Document:

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                                                                    Exhibit 10.3

                          APPLE HOSPITALITY FIVE, INC.

                               2002 INCENTIVE PLAN

                           EFFECTIVE DECEMBER __, 2002

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                          APPLE HOSPITALITY FIVE, INC.

                 2002 INCENTIVE PLAN EFFECTIVE DECEMBER __, 2002

     1.   Purpose. The purpose of this Apple Hospitality Five, Inc. 2002
Incentive Plan (the "Plan") is to further the long term stability and financial
success of Apple Hospitality Five, Inc. (the "Company) by attracting and
retaining key employees of the Company through the use of stock incentives. It
is believed that ownership of Company stock will stimulate the efforts of those
employees of the Company upon whose judgment and interest the Company is and
will be largely dependent for the successful conduct of its business. It is also
believed that Incentive Awards granted to such employees under this Plan will
strengthen their desire to remain with the Company and will further the
identification of those employees' interests with those of the Company's
shareholders. The Plan is intended to conform to the provisions of Securities
and Exchange Commission Rule 16b-3. Definitions. As used in the Plan, the
following terms have the meanings indicated:

     2.   Definitions.

          (a)  "Act" means the Securities Exchange Act of 1934, as amended.

          (b)  "Applicable Withholding Taxes" means the aggregate amount of
     federal, state and local income and payroll taxes that the Employer is
     required to withhold in connection with any exercise of an Option or any
     lapse of restrictions on Restricted Stock.

          (c)  "Board" means the board of directors of the Company.

          (d)  "Change of Control" means:

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               (i)  The acquisition, other than from the Company, by any
          individual, entity or group (within the meaning of Section 13(d)(3) or
          14(d)(2) of the Act), of beneficial ownership (within the meaning of
          Rule 13d-3 promulgated under the Act) of 20% or more of either the
          then outstanding shares of common stock of the Company or the combined
          voting power of the then outstanding voting securities of the Company
          entitled to vote generally in the election of directors, but excluding
          for this purpose, any such acquisition by the Company or any of its
          subsidiaries, or any employee benefit plan (or related trust) of the
          Company or its subsidiaries, or any corporation with respect to which,
          following such acquisition, more than 50% of, respectively, the then
          outstanding shares of common stock of such corporation and the
          combined voting power of the then outstanding voting securities of
          such corporation entitled to vote generally in the election of
          directors is then beneficially owned, directly or indirectly, by the
          individuals and entities who were the beneficial owners, respectively,
          of the common stock and voting securities of the Company immediately
          prior to such acquisition in substantially the same proportion as
          their ownership, immediately prior to such acquisition, of the then
          outstanding shares of common stock of the Company or the combined
          voting power of the then outstanding voting securities of the Company
          entitled to vote generally in the election of directors, as the case
          may be; or

               (ii) Individuals who, as of the date hereof, constitute the Board
          (as of the date hereof the "Incumbent Board") cease for any reason to
          constitute at least a majority of the Board, provided that any
          individual becoming a director subsequent to the date hereof whose
          election or nomination for election by the

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          Company's shareholders was approved by a vote of at least a majority
          of the directors comprising the Incumbent Board shall be considered as
          though such individual were a member of the Incumbent Board, but
          excluding, for this purpose, any such individual whose initial
          assumption of office is in connection with an actual or threatened
          election contest relating to the election of the Directors of the
          Company (as such terms are used in Rule 14a-11 of Regulation 14A
          promulgated under the Act); or

               (iii)  Approval by the shareholders of the Company of a
          reorganization, merger or consolidation, in each case, with respect to
          which the individuals and entities who were the respective beneficial
          owners of the common stock and voting securities of the Company
          immediately prior to such reorganization, merger or consolidation do
          not, following such reorganization, merger or consolidation,
          beneficially own, directly or indirectly, more than 50% of,
          respectively, the then outstanding shares of common stock and the
          combined voting power of the then outstanding voting securities
          entitled to vote generally in the election of directors, as the case
          may be, of the corporation resulting from such reorganization, merger
          or consolidation, or a complete liquidation or dissolution of the
          Company or a sale or other disposition of all or substantially all of
          the assets of the Company.

          (e)  "Code" means the Internal Revenue Code of 1986, as amended.

          (f)  "Committee" means the committee appointed by the Board as
     described under Section 13.

          (g)  "Company" means Apple Hospitality Five, Inc., a Virginia
     corporation.

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          (h)  "Company Stock" means Units consisting of one common share and
     one Series A preferred share, no par value, of the Company. If the par
     value of the Company Stock is changed, or in the event of a change in the
     capital structure of the Company (as provided in Section 12), the shares
     resulting from such a change shall be deemed to be Company Stock within the
     meaning of the Plan.

          (i)  "Date of Grant" means the date on which an Incentive Award is
     granted by the Committee.

          (j)  "Disability" or "Disabled" means a physical or mental condition
     that prevents the Participant from performing his customary duties with the
     Employer. The Committee shall determine whether a Disability exists on the
     basis of competent medical evidence, and such determination shall be
     conclusive.

          (k)  "Employer" means the Company.

          (l)  "Fair Market Value" means, on any given date, (i) if the Company
     Stock is traded on an exchange, the closing registered sales prices of the
     Company Stock on such day on the exchange on which it generally has the
     greatest trading volume, (ii) if the Company Stock is traded on the
     over-the-counter market, the average between the closing bid and asked
     prices on such day as reported by NASDAQ, or (iii) if the Company Stock is
     not traded on any exchange or over-the-counter market, the fair market
     value shall be determined by the Board using any reasonable method in good
     faith.

          (m)  "Incentive Award" means, collectively, the award of an Option or
     Restricted Stock under the Plan.

          (n)  "Initial Closing" means the first closing of the Offering that
     will occur after the Minimum Offering is achieved.

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          (o)  "Insider" means a person subject to Section 16(b) of the Act.

          (p)  "Minimum Offering" means the sale of 2,857,143 shares of Company
     Stock pursuant to the Offering.

          (q)  "Nonstatutory Stock Option" means an Option that does not meet
     the requirements of Code section 422, or, even if meeting the requirements
     of Code section 422, is not intended to be an incentive stock option and is
     so designated.

          (r)  "Offering" means, collectively, (1) the sale of up to $30,000,000
     in shares of Company Stock to the public and the registration of such
     shares with the Securities and Exchange Commission, as authorized by
     resolutions of the Board dated August 3, 1992 (the "Initial Offering"), and
     (2) the issuance of any additional shares of Company Stock as authorized by
     resolutions of the Board from time to time, which issuance occurs before
     the termination of this Plan (the "Additional Offerings").

          (s)  "Option" means a right to purchase Company Stock granted under
     the Plan, at a price determined in accordance with the Plan.

          (t)  "Participant" means any employee of the Employer who receives an
     Incentive Award under the Plan.

          (u)  "Restricted Stock" means Company Stock awarded upon the terms and
     subject to the restriction set forth in Section 6.

          (v)  "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
     Commission promulgated under the Act. A reference in the Plan to Rule 16b-3
     shall include a reference to any corresponding rule (or number
     redesignation) of any amendments to Rule 16b-3 enacted after the effective
     date of the Plan's adoption.

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          (w)  "Window Period" means the period beginning on the third business
     day and ending on the twelfth business day following the release for
     publication of quarterly or annual summary statements of the Company's
     sales and earnings. The release for publication shall be deemed to have
     occurred if the specified financial data (i) appears on a wire service,
     (ii) appears in a financial news service, (iii) appears in a newspaper of
     general circulation, or (iv) is otherwise made publicly available.

     3.   General. The following types of Incentive Awards may be granted under
the Plan: Options and Restricted Stock. Options granted under the Plan shall be
Nonstatutory Stock Options.

     4.   Stock. Subject to Section 12 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of (1) 35,000 shares of Company Stock plus
(2) 4.625% of the number of shares of Company Stock sold in the Initial Offering
in excess of the Minimum Offering plus (3) 5.0% of the total number of shares of
Company Stock sold in the Additional Offerings, which shall be authorized, but
unissued shares. Shares allocable to Options or portions thereof granted under
the Plan that expire or otherwise terminate unexercised may again be subjected
to an Option under the Plan. The Committee is expressly authorized to make an
Incentive Award to a Participant conditioned upon the surrender for cancellation
of an option granted under an existing Incentive Award. For purposes of
determining the number of shares that are available for Incentive Awards under
the Plan, such number shall, to the extent permissible under Rule 16b-3, include
the number of shares surrendered by an optionee or retained by the Company in
payment of Applicable Withholding Taxes.

     5.   Eligibility.

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          (a)  All present and future employees of the Employer who hold
     positions with management responsibilities with the Employer (or any parent
     or subsidiary of the Company, whether now existing or hereafter created or
     acquired) shall be eligible to receive Incentive Awards under the Plan. The
     Committee shall have the power and complete discretion, as provided in
     Section 13, to select eligible employees to receive Incentive Awards and to
     determine for each employee the terms and conditions, the nature of the
     award and the number of shares to be allocated to each employee as part of
     each Incentive Award.

          (b)  The grant of an Incentive Award shall not obligate the Employer
     or any parent or subsidiary of the Company to pay an employee any
     particular amount of remuneration, to continue the employment of the
     employee after the grant or to make further grants to the employee at any
     time thereafter.

     6.   Restricted Stock Awards.

          (a)  Whenever the Committee deems it appropriate to grant Restricted
     Stock, notice shall be given to the Participant stating the number of
     shares of Restricted Stock granted and the terms and conditions to which
     the Restricted Stock is subject. This notice, when accepted in writing by
     the Participant shall become an award agreement between the Company and the
     Participant and certificates representing the shares shall be issued and
     delivered to the Participant. Restricted Stock may be awarded by the
     Committee in its discretion without cash consideration.

          (b)  Restricted Stock issued pursuant to the Plan shall be subject to
     the following restrictions:

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               (i)   No shares of Restricted Stock may be sold, assigned,
          transferred or disposed of by an Insider within a six-month period
          beginning on the Date of Grant, and Restricted Stock may not be
          pledged, hypothecated or otherwise encumbered within a six-month
          period beginning on the Date of Grant if such action would be treated
          as a sale or disposition under Rule 16b-3.

               (ii)  No shares of Restricted Stock may be sold, assigned,
          transferred, pledged, hypothecated, or otherwise encumbered or
          disposed of until the restrictions on such shares as set forth in the
          Participant's award agreement have lapsed or been removed pursuant to
          paragraph (d) or (e) below.

               (iii) If a Participant ceases to be employed by the Employer or a
          parent or subsidiary of the Company, the Participant shall forfeit to
          the Company any shares of Restricted Stock on which the restrictions
          have not lapsed or been removed pursuant to paragraph (d) or (e) below
          on the date such Participant shall cease to be so employed.

          (c)  Upon the acceptance by a Participant of an award of Restricted
     Stock, such Participant shall, subject to the restrictions set forth in
     paragraph (b) above, have all the rights of a shareholder with respect to
     such shares of Restricted Stock, including, but not limited to, the right
     to vote such shares of Restricted Stock and the right to receive all
     dividends and other distributions paid thereon. Certificates representing
     Restricted Stock shall bear a legend referring to the restrictions set
     forth in the Plan and the Participant's award agreement.

          (d)  The Committee shall establish as to each award of Restricted
     Stock the terms and conditions upon which the restrictions set forth in
     paragraph (b) above shall

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lapse. Such terms and conditions may include, without limitation, the lapsing of
such restrictions as a result of the Disability, death or retirement of the
Participant or the occurrence of a Change of Control.

     (e)  Notwithstanding the provisions of paragraphs (b)(ii) and (iii) above,
the Committee may at any time, in its sole discretion, accelerate the time at
which any or all restrictions will lapse or remove any and all restrictions will
lapse or remove any and all such restrictions.

     (f)  Each Participant shall agree at the time his Restricted Stock is
granted, and as a condition thereof, to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment to the Company of, Applicable
Withholding Taxes. Until such amount has been paid or arrangements satisfactory
to the Company have been made, no stock certificate free of a legend reflecting
the restrictions set forth in paragraph (b) above shall be issued to such
Participant.

7.   Stock Options.

     (a)  Whenever the Committee deems it appropriate to grant Options, notice
shall be given to the Participant stating the number of shares for which Options
are granted, the Option price per share, and the conditions to which the grant
and exercise of the Options are subject. This notice, when duly accepted in
writing by the Participant, shall become a stock option agreement between the
Company and the Participant.

     (b)  The exercise price of shares of Company Stock covered by an Option
shall be not less than 100% of the Fair Market Value of such shares on the Date
of Grant.

     (c)  Options may be exercised in whole or in part at such times as may be
specified by the Committee in the Participant's stock option agreement; provided
that, the

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exercise provisions for Options shall in all events not be more liberal than the
following provisions:

          (i)  No Option may be exercised after ten years from the Date of
     Grant.

          (ii) Except as otherwise provided in this paragraph, no Option may be
     exercised unless the Participant is employed by the Employer or a parent or
     subsidiary of the Company at the time of the exercise and has been so
     employed at all times since the Date of Grant. Notwithstanding the
     foregoing, the Committee may at any time, in its sole discretion, modify
     the requirements that, in order to be exercisable thereafter, an Option be
     exercisable on the date of termination of employment and/or such Option be
     exercised within 60 days after the Participant's termination of employment,
     provided that the modification is set forth in the terms and conditions of
     the award agreement between the Company and the Participant. If a
     Participant's employment is terminated other than by reason of his
     Disability or death at a time when the Participant holds an Option that is
     exercisable (in whole or in part), the Participant may exercise any or all
     of the exercisable portion of the Option (to the extent exercisable on the
     date of termination) within 60 days after the Participant's termination of
     employment. If a Participant's employment is terminated by reason of his
     Disability at a time when the Participant holds an Option that is
     exercisable (in whole or in part), the Participant may exercise any or all
     of the exercisable portion of the Option (to the extent exercisable on the
     date of Disability) within 180 days after the Participant's termination of
     employment. If a Participant's employment is terminated by

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     reason of his death at a time when the Participant holds an Option that is
     exercisable (in whole or in part), the Option may be exercised (to the
     extent exercisable on the date of death) within 180 days after the
     Participant's death by the person to whom the Participant's rights under
     the Option shall have passed by will or by the law of descent and
     distribution.

     (d)  Notwithstanding the foregoing, no Option shall be exercisable by an
Insider within the first six months after it is granted (as determined under
Rule 16b-3); provided that, this restriction shall not apply if the Participant
becomes Disabled or dies during the six-month period.

     (e)  The Committee may, in its discretion, grant Options that by their
terms become fully exercisable upon a Change of Control, notwithstanding other
conditions on exercisability in the stock option agreement.

8.   Method of Exercise of Options.

     (a)  Options may be exercised by the Participant giving written notice of
the exercise to the Company, stating the number of shares the Participant has
elected to purchase under the Option. Such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that, if the terms
of an Option so permit, the Participant may (i) deliver shares of Company Stock
(valued at their Fair Market Value on the date of exercise) in satisfaction of
all or any part of the exercise price, (ii) deliver a properly executed exercise
notice together with irrevocable instructions to a broker to deliver promptly to
the Company, from the sale or loan proceeds with respect to the sale of Company
Stock or a loan secured by Company Stock, the amount necessary to pay the
exercise price and, if required by the Committee, Applicable Withholding Taxes,
or

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(iii) deliver an interest bearing promissory note, payable to the Company, in
payment of all or part of the exercise price together with such collateral as
may be required by the Committee at the time of exercise. The interest rate
under any such promissory note shall be established by the Committee and shall
be at least equal to the minimum interest rate required at the time to avoid
imputed interest under the Code.

     (b)  The Company may place on any certificate representing Company Stock
issued upon the exercise of an Option any legend deemed desirable by the
Company's counsel to comply with federal or state securities laws, and the
Company may require a customary written indication of the Participant's
investment intent. Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued a certificate for
the shares of Company Stock acquired, he shall possess no shareholder rights
with respect to the shares.

     (c)  As an alternative to making a cash payment to the Company to satisfy
Applicable Withholding Taxes, if the Option so provides, the Participant may,
subject to the provisions set forth below, elect to (i) deliver shares of
already owned Company Stock or (ii) have the Company retain that number of
shares of Company Stock that would satisfy all or a specified portion of the
Applicable Withholding Taxes. The Committee shall have sole discretion to
approve or disapprove any such election. If the Participant is an Insider, the
following provisions apply to elections to satisfy Applicable Withholding Taxes,
to the extent required by Rule 16b-3:

          (i)  The Participant's election to have the Company retain from the
     shares of Company Stock to be issued upon exercise of an Option the number
     of

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          shares of Company Stock that would satisfy Applicable Withholding
          Taxes must be made at least six months after the Option was granted
          and either:

                     (x)  during a Window Period; or

                     (y)  at least six months before the amount of Applicable
               Withholding Taxes is calculated.

               (ii)  The Participant's election must be irrevocable.

               (iii) Notwithstanding any of the foregoing provisions, the manner
          and timing of elections may be varied from those provided, and
          elections previously made as irrevocable may be revoked, if such
          variance or revocation is permissible under Rule 16b-3.

          (d)  Notwithstanding anything herein to the contrary, Options shall
     always be granted and exercised in such a manner as to conform to the
     provisions of Rule 16b-3.B

     9.   Nontransferability of Options. Options by their terms shall not be
transferable except by will or by the laws of descent and distribution or, if
permitted by Rule 16b-3, pursuant to a qualified domestic relations order (as
defined in Code section 414(p)) ("QDRO") and shall be exercisable, during the
Participant's lifetime, only by the Participant or, if permitted by Rule 16b-3,
an alternate payee under a QDRO, or by his guardian, duly authorized
attorney-in-fact or other legal representative.

     10.  Effective Date of the Plan. This Plan was originally effective on
September __, 2002, having been approved by the shareholders of the Company on
such date. Until the requirements of any applicable state or federal securities
laws have been met, no Option shall be exercisable.

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     11.  Termination, Modification, Change. If not sooner terminated by the
Board, this Plan, as amended and restated, shall terminate at the close of
business on which the Company's existence terminates (provided, however, that if
the existence of the Company terminates and is reinstated as permitted by law,
the Plan shall continue during the effective period of any reinstatement,
subject to earlier termination pursuant to action of the Board.) No Incentive
Awards shall be made under the Plan after its termination. The Board may
terminate the Plan or any amend the Plan in such respects as it shall deem
advisable; provided that, if and to the extent required by Rule 16b-3, no change
shall be made that increases the total number of shares of Company Stock
reserved for issuance pursuant to Incentive Awards granted under the Plan
(except pursuant to Section 12), materially modifies the requirements as to
eligibility for participation in the Plan, or materially increases the benefits
accruing to Participants under the Plan, unless such change is authorized by the
shareholders of the Company. Notwithstanding the foregoing, the Board may
unilaterally amend the Plan and Incentive Awards as it deems appropriate to
ensure compliance with Rule 16b-3. Except as provided in the preceding sentence,
a termination or amendment of the Plan shall not, without the consent of the
Participant, adversely affect the Participant's rights under an Incentive Award
previously granted to him.

     12.  Change in Capital Structure.

          (a)  In the event of a stock dividend, stock split or combination of
     shares, recapitalization or merger in which the Company is the surviving
     corporation or other change in the Company's capital stock (including, but
     not limited to, the creation or issuance to shareholders generally of
     rights, options or warrants for the purchase of common stock or preferred
     stock of the Company), the number and kind of shares of

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     stock or securities of the Company to be subject to the Plan and to Options
     then outstanding or to be granted thereunder, the maximum number of shares
     or securities which may be delivered under the Plan, the exercise price and
     other relevant provisions shall be appropriately adjusted by the Committee,
     whose determination shall be binding on all persons. If the adjustment
     would produce fractional shares with respect to any unexercised Option, the
     Committee may adjust appropriately the number of shares covered by the
     Option so as to eliminate the fractional shares.

          (b)  If the Company is a party to a consolidation or a merger in which
     the Company is not the surviving corporation, a transaction that results in
     the acquisition of substantially all of the Company's outstanding stock by
     a single person or entity, or a sale or transfer of substantially all of
     the Company's assets, the Committee may take such actions with respect to
     outstanding Incentive Awards as the Committee deems appropriate.

          (c)  Notwithstanding anything in the Plan to the contrary, the
     Committee may take the foregoing actions without the consent of any
     Participant, and the Committee's determination shall be conclusive and
     binding on all persons for all purposes.

     13.  Administration of the Plan. The Plan shall be administered by the
Committee, which shall consist of not less than two members of the Board, who
shall be appointed by the Board. The Committee shall have general authority to
impose any limitation or condition upon an Incentive Award the Committee deems
appropriate to achieve the objectives of the Incentive Award and the Plan and,
without limitation and in addition to powers set forth elsewhere in the Plan,
shall have the following specific authority:

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          (a)  The Committee shall have the power and complete discretion to
     determine (i) which eligible employees shall receive Incentive Awards and
     the nature of each Incentive Award, (ii) the number of shares of Company
     Stock to be covered by each Incentive Award, (iii) the Fair Market Value of
     Company Stock, (iv) the time or times when an Incentive Award shall be
     granted, (v) whether an Incentive Award shall become vested over a period
     of time and when it shall be fully vested, (vi) when Options may be
     exercised, (vii) whether a Disability exists, (viii) the manner in which
     payment will be made upon the exercise of Options, (ix) conditions relating
     to the length of time before disposition of Company Stock received upon the
     exercise of Options is permitted, (x) whether to approve a Participant's
     elections under the Plan, (xi) notice provisions relating to the sale of
     Company Stock acquired under the Plan, and (xii) any additional
     requirements relating to Incentive Awards that the Committee deems
     appropriate. The Committee shall have the power to amend the terms of
     previously granted Incentive Awards so long as the terms as amended are
     consistent with the terms of the Plan and provided that the consent of the
     Participant is obtained with respect to any amendment that would be
     detrimental to him, except that such consent will not be required if such
     amendment is for the purpose of complying with Rule 16b-3.

          (b)  The Committee may adopt rules and regulations for carrying out
     the Plan. The interpretation and construction of any provision of the Plan
     by the Committee shall be final and conclusive. The Committee may consult
     with counsel, who may be counsel to the Company, and shall not incur any
     liability for any action taken in good faith in reliance upon the advice of
     counsel.

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          (c)  A majority of the members of the Committee shall constitute a
     quorum, and all actions of the Committee shall be taken by a majority of
     the members present. Any action may be taken by a written instrument signed
     by all of the members, and any action so taken shall be fully effective as
     if it had been taken at a meeting.

          (d)  The Board from time to time may appoint members previously
     appointed and may fill vacancies, however caused, in the Committee. Insofar
     as it is necessary to satisfy the requirements of Section 16(b) of the Act,
     no member of the Committee shall be eligible to participate in the Plan or
     in any other plan of the Company or any parent or subsidiary of the Company
     that entitles participants to acquire stock, stock options or stock
     appreciation rights of the Company or any parent or subsidiary of the
     Company, and no person shall become a member of the Committee if, within
     the preceding one-year period, the person shall have been eligible to
     participate in such a plan (other than a "safe harbor plan" permitted under
     Rule 16b-3(c)(2)(i) and (ii)).

     14.  Notice. All notices and other communications required or permitted
to be given under this Plan be in writing and shall be deemed to have been duly
given if delivered personally or mailed first class, postage prepaid, as follows
(a) if to the Company - at its principal business address to the attention of
the President; (b) if to any Participant - at the last address of the
Participant known to the sender at the time the notice or other communication is
sent.

     15.  Governing Law. The terms of this Plan shall be governed by the laws of
the Commonwealth of Virginia.

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     IN WITNESS WHEREOF, the Company has caused this Plan to be executed this __
day of September __, 2002.

                                                APPLE HOSPITALITY FIVE, INC.

                                                By _____________________________
                                                   Glade M. Knight
                                                   Chairman of the Board

                                       19<PAGE>

                                                                    Exhibit 10.4

                          APPLE HOSPITALITY FIVE, INC.

                  2002 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

                           EFFECTIVE DECEMBER __, 2002

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                          APPLE HOSPITALITY FIVE, INC.

                  2002 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

                           EFFECTIVE DECEMBER __, 2002

     1.   Purpose. The purpose of this Apple Hospitality Five, Inc. 2002
Non-Employee Directors Stock Option Plan (the "Plan") is to encourage ownership
in Apple Hospitality Five, Inc. (the "Company) by non-employee members of the
Board, in order to promote long-term stockholder value and to provide
non-employee members of the Board with an incentive to continue as directors of
the Company.

     2.   Definitions. As used in the Plan, the following terms have the
meanings indicated:

          (a)  "Act" means the Securities Exchange Act of 1934, as amended.

          (b)  "Board" means the board of directors of the Company.

          (c)  "Code" means the Internal Revenue Code of 1986, as amended.

          (d)  "Company" means Apple Hospitality Five, Inc., a Virginia
     corporation.

          (e)  "Company Stock" means Units consisting of one common share and
     one Series A preferred share, no par value, of the Company. If the par
     value of the Company Stock is changed, or in the event of a change in the
     capital structure of the Company (as provided in Section 12), the shares
     resulting from such a change shall be deemed to be Company Stock within the
     meaning of the Plan.

          (f)  "Date of Grant" means the date as of which an Eligible Director
     is automatically awarded an Option pursuant to Section 7.

          (g)  "Disability" or "Disabled" means a physical or mental condition
     that prevents the director from performing his customary duties with the
     Company. The

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     Board shall determine whether a Disability exists on the basis of competent
     medical evidence, and such determination shall be conclusive.

          (h)  "Eligible Director" means a director described in Section 4.

          (i)  "Employer" means the Company.

          (j)  "Fair Market Value" means, on any given date, (i) if the Company
     Stock is traded on an exchange, the closing registered sales prices of the
     Company Stock on such day on the exchange on which it generally has the
     greatest trading volume, (ii) if the Company Stock is traded on the
     over-the-counter market, the average between the closing bid and asked
     prices on such day as reported by NASDAQ, or (iii) if the Company Stock is
     not traded on any exchange or over-the-counter market, the fair market
     value shall be determined by the Board using any reasonable method in good
     faith.

          (k)  "Initial Closing" means the first closing of the Offering that
     will occur after the Minimum Offering is achieved.

          (l)  "Insider" means a person subject to Section 16(b) of the Act.

          (m)  "Minimum Offering" means the sale of 2,857,143 Units of Company
     Stock pursuant to the Offering.

          (n)  "Offering" means, collectively, (1) the sale of up to $30,000,000
     in shares of Company Stock to the public and the registration of such
     shares with the Securities and Exchange Commission, as authorized by
     resolutions of the Board dated September __, 2002 (the "Initial Offering"),
     and (2) the issuance of any additional shares of Company Stock as
     authorized by resolutions of the Board from time to time, which issuance
     occurs before the termination of this Plan (the "Additional Offerings").

                                       2

<PAGE>

          (o)  "Option" means a right to acquire Company Stock granted under the
     Plan, at a price determined in accordance with the Plan.

     3.   Administration. The Plan shall be administered by the Board. Options
shall be granted as described in Section 7. However, the Board shall have all
powers vested in it by the terms of the Plan, including, without limitation, the
authority (within the limitations described herein) to prescribe the form of the
agreement embodying the grant of Options, to construe the Plan, to determine all
questions arising under the Plan, and to adopt and amend rules and regulations
for the administration of the Plan as it may deem desirable. Any decision of the
Board in the administration of the Plan, as described herein, shall be final and
conclusive. The Board may act only by a majority of its members in office,
except that members thereof may authorize any one or more of their number or any
officer of the Company to execute and deliver documents on behalf of the Board.
No member of the Board shall be liable for anything done or omitted to be done
by him or any other member of the Board in connection with the Plan, except for
his own willful misconduct or as expressly provided by statue.

     4.   Participation in the Plan. Each director of the Company who is not
otherwise an employee of the Employer or any subsidiary of the Company and was
not an employee of the Employer or subsidiary for a period of at least one year
before the Date of Grant shall be eligible to participate in the Plan.

     5.   Stock Subject to the Plan. Subject to Section 12 of the Plan, there
shall be reserved for issuance under the Plan an aggregate of 45,000 shares of
Company Stock plus 2.0% of the total number of shares of Company Stock issued in
the Offering in excess of the Minimum Offering, which shall be authorized, but
unissued shares. Shares allocable to Options or portions

                                       3

<PAGE>

thereof granted under the Plan that expire or otherwise terminate unexercised
may again be subjected to an Option under the Plan.

     6.   Non-Statutory Stock Options. All options granted under the Plan shall
be non-statutory in nature and shall not be entitled to special tax treatment
under Code section 422.

     7.   Award, Terms, Conditions and Form of Options. Each Option shall be
evidenced by a written agreement in such form as the Board shall from time to
time approve, which agreement shall comply with and be subject to the following
terms and conditions:

          (a)  Automatic Award of Option.

               (i)   As of the Initial Closing, each Eligible Director shall
          automatically receive an Option to purchase 500 shares of Company
          Stock plus 0.0125% of the number of shares of Company Stock in excess
          of the Minimum Offering sold by the Initial Closing.

               (ii)  As of each June 1 during the years 2003 and ending upon the
          termination of the Plan, each Eligible Director shall automatically
          receive an Option to purchase 0.02% of the total number of shares of
          Company Stock issued and outstanding on that date.

               (iii) [As of the effective date of the amendment and restatement
          of this Plan, each Eligible Director shall automatically receive an
          Option to purchase 5,000 shares of Company Stock.]

               (iv)  As of the election as a director of any new person who
          qualifies as an Eligible Director, such Eligible Director shall
          automatically receive an Option to purchase 5,000 shares of Company
          Stock.

                                       4

<PAGE>

               (v)  If at any time under the Plan there are not sufficient
          shares available to fully permit the automatic Option grants described
          in this paragraph, the Option grants shall be reduced pro rate (to
          zero if necessary) so as not to exceed the number of shares available.

          (b)  Option Exercise Price. The Option exercise price shall be the
     Fair Market Value of the shares of Company Stock subject to the Option on
     the Date of Grant.

          (c)  Options Not Transferable. An Option shall not be transferable by
     the optionee otherwise than by will, or by the laws of descent and
     distribution, and shall be exercised during the lifetime of the optionee
     only by him. An Option transferred by will or by the laws of descent and
     distribution may be exercised by the optionee's personal representative
     within one year of the date of the optionee's death to the extent the
     optionee could have exercised the Option on the date of his death. No
     Option or interest therein may be transferred, assigned, pledged or
     hypothecated by the optionee during his lifetime, whether by operation of
     law or otherwise, or be made subject to execution, attachment or similar
     process.

          (d)  Exercise of Options. In no event shall an Option be exercisable
     earlier than six months from the later of the Date of Grant or the date of
     approval of the Plan by stockholders of the Company. Furthermore, no Option
     may be exercised:

               (i)  Before any amendment or restatement that requires
          shareholder approval pursuant to Section 13 of the Plan, is approved
          by stockholders of the Company;

               (ii) Unless at such time the optionee is a director of the
          Company, except that he may exercise the Option within three years of
          the date he ceases to

                                       5

<PAGE>

          be a director of the Company if he ceased to be a director more than
          six months after the Date of Grant of the Option;

               (iii) After the expiration of ten years from the Date of Grant;
          and

               (iv)  Except by written notice to the Company at its principal
          office, stating the number of shares the optionee has elected to
          purchase, accompanied by payment in cash and/or by delivery to the
          Company of shares of Company Stock (valued at Fair Market Value on the
          date of exercise) in the amount of the full Option exercise price for
          the shares of Company Stock being acquired thereunder.

     8.   Withholding. If the Company is required by law to withhold federal or
state income taxes when an Option is exercised, the Company shall have the right
to retain or sell without notice shares of Company Stock having a Fair Market
Value sufficient on such date or dates as may be determined by the Board (but
not more than five business days prior to the date on which such shares would
otherwise have been delivered) to cover the amount of any federal or state
income tax required to be withheld or otherwise deducted and paid with respect
to such payment and the exercise of the Option, remitting any balance to the
optionee; provided, however, that the optionee shall have the right to make
other arrangements satisfactory to the Company or to provide the Company with
the funds to enable it to pay such tax. Notwithstanding the foregoing, the
Company shall not sell shares of Company Stock if the Optionee is an Insider and
such sale will cause the Optionee to incur a liability under Section 16(b) of
Exchange Act.

     9.   Modification, Extension and Renewal of Options. The Board shall have
the power to modify, extend or renew outstanding Options and to authorize the
grant of new options in substitution therefor, provided that any such action may
not enhance the rights of the optionee

                                       6

<PAGE>

without stockholder approval or have the effect of altering, enhancing or
impairing any rights or obligations of any person under any Option previously
granted without the consent of the optionee.

     10.  Termination. The Plan shall terminate upon the earlier of:

          (a)  The adoption of a resolution of the Board terminating the Plan;
     or

          (b)  The date on which the Company's existence terminates (provided,
     however, that if the existence of the Company is reinstated as permitted by
     law, the Plan shall continue during the effective period of any
     reinstatement, subject to earlier termination pursuant to Section 10(a)
     above).

No termination of the Plan shall without his consent materially and adversely
affect any of the rights or obligations of any person under any Option
previously granted under the Plan.

     11.  Limitation of Rights..

          (a)  No Right to Continue as a Director. Neither the Plan nor any
     action taken pursuant to the Plan shall constitute or be evidence of any
     agreement or understanding, express or implied, that the Company will
     retain any person as a director for any period of time.

          (b)  No Stockholders Rights Under Options. An optionee shall have no
     rights as a stockholder with respect to shares covered by his Option until
     the date of exercise of the Option, and, except as provided in Section 12,
     no adjustment will be made for dividends or other rights for which the
     record date is prior to the date of such exercise.

     12.  Changes in Capital Structure.

          (a)  In the event of a stock dividend, stock split or combination of
     shares, recapitalization or merger in which the Company is the surviving
     corporation or other

                                       7

<PAGE>

     change in the Company's capital stock (including, but not limited to, the
     creation or issuance to shareholders generally of rights, options or
     warrants for the purchase of common stock or preferred stock of the
     Company), the number and kind of shares of stock or securities of the
     Company to be subject to the Plan and to Options then outstanding or to be
     granted thereunder, the maximum number of shares or securities which may be
     delivered under the Plan, the exercise price and other relevant provisions
     shall be appropriately adjusted by the Board, whose determination shall be
     binding on all persons. If the adjustment would produce fractional shares
     with respect to any unexercised Option, the Board may adjust appropriately
     the number of shares covered by the Option so as to eliminate the
     fractional shares.

          (b)  If the Company is a party to a consolidation or a merger in which
     the Company is not the surviving corporation, a transaction that results in
     the acquisition of substantially all of the Company's outstanding stock by
     a single person or entity, or a sale or transfer of substantially all of
     the Company's assets, the Board may take such actions with respect to
     outstanding Options as the Board deems appropriate.

          (g)  Notwithstanding anything in the Plan to the contrary, the Board
     may take the foregoing actions without the consent of any optionee and the
     Board's determination shall be conclusive and binding on all persons for
     all purposes.

     13.  Amendment of the Plan. The Board (except as provided below) may
suspend or discontinue the Plan or revise or amend the Plan in any respect;
provided, however, that without approval of the stockholders of the Company no
revision or amendment shall increase the number of shares subject to the Plan
(except as provided in Section 12) or materially increase the benefits accruing
to participants under the Plan. The Plan shall not be amended more than once

                                       8

<PAGE>

every six months other than an amendment required to comply with changes in the
Internal Revenue Code or the Employee Retirement Income Security Act of 1974 or
regulations thereunder. Notwithstanding the foregoing, the Board may
unilaterally amend the Plan and the terms of Options granted hereunder to ensure
compliance with Rule 16b-3 of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934, as amended.

     14. Notice. All notices and other communications required or permitted to
be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows: (a) if the Company - at its principal business address to the attention
of the President; (b) if to any participant - at the last address of the
participant know to the sender at the time the notice or other communication is
sent.

     15. Governing Law. The terms of this Plan shall be governed by the laws of
the Commonwealth of Virginia.

     IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
____ day of _________, 2002.

                                    APPLE HOSPITALITY FIVE, INC.

                                    By: ________________________________
                                        Glade M. Knight,
                                        Chairman of the Board

                                       9

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