<PAGE>   1

                                  Exhibit 10.1




                                       49


<PAGE>   2



July 16, 1996

Mr. Michael J. Moriarty
10701 Wynkoop Drive
Great Falls, VA  22066

Dear Mike:

I am excited to offer you the position of President and Chief Operating Officer
of Studio Plus Hotels, Inc. This position will have the following salary,
options and benefits:

         Position:                  President and Chief Operating Officer

         Salary:                    $7692.31 bi-weekly

         Bonus:                     $50,000 minimum for each of the first
                                            two fiscal years

         Start Date:                Employment date of July 16, 1996 with first 
                                    workday at corporate headquarters 
                                    anticipated to be August 19, 1996

         Benefits:                  Medical Insurance - Studio Plus pays 100% 
                                    of monthly premium

                                    Long-term Disability - group coverage of
                                    60% of salary and individual wrap policy of
                                    20% of salary, aggregate of 80% of salary,
                                    subject to $11,250 per month maximum

                                    Life Insurance - $25,000 coverage

                                    Holiday Pay - Six (6) days per year New
                                    Years, Memorial Day, July 4th, Labor Day,
                                    Thanksgiving, Christmas Day). Studio Plus
                                    properties are currently closed on these
                                    days.

                                    Sick Pay - Six (6) days per year

                                    Vacation - Four (4) weeks; Five (5) weeks
                                    after 25 years.

         Employment                 You will enter into an Employment
         Agreement:                 Agreement with the Company for the period 
                                    through December 31, 1998 on the terms in 
                                    the separate Employment Agreement
                                    enclosed with this letter.

         Stock Options:             a) On July 16, 1996, your first day of 
                                    employment, you will be granted an option
                                    for 150,000 shares of the Company's common
                                    stock under the Company's 1995 Stock
                                    Incentive Plan, with 50,000 shares to vest
                                    on the first day you report for work at the



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                                    Company's headquarters in Lexington,
                                    Kentucky, 50,000 shares to vest on the date
                                    of your first anniversary of the first day
                                    you report for work at the Company's
                                    headquarters in Lexington, Kentucky and
                                    50,000 shares to vest on the date of your
                                    second anniversary of the first day you
                                    report for work at the Company's
                                    headquarters in Lexington, Kentucky, with
                                    an exercise price equal to the closing
                                    price of a share of the Company's common
                                    stock on July 16, 1996. If a share of the
                                    Company's common stock during the period
                                    from your first day of employment through
                                    December 31, 1996 decreases by more than
                                    ten percent (10%) of the exercise price
                                    above, you will have the right, subject to
                                    any applicable legal considerations,
                                    exercisable once, to substitute a new
                                    option for the same number of shares above
                                    on the same terms as above but at a lower
                                    exercise price equal to the closing price
                                    of a share of the Company's common stock on
                                    the day you make the decision to
                                    substitute.

                                    b) On the first anniversary of the day you
                                    report for work at the Company's
                                    headquarters in Lexington, Kentucky, you
                                    will be granted an option to purchase fifty
                                    thousand (50,000) shares of the Company's
                                    common stock to vest half on December 31,
                                    1997 and half on December 31, 1998,
                                    exercisable at the closing price of a share
                                    of the Company's common stock on the date
                                    of the first anniversary of your grant date
                                    under this subparagraph (b) or, if there is
                                    no closing price for the Company's common
                                    stock on that date, on the last preceding
                                    trading day before that date. However,
                                    regardless of whether this option is vested
                                    or not, it cannot be exercised until after
                                    December 31, 1997, and then only if the
                                    Company, on December 31, 1997, has at least
                                    sixty-seven (67) Studio Plus hotels in
                                    operation which it owns or leases and which
                                    have been constructed by the Company.
                                    Acquisitions of hotels, mergers or
                                    development by outside development firms
                                    developing for the Company, etc. will not
                                    be counted in the 67 hotel number. Full and
                                    not substantial compliance is required to
                                    satisfy this condition to exercise.

                                    c) On the second anniversary of the day you
                                    report for work at the Company's
                                    headquarters in Lexington, Kentucky, you
                                    will be granted an option to purchase fifty
                                    thousand (50,000) shares of the Company's
                                    common stock to vest half on December 31,
                                    1998 and half on December 31, 1999 at the
                                    closing price of a share of the Company's
                                    common stock on the date of the second
                                    anniversary of your grant date under this
                                    subparagraph (c) or, if there is no closing
                                    price for the Company's common stock on
                                    that date, on the last preceding trading
                                    day before that date. However, regardless
                                    of whether this option is vested or not, it
                                    cannot be exercised until after December
                                    31, 1998, and then only if the Company, on
                                    December 31, 1998, has at least one hundred
                                    ten (110) Studio Plus hotels in operation
                                    which it owns or leases

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                                    and which have been constructed by the
                                    Company. Acquisitions of hotels, mergers or
                                    development by outside development firms
                                    developing for the Company, etc. will not
                                    be counted in the 110 hotel number. Full
                                    and not substantial compliance is required
                                    to satisfy this condition to exercise.

                                    (d) All other option terms for each of the
                                    above options shall be the same as
                                    contained in the Company's standard stock
                                    option grant agreement. As many options as
                                    possible will be granted as incentive stock
                                    options.

         Lump Sum                   If you are Terminated Without Cause, as
         Payment:                   that term is defined in your Employment
                                    Agreement of even date herewith, by the
                                    Company on or before August 31, 2001, then,
                                    as a severance benefit, the Company agrees
                                    to pay you Three Hundred Thousand Dollars
                                    ($300,000) in a lump sum on or before
                                    September 5, 2001. If you are still
                                    employed by the Company on August 31, 2001
                                    as an Executive Officer, then, as a bonus,
                                    the Company agrees to pay you, on or before
                                    September 5, 2001, Three Hundred Thousand
                                    Dollars ($300,000) in a lump sum. If,
                                    before August 31, 2001 but after August 31,
                                    1997, you have a Voluntary Termination, as
                                    that term is defined in your Employment
                                    Agreement of even date herewith, of your
                                    employment with the Company (death or
                                    Disability, as defined in your Employment
                                    Agreement, is not a Voluntary Termination),
                                    then the Company agrees to pay you a
                                    severance benefit between Fifteen Thousand
                                    Dollars ($15,000) and Sixty Thousand
                                    Dollars ($60,000), based on the following
                                    vesting schedule:


<TABLE>
<CAPTION>
                                                              Total              Total
  Voluntary Termination After                           Vesting Benefit
  ---------------------------                           ---------------
<S>                                                      <C>                    <C>    
8/31/97 - but before 8/31/98                              5%                    $15,000
8/31/98 - but before 8/31/99                             10%                    $30,000
8/31/99 - but before 8/31/2000                           15%                    $45,000
8/31/2000 - but before 8/31/2001                         20%                    $60,000
</TABLE>

For example, if you have a Voluntary Termination in July 1999, your total
severance benefit payment would be $30,000.

If this letter correctly sets forth our understanding, please execute this
letter where indicated below and return an executed copy to my attention.

Very truly yours,

/s/ (Norwood Cowgill, Jr.)
Norwood Cowgill, Jr.
Chairman of the Board
/sam


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<PAGE>   5



The above terms correctly set forth our complete understanding.

Date:                                     /s/ Michael J. Moriarty
      ------------------------            --------------------------------


                          EMPLOYMENT AGREEMENT BETWEEN
                            STUDIO PLUS HOTELS, INC.
                            AND MICHAEL J. MORIARTY

         THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective as of July
16, 1996, by and between STUDIO PLUS HOTELS, INC., a Virginia corporation (the
"Company"), and MICHAEL J. MORIARTY (the "Executive").

                                  WITNESSETH:

         WHEREAS, the Company is a Virginia corporation which owns, develops
and manages extended stay lodging properties, including "Studio Plus" brand
hotel properties (the "Properties"); and

         WHEREAS, the Company desires to employ the Executive to devote his
full time efforts and skills to the business of the Company and to serve as the
President and Chief Operating Officer of the Company; and

         WHEREAS, the Executive desires to be so employed on the terms and
subject to the conditions hereinafter stated;

         NOW, THEREFORE, in consideration of the premises and mutual
obligations hereinafter set forth, the parties agree as follows:

         1. Employment. The Company shall employ the Executive and the
Executive agrees to be so employed initially in the capacity of President and
Chief Operating Officer of the Company to serve for the Term, defined
hereinbelow, subject to earlier termination as hereinafter provided.

         2. Term. The term of the Executive's employment hereunder (the "Term")
shall be for a period commencing on the first day of the Executive's
employment, July 16, 1996, and continuing through December 31, 1998, unless
terminated earlier as provided herein; provided, however, that this Agreement
shall continue after the Term on a year-to-year term (the "Extended Term")
unless terminated by either party on at least forty-five (45) days written
notice to the other party prior to the end of the then-current Term or Extended
Term.

         3. Services. The Executive shall devote such amount of his time and
attention to the Company's affairs as is necessary to competently perform his
duties, consistent with directions from the Company's Chairman of the Board or
the Board of Directors ("Board") and as set forth in the Company's By-laws.



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<PAGE>   6



         4.  Compensation.

             (a) During each year of the Term, commencing on the first day
Executive reports for work at the Company's headquarters in Lexington,
Kentucky, the Company shall pay the Executive for his services a base salary at
a rate of Seven Thousand Six Hundred Ninety-Two and 31/100 Dollars ($7692.31),
bi-weekly, with such base salary being subject to increases as approved by the
Compensation Committee of the Board (the "Compensation Committee"). Such base
salary as increased from time to time and in effect at the time certain
termination events specified herein occur shall thereafter be the base salary
for all purposes under this Agreement relating to such termination ("Base
Salary"). In the event of any extension or extensions of the Term or Extended
Term in accordance with Section 2 hereof, the annual base salary for each
Extended Term shall be determined by the Compensation Committee but shall not
be less than the annual base salary in effect for the immediately preceding
Term or Extended Term, unless consented to in writing by the Executive.

             (b) In addition to the annual Base Salary described in Section (a)
above, the Executive shall be eligible for an annual cash bonus in accordance
with such policies, rules and criteria as shall be established by the
Compensation Committee, in its sole discretion or for each of the first two (2)
years of the Term as may be agreed upon in writing by the Executive and the
Company at the time of hire.

             (c) In addition, the Board or the Compensation Committee may from
time to time authorize the payment to the Executive of other incentive
compensation, including but not limited to stock options or restricted stock,
in accordance with rules and criteria established by the Compensation
Committee, in its sole discretion. Such criteria may include, but not be
limited to, the growth in net income per share of Common Stock and/or other
performance goals.

             5. Benefits. The Company agrees to provide the Executive with
the following benefits:

             (a) Vacation. The Executive shall be entitled each year to take
four (4) weeks vacation, during which time his compensation shall be paid in
full.

             (b) Employee Benefits. This Agreement shall be in addition to and
not be in lieu of any rights, benefits and privileges to which the Executive
may be entitled as a management level employee of the Company, including but
not limited to any retirement, pension, profit-sharing, life insurance,
disability, hospitalization, major medical, dental or other plans which may now
be in effect or which may hereafter be authorized by the Compensation Committee
or adopted by the Company. During the initial Term, and, if the Term is
extended during an Extended Term, the Executive shall have the same rights and
privileges to participate in such plans and benefits intended generally for
management employees on the same basis as any other management level employee.

         6.  Expenses. The Company recognizes that the Executive will have to
incur certain out-of-pocket expenses, including but not limited to travel
expenses, related to his services and the Company's business and the Company
agrees to reimburse the Executive for all reasonable expenses incurred by him
in the performance of his duties upon presentation of a voucher or
documentation, as reasonably specified by the Company, indicating the amount
and business



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purposes of any such expenses. If the Company adopts a travel and expense
reimbursement policy applicable uniformly to all management employees, the
Executive agrees to adhere to the terms of such policy.

         7. Definitions. For purposes of this Agreement, the following terms
shall have the following definitions:

            (a)  "Disability" means the Executive's inability, by reason of
physical or mental impairment, confirmed by a licensed physician designated by
the Board, to perform the services described in Section 3 above which inability
continues for a period equal to the then current elimination period in the
Company's group disability insurance policy, presently ninety (90) days, within
any period of three hundred sixty-five (365) days and results in termination of
the Executive's employment with the Company.

            (b)  "Voluntary Termination" means the Executive's voluntary
termination of his employment hereunder, which may be effected by the Executive
giving the Company's Chairman of the Board or Board of Directors notice of the
Executive's desire to terminate his employment (ninety (90) days written notice
is preferred) or the Executive's failure after written notice from the Company
to provide substantially all the services described in Section 3 hereof for a
period greater than four (4) consecutive weeks by reason of the Executive's
voluntary refusal to perform such services. Notwithstanding the foregoing, if
the Executive gives notice of Voluntary Termination and, prior to the
expiration of any notice period, the Executive voluntarily refuses or fails to
provide substantially all the services described in Section 3 hereof for a
period of five (5) or more business days after notice from the Company, the
Voluntary Termination shall be deemed to be effective as of the date on which
the Executive so ceases to carry out his duties. For purposes of this Section
7, voluntary refusal to perform services shall not include taking vacation
otherwise permitted in accordance with Section 5(a) hereof, the Executive's
failure to perform services on account of his illness or death or the illness
of a member of his immediate family, provided such illnesses or death is
adequately substantiated at the reasonable request of the Company, or any other
absence from service with the written consent of the Company's Chairman of the
Board or the Board. For purposes of this Section 7(b), immediate family shall
constitute the Executive's parents, spouse and children, if any.

            (c)  "Termination With Cause" means the termination by the Company
of the Executive's employment for any of the following reasons:

                            (i)     the Executive's conviction of a crime
                                    involving some act of dishonesty or moral
                                    turpitude (specifically excepting simple
                                    misdemeanors not involving acts of
                                    dishonesty and all minor traffic
                                    violations;

                            (ii)    the Executive's conviction of theft,
                                    embezzlement or misappropriation of the
                                    Company's property or a final judgment
                                    against the Executive for the intentional
                                    and malicious infliction of damage to the
                                    Company's business, property or business
                                    opportunity;

                            (iii)   the Executive's material breach of the 
                                    confidentiality and



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                                    noncompetition covenants in Section 10 
                                    hereof;

                            (iv)    the Executive's continuous neglect of his
                                    service and duties with the Company under
                                    Section 3 hereof or his continuous failure
                                    or refusal to follow any reasonable,
                                    unambiguous, duly adopted written directive
                                    of the Board of Directors or any duly
                                    constituted committee thereof, after
                                    written notice from the Company of such
                                    neglect, failure or refusal; and

                            (v)     the Executive's sustained abuse of alcohol
                                    or use of illegal drugs, or the abuse of
                                    other controlled substances, or his
                                    engaging in other extreme personal
                                    activities in a manner that, in the
                                    reasonable judgment of the Board of
                                    Directors, adversely affects the
                                    reputation, goodwill or business position
                                    or prospects of the Company.

            (d) "Termination Without Cause" means the termination of the
Executive's employment by the Company for any reason other than Voluntary
Termination or Termination With Cause or termination because of death or
Disability.

         8. Voluntary Termination; Termination With Cause. During the Term or
an Extended Term, if the Executive shall cease being an employee of the Company
on account of a Voluntary Termination or shall suffer a Termination With Cause,
then the Executive shall not be entitled to any compensation or other benefits
after the effective date of such Voluntary Termination or Termination With
Cause (except compensation earned but unpaid on the date of such event, accrued
but not taken vacation and stock options which the Executive may have a vested
right to exercise or benefits required by law). In the event of such Voluntary
Termination or Termination With Cause, the Executive shall continue to be
subject to the noncompetition and confidentiality covenants contained in
Section 10 hereof.

         9. Termination Without Cause. In the event of the Executive's
Termination Without Cause during the Term, the Executive shall be entitled to
receive, in addition to the Base Salary earned and expenses incurred but not
paid through the date of the Executive's termination, accrued but not taken
vacation, and stock options which the Executive may have a vested right to
exercise on the date of termination, bi-weekly payments equal to the
Executive's Base Salary in effect at the time of termination for twenty-four
(24) months. In the event of the Executive's Termination Without Cause during
an Extended Term, the Executive shall be entitled to receive, in addition to
the Base Salary earned and expenses incurred but not paid through the date of
the Executive's termination, accrued but not taken vacation, and stock options
which the Executive may have a vested right to exercise on the date of
termination, bi-weekly payments equal to the Executive's Base Salary in effect
at the time of termination for the balance of the Extended Term then in effect.
Such payments shall be made on the Company's normal payroll dates and shall be
in the amount of the Executive's bi-weekly Base Salary for that payroll period
as if he were still working. In the event of such Termination Without Cause,
the Executive shall continue to be subject to the noncompetition and
confidentiality covenants contained in Section 10 hereof.

         10.Confidentiality; Noncompetition.



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               (a) The Executive acknowledges that he has access to proprietary
information developed by the Company with respect to the development,
construction, operation and marketing of the Company's extended stay lodging
business and properties (the "Confidential Information") and the Executive
hereby acknowledges that the Confidential Information represents a valuable,
special and unique asset of the Company' business. The Executive agrees that he
will not either during or after the Term, or any Extended Term, disclose the
Confidential Information, or any portion thereof, to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever,
except with respect to performance of his duties hereunder or as may be
required by applicable federal or state regulations or law and then only after
written notice to the Company. Executive's duty to keep the Confidential
Information confidential shall continue for two (2) years after termination of
employment unless the Confidential Information becomes public knowledge sooner
through no fault of Executive.

               (b) During the Term and Extended Term of this Agreement and for
a period of two (2) years following the termination of this Agreement, the
Executive shall not serve as an officer, director, trustee, member, consultant,
advisor, employee, agent or in any other capacity or as an owner, shareholder
or partner, in any corporation, partnership, sole proprietorship, joint
venture, trust, limited liability company or any other entity engaged in
managing, developing, constructing, operating or owning any interest in, any
extended stay hotel, provided this restriction shall not prohibit being a
shareholder owning less than five percent (5%) of the outstanding stock in any
class of a public corporation. An extended stay hotel for the purposes of this
Section 10 shall mean a hotel composed of hotel suite rooms rented
predominantly by the week at an average weekly rate of Three Hundred Sixty
Dollars ($360.00) per week or less, each room having a kitchen with at least a
refrigerator, a range top burner and a microwave oven.

               (c) The Executive agrees that damages at law for violation of
the restrictive covenants contained in this Section 10 would not be an adequate
or prior remedy to the Company, and that should the Executive violate or
threaten to violate any of the provisions of such covenant, the Company, its
successors or assigns, shall be entitled to obtain a temporary or permanent
injunction against the Executive in any court having personal and subject
matter jurisdiction, prohibiting any further violation of any such covenants.
The injunctive relief provided herein shall be in addition to any award of
damages, compensatory, exemplary or otherwise, payable by reason of such
violation. The running of the term of the noncompetition period shall be
extended day for day for any period during which the Executive is in breach of
the covenants and agreements contained herein for any reason whatsoever. The
Executive further agrees that the Company need not post any bond in connection
with seeking to obtain injunctive relief under this Section 10.

               (d) The Executive acknowledges that this Agreement has been
negotiated at arm's length by the parties, neither being under any compulsion
to enter into this Agreement, and that the foregoing restrictive covenant does
not in any respect inhibit his ability to earn a livelihood in his chosen
profession without violating the restrictive covenant contained herein. The
Company by these presents has attempted to limit the Executive's right to
compete only to the extent necessary to protect the Company from unfair
competition. The Company recognizes, however, that reasonable people may differ
in making such a determination. Consequently, the Company agrees that if the
scope or enforceability of the noncompetition covenant contained herein is in
any way disputed at any time, a court or other trier of fact may modify and
enforce



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<PAGE>   10



the covenant to the extent that it believes to be reasonable under the
circumstances existing at the time.

         11. Notices. All notices or deliveries authorized or required pursuant
to this Agreement shall be deemed to have been given when in writing and
personally delivered, one day after being deposited prepaid with a national
overnight delivery service for next day delivery, or three days after being
deposited in the U.S. mail, certified, return receipt requested, postage
prepaid, addressed to the parties at the following addresses or to such other
addresses as either may designate in writing to the other party:

         To the Company:            Studio Plus Hotels, Inc.
                                            1999 Richmond Road, Suite Four
                                            Lexington, Kentucky  40502
                                            Attn:  Board of Directors

         To the Executive:          Michael J. Moriarty
                                            c/o Studio Plus Hotels, Inc.
                                            1999 Richmond Road, Suite Four
                                            Lexington, Kentucky  40502

         12. Entire Agreement. This Agreement contains the entire understanding
between the parties with respect to the subject matter hereof and shall not be
modified, waived or discharged, in any manner except by an instrument in
writing signed, by or on behalf of, the Executive and an officer authorized by
the Board. Waiver by any party of any breach of or failure to comply with any
provision of this Agreement by the other party shall be not construed as, or
constitute, a continuing waiver of such provision, or a waiver of any other
breach of, or failure to comply with, any other provision of this Agreement;
provided, however, that any amendment or termination of the covenants of
noncompetition and confidentiality in Section 10 must be approved by a majority
of the Company's directors who are not officers or employees of the Company.
This Agreement shall be binding upon and inure to the benefit of the heirs,
successors, legal representations and assigns of the parties hereto.

         13. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Kentucky. Should any provision
of this Agreement be declared and determined by any court to be illegal or
invalid, the validity of the remaining parts, terms or provisions shall not be
affected thereby and said illegal or invalid part, term or provision shall be
deemed not to be a part of this Agreement. Should any provision of this
Agreement be declared and determined by any Court to be unenforceable as
written, the Court shall interpret the unenforceable provision in a manner so
it will be enforceable to the maximum extent possible to require the least
change in the meaning of the language being interpreted.

         14. Assignment. The Executive acknowledges that his services are
unique and personal. Accordingly, the Executive may not assign his rights or
delegate his duties or obligations under this Agreement. The Company shall
assign its rights and obligations under this Agreement in connection with a
merger, business combination or sale of substantially all of the assets of the
Company. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation, liquidation or otherwise) to all or
substantially all



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of the business and/or assets of the Company to agree to assume all of the
obligations of the Company under this Agreement upon or prior to such
succession taking place. A copy of such assumption and agreement shall be
delivered to the Executive promptly after its execution by the successor. As
used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which is
required to execute and deliver the agreement provided for in this Section 14
or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.

         15. Headings. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.

         16. Tax Withholding. The Company may withhold from any amounts payable
to the Executive hereunder all federal, state, city or other taxes that the
Company may reasonably determine are required to be withheld pursuant to any
applicable law or regulation.

         17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original.

         18. Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.

                              STUDIO PLUS HOTELS, INC.

                              BY:        /s/ Norwood Cowgill, Jr.
                                    --------------------------------------
                                    Name:   NORWOOD COWGILL, JR.
                                    Title:     Chairman of the Board



                              EXECUTIVE:



                                         /s/ Michael J. Moriarty
                                    --------------------------------------
                                    Name:  Michael J. Moriarty



                                       59