Document:

<PAGE>   1

                                                                    EXHIBIT 10.3

                                 LEASE AGREEMENT

                            Dated as of July 9, 2000

                                 By and Between

                           SOUTHEAST TEXAS INNS, INC.,

                                  AS LANDLORD,

                                       AND

                                 MAY-RIDGE, L.P.

                                    AS TENANT

<PAGE>   2

                                 LEASE AGREEMENT

                  THIS LEASE AGREEMENT is entered into as of this 9th day of
July, 2000, by and between SOUTHEAST TEXAS INNS, INC., a Tennessee corporation,
as landlord ("Landlord"), and MAY-RIDGE, L.P., a Delaware limited partnership,
as tenant ("Tenant").

                                   WITNESSETH:

                  WHEREAS, Landlord owns fee simple title to the Leased Property
(this and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in Article 1) described in Exhibit A-1 and
Exhibit A-2 and holds the tenant's interest under the Ground Lease with respect
to the Property described in Exhibit A-3; and

                  WHEREAS, Landlord wishes to lease the Leased Property to
Tenant and Tenant wishes to lease the Leased Property from Landlord, all subject
to and upon the terms and conditions herein set forth;

                  NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the mutual receipt
and legal sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree as follows:

                                   ARTICLE 1.

                                   DEFINITIONS

                  For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article shall have the meanings assigned to them in this Article
and include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein shall have the meanings assigned to them in accordance
with GAAP, (iii) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Agreement, and (iv) the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision.

                  1.1.     "ACCOUNTING PERIOD" shall mean each calendar month.

                  1.2.     "ADDITIONAL CHARGES" shall have the meaning given
such term in Section 3.1.3.

                  1.3.     "ADDITIONAL RENT" shall have the meaning given such
term in Section 3.1.2(a).

                  1.4.     "AFFILIATED PERSON" shall mean, with respect to any
Person, (a) in the case of any such Person which is a partnership, any partner
in such partnership, (b) in the case of any such Person which is a limited
liability company, any member of such company, (c) any other Person which is a
Parent, a Subsidiary, or a Subsidiary of a Parent with respect to such Person or
to one or more of the Persons referred to in the preceding clauses (a) and (b),
(d) any other Person who is an officer, director, trustee or employee of, or
partner in or member of, such

<PAGE>   3

Person or any Person referred to in the preceding clauses (a), (b) and (c), and
(e) any other Person who is a member of the Immediate Family of such Person or
of any Person referred to in the preceding clauses (a) through (d).

                  1.5.     "AGREEMENT" shall mean this Lease Agreement,
including Exhibits A-1 through A-3, B and C hereto, as it and they may be
amended from time to time as herein provided.

                  1.6.     "APPLICABLE LAWS" shall mean all applicable laws,
statutes, regulations, rules, ordinances, codes, licenses, permits and orders,
from time to time in existence, of all courts of competent jurisdiction and
Government Agencies, and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to injury to, or the protection of, real or personal
property or human health or the Environment, including, without limitation, all
valid and lawful requirements of courts and other Government Agencies pertaining
to reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pesticides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature, into
the Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.

                  1.7.     "APPLICABLE PERCENTAGE" shall mean five percent (5%).

                  1.8.     "AWARD" shall mean all compensation, sums or other
value awarded, paid or received by virtue of a total or partial Condemnation of
any of the Leased Property (after deduction of all reasonable legal fees and
other reasonable costs and expenses, including, without limitation, expert
witness fees, incurred by Landlord, in connection with obtaining any such
award).

                  1.9.     "BASE TOTAL HOTEL SALES" shall mean, with respect to
each Property, Total Hotel Sales for such Property for the Base Year; provided,
however, that in the event that, with respect to any Lease Year, or portion
thereof, for any reason (including, without limitation, a casualty or
Condemnation) there shall be a reduction of five percent (5%) or more in the
number of rooms at any Hotel or a change in the services provided at any Hotel
(including, without limitation, if applicable, the closing of restaurants or the
discontinuation of food or beverage services) from the number of rooms or the
services provided during the Base Year, in determining Additional Rent payable
with respect to such Lease Year, Base Total Hotel Sales shall be reduced as
follows: (a) in the event of the termination of this Lease with respect to any
Property pursuant to Article 10, 11 or 12, all Total Hotel Sales attributable to
such Property during the Base Year shall be subtracted from Base Total Hotel
Sales, appropriately prorated based on time elapsed if such termination occurs
on a date other than the first day of any Fiscal Year; (b) in the event of a
complete closing of a Hotel, all Total Hotel Sales attributable to such Hotel
during the Base Year shall be subtracted from Base Total Hotel Sales throughout
the

                                        2
<PAGE>   4

period of such closing; (c) in the event of a partial closing of a Hotel
affecting five percent (5%) or more of the guest rooms in such Hotel, Total
Hotel Sales attributable to guest room occupancy or guest room services at such
Hotel during the Base Year shall be ratably allocated among all guest rooms in
service at such Hotel during the Base Year and all such Total Hotel Sales
attributable to rooms no longer in service shall be subtracted from Base Total
Hotel Sales throughout the period of such closing; (d) in the event of a closing
of a restaurant, all Total Hotel Sales attributable to such restaurant during
the Base Year shall be subtracted from Base Total Hotel Sales throughout the
period of such closing; and (e) in the event of any other change in
circumstances affecting any Hotel, Base Total Hotel Sales shall be equitably
adjusted in such manner as Landlord and Tenant shall reasonably agree.

                  1.10.    "BASE YEAR" shall mean the year commencing July 1,
2000 and ending June 30, 2001.

                  1.11.    "BUSINESS DAY" shall mean any day other than
Saturday, Sunday, or any other day on which banking institutions in the State of
Tennessee or the State of New York are authorized by law or executive action to
close.

                  1.12.    "CAPITAL ADDITION" shall mean any renovation, repair
or improvement to the Leased Property (or portion thereof), the cost of which
constitutes a Capital Expenditure.

                  1.13.    "CAPITAL EXPENDITURE" shall mean any expenditure
treated as capital in nature in accordance with GAAP.

                  1.14.    "CLAIM" shall have the meaning given such term in
Article 8.

                  1.15.    "CODE" shall mean the Internal Revenue Code of 1986
and, to the extent applicable, the Treasury Regulations promulgated thereunder,
each as from time to time amended.

                  1.16.    "COMMENCEMENT DATE" shall mean July 9, 2000 at 11:00
p.m. (New York time).

                  1.17.    "CONDEMNATION" shall mean, with respect to any
Property, (a) the exercise of any governmental power with respect to such
Property, whether by legal proceedings or otherwise, by a Condemnor of its power
of condemnation, (b) a voluntary sale or transfer of such Property by Landlord
to any Condemnor, either under threat of condemnation or while legal proceedings
for condemnation are pending, or (c) a taking or voluntary conveyance of all or
part of such Property, or any interest therein, or right accruing thereto or use
thereof, as the result or in settlement of any condemnation or other eminent
domain proceeding affecting such Property, whether or not the same shall have
actually been commenced.

                  1.18.    "CONDEMNOR" shall mean any public or quasi-public
Person, having the power of Condemnation.

                  1.19.    "DATE OF TAKING" shall mean, with respect to any
Property, the date the Condemnor has the right to possession of such Property,
or any portion thereof, in connection with a Condemnation.

                                       3
<PAGE>   5

                  1.20.    "DEFAULT" shall mean any event or condition which
with the giving of notice and/or lapse of time would ripen into an Event of
Default.

                  1.21.    "DISBURSEMENT RATE" shall mean an annual rate of
interest, as of the date of determination, equal to the greater of (i) the
Interest Rate and (ii) the per annum rate for fifteen (15) year U.S. Treasury
Obligations as published in The Wall Street Journal plus three hundred fifty
(350) basis points.

                  1.22.    "DISTRIBUTION" shall mean (a) any declaration or
payment of any dividend (except dividends payable in common stock of Tenant, if
applicable) on or in respect of any shares of any class of capital stock of
Tenant or similar payment with respect to a partnership interest in Tenant, as
the case may be, (b) any purchase, redemption, retirement or other acquisition
of any shares of any class of capital stock of Tenant or any partnership
interest in Tenant, as the case may be, (c) any other distribution on or in
respect of any shares of any class of capital stock of Tenant or any partnership
interest in Tenant, as the case may be, or (d) any return of capital to
shareholders or partners of Tenant.

                  1.23.    "EASEMENT AGREEMENT" shall mean any conditions,
covenants and restrictions, easements, declarations, licenses and other
agreements which are Permitted Encumbrances and such other agreements as may be
granted in accordance with Section 19.1.

                  1.24.    "ENCUMBRANCE" shall have the meaning given such term
in Section 20.1.

                  1.25.    "ENTITY" shall mean any corporation, general or
limited partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency, authority or
political subdivision thereof or any other entity.

                  1.26.    "ENVIRONMENT" shall mean soil, surface waters, ground
waters, land, stream, sediments, surface or subsurface strata and ambient air.

                  1.27.    "ENVIRONMENTAL OBLIGATION" shall have the meaning
given such term in Section 4.3.1.

                  1.28.    "ENVIRONMENTAL NOTICE" shall have the meaning given
such term in Section 4.3.1.

                  1.29.    "EVENT OF DEFAULT" shall have the meaning given such
term in Section 12.1.

                  1.30.    "EXCESS TOTAL HOTEL SALES" shall mean, with respect
to any Property, with respect to any Lease Year, or portion thereof, the amount
of Total Hotel Sales for such Property for such Lease Year, or portion thereof,
in excess of Base Total Hotel Sales for such Property for the equivalent period.

                  1.31.    "EXTENDED TERMS" shall have the meaning given such
term in Section 2.4.

                                       4
<PAGE>   6

                  1.32.    "FF&E ESTIMATE" shall have the meaning given such
term in Section 5.1.2(c).

                  1.33.    "FF&E PLEDGE" shall mean the Assignment and Security
Agreement, dated as of the date hereof, made by Tenant for the benefit of
Landlord.

                  1.34.    "FF&E RESERVE" shall have the meaning given such term
in Section 5.1.2(a).

                  1.35.    "FINANCIAL OFFICER'S CERTIFICATE" shall mean a
certificate of the chief executive officer, chief financial officer or chief
accounting officer (or such officers' authorized designee) of Tenant, duly
authorized, accompanying the financial statements required to be delivered
pursuant to Section 17.2, in which such officer shall certify (a) that such
statements have been properly prepared in accordance with GAAP and are true,
correct and complete in all material respects and fairly present the financial
condition of Tenant at and as of the dates thereof and the results of Tenant's
operations for the periods covered thereby, and (b) that no Event of Default has
occurred and is continuing hereunder.

                  1.36.    "FISCAL YEAR" shall mean each calendar year.

                  1.37.    "FIXED TERM" shall have the meaning given such term
in Section 2.3.

                  1.38.    "FIXTURES" shall have the meaning given such term in
Section 2.1(d).

                  1.39.    "GAAP" shall mean generally accepted accounting
principles consistently applied.

                  1.40.    "GOVERNMENT AGENCIES" shall mean any court, agency,
authority, board (including, without limitation, environmental protection,
planning and zoning), bureau, commission, department, office or instrumentality
of any nature whatsoever of any governmental or quasi-governmental unit of the
United States or any State or any county or any political subdivision of any of
the foregoing, whether now or hereafter in existence, having jurisdiction over
Tenant or the Leased Property or any portion thereof or any Hotel operated
thereon.

                  1.41.    "GROUND LEASE" shall mean the Ground Lease Agreement,
dated April 12, 1995, between Adorff, Inc., Lehndorff Capital Resources, Inc.,
Wonderland Associates, Noble Associates and Lehndorff United Properties (USA),
collectively as predecessor in interest to MRO Southwest, Inc., a Delaware
corporation, as landlord, and Landlord, as tenant, as amended from time to time.

                  1.42.    "HAZARDOUS SUBSTANCES" shall mean any substance:

                           (a)      the presence of which requires or may
         hereafter require notification, investigation or remediation under any
         federal, state or local statute, regulation, rule, ordinance, order,
         action or policy; or

                           (b)      which is or becomes defined as a "hazardous
         waste", "hazardous material" or "hazardous substance" or "pollutant" or
         "contaminant" under any present or

                                       5
<PAGE>   7

         future federal, state or local statute, regulation, rule or ordinance
         or amendments thereto including, without limitation, the Comprehensive
         Environmental Response, Compensation and Liability Act (42 U.S.C. et
         seq.) and the Resource Conservation and Recovery Act (42 U.S.C. section
         6901 et seq.) and the regulations promulgated thereunder; or

                           (c)      which is toxic, explosive, corrosive,
         flammable, infectious, radioactive, carcinogenic, mutagenic or
         otherwise hazardous and is or becomes regulated by any governmental
         authority, agency, department, commission, board, agency or
         instrumentality of the United States, any state of the United States,
         or any political subdivision thereof; or

                           (d)      the presence of which on the Leased
         Property, or any portion thereof, causes or materially threatens to
         cause an unlawful nuisance upon the Leased Property, or any portion
         thereof, or to adjacent properties or poses or materially threatens to
         pose a hazard to the Leased Property, or any portion thereof, or to the
         health or safety of persons on or about the Leased Property, or any
         portion thereof; or

                           (e)      without limitation, which contains gasoline,
         diesel fuel or other petroleum hydrocarbons or volatile organic
         compounds; or

                           (f)      without limitation, which contains
         polychlorinated biphenyls (PCBs) or asbestos or urea formaldehyde foam
         insulation; or

                           (g)      without limitation, which contains or emits
         radioactive particles, waves or material; or

                           (h)      without limitation, constitutes materials
         which are now or may hereafter be subject to regulation pursuant to the
         Material Waste Tracking Act of 1988.

                  1.43.    "HOTEL" shall mean, with respect to any Property
described on Exhibit A-1 through A-3, the all suites hotel being operated on
such Property.

                  1.44.    "HOTEL MORTGAGE" shall mean any Encumbrance placed
upon the Leased Property in accordance with Article 20.

                  1.45.    "HOTEL MORTGAGEE" shall mean the holder of any Hotel
Mortgage.

                  1.46.    "HPT" shall mean Hospitality Properties Trust, a
Maryland real estate investment trust.

                  1.47.    "IMMEDIATE FAMILY" shall mean, with respect to any
individual, such individual's spouse, parents, brothers, sisters, children
(natural or adopted), stepchildren, grandchildren, grandparents, parents-in-law,
brothers-in-law, sisters-in-law, nephews and nieces.

                  1.48.    "IMPOSITIONS" shall mean collectively, all taxes
(including, without limitation, all taxes imposed under the laws of any State,
as such laws may be amended from time to time, and all ad valorem, sales and
use, or similar taxes as the same relate to or are

                                       6
<PAGE>   8

imposed upon Landlord, Tenant or the 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), water, sewer or other rents and charges, excises, tax levies,
fees (including, without limitation, license, permit, 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 Tenant (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon (a) Landlord'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 Tenant; provided,
however, that nothing contained herein shall be construed to require Tenant to
pay and the term "Impositions" shall not include (i) any tax based on net income
imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer
fee (but excluding any mortgage or similar tax payable in connection with a
Hotel Mortgage) or other tax imposed with respect to the sale, exchange or other
disposition by Landlord of the Leased Property or the proceeds thereof, (iv) any
single business, gross receipts tax, transaction privilege, rent or similar
taxes as the same relate to or are imposed upon Landlord, (v) any interest or
penalties imposed on Landlord as a result of the failure of Landlord to file any
return or report timely and in the form prescribed by law or to pay any tax or
imposition, except to the extent such failure is a result of a breach by Tenant
of its obligations pursuant to Section 3.1.3, (vi) any impositions imposed on
Landlord that are a result of Landlord not being considered a "United States
person" as defined in Section 7701 (a) (30) of the Code, (vii) any impositions
that are enacted or adopted by their express terms as a substitute for any tax
that would not have been payable by Tenant pursuant to the terms of this
Agreement or (viii) any impositions imposed as a result of a breach of covenant
or representation by Landlord in any agreement governing Landlord's conduct or
operation or as a result of the negligence or willful misconduct of Landlord.

                  1.49.    "INCIDENTAL DOCUMENTS" shall mean the Security
Agreement, the Partnership Interest Documents and the FF&E Pledge.

                  1.50.    "INDEBTEDNESS" shall mean all obligations, contingent
or otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as liabilities.

                  1.51.    "INSURANCE REQUIREMENTS" shall mean all terms of any
insurance policy required by this Agreement and all requirements of the issuer
of any such policy and all orders, rules and regulations and any other
requirements of the National Board of Fire Underwriters (or any other body
exercising similar functions) binding upon Landlord, Tenant or the Leased
Property.

                  1.52.    "INTEREST RATE" shall mean ten percent (l0%) per
annum.

                  1.53.    "LAND" shall have the meaning given such term in
Section 2.1(a).

                                       7
<PAGE>   9

                  1.54.    "LANDLORD" shall have the meaning given such term in
the preambles to this Agreement and shall also include its permitted successors
and assigns.

                  1.55.    "LANDLORD LIENS" shall mean liens on or against the
Leased Property or any payment of Rent (a) which result from any act of, or any
claim against, Landlord or any owner of a direct or indirect interest in the
Leased Property, or which result from any violation by Landlord of any terms of
this Agreement, or (b) which result from liens in favor of any taxing authority
by reason of any tax owed by Landlord or any fee owner of a direct or indirect
interest in the Leased Property; provided, however, that "Landlord Lien" shall
not include any lien resulting from any tax for which Tenant is obligated to pay
or indemnify Landlord against until such time as Tenant shall have already paid
to or on behalf of Landlord the tax or the required indemnity with respect to
the same.

                  1.56.    "LEASE YEAR" shall mean any Fiscal Year or portion
thereof, commencing with the 2000 Fiscal Year, during the Term.

                  1.57.    "LEASED IMPROVEMENTS" shall have the meaning given
such term in Section 2.1(b).

                  1.58.    "LEASED INTANGIBLE PROPERTY" shall mean all hotel
licensing agreements and other service contracts, equipment leases, booking
agreements and other arrangements or agreements affecting the ownership, repair,
maintenance, management, leasing or operation of the Leased Property to which
Landlord is a party; all books, records and files relating to the leasing,
maintenance, management or operation of the Leased Property belonging to
Landlord; all transferable or assignable permits, certificates of occupancy,
operating permits, sign permits, development rights and approvals, certificates,
licenses, warranties and guarantees, rights to deposits, telephone exchange
numbers identified with the Leased Property, and all other transferable
intangible property, miscellaneous rights, benefits and privileges of any kind
or character belonging to Landlord with respect to the Leased Property other
than liquor licenses and other than trade names and service marks, the use of
which by Tenant shall be governed by the Purchase Agreement; provided, however,
there shall be excluded from the term "Leased Intangible Property" so much of
the property described above as shall have been transferred to Tenant pursuant
to the Purchase Agreement and the portion of the property described above that
the leasing thereof to Tenant pursuant to this Agreement would be inconsistent
with the Purchase Agreement.

                  1.59.    "LEASED PERSONAL PROPERTY" shall have the meaning
given such term in Section 2.1(e).

                  1.60.    "LEASED PROPERTY" shall have the meaning given such
term in Section 2.1.

                  1.61.    "LEGAL REQUIREMENTS" shall mean all federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting the Leased
Property or the maintenance, construction, alteration or operation thereof,
whether now or hereafter enacted or in existence, including, without limitation,
(a) all permits, licenses, authorizations, certificates and regulations
necessary to

                                       8
<PAGE>   10

operate any Property for its Permitted Use, and (b) all covenants, agreements,
restrictions and encumbrances contained in any instruments at any time in force
affecting any Property, including those which may (i) require material repairs,
modifications or alterations in or to any Property or (ii) in any way materially
and adversely affect the use and enjoyment thereof, but excluding any
requirements which would arise if Landlord were a real estate investment trust.

                  1.62.    "LIEN" shall mean any mortgage, security interest,
pledge, collateral assignment, or other encumbrance, lien or charge of any kind,
or any transfer of property or assets for the purpose of subjecting the same to
the payment of Indebtedness or performance of any other obligation in priority
to payment of its general creditors.

                  1.63.    "MANAGEMENT AGREEMENT" shall mean any management
agreement entered into by Tenant with respect to all or any portion of the
Leased Property, together with all amendments, modifications and supplements
thereto.

                  1.64.    "MANAGER" shall mean any manager under a Management
Agreement.

                  1.65.    "MINIMUM RENT" shall mean an amount equal to (a) Two
Hundred Forty-Two Thousand Six Hundred Eighty-Seven and No/100 Dollars
($242,687.00) per Accounting Period prior to July 1, 2011, and (b) Two Hundred
Sixty Thousand Six Hundred Fifty and No/100 Dollars ($260,650.00) per Accounting
Period after June 30, 2011. Notwithstanding anything to the contrary, in the
event that (x) either (i) any portion of the HPT Lease Security Deposit (as
defined in the Purchase Agreement) which relates to an Existing HPT Hotel (as
defined in the Purchase Agreement) (or a hotel exchanged for an Existing HPT
Hotel as contemplated in the last sentence of Section 11.6 of the Purchase
Agreement) is either (A) returned to Prime or the Prime HPT Subsidiary (as
defined in the Purchase Agreement) prior to June 30, 2013 for any reason or (B)
applied against any obligation of the Prime HPT Subsidiary in accordance with
the terms of the HPT Lease (as defined in the Purchase Agreement) prior to June
30, 2013 due to a default by the Prime HPT Subsidiary under the HPT Lease, or
(ii) any portion of the HPT Lease Security Deposit is paid to ShoLodge and Prime
pursuant to the last sentence of the initial paragraph of Section 5.3 or the
last sentence of the third paragraph of Section 5.4 of the Purchase Agreement,
then (y) the Minimum Rent payable prior to July 1, 2011 (as previously
increased, if applicable), shall be increased by an amount calculated by first
determining the monthly amount that if invested at nine percent (9%) for the
number of months between the date of calculation and June 30, 2013 (disregarding
partial months) would equal the reduction in the amount payable by Prime to
ShoLodge pursuant to Section 18.3 of the Purchase Agreement as a result of the
event requiring such calculation (and assuming for the purpose of calculating
such reduction only that Minimum Rent is increased as a result of such event and
paid in a timely manner), such increase in Minimum Rent to be allocated among
the Hotels in the same proportion as the Minimum Rent is allocated among the
Hotels before such calculation. The calculation of Minimum Rent under this Lease
as set forth in part (y) of the preceding sentence is described in Exhibit C
attached hereto and incorporated herein by this reference. In the event of any
conflict between the calculation of Minimum Rent as set forth in part (y) above
and Exhibit C, the terms of Exhibit C shall govern.

                  1.66.    "NET WORTH" shall mean the excess of total assets
over total liabilities, total assets and total liabilities each to be determined
in accordance with GAAP.

                                       9
<PAGE>   11

                  1.67.    "NOTICE" shall mean a notice given in accordance with
Section 22.10.

                  1.68.    "OFFICER'S CERTIFICATE" shall mean a certificate
signed by an officer or other duly authorized individual of the certifying
Entity duly authorized by the board of directors or other governing body of the
certifying Entity.

                  1.69.    "OVERDUE RATE" shall mean, on any date, a per annum
rate of interest equal to the lesser of thirteen percent (13%) and the maximum
rate then permitted under applicable law.

                  1.70.    "PARENT" shall mean, with respect to any Person, any
Person which owns directly, or indirectly through one or more Subsidiaries or
Affiliated Persons, fifty percent (50%) or more of the voting or beneficial
interest in, or otherwise has the right or power (whether by contract, through
ownership of securities or otherwise) to control, such Person.

                  1.71.    "PARTNERSHIP INTEREST DOCUMENTS" shall mean
collectively the Collateral Assignment of Partnership Interest, dated as of the
date hereof, made by Ridgewood Holding Corp. to Landlord with respect to its
partnership interest in Tenant, and the Collateral Assignment of Partnership
Interest, dated as of the date hereof, made by Maywood Holding Corp. to Landlord
with respect to its partnership interest in Tenant, as each such document may be
amended, restated, supplemented or otherwise modified from time to time.

                  1.72.    "PERMITTED ENCUMBRANCES" shall mean, with respect to
any Property, such encumbrances as may be "Permitted Exceptions" under the
Purchase Agreement or as may have been consented to in writing by Landlord and
Tenant from time to time.

                  1.73.    "PERMITTED LIENS" shall mean any Liens granted in
accordance with Section 21.9(a).

                  1.74.    "PERMITTED USE" shall mean, with respect to any
Property, any use of such Property permitted pursuant to Section 4.1.1.

                  1.75.    "PERSON" shall mean any individual or Entity, and the
heirs, executors, administrators, legal representatives, successors and assigns
of such Person where the context so admits.

                  1.76.    "PRIME" means Prime Hospitality Corp., a Delaware
corporation, its successors and assigns.

                  1.77.    "PROPERTY" shall have the meaning given such term in
Section 2.1.

                  1.78.    "PURCHASE AGREEMENT" shall mean the Sale and Purchase
Agreement, dated March 16, 2000, as amended by First Amendment to Sale and
Purchase Agreement dated as of the date hereof, both by and between ShoLodge and
Prime, as further amended, restated, supplemented or otherwise modified from
time to time.

                  1.79.    "RECORDS" shall have the meaning given such term in
Section 7.2.

                                       10
<PAGE>   12

                  1.80.    "RENT" shall mean, collectively, the Minimum Rent,
Additional Rent and Additional Charges.

                  1.81.    "RETAINED FUNDS" shall mean a cash amount equal to
Three Million One Hundred Twenty-Seven Thousand Eight Hundred and No/100 Dollars
($3,127,800.00).

                  1.82.    "SEC" shall mean the Securities and Exchange
Commission.

                  1.83.    "SECURITY AGREEMENT" shall mean the Security
Agreement, dated as of the date hereof, made by Tenant for the benefit of
Landlord, as it may be amended, restated, supplemented or otherwise modified
from time to time.

                  1.84.    "SHOLODGE" shall mean ShoLodge, Inc., a Tennessee
corporation, its successors and assigns.

                  1.85.    "STATE" shall mean, with respect to any Property, the
state, commonwealth or district in which such Property is located.

                  1.86.    "SUBORDINATED CREDITOR" shall mean any creditor of
Tenant which is a party to a Subordination Agreement in favor of Landlord.

                  1.87.    "SUBORDINATION AGREEMENT" shall mean any agreement
(and any amendments thereto) executed by a Subordinated Creditor pursuant to
which the payment and performance of Tenant's obligations to such Subordinated
Creditor are subordinated to the payment and performance of Tenant's obligations
to Landlord under this Agreement.

                  1.88.    "SUBSIDIARY" shall mean, with respect to any Person,
any Entity (a) in which such Person owns directly, or indirectly through one or
more Subsidiaries, twenty percent (20%) or more of the voting or beneficial
interest or (b) which such Person otherwise has the right or power to control
(whether by contract, through ownership of securities or otherwise).

                  1.89.    "SUCCESSOR LANDLORD" shall have the meaning given
such term in Section 20.2.

                  1.90.    "TENANT" shall have the meaning given such term in
the preambles to this Agreement and shall also include its permitted successors
and assigns.

                  1.91.    "TENANT FINANCIALS" shall mean, for any Fiscal Year
or other accounting period of Tenant, annual and quarterly financial statements
of Tenant, including Tenant's balance sheet and the related statements of income
and cash flows, 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 GAAP throughout the periods reflected.
Notwithstanding anything to the contrary, all financial statements shall be
unaudited; provided, that with respect to Total Hotel Sales only, Tenant's
Officer's Certificate required pursuant to Section 3.1.2 shall be audited as
further provided for in Section 3.1.2; provided further, that Tenant shall, at
the sole cost and expense of Landlord, provide audited financial reporting
information required pursuant to Section 17.2(d); provided further, from and
after any sale of the Leased Property or any part thereof to HPT or any of its
Affiliated Persons, if requested by

                                       11
<PAGE>   13

such transferee, Tenant shall comply with the reporting and audit requirements
of the HPT Lease (as defined in the Purchase Agreement).

                  1.92.    "TENANT'S PERSONAL PROPERTY" shall mean all motor
vehicles and consumable inventory and supplies, furniture, furnishings, movable
walls and partitions, equipment and machinery and all other tangible personal
property of Tenant, if any, acquired by Tenant on and after the date hereof and
located at the Leased Property or used in Tenant's business at the Leased
Property and all modifications, replacements, alterations and additions to such
personal property installed at the expense of Tenant, other than any items
included within the definition of Fixtures or Leased Personal Property.

                  1.93.    "TERM" shall mean, collectively, the Fixed Term and
the Extended Terms, to the extent properly exercised pursuant to the provisions
of Section 2.4, unless sooner terminated pursuant to the provisions of this
Agreement.

                  1.94.    "TOTAL HOTEL SALES" shall mean, with respect to each
Property, for each Fiscal Year during the Term, all revenues and receipts of
every kind derived by Tenant from operating such Property and parts thereof,
including, but not limited to: income (from both cash and credit transactions),
after deductions for bad debts, and discounts for prompt or cash payments and
refunds, from rental of rooms, stores, offices, meeting, exhibit or sales space
of every kind; license, lease and concession fees and rentals (not including
gross receipts of licensees, lessees and concessionaires); income from vending
machines; health club membership fees; food and beverage sales; wholesale and
retail sales of merchandise (other than proceeds from the sale of furnishings,
fixture and equipment no longer necessary to the operation of any Hotel, which
shall be deposited in the FF&E Reserve); service charges, to the extent not
distributed to the employees at any Hotel as gratuities; and proceeds, if any,
from business interruption or other loss of income insurance; provided, however,
that Total Hotel Sales shall not include the following: gratuities to or
collected on behalf of Hotel employees; federal, state or municipal excise,
sales, use, occupancy or similar taxes collected directly from patrons or guests
or included as part of the sales price of any goods or services; insurance
proceeds (other than proceeds from business interruption or other loss of income
insurance); Award proceeds (other than for a temporary Condemnation); any
proceeds from any sale of such Property or from the refinancing of any debt
encumbering such Property; proceeds from the disposition of furnishings, fixture
and equipment no longer necessary for the operation of any Hotel; interest which
accrues on amounts deposited in the FF&E Reserve; and any security deposits and
other advance deposits, until and unless the same are forfeited to Tenant or
applied for the purpose for which they were collected; and interest income from
any bank account or investment of Tenant.

                  1.95.    "UNIFORM SYSTEM OF ACCOUNTS" shall mean A Uniform
System of Accounts for Hotels, Eighth Revised Edition, 1986, as published by the
Hotel Association of New York City, as the same may be further revised from time
to time.

                  1.96.    "UNSUITABLE FOR ITS PERMITTED USE" shall mean, with
respect to such Hotel, a state or condition of such Hotel such that (a)
following any damage or destruction involving a Hotel, such Hotel cannot be
operated in the good faith judgment of Tenant on a commercially practicable
basis for its Permitted Use and it cannot reasonably be expected to be restored
to substantially the same condition as existed immediately before such damage or

                                       12
<PAGE>   14

destruction, and as otherwise required by Section 10.2.4, within twelve (12)
months following such damage or destruction or such shorter period of time as to
which business interruption insurance is available to cover Rent and other costs
related to the applicable Property following such damage or destruction, or (b)
as the result of a partial taking by Condemnation, such Hotel cannot be
operated, in the good faith judgment of Tenant, on a commercially practicable
basis for its Permitted Use.

                  1.97.    "WORK" shall have the meaning given such term in
Section 10.2.4.

                                   ARTICLE 2.

                            LEASED PROPERTY AND TERM

                  2.1.     LEASED PROPERTY. Upon and subject to the terms and
conditions hereinafter set forth, Landlord leases to Tenant and Tenant leases
from Landlord all of Landlord's right, title and interest in and to all of the
following (each of items (a) through (g) below which, as of the Commencement
Date, relates to any single Hotel, a "Property" and, collectively, the "Leased
Property"):

                           (a)      those certain tracts, pieces and parcels of
         land, as more particularly described in Exhibit A-l through A-3,
         attached hereto and made a part hereof (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 off-site), 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, now or 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 maximum extent
         permitted by law, are hereby deemed by the parties hereto to constitute
         real estate, together with all replacements, modifications, alterations
         and additions thereto, but specifically excluding all items included
         within the category of Tenant's Personal Property (collectively, the
         "Fixtures");

                           (e)      all machinery, equipment, furniture,
         furnishings, moveable walls or partitions, computers or trade fixtures
         or other personal property of any kind or description used or useful in
         Tenant's business on or in the Leased Improvements, and located on or
         in the Leased Improvements, and all modifications, replacements,
         alterations and additions to such personal property, except items, if
         any, included within

                                       13
<PAGE>   15

         the category of Fixtures, but specifically excluding all items included
         within the category of Tenant's Personal Property (collectively, the
         "Leased Personal Property");

                           (f)      all of the Leased Intangible Property; and

                           (g)      any and all leases of space in the Leased
         Improvements.

                  2.2.     CONDITION OF LEASED PROPERTY. Tenant acknowledges
receipt and delivery of possession of the Leased Property and Tenant accepts the
Leased Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Leased Property, all applicable
Legal Requirements, the lien of any financing instruments, mortgages and deeds
of trust existing prior to the Commencement Date or permitted by the terms of
this Agreement, and such other matters which would be disclosed by an inspection
of the Leased Property and the record title thereto or by an accurate survey
thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF
THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST
LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. LANDLORD 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 TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any predecessor in title for breaches of warranties or representations
or for latent defects in the Leased Property. Landlord shall fully cooperate
with Tenant in the prosecution of any such claims, in Landlord's or Tenant's
name, all at Tenant's sole cost and expense. Tenant shall indemnify, defend, and
hold harmless Landlord from and against any loss, cost, damage or liability
(including reasonable attorneys' fees) incurred by Landlord in connection with
such cooperation. The foregoing, however, shall not prevent Prime or Tenant from
pursuing a claim for breaches of warranties or representations of ShoLodge set
forth in the Purchase Agreement in accordance with the provisions thereof.

                  2.3.     FIXED TERM. The initial term of this Agreement (the
"Fixed Term") shall commence on the Commencement Date and shall expire June 30,
2011.

                  2.4.     EXTENDED TERM. Provided that no Event of Default
shall have occurred and be continuing, the Term shall be automatically extended
for five (5) consecutive renewal terms of ten (10) years each (collectively, the
"Extended Terms"), unless Tenant shall give Landlord Notice, not later than
eighteen (18) months prior to the scheduled expiration of the then current Term
of this Agreement (Fixed or Extended, as the case may be), that Tenant elects
not to extend the term of this Agreement.

                                       14
<PAGE>   16

                  Each Extended Term shall commence on the day succeeding the
expiration of the Fixed Term or the preceding Extended Term, as the case may be.
All of the terms, covenants and provisions of this Agreement shall apply to each
such Extended Term, except that Tenant shall have no right to extend the Term
beyond the expiration of the Extended Terms. If Tenant shall give Notice that it
elects not to extend the Term in accordance with this Section 2.4, this
Agreement shall automatically terminate at the end of the Term then in effect
and Tenant shall have no further option to extend the Term of this Agreement.
Otherwise, the extension of this Agreement shall be automatically effected
without the execution of any additional documents; it being understood and
agreed, however, that Tenant and Landlord shall execute such documents and
agreements as either party shall reasonably require to evidence the same.

                                   ARTICLE 3.

                                      RENT

                  3.1.     RENT. Tenant shall pay, in lawful money of the United
States of America which shall be legal tender for the payment of public and
private debts, without offset, abatement, demand or deduction (unless otherwise
expressly provided in this Agreement), Minimum Rent and Additional Rent to
Landlord and Additional Charges to the party to whom such Additional Charges are
payable, during the Term. All payments to Landlord shall be made by wire
transfer of immediately available federal funds or by other means acceptable to
Landlord in its sole discretion. Rent for any partial Accounting Period shall be
prorated on a per diem basis.

                           3.1.1.   MINIMUM RENT.

                           (a)      PAYMENTS. Minimum Rent shall be paid in
         advance on the first Business Day of each Accounting Period; provided,
         however, that the first payment of Minimum Rent shall be payable on the
         date hereof (and, if applicable, such payment shall be prorated as
         provided in the last sentence of the first paragraph of Section 3.1).

                           (b)      ADJUSTMENTS OF MINIMUM RENT FOLLOWING
         DISBURSEMENTS UNDER SECTIONS 5.1.3(B), 10.2.3 AND 11.2. Effective on
         the date of each disbursement to pay for the cost of any repairs,
         maintenance, renovations or replacements pursuant to Sections 5.1.3(b),
         10.2.3 or 11.2, the annual Minimum Rent shall be increased by a per
         annum amount equal to the Disbursement Rate times the amount so
         disbursed. If any such disbursement is made during any month on a day
         other than the first Business Day of an Accounting Period, Tenant shall
         pay to Landlord on the first Business Day of the immediately following
         Accounting Period (in addition to the amount of Minimum Rent payable
         with respect to such Accounting Period, as adjusted pursuant to this
         paragraph (b)) the amount by which Minimum Rent for the preceding
         Accounting Period, as adjusted for such disbursement on a per diem
         basis, exceeded the amount of Minimum Rent paid by Tenant for such
         preceding Accounting Period.

                           (c)      ADJUSTMENTS OF MINIMUM RENT FOLLOWING
         PARTIAL LEASE TERMINATION. If this Lease shall terminate with respect
         to any Property but less than all of the Leased Property, Minimum Rent
         shall be reduced by the affected Property's

                                       15
<PAGE>   17

         allocable share of Minimum Rent as set forth in Exhibit D.

                           3.1.2.   ADDITIONAL RENT.

                           (a)      AMOUNT. Tenant shall pay additional rent
         ("Additional Rent") with respect to each Property with respect to each
         Lease Year beginning with the 2001 Lease Year, in an amount, not less
         than zero, equal to eight percent (8%) of Excess Total Hotel Sales for
         such Property.

                           (b)      ACCOUNTING PERIOD INSTALLMENTS. Installments
         of Additional Rent for each Lease Year or portion thereof shall be
         calculated and paid with respect to each Accounting Period in arrears
         on the first Business Day of each Accounting Period, based on Total
         Hotel Sales for the preceding year, together with an Officer's
         Certificate setting forth the calculation of Additional Rent due and
         payable for such Accounting Period.

                           (c)      RECONCILIATION OF ADDITIONAL RENT. On or
         before October 31, 2001, Tenant shall deliver to Landlord an Officer's
         Certificate setting forth Total Hotel Sales for each Property for the
         Base Year together with an audit thereof by Ernst & Young LLP or
         another firm of independent certified public accountants proposed by
         Tenant and approved by Landlord (which approval shall not be
         unreasonably withheld, delayed or conditioned). On or before April 30
         of each year, commencing April 30, 2002, Tenant shall deliver to
         Landlord an Officer's Certificate setting forth the Total Hotel Sales
         for each Property for the preceding Lease Year and the Additional Rent
         payable with respect to such Property for such Lease Year, together
         with an audit thereof, by Ernst & Young LLP or another firm of
         independent certified public accountants proposed by Tenant and
         approved by Landlord (which approval shall not be unreasonably
         withheld, delayed or conditioned).

                  If the annual Additional Rent for such preceding Lease Year as
shown in the Officer's Certificate exceeds the amount previously paid with
respect thereto by Tenant, Tenant shall pay such excess to Landlord at such time
as the Officer's Certificate is delivered, together with interest at the
Interest Rate, which interest shall accrue from the close of such preceding
Lease Year until the date that such certificate is required to be delivered and,
thereafter, such interest shall accrue at the Overdue Rate, until the amount of
such difference shall be paid or otherwise discharged. If the annual Additional
Rent for such preceding Lease Year as shown in the Officer's Certificate is less
than the amount previously paid with respect thereto by Tenant, provided that no
Event of Default shall have occurred and be continuing, Landlord shall grant
Tenant a credit against the Rent next coming due in the amount of such
difference, together with interest at the Interest Rate, which interest shall
accrue from the date of payment by Tenant until the date such credit is applied
or paid, as the case may be. If such credit cannot be made because the Term has
expired prior to application in full thereof, provided no Event of Default has
occurred and is continuing, Landlord shall pay the unapplied balance of such
credit to Tenant, together with interest at the Interest Rate, which interest
shall accrue from the date of payment by Tenant until the date of payment by
Landlord.

                           (d)      CONFIRMATION OF ADDITIONAL RENT. Tenant
         shall utilize, or cause to be utilized, an accounting system for the
         Leased Property in accordance with its usual

                                       16
<PAGE>   18

         and customary practices and in accordance with GAAP, which will
         accurately record all Total Hotel Sales and Tenant shall retain, for at
         least three (3) years after the expiration of each Lease Year,
         reasonably adequate records conforming to such accounting system
         showing all Total Hotel Sales for such Lease Year. Landlord, at its own
         expense, except as provided hereinbelow, shall have the right,
         exercisable by Notice to Tenant within one (1) year after receipt of
         the applicable Officer's Certificate, by its accountants or
         representatives, to audit the information set forth in the Officer's
         Certificate referred to in subparagraph (c) above and, in connection
         with such audits, to examine Tenant's books and records with respect
         thereto (including supporting data and sales and excise tax returns).
         If any such audit discloses a deficiency in the payment of Additional
         Rent and either Tenant agrees with the result of such audit or the
         matter is otherwise compromised with Landlord, Tenant shall forthwith
         pay to Landlord the amount of the deficiency, as finally agreed or
         determined, together with interest at the Interest Rate, from the date
         such payment should have been made to the date of payment thereof. If
         such deficiency, as agreed upon or compromised as aforesaid, is more
         than five percent (5%) of Additional Rent paid by Tenant for such Lease
         Year and, as a result, Landlord did not receive at least ninety-five
         percent (95%) of the Additional Rent payable with respect to such Lease
         Year, Tenant shall pay the reasonable cost of such audit and
         examination. If any such audit discloses that Tenant paid more
         Additional Rent for any Lease Year than was due hereunder, and either
         Landlord agrees with the result of such audit or the matter is
         otherwise determined, provided no Event of Default has occurred and is
         continuing, Landlord shall grant Tenant a credit equal to the amount of
         such overpayment against the Rent next coming due in the amount of such
         difference, as finally agreed or determined, together with interest at
         the Interest Rate, which interest shall accrue from the time of payment
         by Tenant until the date such credit is applied or paid, as the case
         may be. If such a credit cannot be made because the Term has expired
         before the credit can be applied in full, provided no Event of Default
         has occurred and is continuing, Landlord shall pay the unapplied
         balance of such credit to Tenant, together with interest at the
         Interest Rate, which interest shall accrue from the date of payment by
         Tenant until the date of payment from Landlord.

                  Any proprietary information obtained by Landlord with respect
to Tenant pursuant to the provisions of this Agreement shall be treated as
confidential, except that such information may be used, subject to appropriate
confidentiality safeguards, in any litigation between the parties and except
further that Landlord may disclose such information to its prospective lenders,
provided that Landlord shall direct and obtain the agreement of such lenders to
maintain such information as confidential. The obligations of Tenant and
Landlord contained in this Section 3.1.2 shall survive the expiration or earlier
termination of this Agreement.

                           3.1.3.   ADDITIONAL CHARGES. In addition to the
Minimum Rent and Additional Rent payable hereunder, Tenant shall pay to the
appropriate parties and discharge as and when due and payable the following
(collectively, "Additional Charges").

                           (a)      IMPOSITIONS. Subject to Article 8 relating
         to permitted contests, Tenant shall pay, or cause to be paid, all
         Impositions before any fine, penalty, interest or cost (other than any
         opportunity cost as a result of a failure to take advantage of any
         discount for early payment) may be added for non-payment, such payments
         to be made

                                       17
<PAGE>   19

         directly to the taxing authorities where feasible, and shall promptly,
         upon request, furnish to Landlord copies of official receipts or other
         reasonably satisfactory proof evidencing such payments. 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), Tenant 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 as the same become due and before any
         fine, penalty, premium, further interest or cost may be added thereto.
         Landlord, at its expense, shall, to the extent required or permitted by
         Applicable Law, prepare and file all tax returns and pay all taxes due
         in respect of Landlord's net income, gross receipts, sales and use,
         single business, transaction privilege, rent, ad valorem, franchise
         taxes and taxes on its capital stock, and Tenant, 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 Government Agencies.
         Provided no Event of Default shall have occurred and be continuing, if
         any refund shall be due from any taxing authority in respect of any
         Imposition paid by Tenant, the same shall be paid over to or retained
         by Tenant. Landlord and Tenant 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. In the event Government Agencies
         classify any property covered by this Agreement as personal property,
         Tenant shall file all personal property tax returns in such
         jurisdictions where it may legally so file. Each party shall, to the
         extent it possesses the same, provide the other, upon request, with
         cost and depreciation records necessary for filing returns for any
         property so classified as personal property. Where Landlord is legally
         required to file personal property tax returns for property covered by
         this Agreement, Landlord shall provide Tenant with copies of assessment
         notices in sufficient time for Tenant to file a protest. All
         Impositions assessed against such personal property shall be
         (irrespective of whether Landlord or Tenant shall file the relevant
         return) paid by Tenant not later than the last date on which the same
         may be made without interest or penalty, subject to the provisions of
         Article 8.

                           Landlord shall give prompt Notice to Tenant of all
         Impositions payable by Tenant hereunder of which Landlord at any time
         has knowledge; provided, however, that Landlord's failure to give any
         such notice shall in no way diminish Tenant's obligation hereunder to
         pay such Impositions unless such failure continues for more than ninety
         (90) days after the date Landlord learned of such Imposition.

                           (b)      UTILITY CHARGES. Tenant shall pay or cause
         to be paid all charges for electricity, power, gas, oil, water and
         other utilities used in connection with the Leased Property.

                           (c)      INSURANCE PREMIUMS. Tenant shall pay or
         cause to be paid all premiums for the insurance coverage required to be
         maintained pursuant to Article 9.

                           (d)      OTHER CHARGES. Tenant shall pay or cause to
         be paid all other amounts, liabilities and obligations, including,
         without limitation, ground rents and other sums payable under the
         Ground Lease and all amounts payable under any equipment

                                       18
<PAGE>   20

         leases and all agreements to indemnify Landlord under Sections 4.3.2
         and 9.7.

                           (e)      REIMBURSEMENT FOR ADDITIONAL CHARGES. If
         Tenant pays or causes to be paid property taxes or similar or other
         Additional Charges attributable to periods after the end of the Term,
         whether upon expiration or sooner termination of this Agreement (other
         than termination by reason of an Event of Default), Tenant may, within
         a reasonable time after the end of the Term, provide Notice to Landlord
         of its estimate of such amounts. Landlord shall promptly reimburse
         Tenant for all payments of such taxes and other similar Additional
         Charges that are attributable to any period after the Term of this
         Agreement.

                  3.2.     LATE PAYMENT OF RENT, ETC. If any installment of
Minimum Rent, Additional Rent or Additional Charges (but only as to those
Additional Charges which are payable directly to Landlord) shall not be paid
within ten (10) days after its due date, Tenant shall pay Landlord, 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 Tenant pays any
Additional Charges directly to Landlord or any Hotel Mortgagee pursuant to any
requirement of this Agreement, Tenant shall be relieved of its obligation to pay
such Additional Charges to the Entity to which they would otherwise be due. If
any payments due from Landlord to Tenant shall not be paid within ten (10) days
after its due date, Landlord shall pay to Tenant, on demand, 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.

                  In the event of any failure by Tenant to pay any Additional
Charges when due, Tenant shall promptly pay and discharge, as Additional
Charges, every fine, penalty, interest and cost which is added for non-payment
or late payment of such items. Landlord shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Agreement or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Minimum Rent and Additional Rent.

                  3.3.     NET LEASE. The Rent shall be absolutely net to
Landlord so that this Agreement shall yield to Landlord the full amount of the
installments or amounts of the Rent throughout the Term, subject to any other
provisions of this Agreement which expressly provide otherwise, including those
provisions for adjustment or abatement of such Rent.

                  3.4.     NO TERMINATION, ABATEMENT, ETC. Except as otherwise
specifically provided in this Agreement, each of Landlord and Tenant, to the
maximum extent permitted by law, shall remain bound by this Agreement in
accordance with its terms and shall not take any action without the consent of
the other to modify, surrender or terminate this Agreement. In addition, except
as otherwise expressly provided in this Agreement, Tenant shall not seek, or be
entitled to, any abatement, deduction, deferment or reduction of the Rent, or
set-off against the Rent, nor shall the respective obligations of Landlord and
Tenant be otherwise affected by reason of (a) any damage to or destruction of
the Leased Property or any portion thereof from whatever cause or any
Condemnation, (b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Leased Property, or any portion thereof, or the interference
with such use by any Person or by reason of eviction by paramount title; (c) any
claim which Tenant may have

                                       19
<PAGE>   21

against Landlord by reason of any default (other than a monetary default) or
breach of any warranty by Landlord under this Agreement or any other agreement
between Landlord and Tenant, or to which Landlord and Tenant are parties; (d)
any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Landlord or
any assignee or transferee of Landlord; or (e) for any other cause whether
similar or dissimilar to any of the foregoing (other than a monetary default by
Landlord); provided, however, that the foregoing shall not apply or be construed
to restrict Tenant's rights in the event of any act or omission by Landlord
constituting negligence or willful misconduct. Except as otherwise specifically
provided in this Agreement, Tenant hereby waives all rights arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law
(a) to modify, surrender or terminate this Agreement or quit or surrender the
Leased Property or any portion thereof, or (b) which would entitle Tenant to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
or other obligations to be performed by Tenant hereunder. The obligations of
Tenant hereunder shall be separate and independent covenants and agreements, and
the Rent and all other sums payable by Tenant 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 Agreement. In any instance where,
after the occurrence of an Event of Default, Landlord retains funds which, but
for the occurrence of such Event of Default, would be payable to Tenant,
Landlord shall refund such funds to Tenant to the extent the amount thereof
exceeds the amount necessary to compensate Landlord for any cost, loss or damage
incurred in connection with such Event of Default.

                  3.5.     RETAINED FUNDS. Pursuant to the Purchase Agreement,
Landlord is holding the Retained Funds as security for the faithful observance
and performance by Tenant of all the terms, covenants and conditions of this
Lease by Tenant to be observed and performed. The Retained Funds shall not be
mortgaged, assigned, transferred or otherwise encumbered by Tenant or any of its
Affiliated Persons without the prior written consent of Landlord and any such
act on the part of Tenant or any of its Affiliated Persons without first having
obtained Landlord's consent shall be without force and effect and shall not be
binding upon Landlord.

                  If an Event of Default shall occur and be continuing, Landlord
may, at its option and without prejudice to any other remedy which Landlord may
have on account thereof, appropriate and apply the entire Retained Funds or so
much thereof as may be necessary to compensate Landlord toward the payment of
Rent or other sums or loss or damage sustained by Landlord due to such breach on
the part of Tenant. It is understood and agreed that the Retained Funds are not
to be considered as prepaid rent, nor shall damages be limited to the amount of
the Retained Funds. Provided no Event of Default shall have occurred and be
continuing, any unapplied balance of the Retained Funds shall be paid to Tenant
or its Affiliated Persons at the end of the Term or, in the event of any early
termination of this Lease with respect to any Property, such portion thereof as
is allocable to such Property (as reasonably determined by Landlord) upon such
termination. Landlord shall have no obligation to pay interest on the Retained
Funds and shall have the right to commingle the same with Landlord's other
funds. If Landlord conveys Landlord's interest under this Lease, the Retained
Funds, or any part thereof not previously applied, shall be turned over by
Landlord to Landlord's grantee, and, if so turned over, Tenant, subject to the
provisions of Section 22.7, shall look solely to such grantee for proper
application of the Retained Funds in accordance with the terms of this Section
3.5 and the return thereof in accordance herewith. The holder of a mortgage on
the Leased Property shall

                                       20
<PAGE>   22

not be responsible to Tenant for the return or application of the Retained
Funds, if it succeeds to the position of Landlord hereunder, unless the Retained
Funds shall have been received in hand by such holder.

                  In the event of bankruptcy or other creditor-debtor
proceedings against Tenant, the Retained Funds shall be deemed to be applied
first to the payment of Rent and other charges due Landlord for all periods
prior to the filing of such proceedings.

                                   ARTICLE 4.

                           USE OF THE LEASED PROPERTY

                  4.1.     PERMITTED USE.

                           4.1.1.   PERMITTED USE. (a) Tenant shall, at all
times during the Term, subject to temporary periods for the repair of damage
caused by casualty or Condemnation, continuously use and operate each Property
as an all suites hotel and any uses incidental thereto. Tenant shall not use or
permit to be used any Property or any portion thereof for any other use without
the prior written consent of Landlord, which approval shall not be unreasonably
withheld, delayed or conditioned. On the Commencement Date, the Hotels shall be
operated under the "Sumner Suites" brand. As contemplated in the Purchase
Agreement, within nine (9) months from the Commencement Date, Tenant shall
change the Hotels to the "AmeriSuites" brand and shall discontinue use of the
name "Sumner Suites". No other change in the brand of the Hotels shall be made
by Tenant without Landlord's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. No use shall be made or permitted
to be made of any Property and no acts shall be done thereon which will cause
the cancellation of any insurance policy covering such Property or any part
thereof (unless another adequate policy is available), nor shall Tenant sell or
otherwise provide or permit to be kept, used or sold in or about any Property
any article which may be prohibited by law or by the standard form of fire
insurance policies, or any other insurance policies required to be carried
hereunder, or fire underwriter's regulations. Tenant shall, at its sole cost,
comply with all Insurance Requirements.

                           (b)      In the event that, in the reasonable
determination of Tenant, it shall no longer be economically practical to operate
the Leased Property as an all suites hotel, Tenant shall give Landlord Notice
thereof, which Notice shall set forth in reasonable detail the reasons therefor.
Thereafter, Landlord and Tenant shall negotiate in good faith to agree on an
alternative use for the Property or a replacement property therefor (in which
event the Leased Property shall be transferred to Tenant or Tenant's designee),
appropriate adjustments to the Additional Rent and other related matters;
provided, however, in no such event shall the Minimum Rent be reduced or abated.

                           4.1.2.   NECESSARY APPROVALS. Tenant shall proceed
with all due diligence and exercise reasonable efforts to obtain and maintain
all approvals necessary to use and operate, for its Permitted Use, each Property
and the Hotel located thereon under applicable law.

                           4.1.3.   LAWFUL USE, ETC. Tenant shall not use or
suffer or permit the use of the Leased Property or Tenant's Personal Property,
if any, for any unlawful purpose. Tenant

                                       21
<PAGE>   23

shall not, and shall direct the Manager not to, commit or suffer to be committed
any waste on any Property, or in any Hotel, nor shall Tenant cause or permit any
unlawful nuisance thereon or therein. Tenant shall not, and shall direct the
Manager not to, suffer nor permit the Leased Property, or any portion thereof,
to be used in such a manner as (i) may materially and adversely impair
Landlord's title thereto or to any portion thereof, or (ii) may reasonably allow
a claim or claims for adverse usage or adverse possession by the public, as
such, or of implied dedication of the Leased Property or any portion thereof.

                  4.2.     COMPLIANCE WITH LEGAL/INSURANCE REQUIREMENTS, ETC.
Subject to the provisions of Article 8 and Section 5.1.3(b), Tenant, at its sole
expense, shall (i) comply with all material Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair, alteration
and restoration of the Leased Property and with the terms and conditions of the
Ground Lease and/or any sublease affecting the Leased Property, (ii) perform all
obligations of the landlord under any sublease affecting the Leased Property and
(iii) procure, maintain and comply with all material licenses, and other
authorizations and agreements required for any use of the Leased Property and
Tenant's Personal Property, if any, then being made, and for the proper
erection, installation, operation and maintenance of the Leased Property or any
part thereof.

                  4.3.     ENVIRONMENTAL MATTERS.

                           4.3.1.   RESTRICTION ON USE, ETC. During the Term and
any other time that Tenant shall be in possession of the Leased Property, Tenant
shall not store, spill upon, dispose of or transfer to or from the Leased
Property any Hazardous Substance, except in compliance with all Applicable Laws.
During the Term and any other time that Tenant shall be in possession of the
Leased Property, Tenant shall maintain (and shall direct the Manager to
maintain) the Leased Property at all times free of any Hazardous Substance
(except in compliance with all Applicable Laws). Tenant shall promptly: (a) upon
receipt of notice or knowledge and shall direct the Manager upon receipt of
notice or knowledge promptly to, notify Landlord in writing of any material
change in the nature or extent of Hazardous Substances at the Leased Property,
(b) transmit to Landlord a copy of any report which is required to be filed with
respect to the Leased Property pursuant to SARA Title III or any other
Applicable Law, (c) transmit to Landlord copies of any citations, orders,
notices or other governmental communications received by Tenant or its agents or
representatives with respect thereto (collectively, "Environmental Notice"),
which Environmental Notice requires a written response or any action to be taken
and/or if such Environmental Notice gives notice of and/or presents a material
risk of any material violation of any Applicable Law and/or presents a material
risk of any material cost, expense, loss or damage (an "Environmental
Obligation"), (d), subject to the provisions of Article 8, observe and comply
with all Applicable Laws relating to the use, maintenance and disposal of
Hazardous Substances and all orders or directives from any official, court or
agency of competent jurisdiction relating to the use or maintenance or requiring
the removal, treatment, containment or other disposition thereof, and (e)
subject to the provisions of Article 8, pay or otherwise dispose of any fine,
charge or Imposition related thereto.

                  If, at any time prior to the termination of this Agreement,
Hazardous Substances (other than those maintained in accordance with Applicable
Laws) are discovered on the Leased Property, subject to Tenant's right to
contest the same in accordance with Article 8, Tenant shall

                                       22
<PAGE>   24

take all actions and incur any and all expenses, as are required by any
Government Agency and by Applicable Law, (i) to clean up and remove from and
about the Leased Property all Hazardous Substances thereon, (ii) to contain and
prevent any further release or threat of release of Hazardous Substances on or
about the Leased Property and (iii) to use good faith efforts to eliminate any
further release or threat of release of Hazardous Substances on or about the
Leased Property.

                           4.3.2.   INDEMNIFICATION OF LANDLORD. Tenant shall
protect, indemnify and hold harmless Landlord and each Hotel Mortgagee, their
trustees, officers, agents, employees and beneficiaries, and any of their
respective successors or assigns with respect to this Agreement (collectively,
the "Indemnitees" and, individually, an "Indemnitee") for, from and against any
and all debts, liens, claims, causes of action, administrative orders or
notices, costs, fines, penalties or expenses (including, without limitation,
reasonable attorney's fees and expenses) imposed upon, incurred by or asserted
against any Indemnitee resulting from, either directly or indirectly, the
presence during the Term (or any other time Tenant shall be in possession of the
Leased Property) in, upon or under the soil or ground water of the Leased
Property or any properties surrounding the Leased Property of any Hazardous
Substances in violation of any Applicable Law or otherwise, provided that any of
the foregoing arises by reason of any failure by Tenant or any Person claiming
by, through or under Tenant to perform or comply with any of the terms of this
Section 4.3, except to the extent the same arise from the acts or omissions of
Landlord or any other Indemnitee or during any period that Landlord or a Person
designated by Landlord (other than Tenant) is in possession of the Leased
Property. Tenant's duty herein includes, but is not limited to, costs associated
with personal injury or property damage claims as a result of the presence prior
to the expiration or sooner termination of the Term and the surrender of the
Leased Property to Landlord in accordance with the terms of this Agreement of
Hazardous Substances in, upon or under the soil or ground water of the Leased
Property in violation of any Applicable Law. Upon Notice from Landlord and any
other of the Indemnitees, Tenant shall undertake the defense, at Tenant's sole
cost and expense, of any indemnification duties set forth herein, in which
event, Tenant shall not be liable for payment of any duplicative attorneys' fees
incurred by any Indemnitee.

                  Tenant shall, upon demand, pay to Landlord, as an Additional
Charge, any cost, expense, loss or damage (including, without limitation,
reasonable attorneys' fees) reasonably incurred by Landlord and arising from a
failure of Tenant to observe and perform the requirements of this Section 4.3,
which amounts shall bear interest from the date ten (10) Business Days after
written demand therefor is given to Tenant until paid by Tenant to Landlord at
the Overdue Rate.

                           4.3.3.   SURVIVAL. The provisions of this Section 4.3
shall survive the expiration or sooner termination of this Agreement.

                                       23
<PAGE>   25
                                   ARTICLE 5.

                             MAINTENANCE AND REPAIRS

                  5.1.     MAINTENANCE AND REPAIR.

                           5.1.1.   TENANT'S GENERAL OBLIGATIONS. Tenant shall,
at its sole cost and expense (except as expressly provided in Section 5.1.3(b)),
keep the Leased Property and all private roadways, sidewalks and curbs
appurtenant thereto (and Tenant's Personal Property) in good order and repair,
reasonable wear and tear excepted (whether or not the need for such repairs
occurs as a result of Tenant's use, any prior use, the elements or the age of
the Leased Property or Tenant's Personal Property or any portion thereof), and
shall promptly make all necessary and appropriate repairs and replacements
thereto of every kind and nature, whether interior or exterior, structural or
nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the commencement of the Term (concealed
or otherwise). All repairs shall be made in a good, workmanlike manner,
consistent with industry standards for like hotels in like locales, in
accordance with all applicable federal, state and local statutes, ordinances,
codes, rules and regulations relating to any such work. Tenant shall not take or
omit to take any action, the taking or omission of which would materially and
adversely impair the value or the usefulness of the Leased Property or any
material part thereof for its Permitted Use. Tenant's obligations under this
Section 5.1.1 shall be limited in the event of any casualty or Condemnation as
set forth in Sections 10.2 and 11.2 and also as set forth in Section 5.1.3(b)
and Tenant's obligations with respect to Hazardous Substances are as set forth
in Section 4.3.

                           5.1.2.   FF&E RESERVE.

                           (a)      Upon execution of this Agreement, Tenant has
         established a reserve account (the "FF&E Reserve") in a bank designated
         by Tenant and approved by Landlord. The purpose of the FF&E Reserve is
         to cover the cost of:

                                    (i)      Replacements and renewals to any
                                             Hotel's furnishings, fixtures and
                                             equipment;

                                    (ii)     Certain routine repairs and
                                             maintenance to any Hotel building
                                             which are normally capitalized
                                             under GAAP such as exterior and
                                             interior repainting, resurfacing
                                             building walls, floors, roofs and
                                             parking areas, and replacing
                                             folding walls and the like; and

                                    (iii)    Major repairs, alterations,
                                             improvements, renewals or
                                             replacements to any Hotel's
                                             buildings' structure, roof, or
                                             exterior facade, or to its
                                             mechanical, electrical, heating,
                                             ventilating, air conditioning,
                                             plumbing or vertical transportation
                                             systems.

                           Tenant agrees that it will, from time to time,
         execute such reasonable documentation as may be requested by Landlord
         and any Hotel Mortgagee to assist

                                       24
<PAGE>   26

         Landlord and such Hotel Mortgagee in establishing or perfecting the
         Hotel Mortgagee's security interest in Landlord's residual interest in
         the funds which are in the FF&E Reserve; provided, however, that no
         such documentation shall contain any amendment to or modification of
         any of the provisions of this Agreement. It is acknowledged and agreed
         that, during the Term, funds in the FF&E Reserve are the property of
         Tenant.

                           (b)      Throughout the Term, Tenant shall transfer
         (within ten (10) Business Days after the end of each Accounting Period
         during the Term) into the FF&E Reserve an amount equal to the
         Applicable Percentage of Total Hotel Sales for such Accounting Period.
         Together with the documentation provided to Landlord pursuant to
         Section 3.1.2(c), Tenant shall deliver to Landlord an Officer's
         Certificate setting forth the total amount of deposits made to and
         expenditures from the FF&E Reserve for the preceding Fiscal Year,
         together with a reconciliation of such expenditures with the applicable
         FF&E Estimate.

                           (c)      With respect to each Lease Year, Tenant
         shall prepare an estimate (the "FF&E Estimate") of FF&E Reserve
         expenditures necessary during the ensuing Fiscal Year, and shall submit
         such FF&E Estimate to Landlord, on or before December 1 of the
         preceding Lease Year, for its review and approval, which approval shall
         not be unreasonably withheld, delayed or conditioned. In the event that
         Landlord shall fail to respond within thirty (30) days after receipt of
         the FF&E Estimate, such FF&E Estimate shall be deemed approved by
         Landlord. All expenditures from the FF&E Reserve shall be (as to both
         the amount of each such expenditure and the timing thereof) both
         reasonable and necessary, given the objective that the Hotels will be
         maintained and operated to a standard comparable to competitive hotels.
         All amounts from the FF&E Reserve shall be paid to Persons who are not
         Affiliated Persons of Tenant without mark-up or allocated internal
         costs by Tenant or its Affiliated Persons except that Tenant may use
         Affiliated Persons to provide goods and services if Landlord has
         granted its prior written approval thereof or the cost is the lesser of
         (x) the lowest of two competitive bids therefor submitted by
         non-Affiliated Persons of Tenant and (y) fair market.

                           (d)      Tenant shall, consistent with the FF&E
         Estimate approved by Landlord, from time to time make expenditures from
         the FF&E Reserve as it deems necessary provided that Tenant shall not
         materially deviate from the FF&E Estimate approved by Landlord without
         the prior approval of Landlord, which approval shall not be
         unreasonably withheld, delayed or conditioned, except in the case of
         emergency where immediate action is necessary to prevent imminent harm
         to person or property.

                           (e)      Upon the expiration or sooner termination of
         this Agreement, funds in the FF&E Reserve and all property purchased
         with funds from the FF&E Reserve during the Term shall be paid, granted
         and assigned to Landlord as Additional Charges.

                                       25
<PAGE>   27

                           5.1.3.   LANDLORD'S OBLIGATIONS.

                           (a)      Except as otherwise expressly provided in
         this Agreement, Landlord shall not, under any circumstances, be
         required to build or rebuild any improvement on the Leased Property, or
         to make any repairs, replacements, alterations, restorations or
         renewals of any nature or description to the Leased Property, whether
         ordinary or extraordinary, structural or nonstructural, foreseen or
         unforeseen, or to make any expenditure whatsoever with respect thereto,
         or to maintain the Leased Property in any way. Except as otherwise
         expressly provided in this Agreement, Tenant hereby waives, to the
         maximum extent permitted by law, the right to make repairs at the
         expense of Landlord pursuant to any law in effect on the date hereof or
         hereafter enacted. Landlord shall have the right to give, record and
         post, as appropriate, notices of nonresponsibility under any mechanic's
         lien laws now or hereafter existing.

                           (b)      If, at any time, funds in the FF&E Reserve
         shall be insufficient for necessary and permitted expenditures thereof
         or, pursuant to the terms of this Agreement, Tenant is required to make
         any expenditures in connection with any repair, maintenance or
         renovation with respect to the Leased Property and the amount of such
         disbursements or expenditures exceeds the amount on deposit in the FF&E
         Reserve or such repair, maintenance or renovation is not a permitted
         expenditure from the FF&E Reserve as described in Section 5.1.2(a)(i),
         (ii) and (iii), Tenant may, at its election, give Landlord Notice
         thereof, which Notice shall set forth, in reasonable detail, the nature
         of the required repair, renovation or replacement, the estimated cost
         thereof and such other information with respect thereto as Landlord may
         reasonably require. Provided that no Event of Default shall have
         occurred and be continuing and Tenant shall otherwise comply with the
         applicable provisions of Article 6, Landlord shall, within ten (10)
         Business Days after such Notice, subject to and in accordance with the
         applicable provisions of Article 6, disburse such required funds to
         Tenant (or, if Tenant shall so elect, directly to any other Person
         performing the required work) and, upon such disbursement, the Minimum
         Rent shall be adjusted as provided in Section 3.1.1(b); provided,
         however, that, in the event that Landlord shall elect not to disburse
         any funds pursuant to this Section 5.1.3(b), Tenant's sole recourse
         shall be to elect not to make the applicable repair, maintenance or
         renovation, and such failure shall not be deemed a Default or Event of
         Default. Tenant shall include a good faith projection of funds required
         pursuant to this Section 5.1.3(b) in the FF&E Estimate.

                           5.1.4.   NONRESPONSIBILITY OF LANDLORD, ETC. All
materialmen, contractors, artisans, mechanics and laborers and other persons
contracting with Tenant with respect to the Leased Property, or any part
thereof, are hereby charged with notice that liens on the Leased Property or on
Landlord's interest therein are expressly prohibited and that they must look
solely to Tenant to secure payment for any work done or material furnished by
Tenant or for any other purpose during the term of this Agreement.

                  Nothing contained in this Agreement shall be deemed or
construed in any way as constituting the consent or request of Landlord, express
or implied, by inference or otherwise, to any contractor, subcontractor, laborer
or materialmen for the performance of any labor or the furnishing of any
materials for any alteration, addition, improvement or repair to the Leased

                                       26
<PAGE>   28

Property or any part thereof or as giving Tenant any right, power or authority
to contract for or permit the rendering of any services or the furnishing of any
materials that would give rise to the filing of any lien against the Leased
Property or any part thereof nor to subject Landlord's estate in the Leased
Property or any part thereof to liability under any mechanic's lien law of any
State in any way, it being expressly understood Landlord's estate shall not be
subject to any such liability.

                  5.2.     TENANT'S PERSONAL PROPERTY. Tenant shall provide and
maintain throughout the Term all such Tenant's Personal Property as shall be
necessary in order to operate in compliance with applicable material Legal
Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Permitted Use, and all of such
Tenant's Personal Property shall, upon the expiration or earlier termination of
this Agreement, become the property of Landlord. If, from and after the
Commencement Date, Tenant acquires an interest in any item of tangible personal
property (other than motor vehicles) on, or in connection with, the Leased
Property which belongs to anyone other than Tenant, Tenant shall require the
agreements permitting such use to provide that Landlord or its designee may
assume Tenant's rights and obligations under such agreement upon the termination
of this Agreement and the assumption of management or operation of the Hotel by
Landlord or its designee.

                  5.3.     YIELD UP. Upon the expiration or sooner termination
of this Agreement, Tenant shall vacate and surrender the Leased Property to
Landlord in substantially the same condition in which the Leased Property was in
on the Commencement Date, except as repaired, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Agreement,
reasonable wear and tear excepted (and casualty damage and Condemnation, in the
event that this Agreement is terminated following a casualty or Condemnation in
accordance with Article 10 or Article 11 excepted), and except for repairs
Tenant elects not to make pursuant to Section 5.1.3(b).

                  In addition, upon the expiration or earlier termination of
this Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith efforts to transfer to and cooperate with Landlord or Landlord's nominee
in connection with the processing of all applications for licenses, operating
permits and other governmental authorizations and all contracts, including
contracts with governmental or quasi-governmental Entities which may be
necessary for the use and operation of the Hotel as then operated. If requested
by Landlord, Tenant will direct the Manager to continue, or if there is no
Manager, Tenant shall continue to manage one or more of the Hotels after the
expiration of the Term and for up to one (1) year, on such reasonable terms
(which shall include a market rate management fee, customary royalty for
non-exclusive license to use the trademarks then being used at the Leased
Property and an agreement to reimburse the Manager or Tenant, as the case may
be, for its reasonable out-of-pocket costs and expenses, and reasonable
administrative costs), as Landlord shall reasonably request.

                  5.4.     MANAGEMENT AGREEMENT. Tenant shall not, without
Landlord's prior written consent (which consent shall not be unreasonably
withheld, delayed or conditioned), enter into, or amend or modify the provisions
of any Management Agreement. Any Management Agreement shall be subordinate to
this Agreement and shall provide, inter alia, that all amounts due from Tenant
to the Manager shall be subordinate to all amounts due from Tenant

                                       27
<PAGE>   29

to Landlord (provided that, as long as no Event of Default has occurred and is
continuing, Tenant may pay all amounts due to a Manager pursuant to a Management
Agreement) and for termination thereof, at Landlord's option, upon the
termination of this Agreement. Tenant shall not take any action, grant any
consent or permit any action under any Management Agreement which might have a
material adverse effect on Landlord, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, delayed or
conditioned.

                                   ARTICLE 6.

                               IMPROVEMENTS, ETC.

                  6.1.     IMPROVEMENTS TO THE LEASED PROPERTY. Tenant shall not
make, construct or install any Capital Additions (other than Capital Additions
of the type described in Section 5.1.2(a) (ii) or 5.1.2(a) (iii) and approved
pursuant to Section 5.1.2(c)) without, in each instance, obtaining Landlord's
prior written consent, which consent shall not be unreasonably withheld, delayed
or conditioned provided that (a) construction or installation of the same would
not adversely affect or violate any material Legal Requirement or Insurance
Requirement applicable to the Leased Property and (b) Landlord shall have
received an Officer's Certificate certifying as to the satisfaction of the
conditions set out in clause (a) above; provided, however, that no such consent
shall be required in the event immediate action is required to prevent imminent
harm to person or property. Prior to commencing construction of any Capital
Addition, Tenant shall submit to Landlord, in writing, a proposal setting forth,
in reasonable detail, any such proposed improvement and shall provide to
Landlord such plans and specifications, and such permits, licenses, contracts
and such other information concerning the same as Landlord may reasonably
request. Landlord shall have thirty (30) days to review all materials submitted
to Landlord in connection with any such proposal. Failure of Landlord to respond
to Tenant's proposal within such 30-day period shall be deemed approval thereof.
Without limiting the generality of the foregoing, such proposal shall indicate
the approximate projected cost of constructing such proposed improvement and the
use or uses to which it will be put. No Capital Addition shall be made which
would tie in or connect any Leased Improvements with any other improvements on
property adjacent to the Leased Property (and not part of the Land) including,
without limitation, tie-ins of buildings or other structures or utilities.
Except as permitted herein, Tenant shall not finance the cost of any
construction of such improvement by the granting of a lien on or security
interest in the Leased Property or such improvement, or Tenant's interest
therein, without the prior written consent of Landlord, which consent may be
withheld by Landlord in Landlord's sole discretion. Any such improvements shall,
upon the expiration or sooner termination of this Agreement, remain or pass to
and become the property of Landlord, free and clear of all encumbrances other
than Permitted Encumbrances.

                  6.2.     SALVAGE. All materials which are scrapped or removed
in connection with the making of either Capital Additions or non-Capital
Additions or repairs required by Article 5 shall be or become the property of
the party that paid for such work.

                                       28
<PAGE>   30

                                   ARTICLE 7.

                                      LIENS

                  7.1.     LIENS. Subject to Article 8, Tenant shall not,
directly or indirectly, create or allow to remain and shall promptly discharge,
at its expense, any lien, encumbrance, attachment, title retention agreement or
claim upon the Leased Property or Tenant's leasehold interest therein or any
attachment, levy, claim or encumbrance in respect of the Rent, other than (a)
Permitted Encumbrances, (b) restrictions, liens and other encumbrances which are
consented to in writing by Landlord, (c) liens for those taxes of Landlord which
Tenant is not required to pay hereunder, (d) subleases permitted by Article 16,
(e) liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are not yet due and payable, or (ii) are
being contested in accordance with Article 8, (f) liens of mechanics, laborers,
materialmen, suppliers or vendors incurred in the ordinary course of business
that are not yet due and payable or are for sums that are being contested in
accordance with Article 8, (g) any Hotel Mortgages or other liens which are the
responsibility of Landlord pursuant to the provisions of Article 20 and (h)
Landlord Liens and any other voluntary liens created by Landlord.

                  7.2.     LANDLORD'S LIEN. In addition to any statutory
landlord's lien and in order to secure payment of the Rent and all other sums
payable hereunder by Tenant, and to secure payment of any loss, cost or damage
which Landlord may suffer by reason of Tenant's breach of this Agreement, Tenant
hereby grants unto Landlord, to the maximum extent permitted by Applicable Law,
a security interest in and an express contractual lien upon Tenant's Personal
Property (except motor vehicles and liquor licenses and permits), and Tenant's
interest in all ledger sheets, files, records, documents and instruments
(including, without limitation, computer programs, tapes and related electronic
data processing) relating to the operation of the Hotels (the "Records") and all
proceeds therefrom, subject to any Permitted Encumbrances; and such Tenant's
Personal Property shall not be removed from the Leased Property at any time when
an Event of Default has occurred and is continuing.

                  Upon Landlord's request, Tenant shall execute and deliver to
Landlord financing statements in form sufficient to perfect the security
interest of Landlord in Tenant's Personal Property and the proceeds thereof in
accordance with the provisions of the applicable laws of the State. During the
continuance of an Event of Default, Tenant hereby grants Landlord an irrevocable
limited power of attorney, coupled with an interest, to execute all such
financing statements in Tenant's name, place and stead. The security interest
herein granted is in addition to any statutory lien for the Rent.

                                   ARTICLE 8.

                               PERMITTED CONTESTS

                  Tenant shall have the right to contest the amount or validity
of any Imposition, Legal Requirement, Insurance Requirement, Environmental
Obligation, lien, attachment, levy, encumbrance, charge or claim (collectively,
"Claims") as to the Leased Property, by appropriate legal proceedings, conducted
in good faith and with due diligence, provided that (a) the

                                       29
<PAGE>   31

foregoing shall in no way be construed as relieving, modifying or extending
Tenant's obligation to pay any Claims as finally determined, (b) such contest
shall not cause Landlord or Tenant to be in default under any mortgage or deed
of trust encumbering the Leased Property (Landlord agreeing that any such
mortgage or deed of trust shall permit Tenant to exercise the rights granted
pursuant to this Article 8) or any interest therein or result in or reasonably
be expected to result in a lien attaching to the Leased Property (unless Tenant
shall provide Landlord with a bond or other assurance reasonably acceptable to
Landlord with respect to any such lien), (c) no part of the Leased Property nor
any Rent therefrom shall be in any immediate danger of sale, forfeiture,
attachment or loss, and (d) Tenant shall indemnify and hold harmless Landlord
from and against any cost, claim, damage, penalty or reasonable expense,
including reasonable attorneys' fees, incurred by Landlord in connection
therewith or as a result thereof. Landlord agrees to join in any such
proceedings if required legally to prosecute such contest, provided that
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith) unless Tenant agrees by agreement in form and substance reasonably
satisfactory to Landlord, to assume and indemnify Landlord with respect to the
same. Tenant shall be entitled to any refund of any Claims and such charges and
penalties or interest thereon which have been paid by Tenant or paid by Landlord
to the extent that Landlord has been fully reimbursed by Tenant. If Tenant shall
fail (x) to pay or cause to be paid any Claims when finally determined, (y) to
provide reasonable security therefor or (z) to prosecute or cause to be
prosecuted any such contest diligently and in good faith, Landlord may, upon
reasonable notice to Tenant (which notice shall not be required if Landlord
shall reasonably determine that the same is not practicable), pay such charges,
together with interest and penalties due with respect thereto, and Tenant shall
reimburse Landlord therefor, upon demand, as Additional Charges.

                                   ARTICLE 9.

                          INSURANCE AND INDEMNIFICATION

                  9.1.     GENERAL INSURANCE REQUIREMENTS. Tenant shall, at all
times during the Term and at any other time Tenant shall be in possession of the
Leased Property, keep the Leased Property and all property located therein or
thereon, insured against the risks and in the amounts as follows and shall
maintain, with respect to each Property, the following insurance:

                           (a)      "All-risk" property insurance, including
         insurance against loss or damage by fire, vandalism and malicious
         mischief, earthquake, explosion of steam boilers, pressure vessels or
         other similar apparatus, now or hereafter installed in the Hotel
         located at such Property, with the usual extended coverage
         endorsements, in an amount equal to one hundred percent (l00%) of the
         then full Replacement Cost thereof (as defined in Section 9.2);

                           (b)      Business interruption insurance covering
         risk of loss during the lesser of the first twelve (12) months of
         reconstruction or the actual reconstruction period necessitated by the
         occurrence of any of the hazards described in subparagraph (a) above,
         in such amounts as may be customary for comparable properties in the
         area and in an amount sufficient to prevent Landlord or Tenant from
         becoming a co-insurer;

                                       30
<PAGE>   32

                           (c)      Comprehensive general liability insurance,
         including bodily injury and property damage in a form reasonably
         satisfactory to Landlord (and including, without limitation, broad form
         contractual liability, independent contractor's hazard and completed
         operations coverage) in an amount not less than One Million Dollars
         ($1,000,000) per occurrence, Two Million Dollars ($2,000,000) in the
         aggregate and umbrella coverage of all such claims in an amount not
         less than Fifty Million Dollars ($50,000,000);

                           (d)      Flood (if such Property is located in whole
         or in part within an area identified as an area having special flood
         hazards and in which flood insurance has been made available under the
         National Flood Insurance Act of 1968, as amended, or the Flood Disaster
         Protection Act of 1973, as amended (or any successor acts thereto)) in
         such amounts as may be customary for comparable properties in the area;

                           (e)      Worker's compensation insurance coverage if
         required by applicable law for all persons employed by Tenant on such
         Property with statutory limits and otherwise with limits of and
         provisions in accordance with the requirements of applicable local,
         State and federal law, and employer's liability insurance as is
         customarily carried by similar employers; and

                           (f)      Such additional insurance as may be
         reasonably required, from time to time, by Landlord or any Hotel
         Mortgagee and which is customarily carried by comparable lodging
         properties in the area.

                  9.2. REPLACEMENT COST. "Replacement Cost", as used herein,
shall mean the actual replacement cost of the property requiring replacement
from time to time, including an increased cost of construction endorsement, less
exclusions provided in the standard form of fire insurance policy. In the event
either party believes that the then full Replacement Cost has increased or
decreased at any time during the Term, such party, at its own cost, shall have
the right to have such full Replacement Cost redetermined by an independent
accredited appraiser approved by the other, which approval shall not be
unreasonably withheld or delayed. The party desiring to have the full
Replacement Cost so redetermined shall forthwith, on receipt of such
determination by such appraiser, give Notice thereof to the other. The
determination of such appraiser shall be final and binding on the parties hereto
until any subsequent determination under this Section 9.2, and Tenant shall
forthwith conform the amount of the insurance carried to the amount so
determined by the appraiser.

                  9.3.     WAIVER OF SUBROGATION. Landlord and Tenant agree that
(insofar as and to the extent that such agreement may be effective without
invalidating or making it impossible to secure insurance coverage from
responsible insurance companies doing business in any State) with respect to any
property loss which is covered by insurance then being carried by Landlord or
Tenant, respectively, the party carrying such insurance and suffering said loss
releases the other of and from any and all claims with respect to such loss; and
they further agree that their respective insurance companies shall have no right
of subrogation against the other on account thereof, even though extra premium
may result therefrom. In the event that any extra premium is payable by Tenant
as a result of this provision, Landlord shall not be liable for reimbursement to
Tenant for such extra premium.

                                       31
<PAGE>   33

                  9.4.     FORM SATISFACTORY, ETC. All insurance policies and
endorsements required pursuant to this Article 9 shall be fully paid for,
nonassessable and be issued by insurance carriers authorized to do business in
the State, having a general policy holder's rating of no less than B++ in Best's
latest rating guide. All such policies described in Sections 9.1(a) through (d)
shall include no deductible in excess of Two Hundred Fifty Thousand Dollars
($250,000) (with the exception of insurance described in Section 9.1(a)
providing coverage for windstorm which may have a deductible not exceeding five
percent (5%) of the policy amount for such insurance or such lesser amount as
may be usual and customary in the insurance industry for like properties) and,
with the exception of the insurance described in Sections 9.1(e), shall name
Landlord and any Hotel Mortgagee as additional insureds, as their interests may
appear. All loss adjustments shall be payable as provided in Article 10, except
that losses under Sections 9.1(c) and (e) shall be payable directly to the party
entitled thereto. Tenant shall cause all insurance premiums to be paid and shall
deliver policies or certificates thereof to Landlord prior to their effective
date (and, with respect to any renewal policy, prior to the expiration of the
existing policy). All such policies shall provide Landlord (and any Hotel
Mortgagee if required by the same) thirty (30) days prior written notice of any
material change or cancellation of such policy. In the event Tenant shall fail
to effect such insurance as herein required, to pay the premiums therefor or to
deliver such policies or certificates to Landlord or any Hotel Mortgagee at the
times required, Landlord shall have the right, upon Notice to Tenant, but not
the obligation, to acquire such insurance and pay the premiums therefor, which
amounts shall be payable to Landlord, upon demand, as Additional Charges,
together with interest accrued thereon at the Overdue Rate from the date such
payment is made until (but excluding) the date repaid.

                  9.5.     BLANKET POLICY. Notwithstanding anything to the
contrary contained in this Article 9, Tenant's obligation to maintain the
insurance herein required may be brought within the coverage of a so-called
blanket policy or policies of insurance carried and maintained by Tenant,
provided, that (a) the coverage thereby afforded will not be reduced or
diminished from that which would exist under a separate policy meeting all other
requirements of this Agreement, and (b) the requirements of this Article 9 are
otherwise satisfied. Without limiting the foregoing, the amounts of insurance
that are required to be maintained pursuant to Section 9.1 shall be on a Hotel
by Hotel basis, and shall not be subject to an aggregate limit, except for
flood, earthquake and umbrella coverages.

                  9.6.     NO SEPARATE INSURANCE. Tenant shall not take out
separate insurance, concurrent in form or contributing in the event of loss with
that required by this Article 9, or increase the amount of any existing
insurance by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of such insurance,
including Landlord and all Hotel Mortgagees, are included therein as additional
insureds and the loss is payable under such insurance in the same manner as
losses are payable under this Agreement. In the event Tenant shall take out any
such separate insurance or increase any of the amounts of the then existing
insurance, Tenant shall give Landlord prompt Notice thereof.

                  9.7.     INDEMNIFICATION OF LANDLORD. Notwithstanding the
existence of any insurance provided for herein and without regard to the policy
limits of any such insurance, Tenant shall protect, indemnify and hold harmless
Landlord for, from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and reasonable expenses (including, without
limitation, reasonable attorneys' fees), to the maximum extent permitted by

                                       32
<PAGE>   34

law, imposed upon or incurred by or asserted against Landlord 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 or rights of
way, (b) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Tenant or anyone claiming under Tenant of
the Leased Property or Tenant's Personal Property or any litigation, proceeding
or claim by governmental entities or other third parties to which Landlord is
made a party or participant relating to the Leased Property or Tenant's Personal
Property or such use, misuse, non-use, condition, management, maintenance, or
repair thereof including, failure to perform obligations (other than
Condemnation proceedings) to which Landlord is made a party, (c) any Impositions
that are the obligations of Tenant to pay pursuant to the applicable provisions
of this Agreement, and (d) any failure on the part of Tenant or anyone claiming
under Tenant to perform or comply with any of the terms of this Agreement.
Tenant, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against Landlord (and shall not be
responsible for any duplicative attorneys' fees incurred by Landlord) or may
compromise or otherwise dispose of the same, with Landlord's prior written
consent (which consent may not be unreasonably withheld, delayed or
conditioned). The obligations of Tenant under this Section 9.7 are in addition
to the obligations set forth in Section 4.3 and shall survive the termination of
this Agreement.

                                  ARTICLE 10.

                                    CASUALTY

                  10.1.    INSURANCE PROCEEDS. Except as provided in the last
clause of this sentence, all proceeds payable by reason of any loss or damage to
any Property, or any portion thereof, and insured under any policy of insurance
required by Article 9 (other than the proceeds of any business interruption
insurance) shall be paid directly to Landlord (subject to the provisions of
Section 10.2) and all loss adjustments with respect to losses payable to
Landlord shall require the prior written consent of Landlord, which consent
shall not be unreasonably withheld, delayed or conditioned; provided, however,
that, so long as no Event of Default shall have occurred and be continuing, all
such proceeds less than or equal to Five Hundred Thousand Dollars ($500,000)
shall be paid directly to Tenant and such losses may be adjusted without
Landlord's consent. If Tenant is required to reconstruct or repair any Property
as provided herein, such proceeds shall be paid out by Landlord from time to
time for the reasonable costs of reconstruction or repair of such Property
necessitated by such damage or destruction, subject to and in accordance with
the provisions of Section 10.2.4. Provided no Default or Event of Default has
occurred and is continuing, any excess proceeds of insurance remaining after the
completion of the restoration shall be paid to Tenant. In the event that the
provisions of Section 10.2.1 are applicable, the insurance proceeds shall be
retained by the party entitled thereto pursuant to Section 10.2.1.

                  10.2.    DAMAGE OR DESTRUCTION.

                           10.2.1.  DAMAGE OR DESTRUCTION OF LEASED PROPERTY.
If, during the Term, any Property shall be totally or partially destroyed and
the Hotel located thereon is thereby rendered Unsuitable for Its Permitted Use,
Tenant may, by the giving of Notice thereof to Landlord, within ninety (90) days
after the date of casualty, terminate this Agreement with

                                       33
<PAGE>   35

respect to such Property, in which event, Landlord shall be entitled to retain
the insurance proceeds payable on account of such damage, except that Landlord
shall pay to Tenant any net proceeds in excess of the replacement cost of such
Property reasonably allocable to the value of Tenant's leasehold, Tenant's
Personal Property and Capital Additions paid for by Tenant.

                           10.2.2.  PARTIAL DAMAGE OR DESTRUCTION. If, during
the Term, any Property shall be totally or partially destroyed but the Hotel is
not rendered Unsuitable for Its Permitted Use, Tenant shall promptly restore
such Hotel as provided in Section 10.2.4 unless this Agreement is terminated as
to such Hotel as provided in Section 10.2.3.

                           10.2.3. INSUFFICIENT INSURANCE PROCEEDS. If this
Agreement is not otherwise terminated pursuant to this Article 10 and the cost
of the repair or restoration of the applicable Property exceeds the amount of
insurance proceeds received by Landlord and Tenant pursuant to Section 9.1(a),
(c), (d) or, if applicable, (f), Tenant shall give Landlord Notice thereof which
Notice shall set forth in reasonable detail the nature of such deficiency and
whether Tenant shall pay and assume the amount of such deficiency (Tenant having
no obligation to do so, except that, if Tenant shall elect to make such funds
available, the same shall become an irrevocable obligation of Tenant pursuant to
this Agreement). In the event Tenant shall elect not to pay and assume the
amount of such deficiency, Landlord shall have the right (but not the
obligation), exercisable at Landlord's sole election by Notice to Tenant, given
within sixty (60) days after Tenant's Notice of the deficiency, to elect to make
available for application to the cost of repair or restoration the amount of
such deficiency; provided, however, in such event, upon any disbursement by
Landlord thereof, the Minimum Rent shall be adjusted as provided in Section
3.1.1(b). In the event that neither Landlord nor Tenant shall elect to make such
deficiency available for restoration, either Landlord or Tenant may terminate
this Agreement with respect to the affected Property by Notice to the other,
whereupon, this Agreement shall terminate and insurance proceeds shall be
distributed as provided in Section 10.2.1. It is expressly understood and
agreed, however, that, notwithstanding anything in this Agreement to the
contrary, Tenant shall be strictly liable and solely responsible for the amount
of any deductible and shall, upon any insurable loss, pay over the amount of
such deductible to Landlord at the time and in the manner herein provided for
payment of the applicable proceeds to Landlord.

                           10.2.4.  DISBURSEMENT OF PROCEEDS. In the event
Tenant is required to restore any Property pursuant to Section 10.2 and this
Agreement is not terminated as to such Property pursuant to this Article 10,
Tenant shall commence promptly and continue diligently to perform the repair and
restoration of such Property (hereinafter called the "Work"), so as to restore
such Property in material compliance with all Legal Requirements and so that
such Property shall be, to the extent practicable, substantially equivalent in
value and general utility to its general utility and value immediately prior to
such damage or destruction. Subject to the terms hereof, Landlord shall advance
the insurance proceeds and any additional amounts payable by Landlord pursuant
to Section 10.2.3 or otherwise deposited with Landlord to Tenant regularly
during the repair and restoration period so as to permit payment for the cost of
any such restoration and repair. Any such advances shall be made not more than
monthly within ten (10) Business Days after Tenant submits to Landlord a written
requisition and substantiation therefor on AIA Forms G702 and G703 (or on such
other form or forms as may be reasonably acceptable to Landlord). Landlord may,
at its option, condition advancement of such insurance proceeds

                                       34
<PAGE>   36

and other amounts on (i) the absence of any Event of Default, (ii) its approval
of plans and specifications of an architect satisfactory to Landlord (which
approval shall not be unreasonably withheld, delayed or conditioned), (iii)
general contractors' estimates, (iv) architect's certificates, (v) unconditional
lien waivers of general contractors, if available, (vi) evidence of approval by
all governmental authorities and other regulatory bodies whose approval is
required, (vii), if Tenant has elected to advance deficiency funds pursuant to
Section 10.2.3, Tenant depositing the amount thereof with Landlord and (viii)
such other certificates as Landlord may, from time to time, reasonably require.

                  Landlord's obligation to disburse insurance proceeds under
this Article 10 during the last two (2) years of the Term (including any
automatic renewals thereof) shall be subject to the release of such proceeds by
any Hotel Mortgagee to Landlord. If any Hotel Mortgagee shall be unwilling to
disburse insurance proceeds in accordance with the terms of this Agreement,
Tenant shall have the right, by the giving of Notice thereof to Landlord within
ten (10) Business Days after Tenant learns of such unwillingness, to treat such
Property as rendered Unsuitable for its Permitted Use for purposes of Section
10.2.1. Tenant's obligation to restore the applicable Property pursuant to this
Article 10 shall be subject to the release of available insurance proceeds by
the applicable Hotel Mortgagee to Landlord or directly to Tenant.

                  10.3.    DAMAGE NEAR END OF TERM. Notwithstanding any
provisions of Section 10.1 or 10.2 to the contrary, if damage to or destruction
of any Property occurs during the last two (2) years of the Term (including any
automatic Extended Terms) and if such damage or destruction cannot reasonably be
expected to be fully repaired and restored prior to the date that is twelve (12)
months prior to the end of the Term, the provisions of Section 10.2.1 shall
apply as if such Property had been totally or partially destroyed and the Hotel
thereon rendered Unsuitable for its Permitted Use.

                  10.4.    TENANT'S PROPERTY. All insurance proceeds payable by
reason of any loss of or damage to any of Tenant's Personal Property shall be
paid to Tenant and, to the extent necessary to repair or replace Tenant's
Personal Property in accordance with Section 10.5, Tenant shall hold such
proceeds in trust to pay the cost of repairing or replacing damaged Tenant's
Personal Property.

                  10.5.    RESTORATION OF TENANT'S PROPERTY. If Tenant is
required to restore any Property as hereinabove provided and this Agreement is
not terminated as to such Property pursuant to the terms of Article 10, Tenant
shall either (a) restore all alterations and improvements made by Tenant and
Tenant's Personal Property, or (b) replace such alterations and improvements and
Tenant's Personal Property with improvements or items of the same or better
quality and utility in the operation of such Property. If Tenant is not required
to restore and does not, in fact, restore, Tenant shall pay over to Landlord the
amount, if any, of insurance proceeds received by Tenant with respect to any of
Tenant's Personal Property which was purchased with funds from the FF&E Reserve.

                  10.6.    NO ABATEMENT OF RENT. Except as expressly provided
herein, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any damage involving the Leased Property (provided

                                       35
<PAGE>   37

that Landlord shall credit against such payments any amounts paid to Landlord as
a consequence of such damage under any business interruption insurance obtained
by Tenant hereunder) . The provisions of this Article 10 shall be considered an
express agreement governing any cause of damage or destruction to the Leased
Property and, to the maximum extent permitted by law, no local or State statute,
laws, rules, regulation or ordinance in effect during the Term which provide for
such a contingency shall have any application in such case.

                  10.7.    WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the Leased
Property, or any portion thereof.

                                  ARTICLE 11.

                                  CONDEMNATION

                  11.1.    TOTAL CONDEMNATION, ETC. If either (i) the whole of
any Property shall be taken by Condemnation or (ii) a Condemnation of less than
the whole of any Property renders any Property Unsuitable for Its Permitted Use,
this Agreement shall terminate with respect to such Property, Tenant and
Landlord shall seek the Award for their interests in the applicable Property as
provided in Section 11.6 and, as the effective date of taking, the Minimum Rent
payable hereunder shall be reduced by such Property's allocable share thereof as
set forth in Exhibit D.

                  11.2.    PARTIAL CONDEMNATION. In the event of a Condemnation
of less than the whole of any Property such that such Property is still suitable
for its Permitted Use, Tenant shall commence promptly and continue diligently to
restore the untaken portion of the applicable Leased Improvements so that such
Leased Improvements shall constitute a complete architectural unit of the same
general character and condition (as nearly as may be possible under the
circumstances) as such Leased Improvements existing immediately prior to such
Condemnation, in material compliance with all Legal Requirements, subject to and
unless this Agreement is terminated pursuant to the provisions of this Section
11.2. If the cost of the repair or restoration of the affected Property exceeds
the amount of the Award, Tenant shall give Landlord Notice thereof which Notice
shall set forth in reasonable detail the nature of such deficiency and whether
Tenant shall pay and assume the amount of such deficiency (Tenant having no
obligation to do so, except that if Tenant shall elect to make such funds
available, the same shall become an irrevocable obligation of Tenant pursuant to
this Agreement). In the event Tenant shall elect not to pay and assume the
amount of such deficiency, Landlord shall have the right (but not the
obligation), exercisable at Landlord's sole election by Notice to Tenant given
within sixty (60) days after Tenant's Notice of the deficiency, to elect to make
available for application to the cost of repair or restoration the amount of
such deficiency; provided, however, in such event, upon any disbursement by
Landlord thereof, the Minimum Rent shall be adjusted as provided in Section
3.1.1(b). In the event that neither Landlord nor Tenant shall elect to make such
deficiency available for restoration, either Landlord or Tenant may terminate
this Agreement with respect to the affected Property and the entire Award shall
be allocated as set forth in Section 11.6.

                  Subject to the terms hereof, Landlord shall contribute to the
cost of restoration that part of the Award necessary to complete such repair or
restoration, together with severance

                                       36
<PAGE>   38

and other damages awarded for the taken Leased Improvements and any other
amounts deposited with or payable by Landlord, to Tenant regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration. Landlord may, at its option, condition advancement of such Award
and other amounts on (i) the absence of any Event of Default, (ii) its approval
of plans and specifications of an architect satisfactory to Landlord (which
approval shall not be unreasonably withheld, delayed or conditioned), (iii)
general contractors' estimates, (iv) architect's certificates, (v) unconditional
lien waivers of general contractors, if available, (vi) evidence of approval by
all governmental authorities and other regulatory bodies whose approval is
required, (vii), if Tenant has elected to advance deficiency funds pursuant to
the preceding paragraph, Tenant depositing the amount thereof with Landlord and
(viii) such other certificates as Landlord may, from time to time, reasonably
require. Landlord's obligation under this Section 11.2 to disburse the Award and
such other amounts shall be subject to (x) the collection thereof by Landlord
and (y) during the last two (2) years of the Term (including any exercised
renewals thereof), the release of such Award by the applicable Hotel Mortgagee.
If any Hotel Mortgagee shall be unwilling to disburse Award proceeds in
accordance with the terms of this Agreement, Tenant shall have the right, by the
giving of Notice thereof to Landlord within ten (10) Business Days after Tenant
learns of such unwillingness, to treat such Property as rendered Unsuitable for
its Permitted Use for purposes of Section 11.1. Tenant's obligation to restore
the Leased Property shall be subject to the release of the Award by the
applicable Hotel Mortgagee to Landlord or directly to Tenant.

                  11.3.    ABATEMENT OF RENT. Other than as specifically
provided in this Agreement, this Agreement shall remain in full force and effect
and Tenant's obligation to make all payments of Rent and to pay all other
charges as and when required under this Agreement shall remain unabated during
the Term notwithstanding any Condemnation involving the Leased Property, or any
portion thereof. The provisions of this Article 11 shall be considered an
express agreement governing any Condemnation involving the Leased Property and,
to the maximum extent permitted by law, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such a
contingency shall have any application in such case.

                  11.4.    TEMPORARY CONDEMNATION. In the event of any temporary
Condemnation of any Property or Tenant's interest therein, this Agreement shall
continue in full force and effect and Tenant shall continue to pay, in the
manner and on the terms herein specified, the full amount of the Rent. Tenant
shall continue to perform and observe all of the other terms and conditions of
this Agreement on the part of the Tenant to be performed and observed. Provided
no Event of Default has occurred and is continuing, the entire amount of any
Award made for such temporary Condemnation allocable to the Term, whether paid
by way of damages, rent or otherwise, shall be paid to Tenant. Tenant shall,
promptly upon the termination of any such period of temporary Condemnation, at
its sole cost and expense, restore the Leased Property to the condition that
existed immediately prior to such Condemnation, in material compliance with all
applicable Legal Requirements, unless such period of temporary Condemnation
shall extend beyond the expiration of the Term, in which event Tenant shall not
be required to make such restoration.

                  11.5.    CONDEMNATION NEAR END OF TERM. Notwithstanding any
provisions of Sections 11.2 or 11.3 to the contrary, if Condemnation of any
Property occurs during the last two (2) years of the Term (including any
automatic Extended Terms) and if restoration cannot

                                       37
<PAGE>   39

reasonably be expected to be completed prior to the date that is twelve (12)
months prior to the end of the Term, the provisions of Section 11.1 shall apply
as if such Property had been totally or partially taken and the Hotel thereon
rendered Unsuitable for its Permitted Use.

                  11.6.    ALLOCATION OF AWARD. Except as provided in Section
11.4 and the second sentence of this Section 11.6, the total Award shall be
solely the property of and payable to Landlord. Any portion of the Award made
for the taking of Tenant's leasehold interest in the Leased Property, loss of
business during the remainder of the Term, the taking of Tenant's Personal
Property (other than any such property purchased with the FF&E Reserve), the
taking of Capital Additions paid for by Tenant and Tenant's removal and
relocation expenses shall be the sole property of and payable to Tenant. In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.

                                  ARTICLE 12.

                              DEFAULTS AND REMEDIES

                  12.1.    EVENTS OF DEFAULT. The occurrence of any one or more
of the following events shall constitute an "Event of Default" hereunder:

                           (a)      should Tenant fail to make any payment of
         the Rent or any other sum (including, but not limited to, funding of
         the FF&E Reserve) payable hereunder when due; or

                           (b)      should Tenant fail to maintain the insurance
         coverages required under Article 9 and such failure shall continue for
         ten (10) Business Days after Notice thereof (except that no Notice
         shall be required if any such insurance coverages shall have lapsed);
         or

                           (c)      should Tenant default in the due observance
         or performance of any of the terms, covenants or agreements contained
         herein to be performed or observed by it (other than as specified in
         clauses (a) and (b) above) and such default shall continue for a period
         of thirty (30) days after Notice thereof from Landlord to Tenant;
         provided, however, that if such default is susceptible of cure but such
         cure cannot be accomplished with due diligence within such period of
         time and if, in addition, Tenant commences to cure or cause to be cured
         such default within thirty (30) days after Notice thereof from Landlord
         and thereafter prosecutes the curing of such default with all due
         diligence, such period of time shall be extended to such period of time
         (not to exceed an additional one (1) year in the aggregate) as may be
         necessary to cure such default with all due diligence; or

                           (d)      should any obligation of Tenant in excess of
         One Million Dollars ($1,000,000) in respect of any Indebtedness for
         money borrowed or for any material property or services, or any
         guaranty relating thereto, be declared to be or become due and payable
         prior to the stated maturity thereof, or should there occur and be
         continuing with respect to any such Indebtedness any event of default
         under any instrument or agreement evidencing or securing the same, the
         effect of which is to permit the holder or

                                       38
<PAGE>   40

         holders of such instrument or agreement or a trustee, agent or other
         representative on behalf of such holder or holders, to cause any such
         obligations to become due prior to its stated maturity; or

                           (e)      should an event of default by Tenant or any
         Affiliated Person of Tenant occur and be continuing beyond the
         expiration of any applicable cure period under any of the Incidental
         Documents; or

                           (f)      should any material representation or
         warranty made by Tenant or any Affiliated Person of Tenant under or in
         connection with this Agreement or any Incidental Document or in any
         document, certificate or agreement delivered in connection herewith or
         therewith, prove to have been false or misleading in any material
         respect on the date when made or deemed made and the same shall
         continue for five (5) Business Days after Notice thereof from Landlord;
         or

                           (g)      should Tenant generally not be paying its
         debts as they become due or should Tenant make a general assignment for
         the benefit of creditors; or

                           (h)      should any petition be filed by or against
         Tenant under the Federal bankruptcy laws, or should any other
         proceeding be instituted by or against Tenant seeking to adjudicate
         Tenant a bankrupt or insolvent, or seeking liquidation, reorganization,
         arrangement, adjustment or composition of Tenant's debts under any law
         relating to bankruptcy, insolvency or reorganization or relief of
         debtors, or seeking the entry of an order for relief or the appointment
         of a receiver, trustee, custodian or other similar official for Tenant
         or for any substantial part of the property of Tenant and such
         proceeding is not dismissed within one hundred eighty (180) days after
         institution thereof; or

                           (i)      should Tenant cause or institute any
         proceeding for its dissolution or termination; or

                           (j)      should the estate or interest of Tenant in
         the Leased Property or any part thereof be levied upon or attached in
         any proceeding and the same shall not be vacated or discharged within
         the later of (x) two hundred seventy (270) days after commencement
         thereof, unless the amount in dispute is less than $1,000,000, in which
         case Tenant shall give notice to Landlord of the dispute but Tenant may
         defend in any suitable way, and (y) two hundred seventy (270) days
         after receipt by Tenant of Notice thereof from Landlord (unless Tenant
         shall be contesting such lien or attachment in good faith in accordance
         with Article 8); or

                           (k)      should Tenant at any time cease to be a
         wholly owned, direct or indirect, Subsidiary of Prime;

then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement with respect to any or all of the
Leased Property by giving Notice thereof to Tenant and upon the expiration of
the time, if any, fixed in such Notice, this Agreement shall terminate with
respect to all or the designated portion of the Leased Property and all rights
of Tenant under this Agreement with respect thereto shall cease. Landlord shall

                                       39
<PAGE>   41

have and may exercise all rights and remedies available at law and in equity to
Landlord as a result of Tenant's breach of this Agreement.

                  Upon the occurrence of an Event of Default, Landlord may, in
addition to any other remedies provided herein, enter upon the Leased Property
or any portion thereof and take possession of any and all of Tenant's Personal
Property, if any, and the Records, without liability for trespass or conversion
(Tenant hereby waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or any portion of
Tenant's Personal Property, if any, unless otherwise prohibited by law. Unless
otherwise provided by law and without intending to exclude any other manner of
giving Tenant reasonable notice, the requirement of reasonable Notice shall be
met if such Notice is given at least ten (10) days before the date of sale. The
proceeds from any such disposition, less all expenses incurred in connection
with the taking of possession, holding and selling of such property (including
reasonable attorneys' fees) shall be applied as a credit against the
indebtedness which is secured by the security interest granted in Section 7.2.
Any surplus shall be paid to Tenant or as otherwise required by law and Tenant
shall pay any deficiency to Landlord, as Additional Charges, upon demand.

                  12.2.    REMEDIES. None of (a) the termination of this
Agreement pursuant to Section 12.1, (b) the repossession of the Leased Property
or any portion thereof, (c) the failure of Landlord to re-let the Leased
Property or any portion thereof, nor (d) the reletting of all or any portion of
the Leased Property, shall relieve Tenant of its liability and obligations
hereunder, all of which shall survive any such termination, repossession or
re-letting. In the event of any such termination, Tenant shall forthwith pay to
Landlord all Rent due and payable with respect to the Leased Property through
and including the date of such termination. Thereafter, Tenant, until the end of
what would have been the Term of this Agreement in the absence of such
termination, and whether or not the Leased Property or any portion thereof shall
have been re-let, shall be liable to Landlord for, and shall pay to Landlord, as
current damages, the Rent (Additional Rent to be reasonably calculated by
Landlord based on historical Total Hotel Sales) and other charges which would be
payable hereunder for the remainder of the Term had such termination not
occurred, less the net proceeds, if any, of any re-letting of the Leased
Property, after deducting all reasonable expenses in connection with such
reletting, including, without limitation, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alteration costs and expenses of preparation for such reletting.
Tenant shall pay such current damages to Landlord monthly on the days on which
the Minimum Rent would have been payable hereunder if this Agreement had not
been so terminated with respect to such of the Leased Property.

                  At any time after such termination, whether or not Landlord
shall have collected any such current damages, as liquidated final damages
beyond the date of such termination, at Landlord's election, Tenant shall pay to
Landlord an amount equal to the present value (discounted at the Interest Rate)
of the excess, if any, of the Rent and other charges which would be payable
hereunder from the date of such termination (assuming that, for the purposes of
this paragraph, annual payments by Tenant on account of Impositions and
Additional Rent would be the same as payments required for the immediately
preceding twelve calendar months, or if less than twelve calendar months have
expired since the Commencement Date, the payments required

                                       40
<PAGE>   42

for such lesser period projected to an annual amount) for what would be the then
unexpired term of this Agreement if the same remained in effect, over the fair
market rental for the same period. Nothing contained in this Agreement shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater than, equal to, or less than the amount of the loss or damages referred
to above.

                  In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (a) relet the
Leased Property or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may at Landlord's option, be equal to, less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant concessions or free rent to the extent that Landlord
considers advisable and necessary to relet the same, and (b) may make such
reasonable alterations, repairs and decorations in the Leased Property or any
portion thereof as Landlord, in its sole and absolute discretion, considers
advisable and necessary for the purpose of reletting the Leased Property; and
the making of such alterations, repairs and decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Subject to
the last sentence of this paragraph and as long as Landlord uses reasonable
efforts to mitigate its damages as provided in such sentence, Landlord shall in
no event be liable in any way whatsoever for any failure to relet all or any
portion of the Leased Property, or, in the event that the Leased Property is
relet, for failure to collect the rent under such reletting. To the maximum
extent permitted by law, Tenant hereby expressly waives any and all rights of
redemption granted under any present or future laws in the event of Tenant being
evicted or dispossessed, or in the event of Landlord obtaining possession of the
Leased Property, by reason of the occurrence and continuation of an Event of
Default hereunder. Landlord covenants and agrees, in the event of any
termination of this Agreement as a result of an Event of Default, to use
reasonable efforts to mitigate its damages.

                  12.3.    TENANT'S WAIVER. IF THIS AGREEMENT IS TERMINATED
PURSUANT TO SECTION 12.1 OR 12.2, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW,
ANY RIGHT TO A TRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE
REMEDIES SET FORTH IN THIS ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR
HEREAFTER IN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.

                  12.4.    APPLICATION OF FUNDS. Any payments received by
Landlord under any of the provisions of this Agreement during the existence or
continuance of any Event of Default (and any payment made to Landlord rather
than Tenant due to the existence of any Event of Default) shall be applied to
Tenant's current and past due obligations under this Agreement in such order as
Landlord may determine or as may be prescribed by the laws of the State. Any
balance shall be paid to Tenant.

                  12.5.    LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If an
Event of Default shall have occurred and be continuing, Landlord, after Notice
to Tenant (which Notice shall not be required if Landlord shall reasonably
determine immediate action is necessary to protect person or property), without
waiving or releasing any obligation of Tenant and without waiving

                                       41
<PAGE>   43

or releasing any Event of Default, may (but shall not be obligated to), at any
time thereafter, make such payment or perform such act for the account and at
the expense of Tenant, and may, to the maximum extent permitted by law, enter
upon the Leased Property or any portion thereof for such purpose and take all
such action thereon as, in Landlord's sole and absolute discretion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred by Landlord in connection therewith,
together with interest thereon (to the extent permitted by law) at the Overdue
Rate from the date such sums are paid by Landlord until repaid, shall be paid by
Tenant to Landlord, on demand.

                                  ARTICLE 13.

                                  HOLDING OVER

                  Any holding over by Tenant after the expiration or sooner
termination of this Agreement shall be treated as a daily tenancy at sufferance
at a rate equal to two (2) times the Minimum Rent and other charges herein
provided (prorated on a daily basis). Tenant shall also pay to Landlord all
damages (direct or indirect) sustained by reason of any such holding over.
Otherwise, such holding over shall be on the terms and conditions set forth in
this Agreement, to the extent applicable. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Agreement.

                                  ARTICLE 14.

                 LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT

                  14.1.    LANDLORD NOTICE OBLIGATION. Notwithstanding anything
to the contrary contained herein, Landlord shall give prompt Notice to Tenant of
any matters affecting the Leased Property of which Landlord receives written
notice or actual knowledge and, to the extent Tenant otherwise has no notice or
actual knowledge thereof, Landlord shall be liable for any liabilities arising
from the failure to deliver such Notice to Tenant.

                  14.2.    LANDLORD'S DEFAULT. If Landlord shall default in the
performance or observance of any of its covenants or obligations set forth in
this Agreement or any obligation of Landlord, if any, under any agreement
affecting the Leased Property, the performance of which is not Tenant's
obligation pursuant to this Agreement, and any such default shall continue for a
period of five (5) Business Days after Notice thereof with respect to monetary
defaults and twenty (20) Business Days after Notice thereof with respect to
non-monetary defaults from Tenant to Landlord and any applicable Hotel
Mortgagee, or such additional period as may be reasonably required to correct
the same, provided Landlord is proceeding with due diligence to correct the
same, Tenant may declare the occurrence of a "Landlord Default" by a second
Notice to Landlord and to such Hotel Mortgagee. Thereafter, Tenant may forthwith
cure the same and, subject to the provisions of the following paragraph, invoice
Landlord for costs and expenses (including reasonable attorneys' fees and court
costs) incurred by Tenant in curing the same, together with interest thereon (to
the extent permitted by law) from the date Landlord receives Tenant's invoice
until paid, at the Overdue Rate, and/or offset such amounts against Additional

                                       42
<PAGE>   44

Rent due and payable hereunder. Tenant shall have no right to terminate this
Agreement for any default by Landlord hereunder and no right, for any such
default, to offset or counterclaim against any Rent or other charges due
hereunder, except with respect to Additional Rent as set forth in the preceding
sentence.

                  If Landlord shall in good faith dispute the occurrence of any
Landlord Default and Landlord, before the expiration of the applicable cure
period, shall give Notice thereof to Tenant, setting forth, in reasonable
detail, the basis therefor, no Landlord Default shall be deemed to have occurred
and Landlord shall have no obligation with respect thereto until final adverse
determination thereof; provided, however, that in the event of any such adverse
determination, Landlord shall pay to Tenant interest on any disputed funds at
the Interest Rate, from the date demand for such funds was made by Tenant until
the date of final adverse determination and, thereafter, at the Overdue Rate
until paid. If Tenant and Landlord shall fail, in good faith, to resolve any
such dispute within ten (10) days after Landlord's Notice of dispute, either may
submit the matter for resolution to a court of competent jurisdiction.

                  14.3.    INDEMNIFICATION OF TENANT. Notwithstanding the
existence of any insurance provided for herein and without regard to the policy
limits of any such insurance, Landlord shall protect, indemnify and hold
harmless Tenant for, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and reasonable expenses (including,
without limitation, reasonable attorneys' fees), to the maximum extent permitted
by law, imposed upon or incurred by or asserted against Tenant by reason of: (a)
any Impositions that are the obligations of Landlord to pay pursuant to the
applicable provisions of this Agreement, and (b) any failure on the part of
Landlord or anyone claiming under Landlord to perform or comply with any of the
terms of this Agreement. Landlord, at its expense, shall contest, resist and
defend any such claim, action or proceeding asserted or instituted against
Tenant (and shall not be responsible for any duplicative attorneys' fees
incurred by Tenant) or may compromise or otherwise dispose of the same, with
Tenant's prior written consent (which consent may not be unreasonably withheld,
delayed or conditioned). The obligations of Landlord under this Section 14.3
shall survive termination of this Agreement.

                                  ARTICLE 15.

                                PURCHASE RIGHTS

                  Landlord shall have the option to purchase Tenant's Personal
Property, at the expiration or termination of this Agreement, for an amount
equal to the then net market value thereof (current replacement cost as
determined by agreement of the parties or, in the absence of such agreement,
appraisal, less accumulated depreciation on Tenant's books pertaining thereto),
subject to, and with appropriate price adjustments for, all equipment leases,
conditional sale contracts, UCC-l financing statements and other encumbrances to
which such Personal Property is subject (except that any such property purchased
with the FF&E Reserve shall be transferred to Landlord as provided in Section
5.1.2(e)). Upon the expiration or sooner termination of this Agreement, Tenant
shall use its reasonable efforts to transfer and assign to Landlord or its
designee, or assist Landlord or its designee in obtaining, any contracts,
licenses, and certificates required for the then operation of the Leased
Property.

                                       43
<PAGE>   45

                                  ARTICLE 16.

                            SUBLETTING AND ASSIGNMENT

                  16.1.    SUBLETTING AND ASSIGNMENT. Except as provided in
Section 16.3, Tenant shall not, without Landlord's prior written consent (which
consent may be given or withheld in Landlord's sole and absolute discretion),
assign, mortgage, pledge, hypothecate, encumber or otherwise transfer this
Agreement or sublease (which term shall be deemed to include the granting of
concessions, licenses and the like but shall not be deemed to include the
lodging of hotel guests consistent with the Permitted Use), all or any part of
the Leased Property or suffer or permit this Agreement or the leasehold estate
created hereby or any other rights arising under this Agreement to be assigned,
transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in
part, whether voluntarily, involuntarily or by operation of law, or permit the
use or operation of the Leased Property by anyone other than Tenant, or the
Leased Property to be offered or advertised for assignment or subletting;
provided, however, that an assignment to a wholly owned Subsidiary (direct or
indirect) of Prime shall be permitted without the consent of, but upon Notice
to, Landlord. For purposes of this Section 16.1, an assignment of this Agreement
shall be deemed to include any direct or indirect transfer of any interest in
Tenant such that Tenant shall cease to be a wholly owned direct or indirect
Subsidiary of Prime or any transaction pursuant to which Tenant is merged or
consolidated with another Entity or pursuant to which all or substantially all
of Tenant's assets are transferred to any other Entity, as if such change in
control or transaction were an assignment of this Agreement, unless such Entity
is a wholly owned Subsidiary (direct or indirect) of Prime.

                  If this Agreement is assigned or if the Leased Property or any
part thereof are sublet (or occupied by anybody other than Tenant and their
respective employees or hotel guests) Landlord may collect the rents from such
assignee, subtenant or occupant, as the case may be, and apply the net amount
collected to the Rent herein reserved, but no such collection shall be deemed a
waiver of the provisions set forth in the first paragraph of this Section 16.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its covenants, agreements or obligations contained in this Agreement.

                  No subletting or assignment shall in any way impair the
continuing primary liability of Tenant hereunder (unless Landlord and Tenant
expressly otherwise agree that Tenant shall be released from all obligations
hereunder), and no consent to any subletting or assignment in a particular
instance shall be deemed to be a waiver of the prohibition set forth in this
Section 16.1. No assignment, subletting or occupancy shall affect any Permitted
Use. Any subletting, assignment or other transfer of Tenant's interest under
this Agreement in contravention of this Section 16.1 shall be voidable at
Landlord's option.

                  16.2.    REQUIRED SUBLEASE PROVISIONS. Any sublease of all or
any portion of the Leased Property entered into on or after the date hereof
shall provide (a) that it is subject and subordinate to this Agreement and to
the matters to which this Agreement is or shall be subject or subordinate; (b)
that in the event of termination of this Agreement or reentry or dispossession
of Tenant by Landlord under this Agreement, Landlord may, at its option,
terminate such sublease or take over all of the right, title and interest of
Tenant, as sublessor under such

                                       44
<PAGE>   46

sublease, and such subtenant shall, at Landlord's option, attorn to Landlord
pursuant to the then executory provisions of such sublease, except that neither
Landlord nor any Hotel Mortgagee, as holder of a mortgage or as Landlord under
this Agreement, if such mortgagee succeeds to that position, shall (i) be liable
for any act or omission of Tenant under such sublease, (ii) be subject to any
credit, counterclaim, offset or defense which theretofore accrued to such
subtenant against Tenant, (iii) be bound by any previous modification of such
sublease not consented to in writing by Landlord or by any previous prepayment
of more than one (1) month's rent, (iv) be bound by any covenant of Tenant to
undertake or complete any construction of the Leased Property or any portion
thereof, (v) be required to account for any Retained Funds of the subtenant
other than any Retained Funds actually delivered to Landlord by Tenant, (vi) be
bound by any obligation to make any payment to such subtenant or grant any
credits, except for services, repairs, maintenance and restoration provided for
under the sublease that are performed after the date of such attornment, (vii)
be responsible for any monies owing by Tenant to the credit of such subtenant
unless actually delivered to Landlord by Tenant, or (viii) be required to remove
any Person occupying any portion of the Leased Property; and (c), in the event
that such subtenant receives a written Notice from Landlord or any Hotel
Mortgagee stating that an Event of Default has occurred and is continuing, such
subtenant shall thereafter be obligated to pay all rentals accruing under such
sublease directly to the party giving such Notice or as such party may direct.
All rentals received from such subtenant by Landlord or the Hotel Mortgagee, as
the case may be, shall be credited against the amounts owing by Tenant under
this Agreement and such sublease shall provide that the subtenant thereunder
shall, at the request of Landlord, execute a suitable instrument in confirmation
of such agreement to attorn. An original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such subtenant or
assignee, as the case may be, in form and substance reasonably satisfactory to
Landlord, shall be delivered promptly to Landlord and (a) in the case of an
assignment, the assignee shall assume in writing and agree to keep and perform
all of the terms of this Agreement on the part of Tenant to be kept and
performed and shall be, and become, jointly and severally liable with Tenant for
the performance thereof and (b) in case of either an assignment or subletting,
Tenant 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 Tenant hereunder.

                  The provisions of this Section 16.2 shall not be deemed a
waiver of the provisions set forth in the first paragraph of Section 16.1.

                  16.3.    PERMITTED SUBLEASE. Notwithstanding the foregoing,
including, without limitation, Section 16.2, but subject to the provisions of
Section 16.4 and any other express conditions or limitations set forth herein,
Tenant may, in each instance after Notice to Landlord, sublease space at any
Property for newsstand, car rental agency, business services office, gift shop,
parking garage, health club, restaurant, bar or commissary purposes or other
concessions in furtherance of the Permitted Use, so long as such subleases do
not demise, in the aggregate, in excess of two thousand (2,000) square feet per
Property or, in the case of a restaurant or bar, four thousand (4,000) square
feet per Property, will not violate or affect any Legal Requirement or Insurance
Requirement, and Tenant shall provide such additional insurance coverage
applicable to the activities to be conducted in such subleased space as Landlord
and any Hotel Mortgagee may reasonably require.

                                       45
<PAGE>   47

                  16.4.    SUBLEASE LIMITATION. For so long as Landlord or any
Affiliated Person as to Landlord shall seek to qualify as a real estate
investment trust, anything contained in this Agreement to the contrary
notwithstanding, Tenant shall not sublet the Leased Property on any basis such
that the rental to be paid by any sublessee thereunder would be based, in whole
or in part, on the income or profits derived by the business activities of such
sublessee, any other formula such that any portion of such sublease rental 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 or would
otherwise disqualify Landlord for treatment as a real estate investment trust.

                                  ARTICLE 17.

                 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

                  17.1.    ESTOPPEL CERTIFICATES. At any time and from time to
time, but not more than a reasonable amount of times per year, upon not less
than ten (10) Business Days prior Notice by either party, the party receiving
such Notice shall furnish to the other an Officer's Certificate certifying that
this Agreement is unmodified and in full force and effect (or that this
Agreement is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, that no Default or an
Event of Default has occurred and is continuing or, if a Default or an Event of
Default shall exist, specifying in reasonable detail the nature thereof, and the
steps being taken to remedy the same, and such additional information as the
requesting party may reasonably request. Any such certificate furnished pursuant
to this Section 17.1 may be relied upon by the requesting party, its lenders and
any prospective purchaser or mortgagee of the Leased Property or the leasehold
estate created hereby.

                  17.2.    FINANCIAL STATEMENTS. Tenant shall furnish the
following statements to Landlord:

                           (a)      within fifty (50) days after each of the
         first three fiscal quarters of any Fiscal Year, the most recent Tenant
         Financials, accompanied by the Financial Officer's Certificate;

                           (b)      within one hundred (100) days after the end
         of each Fiscal Year, the most recent Tenant Financials, accompanied by
         a Financial Officer's Certificate;

                           (c)      within thirty (30) days after the end of
         each month, an unaudited operating statement and statement of capital
         expenditures prepared on a Hotel by Hotel basis and a combined basis,
         including occupancy percentages and average rate, accompanied by a
         Financial Officer's Certificate;

                           (d)      at any time and from time to time upon not
         less than twenty (20) days Notice from Landlord or such additional
         period as may be reasonable under the circumstances, any Tenant
         Financials or any other audited or unaudited financial reporting
         information required to be filed by Landlord or ShoLodge with any
         securities and exchange commission, the SEC or any successor agency, or
         any other governmental authority, or required pursuant to any order
         issued by any court, governmental authority

                                       46
<PAGE>   48

         or arbitrator in any litigation to which Landlord or ShoLodge is a
         party, for purposes of compliance therewith; and

                           (e)      promptly, upon Notice from Landlord, such
         other information concerning the business, financial condition and
         affairs of Tenant as Landlord reasonably may request from time to time.

                  Landlord may at any time, and from time to time, provide any
Hotel Mortgagee with copies of any of the foregoing statements, subject to
Landlord obtaining the agreement of such Hotel Mortgagee to maintain such
statements and the information therein as confidential.

                                  ARTICLE 18.

                           LANDLORD'S RIGHT TO INSPECT

                  Tenant shall permit Landlord and its authorized
representatives to inspect the Leased Property during usual business hours upon
not less than forty-eight (48) hours' Notice and to make such repairs as
Landlord is permitted or required to make pursuant to the terms of this
Agreement, provided that any inspection or repair by Landlord or its
representatives will not unreasonably interfere with Tenant's use and operation
of the Leased Property and further provided that in the event of an emergency,
as determined by Landlord in its reasonable discretion, prior Notice shall not
be necessary.

                                  ARTICLE 19.

                                   EASEMENTS

                  19.1.    GRANT OF EASEMENTS. Provided no Event of Default has
occurred and is continuing, Landlord will join in granting and, if necessary,
modifying or abandoning such rights-of-way, easements and other interests as may
be reasonably requested by Tenant for ingress and egress, and electric,
telephone, gas, water, sewer and other utilities so long as:

                           (a)      the instrument creating, modifying or
         abandoning any such easement, right-of-way or other interest is
         satisfactory to and approved by Landlord (which approval shall not be
         unreasonably withheld, delayed or conditioned); and

                           (b)      Landlord receives an Officer's Certificate
         from Tenant stating (i) that such grant, modification or abandonment is
         not detrimental to the proper conduct of business on such Property,
         (ii) the consideration, if any, being paid for such grant, modification
         or abandonment (which consideration shall be paid by Tenant), (iii)
         that such grant, modification or abandonment does not impair the use or
         value of such Property for the Permitted Use, and (iv) that, for as
         long as this Agreement shall be in effect, Tenant will perform all
         obligations, if any, of Landlord under any such instrument.

                  19.2.    EXERCISE OF RIGHTS BY TENANT. So long as no Event of
Default has occurred and is continuing, Tenant shall have the right to exercise
all rights of Landlord under the Easement Agreements and, in connection
therewith, Landlord shall execute and promptly

                                       47

<PAGE>   49

return to Tenant such documents as Tenant shall reasonably request. Tenant shall
perform all obligations of Landlord under the Easement Agreements.

                  19.3.    PERMITTED ENCUMBRANCES. Any agreements entered into
in accordance with Section 19.1 shall be deemed a Permitted Encumbrance.

                                   ARTICLE 20.

                                 HOTEL MORTGAGES

                  20.1.    LANDLORD MAY GRANT LIENS. Without the consent of
Tenant, Landlord may, subject to the terms and conditions set forth in this
Section 20.1, 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. Notwithstanding anything to the contrary set forth in Section 20.2,
any such Encumbrance shall include the right to prepay (whether or not subject
to a prepayment penalty) and shall provide (subject to Section 20.2) that it is
subject to the rights of Tenant under this Agreement.

                  20.2.    SUBORDINATION OF LEASE. Subject to Section 20.1 and
this Section 20.2, this Agreement and any and all rights of Tenant hereunder,
are and shall be subject and subordinate to any ground or master lease, and all
renewals, extensions, modifications and replacements thereof, and to all
mortgages and deeds of trust, which may now or hereafter affect the Leased
Property or any improvements thereon and/or any of such leases, whether or not
such mortgages or deeds of trust shall also cover other lands and/or buildings
and/or leases, to each and every advance made or hereafter to be made under such
mortgages and deeds of trust, and to all renewals, modifications, replacements
and extensions of such leases and such mortgages and deeds of trust and all
consolidations of such mortgages and deeds of trust. This section shall be
self-operative and no further instrument of subordination shall be required
provided that Tenant has received a nondisturbance and attornment agreement from
each Superior Mortgagee (as defined below), consistent with the provisions of
this Section 20.2 and otherwise in form and substance reasonably satisfactory to
Tenant. In confirmation of such subordination, Tenant shall promptly execute,
acknowledge and deliver any instrument that Landlord, the lessor under any such
lease or the holder of any such mortgage or the trustee or beneficiary of any
deed of trust or any of their respective successors in interest may reasonably
request to evidence such subordination. Any lease to which this Agreement is, at
the time referred to, subject and subordinate is herein called "Superior Lease"
and the lessor of a Superior Lease or its successor in interest at the time
referred to is herein called "Superior Landlord" and any mortgage or deed of
trust to which this Agreement is, at the time referred to, subject and
subordinate is herein called "Superior Mortgage" and the holder, trustee or
beneficiary of a Superior Mortgage is herein called "Superior Mortgagee".

                  If any Superior Landlord or Superior Mortgagee or the nominee
or designee of any Superior Landlord or Superior Mortgagee shall succeed to the
rights of Landlord under this Agreement (any such person, "Successor Landlord"),
whether through possession or foreclosure action or delivery of a new lease or
deed, or otherwise, such Successor Landlord shall recognize Tenant's rights
under this Agreement as herein provided and Tenant shall attorn to and recognize

                                       48
<PAGE>   50

the Successor Landlord as Tenant's landlord under this Agreement and Tenant
shall promptly execute and deliver any instrument that such Successor Landlord
may reasonably request to evidence such attornment (provided that such
instrument does not alter the terms of this Agreement), whereupon, this
Agreement shall continue in full force and effect as a direct lease between the
Successor Landlord and Tenant upon all of the terms, conditions and covenants as
are set forth in this Agreement, except that the Successor Landlord (unless
formerly the landlord under this Agreement or its nominee or designee) shall not
be (a) liable in any way to Tenant for any act or omission, neglect or default
on the part of any prior Landlord under this Agreement, (b) responsible for any
monies owing by or on deposit with any prior Landlord to the credit of Tenant
(except to the extent actually paid or delivered to the Successor Landlord), (c)
subject to any counterclaim or setoff which theretofore accrued to Tenant
against any prior Landlord, (d) bound by any modification of this Agreement
subsequent to such Superior Lease or Mortgage, or by any previous prepayment of
Rent for more than one (1) month in advance of the date due hereunder, which was
not approved in writing by the Superior Landlord or the Superior Mortgagee
thereto, (e) liable to Tenant beyond the Successor Landlord's interest in the
Leased Property and the rents, income, receipts, revenues, issues and profits
issuing from the Leased Property, (f) responsible for the performance of any
work to be done by the Landlord under this Agreement to render the Leased
Property ready for occupancy by Tenant, or (g) required to remove any Person
occupying the Leased Property or any part thereof, except if such person claims
by, through or under the Successor Landlord. Tenant agrees at any time and from
time to time to execute a suitable instrument in confirmation of Tenant's
agreement to attorn, as aforesaid and Landlord agrees to provide Tenant with an
instrument of nondisturbance and attornment from each such Superior Mortgagee
and Superior Landlord in form and substance reasonably satisfactory to Tenant.
Nothing contained in this Section 20.2 shall relieve Landlord from any liability
to Tenant under this Agreement following the exercise of remedies by a Superior
Mortgagee.

                  20.3.     NOTICE TO MORTGAGEE AND SUPERIOR LANDLORD.
Subsequent to the receipt by Tenant of Notice from Landlord as to the identity
of any Hotel Mortgagee or Superior Landlord under a lease with Landlord, as
ground lessee, which includes the Leased Property as part of the demised
premises and which complies with Section 20.1 and 20.2 (which Notice shall be
accompanied by a copy of the applicable mortgage or lease), no Notice from
Tenant to Landlord as to a default by Landlord under this Agreement shall be
effective with respect to a Hotel Mortgagee or Superior Landlord unless and
until a copy of the same is given to such Hotel Mortgagee or Superior Landlord
at the address set forth in the above described Notice, and the curing of any of
Landlord's defaults within the applicable notice and cure periods set forth in
Section 14.2 by such Hotel Mortgagee or Superior Landlord shall be treated as
performance by Landlord.

                                  ARTICLE 21.

                         ADDITIONAL COVENANTS OF TENANT

                  21.1.     PROMPT PAYMENT OF INDEBTEDNESS. Tenant shall (a)
pay or cause to be paid when due all payments of principal of and premium and
interest on Tenant's Indebtedness for money borrowed and shall not permit or
suffer any such Indebtedness to become or remain in default beyond any
applicable grace or cure period, (b) pay or cause to be paid when due all

                                       49
<PAGE>   51

lawful claims for labor and rents with respect to the Leased Property, (c) pay
or cause to be paid when due all trade payables and (d) pay or cause to be paid
when due all other of Tenant's Indebtedness upon which it is or becomes
obligated, except, in each case, other than that referred to in clause (a), to
the extent payment is being contested in good faith by appropriate proceedings
in accordance with Article 8 and if Tenant shall have set aside on its books
adequate reserves with respect thereto in accordance with GAAP, if appropriate,
or unless and until foreclosure, distraint sale or other similar proceedings
shall have been commenced.

                  21.2.    CONDUCT OF BUSINESS. Tenant shall not engage in any
business other than the leasing and operation of the Leased Property (including
any incidental or ancillary business relating thereto) and shall do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect and in good standing its corporate existence and its rights and licenses
necessary to conduct such business.

                  21.3.    MAINTENANCE OF ACCOUNTS AND RECORDS. Tenant shall
keep true records and books of account of Tenant in which full, true and correct
entries will be made of dealings and transactions in relation to the business
and affairs of Tenant in accordance with GAAP. Tenant shall apply accounting
principles in the preparation of the financial statements of Tenant which, in
the judgment of and the opinion of its independent public accountants, are in
accordance with GAAP, where applicable, except for changes approved by such
independent public accountants. Tenant shall provide to Landlord either in a
footnote to the financial statements delivered under Section 17.2 which relate
to the period in which such change occurs, or in separate schedules to such
financial statements, information sufficient to show the effect of any such
changes on such financial statements.

                  21.4.     NOTICE OF LITIGATION, ETC. Tenant shall give prompt
Notice to Landlord of any litigation or any administrative proceeding to which
it may hereafter become a party of which Tenant has notice or actual knowledge
which involves a potential liability equal to or greater than Five Hundred
Thousand Dollars ($500,000) or which may otherwise result in any material
adverse change in the business, operations, property, prospects, results of
operation or condition, financial or other, of Tenant. Forthwith upon Tenant
obtaining knowledge of any Default, Event of Default or any default or event of
default under any agreement relating to Indebtedness for money borrowed in an
aggregate amount exceeding, at any one time, Five Hundred Thousand Dollars
($500,000), or any event or condition that would be required to be disclosed in
a current report filed by Tenant on Form 8-K or in Part II of a quarterly report
on Form l0-Q if Tenant were required to file such reports under the Securities
Exchange Act of 1934, as amended, Tenant shall furnish Notice thereof to
Landlord specifying the nature and period of existence thereof and what action
Tenant has taken or is taking or proposes to take with respect thereto.

                  21.5.     INDEBTEDNESS OF TENANT. Tenant shall not create,
incur, assume or guarantee, or permit to exist, or become or remain liable
directly or indirectly upon, any Indebtedness except the following:

                           (a)      Indebtedness of Tenant to Landlord;

                                       50
<PAGE>   52

                           (b)      Indebtedness of Tenant for Impositions, to
         the extent that payment thereof shall not at the time be required to be
         made in accordance with the provisions of Article 8;

                           (c)      Indebtedness of Tenant in respect of
         judgments or awards (i) which have been in force for less than the
         applicable appeal period and in respect of which execution thereof
         shall have been stayed pending such appeal or review, or (ii) which are
         fully covered by insurance payable to Tenant, or (iii) which are for an
         amount not in excess of $500,000 in the aggregate at any one time
         outstanding and (x) which have been in force for not longer than the
         applicable appeal period, so long as execution is not levied thereunder
         or (y) in respect of which an appeal or proceedings for review shall at
         the time be prosecuted in good faith in accordance with the provisions
         of Article 8, and in respect of which execution thereof shall have been
         stayed pending such appeal or review;

                           (d)      unsecured borrowings of Tenant from its
         Affiliated Persons which are by their terms expressly subordinate
         pursuant to a Subordination Agreement to the payment and performance of
         Tenant's obligations under this Agreement; or

                           (e)      Indebtedness for purchase money financing in
         accordance with Section 21.9(a) and other operating liabilities
         incurred in the ordinary course of Tenant's business.

                  21.6.    FINANCIAL CONDITION OF TENANT. Tenant shall at all
times maintain Net Worth (except as provided in the last clause of this
sentence) in an amount at least equal to the aggregate of one year's Minimum
Rent payable pursuant to this Agreement; it being expressly understood and
agreed that the right to receive the Retained Funds, if assigned to Tenant, may
for such purpose be counted as equity at the full amount thereof.

                  21.7.     DISTRIBUTIONS, PAYMENTS TO AFFILIATED PERSONS, ETC.
Tenant shall not declare, order, pay or make, directly or indirectly, any
Distributions or any payment to any Affiliated Person of Tenant (including
payments in the ordinary course of business and payments pursuant to Management
Agreements with any such Affiliated Person) or set apart any sum or property
therefor, or agree to do so, if, at the time of such proposed action, or
immediately after giving effect thereto, any Event of Default shall have
occurred and be continuing. Otherwise, as long as no Event of Default shall have
occurred and be continuing, Tenant may make Distributions and payments to
Affiliated Persons (other than from the FF&E Reserve which shall be governed by
Section 5.1.2) without restriction.

                  21.8.     PROHIBITED TRANSACTIONS. Tenant shall not permit to
exist or enter into any agreement or arrangement whereby it engages in a
transaction of any kind with any Affiliated Person as to Tenant, except on terms
and conditions which are commercially reasonable.

                  21.9.     LIENS AND ENCUMBRANCES. Except as permitted by
Section 7.1 and Section 21.5, Tenant shall not create or incur or suffer to be
created or incurred or to exist any Lien on this Agreement or any of Tenant's
assets, properties, rights or income, or any of its interest therein, now or at
any time hereafter owned, other than:

                                       51
<PAGE>   53

                           (a)      Security interests securing the purchase
         price of equipment or personal property whether acquired before or
         after the Commencement Date; provided, however, that (i) such Lien
         shall at all times be confined solely to the asset in question and (ii)
         the aggregate principal amount of Indebtedness secured by any such Lien
         shall not exceed the cost of acquisition or construction of the
         property subject thereto;

                           (b)      Permitted Encumbrances; and

                           (c)      As permitted pursuant to Section 21.5.

                  21.10.   MERGER; SALE OF ASSETS; ETC. Tenant shall not (i)
sell, lease (as lessor or sublessor), transfer or otherwise dispose of, or
abandon, all or any material portion of its assets (including capital stock) or
business to any Person, unless such Person is a wholly owned Subsidiary, direct
or indirect, of Prime (in which event Tenant shall give Landlord prior Notice
thereof), (ii) merge into or with or consolidate with any other Entity, unless
such Entity is a wholly owned Subsidiary, direct or indirect, of Prime (in which
event Tenant shall give Landlord prior Notice thereof), or (iii) sell, lease (as
lessor or sublessor), transfer or otherwise dispose of, or abandon, any personal
property or fixtures or any real property; provided, however, that,
notwithstanding the provisions of clause (iii) preceding, Tenant may dispose of
equipment or fixtures which have become inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary, provided substitute equipment or
fixtures having equal or greater value and utility (but not necessarily having
the same function) have been provided.

                                  ARTICLE 22.

                                 MISCELLANEOUS

                  22.1.    LIMITATION ON PAYMENT OF RENT. All agreements between
Landlord and Tenant herein are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration of Rent, or
otherwise, shall the Rent or any other amounts payable to Landlord under this
Agreement exceed the maximum permissible under applicable law, the benefit of
which may be asserted by Tenant as a defense, and if, from any circumstance
whatsoever, fulfillment of any provision of this Agreement, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, or if from any circumstances Landlord should ever
receive as fulfillment of such provision such an excessive amount, then, ipso
facto, the amount which would be excessive shall be applied to the reduction, of
the installment(s) of Minimum Rent next due, and not to the payment of such
excessive amount. This provision shall control every other provision of this
Agreement and any other agreements between Landlord and Tenant.

                  22.2.     NO WAIVER. No failure by Landlord or Tenant 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 maximum
extent permitted by law, no waiver of any breach shall affect or alter this
Agreement, which shall continue in full force and effect with respect to any
other then existing or subsequent breach.

                                       52
<PAGE>   54

                  22.3.    REMEDIES CUMULATIVE. To the maximum extent permitted
by law, each legal, equitable or contractual right, power and remedy of Landlord
or Tenant, now or hereafter provided either in this Agreement or by statute or
otherwise, shall be cumulative and concurrent and shall be in addition to every
other right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.

                  22.4.     SEVERABILITY. Any clause, sentence, paragraph,
section or provision of this Agreement held by a court of competent jurisdiction
to be invalid, illegal or ineffective shall not impair, invalidate or nullify
the remainder of this Agreement, but rather the effect thereof shall be confined
to the clause, sentence, paragraph, section or provision so held to be invalid,
illegal or ineffective, and this Agreement shall be construed as if such
invalid, illegal or ineffective provisions had never been contained herein.

                  22.5.    ACCEPTANCE OF SURRENDER. No surrender to Landlord of
this Agreement 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
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.

                  22.6.     NO MERGER OF TITLE. It is expressly acknowledged and
agreed that it is the intent of the parties that there shall be no merger of
this Agreement or of the leasehold estate created hereby by reason of the fact
that the same Person may acquire, own or hold, directly or indirectly this
Agreement or the leasehold estate created hereby and the fee estate or ground
Landlord's interest in the Leased Property.

                  22.7.    CONVEYANCE BY LANDLORD. If Landlord or any successor
owner of all or any portion of the Leased Property shall convey all or any
portion of the Leased Property in accordance with the terms hereof other than as
security for a debt, and the grantee or transferee of such of the Leased
Property shall expressly assume all obligations of Landlord hereunder arising or
accruing from and after the date of such conveyance or transfer, Landlord or
such successor owner, as the case may be, shall thereupon be released from all
future liabilities and obligations of Landlord under this Agreement with respect
to such of the Leased Property arising or accruing from and after the date of
such conveyance or other transfer and all such future liabilities and
obligations shall thereupon be binding upon the new owner; provided, however,
that, Landlord shall not be released from liability with respect to the Retained
Funds unless such successor shall have a Net Worth equal to or greater than ten
(10) times the unapplied balance of the Retained Funds. If such successor shall
not satisfy the aforesaid Net Worth requirement, Landlord shall, in a guaranty
in form and substance reasonably satisfactory to Tenant, guaranty payment of the
Retained Funds in accordance with this Agreement. Additionally, the parties
hereby acknowledge that ShoLodge has entered into a certain Guaranty, dated of
even date herewith, for the benefit of Tenant, guaranteeing the delivery of the
Retained Funds upon the expiration of this Lease. The obligations of ShoLodge
pursuant to such guaranty shall continue until the transfer of the Leased
Property to (x) HPT or its Affiliated Persons or (y) such other successor owner
of the Leased Property provided that such other successor owner has satisfied
the aforesaid Net Worth requirement and has assumed the obligations of Landlord
to deliver the

                                       53
<PAGE>   55

Retained Funds upon the expiration of this Lease by written documents in form
and substance reasonably acceptable to Tenant.

                  22.8.    QUIET ENJOYMENT. Tenant shall peaceably and quietly
have, hold and enjoy the Leased Property for the Term, free of hindrance or
molestation by Landlord or anyone claiming by, through or under Landlord, but
subject to (a) any Encumbrance permitted under Article 20 or otherwise permitted
to be created by Landlord hereunder provided that the holder of such Encumbrance
has, to the extent appropriate, executed a nondisturbance agreement pursuant to
Section 20.2 or a subordination agreement in form and substance reasonably
acceptable to Tenant, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings, provided the same do not materially
interfere with Tenant's ability to operate the Hotels and (d) liens that have
been consented to in writing by Tenant. Except as otherwise provided in this
Agreement, no failure by Landlord to comply with the foregoing covenant shall
give Tenant any right to cancel or terminate this Agreement or abate, reduce or
make a deduction from or offset against the Rent or any other sum payable under
this Agreement (except as expressly provided in Section 14.2), or to fail to
perform any other obligation of Tenant hereunder.

                  22.9.    MEMORANDUM OF LEASE. Neither Landlord nor Tenant
shall record this Agreement. However, Landlord and Tenant shall promptly, upon
the request of the other, enter into a short form memorandum of this Agreement,
in form suitable for recording under the laws of the State in which reference to
this Agreement, and all options contained herein, shall be made. Tenant shall
pay all costs and expenses of recording such memorandum.

                  22.10.   NOTICES.

                           (a)      Any and all notices, demands, consents,
         approvals, offers, elections and other communications required or
         permitted under this Agreement shall be deemed adequately given if in
         writing and the same shall be delivered either in hand, by telecopier
         with written acknowledgment of receipt, or by mail or Federal Express
         or similar expedited commercial carrier, addressed to the recipient of
         the notice, postpaid and registered or certified with return receipt
         requested (if by mail), or with all freight charges prepaid (if by
         Federal Express or similar carrier).

                           (b)      All notices required or permitted to be sent
         hereunder shall be deemed to have been given for all purposes of this
         Agreement upon the date of acknowledged receipt, in the case of a
         notice by telecopier, and, in all other cases, upon the date of receipt
         or refusal, except that whenever under this Agreement a notice is
         either received on a day which is not a Business Day or is required to
         be delivered on or before a specific day which is not a Business Day,
         the day of receipt or required delivery shall automatically be extended
         to the next Business Day.

                                       54
<PAGE>   56

                           (c)      All such notices shall be addressed,

                  if to Landlord:

                  c/o ShoLodge, Inc.
                  130 Maple Drive North
                  Hendersonville, TN 37075
                  Attn:  Mr. Leon L. Moore
                  [Telecopier No. (615) 264-1758]

                  with a copy to:

                  Boult Cummings Conners & Berry, PLC
                  414 Union Street, Suite 1600
                  Nashville, TN 37219
                  Attn:  Patrick L. Alexander, Esq.
                  [Telecopier No. (615) 252-6362]

                  if to Tenant to:

                  c/o Prime Hospitality Corp.
                  700 Route 46 East
                  Fairfield, NJ 07004
                  Attn:  Douglas W. Vicari
                  [Telecopier No. (973) 882-7635]

                  with a copy to:

                  Prime Law Department
                  700 Route 46 East
                  Fairfield, NJ 07004
                  Attn:  Joseph Bernadino, Esq.
                  [Telecopier No. (973) 882-1787]

                           (d)      By notice given as herein provided, the
         parties hereto and their respective successor and assigns shall have
         the right from time to time and at any time during the term of this
         Agreement to change their respective addresses effective upon receipt
         by the other parties of such notice and each shall have the right to
         specify as its address any other address within the United States of
         America.

                  22.11.   TRADE AREA RESTRICTION. Neither Tenant, Prime nor any
of their Affiliated Persons shall own, build, franchise, manage or operate an
all suite hotel of the same brand as the Hotels within the designated areas on
Exhibit B, at any time during the Term. For a twenty (20) year period commencing
on the Commencement Date, neither ShoLodge nor any of its Affiliated Persons
shall own, operate or franchise any all-suites hotel substantially similar in
nature and kind to the AmeriSuites hotels to be operated by Prime or any of its
Affiliated Persons, as applicable, anywhere within a certain designated area of
each Hotel, as set forth in

                                       55
<PAGE>   57

Exhibit B. The foregoing, however, shall not apply upon the expiration or
earlier termination of this Lease, other than a termination due to a default by
Landlord and the foregoing shall not limit ShoLodge or any of its Affiliated
Persons from (i) developing or constructing any all-suites hotel substantially
similar in nature and kind to the AmeriSuites hotels contemplated herein within
such restricted area as long as such hotel is both (A) operated by someone other
than ShoLodge or one of its Affiliated Persons, and (B) owned by someone other
than ShoLodge or one of its Affiliated Persons, or (ii) owning, operating or
franchising (A) any "Shoney's" brand all-suites hotel within such restricted
area, or (B) any other hotel within such restricted area as long as such other
hotel is not an all-suites hotel substantially similar in nature and kind to the
AmeriSuites hotels contemplated herein. Tenant and/or Prime shall have the right
to any remedies available to either of them at law or in equity, including
without limitation, injunction, in the event ShoLodge or any of its Affiliated
Persons violates the covenant set forth in this Section 22.11.

                  22.12.   CONSTRUCTION. Anything contained in this Agreement to
the contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such termination or
expiration. In no event shall Landlord be liable for any consequential damages
suffered by Tenant as the result of a breach of this Agreement by Landlord.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by the party
to be charged. All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Each term or provision of this Agreement to be performed
by Tenant shall be construed as an independent covenant and condition. Time is
of the essence with respect to the provisions of this Agreement. Except as
otherwise set forth in this Agreement, any obligations of Tenant (including
without limitation, any monetary, repair and indemnification obligations) and
Landlord shall survive the expiration or sooner termination of this Agreement.

                  22.13.   COUNTERPARTS; HEADINGS. This Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but which, when taken together, shall constitute but one instrument
and shall become effective as of the date hereof when copies hereof, which, when
taken together, bear the signatures of each of the parties hereto shall have
been signed. Headings in this Agreement are for purposes of reference only and
shall not limit or affect the meaning of the provisions hereof.

                  22.14.   APPLICABLE LAW, ETC. This Agreement shall be
interpreted, construed, applied and enforced in accordance with the laws of the
State of Tennessee applicable to contracts between residents of Tennessee which
are to be performed entirely within Tennessee, regardless of (i) where this
Agreement is executed or delivered; or (ii) where any payment or other
performance required by this Agreement is made or required to be made; or (iii)
where any breach of any provision of this Agreement occurs, or any cause of
action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than Tennessee; or (vii) any combination of the
foregoing. Notwithstanding the foregoing, the laws of the State shall apply to
the perfection and priority of liens upon and the disposition of any Property.

                                       56
<PAGE>   58

                  To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of Tennessee as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in Tennessee and to service of
process by registered mail, return receipt requested, or by any other manner
provided by law.

                  22.15.  RIGHT TO MAKE AGREEMENT. Each party warrants, with
respect to itself, that neither the execution of this Agreement, nor the
consummation of any transaction contemplated hereby, shall violate any provision
of any law, or any judgment, writ, injunction, order or decree of any court or
governmental authority having jurisdiction over it; nor result in or constitute
a breach or default under any indenture, contract, other commitment or
restriction to which it is a party or by which it is bound; nor require any
consent, vote or approval which has not been given or taken, or at the time of
the transaction involved shall not have been given or taken. Each party
covenants that it has and will continue to have throughout the term of this
Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.

                  22.16.    NONRECOURSE. Nothing contained in this Agreement
shall be construed to impose any liabilities or obligations on Tenant's general
partners, limited partners, agents or employees (or any shareholders, officers,
directors, agents or employees of any of the foregoing) for the performance of
the obligations of Landlord or Tenant hereunder.

                  22.17.   ATTORNEYS' FEES. If any lawsuit or arbitration or
other legal proceeding arises in connection with the interpretation or
enforcement of this Agreement, the prevailing party therein shall be entitled to
receive from the other party the prevailing party's costs and expenses,
including reasonable attorneys' fees incurred in connection therewith, in
preparation therefor and on appeal therefrom, which amounts shall be included in
any judgment therein.

                  IN WITNESS WHEREOF, the parties have executed this Agreement
as a sealed instrument as of the date above first written.

                                               LANDLORD:

                                               SOUTHEAST TEXAS INNS, INC.

                                               By:       John C. Buttolph
                                                   ----------------------------
                                                       Its (Vice) President

                    (signatures continued on following page)

                                       57
<PAGE>   59

                                     TENANT:

                                     MAY-RIDGE, L.P.

                                     By: Ridgewood Holding Corp.,
                                         Its General Partner

                                     By: /s/ Douglas Vicari
                                         -------------------------------
                                               Its (Vice) President

Prime Hospitality Corp. hereby acknowledges and agrees to be bound by the
provisions of Section 22.11 of the foregoing Lease Agreement.

                                     PRIME HOSPITALITY CORP.

                                     By: /s/ Douglas Vicari
                                         -------------------------------
                                               Its (Vice) President

                                     Date:    July 9, 2000

                                       58
<PAGE>   60

                                   EXHIBIT A-1               [Grand Prairie, TX]

                              PROPERTY DESCRIPTION

Being all of Lot 2 as shown on the Final Plat Sumner Suites Hotel Addition as
recorded in Cabinet A, Slide 4603, in the Tarrant County map and Plat Records.

TOGETHER with all rights and easements which benefit the above-described
property pursuant to that certain Declaration of Detention Area Easements
recorded as Instrument D199026493, Deed Records of Tarrant County, Texas.

                                      A-1
<PAGE>   61

                                   EXHIBIT A-2

                                                   [Houston (Hobby Airport), TX]

                              PROPERTY DESCRIPTION

DESCRIPTION OF A TRACT OF LAND CONTAINING
2.1880 ACRES (95,309 SQUARE FEET) SITUATED
IN THE M.A. NICHOLS SURVEY, A-1350, HARRIS
COUNTY, TEXAS

                  Being a tract of land containing 2.1880 acres (95,309 square
feet) situated in the M.A. Nichols Survey, A-1350 in Harris County, Texas, and
also being out of a 4.719-acre tract as conveyed unto Southeast Texas Inns, Inc.
by deed recorded under County Clerk's File No. R283013, Film Code No.
###-##-#### of the Official Public Records of Real Property of Harris County,
Texas, and also being out of Lot 122 of South Houston Gardens, Section Six, a
subdivision plat recorded in Volume 2, Page 74 of the Map Records of Harris
County, Texas. Said 2.1880-acre tract being more particularly described by metes
and bounds as follows:

                  COMMENCING FOR REFERENCE at a found 5/8-inch iron rod located
at the intersection of the west right-of-way line of Mosley (80 feet wide) and
the south line of said Lot 122 and the north line of Lot 103 of said South
Houston Gardens, Section Six, for the southeast corner of said 4.719-acre tract
and for the southeast corner of a 1.1640-acre tract (Tract 1) described by metes
and bounds prepared by Cobb, Fendley and Associates, Inc. dated March 9, 1999
and revised June 2, 1999;

                  THENCE South 88(degree) 46' 00" West with the south line of
said Lot 122 and the north line of said Lot 103, a distance of 171.00 feet to a
set 5/8-inch iron rod with cap for the southwest corner of said 1.1640-acre
tract, for the southeast corner of said tract herein described and for the POINT
OF BEGINNING;

                  THENCE South 88(degree) 46' 00" West continuing with the south
line of said Lot 122 and the north line of said Lot 103, a distance of 314.33
feet to a set 5/8-inch iron rod with cap for the southwest corner of said tract
herein described and for the southeast corner of a 1.3669-acre tract (Tract 3)
described by metes and bounds prepared by Cobb, Fendley and Associates, Inc.
dated March 9, 1999 and revised June 2, 1999;

                  THENCE North 01(degree) 14' 00" West with the east line of
said 1.3669-acre tract, a distance of 268.81 feet to a set 5/8-inch iron rod
with cap for a corner of said tract herein described;

                  THENCE South 88(degree) 46' 00" West, a distance of 11.27 feet
to a 5/8-inch iron rod with cap set for a corner of said tract herein described;

                  THENCE North 01(degree) 14' 00" West, a distance of 31.19 feet
to a set 5/8-inch iron rod with cap located in the north line of said Lot 122
and the south line of Lot 121 of said South

                                      A-2
<PAGE>   62

Houston Gardens, Section Six, for the northwest corner of said tract herein
described and for the northeast corner of said 1.3669-acre tract;

                  THENCE North 88(degree) 46' 00" East with the north line of
said Lot 122 and the south line of said Lot 121, a distance of 349.51 feet to a
set 5/8-inch iron rod with cap for the northeast corner of said tract herein
described and for the northwest corner of said 1.1640-acre tract;

                  THENCE South 01(degree) 14' 00" East with the west line of
said 1.1640-acre tract, a distance of 27.52 feet to a set 5/8-inch iron rod with
cap for a corner of said tract herein described;

                  THENCE South 88(degree) 46' 00" West with a northerly line of
said 1.1640-acre tract, a distance of 23.91 feet to a set 5/8-inch iron rod with
cap for a corner of said tract herein described;

                  THENCE South 01(degree) 14' 00" East with the west line of
said 1.1640-acre tract, a distance of 272.48 feet to the POINT OF BEGINNING and
containing 2.1880 acres (95,309 square feet) of land, more or less.

TOGETHER with all rights and easements which benefit the above-described
property pursuant to that certain Declaration of Easements recorded as number
###-##-####, Deed Records of Harris County, Texas.

                                      A-3
<PAGE>   63
                                  EXHIBIT A-3

                                                    [San Antonio/Crossroads, TX]

                              PROPERTY DESCRIPTION

Being a 1.148 acre tract of land out of Lot 2, Block 3, New City Block 11632,
County Block 5508, Crossroads Unit 1 Subdivision, partially in the City of
Balcones Heights and partially in the City of San Antonio, Bexar County, Texas,
as recorded in Volume 9516, pages 209-212, of the Deed and Plat Records of Bexar
County, Texas, said 1.148 acre tract being more particularly described by metes
and bounds description as follows:

BEGINNING at a 1/2" iron pin set on the south curved right-of-way line of N.W.
Loop 410 (a dedicated variable width right-of-way) said 1/2" iron pin being
23.81' along said curved right-of-way line of N.W. Loop 410 which ahs a radius
of 3819.72 feet, a central angel of 00(degree)21'26" and a chord bearing and
distance of N 53(degree)17'45" E 23.81' from the northernmost corner of Lot 8,
Block 3, New City Block 11632, Crossroads, Unit 3 Subdivision, partially in the
City of Balcones Heights and partially in the City of San Antonio, Bexar County,
Texas, according to plat thereof recorded in Volume 9522, page 148, Deed and
Plat Records of Bexar County, Texas;

THENCE, 90.22 feet along said curve to the left of N.W. Loop 410 which has a
radius of 3819.72 feet, a central angle of 01(degree)21'12" and a chord bearing
and distance of N 52(degree)26'26" E 90.22 feet to a 1/2" iron set for a corner;

THENCE, S 33(degree)31'58" E 73.79 feet to a 1/2" iron pin set for an inner ell;

THENCE, N 56(degree)28'02" E 190.80 feet to an 1/2" iron pin set for a corner;

THENCE, S 33(degree)31'58" E 155.48 feet to a 1/2" iron pin set for a corner;

THENCE, S 56(degree)28'02" W 280.80 feet to a 1/2" iron pin set for a corner;

THENCE, N 33(degree)31'58" W 222.94 feet to the POINT OF BEGINNING of this 1.148
acre tract of land.

Being the same property leased pursuant to that certain Ground Lease Agreement
among Adorff, Inc., Lehndorff Capital Resources, Inc. Wonderland Associates,
Noble Associates and Lehndorff United Properties (USA) and Southeast Texas Inns,
Inc., a Memorandum of Lease in connection therewith being recorded as Number
95-0092358, Volume 6457, page 664, Official Records, Bexar County, Texas.

                                      A-4
<PAGE>   64

                                    EXHIBIT B

                                DESIGNATED AREAS
<TABLE>
<CAPTION>

                 Property                                     Area

                 <S>                                          <C>
                 Grand Prairie, TX                            3 miles
                 Houston (Hobby Airport), TX                  3 miles
                 San Antonio (Crossroads), TX                 3 miles
</TABLE>

                                      B-1
<PAGE>   65

773712.4

                                    EXHIBIT C

                            MINIMUM RENT CALCULATION

                                      C-1
<PAGE>   66

                                    EXHIBIT D

                       ALLOCABLE RENTS BEFORE JULY 1, 2011

<TABLE>
<CAPTION>
                                                        Allocable Rent Per
                 Property                               Accounting Period
                 --------                               ------------------
                 <S>                                    <C>
                 Grand Prairie, TX                           $ 90,631
                 Houston (Hobby Airport), TX                 $ 81,901
                 San Antonio (Crossroads), TX                $ 70,155
                                                             --------
                 Total                                       $242,687
</TABLE>

                       ALLOCABLE RENTS AFTER JUNE 30, 2011

<TABLE>
<CAPTION>
                                                        Allocable Rent Per
                 Property                               Accounting Period
                 --------                               ------------------

                 <S>                                    <C>
                 Grand Prairie, TX                           $ 97,339
                 Houston (Hobby Airport), TX                 $ 87,963
                 San Antonio (Crossroads), TX                $ 75,348
                                                             --------
                          Total                              $260,650
</TABLE>

                                      D-1
<PAGE>   67

                                Table of Contents

<TABLE>
<CAPTION>

                                                                             Page
                                                                             ----

<S>                                                                          <C>
ARTICLE 1.        DEFINITIONS..................................................1

                  1.1.    "Accounting Period"..................................1
                  1.2.    "Additional Charges".................................1
                  1.3.    "Additional Rent"....................................1
                  1.4.    "Affiliated Person"..................................1
                  1.5.    "Agreement"..........................................2
                  1.6.    "Applicable Laws"....................................2
                  1.7.    "Applicable Percentage"..............................2
                  1.8.    "Award"..............................................2
                  1.9.    "Base Total Hotel Sales".............................2
                  1.10.   "Base Year"..........................................3
                  1.11.   "Business Day".......................................3
                  1.12.   "Capital Addition"...................................3
                  1.13.   "Capital Expenditure"................................3
                  1.14.   "Claim"..............................................3
                  1.15.   "Code"...............................................3
                  1.16.   "Commencement Date"..................................3
                  1.17.   "Condemnation".......................................3
                  1.18.   "Condemnor"..........................................3
                  1.19.   "Date of Taking".....................................3
                  1.20.   "Default"............................................4
                  1.21.   "Disbursement Rate"..................................4
                  1.22.   "Distribution".......................................4
                  1.23.   "Easement Agreement".................................4
                  1.24.   "Encumbrance"........................................4
                  1.25.   "Entity".............................................4
                  1.26.   "Environment"........................................4
                  1.27.   "Environmental Obligation"...........................4
                  1.28.   "Environmental Notice"...............................4
                  1.29.   "Event of Default"...................................4
                  1.30.   "Excess Total Hotel Sales"...........................4
                  1.31.   "Extended Terms".....................................4
                  1.32.   "FF&E Estimate"......................................5
                  1.33.   "FF&E Pledge"........................................5
                  1.34.   "FF&E Reserve".......................................5
                  1.35.   "Financial Officer's Certificate"....................5
</TABLE>

                                       i
<PAGE>   68

                                Table of Contents

                                   (continued)
<TABLE>
<CAPTION>

                                                                             Page
                                                                             ----

                  <S>                                                        <C>
                  1.36.   "Fiscal Year"........................................5
                  1.37.   "Fixed Term".........................................5
                  1.38.   "Fixtures"...........................................5
                  1.39.   "GAAP"...............................................5
                  1.40.   "Government Agencies"................................5
                  1.41.   "Ground Lease".......................................5
                  1.42.   "Hazardous Substances"...............................5
                  1.43.   "Hotel"..............................................6
                  1.44.   "Hotel Mortgage".....................................6
                  1.45.   "Hotel Mortgagee"....................................6
                  1.46.   "HPT"................................................6
                  1.47.   "Immediate Family"...................................6
                  1.48.   "Impositions"........................................6
                  1.49.   "Incidental Documents"...............................7
                  1.50.   "Indebtedness".......................................7
                  1.51.   "Insurance Requirements".............................7
                  1.52.   "Interest Rate"......................................7
                  1.53.   "Land"...............................................7
                  1.54.   "Landlord"...........................................8
                  1.55.   "Landlord Liens".....................................8
                  1.56.   "Lease Year".........................................8
                  1.57.   "Leased Improvements"................................8
                  1.58.   "Leased Intangible Property".........................8
                  1.59.   "Leased Personal Property"...........................8
                  1.60.   "Leased Property"....................................8
                  1.61.   "Legal Requirements".................................8
                  1.62.   "Lien"...............................................9
                  1.63.   "Management Agreement"...............................9
                  1.64.   "Manager"............................................9
                  1.65.   "Minimum Rent".......................................9
                  1.66.   "Net Worth"..........................................9
                  1.67.   "Notice"............................................10
                  1.68.   "Officer's Certificate".............................10
                  1.69.   "Overdue Rate"......................................10
                  1.70.   "Parent"............................................10
                  1.71.   "Partnership Interest Documents"....................10
                  1.72.   "Permitted Encumbrances"............................10
</TABLE>

                                       ii
<PAGE>   69

                                Table of Contents

                                   (continued)

<TABLE>
<CAPTION>
                                                                             Page
                                                                             ----

<S>                                                                          <C>
                  1.73.   "Permitted Liens"...................................10
                  1.74.   "Permitted Use".....................................10
                  1.75.   "Person"............................................10
                  1.76.   "Prime".............................................10
                  1.77.   "Property"..........................................10
                  1.78.   "Purchase Agreement"................................10
                  1.79.   "Records"...........................................10
                  1.80.   "Rent"..............................................11
                  1.81.   "Retained Funds"....................................11
                  1.82.   "SEC"...............................................11
                  1.83.   "Security Agreement"................................11
                  1.84.   "ShoLodge"..........................................11
                  1.85.   "State".............................................11
                  1.86.   "Subordinated Creditor".............................11
                  1.87.   "Subordination Agreement"...........................11
                  1.88.   "Subsidiary"........................................11
                  1.89.   "Successor Landlord"................................11
                  1.90.   "Tenant"............................................11
                  1.91.   "Tenant Financials".................................11
                  1.92.   "Tenant's Personal Property"........................12
                  1.93.   "Term"..............................................12
                  1.94.   "Total Hotel Sales".................................12
                  1.95.   "Uniform System of Accounts"........................12
                  1.96.   "Unsuitable for Its Permitted Use"..................12
                  1.97.   "Work"..............................................13

ARTICLE 2.        LEASED PROPERTY AND TERM....................................13

                  2.1.    Leased Property.....................................13
                  2.2.    Condition of Leased Property........................14
                  2.3.    Fixed Term..........................................14
                  2.4.    Extended Term.......................................14

ARTICLE 3.        RENT........................................................15

                  3.1.    Rent................................................15
                  3.2.    Late Payment of Rent, Etc. .........................19
                  3.3.    Net Lease...........................................19
                  3.4.    No Termination, Abatement, Etc. ....................19
</TABLE>

                                      iii
<PAGE>   70

                                Table of Contents

                                   (continued)
<TABLE>
<CAPTION>

                                                                             Page
                                                                             ----

<S>               <C>                                                        <C>
                  3.5.    Retained Funds......................................20

ARTICLE 4.        USE OF THE LEASED PROPERTY..................................21

                  4.1.    Permitted Use.......................................21
                  4.2.    Compliance with Legal/Insurance Requirements, Etc...22
                  4.3.    Environmental Matters...............................22

ARTICLE 5.        MAINTENANCE AND REPAIRS.....................................24

                  5.1.    Maintenance and Repair..............................24
                  5.2.    Tenant's Personal Property..........................27
                  5.3.    Yield Up............................................27
                  5.4.    Management Agreement................................27

ARTICLE 6.        IMPROVEMENTS. ETC...........................................28

                  6.1.    Improvements to the Leased Property.................28
                  6.2.    Salvage.............................................28

ARTICLE 7.        LIENS.......................................................29

                  7.1.    Liens...............................................29
                  7.2.    Landlord's Lien.....................................29

ARTICLE 8.        PERMITTED CONTESTS..........................................29

ARTICLE 9.        INSURANCE AND INDEMNIFICATION...............................30

                  9.1.    General Insurance Requirements......................30
                  9.2.    Replacement Cost....................................31
                  9.3.    Waiver of Subrogation...............................31
                  9.4.    Form Satisfactory, Etc..............................32
                  9.5.    Blanket Policy......................................32
                  9.6.    No Separate Insurance...............................32
                  9.7.    Indemnification of Landlord.........................32

ARTICLE 10.       CASUALTY....................................................33

                  10.1.   Insurance Proceeds..................................33
                  10.2.   Damage or Destruction...............................33
                  10.3.   Damage Near End of Term.............................35
                  10.4.   Tenant's Property...................................35
                  10.5.   Restoration of Tenant's Property....................35
</TABLE>

                                       iv
<PAGE>   71

                                Table of Contents

                                   (continued)
<TABLE>
<CAPTION>
                                                                             Page
                                                                             ----

<S>               <C>                                                        <C>
                  10.6.   No Abatement of Rent................................35
                  10.7.   Waiver..............................................36

ARTICLE 11.       CONDEMNATION................................................36

                  11.1.   Total Condemnation, Etc.............................36
                  11.2.   Partial Condemnation................................36
                  11.3.   Abatement of Rent...................................37
                  11.4.   Temporary Condemnation..............................37
                  11.5.   Condemnation Near End of Term.......................37
                  11.6.   Allocation of Award.................................38

ARTICLE 12.       DEFAULTS AND REMEDIES.......................................38

                  12.1.   Events of Default...................................38
                  12.2.   Remedies............................................40
                  12.3.   Tenant's Waiver.....................................41
                  12.4.   Application of Funds................................41
                  12.5.   Landlord's Right to Cure Tenant's Default...........41

ARTICLE 13.       HOLDING OVER................................................42

ARTICLE 14.       LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT.............42

                  14.1.   Landlord Notice Obligation..........................42
                  14.2.   Landlord's Default..................................42
                  14.3.   Indemnification of Tenant...........................43

ARTICLE 15.       PURCHASE RIGHTS.............................................43

ARTICLE 16.       SUBLETTING AND ASSIGNMENT...................................44

                  16.1.   Subletting and Assignment...........................44
                  16.2.   Required Sublease Provisions........................44
                  16.3.   Permitted Sublease..................................45
                  16.4.   Sublease Limitation.................................46

ARTICLE 17.       ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS..............46

                  17.1.   Estoppel Certificates...............................46
                  17.2.   Financial Statements................................46

ARTICLE 18.       LANDLORD'S RIGHT TO INSPECT.................................47
</TABLE>

                                       v
<PAGE>   72

                                Table of Contents

                                   (continued)
<TABLE>
<CAPTION>
                                                                             Page
                                                                             ----

<S>               <C>                                                        <C>
ARTICLE 19.       EASEMENTS...................................................47

                  19.1.   Grant of Easements..................................47
                  19.2.   Exercise of Rights by Tenant........................47
                  19.3.   Permitted Encumbrances..............................48

ARTICLE 20.       HOTEL MORTGAGES.............................................48

                  20.1.   Landlord May Grant Liens............................48
                  20.2.   Subordination of Lease..............................48
                  20.3.   Notice to Mortgagee and Superior Landlord...........49

ARTICLE 21.       ADDITIONAL COVENANTS OF TENANT..............................49

                  21.1.   Prompt Payment of Indebtedness......................49
                  21.2.   Conduct of Business.................................50
                  21.3.   Maintenance of Accounts and Records.................50
                  21.4.   Notice of Litigation, Etc...........................50
                  21.5.   Indebtedness of Tenant..............................50
                  21.6.   Financial Condition of Tenant.......................51
                  21.7.   Distributions, Payments to Affiliated Persons, Etc..51
                  21.8.   Prohibited Transactions.............................51
                  21.9.   Liens and Encumbrances..............................51
                  21.10.  Merger; Sale of Assets; Etc.........................52

ARTICLE 22.       MISCELLANEOUS...............................................52

                  22.1.   Limitation on Payment of Rent.......................52
                  22.2.   No Waiver...........................................52
                  22.3.   Remedies Cumulative.................................53
                  22.4.   Severability........................................53
                  22.5.   Acceptance of Surrender.............................53
                  22.6.   No Merger of Title..................................53
                  22.7.   Conveyance by Landlord..............................53
                  22.8.   Quiet Enjoyment.....................................54
                  22.9.   Memorandum of Lease.................................54
                  22.10.  Notices.............................................54
                  22.11.  Trade Area Restriction..............................55
                  22.12.  Construction........................................56
                  22.13.  Counterparts; Headings..............................56
                  22.14.  Applicable Law, Etc.................................56
</TABLE>

                                       vi
<PAGE>   73

                                Table of Contents

                                   (continued)
<TABLE>
<CAPTION>

                                                                             Page
                                                                             ----

                  <S>                                                        <C>
                  22.15.  Right to Make Agreement.............................57
                  22.16.  Nonrecourse.........................................57
                  22.17.  Attorneys'Fees......................................57
</TABLE>

                                       vii<PAGE>   1

                                                                    EXHIBIT 10.4

                      CONTRACTOR AND DEVELOPMENT AGREEMENT

         THIS Contractor AGREEMENT ("Agreement") is made this 9th day of July,
2000, by and between PRIME HOSPITALITY CORP. ("Owner") whose principal place of
business is located at 700 Route 46 East, Fairfield, New Jersey 07004 and MOORE
& ASSOCIATES, INC.("Contractor") whose principal place of business is located at
130 Maple Drive North, Hendersonville, Tennessee 37075 and whose telephone
number is (615) 264-8020, and SHOLODGE, INC., whose principal place of business
is located at 130 Maple Drive North, Hendersonville, Tennessee 37075
("Guarantor").

                                    ARTICLE 1
                            DEFINITIONS AND EXHIBITS

         This Agreement contains the following exhibits:

         Exhibit A - Architect
         Exhibit B - FF&E
         Exhibit C - Plans and Specifications
         Exhibit D - Schedule of Values
         Exhibit E - Supplemental Conditions

         As used in this Agreement, the terms set forth in this Article 1 have
the meanings set forth below. The singular use of any defined term includes the
plural and the plural use includes the singular.

         Section 1.1.      Architect. The term "Architect" means the architect
or architectural firm retained by the Contractor and identified on Exhibit "A"
attached hereto.

         Section 1.2.      Commencement Date. The term "Commencement Date"
means the date at the top of this Agreement, which shall coincide with the date
of delivery of the executed Agreement to the Contractor.

         Section 1.3.      Completion Date. The term "Completion Date" means
October 30, 2001.

         Section 1.4.      Construction Commencement Date. Construction
Commencement Date means the date upon which Contractor receives all permits for
the construction of the Project.

         Section 1.5.      Contract Documents. The term "Contract Documents"
means collectively this Agreement, including and the Exhibits A, B, C, D, E and
F attached hereto, and any change orders.

                                       1
<PAGE>   2

         Section 1.6.      Contract Sum. The term "Contract Sum" means the total
aggregate sum of EIGHT MILLION THREE HUNDRED SEVENTY-ONE AND NO/100
($8,371,000.00) DOLLARS to complete the Work.

         Section 1.7       FF&E. FF&E means the furniture, fixtures and
equipment used in the operation of the Project as identified on Exhibit B,
including telephone and property management systems.

         Section 1.8.      Final Completion. The term "Final Completion" means
that stage of the Work when the Owner has determined that all services and work
called for in the Contract Documents, including but not limited to all punchlist
items, have been completed and all other terms and conditions of the Contract
Documents applicable to the Contractor have been fulfilled.

         Section 1.9.      Governmental Bodies. The term "Governmental Bodies"
means collectively all federal, state, municipal, and local governments,
agencies, and representatives thereof which have jurisdiction, control or
authority over the Work on the Project.

         Section 1.10.     Job Progress Schedule. The term "Job Progress
Schedule" means a bar chart to be submitted by the Contractor prior to the
Commencement Date to the Owner and approved in writing by the Owner, which will
set forth: (a) the projected times for the commencement and completion of each
stage of the Work, including but not limited to the dates of Substantial
Completion and the Final Completion; (b) required delivery dates of materials,;
(c) the percentage of completion of the Work at the end of each stage; and (d)
the proportionate amount of the Contract Sum allocated to each such stage of the
Work.

         Section 1.11.     Laws. The term "Laws" means collectively all
ordinances, statues, rules, regulations, orders, injunctions, writs or decrees
of any government or political subdivision or agency thereof, or any court or
similar entity established by any thereof.

         Section 1.12.     Location. The term "Location" means the Location of
the Project which is the 124 suite AmeriSuites Hotel, located at Utica,
Michigan.

         Section 1.13.     Person. The term "Person" means any individual,
corporation, partnership, association, joint-stock company, trust,
unincorporated organization, joint venture, court, or government or political
subdivision or agency thereof.

         Section 1.14.     Plans and Specifications. The term "Plans and
Specifications" means collectively each of the plans and specifications listed
and described on Exhibit "C" attached as prepared by the Architect and the other
professionals retained by the Contractor as listed on Exhibit "C".

                                       2
<PAGE>   3

         Section 1.15.     Project. The term "Project" means the total
construction Project in connection with which the Work is to be performed and
which may include construction activities by other Persons, including but not
limited to activities by the Owner and other Contractors, under separate
contracts not constituting part of the Contract Documents.

         Section 1.16.     Sale Agreement. The term "Sale Agreement" means the
Sale and Purchase Agreement entered into between Prime Hospitality Corp. and
ShoLodge, Inc. dated March 16, 2000, as amended, July 9, 2000.

         Section 1.17.     Schedule of Values. The Schedule of Values means the
schedule of construction values set forth as Exhibit D.

         Section 1.18.     Substantial Completion. The term "Substantial
Completion" means that stage in the progress of the Work when the Owner has
determined that the Work or any referenced portion thereof is sufficiently
complete in accordance with the Contract Documents so that the Owner may occupy
and utilize the back of house and public areas for their intended use and all
guest rooms are deemed by Owner suitable to occupy, all in accordance with all
applicable Laws, and after the final issuance of all occupancy and other permits
necessary for the use or occupancy thereof.

         Section 1.19.     Supplemental Conditions. The term "Supplemental
Conditions" means collectively the terms and conditions set forth on Exhibit "E"
attached hereto.

         Section 1.20.     Work. The term "Work" means the construction and
services required by the Contract Documents, including without limitation, the
following:

                  (a)      Design. Design includes preparation of all civil and
architectural drawings, plans and specifications.

                  (b)      Public Approvals. Public approvals include all
approvals of Governmental and quasi Governmental Bodies, including site plan
approvals, zoning approvals, environmental approvals, architectural plan
approvals and the like.

                  (c)      Private Approvals. Private approvals include
approvals of utilities, property owner's association, and the like, and further
includes any public or private easements necessary for ingress, egress, and
utilities.

                  (d)      Testing and Inspections. Testing and inspections
include all testing and inspections required by Governmental and quasi
Governmental Bodies before, during and after construction.

                  (e)      Permits. Permits include all building permits and
certificates of occupancy.

                                       3
<PAGE>   4

                  (f)      Construction. Construction includes the construction
and furnishing of the AmeriSuites hotel in accordance with the Contract
Documents. Construction will also include the procurement and installation of
FF&E.

                  (g)      Payment of Fees. Payment of fees shall include
payment of all fees in connection with the work, including application fees for
approvals, permit fees, inspection fees, impact fees and the like.

                                    ARTICLE 2
                               PERFORMANCE OF WORK

         Section 2.1.      Agreement to Perform. The Contractor agrees to
commence all Work prepatory to construction on the Commencement Date, engage and
supervise adequate labor forces; perform and complete the Work in accordance
with the terms of the Contract Documents; and achieve Substantial Completion of
all of the Work on or before the Completion Date. All documents and construction
methods and acceptance by governmental agencies is the responsibility of the
Contractor including code compliance. It is understood that the Contractor will
work with Architect to make sure all plans meet all governmental codes.

         Prior to the commencement of any work, Contractor will provide Owner
with a detailed final construction budget in substantially the form of Exhibit D
attached to this Agreement, which budget shall confirm to Owner's reasonable
satisfaction that the total cost of the Work shall not exceed the Contract Sum.
Immediately upon the signing of a subcontract, Contractor shall provide Owner
with a copy of each such subcontract.

         Section 2.2.      Change Orders. Change Orders shall be limited to
Owner requested changes. Change Orders shall not be issued for site conditions,
documented code compliance changes by the governing municipality(s), or
architectural errors. Contractor shall be solely responsible for such matters.
If arbitrary changes in the work are requested and directed by the Owner which
impact the Completion Date, the Contractor will so notify the Owner and the
parties will agree upon an extension of the Completion Date (either increase or
decrease). The Contract Sum shall be increased by the agreed-upon increase or
decrease in the construction cost.

Amounts for overhead and profit for change orders will be limited to the
following:

                  (a)      For the Contractor, for Work performed by the
                           Contractor's subcontractor, ten (10%) percent of the
                           amount due to the subcontractor.

                  (b)      For the Contractor, for Work performed by the
                           Contractor's own forces, fifteen (15%) of the actual,
                           direct cost of the Work.

                                       4
<PAGE>   5

         Section 2.3.      FF&E and Signage Purchases. FF&E and signage will be
purchased by Contractor in accordance with the plans and standard AmeriSuites
FF&E specifications in accordance with Exhibit B, provided that Owner may bid on
the procurement of FF&E.

         Section 2.4.      Time of Performance. Contractor agrees that the time
of performance is governed by the obligations of the Guarantor under the Sale
Agreement and the Exchange Agreement dated the same date as this Agreement
between Owner and Hospitality Property Trust, or its Affiliates. . Delays and
excused performance are permitted only to the extent permitted under the Sale
Agreement and the Exchange Agreement.

         Section 2.5.      Payment for Work. Contractor agrees that all costs
and expenses in connection with the work shall be paid by Contractor. Contractor
takes responsibility for all site contingencies, such as site conditions,
weather conditions, supply problems, labor problems and the like.

                                    ARTICLE 3
                                TERMS OF PAYMENT

         Section 3.1.      Contract Sum. The Owner will pay the Contract Sum to
the Contractor for the Contractor's performance of the obligations of the
Contractor set forth in this Agreement in accordance with this Article 3.
Payment of these Sums will be at such times and in such amounts as set forth in
the Contract Documents. The Contract Sum is the maximum total and final amount
to be paid to the Contractor and is intended to be inclusive of all charges and
expenses of every kind and nature with respect to the Work, including but not
limited to: (a) the cost of all permits, fees, licenses, and inspections
required by any Governmental Bodies; (b) all taxes assessed by any Governmental
Bodies, including but not limited to sales taxes with respect to the
construction of the Project, use taxes with respect to the construction of the
Project, gross receipts taxes, if applicable for amounts earned by the
Contractor under Michigan tax laws, and impact fees; (c) costs of all labor,
services and materials for performance of the Work, including without
limitation, Exhibits A, B, C, D, E and F; (d) all charges or fees incurred by
the Contractor for any subcontractors, equipment lessors, mechanics,
materialmen, or suppliers of the Contractor; (e) procurement and installation of
the FF&E and (f) bonds. In the event that the parties are required by any
applicable Laws to separately state or charge any taxes or other charges
assessed by any Governmental Body, the aggregate amount of all payments made by
the Owner to the Contractor, including any such separately stated amounts, will
not be in excess of the Contract Sum. The total contract sum will not be greater
than the sum under Section 1.5, excluding the costs associated with arbitrary
Owner-requested changes.

          Section 3.2.     Submission of Monthly Applications for Payment. On or
before the twenty-fifth (25th) of each calendar month, the Contractor will
submit to the Owner (a) an itemized application for payment on AIA form G702 and
G703 (Owner's Schedule of Values, which application will be notarized and
supported by such data substantiating the Contractor's

                                       5
<PAGE>   6

application for payment as the Owner may require and (b) an updated Job Progress
Schedule. The monthly application for payment will compare: (i) the status of
the Work installed or completed as of the stated date of the application with
the schedule of Work to be installed or completed set forth on the Job Progress
Schedule; and (ii) the value of such Work with the values set forth on the Job
Progress Schedule. With each application Contractor will deliver lien releases
for the prior month's advance. The Contractor agrees to the following conditions
with respect to each application for payment:

         Section 3.2.1.    No Payment of Disputed Sums. The Contractor will not
include in any request for payment any sums which the Contractor does not intend
to pay to a subcontractor, equipment lessor, mechanic, materialman, material
supplier, or other Person because of a dispute or for any other reason.

         Section 3.2.2.    No Payments for Off-Site Materials or Equipment.
Unless expressly authorized by the terms of the Contract Documents or otherwise
approved in writing by the Owner, the Contractor will not include in any
requests for payment any sums to be made on the account of materials or
equipment not physically located at the Location.

         Section 3.2.3.    Warranty of Title. The Contractor represents and
warrants to the Owner at the time of the submission of each monthly application
for payment that: (a) title to all materials and equipment covered by such
application will pass to the Owner either upon the incorporation of such into
the Project or upon the receipt of payment by the Contractor, whichever occurs
first, free and clear of all liens, claims, security interests or encumbrances
of every kind and nature; (b) no work, materials, equipment, or supplies covered
by the application has been acquired by the Contractor, or by any Person for
whose performance the Contractor is responsible, subject to a security
agreement, lease or other encumbrance, (c) the progress of the Work is in
accordance with the Contract Documents and the updated Job Progress Schedule,
(d) and Substantial Completion of the Work will be attained on or before the
Completion Date.

         Section 3.3.      Payment by Owner. On or before the twenty-fifth (25)
day of each calendar month the Contractor will submit to Owner on AIA form G702
and G703 , or such other form as Owner will require, a written requisition for
payment showing the proportionate value of the Work installed to date, from
which Contractor will deduct: (a) a reserve of ten (10%) percent ("Retainage")
until 80% of the construction has been completer and then no additional
retainage; (b) all previous payments; and (c) all other charges for material or
service furnished by Owner to Contractor. The balance of the amount of the
requisition, as approved by Owner, Architect, or Engineer, as appropriate, will
be due Contractor as of the first business day following the fifteenth (15th)
day of the succeeding calendar month. With each application for payment
Contractor will submit, in form and substance reasonably satisfactory to Owner,
lien waivers from each subcontractor paid out of the preceding application for
payment and an update of the Job Progress Schedule establishing to Owner's
reasonable satisfaction that Substantial Completion will be achieved by the
Completion Date. Contractor will not be entitled to payment and no payment

                                       6
<PAGE>   7

will be made until all releases are received.

         Section 3.4.      Substantial Completion. At such time as the
Contractor considers that Substantial Completion of the Work has been
accomplished, the Contractor will prepare for submission to the Owner a written
punch list of items which need to be completed or corrected, and will state in
writing the time period in which such items will be completed or corrected. The
failure to include any items on the punch list does not waive, alter or vary any
responsibility of the Contractor to complete the Work in accordance with the
Contract Documents. Within twenty (20) days of receipt of the written punch
list, the Owner will (i) then inspect the Work to determine if Substantial
Completion of the Work has been achieved, (ii) review the accuracy and
completeness of the punch list, and (iii) respond in writing to the punch list.
Upon the agreement of the Owner that Substantial Completion of the Work has been
achieved, the Owner will make such payments, if any, as are due upon Substantial
Completion in accordance with the Job Progress Schedule. All punch list items
will be completed promptly and in accordance with the schedule agreed to by
Owner or if unscheduled corrected within twenty (20) calendar days after the
date that the Owner agrees that Substantial Completion of the Work has been
achieved. Owner may correct any punchlist item not completed or corrected upon
twenty (20) days prior written notice to Contractor and apply Contractor's
retainage to pay for completion or correction, provided that the punch list
items were not performed in accordance with the schedule.

         Section 3.5.      Final Payment. The Owner will pay to the Contractor
the final payment of the Contract Sum, including the remaining retainage no
later than fifteen (15) days after the completion of the following: (a) the
Owner determines that Final Completion has occurred; (b) the Contractor has
submitted an affidavit to the Owner identifying the names of all suppliers and
subcontractors providing materials or services in connection with the Work and
stating that all payrolls, bills for materials and equipment, and other
indebtedness connected with the Work have been paid or otherwise satisfied; (c)
the Owner has received consent to final payment by the Contractor's sureties, if
such consent is required by the terms of any applicable bonds or other
agreements; (d) the Contractor has submitted a certificate evidencing that
insurance required by the Contract Documents to remain in force after final
payment is then currently in effect and will not be canceled or allowed to
expire until at least thirty (30) days prior written notice has been given to
the Owner; (e) all of the Plans and Specifications have been delivered to the
Owner by the Architect or Contractor; (f) a final certificate of occupancy and
any other permits or licenses required for occupancy have been issued for the
Work; (g) the Owner has received such evidence of payment and satisfaction of
obligations as may be required by the Owner, including but not limited to
affidavits and lien releases from the Contractor, subcontractors, equipment
lessors, mechanics, materialmen, and major suppliers; (h) the Owner has received
all warranties, service manuals, maintenance schedules, plumbing and mechanical
value charts and locations, electrical panel charts and locations, "As Built"
drawings and catalog cuts, and any other pertinent information requested by
Owner, (j) if required by the Owner, the Owner has been supplied with an
endorsement to any existing title insurance policy for the Project insuring
title as of the date of Final Completion without any exceptions to coverage
caused by or related to the Work or the

                                       7
<PAGE>   8

activities of the Contractor at the Project and (j) an as built survey.

         Section 3.6.      Basis for Withholding Payment. The Owner may withhold
any payment due to the Contractor, in whole or in part, if in the Owner's
opinion such payment should be withheld in order to reasonably protect the Owner
from loss because of: (a) defective Work not remedied; (b) third party claims;
(c) reasonable evidence of the probability of the filing of the third party
claims; (d) the failure of the Contractor to pay subcontractors or suppliers;
(e) the determination that the Work cannot be completed for the unpaid balance
of the Contract Sum; (f) damage to the Owner or to another contractor; (g) the
determination that Substantial Completion of the Work will not be achieved prior
to the Completion Date; (h) the failure of the Contractor to perform the Work in
accordance with the Contract Documents; or (i) the breach of this Agreement or
any Contract Document. Owner will detail in writing the factual basis for the
proposed withholding to the Contractor, and Contractor shall have ten (10) days
in which to respond.

         Section 3.7.      Effect of Payments. The parties agree that no payment
made by the Owner to the Contractor will constitute a waiver of any claims by
the Owner against the Contractor, including but not limited to claims arising
from: (a) unsettled liens; (b) faulty or defective work or materials; (c)
failure of the Work to conform with the Contract Documents; (d) the terms of any
warranties made by the Contractor pursuant to the Contract Documents; or (e) any
breach by the Contractor of the duties and obligations of the Contractor set
forth in the Contract Documents. Acceptance of any final payment by the
Contractor or by any subcontractor, equipment lessor, or material supplier will
constitute a waiver of any claims against the Owner by such payee.

                                    ARTICLE 4
                              DUTIES OF CONTRACTOR

         Section 4.1.      Design. Contractor will be responsible for hiring all
design experts, including architects and engineers, and for preparing all Plans
and Specifications for the Project. Contractor will submit to Owner for Owner's
approval before implementation, all plans and specifications. Contractor's
subcontracts with architects and engineers shall provide that Owner shall be the
owner of the Plans and Specifications. Contractor will be responsible for
conforming and will pay the cost of conforming the Plans and Specifications and
construction of the Work to all requirements of Governmental Bodies. If during
the course of construction the requirements of any Governmental Body changes,
Contractor will be responsible for conforming and will pay the cost of
conforming the Plans and Specifications and construction of the Work to all
requirements of Governmental Bodies.

         Section 4.2.      Public Approval. Contractor will obtain all approvals
of Governmental and quasi Governmental Bodies, including site plan approvals,
zoning approvals, environmental approvals, architectural and design approvals,
and the like. Contractor will be responsible for conforming and will pay the
cost of conforming the Plans and Specifications and the construction of the Work
and the Project design to the conditions of any such approvals.

                                       8
<PAGE>   9

         Section 4.3.      Private Approvals. Contractor will obtain all private
approvals, including approvals of utilities, property owners' associations and
the like and further will obtain any public or private easements for ingress,
egress and public utilities.

         Section 4.4.      Testing and Inspections; Permits. Contractor will be
responsible for all testing and inspections by all Governmental Bodies and quasi
Governmental Bodies, before, during and after construction. Contractor will be
responsible for obtain all building permits and certificates of occupancy.

         Section 4.5.      Construction. Contractor will be responsible for
performance of the Work and construction of the Project in accordance with the
Plans and Specifications. Upon the Commencement Date, Contractor will begin
performance under this Contract and will proceed diligently to meet the
construction schedule deadlines set forth on Schedule ____.

         Section 4.6.      Contractor's Labor. The Contractor will purchase or
otherwise arrange for and will pay for all labor, materials, tools, equipment,
construction equipment, and machinery, water, heat, utilities, transportation,
and other facilities or services required for the complete and workmanlike
performance of the Work, including but not limited to temporary and permanent
structures whether or not incorporated or to be incorporated into the Work. A
force of skilled workers sufficient to accomplish the Work on a timely basis
will be maintained by the Contractor at the Location at all times and the
Contractor will be responsible for maintaining order and discipline among the
Contractor's work force and the work force of the subcontractors of the
Contractor. The Contractor agrees to remove from the Project any worker against
whom the Owner or Architect has raised a reasonable objection. The Contractor
will not permit employment of unfit Persons or Persons not skilled in tasks
assigned to them. The Contractor agrees that it will not employ workers or
utilize means which may cause work stoppages or other disturbances by workers
employed by the Contractor, the Owner, or other contractors or subcontractors at
the Project. Any disputes as to jurisdiction of trades arising at the Project
with the Contractor will be adjusted in accordance with any applicable plan of
jurisdictional disputes which may be in effect nationally or in the locality in
which the Project is located; provided, however, that nothing contained herein
will violate or be in conflict with any Laws pertaining to or regulating the
settlement of any such disputes. The Contractor acknowledges that the Contract
Sum reflects any costs to the Contractor for any additional labor and other
factors which may be necessary to prevent or resolve labor jurisdictional
disputes, and that there will be no further charges to the Owner with respect
thereto.

         Section 4.7.      Quality of Materials and Work. The Contractor agrees
that: (a) the materials and equipment furnished by the Contractor pursuant to
the Contract Documents will be of good quality and new unless otherwise required
or permitted by the Contract Documents; (b) the Work will be free from defects;
and (c) the Work will conform with the requirements of the Contract Documents.
Upon the request of the Owner, the Contractor will furnish satisfactory

                                       9
<PAGE>   10

evidence as to the kind and quality of materials and equipment.

         Section 4.8.      Taxes. The Contractor will pay all excise taxes
imposed with respect to the Work, sales taxes imposed with respect to the Work,
use taxes imposed with respect to the Work, gross receipts, if applicable for
amounts earned by the Contractor under Michigan tax laws, and similar taxes
imposed by any Governmental Bodies for the Work.

         Section 4.9.      Permits, Fees and Notices. The Contractor will apply
for, obtain, and pay for any and all required permits, licenses and inspections
required by any Governmental Body which are necessary for the proper execution
and completion of the Work, including the cost of the Building Permit. The
Contractor will give all notices (with copies to Owner) and comply with all
applicable Laws with respect to the performance and completion of the Work. In
the event that the Contractor determines that any of the Contract Documents are
at variance with any applicable Laws, the Contractor will immediately notify
Owner and will be responsible for correcting any such variance at Contractor's
cost and expense. The Contractor will assume full responsibility for any portion
of the Work performed by the Contractor while knowing or having reasonable cause
to know that such portion of the Work is contrary to applicable Laws. At or
before the Owner's final acceptance of the Work, the Contractor will deliver to
the Owner all certificates, receipts or other evidence of approval, acceptance
or payment of fees which may be required to establish the compliance of the Work
with applicable Laws.

         Section 4.10.     Supervision of Construction. The Contractor will
supervise and direct the Work using the Contractor's best skill and attention.
The Contractor will be solely responsible for and have control over construction
means, methods, techniques, sequences and procedures and for coordinating all
portions of the Work to be performed by the Contractor pursuant to the Contract
Documents, subject, however, to the terms and conditions of the Contract
Documents. The Contractor will be responsible to the Owner for acts and
omissions of the Contractor's employees, subcontractors and their agents and
employees, and other Persons performing portions of the Work pursuant to any
Contractor agreement with the Contractor. The Contractor will not be relieved of
any of its duties or obligations to perform the Work in accordance with the
terms of the Contract Documents by the activities of the Architect or by any
tests, inspections or approvals required or performed by Persons other than the
Contractor, all of which will be deemed to have been performed for the sole
benefit of the Owner. The Contractor will inspect portions of the Project
related to the Contractor's Work in order to determine that such portions are in
proper condition to receive subsequent Work.

         Section 4.11.     Review of Contract Documents, Field Conditions, and
Plans and Specifications by Contractor. The Contractor agrees to: (a) carefully
review and compare each of the Contract Documents with the other Contract
Documents and with any information furnished to the Contractor by the Owner or
the Architect; and (b) take field measurements and verify field conditions and
compare such field measurements and conditions and other information known to
the Contractor with the Contract Documents before commencing the Work. The
Contractor is

                                       10
<PAGE>   11

responsible for all site conditions, code compliance and architectural errors.
Contractor will be responsible for all coordination of specifications,
structural, mechanical, electrical, fire protection, fire alarm, architectural,
engineering drawings and installation of FF&E . The Contractor will promptly
report to the Owner any errors, inconsistencies or omissions discovered by the
Contractor. The Contractor acknowledges that the dimensions set forth on the
Plans And Specifications may be approximate and that the Contractor will use all
necessary means to discover any defects in such other work and will report any
such defects to the Owner before preceding with the Work and promptly undertake
to remedy any such defects. Any approval by the Owner or any representative of
the Owner of shop drawings prepared by the Contractor with respect to the Work
will not relieve the Contractor of the Contractor's obligation to perform the
Work in strict compliance with the Plans and Specifications and to properly
match and fit the Work with contiguous work. The decision of the Owner with
respect to any issues concerning meaning or interpretation of the Plans and
Specifications only (an not with respect to the Contract in general), will be
binding upon the Contractor with respect to any issues concerning the Plans and
Specifications. The Contractor is responsible for using existing soils or import
suitable soil to meet soil requirements and specifications.

         Section 4.12.     Identification of Subcontractors and Suppliers. The
Contractor, as soon as practical but no later than the first application for
payment, will furnish the Owner in writing the names of all subcontractors and
all other Persons who are to furnish materials or equipment for any portion of
the Work, provided that for subcontracts in excess of Seventy Thousand
($70,000.00) dollars, including self-performed line items. Contractor will
provide such names prior to Contractor's delivery of the first Application for
Payment.

         Section 4.13.     Agreements with Subcontractors. The Contractor will
employ each subcontractor pursuant to a written subcontract document which will
provide that the subcontractor will be bound to the Contractor by the terms of
the Contract Documents, and that the subcontractor assumes toward the Contractor
all of the obligations and responsibilities which the Contractor assumes toward
the Owner in accordance with the Contract Documents. Each subcontract agreement
will provide that such subcontract agreement is assignable to the Owner upon:
(a) a termination of the Contractor by the Owner in accordance with the terms of
this Agreement; (b) the written election of the Owner of assignment; and (c)
subject to any prior rights, if any, of any sureties obligated under bond to the
Owner with respect to the Work. Each subcontract agreement will preserve and
protect the rights of the Owner under the Contract Documents with respect to the
Work to be performed by the subcontractor so that the subcontracting thereof
will not prejudice such rights of the Owner as to the Contractor. Each
subcontractor will similarly engage its sub-subcontractors. Subcontracting will
in no way diminish or lessen the Contractor's obligations to the Owner in
accordance with the Contract Documents.

         Section 4.14.     Construction Meetings. Contractor will hold regularly
scheduled monthly job meetings among the Contractor and subcontractors, and
Owner may attend. Contractor will take minutes of such meetings and provide
Owner with copies of those minutes promptly after

                                       11
<PAGE>   12

completion of the meetings.

         Section 4.15.     Shipments of Materials. The Contractor agrees that it
will not ship or order shipments in the name of the Owner. All shipping charges
shall be paid by the Contractor. The Owner will have the right to designate any
carriers upon which materials required for the Work will be shipped provided
that any such designation by the Owner will not increase the costs of the
Contractor therefor. All materials and equipment to be delivered to the Project
by or on behalf of the Contractor will be delivered at such times and in such a
manner as to not unreasonably interfere with other activities at the Project.
Within ninety (90) days after the date of this Agreement, Contractor will
provide Owner with a schedule of delivery dates and shipping address for all
FF&E

         Section 4.16.     Use of Project Site. The Contractor agrees to not
unreasonably encumber the site of the Project with the Contractor's materials or
equipment. The Contractor will confine the operations of the Contractor to areas
necessary for the performance of the Work and as permitted by applicable Laws
and as authorized by the directions of the Owner or by any Governmental Body.
All rules and regulations of the Owner which may be in effect at the Location
regarding passes, badges, smoking, fire prevention, signs, conduct, and the
like, will be observed by the Contractor, the subcontractors of the Contractor,
and their respective employees. The Contractor will keep the Project free from
accumulations of waste materials or rubbish generated as a result of the Work.
All waste materials and rubbish generated by the Contractor or arising in
connection with the Work will be promptly removed from the Project. In the event
that the Contractor fails to keep the Project site clean or to remove the
Contractor's equipment and apparatus upon the completion of the Work, the Owner
may upon seven (7) days prior written notice, do so and the costs thereof will
be charged to the Contractor. The Contractor will be responsible for all
cutting, fitting, patching, or other activities required to complete the Work or
make its parts fit together properly with each other or with other portions of
the Project. The Contractor agrees to coordinate the Contractor's efforts at the
Location with the efforts of the Owner and of other Contractors working upon the
Project in order to promote the overall efficient and harmonious completion of
the Project.

         Section 4.17.     Patents and Royalties. The Contractor agrees to pay
for any and all applicable royalties and license fees relating to or arising
from the use of any products or processes called for by the Contract Documents
or used by the Contractor in performing the Work. The Contractor agrees to
indemnify the Owner and hold the Owner harmless from loss or damage, and to
reimburse the Owner for all expenses, including legal fees, which the Owner may
incur as a result of any litigation based upon or alleging infringement upon any
patents or patent rights as a result of the Work or the materials or processes
used by the Contractor in performing the Work.

         Section 4.18.     Correction of Work. The Contractor agrees to promptly
correct any portion of the Work which is rejected by the Owner in writing for
failing to conform to the requirements

                                       12
<PAGE>   13

of the Contract Documents, whether observed before or after payment of the
Contract Sum, and whether or not fabricated, installed, or completed. The
Contractor will pay all costs of correcting any such rejected portion of the
Work including but not limited to the costs of all tests and inspections. The
Contractor will remove from the Project, at the Contractor's expense, any
portions of the Work which are not in substantial conformance with the Contract
Documents and which have been neither corrected by the Contractor nor accepted
by the Owner. In the event that the Contractor fails to correct or remove
nonconforming Work, the Owner, in addition to any other rights and remedies of
the Owner, may elect to correct or remove any such nonconforming Work at the
expense of the Contractor.

         Section 4.19.     Records. Contractor shall keep and distribute orderly
and complete records of the Work and the progress thereof in accordance with
industry standards. The Contractor agrees to follow such procedures throughout
the course of the Work.

         Section 4.20.     Indemnification from Liens. The Owner will have the
right upon seven (7) days prior written notice to deduct from any payment
otherwise due to the Contractor, or thereafter to become due, such sums as the
Owner determines to be sufficient to completely indemnify the Owner against any
notice of lien, lien, or the like, which is filed or served upon the Owner or
the Project, by any mechanic, materialman, laborer, lessor, subcontractor, or
supplier on account of any work done, labor performed, or materials supplied in
connection with the Work. The Owner will further have the right to call upon the
Contractor to satisfy any such lien and obtain its discharge or removal
(pursuant to state law) within ten (10) days of notice from Owner. Upon the
failure of the Contractor to cause the satisfaction and discharge or removal of
the lien, the Owner may pay the amount of the lien from any retained or unpaid
amounts of the Contract Sum. The Contractor agrees to be responsible for the
amount of any premiums for any bonds which the Owner may elect to give with
respect to any such lien in order to obtain discharge of any such lien from the
Project, or for the interest of any money deposited by the Owner for the purpose
of discharging any such lien. To the extent that the Contractor breaches its
obligations as set forth in this Section, the Contractor agrees to indemnify and
hold the Owner harmless from all damages, costs, or expenses, including legal
fees, which arise out of or relate to any of the above-described liens or the
assertion of any of such liens against the Owner, the property of the Owner, or
the Project. The Contractor shall require any and all professionals providing
services under this Contract (including architects or engineers) to provide and
maintain professional liability coverage in an amount not less than
$1,000,000.00.

         Section 4.21.     Warranty Obligations of the Contractor. The
Contractor unconditionally warrants and guarantees to the Owner that all Work
will be performed free from defects in workmanship and materials, will conform
to the requirements of the Plans and Specifications and the other Contract
Documents, and will be fit and sufficient for the purposes expressed in or
reasonably to be inferred from the Contract Documents. The Contractor will, at
no expense to the Owner, correct any failure to fulfill the above warranty which
may appear at any time within twelve (12) months (or in the case of items as to
which a longer warranty period is set forth in the

                                       13
<PAGE>   14

Contract Documents, within such longer period) after the date that the Owner has
agreed that Substantial Completion of the Work has been achieved. The Contractor
will indemnify and hold the Owner harmless from any and all damages or expenses
incurred by the Owner as a result of any breach of the warranties of the
Contractor set forth herein, including but not limited to damages to other work
constituting part of the Project and attorneys' fees.

         Section 4.22.     Soil Test and Engineering Reports. The Contractor is
responsible for all soil tests and site condition. Owner will provide Contractor
with any test results or reports in its possession, but does not warrant or
represent the accuracy of such tests or such reports.

                                    ARTICLE 5
                             SAFETY, LIABILITY, RISK
                      OF LOSS, INSURANCE, AND SURETY BONDS

         Section 5.1.      Safety. The Contractor will develop, implement and
maintain all safety programs necessary for the safe performance of the Work,
including but not limited to all OSHA requirements. The Contractor will be
responsible for taking all reasonable safety precautions to prevent injury or
death to Persons or damage to property arising out of or related to the Work.
Such obligations of the Contractor will extend to the protection of all
employees engaged in the Work and to all other Persons who may be affected by
the Work. The Contractor will protect all materials and equipment to be
incorporated into the Work, whether in storage or under the care or control of
the Contractor or any Person for whom the Contractor is responsible. The
Contractor will further protect from any harm arising from the Work all other
property located at the Project or adjacent thereto, including but not limited
to trees, shrubs, walks, roadways, structures, and utilities not designated for
removal, relocation, or replacement in the course of the performance of the
Work. The Contractor will comply with all requirements of applicable Laws
pertaining to the safety of Persons or property, and will erect and maintain
such reasonable safeguards for safety and protection, including but not limited
to the posting of signs and the giving of warnings.

         Section 5.2(a).   Indemnification from Liabilities. The Contractor
assumes sole responsibility and liability for any and all damages or injuries of
any kind or nature whatsoever incurred by any Persons or property arising out of
or resulting from the Work or occurring in connection therewith. The Contractor
agrees to indemnify, defend, and hold harmless the Owner, and the officers,
employees and agents of the Owner, from and against any and all claims, suits,
or demands, including costs, litigation expenses, and attorneys' fees in
connection with, arising out of, or related to the death or injury of any Person
or the damage to any property to the extent that any such death, injury, or
damage is caused by the acts, errors, or omissions of the Contractor or any
Person for whose acts or omissions the Contractor is responsible while engaged
in performance of the Work or any activity associated therewith or relating
thereto. The obligations of indemnification provided for herein: (a) are in
addition to, and are not limited by, any insurance maintained by the Contractor
or any subcontractor or by the amount of damages, compensation

                                       14
<PAGE>   15

or benefits payable under worker's compensation acts, disability benefit acts,
or other employee benefit acts; and (b) will survive Final Completion and the
satisfaction of all of the other obligations owed by the parties to each other
in accordance with the Contract Documents.

         Section 5.2(b).   Indemnification from Liabilities. The Owner assumes
sole responsibility and liability for any and all damages or injuries of any
kind or nature whatsoever incurred by any Persons or property arising out of or
resulting to any work performed by owner or any entity with whom the Owner has
directly contracted or contracted through in connection therewith, excluding the
Contractor whose obligations under Section 5.2(a) remain in full force. the
Owner agrees to indemnify, defend, and hold harmless the Contractor, the
officers, employees and agents of the Contractor, from and against any and all
claims, suits, or demands, including costs, litigation expenses, and attorneys'
fees in connection with, arising out of, or related to the death or injury of
any Person or the damage to any property to the extent that any such death,
injury, or damage is caused by the acts, errors, or omissions of the Owner or
any Person for whose acts or omissions the Owner is responsible while engaged in
any work or any activity associated therewith or relating thereto. The
obligations of indemnification provided for herein: (a) are not limited by any
insurance maintained by the Owner or by the amount of damages, compensation or
benefits payable under worker's compensation acts, disability benefit acts, or
other employee benefit acts; and (b) will survive Final Completion and the
satisfaction of all of the other obligations owed by the parties to each other
in accordance with the Contract Documents.

         Section 5.3.      Risk of Loss. The Contractor agrees that the Owner
will not be responsible for any risk of loss or damage to all or any portion of
the Work until after Final Completion. The Owner will have no risk of loss or
damage to any materials, equipment, or tools of the Contractor, or of any other
Person, used or to be used in performing, implementing, or completing the Work.

         Section 5.4.      General Insurance Obligations of the Contractor. The
Contractor agrees to maintain insurance sufficient, to protect the Contractor,
the Owner, and the Owner's mortgagee, if any, from the types of claims set forth
in Sections 5.2 (a) and (b) below which may arise out of or result from the
Contractor's operations pursuant to the Contract Documents or otherwise in
connection with the Work, whether such operations be by the Contractor, a
subcontractor, or any other Person directly or indirectly employed by any of
them, or by anyone for whose acts any of them may be liable: (a) claims under
worker's compensation, disability benefit and other similar employee benefit
acts; (b) claims for damages because of bodily injury, occupational sickness or
disease, or death; (c) claims for damages insured by Personal injury liability
coverage which are sustained by any Person as a result of an offense directly or
indirectly related to employment of such Person by the Contractor or by any
other Person; (d) claims for damages because of injury to or destruction of
tangible property, including loss of use resulting therefrom; and (e) claims for
damages because of bodily injury, death, or property damage arising out of
Ownership, maintenance, or use of a motor vehicle and/or mobil construction
equipment. Without limitation to any of the foregoing, the Contractor will
purchase a commercial general liability insurance

                                       15
<PAGE>   16

policy (including Contractors' protective liability insurance) with a minimum of
$ 10,000,000 per occurrence and $10,000,000 aggregate which may be satisfied by
the application of the primary commercial policy single limit for bodily injury,
property damage, and Personal injury, which policy will include contractual
liability and broad form property damage and will name the Owner and Owner's
mortgagee as additional named insureds. The Contractor will provide the Owner
and the Owner's mortgagee, if any, with such evidence of insurance coverage as
the Owner or the Owner's mortgagee may request, including but not limited to a
certificate of insurance to be submitted to the Owner prior to the Commencement
Date which evidences the Contractor's insurance coverages and provides that the
Owner will receive not less than thirty (30) days advance written notice of
cancellation or alteration. In the event that the Contractor fails to procure
and maintain the above-described insurance coverages, the Owner will have the
right, but not the duty, to procure and maintain such insurance for and in the
name of the Contractor at the sole expense of the Contractor. The Contractor
will maintain such insurance coverages without interruption from the date of the
commencement of the Work until Final Completion and the making of the final
payment described in Section 3.5 of this Agreement. All liability insurance to
be maintained by the Contractor will be written on an occurrence basis, with
only such limitations, exceptions from coverage, and deductibles as are
acceptable to the Owner. The attached Insurance Addendum is incorporated herein.

         Section 5.5.      Property Insurance. The Contractor will maintain a
builder's risk insurance policy in an amount not less than the Contract Sum for
the Work on a replacement cost basis until the final payment has been made to
the Contractor as provided for in Section 3.5 of this Agreement, or until the
Contractor has no insurable interest in the Work, whichever is earlier. The
Contractor's builder's risk property insurance will be written on an "all-risk"
policy form and will insure against the perils of fire and extended coverage and
physical loss or damage including without duplication of coverage, theft,
vandalism, malicious mischief, collapse, false work, temporary buildings, and
debris removal including demolition occasioned by enforcement of any applicable
legal requirements. Such insurance will insure the interests of the Owner, the
Owner's mortgagee, if any, the Contractor, and other Persons recognized by the
Owner to have an insurable interest in the Work, as their interests may appear.
The maximum insurable interests of the Contractor, and of all Persons claiming
through the Contractor will be limited to the total value of the Work reported
to the date of any loss by the Contractor to the Owner, plus such additional
value of the Work as the Contractor can substantiate has been performed or
supplied since the last monthly application for payment; less all portions of
the Contract Sum which have been paid by the Owner with respect thereto. The
Contractor, and all Persons claiming through the Contractor, will not be
entitled under any circumstances to any portion of insurance proceeds payable in
connection with the loss which is greater than the actual loss sustained by the
Contractor and the Persons claiming through the Contractor. In the event that
the Contractor's insurance coverage requires minimal deductibles, the Owner will
pay or bear any costs or losses not covered because such deductibles. All
deductible amounts must be approved by Owner prior to the policy being accepted.
The insurance described in this Section is not intended to cover machinery,
tools, equipment owned or rented by the Contractor which are utilized in the

                                       16
<PAGE>   17

performance of the Work but not incorporated into the Work. The Contractor will,
at the Contractor's sole expense, provide insurance coverage for owned or rented
machinery, tools, or equipment, and for materials not yet made a part of the
Work, in accordance with the provisions of the attached Insurance Addendum. The
Owner maintains the right to be involved in and have an equal say in any
adjustments or settlements which may be made between the Contractor and the
Contractor's insurers. All insurance proceeds from the property insurance
maintained by the Contractor will be payable to the Owner and Contractor as loss
payees, who will then distribute such proceeds in accordance with the provisions
of this Section and as otherwise required by the Contract Documents. The Owner
and the Contractor waive all rights against each other for damages caused by
fire or other perils to the extent covered by the insurance obtained pursuant to
this Section, or other property insurance applicable to the Work, except such
rights as the Owner and the Contractor may have to the proceeds of such
insurance. The Contractor will require each subcontractor in such
subcontractor's agreements with the Contractor to provide a similar waiver in
favor of the Owner and the Contractor. The insurance policies of the Owner, the
Contractor, and subcontractors, will provide waivers of subrogation.

         Section 5.6.      Payment and Performance Bonds. The Contractor will
deliver to the Owner, at the sole expense of the Contractor, bonds for the
benefit of the Owner, and the Owner's mortgagee, if any, guaranteeing the
faithful performance by the Contractor of the duties and obligations owed by the
Contractor pursuant to the Contract Documents, including but not limited to the
obligation to perform and construct the Work in accordance with the Contract
Documents, and guaranteeing the faithful payment by the Contractor of the
obligations of the Contractor arising as a result thereof. The bonds will be in
form and substance acceptable to the Owner and issued by surety companies
acceptable to the Owner, and will contain dual-obligee riders in favor of the
Owner, the Owner's mortgagee, if any, and their successors or assigns. The
undersigned officer of the Contractor by his execution and delivery of this
Agreement, Personally warrants and represents to the Owner that the
above-described bonds will be in existence and effective on or before the
Commencement Date. The bonds will be in amounts of not less than the Contract
Sum or in such other amounts as is required by the terms of the Contract
Documents.

                                    ARTICLE 6
                         OWNER'S RIGHTS TO STOP OR CARRY
                      OUT WORK AND TO TERMINATE CONTRACTOR

         Section 6.1.      Owner's Right to Stop Work. The Owner will have the
right to direct the Contractor in writing to stop the performance of the Work at
any time that the Owner determines that the Contractor is performing defective
work, is failing to correct defective work or is otherwise failing to perform
the Contractor's duties in accordance with the terms and conditions of the
Contract Documents. The exercise of any such right will be by written notice and
will specify the basis for the demand and give the Contractor five (5) days
written notice to respond or begin to take corrective action. The right of the
Owner is without prejudice to any other rights or remedies available to the
Owner as a result of the actions of the Contractor. Upon the receipt

                                       17
<PAGE>   18

by the Contractor of a written notice from the Owner that the Contractor is to
stop the Work, or the portion of it described in the notice, and the failure of
the Contractor to properly respond to the written notice, the Owner can and will
order the Contractor to immediately cease the further performance of the Work
until such time as the cause for such stop order has been eliminated to the
Owner's satisfaction.

         Section 6.2.      Owner's Right to Carry Out the Work. If the
Contractor should fail to prosecute, in whole or in part, the Work properly
(including the failure to man the job due to labor disputes of any type) or fail
to perform any provision of the Contract Documents (including unauthorized
schedule delay) the Owner may, without prejudice to any other rights or remedies
available to the Owner, give to Contractor seven (7) days prior notice which
will specify the Owner's deficiencies. If the Contractor fails or refuses to
have such deficiencies made good by others, then at the sole expense of the
Contractor, the Owner may deduct the costs thereof from any payments then or
thereafter due to the Contractor.

         Section 6.3.      Purchase and Sale Agreement. This Agreement has been
entered into by the Contractor and the Guarantor and their performance hereunder
is required pursuant to the Guarantor's obligations under the Purchase and Sale
Agreement. The terms and conditions and intent of the Purchase and Sale
Agreement shall govern this Agreement in all respects and shall be interpreted
and the obligations of Contractor carried out for the purpose of effecting
Guarantor's obligations under the Purchase and Sale Agreement. Any material
breach of this Agreement by the Contractor or Guarantor which has not been cured
despite a written demand shall constitute a breach of the Purchase and Sale
Agreement.

                                       18
<PAGE>   19

                                    ARTICLE 7
                            MISCELLANEOUS PROVISIONS

         Section 7.1.      Warranties of Contractor's Status. The Contractor
represents and warrants to the Owner that: (a) the Contractor is validly
incorporated under the Laws of the State of its organization; (b) the Contractor
is duly qualified to conduct business in the State in which the Location is
situated; (c) the Contractor is in good standing in the State of its
organization and in the State in which the Location is situated; (d) the
Contractor possesses all licenses and permits necessary or required by
applicable Laws for the Contractor to enter into this Agreement and to perform
the Work and the other duties and obligations required of the Contractor by the
terms and conditions of the Contract Documents; and (e) this Agreement is the
valid and binding obligation of the Contractor and is fully enforceable against
the Contractor in accordance with all stated terms.

         Section 7.2.      Assignments. The Contractor will have no right to
assign this Agreement or any of the Contractor's rights under this Agreement or
the Contract Documents, including but not limited to the payments to be made
thereunder.

         Section 7.3.      Notices Any notice required or permitted by or in
connection with this Agreement or any of the other Contract Documents will be in
writing and will be made by facsimile (confirmed on the date the facsimile is
sent by one of the other methods of giving notice provided for in this Section)
or by hand delivery, by Federal Express, or other similar overnight delivery
service, or by certified mail, unrestricted delivery, return receipt requested,
postage prepaid, addressed to the Owner or the Contractor at the appropriate
address set forth below or to such other address as may be hereafter specified
by written notice by the Owner or the Contractor. Notice will be considered
given as of the date of the facsimile or the hand delivery, one (1) calendar day
after delivery to Federal Express or similar overnight delivery service, or
three (3) calendar days after the date of mailing, independent of the date of
actual delivery or whether delivery is ever in fact made, as the case may be,
provided the giver of notice can establish the fact that notice was given as
provided herein. If notice is tendered pursuant to the provisions of this
Section and is refused by the intended recipient thereof, the notice,
nevertheless, will be considered to have been given and will be effective as of
the date herein provided.

                  If to the Owner:

                           PRIME HOSPITALITY CORP.
                           700 Route 46 East
                           Fairfield, New Jersey 07004
                           Attn: Law Department
                           Fax No.: (201) 882-1787

                                       19
<PAGE>   20

         If to the Contractor:
                           Moore & Associates
                           130 Maple Drive North
                           Hendersonville, TN 37075
                           Attn.:  Martin Fugardi
                           Fax No. (615) 264-8020________________________

         with a copy to:

                           Boult, Cummings, Conners & Berry, PLC
                           David K. Taylor
                           414 Union Street
                           Suite 1600
                           P.O. Box 198062
                           Nashville, TN 37219
                           Fax:  615-252-2380

         Section 7.4.      Time. Time is of the essence to this Agreement and
the other Contract Documents and to each undertaking of the parties thereunder.

         Section 7.5.      Estoppels. The Contractor agrees to provide the Owner
and the Owner's mortgagee, if any, from time to time with such letters of
estoppel as may be required by the Owner or the Owner's mortgagee.

         Section 7.6.      Binding Obligation. This Agreement will be binding
upon the parties and their successors and assigns.

         Section 7.7.      Final Agreement. This Agreement and the Contract
Documents contain the final and entire agreement and understanding of the
parties, and any terms and conditions not set forth in this Agreement or the
other Contract Documents are not a part of this Agreement and the understanding
of the parties hereto. In the event of any conflict or variance between the
terms of this Agreement and the terms of the Supplemental Conditions, the terms
and conditions of the Supplemental Conditions will control. The Contractor
acknowledges that the Contract Documents will in all cases supersede any
proposals submitted by the Contractor to the Owner. This Agreement may only be
amended by a writing signed by all of the parties hereto.

         Section 7.8.      Choice of Law. The Laws of the State where the
Location is situated (excluding, however, conflict of law principles) will
govern and be applied to determine all issues relating to this Agreement and the
Contract Documents.

         Section 7.9.      Captions. The captions contained herein are for
purposes of convenience only and are not a part of this Agreement.

                                       20
<PAGE>   21

         Section 7.10.     Effective Date. This Agreement will be effective as
of the date first above written, independent of the date of execution or
delivery hereof.

         Section 7.11.     Guarantor: Guarantor acknowledges that as a matter of
convenience to Guarantor, Moore & Associates, Inc. has been designated as
Contractor. Notwithstanding such designation, the Guarantor is obligated to
perform all of the obligations of Contractor under this Agreement pursuant to
the terms of the Purchase and Sale Agreement. Owner has recourse to Guarantor
with respect to Contractor's failure to perform any obligation under this
Agreement.

         IN WITNESS WHEREOF, the Owner and the Contractor have duly executed
this Agreement under seal as of the date first above written.

WITNESS/ATTEST:                     OWNER:
                                    PRIME HOSPITALITY CORP.

                                    By: /s/ Douglas Vicari
                                       -----------------------------------------
                                    Name: Douglas Vicari
                                         ---------------------------------------
                                    Title: Senior Vice President
                                          --------------------------------------
                                    Date: 7/9/00
                                         ---------------------------------------

                                    --------------------------------------------
                                    CONTRACTOR:
                                    MOORE & ASSOCIATES, INC.

                                    By: /s/ Martin Fugardi
                                       -----------------------------------------
                                    Name: Martin Fugardi
                                         ---------------------------------------
                                    Title: President
                                          --------------------------------------
                                    Date: 7/9/00
                                         ---------------------------------------

                                    GUARANTOR:
                                    SHOLODGE, INC.

                                    By: /s/ Leon Moore
                                       -----------------------------------------
                                    Name: Leon Moore
                                         ---------------------------------------
                                    Title: President
                                          --------------------------------------
                                    Date: 7/9/00
                                         ---------------------------------------

                                       21
<PAGE>   22

                               INSURANCE ADDENDUM

PURPOSE

This coverage is designed for manufacturers, retailers, wholesalers and
contractors who sell, distribute and/or are under contract to install machinery,
equipment and building materials for their customers. In almost all instances,
title to the property does not pass to the purchaser and/or building owner until
the property is completely installed and/or accepted as satisfactory.

The types of property under installation circumstances will vary from simple
installations involving oil or gas burners, plumbing, air conditioning and
electric fixtures, building materials to very complex installations of
industrial machinery.

Coverage under an Installation Floater is usually provided while the covered
property is in transit, while at temporary staging or storage areas and while at
sites of actual installation. The form itself is "tailored" to fit each specific
account but usually insurance applies until the property has been accepted by
the purchase/owner, the interest of the insured ceases, 30 days after completion
of installation and, of course, policy expiration/termination date whichever
first occurs.

This is a nonfiled Commercial Inland Marine class so the underwriter has
complete flexibility, within sound underwriting standards, in designing limits,
deductible and rate levels. For many insureds policies are written to
automatically cover all installations made during the course of a policy year.
While others may wish a policy to cover a single installation, particularly when
the risk presents unique or unusual conditions or values at risk.

POLICY TERM

Policies may be written for a one year term or short term depending upon the
individual account circumstances.

APPLICATIONS

Available is UK 324 (multiple jobs) and UK 324 for single jobs. However, ACCORD
applications may be utilized as appropriate.

SCHEDULE REQUIREMENTS

Wherever possible and practical, the actual locations at which coverage is being
provided should be listed in the policy with a specific limit of liability. Of
equal benefit is the listing of actual installation locations in reports of
values, if the coverage may be constructed in this fashion. When the limit at
any one location is nominal, this requirement may be waived provided adequate
data is developed annually to make certain premiums and rate levels are
commensurate with exposures.

                                       22
<PAGE>   23

                                   EXHIBIT "A"
                                    ARCHITECT

To be provided by Contractor as soon as possible.

                                       23
<PAGE>   24

                                   EXHIBIT "B"
                         FURNITURE FIXTURES & EQUIPMENT

Contractor will furnish the property with standard AmeriSuites Furniture,
Fixtures & Equipment. By way of illustration a copy of AmeriSuites standard FF&E
package is attached as Exhibit B.

                                       24
<PAGE>   25

                                   EXHIBIT "C"
                            PLANS AND SPECIFICATIONS

The parties contemplate that Contractor will build a "ShoLodge" style building
with "AmeriSuites" finishes sufficient for ShoLodge, Inc. to satisfy the terms
and conditions of the Purchase and Sale Agreement. The parties will agree upon
final Plans and Specifications as soon as possible after the Commencement Date.

The Contract has been based on the following Drawings and Specifications
prepared by _____________:

<TABLE>
<CAPTION>
Architectural Drawings                                                          Dated
----------------------                                                          -----

<S>               <C>                                                           <C>
A00.1             Fire Protection Plans - Code Summary                          ?
A00.2             Wall Assemblies                                               ?
A00.3             Fire Protection Assemblies                                    ?
A15.1             Site Plan                                                     ?
A15.2             Site Details                                                  ?
A30.1             Lower Level and First Floor Plan                              ?
A30.1             Second and Third Floor Plan                                   ?
A32.1             Roof Plan                                                     ?
A40.1             Building Elevations                                           ?
A40.2             Enlarged Building Elevations                                  ?
A40.3             Building Sections - Wings                                     ?
A40.4             Building Sections - Wings                                     ?
A40.5             Building Sections - Lobby                                     ?
A40.6             Building Sections - Tower                                     ?
A50.1             Enlarged Unit Plans                                           ?
A50.2             Enlarged Unit Plans                                           ?
A50.3             Enlarged Unit Plans                                           ?
A50.4             Enlarged Lower Level Lobby Plan                               ?
A50.5             Enlarged First Floor Lobby Plan                               ?
A50.6             Enlarged Second Floor Lobby Plan                              ?
A50.7             Enlarged Third Floor Lobby Plan                               ?
A50.8             Enlarged Lower Level Corner Plan                              ?
A50.9             Enlarged First, Second & Third Floor Corner Plans             ?
A50.10            Enlarged Stair Plans and Sections                             ?
A50.11            Enlarged Stair Section and Details                            ?
A50.12            Elevator Details and Sections                                 ?
A52.1             Interior Elevations                                           ?
A52.2             Interior Elevations                                           ?
A52.3             Interior Elevations                                           ?
A52.4             Interior Details                                              ?
</TABLE>

                                       25
<PAGE>   26
<TABLE>
<S>               <C>                                                           <C>
A52.5             Interior Details                                              ?
A56.1             Window and Door Details                                       ?
A56.2             Exterior Details                                              ?
A56.3             Reception Desk                                                ?
A58.1             Door and Window Schedule & Details                            ?
Exhibit "A": Contract Drawings                                                  Page 2 of 3

A58.2             Finish Schedules                                              ?
A58.3             Hardware Schedule                                             ?
</TABLE>

<TABLE>
<CAPTION>
Structural Drawings                                                             Dated
-------------------                                                             -----
<S>               <C>                                                           <C>

S00.1             General Structural Notes                                      ?
S20.1             Lower Level Foundation Plan                                   ?
S30.1             First Floor Foundation and Framing Plan                       ?
S30.2             Second Floor Framing Plan                                     ?
S30.3             Third Floor Framing Plan                                      ?
S30.4             Roof Framing Plan                                             ?
S60.1             Sections and Details                                          ?
S60.2             Sections and Details                                          ?
S60.3             Sections and Details                                          ?
S90.1             Truss Profiles/Sections and Details                           ?
S90.2             Shearwall Schedules, Sections and Details                     ?

<CAPTION>

Electrical Drawings                                                             Dated
-------------------                                                             -----
<S>               <C>                                                           <C>
ES-1              Electrical Site Plan                                          ?
E-1               Electrical Floor Plan                                         ?
E-2               Electrical Floor Plan                                         ?
E-3               Electrical Floor Plan                                         ?
E-4               Electrical Floor Plan                                         ?
E-5               Enlarged Electrical Floor Plan                                ?
E-6               Enlarged Guest Suite Lighting and Power Plans                 ?
E-7               TV, Telephone and Fire Alarm Details and Notes                ?
E-8               One Line Riser Diagram, Lighting Schedule, Legend &
                  General Notes                                                 ?
E-9               Electrical Panelboard Schedules                               ?
E-10              Electrical Panelboard Schedules                               ?
</TABLE>

                                       26
<PAGE>   27

<TABLE>
<CAPTION>
Exhibit "A" Contract Drawings                                                   Page 3 of 3
Mechanical Drawings                                                             Dated
-------------------                                                             -----
<S>               <C>                                                           <C>
M-1               Lower Level Mechanical Plan                                   ?
M-2               First Floor Mechanical Plan                                   ?
M-3               Second Floor Mechanical Plan                                  ?
M-4               Third Floor Mechanical Plan                                   ?
M-5               Mechanical Schedules and Legends                              ?
M-6               Mechanical Details and Sections                               ?

<CAPTION>

Plumbing Drawings                                                               Dated
-----------------                                                               -----
<S>               <C>                                                           <C>
P-1               Plumbing Schedules and Symbols                                ?
P-2               Plumbing Floor Plan                                           ?
P-3               Plumbing Floor Plan                                           ?
P-4               Plumbing Floor Plan                                           ?
P-5               Plumbing Floor Plan                                           ?
P-6               Plumbing Floor Plan                                           ?
P-7               Lower Level Partial Plan                                      ?
P-8               Plumbing Floor Plan                                           ?
P-9               Plumbing Floor Plan                                           ?
P-10              Plumbing Floor Plan                                           ?
P-11              Plumbing Partials                                             ?
P-12              Plumbing Partials                                             ?
P-13              Plumbing Partials                                             ?
P-14              Plumbing Partials                                             ?
P-15              Plumbing Details                                              ?

<CAPTION>

Civil Engineering                                                               Dated
-----------------                                                               -----
<S>      <C>                                                                    <C>
D6       Cover Sheet, Vicinity Map and Schedule of Drawings                     ?
1        Layout Plan                                                            ?
2        Grading, Drainage and Erosion Control Plan                             ?
3        Utility Plan                                                           ?
4        Landscaping Plan                                                       ?
5        Details                                                                ?
</TABLE>

Other

         Geotechnical Engineering Evaluation for Proposed ________________,
         dated __________ by _________________ (Project No.
         _____________________)

         AmeriSuites Construction and Design Standards Manual dated ______ by
         Prime

                                       27
<PAGE>   28

         Hospitality Design Department.

                                       28
<PAGE>   29

                                    EXHIBIT D
                               SCHEDULE OF VALUES

                                       29
<PAGE>   30

                                   EXHIBIT "E"
                             SUPPLEMENTAL CONDITIONS

1.       For 60 days before the Completion Date, Contractor shall provide Owner,
         at no additional installation or rental cost, use of a secured trailer
         on-site with electrical power, lighting and two telephone lines. Owner
         shall pay directly for use of its telephone and electrical service.

                                       30

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00012-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00012-of-00352.parquet"}]]