cooperate. In the event of a sale (a "Sale") by
Owner of any or all of the Hotels, Operator hereby agrees to cooperate with
Lessee and Owner in connection with the Sale, including, but not limited to,
cooperating with any proposed purchaser in connection with said purchaser's
inspections or other due diligence of any of the Hotels.

Section 22.18. Document Retention Policy. Lessee and Operator hereby agree to
coordinate efforts to develop a records retention policy for the operation and
management of the Hotels. Operator hereby agrees to implement the records
retention policy once developed.

Section 22.19. Sarbanes-Oxley Act of 2002. In connection with the Sarbanes-Oxley
Act of 2002, Operator hereby agrees to exercise commercially reasonable efforts
to provide all information and certifications that may be required in connection
with any regulatory or SEC filings that Owner, Lessee or any of their Affiliates
may be required to deliver.

Section 22.20. Contracts and Affiliates. Operator may, on behalf of Lessee,
contract with Affiliates of Operator for any services which are customarily
provided to the Hotels or comparable properties by third party vendors, only on
the condition that (i) Lessee has approved the contract in writing, (ii) the
fees charged or the terms of any such contract with Operator's


                                       43
<PAGE>


Affiliate shall be no less favorable to Lessee or the Hotels than fees or terms
which could be obtained from an unaffiliated third party, and (iii) such
contract is cancelable by Lessee on a maximum of thirty (30) day prior notice
without penalty.

Section 22.21. Special Provisions.

         (a) Operator agrees that for any Hotel subject to a Holiday Hospitality
Franchising, Inc. or Six Continents Hotels, Inc. franchising agreement ("Holiday
Inn Franchise Agreements") Operator for such Hotel shall accept, abide by and be
subject to all the rules regulations, inspections and requirements of such
Holiday Inn Franchise Agreements.

         (b) If the licensing agreement for the "Holiday Inn" brand shall
terminate for any Hotel, the Operator shall cease operating the Hotel as a
Holiday Inn brand hotel.

         (c) If there is a conflict with respect to the terms of this Agreement
and a Holiday Inn Franchise Agreement, the terms of the Holiday Inn Franchise
Agreement shall prevail.

         (d) Notwithstanding the consent of the owners of the Holiday Inn
Franchise Agreements to this Agreement, the owners of the Hotels and guarantors,
if any, shall remain liable under the Holiday Inn Franchise Agreements.

         (e) Lessee hereby agrees that Noble may include in its promotional
materials statements claiming its ownership in Operator and the number of Hotels
managed by Operator under this Agreement; provided, however, there shall be no
advertisements or press releases relating to Noble's ownership in Operator and
the number of Hotels managed by Operator.

         (f) Lessee shall show to and consult with Operator on any press release
regarding Operator's operation of the Hotel including, without limitation, any
termination of this Agreement, but Lessee and Winston Hotels, Inc. shall have
the exclusive right to finally determine the content of any press release by
them; provided, however, Noble shall have the limited right to consent to
specific content of the press release that relates to statements specifically
about Noble, said consent to not be unreasonably withheld, conditioned or
delayed.

         (g) Notwithstanding the terms of this Agreement, (i) with respect to
those Hotels that are subject to and for so long as they are subject to the lien
of the $71,000,000 loan dated November 3, 1998 made by CMF Capital Company
(together with its successors and assigns, "CMF Capital") and Winston SPE LLC
("Winston SPE") and governed by the Loan Agreement ("CMF Loan Agreement"), and
(ii) with respect to those Hotels that are subject to and for so long as they
are subject to the lien of the $125,000,000 loan made by Wachovia Bank, National
Association and certain other lenders (together with their successors and
assigns, the "Credit Facility Lenders") to Winston Hotels, Inc. and WINN Limited
Partnership (collectively, "Winston"), governed by a Second Amended and Restated
Syndicated Credit Agreement (as such agreement may be amended from time to time,
the "Credit Agreement") (each of CMF Capital and the Credit Facility Lenders
being individually referred to as "Lender" in the case of the lender having a
security interest in such hotel at issue; the CMF Loan Agreement and the Credit
Agreement being individually referred to as the "Loan Agreement"; and Winston
SPE and Winston being individually referred to as the "Borrower" in the case of
the borrower having an


                                       44
<PAGE>


ownership interest in such hotel at issue), Operator hereby consents to and
covenants and agrees as follows:

                           (i) Operator shall not terminate this Agreement
without first obtaining Lender's written consent. Notwithstanding the foregoing,
Operator shall have the right to terminate this Agreement for default by Lessee
with respect to non-payment of the management fee due hereunder or any costs of
operating the Hotels in accordance with this Agreement by giving Lender sixty
(60) days' prior written notice of such termination. In the event Lender (or
Borrower) shall cure such non-payment default in the aforesaid sixty (60) day
period, then any termination notice related to such cause shall be of no further
force or effect.

                           (ii) This Agreement and any and all liens, rights and
interests (whether choate or inchoate and including, without limitation, all
mechanic's and materialmen's liens under applicable law) owed, claimed or held,
by Operator in and to the Hotels, are and shall be in all respects subordinate
and inferior to the liens and security interests created or to be created for
the benefit of Lender, and securing the repayment of the note and the
obligations under the Loan Agreement including, without limitation, those
created under any mortgage covering, among other things, the Hotels, and filed
or to be filed of record in the public records maintained for the recording of
mortgages in the jurisdiction where any Hotel is located, and all renewals,
extensions, increases, supplements, amendments, modifications or replacements
thereof.

                           (iii) Upon the occurrence and continuance of an event
of default under the Loan Agreement, Operator (i) shall, at the request of
Lender, continue performance on behalf of Lender of all Operator's obligations
under the terms of this Agreement with respect to the Hotels and (ii) hereby
agrees to attorn to Lender following any such event of default and following the
exercise of any remedies Lender may have against Lessee or Owner, provided
Lender sends to Operator notice and performs or causes to be performed the
obligations of Lessee to Operator under this Agreement accruing or arising from
and after, and with respect to the period commencing upon, the effective date of
such notice. Upon, or at any time after an event of default under the Loan
Agreement and continuance thereof, Lender shall have the right to terminate this
Agreement by giving Operator thirty (30) days' prior written notice of such
termination, in which event Operator shall resign as manager of the Hotels
effective upon the end of such thirty (30) day period and Lender shall neither
be bound nor obligated to perform the covenants and obligations of Lessee under
this Agreement. Without limiting Operator's rights against Lessee, Operator
agrees not to look to Lender for payment of any accrued but unpaid management
fees relating to the Hotels accruing prior to the effective date of the notice
hereof or those which may occur prior to any notice of termination if such
notice is prior to the notice hereof.

                           (iv) Without the consent of Lender, Operator shall
not amend or modify this Agreement in any material respect.

                           (v) Operator further agrees to (i) execute such
affidavits and certificates as Lender shall reasonably require to further
evidence the agreements herein contained, (ii) on request from Lender, furnish
Lender with copies of such information as Lessee is entitled to receive under
this Agreement, and (iii) cooperate with Lender's representative in any
inspection of all or any portion of the Hotels. Operator hereby acknowledges
that some, or

                                       45
<PAGE>


all, permits, licenses and authorizations necessary for the use, operation and
maintenance of the Hotels (the "Permits") are held by the Operator. By executing
this Agreement, the Operator (A) agrees that it is holding all such Permits by
and for the benefit of the Lessee and (B) hereby agrees that as security for the
repayment of the debt by the Borrower in accordance with the Loan Agreement, to
the extent permitted by applicable law, the Operator hereby agrees that, upon an
event of default under the Loan Agreement and after notice from Lender, it will
assign the Permits to Lender if such Permits are assignable or otherwise
continue to hold such Permits for the benefit of Lender until such time as
Lender can obtain such Permits in its own name or the name of a nominee.

                           (vi) Operator acknowledges that, as further security
for the note and Loan Agreement, Borrower has executed and delivered to Lender
an Assignment of Leases and Rents, dated as of the date hereof (the
"Assignment"), assigning to Lender, among other things, all of Borrower's right,
title and interest in and to all of the leases now or hereafter affecting the
Hotels. Operator hereby agrees that upon receipt of written notice from Lender
that an event of default has occurred and is continuing under the Loan
Agreement, Operator shall thereafter deliver to the Lender, for application in
accordance with the terms and conditions of the Assignment, all income and
proceeds relating to the Hotels subject to the loan then being held by Operator,
and all rents, security deposits (upon compliance with any requirements of
applicable law with respect thereto) and other income and proceeds received from
and after the date thereof from any and all tenants or other parties occupying
or using any portion of the Hotels.

                           (vii) Lender has no obligation to Operator with
respect to the loan documents and Operator shall not be a third party
beneficiary with respect to any of Lender's obligations to Borrower set forth in
the Loan Agreement. The relationship of Lender to Borrower, is one of a creditor
to a debtor, and Lender is not a joint venturer or partner of Borrower.

                           (viii) Operator further agrees that nothing herein
shall impose upon Lender any obligation for payment or performance in favor of
Operator, unless Lender notifies Operator in writing after an event of default
under the Loan Agreement, that (i) Lender has elected to assert Lessee's rights
under this Agreement with respect to the Hotels subject to the Loan Agreement
and assumes its obligations thereunder and (ii) Lender agrees to pay Operator
the sums due Operator with respect to such Hotels under the terms of this
Agreement from and after the effective date of Lender's notice to Operator.

                           (ix) Operator has executed this Agreement in order to
induce Lender to accept the Loan Agreement and the loan documents and with full
knowledge that Lender shall rely upon the representations, warranties and
agreements herein contained, and that but for this instrument and the
representations, warranties and agreements therein contained, Lender would not
take such actions.

                           (x) Operator agrees that until such time as the debt
shall be paid in full in accordance with its terms and those of the Loan
Agreement, Operator shall comply with its obligations under the Cash Management
Agreement (as defined in the Loan Agreement) and otherwise observe all of
Borrower's obligations under the Loan Agreement with respect to the operation,
management and leasing of the Hotels subject to the Loan Agreement,


                                       46
<PAGE>


notwithstanding anything contained in this Agreement to the contrary. Operator
confirms that it has received copies of the Loan Agreement, the Cash Management
Agreement (as defined in the Loan Agreement) and other loan documents and is
fully familiar with the terms thereof.

                           (xi) Operator understands that Lender intends to
assign this Agreement and the note, the Loan Agreement, the Assignment and the
other loan documents. Operator agrees that this Agreement and Operator's
obligations hereunder shall be binding upon Operator and its successors and
assigns and shall inure to the benefit of Lender and its successors and assigns
including, without limitation, any parties to whom Lender's interest in the
note, the Loan Agreement and the other loan documents are assigned. No sale,
transfer or assignment of any interest in the Operator shall be permitted
without Lender's consent.

                           (xii) Lender may cause the termination of the
Operator under the loan documents, including Section 14.4 of the Loan Agreement.

                           (xiii) Operator acknowledges and agrees that it is
collecting and processing the rents solely as the agent for the Lessee and
Operator has no right to, or title in, the rents. Notwithstanding anything to
the contrary in this Agreement, the Operator acknowledges and agrees that the
rents are the sole property of the Lessee and Borrower, encumbered by the lien
of the Loan Agreement, any mortgage and other loan documents in favor of Lender.
In any bankruptcy, insolvency or similar proceeding the Operator, or any trustee
acting on behalf of the Operator, waives any claim to the rents other than as
such rents may be used to pay the fees and compensation of the Operator pursuant
to the terms and conditions of this Agreement.

                           (xiv) Operator hereby agrees that Lender shall have
the right to enforce the provisions of this Agreement against Operator,
including, without limitation, the provisions of this Section 22.21(g).

                           (xv) Operator hereby agrees that, if required by
GEMSA Loan Services, L.P., as Master Servicer for Wells Fargo Bank Minnesota, N.
A., (formerly Norwest Bank Minnesota, N. A.) as Trustee and REMIC Administrator,
under that certain Pooling and Servicing Agreement dated as of March 1, 1999,
for DLJ Mortgage Pass-Through Certificates, Series 1999-CG1, it will execute the
Manager's Consent and Subordination of Management Agreement listed on Schedule X
of the CMF Loan Agreement.


                  [Remainder of Page Intentionally Left Blank]


                                       47
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.

                                     LESSEE:

                                           BARCLAY HOSPITALITY SERVICES INC.

                                           By:    /s/ Robert W. Winston
                                                  -----------------------------

                                           Name:  Robert W. Winston
                                                  -----------------------------

                                           Title: Chief Executive Officer
                                                  -----------------------------

                                     OPERATOR:

                                           ALLIANCE HOSPITALITY MANAGEMENT, LLC

                                           By:    /s/ Dale M. Turner
                                                  -----------------------------

                                           Name:  Dale M. Turner
                                                  -----------------------------

                                           Title: President
                                                  -----------------------------

<PAGE>

                                    EXHIBIT A


<Table>
<Caption>
          Hotel                                       Owner
<S>                                          <C>
Comfort Inn Fayetteville                     WINN Limited Partnership
Comfort Inn Greenville                       WINN Limited Partnership
Comfort Inn Wilmington                       WINN Limited Partnership
Comfort Suites Orlando                       Winston SPE LLC
Courtyard by Marriott Ann Arbor              Winston SPE LLC
Courtyard by Marriott Houston                WINN Limited Partnership
Courtyard by Marriott Wilmington             Winston SPE LLC
Fairfield Inn Ann Arbor                      WINN Limited Partnership
Hampton Inn & Suites Gwinnett                Winston SPE LLC
Hampton Inn Boone                            WINN Limited Partnership
Hampton Inn Brunswick                        WINN Limited Partnership
Hampton Inn Cary                             Winston SPE LLC
Hampton Inn Charlotte                        Winston SPE LLC
Hampton Inn Durham                           WINN Limited Partnership
Hampton Inn Jacksonville                     WINN Limited Partnership
Hampton Inn Las Vegas                        WINN Limited Partnership
Hampton Inn Perimeter                        Winston SPE LLC
Hampton Inn Ponte Vedra                      Marsh Landing Hotel Associates LLC
Hampton Inn Southlake                        WINN Limited Partnership
Hampton Inn West Springfield                 Winston SPE LLC
Hampton Inn White Plains                     Winston SPE LLC
Hampton Inn Wilmington                       WINN Limited Partnership
Hilton Garden Inn Albany Airport             WINN Limited Partnership
Hilton Garden Inn at RDU                     WINN Limited Partnership
Hilton Garden Inn Atlanta Winward            WINN Limited Partnership
Hilton Garden Inn Evanston                   Evanston Hotel Associates LLC
Holiday Inn Tinton Falls                     WINN Limited Partnership
Holiday Inn Express Abingdon                 WINN Limited Partnership
</Table>


<PAGE>

<Table>
<Caption>
          Hotel                                       Owner
<S>                                          <C>
Holiday Inn Express Clearwater               WINN Limited Partnership
Homewood Suites Alpharetta                   WINN Limited Partnership
Homewood Suites Cary                         Winston SPE LLC
Homewood Suites Durham                       WINN Limited Partnership
Homewood Suites Lake Mary                    WINN Limited Partnership
Homewood Suites Phoenix                      Winston SPE LLC
Comfort Inn Charleston                       Winston SPE LLC
Quality Suites Charleston                    Winston SPE LLC
Comfort Inn Chester                          WINN Limited Partnership
Comfort Inn Durham                           WINN Limited Partnership
Hampton Inn Hilton Head                      WINN Limited Partnership
Hampton Inn Raleigh                          Winston SPE LLC
</Table>

                                       2

<PAGE>


                                    EXHIBIT B


                              Franchise Agreements


                                    (TO COME)


<PAGE>

                                    EXHIBIT D

                                   REIT Hotels


<Table>
<Caption>
No.           Hotel Name                 Rooms    Mgmt       State
<S>                                      <C>      <C>        <C>
1.  Comfort Inn Fayetteville             176                   NC
2.  Comfort Inn Greenville               190                   SC
3.  Comfort Inn Wilmington               146                   NC
4.  Comfort Suites Orlando               215                   FL
5.  Courtyard by Marriott Ann Arbor      160                   MI
6.  Courtyard by Marriott Houston        198                   TX
7.  Courtyard by Marriott Wilmington     128                   NC
8.  Fairfield Inn Ann Arbor              110                   MI
9.  Hampton Inn & Suites Gwinnett        136                   GA
10. Hampton Inn Boone                     95                   NC
11. Hampton Inn Brunswick                127                   GA
12. Hampton Inn Cary                     130                   NC
13. Hampton Inn Charlotte                125                   NC
14. Hampton Inn Durham                   137                   NC
15. Hampton Inn Jacksonville             120                   NC
16. Hampton Inn Las Vegas                128                   NV
17. Hampton Inn Perimeter                131                   GA
18. Hampton Inn Ponte Vedra              118                   FL
19. Hampton Inn Southlake                124                   GA
20. Hampton Inn West Springfield         126                   MA
21. Hampton Inn White Plains             156                   NY
22. Hampton Inn Wilmington               118                   NC
23. Hilton Garden Inn Albany Airport     155                   NY
24. Hilton Garden Inn at RDU             155                   NC
25. Hilton Garden Inn Atlanta Winward    164                   GA
26. Hilton Garden Inn Evanston           178                   IL
27. Holiday Inn Tinton Falls             171                   NJ
28. Holiday Inn Express Abingdon          81                   VA
29. Holiday Inn Express Clearwater       127                   FL
30. Homewood Suites Alpharetta           112                   GA
31. Homewood Suites Cary                 120                   NC
32. Homewood Suites Durham                96                   NC
33. Homewood Suites Lake Mary            112                   FL
34. Homewood Suites  Phoenix             126                   AZ
35. Comfort Inn Charleston               128                   SC
36. Quality Suites Charleston            168                   SC
37. Comfort Inn Chester                  123                   VA
</Table>


<PAGE>

<Table>
<Caption>
No.           Hotel Name                 Rooms    Mgmt       State
<S>                                      <C>      <C>        <C>
38. Comfort Inn Durham                   138                   NC
39. Hampton Inn Hilton Head              125                   SC
40. Hampton Inn Raleigh                  141                   NC
</Table>


                                       2

<PAGE>

                                    EXHIBIT E

                                    INSURANCE


                               INSURANCE COVERAGE

         Operator shall at all times keep the Hotel insured with the kinds and
amounts of insurance described below; provided that Lessor or Lessee will assist
if Operator cannot obtain such insurance and Lessor or Lessee may choose to
place such insurance itself, if it has the ability to do so and notifies
Operator. This insurance shall be written by companies authorized to issue
insurance in the state in which the Hotel is located and holding a current
Best's rating of at least A-VI. The policies of insurance (in 3 thru 6 and 8
below) must name the Owner of the Hotel ("Lessor") as an additional insured, as
its interest may appear. Any loss adjustment shall require the written consent
of Lessor and Lessee, and require Operator to act reasonably and in good faith.
On or before the inception of this Management Agreement and annually thereafter,
certificates of insurance shall be provided to Lessor at the address of its
corporate office. The insurance coverages on the Hotel, including the
improvements, fixtures and Lessee's personal property, shall include:

                  (1) Real and personal property insurance on the "Special
Causes of Loss Form" (formerly known as "All Risk" form) including earthquake
and flood in exposed areas and all Tier 1 counties including A and V flood
zones; property insurance shall include protection for operation of building
laws/increased cost of construction and debris removal endorsements, in an
amount not less than 100% of the full replacement cost thereof (as defined
below), with all coinsurance waived;

                  (2) Boiler and Machinery Insurance, including business
interruption and extra expense on an actual loss-sustained basis, with all
coinsurance waived, in the minimum amount of $5,000,000, or in such greater
amounts as are then customary or as may be reasonably requested by Lessee or
Lessor from time to time;

                  (3) Business Interruption and Extra Expense insurance,
insuring Special Causes of Loss perils on an actual loss sustained/gross
earnings basis, with all coinsurance waived, and with an extended period of
indemnity of at least 180 days;

                  (4) Primary commercial general liability insurance, (ISO -
1986 or broader) with limits of not less than $1,000,000 each occurrence and
$2,000,000 in the general aggregate, including Liquor Law Liability Insurance;

                           (a) Excess/Umbrella liability, with limits of not
less than $25,000,000;

                  (5) Insurance covering such other hazards and in such amounts
as may be customary for comparable properties in the areas of the Hotel as may
be reasonably requested by Lessee or Lessor;

<PAGE>

                  (6) A blanket Fidelity bond with a limit of at least $500,000,
and a deductible of no more, than $35,000, or as may be reasonably requested by
Lessee or Lessor, with Lessor and Lessee named as loss payee;

                  (7) Statutory Workmen's compensation insurance and at least
$500,000/$500,000/$500,000 Employer's Liability Insurance;

                  (8) Business Automobile liability insurance for "All Autos"
with a limit of not less than $1,000,000 for each accident;

Responsibility for Premiums. Lessor shall keep in force, at its own expense, the
insurance coverages required under (1), (2) and (3) above except to the extent
that the premium or premiums relate to coverages for property owned by the
Lessee. Operator shall keep in force, at Lessee's expense, all other insurance
coverages described above.

Replacement Cost. The term "full replacement cost" as used herein shall mean the
actual replacement cost of the Hotel without regard to depreciation. In the
event either Lessor or Lessee believes that full replacement cost (the
then-replacement cost less such exclusions) has increased or decreased at any
time, it shall have the right to have such full replacement cost re-determined.

Waiver of Subrogation. All property insurance policies carried by Operator,
Lessor or Lessee shall expressly waive any right of subrogation on the part of
the insurer against the other parties.

Form Satisfactory, etc. All of the policies of insurance referred to in this
Exhibit E shall be written in a form and with deductibles satisfactory to
Lessee. Operator shall pay all of the premiums as agent of Lessee relating to
insurance coverages required to be obtained by Operator and deliver certificates
thereof to Lessor and Lessee prior to their effective date and annually
thereafter. In the event of the failure of Operator either to effect such
insurance as herein called for or to pay the premiums therefore, or to deliver
such certificates thereof to Lessor and Lessee at the times required, Lessee or
Lessor shall be entitled, but shall have no obligation, to effect such insurance
and pay the premiums. Each insurer mentioned in this Exhibit E shall agree, by
endorsement to the policy or policies issued by it, that it will give to lessor
at least 30 days written notice before the coverage under such policy or
policies in question shall be materially reduced, allowed to expire or
cancelled.

Increase in Limits. If either Lessor or Lessee at any time deems the limits
and/or retentions of the coverages outlined in Exhibit E then carried to be
either excessive or insufficient, Lessor and Lessee shall endeavor in good faith
to agree in writing on the proper and reasonable limits for such insurance to be
carried and such insurance shall thereafter be carried with the limits and/or
retentions thus agreed on until further change pursuant to the provision of this
Exhibit E.

Blanket Policy. Notwithstanding anything to the contrary contained in this
Exhibit E, Operator, Lessee or Lessor may bring the insurance provided for
herein within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Operator, Lessee or Lessor; provided,
however, that the coverage afforded to Operator, Lessor and Lessee will not be
reduced or diminished or otherwise be different from that which would exist
under a separate


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<PAGE>

policy of insurance, and provided further that the requirements of this Exhibit
E are otherwise satisfied.

Separate Insurance. Operator shall not on Operator's own initiative or pursuant
to the request or requirement of any third party, take out separate insurance or
increase the amount of any then existing insurance by securing an additional
policy or additional policies, unless all parties having an insurable interest
in the subject matter of the insurance, including in all cases Lessor and Lessee
are included therein as insureds, and the loss is payable under such separate
additional insurance in the same manner as losses are payable under the Lease.
Operator shall immediately notify Lessee in writing that Operator has obtained
any such separate insurance or of the increasing of any of the amounts of the
then existing insurance.

Reports on Insurance Claims. Operator shall promptly investigate and make a
complete and timely written report to the appropriate insurance company as to
all accidents. Claims for damage relating to the ownership, operation, and
maintenance of the Hotel, any damage or destruction to the Hotel and the
estimated cost of repair thereof shall be prepared by the Operator. The Operator
shall prepare any and all reports required by any insurance company as required
under the terms of the insurance policy involved, and a final copy of such
report shall be furnished to Lessee and Lessor. Operator shall be authorized to
execute proofs of such loss, in the aggregate amount of $5,000 or less, with
respect to any single casualty or other event.

Notwithstanding anything herein to the contrary, so long as the CMF Loan
Agreement is in effect then the insurance provisions under Article 5 of the CMF
Loan Agreement shall apply to those Hotels that are security under the CMF Loan
Agreement.

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