Document:

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                                                                    Exhibit 10.4

                          MASTER HOTEL LEASE AGREEMENT

                         EFFECTIVE AS OF MARCH 29, 2002

                                     BETWEEN

                   MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP,
                         A DELAWARE LIMITED PARTNERSHIP

                                    AS LESSOR

                                       AND

                          AHM RES I LIMITED PARTNESHIP
                         A VIRGINIA LIMITED PARTNERSHIP

                                    AS LESSEE

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                                TABLE OF CONTENTS
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ARTICLE 1 LEASED PROPERTY; OTHER DEFINITIONS........................................................1
---------
   1.1.  Leased Property............................................................................1
   1.2.  Definitions................................................................................2
ARTICLE 2 TERM; TERMINATION........................................................................14
---------
   2.1.  Term......................................................................................14
   2.2.  Lessor's Option to Terminate Lease........................................................14
   2.3.  Transition Procedures.....................................................................15
   2.4.  Holding Over..............................................................................16
ARTICLE 3 RENT; RENT ADJUSTMENTS...................................................................17
---------
   3.1.  Rent......................................................................................17
   3.2.  Confirmation of Percentage Rent and Sundry Rent...........................................21
   3.3.  Additional Charges........................................................................22
   3.4.  Net Lease; No Termination, Abatement, Etc.................................................22
   3.5.  Material Changes in Economic Climate......................................................23
   3.6.  Rent Adjustment:  Basic Assumptions Incorrect.............................................24
ARTICLE 4 ANNUAL BUDGETS; BOOKS AND RECORDS........................................................25
---------
   4.1.  Annual Budget.............................................................................25
   4.2.  Books and Records.........................................................................25
ARTICLE 5 IMPOSITIONS; HOTEL COSTS.................................................................26
---------
   5.1.  Payment of Impositions....................................................................26
   5.2.  Notice of Impositions.....................................................................27
   5.3.  Adjustment of Impositions.................................................................27
   5.4.  Utility Charges...........................................................................27
   5.5.  Insurance Premiums........................................................................27
   5.6.  Fees......................................................................................27
   5.7.  Ground Rent...............................................................................27
ARTICLE 6 LEASED PROPERTY; LESSEE'S PERSONAL PROPERTY..............................................27
---------
   6.1.  Ownership of the Leased Property..........................................................27
   6.2.  Lessee's Personal Property................................................................27
   6.3.  Lessor's Lien.............................................................................28
   6.4.  Lessor's Option to Purchase Assets of Lessee..............................................28
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY.....................................................28
---------
   7.1.  Condition of the Leased Property..........................................................28
   7.2.  Use of the Leased Property................................................................29
   7.3.  Lessor to Grant Easements, Etc............................................................30
ARTICLE 8 LESSEE'S COMPLIANCE WITH LAW; ENVIRONMENTAL COVENANTS....................................30
---------
   8.1.  Compliance with Legal and Insurance Requirements, Etc.....................................30
   8.2.  Legal Requirement Covenants...............................................................30
   8.3.  Environmental Covenants...................................................................32
ARTICLE 9 MAINTENANCE AND REPAIRS; ENCROACHMENTS AND RESTRICTIONS..................................34
---------
   9.1.  Maintenance and Repairs...................................................................34
   9.2.  Encroachments, Restrictions, Etc..........................................................35
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ARTICLE 10 ALTERATIONS AND IMPROVEMENTS; FF&E RESERVE..............................................36
----------
   10.1.    Alterations............................................................................36
   10.2.    Salvage................................................................................36
   10.3.    Joint Use Agreements...................................................................36
   10.4.    [Reserved].............................................................................36
   10.5.    Furniture, Fixture and Equipment Allowance.............................................36
ARTICLE 11 COMPLIANCE WITH MANAGEMENT AGREEMENT....................................................37
----------
   11.1.    Compliance with Management Agreement...................................................37
ARTICLE 12 PERMITTED LIENS AND CONTESTS............................................................37
----------
   12.1.    Liens..................................................................................37
   12.2.    Permitted Contests.....................................................................38
ARTICLE 13 INSURANCE REQUIREMENTS..................................................................38
----------
   13.1.    General Insurance Requirements.........................................................38
   13.2.    Replacement Cost.......................................................................40
   13.3.    Waiver of Subrogation..................................................................40
   13.4.    Form Satisfactory, Etc.................................................................40
   13.5.    Increase in Limits.....................................................................41
   13.6.    Blanket Policy.........................................................................41
   13.7.    No Separate Insurance..................................................................41
   13.8.    Reports On Insurance Claims............................................................41
ARTICLE 14 CASUALTY INSURANCE PROCEEDS; RECONSTRUCTION.............................................42
----------
   14.1.    Insurance Proceeds.....................................................................42
   14.2.    Reconstruction in the Event of Damage or Destruction Covered by Insurance..............42
   14.3.    Reconstruction in the Event of Damage or Destruction Not Covered by Insurance..........43
   14.4.    Lessee's Property......................................................................43
   14.5.    Abatement of Rent......................................................................43
   14.6.    Damage Near End of Term................................................................44
   14.7.    Waiver.................................................................................44
ARTICLE 15 CONDEMNATION; AWARD ALLOCATION..........................................................44
----------
   15.1.    Definitions............................................................................44
   15.2.    Parties' Rights and Obligations........................................................44
   15.3.    Total Taking...........................................................................44
   15.4.    Allocation of Award....................................................................45
   15.5.    Partial Taking.........................................................................45
   15.6.    Temporary Taking.......................................................................45
ARTICLE 16 DEFAULT BY LESSEE; LESSOR'S REMEDIES....................................................46
----------
   16.1.    Events of Default......................................................................46
   16.2.    Surrender..............................................................................47
   16.3.    Damages................................................................................47
   16.4.    Waiver.................................................................................48
   16.5.    Application of Funds...................................................................49
   16.6.    Lessor's Right to Cure Lessee's Default................................................49
ARTICLE 17 DEFAULT BY LESSOR; LESSEE'S REMEDIES....................................................49
----------
   17.1.    Breach by Lessor.......................................................................49
   17.2.    Lessee's Right to Cure.................................................................50
   17.3.    Provisions Relating to Purchase of the Leased Property by Lessee.......................50
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ARTICLE 18 INDEMNIFICATION.........................................................................50
----------
   18.1.    Indemnification........................................................................50
ARTICLE 19 REIT REQUIREMENTS AND RESTRICTIONS......................................................51
----------
   19.1.    Personal Property Limitation...........................................................51
   19.2.    Sublease Rent Limitation...............................................................52
   19.3.    Sublease Tenant Limitation.............................................................52
   19.4.    Lessee Ownership Limitations...........................................................52
   19.5.    Lessee Officer and Employee Limitation.................................................52
   19.6.    Payments to Affiliates of Lessee.......................................................52
ARTICLE 20 SUBLETTING AND ASSIGNMENT...............................................................53
----------
   20.1.    Subletting and Assignment..............................................................53
   20.2.    Attornment.............................................................................53
   20.3.    Conveyance by Lessor...................................................................53
ARTICLE 21 QUIET ENJOYMENT; RISK OF LOSS...........................................................54
----------
   21.1.    Quiet Enjoyment........................................................................54
   21.2.    Risk of Loss...........................................................................54
ARTICLE 22 LESSOR MORTGAGES; SUBORDINATION OF LEASE................................................54
----------
   22.1.    Lessor May Grant Liens.................................................................54
   22.2.    Subordination of Lease.................................................................54
ARTICLE 23 ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS; INSPECTION RIGHTS..........................55
----------
   23.1.    Estoppel Certificates; Financial Statements............................................55
   23.2.    Lessor's Right to Inspect..............................................................56
ARTICLE 24 APPRAISERS..............................................................................56
----------
   24.1.    Appraisers.............................................................................56
ARTICLE 25 ARBITRATION AND DISPUTE RESOLUTION PROCEDURES...........................................57
----------
   25.1.    Arbitration............................................................................57
   25.2.    Alternative Arbitration................................................................57
   25.3.    Arbitration Procedure..................................................................57
ARTICLE 26 NOTICES.................................................................................58
----------
   26.1.    Notices................................................................................58
ARTICLE 27 MISCELLANEOUS...........................................................................58
----------
   27.1.    No Waiver..............................................................................58
   27.2.    Remedies Cumulative....................................................................58
   27.3.    Waiver of Trial by Jury................................................................59
   27.4.    Acceptance of Surrender................................................................59
   27.5.    No Merger of Title.....................................................................59
   27.6.    Waiver of Presentment, Etc.............................................................59
   27.7.    Action for Damages.....................................................................59
   27.8.    Lease Assumption in Bankruptcy Proceeding..............................................59
   27.9.    Enforceability.........................................................................59
   27.10.   Memorandum of Lease....................................................................60
</TABLE>

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Exhibit A - Legal Description
Schedule 2.1 - Commencement Dates
Schedule 3.1(a) - Base Rents
Schedule 3.1(b) - Suite Revenue Breakpoints

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                          MASTER HOTEL LEASE AGREEMENT

     THIS MASTER HOTEL LEASE AGREEMENT (hereinafter called "Lease"), effective
as of the 29th day of March, 2002, by and between Marriott Residence Inn Limited
Partnership, a Delaware limited partnership (hereinafter called "Lessor"), and
AHM Res Limited Partnership, a Virginia limited partnership (hereinafter called
"Lessee"), provides as follows:

                                   AGREEMENT:
                                   ----------

     Lessor, for and in consideration of the payment of rent by Lessee to
Lessor, the covenants and agreements to be performed by Lessee, and upon the
terms and conditions hereinafter stated, does hereby rent and lease unto Lessee,
and Lessee does hereby rent and lease from Lessor, the Leased Property.

                                    ARTICLE 1
                                    ---------
                       LEASED PROPERTY; OTHER DEFINITIONS

     1.1. Leased Property. The Leased Property shall mean and is comprised of
          ---------------
Lessor's interest in the following:

          (a) the land described in Exhibit A attached hereto and by reference
incorporated herein (the "Land");

          (b) all buildings, structures and other improvements of every kind
including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and offsite), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Leased Improvements");

          (c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements;

          (d) all equipment, machinery, fixtures, and other items of property
required for or incidental to the use of the Leased Improvements as a hotel,
including all components thereof, now and hereafter permanently affixed to or
incorporated into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which to the greatest
extent permitted by law are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto (collectively, the "Fixtures");

          (e) all furniture and furnishings and all other items of personal
property (excluding Inventory and personal property owned by Lessee) located on,
and used in connection with, the operation of the Leased Improvements as a
hotel, together with all replacements, modifications, alterations and additions
thereto; and

<PAGE>

          (f) all existing leases of space within the Leased Property (including
any security deposits or collateral held by Lessor pursuant thereto).

THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS AND OTHER MATTERS WHICH WOULD BE
DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY
THEREOF.

     1.2. Definitions. For all purposes of this Lease, except as otherwise
          -----------
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as are at the time applicable, (c) all
references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:

          Additional Charges: As defined in Section 3.3.
          ------------------

          Affiliate: As used in this Lease the term "Affiliate" of a Person
          ---------
shall mean (a) any Person that, directly or indirectly, controls or is
controlled by or is under common control with such Person, (b) any other 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, manager or trustee of such Person or
any Person controlling, controlled by or under common control with such Person
or 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 (excluding trustees and Persons serving in similar capacities who are not
otherwise an Affiliate of such Person). For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.

          Annual Budget: As used in this Lease, the term "Annual Budget" shall
          -------------
mean an operating and capital budget prepared by Lessee and delivered to Lessor
in accordance with Section 4.1.

          Award: As defined in Subsection 15.1(a).
          -----

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          Base Rate: The rate of interest announced publicly by Citibank, N.A.,
          ---------
in New York, New York, from time to time, as such bank's base rate. If no such
rate is announced or if such rate becomes discontinued, then such other rate as
Lessor may reasonably designate.

          Base Rent: As defined in Subsection 3.1(a).
          ---------

          Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
          ------------
that is not a day on which national banks in the City of New York, New York, or
in the municipality wherein the Leased Property is located are closed.

          CERCLA: The Comprehensive Environmental Response, Compensation and
          ------
Liability Act of 1980, as amended.

          Change of Control: The sale, conveyance, assignment, encumbering,
          -----------------
pledging, hypothecation, granting a security interest in, granting of options
with respect to, or other disposition of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not for
consideration) of any class stock or other equity interests in a Person (other
than among existing holders of interests in such Person on the Commencement Date
and/or family members of such holders and/or trusts for the benefit of any of
the foregoing) that, upon a transfer of any portion thereof, will create in the
transferee thereof, directly or indirectly, a majority of any class of stock or
other equity interests of such Person.

          Claims: As defined in Section 12.2.
          ------

          COBRA: As defined in Subsection 8.2(b).
          -----

          Code: The Internal Revenue Code of 1986, as amended.
          ----

          Commencement Date: As defined in Section 2.1.
          -----------------

          Competitive Set: As defined in the STR Reports. Lessor and Lessee
          ---------------
shall work in good faith to determine any additions and deletions to the Hotel's
Competitive Set, on or before November 15th of each year, with such changes to
be applicable for the following Fiscal Year. In the event Lessor and Lessee
cannot agree to the Hotel's Competitive Set by November 15th of any year, such
unagreed items shall be determined by Smith Travel Research (or, if it refuses
or is unable to do so, by arbitration pursuant to Section 25.2). The costs of
resetting the Hotel's Competitive Set shall be borne equally by the parties.

          Comparison Month: As defined in Subsection 3.1(e).
          ----------------

          Condemnation, Condemnor: As defined in Section 15.1
          -----------------------

          Consolidated Financials: For any fiscal year or other accounting
          -----------------------
period for Lessee and its consolidated subsidiaries, if any, statements of
earnings and retained earnings and of changes in financial position for such
period and for the period from the beginning of the respective fiscal year to
the end of such period and the related balance sheet as at the end of such
period,

                                       3

<PAGE>

together with the notes thereto, all in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared in accordance with generally accepted
accounting principles and audited by independent certified public accountants
acceptable to Lessor in its sole discretion.

          Consumer Price Index: The "U.S. City Average, All Items" Consumer
          --------------------
Price Index for All Urban Consumers published by the Bureau of Labor Statistics
of the United States Department of Labor (Base: 1982-1984=100), or any successor
index thereto. If the Consumer Price Index is hereafter converted to a different
standard reference base or otherwise revised, any determination hereunder that
uses the Consumer Price Index shall be made with the use of such conversion
factor, formula or table for converting the Consumer Price Index as may be
published by the Bureau of Labor Statistics, or, if the Bureau shall no longer
publish the same, then with the use of such conversion factor, formula or table
as may be published by Prentice Hall, Inc., or, failing such publication, by any
other nationally recognized publisher of similar statistical information.

          Date of Taking: As defined in Subsection 15.1(d).
          --------------

          Encumbrance: As defined in Section 22.1.
          -----------

          Environmental Audit: As defined in Subsection 8.3(b).
          -------------------

          Environmental Authority: Any department, agency or other body or
          -----------------------
component of any Government that exercises any form of jurisdiction or authority
under any Environmental Law.

          Environmental Authorization: Any license, permit, order, approval,
          ---------------------------
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.

          Environmental Laws: All applicable federal, state, local and foreign
          ------------------
laws and regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including without limitation laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. Environmental
Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and TSCA.

          Environmental Liabilities: Any and all obligations to pay the amount
          -------------------------
of any judgment or settlement, the cost of complying with any settlement,
judgment or order for injunctive or other equitable relief, the cost of
compliance or corrective action in response to any notice, demand or request
from an Environmental Authority, the amount of any civil penalty or criminal
fine, and any court costs and reasonable amounts for attorney's fees, fees for
witnesses and experts, and costs of investigation and preparation for defense of
any claim or any Proceeding, regardless of whether such Proceeding is
threatened, pending or completed, that may be or have been asserted against or
imposed upon Lessor, Lessee, any Predecessor, the Leased Property or any
property used therein and arising out of:

                                       4

<PAGE>

          (a) Failure of Lessee, Lessor, any Predecessor or the Leased Property
to comply at any time with all Environmental Laws;

          (b) Presence of any Hazardous Materials on, in, under, at or in any
way affecting the Leased Property;

          (c) A Release at any time of any Hazardous Materials on, in, at, under
or in any way affecting the Leased Property;

          (d) Identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any Environmental Law
similar to CERCLA;

          (e) Presence at any time of any above-ground and/or underground
storage tanks, as defined in RCRA or in any applicable Environmental Law on, in,
at or under the Leased Property or any adjacent site or facility; or

          (f) Any and all claims for injury or damage to Persons or property
arising out of exposure to Hazardous Materials originating or located at the
Leased Property, or resulting from operation thereof or any adjoining property.

          Event of Default: As defined in Section 16.1.
          ----------------

          Fair Market Rental: The fair market rental of the Leased Property
          ------------------
means the rental which a willing tenant not compelled to rent would pay a
willing landlord not compelled to lease for the use and occupancy of such Leased
Property pursuant to the Lease for the term in question, (a) assuming that
Lessee is not in default thereunder and (b) determined in accordance with the
appraisal procedures set forth in Article 24 or in such other manner as shall be
mutually acceptable to Lessor and Lessee.

          Fair Market Value: The fair market value of the Leased Property means
          -----------------
an amount equal to the price that a willing buyer not compelled to buy would pay
a willing seller not compelled to sell for such Leased Property, (a) assuming
the same is unencumbered by this Lease, (b) determined in accordance with the
appraisal procedures set forth in Article 24 or in such other manner as shall be
mutually acceptable to Lessor and Lessee, (c) assuming that such seller must pay
customary closing costs and title premiums, and (d) taking into account the
positive or negative effect on the value of the Leased Property attributable to
the interest rate, amortization schedule, maturity date, prepayment penalty and
other terms and conditions of any encumbrance that is assumed by the transferee.
In addition, in determining the Fair Market Value with respect to damaged or
destroyed Leased Property such value shall be determined as if such Leased
Property had not been so damaged or destroyed.

          FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
          -----
amended.

          Fiscal Year: The twelve (12) month period from January 1 to December
          -----------
31, or any shorter period at the beginning or end of the Term.

                                       5

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          Fixtures: As defined in Section 1.1.
          --------

          Force Majeure: An Unavoidable Occurrence, generally affecting travel
          -------------
and/or the hotel or lodging business in the market and/or submarket in which the
Hotel is located.

          Furniture and Equipment: For purposes of this Lease, the terms
          -----------------------
"furniture and equipment" shall mean collectively all furniture, furnishings,
wall coverings, fixtures and hotel equipment and systems located at, or used in
connection with, the Hotel, together with all replacements therefor and
additions thereto, including, without limitation, (i) all equipment and systems
required for the operation of kitchens and bars, laundry and dry cleaning
facilities, (ii) office equipment, (iii) material handling equipment, cleaning
and engineering equipment, (iv) telephone and computerized accounting systems,
and (v) vehicles.

          Government: The United States of America, any state, district or
          ----------
territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any agency or political
subdivision of any of the foregoing.

          Gross Operating Expenses: The term "Gross Operating Expenses" shall
          ------------------------
include (i) all costs and expenses of operating the Hotel included within the
meaning of the term "Total Costs and Expenses" contained in the Uniform System
and, (ii) without duplication, the following: all salaries and employee expense
and payroll taxes (including salaries, wages, bonuses and other compensation of
all employees of the Hotel, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Lease, governmental fees and assessments, common area maintenance
costs and other common area fees and assessments, food, beverages, laundry
service expense, the cost of Inventories, license fees, advertising, marketing,
reservation systems and any and all other operating expenses as are reasonably
necessary for the proper and efficient operation of the Hotel and the Leased
Property incurred by Lessee in accordance with the provisions hereof (excluding,
however, (i) federal, state and municipal excise, sales and use taxes collected
directly from patrons and guests or as a part of the sales price of any goods,
services or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes paid over to federal, state or municipal governments, (ii) the
cost of insurance to be provided under Article 13, (iii) expenditures by Lessor
pursuant to Article 13 and (iv) payments on any Mortgage or other mortgage or
security instrument on the Hotel); all determined in accordance with generally
accepted accounting principles. No part of Lessee's central office overhead or
general or administrative expense (as opposed to that of the Hotel) shall be
deemed to be a part of Gross Operating Expenses, as herein provided. Reasonable
out-of-pocket expenses of Lessee incurred for the account of or in connection
with the Hotel operations, including but not limited to postage, telephone
charges and reasonable travel expenses of employees, officers and other
representatives and consultants of Lessee and its Affiliates, shall be deemed to
be a part of Gross Operating Expenses and such Persons shall be afforded
reasonable accommodations, food, beverages, laundry, valet and other such
services by and at the Hotel without charge to such Persons or Lessee.

          Gross Operating Profit: For any Fiscal Year, the excess of Gross
          ----------------------
Revenues for such Fiscal Year over Gross Operating Expenses for such Fiscal
Year.

                                       6

<PAGE>

          Gross Revenues: All revenues, receipts, and income of any kind derived
          --------------
directly or indirectly by Lessee from or in connection with the Hotel (including
rentals or other payments from tenants, lessees, licensees or concessionaires
but not including their gross receipts) whether on a cash basis or credit, paid
or collected, determined in accordance with generally accepted accounting
principles, excluding, however: (i) funds furnished by Lessor, (ii) federal,
state and municipal excise, sales, and use taxes collected directly from patrons
and guests or as a part of the sales price of any goods, services or displays,
such as gross receipts, admissions, cabaret or similar or equivalent taxes and
paid over to federal, state or municipal governments, (iii) the amount of all
credits, rebates or refunds to customers, guests or patrons, and all service
charges, finance charges, interest and discounts attributable to charge accounts
and credit cards, to the extent the same are paid to Lessee by its customers,
guests or patrons, or to the extent the same are paid for by Lessee to, or
charged to Lessee by, credit card companies, (iv) gratuities or service charges
actually paid to employees, (v) proceeds of insurance and condemnation, (vi)
proceeds from sales other than sales in the ordinary course of business, (vii)
all loan proceeds from financing or refinancings of the Hotel or interests
therein or components thereof, (viii) judgments and awards, except any portion
thereof arising from normal business operations of the Hotel, and (ix) items
constituting "allowances" under the Uniform System.

          Hazardous Materials: All chemicals, pollutants, contaminants, wastes
          -------------------
and toxic substances, including without limitation:

          (a) Solid or hazardous waste, as defined in RCRA or any other
Environmental Law;

          (b) Hazardous substances, as defined in CERCLA or any other
Environmental Law;

          (c) Toxic substances, as defined in TSCA or any other Environmental
Law;

          (d) Insecticides, fungicides, or rodenticides, as defined in FIFRA or
any other Environmental Law; and

          (e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenyl, asbestos and urea formaldehyde.

          Hotel: The hotel and/or other facility offering lodging and other
          -----
services or amenities being operated or proposed to be operated on the Leased
Property.

          Hotel Market Decline: A period of six (6) consecutive calendar months
          --------------------
during which there is (i) a twenty percent (20%) decline in average hotel
occupancy for the Hotel from the average hotel occupancy levels for same period
during the prior calendar year and (ii) a twenty percent (20%) decline in
average hotel occupancy for the Hotel's Competitive Set from the average hotel
occupancy levels for the same period during the prior calendar year, as
published in the applicable STR Reports.

                                       7

<PAGE>

          Impositions: Collectively, all taxes (including, without limitation,
          -----------
all ad valorem, sales and use, single business, gross receipts, transaction,
privilege, rent or similar taxes as the same relate to or are imposed upon
Lessee or its business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), ground rents, water, sewer or
other rents and charges, excises, tax inspection, authorization and similar fees
and all other governmental charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character in
respect of the Leased Property or the business conducted thereon by Lessee
(including all interest and penalties thereon caused by any failure in payment
by Lessee), which at any time prior to, during or with respect to the Term
hereof may be assessed or imposed on or with respect to or be a lien upon (a)
Lessor's interest in the Leased Property, (b) the Leased Property, or any part
thereof or any rent therefrom or any estate, right, title or interest therein,
or (c) any occupancy, operation, use or possession of, or sales from, or
activity conducted on or in connection with the Leased Property, or the leasing
or use of the Leased Property or any part thereof by Lessee. Nothing contained
in this definition of Impositions shall be construed to require Lessee to pay
(1) any tax based on net income (whether denominated as a franchise or capital
stock or other tax) imposed on Lessor or any other Person, or (2) any net
revenue tax of Lessor or any other Person, or (3) any tax imposed with respect
to the sale, exchange or other disposition by Lessor of any Leased Property or
the proceeds thereof, or (4) any single business, gross receipts (other than a
tax on any rent received by Lessor from Lessee), transaction, privilege or
similar taxes as the same relate to or are imposed upon Lessor, except to the
extent that any tax, assessment, tax levy or charge that Lessee is obligated to
pay pursuant to the first sentence of this definition and that is in effect at
any time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (1) or (2) is levied,
assessed or imposed expressly in lieu thereof.

          Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
          -----------------
Indemnified Party.

          Indemnifying Party: Any party obligated to indemnify an Indemnified
          ------------------
Party pursuant to Sections 8.3 or 18.1.

          Insurance Requirements: All terms of any insurance policy required by
          ----------------------
this Lease and all requirements of the issuer of any such policy.

          Inventory: All "Inventories of Merchandise" and "Inventories of
          ---------
Supplies" as defined in the Uniform System, including without limitation linens,
china, silver, glassware and other non-depreciable personal property, and
including any property of the type described in Section 1221(1) of the Code.

          Land: As defined in Section 1.1.
          ----

          Lease: This Lease.
          -----

          Leased Improvements; Leased Property: Each as defined in Section 1.1.
          ------------------------------------

                                       8

<PAGE>

          Legal Requirements: All federal, state, county, municipal and other
          ------------------
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use or alteration thereof (whether by Lessee or otherwise),
whether now in force or hereafter enacted and in force, including (a) all laws,
rules or regulations pertaining to the environment, occupational health and
safety and public health, safety or welfare, and (b) any laws, rules or
regulations that may (1) require repairs, modifications or alterations in or to
the Leased Property or (2) in any way adversely affect the use and enjoyment
thereof; and all permits, licenses and authorizations and regulations relating
thereto and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.

          Lending Institution: Any insurance company, credit company,
          -------------------
federally-insured commercial or savings bank, national banking association,
savings and loan association, employees welfare, pension or retirement fund or
system, corporate profit sharing or pension trust, college or university, or
real estate investment trust, including any corporation qualified to be treated
for federal tax purposes as a real estate investment trust, such trust having a
net worth of at least $10,000,000.

          Lessee: The Lessee designated on this Lease and its respective
          ------
permitted successors and assigns.

          Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
          ------------------------
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's or
member's interest) in Lessee, the officers, directors, stockholders, members,
managers, employees, agents and representatives of Lessee, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, stockholder, member, manager, employee, agent or representative.

          Lessee's Personal Property: As defined in Section 6.2.
          --------------------------

          Lessor: The Lessor designated In this Lease and its respective
          ------
successors and assigns.

          Lessor Indemnified Party: Lessor, any Affiliate of Lessor, any other
          ------------------------
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's or
partnership interest) in Lessor, the officers, directors, stockholders, members,
managers, employees, agents and representatives of the general partner of Lessor
and any partner, agent, or representative of Lessor, and the respective heirs,
personal representatives, successors and assigns of any such officer, director,
stockholder, partner, member, manager, employee, agent or representative.

          Licenses: As defined in Subsection 2.3(a).
          --------

          Management Agreement: The agreement pursuant to which Manager operates
          --------------------
the Hotel.

                                       9

<PAGE>

          Manager: Residence Inn by Marriott, Inc., a Delaware corporation, or
          -------
any successor manager that is retained by Lessee to operate the Hotel pursuant
to this Lease and the Management Agreement.

          Minimum Price: The sum of (a) the equity in the Leased Property at the
          -------------
time of acquisition of the Leased Property by Lessor, plus (b) other capital
expenditures on the Leased Property by Lessor after the date hereof (less
depreciation and amortization thereof) plus (c) the unpaid principal balance
plus accrued interest and any other amounts then due and payable of all
encumbrances against the Leased Property at the time of purchase of the Leased
Property by Lessee, less (x) all proceeds received by Lessor from any financing
or refinancing of the Leased Property after the date hereof (after payment of
any debt refinanced and net of any costs and expenses incurred in connection
with such financing or refinancing, including, without limitation, loan points,
commitment fees and commissions and legal fees) and (y) the net amount (after
deduction of all reasonable legal fees and other costs and expenses, including
without limitation expert witness fees, incurred by Lessor in connection with
obtaining any such proceeds or award) of all insurance proceeds received by
Lessor and awards received by Lessor from any partial Taking of the Leased
Property that are not applied to restoration.

          Mortgage: As defined in Section 22.2.
          --------

          National Economic Decline: A period of six (6) consecutive calendar
          -------------------------
months during which there occurs or continues a ten percent (10%) decline in
average hotel occupancy, from average hotel occupancy levels for the same period
during the prior calendar year, for all open and operating hotels in the United
States as determined from the applicable STR Reports or, if the STR Reports are
not longer published, other reputable national economic data regarding the
hospitality industry.

          Notice: As defined in Article 26.
          ------

          Officer's Certificate: A certificate of Lessee reasonably acceptable
          ---------------------
to Lessor, signed by the chief financial officer or another officer authorized
so to sign by the board of directors or other governing body of Lessee, or
bylaws or limited liability company agreement of Lessee, or any other Person
whose power and authority to act has been authorized by delegation in writing by
any such officer.

          Optional Termination Date: As defined in Section 2.2.
          -------------------------

          Overdue Rate: On any date, a rate equal to the Base Rate plus five
          ------------
percent (5%) per annum, but in no event greater than the maximum rate then
permitted under applicable law.

          Payment Date: Any due date for the payment of any installment of Base
          ------------
Rent.

          Percentage Rent: As defined in Subsection 3.1(b).
          ---------------

                                       10

<PAGE>

          Person: Any Government, natural person, corporation, general or
          ------
limited partnership, limited liability company, stock company or association,
joint venture, association, company, trust, bank, trust company, land trust,
business trust, or other entity.

          Personal Property Taxes: All personal property taxes imposed on the
          -----------------------
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and other personal property owned by Lessee), together with all
replacement, modifications, alterations and additions thereto.

          Predecessor: Any Person whose liabilities arising under any
          -----------
Environmental Law have or may have been retained or assumed by Lessor or Lessee,
either contractually or by operation of law, relating to the Leased Property.

          Primary Intended Use: As defined in Subsection 7.2(b).
          --------------------

          Proceeding: Any judicial action, suit or proceeding (whether civil or
          ----------
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.

          Quarterly Revenues Computation: As defined in Subsection 3.1(b).
          ------------------------------

          RCRA: The Resource Conservation and Recovery Act, as amended.
          ----

          Real Estate Taxes: All real estate taxes, including general and
          -----------------
special assessments, if any, which are imposed upon the Land, and any
improvements thereon.

          Regional Market Decline: A period of six (6) consecutive calendar
          -----------------------
months during which there is a twenty percent (20%) decline in average hotel
occupancy from hotel occupancy levels for the same period during the then prior
calendar year, for all open and operating hotels in the Smith Travel Research
Region in which the Hotel is located, as determined from applicable STR Reports
or, if the STR Reports are no longer published, other reputable regional
economic data regarding the hospitality industry.

          Rejectable Offer Price: An amount equal to the greater of (a) the Fair
          ----------------------
Market Value, determined as of the applicable purchase date, or (b) the Minimum
Price.

          Release: A "Release" as defined in CERCLA or in any Environmental Law,
          -------
unless such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.

          Rent: Collectively, the Base Rent, Percentage Rent, Sundry Rent and
          ----
Additional Charges.

          Repositioning: As defined in Section 3.6.
          -------------

                                       11

<PAGE>

          SARA: The Superfund Amendments and Reauthorization Act of 1986, as
          ----
amended.

          Solvent: As to any Person, (a) the sum of the assets of such Person
          -------
exceeds its liabilities and (b) such Person has sufficient capital with which to
conduct its business as presently conducted and as proposed to be conducted.

          State: The state or commonwealth in which the Hotel is located.
          -----

          STR Reports: Reports compiled by Smith Travel Research, or its
          -----------
successor, which contain historical supply and demand, occupancy, and average
rate information for the Hotel and hotels with which it competes (or, in the
event that Smith Travel Research discontinues providing such information,
reports of similar nature compiled by an authority recognized nationally in the
hospitality industry).

          Subsidiaries: Persons in which Lessee owns, directly or indirectly,
          ------------
more than fifty percent (50%) of the voting stock or control, as applicable.

          Suite Revenue Breakpoint: As defined in Subsection 3.1(b).
          ------------------------

          Suite Revenues: All revenues, receipts, and income of any kind derived
          --------------
directly or indirectly by Lessee from or in connection with the rental of guest
rooms or suites, whether to individuals, groups or transients, at the Hotel,
whether on a cash basis or credit, paid or collected, determined in accordance
with generally accepted accounting principles, but excluding the following:

          (a) The amount of all credits, rebates or refunds to customers, guests
or patrons, and all service charges, finance charges, interest and discounts
attributable to charge accounts and credit cards, to the extent the same are
paid to Lessee by its customers, guests or patrons, or to the extent the same
are paid for by Lessee to, or charged to Lessee by, credit card companies;

          (b) All sales taxes or any other taxes imposed on the rental of such
guest rooms or suites;

          (c) Gratuities or service charges actually paid to employees;

          (d) Proceeds of business interruption and other insurance; and

          (e) Sundry Revenues.

          Sundry Rent: As defined in Section 3.1(c).
          -----------

          Sundry Revenues: All revenues, receipts, and income derived from the
          ---------------
Hotel's meeting rooms, telephones, TV and movie rentals, check room, washroom,
laundry, valet, vending machines, and other sources not specified herein as
Suite Revenues.

                                       12

<PAGE>

          Taking: A taking or voluntary conveyance during the Term hereof of all
          ------
or part of the Leased Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of, any Condemnation
or other eminent domain Proceeding affecting the Leased Property whether or not
the same shall have actually been commenced.

          Term: As defined in Section 2.1.
          ----

          TSCA: The Toxic Substances Control Act, as amended.
          ----

          Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
          ------------------
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the other party hereto to perform any obligations of such party under
this Lease or any guaranty of this Lease.

          Unavoidable Occurrence. The occurrence of strikes, lockouts, labor
          ----------------------
unrest, gasoline and other energy shortages, widespread disruption of air, auto
or other travel, inability to procure materials or services, power or other
utility failure, acts of God (such as hurricanes, tornadoes, earthquakes, floods
and mud slides), governmental restrictions, war or other enemy or terrorist
action, civil commotion, fire, casualty, condemnation or other similar causes,
in each case, if such cause is beyond the reasonable control of Lessee; provided
that (i) lack of funds shall not be deemed a cause beyond the reasonable control
of either party hereto unless such lack of funds is caused by the failure of the
other party hereto to perform any obligations of such party under this Lease or
any guaranty of this Lease, and (ii) any such occurrence is an extraordinary, as
opposed to a routine or cyclical, material event that was not reasonably
foreseeable when the then-applicable Annual Budget was prepared.

          Uneconomic for its Primary Intended Use: A state or condition of the
          ---------------------------------------
Hotel such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body of
Lessee, the Hotel cannot be operated on a commercially practicable basis for its
Primary Intended Use, taking into account, among other relevant factors, the
number of usable rooms and projected revenues, such that Lessee intends to, and
shall, complete the cessation of operations from the Leased Hotel.

          Uniform System: The Uniform System of Accounts for Hotels (9th Revised
          --------------
Edition, 1996) as published by the Hotel Association of New York City, Inc.,
with such later revisions as may be agreed to by both Lessor and Lessee.

          Unsuitable for its Primary Intended Use: A state or condition of the
          ---------------------------------------
Hotel such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body of
Lessee, due to casualty damage or loss through Condemnation, the Hotel cannot
function as an integrated hotel facility consistent with standards applicable to
a well maintained and operated hotel.

                                       13

<PAGE>

          WARN Act: As defined in Subsection 8.2(b).
          --------

          Working Capital: Funds reasonably necessary for the day-to-day
          ---------------
operation of the Hotel's business for a thirty (30) day period, including,
without limitation, amounts sufficient for the maintenance of change and petty
cash funds, operating bank accounts, payrolls, accounts payable, accrued current
liabilities, and funds required to maintain Inventories.

                                    ARTICLE 2
                                    ---------
                                TERM; TERMINATION

     2.1. Term.
          -----

          (a) The term of the Lease (the "Term") shall commence on the date
specified in Schedule 2.1 (the "Commencement Date"), and shall end on the tenth
             ------------
(10th) anniversary of the Commencement Date, unless sooner terminated in
accordance with the provisions hereof or extended to an anniversary of the
initial expiration date pursuant to this Article 2.

          (b) Lessee is granted the option to extend the Term of this Lease for
a period of five (5) years (the "First Extension"), provided that Lessee is not
in default hereunder either at the time of deemed exercise of the option or at
the end of the original Term, which option must be exercised by written notice
to Lessor at least one hundred twenty (120) days prior to the expiration of the
original Term. The First Extension shall be upon the same terms, conditions and
rentals as set forth herein for the original Term.

          (c) Lessee is granted an option to extend the Term for a period of
five (5) years following the end of the First Extension (the "Second
Extension"), provided that Lessee is not in default hereunder either at the time
of exercise of the option or at the end of the First Extension, which option
must be exercised by written notice to Lessor at least one hundred twenty (120)
days prior to the expiration of the First Extension. If such option is
exercised, Lessor and Lessee shall negotiate in good faith modifications to the
Rent for the Second Extension to adjust such Rent to market rates for
arms-length hotel REIT leases between unrelated parties for similar hotel
properties at that time. In the event Lessor and Lessee are unable to agree upon
Rent terms for the Second Extension at least ninety (90) days prior to the
expiration of the Term, the Rent terms for the Second Extension shall be
determined by a panel of three (3) persons who have generally recognized
expertise in evaluating hotel REIT leases and who are not Affiliates of Lessor
or Lessee. Lessee and the Lessor each shall have the right to designate one
panel member and the two (2) panel members so designated will designate the
third panel member. Rent terms approved by at least two (2) of the three (3)
panel members will be binding on Lessee and Lessor for the Second Extension,
which shall be otherwise on the terms set forth herein. In determining the
market rates for the Second Extension, the panel members shall be instructed to
consider hotel REIT lease terms with respect to similar hotel property types.
The Second Extension shall be otherwise upon the same terms and conditions as
set forth herein for the original Term.

     2.2. Lessor's Option to Terminate Lease. In the event Lessor enters into a
          ----------------------------------
bona fide contract to sell the Leased Property to a non-Affiliate, there is a
Change of Control of Lessor, or the

                                       14

<PAGE>

provisions of the Code are amended to permit Lessor to operate hotels or
otherwise render the structure embodied by this Lease to be obsolete, Lessor may
terminate the Lease by giving not less than thirty (30) days' prior Notice to
Lessee of Lessor's election to terminate the Lease effective upon, as
appropriate, the closing under such contract, the date of such Change of
Control, or the effective date of such amendment to the Code (or any other
specified date within 30 days after such date) (the "Optional Termination
Date"). Effective upon the Optional Termination Date, this Lease shall terminate
and be of no further force and effect except as to any obligations of the
parties existing as of such date that survive termination of this Lease. As
compensation for the early termination of its leasehold estate under this
Section 2.2, Lessor shall within 12 months of the Optional Termination Date
either (a) pay to Lessee the fair market value of Lessee's leasehold estate
hereunder plus interest thereon at the Base Rate as of the Optional Termination
Date or (b) offer to lease to Lessee one or more substitute hotel facilities
pursuant to one or more leases that would create for Lessee leasehold estates
that have an aggregate fair market value of no less than the fair market value
of the original leasehold estate, both such values as determined as of the
Optional Termination Date. Lessor also shall pay to Lessee, or reimburse Lessee
for any assignment fees, termination fees or other liabilities arising under the
Management Agreement solely as a result of the assignment or termination of such
Management Agreement in connection with the termination of this Lease under this
Section 2.2. If Lessor elects and complies with the option described in (b)
above, regardless of whether Lessee enters into the lease(s) described therein,
Lessor shall have no further obligations to Lessee with respect to compensation
for the early termination of this Lease. In the event Lessor and Lessee are
unable to agree upon the fair market value of an original or replacement
leasehold estate, it shall be determined by appraisal using the appraisal
procedure set forth in Article 24.

     For the purposes of this Article, fair market value of the leasehold estate
means, as applicable, an amount equal to the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for Lessee's
leasehold estate under this Lease or an offered replacement leasehold estate,
taking into account that the leasehold estate is encumbered by an arm's-length
Management Agreement.

     2.3. Transition Procedures. Upon the expiration or termination of the Term
          ---------------------
of this Lease, for whatever reason (other than a purchase of the Leased Property
by Lessee), Lessor and Lessee shall do the following (and the provisions of this
Section 2.3 shall survive the expiration or termination of this Lease until they
have been fully performed) and, in general, shall cooperate in good faith to
effect an orderly transition of the management and/or lease of the Hotel:

          (a) Transfer of Licenses. Lessee shall use reasonable efforts (i) to
              --------------------
transfer to Lessor or Lessor's nominee all licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities, that may be necessary for the
operation of the Hotel (collectively, "Licenses"), or (ii) if such transfer is
prohibited by law or Lessor otherwise elects, to cooperate with Lessor or
Lessor's nominee in connection with the processing by Lessor or Lessor's nominee
of any applications for, all Licenses; provided, in either case, that the costs
and expenses of any such transfer or the processing of any such application
shall be paid by Lessor or Lessor's nominee.

                                       15

<PAGE>

          (b) Leases and Concessions. Lessee shall assign to Lessor or Lessor's
              ----------------------
nominee simultaneously with the termination of this Lease, and the assignee
shall assume, all leases and concession agreements in effect with respect to the
Hotel then in Lessee's name.

          (c) Books and Records. All books and records for the Hotel kept by
              -----------------
Lessee pursuant to Section 4.2 shall be delivered promptly to Lessor or Lessor's
nominee, simultaneously with the termination of this Lease, but such books and
records shall thereafter be available to Lessee at all reasonable times for
inspection, audit, examination, and transcription for a period of one (1) year
and Lessee may retain (on a confidential basis) copies or computer records
thereof.

          (d) Receivables and Payables. Lessee shall be entitled to retain all
              ------------------------
cash, bank accounts and house banks, and to collect all Gross Revenues and
accounts receivable accrued through the termination date. Lessee shall be
responsible for the payment of Rent, all Gross Operating Expenses and all other
obligations of Lessee accrued under this Lease as of the termination date, and
Lessor or Lessor's nominee shall be responsible for all Gross Operating Expenses
of the Hotel accruing after the termination date.

          (e) Final Accounting. Lessee shall, within forty five (45) days after
              ----------------
the expiration or termination of the Term, prepare and deliver to Lessor a final
accounting statement, dated as of the date of the expiration or termination,
along with a statement of any sums due from Lessee to Lessor pursuant hereto and
payment of such funds.

          (f) Inventory. Lessee shall insure that the Leased Property, at the
              ---------
date of such termination or expiration, has Inventory of a substantially
equivalent nature and amount as exists at the Leased Property on the
Commencement Date, and Lessor or its designee shall acquire such Inventory from
Lessee for a sale price equal to the fair market value of such Inventory.

          (g) Surrender. Lessee will, upon the expiration or prior termination
              ---------
of the Term, vacate and surrender the Leased Property to Lessor in the condition
in which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and repair,
as would a prudent owner, during the entire Term of the Lease), or damage by
casualty or Condemnation (subject to the obligations of Lessee to restore or
repair as set forth in the Lease)

     The provisions of this Section 2.3 shall survive the expiration or
termination of this Lease until they have been fully performed. Nothing
contained herein shall limit Lessor's rights and remedies under this Lease if
such termination occurs as the result of an Event of Default.

     2.4. Holding Over. If Lessee for any reason remains in possession of the
          ------------
Leased Property after the expiration or earlier termination of the Term, such
possession shall be as a tenant at sufferance during which time Lessee shall pay
as rental each month 150% of the aggregate of (a) one-twelfth of the aggregate
Base Rent and Percentage Rent payable with respect to the last Fiscal Year of
the Term, (b) all Additional Charges accruing during the applicable month and
(c) all other sums, if any, payable by Lessee under this Lease with respect to
the Leased Property. During such period, Lessee shall be obligated to perform
and observe all of the terms, covenants and conditions

                                       16

<PAGE>

of this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenancies at sufferance, to continue its occupancy and
use of the Leased Property. Nothing contained herein shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease.

                                    ARTICLE 3
                                    ---------
                             RENT; RENT ADJUSTMENTS

     3.1. Rent. Lessee will pay to Lessor in lawful money of the United States
          ----
of America which shall be legal tender for the payment of public and private
debts, in immediately available funds, at Lessor's address set forth in Article
26 hereof or at such other place or to such other Person as Lessor from time to
time may designate in a Notice, all Base Rent, Percentage Rent, Sundry Rent and
Additional Charges, during the Term, as follows:

          (a) Base Rent: The annual sum specified in Schedule 3.1(a) (prorated
              ---------                              ---------------
for fiscal year 2002), as adjusted pursuant to Subsection 3.1(e) hereof, payable
in advance in equal, consecutive monthly installments, on or before the tenth
day of each calendar month of the Term ("Base Rent"); provided, however, that
the first monthly payment of Base Rent shall be payable during the second
calendar month of the Term, and that the first and last monthly payments of Base
Rent shall be pro rated as to any partial month (subject to adjustment as
provided in Sections 14.5, 15.3 and 15.5).

          (b) Percentage Rent: For each calendar quarter during the Term
              ---------------
commencing with the calendar quarter in which the Commencement Date falls and
ending with the calendar quarter in which the Term (including any applicable
extensions) ends, Lessee shall pay percentage rent ("Percentage Rent").

     Percentage Rent for the applicable quarter shall be an amount equal to the
following formula:

          The amount equal to the applicable Quarterly Revenues Computation (as
     defined below) less the sum of

               (i) an amount equal to the Base Rent paid with respect to such
          quarter and all prior calendar quarters of the applicable Fiscal Year
          and

               (ii) an amount equal to Percentage Rent paid with respect to all
          prior calendar quarters of the applicable Fiscal Year.

For the purpose of the above formula:

     The quarterly revenues computation ("Quarterly Revenues Computation") is
equal to the amount obtained by adding, for the applicable calendar quarter, an
amount equal to the sum of (i) seventeen percent (17%) of all Fiscal Year to
date Suite Revenues up to the applicable suite revenue breakpoint (the "Suite
Revenue Breakpoint") described in Schedule 3.1(b), attached hereto,
                                  ---------------

                                       17

<PAGE>

(prorated for the first and last calendar quarters of the Term (including any
applicable extensions)) and fifty-five percent (55%) of all Fiscal Year to date
Suite Revenues in excess of the applicable Suite Revenue Breakpoint. At the
beginning of each Fiscal Year, the Suite Revenue Breakpoints shall be adjusted
by the same percentage that the Base Rent is adjusted pursuant to Subsection
3.1(e).

The Percentage Rent shall be payable as follows:

     (i)  with respect to each calendar month of the Term, except for the
          calendar months in the first partial and next two full calendar
          quarters at the beginning of the Term, Lessee shall pay on or before
          the last day of the calendar month an amount equal to the excess, if
          any, of (A) seventy-five percent (75%) of the amount of Lessee's
          budgeted Percentage Rent payable with respect to the then current
          calendar month (which budgeted amount shall be equal to one-third
          (1/3) of the quarterly estimate of Percentage Rent included in the
          Annual Budget for the calendar quarter in which the calendar month
          occurs) over (B) Base Rent for such calendar month; and

     (ii) with respect to each calendar quarter of the Term, except for the
          calendar months in the first partial and next two full calendar
          quarters at the beginning of the Term, Lessee shall pay on or before
          the 15th day following the end of the calendar quarter an amount equal
          to the amount, if any, by which the aggregate of all payments in
          respect of Base Rent and Percentage Rent for such calendar quarter
          shall be less than the amount determined pursuant to the Quarterly
          Revenues Computation for such calendar quarter; and

     (iii) with respect to the first partial and next two full calendar quarters
          at the beginning of the Term, Lessee shall pay on or before the 15th
          day following the end of the calendar quarter an amount equal to the
          amount, if any, by which the aggregate of all payments in respect of
          Base Rent for such calendar quarter shall be less than the amount
          determined pursuant to the Quarterly Revenues Computation of such
          calendar quarter.

In no event will the amount of Percentage Rent payable for any calendar quarter
or the result of any Quarterly Revenues Computation be less than zero, and there
shall be no reduction in the Base Rent regardless of the result of any Quarterly
Revenues Computation.

          (c) Sundry Rent. For each calendar quarter during the Term commencing
              -----------
with the calendar quarter in which the Commencement Date falls and ending with
the calendar quarter in which the Term (including any applicable extensions)
ends, Lessee shall pay sundry rent ("Sundry Rent"). Sundry Rent shall be an
amount equal to fifty-five percent (55%) of all Fiscal Year to date Sundry
Revenues less an amount equal to Sundry Rent paid with respect to all prior
calendar quarters of the applicable Fiscal Year. Sundry Rent shall be payable as
follows:

     (i)  with respect to each calendar month of the Term, except for the
          calendar months in the first partial and next two full calendar
          quarters at the beginning of the Term, on or before the last day of
          the calendar month an amount equal to seventy-five percent

                                       18

<PAGE>

          (75%) of the amount of Lessee's budgeted Sundry Rent payable with
          respect to the then current calendar month (which budgeted amount
          shall be equal to one-third (1/3) of the quarterly estimate of Sundry
          Rent included in the Annual Budget for the calendar quarter in which
          the calendar month occurs); and

     (ii) with respect to each calendar quarter of the Term, except for the
          calendar months in the first partial and next two full calendar
          quarters at the beginning of the Term, on or before the 15th day
          following the end of the calendar quarter an amount equal to the
          amount, if any, by which the aggregate of all payments pursuant to
          Section 3.1(c)(i) in respect of Sundry Rent for such calendar quarter
          shall be less than fifty-five percent (55%) of Sundry Revenues for
          such calendar quarter; and

     (iii) with respect to the first partial and next two full calendar quarters
          at the beginning of the Term, on or before the 15th day following the
          end of the calendar quarter.

          (d) Officer's Certificates. Additionally, an Officer's Certificate
              ----------------------
shall be delivered to Lessor quarterly, together with such quarterly Percentage
Rent payment and quarterly Sundry Rent payment, setting forth the calculation of
such rent payment for such quarter, within thirty (30) days after each of the
first three quarters of each Fiscal Year (or part thereof) in the Term. Such
quarterly payments shall be based on the formula set forth in Subsection 3.1(b)
and 3.1(c), as applicable. There shall be no reduction in the Base Rent
regardless of the result of the Quarterly Revenues Computations.

     In addition, on or before March 1 of each year, commencing with March 1,
2003, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor setting forth the computation of the actual Percentage Rent
and Sundry Rent that accrued for each quarter of the Fiscal Year that ended on
the immediately preceding December 31 and shall pay to Lessor Percentage Rent
and Sundry Rent, if due and payable, for the last quarter of the applicable
Fiscal Year. Additionally, if the annual Percentage Rent or Sundry Rent due and
payable for any Fiscal Year (as shown in the applicable Officer's Certificate)
exceeds the amount actually paid as Percentage Rent or Sundry Rent by Lessee for
such year, Lessee also shall pay such excess to Lessor at the time such
certificate is delivered. If the Percentage Rent or Sundry Rent actually due and
payable for such Fiscal Year is shown by such certificate to be less than the
amount actually paid as Percentage Rent or Sundry Rent for the applicable Fiscal
Year, Lessor, at its option, shall reimburse such amount to Lessee or credit
such amount against subsequent months' Base Rent or Sundry Rent, as applicable,
and with respect to Percentage Rent, to the extent necessary, subsequent
quarters' Percentage Rent payments. Any such credit to Base Rent shall not be
applied for purposes of calculating Percentage Rent payable for any subsequent
quarter.

     Any difference between the annual Percentage Rent or Sundry Rent due and
payable for any Fiscal Year (as shown in the applicable Officer's Certificate or
as adjusted pursuant to Section 3.3) and the total amount of quarterly payments
for such Fiscal Year actually paid by Lessee as Percentage Rent or Sundry Rent,
whether in favor of Lessor or Lessee, shall bear interest at the Overdue Rate,
which interest shall accrue from the due date of the last quarterly payment for
the Fiscal Year until the amount of such difference shall be paid or otherwise
discharged. Any such interest payable to Lessor shall be deemed to be and shall
be payable as Additional Charges.

                                       19

<PAGE>

     The obligation to pay Percentage Rent and Sundry Rent shall survive the
expiration or earlier termination of the Term, and a final reconciliation,
taking into account, among other relevant adjustments, any adjustments which are
accrued after such expiration or termination date but which related to
Percentage Rent and Sundry Rent accrued prior to such termination date, and
Lessee's good faith best estimate of the amount of any unresolved contractual
allowances, shall be made not later than two (2) years after such expiration or
termination date, but Lessee shall advise Lessor within sixty (60) days after
such expiration or termination date of Lessee's best estimate at that time of
the approximate amount of such adjustments, which estimate shall not be binding
on Lessee or have any legal effect whatsoever.

          (e) CPI Adjustments to Base Rent and Percentage Rent. For each year of
              ------------------------------------------------
the Term beginning on or after January 1, 2003, the Base Rent shall be adjusted
from time to time as follows:

               (1) If the most recently published Consumer Price Index as of the
          last day of the last month (the "Comparison Month") of any Fiscal Year
          is different than the average Consumer Price Index for the twelve (12)
          month period prior thereto, the Base Rent for the next Fiscal Year
          shall be adjusted by the percentage change in the Consumer Price Index
          calculated as follows:

                    (A) The difference between the Consumer Price Index for the
          most recent Comparison Month and the average Consumer Price Index for
          the twelve (12) month period prior thereto shall be divided by the
          average Consumer Price Index for the twenty four (24) month period
          prior thereto.

                    (B) The Base Rent shall be multiplied by the lesser of (i)
          seven percent (7%) or (ii) the quotient obtained in subparagraph
          (e)(1)(A) above.

                    (C) The product obtained in subparagraph (e)(1)(B) above
          shall be added to the Base Rent.

     Adjustments in the Base Rent shall be effective on the first day of the
first calendar month of the Fiscal Year to which such adjusted Base Rent
applies. The Suite Revenue Breakpoint then included in the Quarterly Revenues
Computation pursuant to Subsection 3.1(b) shall be similarly adjusted, effective
with any such adjustment in the Base Rent.

               (2) If (i) a significant change is made in the number or nature
          (or both) of items used in determining the Consumer Price Index, or
          (ii) the Consumer Price Index shall be discontinued for any reason,
          the Bureau of Labor Statistics shall be requested to furnish a new
          index comparable to the Consumer Price Index, together with
          information which will make possible a conversion to the new index in
          computing the adjusted Base Rent hereunder. If for any reason the
          Bureau of Labor Statistics does not furnish such an index and such
          information, the parties will instead mutually select, accept and use
          such other index or comparable statistics on

                                       20

<PAGE>

          the cost of living in Washington, D.C. that is computed and published
          by an agency of the United States or a responsible financial
          periodical of recognized authority.

          (f) Manager Fund-up Cure Payments. If and to the extent that Manager
              -----------------------------
pays amounts to Lessee pursuant to the Management Agreement in order to avoid
termination of the Management Agreement by Lessee for Manager's failure to meet
certain performance hurdles described therein, such amounts shall be treated as
additional Suite Revenues for purposes of the Percentage Rent calculation
hereunder.

          (g) Allocation of Rent. The parties hereto acknowledge and agree that
              ------------------
the Base Rent paid or payable by Lessee to Lessor hereunder shall, to the extent
relevant, be allocated between the personal property and real property
constituting Leased Property hereunder in direct proportion to the then
recognizable fair market value of such personal property and real property.
Percentage Rent in excess of Base Rent shall be allocated solely to real
property.

     3.2. Confirmation of Percentage Rent and Sundry Rent. Lessee shall utilize,
          -----------------------------------------------
or cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices, and in accordance with
generally accepted accounting principles, that will accurately record all data
necessary to compute Percentage Rent and Sundry Rent, and Lessee shall retain,
for at least four (4) years after the expiration of each Fiscal Year (and in any
event until the reconciliation described in Subsection 3.1(c) for such Fiscal
Year has been made), reasonably adequate records conforming to such accounting
system showing all data necessary to compute Percentage Rent and Sundry Rent for
the applicable Fiscal Years. Lessor, at its expense (except as provided
hereinbelow), shall have the right from time to time, upon prior written notice
to Lessee and Manager, by its accountants or representatives to audit the
information that formed the basis for the data set forth in any Officer's
Certificate provided under Subsection 3.1(d) and, in connection with such
audits, to examine all Lessee's records (including supporting data and sales and
excise tax returns) reasonably required to verify Percentage Rent and Sundry
Rent, subject to any prohibitions or limitations on disclosure of any such data
under Legal Requirements; provided, however that Lessor may only inspect or
audit records in Manager's possession subject to the terms of Lessee's access
thereto under the Management Agreement. If any such audit discloses a deficiency
in the payment of Percentage Rent or Sundry Rent, and either Lessee agrees with
the result of such audit or the matter is otherwise determined or compromised,
Lessee shall forthwith pay to Lessor the amount of the deficiency, as finally
agreed or determined, together with interest at the Overdue Rate from the date
when said payment should have been made to the date of payment thereof;
provided, however, that as to any audit that is commenced more than two (2)
years after the date Percentage Rent or Sundry Rent for any Fiscal Year is
reported by Lessee to Lessor, the deficiency, if any, with respect to such
Percentage Rent or Sundry Rent shall bear interest at the Overdue Rate only from
the date such determination of deficiency is made unless such deficiency is the
result of gross negligence or willful misconduct on the part of Lessee, in which
case interest at the Overdue Rate will accrue from the date such payment should
have been made to the date of payment thereof. If any such audit discloses that
the Percentage Rent or Sundry Rent actually due from Lessee for any Fiscal Year
exceed those reported by Lessee by more than three percent (3%), Lessee shall
pay the cost of such audit and examination. Any proprietary information obtained
by Lessor pursuant to the provisions of this Section shall be treated as
confidential, except that such information may be used, subject to appropriate

                                       21

<PAGE>

confidentiality safeguards, in any litigation between the parties and except
further that Lessor may disclose such information to prospective lenders. The
obligations of Lessee contained in this Section shall survive the expiration or
earlier termination of this Lease.

     3.3. Additional Charges. In addition to the Base Rent, Percentage Rent and
          ------------------
Sundry Rent, (a) Lessee also will pay and discharge as and when due and payable
all other amounts, liabilities, obligations and Impositions that Lessee assumes
or agrees to pay under this Lease, and (b) in the event of any failure on the
part of Lessee to pay any of those items referred to in clause (a) of this
Section 3.3, Lessee also will promptly pay and discharge every fine, penalty,
interest and cost that may be added for non-payment or late payment of such
items (the items referred to in clauses (a) and (b) of this Section 3.3 being
additional rent hereunder and being referred to herein collectively as the
"Additional Charges"), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Base Rent. If any installment of Base Rent,
Percentage Rent and Sundry Rent or Additional Charges (but only as to those
Additional Charges that are payable directly to Lessor) shall not be paid on its
due date, Lessee will pay Lessor on demand, as Additional Charges, a late charge
(to the extent permitted by law) computed at the Overdue Rate on the amount of
such installment, from the due date of such installment to the date of payment
thereof. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease, Lessee shall be relieved of its
obligation to pay such Additional Charges to the entity to which they would
otherwise be due and Lessor shall pay same from monies received from Lessee.

     3.4. Net Lease; No Termination, Abatement, Etc.
          ------------------------------------------

          (a) The Rent shall be paid absolutely net to Lessor, so that this
Lease shall yield to Lessor the full amount of the installments of Base Rent,
Percentage Rent, Sundry Rent and Additional Charges throughout the Term, all as
more fully set forth in Article 5, but subject to any other provisions of this
Lease that expressly provide for adjustment or abatement of Rent or other
charges or expressly provide that certain expenses or maintenance shall be paid
or performed by Lessor.

          (b) Except as otherwise specifically provided in this Lease, and
except for loss of the Management Agreement solely by reason of any action or
inaction by Lessor, Lessee, to the extent permitted by law, shall remain bound
by this Lease in accordance with its terms and shall neither take any action
without the written consent of Lessor (which shall not be unreasonably withheld
or delayed) to modify, surrender or terminate the same, nor seek nor be entitled
to any abatement, deduction, deferment or reduction of the Rent, or setoff
against the Rent, nor shall the obligations of Lessee be otherwise affected by
reason of (a) any damage to, or destruction of, any Leased Property or any
portion thereof from whatever cause or any Taking of the Leased Property or any
portion thereof, (b) the lawful or unlawful prohibition of, or restriction upon,
Lessee's use of the Leased Property, or any portion thereof, or the interference
with such use by any Person other than Lessor, (c) any claim which Lessee has or
might have against Lessor by reason of any default or breach of any warranty by
Lessor under this Lease or any other agreement between Lessor and Lessee, or to
which Lessor and Lessee are parties, (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting

                                       22

<PAGE>

Lessor or any assignee or transferee of Lessor, or (e) for any other cause
whether similar or dissimilar to any of the foregoing other than a discharge of
Lessee from any such obligations as a matter of law. Lessee hereby specifically
waives all rights, arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law to (1) modify, surrender or terminate this
Lease or quit or surrender the Leased Property or any portion thereof, or (2)
entitle Lessee to any abatement, reduction, suspension or deferment of the Rent
or other sums payable by Lessee hereunder, except as otherwise specifically
provided in this Lease. The obligations of Lessee hereunder shall be separate
and independent covenants and agreements and the Rent and all other sums payable
by Lessee hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason of
an Event of Default.

     3.5. Material Changes in Economic Climate.
          ------------------------------------

          (a) In the event of the occurrence of a Force Majeure or a Hotel
Market Decline, Lessor and Lessee shall, in good faith, negotiate possible
modifications to the Base Rent and Percentage Rent to reduce such Base Rent and
Percentage Rent to recent market rates for hotel REIT leases for similar hotel
properties in the Hotel's Competitive Set, retroactively effective as of the
first calendar month of the Term following the last day of the six-month period
during which such Hotel Market Decline has occurred with the excess of Base Rent
and Percentage Rent actually paid for such period over the reduced Base Rent and
Percentage Rent, plus interest thereon at the Base Rate, to be credited to the
next payments of Rent due and owing hereunder. If Lessor and Lessee are unable
to agree that a Force Majeure or a Hotel Market Decline has occurred, within
thirty (30) days after the date of written certification from Lessee to Lessor
that a Force Majeure and Hotel Market Decline has occurred (accompanied by
reasonably detailed computations and documentation to support such assertion),
the matter may be submitted by either party to arbitration under Section 25.2
hereof for resolution (during which period Lessee shall continue to pay Base
Rent and Percentage Rent as required under Section 3.1 of this Lease). If,
within ninety (90) days (during which period Lessee shall continue to pay Base
Rent and Percentage Rent as required under Section 3.1 of this Lease) following
the date of such written certification from Lessee (or the date of a decision of
an arbitrator if required hereunder to determine that a Force Majeure and Hotel
Market Decline has occurred), Lessor and Lessee are unable to agree upon the
amount of reduction in Base Rent and Percentage Rent contemplated hereby, Lessee
shall have the option to terminate this Lease upon not less than thirty (30)
days prior written notice to Lessor.

          (b) In the event of the occurrence of a National Economic Decline or a
Regional Market Decline, Lessor and Lessee shall, in good faith, negotiate (i)
possible modifications to the Base Rent and Percentage Rent to reduce such Base
Rent and Percentage Rent to recent market rates for hotel REIT leases for
similar hotel properties in the Hotel's Competitive Set, and (ii) possible
modifications to the Base and Percentage Rent payable under each of the Other
Leases for Other Hotels in the same Region (as defined in the STR Reports) as
the Hotel to reduce such Base Rent and Percentage Rent to recent market rates
for hotel REIT leases for similar hotel properties in the Hotel's Competitive
Set, in each case retroactively effective as of the first calendar month of the
Term following the last day of the six month period during which such Regional
Market Decline has occurred with the excess of Base Rent and Percentage Rent
actually paid for such period over the reduced Base Rent and Percentage Rent,
plus interest thereon at the Base Rent, to

                                       23

<PAGE>

be credited to the next payments of Rent due and owing hereunder. If, within
thirty (30) days after the date of written certification from Lessee to Lessor
that a National Economic Decline and Regional Market Decline has occurred
(accompanied by reasonably detailed computations and documentation to support
such assertion), Lessor and Lessee are unable to agree that a National Economic
Decline or Regional Market Decline has occurred, the matter may be submitted by
either party to arbitration under Section 25.2 hereof for resolution (during
which period Lessee shall continue to pay Base Rent and Percentage Rent as
required under Section 3.1 of this Lease). If, within ninety (90) days (during
which period Lessee shall continue to pay Base Rent and Percentage Rent as
required under Section 3.1 of this Lease) following the date of such initial
written certification from Lessee (or the date of a decision of an arbitrator if
required hereunder to determine that a National Economic Decline and Regional
Market Decline has occurred), Lessor and Lessee are unable to agree upon the
amount of reduction in Base Rent and Percentage Rent contemplated hereby, Lessee
shall have the option, upon not less than sixty (60) days prior written notice
to Lessor, to terminate all (but not less than all) of the Existing Leases of
hotels in the same Region as the Hotel, including this Lease.

     3.6. Rent Adjustment: Basic Assumptions Incorrect. Except to the extent
          --------------------------------------------
that doing so would cause Lessor to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code, notwithstanding anything
herein (other than Article 19) to the contrary, if (i) the facts and
circumstances underlying the documented, basic assumptions upon which both
Lessor and Lessee have relied in determining the Base Rent, the Suite Revenue
Breakpoint, and the Percentage Rent payable hereunder become materially
incorrect solely as a result of (A) a decision to re-brand the Hotel that is
made after the Commencement Date, (B) the scope or cost of substantial
renovations or other capital improvements to the Hotel, or (C) the
implementation of any other hotel repositioning strategies (that were not
planned as of the Commencement Date) resulting in significant disruption of the
operations of the Hotel (collectively, a "Repositioning"), and (ii) Lessor and
Lessee so agree in writing, then Lessor and Lessee shall, in good faith,
negotiate modifications to the Base Rent, Suite Revenue Breakpoint and
Percentage Rent to adjust (i.e., increase, decrease or reallocate among revenue
categories) such Base Rent, Suite Revenue Breakpoint and Percentage Rent to
reflect such change in basic assumptions for the affected periods, using the
same methodology and other basic assumptions as were initially utilized in
determining the Base Rent, Suite Revenue Breakpoint and Percentage Rent
hereunder. If Lessor and Lessee are unable to agree, within thirty (30) days
after the date of written certification from either Lessee or Lessor to the
other party that a good faith dispute exists, as to the existence of the
occurrence of a Repositioning or the adjustments to be made to the amounts or
percentages for the Base Rent, Suite Revenue Breakpoint and Percentage Rent
hereunder as a result of any repositioning, the dispute may be submitted by
either party to arbitration under Section 25.2 hereof for resolution (during
which period Lessee shall continue to pay Base Rent and Percentage Rent as
required under Section 3.1 of this Lease); provided, however, that for purposes
of applying the procedures in Section 25.3 to such arbitration, the target
deadline therein for concluding the arbitration shall be shortened from ninety
(90) days to thirty (30) days.

                                       24

<PAGE>

                                    ARTICLE 4
                                    ---------
                        ANNUAL BUDGETS; BOOKS AND RECORDS

     4.1. Annual Budget. Not later than thirty (30) days prior to the
          --------------
commencement of each Fiscal Year, Lessee shall submit the Annual Budget to
Lessor. The Annual Budget shall contain the following, to the extent included in
the operating budgets and capital budgets provided to Lessee by Manager under
the management agreement for the Hotel:

          (a) Lessee's reasonable estimate of Gross Revenues (including room
rates and Suite Revenues), Gross Operating Expenses, and Gross Operating Profits
for the forthcoming Fiscal Year itemized on schedules on a quarterly basis as
approved by Lessor and Lessee, as same may be revised or replaced from time to
time by Lessee and approved by Lessor, together with the assumptions, in
narrative form, forming the basis of such schedules.

          (b) An estimate of the amounts to be dedicated to the repair,
replacement, or refurbishment of Furniture and Equipment.

          (c) An estimate of any amounts Lessor will be required to provide for
required or desirable capital improvements to the Hotel or any of its
components.

          (d) A cash flow projection.

          (e) A business plan, which shall describe business objectives and
strategies for the forthcoming Fiscal Year, and shall include without limitation
an analysis of the market area in which the Hotel competes, a comparison of the
Hotel and its business with competitive hotels, an analysis of categories of
potential guests, and a description of sales and marketing activities designed
to achieve and implement identified objectives and strategies.

     4.2. Books and Records. Lessee shall keep full and adequate books of
          ------------------
account and other records reflecting the results of operation of the Hotel on an
accrual basis, all in accordance with generally accepted accounting principles
and the obligations of Lessee under this Lease. The books of account and all
other records relating to or reflecting the operation of the Hotel shall be kept
either at the Hotel or at Lessee's offices in Richmond, Virginia or at Manager's
central offices, and shall be available to Lessor and its representatives and
its auditors or accountants, at all reasonable times, upon prior written notice
to Lessee and Manager, for examination, audit, inspection, and transcription;
provided, however that Lessor may only inspect or audit records in Manager's
possession subject to the terms of Lessee's access thereto under the Management
Agreement. All of such books and records pertaining to the Hotel including,
without limitation, books of account, guest records and front office records, at
all times shall be the property of Lessor and shall not be removed from the
Hotel or Lessee's offices or Manager's central offices (but may be moved among
any of the foregoing) by Lessee without Lessor approval.

                                       25

<PAGE>

                                    ARTICLE 5
                                    ---------
                            IMPOSITIONS; HOTEL COSTS

     5.1. Payment of Impositions. Subject to Section 12.2 (relating to permitted
          -----------------------
contests), Lessee will pay, or cause to be paid, all Impositions (other than
Real Estate Taxes and Personal Property Taxes, which shall be paid by Lessor)
before any fine, penalty, interest or cost may be added for non-payment, such
payments to be made directly to the taxing or other authorities where feasible,
and will promptly furnish to Lessor copies of official receipts or other
satisfactory proof evidencing such payments. Lessee's obligation to pay such
Impositions shall be deemed absolutely fixed upon the date such Impositions
become a lien upon the Leased Property or any part thereof. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Imposition),
Lessee may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Imposition) in installments and in such event, shall pay
such installments during the Term hereof (subject to Lessee's right of contest
pursuant to the provisions of Section 12.2) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto. Lessor, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of Lessor's net
income, gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes, Real Estate Taxes, Personal Property Taxes
and taxes on its capital stock, and Lessee, at its expense, shall, to the extent
required or permitted by applicable laws and regulations, prepare and file all
other tax returns and reports in respect of any Imposition as may be required by
governmental authorities. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Lessee, the same shall be paid over to or
retained by Lessee if no Event of Default shall have occurred hereunder and be
continuing. If an Event of Default shall have occurred and be continuing, any
such refund shall be paid over to or retained by Lessor. Any such funds retained
by Lessor due to an Event of Default shall be applied as provided in Article 16.
Lessor and Lessee shall, upon request of the other, provide such data as is
maintained by the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and reports. Lessee
shall file all Personal Property Tax returns in such jurisdictions where it is
legally required so to file. Lessor, to the extent it possesses the same, and
Lessee, to the extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for any
property classified as personal property. Where Lessor is legally required to
file Personal Property Tax returns, Lessee shall provide Lessor with copies of
assessment notices in sufficient time for Lessor to file a protest. Lessor may,
upon Notice to Lessee, at Lessor's option and at Lessor's sole expense, protest,
appeal, or institute such other proceedings (in its or Lessee's name) as Lessor
may deem appropriate to effect a reduction of real estate or personal property
assessments for those Impositions to be paid by Lessor, and Lessee, at Lessor's
expense as aforesaid, shall fully cooperate with Lessor in such protest, appeal,
or other action. Lessor hereby agrees to indemnify, defend, and hold harmless
Lessee from and against any claims, obligations, liabilities and loss against or
incurred by Lessee in connection with such cooperation. Billings for
reimbursement of Personal Property Taxes by Lessee to Lessor shall be
accompanied by copies of a bill therefor and payments thereof which identify the
personal property with respect to which such payments are made. Lessor, however,
reserves the right to effect any such protest, appeal or other action and, upon
Notice to Lessee, shall control any such activity, which shall then go forward
at Lessor's sole expense. Upon such Notice, Lessee, at Lessor's expense, shall
cooperate fully with such activities.

                                       26

<PAGE>

     5.2. Notice of Impositions. Lessor shall give prompt Notice to Lessee of
          ----------------------
all Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, provided that Lessor's failure to give any such Notice shall in no
way diminish Lessee's obligations hereunder to pay such Impositions, but such
failure shall obviate any default hereunder for a reasonable time after Lessee
receives Notice of any Imposition which it is obligated to pay during the first
taxing period applicable thereto.

     5.3. Adjustment of Impositions. Impositions imposed in respect of the
          --------------------------
tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's obligation to pay its prorated
share thereof after termination shall survive such termination.

     5.4. Utility Charges. Lessee will be solely responsible for obtaining and
          ----------------
maintaining utility services to the Leased Property and will pay or cause to be
paid all charges for electricity, gas, oil, water, sewer and other utilities
used in the Leased Property during the Term.

     5.5. Insurance Premiums. Lessee will pay or cause to be paid all premiums
          -------------------
for the insurance coverage's required to be maintained by it under Article 13.

     5.6. Fees. Lessee will maintain in full force and effect, and pay or cause
          -----
to be paid all fees and other charges payable pursuant to, any Management
Agreement with respect to the Hotel.

     5.7. Ground Rent. In the event that Lessor's interest in the Land is
          ------------
pursuant to a Ground Lease or sublease, Lessor shall be solely responsible for
the payment of any ground rent, building rent or subrent, as the case may be,
due with respect to the Leased Property.

                                    ARTICLE 6
                                    ---------
                   LEASED PROPERTY; LESSEE'S PERSONAL PROPERTY

     6.1. Ownership of the Leased Property. Lessee acknowledges that the Leased
          ---------------------------------
Property is the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Property upon the terms and conditions of this
Lease.

     6.2. Lessee's Personal Property. Lessee will acquire and maintain
          ---------------------------
throughout the Term such Inventory as is required to operate the Leased Property
in the manner contemplated by this Lease. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of personal property
(including Inventory) owned by Lessee. Lessee, at the commencement of the Term,
and from time to time thereafter, shall provide Lessor with an accurate list of
all such items of Lessee's personal property (collectively, the "Lessee's
Personal Property"). Lessee may, subject to the first sentence of this Section
6.2 and the conditions set forth below, remove any of Lessee's Personal Property
set forth on such list at any time during the Term or upon the expiration or any
prior termination of the Term. All of Lessee's Personal Property, other than
Inventory, not removed by Lessee within ten (10) days following the expiration
or earlier termination of the Term shall be

                                       27

<PAGE>

considered abandoned by Lessee and may be appropriated, sold, destroyed or
otherwise disposed of by Lessor without first giving Notice thereof to Lessee,
without any payment to Lessee and without any obligation to account therefor.
Lessee will, at its expense, restore the Leased Property to the condition
required by Subsection 2.3(g), including repair of all damage to the Leased
Property caused by the removal of Lessee's Personal Property, whether effected
by Lessee or Lessor. Upon the expiration or earlier termination of the Term,
Lessor or its designee shall have the option to purchase all Inventory on hand
at the Leased Property at the time of such expiration or termination for a sale
price equal to the fair market value of such Inventory. Lessee may make such
financing arrangements, title retention agreements, leases or other agreements
with respect to Lessee's Personal Property as it sees fit provided that Lessee
first advises Lessor of any such arrangement and such arrangement expressly
provides that in the event of Lessee's default thereunder, Lessor (or its
designee) may assume Lessee's obligations and rights under such arrangement.

     6.3. Lessor's Lien. To the fullest extent permitted by applicable law,
          --------------
Lessor is granted a lien and security interest on all Lessee's personal property
now or hereinafter placed in or upon the Leased Property, and such lien and
security interest shall remain attached to such Lessee's personal property until
payment in full of all Rent and satisfaction of all of Lessee's obligations
hereunder; provided, however, Lessor shall subordinate its lien and security
interest to that of any non-Affiliate of Lessee which finances such Lessee's
personal property or any non-Affiliate conditional seller of such Lessee's
personal property, the terms and conditions of such subordination to be
satisfactory to Lessor in the exercise of reasonable discretion. Lessee shall,
upon the request of Lessor, execute such financing statements or other documents
or instruments reasonably requested by Lessor to perfect the lien and security
interests herein granted. Lessee hereby authorizes Lessor to execute and file
financing statements signed only be a representative of Lessor covering the
security interest of Lessor in Lessee's personal property.

     6.4. Lessor's Option to Purchase Assets of Lessee. Effective on not less
          ---------------------------------------------
than ninety (90) days' prior Notice given at any time within one hundred eighty
(180) days before the expiration of the Term, but not later than ninety (90)
days prior to such expiration, or upon such shorter Notice period as shall be
appropriate if this Lease is terminated prior to its expiration date, Lessor
shall have the option to purchase all (but not less than all) of the assets of
Lessee, tangible and intangible, relating to the Leased Property (other than
this Lease), at the expiration or termination of this Lease for an amount
(payable in cash on the expiration date of this Lease) equal to the fair market
value thereof as appraised in conformity with Article 24, except that the
appraisers need not be members of the American Institute of Real Estate
Appraisers, but rather shall be appraisers having at least ten (10) years'
experience in valuing similar assets. Notwithstanding any such purchase, Lessor
shall obtain no rights to any trade name or logo used in connection with the
Management Agreement unless separate agreement as to such use is reached with
the applicable franchisor.

                                    ARTICLE 7
                                    ---------
                      CONDITION AND USE OF LEASED PROPERTY

     7.1. Condition of the Leased Property. Lessee acknowledges receipt and
          ---------------------------------
delivery of possession of the Leased Property. Lessee has examined and otherwise
has knowledge of the condition of the Leased Property and has found the same to
be satisfactory for its purposes

                                       28

<PAGE>

hereunder. Lessee is leasing the Leased Property "as is" in its present
condition. Lessee waives any claim or action against Lessor in respect of the
condition of the Leased Property. LESSOR MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY, OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE.
LESSEE ACKNOWLEDGES THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS
SATISFACTORY TO IT. Provided, however, to the extent permitted by law, Lessor
hereby assigns to Lessee all of Lessor's rights to proceed against any
predecessor in title (other than any Affiliate of Lessee which conveyed the
Property to Lessor) for breaches of warranties or representations or for latent
defects in the Leased Property. Lessor shall fully cooperate with Lessee in the
prosecution of any such claim, in Lessor's or Lessee's name, all at Lessee's
sole cost and expense. Lessee hereby agrees to indemnify, defend and hold
harmless Lessor from and against any claims, obligations and liabilities against
or incurred by Lessor in connection with such cooperation.

     7.2. Use of the Leased Property.
          ---------------------------

          (a) Lessee covenants that it will proceed with all due diligence and
will exercise reasonable efforts to obtain and to maintain all Licenses and
other approvals needed to use and operate the Leased Property and the Hotel
under applicable local, state and federal law.

          (b) Lessee shall use or cause to be used the Leased Property only as a
Residence Inn by Marriott hotel facility, and for such other uses as may be
necessary or incidental to such use or such other use as otherwise approved by
Lessor (the "Primary Intended Use"). Lessee shall not use the Leased Property or
any portion thereof for any other use without the prior written consent of
Lessor, which consent may be granted, denied or conditioned in Lessor's sole
discretion. No use shall be made or permitted to be made of the Leased Property,
and no acts shall be done, which will cause the cancellation or increase the
premium of any insurance policy covering the Leased Property or any part thereof
(unless another adequate policy satisfactory to Lessor is available and Lessee
pays any premium increase), nor shall Lessee sell or permit to be kept, used or
sold in or about the Leased Property any article which may be prohibited by law
or fire underwriter's regulations. Lessee shall, at its sole cost, comply with
all of the requirements pertaining to the Leased Property of any insurance
board, association, organization or company necessary for the maintenance of
insurance, as herein provided, covering the Leased Property and Lessee's
Personal Property.

          (c) Subject to the provisions of Articles 14, 15, 18 and 21, Lessee
covenants and agrees that during the Term it will (1) operate continuously the
Leased Property as a hotel facility, (2) keep in full force and effect and
comply with all the provisions of the Management Agreement, (3) not terminate or
amend the Management Agreement without the consent of Lessor (which shall not be
unreasonably withheld or delayed), (4) maintain appropriate certifications and
Licenses for such use and (5) seek to maximize the Gross Revenues generated
therefrom consistent with sound business practices.

                                       29

<PAGE>

          (d) Lessee shall not commit or suffer to be committed any waste on the
Leased Property, or in the Hotel, nor shall Lessee cause or permit any nuisance
thereon.

          (e) Lessee shall neither suffer nor permit the Leased Property or any
portion thereof, or Lessee's Personal Property, to be used in such a manner as
(1) might reasonably tend to impair Lessor's (or Lessee's, as the case may be)
title thereto or to any portion thereof, or (2) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public, as such,
or of implied dedication of the Leased Property or any portion thereof, except
as necessary in the ordinary and prudent operation of the Hotel on the Leased
Property.

     7.3. Lessor to Grant Easements, Etc. Lessor will, from time to time, so
          -------------------------------
long as no Event of Default has occurred and is continuing, at the request of
Lessee and at Lessee's cost and expense (but subject to the approval of Lessor,
which approval shall not be unreasonably withheld or delayed and Lessor's
Mortgagee), (a) grant easements and other rights in the nature of easements with
respect to the Leased Property to third parties, (b) release existing easements
or other rights in the nature of easements which are for the benefit of the
Leased Property, (c) dedicate or transfer unimproved portions of the Leased
Property for road, highway or other public purposes, (d) execute petitions to
have the Leased Property annexed to any municipal corporation or utility
district, (e) execute amendments to any covenants and restrictions affecting the
Leased Property and (f) execute and deliver to any Person any instrument
appropriate to confirm or effect such grants, releases, dedications, transfers,
petitions and amendments (to the extent of its interests in the Leased
Property), but only upon delivery to Lessor of an Officer's Certificate stating
that such grant, release, dedication, transfer, petition or amendment does not
interfere with the proper conduct of the business of Lessee on the Leased
Property and does not materially reduce the value of the Leased Property.

                                    ARTICLE 8
                                    ---------
              LESSEE'S COMPLIANCE WITH LAW; ENVIRONMENTAL COVENANTS

     8.1. Compliance with Legal and Insurance Requirements, Etc. Subject to
          ------------------------------------------------------
Subsection 8.3(b) below and Section 12.2 (relating to permitted contests),
Lessee, at its expense, will promptly (a) comply with all applicable Legal
Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair and restoration of the Leased Property (excluding any repair
or restoration of any portion of the Leased Property required to be made by
Lessor pursuant to Subsection 9.1(b) below, which repair shall be made by
Lessor), and (b) procure, maintain and comply with all appropriate Licenses and
other authorizations required for any use of the Leased Property and Lessee's
Personal Property then being made, and for the proper erection, installation,
operation and maintenance of the Leased Property or any part thereof.

     8.2. Legal Requirement Covenants.
          ----------------------------

          (a) Subject to Subsection 8.3(b) and Subsection 9.1(b) below, Lessee
covenants and agrees that the Leased Property and Lessee's Personal Property
shall not be used for any unlawful purpose, and that Lessee shall not permit or
suffer to exist any unlawful use of the Leased Property by others. Lessee shall
acquire and maintain all appropriate licenses, certifications, permits and other
authorizations and approvals needed to operate the Leased Property in its

                                       30

<PAGE>

customary manner for the Primary Intended Use, and any other lawful use
conducted on the Leased Property as may be permitted from time to time
hereunder. Lessee further covenants and agrees that Lessee's use of the Leased
Property and maintenance, alteration, and operation of the same, and all parts
thereof, shall at all times conform to all Legal Requirements, unless the same
are finally determined by a court of competent jurisdiction to be unlawful (and
Lessee shall cause all sub-tenants, invitees or others within its control so to
comply with all Legal Requirements). Lessee may, however, upon prior Notice to
Lessor, contest the legality or applicability of any such Legal Requirement or
any licensure or certification decision if Lessee maintains such action in good
faith, with due diligence, without prejudice to Lessor's rights hereunder, and
at Lessee's sole expense. If by the terms of any such Legal Requirement
compliance therewith pending the prosecution of any such proceeding may legally
be delayed without the occurrence of any charge or liability of any kind, or the
filing of any lien, against the Hotel or Lessee's leasehold interest therein and
without subjecting Lessee or Lessor to any liability, civil or criminal, for
failure so to comply therewith, Lessee may delay compliance therewith until the
final determination of such proceeding. If any lien, charge or civil or criminal
liability would be incurred by reason of any such delay, Lessee, on the prior
written consent of Lessor, which consent shall not be unreasonably withheld or
delayed, may nonetheless contest as aforesaid and delay as aforesaid provided
that such delay would not subject Lessor to criminal liability and Lessee both
(a) furnishes to Lessor security reasonably satisfactory to Lessor against any
loss or injury by reason of such contest or delay and (b) prosecutes the contest
with due diligence and in good faith.

          (b) As between Lessor and Lessee, Lessee is solely responsible for all
liabilities or obligations of any kind with respect to employees at the Leased
Property during the Term. Without limiting the generality of the foregoing
sentence, Lessee is solely responsible for any required compliance with the
Worker Adjustment, Retraining and Notification Act of 1988 (the "WARN Act") or
any similar state law applicable to the Leased Property; any required compliance
with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"); and all alleged and actual obligations and claims arising from or
relating to any employment agreement, collective bargaining agreement or
employee benefit plans, any grievances, arbitration's, or unfair labor practice
charges, and relating to compliance with any applicable state or federal labor
employment law, including but not limited to all laws pertaining to
discrimination, workers' compensation, unemployment compensation, occupational
safety and health, unfair labor practices, family and medical leave, and wages,
hours or employee benefits. Lessee agrees to indemnify and defend and hold
harmless Lessor from and against any claims relating to any of the foregoing
matters. Lessee further agrees to reimburse Lessor for any and all losses,
damages, costs, expenses, liabilities and obligations of any kind, including
without limitation reasonable attorney's fees and other legal costs and
expenses, incurred by Lessor in connection with any of the foregoing matters.

          (c) Notwithstanding the Lessee's obligations under Section 8.1 to
obtain and maintain all permits and licenses required for the use of the Leased
Property, and without limiting any obligations of Lessee hereunder, if (i)
applicable law requires that the owner (rather than a lessee) of a hotel be the
licensee under the required liquor license for the Hotel or (ii) the former
owner of the Hotel is holding the liquor license and continuing to exercise
management and supervision of the liquor services at the Hotel pending transfer
of the license to Lessor or Lessee, the Lessee shall indemnify and hold Lessor
harmless from any liability, damages or claims (a) arising in connection with
liquor operations at the Hotel during such period of time following the

                                       31

<PAGE>

Commencement Date, except to the extent caused by Lessor's gross negligence or
willful misconduct or (b) made by or through the former owner with respect to
liquor operations at the Hotel following the Commencement Date.

     8.3. Environmental Covenants. Lessor and Lessee (in addition to, and not in
          ------------------------
diminution of, Lessee's covenants and undertakings in Sections 8.1 and 8.2
hereof) covenant and agree as follows:

          (a) At all times hereafter until the later of (i) such time as all
liabilities, duties or obligations of Lessee to Lessor under the Lease have been
satisfied in full and (ii) such time as Lessee completely vacates the Leased
Property and surrenders possession of the same to Lessor, Lessee shall fully
comply with all Environmental Laws applicable to the Leased Property and the
operations thereon. Lessee agrees to give Lessor prompt Notice of (1) all
Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating to
any Environmental Liability or relating to the issuance, revocation or change in
any Environmental Authorization required for operation of the Leased Property;
(3) all Releases at, on, in, under or in any way affecting the Leased Property,
or any Release known by Lessee at, on, in or under any property adjacent to the
Leased Property; and (4) all facts, events or conditions that could reasonably
lead to the occurrence of any of the above-referenced matters.

          (b) Lessor hereby agrees to defend, indemnify and save harmless any
and all Lessee Indemnified Parties from and against any and all Environmental
Liabilities other than (i) Environmental Liabilities resulting from conditions
disclosed in any environmental audit obtained by Lessor and provided to Lessee
prior to the execution of this Lease (the "Environmental Audit"), and (ii)
Environmental Liabilities which were caused by the acts or negligent failures to
act of Lessee.

          (c) Lessee hereby agrees to defend, indemnify and save harmless any
and all Lessor Indemnified Parties from and against any and all Environmental
Liabilities which were (i) resulting from conditions disclosed in the
Environmental Audit, and (ii) caused by the acts or negligent failures to act of
Lessee.

          (d) If any Proceeding is brought against any Indemnified Party in
respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Subsection 8.3(b) or (c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnified Party and approved by the Indemnifying Party,
which approval shall not be unreasonably withheld or delayed; provided, however,
that such approval shall not be required in the case of defense by counsel
designated by any insurance company undertaking such defense pursuant to any
applicable policy of insurance. Each Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel will be at the sole expense
of such Indemnified Party unless such counsel has been approved by the
Indemnifying Party, which approval shall not be unreasonably withheld or
delayed. The Indemnifying Party shall not be liable for any settlement of any
such Proceeding made without its consent, which shall not be unreasonably
withheld or delayed, but if

                                       32

<PAGE>

settled with the consent of the Indemnifying Party, or if settled without its
consent (if its consent shall be unreasonably withheld or delayed), or if there
be a final, nonappealable judgment for an adversary party in any such
Proceeding, the Indemnifying Party shall indemnify and hold harmless the
Indemnified Parties from and against any liabilities and loss incurred by such
Indemnified Parties by reason of such settlement or judgement.

          (e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior Notice to Lessee and Manager stating such Indemnified
Party's basis for such belief, an Indemnified Party shall be given immediate
access to the Leased Property (including, but not limited to, the right to enter
upon, investigate, drill wells, take soil borings, excavate, monitor, test, cap
and use available land for the testing of remedial technologies), Lessee's
employees, and to all relevant documents and records regarding the matter as to
which a responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may he conditioned or
restricted as may be reasonably necessary to ensure compliance with law and the
safety of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable.

          (f) The indemnification rights and obligations provided for in this
Article 8 shall be in addition to any indemnification rights and obligations
provided for elsewhere in this Lease.

          (g) The indemnification rights and obligations provided for in this
Article 8 shall survive the termination of this Lease.

     For purposes of this Section 8.3, all amounts for which any Indemnified
Party seeks indemnification shall be computed net of (a) any actual income tax
benefit resulting therefrom to such Indemnified Party, (b) any insurance
proceeds received (net of tax effects) with respect thereto, and (c) any amounts
recovered (net of tax effects) from any third parties based on claims the
Indemnified Party has against such third parties which reduce the damages that
would otherwise be sustained; provided that in all cases, the timing of the
receipt or realization of insurance proceeds or income tax benefits or
recoveries from third parties shall be taken into account in determining the
amount of reduction of damages. Each Indemnified Party agrees to use its
reasonable efforts to pursue, or assign to Lessee or Lessor, as the case may be,
any claims or rights it may have against any third party which would materially
reduce the amount of damages otherwise incurred by such Indemnified Party.

     Notwithstanding anything to the contrary contained in this Lease, if Lessor
shall become entitled to the possession of the Leased Property by virtue of the
termination of the Lease or repossession of the Leased Property, then Lessor may
assign its indemnification rights under this Section 8.3 (but not any other
rights under this Section 8.3) to any Person to whom Lessor subsequently
transfers the Leased Property, subject to the following conditions and
limitations, each of which shall be deemed to be incorporated into the terms of
such assignment, whether or not specifically referred to therein:

                                       33

<PAGE>

               (i) The indemnification rights referred to in this section may be
          assigned only if a known Environmental Liability then exists or if a
          Proceeding is then pending or, to the knowledge of Lessee or Lessor,
          then threatened with respect to the Leased Property;

               (ii) Such indemnification rights shall be limited to
          Environmental Liabilities relating to or specifically affecting the
          Leased Property; and

               (iii) Any assignment of such indemnification rights shall be
          limited to the immediate transferee of Lessor, and shall not extend to
          any such transferee's successors or assigns.

                                    ARTICLE 9
                                    ---------
             MAINTENANCE AND REPAIRS; ENCROACHMENTS AND RESTRICTIONS

     9.1. Maintenance and Repairs.
          ------------------------

          (a) Lessee, at its sole expense, will keep the Leased Property, and
all private roadways, sidewalks and curbs appurtenant thereto that are under
Lessee's control, including windows and plate glass, mechanical, electrical and
plumbing systems and equipment (including conduit and ductware), and non-load
bearing interior walls, and parking lot surfaces, in good order and repair,
except (i) for ordinary wear and tear (whether or not the need for such repairs
occurred as a result of Lessee's use, any prior use, the elements or the age of
the Leased Property, or any portion thereof) and (ii) to the extent of damage
caused by Lessor's gross negligence or willful misconduct or that of its
employees or agents, and, except as otherwise provided in Subsection 9.1(b),
Article 14 or Article 15, with reasonable promptness, make all necessary and
appropriate repairs replacements, and improvements thereto of every kind and
nature, whether interior or exterior ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
commencement of the Term of this Lease (concealed or otherwise), or required by
any governmental agency having jurisdiction over the Leased Property, except as
to the structural elements of the Leased Improvements. Lessee, however, shall be
permitted to prosecute claims against Lessor's predecessors in title for breach
of any representation or warranty or for any latent defects in the Leased
Property to be maintained by Lessee unless Lessor is already diligently pursuing
such a claim. All repairs shall, to the extent reasonably achievable, be at
least equivalent in quality to the original work. Lessee will not take or omit
to take any action, the taking or omission of which might materially impair the
value or the usefulness of the Leased Property or any part thereof for its
Primary Intended Use.

          (b) Notwithstanding Lessee's obligations under Subsection 9.1(a)
above, except to the extent of damage caused by Lessee's negligence or willful
misconduct or that of its employees or agents, Lessor shall be required to bear
the cost of maintaining any underground utilities and the structural elements of
the Leased Improvements, including exterior walls and the roof of the Hotel (but
excluding windows and plate glass, mechanical, electrical and plumbing systems
and equipment, including conduit and ductware, and non-load bearing walls, and
parking lot surfaces). Except as set forth in the preceding sentence and in
Section 10.5, Lessor shall not under any circumstances be required to build or
rebuild any improvement on the Leased Property,

                                       34

<PAGE>

or to make any repairs, replacements, alterations, restorations or renewals of
any nature or description to the Leased Property, whether ordinary or
extraordinary, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto, in connection with this Lease, or to maintain the Leased
Property in any way. Lessee hereby waives, to the extent permitted by law, the
right to make repairs at the expense of Lessor, pursuant to any law in effect at
the time of the execution of this Lease or hereafter enacted, except following
default by Lessor under this Lease, to the extent of repairs (for which Lessor
is obligated hereunder) required to be made in order for the Hotel, and Lessee's
use thereof, to comply with Lessee's obligations under the Management Agreement.
Lessor shall have the right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter existing.

          (c) Nothing contained in this Lease and no action or inaction by
Lessor shall be construed as (1) constituting the request of Lessor, expressed
or implied, to any contractor, subcontractor, laborer, materialman or vendor to
or for the performance of any labor or services or the furnishing of any
materials or other property for the construction, alteration, addition, repair
or demolition of or to the Leased Property or any part thereof, or (2) giving
Lessee any right, power or permission to contract for or permit the performance
of any labor or services or the furnishing of any materials or other property in
such fashion as would permit the making of any claim against Lessor in respect
thereof or to make any agreement that may create, or in any way be the basis for
any right, title, interest, lien, claim or other encumbrance upon the estate of
Lessor in the Leased Property, or any portion thereof.

     9.2. Encroachments, Restrictions, Etc. Lessor represents and warrants that
          ---------------------------------
the Leased Improvements do not materially encroach upon any property, street or
right-of-way adjacent to the Leased Property, or violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting the Leased Property, or any part thereof, or impair the rights of
others under any easement or right-of-way to which the Leased Property is
subject. Except to the extent that such representation and warranty is breached
by Lessor, if any of the Leased Improvements, at any time hereafter, materially
encroach upon any property, street or right-of-way adjacent to the Leased
Property, or violate the agreements or conditions contained in any lawful
restrictive covenant or other agreement affecting the Leased Property, or any
part thereof, or impair the rights of others under any easement or right-of-way
to which the Leased Property is subject, then promptly upon the request of
Lessor or at the behest of any Person affected by any such encroachment,
violation or impairment, Lessee shall, at its expense, subject to its right to
contest the existence of any encroachment, violation or impairment and in such
case, in the event of an adverse final determination, either (a) obtain valid
and effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect Lessor or Lessee or (b) make such changes in the Leased
Improvements, and take such other actions, as Lessee in the good faith exercise
of its judgment deems reasonably practicable to remove such encroachment, and to
end such violation or impairment, including, if necessary, the alteration of any
of the Leased Improvements, and in any event take all such actions as may be
necessary in order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use substantially in the manner and to the
extent the Leased Improvements were operated prior to the assertion of such
violation, impairment or encroachment. Any such alteration shall be made in
conformity with the applicable requirements of Article 10. Lessee's obligations
under this Section 9.2 shall be in addition to and shall in no way

                                       35

<PAGE>

discharge or diminish any obligation of any insurer under any policy of title or
other insurance held by Lessor.

                                   ARTICLE 10
                                   ----------
                   ALTERATIONS AND IMPROVEMENTS; FF&E RESERVE

     10.1. Alterations. After receiving approval of Lessor, which approval shall
           ------------
not be unreasonably withheld or delayed, Lessee shall have the right to make
such additions, modifications or improvements to the Leased Property from time
to time as Lessee deems desirable for its permitted uses and purposes, provided
that such action will not significantly alter the character or purposes or
significantly detract from the value or operating efficiency thereof and will
not significantly impair the revenue-producing capability of the Leased Property
or adversely affect the ability of Lessee to comply with the provisions of this
Lease. The cost of such additions, modifications or improvements to the Leased
Property shall be paid by Lessee, and all such additions, modifications and
improvements shall, without payment by Lessor at any time, be included under the
terms of this Lease and upon expiration or earlier termination of this Lease
shall pass to and become the property of Lessor.

     10.2. Salvage. All materials which are scrapped or removed in connection
           --------
with the making of repairs required by Articles 9 or 10 shall be or become the
property of Lessor or Lessee depending on which party is paying for or providing
the financing for such work.

     10.3. Joint Use Agreements. If Lessee constructs additional improvements
           ---------------------
that are connected to the Leased Property or share maintenance facilities, HVAC,
electrical, plumbing or other systems, utilities, parking or other amenities,
the parties shall enter into a mutually agreeable cross-easement or joint use
agreement, the form of which has been approved in advance by Lessor, to make
available necessary services and facilities in connection with such additional
improvements, to protect each of their respective interests in the properties
affected, and to provide for separate ownership, use, and/or financing of such
improvements.

     10.4. [Reserved].
           -----------

     10.5. Furniture, Fixture and Equipment Allowance. Lessor shall be obligated
           -------------------------------------------
to pay Lessee, when and as required to meet the requirements of the Management
Agreement for a reserve for periodic repair, replacement or refurbishing of
furniture, fixtures and equipment that constitute Leased Property, an amount
equal up to five percent (5%) of Suite Revenues monthly. Upon written request by
Lessee to Lessor stating the specific use to be made and the reasonable approval
thereof by Lessor (or as otherwise required by the Manager under the Management
Agreement), such reserve funds (and additional funds of Lessor, if necessary)
shall be made available by Lessor for use by Lessee for replacement or
refurbishing of furniture, fixtures and equipment that constitute Leased
Property in connection with the Primary Intended Use; provided, however, that no
amounts made available under this Article shall be used to purchase property
(other than "real property" within the meaning of Treasury Regulations Section
1.856-3(d)), to the extent that doing so would cause Lessor to recognize income
other than "rents from real property" as defined in Section 856(d) of the Code.
Lessor's obligation shall be cumulative, but not compounded, and any amounts
that have accrued hereunder shall be payable in future periods for such uses and
in

                                       36

<PAGE>

accordance with the procedure set forth herein. Lessee shall have no interest in
any accrued obligation of Lessor hereunder after the termination of this Lease.

                                   ARTICLE 11
                                   ----------
                      COMPLIANCE WITH Management agreement

     11.1. Compliance with Management Agreement. To the extent any of the
           -------------------------------------
provisions of the Management Agreement impose a greater obligation on Lessee
than the corresponding provisions of the Lease, then Lessee shall be obligated
to comply with, and to take all reasonable actions necessary to prevent breaches
or defaults under, the provisions of the Management Agreement. It is the intent
of the parties hereto that Lessee shall comply in every respect with the
provisions of the Management Agreement so as to avoid any material default
thereunder during the term of this Lease. Lessee shall not terminate, extend or
enter into any material modification of the Management Agreement without in each
instance first obtaining Lessor's prior written consent, which shall not be
unreasonably withheld. Lessor and Lessee agree to cooperate with each other in
the event it becomes necessary to obtain a franchise extension or modification
(or, at Lessor's option, a new franchise) for the Leased Property, and in any
transfer of the Management Agreement to Lessor or any designee of Lessor or any
successor to Lessee upon the termination of this Lease. In the event of
expiration or termination of a Management Agreement, for whatever reason, Lessor
will have the right, in the exercise of its sole discretion, to approve any new
Management Agreement for the Hotel.

                                   ARTICLE 12
                                   ----------
                          PERMITTED LIENS AND CONTESTS

     12.1. Liens. Subject to the provisions of Section 12.2 relating to
           ------
permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (a) this Lease, (b) the matters included as exceptions in the title
policy insuring Lessor's interest in the Leased Property, (c) restrictions,
liens and other encumbrances which are consented to in writing by Lessor or any
easements granted pursuant to the provisions of Section 7.3 of this Lease, (d)
liens for those taxes upon Lessor or the Leased Property which Lessee is not
required to pay hereunder, (e) subleases permitted by Article 20 hereof, (f)
liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (1) the same are not yet payable or are payable without
the addition of any fine or penalty or (2) such liens are in the process of
being contested as permitted by Section 12.2, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed or not yet due
provided that (1) the payment of such sums shall not be postponed under any
related contract for more than sixty (60) days after the completion of the
action giving rise to such lien and such reserve or other appropriate provisions
as shall be required by law or generally accepted accounting principles shall
have been made therefor or (2) any such liens are in the process of being
contested as permitted by Section 12.2 hereof, and (h) any liens which are the
responsibility of Lessor pursuant to the provisions of Article 22 of this Lease.

                                       37

<PAGE>

     12.2. Permitted Contests. Lessee shall have the right to contest the amount
           -------------------
or validity of any Imposition to be paid by Lessee or any Legal Requirement or
Insurance Requirement or any lien, attachment, levy, encumbrance, charge or
claim ("Claims") not otherwise permitted by Section 12.1, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Section provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon will be paid, or (b)
deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security for
the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all Claims
which may be assessed against or become a Claim on the Leased Property, or any
part thereof, in said legal proceedings. Lessee shall furnish Lessor and any
lender of Lessor with reasonable evidence of such deposit within five (5) days
of the same. Lessor agrees to join in any such proceedings if the same be
required legally to prosecute such contest of the validity of such Claims;
provided, however, that Lessor shall not thereby be subjected to any liability
or loss for the payment of any costs or expenses in connection with any
proceedings brought by Lessee; and Lessee covenants to indemnify and save
harmless Lessor from any such liabilities, losses, costs or expenses. Lessee
shall be entitled to any refund of any Claims and such charges and penalties or
interest thereon which have been paid by Lessee or paid by Lessor and for which
Lessor has been fully reimbursed. In the event that Lessee fails to pay any
Claims when due or to provide the security therefor as provided in this Section
and diligently to prosecute any contest of the same, Lessor may, upon ten (10)
days' advance Notice to Lessee, and Lessee's failure to correct the same within
such ten (10) day period, pay such charges together with any interest and
penalties and the same shall be repayable by Lessee to Lessor as Additional
Charges at the next Payment Date provided for in this Lease; provided, however,
that should Lessor reasonably determine that the giving of such Notice would
risk loss to the Leased Property or cause damage to Lessor, then Lessor shall
give such Notice as is practical under the circumstances. Lessor reserves the
right to contest any of the Claims at its expense not pursued by Lessee. Lessor
and Lessee agree to cooperate in coordinating the contest of any Claims.

                                   ARTICLE 13
                                   ----------
                             INSURANCE REQUIREMENTS

     13.1. General Insurance Requirements. During the Term of this Lease, Lessor
           -------------------------------
and Lessee shall at all times keep the Leased Property insured with the kinds
and amounts of insurance described below, or such other insurance coverage(s) as
may be required by the Management Agreement. This insurance shall be written by
companies authorized to issue insurance in the State. The policies must name
Lessor and Mortgagee and/or Lessee, as applicable, as the insured or as an
additional named insured, as the case may be. Losses shall be payable to Lessor
or Lessee as provided in this Lease. Any loss adjustment shall require the
written consent of Lessor and

                                       38

<PAGE>

Lessee, each acting reasonably and in good faith. Evidence of insurance shall be
deposited with Lessor. The policies on the Leased Property, including the Leased
Improvements, Fixtures and Lessee's Personal Property, shall include the
following:

          (a) Lessor shall obtain and maintain, at its own expense:

               (i) Building insurance on the "Special Form" (formerly "All Risk"
          form) (including earthquake and flood in reasonable amounts as
          determined by Lessor) in an amount not less than 100% of the then full
          replacement cost thereof (as defined in Section 13.2) or such other
          amount which is acceptable to Lessor and Lessee, and personal property
          insurance (on other than Lessee's Personal Property) on the "Special
          Form" in the full amount of the replacement cost thereof;

               (ii) Insurance for loss or damage (direct and indirect) from
          steam boilers, pressure vessels or similar apparatus, now or hereafter
          installed in the Hotel, in the minimum amount of $5,000,000 or in such
          greater amounts as are then customary; and

               (iii) Loss of income insurance on the "Special Form", in the
          amount of one year of Base Rent and Additional Charges (to the extent
          quantifiable) for the benefit of Lessor.

          (b) Lessee shall obtain and maintain, at its own expense:

               (i) Personal property insurance on Lessee's Personal Property on
          the "Special Form" in the full amount of the replacement cost thereof;

               (ii) Comprehensive general liability insurance, with amounts not
          less than $10,000,000 covering each of the following: bodily injury,
          death, or property damage liability per occurrence, personal and
          advertising injury, general aggregate, products and completed
          operations, with respect to Lessor, and "all risk legal liability"
          (including liquor law or "dram shop" liability, if liquor or alcoholic
          beverages are served on the Leased Property) with respect to Lessor
          and Lessee;

               (iii) Insurance covering such other hazards and in such amounts
          as may be customary for comparable properties in the area of the
          Leased Property and is available from insurance companies, insurance
          pools or other appropriate companies authorized to do business in the
          State at rates which are economically practicable in relation to the
          risks covered, as may be reasonably requested by Lessor;

               (iv) Fidelity bonds with limits and deductibles as may be
          reasonably requested by Lessor, covering Lessee's employees in job
          classifications normally bonded under prudent hotel management
          practices in the United States or otherwise required by law;

                                       39

<PAGE>

               (v) Worker's compensation insurance coverage for all persons, if
          any, employed by Lessee on the Leased Premises, to the extent
          necessary to protect Lessor and the Leased Property against Lessee's
          worker's compensation claims, such worker's compensation insurance to
          be in accordance with the requirements of applicable local, state and
          federal law;

               (vi) Vehicle liability insurance for owned, non-owned, and hired
          vehicles, in the amount of $5,000,000; and

               (vii) Such other insurance as Lessor may reasonably request for
          facilities such as the Leased Property and the operation thereof.

     13.2. Replacement Cost. The term "full replacement cost" as used herein
           -----------------
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
exclusions) has increased or decreased at any time during the Lease Term, it
shall have the right to have such full replacement cost re-determined.

     13.3. Waiver of Subrogation. All insurance policies carried by Lessor or
           ----------------------
Lessee covering the Leased Property, the Fixtures, the Hotel or Lessee's
Personal Property, including, without limitation, contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party. The parties hereto agree that their policies
will include such waiver clause or endorsement so long as the same are
obtainable without extra cost, and in the event of such an extra charge the
other party, at its election, may pay the same, but shall not be obligated to do
so.

     13.4. Form Satisfactory, Etc.
           -----------------------

          (a) All of the policies of insurance referred to in this Article 13 to
be maintained by Lessee shall be written in a form, with deductibles and by
insurance companies satisfactory to Lessor. Lessee shall pay all of the premiums
therefor, and deliver such policies or certificates thereof to Lessor prior to
their effective date (and, with respect to any renewal policy, thirty (30) days
prior to the expiration of the existing policy), and in the event of the failure
of Lessee either to effect such insurance as herein called for or to pay the
premiums therefor, or to deliver such policies or certificates thereof to Lessor
at the times required, Lessor shall be entitled, but shall have no obligation,
to effect such insurance and pay the premiums therefor, and Lessee shall
reimburse Lessor for any premium or premiums paid by Lessor for the coverages
required of Lessee under this Article 13 upon written demand therefor, and
Lessee's failure to repay the same within thirty (30) days after Notice of such
failure from Lessor shall constitute an Event of Default within the meaning of
Section 16.1. Each insurer mentioned in this Article 13 shall agree, by
endorsement to the policy or policies issued by it, or by independent instrument
furnished to Lessor, that it will give to Lessor thirty (30) days' written
notice before the policy or policies in question shall be materially altered,
allowed to expire or canceled.

                                       40

<PAGE>

          (b) All of the policies of insurance referred to in this Article 13 to
be maintained by Lessor shall be written in a form, with deductibles and by
insurance companies satisfactory to Lessee. Lessor shall pay all of the premiums
therefor, and deliver such policies or certificates thereof to Lessee prior to
their effective date (and, with respect to any renewal policy, thirty (30) days
prior to the expiration of the existing policy), and in the event of the failure
of Lessor either to effect such insurance as herein called for or to pay the
premiums therefor, or to deliver such policies or certificates thereof to Lessee
at the times required, Lessee shall be entitled, but shall have no obligation,
to effect such insurance and pay the premiums therefor, and Lessor shall
reimburse Lessee for any premium or premiums paid by Lessee for the coverages
required under this Section upon written demand therefor. Each insurer mentioned
in this Article 13 shall agree, by endorsement to the policy or policies issued
by it, or by independent instrument furnished to Lessee, that it will give to
Lessee thirty (30) days' written notice before the policy or policies in
question shall be materially altered, allowed to expire or canceled.

     13.5. Increase in Limits. If either Lessor or Lessee at any time deems the
           -------------------
limits of the personal injury or property damage under the comprehensive public
liability insurance then carried to be either excessive or insufficient, Lessor
and Lessee shall endeavor in good faith to agree on the proper and reasonable
limits for such insurance to be carried and such insurance shall thereafter be
carried with the limits thus agreed on until further change pursuant to the
provisions of this Article 13.

     13.6. Blanket Policy. Notwithstanding anything to the contrary contained in
           ---------------
this Article 13. 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 Lessee (or Manager) or Lessor; provided, however, that
the coverage afforded to Lessor and Lessee will not be reduced or diminished or
otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article 13 are otherwise satisfied.

     13.7. No Separate Insurance. Lessee shall not, on Lessee's own initiative
           ----------------------
or pursuant to the request or requirement of any third party, take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article to be furnished, 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, are included therein as additional
insured, and the loss is payable under such additional separate insurance in the
same manner as losses are payable under this Lease. Lessee shall immediately
notify Lessor of any such separate insurance that Lessee has obtained or of the
increase of any of the amounts of the then existing insurance.

     13.8. Reports On Insurance Claims. Lessee 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 and shall prepare any and all reports required
by any insurance company in connection therewith. All such reports shall be
timely filed with the insurance company as required under the terms of the
insurance policy involved, and a final copy of such report shall be furnished to
Lessor. Lessee shall be authorized to

                                       41

<PAGE>

adjust, settle, or compromise any insurance loss, or to execute proofs of such
loss, in the aggregate amount of $25,000 or less, with respect to any single
casualty or other event.

                                   ARTICLE 14
                                   ----------
                   CASUALTY INSURANCE PROCEEDS; RECONSTRUCTION

     14.1. Insurance Proceeds. Subject to the provisions of Section 14.4, all
           -------------------
proceeds payable by reason of any loss or damage to the Leased Property, or any
portion thereof, insured under any policy of insurance required by Article 13 of
this Lease, shall be paid to Lessor and held in trust by Lessor in an
interest-bearing account, shall be made available, if applicable, for
reconstruction or repair, as the case may be, of any damage to or destruction of
the Leased Property, or any portion thereof, and, if applicable, shall be paid
out by Lessor from time to time for the reasonable costs of such reconstruction
or repair upon satisfaction of reasonable terms and conditions specified by
Lessor. Any excess proceeds of insurance (and accrued interest) remaining after
the completion of the restoration or reconstruction of the Leased Property, as
hereinafter set forth, shall be paid to Lessee. If neither Lessor nor Lessee is
required or elects to repair and restore, and the Lease is terminated without
purchase by Lessee as described in Section 14.2, all such insurance proceeds
shall be retained by Lessor. All salvage resulting from any risk covered by
insurance shall belong to Lessor.

     14.2. Reconstruction in the Event of Damage or Destruction Covered by
           ---------------------------------------------------------------
Insurance.
----------

          (a) Except as provided in Section 14.6 and subject to the right of the
Mortgagee, if during the Term the Leased Property is totally or partially
destroyed by a risk covered by the insurance described in Article 13 and the
Hotel thereby is rendered Unsuitable for its Primary Intended Use, Lessee shall,
at Lessee's option, either (1) restore the Hotel to substantially the same
condition as existed immediately before the damage or destruction and otherwise
in accordance with the terms of the Lease, or (2) offer to acquire the Leased
Property from Lessor for a purchase price equal to the Rejectable Offer Price of
the Leased Property. If Lessee restores the Hotel, the insurance proceeds shall
be paid out by Lessor from time to time for the reasonable costs of such
restoration upon satisfaction of reasonable terms and conditions, and any excess
proceeds remaining after such restoration shall be paid to Lessee. If Lessee
acquires the Leased Property, Lessee shall receive the insurance proceeds. If
Lessor does not accept Lessee's offer so to purchase the Leased Property within
ninety (90) days, Lessee may withdraw its offer to purchase the Leased Property
and, if so withdrawn, Lessee may terminate the Lease with respect to the Leased
Property without further liability hereunder and Lessor shall be entitled to
retain all insurance proceeds.

          (b) Except as provided in Section 14.6, if during the Term the Leased
Property is partially destroyed by a risk covered by the insurance described in
Article 13, but the Hotel is not thereby rendered Unsuitable for its Primary
Intended Use, Lessee shall restore the Hotel to substantially the same condition
as existed immediately before the damage or destruction and otherwise in
accordance with the terms of the Lease. Such damage or destruction shall not
terminate this Lease; provided, however, that if Lessee cannot within a
reasonable time obtain all necessary government approvals, including building
permits, licenses and conditional use permits, after diligent efforts to do so,
to perform all required repair and restoration work and to operate the Hotel for
its Primary Intended Use in substantially the same manner as that existing
immediately

                                       42

<PAGE>

prior to such damage or destruction and otherwise in accordance with the terms
of the Lease, Lessee may offer to purchase the Leased Property for a purchase
price equal to the Rejectable Offer Price of the Leased Property, determined
without regard to such damage or destruction if insurance proceeds are available
to restore the Hotel. If Lessee makes such offer and Lessor does not accept the
same, Lessee shall withdraw such offer, in which event this Lease shall remain
in full force and effect and Lessee shall immediately proceed to restore the
Hotel to substantially the same condition as existed immediately before such
damage or destruction and otherwise in accordance with the terms of the Lease.
If Lessee restores the Hotel, the insurance proceeds shall be paid out by Lessor
from time to time for the reasonable costs of such restoration upon satisfaction
of reasonable terms and conditions specified by Lessor, and any excess proceeds
remaining after such restoration shall be paid to Lessee.

          (c) If the cost of the repair or restoration exceeds the amount of
proceeds received by Lessor from the insurance it maintains as required under
Article 13, Lessee shall be obligated to contribute any excess amounts needed to
restore the Hotel. Such difference shall be paid by Lessee to Lessor promptly
after Lessee receives Lessor's written invoice therefor, to be held in trust in
an interest-bearing account, together with any other insurance proceeds, for
application to the cost of repair and restoration.

          (d) If Lessor accepts Lessee's offer to purchase the Leased Property
under this Article, this Lease shall terminate as to the Leased Property upon
payment of the purchase price, and Lessor shall remit to Lessee all insurance
proceeds pertaining to the Leased Property being held in trust by Lessor.

     14.3. Reconstruction in the Event of Damage or Destruction Not Covered by
           -------------------------------------------------------------------
Insurance. Except as provided in Section 14.6, if during the Term the Hotel is
----------
totally or materially destroyed by a risk not covered by the insurance described
in Article 13, whether or not such damage or destruction renders the Hotel
Unsuitable for its Primary Intended Use, Lessee at its option shall either, (a)
at Lessee's sole cost and expense, restore the Hotel to substantially the same
condition it was in immediately before such damage or destruction and such
damage or destruction shall not terminate this Lease, or (b) offer to purchase
the Leased Property for a purchase price equal to the Rejectable Offer Price of
the Leased Property without regard to such damage or destruction. If such damage
or destruction is not material, Lessee shall restore the Hotel to substantially
the same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease. If Lessor does not accept
Lessee's offer so to purchase the Leased Property within ninety (90) days,
Lessee may withdraw its offer to purchase the Leased Property and, if so
withdrawn, Lessee may terminate the Lease with respect to the Leased Property
without further liability hereunder.

     14.4. Lessee's Property. All insurance proceeds payable by reason of any
           ------------------
loss of or damage to any of Lessee's Personal Property shall be paid to Lessee;
provided, however, no such payments shall diminish or reduce the insurance
payments otherwise payable to or for the benefit of Lessor hereunder.

     14.5. Abatement of Rent. Any damage or destruction due to casualty
           ------------------
notwithstanding, this Lease shall remain in full force and effect and Lessee's
obligation to make rental payments and

                                       43

<PAGE>

to pay all other charges required by this Lease shall remain unabated during the
first three (3) months of any period required for the applicable repair and
restoration. Thereafter, Base Rent shall be equitably abated.

     14.6. Damage Near End of Term. Notwithstanding any provisions of Section
           ------------------------
14.2 or 14.3 appearing to the contrary, if damage to or destruction of the Hotel
rendering it unsuitable for its Primary Intended Use occurs during the last
twenty-four (24) months of the Term, then Lessor or Lessee shall have the right
to terminate this Lease by giving Notice, respectively, to Lessee or Lessor
within thirty (30) days after the date of damage or destruction, whereupon all
accrued Rent shall be paid immediately, and this Lease shall automatically
terminate five (5) days after the date of such Notice.

     14.7. Waiver. Lessee hereby waives any statutory rights of termination that
           -------
may arise by reason of any damage or destruction of the Hotel that Lessor is
obligated to restore or may restore under any of the provisions of this Lease.

                                   ARTICLE 15
                                   ----------
                         CONDEMNATION; AWARD ALLOCATION

     15.1. Definitions.
           ------------

          (a) "Award" means all compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.

          (b) "Condemnation" means a Taking resulting from (1) the exercise of
any governmental power, whether by legal proceedings or otherwise, by a
Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.

          (c) "Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.

          (d) "Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.

     15.2. Parties' Rights and Obligations. If during the Term there is any
           --------------------------------
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this Article 15.

     15.3. Total Taking If title to the fee of the whole of the Leased Property
           ------------
is condemned by any Condemnor, this Lease shall cease and terminate as of the
Date of Taking by the Condemnor. If title to the fee of less than the whole of
the Leased Property is so taken or condemned, which nevertheless renders the
Leased Property Unsuitable or Uneconomic for its Primary Intended Use, Lessee
and Lessor shall each have the option, by Notice to the other, at any time prior
to the Date of Taking, to terminate this Lease as of the Date of Taking. Upon
such date, if such Notice has been given, this Lease shall thereupon cease and
terminate. All Base Rent, Percentage Rent and

                                       44

<PAGE>

Additional Charges paid or payable by Lessee hereunder shall be apportioned as
of the Date of Taking, and Lessee shall promptly pay Lessor such amounts.

     15.4. Allocation of Award. The total Award made with respect to the Leased
           --------------------
Property or for loss of rent, or for Lessor's loss of business beyond the Term,
shall be solely the property of and payable to Lessor. Any Award made for loss
of Lessee's business during the remaining Term, if any, for the taking of
Lessee's Personal Property, or for removal and relocation expenses of Lessee in
any such proceedings shall be the sole property of and payable to Lessee. In any
Condemnation proceedings Lessor and Lessee shall each seek its Award in
conformity herewith, at its respective expense; provided, however, Lessee shall
not initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to Lessor.

     15.5. Partial Taking. If title to less than the whole of the Leased
           ---------------
Property is condemned, and the Leased Property is not Unsuitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as provided in
Section 15.3, Lessee at its cost shall with all reasonable dispatch restore the
untaken portion of any Leased Improvements so that such Leased Improvements
constitute a complete architectural unit of the same general character and
condition (as nearly as may be possible under the circumstances) as the Leased
Improvements existing immediately prior to the Condemnation. Lessor shall
contribute to the cost of restoration that part of its Award specifically
allocated to such restoration, if any, together with severance and other damages
awarded for the taken Leased Improvements; provided, however, that the amount of
such contribution shall not exceed such cost. In the event of such a partial
Taking, this Lease shall not terminate, but the Base Rent shall be abated in the
manner and to the extent that is fair, just and equitable to both Lessee and
Lessor, taking into consideration, among other relevant factors, the number of
usable rooms, the amount of square footage, or the revenues affected by such
partial Taking. If Lessor and Lessee are unable to agree upon the amount of such
abatement within thirty (30) days after such partial Taking, the matter may be
submitted by either party to a court of competent jurisdiction for resolution.

     15.6. Temporary Taking. If the whole or any part of the Leased Property
           -----------------
(other than the fee) or of Lessee's interest under this Lease is condemned by
any Condemnor for its temporary use or occupancy (which shall mean a period not
to exceed two years), this Lease shall not terminate by reason thereof, and
Lessee shall continue to pay, in the manner and at the terms herein specified,
the full amounts of Base Rent and Additional Charges. In addition, Lessee shall
pay Percentage Rent at a rate equal to the average Percentage Rent during the
last three (3) preceding Fiscal Years (or if three (3) Fiscal Years shall not
have elapsed, the average during the preceding Fiscal Years). Except only to the
extent that Lessee may be prevented from so doing pursuant to the terms of the
order of the Condemnor, Lessee shall continue to perform and observe all of the
other terms, covenants, conditions and obligations hereof on the part of Lessee
to be performed and observed, as though such Condemnation had not occurred. In
the event of any Condemnation as in this Section 15.6 described, the entire
amount of any Award made for such Condemnation allocable to the Term of this
Lease, whether paid by way of damages, rent or otherwise, shall be paid to
Lessee. Lessee covenants that upon the termination of any such period of
temporary use or occupancy it will, at its sole cost and expense (subject to
Lessor's contribution as set forth below), restore the Leased Property as nearly
as may be reasonably possible to the condition in which the same was immediately
prior to such Condemnation, unless such period of temporary use or occupancy

                                       45

<PAGE>

extends beyond the expiration of the Term, in which case Lessee shall not be
required to make such restoration. If restoration is required hereunder, Lessor
shall contribute to the cost of such restoration that portion of its entire
Award that is specifically allocated to such restoration in the judgment or
order of the court, if any, and Lessee shall fund the balance of such costs in a
manner reasonably satisfactory to Lessor.

                                   ARTICLE 16
                                   ----------
                      DEFAULT BY LESSEE; LESSOR'S REMEDIES

     16.1. Events of Default. If any one or more of the following events
           ------------------
(individually, an "Event of Default") occurs:

          (a) if an Event of Default occurs under any other lease between Lessor
or any Affiliate of Lessor and Lessee or any Affiliate of Lessee; or

          (b) if Lessee fails to make payment of the Base Rent within ten (10)
days after the same becomes due and payable; or

          (c) if Lessee fails to make payment of Percentage Rent when the same
becomes due and payable and such condition continues for a period of thirty (30)
days after the end of the applicable quarter; or

          (d) if Lessee fails to observe or perform any other term, covenant or
condition of this Lease and such failure is not cured by Lessee within a period
of thirty (30) days after receipt by Lessee of Notice thereof from Lessor,
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case it shall not be deemed an Event of Default if Lessee
proceeds promptly and with due diligence to cure the failure and diligently
completes the curing thereof provided, however, in no event shall such cure
period extend beyond ninety (90) days after such Notice; or

          (e) if Lessee shall file a petition in bankruptcy or reorganization
for an arrangement pursuant to any federal or state bankruptcy law or any
similar federal or state law, or shall be adjudicated a bankrupt or shall make
an assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts generally as they become due, or if a petition or
answer proposing the adjudication of Lessee as a bankrupt or its reorganization
pursuant to any federal or state bankruptcy law or any similar federal or state
law shall be filed in any court and Lessee shall be adjudicated a bankrupt and
such adjudication shall not be vacated or set aside or stayed within sixty (60)
days after the entry of an order in respect thereof, or if a receiver of Lessee
or of the whole or substantially all of the assets of Lessee shall be appointed
in any proceeding brought by Lessee or if any such receiver, trustee or
liquidator shall be appointed in any proceeding brought against Lessee and shall
not be vacated or set aside or stayed within sixty (60) days after such
appointment; or

          (f) if Lessee is liquidated or dissolved, or begins proceedings toward
such liquidation or dissolution, or, in any manner, permits the sale or
divestiture of substantially all of its assets; or

                                       46

<PAGE>

          (g) if, except as expressly permitted herein, the estate or interest
of Lessee in the Leased Property or any part thereof is voluntarily or
involuntarily transferred, assigned, conveyed, levied upon or attached in any
proceeding (unless Lessee is contesting such lien or attachment in good faith in
accordance with Section 12.2 hereof) or there is a Change of Control of Lessee;
or

          (h) if, except as a result of damage, destruction or a partial or
complete Condemnation as contemplated by this Lease, Lessee voluntarily ceases
operations on the Leased Property for a period in excess of thirty (30) days; or

          (i) if an event of default has been declared by the Manager under the
Management Agreement with respect to the Hotel as a result of any action or
failure to act by Lessee or any Person with whom Lessee contracts for management
services at the Hotel, and such default is not cured by the earlier of (A) ten
(10) days following notice from Lessor or (B) such earlier date as is required
for Lessee to avoid termination of the Management Agreement by the Manager;

then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including but not limited to its right to
terminate this Lease by giving Lessee not less than ten (10) days' Notice of
such termination.

          If litigation is commenced with respect to any alleged default under
this Lease, the prevailing party in such litigation shall receive, in addition
to its damages incurred, such sum as the court shall determine as its reasonable
attorneys' fees, and all costs and expenses incurred in connection therewith.

          No Event of Default (other than a failure to make a payment of money)
shall be deemed to exist under clause (d) during any time the curing thereof is
prevented by an Unavoidable Delay, provided that upon the cessation of such
Unavoidable Delay, Lessee remedies such default or Event of Default without
further delay.

     16.2. Surrender. If an Event of Default occurs (and the event giving rise
           ----------
to such Event of Default has not been cured within the curative period relating
thereto as set forth in Section 16.1) and is continuing, whether or not this
Lease has been terminated pursuant to Section 16.1, Lessee shall, if requested
by Lessor so to do, immediately surrender to Lessor the Leased Property
including, without limitation, any and all books, records, files, licenses,
permits and keys relating thereto, and quit the same and Lessor may enter upon
and repossess the Leased Property by summary proceedings, ejectment or
otherwise, and may remove Lessee and all other Persons and any and all personal
property from the Leased Property, subject to rights of any hotel guests and to
any requirement of law. Lessee hereby waives any and all requirements of
applicable laws for service of notice to re-enter the Leased Property. Lessor
shall be under no obligation to, but may if it so chooses, relet the Leased
Property or otherwise mitigate Lessor's damages.

     16.3. Damages. Neither (a) the termination of this Lease, (b) the
           --------
repossession of the Leased Property, (c) the failure of Lessor to relet the
Leased Property, nor (d) the reletting of all or any portion thereof, shall
relieve Lessee of its liability and obligations hereunder, all of which shall

                                       47

<PAGE>

survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all Rent due and payable
with respect to the Leased Property to and including the date of such
termination.

          Lessee shall forthwith pay to Lessor, at Lessor's option, as and for
liquidated and agreed current damages for Lessee's default, either:

               (i) Without termination of Lessee's right to possession of the
          Leased Property, each installment of Rent (including Percentage Rent
          as determined below) and other sums payable by Lessee to Lessor under
          the Lease as the same becomes due and payable, which Rent and other
          sums shall bear interest at the Overdue Rate, and Lessor may enforce,
          by action or otherwise, any other term or covenant of this Lease; or

               (ii) the sum of:

                    (A) the unpaid Rent which had been earned at the time of
          termination, repossession or reletting, and

                    (B) the worth at the time of termination, repossession or
          reletting of the amount by which the unpaid Rent for the balance of
          the Term after the time of termination, repossession or reletting,
          exceeds the amount of such rental loss that Lessee proves could be
          reasonably avoided and as reduced for rentals received after the time
          of termination, repossession or reletting, if and to the extent
          required by applicable law, and

                    (C) any other amount necessary to compensate Lessor for all
          the detriment proximately caused by Lessee's failure to perform its
          obligations under this Lease or which in the ordinary course of
          things, would be likely to result therefrom.

          The worth at the time of termination, repossession or reletting of the
amount referred to in subparagraph (B) is computed by discounting such amount at
the discount rate of the Federal Reserve Bank of New York at the time of award
plus one percent (1%). Percentage Rent for the purposes of this Section 16.3
shall be a sum equal to (i) the average of the annual amounts of the Percentage
Rent for the three (3) Fiscal Years immediately preceding the Fiscal Year in
which the termination, re-entry or repossession takes place, or (ii) if three
(3) Fiscal Years shall not have elapsed, the average of the Percentage Rent
during the preceding Fiscal Years during which the Lease was in effect, or (iii)
if one Fiscal Year has not elapsed, the amount derived by annualizing the
Percentage Rent from the effective date of this Lease.

     16.4. Waiver. If this Lease is terminated pursuant to Section 16.1, Lessee
           -------
waives, to the extent permitted by applicable law, (a) any right to a trial by
jury in the event of summary proceedings to enforce the remedies set forth in
this Article 16, and (b) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt and Lessor waives any
right to "pierce the corporate veil" of Lessee other than to the extent funds
shall have been

                                       48

<PAGE>

fraudulently paid by Lessee to any Affiliate of Lessee following a default
resulting in an Event of Default.

     16.5. Application of Funds. Any payments received by Lessor under any of
           ---------------------
the provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee's obligations in the order that Lessor may
determine or as may be prescribed by the laws of the State.

     16.6. Lessor's Right to Cure Lessee's Default. If Lessee fails to make any
           ----------------------------------------
payment or to perform any act required to be made or performed under this Lease,
including, without limitation, Lessee's failure to comply with the terms of any
Management Agreement, and fails to cure the same within the relevant time
periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for such
purpose and, subject to Section 16.4, take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case to the extent permitted by law) so incurred, together
with a late charge thereon (to the extent permitted by law) at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessors,
shall be paid by Lessee to Lessor on demand. The obligations of Lessee and
rights of Lessor contained in this Article shall survive the expiration or
earlier termination of this Lease.

                                   ARTICLE 17
                                   ----------
                      DEFAULT BY LESSOR; LESSEE'S REMEDIES

     17.1. Breach by Lessor. It shall be a breach of this Lease if Lessor fails
           -----------------
to observe or perform any term, covenant or condition of this Lease on its part
to be performed and such failure continues for a period of thirty (30) days
after Notice thereof from Lessee, unless such failure cannot with due diligence
be cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Lessor, within such thirty (30) day period,
proceeds promptly and with due diligence to cure the failure and diligently
completes the curing thereof; provided, however, that such default shall be
cured by Lessor in any event prior to the date on which the default becomes an
event of default under the terms of the Management Agreement for the Hotel. The
time within which Lessor shall be obligated to cure any such failure also shall
be subject to extension of time due to the occurrence of any Unavoidable Delay.
If Lessor fails to cure any such breach within the grace period described above,
Lessee, without waiving or releasing any obligations hereunder, and in addition
to all other remedies available to Lessee at law or in equity, may purchase the
Leased Property from Lessor for a purchase price equal to the then Fair Market
Value. If Lessee elects to purchase the Leased Property it shall deliver a
Notice thereof to Lessor specifying a settlement date to occur not less than
ninety (90) days subsequent to the date of such Notice on which it shall
purchase the Leased Property, and the same shall be thereupon conveyed in
accordance with the provisions of Section 17.3; provided, however, that Lessor
shall pay the cost of Lessee's title insurance and all closing costs associated
with such purchase by Lessee following default by Lessor.

                                       49

<PAGE>

     17.2. Lessee's Right to Cure. Subject to the provisions of Section 17.1, if
           -----------------------
Lessor breaches any covenant to be performed by it under this Lease, Lessee,
after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to all other remedies available to Lessee,
may (but shall be under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the expense of Lessor. All
sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys' fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand or,
following entry of a final, nonappealable judgment against Lessor for such sums,
may be offset by Lessee against the Base Rent and/or Percentage Rent payments
next accruing or coming due. The rights of Lessee hereunder to cure and to
secure payment from Lessor in accordance with this Section 17.2 shall survive
the termination of this Lease with respect to the Leased Property.

     17.3. Provisions Relating to Purchase of the Leased Property by Lessee. If
           -----------------------------------------------------------------
Lessee purchases the Leased Property from Lessor pursuant to any of the terms of
this Lease, Lessor shall, upon receipt from Lessee of the applicable purchase
price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to
Lessee an appropriate limited or special warranty deed or other conveyance
conveying the entire interest of Lessor in and to the Leased Property to Lessee
free and clear of all encumbrances other than (a) those that Lessee has agreed
hereunder to pay or discharge, (b) those mortgage liens to the extent assignable
and assumable, if any, that Lessee has agreed in writing to accept and to take
title subject to, (c) those liens and encumbrances subject to which the Leased
Property was conveyed to Lessor, to the extent not released in connection with
the transactions contemplated by this Lease, (d) encumbrances, easements,
licenses or rights of way required to be imposed on the Leased Property under
Section 7.3, and (e) any other encumbrances permitted to be imposed on the
Leased Property under the provisions of Article 22 that are assumable at no cost
to Lessee or to which Lessee may take subject without cost to Lessee. The
difference between the applicable purchase price and the total of the
encumbrances assumed or taken subject to shall be paid in cash to Lessor or as
Lessor may direct, in federal or other immediately available funds, except as
otherwise mutually agreed by Lessor and Lessee. All expenses of such conveyance,
including, without limitation, the cost of title examination or title insurance,
if desired by Lessee, Lessee's attorneys' fees incurred in connection with such
conveyance and release, and one-half of any transfer taxes and recording fees,
shall be paid by Lessee. Lessor shall pay one-half of any transfer taxes and
recording fees and its attorney's fees.

                                   ARTICLE 18
                                   ----------
                                 INDEMNIFICATION

     18.1. Indemnification.
           ----------------

          (a) Notwithstanding the existence of any insurance, and without regard
to the policy limits of any such insurance or self-insurance, but subject to
Section 13.3 and Section 8.3, Lessee will protect, indemnify, hold harmless and
defend Lessor from and against all liabilities, losses, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses), to the extent permitted by
law,

                                       50

<PAGE>

imposed upon or incurred by or asserted against Lessor Indemnified Parties by
reason of: (a) any accident, injury to or death of persons or loss of or damage
to property occurring on or about the Leased Property or adjoining sidewalks,
including without limitation any claims under liquor liability, "dram shop" or
similar laws, (b) any use, misuse, non-use, condition, management, maintenance
or repair by Lessee or any of its agents, employees or invitees of the Leased
Property or Lessee's Personal Property during the Term or any litigation,
proceeding or claim by governmental entities or other third parties to which a
Lessor Indemnified Party is made a party or participant related to such use,
misuse, non-use, condition, management, maintenance, or repair thereof by Lessee
or any of its agents, employees or invitees, including any failure of lessee or
any of its agents, employees or invitees to perform any obligations under this
Lease or imposed by applicable law (other than arising out of Condemnation
proceedings), (c) any Impositions that are the obligations of Lessee pursuant to
the applicable provisions of this Lease, (d) any failure on the part of Lessee
to perform or comply with any of the terms of this Lease, and (e) the
non-performance of any of the terms and provisions of any and all existing and
future subleases of the Leased Property to be performed by the landlord
thereunder.

          (b) Notwithstanding the existence of any insurance, and without regard
to the policy limits of any such insurance or self-insurance, but subject to
Section 13.3 and Section 8.3, Lessor shall indemnify, save harmless and defend
Lessee Indemnified Parties from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses imposed upon or
incurred by or asserted against Lessee Indemnified Parties as a result of (a)
the gross negligence or willful misconduct of Lessor arising in connection with
this Lease or (b) any failure on the part of Lessor to perform or comply with
any of the terms of this Lease. Any amounts that become payable by an
Indemnifying Party under this Section shall be paid within ten (10) days after
liability therefor on the part of the Indemnifying Party is determined by
litigation or otherwise, and if not timely paid, shall bear a late charge (to
the extent permitted by law) at the Overdue Rate from the date of such
determination to the date of payment. An Indemnifying Party, at its expense,
shall contest, resist and defend any such claim, action or proceeding asserted
or instituted against the Indemnified Party. The Indemnified Party, at its
expense, shall be entitled to participate in any such claim, action, or
proceeding, and the Indemnifying Party may not compromise or otherwise dispose
of the same without the consent of the Indemnified Party, which may not be
unreasonably withheld or delayed. Nothing herein shall be construed as
indemnifying a Lessor Indemnified Party against its own (or Lessor's) grossly
negligent acts or omissions or willful misconduct.

          (c) Lessee's or Lessor's liability for a breach of the provisions of
this Article shall survive any termination of this Lease.

                                   ARTICLE 19
                                   ----------
                       REIT REQUIREMENTS AND RESTRICTIONS

     19.1. Personal Property Limitation. Anything contained in this Lease to the
           -----------------------------
contrary notwithstanding, the average of the adjusted tax bases of the items of
personal property that are leased to Lessee under this Lease at the beginning
and at the end of any Fiscal Year shall not exceed fifteen percent (15%) of the
average of the aggregate adjusted tax bases of the Leased Property at the
beginning and at the end of such Fiscal Year. This Section 19.1 is intended to

                                       51

<PAGE>

ensure that the Rent qualifies as "rents from real property," within the meaning
of Section 856(d) of the Code, or any similar or successor provisions thereto,
and shall be interpreted in a manner consistent with such intent.

     19.2. Sublease Rent Limitation. Anything contained in this Lease to the
           ------------------------
contrary notwithstanding, Lessee shall not sublet the Leased Property on any
basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of the sublessee, or (b) 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.

     19.3. Sublease Tenant Limitation. Anything contained in this Lease to the
           --------------------------
contrary notwithstanding, Lessee shall not sublease the Leased Property to any
Person in which Lessor owns, directly or indirectly, a ten percent (10%) or more
interest, within the meaning of Section 856(d)(2)(B) of the Code, or any similar
or successor provisions thereto.

     19.4. Lessee Ownership Limitations.
           ----------------------------

          (a) Anything contained in this Lease to the contrary notwithstanding,
neither Lessee nor an Affiliate of Lessee shall acquire, directly or indirectly,
a ten percent (10%) or more interest in Lessor within the meaning of Section
856(d)(2)(B) of the Code, or any similar or successor provision thereto.

          (b) Lessee shall not own, operate, manage or have any interest in any
hotel or motel property in which Lessor or an Affiliate of Lessor does not have
an interest, pursuant to this Lease or another lease, agreement or arrangement
with Lessor or an Affiliate of Lessor. Lessor agrees to notify Lessee promptly
of the location of any hotel or motel property in which Lessor or an Affiliate
of Lessor has an interest.

     19.5. Lessee Officer and Employee Limitation. If a Person serves as both
           --------------------------------------
(a) a director of Lessee (or any Person who furnishes or renders services to the
tenants of the Leased Property, or manages or operates the Leased Property) and
(b) an officer (or employee) of the Lessor that Person shall not receive any
compensation for serving as a director of Lessee (or any Person who furnishes or
renders services to the tenants of the Leased Property, or manages or operates
the Leased Property). Furthermore, if a Person serves as both (a) a director of
the Lessor and (b) an officer (or employee) of Lessee (or any Person who
furnishes or renders services to the tenants of the Leased Property, or manages
or operates the Leased Property), that Person shall not receive any compensation
for serving as a director of the Lessor. No Person, other than Glade M. Knight,
shall serve as an officer (or employee) of both Lessor and Lessee.

     19.6. Payments to Affiliates of Lessee. During the Term, Lessee shall not
           --------------------------------
pay, or become obligated to pay, any fees to any Affiliate of Lessee in
connection with the Hotel, other than fees that are subordinated to the payments
that are required to be made to Lessor pursuant to this Lease.

                                       52

<PAGE>

                                   ARTICLE 20
                                   ----------
                            SUBLETTING AND ASSIGNMENT

     20.1. Subletting and Assignment. Subject to the provisions of Article 19
           -------------------------
and Section 20.2 and any other express conditions or limitations set forth
herein, Lessee may, but only with the consent of Lessor (which shall not be
unreasonably withheld or delayed), (a) assign this Lease or sublet all or any
part of the Leased Property to an Affiliate of Lessee, or (b) sublet any retail
or restaurant portion of the Leased Improvements in the normal course of the
Primary Intended Use; provided that any subletting to any party other than an
Affiliate of Lessee shall not individually as to any one such subletting, or in
the aggregate, materially diminish the actual or potential Percentage Rent
payable under this Lease. In the case of a subletting, the sublessee shall
comply with the provisions of Section 20.2, and in the case of an assignment,
the assignee shall assume in writing and agree to keep and perform all of the
terms of this Lease on the part of Lessee to be kept and performed and shall be,
and become, jointly and severally liable with Lessee for the performance
thereof. Notwithstanding the above, Lessee may assign the Lease to an Affiliate
without the consent of Lessor; provided that any such assignee assumes in
writing and agrees to keep and perform all of the terms of the Lease on the part
of Lessee to be kept and performed and shall be and become jointly and severally
liable with Lessee for the performance thereof. In case of either an assignment
 or subletting made during the Term, Lessee shall remain primarily liable, as
principal rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Lessee hereunder. An original counterpart of each such sublease and
assignment and assumption, duly executed by Lessee and such sublessee or
assignee, as the case may be, in form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor.

     20.2. Attornment. Lessee shall insert in each sublease permitted under
           ----------
Section 20.1 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) if this Lease terminates before the expiration of such
sublease, the sublessee thereunder will, at Lessor's option, attorn to Lessor
and waive any right the sublessee may have to terminate the sublease or to
surrender possession thereunder as a result of the termination of this Lease,
and (c) if the sublessee receives a Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if any,
as the case may be, shall be credited against the amounts owing by Lessee under
this Lease.

     20.3. Conveyance by Lessor. Lessor may assign this Lease to any purchaser
           --------------------
of the Leased Property and/or to secure indebtedness. If Lessor or any successor
owner of the Leased Property conveys the Leased Property in accordance with the
terms hereof other than as security for a debt, and the grantee or transferee of
the Leased Property expressly assumes all obligations of Lessor hereunder
arising or accruing from and after the date of such conveyance or transfer,
Lessor or such successor owner, as the case may be, shall thereupon be released
from all future liabilities and obligations of Lessor under this Lease arising
or accruing from and after the date of such

                                       53

<PAGE>

conveyance or other transfer as to the Leased Property and all such future
liabilities and obligations shall thereupon be binding upon the new owner.

                                   ARTICLE 21
                                   ----------
                          QUIET ENJOYMENT; RISK OF LOSS

     21.1. Quiet Enjoyment. So long as Lessee pays all Rent as the same becomes
           ---------------
due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if any,
Lessee shall peaceably and quietly have, hold and enjoy the Leased Property for
the Term hereof, free of any claim or other action by Lessor or anyone claiming
by, through or under Lessor, but subject to all liens and encumbrances subject
to which the Leased Property was conveyed to Lessor, to the extent not released
in connection with the transactions contemplated by this Lease, or hereafter
consented to by Lessee or provided for herein. Notwithstanding the foregoing,
Lessee shall have the right by separate and independent action to pursue any
claim it may have against Lessor as a result of a breach by Lessor of the
covenant of quiet enjoyment contained in this Section.

     21.2. Risk of Loss. During the Term, the risk of loss or of decrease in the
           ------------
enjoyment and beneficial use of the Leased Property in consequence of the damage
or destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than those caused by Lessor and those claiming from, through or under
Lessor) is assumed by Lessee, and, in the absence of gross negligence, willful
misconduct or breach of this Lease by Lessor pursuant to Section 17.1, Lessor
shall in no event be answerable or accountable therefor, nor shall any of the
events mentioned in this Section entitle Lessee to any abatement of Rent except
as specifically provided in this Lease.

                                   ARTICLE 22
                                   ----------
                    LESSOR MORTGAGES; SUBORDINATION OF LEASE

     22.1. Lessor May Grant Liens. Without the consent of Lessee, Lessor may,
           ----------------------
subject to the terms and conditions set forth below in this Section 22.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Upon the request of
Lessor, Lessee shall subordinate this Lease to the lien of a new mortgage on the
Leased Property.

     22.2. Subordination of Lease. This Lease and Lessee's interest hereunder
           ----------------------
shall at all times be subject and subordinate to the lien and security title of
any deeds to secure debt, deeds of trust, mortgages, or other Encumbrances
heretofore or hereafter granted by Lessor or which otherwise encumber or affect
the Leased Property and to any and all advances to be made thereunder and to all
renewals, modifications, consolidations, replacements, substitutions, and
extensions thereof (all of which are herein called the "Mortgage"); provided,
however, that with respect to any Mortgage hereafter granted (but not with
respect to any existing Mortgage), such subordination is conditioned upon
delivery to Lessee of a non-disturbance agreement in form and substance
reasonably satisfactory to Lessee and the holder of any Mortgage which provides
that, so long as Lessee is not then in default hereunder beyond any applicable
notice and cure period, Lessee shall not be

                                       54

<PAGE>

disturbed in its possession of the Leased Property hereunder following a
foreclosure of such Mortgage (or delivery of a deed-in-lieu-of-foreclosure) and
that the holder of such Mortgage or the purchaser at a foreclosure sale (or
grantee under such deed-in-lieu-of-foreclosure) shall perform all obligations of
Lessor under this Lease first arising from and after the date of such
foreclosure sale (or deed in lieu thereof). In confirmation of such
subordination, however, Lessee shall, at Lessor's request, promptly execute,
acknowledge and deliver any instrument which may be required to evidence
subordination to any Mortgage and to the holder thereof. In the event of
Lessee's failure to deliver such subordination and if the Mortgage does not
change any term of the Lease, Lessor may, in addition to any other remedies for
breach of covenant hereunder, execute, acknowledge, and deliver the instrument
as the agent or attorney-in-fact of Lessee, and Lessee hereby irrevocably
constitutes Lessor its attorney-in-fact for such purpose, Lessee acknowledging
that the appointment is coupled with an interest and is irrevocable.

                                   ARTICLE 23
                                   ----------
         ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS; INSPECTION RIGHTS

     23.1. Estoppel Certificates; Financial Statements.
           -------------------------------------------

          (a) At any time and from time to time upon not less than ten (10) days
Notice by Lessor, Lessee will furnish to Lessor an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default exists
thereunder by Lessor or Lessee, and such other information as may be reasonably
requested by Lessor. Any such certificate furnished pursuant to this Section may
be relied upon by Lessor, any lender and any prospective purchaser of the Leased
Property.

          (b) Lessee will furnish the following statements to Lessor:

               (i) with reasonable promptness, such information respecting the
          financial condition and affairs of Lessee including audited financial
          statements prepared by the same certified independent accounting firm
          that prepares the returns for Lessor or such other accounting firm as
          may be approved by Lessor, as Lessor may request from time to time;
          and

               (ii) the most recent Consolidated Financials of Lessee within
          forty-five (45) days after each quarter of any Fiscal Year (or, in the
          case of the final quarter in any Fiscal Year, the most recent audited
          Consolidated Financials of Lessee within ninety (90) days); and

               (iii) on or about the 20th day of each month, a detailed profit
          and loss statement for the Leased Property for the preceding month, a
          balance sheet for the Leased Property as of the end of the preceding
          month, and a detailed accounting of revenues for the Leased Property
          for the preceding month, each in form acceptable to Lessor.

                                       55

<PAGE>

Lessee will permit the inclusion of such statements in any filings required to
be made by Lessor under the Securities Act of 1933 and the Securities Exchange
Act of 1934.

          (c) At any time and from time to time upon not less than ten (10) days
Notice by Lessee, Lessor will furnish to Lessee or to any Person designated by
Lessee an estoppel certificate certifying that this Lease is unmodified and in
full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications), the date to which Rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee.

          (d) Lessee shall at all times be Solvent. Furthermore, as of the date
of this Agreement, Lessee agrees to establish and maintain, in a form
satisfactory to Lessor, a funding commitment in an amount equal to $2,000,000
upon which Lessee may draw upon to pay to Lessor Base Rent, Percentage Rent and
Additional Charges. Repayment of the funding commitment shall be subordinated to
all payments of Base Rent, Percentage Rent and additional charges under all
Leases between Lessor and Lessee.

     23.2. Lessor's Right to Inspect. Lessee shall permit Lessor and its
           -------------------------
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining thereto
and make copies thereof, during usual business hours upon reasonable advance
Notice, subject only to any business confidentiality requirements reasonably
requested by Lessee.

                                   ARTICLE 24
                                   ----------
                                   APPRAISERS

     24.1. Appraisers. If it becomes necessary to determine the Fair Market
           ----------
Value or Fair Market Rental of the Leased Property for any purpose of this
Lease, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a Person selected to act
as appraiser on its behalf. Within ten (10) days after Notice, Lessor (or
Lessee, as the case may be) shall by Notice to Lessee (or Lessor, as the case
may be) appoint a second Person as appraiser on its behalf. The appraisers thus
appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) with at least five (5)
years' experience in the State appraising property similar to the Leased
Property, shall, within forty-five (45) days after the date of the Notice
appointing the first appraiser, proceed to appraise the Leased Property to
determine the Fair Market Value or Fair Market Rental thereof as of the relevant
date (giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
shall have been so appointed, then the determination of such appraiser shall be
final and binding upon the parties. To the extent consistent with sound
appraisal practice as then existing at the time of any such appraisal, such
appraisal shall be made on a basis consistent with the basis on which the Leased
Property was appraised for purposes of determining its Fair Market Value at the
time the Leased Property was acquired by Lessor. If two (2) appraisers are
appointed and if the difference between the amounts so determined does not
exceed five percent (5%) of the lesser of such amounts, then the Fair Market
Value or Fair Market Rental shall be an amount equal to fifty percent (50%) of
the sum of the amounts so determined. If the difference between the amounts so
determined exceeds five

                                       56

<PAGE>

percent (5%) of the lesser of such amounts, then such two appraisers shall have
twenty (20) days to appoint a third appraiser. If no such appraiser shall have
been appointed within such twenty (20) days or within ninety (90) days of the
original request for a determination of Fair Market Value or Fair Market Rental,
whichever is earlier, either Lessor or Lessee may apply to any court having
jurisdiction to have such appointment made by such court. Any appraiser
appointed by the original appraisers or by such court shall be instructed to
determine the Fair Market Value or Fair Market Rental within forty-five (45)
days after appointment of such appraiser. The determination of the appraiser
which differs most in the terms of dollar amount from the determinations of the
other two appraisers shall be excluded, and fifty percent (50%) of the sum of
the remaining two determinations shall be final and binding upon Lessor and
Lessee as the Fair Market Value or Fair Market Rental of the Leased Property, as
the case may be. This provision for determining by appraisal shall be
specifically enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law. Lessor and Lessee shall each pay
the fees and expenses of the appraiser appointed by it and each shall pay
one-half of the fees and expenses of the third appraiser and one-half of all
other costs and expenses incurred in connection with each appraisal.

                                   ARTICLE 25
                                   ----------
                  ARBITRATION AND DISPUTE RESOLUTION PROCEDURES

     25.1. Arbitration. Except as set forth in Section 25.2, in each case
           -----------
specified in this Lease in which it shall become necessary to resort to
arbitration, such arbitration shall be determined as provided in this Section
25.1. The party desiring such arbitration shall give Notice to that effect to
the other party, and an arbitrator shall be selected by mutual agreement of the
parties, or if they cannot agree within thirty (30) days of such notice, by
appointment made by the American Arbitration Association ("AAA") from among the
members of its panels who are qualified and who have experience in resolving
matters of a nature similar to the matter to be resolved by arbitration.

     25.2. Alternative Arbitration. In each case specified in this Lease for a
           -----------------------
matter to be submitted to arbitration pursuant to the provisions of this Section
25.2, Lessor and Lessee will agree upon a nationally recognized accounting firm
with a hospitality division of which neither party nor their Affiliates of
Lessor is a significant client to serve as arbitrator of such dispute within
fifteen (15) days after written demand for arbitration is received or sent by
either party. In the event the parties fail to make such designation within such
fifteen (15) day period, Lessor shall be entitled to designate any nationally
recognized accounting firm with a hospitality division of which Lessor or an
Affiliate of Lessor is not a significant client to serve as arbitrator of such
dispute within fifteen (15) days after the parties fail to timely make such
designation. In the event Lessor fails to make such designation within such
fifteen (15) day period, Lessee shall be entitled to designate any nationally
recognized accounting firm with hospitality division of which Lessee or an
Affiliate of Lessee is not a significant client to serve as arbitrator of such
dispute within fifteen (15) days after the parties fail to timely make such
designation. In the event no nationally recognized accounting firm satisfying
such qualifications is available and willing to serve as arbitrator, the
arbitrator shall instead be administered as set forth in Section 25.1.

     25.3. Arbitration Procedure. In any arbitration commenced pursuant to
           ---------------------
Sections 25.1 or 25.2, a single arbitrator shall be designated and shall resolve
the dispute. The arbitrator's decision

                                       57

<PAGE>

shall be binding on all parties, shall not be subject to further review or
appeal except as otherwise allowed by applicable law and may be filed in and
enforced by a court of competent jurisdiction. Upon the failure of either party
(the "non-complying party") to comply with his decision, the arbitrator shall be
empowered, at the request of the other party, to order such compliance by the
non-complying party and to supervise or arrange for the supervision of the
non-complying party's obligation to comply with the arbitrator's decision, all
at the expense of the non-complying party. To the maximum extent practicable,
the arbitrator and the parties, and the AAA if applicable, shall take any action
necessary to insure that the arbitration shall be concluded within ninety (90)
days of the filing of such dispute. The fees and expenses of the arbitrator
shall be shared equally by Lessor and Lessee except as otherwise specified above
in this Section 25.3. Unless otherwise agreed in writing by the parties or
required by the arbitrator or AAA, if applicable, arbitration proceedings
hereunder shall be conducted in the State. Notwithstanding formal rules of
evidence, each party may submit such evidence as each party deems appropriate to
support its position and the arbitrator shall have access to and right to
examine all books and records of Lessee and Lessor regarding the Hotel during
the arbitration.

                                   ARTICLE 26
                                   ----------
                                     NOTICES

     26.1. Notices. All notices, demands, requests, consents approvals and other
           -------
communications ("Notice" or "Notices") hereunder shall be in writing and
hand-delivered, sent by FedEx or other nationally recognized overnight courier
service, or mailed (by registered or certified mail, return receipt requested
and postage prepaid), if to Lessor at 10 South Third Street, Richmond, Virginia
23219, Attn: Glade M. Knight and if to Lessee at 10 South Third Street,
Richmond, Virginia 23219, Attn: Glade M. Knight or to such other address or
addresses as either party may hereafter designate. Personally delivered Notice
shall be effective upon receipt, and Notice given by overnight courier service
or by mail shall be complete at the time of deposit with the courier service or
in the U.S. Mail system, respectively, but any prescribed period of Notice and
any right or duty to do any act or make any response within any prescribed
period or on a date certain after the service of such Notice given by overnight
courier service shall be extended one (1) day and by mail shall be extended five
(5) days.

                                   ARTICLE 27
                                   ----------
                                  MISCELLANEOUS

     27.1. No Waiver. No failure by Lessor or Lessee to insist upon the strict
           ---------
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.

     27.2. Remedies Cumulative. To the extent permitted by law and unless
           -------------------
otherwise provided herein to the contrary, each legal, equitable or contractual
right, power and remedy of Lessor or Lessee now or hereafter provided either in
this Lease or by statute or otherwise shall be cumulative and concurrent and
shall be in addition to every other right, power and remedy and the

                                       58

<PAGE>

exercise or beginning of the exercise by Lessor or Lessee of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Lessor or Lessee of any or all of such other rights,
powers and remedies.

     27.3. Waiver of Trial by Jury. LESSOR AND LESSEE EACH WAIVE, TO THE FULLEST
           -----------------------
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN THE EVENT OF
A PROCEEDING WITH RESPECT TO THIS LEASE, INCLUDING, WITHOUT LIMITATION, SUMMARY
PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN ARTICLE 16.

     27.4. Acceptance of Surrender. No surrender to Lessor of this Lease or of
           ------------------------
the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor and no act
by Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.

     27.5. No Merger of Title. There shall be no merger of this Lease or of the
           -------------------
leasehold estate created hereby by reason of the fact that the same Person may
acquire, own or hold, directly or indirectly: (a) this Lease or the leasehold
estate created hereby or any interest in this Lease or such leasehold estate and
(b) the fee estate in the Leased Property.

     27.6. Waiver of Presentment, Etc. Lessee waives all presentments, demands
           ---------------------------
for payment and for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor, and notices of acceptance and waives all notices
of the existence, creation, or incurring of new or additional obligations,
except as expressly granted herein.

     27.7. Action for Damages. Except as otherwise expressly provided herein, in
           -------------------
any suit or other claim brought by either party seeking damages against the
other party for breach of its obligations under this Lease, the party against
whom such claim is made shall be liable to the other party only for actual
damages and not for consequential, punitive or exemplary damages.

     27.8. Lease Assumption in Bankruptcy Proceeding. If an Event of Default
           ------------------------------------------
occurs and Lessee has filed or has had filed against it a petition in bankruptcy
or for reorganization or other relief pursuant to the federal bankruptcy code,
Lessee shall promptly move the court presiding over the proceeding to assume
this Lease pursuant to 11 U.S.C. Section 365, without seeking an extension of
the time to file said motion.

     27.9. Enforceability. Anything contained in this Lease to the contrary
           ---------------
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable law,
the parties agree that such charges shall be fixed at the maximum permissible
rate. Neither this Lease nor any provision hereof may be changed, waived,
discharged or terminated except by a written instrument in recordable form
signed by Lessor and Lessee. All the terms and

                                       59

<PAGE>

provisions of this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The
headings in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof. This Lease shall be governed by and
construed in accordance with the laws of the State, but not including its
conflicts of laws rules.

     27.10. Memorandum of Lease. Lessor and Lessee shall promptly, upon the
            --------------------
request of either party, enter into a short form memorandum of this Lease, in
form suitable for recording under the laws of the State in which reference to
this Lease, and all options contained herein, shall be made. Lessee shall pay
all costs and expenses of recording such memorandum of this Lease.

                                       60

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.

                                 "LESSOR"

                                 MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP

                                 BY AHT RES I GP, INC., its sole general partner

                                 By:  /s/ Glade M. Knight
                                     -------------------------------------------
                                 Name:  Glade M. Knight
                                 Title: President and Manager

                                 "LESSEE"

                                 AHM RES I LIMITED PARTNERSHIP

                                 BY AHM RES I GP, INC., its sole general partner

                                 By:  /s/ Glade M. Knight
                                     -------------------------------------------
                                 Name:  Glade M. Knight
                                 Title: President

<PAGE>

                                   EXHIBIT A-1
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                   EXHIBIT A-2
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                   EXHIBIT A-3
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                   EXHIBIT A-4
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                   EXHIBIT A-5
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                   EXHIBIT A-6
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                   EXHIBIT A-7
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                   EXHIBIT A-8
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                   EXHIBIT A-9
                                   -----------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                  EXHIBIT A-10
                                  ------------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                  EXHIBIT A-11
                                  ------------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                  EXHIBIT A-12
                                  ------------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                  EXHIBIT A-13
                                  ------------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                  EXHIBIT A-14
                                  ------------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                  EXHIBIT A-15
                                  ------------

                                LEGAL DESCRIPTION
                                -----------------

<PAGE>

                                 SCHEDULE 2.1(a)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Costa Mesa Residence Inn - California

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(b)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

LaJolla Residence Inn - California

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(c)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Long Beach Residence Inn - California

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(d)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Boulder Residence Inn - Colorado

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(e)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Atlanta-Buckhead Residence Inn - Georgia

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(f)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Atlanta-Cumberland Residence Inn - Georgia

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(g)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Atlanta-Dunwoody Residence Inn - Georgia

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(h)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Chicago Lombardi Residence Inn - Illinois

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(i)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Southfield Residence Inn - Michigan

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(j)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

St. Louis - Chesterfield Residence Inn - Missouri

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(k)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

St. Louis - Galleria Residence Inn - Missouri

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(l)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Cincinnati - Sharonville Residence Inn - Ohio

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(m)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Columbus - North Residence Inn - Ohio

March 29, 2002

<PAGE>

                                 SCHEDULE 2.1(n)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Dayton - North Residence Inn - Ohio

Mach 29, 2002

<PAGE>

                                 SCHEDULE 2.1(o)
                                 ---------------

                               COMMENCEMENT DATES
                               ------------------

Dayton - South Residence Inn - Ohio

March 29, 2002

<PAGE>

                                SCHEDULE 3.1(a)-1
                                -----------------

                                   BASE RENTS
                                   ----------

Costa Mesa Residence Inn - California

                                   $1,812,570

<PAGE>

                                SCHEDULE 3.1(a)-2
                                -----------------

                                   BASE RENTS
                                   ----------

LaJolla Residence Inn - California

                                   $4,231,315

<PAGE>

                                SCHEDULE 3.1(a)-3
                                -----------------

                                   BASE RENTS
                                   ----------

Long Beach Residence Inn - California

                                   $2,937,697

<PAGE>

                                SCHEDULE 3.1(a)-4
                                -----------------

                                   BASE RENTS
                                   ----------

Boulder Residence Inn - Colorado

                                   $1,774,524

<PAGE>

                                SCHEDULE 3.1(a)-5
                                -----------------

                                   BASE RENTS
                                   ----------

Atlanta - Buckhead Residence Inn - Georgia

                                   $1,277,593

<PAGE>

                                SCHEDULE 3.1(a)-6
                                -----------------

                                   BASE RENTS
                                   ----------

Atlanta - Cumberland Residence Inn - Georgia

                                    $817,553

<PAGE>

                                SCHEDULE 3.1(a)-7
                                -----------------

                                   BASE RENTS
                                   ----------

Atlanta - Dunwoody Residence Inn - Georgia

                                    $809,127

<PAGE>

                                SCHEDULE 3.1(a)-8
                                -----------------

                                   BASE RENTS
                                   ----------

Chicago Lombardi Residence Inn - Illinois

                                   $1,580,593

<PAGE>

                                SCHEDULE 3.1(a)-9
                                -----------------

                                   BASE RENTS
                                   ----------

Southfield Residence Inn - Michigan

                                   $1,319,385

<PAGE>

                               SCHEDULE 3.1(a)-10
                               ------------------

                                   BASE RENTS
                                   ----------

St. Louis - Chesterfield Residence Inn - Missouri

                                    $794,281

<PAGE>

                               SCHEDULE 3.1(a)-11
                               ------------------

                                   BASE RENTS
                                   ----------

St. Louis - Galleria Residence Inn - Ohio

                                   $1,728,421

<PAGE>

                               SCHEDULE 3.1(a)-12
                               ------------------

                                   BASE RENTS
                                   ----------

Cincinnati - Sharonville Residence Inn - Ohio

                                    $746,307

<PAGE>

                               SCHEDULE 3.1(a)-13
                               ------------------

                                   BASE RENTS
                                   ----------

Columbus - North Residence Inn - Ohio

                                    $529,369

<PAGE>

                               SCHEDULE 3.1(a)-14
                               ------------------

                                   BASE RENTS
                                   ----------

Dayton - North Residence Inn - Ohio

                                    $406,223

<PAGE>

                               SCHEDULE 3.1(a)-15
                               ------------------

                                   BASE RENTS
                                   ----------

Dayton - South Residence Inn - Ohio

                                    $760,073

<PAGE>

                                SCHEDULE 3.1(b)-1
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Costa Mesa Residence Inn
     California

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
 Quarters       2002       2003       2004       2005       2006       2007       2008       2009       2010       2011       2012
-----------   --------   --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>           <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>

1st Quarter   $ 19,414   $ 32,307   $ 32,953   $ 33,612   $ 34,284   $ 34,970   $ 35,669   $ 36,383   $ 37,110   $ 37,852   $ 38,609

2nd Quarter   $ 48,534   $ 64,613   $ 65,906   $ 67,224   $ 68,568   $ 69,940   $ 71,338   $ 72,765   $ 74,220   $ 75,705   $ 77,219

3rd Quarter   $ 77,655   $ 96,920   $ 98,858   $100,836   $102,852   $104,909   $107,008   $109,148   $111,331   $113,557   $115,828

4th Quarter   $106,786   $129,227   $131,811   $134,447   $137,136   $139,879   $142,677   $145,530   $148,441   $151,410   $154,438
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 3.1(b)-2
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     LaJolla Residence Inn
     California

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
  Quarters      2002     2003     2004     2005     2006     2007     2008     2009     2010     2011     2012
-----------   -------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ------
<S>           <C>       <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>

1st Quarter   $ 6,165   $1,656   $1,689   $1,722   $1,757   $1,792   $1,828   $1,864   $1,902   $1,940   $1,979

2nd Quarter   $15,413   $3,311   $3,377   $3,445   $3,514   $3,584   $3,656   $3,729   $3,803   $3,879   $3,957

3rd Quarter   $24,661   $4,967   $5,066   $5,167   $5,271   $5,376   $5,484   $5,593   $5,705   $5,819   $5,936

4th Quarter   $33,912   $6,622   $6,755   $6,890   $7,027   $7,168   $7,311   $7,458   $7,607   $7,759   $7,914
---------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 3.1(b)-3
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Long Beach Residence Inn
     California

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
 Quarters       2002       2003       2004       2005       2006       2007       2008       2009       2010       2011       2012
-----------   --------   --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>           <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>

1st Quarter   $ 20,037   $ 51,934   $ 52,972   $ 54,032   $ 55,113   $ 56,215   $ 57,339   $ 58,486   $ 59,656   $ 60,849   $ 62,066

2nd Quarter   $ 50,093   $103,868   $105,945   $108,064   $110,225   $112,430   $114,678   $116,972   $119,311   $121,697   $124,131

3rd Quarter   $ 80,149   $155,801   $158,917   $162,096   $165,338   $168,644   $172,017   $175,458   $178,967   $182,546   $186,197

4th Quarter   $110,216   $207,735   $211,890   $216,128   $220,450   $224,859   $229,356   $233,943   $238,622   $243,395   $248,263
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 3.1(b)-4
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Boulder Residence Inn
     Colorado

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
 Quarters      2002      2003      2004      2005      2006      2007      2008      2009      2010      2011      2012
-----------   -------   -------   -------   -------   -------   -------   -------   -------   -------   -------   -------
<S>           <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>

1st Quarter   $11,524   $20,300   $20,706   $21,120   $21,543   $21,974   $22,413   $22,861   $23,319   $23,785   $24,261

2nd Quarter   $28,809   $40,601   $41,413   $42,241   $43,086   $43,947   $44,826   $45,723   $46,637   $47,570   $48,521

3rd Quarter   $46,094   $60,901   $62,119   $63,361   $64,629   $65,921   $67,240   $68,584   $69,956   $71,355   $72,782

4th Quarter   $63,386   $81,201   $82,825   $84,482   $86,171   $87,895   $89,653   $91,446   $93,275   $95,140   $97,043
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 3.1(b)-5
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Atlanta - Buckhead Residence Inn
     Georgia

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
 Quarters       2002       2003       2004       2005        2006         2007
-----------   --------   --------   --------   --------   ----------   ----------
<S>           <C>        <C>        <C>        <C>        <C>          <C>

1st Quarter   $147,859   $236,675   $241,409   $246,237   $  251,162   $  256,185

2nd Quarter   $369,647   $473,351   $482,818   $492,474   $  502,324   $  512,370

3rd Quarter   $591,435   $710,026   $724,227   $738,711   $  753,485   $  768,555

4th Quarter   $813,304   $946,701   $965,635   $984,948   $1,004,647   $1,024,740

---------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------
 Quarters        2008         2009         2010         2011         2012
-----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>

1st Quarter   $  261,309   $  266,535   $  271,866   $  277,303   $  282,849

2nd Quarter   $  522,617   $  533,070   $  543,731   $  554,606   $  565,698

3rd Quarter   $  783,926   $  799,605   $  815,597   $  831,909   $  848,547

4th Quarter   $1,045,235   $1,066,140   $1,087,462   $1,109,212   $1,131,396

----------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 3.1(b)-6
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Atlanta - Cumberland Residence Inn
     Georgia

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
 Quarters        2002         2003         2004         2005         2006         2007
-----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>          <C>

1st Quarter   $  214,975   $  346,951   $  353,891   $  360,968   $  368,188   $  375,551

2nd Quarter   $  537,438   $  693,903   $  707,781   $  721,937   $  736,375   $  751,103

3rd Quarter   $  859,902   $1,040,854   $1,061,672   $1,082,905   $1,104,563   $1,126,654

4th Quarter   $1,182,483   $1,387,806   $1,415,562   $1,443,873   $1,472,751   $1,502,206

-----------------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------
 Quarters        2008         2009         2010         2011         2012
-----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>

1st Quarter   $  383,062   $  390,724   $  398,538   $  406,509   $  414,639

2nd Quarter   $  766,125   $  781,447   $  797,076   $  813,018   $  829,278

3rd Quarter   $1,149,187   $1,172,171   $1,195,615   $1,219,527   $1,243,917

4th Quarter   $1,532,250   $1,562,895   $1,594,153   $1,626,036   $1,658,557

----------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 3.1(b)-7
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Atlanta - Dunwoody Residence Inn
     Georgia

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
 Quarters        2002         2003         2004         2005         2006         2007
-----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>          <C>

1st Quarter   $  303,483   $  488,727   $  498,502   $  508,472   $  518,641   $  529,014

2nd Quarter   $  758,708   $  977,454   $  997,003   $1,016,943   $1,037,282   $1,058,028

3rd Quarter   $1,213,933   $1,466,181   $1,495,505   $1,525,415   $1,555,923   $1,587,042

4th Quarter   $1,669,324   $1,954,908   $1,994,007   $2,033,887   $2,074,564   $2,116,056

-----------------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------
 Quarters        2008         2009         2010         2011         2012
-----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>

1st Quarter   $  539,594   $  550,386   $  561,394   $  572,622   $  584,074

2nd Quarter   $1,079,188   $1,100,772   $1,122,788   $1,145,243   $1,168,148

3rd Quarter   $1,618,783   $1,651,158   $1,684,181   $1,717,865   $1,752,222

4th Quarter   $2,158,377   $2,201,544   $2,245,575   $2,290,487   $2,336,297

----------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 3.1(b)-8
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Chicago Lombardi Residence Inn
     Missouri

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
 Quarters       2002       2003       2004        2005         2006         2007
-----------   --------   --------   --------   ----------   ----------   ----------
<S>           <C>        <C>        <C>        <C>          <C>          <C>

1st Quarter   $130,275   $242,166   $247,010   $  251,950   $  256,989   $  262,129

2nd Quarter   $325,687   $484,333   $494,020   $  503,900   $  513,978   $  524,258

3rd Quarter   $521,099   $726,499   $741,029   $  755,850   $  770,967   $  786,386

4th Quarter   $716,583   $968,666   $988,039   $1,007,800   $1,027,956   $1,048,515

-----------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------
 Quarters        2008         2009         2010         2011         2012
-----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>

1st Quarter   $  267,371   $  272,719   $  278,173   $  283,737   $  289,411

2nd Quarter   $  534,743   $  545,438   $  556,346   $  567,473   $  578,823

3rd Quarter   $  802,114   $  818,156   $  834,519   $  851,210   $  868,234

4th Quarter   $1,069,485   $1,090,875   $1,112,693   $1,134,946   $1,157,645

----------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 3.1(b)-9
                                -----------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Southfield Residence Inn
     Michigan

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
 Quarters        2002         2003         2004         2005         2006         2007
-----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>          <C>

1st Quarter   $  237,164   $  393,910   $  401,788   $  409,824   $  418,020   $  426,380

2nd Quarter   $  592,911   $  787,819   $  803,576   $  819,647   $  836,040   $  852,761

3rd Quarter   $  948,658   $1,181,729   $1,205,363   $1,229,471   $1,254,060   $1,279,141

4th Quarter   $1,304,535   $1,575,638   $1,607,151   $1,639,294   $1,672,080   $1,705,522
-----------------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------
 Quarters        2008         2009         2010         2011         2012
-----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>

1st Quarter   $  434,908   $  443,606   $  452,478   $  461,528   $  470,758

2nd Quarter   $  869,816   $  887,212   $  904,957   $  923,056   $  941,517

3rd Quarter   $1,304,724   $1,330,819   $1,357,435   $1,384,584   $1,412,275

4th Quarter   $1,739,632   $1,774,425   $1,809,913   $1,846,112   $1,883,034
----------------------------------------------------------------------------
</TABLE>

<PAGE>

                               SCHEDULE 3.1(b)-10
                               ------------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     St. Louis - Chesterfield Residence Inn
     Missouri

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
 Quarters       2002        2003         2004         2005         2006         2007
-----------   --------   ----------   ----------   ----------   ----------   ----------
<S>           <C>        <C>          <C>          <C>          <C>          <C>

1st Quarter   $173,016   $  290,760   $  296,575   $  302,506   $  308,556   $  314,728

2nd Quarter   $432,541   $  581,519   $  593,150   $  605,013   $  617,113   $  629,455

3rd Quarter   $692,066   $  872,279   $  889,724   $  907,519   $  925,669   $  944,183

4th Quarter   $951,685   $1,163,039   $1,186,299   $1,210,025   $1,234,226   $1,258,910
---------------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------
 Quarters        2008         2009         2010         2011        2012
-----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>

1st Quarter   $  321,022   $  327,443   $  333,991   $  340,671   $  347,485

2nd Quarter   $  642,044   $  654,885   $  667,983   $  681,343   $  694,969

3rd Quarter   $  963,066   $  982,328   $1,001,974   $1,022,014   $1,042,454

4th Quarter   $1,284,089   $1,309,770   $1,335,966   $1,362,685   $1,389,939
----------------------------------------------------------------------------
</TABLE>

<PAGE>

                               SCHEDULE 3.1(b)-11
                               ------------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     St. Louis - Galleria Residence Inn
     Missouri

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
 Quarters       2002       2003       2004       2005       2006       2007       2008       2009       2010       2011       2012
-----------   --------   --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>           <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>

1st Quarter   $119,992   $207,786   $211,942   $216,181   $220,504   $224,914   $229,413   $234,001   $238,681   $243,455   $248,324

2nd Quarter   $299,979   $415,572   $423,884   $432,361   $441,009   $449,829   $458,825   $468,002   $477,362   $486,909   $496,647

3rd Quarter   $479,966   $623,358   $635,826   $648,542   $661,513   $674,743   $688,238   $702,003   $716,043   $730,364   $744,971

4th Quarter   $660,020   $831,144   $847,767   $864,723   $882,017   $899,658   $917,651   $936,004   $954,724   $973,818   $993,295
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                               SCHEDULE 3.1(b)-12
                               ------------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Cincinnati - Sharonville Residence Inn
     Ohio

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
 Quarters        2002         2003         2004         2005         2006         2007
-----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>          <C>

1st Quarter   $  253,604   $  407,684   $  415,838   $  424,155   $  432,638   $  441,291

2nd Quarter   $  634,011   $  815,368   $  831,676   $  848,309   $  865,275   $  882,581

3rd Quarter   $1,014,418   $1,223,053   $1,247,514   $1,272,464   $1,297,913   $1,323,872

4th Quarter   $1,394,964   $1,630,737   $1,663,352   $1,696,619   $1,730,551   $1,765,162
-----------------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------
 Quarters        2008         2009         2010         2011         2012
-----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>

1st Quarter   $  450,116   $  459,119   $  468,301   $  477,667   $  487,220

2nd Quarter   $  900,233   $  918,237   $  936,602   $  955,334   $  974,441

3rd Quarter   $1,350,349   $1,377,356   $1,404,903   $1,433,001   $1,461,661

4th Quarter   $1,800,465   $1,836,475   $1,873,204   $1,910,668   $1,948,881
----------------------------------------------------------------------------
</TABLE>

<PAGE>

                               SCHEDULE 3.1(b)-13
                               ------------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

      Columbus - North Residence Inn
      Ohio

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
 Quarters       2002        2003         2004         2005         2006         2007
-----------   --------   ----------   ----------   ----------   ----------   ----------
<S>           <C>        <C>          <C>          <C>          <C>          <C>

1st Quarter   $179,599   $  287,745   $  293,500   $  299,370   $  305,357   $  311,465

2nd Quarter   $448,999   $  575,490   $  587,000   $  598,740   $  610,715   $  622,929

3rd Quarter   $718,398   $  863,235   $  880,500   $  898,110   $  916,072   $  934,394

4th Quarter   $987,896   $1,150,981   $1,174,000   $1,197,480   $1,221,430   $1,245,858
---------------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------
 Quarters        2008         2009         2010         2011         2012
-----------   ----------   ----------   ----------   ----------   ----------
<S>           <C>          <C>          <C>          <C>          <C>

1st Quarter   $  317,694   $  324,048   $  330,529   $  337,139   $  343,882

2nd Quarter   $  635,388   $  648,096   $  661,057   $  674,279   $  687,764

3rd Quarter   $  953,082   $  972,143   $  991,586   $1,011,418   $1,031,646

4th Quarter   $1,270,776   $1,296,191   $1,322,115   $1,348,557   $1,375,528
----------------------------------------------------------------------------
</TABLE>

<PAGE>

                               SCHEDULE 3.1(b)-14
                               ------------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Dayton - North Residence Inn
     Ohio

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
 Quarters       2002       2003       2004       2005       2006       2007        2008         2009         2010
-----------   --------   --------   --------   --------   --------   --------   ----------   ----------   ----------
<S>           <C>        <C>        <C>        <C>        <C>        <C>        <C>          <C>          <C>

1st Quarter   $145,136   $230,684   $235,297   $240,003   $244,803   $249,699   $  254,693   $  259,787   $  264,983

2nd Quarter   $362,839   $461,367   $470,594   $480,006   $489,606   $499,399   $  509,386   $  519,574   $  529,966

3rd Quarter   $580,543   $692,051   $705,892   $720,009   $734,410   $749,098   $  764,080   $  779,361   $  794,949

4th Quarter   $798,327   $922,734   $941,189   $960,013   $979,213   $998,797   $1,018,773   $1,039,148   $1,059,931
--------------------------------------------------------------------------------------------------------------------

<CAPTION>
-------------------------------------
 Quarters        2011         2012
-----------   ----------   ----------
<S>           <C>          <C>

1st Quarter   $  270,283   $  275,688

2nd Quarter   $  540,565   $  551,376

3rd Quarter   $  810,848   $  827,064

4th Quarter   $1,081,130   $1,102,753
-------------------------------------
</TABLE>

<PAGE>

                               SCHEDULE 3.1(b)-15
                               ------------------
                            SUITE REVENUE BREAKPOINT
                            ------------------------

     Dayton - South Residence Inn
     Ohio

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
 Quarters       2002       2003       2004       2005       2006       2007       2008       2009       2010       2011       2012
-----------   --------   --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>           <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>

1st Quarter   $109,052   $180,743   $184,358   $188,045   $191,806   $195,642   $199,555   $203,546   $207,617   $211,769   $216,005

2nd Quarter   $272,629   $361,486   $368,716   $376,090   $383,612   $391,284   $399,110   $407,092   $415,234   $423,539   $432,009

3rd Quarter   $436,206   $542,229   $553,074   $564,135   $575,418   $586,926   $598,665   $610,638   $622,851   $635,308   $648,014

4th Quarter   $599,844   $722,972   $737,432   $752,180   $767,224   $782,568   $798,220   $814,184   $830,468   $847,077   $864,019
------------------------------------------------------------------------------------------------------------------------------------
</TABLE><PAGE>

                                                                    Exhibit 10.5

                                 OWNER AGREEMENT
                                 ---------------

          THIS OWNER AGREEMENT ("Agreement") is being entered into as of March
29, 2002, by and between MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP, a Delaware
limited partnership with a mailing address at 306 East Main Street, Richmond,
Virginia 23219 ("Lessor"); AHM RES I LIMITED PARTNERSHIP, a Virginia limited
partnership with a mailing address at 10 South Third Street, Richmond, Virginia
23219 ("Lessee"); and RESIDENCE INN BY MARRIOTT, INC., a Delaware corporation
with a mailing address at 10400 Fernwood, Bethesda, MD 20817 ("Manager").

                                    RECITALS:

     WHEREAS, Lessor owns fee simple title to fifteen (15) Inns, currently
operated under the trade name "Residence Inn" or "Residence Inn by Marriott" or
"Marriott Residence Inn," described on Exhibit A attached to this Agreement and
                                       ---------
incorporated herein (these fifteen (15) Inns collectively referred to herein as
the "Inns" or, individually, as an "Inn").

     WHEREAS, in connection with the acquisition of indirect ownership of 100%
of the partnership interests in Lessor by Apple Hospitality Two, Inc. ("Apple
Hospitality"), Lessor has leased the Inns to Lessee, and Lessee has leased the
Inns from Lessor, pursuant to that certain lease attached hereto as Exhibit B
                                                                    ---------
(the "Lease").

     WHEREAS, Manager has operated and managed the Inns pursuant to that certain
Management Agreement dated as of March 29, 1988, by and between Manager and
Lessor (the "Original Management Agreement"), as amended by (i) that certain
Manager's Letter Agreement dated October 10, 1995, among Manager, Lessor and
German American Capital Corporation ("GACC"); (ii) that certain Manager's Letter
Agreement dated October 10, 1995, among Manager, Lessor, and iStar Financial
Inc. ("iStar"), successor to Starwood Mezzanine Investors, L.P.; (iii) that
certain Letter Agreement dated October 9, 1998, between Lessor and Manager; and
(iv) that certain Four Party Agreement dated October 10, 1995, between GACC,
iStar, Lessor and Manager.

     WHEREAS, pursuant to that certain Consent, Assignment and Assumption of
Management Agreement of even date hereof ("Assignment Agreement"), Lessor
assigned to Lessee the Original Management Agreement and the Letter Agreement
described in clause (iii) of the preceding recital (the "Letter Agreement").

     WHEREAS, Manager has consented to such assignment by Lessor to Lessee
subject to, among other things: (i) Lessor guarantying the obligations of Lessee
under the Original Management Agreement and the Letter Agreement; (ii) Lessor
agreeing to grant certain protections to Manager in the event the Lease is
terminated for any reason; and (iii) Lessee meeting certain criteria, the
satisfaction of which is confirmed by the execution of this Agreement.

<PAGE>

     WHEREAS, Lessee and Manager have executed by even date hereof an Amendment
and Restatement of Management Agreement (hereinafter referred to, together with
the Letter Agreements, collectively as the "Management Agreement").

     NOW, THEREFORE, for the mutual covenants and considerations herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto intending to be
legally bound agree as follows:

     1. Definitions. Capitalized terms not specifically defined herein shall
        -----------
have the meaning provided in the Management Agreement.

     2. Lessor Consideration. Lessor hereby acknowledges that: (i) Lessor
        --------------------
derives and expects to derive benefits from this Agreement, and (ii) Lessor has
determined that Lessor's execution, delivery and performance of this Agreement
directly benefit Lessor, are within the partnership purposes of Lessor, and are
in the best interest of Lessor.

     3. Acknowledgement of Lease. Manager hereby acknowledges and consents to
        ------------------------
the lease of Inns from Lessor to Lessee pursuant to the Lease in the form
attached hereto as Exhibit B. The Lease shall not be construed to impose any
                   ---------
additional obligations or liabilities upon Manager, and shall not be construed
to modify or amend any of the rights and duties of the parties under the
Management Agreement. To the extent that any of the provisions of the Management
Agreement impose a greater or inconsistent obligation on Lessee than the
corresponding provisions of the Lease, then Lessee shall be obligated to comply
with, and to take all actions necessary to prevent breaches or defaults under,
the relevant provisions of the Management Agreement.

     Manager acknowledges that Lessor and Lessee have, pursuant to the terms of
the Lease, agreed that Lessor shall pay, among other things (i) land, building
and personal property taxes and assessments applicable to the Inns, (ii)
premiums and charges for the casualty insurance coverages specified in the
Management Agreement (iii) expenditures for capital replacements, (iv)
expenditures for maintenance and repair of underground utilities and structural
elements of the Inns and (v) the payments of principal, interest and other sums
payable under the Loan Agreement (collectively, "Ownership Costs"). Manager
shall have no duty, obligation or liability to Lessor or Lessee (i) to make any
determination as to whether any expense required to be paid by Manager hereunder
is an Ownership Cost or a cost of Lessee, (ii) to require that Ownership Costs
be paid from funds which can be identified as belonging to Lessor, or that other
costs and expenses required to be paid by Lessee be paid from funds which can be
identified as belonging to Lessee; it being the intent of the parties to this
Agreement that (i) Lessee and Lessor shall look only to each other and not to
Manager with respect to moneys that may be owed one to the other under the
Management Agreement and (ii) Manager need only look to Lessee to pay operating
costs of the Inns and other such obligations under the Management Agreement,
including, without limitation, those designated herein as Ownership Costs.

     4. Lessor and Lessee Representations and Warranties. Lessor and Lessee each
        ------------------------------------------------
hereby represents and warrants that Lessor currently maintains a direct or
indirect (currently a one-hundred percent) controlling and majority interest in
Lessee. With respect to a sale,

                                       2

<PAGE>

assignment or transfer of an Inn by Lessor or Lessee to an Affiliate of Owner
that is permitted under the Management Agreement, the parties having an interest
in the Inn after such permitted sale, assignment or transfer shall have an
ownership relationship that is in form and substance similar to that of Lessor
and Lessee (including, without limitation, Lessor's controlling and majority
interest in Lessee), in order to ensure that Manager will incur no greater
liability, cost or risk of termination of the Management Agreement as a result
of such permitted sale, assignment or transfer; provided, however, that in the
event of actual conflict between the terms and provisions of this Agreement and
the terms and provisions of the Management Agreement, the terms and provisions
of the Management Agreement shall control.

     5. Termination of the Lease. The parties agree that the Management
        ------------------------
Agreement and the rights and benefits of Manager thereunder shall not be
terminated or disturbed in any respect except in accordance with the terms of
the Management Agreement, and not as a result of any termination of the Lease.
Accordingly, if the Lease is terminated for any reason, including, without
limitation, expiration of the term thereof or the "rejection" thereof following
Bankruptcy (as defined below) of Lessee (collectively, a "Lease Termination"),
Lessor: (a) shall recognize Manager's rights under the Management Agreement, (b)
agrees that Manager shall not be named as a party in any eviction or other
possessory action or proceeding, and that Manager shall not be disturbed in its
right to manage the Inns pursuant to the Management Agreement, and (c) shall at
the time of or prior to such Lease Termination either (i) elect not to take
either of the actions described in clause (c)(ii) below, in which case all of
"Lessee's" rights, benefits, privileges and obligations under the Management
Agreement with respect to periods after the Lease Termination shall be assumed
directly by Lessor, or (ii) cause an "Approved Lessee" (as defined below) to (x)
succeed to and assume Lessee's rights and obligations under the Lease, the
Management Agreement, and this Agreement, or (y) enter into a new lease with
Lessor in substantially the same form as the Lease, and assume the rights and
obligations of the Lessee under the Management Agreement and this Agreement, the
intent being that the relationship between any successor Lessee, Lessor and
Manager be under the same terms and conditions as the relationship between
Lessee, Lessor and Manager hereunder and under the Management Agreement and the
Lease. Any successor to Lessee under clause (c)(ii) above shall be subject to
Manager's prior written approval, which approval shall not be withheld or
delayed if such successor to Lessee is (i) a direct or indirect wholly-owned
subsidiary of Lessor, (ii) a person or entity to whom a Sale of the Inns is
permitted under Section 18.01 (A) of the Management Agreement, or (iii) a person
or entity who otherwise is approved by Manager in its sole discretion (an
"Approved Lessee").

     6. Guaranty. Lessor shall be liable for the complete and satisfactory
        --------
payment and performance of each and every obligation of Lessee as "Lessee" under
the Management Agreement (the "Guarantied Obligations"). Lessor hereby
absolutely, irrevocably, and unconditionally guaranties that the Guarantied
Obligations which are monetary obligations shall be paid when due and payable
and that the Guarantied Obligations which are performance obligations shall be
fully performed at the times and in the manner such performance is required by
the Management Agreement. This guaranty is an absolute, irrevocable, and
unconditional guaranty of payment and performance and the liability of Lessor
hereunder shall be absolute and unconditional irrespective of: (i) any lack of
validity, irregularity or enforceability of the Management Agreement or this
Agreement; (ii) any change in the time, manner, place or any

                                       3

<PAGE>

other term or condition of payments due under the Management Agreement or this
Agreement, or any other amendment or waiver of, or consent to, any departure
from the Management Agreement or this Agreement; (iii) any failure of Manager to
enforce the provisions of the Management Agreement or this Agreement against
Lessee; or (iv) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, of any of the Guarantied Obligations
(other than because, or to the extent, the same have been previously discharged
in accordance with the terms of the Management Agreement). If all or any part of
the Guarantied Obligations shall not have been paid when due and payable or
performed at the time performance is required, Lessor (without first requiring
the Manager to proceed against Lessee or any other party or any other security)
shall pay or cause to be paid to Manager the amount thereof as is then due and
payable and unpaid (including interest and other charges, if any, due thereon
through the date of payment in accordance with the applicable provisions of the
Management Agreement) or perform or cause to be performed such obligations in
accordance with the Management Agreement, within ten (10) Business Days after
receipt of written notice from the Manager of the failure by Lessee to make such
payment or render such performance; provided, however, that, notwithstanding the
foregoing, Lessor shall have the right, in connection with a demand by Manager
for payment by Lessor of Guaranteed Obligations, to assert any defenses or claim
of Lessee under the Management Agreement with respect to such Guaranteed
Obligations. If for any reason Lessor fails to perform or cause to be performed
such obligations, Manager shall have the right to exercise any and all of the
remedies available at law or in equity and Lessor hereby agrees to pay any and
all reasonable expenses (including counsel fees and expenses) incurred by
Manager in enforcing its rights under this Agreement. The guaranty contained in
this Agreement: (i) is a continuing guaranty and shall remain in full force and
effect until the indefeasible satisfaction and discharge in full of Lessee's
obligations as "Lessee" under the Management Agreement and Lessor's and Lessee's
obligations under this Agreement, and (ii) shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment under the
Management Agreement or this Agreement becomes unrecoverable from Lessee by
operation of law or for any other reason or must otherwise be returned by
Manager upon the insolvency, bankruptcy or reorganization of Lessor or Lessee.

     7. Obligation to Terminate Lease Upon Lessee Default under Management
        ------------------------------------------------------------------
Agreement. Upon receiving a written request from Manager to do so (and provided
---------
that Manager has sent to Lessor a notice as described in Section 6 above with
respect to the applicable Default), Lessor shall terminate the Lease if an Event
of Default by Lessee has occurred under the Management Agreement. In terminating
the Lease pursuant to this Section 7, Lessor shall issue its notice of
termination to Lessee promptly following its receipt of Manager's request
therefor. Lessor shall thereafter promptly initiate, and thereafter diligently
and continuously prosecute, such actions as may be required to confirm such
Lease termination and repossess the Inns, including, without limitation,
instituting such legal action as may be necessary to accomplish same. Upon
Lessor's termination of the Lease in accordance with this Section 7, Lessor
shall thereupon be obligated to comply with the provisions of Section 5
applicable upon a Lease Termination.

     8. Agreements Relating to Tenancy. In order to address the fact that
        ------------------------------
Lessee's interest in the Site and the Inns is leasehold, and to address certain
other related matters, the

                                       4

<PAGE>

parties agree to the following modifications of the Management Agreement, to be
effective for so long as Lessee's interest in the Site and Inns is held through
tenancy title as that of Lessee:

     A. Subject to the terms of the Management Agreement, Lessor and Lessee
covenant and agree, and Manager acknowledges, that: (i) Lessor holds, and shall
have, keep and maintain throughout the term of the Management Agreement, good
and marketable fee title to the Inns and Site; (ii) Lessee holds, and shall
have, keep and maintain throughout the term of the Management Agreement,
leasehold title to the Inns and Site free and clear of any and all liens,
encumbrances or other charges, except for those specifically set forth in
Section 3.01.A. of the Management Agreement.

     B. In connection with any "Sale of the Inns" that is consented to by
Manager under Article XVIII of the Management Agreement, Lessor and Lessee agree
that an agreement in form and substance similar to this Agreement will be
required in order to ensure that Manager will incur no greater liability, cost
or risk of termination of the Management Agreement as a result of such "Sale of
the Inns".

     C. If Lessor hereafter encumbers the Site and/or the Inns with a Mortgage,
the Subordination Agreement required in Article XVII of the Management Agreement
with respect to such Mortgage shall be modified (i) to account for the facts
that Lessor (rather than Lessee) has encumbered the Site and/or the Inns with
such Mortgage, and (ii) to provide that the parties' rights and obligations
under such Subordination Agreement shall, as applicable, apply to both the
Management Agreement and this Agreement.

     9. Additional Lessor Obligations.
        -----------------------------

     A. Lessor agrees to fully and timely comply with all notice requirements
set forth in Section 18.01 of the Management Agreement on each occasion that
Lessor receives a bona fide written offer for a Sale of an Inn that it desires
to accept. Lessor further acknowledges and agrees that any failure by Lessor to
timely provide notice to Manager as set forth in Section 18.01 of the Management
Agreement with respect to a bona fide written offer for a Sale of an Inn shall
extinguish any right of Lessor to enter such Sale.

     B. Lessor agrees, where applicable, upon request by Manager, not to
unreasonably withhold, condition or delay the prompt signing, without charge, of
applications for licenses, permits or other instruments necessary for operation
of each Inn, which applications shall be prepared by Manager as necessary from
time to time.

     10. Certain Provisions Regarding Bankruptcy. In the event the Lease shall
         ---------------------------------------
be rejected on behalf of Lessor under Section 365 of the United States
Bankruptcy Code ("Code") or any other applicable law or authority ("Rejection"),
Lessee shall promptly notify Manager in writing of such Rejection and Lessee
shall, as directed by Manager, either treat the Lease as terminated by such
Rejection or retain its rights under the Lease as permitted by the Code or other
applicable law or authority. In the event the Management Agreement is terminated
as a result of Rejection on behalf of Lessee, the Management Agreement will
remain effective with respect to Lessor, and Lessor shall, if directed by
Manager (but only to the extent such right may

                                       5

<PAGE>

be exercised under the Code or other applicable law and authority), terminate
the Lease, subject to the provisions of Section 5 hereof. Lessor and Lessee each
agree that it will not join in any involuntary petition against the other under
the Code or any other similar federal or state law providing for debtor relief,
without the consent of Manager.

     11. Term. The term of this Agreement shall commence on the date set forth
         ----
above and shall run concurrently with the term of the Management Agreement.

     12. Required Assignment. In connection with any Sale of the Inns which
         -------------------
includes a transfer of Lessor's and/or Lessee's title in the Site and/or the
Inns, Lessor and Lessee agree that the successors to their respective titles in
the Site and/or the Inns shall also assume their respective rights and
obligations under this Agreement and shall cause such successor(s) to assume
such rights and obligations pursuant to an assumption of this Agreement
reasonably acceptable to Manager.

     13. Notices. All notices and other communications provided for hereunder
         -------
shall be in writing, and shall be sent or delivered by the methods and to the
addresses for Lessor, Lessee and Manager as required under the Management
Agreement.

     14. Eligible Independent Contractor. Manager agrees that, as of the date
         -------------------------------
hereof, it is an eligible independent contractor under Section 856(d) of the
Internal Revenue Code, and further agrees that it shall maintain such status to
the extent it is able to do so, acknowledging that events outside of Manager's
control may result in an overlap of ownership between Manager and Lessor or
Lessee which could affect Manager's independent contractor status. Lessor,
Manager and Lessee agree to cooperate in good faith to ensure that Manager
retains such status. This covenant shall apply for so long as the Inns are owned
by Lessor (or another direct or indirect wholly-owned subsidiary of Apple
Hospitality pursuant to a permitted assignment) and leased to Lessee (or another
direct or indirect wholly-owned subsidiary of Apple Hospitality pursuant to a
permitted assignment) as part of an ownership structure that is subject to REIT
tax requirements.

     15. Miscellaneous.
         -------------

     A. Modification of this Agreement. No amendment, modification, alteration
        ------------------------------
or waiver of any provision of this Agreement shall be effective unless it is in
writing and signed by the party against whom enforcement of such amendment is
sought, and no waiver of any provision of this Agreement by any party hereto,
and no consent to any departure therefrom by any party hereto, shall be
effective unless it is in writing and signed by the party against whom
enforcement of such waiver or consent is sought, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

     B. No Waiver. No failure by any party hereto to exercise, and no delay in
        ---------
exercising, any right under the Management Agreement or this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right preclude any other or further exercise thereof or the exercise of any
other right.

                                       6

<PAGE>

     C. Remedies Cumulative. The rights and remedies of any party hereto
        --------------------
provided in the Management Agreement and this Agreement are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law or
equity.

     D. Governing Law. This Agreement shall be governed by and construed in
        --------------
accordance with the laws of the State of Maryland.

     E. Severability. The invalidity, illegality or unenforceability of any one
        ------------
or more phrases, sentences, clauses or sections contained in this Agreement
shall not affect the validity, legality or enforceability of the remaining
portions of this Agreement.

     F. Entire Agreement. This Agreement, together with the Management Agreement
        ----------------
(including the Letter Agreements), Assignment Agreement (defined herein), and
the Lease, constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties hereto with
respect to the subject matter hereof and may be executed simultaneously in
several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

     G. Successors and Assigns. The parties hereto shall not assign or transfer
        ----------------------
or permit the assignment or transfer of this Agreement without the prior written
consent of the other parties hereto, except that Lessee and Manager shall each
have the right and obligation to assign its respective interest in this
Agreement to any party to which its respective interest in the Management
Agreement may be assigned under the terms of the Management Agreement, and
Lessor shall have the right and obligation to assign its interest in this
Agreement to any party to which its interest in the Site and Inn may be
assigned, subject to the requirements of the Management Agreement.

     H. Captions. The captions and headings of the sections and subsections of
        --------
this Agreement are for purposes of convenience and reference only and shall not
limit or otherwise affect the meaning hereof.

     I. Time of the Essence. Time shall be of the essence in the performance of
        -------------------
this Agreement.

     J. Incorporation of Recitals. The recitals hereto are incorporated herein
        -------------------------
as part of this Agreement.

     K. Counterparts - This Assignment may be executed in counterparts, each of
        ------------
which, taken together with the others, shall constitute the original.

                        [SIGNATURES FOLLOW ON NEXT PAGE]

                                       7

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under seal as of the date first written above.

                                         LESSOR:

                                         MARRIOTT RESIDENCE INN
                                          LIMITED PARTNERSIHP,
                                         a Delaware limited partnership
                                         AHT RES I GP, INC., as general partner

                                         By:  /s/ Glade M. Knight
                                             -----------------------------------
                                         Name: Glade M. Knight
                                         Title: President

                                         LESSEE:

                                         AHM RES I LIMITED PARTNERSHIP
                                         a Virginia limited partnership
                                         AHM RES I GP, INC., as general partner

                                         By:  /s/ Glade M. Knight
                                             -----------------------------------
                                         Name: Glade M. Knight
                                         Title: President

                                         MANAGEMENT COMPANY:

                                         RESIDENCE INN BY MARRIOTT, INC.,
                                         a Delaware corporation,

                                         By:  /s/ M. Lester Pulse, Jr.
                                             -----------------------------------
                                         Name: M. Lester Pulse, Jr.
                                               ---------------------------------
                                         Title:  Vice President
                                                --------------------------------

                                       8

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