Document:

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                                                                    EXHIBIT 10.7

                             HOTEL LEASE AGREEMENT

                          DATED AS OF APRIL 26, 2001

                                    BETWEEN

                              APPLE SUITES, INC.,
                            A VIRGINIA CORPORATION

                                   AS LESSOR

                                      AND

                         APPLE SUITES MANAGEMENT, INC.
                            A VIRGINIA CORPORATION

                                   AS LESSEE
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                               TABLE OF CONTENTS
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ARTICLE 1 LEASED PROPERTY; OTHER DEFINITIONS.....................................................................   1
   1.1.  Leased Property.........................................................................................   1
   1.2.  Definitions.............................................................................................   2

ARTICLE 2 TERM; TERMINATION......................................................................................  14
   2.1.  Term....................................................................................................  14
   2.2.  Lessor's Option to Terminate Lease......................................................................  15
   2.3.  Transition Procedures...................................................................................  16
   2.4.  Holding Over............................................................................................  17

ARTICLE 3 RENT; RENT ADJUSTMENTS.................................................................................  17
   3.1.  Rent....................................................................................................  17
   3.2.  Confirmation of Percentage Rent and Sundry Rent.........................................................  21
   3.3.  Additional Charges......................................................................................  22
   3.4.  Net Lease; No Termination, Abatement, Etc...............................................................  22
   3.5.  Material Changes in Economic Climate....................................................................  23
   3.6.  Rent Adjustment:  Basic Assumptions Incorrect...........................................................  24

ARTICLE 4 ANNUAL BUDGETS; BOOKS AND RECORDS......................................................................  25
   4.1.  Annual Budget...........................................................................................  25
   4.2.  Books and Records.......................................................................................  26

ARTICLE 5 IMPOSITIONS; HOTEL COSTS...............................................................................  26
   5.1.  Payment of Impositions..................................................................................  26
   5.2.  Notice of Impositions...................................................................................  27
   5.3.  Adjustment of Impositions...............................................................................  27
   5.4.  Utility Charges.........................................................................................  27
   5.5.  Insurance Premiums......................................................................................  27
   5.6.  Franchise Fees..........................................................................................  27
   5.7.  Ground Rent.............................................................................................  27

ARTICLE 6 LEASED PROPERTY; LESSEE'S PERSONAL PROPERTY............................................................  28
   6.1.  Ownership of the Leased Property........................................................................  28
   6.2.  Lessee's Personal Property..............................................................................  28
   6.3.  Lessor's Lien...........................................................................................  28
   6.4.  Lessor's Option to Purchase Assets of Lessee............................................................  29

ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY...................................................................  29
   7.1.  Condition of the Leased Property........................................................................  29
   7.2.  Use of the Leased Property..............................................................................  29
   7.3.  Lessor to Grant Easements, Etc..........................................................................  30

ARTICLE 8 LESSEE'S COMPLIANCE WITH LAW; ENVIRONMENTAL COVENANTS..................................................  31
   8.1.  Compliance with Legal and Insurance Requirements, Etc...................................................  31
   8.2.  Legal Requirement Covenants.............................................................................  31
   8.3.  Environmental Covenants.................................................................................  32

ARTICLE 9 MAINTENANCE AND REPAIRS; ENCROACHMENTS AND RESTRICTIONS................................................  34
   9.1.  Maintenance and Repairs.................................................................................  34
   9.2.  Encroachments, Restrictions, Etc........................................................................  35
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ARTICLE 10 ALTERATIONS AND IMPROVEMENTS; FF&E RESERVE............................................................  36
   10.1.    Alterations..........................................................................................  36
   10.2.    Salvage..............................................................................................  36
   10.3.    Joint Use Agreements.................................................................................  36
   10.4.    Initial Upgrade of Leased Improvements...............................................................  37
   10.5.    Furniture, Fixture and Equipment Allowance...........................................................  37

ARTICLE 11 COMPLIANCE WITH FRANCHISE.............................................................................  37
   11.1.    Compliance with Franchise Agreement and Management Agreement.........................................  37

ARTICLE 12 PERMITTED LIENS AND CONTESTS..........................................................................  38
   12.1.    Liens................................................................................................  38
   12.2.    Permitted Contests...................................................................................  38

ARTICLE 13 INSURANCE REQUIREMENTS................................................................................  39
   13.1.    General Insurance Requirements.......................................................................  39
   13.2.    Replacement Cost.....................................................................................  40
   13.3.    Waiver of Subrogation................................................................................  41
   13.4.    Form Satisfactory, Etc...............................................................................  41
   13.5.    Increase in Limits...................................................................................  41
   13.6.    Blanket Policy.......................................................................................  42
   13.7.    No Separate Insurance................................................................................  42
   13.8.    Reports On Insurance Claims..........................................................................  42

ARTICLE 14 CASUALTY INSURANCE PROCEEDS; RECONSTRUCTION...........................................................  42
   14.1.    Insurance Proceeds...................................................................................  42
   14.2.    Reconstruction in the Event of Damage or Destruction Covered by Insurance............................  43
   14.3.    Reconstruction in the Event of Damage or Destruction Not Covered by Insurance........................  44
   14.4.    Lessee's Property....................................................................................  44
   14.5.    Abatement of Rent....................................................................................  44
   14.6.    Damage Near End of Term..............................................................................  44
   14.7.    Waiver...............................................................................................  44

ARTICLE 15 CONDEMNATION; AWARD ALLOCATION........................................................................  45
   15.1.    Definitions..........................................................................................  45
   15.2.    Parties' Rights and Obligations......................................................................  45
   15.3.    Total Taking.........................................................................................  45
   15.4.    Allocation of Award..................................................................................  45
   15.5.    Partial Taking.......................................................................................  45
   15.6.    Temporary Taking.....................................................................................  46

ARTICLE 16 DEFAULT BY LESSEE; LESSOR'S REMEDIES..................................................................  46
   16.1.    Events of Default....................................................................................  46
   16.2.    Surrender............................................................................................  48
   16.3.    Damages..............................................................................................  48
   16.4.    Waiver...............................................................................................  49
   16.5.    Application of Funds.................................................................................  49
   16.6.    Lessor's Right to Cure Lessee's Default..............................................................  49

ARTICLE 17 DEFAULT BY LESSOR; LESSEE'S REMEDIES..................................................................  50
   17.1.    Breach by Lessor.....................................................................................  50
   17.2.    Lessee's Right to Cure...............................................................................  50
   17.3.    Provisions Relating to Purchase of the Leased Property by Lessee.....................................  51
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ARTICLE 18 INDEMNIFICATION.......................................................................................  51
   18.1.    Indemnification......................................................................................  51

ARTICLE 19 REIT REQUIREMENTS AND RESTRICTIONS....................................................................  52
   19.1.    Personal Property Limitation.........................................................................  52
   19.2.    Sublease Rent Limitation.............................................................................  52
   19.3.    Sublease Tenant Limitation...........................................................................  53
   19.4.    Lessee Ownership Limitations.........................................................................  53
   19.5.    Lessee Officer and Employee Limitation...............................................................  53
   19.6.    Payments to Affiliates of Lessee.....................................................................  53

ARTICLE 20 SUBLETTING AND ASSIGNMENT.............................................................................  53
   20.1.    Subletting and Assignment............................................................................  53
   20.2.    Attornment...........................................................................................  54
   20.3.    Conveyance by Lessor.................................................................................  54

ARTICLE 21 QUIET ENJOYMENT; RISK OF LOSS.........................................................................  54
   21.1.    Quiet Enjoyment......................................................................................  54
   21.2.    Risk of Loss.........................................................................................  55

ARTICLE 22 LESSOR MORTGAGES; SUBORDINATION OF LEASE..............................................................  55
   22.1.    Lessor May Grant Liens...............................................................................  55
   22.2.    Subordination of Lease...............................................................................  55

ARTICLE 23 ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS; INSPECTION RIGHTS........................................  56
   23.1.    Estoppel Certificates; Financial Statements..........................................................  56
   23.2.    Lessor's Right to Inspect............................................................................  57

ARTICLE 24 APPRAISERS............................................................................................  57
   24.1.    Appraisers...........................................................................................  57

ARTICLE 25 ARBITRATION AND DISPUTE RESOLUTION PROCEDURES.........................................................  58
   25.1.    Arbitration..........................................................................................  58
   25.2.    Alternative Arbitration..............................................................................  58
   25.3.    Arbitration Procedure................................................................................  58

ARTICLE 26 NOTICES...............................................................................................  59
   26.1.    Notices..............................................................................................  59

ARTICLE 27 MISCELLANEOUS.........................................................................................  59
   27.1.    No Waiver............................................................................................  59
   27.2.    Remedies Cumulative..................................................................................  59
   27.3.    Waiver of Trial by Jury..............................................................................  60
   27.4.    Acceptance of Surrender..............................................................................  60
   27.5.    No Merger of Title...................................................................................  60
   27.6.    Waiver of Presentment, Etc...........................................................................  60
   27.7.    Action for Damages...................................................................................  60
   27.8.    Lease Assumption in Bankruptcy Proceeding............................................................  60
   27.9.    Enforceability.......................................................................................  60
   27.10.   Memorandum of Lease..................................................................................  61
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Exhibit A - Legal Description
Exhibit B - Work Letter
Schedule 3.1(b) - Suite Revenue Breakpoint

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                             HOTEL LEASE AGREEMENT

     THIS HOTEL LEASE AGREEMENT (hereinafter called "Lease"), made as of the
26th day of April, 2001, by and between Apple Suites, Inc., a Virginia
corporation (hereinafter called "Lessor"), and Apple Suites Management, Inc., a
Virginia corporation (hereinafter called "Lessee"), provides as follows:

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

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

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

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

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

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

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

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

          (e) all furniture and furnishings and all other items of personal
property (excluding Inventory and personal property owned by Lessee) located on,
and used in connection with, the operation of the Leased Improvements as a
hotel, together with all replacements, modifications, alterations and additions
thereto; and
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          (f) all existing leases of space within the Leased Property (including
any security deposits or collateral held by Lessor pursuant thereto).

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

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

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

          Affiliate:  As used in this Lease the term "Affiliate" of a Person
          ---------
shall mean (a) any Person that, directly or indirectly, controls or is
controlled by or is under common control with such Person, (b) any other Person
that owns, beneficially, directly or indirectly, ten percent (10%) or more of
the outstanding capital stock, shares or equity interests of such Person, or (c)
any officer, director, employee, partner, manager or trustee of such Person or
any Person controlling, controlled by or under common control with such Person
or any Person that owns, beneficially, directly or indirectly, ten percent (10%)
or more of the outstanding capital stock, shares or equity interests of such
Person (excluding trustees and Persons serving in similar capacities who are not
otherwise an Affiliate of such Person).  For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       3
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together with the notes thereto, all in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared in accordance with generally accepted
accounting principles and audited by independent certified public accountants
acceptable to Lessor in its sole discretion.

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

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

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

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

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

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

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

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

                                       4
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          (a) Failure of Lessee, Lessor, any Predecessor or the Leased Property
to comply at any time with all Environmental Laws;

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

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

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

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

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

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

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

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

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

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

                                       5
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          Fixtures:  As defined in Section 1.1.
          --------

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

          Franchise Agreement:  Any franchise agreement or license agreement
          -------------------
with a franchisor (such as Promus Hotels, Inc.) under which the Hotel is
operated.

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

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

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

                                       6
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       7
<PAGE>

hotel occupancy levels for the same period during the prior calendar year, as
published in the applicable STR Reports.

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

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

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

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

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

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

          Lease:  This Lease.
          -----

                                       8
<PAGE>

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

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

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

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

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

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

          Lessee's Work:  As defined in Section 10.4.
          -------------

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

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

                                       9
<PAGE>

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

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

          Manager:  Promus Hotels, Inc., a Delaware corporation, or any
          -------
successor manager that is retained by Lessee to operate the Hotel pursuant to
this Lease and the Franchise Agreement.

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

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

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

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

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

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

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

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

                                      10
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

                                      11
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

          (e)  Sundry Revenues.

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

                                      12
<PAGE>

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

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

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

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

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

          Unavoidable Occurrence.  The occurrence of strikes, lockouts, labor
          ----------------------
unrest, gasoline and other energy shortages, widespread disruption of air, auto
or other travel, inability to procure materials or services, power or other
utility failure, acts of God (such as hurricanes, tornadoes, earthquakes, floods
and mud slides), governmental restrictions, war or other enemy or terrorist
action, civil commotion, fire, casualty, condemnation, the Year 2000 Problem or
other similar causes, in each case, if such cause is beyond the reasonable
control of Lessee; provided that (i) lack of funds shall not be deemed a cause
beyond the reasonable control of either party hereto unless such lack of funds
is caused by the failure of the other party hereto to perform any obligations of
such party under this Lease or any guaranty of this Lease, and (ii) any such
occurrence is an extraordinary, as opposed to a routine or cyclical, material
event that was not reasonably foreseeable when the then-applicable Annual Budget
was prepared.

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

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

                                      13
<PAGE>

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

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

           Work Letter:  As defined in Section 10.4.
           -----------

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

           Year 2000 Problem:  The malfunction of software, hardware or an
           -----------------
embedded technological system due to the failure to properly process any date or
input which includes an indication of or reference to a date, including
specifically but not limited to dates that represent or reference different
centuries or more than one century, if either (i) Lessor had previously refused
to make or approve a capital expenditure reasonably proposed by Lessee to avoid
such Year 2000 Problem, or (ii) such Year 2000 Problem results from a
governmental or other third party failure to be year 2000 compliant and Lessee
has not failed to take reasonable steps to seek assurances that such parties
will be year 2000 compliant.

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

     2.1.  Term.
           -----

           (a)  The term of the Lease (the "Term") shall commence April 26, 2001
(the "Commencement Date"), and shall end on the tenth (10th) anniversary of the
Commencement Date, unless sooner terminated in accordance with the provisions
hereof or extended to an anniversary of the initial expiration date pursuant to
this Article 2.

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

           (c)  Lessee is granted an option to extend the Term for a period of
five (5) years following the end of the First Extension (the "Second
Extension"), provided that Lessee is not in default hereunder either at the time
of exercise of the option or at the end of the First Extension, which option
must be exercised by written notice to Lessor at least one hundred twenty (120)
days

                                      14
<PAGE>

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

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

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

                                      15
<PAGE>

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

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

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

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

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

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

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

           (g)  Surrender. Lessee will, upon the expiration or prior termination
                ---------
of the Term, vacate and surrender the Leased Property to Lessor in the condition
in which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as

                                      16
<PAGE>

permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Lessee to maintain the Leased
Property in good order and repair, as would a prudent owner, during the entire
Term of the Lease), or damage by casualty or Condemnation (subject to the
obligations of Lessee to restore or repair as set forth in the Lease)

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

     2.4.  Holding Over.  If Lessee for any reason remains in possession of the
           -------------
Leased Property after the expiration or earlier termination of the Term, such
possession shall be as a tenant at sufferance during which time Lessee shall pay
as rental each month 150% of the aggregate of (a) one-twelfth of the aggregate
Base Rent and Percentage Rent payable with respect to the last Fiscal Year of
the Term, (b) all Additional Charges accruing during the applicable month and
(c) all other sums, if any, payable by Lessee under this Lease with respect to
the Leased Property. During such period, Lessee shall be obligated to perform
and observe all of the terms, covenants and conditions of this Lease, but shall
have no rights hereunder other than the right, to the extent given by law to
tenancies at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease.

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

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

           (a)  Base Rent:  The annual sum of Four Hundred Eighty-Six Thousand
                ---------
Three Hundred Seventy-Three Dollars ($486,373) (prorated for fiscal year 2001),
as adjusted pursuant to Subsection 3.1(d) hereof, payable in advance in equal,
consecutive monthly installments, on or before the tenth day of each calendar
month of the Term ("Base Rent"); provided, however, that the first monthly
payment of Base Rent shall be payable during the second calendar month of the
Term, and that the first and last monthly payments of Base Rent shall be pro
rated as to any partial month (subject to adjustment as provided in Sections
14.5, 15.3 and 15.5).

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

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

                                      17
<PAGE>

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

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

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

For the purpose of the above formula:

     The quarterly revenues computation ("Quarterly Revenues Computation") is
equal to the amount obtained by adding, for the applicable calendar quarter, an
amount equal to the sum of (i) seventeen percent (17%) of all Fiscal Year to
date Suite Revenues up to the applicable suite revenue breakpoint (the "Suite
Revenue Breakpoint") described in Schedule 3.1(b), attached hereto, (prorated
                                  ---------------
for the first and last calendar quarters of the Term (including any applicable
extensions)) and fifty-five percent (55%) of all Fiscal Year to date Suite
Revenues in excess of the applicable Suite Revenue Breakpoint.  At the beginning
of each Fiscal Year, the Suite Revenue Breakpoints shall be adjusted by the same
percentage that the Base Rent is adjusted pursuant to Subsection 3.1(d).

The Percentage Rent shall be payable as follows:

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

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

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

                                      18
<PAGE>

           amount determined pursuant to the Quarterly Revenues Computation of
           such calendar quarter.

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

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

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

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

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

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

     In addition, on or before March 1 of each year, commencing with March 1,
2000, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor setting forth the computation of the actual Percentage Rent
and Sundry Rent that accrued for each quarter of the Fiscal Year that ended on
the immediately preceding December 31 and shall pay to Lessor Percentage Rent
and Sundry Rent, if due and payable, for the last quarter of the applicable
Fiscal Year. Additionally, if the annual Percentage Rent or Sundry Rent due and
payable for any Fiscal

                                      19
<PAGE>

Year (as shown in the applicable Officer's Certificate) exceeds the amount
actually paid as Percentage Rent or Sundry Rent by Lessee for such year, Lessee
also shall pay such excess to Lessor at the time such certificate is delivered.
If the Percentage Rent or Sundry Rent actually due and payable for such Fiscal
Year is shown by such certificate to be less than the amount actually paid as
Percentage Rent or Sundry Rent for the applicable Fiscal Year, Lessor, at its
option, shall reimburse such amount to Lessee or credit such amount against
subsequent months' Base Rent or Sundry Rent, as applicable, and with respect to
Percentage Rent, to the extent necessary, subsequent quarters' Percentage Rent
payments. Any such credit to Base Rent shall not be applied for purposes of
calculating Percentage Rent payable for any subsequent quarter.

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

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

          (e)  CPI Adjustments to Base Rent and Percentage Rent.  For each year
               ------------------------------------------------
of the Term beginning on or after January 1, 2001, the Base Rent shall be
adjusted from time to time as follows:

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

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

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

                                      20
<PAGE>

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

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

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

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

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

    3.2.  Confirmation of Percentage Rent and Sundry Rent.  Lessee shall
          ------------------------------------------------
utilize, or cause to be utilized, an accounting system for the Leased Property
in accordance with its usual and customary practices, and in accordance with
generally accepted accounting principles, that will accurately record all data
necessary to compute Percentage Rent and Sundry Rent, and Lessee shall retain,
for at least four (4) years after the expiration of each Fiscal Year (and in any
event until the reconciliation described in Subsection 3.1(c) for such Fiscal
Year has been made), reasonably adequate records conforming to such accounting
system showing all data necessary to compute Percentage Rent and Sundry Rent for
the applicable Fiscal Years. Lessor, at its expense (except as provided
hereinbelow), shall have the right from time to time, upon prior written notice
to Lessee and Manager, by its accountants or representatives to audit the
information that formed the basis for the data set forth in any Officer's
Certificate provided under Subsection 3.1(d) and, in connection with such
audits, to examine all Lessee's records (including supporting data and sales and
excise tax returns) reasonably required to verify Percentage Rent and Sundry
Rent, subject to any prohibitions or limitations on disclosure of any such data
under Legal Requirements; provided, however that Lessor may only inspect or
audit records in Manager's possession subject to the terms

                                      21
<PAGE>

of Lessee's access thereto under the Management Agreement. If any such audit
discloses a deficiency in the payment of Percentage Rent or Sundry Rent, and
either Lessee agrees with the result of such audit or the matter is otherwise
determined or compromised, Lessee shall forthwith pay to Lessor the amount of
the deficiency, as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the date
of payment thereof; provided, however, that as to any audit that is commenced
more than two (2) years after the date Percentage Rent or Sundry Rent for any
Fiscal Year is reported by Lessee to Lessor, the deficiency, if any, with
respect to such Percentage Rent or Sundry Rent shall bear interest at the
Overdue Rate only from the date such determination of deficiency is made unless
such deficiency is the result of gross negligence or willful misconduct on the
part of Lessee, in which case interest at the Overdue Rate will accrue from the
date such payment should have been made to the date of payment thereof. If any
such audit discloses that the Percentage Rent or Sundry Rent actually due from
Lessee for any Fiscal Year exceed those reported by Lessee by more than three
percent (3%), Lessee shall pay the cost of such audit and examination. Any
proprietary information obtained by Lessor pursuant to the provisions of this
Section shall be treated as confidential, except that such information may be
used, subject to appropriate confidentiality safeguards, in any litigation
between the parties and except further that Lessor may disclose such information
to prospective lenders. The obligations of Lessee contained in this Section
shall survive the expiration or earlier termination of this Lease.

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

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

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

                                      22
<PAGE>

charges or expressly provide that certain expenses or maintenance shall be paid
or performed by Lessor.

           (b)  Except as otherwise specifically provided in this Lease, and
except for loss of the Franchise Agreement solely by reason of any action or
inaction by Lessor, Lessee, to the extent permitted by law, shall remain bound
by this Lease in accordance with its terms and shall neither take any action
without the written consent of Lessor (which shall not be unreasonably withheld
or delayed) to modify, surrender or terminate the same, nor seek nor be entitled
to any abatement, deduction, deferment or reduction of the Rent, or setoff
against the Rent, nor shall the obligations of Lessee be otherwise affected by
reason of (a) any damage to, or destruction of, any Leased Property or any
portion thereof from whatever cause or any Taking of the Leased Property or any
portion thereof, (b) the lawful or unlawful prohibition of, or restriction upon,
Lessee's use of the Leased Property, or any portion thereof, or the interference
with such use by any Person other than Lessor, (c) any claim which Lessee has or
might have against Lessor by reason of any default or breach of any warranty by
Lessor under this Lease or any other agreement between Lessor and Lessee, or to
which Lessor and Lessee are parties, (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor,
or (e) for any other cause whether similar or dissimilar to any of the foregoing
other than a discharge of Lessee from any such obligations as a matter of law.
Lessee hereby specifically waives all rights, arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law to (1)
modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (2) entitle Lessee to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Lessee hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease or by
termination of this Lease other than by reason of an Event of Default.

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

           (a)  In the event of the occurrence of a Force Majeure or a Hotel
Market Decline, Lessor and Lessee shall, in good faith, negotiate possible
modifications to the Base Rent and Percentage Rent to reduce such Base Rent and
Percentage Rent to recent market rates for hotel REIT leases for similar hotel
properties in the Hotel's Competitive Set, retroactively effective as of the
first calendar month of the Term following the last day of the six-month period
during which such Hotel Market Decline has occurred with the excess of Base Rent
and Percentage Rent actually paid for such period over the reduced Base Rent and
Percentage Rent, plus interest thereon at the Base Rate, to be credited to the
next payments of Rent due and owing hereunder. If Lessor and Lessee are unable
to agree that a Force Majeure or a Hotel Market Decline has occurred, within
thirty (30) days after the date of written certification from Lessee to Lessor
that a Force Majeure and Hotel Market Decline has occurred (accompanied by
reasonably detailed computations and documentation to support such assertion),
the matter may be submitted by either party to arbitration under Section 25.2
hereof for resolution (during which period Lessee shall continue to pay Base
Rent and Percentage Rent as required under Section 3.1 of this Lease). If,
within ninety (90) days (during which period Lessee shall continue to pay Base
Rent and Percentage Rent as required

                                      23
<PAGE>

under Section 3.1 of this Lease) following the date of such written
certification from Lessee (or the date of a decision of an arbitrator if
required hereunder to determine that a Force Majeure and Hotel Market Decline
has occurred), Lessor and Lessee are unable to agree upon the amount of
reduction in Base Rent and Percentage Rent contemplated hereby, Lessee shall
have the option to terminate this Lease upon not less than thirty (30) days
prior written notice to Lessor.

           (b)  In the event of the occurrence of a National Economic Decline or
a Regional Market Decline, Lessor and Lessee shall, in good faith, negotiate (i)
possible modifications to the Base Rent and Percentage Rent to reduce such Base
Rent and Percentage Rent to recent market rates for hotel REIT leases for
similar hotel properties in the Hotel's Competitive Set, and (ii) possible
modifications to the Base and Percentage Rent payable under each of the Other
Leases for Other Hotels in the same Region (as defined in the STR Reports) as
the Hotel to reduce such Base Rent and Percentage Rent to recent market rates
for hotel REIT leases for similar hotel properties in the Hotel's Competitive
Set, in each case retroactively effective as of the first calendar month of the
Term following the last day of the six month period during which such Regional
Market Decline has occurred with the excess of Base Rent and Percentage Rent
actually paid for such period over the reduced Base Rent and Percentage Rent,
plus interest thereon at the Base Rent, to be credited to the next payments of
Rent due and owing hereunder. If, within thirty (30) days after the date of
written certification from Lessee to Lessor that a National Economic Decline and
Regional Market Decline has occurred (accompanied by reasonably detailed
computations and documentation to support such assertion), Lessor and Lessee are
unable to agree that a National Economic Decline or Regional Market Decline has
occurred, the matter may be submitted by either party to arbitration under
Section 25.2 hereof for resolution (during which period Lessee shall continue to
pay Base Rent and Percentage Rent as required under Section 3.1 of this Lease).
If, within ninety (90) days (during which period Lessee shall continue to pay
Base Rent and Percentage Rent as required under Section 3.1 of this Lease)
following the date of such initial written certification from Lessee (or the
date of a decision of an arbitrator if required hereunder to determine that a
National Economic Decline and Regional Market Decline has occurred), Lessor and
Lessee are unable to agree upon the amount of reduction in Base Rent and
Percentage Rent contemplated hereby, Lessee shall have the option, upon not less
than sixty (60) days prior written notice to Lessor, to terminate all (but not
less than all) of the Existing Leases of hotels in the same Region as the Hotel,
including this Lease.

     3.6.  Rent Adjustment: Basic Assumptions Incorrect.  Except to the extent
           ---------------------------------------------
that doing so would cause Lessor to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code, notwithstanding anything
herein (other than Article 19) to the contrary, if (i) the facts and
circumstances underlying the documented, basic assumptions upon which both
Lessor and Lessee have relied in determining the Base Rent, the Suite Revenue
Breakpoint, and the Percentage Rent payable hereunder become materially
incorrect solely as a result of (A) a decision to re-brand the Hotel that is
made after the Commencement Date, (B) the scope or cost of substantial
renovations or other capital improvements to the Hotel, or (C) the
implementation of any other hotel repositioning strategies (that were not
planned as of the Commencement Date) resulting in significant disruption of the
operations of the Hotel (collectively, a "Repositioning"), and (ii) Lessor and
Lessee so agree in writing, then Lessor and Lessee shall, in good faith,
negotiate modifications to the Base Rent, Suite Revenue Breakpoint and
Percentage Rent to adjust (i.e., increase, decrease or reallocate among revenue
categories) such Base Rent, Suite Revenue

                                      24
<PAGE>

Breakpoint and Percentage Rent to reflect such change in basic assumptions for
the affected periods, using the same methodology and other basic assumptions as
were initially utilized in determining the Base Rent, Suite Revenue Breakpoint
and Percentage Rent hereunder. If Lessor and Lessee are unable to agree, within
thirty (30) days after the date of written certification from either Lessee or
Lessor to the other party that a good faith dispute exists, as to the existence
of the occurrence of a Repositioning or the adjustments to be made to the
amounts or percentages for the Base Rent, Suite Revenue Breakpoint and
Percentage Rent hereunder as a result of any repositioning, the dispute may be
submitted by either party to arbitration under Section 25.2 hereof for
resolution (during which period Lessee shall continue to pay Base Rent and
Percentage Rent as required under Section 3.1 of this Lease); provided, however,
that for purposes of applying the procedures in Section 25.3 to such
arbitration, the target deadline therein for concluding the arbitration shall be
shortened from ninety (90) days to thirty (30) days.

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

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

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

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

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

           (d)  A cash flow projection.

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

                                      25
<PAGE>

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

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

     5.1.  Payment of Impositions.  Subject to Section 12.2 (relating to
           -----------------------
permitted contests), Lessee will pay, or cause to be paid, all Impositions
(other than Real Estate Taxes and Personal Property Taxes, which shall be paid
by Lessor) before any fine, penalty, interest or cost may be added for non-
payment, such payments to be made directly to the taxing or other authorities
where feasible, and will promptly furnish to Lessor copies of official receipts
or other satisfactory proof evidencing such payments. Lessee's obligation to pay
such Impositions shall be deemed absolutely fixed upon the date such Impositions
become a lien upon the Leased Property or any part thereof. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Imposition),
Lessee may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Imposition) in installments and in such event, shall pay
such installments during the Term hereof (subject to Lessee's right of contest
pursuant to the provisions of Section 12.2) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto. Lessor, at its expense, shall, to the extent required or permitted by
applicable law, prepare and file all tax returns in respect of Lessor's net
income, gross receipts, sales and use, single business, transaction privilege,
rent, ad valorem, franchise taxes, Real Estate Taxes, Personal Property Taxes
and taxes on its capital stock, and Lessee, at its expense, shall, to the extent
required or permitted by applicable laws and regulations, prepare and file all
other tax returns and reports in respect of any Imposition as may be required by
governmental authorities. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Lessee, the same shall be paid over to or
retained by Lessee if no Event of Default shall have occurred hereunder and be
continuing. If an Event of Default shall have occurred and be continuing, any
such refund shall be paid over to or retained by Lessor. Any such funds retained
by Lessor due to an Event of Default shall be applied as provided in Article 16.
Lessor and Lessee shall, upon request of the other, provide such data as is
maintained by the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and reports. Lessee
shall file all Personal Property Tax returns in such jurisdictions where it is
legally required so to file. Lessor, to the extent it possesses the same, and
Lessee, to the extent it possesses the same, will provide the other party,

                                      26
<PAGE>

upon request, with cost and depreciation records necessary for filing returns
for any property classified as personal property. Where Lessor is legally
required to file Personal Property Tax returns, Lessee shall provide Lessor with
copies of assessment notices in sufficient time for Lessor to file a protest.
Lessor may, upon Notice to Lessee, at Lessor's option and at Lessor's sole
expense, protest, appeal, or institute such other proceedings (in its or
Lessee's name) as Lessor may deem appropriate to effect a reduction of real
estate or personal property assessments for those Impositions to be paid by
Lessor, and Lessee, at Lessor's expense as aforesaid, shall fully cooperate with
Lessor in such protest, appeal, or other action. Lessor hereby agrees to
indemnify, defend, and hold harmless Lessee from and against any claims,
obligations, liabilities and loss against or incurred by Lessee in connection
with such cooperation. Billings for reimbursement of Personal Property Taxes by
Lessee to Lessor shall be accompanied by copies of a bill therefor and payments
thereof which identify the personal property with respect to which such payments
are made. Lessor, however, reserves the right to effect any such protest, appeal
or other action and, upon Notice to Lessee, shall control any such activity,
which shall then go forward at Lessor's sole expense. Upon such Notice, Lessee,
at Lessor's expense, shall cooperate fully with such activities.

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

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

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

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

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

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

                                      27
<PAGE>

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

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

     6.2.  Lessee's Personal Property.  Lessee will acquire and maintain
           ---------------------------
throughout the Term such Inventory as is required to operate the Leased Property
in the manner contemplated by this Lease. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of personal property
(including Inventory) owned by Lessee. Lessee, at the commencement of the Term,
and from time to time thereafter, shall provide Lessor with an accurate list of
all such items of Lessee's personal property (collectively, the "Lessee's
Personal Property"). Lessee may, subject to the first sentence of this Section
6.2 and the conditions set forth below, remove any of Lessee's Personal Property
set forth on such list at any time during the Term or upon the expiration or any
prior termination of the Term. All of Lessee's Personal Property, other than
Inventory, not removed by Lessee within ten (10) days following the expiration
or earlier termination of the Term shall be considered abandoned by Lessee and
may be appropriated, sold, destroyed or otherwise disposed of by Lessor without
first giving Notice thereof to Lessee, without any payment to Lessee and without
any obligation to account therefor. Lessee will, at its expense, restore the
Leased Property to the condition required by Subsection 2.3(g), including repair
of all damage to the Leased Property caused by the removal of Lessee's Personal
Property, whether effected by Lessee or Lessor. Upon the expiration or earlier
termination of the Term, Lessor or its designee shall have the option to
purchase all Inventory on hand at the Leased Property at the time of such
expiration or termination for a sale price equal to the fair market value of
such Inventory. Lessee may make such financing arrangements, title retention
agreements, leases or other agreements with respect to Lessee's Personal
Property as it sees fit provided that Lessee first advises Lessor of any such
arrangement and such arrangement expressly provides that in the event of
Lessee's default thereunder, Lessor (or its designee) may assume Lessee's
obligations and rights under such arrangement.

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

                                      28
<PAGE>

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

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

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

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

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

           (b)  Lessee shall use or cause to be used the Leased Property only as
a Homewood Suites(R) all-suite hotel facility, and for such other uses as may be
necessary or incidental to such use or such other use as otherwise approved by
Lessor (the "Primary Intended

                                      29
<PAGE>

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

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

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

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

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

                                      30
<PAGE>

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

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

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

     (a)  Subject to Subsection 8.3(b) and Subsection 9.1(b) below, Lessee
covenants and agrees that the Leased Property and Lessee's Personal Property
shall not be used for any unlawful purpose, and that Lessee shall not permit or
suffer to exist any unlawful use of the Leased Property by others.  Lessee shall
acquire and maintain all appropriate licenses, certifications, permits and other
authorizations and approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use, and any other lawful use
conducted on the Leased Property as may be permitted from time to time
hereunder.  Lessee further covenants and agrees that Lessee's use of the Leased
Property and maintenance, alteration, and operation of the same, and all parts
thereof, shall at all times conform to all Legal Requirements, unless the same
are finally determined by a court of competent jurisdiction to be unlawful (and
Lessee shall cause all sub-tenants, invitees or others within its control so to
comply with all Legal Requirements).  Lessee may, however, upon prior Notice to
Lessor, contest the legality or applicability of any such Legal Requirement or
any licensure or certification decision if Lessee maintains such action in good
faith, with due diligence, without prejudice to Lessor's rights hereunder, and
at Lessee's sole expense.  If by the terms of any such Legal Requirement
compliance therewith pending the prosecution of any such proceeding may legally
be delayed without the occurrence of any charge or liability of any kind, or the
filing of any lien, against the Hotel or Lessee's leasehold interest therein and
without subjecting Lessee or Lessor to any liability, civil or criminal, for
failure so to comply therewith, Lessee may delay compliance therewith until the
final determination of such proceeding.  If any lien, charge or civil or
criminal liability would be incurred by reason of any such delay, Lessee, on the
prior written consent of Lessor, which consent shall not be unreasonably
withheld or delayed, may nonetheless contest as aforesaid and delay as aforesaid
provided that such delay would not subject Lessor to criminal liability and
Lessee both (a) furnishes to Lessor security reasonably satisfactory to Lessor
against any loss or injury by reason of such contest or delay and (b) prosecutes
the contest with due diligence and in good faith.

          (b)  As between Lessor and Lessee, Lessee is solely responsible for
all liabilities or obligations of any kind with respect to employees at the
Leased Property during the Term. Without limiting the generality of the
foregoing sentence, Lessee is solely responsible for any required compliance
with the Worker Adjustment, Retraining and Notification Act of 1988 (the "WARN
Act") or any similar state law applicable to the Leased Property; any required
compliance

                                      31
<PAGE>

with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"); and all alleged and actual obligations and claims arising from or
relating to any employment agreement, collective bargaining agreement or
employee benefit plans, any grievances, arbitrations, or unfair labor practice
charges, and relating to compliance with any applicable state or federal labor
employment law, including but not limited to all laws pertaining to
discrimination, workers' compensation, unemployment compensation, occupational
safety and health, unfair labor practices, family and medical leave, and wages,
hours or employee benefits. Lessee agrees to indemnify and defend and hold
harmless Lessor from and against any claims relating to any of the foregoing
matters. Lessee further agrees to reimburse Lessor for any and all losses,
damages, costs, expenses, liabilities and obligations of any kind, including
without limitation reasonable attorney's fees and other legal costs and
expenses, incurred by Lessor in connection with any of the foregoing matters.

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

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

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

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

                                      32
<PAGE>

and (ii) Environmental Liabilities which were caused by the acts or negligent
failures to act of Lessee.

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

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

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

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

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

                                      33
<PAGE>

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

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

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

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

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

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

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

          (a)  Lessee, at its sole expense, will keep the Leased Property, and
all private roadways, sidewalks and curbs appurtenant thereto that are under
Lessee's control, including windows and plate glass, mechanical, electrical and
plumbing systems and equipment (including conduit and ductware), and non-load
bearing interior walls, and parking lot surfaces, in good order and repair,
except (i) for ordinary wear and tear (whether or not the need for such repairs
occurred as a result of Lessee's use, any prior use, the elements or the age of
the Leased Property, or any portion thereof) and (ii) to the extent of damage
caused by Lessor's gross negligence or willful misconduct or that of its
employees or agents, and, except as otherwise provided in Subsection 9.1(b),
Article 14 or Article 15, with reasonable promptness, make all necessary and
appropriate

                                      34
<PAGE>

repairs replacements, and improvements thereto of every kind and nature, whether
interior or exterior ordinary or extraordinary, foreseen or unforeseen or
arising by reason of a condition existing prior to the commencement of the Term
of this Lease (concealed or otherwise), or required by any governmental agency
having jurisdiction over the Leased Property, except as to the structural
elements of the Leased Improvements. Lessee, however, shall be permitted to
prosecute claims against Lessor's predecessors in title for breach of any
representation or warranty or for any latent defects in the Leased Property to
be maintained by Lessee unless Lessor is already diligently pursuing such a
claim. All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work. Lessee will not take or omit to take
any action, the taking or omission of which might materially impair the value or
the usefulness of the Leased Property or any part thereof for its Primary
Intended Use.

          (b)  Notwithstanding Lessee's obligations under Subsection 9.1(a)
above, except to the extent of damage caused by Lessee's negligence or willful
misconduct or that of its employees or agents, Lessor shall be required to bear
the cost of maintaining any underground utilities and the structural elements of
the Leased Improvements, including exterior walls and the roof of the Hotel (but
excluding windows and plate glass, mechanical, electrical and plumbing systems
and equipment, including conduit and ductware, and non-load bearing walls, and
parking lot surfaces).  Except as set forth in the preceding sentence and in
Section 10.5, Lessor shall not under any circumstances be required to build or
rebuild any improvement on the Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or description
to the Leased Property, whether ordinary or extraordinary, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease, or to maintain the Leased Property in any way.
Lessee hereby waives, to the extent permitted by law, the right to make repairs
at the expense of Lessor, pursuant to any law in effect at the time of the
execution of this Lease or hereafter enacted, except following default by Lessor
under this Lease, to the extent of repairs (for which Lessor is obligated
hereunder) required to be made in order for the Hotel, and Lessee's use thereof,
to comply with Lessee's obligations under the Franchise Agreement and the
Management Agreement.  Lessor shall have the right to give, record and post, as
appropriate, notices of nonresponsibility under any mechanic's lien laws now or
hereafter existing.

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

     9.2. Encroachments, Restrictions, Etc. Lessor represents and warrants that
          --------------------------------
the Leased Improvements do not materially encroach upon any property, street or
right-of-way adjacent to the Leased Property, or violate the agreements or
conditions contained in any lawful restrictive

                                      35
<PAGE>

covenant or other agreement affecting the Leased Property, or any part thereof,
or impair the rights of others under any easement or right-of-way to which the
Leased Property is subject. Except to the extent that such representation and
warranty is breached by Lessor, if any of the Leased Improvements, at any time
hereafter, materially encroach upon any property, street or right-of-way
adjacent to the Leased Property, or violate the agreements or conditions
contained in any lawful restrictive covenant or other agreement affecting the
Leased Property, or any part thereof, or impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, then promptly
upon the request of Lessor or at the behest of any Person affected by any such
encroachment, violation or impairment, Lessee shall, at its expense, subject to
its right to contest the existence of any encroachment, violation or impairment
and in such case, in the event of an adverse final determination, either (a)
obtain valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same shall affect Lessor or Lessee or (b) make such changes in the Leased
Improvements, and take such other actions, as Lessee in the good faith exercise
of its judgment deems reasonably practicable to remove such encroachment, and to
end such violation or impairment, including, if necessary, the alteration of any
of the Leased Improvements, and in any event take all such actions as may be
necessary in order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use substantially in the manner and to the
extent the Leased Improvements were operated prior to the assertion of such
violation, impairment or encroachment. Any such alteration shall be made in
conformity with the applicable requirements of Article 10. Lessee's obligations
under this Section 9.2 shall be in addition to and shall in no way discharge or
diminish any obligation of any insurer under any policy of title or other
insurance held by Lessor.

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

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

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

     10.3.  Joint Use Agreements. If Lessee constructs additional improvements
            --------------------
that are connected to the Leased Property or share maintenance facilities, HVAC,
electrical, plumbing or other systems, utilities, parking or other amenities,
the parties shall enter into a mutually agreeable

                                      36
<PAGE>

cross-easement or joint use agreement, the form of which has been approved in
advance by Lessor, to make available necessary services and facilities in
connection with such additional improvements, to protect each of their
respective interests in the properties affected, and to provide for separate
ownership, use, and/or financing of such improvements.

     10.4.  Initial Upgrade of Leased Improvements. Lessee desires to install,
            --------------------------------------
construct and complete the improvements, alterations, upgrades and
refurbishments in the Leased Improvements (collectively, "Lessee's Work")
necessary to qualify the Leased Improvements to operate under the Franchise
Agreement as a "Homewood Suites" hotel. Pursuant to the terms of the Work Letter
(the "Work Letter") attached hereto as Exhibit B, Lessee agrees to perform
Lessee's Work; provided, however, Lessor shall pay the costs actually incurred
by Lessee to perform Lessee's Work, subject to and in accordance with the terms
and conditions of the Work Letter. Lessee shall pay all increased taxes and
insurance on Lessee's Work or attributable thereto.

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

                                  ARTICLE 11
                                  ----------
                           COMPLIANCE WITH FRANCHISE

     11.1.  Compliance with Franchise Agreement and Management Agreement. To the
            ------------------------------------------------------------
extent any of the provisions of the Franchise Agreement or Management Agreement
impose a greater obligation on Lessee than the corresponding provisions of the
Lease, then Lessee shall be obligated to comply with, and to take all reasonable
actions necessary to prevent breaches or defaults under, the provisions of the
Franchise Agreement and the Management Agreement. It is the intent of the
parties hereto that Lessee shall comply in every respect with the provisions of
the Franchise Agreement and the Management Agreement so as to avoid any material
default thereunder during the term of this Lease. Lessee shall not terminate,
extend or enter into any material modification of the Franchise Agreement or the
Management Agreement without in each instance first obtaining Lessor's prior
written consent, which shall not be unreasonably withheld. Lessor and Lessee
agree

                                      37
<PAGE>

to cooperate with each other in the event it becomes necessary to obtain a
franchise extension or modification (or, at Lessor's option, a new franchise)
for the Leased Property, and in any transfer of the Franchise Agreement or
Management Agreement to Lessor or any designee of Lessor or any successor to
Lessee upon the termination of this Lease. In the event of expiration or
termination of a Franchise Agreement or Management Agreement, for whatever
reason, Lessor will have the right, in the exercise of its sole discretion, to
approve any new Franchise Agreement or Management Agreement for the Hotel.

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

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

     12.2.  Permitted Contests. Lessee shall have the right to contest the
            ------------------
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement or Insurance Requirement or any lien, attachment, levy, encumbrance,
charge or claim ("Claims") not otherwise permitted by Section 12.1, by
appropriate legal proceedings in good faith and with due diligence (but this
shall not be deemed or construed in any way to relieve, modify or extend
Lessee's covenants to pay or its covenants to cause to be paid any such charges
at the time and in the manner as in this Section provided), on condition,
however, that such legal proceedings shall not operate to relieve Lessee from
its obligations hereunder and shall not cause the sale or risk the loss of any
portion of the Leased Property, or any part thereof, or cause Lessor or Lessee
to be in default under any mortgage, deed of trust, security deed or other
agreement encumbering the Leased Property or any interest therein. Upon the
request of Lessor, Lessee shall either (a) provide a bond or other assurance
reasonably satisfactory to Lessor that all Claims which may be assessed against
the Leased Property together with interest and penalties, if any, thereon will
be paid, or (b) deposit within the time otherwise required for payment with a
bank or trust company as trustee upon terms reasonably satisfactory to Lessor,
as security for the payment of such Claims, money in an amount

                                      38
<PAGE>

sufficient to pay the same, together with interest and penalties in connection
therewith, as to all Claims which may be assessed against or become a Claim on
the Leased Property, or any part thereof, in said legal proceedings. Lessee
shall furnish Lessor and any lender of Lessor with reasonable evidence of such
deposit within five (5) days of the same. Lessor agrees to join in any such
proceedings if the same be required legally to prosecute such contest of the
validity of such Claims; provided, however, that Lessor shall not thereby be
subjected to any liability or loss for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and Lessee covenants to
indemnify and save harmless Lessor from any such liabilities, losses, costs or
expenses. Lessee shall be entitled to any refund of any Claims and such charges
and penalties or interest thereon which have been paid by Lessee or paid by
Lessor and for which Lessor has been fully reimbursed. In the event that Lessee
fails to pay any Claims when due or to provide the security therefor as provided
in this Section and diligently to prosecute any contest of the same, Lessor may,
upon ten (10) days' advance Notice to Lessee, and Lessee's failure to correct
the same within such ten (10) day period, pay such charges together with any
interest and penalties and the same shall be repayable by Lessee to Lessor as
Additional Charges at the next Payment Date provided for in this Lease;
provided, however, that should Lessor reasonably determine that the giving of
such Notice would risk loss to the Leased Property or cause damage to Lessor,
then Lessor shall give such Notice as is practical under the circumstances.
Lessor reserves the right to contest any of the Claims at its expense not
pursued by Lessee. Lessor and Lessee agree to cooperate in coordinating the
contest of any Claims.

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

     13.1.  General Insurance Requirements. During the Term of this Lease,
            ------------------------------
Lessor and Lessee shall at all times keep the Leased Property insured with the
kinds and amounts of insurance described below, or such other insurance
coverage(s) as may be required by the Franchise Agreement. This insurance shall
be written by companies authorized to issue insurance in the State. The policies
must name Lessor and/or Lessee, as applicable, as the insured or as an
additional named insured, as the case may be. Losses shall be payable to Lessor
or Lessee as provided in this Lease. Any loss adjustment shall require the
written consent of Lessor and Lessee, each acting reasonably and in good faith.
Evidence of insurance shall be deposited with Lessor. The policies on the Leased
Property, including the Leased Improvements, Fixtures and Lessee's Personal
Property, shall include the following:

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

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

               (ii)  Insurance for loss or damage (direct and indirect) from
          steam boilers, pressure vessels or similar apparatus, now or hereafter
          installed in the Hotel, in the

                                      39
<PAGE>

          minimum amount of $5,000,000 or in such greater amounts as are then
          customary; and

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

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

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

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

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

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

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

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

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

     13.2.  Replacement Cost. The term "full replacement cost" as used herein
            ----------------
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such

                                      40
<PAGE>

exclusions) has increased or decreased at any time during the Lease Term, it
shall have the right to have such full replacement cost re-determined.

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

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

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

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

       13.5.   Increase in Limits. If either Lessor or Lessee at any time deems
               ------------------
the limits of the personal injury or property damage under the comprehensive
public liability insurance then carried to be either excessive or insufficient,
Lessor and Lessee shall endeavor in good faith to agree on

                                      41
<PAGE>

the proper and reasonable limits for such insurance to be carried and such
insurance shall thereafter be carried with the limits thus agreed on until
further change pursuant to the provisions of this Article 13.

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

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

       13.8.   Reports On Insurance Claims. Lessee shall promptly investigate
               ----------------------------
and make a complete and timely written report to the appropriate insurance
company as to all accidents, claims for damage relating to the ownership,
operation, and maintenance of the Hotel, any damage or destruction to the Hotel
and the estimated cost of repair thereof and shall prepare any and all reports
required by any insurance company in connection therewith. All such reports
shall be timely filed with the insurance company as required under the terms of
the insurance policy involved, and a final copy of such report shall be
furnished to Lessor. Lessee shall be authorized to adjust, settle, or compromise
any insurance loss, or to execute proofs of such loss, in the aggregate amount
of $25,000 or less, with respect to any single casualty or other event.

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

       14.1.   Insurance Proceeds. Subject to the provisions of Section 14.4,
               ------------------
all proceeds payable by reason of any loss or damage to the Leased Property, or
any portion thereof, insured under any policy of insurance required by Article
13 of this Lease, shall be paid to Lessor and held in trust by Lessor in an
interest-bearing account, shall be made available, if applicable, for
reconstruction or repair, as the case may be, of any damage to or destruction of
the Leased Property, or any portion thereof, and, if applicable, shall be paid
out by Lessor from time to time for the reasonable costs of such reconstruction
or repair upon satisfaction of reasonable terms and conditions specified by
Lessor. Any excess proceeds of insurance (and accrued interest) remaining after
the completion of the restoration or reconstruction of the Leased Property, as
hereinafter set forth, shall be paid to Lessee. If neither Lessor nor Lessee is
required or elects to repair and restore, and the Lease is

                                      42
<PAGE>

terminated without purchase by Lessee as described in Section 14.2, all such
insurance proceeds shall be retained by Lessor. All salvage resulting from any
risk covered by insurance shall belong to Lessor.

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

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

               (b) Except as provided in Section 14.6, if during the Term the
Leased Property is partially destroyed by a risk covered by the insurance
described in Article 13, but the Hotel is not thereby rendered Unsuitable for
its Primary Intended Use, Lessee shall restore the Hotel to substantially the
same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease. Such damage or destruction
shall not terminate this Lease; provided, however, that if Lessee cannot within
a reasonable time obtain all necessary government approvals, including building
permits, licenses and conditional use permits, after diligent efforts to do so,
to perform all required repair and restoration work and to operate the Hotel for
its Primary Intended Use in substantially the same manner as that existing
immediately prior to such damage or destruction and otherwise in accordance with
the terms of the Lease, Lessee may offer to purchase the Leased Property for a
purchase price equal to the Rejectable Offer Price of the Leased Property,
determined without regard to such damage or destruction if insurance proceeds
are available to restore the Hotel. If Lessee makes such offer and Lessor does
not accept the same, Lessee shall withdraw such offer, in which event this Lease
shall remain in full force and effect and Lessee shall immediately proceed to
restore the Hotel to substantially the same condition as existed immediately
before such damage or destruction and otherwise in accordance with the terms of
the Lease. If Lessee restores the Hotel, the insurance proceeds shall be paid
out by Lessor from time to time for the reasonable costs of such restoration
upon satisfaction of reasonable terms and conditions specified by Lessor, and
any excess proceeds remaining after such restoration shall be paid to Lessee.

               (c) If the cost of the repair or restoration exceeds the amount
of proceeds received by Lessor from the insurance it maintains as required under
Article 13, Lessee shall be obligated to contribute any excess amounts needed to
restore the Hotel. Such difference shall be paid by Lessee to Lessor promptly
after Lessee receives Lessor's written invoice therefor, to be

                                      43
<PAGE>

held in trust in an interest-bearing account, together with any other insurance
proceeds, for application to the cost of repair and restoration.

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

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

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

       14.5.   Abatement of Rent. Any damage or destruction due to casualty
               -----------------
notwithstanding, this Lease shall remain in full force and effect and Lessee's
obligation to make rental payments and to pay all other charges required by this
Lease shall remain unabated during the first three (3) months of any period
required for the applicable repair and restoration. Thereafter, Base Rent shall
be equitably abated.

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

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

                                      44
<PAGE>

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

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

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

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

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

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

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

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

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

       15.5.   Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is not Unsuitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as provided in
Section 15.3, Lessee at its cost shall with all reasonable dispatch restore the
untaken

                                      45
<PAGE>

portion of any Leased Improvements so that such Leased Improvements constitute a
complete architectural unit of the same general character and condition (as
nearly as may be possible under the circumstances) as the Leased Improvements
existing immediately prior to the Condemnation. Lessor shall contribute to the
cost of restoration that part of its Award specifically allocated to such
restoration, if any, together with severance and other damages awarded for the
taken Leased Improvements; provided, however, that the amount of such
contribution shall not exceed such cost. In the event of such a partial Taking,
this Lease shall not terminate, but the Base Rent shall be abated in the manner
and to the extent that is fair, just and equitable to both Lessee and Lessor,
taking into consideration, among other relevant factors, the number of usable
rooms, the amount of square footage, or the revenues affected by such partial
Taking. If Lessor and Lessee are unable to agree upon the amount of such
abatement within thirty (30) days after such partial Taking, the matter may be
submitted by either party to a court of competent jurisdiction for resolution.

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

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

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

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

                                      46
<PAGE>

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

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

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

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

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

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

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

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

                                      47
<PAGE>

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

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

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

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

       16.3.   Damages. Neither (a) the termination of this Lease, (b) the
               -------
repossession of the Leased Property, (c) the failure of Lessor to relet the
Leased Property, nor (d) the reletting of all or any portion thereof, shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all Rent due and payable
with respect to the Leased Property to and including the date of such
termination.

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

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

                                      48
<PAGE>

               (ii)  the sum of:

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

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

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

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

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

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

       16.6.   Lessor's Right to Cure Lessee's Default. If Lessee fails to make
               --------------------------------------
any payment or to perform any act required to be made or performed under this
Lease, including, without limitation, Lessee's failure to comply with the terms
of any Franchise Agreement, and fails to cure the same within the relevant time
periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or
default, may (but shall be

                                      49
<PAGE>

under no obligation to) at any time thereafter make such payment or perform such
act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and, subject
to Section 16.4, take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case to the
extent permitted by law) so incurred, together with a late charge thereon (to
the extent permitted by law) at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessors, shall be paid by Lessee to
Lessor on demand. The obligations of Lessee and rights of Lessor contained in
this Article shall survive the expiration or earlier termination of this Lease.

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

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

       17.2.  Lessee's Right to Cure.
       -----  -----------------------

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

                                      50
<PAGE>

Lessee hereunder to cure and to secure payment from Lessor in accordance with
this Section 17.2 shall survive the termination of this Lease with respect to
the Leased Property.

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

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

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

            (a)     Notwithstanding the existence of any insurance, and without
regard to the policy limits of any such insurance or self-insurance, but subject
to Section 13.3 and Section 8.3, Lessee will protect, indemnify, hold harmless
and defend Lessor from and against all liabilities, losses, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses), to the extent permitted by
law, imposed upon or incurred by or asserted against Lessor Indemnified Parties
by reason of: (a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Leased Property or adjoining
sidewalks, including without limitation any claims under liquor liability, "dram
shop" or similar laws, (b) any use, misuse, non-use, condition, management,
maintenance or repair by Lessee or any of its agents, employees or invitees of
the Leased Property or Lessee's Personal Property during the Term or any
litigation, proceeding or claim by governmental entities or other third parties
to which a Lessor Indemnified Party is made a party or participant related to
such use, misuse, non-use, condition, management, maintenance, or repair thereof
by Lessee or any of its agents, employees or invitees, including any failure of
lessee or any of its agents, employees or invitees to perform any obligations
under this Lease or imposed by

                                      51
<PAGE>

applicable law (other than arising out of Condemnation proceedings), (c) any
Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the part of Lessee to perform or
comply with any of the terms of this Lease, and (e) the non-performance of any
of the terms and provisions of any and all existing and future subleases of the
Leased Property to be performed by the landlord thereunder.

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

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

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

     19.1.  Personal Property Limitation. Anything contained in this Lease to
              -----------------------------
the contrary notwithstanding, the average of the adjusted tax bases of the items
of personal property that are leased to Lessee under this Lease at the beginning
and at the end of any Fiscal Year shall not exceed fifteen percent (15%) of the
average of the aggregate adjusted tax bases of the Leased Property at the
beginning and at the end of such Fiscal Year. This Section 19.1 is intended to
ensure that the Rent qualifies as "rents from real property," within the meaning
of Section 856(d) of the Code, or any similar or successor provisions thereto,
and shall be interpreted in a manner consistent with such intent.

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

                                      52
<PAGE>

portion of the Rent would fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto.

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

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

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

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

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

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

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

     20.1.  Subletting and Assignment. Subject to the provisions of Article 19
            --------------------------
and Section 20.2 and any other express conditions or limitations set forth
herein, Lessee may, but only with the consent of Lessor (which shall not be
unreasonably withheld or delayed), (a) assign this Lease or sublet all or any
part of the Leased Property to an Affiliate of Lessee, or (b) sublet any retail
or restaurant portion of the Leased Improvements in the normal course of the
Primary Intended Use; provided that any subletting to any party other than an
Affiliate of Lessee shall not individually as

                                      53
<PAGE>

to any one such subletting, or in the aggregate, materially diminish the actual
or potential Percentage Rent payable under this Lease. In the case of a
subletting, the sublessee shall comply with the provisions of Section 20.2, and
in the case of an assignment, the assignee shall assume in writing and agree to
keep and perform all of the terms of this Lease on the part of Lessee to be kept
and performed and shall be, and become, jointly and severally liable with Lessee
for the performance thereof. Notwithstanding the above, Lessee may assign the
Lease to an Affiliate without the consent of Lessor; provided that any such
assignee assumes in writing and agrees to keep and perform all of the terms of
the Lease on the part of Lessee to be kept and performed and shall be and become
jointly and severally liable with Lessee for the performance thereof. In case of
either an assignment or subletting made during the Term, Lessee shall remain
primarily liable, as principal rather than as surety, for the prompt payment of
the Rent and for the performance and observance of all of the covenants and
conditions to be performed by Lessee hereunder. An original counterpart of each
such sublease and assignment and assumption, duly executed by Lessee and such
sublessee or assignee, as the case may be, in form and substance satisfactory to
Lessor, shall be delivered promptly to Lessor.

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

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

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

     21.1.  Quiet Enjoyment. So long as Lessee pays all Rent as the same
            ----------------
becomes due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if any,
Lessee shall peaceably and quietly have, hold and enjoy the Leased Property for
the Term hereof, free of any claim or other action by Lessor or anyone

                                      54
<PAGE>

claiming by, through or under Lessor, but subject to all liens and encumbrances
subject to which the Leased Property was conveyed to Lessor, to the extent not
released in connection with the transactions contemplated by this Lease, or
hereafter consented to by Lessee or provided for herein. Notwithstanding the
foregoing, Lessee shall have the right by separate and independent action to
pursue any claim it may have against Lessor as a result of a breach by Lessor of
the covenant of quiet enjoyment contained in this Section.

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

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

     22.1.  Lessor May Grant Liens. Without the consent of Lessee, Lessor may,
            -----------------------
subject to the terms and conditions set forth below in this Section 22.1, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Upon the request of
Lessor, Lessee shall subordinate this Lease to the lien of a new mortgage on the
Leased Property, on the condition that the proposed mortgagee executes a non-
disturbance agreement recognizing this Lease in accordance with the provisions
of Section 22.2, and agreeing, for itself and its successors and assigns, to
comply with the provisions of this Article 22.

     22.2.  Subordination of Lease. This Lease and Lessee's interest hereunder
            -----------------------
shall at all times be subject and subordinate to the lien and security title of
any deeds to secure debt, deeds of trust, mortgages, or other Encumbrances
heretofore or hereafter granted by Lessor or which otherwise encumber or affect
the Leased Property and to any and all advances to be made thereunder and to all
renewals, modifications, consolidations, replacements, substitutions, and
extensions thereof (all of which are herein called the "Mortgage"); provided,
however, that with respect to any Mortgage hereafter granted, such subordination
is conditioned upon delivery to Lessee of a non-disturbance agreement which
provides that Lessee shall not be disturbed in its possession of the Leased
Property hereunder following a foreclosure of such Mortgage (or delivery of a
deed-in-lieu-of-foreclosure) and that the holder of such Mortgage or the
purchaser at a foreclosure sale (or grantee under such deed-in-lieu-of-
foreclosure) shall perform all obligations of Lessor under this Lease. In
confirmation of such subordination, however, Lessee shall, at Lessor's request,
promptly execute, acknowledge and deliver any instrument which may be required
to evidence subordination to any Mortgage and to the holder thereof. In the
event of Lessee's failure to deliver such subordination and if the Mortgage does
not change any term of the Lease, Lessor may, in addition to any other remedies
for breach of covenant hereunder, execute, acknowledge, and deliver the
instrument as
                                      55
<PAGE>

the agent or attorney-in-fact of Lessee, and Lessee hereby irrevocably
constitutes Lessor its attorney-in-fact for such purpose, Lessee acknowledging
that the appointment is coupled with an interest and is irrevocable.

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

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

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

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

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

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

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

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

            (c)     At any time and from time to time upon not less than ten
(10) days Notice by Lessee, Lessor will furnish to Lessee or to any Person
designated by Lessee an estoppel certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications), the date to which Rent
has been paid,

                                      56
<PAGE>

whether to the knowledge of Lessor there is any existing default
or Event of Default on Lessee's part hereunder, and such other information as
may be reasonably requested by Lessee.

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

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

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

     24.1.  Appraisers. If it becomes necessary to determine the Fair Market
            -----------
Value or Fair Market Rental of the Leased Property for any purpose of this
Lease, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a Person selected to act
as appraiser on its behalf. Within ten (10) days after Notice, Lessor (or
Lessee, as the case may be) shall by Notice to Lessee (or Lessor, as the case
may be) appoint a second Person as appraiser on its behalf. The appraisers thus
appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) with at least five (5)
years' experience in the State appraising property similar to the Leased
Property, shall, within forty-five (45) days after the date of the Notice
appointing the first appraiser, proceed to appraise the Leased Property to
determine the Fair Market Value or Fair Market Rental thereof as of the relevant
date (giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
shall have been so appointed, then the determination of such appraiser shall be
final and binding upon the parties. To the extent consistent with sound
appraisal practice as then existing at the time of any such appraisal, such
appraisal shall be made on a basis consistent with the basis on which the Leased
Property was appraised for purposes of determining its Fair Market Value at the
time the Leased Property was acquired by Lessor. If two (2) appraisers are
appointed and if the difference between the amounts so determined does not
exceed five percent (5%) of the lesser of such amounts, then the Fair Market
Value or Fair Market Rental shall be an amount equal to fifty percent (50%) of
the sum of the amounts so determined. If the difference between the amounts so
determined exceeds five percent (5%) of the lesser of such amounts, then such
two appraisers shall have twenty (20) days to appoint a third appraiser. If no
such appraiser shall have been appointed within such twenty (20) days or within
ninety (90) days of the original request for a determination of Fair Market
Value or Fair Market Rental, whichever is earlier, either Lessor or Lessee may
apply to any court having jurisdiction to have such appointment made by such
court. Any appraiser appointed by the original appraisers or by such court shall
be instructed to determine the Fair Market Value or Fair Market

                                      57
<PAGE>

Rental within forty-five (45) days after appointment of such appraiser. The
determination of the appraiser which differs most in the terms of dollar amount
from the determinations of the other two appraisers shall be excluded, and fifty
percent (50%) of the sum of the remaining two determinations shall be final and
binding upon Lessor and Lessee as the Fair Market Value or Fair Market Rental of
the Leased Property, as the case may be. This provision for determining by
appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law.
Lessor and Lessee shall each pay the fees and expenses of the appraiser
appointed by it and each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.

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

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

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

     25.3.  Arbitration Procedure. In any arbitration commenced pursuant to
            ----------------------
Sections 25.1 or 25.2, a single arbitrator shall be designated and shall resolve
the dispute. The arbitrator's decision shall be binding on all parties, shall
not be subject to further review or appeal except as otherwise allowed by
applicable law and may be filed in and enforced by a court of competent
jurisdiction. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party's

                                      58
<PAGE>

obligation to comply with the arbitrator's decision, all at the expense of the
non-complying party. To the maximum extent practicable, the arbitrator and the
parties, and the AAA if applicable, shall take any action necessary to insure
that the arbitration shall be concluded within ninety (90) days of the filing of
such dispute. The fees and expenses of the arbitrator shall be shared equally by
Lessor and Lessee except as otherwise specified above in this Section 25.3.
Unless otherwise agreed in writing by the parties or required by the arbitrator
or AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Lessee and Lessor regarding the Hotel during the arbitration.

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

     26.1.  Notices. All notices, demands, requests, consents approvals and
            --------
other communications ("Notice" or "Notices") hereunder shall be in writing and
hand-delivered, sent by FedEx or other nationally recognized overnight courier
service, or mailed (by registered or certified mail, return receipt requested
and postage prepaid), if to Lessor at 306 East Main Street, Richmond, Virginia
23219, Attn: Glade M. Knight and if to Lessee at 306 East Main Street, Richmond,
Virginia 23219, Attn: Glade M. Knight or to such other address or addresses as
either party may hereafter designate. Personally delivered Notice shall be
effective upon receipt, and Notice given by overnight courier service or by mail
shall be complete at the time of deposit with the courier service or in the U.S.
Mail system, respectively, but any prescribed period of Notice and any right or
duty to do any act or make any response within any prescribed period or on a
date certain after the service of such Notice given by overnight courier service
shall be extended one (1) day and by mail shall be extended five (5) days.

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

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

     27.2.  Remedies Cumulative. To the extent permitted by law and unless
            --------------------
otherwise provided herein to the contrary, each legal, equitable or contractual
right, power and remedy of Lessor or Lessee now or hereafter provided either in
this Lease or by statute or otherwise shall be cumulative and concurrent and
shall be in addition to every other right, power and remedy and the exercise or
beginning of the exercise by Lessor or Lessee of any one or more of such rights,
powers and remedies shall not preclude the simultaneous or subsequent exercise
by Lessor or Lessee of any or all of such other rights, powers and remedies.

                                      59
<PAGE>

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

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

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

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

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

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

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

                                      60
<PAGE>

governed by and construed in accordance with the laws of the State, but not
including its conflicts of laws rules.

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

                                      61
<PAGE>

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

                              "LESSOR"

                              APPLE SUITES, INC.

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

                              "LESSEE"

                              APPLE SUITES MANAGEMENT, INC.

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

                                   EXHIBIT A
                                   ---------

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

                                   [OMITTED]
<PAGE>

                                   EXHIBIT B
                                   ---------

                                  WORK LETTER
                                  -----------

     This Work Letter describes and specifies the rights and obligations of
Apple Suites, Inc. ("Lessor"), and Apple Suites Management, Inc. ("Lessee"),
with respect to the design, construction, installation and payment for the
completion of Lessee's Work (as defined in Section 10.4 of the Lease).

     1. Definitions. Terms which are defined in that certain Hotel Lease
        -----------
Agreement (the "Lease") executed contemporaneously herewith, by and between
Lessor and Lessee, shall have the same meaning in this Work Letter.
Additionally, as used in this Work Letter, the following terms (when delineated
with initial capital letters) shall have the respective meaning indicated for
each as follows:

          (a) "Plans and Specifications" shall mean, collectively, the plans,
               ------------------------
     specifications and other information prepared or to be prepared by Lessee's
     architect and, where necessary, by Lessee's electrical, mechanical and
     structural engineers, which shall detail Lessee's Work and which shall be
     approved in writing by both Lessee and Lessor prior to the commencement of
     such work.  The Plans and Specifications shall comply with the minimum
     requirements established by Lessor.

          (b) "Cost of the Work" shall mean the actual contract costs of all
               ----------------
     materials and labor for the design, construction and installation to
     completion of the Lessee's Work in accordance with the Plans and
     Specifications.

          (c) "Change Cost" shall mean any increase in the Cost of the Work
               -----------
     attributable to any change in the Plans and Specifications.

     2. Procedure for the Completion of Plans and Specifications.  The Plans and
        --------------------------------------------------------
Specifications shall be completed in accordance with the following procedure:

          (a) Design Drawings.  Lessee shall submit to Lessor design drawings
              ---------------
     specifying the intended design, character and finishing of Lessee's Work.
     The design drawings shall set forth the requirements of Lessee with respect
     to the installation of Lessee's Work.

               (i)  After receipt of design drawings, Lessor shall return to
          Lessee Lessor's required modifications and/or approval.

               (ii) If Lessor requires modifications, the design drawings shall
          be revised by Lessee and resubmitted to Lessor for approval. Unless
          such action is taken, Lessee will be deemed to have accepted and
          approved all of Lessor's comments on the design drawings. This process
          will continue until approval of Lessor is obtained.
<PAGE>

          (b) Completion of Plans and Specifications.  All Plans and
              --------------------------------------
     Specifications shall be prepared in strict compliance with applicable
     standards and requirements as set forth in the Lease, this Work Letter and
     otherwise, and shall also adhere to the design drawings approved by Lessor.
     Lessee shall deliver to Lessor, as soon as practicable after the date of
     Lessor's approval of design drawings, the proposed Plans and
     Specifications. If the Plans and Specifications are returned to Lessee with
     comments, but not bearing approval of Lessor, the Plans and Specifications
     shall be revised by Lessee and resubmitted to Lessor for approval. This
     process will continue until approval of Lessor is obtained.

          (c) Compliance with Laws.  Lessee shall have the sole responsibility
              --------------------
     for compliance of the Plans and Specifications with all applicable
     statutes, codes, ordinances and other regulations. The approval of the
     Plans and Specifications or calculations included therein by Lessor shall
     not constitute an indication, representation or certification by Lessor
     that such Plans and Specifications or calculations are in compliance with
     said statutes, codes, ordinances and other regulations. In instances where
     several sets of requirements must be met, the requirements of Lessor's
     insurance underwriter or the strictest applicable requirements shall apply
     where not prohibited by applicable codes.

     3. Pricing.  As soon as practicable after finalization of the Plans and
        -------
Specifications, as evidenced by Lessor's written approval thereof, Lessee shall
notify Lessor in writing of the Cost of the Work.  Lessor shall either approve
the Cost of the Work in writing or request that the Plans and Specifications and
the Cost of the Work be revised and resubmitted to Lessor for approval.  Lessee
shall revise the Plans and Specifications and the Cost of the Work and resubmit
them to Lessor for approval.  This procedure shall continue until Lessor
approves the Cost of the Work.

     4. Performance of Work and Delays.  Lessee shall select one or more
        ------------------------------
contractors ("Contractors") to furnish labor and/or materials for the Lessee's
Work in substantial accordance with the Plans and Specifications. Each
Contractor and the contract between Lessee and such Contractor must be approved
in advance by Lessor. After Lessor's approval of the Plans and Specifications,
the Cost of the Work, Contractors and contracts, Lessee agrees to cause the
Contractors to commence the construction and installation of the Lessee's Work
as promptly as reasonably practicable and to proceed with due diligence to
perform Lessee's Work in a good and workmanlike manner. Lessee warrants to
Lessor that all materials and equipment furnished in constructing and installing
the Lessee's Work will be new, unless otherwise specified to Lessor, and that
such work shall be of good quality, free from faults and defects; provided,
however, Lessor's sole remedy for breach of the above warranty shall be that
Lessee, for a period of twelve (12) months after substantial completion of the
Lessee's Work, at its sole cost and expense, will make all necessary repairs,
replacements and corrections of any nature or description as may become
necessary by reason of faulty construction, labor or materials in the Lessee's
Work. Any delays in the completion of Lessee's Work shall not justify any
abatement or reduction of the rent payable under the Lease.

     5. Payments for Cost of Work.  Lessor shall be liable for payment of the
        -------------------------
Cost of the Work. Within ten (10) days after Lessor's receipt of an invoice from
Lessee, together with supporting billing statements, architect certificates and
other detailed information required by the construction contracts with the
Contractors, Lessor shall pay to Lessee the amount of the invoice. Lessee shall

                                       2
<PAGE>

pay over to its Contractors any payments by Lessor to Lessee for the Cost of the
Work. Lessor may, at its option, elect to make its payments for the Cost of the
Work directly to the Contractors rather than to Lessee. Lessor shall not be
obligated to pay for, and Lessee shall not pay for, any work performed by any of
the Contractors or their mechanics, workmen or subcontractors until Lessor has
received a lien waiver from any said party.

     6. Change Orders.  All changes and modifications in Lessee's Work from that
        -------------
contemplated in the Plans and Specifications, whether or not such change or
modification gives rise to a Change Cost, must be evidenced by a written change
order executed by both Lessor and Lessee.  In that regard, Lessee shall submit
to Lessor such information as Lessor shall require with respect to any change
order requested by Lessee.  After receipt of any requested change order,
together with such information as Lessor shall require with respect thereto,
Lessor shall return to Lessee either the executed change order, which will
evidence Lessor's approval thereof, or the Plans and Specifications with respect
thereto with Lessor's suggested modifications.  Lessee shall revise the change
order and resubmit it to Lessor.  This process will continue until Lessor's
approval is obtained.

     7. Punch List.  Within ten (10) days after Lessor receives notice from
        ----------
Lessee of the substantial completion of Lessee's Work, Lessor shall give Lessee
written notice specifying any details of construction, decoration, installation
or mechanical adjustment which remain to be performed with respect to Lessee's
Work; and except for the details contained in such written notice from Lessor,
all obligations of Lessee in regard to Lessee's Work shall be deemed to have
been satisfied. Lessor or its agents, servants, employees or contractors shall
have the right to enter the Leased Improvements during the progress and after
the completion of the Lessee's Work to inspect any details of the Lessee's Work,
and entry by Lessor, its agents, servants, employees or contractors for such
purpose shall not relieve Lessee of any of its obligations under the Lease or
impose any liability on Lessor or its agents, servants, employees or
contractors.

     8. Insurance; Liability.  Lessee shall procure and maintain adequate
        --------------------
Workmen's Compensation and public liability insurance for bodily injury and
property damage, all in amounts, with companies and in forms satisfactory to
Lessor. Lessee shall also cause each of the Contractors to provide and maintain
certificates of such insurance and furnish copies of same to Lessor prior to
proceeding with the Lessee's Work. Lessor shall not be liable in any way for any
injury, loss or damage which may occur in connection with or as a result of the
Lessee's Work, the same being solely at Lessee's risk. Lessee shall hold Lessor
harmless from any claim, demand or action arising from the construction or
installation activities in connection with Lessee's Work, the Contractors or any
workmen, mechanics or subcontractors working on the Lessee's Work.

     9. Whole Agreement; No Oral Modification.  This Work Letter and the Lease
        -------------------------------------
embody all representations, warranties and agreements of Lessor and Lessee with
respect to the matter described herein, and this Work Letter may not be altered
or modified except by an agreement in writing signed by the parties.

     10. Paragraph Headings.  The paragraph headings contained in this Work
         ------------------
Letter are for convenient reference only and shall not in any way affect the
meaning or interpretation of such paragraphs.

                                       3
<PAGE>

     11. Notices. All notices required or contemplated hereunder shall be given
         -------
to the parties in the manner specified for giving notices under the Lease.

     12. Binding Effect.  This Work Letter shall be construed under the laws of
         --------------
the State of Texas and shall be binding upon and shall inure to the benefit of
the parties hereto and their respective permitted successors and assigns.

     13. Conflict.  In the event of conflict between this Work Letter and any
         --------
other exhibits or addenda to the Lease, this Work Letter shall prevail.

     DATED as of the 26th day of April, 2001.

                              "LESSOR"

                              APPLE SUITES, INC.

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

                              "LESSEE"

                              APPLE SUITES MANAGEMENT, INC.

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

                                       4
<PAGE>

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

     Homewood Suites(R) Atlanta - Buckhead
     Atlanta, Georgia

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Quarters            2001      2002      2003      2004      2005      2006      2007      2008      2009      2010
----------------  --------  --------  --------  --------  --------  --------  --------  --------  --------  --------
<S>               <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
1/st/ Quarter     $     --  $158,119  $162,862  $167,748  $172,781  $177,964  $183,303  $188,802  $194,466  $200,300

2/nd/ Quarter     $138,866  $316,238  $325,725  $335,496  $345,561  $355,928  $366,606  $377,604  $388,932  $400,600

3/rd/ Quarter     $335,414  $474,356  $488,587  $503,245  $518,342  $533,892  $549,909  $566,406  $583,398  $600,900

4/th/ Quarter     $531,962  $632,475  $651,449  $670,993  $691,123  $711,856  $733,212  $755,208  $777,864  $801,200
--------------------------------------------------------------------------------------------------------------------
</TABLE><PAGE>

                                                                     Exhibit 4.8

================================================================================

                                BB&T CORPORATION

                                       to

                      STATE STREET BANK AND TRUST COMPANY,

                                   as Trustee

                               _________________

                         JUNIOR SUBORDINATED INDENTURE

                         Dated as of ________ __, 20__

                               _________________

================================================================================
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
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ARTICLE I      Definitions and Other Provisions of General Application.................................................   1
----------------------------------------------------------------------

     Section 1.1.   Definitions........................................................................................   1
     --------------------------
     Section 1.2.   Compliance Certificate and Opinions................................................................  10
     --------------------------------------------------
     Section 1.3.   Forms of Documents Delivered to Trustee............................................................  10
     ------------------------------------------------------
     Section 1.4.   Acts of Holders....................................................................................  11
     ------------------------------
     Section 1.5.   Notices, Etc. to Trustee and Corporation...........................................................  13
     -------------------------------------------------------
     Section 1.6.   Notice to Holders; Waiver..........................................................................  13
     ----------------------------------------
     Section 1.7.   Conflict with Trust Indenture Act..................................................................  14
     ------------------------------------------------
     Section 1.8.   Effect of Headings and Table of Contents...........................................................  14
     -------------------------------------------------------
     Section 1.9.   Successors and Assigns.............................................................................  14
     -------------------------------------
     Section 1.10.  Separability Clause................................................................................  14
     ----------------------------------
     Section 1.11.  Benefits of Indenture..............................................................................  14
     ------------------------------------
     Section 1.12.  Governing Law......................................................................................  14
     ----------------------------
     Section 1.13.  Non-Business Days..................................................................................  15
     --------------------------------

ARTICLE II     Security Forms..........................................................................................  15
-----------------------------

     Section 2.1.   Forms Generally....................................................................................  15
     ------------------------------
     Section 2.2.   Form of Face of Security...........................................................................  15
     ---------------------------------------
     Section 2.3.   Form of Reverse of Security........................................................................  19
     ------------------------------------------
     Section 2.4.   Additional Provisions Required in Global Security..................................................  22
     ----------------------------------------------------------------
     Section 2.5.   Form of Trustee's Certificate of Authentication....................................................  23
     --------------------------------------------------------------

ARTICLE III    The Securities..........................................................................................  23
-----------------------------

     Section 3.1.   Title and Terms....................................................................................  23
     ------------------------------
     Section 3.2.   Denominations......................................................................................  26
     ----------------------------
     Section 3.3.   Execution, Authentication, Delivery and Dating.....................................................  26
     -------------------------------------------------------------
     Section 3.4.   Temporary Securities...............................................................................  28
     -----------------------------------
     Section 3.5.   Global Securities..................................................................................  28
     --------------------------------
     Section 3.6.   Registration, Transfer and Exchange Generally; Certain Transfers and Exchanges; Securities Act
     -------------------------------------------------------------------------------------------------------------
                    Legends............................................................................................  30
                    -------
     Section 3.7.   Mutilated, Destroyed, Lost and Stolen Securities...................................................  32
     ---------------------------------------------------------------
     Section 3.8.   Payment of Interest and Additional Interest; Interest Rights Preserved.............................  33
     -------------------------------------------------------------------------------------
     Section 3.9.   Persons Deemed Owners..............................................................................  34
     ------------------------------------
     Section 3.10.  Cancellation.......................................................................................  35
     ---------------------------
     Section 3.11.  Computation of Interest............................................................................  35
     --------------------------------------
     Section 3.12.  Deferrals of Interest Payment Dates................................................................  35
     --------------------------------------------------
     Section 3.13.  Right of Set-Off...................................................................................  36
     -------------------------------
     Section 3.14.  Agreed Tax Treatment...............................................................................  37
     -----------------------------------
     Section 3.15.  Shortening or Extension of Stated Maturity.........................................................  37
     ---------------------------------------------------------
</TABLE>

                                       i
<PAGE>

<TABLE>
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     Section 3.16.  CUSIP Numbers......................................................................................  37
     ----------------------------

ARTICLE IV     Satisfaction and Discharge..............................................................................  37
-----------------------------------------

     Section 4.1.   Satisfaction and Discharge of Indenture............................................................  37
     ------------------------------------------------------
     Section 4.2.   Application of Trust Money.........................................................................  38
     -----------------------------------------

ARTICLE V      Remedies................................................................................................  39
-----------------------

     Section 5.1.   Events of Default..................................................................................  39
     --------------------------------
     Section 5.2.   Acceleration of Maturity; Rescission and Annulment.................................................  40
     -----------------------------------------------------------------
     Section 5.3.   Collection of Indebtedness and Suits for Enforcement by Trustee....................................  41
     ------------------------------------------------------------------------------
     Section 5.4.   Trustee May File Proofs of Claim...................................................................  42
     -----------------------------------------------
     Section 5.5.   Trustee May Enforce Claim Without Possession of Securities.........................................  42
     -------------------------------------------------------------------------
     Section 5.6.   Application of Money Collected.....................................................................  43
     ---------------------------------------------
     Section 5.7.   Limitation on Suits................................................................................  43
     ----------------------------------
     Section 5.8.   Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by
     ----------------------------------------------------------------------------------------------------------
                    Holders of Capital Securities......................................................................  44
                    -----------------------------
     Section 5.9.   Restoration of Rights and Remedies.................................................................  44
     -------------------------------------------------
     Section 5.10.  Rights and Remedies Cumulative.....................................................................  44
     ---------------------------------------------
     Section 5.11.  Delay or Omission Not Waiver.......................................................................  45
     -------------------------------------------
     Section 5.12.  Control by Holders.................................................................................  45
     ---------------------------------
     Section 5.13.  Waiver of Past Defaults............................................................................  45
     --------------------------------------
     Section 5.14.  Undertaking for Costs..............................................................................  46
     ------------------------------------
     Section 5.15.  Waiver of Usury, Stay or Extension Laws............................................................  46
     ------------------------------------------------------

ARTICLE VI     The Trustee.............................................................................................  47
--------------------------

     Section 6.1.   Certain Duties and Responsibilities................................................................  47
     --------------------------------------------------
     Section 6.2.   Notice of Defaults.................................................................................  48
     ---------------------------------
     Section 6.3.   Certain Rights of Trustee..........................................................................  48
     ----------------------------------------
     Section 6.4.   Not Responsible for Recitals or Issuance of Securities.............................................  49
     ---------------------------------------------------------------------
     Section 6.5.   May Hold Securities................................................................................  49
     ----------------------------------
     Section 6.6.   Money Held in Trust................................................................................  49
     ----------------------------------
     Section 6.7.   Compensation and Reimbursement.....................................................................  49
     ---------------------------------------------
     Section 6.8.   Disqualification; Conflicting Interests............................................................  50
     ------------------------------------------------------
     Section 6.9.   Corporate Trustee Required; Eligibility............................................................  50
     ------------------------------------------------------
     Section 6.10.  Resignation and Removal; Appointment of Successor..................................................  51
     ----------------------------------------------------------------
     Section 6.11.  Acceptance of Appointment by Successor.............................................................  52
     -----------------------------------------------------
     Section 6.12.  Merger, Conversion, Consolidation or Succession to Business........................................  53
     --------------------------------------------------------------------------
     Section 6.13.  Preferential Collection of Claims Against Corporation..............................................  53
     --------------------------------------------------------------------
     Section 6.14.  Appointment of Authenticating Agent................................................................  54
     --------------------------------------------------

ARTICLE VII    Holder's Lists and Reports by Trustee And Corporation...................................................  55
--------------------------------------------------------------------

     Section 7.1.   Corporation to Furnish Trustee Names and Addresses of Holders......................................  55
     ----------------------------------------------------------------------------
</TABLE>

                                      ii
<PAGE>

<TABLE>
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     Section 7.2.   Preservation of Information, Communications to Holders.............................................  55
     ---------------------------------------------------------------------
     Section 7.3.   Reports by Trustee.................................................................................  56
     ---------------------------------
     Section 7.4.   Reports by Corporation.............................................................................  56
     -------------------------------------

ARTICLE VIII   Consolidation, Merger, Conveyance, Transfer or Lease....................................................  57
-------------------------------------------------------------------

     Section 8.1.   Corporation May Consolidate, Etc., Only on Certain Terms...........................................  57
     ----------------------------------------------------------------------
     Section 8.2.   Successor Corporation Substituted..................................................................  57
     ------------------------------------------------

ARTICLE IX     Supplemental Indentures.................................................................................  58
--------------------------------------

     Section 9.1.   Supplemental Indentures without Consent of Holders.................................................  58
     -----------------------------------------------------------------
     Section 9.2.   Supplemental Indentures with Consent of Holders....................................................  59
     --------------------------------------------------------------
     Section 9.3.   Execution of Supplemental Indentures...............................................................  60
     ---------------------------------------------------
     Section 9.4.   Effect of Supplemental Indentures..................................................................  61
     ------------------------------------------------
     Section 9.5.   Conformity with Trust Indenture Act................................................................  61
     --------------------------------------------------
     Section 9.6.   Reference in Securities to Supplemental Indentures.................................................  61
     -----------------------------------------------------------------

ARTICLE X      Covenants...............................................................................................  61
------------------------

     Section 10.1.  Payment of Principal, Premium and Interest.........................................................  61
     ---------------------------------------------------------
     Section 10.2.  Maintenance of Office or Agency....................................................................  61
     ----------------------------------------------
     Section 10.3.  Money for Security Payments to be Held in Trust....................................................  62
     --------------------------------------------------------------
     Section 10.4.  Statement as to Compliance.........................................................................  63
     -----------------------------------------
     Section 10.5.  Waiver of Certain Covenants........................................................................  63
     ------------------------------------------
     Section 10.6.  Additional Sums....................................................................................  64
     ------------------------------
     Section 10.7.  Additional Covenants...............................................................................  64
     -----------------------------------
     Section 10.8.  Original Issue Discount............................................................................  65
     --------------------------------------

ARTICLE XI     Redemption of Securities................................................................................  66
---------------------------------------

     Section 11.1.  Applicability of This Article......................................................................  66
     --------------------------------------------
     Section 11.2.  Election to Redeem; Notice to Trustee..............................................................  66
     ----------------------------------------------------
     Section 11.3.  Selection of Securities to be Redeemed.............................................................  66
     -----------------------------------------------------
     Section 11.4.  Notice of Redemption...............................................................................  67
     -----------------------------------
     Section 11.5.  Deposit of Redemption Price........................................................................  68
     ------------------------------------------
     Section 11.6.  Payment of Securities Called for Redemption........................................................  68
     ----------------------------------------------------------
     Section 11.7.  Right of Redemption of Securities Initially Issued to an Issuer Trust..............................  68
     ------------------------------------------------------------------------------------

ARTICLE XII    Sinking Funds...........................................................................................  69
----------------------------

     Section 12.1.  Applicability of Article...........................................................................  69
     ---------------------------------------
     Section 12.2.  Satisfaction of Sinking Fund Payments with Securities..............................................  69
     --------------------------------------------------------------------
     Section 12.3.  Redemption of Securities for Sinking Fund..........................................................  69
     --------------------------------------------------------
</TABLE>

                                      iii
<PAGE>

<TABLE>
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ARTICLE XIII   Subordination of Securities.............................................................................  71
------------------------------------------

     Section 13.1.  Securities Subordinate to Senior Indebtedness......................................................  71
     ------------------------------------------------------------
     Section 13.2.  No Payment When Senior Indebtedness in Default; Payment Over of Proceeds Upon Dissolution, Etc.....  71
     -------------------------------------------------------------------------------------------------------------
     Section 13.3.  Payment Permitted If No Default....................................................................  73
     ----------------------------------------------
     Section 13.4.  Subrogation to Rights of Holders of Senior Indebtedness............................................  73
     ----------------------------------------------------------------------
     Section 13.5.  Provisions Solely to Define Relative Rights........................................................  73
     ----------------------------------------------------------
     Section 13.6.  Trustee to Effectuate Subordination................................................................  74
     --------------------------------------------------
     Section 13.7.  No Waiver of Subordination Provisions..............................................................  74
     ----------------------------------------------------
     Section 13.8.  Notice to Trustee..................................................................................  75
     --------------------------------
     Section 13.9.  Reliance on Judicial Order or Certificate of Liquidating Agent.....................................  75
     -----------------------------------------------------------------------------
     Section 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness...........................................  76
     -----------------------------------------------------------------------
     Section 13.11. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights...............  76
     ---------------------------------------------------------------------------------------------------
     Section 13.12. Article Applicable to Paying Agents................................................................  76
     --------------------------------------------------
</TABLE>

                                      iv
<PAGE>

     JUNIOR SUBORDINATED INDENTURE, dated as of ___________, 20__, between BB&T
CORPORATION, a North Carolina corporation (the "Corporation"), having its
principal office at 200 West Second Street, Winston-Salem, North Carolina 27101,
and STATE STREET BANK AND TRUST COMPANY, as Trustee (the "Trustee").

                          Recitals of the Corporation
                          ---------------------------

     Whereas, the Corporation has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its unsecured
junior subordinated debt securities in series (hereinafter called the
"Securities") of substantially the tenor hereinafter provided, including
Securities issued to evidence loans made to the Corporation of the proceeds from
the issuance from time to time by one or more business trusts (each an "Issuer
Trust") of undivided preferred beneficial interests in the assets of such Issuer
Trusts (the "Capital Securities") and undivided common beneficial interests in
the assets of such Issuer Trusts (the "Common Securities" and, collectively with
the Capital Securities, the "Trust Securities"), and to provide the terms and
conditions upon which the Securities are to be authenticated, issued and
delivered; and

     Whereas, all things necessary to make this Indenture a valid agreement of
the Corporation, in accordance with its terms, have been done.

     Now Therefore, this Indenture Witnesseth:

     For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of any series thereof,
as follows:

                                   ARTICLE I

            Definitions and Other Provisions of General Application

Section 1.1.  Definitions.

     For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:

          (1) The terms defined in this Article have the meanings assigned to
     them in this Article, and include the plural as well as the singular;

          (2) All other terms used herein that are defined in the Trust
     Indenture Act, either directly or by reference therein, have the meanings
     assigned to them therein;

          (3) The words "include", "includes" and "including" shall be deemed to
     be followed by the phrase "without limitation";
<PAGE>

          (4) All accounting terms not otherwise defined herein have the
     meanings assigned to them in accordance with generally accepted accounting
     principles;

          (5) Whenever the context may require, any gender shall be deemed to
     include the others;

          (6) Unless the context otherwise requires, any reference to an
     "Article" or a "Section" refers to an Article or a Section, as the case may
     be, of this Indenture; and

          (7) The words "hereby", "herein", "hereof" and "hereunder" and other
     words of similar import refer to this Indenture as a whole and not to any
     particular Article, Section or other subdivision.

     "Act" when used with respect to any Holder has the meaning specified in
      ---
Section 1.4.

     "Additional Interest" means the interest, if any, that shall accrue on any
      -------------------
interest on the Securities of any series the payment of which has not been made
on the applicable Interest Payment Date and which shall accrue at the rate per
annum specified or determined as specified in such Security.

     "Additional Sums" has the meaning specified in Section 10.6.
      ---------------

     "Additional Taxes" means any additional taxes, duties and other
      ----------------
governmental charges to which an Issuer Trust has become subject from time to
time as a result of a Tax Event.

     "Affiliate" of any specified Person means any other Person directly or
      ---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person.  For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

     "Agent Member" means any member of, or participant in, the Depositary.
      ------------

     "Applicable Procedures" means, with respect to any transfer or transaction.
      ---------------------
involving a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Security, in each case to the extent
applicable to such transaction and as in effect from time to time.

     "Authenticating Agent" means any Person authorized by the Trustee pursuant
      --------------------
to Section 6.14 to act on behalf of the Trustee to authenticate Securities of
one or more series.

     "Bankruptcy Code" means Title 11 of the United States Code or any successor
      ---------------
statute thereto, in each case as amended from time to time.

     "Board of Directors" means the board of directors of the Corporation or the
      ------------------
Executive Committee of the board of directors of the Corporation (or any other
committee of the board of directors of the Corporation performing similar
functions) or a committee designated by the

                                       2
<PAGE>

board of directors of the Corporation (or such committee), comprised of two or
more members of the board of directors of the Corporation or officers of the
Corporation, or both.

     "Board Resolution" means a copy of a resolution certified by the Secretary
      ----------------
or an Assistant Secretary of the Corporation to have been duly adopted by the
Board of Directors, or officers of the Corporation to which authority to act on
behalf of the Board of Directors has been delegated, and to be in full force and
effect on the date of such certification, and delivered to the Trustee.

     "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
      ------------
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed, or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to the Securities of a
series initially issued to an Issuer Trust for so long as such Securities are
held by such Issuer Trust, the "Corporate Trust Office" (as defined in the
related Trust Agreement) of the Property Trustee or the Delaware Trustee under
the related Trust Agreement, is closed for business.

     "Capital Securities" has the meaning specified in the first recital of this
      ------------------
Indenture.

     "Capital Treatment Event" means, in respect of any Issuer Trust, the
      -----------------------
reasonable determination by the Corporation (as evidenced by an Officers'
Certificate delivered to the Trustee) that, as a result of the occurrence of any
amendment to, or change (including any announced prospective change) in, the
laws (or any rules or regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws, rules or regulations, which amendment or change is effective
or such pronouncement, action or decision is announced on or after the date of
the issuance of the Capital Securities of such Issuer Trust, there is more than
an insubstantial risk that the Corporation will not be entitled to treat an
amount equal to the aggregate Liquidation Amount (as such term is defined in the
related Trust Agreement) of such Capital Securities as "Tier 1 Capital" (or the
then equivalent thereof) for purposes of the capital adequacy guidelines of the
Board of Governors of the Federal Reserve System, as then in effect and
applicable to the Corporation.

     "Commission" means the Securities and Exchange Commission, as from time to
      ----------
time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.

     "Common Securities" has the meaning specified in the first recital of this
      -----------------
Indenture.

     "Common Stock" means the common stock, par value $5.00 per share, of the
      ------------
Corporation.

     "Corporate Trust Office" means the principal office of the Trustee at which
      ----------------------
at any particular time its corporate trust business shall be administered.

     "corporation" includes a corporation, association, company, limited
      -----------
liability company, joint-stock company or business trust.

                                       3
<PAGE>

     "Corporation" means the Person named as the "Corporation" in the first
      -----------
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Corporation" shall mean such successor corporation.

     "Corporation Request" and "Corporation Order" mean, respectively, the
      -------------------
written request or order signed in the name of the Corporation by its Chairman
of the Board of Directors, its Vice Chairman of the Board of Directors, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.

     "Debt" means, with respect to any Person, whether recourse is to all or a
      ----
portion of the assets of such Person and whether or not contingent and without
duplication, (i) every obligation of such Person for money borrowed; (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses; (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person; (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such Person;
(vi) all indebtedness of the Corporation, whether incurred on or prior to the
date of this Indenture or thereafter incurred, for claims in respect of
derivative products, including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i) through (vi) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor or otherwise.

     "Defaulted Interest" has the meaning specified in Section 3.8.
      ------------------

     "Delaware Trustee" means, with respect to any Issuer Trust, the Person
      ----------------
identified as the "Delaware Trustee" in the related Trust Agreement, solely in
its capacity as Delaware Trustee of such Issuer Trust under such Trust Agreement
and not in its individual capacity, or its successor in interest in such
capacity, or any successor Delaware trustee appointed as therein provided.

     "Depositary" means, with respect to the Securities of any series issuable
      ----------
or issued in whole or in part in the form of one or more Global Securities, the
Person designated as Depositary by the Corporation pursuant to Section 3.1 with
respect to such series (or any successor thereto).

     "Discount Security" means any security that provides for an amount less
      -----------------
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.

     "Distributions," with respect to the Trust Securities issued by an Issuer
      -------------
Trust, means amounts payable in respect of such Trust Securities as provided in
the related Trust Agreement and referred to therein as "Distributions."

     "Dollar" or "$" means the currency of the United States of America that, as
      ------      -
at the time of payment, is legal tender for the payment of public and private
debts.

                                       4
<PAGE>

     "Event of Default", unless otherwise specified with respect to a series of
      ----------------
Securities as contemplated by Section 3.1, has the meaning specified in Article
V.

     "Exchange Act" means the Securities Exchange Act of 1934 or any statute
      ------------
successor thereto, in each case as amended from time to time.

     "Expiration Date" has the meaning specified in Section 1.4.
      ---------------

     "Extension Period" has the meaning specified in Section 3.12.
      ----------------

     "Global Security" means a Security in the form prescribed in Section 2.4
      ---------------
evidencing all or part of a series of Securities, issued to the Depositary or
its nominee for such series, and registered in the name of such Depositary or
its nominee.

     "Guarantee Agreement" means, with respect to any Issuer Trust, the
      -------------------
Guarantee Agreement executed by the Corporation for the benefit of the Holders
of the Capital Securities issued by such Issuer Trust as modified, amended or
supplemented from time to time.

     "Holder" means a Person in whose name a Security is registered in the
      ------
Securities Register.

     "Indenture" means this instrument as originally executed or as it may from
      ---------
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of each particular series of Securities established as
contemplated by Section 3.1.

     "Institutional Accredited Investor" means an institutional accredited
      ---------------------------------
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act.

     "Interest Payment Date" means, as to each series of Securities, the Stated
      ---------------------
Maturity of an installment of interest on such Securities.

     "Investment Company Act" means the Investment Company Act of 1940 or any
      ----------------------
successor statute thereto, in each case as amended from time to time.

     "Investment Company Event" means the receipt by an Issuer Trust of an
      ------------------------
Opinion of Counsel (as defined in the relevant Trust Agreement) experienced in
such matters to the effect that, as a result of the occurrence of a change in
law or regulation or a written change (including any announced prospective
change) in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority, there is more than an
insubstantial risk that such Issuer Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change or prospective change becomes effective or would
become effective, as the case may be, on or after the date of the issuance of
the Capital Securities of such Issuer Trust.

     "Issuer Trust" has the meaning specified in the first recital of this
      ------------
Indenture.

                                       5
<PAGE>

     "Maturity" when used with respect to any Security means the date on which
      --------
the principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.

     "Notice of Default" means a written notice of the kind specified in Section
      -----------------
5.1(3).

     "Officers' Certificate" means a certificate signed by the Chairman of the
      ---------------------
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Corporation and delivered to the Trustee.

     "Opinion of Counsel" means a written opinion of counsel, who may be counsel
      ------------------
for or an employee of the Corporation or any Affiliate of the Corporation.

     "Original Issue Date" means the date of issuance specified as such in each
      -------------------
Security.

     "Outstanding" means, when used in reference to any Securities, as of the
      -----------
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:

          (i) Securities theretofore canceled by the Trustee or delivered to the
     Trustee for cancellation;

          (ii) Securities for whose payment money in the necessary amount has
     been theretofore deposited with the Trustee or any Paying Agent in trust
     for the Holders of such Securities; and

          (iii)  Securities in substitution for or in lieu of which other
     Securities have been authenticated and delivered or that have been paid
     pursuant to Section 3.7, unless proof satisfactory to the Trustee is
     presented that any such Securities are held by Holders in whose hands such
     Securities are valid, binding and legal obligations of the Corporation;

provided, however, that in determining whether the Holders of the requisite
--------  -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Corporation or any other obligor upon the Securities or any Affiliate of
the Corporation or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities that the Trustee knows to be so owned shall
be so disregarded.  Securities so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Corporation or any other obligor upon the Securities or
any Affiliate of the Corporation or such other obligor.  Upon the written
request of the Trustee, the Corporation shall furnish to the Trustee promptly an
Officers' Certificate listing and identifying all Securities, if any, known by
the Corporation to be owned or held by or for the account of the Corporation, or
any other obligor on the Securities or any Affiliate of the Corporation or such
obligor, and subject to the provisions of Section 6.1, the Trustee shall be
entitled to accept such Officers' Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Securities not listed therein
are Outstanding for the purpose of any such

                                       6
<PAGE>

determination. Notwithstanding anything herein to the contrary, Securities of
any series initially issued to an Issuer Trust that are owned by such Issuer
Trust shall be deemed to be Outstanding notwithstanding the ownership by the
Corporation or an Affiliate of any beneficial interest in such Issuer Trust.

     "Paying Agent" means the Trustee or any Person authorized by the
      ------------
Corporation to pay the principal of (or premium, if any) or interest on, or
other amounts in respect of, any Securities on behalf of the Corporation.

     "Person" means a legal person, including any individual, corporation,
      ------
estate, partnership, joint venture, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

     "Place of Payment" means, with respect to the Securities of any series, the
      ----------------
place or places where the principal of (and premium, if any) and interest on the
Securities of such series are payable pursuant to Sections 3.1 and 3.12.

     "Predecessor Security" of any particular Security means every previous
      --------------------
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security.  For the purposes of this definition, any security
authenticated and delivered under Section 3.7 in lieu of a mutilated, destroyed,
lost or stolen Security shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Security.

     "Proceeding" has the meaning specified in Section 13.2.
      ----------

     "Property Trustee" means, with respect to any Issuer Trust, the Person
      ----------------
identified as the "Property Trustee" in the related Trust Agreement, solely in
its capacity as Property Trustee of such Issuer Trust under such Trust Agreement
and not in its individual capacity, or its successor in interest in such
capacity, or any successor property trustee appointed as therein provided.

     "Redemption Date", when used with respect to any Security to be redeemed,
      ---------------
means the date fixed for such redemption by or pursuant to this Indenture or the
terms of such Security.

     "Redemption Price", when used with respect to any Security to be redeemed,
      ----------------
means the price at which it is to be redeemed pursuant to this Indenture.

     "Regular Record Date" for the interest payable on any Interest Payment Date
      -------------------
with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of such series, the date that
is fifteen days next preceding such Interest Payment Date (whether or not a
Business Day).

     "Responsible Officer", when used with respect to the Trustee, means the
      -------------------
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular

                                       7
<PAGE>

corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.

     "Restricted Securities Certificate" means a certificate substantially in
      ---------------------------------
the form set forth in Exhibit A.

     "Restricted Securities Legend" means a legend substantially in the form of
      ----------------------------
the legend required in the form of Security set forth in Section 2.2 to be
placed upon a Restricted Security.

     "Restricted Security" means each Security required pursuant to Section
      -------------------
3.6(c) to bear a Restricted Securities Legend.

     "Rights Plan" means a plan of the Corporation providing for the issuance by
      -----------
the Corporation to all holders of its Common Stock, par value $5.00 per share,
of rights entitling the holders thereof to subscribe for or purchase shares of
any class or series of capital stock of the Corporation which rights (i) are
deemed to be transferred with such shares of such Common Stock, and (ii) are
also issued in respect of future issuances of such Common Stock, in each case
until the occurrence of a specified event or events.

     "Rule 144A Information" shall be such information with respect to the
      ---------------------
Corporation as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto).

     "Securities" or "Security" means any debt securities or debt security, as
      ----------
the case may be, authenticated and delivered under this Indenture.

     "Securities Act" means the Securities Act of 1933 or any successor statute
      --------------
thereto, in each case as amended from time to time.

     "Securities Register" and "Securities Registrar" have the respective
      -------------------
meanings specified in Section 3.6.

     "Senior Indebtedness" means the principal of (and premium, if any) and
      -------------------
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Corporation, whether incurred on or prior to the date of this
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Securities or
to other Debt that is pari passu with, or subordinated to, the Securities,
                      ----------
provided, however, that Senior Indebtedness shall not be deemed to include (a)
--------  -------
any Debt of the Corporation that, when incurred and without respect to any
election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was without
recourse to the Corporation, (b) any Debt of the Corporation to any of its
Subsidiaries, (c) Debt to any employee of the Corporation, (d) any Securities,
(e) trade accounts payable of the Corporation, and (f) accrued liabilities
arising in the ordinary course of business of the Corporation.

     "Special Record Date" for the payment of any Defaulted Interest means a
      -------------------
date fixed by the Trustee pursuant to Section 3.7.

                                       8
<PAGE>

     "Stated Maturity", when used with respect to any Security or any
      ---------------
installment of principal thereof (or premium, if any) or interest (including any
Additional Interest) thereon, means the date specified pursuant to the terms of
such Security as the fixed date on which the principal of such Security or such
installment of principal (or premium, if any) or interest (including any
Additional Interest) is due and payable, as such date may, in the case of the
stated maturity of the principal on any security, be shortened or extended as
provided pursuant to the terms of such Security and this Indenture and, in the
case of any installment of interest, subject to the deferral of any such date in
the case of any Extension Period.

     "Subsidiary" means a corporation more than 50% of the outstanding voting
      ----------
stock of which is owned, directly or indirectly, by the Corporation or by one or
more other Subsidiaries, or by the Corporation and one or more other
Subsidiaries.  For purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.

     "Successor Security" of any particular Security means every Security issued
      ------------------
after, and evidencing all or a portion of the same debt as that evidenced by,
such particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.7 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

     "Tax Event" means the receipt by an Issuer Trust of an Opinion of Counsel
      ---------
(as defined in the relevant Trust Agreement) experienced in such matters to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of the Capital Securities of such Issuer Trust, there is more than
an insubstantial risk that (i) such Issuer Trust is, or will be within 90 days
of the delivery of such Opinion of Counsel, subject to United States Federal
income tax with respect to income received or accrued on the corresponding
series of Securities issued by the Corporation to such Issuer Trust, (ii)
interest payable by the Corporation on such corresponding series of Securities
is not, or within 90 days of the delivery of such Opinion of Counsel will not
be, deductible by the Corporation, in whole or in part, for United States
Federal income tax purposes, or (iii) such Issuer Trust is, or will be within 90
days of the delivery of such Opinion of Counsel, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.

     "Trust Agreement" means, with respect to any Issuer Trust, the trust
      ---------------
agreement or other governing instrument of such Issuer Trust.

     "Trustee" means the Person named as the "Trustee" in the first paragraph of
      -------
this instrument, solely in its capacity as such and not in its individual
capacity, until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder and, if at

                                       9
<PAGE>

any time there is more than one such Person, "Trustee" as used with respect to
the Securities of any series shall mean the Trustee with respect to Securities
of that series.

     "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
      -------------------
(S)(S) 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.

     "Trust Securities" has the meaning specified in the first recital of this
      ----------------
Indenture.

     "Vice President," when used with respect to the Corporation, means any duly
      ---------------
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."

Section 1.2.  Compliance Certificate and Opinions.

     Upon any application or request by the Corporation to the Trustee to take
any action under any provision of this Indenture, the Corporation shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent
(including covenants compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants compliance with which
constitutes a condition precedent), if any, have been complied with, except that
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.

     Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.4) shall include:

          (1) a statement by each individual signing such certificate or opinion
     that such individual has read such covenant or condition and the
     definitions herein relating thereto;

          (2) a brief statement as to the nature and scope of the examination or
     investigation upon which the statements or opinions of such individual
     contained in such certificate or opinion are based;

          (3) a statement that, in the opinion of such individual, he or she has
     made such examination or investigation as is necessary to enable him or her
     to express an informed opinion as to whether or not such covenant or
     condition has been complied with; and

          (4) a statement as to whether, in the opinion of such individual, such
     condition or covenant has been complied with.

Section 1.3.  Forms of Documents Delivered to Trustee.

     In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or

                                      10
<PAGE>

covered by the opinion of, only one such Person, or that they be so certified or
covered by only one document, but one such Person may certify or give an opinion
with respect to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.

     Any certificate or opinion of an officer of the Corporation may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his or her certificate or opinion is based
are erroneous.  Any such certificate or Opinion of Counsel may be based, insofar
as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Corporation stating that the
information with respect to such factual matters is in the possession of the
Corporation, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.

     Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

Section 1.4.  Acts of Holders.

     (a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given to or taken by Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments is or are delivered to the
Trustee, and, where it is hereby expressly required, to the Corporation.  Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments.  Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Corporation, if made in the manner provided in this Section.

     (b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him or her the execution thereof. Where such
execution is by a Person acting in other than his or her individual capacity,
such certificate or affidavit shall also constitute sufficient proof of his or
her authority.

     (c) The fact and date of the execution by any Person of any such instrument
or writing, or the authority of the Person executing the same, may also be
proved in any other manner that the Trustee deems sufficient and in accordance
with such reasonable rules as the Trustee may determine.

     (d) The ownership of Securities shall be proved by the Securities Register.

                                      11
<PAGE>

     (e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or suffered to be done by the Trustee or the Corporation in reliance thereon,
whether or not notation of such action is made upon such Security.

     (f) The Corporation may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Corporation may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next succeeding paragraph.
If any record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
(as defined below) by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date.  Nothing in this paragraph shall
be construed to prevent the Corporation from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken.  Promptly after any record date is set
pursuant to this paragraph, the Corporation, at its own expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 1.6.

     The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2), or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series.  If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date, provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date.  Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken.  Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Corporation's expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration

                                      12
<PAGE>

Date to be given to the Corporation in writing and to each Holder of Securities
of the relevant series in the manner set forth in Section 1.6.

     With respect to any record date set pursuant to this Section, the party
hereto that sets such record date may designate any day as the "Expiration Date"
and from time to time may change the Expiration Date to any earlier or later
day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 1.6, on or prior to the existing Expiration Date.  If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto that set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph.  Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.

     (g) Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.

Section 1.5.  Notices, Etc. to Trustee and Corporation.

     Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,

     (1) the Trustee by any Holder, any holder of Capital Securities or the
Corporation shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
office, or

     (2) the Corporation by the Trustee, any Holder or any holder of Capital
Securities shall be sufficient for every purpose (except as otherwise provided
in Section 5.1) hereunder if in writing and mailed, first class, postage
prepaid, to the Corporation addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any other
address previously furnished in writing to the Trustee by the Corporation.

Section 1.6.  Notice to Holders; Waiver.

     Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice.  If, by reason of the suspension
of or irregularities in regular mail service or for any other reason, it shall
be impossible or impracticable to mail notice of any event to Holders when said
notice is required to be given pursuant to any provision of this Indenture or of
the relevant Securities, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.  In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in

                                      13
<PAGE>

any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.

Section 1.7.  Conflict with Trust Indenture Act.

     Except as otherwise expressly provided herein, the Trust Indenture Act
shall apply as a matter of contract to this Indenture for purposes of
interpretation, construction and defining the rights and obligations hereunder,
and this Indenture, the Corporation, and the Trustee shall be deemed for all
purposes hereof to be subject to and governed by the Trust Indenture Act to the
same extent as would be the case if this Indenture were qualified under that Act
on the date hereof.  Except as otherwise provided herein, if and to the extent
that any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture
Act through operation of Section 318(c) thereof, such imposed duties shall
control.

Section 1.8.  Effect of Headings and Table of Contents.

     The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

Section 1.9.  Successors and Assigns.

     All covenants and agreements in this Indenture by the Corporation shall
bind its successors and assigns, whether so expressed or not.

Section 1.10.  Separability Clause.

     If any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

Section 1.11.  Benefits of Indenture.

     Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns, the holders of Senior Indebtedness, the Holders of the Securities and,
to the extent expressly provided in Sections 5.1, 5.2, 5.8, 5.9, 5.11, 5.13, 9.1
and 9.2, the holders of Capital Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.

Section 1.12.  Governing Law.

     THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                                      14
<PAGE>

Section 1.13.  Non-Business Days.

     If any Interest Payment Date, Redemption Date or Stated Maturity of any
Security shall not be a Business Day, then (notwithstanding any other provision
of this Indenture or the Securities) payment of interest or principal (and
premium, if any) or other amounts in respect of such Security need not be made
on such date, but may be made on the next succeeding Business Day (and no
interest shall accrue in respect of the amounts whose payment is so delayed for
the period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, until such next succeeding Business Day) except
that, if such Business Day falls in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day (in each case
with the same force and effect as if made on the Interest Payment Date or
Redemption Date or at the Stated Maturity).

                                   ARTICLE II

                                 Security Forms

Section 2.1.  Forms Generally.

     The Securities of each series and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article, or
in such other form or forms as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with applicable tax laws or the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such securities, as evidenced by their execution of the
Securities.  If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Corporation and delivered to the Trustee at or prior to the delivery of the
Corporation Order contemplated by Section 3.3 with respect to the authentication
and delivery of such Securities.

     The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.

Section 2.2.  Form of Face of Security.

                                BB&T CORPORATION
                              [TITLE OF SECURITY]

     [IF THE SECURITY IS A RESTRICTED SECURITY, INSERT -- THE SECURITIES
EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE

                                      15
<PAGE>

SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL
INVESTOR (I) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (II) IN AN OFFSHORE TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (III) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), OR (B) BY ANY SUBSEQUENT INVESTOR, AS SET FORTH IN
(A) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
AND, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE
STATES AND OTHER JURISDICTIONS OF THE UNITED STATES. THE HOLDER OF THIS SECURITY
AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS. SECURITIES OWNED BY
AN INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER MAY NOT BE HELD
IN BOOK-ENTRY FORM AND MAY NOT BE TRANSFERRED WITHOUT CERTIFICATION THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS, AS PROVIDED IN THE INDENTURE
REFERRED TO BELOW. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE
EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THE CAPITAL SECURITIES.]

No.    $

     BB&T CORPORATION, a corporation organized and existing under the laws of
North Carolina (hereinafter called the "Corporation", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________, or registered assigns, the
principal sum of __________ Dollars on __________ __, [if the Security is a
Global Security, then insert, if applicable--, or such other principal amount
represented hereby as may be set forth in the records of the Securities
Registrar hereinafter referred to in accordance with the Indenture,] [; provided
that the Corporation may (i) shorten the Stated Maturity of the principal of
this Security to a date not earlier than __________, and (ii) extend the Stated
Maturity of the principal of this Security at any time on one or more occasions,
subject to certain conditions specified in Section 3.15 of the Indenture, but in
no event to a date later than __________].  The Corporation further promises to
pay interest on said principal sum from _______________, ___ or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, [monthly] [quarterly] [semi-annually] [if applicable, insert-- (subject to
deferral as set forth herein)] in arrears on [insert applicable Interest Payment
Dates] of each year, commencing _______________, ___, at the rate of ___% per
annum, [if applicable insert-- together with Additional Sums, if any, as
provided in Section 10.6 of the Indenture] until the principal hereof is paid or
duly provided for or made available for payment [if applicable, insert--;
provided that any overdue principal, premium or Additional Sums and any overdue
installment of interest shall bear Additional Interest at the rate of____% per
annum (to the extent that the payment of such interest shall be legally
enforceable),

                                      16
<PAGE>

compounded [monthly] [quarterly] [semi-annually], from the dates such amounts
are due until they are paid or made available for payment, and such interest
shall be payable on demand]. The amount of interest payable for any period less
than a full interest period shall be computed on the basis of a 360-day year of
twelve 30-day months and the actual days elapsed in a partial month in such
period. The amount of interest payable for any full interest period shall be
computed by dividing the applicable rate per annum by [twelve/four/two]. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in the Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest installment [if
applicable insert--, which shall be the [____________ or ____________] (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date]. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.

     [If applicable, insert--So long as no Event of Default has occurred and is
continuing, the Corporation shall have the right, at any time during the term of
this Security, from time to time to defer the payment of interest on this
Security for up to ______ consecutive [monthly] [quarterly] [semi-annual]
interest payment periods with respect to each deferral period (each an
"Extension Period") [If applicable, insert--, during which Extension Periods the
Corporation shall have the right to make partial payments of interest on any
Interest Payment Date, and] at the end of which the Corporation shall pay all
interest then accrued and unpaid including any Additional Interest, as provided
below; provided, however, that no Extension Period shall extend beyond the
Stated Maturity of the principal of this Security [If Stated Maturity can be
shortened or extended, insert--, as then in effect,] and no such Extension
Period may end on a date other than an Interest Payment Date; and provided,
further, however, that during any such Extension Period, the Corporation shall
not (i) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation that rank
pari passu in all respects with or junior in interest to this Security, or (ii)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Corporation's capital
stock (other than (a) repurchases, redemptions or other acquisitions of shares
of capital stock of the Corporation in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of any one or
more employees, officers, directors or consultants, in connection with a
dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Corporation (or securities convertible into
or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of an exchange or conversion of any class or series of the Corporation's
capital stock (or any capital stock of a Subsidiary of the Corporation) for any
class or series of the Corporation's capital stock or of any class or series of
the Corporation's indebtedness for any class or series of the Corporation's
capital stock, (c) the purchase of fractional interests in shares of the
Corporation's capital stock

                                      17
<PAGE>

Pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (d) any declaration of a dividend in
connection with any Rights Plan, or the issuance of rights, stock or other
property under any Rights Plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock). Prior
to the termination of any such Extension Period, the Corporation may further
defer the payment of interest, provided that no Extension Period shall exceed
______ consecutive [monthly] [quarterly] [semi-annual] interest payment periods,
extend beyond the Stated Maturity of the principal of this Security or end on a
date other than an Interest Payment Date. Upon the termination of any such
Extension Period and upon the payment of all accrued and unpaid interest and any
Additional Interest then due on any Interest Payment Date, the Corporation may
elect to begin a new Extension Period, subject to the above conditions. No
interest shall be due and payable during an Extension Period, except at the end
thereof, but each installment of interest that would otherwise have been due and
payable during such Extension shall bear Additional Interest (to the extent that
the payment of such interest shall be legally enforceable) at the rate of ____%
per annum, compounded [monthly] [quarterly] [semi-annually] and calculated as
set forth in the first paragraph of this Security, from the dates on which
amounts would otherwise have been due and payable until paid or made available
for payment. The Corporation shall give the Holder of this Security and the
Trustee notice of its election to begin any Extension Period at least one
Business Day prior to the next succeeding Interest Payment Date on which
interest on this Security would be payable but for such deferral [if applicable,
insert--or so long as such Securities are held by [insert name of applicable
Issuer Trust], at least one Business Day prior to the earlier of (i) the next
succeeding date on which Distributions on the Capital Securities of such Issuer
Trust would be payable but for such deferral, and (ii) the date on which the
Property Trustee of such Issuer Trust is required to give notice to holders of
such Capital Securities of the record date or the date such Distributions are
payable].

     Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Corporation maintained for
that purpose in the [insert Place of Payment], in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts [if applicable, insert--; provided, however, that at
                                                      --------  -------
the option of the Corporation payment of interest may be made (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Securities Register, or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Securities Register].

     The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto.  Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such actions as
may be necessary or appropriate to effectuate the subordination so provided, and
(c) appoints the Trustee his or her attorney-in-fact for any and all such
purposes.  Each Holder hereof, by his or her acceptance hereof, waives all
notice of the acceptance of the subordination provisions

                                      18
<PAGE>

contained herein and in the Indenture by each holder of Senior Indebtedness,
whether now outstanding or hereafter incurred, and waives reliance by each such
holder upon said provisions.

     Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

     Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

     IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly
executed under its corporate seal.

                              BB&T Corporation

                              By:_____________________________________
                              Name:
                              Title:

Attest:

____________________________________
[Secretary or Assistant Secretary]

Section 2.3.  Form of Reverse of Security.

     This Security is one of a duly authorized issue of securities of the
Corporation (herein called the "Securities"), issued and to be issued in one or
more series under the Junior Subordinated Indenture, dated as of __________, ___
(herein called the "Indenture"), between the Corporation and STATE STREET BANK
AND TRUST COMPANY, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Corporation, the Trustee, the holders of Senior Indebtedness and the Holders
of the Securities, and of the terms upon which the Securities are, and are to
be, authenticated and delivered.  This Security is one of the series designated
on the face hereof [if applicable, insert--, limited in aggregate principal
amount to $ ___________].

     All terms used in this Security that are defined in the Indenture [if
applicable, insert--or in the Amended and Restated Trust Agreement, dated as of
____________, 20__ (as modified, amended or supplemented from time to time, the
"Trust Agreement"), relating to [insert name of Issuer Trust] (the "Issuer
Trust") among the Corporation, as Depositor, the Trustees named therein and the
Holders from time to time of the Trust Securities issued pursuant thereto, shall
have the meanings assigned to them in the Indenture [if applicable, insert--or
the Trust Agreement, as the case may be].

                                      19
<PAGE>

     [If applicable, insert--The Corporation may at any time, at its option, on
or after _________, ____, and subject to the terms and conditions of Article XI
of the Indenture, redeem this Security in whole at any time or in part from time
to time, at the following Redemption Prices (expressed as percentages of the
principal amount hereof): If redeemed during the 12-month period beginning
_____________,

                    Year                   Redemption Price
                    ----------------------------------------------------

and thereafter at a Redemption Price equal to 100% of the principal amount
hereof, together, in the case of any such redemption, with accrued interest [if
applicable, insert--, including any Additional Interest,] to but excluding the
date fixed for redemption.]

     [If applicable, insert--  In addition, upon the occurrence and during the
continuation of a Tax Event, an Investment Company Event or a Capital Treatment
Event in respect of the Issuer Trust, the Corporation may, at its option, at any
time within 90 days of the occurrence and during the continuation of such Tax
Event, Investment Company Event or Capital Treatment Event, as the case may be,
redeem this Security, in whole but not in part, subject to the terms and
conditions of Article XI of the Indenture, at a redemption price equal to
[insert formula].

     [If the Security is subject to redemption of any kind, insert--  In the
event of redemption of this Security in part only, a new Security or Securities
of this series for the unredeemed portion hereof will be issued in the name of
the Holder hereof upon the cancellation hereof.]

     The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Corporation with
certain conditions set forth in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the
Corporation and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Corporation and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture.  The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Corporation with certain provisions of the Indenture
and certain past defaults under the Indenture and their consequences.  Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.

     [If the Security is not a Discount Security, insert--  As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securities of this

                                      20
<PAGE>

series may declare the principal amount of all the Securities of this series to
be due and payable immediately, by a notice in writing to the Corporation (and
to the Trustee if given by Holders) [if applicable, insert--, provided that, if
upon an Event of Default, the Trustee or such Holders fail to declare the
principal of all the Outstanding Securities of this series to be immediately due
and payable, the holders of at least 25% in aggregate Liquidation Amount of the
Capital Securities then Outstanding shall have the right to make such
declaration by a notice in writing to the Corporation and the Trustee]; and upon
any such declaration the principal amount of and the accrued interest (including
any Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of principal and interest
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article XIII of the Indenture.]

     [If the Security is a Discount Security, insert--  As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securities of this
series may declare an amount of principal of the Securities of this series to be
due and payable immediately, by a notice in writing to the Corporation (and to
the Trustee if given by Holders) [if applicable, insert--, provided that, if
upon an Event of Default, the Trustee or such Holders fail to declare such
principal amount of the Outstanding Securities of this series to be immediately
due and payable, the holders of at least 25% in aggregate Liquidation Amount of
the Capital Securities then Outstanding shall have the right to make such
declaration by a notice in writing to the Corporation and the Trustee].  The
principal amount payable upon such acceleration shall be equal to--insert
formula for determining the amount].  Upon any such declaration, such amount of
the principal of and the accrued interest (including any Additional Interest) on
all the Securities of this series shall become immediately due and payable,
provided that the payment of such principal and interest (including any
Additional Interest) on all the Securities of this series shall remain
subordinated to the extent provided in Article XIII of the Indenture.  Upon
payment (i) of the amount of principal so declared due and payable and (ii) of
interest on any overdue principal, premium and interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all of
the Corporation's obligations in respect of the payment of the principal of and
premium and interest, if any, on this Security shall terminate.]

     No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Corporation, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest [insert if applicable--including any Additional Interest)] on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.

     As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Securities Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Corporation maintained under Section 10.2 of the Indenture for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Corporation and the Securities Registrar
duly executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Securities of this series, of like tenor,
of authorized denominations

                                      21
<PAGE>

and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.

     The Securities of this series are issuable only in registered form without
coupons in denominations of $____________ and any integral multiple of
$____________ in excess thereof.  As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.

     No service charge shall be made for any such registration of transfer or
exchange, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the
Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the Person in whose name this Security is registered as the owner hereof
for all purposes, whether or not this Security be overdue, and neither the
Corporation, the Trustee nor any such agent shall be affected by notice to the
contrary.

     The Corporation and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.

     THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.

Section 2.4.  Additional Provisions Required in Global Security.

     Unless otherwise specified as contemplated by Section 3.1, any Global
Security issued hereunder shall, in addition to the provisions contained in
Sections 2.2 and 2.3, bear a legend in substantially the following form:

     THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
     HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
     NOMINEE OF A DEPOSITARY.  THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
     REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
     ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
     TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
     DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
     NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
     THE INDENTURE.

                                      22
<PAGE>

Section 2.5.  Form of Trustee's Certificate of Authentication.

     The Trustee's certificates of authentication shall be in substantially the
following form:

     This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.

Dated:

                              State Street Bank and Trust Company,
                              as Trustee

                              By:_____________________________________
                                           Authorized officer

                                  ARTICLE III

                                The Securities

Section 3.1.  Title and Terms.

     The aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is unlimited.

     The Securities may be issued in one or more series.  There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth or determined in the manner provided in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of a series:

          (a) the title of the securities of such series, which shall
     distinguish the Securities of the series from all other Securities;

          (b) the limit, if any, upon the aggregate principal amount of the
     Securities of such series that may be authenticated and delivered under
     this Indenture (except for Securities authenticated and delivered upon
     registration of transfer of, or in exchange for, or in lieu of, other
     Securities of the series pursuant to Section 3.4, 3.6, 3.7, 9.6 or 11.6 and
     except for any Securities that, pursuant to Section 3.3, are deemed never
     to have been authenticated and delivered hereunder); provided, however,
     that the authorized aggregate principal amount of such series may be
     increased above such amount by a Board Resolution to such effect;

          (c) the Person to whom any interest on a Security of the series shall
     be payable, if other than the Person in whose name that security (or one or
     more Predecessor Securities) is registered at the close of business on the
     Regular Record Date for such interest;

                                      23
<PAGE>

          (d) the Stated Maturity or Maturities on which the principal of the
     Securities of such series is payable or the method of determination
     thereof, and any dates on which or circumstances under which, the
     Corporation shall have the right to extend or shorten such Stated Maturity
     or Maturities;

          (e) the rate or rates, if any, at which the Securities of such series
     shall bear interest, if any, the rate or rates and extent to which
     Additional Interest, if any, shall be payable in respect of any Securities
     of such series, the date or dates from which any such interest or
     Additional Interest shall accrue, the Interest Payment Dates on which such
     interest shall be payable, the right, pursuant to Section 3.12 or as
     otherwise set forth therein, of the Corporation to defer or extend an
     Interest Payment Date, and the Regular Record Date for the interest payable
     on any Interest Payment Date or the method by which any of the foregoing
     shall be determined;

          (f) the place or places where the principal of (and premium, if any)
     and interest (including any Additional Interest) on the Securities of such
     series shall be payable, the place or places where the Securities of such
     series may be presented for registration of transfer or exchange, any
     restrictions that may be applicable to any such transfer or exchange in
     addition to or in lieu of those set forth herein, and the place or places
     where notices and demands to or upon the Corporation in respect of the
     Securities of such series may be made;

          (g) the period or periods within or the date or dates on which, if
     any, the price or prices at which and the terms and conditions upon which
     the Securities of such series may be redeemed, in whole or in part, at the
     option of the Corporation, and if other than by a Board Resolution, the
     manner in which any election by the Corporation to redeem such Securities
     shall be evidenced;

          (h) the obligation or the right, if any, of the Corporation to redeem,
     repay or purchase the Securities of such series pursuant to any sinking
     fund, amortization or analogous provisions, or at the option of a Holder
     thereof, and the period or periods within which, the price or prices at
     which, the currency or currencies (including currency unit or units) in
     which and the other terms and conditions upon which Securities of the
     series shall be redeemed, repaid or purchased, in whole or in part,
     pursuant to such obligation;

          (i) the denominations in which any Securities of such series shall be
     issuable, if other than denominations of $1,000 and any integral multiple
     thereof;

          (j) if other than Dollars, the currency or currencies (including any
     currency unit or units) in which the principal of (and premium, if any) and
     interest and Additional Interest, if any, on the Securities of the series
     shall be payable, or in which the Securities of the series shall be
     denominated and the manner of determining the equivalent thereof in Dollars
     for purposes of the definition of Outstanding;

                                      24
<PAGE>

          (k) the additions, modifications or deletions, if any, in the Events
     of Default or covenants of the Corporation set forth herein with respect to
     the Securities of such series;

          (l) if other than the principal amount thereof, the portion of the
     principal amount of Securities of such series that shall be payable upon
     declaration of acceleration of the Maturity thereof;

          (m) if the principal amount payable at the Stated Maturity of any
     Securities of the series will not be determinable as of any one or more
     dates prior to the Stated Maturity, the amount which shall be deemed to be
     the principal amount of such Securities as of any such date for any purpose
     thereunder or hereunder, including the principal amount thereof which shall
     be due and payable upon any Maturity other than the Stated Maturity or
     which shall be deemed to be Outstanding as of any date prior to the Stated
     Maturity (or, in any such case, the manner in which such amount deemed to
     be the principal amount shall be determined);

          (n) the additions or changes, if any, to this Indenture with respect
     to the Securities of such series as shall be necessary to permit or
     facilitate the issuance of the Securities of such series in bearer form,
     registrable or not registrable as to principal, and with or without
     interest coupons;

          (o) any index or indices used to determine the amount of payments of
     principal of and premium, if any, on the Securities of such series or the
     manner in which such amounts will be determined;

          (p) if applicable, that any Securities of the series shall be issuable
     in whole or in part in the form of one or more Global Securities and, in
     such case, the respective Depositaries for such Global Securities, the form
     of any legend or legends that shall be borne by any such Global Security in
     addition to or in lieu of that set forth in Section 2.4 and any
     circumstances in addition to or in lieu of those set forth in Section 3.6
     in which any such Global Security may be exchanged in whole or in part for
     Securities registered, and any transfer of such Global Security in whole or
     in part may be registered, in the name or names of Persons other than the
     Depositary for such Global Security or a nominee thereof;

          (q) the appointment of any Paying Agent or agents for the Securities
     of such series;

          (r) the terms of any right to convert or exchange Securities of such
     series into any other securities or property of the Corporation, and the
     additions or changes, if any, to this Indenture with respect to the
     Securities of such series to permit or facilitate such conversion or
     exchange;

          (s) if such Securities are to be issued to an Issuer Trust, the form
     or forms of the Trust Agreement and Guarantee Agreement relating thereto;

                                      25
<PAGE>

          (t) if other than as set forth herein, the relative degree, if any, to
     which the Securities of the series shall be senior to or be subordinated to
     other series of Securities in right of payment, whether such other series
     of Securities are Outstanding or not;

          (u) any addition to or change in the Events of Default which applies
     to any Securities of the series and any change in the right of the Trustee
     or the requisite Holders of such Securities to declare the principal amount
     thereof due and payable pursuant to Section 5.2;

          (v) any addition to or change in the covenants set forth in Article X
     which applies to Securities of the series; and

          (w) any other terms of the Securities of such series (which terms
     shall not be inconsistent with the provisions of this Indenture, except as
     permitted by Section 9.1(6)).

     All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided herein or in or pursuant
to such Board Resolution and set forth, or determined in the manner provided, in
such Officers' Certificate or in any indenture supplemental hereto.

     If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Corporation and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.

     The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XIII.

Section 3.2.  Denominations.

     The Securities of each series shall be in registered form without coupons
and shall be issuable in denominations of $100,000 and any integral multiple of
$1,000 in excess thereof, unless otherwise specified as contemplated by Section
3.1.

Section 3.3.  Execution, Authentication, Delivery and Dating.

     The Securities shall be executed on behalf of the Corporation by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced or impressed thereon
and attested by its Secretary or one of its Assistant Secretaries.  The
signature of any of these officers on the Securities may be manual or facsimile.

     Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.  At any time and from
time to time after the execution and delivery of this Indenture, the Corporation
may deliver Securities of any series executed by the Corporation to the Trustee
for

                                      26
<PAGE>

authentication, together with a Corporation Order for the authentication and
delivery of such Securities, and the Trustee in accordance with the Corporation
Order shall authenticate and deliver such Securities. If the form or terms of
the Securities of the series have been established by or pursuant to one or more
Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Opinion of
Counsel stating,

          (1) if the form of such Securities has been established by or pursuant
     to Board Resolution as permitted by Section 2.1, that such form has been
     established in conformity with the provisions of this Indenture;

          (2) if the terms of such Securities have been established by or
     pursuant to Board Resolution as permitted by Section 3.1, that such terms
     have been established in conformity with the provisions of this Indenture;
     and

          (3) that such Securities, when authenticated and delivered by the
     Trustee and issued by the Corporation in the manner and subject to any
     conditions specified in such Opinion of Counsel, will constitute valid and
     legally binding obligations of the Corporation, subject to bankruptcy,
     insolvency, fraudulent transfer, reorganization, moratorium and similar
     laws of general applicability relating to or affecting creditors' rights
     and to general equity principles.

If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner that
is not reasonably acceptable to the Trustee.

     Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Corporation Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.

     Each Security shall be dated the date of its authentication.

     No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder.  Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Corporation, and the Corporation shall deliver such Security to the Trustee for
cancellation as provided in Section 3.10, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.

                                      27
<PAGE>

Section 3.4.  Temporary Securities.

     Pending the preparation of definitive Securities of any series, the
Corporation may execute, and upon Corporation Order the Trustee shall
authenticate and deliver, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any denomination,
substantially of the tenor of the definitive Securities of such series in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.

     If temporary Securities of any series are issued, the Corporation will
cause definitive Securities of such series to be prepared without unreasonable
delay.  After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Corporation designated for that
purpose without charge to the Holder.  Upon surrender for cancellation of any
one or more temporary Securities, the Corporation shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations having the same
Original Issue Date and Stated Maturity and having the same terms as such
temporary Securities.  Until so exchanged, the temporary Securities of any
series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series.

Section 3.5.  Global Securities.

     (a) Each Global Security issued under this Indenture shall be registered in
the name of the Depositary designated by the Corporation for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security shall constitute a
single Security for all purposes of this Indenture.

     (b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee in writing that such
Depositary is no longer willing or able to properly discharge its
responsibilities as Depositary with respect to such Global Security, and the
Corporation is unable to locate a qualified successor, (ii) the Corporation
executes and delivers to the Trustee a Corporation Order stating that the
Corporation elects to terminate the book-entry system through the Depositary,
(iii) there shall have occurred and be continuing an Event of Default, or (iv)
in the case of a transfer of a beneficial interest in such Security to a Person
that is not a "qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act, upon reasonable prior notice of such transfer by the
Depositary or its authorized representative to the Securities Registrar and
delivery to the Securities Registrar of a Restricted Securities Certificate duly
authorized by the Depositary or its authorized representative to the Securities
Registrar and delivery to the Securities Registrar of a Restricted Securities
Certificate duly authorized by the Depositary or its authorized representatives.

                                      28
<PAGE>

     (c) If any Global Security is to be exchanged for other Securities or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Securities Registrar for exchange or cancellation as provided
in this Article III.  If any Global Security is to be exchanged for other
Securities or cancelled in part, or if another Security is to be exchanged in
whole or in part for a beneficial interest in any Global Security, then either
(i) such Global Security shall be so surrendered for exchange or cancellation as
provided in this Article III or (ii) the principal amount thereof shall be
reduced, subject to Section 3.6(b)(v), or increased by an amount equal to the
portion thereof to be so exchanged or cancelled, or equal to the principal
amount of such other Security to be so exchanged for a beneficial interest
therein, as the case may be, by means of an appropriate adjustment made on the
records of the Securities Registrar, whereupon the Trustee, in accordance with
the Applicable Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records.  Upon any such
surrender or adjustment of a Global Security by the Depositary, accompanied by
registration instructions, the Trustee shall, subject to Section 3.5(b) and as
otherwise provided in this Article III, authenticate and deliver any Securities
issuable in exchange for such Global Security (or any portion thereof) in
accordance with the instructions of the Depositary.  The Trustee shall not be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be fully protected in relying on, such instructions.

     (d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article III, Section 9.6 or 11.6 or otherwise,
shall be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof.

     (e) Securities distributed to holders of Book-Entry Capital Securities (as
defined in the applicable Trust Agreement) upon the dissolution of an Issuer
Trust shall be distributed in the form of one or more Global Securities
registered in the name of a Depositary or its nominee, and deposited with the
Securities Registrar, as custodian for such Depositary, or with such Depositary,
for credit by the Depositary to the respective accounts of the beneficial owners
of the Securities represented thereby (or such other accounts as they may
direct).  Securities distributed to holders of Capital Securities other than
Book-Entry Capital Securities upon the dissolution of an Issuer Trust shall not
be issued in the form of a Global Security or any other form intended to
facilitate book-entry trading in beneficial interests in such Securities.

     (f) The Depositary or its nominee, as the registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security shall be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or its Agent Members.
Neither the Trustee nor the Securities Registrar shall have any liability in
respect of any transfers effected by the Depositary.

     (g) The rights of owners of beneficial interests in a Global Security shall
be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Agent Members.

                                      29
<PAGE>

Section 3.6.  Registration, Transfer and Exchange Generally; Certain Transfers
     and Exchanges; Securities Act Legends.

     (a) The Corporation shall cause to be kept at the Corporate Trust Office of
the Trustee a register in which, subject to such reasonable regulations as it
may prescribe, the Corporation shall provide for the registration of Securities
and of transfers of Securities.  Such register is herein sometimes referred to
as the "Securities Register." The Trustee is hereby appointed "Securities
Registrar" for the purpose of registering Securities and transfers of Securities
as herein provided.

     Upon surrender for registration of transfer of any Security at the offices
or agencies of the Corporation designated for that purpose the Corporation shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations of like tenor and aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.

     At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of like tenor and
aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture, upon surrender of the Securities to be exchanged at
such office or agency.  Whenever any securities are so surrendered for exchange,
the Corporation shall execute, and the Trustee shall authenticate and deliver,
the Securities that the Holder making the exchange is entitled to receive.

     All Securities issued upon any transfer or exchange of Securities shall be
the valid obligations of the Corporation, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such transfer or exchange.

     Every Security presented or surrendered for transfer or exchange shall (if
so required by the Corporation or the Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Corporation and the Securities Registrar, duly executed by the Holder thereof or
such Holder's attorney duly authorized in writing.

     No service charge shall be made to a Holder for any transfer or exchange of
Securities, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Securities.

     Neither the Corporation nor the Trustee shall be required, pursuant to the
provisions of this Section, (i) to issue, register the transfer of or exchange
any Security of any series during a period beginning at the opening of business
15 days before the day of selection for redemption of Securities of that series
pursuant to Article XI and ending at the close of business on the day of mailing
of the notice of redemption, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except, in the case of
any such Security to be redeemed in part, any portion thereof not to be
redeemed.

     (b) Certain Transfers and Exchanges.  Notwithstanding any other provision
of this Indenture, transfers and exchanges of Securities and beneficial
interests in a Global Security shall be made only in accordance with this
Section 3.6(b).

                                      30
<PAGE>

          (i)   Restricted Non-Global Security to Global Security. If the Holder
of a Restricted Security (other than a Global Security) wishes at any time to
transfer all or any portion of such Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in a Global Security, such
transfer may be effected only in accordance with the provisions of this Clause
(b)(i) and subject to the Applicable Procedures. Upon receipt by the Securities
Registrar of (A) such Security as provided in Section 3.6(a) and instructions
satisfactory to the Securities Registrar directing that a beneficial interest in
the Global Security in a specified principal amount not greater than the
principal amount of such Security be credited to a specified Agent Member's
account and (B) a Restricted Securities Certificate duly executed by such Holder
or such Holder's attorney duly authorized in writing, then the Securities
Registrar shall cancel such Security (and issue a new Security in respect of any
untransferred portion thereof) as provided in Section 3.6(a) and increase the
aggregate principal amount of the Global Security by the specified principal
amount as provided as provided in Section 3.5(c).

          (ii)  Non-Global Security to Non-Global Security.  A Security that is
not a Global Security may be transferred, in whole or in part, to a Person who
takes delivery in the form of another Security that is not a Global Security as
provided in Section 3.6(a), provided that if the Security to be transferred in
whole or in part is a Restricted Security, the Securities Registrar shall have
received a Restricted Securities Certificate duly executed by the transferor
Holder or such Holder's attorney duly authorized in writing.

          (iii) Exchanges Between Global Security and Non-Global Security.  A
beneficial interest in a Global Security may be exchanged for a Security that is
not a Global Security as provided in Section 3.5.

          (iv)  Certain Initial Transfers of Non-Global Securities.  In the case
of Securities initially issued other than in global form, an initial transfer or
exchange of such Securities that does not involve any change in beneficial
ownership may be made to an Institutional Accredited Investor or Investors as if
such transfer or exchange were not an initial transfer or exchange; provided
that written certification shall be provided by the transferee and transferor of
such Securities to the Securities Registrar that such transfer or exchange does
not involve a change in beneficial ownership.

          (v)   Limitations relating to Principal Amount.  Notwithstanding any
other provision of this Indenture and unless otherwise specified as permitted by
Section 3.1, Securities or portions thereof may be transferred or exchanged only
in principal amounts of not less than $100,000.  Any transfer, exchange or other
disposition of Securities in contravention of this Section 3.6(b)(v) shall be
deemed to be void and of no legal effect whatsoever, any such transferee shall
be deemed not to be the Holder or owner of any beneficial interest in such
Securities for any purpose, including but not limited to the receipt of interest
payable on such Securities, and such transferee shall be deemed to have no
interest whatsoever in such Securities.

     (c)  Restricted Securities Legend.  Except as set forth below, all
Securities shall bear a Restricted Securities Legend:

                                      31
<PAGE>

          (i)   subject to the following Clauses of this Section 3.6(c), a
     Security or any portion thereof that is exchanged, upon transfer or
     otherwise, for a Global Security or any portion thereof shall bear the
     Restricted Securities Legend while represented thereby;

          (ii)  subject to the following Clauses of this Section 3.6(c), a new
     Security which is not a Global Security and is issued in exchange for
     another Security (including a Global Security) or any portion thereof, upon
     transfer or otherwise, shall bear a Restricted Securities Legend;

          (iii) a new Security (other than a Global Security) that does not
     bear a Restricted Securities Legend may be issued in exchange for or in
     lieu of a Restricted Security or any portion thereof that bears such a
     legend if, in the Corporation's judgment, placing such a legend upon such
     new Security is not necessary to ensure compliance with the registration
     requirements of the Securities Act, and the Trustee, at the written
     direction of the Corporation in the form of an Officers' Certificate, shall
     authenticate and deliver such a new Security as provided in this Article
     III;

          (iv)  notwithstanding the foregoing provisions of this Section 3.6(c),
     a Successor Security of a Security that does not bear a Restricted
     Securities Legend shall not bear such form of legend unless the Corporation
     has reasonable cause to believe that such Successor Security is a
     "restricted security" within the meaning of Rule 144, in which case the
     Trustee, at the written direction of the Corporation in the form of an
     Officers' Certificate, shall authenticate and deliver a new Security
     bearing a Restricted Securities Legend in exchange for such Successor
     Security as provided in this Article III; and

          (v)   Securities distributed to a holder of Capital Securities upon
     dissolution of an Issuer Trust shall bear a Restricted Securities Legend if
     the Capital Securities so held bear a similar legend.

Section 3.7.  Mutilated, Destroyed, Lost and Stolen Securities.

     If any mutilated Security is surrendered to the Trustee together with such
security or indemnity as may be required by the Corporation or the Trustee to
save each of them harmless, the Corporation shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of the same series,
of like tenor and aggregate principal amount, bearing the same legends, and
bearing a number not contemporaneously outstanding.

     If there shall be delivered to the Corporation and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Corporation or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Corporation shall execute and upon its request the Trustee shall authenticate
and deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of the same series, of like tenor and aggregate principal amount and
bearing the same legends as such destroyed, lost or stolen Security, and bearing
a number not contemporaneously outstanding.

                                      32
<PAGE>

     If any such mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Corporation in its discretion may, instead
of issuing a new Security, pay such Security.

     Upon the issuance of any new Security under this Section, the Corporation
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

     Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Corporation, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of the same series duly issued hereunder.

     The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.

Section 3.8.  Payment of Interest and Additional Interest; Interest Rights
     Preserved.

     Interest and Additional Interest on any Security of any series that is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date, shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest in respect of Securities of such series, except
that, unless otherwise provided in the Securities of such series, interest and
any Additional Interest payable on the Stated Maturity of the principal of a
Security shall be paid to the Person to whom principal is paid.  The initial
payment of interest on any Security of any series that is issued between a
Regular Record Date and the related Interest Payment Date shall be payable as
provided in such Security or in the Board Resolution pursuant to Section 3.1
with respect to the related series of Securities.

     Any interest on any Security that is due and payable, but is not timely
paid or duly provided for, on any Interest Payment Date for Securities of such
series (herein called "Defaulted Interest"), shall forthwith cease to be payable
to the registered Holder on the relevant Regular Record Date by virtue of having
been such Holder, and such Defaulted Interest may be paid by the Corporation, at
its election in each case, as provided in Clause (1) or (2) below:

          (1) The Corporation may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series in respect
of which interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner.  The
Corporation shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Corporation shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such

                                      33
<PAGE>

money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest,
which shall be not more than 15 days and not less than 10 days prior to the date
of the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly notify
the Corporation of such Special Record Date and, in the name and at the expense
of the Corporation, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first class, postage
prepaid, to each Holder of a Security of such series at the address of such
Holder as it appears in the Securities Register not less than 10 days prior to
such Special Record Date. The Trustee may, in its discretion, in the name and at
the expense of the Corporation, cause a similar notice to be published at least
once in a newspaper, customarily published in the English language on each
Business Day and of general circulation in the Borough of Manhattan, The City of
New York, but such publication shall not be a condition precedent to the
establishment of such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having been mailed
as aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names the Securities of such series (or their respective Predecessor Securities)
are registered on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).

          (2) The Corporation may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of the series in respect of which interest is
in default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after notice
given by the Corporation to the Trustee of the proposed payment pursuant to this
Clause, such payment shall be deemed practicable by the Trustee.

     Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, that were carried by such other Security.

Section 3.9.  Persons Deemed Owners.

     The Corporation, the Trustee and any agent of the Corporation or the
Trustee shall treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payment of principal of and
(subject to Section 3.8) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Corporation, the Trustee nor any agent of the Corporation or the Trustee shall
be affected by notice to the contrary.

     No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary shall have any rights under this Indenture with respect
to such Global Security, and such Depositary may be treated by the Corporation,
the Trustee and any agent of the Corporation or the Trustee as the owner of such
Global Security for all purposes whatsoever.  Notwithstanding the foregoing,
nothing herein shall prevent the Corporation, the Trustee or any agent of the
Corporation or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by a Depositary or impair, as between a
Depositary and such

                                      34
<PAGE>

holders of beneficial interests, the operation of customary practices governing
the exercise of the rights of the Depositary (or its nominee) as Holder of any
Security.

Section 3.10.  Cancellation.

     All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it.  The Corporation
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder that the Corporation may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee.  No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture.  All canceled Securities shall
be destroyed by the Trustee and the Trustee shall deliver to the Corporation a
certificate of such destruction.

Section 3.11.  Computation of Interest.

     Except as otherwise specified as contemplated by Section 3.1 for Securities
of any series, interest on the Securities of each series for any partial period
shall be computed on the basis of a 360-day year of twelve 30-day months and the
actual number of days elapsed in any partial month in such period, and interest
on the Securities of each series for a full period shall be computed by dividing
the rate per annum by the number of interest periods that together constitute a
full twelve months.

Section 3.12.  Deferrals of Interest Payment Dates.

     If specified as contemplated by Section 2.1 or Section 3.1 with respect to
the Securities of a particular series, so long as no Event of Default has
occurred and is continuing, the Corporation shall have the right, at any time
during the term of such series, from time to time to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.1 (each, an "Extension Period"), during which
Extension Periods the Corporation shall, if so specified as contemplated by
Section 3.1, have the right to make partial payments of interest on any Interest
Payment Date.  No Extension Period shall end on a date other than an Interest
Payment Date.  At the end of any such Extension Period the Corporation shall pay
all interest then accrued and unpaid on the Securities (together with Additional
Interest thereon, if any, at the rate specified for the Securities of such
series to the extent permitted by applicable law); provided, however, that no
Extension Period shall extend beyond the Stated Maturity of the principal of the
Securities of such series; and provided further, however that during any such
Extension Period, the Corporation shall not (i) make any payment of principal of
or interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Securities of such series, or (ii) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock
(other than (a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Corporation in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of any one or
more employees, officers, directors or consultants, in connection with a

                                      35
<PAGE>

dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Corporation (or securities convertible into
or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of an exchange or conversion of any class or series of the Corporation's
capital stock (or any capital stock of a Subsidiary of the Corporation) for any
class or series of the Corporation's capital stock or of any class or series of
the Corporation's indebtedness for any class or series of the Corporation's
capital stock, (c) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any Rights Plan, or the issuance of
rights, stock or other property under any Rights Plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock). Prior to the termination of any such Extension Period, the
Corporation may further defer the payment of interest, provided that no Event of
Default has occurred and is continuing, and provided, further that no Extension
Period shall exceed the period or periods specified in such Securities, extend
beyond the Stated Maturity of the principal of such Securities or end on a date
other than an Interest Payment Date. Upon the termination of any such Extension
Period and upon the payment of all accrued and unpaid interest and any
Additional Interest then due on any Interest Payment Date, the Corporation may
elect to begin a new Extension Period, subject to the above conditions. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest as and to the extent as may be specified as contemplated by
Section 3.1. The Corporation shall give the Holders of the Securities of such
series and the Trustee notice of its election to begin any such Extension Period
at least one Business Day prior to the next succeeding Interest Payment Date on
which interest on Securities of such series would be payable but for such
deferral or, with respect to any Securities of a series issued to an Issuer
Trust, so long as any such Securities are held by such Issuer Trust, at least
one Business Day prior to the earlier of (i) the next succeeding date on which
Distributions on the Capital Securities of such Issuer Trust would be payable
but for such deferral, and (ii) the date on which the Property Trustee of such
Issuer Trust is required to give notice to holders of such Capital Securities of
the record date or the date such Distributions are payable.

     The Trustee shall promptly give notice of the Corporation's election to
begin any such Extension Period to the Holders of the Outstanding Securities of
such series.

Section 3.13.  Right of Set-Off.

     With respect to the Securities of a series initially issued to an Issuer
Trust, notwithstanding anything to the contrary herein, the Corporation shall
have the right to set off any payment it is otherwise required to make in
respect of any such Security to the extent the Corporation has theretofore made,
or is concurrently on the date of such payment making, a payment under the
Guarantee Agreement relating to such Security or to a holder of Capital
Securities pursuant to an action undertaken under Section 5.8 of this Indenture.

                                      36
<PAGE>

Section 3.14.  Agreed Tax Treatment.

     Each Security issued hereunder shall provide that the Corporation and, by
its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States Federal, state and local tax purposes it is intended that such
Security constitutes indebtedness.

Section 3.15.  Shortening or Extension of Stated Maturity.

     If specified as contemplated by Section 2.1 or Section 3.1 with respect to
the Securities of a particular series, the Corporation shall have the right to
(i) shorten the Stated Maturity of the principal of the Securities of such
series at any time to any date, and (ii) extend the Stated Maturity of the
principal of the Securities of such series at any time at its election for one
or more periods, provided that, if the Corporation elects to exercise its right
to extend the Stated Maturity of the principal of the Securities of such series
pursuant to Clause (ii) above, at the time such election is made and at the time
of extension, such conditions as may be specified in such Securities shall have
been satisfied.

Section 3.16.  CUSIP Numbers.

     The Corporation in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption and other similar or related materials as a convenience to
Holders; provided that any such notice or other materials may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or other materials
and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers.

                                  ARTICLE IV

                          Satisfaction and Discharge

Section 4.1.  Satisfaction and Discharge of Indenture.

     This Indenture shall, upon Corporation Request, cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for and as otherwise provided
in this Section 4.1) and the Trustee, on demand of and at the expense of the
Corporation, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when

          (1)  either

               (A) all Securities theretofore authenticated and delivered (other
          than (i) Securities that have been destroyed, lost or stolen and that
          have been replaced or paid as provided in Section 3.7 and (ii)
          Securities for whose payment money has theretofore been deposited in
          trust or segregated and held in trust by the Corporation and
          thereafter repaid to the Corporation or discharged from such

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          trust, as provided in Section 10.3) have been delivered to the Trustee
          for cancellation; or

               (B) all such Securities not theretofore delivered to the Trustee
          for cancellation

                    (i)    have become due and payable, or

                    (ii)   will become due and payable at their Stated Maturity
               within one year of the date of deposit, or

                    (iii)  are to be called for redemption within one year under
               arrangements satisfactory to the Trustee for the giving of notice
               of redemption by the Trustee in the name, and at the expense, of
               the Corporation,

          and the Corporation, in the case of subclause (B)(i), (ii) or (iii)
          above, has deposited or caused to be deposited with the Trustee as
          trust funds in trust for such purpose an amount in the currency or
          currencies in which the Securities of such series are payable
          sufficient to pay and discharge the entire indebtedness on such
          Securities not theretofore delivered to the Trustee for cancellation,
          for principal (and premium, if any) and interest (including any
          Additional Interest) to the date of such deposit (in the case of
          Securities that have become due and payable) or to the Stated Maturity
          or Redemption Date, as the case may be;

          (2) the Corporation has paid or caused to be paid all other sums
     payable hereunder by the Corporation; and

          (3) the Corporation has delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel each stating that all conditions
     precedent herein provided for relating to the satisfaction and discharge of
     this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Corporation to the Trustee under Section 6.7, the obligations
of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of Clause
(1) of this Section, the obligations of the Trustee under Section 4.2 and the
last paragraph of Section 10.3 shall survive.

Section 4.2.  Application of Trust Money.

     Subject to the provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Trustee, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Corporation acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest (including any Additional Interest) for the payment of which
such money or obligations have been deposited with or received by the Trustee.

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                                   ARTICLE V

                                   Remedies

Section 5.1.  Events of Default.

     "Event of Default", wherever used herein with respect to the Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body) except
as may be specified pursuant to Section 3.1:

          (1) default in the payment of any interest upon any Security of that
     series, including any Additional Interest in respect thereof, when it
     becomes due and payable, and continuance of such default for a period of 30
     days (subject to the deferral of any due date in the case of an Extension
     Period); or

          (2) default in the payment of the principal of (or premium, if any,
     on) any Security of that series at its Maturity; or

          (3) failure on the part of the Corporation duly to observe or perform
     any other of the covenants or agreements on the part of the Corporation in
     the Securities of that series or in this Indenture for a period of 90 days
     after the date on which written notice of such failure, requiring the
     Corporation to remedy the same, shall have been given to the Corporation by
     the Trustee by registered or certified mail or to the Corporation and the
     Trustee by the Holders of at least 25% in aggregate principal amount of the
     Outstanding Securities of that series; or

          (4) the entry of a decree or order by a court having jurisdiction in
     the premises adjudging the Corporation a bankrupt or insolvent, or
     approving as properly filed a petition seeking reorganization of the
     Corporation under the Bankruptcy Code or any other similar applicable
     Federal or State law, which decree or order shall have continued
     undischarged and unstayed for a period of 60 days; or the entry of a decree
     or order of a court having jurisdiction in the premises for the appointment
     of a receiver or liquidator or trustee or assignee in bankruptcy or
     insolvency of the Corporation or of its property, or for the winding up or
     liquidation of its affairs, which decree or order shall have continued
     undischarged and unstayed for a period of 60 days; or

          (5) the commencement by the Corporation of voluntary proceedings to be
     adjudicated a bankrupt, or consent by the Corporation to the filing of a
     bankruptcy proceeding against it, or the filing by the Corporation of a
     petition or answer or consent seeking reorganization under the Bankruptcy
     Code or any other similar Federal or State law, or consent by the
     Corporation to the filing of any such petition, or the consent by the
     Corporation to the appointment of a receiver or liquidator or trustee or
     assignee in bankruptcy or insolvency of it or of its property, or the
     making by the Corporation of an assignment for the benefit of creditors, or
     the admission by the Corporation in writing of its inability to pay its
     debts generally as they become due; or

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<PAGE>

          (6) any other Event of Default provided with respect to Securities of
     that series.

Section 5.2.  Acceleration of Maturity; Rescission and Annulment.

     If an Event of Default (other than an Event of Default specified in Section
5.1(4) or 5.1(5)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
the Securities of that series are Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
Securities of that series to be due and payable immediately, by a notice in
writing to the Corporation (and to the Trustee if given by Holders), provided
that, in the case of the Securities of a series issued to an Issuer Trust, if,
upon an Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of such series fail to declare
the principal of all the Outstanding Securities of such series to be immediately
due and payable, the holders of at least 25% in aggregate Liquidation Amount (as
defined in the related Trust Agreement) of the related series of Capital
Securities issued by such Issuer Trust then outstanding shall have the right to
make such declaration by a notice in writing to the Corporation and the Trustee;
and upon any such declaration such principal amount (or specified portion
thereof) of and the accrued interest (including any Additional Interest) on all
the Securities of such series shall become immediately due and payable.  If an
Event of Default specified in Section 5.1(4) or 5.1(5) with respect to
Securities of any series at the time Outstanding occurs, the principal amount of
all the Securities of such series (or, if the Securities of such series are
Discount Securities, such portion of the principal amount of such Securities as
may be specified by the terms of that series) shall automatically, and without
any declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable.  Payment of principal and interest (including any
Additional Interest) on such Securities shall remain subordinated to the extent
provided in Article XIII notwithstanding that such amount shall become
immediately due and payable as herein provided.

     At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of that series, by written notice to the Corporation and
the Trustee, may rescind and annul such declaration and its consequences if:

          (1) the Corporation has paid or deposited with the Trustee a sum
     sufficient to pay:

               (A) all overdue installments of interest on all Securities of
          such series,

               (B) any accrued Additional Interest on all Securities of such
          series,

               (C) the principal of (and premium, if any, on) any Securities of
          such series that have become due otherwise than by such declaration of
          acceleration and interest and Additional Interest thereon at the rate
          borne by the Securities, and

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<PAGE>

               (D) all sums paid or advanced by the Trustee hereunder and the
          reasonable compensation, expenses, disbursements and advances of the
          Trustee, its agents and counsel; and

          (2)  all Events of Default with respect to Securities of that series,
     other than the non-payment of the principal of Securities of that series
     that has become due solely by such acceleration, have been cured or waived
     as provided in Section 5.13.

     In the case of Securities of a series initially issued to an Issuer Trust,
if the Holders of such Securities fail to annul such declaration and waive such
default, the holders of a majority in aggregate Liquidation Amount (as defined
in the related Trust Agreement) of the related series of Capital Securities
issued by such Issuer Trust then outstanding shall also have the right to
rescind and annul such declaration and its consequences by written notice to the
Corporation and the Trustee, subject to the satisfaction of the conditions set
forth in Clauses (1) and (2) above of this Section 5.2.

     No such rescission shall affect any subsequent default or impair any right
consequent thereon.

Section 5.3.  Collection of Indebtedness and Suits for Enforcement by Trustee.

     The Corporation covenants that if:

          (1)  default is made in the payment of any installment of interest
     (including any Additional Interest) on any Security of any series when such
     interest becomes due and payable and such default continues for a period of
     30 days, or

          (2)  default is made in the payment of the principal of (and premium,
     if any, on) any Security at the Maturity thereof,

the Corporation will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including any
Additional Interest), and, in addition thereto, all amounts owing the Trustee
under Section 6.7.

     If the Corporation fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Corporation or any other obligor upon such Securities and collect
the moneys adjudged or decreed to be payable in the manner provided by law out
of the property of the Corporation or any other obligor upon the Securities,
wherever situated.

     If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement

                                      41
<PAGE>

of any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

Section 5.4.  Trustee May File Proofs of Claim.

     In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Corporation or any other obligor upon the Securities
or the property of the Corporation or of such other obligor or their creditors,

          (a)  the Trustee (irrespective of whether the principal of the
     Securities of any series shall then be due and payable as therein expressed
     or by declaration or otherwise and irrespective of whether the Trustee
     shall have made any demand on the Corporation for the payment of overdue
     principal (and premium, if any) or interest (including any Additional
     Interest)) shall be entitled and empowered, by intervention in such
     proceeding or otherwise,

               (i)  to file and prove a claim for the whole amount of principal
          (and premium, if any) and interest (including any Additional Interest)
          owing and unpaid in respect to the Securities and to file such other
          papers or documents as may be necessary or advisable and to take any
          and all actions as are authorized under the Trust Indenture Act in
          order to have the claims of the Holders and any predecessor to the
          Trustee under Section 6.7 allowed in any such judicial proceedings;
          and

               (ii) in particular, the Trustee shall be authorized to collect
          and receive any moneys or other property payable or deliverable on any
          such claims and to distribute the same in accordance with Section 5.6;
          and

          (b)  any custodian, receiver, assignee, trustee, liquidator,
     sequestrator (or other similar official) in any such judicial proceeding is
     hereby authorized by each Holder to make such payments to the Trustee for
     distribution in accordance with Section 5.6, and in the event that the
     Trustee shall consent to the making of such payments directly to the
     Holders, to pay to the Trustee any amount due to it and any predecessor
     Trustee under Section 6.7.

     Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.

Section 5.5.  Trustee May Enforce Claim Without Possession of Securities.

     All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production

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<PAGE>

thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, subject to Article XIII and after provision
for the payment of all the amounts owing the Trustee and any predecessor Trustee
under Section 6.7, its agents and counsel, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.

Section 5.6.  Application of Money Collected.

     Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:

          FIRST: To the payment of all amounts due the Trustee and any
     predecessor Trustee under Section 6.7;

          SECOND: Subject to Article XIII, to the payment of the amounts then
     due and unpaid upon Securities of such series for principal (and premium,
     if any) and interest (including any Additional Interest) in respect of
     which or for the benefit of which such money has been collected, ratably,
     without preference or priority of any kind, according to the amounts due
     and payable on such series of Securities for principal (and premium, if
     any) and interest (including any Additional Interest), respectively; and

          THIRD: The balance, if any, to the Person or Persons entitled thereto.

Section 5.7.  Limitation on Suits.

     Subject to Section 5.8, no Holder of any Securities of any series shall
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture or for the appointment of a receiver, assignee, trustee,
liquidator, sequestrator (or other similar official) or for any other remedy
hereunder, unless:

          (1) such Holder has previously given written notice to the Trustee of
     a continuing Event of Default with respect to the Securities of that
     series;

          (2) the Holders of not less than 25% in aggregate principal amount of
     the Outstanding Securities of that series shall have made written request
     to the Trustee to institute proceedings in respect of such Event of Default
     in its own name as Trustee hereunder;

          (3) such Holder or Holders have offered to the Trustee reasonable
     indemnity against the costs, expenses and liabilities to be incurred in
     compliance with such request;

          (4) the Trustee for 60 days after its receipt of such notice, request
     and offer of indemnity has failed to institute any such proceeding; and

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<PAGE>

          (5) no direction inconsistent with such written request has been given
     to the Trustee during such 60-day period by the Holders of a majority in
     aggregate principal amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.

Section 5.8.  Unconditional Right of Holders to Receive Principal, Premium and
     Interest; Direct Action by Holders of Capital Securities.

     Notwithstanding any other provision in this Indenture, the Holder of any
Security of any series shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Sections 3.8 and 3.12) interest (including any Additional Interest)
on such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.  In the case of Securities of a series
issued to an Issuer Trust, any registered holder of the series of Capital
Securities issued by such Issuer Trust shall have the right, upon the occurrence
of an Event of Default described in Section 5.1(1) or 5.1(2), to institute a
suit directly against the Corporation for enforcement of payment to such holder
of principal of (premium, if any) and (subject to Sections 3.8 and 3.12)
interest (including any Additional Interest) on the Securities having a
principal amount equal to the aggregate Liquidation Amount (as defined in the
related Trust Agreement) of such Capital Securities held by such holder.

Section 5.9.  Restoration of Rights and Remedies.

     If the Trustee, any Holder or any holder of Capital Securities issued by
any Issuer Trust has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee, such Holder or such
holder of Capital Securities, then and in every such case the Corporation, the
Trustee, such Holders and such holder of Capital Securities shall, subject to
any determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, such Holder and such holder of Capital Securities shall continue as
though no such proceeding had been instituted.

Section 5.10.  Rights and Remedies Cumulative.

     Except as otherwise provided in the last paragraph of Section 3.7, no right
or remedy herein conferred upon or reserved to the Trustee or the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise.  The assertion or employment of any right or remedy

                                      44
<PAGE>

hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

Section 5.11.  Delay or Omission Not Waiver.

     No delay or omission of the Trustee, any Holder of any Security with
respect to the Securities of the related Series or any holder of any Capital
Security to exercise any right or remedy accruing upon any Event of Default with
respect to the Securities of the related series shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein.

     Every right and remedy given by this Article or by law to the Trustee or to
the Holders and the right and remedy given to the holders of Capital Securities
by Section 5.8 may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee, the Holders or the holders of Capital Securities, as
the case may be.

Section 5.12.  Control by Holders.

     The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee, with
respect to the Securities of such series, provided that:

          (1) such direction shall not be in conflict with any rule of law or
     with this Indenture,

          (2) the Trustee may take any other action deemed proper by the Trustee
     that is not inconsistent with such direction, and

          (3) subject to the provisions of Section 6.1, the Trustee shall have
     the right to decline to follow such direction if a Responsible Officer or
     Officers of the Trustee shall, in good faith, determine that the proceeding
     so directed would be unjustly prejudicial to the Holders not joining in any
     such direction or would involve the Trustee in personal liability.

Section 5.13.  Waiver of Past Defaults.

     The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series affected thereby and, in the case of
any Securities of a series initially issued to an Issuer Trust, the holders of a
majority in aggregate Liquidation Amount (as defined in the related Trust
Agreement) of the Capital Securities issued by such Issuer Trust may waive any
past default hereunder and its consequences with respect to such series except a
default:

          (1) in the payment of the principal of (or premium, if any) or
     interest (including any Additional Interest) on any Security of such series
     (unless such default has been cured and the Corporation has paid to or
     deposited with the Trustee a sum sufficient to pay all matured installments
     of interest (including any Additional Interest) and all

                                      45
<PAGE>

     principal of (and premium, if any, on) all Securities of that series due
     otherwise than by acceleration), or

          (2) in respect of a covenant or provision hereof that under Article IX
     cannot be modified or amended without the consent of each Holder of any
     Outstanding Security of such series affected.

     Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities of such series or, in the case of a waiver by holders of Capital
Securities issued by such Issuer Trust, by all holders of Capital Securities
issued by such Issuer Trust.

     Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

Section 5.14.  Undertaking for Costs.

     All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in aggregate principal amount of the Outstanding
Securities of any series, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security on or after the respective
Stated Maturities expressed in such Security.

Section 5.15.  Waiver of Usury, Stay or Extension Laws.

     The Corporation covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Corporation (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

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<PAGE>

                                  ARTICLE VI

                                  The Trustee

Section 6.1.  Certain Duties and Responsibilities.

     (a)  Except during the continuance of an Event of Default,

          (1) the Trustee undertakes to perform such duties and only such duties
     as are specifically set forth in this Indenture, and no implied covenants
     or obligations shall be read into this Indenture against the Trustee; and

          (2) in the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture; but in
     the case of any such certificates or opinions that by any provisions hereof
     are specifically required to be furnished to the Trustee, the Trustee shall
     be under a duty to examine the same to determine whether or not they
     conform to the requirements of this Indenture.

     (b)  In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.

     (c)  No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that

          (1) this Subsection shall not be construed to limit the effect of
     Subsection (a) of this Section;

          (2) the Trustee shall not be liable for any error of judgment made in
     good faith by a Responsible Officer, unless it shall be proved that the
     Trustee was negligent in ascertaining the pertinent facts; and

          (3) the Trustee shall not be liable with respect to any action taken
     or omitted to be taken by it in good faith in accordance with the direction
     of Holders pursuant to Section 5.12 relating to the time, method and place
     of conducting any proceeding for any remedy available to the Trustee, or
     exercising any trust or power conferred upon the Trustee, under this
     Indenture with respect to the Securities of a series.

     (d)  No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

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<PAGE>

     (e)  Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.

Section 6.2.  Notice of Defaults.

     Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Securities of such series; and provided, further,
that, in the case of any default of the character specified in Section 5.1(3),
no such notice to Holders of Securities of such series shall be given until at
least 30 days after the occurrence thereof.  For the purpose of this Section,
the term "default" means any event that is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.

Section 6.3.  Certain Rights of Trustee.

     Subject to the provisions of Section 6.1:

          (a) the Trustee may rely and shall be protected in acting or
     refraining from acting upon any resolution, certificate, statement,
     instrument, opinion, report, notice, request, direction, consent, order,
     bond, debenture, Security or other paper or document believed by it to be
     genuine and to have been signed or presented by the proper party or
     parties;

          (b) any request or direction of the Corporation mentioned herein shall
     be sufficiently evidenced by a Corporation Request or Corporation Order and
     any resolution of the Board of Directors may be sufficiently evidenced by a
     Board Resolution;

          (c) whenever in the administration of this Indenture the Trustee shall
     deem it desirable that a matter be proved or established prior to taking,
     suffering or omitting any action hereunder, the Trustee (unless other
     evidence be herein specifically prescribed) may, in the absence of bad
     faith on its part, rely upon an Officers' Certificate;

          (d) the Trustee may consult with counsel and the advice of such
     counsel or any Opinion of Counsel shall be full and complete authorization
     and protection in respect of any action taken, suffered or omitted by it
     hereunder in good faith and in reliance thereon;

          (e) the Trustee shall be under no obligation to exercise any of the
     rights or powers vested in it by this Indenture at the request or direction
     of any of the Holders pursuant to this Indenture, unless such Holders shall
     have offered to the Trustee

                                      48
<PAGE>

     reasonable security or indemnity against the costs, expenses and
     liabilities that might be incurred by it in compliance with such request or
     direction;

          (f) the Trustee shall not be bound to make any investigation into the
     facts or matters stated in any resolution, certificate, statement,
     instrument, opinion, report, notice, request, direction, consent, order,
     bond, indenture, Security or other paper or document, but the Trustee in
     its discretion may make such inquiry or investigation into such facts or
     matters as it may see fit, and, if the Trustee shall determine to make such
     inquiry or investigation, it shall be entitled to examine the books,
     records and premises of the Corporation, personally or by agent or
     attorney; and

          (g) the Trustee may execute any of the trusts or powers hereunder or
     perform any duties hereunder either directly or by or through agents or
     attorneys and the Trustee shall not be responsible for any misconduct or
     negligence on the part of any agent or attorney appointed with due care by
     it hereunder.

Section 6.4.  Not Responsible for Recitals or Issuance of Securities.

     The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Corporation, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness.  The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities.  Neither
the Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Corporation of the Securities or the proceeds thereof.

Section 6.5.  May Hold Securities.

     The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Corporation, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Corporation with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying Agent,
Securities Registrar or such other agent.

Section 6.6.  Money Held in Trust.

     Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law.  The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Corporation.

Section 6.7.  Compensation and Reimbursement.

     The Corporation agrees

          (1) to pay to the Trustee from time to time reasonable compensation
     for all services rendered by it hereunder in such amounts as the
     Corporation and the Trustee shall agree from time to time (which
     compensation shall not be limited by any provision of law in regard to the
     compensation of a trustee of an express trust);

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<PAGE>

          (2) to reimburse the Trustee upon its request for all reasonable
     expenses, disbursements and advances incurred or made by the Trustee in
     accordance with any provision of this Indenture (including the reasonable
     compensation and the expenses and disbursements of its agents and counsel),
     except any such expense, disbursement or advance as may be attributable to
     its negligence or bad faith; and

          (3) to indemnify the Trustee for, and to hold it harmless against, any
     loss, liability or expense (including the reasonable compensation and the
     expenses and disbursements of its agents and counsel) incurred without
     negligence or bad faith, arising out of or in connection with the
     acceptance or administration of this trust or the performance of its duties
     hereunder, including the costs and expenses of defending itself against any
     claim or liability in connection with the exercise or performance of any of
     its powers or duties hereunder.  This indemnification shall survive the
     termination of this Indenture.

     When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or 5.1(5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.

Section 6.8.  Disqualification; Conflicting Interests.

     (a)  The Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act.  Nothing
herein shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of said Section 310(b).

     (b)  The Trust Agreement and the Guarantee Agreement with respect to each
Issuer Trust shall be deemed to be specifically described in this Indenture for
the purposes of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.

Section 6.9.  Corporate Trustee Required; Eligibility.

     There shall at all times be a Trustee hereunder which shall be:

          (a) a corporation organized and doing business under the laws of the
     United States of America or of any State or Territory or the District of
     Columbia, authorized under such laws to exercise corporate trust powers and
     subject to supervision or examination by Federal, State, Territorial or
     District of Columbia authority, or

          (b) a corporation or other Person organized and doing business under
     the laws of a foreign government that is permitted to act as Trustee
     pursuant to a rule, regulation or order of the Commission, authorized under
     such laws to exercise corporate trust powers, and subject to supervision or
     examination by authority of such foreign government or a political
     subdivision thereof substantially equivalent to supervision or examination
     applicable to United States institutional trustees,

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<PAGE>

in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article. Neither the Corporation nor any Person directly or indirectly
controlling, controlled by or under common control with the Corporation shall
serve as Trustee for the Securities of any series issued hereunder.

Section 6.10.  Resignation and Removal; Appointment of Successor.

     (a)  No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.

     (b)  The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Corporation.  If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.

     (c)  The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in aggregate principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Corporation.

     (d)  If at any time:

          (1) the Trustee shall fail to comply with Section 6.8 after written
     request therefor by the Corporation or by any Holder who has been a bona
     fide Holder of a Security for at least six months, or

          (2) the Trustee shall cease to be eligible under Section 6.9 and shall
     fail to resign after written request therefor by the Corporation or by any
     such Holder, or

          (3) the Trustee shall become incapable of acting or shall be adjudged
     a bankrupt or insolvent or a receiver of the Trustee or of its property
     shall be appointed or any public officer shall take charge or control of
     the Trustee or of its property or affairs for the purpose of
     rehabilitation, conservation or liquidation,

then, in any such case, (i) the Corporation, acting pursuant to the authority of
a Board Resolution, may remove the Trustee with respect to the Securities of all
series issued hereunder, or (ii) subject to Section 5.14, any Holder who has
been a bona fide Holder of a Security for at least six months may, on behalf of
such Holder and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to the Securities of
all series issued hereunder and the appointment of a successor Trustee or
Trustees.

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<PAGE>

     (e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause with respect
to the Securities of one or more series, the Corporation, by a Board Resolution,
shall promptly appoint a successor Trustee with respect to the Securities of
that or those series.  If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in aggregate principal amount of the Outstanding Securities of
such series delivered to the Corporation and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee with respect to the Securities of such series and
supersede the successor Trustee appointed by the Corporation.  If no successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Corporation or the Holders and accepted appointment in the
manner hereinafter provided, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, subject to Section 5.14, on
behalf of such Holder and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.

     (f) The Corporation shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities of such series as their names and addresses appear in the
Securities Register.  Each notice shall include the name of the successor
Trustee with respect to the Securities of such series and the address of its
Corporate Trust Office.

Section 6.11.  Acceptance of Appointment by Successor.

     (a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Corporation and to the retiring Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Corporation or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.

     (b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Corporation,
the retiring Trustee and each successor Trustee with respect to the Securities
of one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or

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<PAGE>

those series as to which the retiring Trustee is not retiring shall continue to
be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts, and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Corporation or any successor Trustee, such retiring Trustee shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates.

     (c) Upon request of any such successor Trustee, the Corporation shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section, as the case may be.

     (d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.

Section 6.12.  Merger, Conversion, Consolidation or Succession to Business.

     Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto.  In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.

Section 6.13.  Preferential Collection of Claims Against Corporation.

     If and when the Trustee shall be or become a creditor of the Corporation
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Corporation (or any such other obligor).

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<PAGE>

Section 6.14.  Appointment of Authenticating Agent.

     The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities, which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder.  Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent.  Each Authenticating Agent shall be acceptable to the
Corporation and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any State or Territory
thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authority.  If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.  If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.

     Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.

     An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Corporation.  The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Corporation.  Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent, which shall be acceptable to the Corporation and shall give notice of
such appointment in the manner provided in Section 1.6 to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve.  Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent.  No successor Authenticating Agent shall be appointed
unless eligible under the provision of this Section.

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<PAGE>

     The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 6.7.

     If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:

     This is one of the Securities of the series designated therein referred to
in the within mentioned Indenture.

Dated:
                              State Street Bank and Trust Company,
                              As Trustee

                              By: ____________________________________  ,
                                    As Authenticating Agent

                              By: ____________________________________
                                   Authorized Officer

                                  ARTICLE VII

             Holder's Lists and Reports by Trustee And Corporation

Section 7.1.  Corporation to Furnish Trustee Names and Addresses of Holders.

     The Corporation will furnish or cause to be furnished to the Trustee:

          (a) semi-annually, on or before June 30 and December 31 of each year,
     a list, in such form as the Trustee may reasonably require, of the names
     and addresses of the Holders as of a date not more than 15 days prior to
     the delivery thereof, and

          (b) at such other times as the Trustee may request in writing, within
     30 days after the receipt by the Corporation of any such request, a list of
     similar form and content as of a date not more than 15 days prior to the
     time such list is furnished,

in each case to the extent such information is in the possession or control of
the corporation and has not otherwise been received by the Trustee in its
capacity as Securities Registrar.

Section 7.2.  Preservation of Information, Communications to Holders.

     (a)  The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its

                                      55
<PAGE>

capacity as Securities Registrar. The Trustee may destroy any list furnished to
it as provided in Section 7.1 upon receipt of a new list so furnished.

     (b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided in the Trust
Indenture Act.

     (c) Every Holder of Securities, by receiving and holding the same, agrees
with the Corporation and the Trustee that neither the Corporation nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.

Section 7.3.  Reports by Trustee.

     (a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.

     (b) Reports so required to be transmitted at stated intervals of not more
than 12 months shall be transmitted within 60 days after May 15 of each calendar
year, commencing with May 15, 20__ after the first issuance of Securities under
this Indenture.

     (c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each securities exchange upon which any
Securities are listed and also with the Commission.  The Corporation will notify
the Trustee when any Securities are listed on any securities exchange.

Section 7.4.  Reports by Corporation.

     The Corporation shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission.  At any time when the Corporation is not subject to Section 13 or
15(d) of the Exchange Act, upon the request of a Holder or beneficial owner of a
Security, the Corporation shall promptly furnish Rule 144A Information, or cause
such information to be furnished, to such Holder or beneficial owner or to a
prospective purchaser of such Security designated by such Holder or beneficial
owner in order to permit compliance by such Holder or beneficial owner with Rule
144A under the Securities Act in connection with the resale of such Security by
such Holder or beneficial owner; provided, however, that the Corporation shall
not be required to furnish such information at any time to a prospective
purchaser located outside the United States who is not a "U.S. person" within
the meaning of Regulation S under the Securities Act.  The Corporation also
shall comply with the other provisions of Trust Indenture Act Section 314(a).

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<PAGE>

                                 ARTICLE VIII

             Consolidation, Merger, Conveyance, Transfer or Lease

Section 8.1.  Corporation May Consolidate, Etc., Only on Certain Terms.

     The Corporation shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Corporation or convey, transfer or lease its properties and assets substantially
as an entirety to the Corporation, unless:

          (1) if the Corporation shall consolidate with or merge into another
     Person or convey, transfer or lease its properties and assets substantially
     as an entirety to any Person, the corporation formed by such consolidation
     or into which the Corporation is merged or the Person that acquires by
     conveyance or transfer, or that leases, the properties and assets of the
     Corporation substantially as an entirety shall be a corporation,
     partnership or trust organized and existing under the laws of the United
     States of America or any State thereof or the District of Columbia and
     shall expressly assume, by an indenture supplemental hereto, executed and
     delivered to the Trustee, in form satisfactory to the Trustee, the due and
     punctual payment of the principal of (and premium, if any) and interest
     (including any Additional Interest) on all the Securities of every series
     and the performance of every covenant of this Indenture on the part of the
     Corporation to be performed or observed;

          (2) immediately after giving effect to such transaction, no Event of
     Default, and no event that, after notice or lapse of time, or both, would
     constitute an Event of Default, shall have happened and be continuing; and

          (3) the Corporation has delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that such
     consolidation, merger, conveyance, transfer or lease and any such
     supplemental indenture comply with this Article and that all conditions
     precedent herein provided for relating to such transaction have been
     complied with; and the Trustee, subject to Section 6.1, may rely upon such
     Officers' Certificate and Opinion of Counsel as conclusive evidence that
     such transaction complies with this Section 8.1.

Section 8.2.  Successor Corporation Substituted.

     Upon any consolidation or merger by the Corporation with or into any other
Person, or any conveyance, transfer or lease by the Corporation of its
properties and assets substantially as an entirety to any Person in accordance
with Section 8.1, the successor corporation formed by such consolidation or into
which the Corporation is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Corporation under this Indenture with the same effect as if
such successor Person had been named as the Corporation herein; and in the event
of any such conveyance, transfer or lease the Corporation shall be discharged
from all obligations and covenants under the Indenture and the Securities.

                                      57
<PAGE>

     Such successor Person may cause to be executed, and may issue either in its
own name or in the name of the Corporation, any or all of the Securities
issuable hereunder that theretofore shall not have been signed by the
Corporation and delivered to the Trustee; and, upon the order of such successor
Person instead of the Corporation and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities that previously shall have been signed and
delivered by the officers of the Corporation to the Trustee for authentication
pursuant to such provisions and any Securities that such successor Person
thereafter shall cause to be executed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions.  All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture.

     In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form may be made in the Securities thereafter to be
issued as may be appropriate.

                                  ARTICLE IX

                            Supplemental Indentures

Section 9.1.  Supplemental Indentures without Consent of Holders.

     Without the consent of any Holders, the Corporation, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:

          (1) to evidence the succession of another Person to the Corporation,
     and the assumption by any such successor of the covenants of the
     Corporation herein and in the Securities contained; or

          (2) to convey, transfer, assign, mortgage or pledge any property to or
     with the Trustee or to surrender any right or power herein conferred upon
     the Corporation; or

          (3) to establish the form or terms of Securities of any series as
     permitted by Sections 2.1 or 3.1; or

          (4) to add to the covenants of the Corporation for the benefit of the
     Holders of all or any series of Securities (and if such covenants are to be
     for the benefit of less than all series of Securities, stating that such
     covenants are expressly being included solely for the benefit of the series
     specified) or to surrender any right or power herein conferred upon the
     Corporation; or

          (5) to add any additional Events of Default for the benefit of the
     Holders of all or any series of Securities (and if such additional Events
     of Default are to be for the benefit of less than all series of Securities,
     stating that such additional Events of Default are expressly being included
     solely for the benefit of the series specified); or

                                      58
<PAGE>

          (6) to change or eliminate any of the provisions of this Indenture,
     provided that any such change or elimination shall (a) become effective
     only when there is no Security Outstanding of any series created prior to
     the execution of such supplemental indenture that is entitled to the
     benefit of such provision or (b) not apply to any Outstanding Securities;
     or

          (7) to cure any ambiguity, to correct or supplement any provision
     herein that may be defective or inconsistent with any other provision
     herein, or to make any other provisions with respect to matters or
     questions arising under this Indenture, provided that such action pursuant
     to this clause (7) shall not adversely affect the interest of the Holders
     of Securities of any series in any material respect or, in the case of the
     Securities of a series issued to an Issuer Trust and for so long as any of
     the corresponding series of Capital Securities issued by such Issuer Trust
     shall remain outstanding, the holders of such Capital Securities; or

          (8) to evidence and provide for the acceptance of appointment
     hereunder by a successor Trustee with respect to the Securities of one or
     more series and to add to or change any of the provisions of this Indenture
     as shall be necessary to provide for or facilitate the administration of
     the trusts hereunder by more than one Trustee, pursuant to the requirements
     of Section 6.11(b); or

          (9) to comply with the requirements of the Commission in order to
     effect or maintain qualification of this Indenture under the Trust
     Indenture Act.

Section 9.2.  Supplemental Indentures with Consent of Holders.

     With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Corporation and
the Trustee, the Corporation, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of Securities of such series under this Indenture; provided,
however, that no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Security of each series affected thereby,

          (1) change the Stated Maturity of the principal of, or any installment
     of interest (including any Additional Interest) on, any Security, or reduce
     the principal amount thereof or the rate of interest thereon or any premium
     payable upon the redemption thereof, or reduce the amount of principal of a
     Discount Security that would be due and payable upon a declaration of
     acceleration of the Maturity thereof pursuant to Section 5.2, or change the
     place of payment where, or the coin or currency in which, any Security or
     interest thereon is payable, or impair the right to institute suit for the
     enforcement of any such payment on or after the Stated Maturity thereof
     (or, in the case of redemption, on or after the Redemption Date), or

                                      59
<PAGE>

          (2) reduce the percentage in aggregate principal amount of the
     Outstanding Securities of any series, the consent of whose Holders is
     required for any such supplemental indenture, or the consent of whose
     Holders is required for any waiver (of compliance with certain provisions
     of this Indenture or certain defaults hereunder and their consequences)
     provided for in this Indenture, or

          (3) modify any of the provisions of this Section, Section 5.13 or
     Section 10.5, except to increase any such percentage or to provide that
     certain other provisions of this Indenture cannot be modified or waived
     without the consent of the Holder of each Security affected thereby;

provided, further, that, in the case of the Securities of a series issued to an
Issuer Trust, so long as any of the corresponding series of Capital Securities
issued by such Issuer Trust remains outstanding, (i) no such amendment shall be
made that adversely affects the holders of such Capital Securities in any
material respect, and no termination of this Indenture shall occur, and no
waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the aggregate Liquidation Amount (as defined in the related
Trust Agreement) of such Capital Securities then outstanding unless and until
the principal of (and premium, if any, on) the Securities of such series and all
accrued and (subject to Section 3.8) unpaid interest (including any Additional
Interest) thereon have been paid in full, and (ii) no amendment shall be made to
Section 5.8 of this Indenture that would impair the rights of the holders of
Capital Securities issued by any Issuer Trust provided therein without the prior
consent of the holders of each such Capital Security then outstanding unless and
until the principal of (and premium, if any, on) the Securities of such series
and all accrued and (subject to Section 3.8) unpaid interest (including any
Additional Interest) thereon have been paid in full.

     A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for the
benefit of one or more particular series of Securities or any corresponding
series of Capital Securities of an Issuer Trust that holds the Securities of any
series, or that modifies the rights of the Holders of Securities of such series
or holders of such Capital Securities of such corresponding series with respect
to such covenant or other provision, shall be deemed not to affect the rights
under this Indenture of the Holders of Securities of any other series or holders
of Capital Securities of any other such corresponding series.

     It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.

Section 9.3.  Execution of Supplemental Indentures.

     In executing or accepting the additional trusts created by any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions

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precedent herein provided for relating to such action have been complied with.
The Trustee may, but shall not be obligated to, enter into any such supplemental
indenture that affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.

Section 9.4.  Effect of Supplemental Indentures.

     Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.

Section 9.5.  Conformity with Trust Indenture Act.

     Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.

Section 9.6.  Reference in Securities to Supplemental Indentures.

     Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Corporation, bear a notation in form approved by the Corporation as to any
matter provided for in such supplemental indenture.  If the Corporation shall so
determine, new Securities of any series so modified as to conform, in the
opinion of the Corporation, to any such supplemental indenture may be prepared
and executed by the Corporation and authenticated and delivered by the Trustee
in exchange for Outstanding Securities of such series.

                                   ARTICLE X

                                   Covenants

Section 10.1.  Payment of Principal, Premium and Interest.

     The Corporation covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest (including any Additional Interest) on the Securities of
that series in accordance with the terms of such Securities and this Indenture.

Section 10.2.  Maintenance of Office or Agency.

     The Corporation will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Corporation in respect of the Securities of that series and this
Indenture may be served.  The Corporation initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said purposes.  The
Corporation will give prompt written notice to the Trustee of any change in the
location of any such office or agency.  If at any time the Corporation shall
fail to maintain such office or agency or shall fail to furnish the

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Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee, and
the Corporation hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.

     The Corporation may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Corporation of its obligation to maintain an office or agency in
each Place of Payment for Securities of any series for such purposes.  The
Corporation will give prompt written notice to the Trustee of any such
designation and any change in the location of any such office or agency.

Section 10.3.  Money for Security Payments to be Held in Trust.

     If the Corporation shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any, an) or interest on any of the Securities of
such series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.

     Whenever the Corporation shall have one or more Paying Agents, it will,
prior to 10:00 a.m., New York City time, on each due date of the principal of
(or premium, if any) or interest (including any Additional Interest) on any
Securities, deposit with a Paying Agent a sum sufficient to pay the principal
(and premium, if any) or interest (including any Additional Interest) so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal (and premium, if any) or interest (including any
Additional Interest), and (unless such Paying Agent is the Trustee) the
Corporation will promptly notify the Trustee of its failure so to act.

     The Corporation will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:

          (1) hold all sums held by it for the payment of the principal of (and
     premium, if any) or interest (including any Additional Interest) on the
     Securities of a series in trust for the benefit of the Persons entitled
     thereto until such sums shall be paid to such Persons or otherwise disposed
     of as herein provided;

          (2) give the Trustee notice of any default by the Corporation (or any
     other obligor upon such Securities) in the making of any payment of
     principal (and premium, if any) or interest (including any Additional
     Interest) in respect of any Security of any Series;

          (3) at any time during the continuance of any default with respect to
     a series of Securities, upon the written request of the Trustee, forthwith
     pay to the Trustee all sums so held in trust by such Paying Agent with
     respect to such series; and

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          (4) comply with the provisions of the Trust Indenture Act applicable
     to it as a Paying Agent.

     The Corporation may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Corporation Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Corporation or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by the
Corporation or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.

     Any money deposited with the Trustee or any Paying Agent, or then held by
the Corporation in trust for the payment of the principal of (and premium, if
any) or interest (including any Additional Interest) on any Security and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall (unless otherwise required by
mandatory provision of applicable escheat or abandoned or unclaimed property
law) be paid on Corporation Request to the Corporation, or (if then held by the
Corporation) shall (unless otherwise required by mandatory provision of
applicable escheat or abandoned or unclaimed property law) be discharged from
such trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Corporation for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Corporation as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Corporation cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Corporation.

Section 10.4.  Statement as to Compliance.

     The Corporation shall deliver to the Trustee, within 120 days after the end
of each fiscal year of the Corporation ending after the date hereof, an
Officers' Certificate covering the preceding calendar year, stating whether or
not to the best knowledge of the signers thereof the Corporation is in default
in the performance, observance or fulfillment of or compliance with any of the
terms, provisions, covenants and conditions of this Indenture, and if the
Corporation shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.  For the purpose of this
Section 10.4, compliance shall be determined without regard to any grace period
or requirement of notice provided pursuant to the terms of this Indenture.

Section 10.5.  Waiver of Certain Covenants.

     Subject to the rights of holders of Capital Securities specified in Section
9.2, if any, the Corporation may omit in any particular instance to comply with
any covenant or condition provided pursuant to Section 3.1, 9.1(3) or 9.1(4)
with respect to the Securities of any series, if

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before or after the time for such compliance the Holders of at least a majority
in aggregate principal amount of the Outstanding Securities of such series
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Corporation in respect of any such covenant or condition shall remain in
full force and effect.

Section 10.6.  Additional Sums.

     In the case of the Securities of a series initially issued to an Issuer
Trust, so long as no Event of Default has occurred and is continuing and except
as otherwise specified as contemplated by Section 2.1 or Section 3.1, if (i) an
Issuer Trust is the Holder of all of the Outstanding Securities of such series,
and (ii) a Tax Event has occurred and is continuing in respect of such Issuer
Trust, the Corporation shall pay to such Issuer Trust (and its permitted
successors or assigns under the related Trust Agreement) for so long as such
Issuer Trust (or its permitted successor or assignee) is the registered holder
of the Outstanding Securities of such series, such additional sums as may be
necessary in order that the amount of Distributions (including any Additional
Amounts (as defined in such Trust Agreement)) then due and payable by such
Issuer Trust on the related Capital Securities and Common Securities that at any
time remain outstanding in accordance with the terms thereof shall not be
reduced as a result of any Additional Taxes arising from such Tax Event;
provided, however, that Additional Sums shall not include any withholding taxes
arising after the occurrence of a Tax Event and which have been withheld from
payments to Holders of Trust Securities and for which Holders are liable (the
"Additional Sums").  Whenever in this Indenture or the Securities there is a
reference in any context to the payment of principal of or interest on the
Securities, such mention shall be deemed to include mention of the payments of
the Additional Sums provided for in this paragraph to the extent that, in such
context, Additional Sums are, were or would be payable in respect thereof
pursuant to the provisions of this paragraph and express mention of the payment
of Additional Sums (if applicable) in any provisions hereof shall not be
construed as excluding Additional Sums in those provisions hereof where such
express mention is not made; provided, however, that the deferral of the payment
of interest pursuant to Section 3.12 or the Securities shall not defer the
payment of any Additional Sums that may be due and payable.

Section 10.7.  Additional Covenants.

     The Corporation covenants and agrees with each Holder of Securities of each
series that it shall not (x) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Corporation that rank pari passu in all respects with or junior in interest to
the Securities of such series, or (y) declare or pay any dividends or
distributions on, or redeem purchase, acquire or make a liquidation payment with
respect to, any shares of the Corporation's capital stock (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Corporation in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of any one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of capital
stock of the Corporation (or securities convertible into or exercisable for such
capital stock) as consideration

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in an acquisition transaction entered into prior to the applicable Extension
Period, (b) as a result of an exchange or conversion of any class or series of
the Corporation's capital stock (or any capital stock of a Subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series of
the Corporation's capital stock, (c) the purchase of fractional interests in
shares of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any Rights Plan, or the
issuance of rights, stock or other property under any Rights Plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock) if at such time (i) there shall have occurred any event
(A) of which the Corporation has actual knowledge that with the giving of notice
or the lapse of time, or both, would constitute an Event of Default with respect
to the Securities of such series, and (B) which the Corporation shall not have
taken reasonable steps to cure, (ii) if the Securities of such series are held
by an Issuer Trust, the Corporation shall be in default with respect to its
payment of any obligations under the Guarantee Agreement relating to the Capital
Securities issued by such Issuer Trust, or (iii) the Corporation shall have
given notice of its election to begin an Extension Period with respect to the
Securities of such series as provided herein and shall not have rescinded such
notice, or such Extension Period, or any extension thereof, shall be continuing.

     The Corporation also covenants with each Holder of Securities of a series
issued to an Issuer Trust (i) to hold, directly or indirectly, 100% of the
Common Securities of such Issuer Trust, provided that any permitted successor of
the Corporation hereunder may succeed to the Corporation's ownership of such
Common Securities, (ii) as holder of such Common Securities, not to voluntarily
terminate, wind-up or liquidate such Issuer Trust, other than (a) in connection
with a distribution of the Securities of such series to the holders of the
related Capital Securities in liquidation of such Issuer Trust, or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the related Trust Agreement, and (iii) to use its reasonable efforts, consistent
with the terms and provisions of such Trust Agreement, to cause such Issuer
Trust to continue not to be taxable as a corporation for United States federal
income tax purposes.

Section 10.8.   Original Issue Discount.

     For each year during which any Securities that were issued with original
issue discount are Outstanding, the Corporation shall furnish to each Paying
Agent in a timely fashion such information as may be reasonably requested by
each Paying Agent in order that each Paying Agent may prepare the information
which it is required to report for such year on Internal Revenue Service Forms
1096 and 1099 pursuant to Section 6049 of the Internal Revenue Code of 1986, as
amended.  Such information shall include the amount of original issue discount
includible in income for each $1,000 of principal amount at Stated Maturity of
outstanding Securities during such year.

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                                  ARTICLE XI

                           Redemption of Securities

Section 11.1.  Applicability of This Article.

     Redemption of Securities of any series (whether by operation of a sinking
fund or otherwise) as permitted or required by any form of Security issued
pursuant to this Indenture shall be made in accordance with such form of
Security and this Article; provided, however, that if any provision of any such
form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern.  Except as otherwise set forth
in the form of Security for such series, each Security of a series shall be
subject to partial redemption only in the amount of $1,000 or any integral
multiples thereof.

Section 11.2.  Election to Redeem; Notice to Trustee.

     The election of the Corporation to redeem any Securities shall be evidenced
by or pursuant to a Board Resolution.  In case of any redemption at the election
of the Corporation, the Corporation shall, at least 45 days prior to the
Redemption Date (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee and, in the case of Securities of a series held by an Issuer
Trust, the Property Trustee under the related Trust Agreement, of such date and
of the principal amount of Securities of the applicable series to be redeemed
and provide the additional information required to be included in the notice or
notices contemplated by Section 11.4; provided that in the case of any series of
Securities initially issued to an Issuer Trust, for so long as such Securities
are held by such Issuer Trust, such notice shall be given not less than 45 nor
more than 75 days prior to such Redemption Date (unless a shorter notice shall
be satisfactory to the Property Trustee under the related Trust Agreement).  In
the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities, the
Corporation shall furnish the Trustee with an Officers' Certificate and an
Opinion of Counsel evidencing compliance with such restriction.

Section 11.3.  Selection of Securities to be Redeemed.

     If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security.

     The Trustee shall promptly notify the Corporation in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed.  For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security that has been or is to be
redeemed.

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Section 11.4.  Notice of Redemption.

     Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not later than the thirtieth day, and not earlier than the sixtieth day,
prior to the Redemption Date, to each Holder of Securities to be redeemed, at
the address of such Holder as it appears in the Securities Register, provided
that in the case of any series of Securities initially issued to an Issuer
Trust, for so long as such Securities are held by such Issuer Trust, such notice
shall be given not less than 45 nor more than 75 days prior to such Redemption
Date (unless a shorter notice shall be satisfactory to the Property Trustee
under the related Trust Agreement).

     With respect to Securities of each series to be redeemed, each notice of
redemption shall state:

          (a) the Redemption Date;

          (b) the Redemption Price or, if the Redemption Price cannot be
     calculated prior to the time the notice is required to be sent, the
     estimate of the Redemption Price together with a statement that it is an
     estimate and that the actual Redemption Price will be calculated on the
     third Business Day prior to the Redemption Date (and if an estimate is
     provided, a further notice shall be sent of the actual Redemption Price on
     the date that such Redemption Price is calculated);

          (c) if less than all Outstanding Securities of such particular series
     are to be redeemed, the identification (and, in the case of partial
     redemption, the respective principal amounts) of the particular Securities
     to be redeemed;

          (d) that on the Redemption Date, the Redemption Price will become due
     and payable upon each such Security or portion thereof, and that interest
     (including any Additional Interest) thereon, if any, shall cease to accrue
     on and after said date;

          (e) the place or places where such Securities are to be surrendered
     for payment of the Redemption Price;

          (f) that the redemption is for a sinking fund, if such is the case;

          (g) such other provisions as may be required in respect of the terms
     of a particular series of Securities.

     Notice of redemption of Securities to be redeemed at the election of the
Corporation shall be given by the Corporation or, at the Corporation's request,
by the Trustee in the name and at the expense of the Corporation and shall be
irrevocable.  The notice if mailed in the manner provided above shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice.  In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.

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Section 11.5.  Deposit of Redemption Price.

     Prior to 10:00 a.m., New York City time, on the Redemption Date specified
in the notice of redemption given as provided in Section 11.4, the Corporation
will deposit with the Trustee or with one or more Paying Agents (or if the
Corporation is acting as its own Paying Agent, the Corporation will segregate
and hold in trust as provided in Section 10.3) an amount of money sufficient to
pay the Redemption Price of, and any accrued interest (including any Additional
Interest) on, all the Securities (or portions thereof) that are to be redeemed
on that date.

Section 11.6.  Payment of Securities Called for Redemption.

     If any notice of redemption has been given as provided in Section 11.4, the
Securities or portion of Securities with respect to which such notice has been
given shall become due and payable on the date and at the place or places stated
in such notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date.  On
presentation and surrender of such Securities at a Place of Payment in said
notice specified, the said Securities or the specified portions thereof shall be
paid and redeemed by the Corporation at the applicable Redemption Price,
together with accrued interest (including any Additional Interest) to the
Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 3.1, installments of interest (including any Additional
Interest) whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant record
dates according to their terms and the provisions of Section 3.8.

     Upon presentation of any Security redeemed in part only, the Corporation
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Corporation, a new Security or Securities of the
same series, of authorized denominations, in aggregate principal amount equal to
the unredeemed portion of the Security so presented and having the same Original
Issue Date, Stated Maturity and terms.

     If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and premium, if any, on such Security
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.

Section 11.7.  Right of Redemption of Securities Initially Issued to an Issuer
     Trust.

     In the case of the Securities of a series initially issued to an Issuer
Trust, except as otherwise specified as contemplated by Section 3.1, the
Corporation, at its option, may redeem such Securities (i) on or after the date
specified in such Security, in whole at any time or in part from time to time,
or (ii) upon the occurrence and during the continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event, at any time within 90
days following the occurrence and during the continuation of such Tax Event,
Investment Company Event or Capital Treatment Event, in whole (but not in part),
in each case at a Redemption Price specified in such Security, together with
accrued interest (including any Additional Interest) to, but excluding, the
Redemption Date.

     If less than all the Securities of any such series are to be redeemed, the
aggregate principal amount of such Securities remaining Outstanding after giving
effect to such redemption

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shall be sufficient to satisfy any provisions of the Trust Agreement related to
the Issuer Trust to which such Securities were issued, including any requirement
in such Trust Agreement as to the minimum Liquidation Amount (as defined in such
Trust Agreement) of Capital Securities that may be held by a holder of Capital
Securities thereunder.

                                  ARTICLE XII

                                 Sinking Funds

Section 12.1.  Applicability of Article.

     The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.

     The minimum amount of any sinking fund payment provided for by the terms of
any Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any sinking fund payment in excess of such minimum amount that is
permitted to be made by the terms of such Securities of any series is herein
referred to as an "optional sinking fund payment".  If provided for by the terms
of any Securities of any series, the cash amount of any sinking fund payment may
be subject to reduction as provided in Section 12.2.  Each sinking fund payment
shall be applied to the redemption of Securities of any series as provided for
by the terms of such Securities.

Section 12.2.  Satisfaction of Sinking Fund Payments with Securities.

     In lieu of making all or any part of a mandatory sinking fund payment with
respect to any Securities of a series in cash, the Corporation may at its
option, at any time no more than 16 months and no less than 45 days prior to the
date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Corporation, except Securities of such series that have been redeemed through
the application of mandatory or optional sinking fund payments pursuant to the
terms of the Securities of such series, accompanied by a Corporation Order
instructing the Trustee to credit such obligations and stating that the
Securities of such series were originally issued by the Corporation by way of
bona fide sale or other negotiation for value; provided that the Securities to
be so credited have not been previously so credited.  The Securities to be so
credited shall be received and credited for such purpose by the Trustee at the
redemption price for such Securities, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.

Section 12.3.  Redemption of Securities for Sinking Fund.

     Not less than 45 days prior to each sinking fund payment date for any
series of Securities, the Corporation will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash in the currency in which

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the Securities of such series are payable (except as provided pursuant to
Section 3.1) and the portion thereof, if any, that is to be satisfied by
delivering and crediting Securities pursuant to Section 12.2 and will also
deliver to the Trustee any Securities to be so delivered. Such Officers'
Certificate shall be irrevocable and upon its delivery the Corporation shall be
obligated to make the cash payment or payments therein referred to, if any, on
or before the succeeding sinking fund payment date. In the case of the failure
of the Corporation to deliver such Officers' Certificate (or, as required by
this Indenture, the Securities and coupons, if any, specified in such Officers'
Certificate) by the due date therefor, the sinking fund payment due on the
succeeding sinking fund payment date for such series shall be paid entirely in
cash and shall be sufficient to redeem the principal amount of the Securities of
such series subject to a mandatory sinking fund payment without the right to
deliver or credit securities as provided in Section 12.2 and without the right
to make the optional sinking fund payment with respect to such series at such
time.

     Any sinking fund payment or payments (mandatory or optional) made in cash
plus any unused balance of any preceding sinking fund payments made with respect
to the Securities of any particular series shall be applied by the Trustee (or
by the Corporation if the Corporation is acting as its own Paying Agent) on the
sinking fund payment date on which such payment is made (or, if such payment is
made before a sinking fund payment date, on the sinking fund payment date
immediately following the date of such payment) to the redemption of Securities
of such series at the Redemption Price specified in such Securities with respect
to the sinking fund.  Any sinking fund moneys not so applied or allocated by the
Trustee (or, if the Corporation is acting as its own Paying Agent, segregated
and held in trust by the Corporation as provided in Section 10.3) for such
series and together with such payment (or such amount so segregated) shall be
applied in accordance with the provisions of this Section 12.3.  Any and all
sinking fund moneys with respect to the Securities of any particular series held
by the Trustee (or if the Corporation is acting as its own Paying Agent,
segregated and held in trust as provided in Section 10.3) on the last sinking
fund payment date with respect to Securities of such series and not held for the
payment or redemption of particular Securities of such series shall be applied
by the Trustee (or by the Corporation if the Corporation is acting as its own
Paying Agent), together with other moneys, if necessary, to be deposited (or
segregated) sufficient for the purpose, to the payment of the principal of the
Securities of such series at Maturity.  The Trustee shall select the Securities
to be redeemed upon such sinking fund payment date in the manner specified in
Section 11.3 and cause notice of the redemption thereof to be given in the name
of and at the expense of the Corporation in the manner provided in Section 11.4.
Such notice having been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in Section 11.6.  On or before each
sinking fund payment date, the Corporation shall pay to the Trustee (or, if the
Corporation is acting as its own Paying Agent, the Corporation shall segregate
and hold in trust as provided in Section 10.3) in cash a sum in the currency in
which Securities of such series are payable (except as provided pursuant to
Section 3.1) equal to the principal (and premium, if any) and any interest
(including any Additional Interest) accrued to the Redemption Date for
Securities or portions thereof to be redeemed on such sinking fund payment date
pursuant to this Section 12.3.

     Neither the Trustee nor the Corporation shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default

                                      70
<PAGE>

occurring as a consequence of this paragraph) with respect to the Securities of
such series, except that if the notice of redemption shall have been provided in
accordance with the provisions hereof, the Trustee (or the Corporation, if the
Corporation is then acting as its own Paying Agent) shall redeem such Securities
if cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Corporation) for that purpose in accordance with the terms of
this Article XII. Except as aforesaid, any moneys in the sinking fund for such
series at the time when any such default or Event of Default shall occur and any
moneys thereafter paid into such sinking fund shall, during the continuance of
such default or Event of Default, be held as security for the payment of the
Securities and coupons, if any, of such series; provided, however, that in case
such default or Event of Default shall have been cured or waived herein, such
moneys shall thereafter be applied on the next sinking fund payment date for the
Securities of such series on which such moneys may be applied pursuant to the
provisions of this Section 12.3.

                                 ARTICLE XIII

                          Subordination of Securities

Section 13.1.  Securities Subordinate to Senior Indebtedness.

     The Corporation covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the payment of the principal
of (and premium, if any) and interest (including any Additional Interest) on
each and all of the Securities of each and every series are hereby expressly
made subordinate and subject in right of payment to the prior payment in full of
all Senior Indebtedness.

Section 13.2.  No Payment When Senior Indebtedness in Default; Payment Over of
     Proceeds Upon Dissolution, Etc.

     If the Corporation shall default in the payment of any principal of (or
premium, if any) or interest on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, upon written notice of such
default to the Corporation by the holders of Senior Indebtedness or any trustee
therefor, unless and until such default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the principal of (or premium, if any) or interest (including any
Additional Interest) on any of the Securities, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of the Securities.

     In the event of (a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceedings relating
to the Corporation, its creditors or its property, (b) any proceeding for the
liquidation, dissolution or other winding up of the Corporation, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings, (c)
any assignment by the Corporation for the benefit of creditors or (d) any other
marshalling of the assets of the Corporation (each such event, if any, herein
sometimes referred to as a "Proceeding"), all Senior Indebtedness (including any
interest thereon accruing after the

                                      71
<PAGE>

commencement of any such proceedings) shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, shall be
made to any Holder of any of the Securities on account thereof. Any payment or
distribution, whether in cash, securities or other property (other than
securities of the Corporation or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for these subordination provisions) be payable or deliverable in
respect of the Securities of any series shall be paid or delivered directly to
the holders of Senior Indebtedness in accordance with the priorities then
existing among such holders until all Senior Indebtedness (including any
interest thereon accruing after the commencement of any Proceeding) shall have
been paid in full.

     In the event of any Proceeding, after payment in full of all sums owing
with respect to Senior Indebtedness, the Holders of the Securities, together
with the holders of any obligations of the Corporation ranking on a parity with
the Securities, shall be entitled to be paid from the remaining assets of the
Corporation the amounts at the time due and owing on account of unpaid principal
of (and premium, if any) and interest on the Securities and such other
obligations before any payment or other distribution, whether in cash, property
or otherwise, shall be made on account of any capital stock or any obligations
of the Corporation ranking junior to the Securities and such other obligations.
If, notwithstanding the foregoing, any payment or distribution of any character
or any security, whether in cash, securities or other property (other than
securities of the Corporation or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), shall be
received by the Trustee or any Holder in contravention of any of the terms
hereof and before all Senior Indebtedness shall have been paid in full, such
payment or distribution or security shall be received in trust for the benefit
of, and shall be paid over or delivered and transferred to, the holders of the
Senior Indebtedness at the time outstanding in accordance with the priorities
then existing among such holders for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all such Senior
Indebtedness in full.  In the event of the failure of the Trustee or any Holder
to endorse or assign any such payment, distribution or security, each holder of
Senior Indebtedness is hereby irrevocably authorized to endorse or assign the
same.

     The Trustee and the Holders shall take such action (including, without
limitation, the delivery of this Indenture to an agent for the holders of Senior
Indebtedness or consent to the filing of a financing statement with respect
hereto) as may, in the opinion of counsel designated by the holders of a
majority in principal amount of the Senior Indebtedness at the time outstanding,
be necessary or appropriate to assure the effectiveness of the subordination
effected by these provisions.

                                      72
<PAGE>

     The provisions of this Section 13.2 shall not impair any rights, interests,
remedies or powers of any secured creditor of the Corporation in respect of any
security interest the creation of which is not prohibited by the provisions of
this Indenture.

     The securing of any obligations of the Corporation, otherwise ranking on a
parity with the Securities or ranking junior to the Securities, shall not be
deemed to prevent such obligations from constituting, respectively, obligations
ranking on a parity with the Securities or ranking junior to the Securities.

Section 13.3.  Payment Permitted If No Default.

     Nothing contained in this Article or elsewhere in this Indenture or in any
of the Securities shall prevent (a) the Corporation, at any time, except during
the pendency of the conditions described in the first paragraph of Section 13.2
or of any Proceeding referred to in Section 13.2, from making payments at any
time of principal of (and premium, if any) or interest (including any Additional
Interest) on the Securities, or (b) the application by the Trustee of any moneys
deposited with it hereunder to the payment of or on account of the principal of
(and premium, if any) or interest (including any Additional Interest) on the
Securities or the retention of such payment by the Holders, if, at the time of
such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article.

Section 13.4.  Subrogation to Rights of Holders of Senior Indebtedness.

     Subject to the payment in full of all amounts due or to become due on all
Senior Indebtedness, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article (equally and ratably with the holders
of all indebtedness of the Corporation that by its express terms is subordinated
to Senior Indebtedness of the Corporation to substantially the same extent as
the Securities are subordinated to the Senior Indebtedness and is entitled to
like rights of subrogation by reason of any payments or distributions made to
holders of such Senior Indebtedness) to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities shall be paid in full.  For purposes of such subrogation, no payments
or distributions to the holders of the Senior Indebtedness of any cash, property
or securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Indebtedness
by Holders of the Securities or the Trustee, shall, as among the Corporation,
its creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment or distribution by the Corporation to or
on account of the Senior Indebtedness.

Section 13.5.  Provisions Solely to Define Relative Rights.

     The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior

                                      73
<PAGE>

Indebtedness on the other hand. Nothing contained in this Article or elsewhere
in this Indenture or in the Securities is intended to or shall (a) impair, as
between the Corporation and the Holders of the Securities, the obligations of
the Corporation, which are absolute and unconditional, to pay to the Holders of
the Securities the principal of (and premium, if any) and interest (including
any Additional Interest) on the Securities as and when the same shall become due
and payable in accordance with their terms; or (b) affect the relative rights
against the Corporation of the Holders of the Securities and creditors of the
Corporation other than their rights in relation to the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any Security (or to
the extent expressly provided herein, the holder of any Capital Security) from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, including filing and voting claims in any Proceeding, subject to
the rights, if any, under this Article of the holders of Senior Indebtedness to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.

Section 13.6.  Trustee to Effectuate Subordination.

     Each Holder of a Security by his or her acceptance thereof authorizes and
directs the Trustee on his or her behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination provided in this
Article and appoints the Trustee his or her attorney-in-fact for any and all
such purposes.

Section 13.7.  No Waiver of Subordination Provisions.

     No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Corporation or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Corporation with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof that any such
holder may have or be otherwise charged with.

     Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Indebtedness may, at any time and from to time,
without the consent of or notice to the Trustee or the Holders of the Securities
of any series, without incurring responsibility to such Holders of the
Securities and without impairing or releasing the subordination provided in this
Article or the obligations hereunder of such Holders of the Securities to the
holders of Senior Indebtedness, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Corporation and any other Person.

                                      74
<PAGE>

Section 13.8.  Notice to Trustee.

     The Corporation shall give prompt written notice to the Trustee of any fact
known to the Corporation that would prohibit the making of any payment to or by
the Trustee in respect of the Securities.  Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Corporation or a holder of Senior Indebtedness or from any trustee, agent or
representative therefor; provided, however, that if the Trustee shall not have
received the notice provided for in this Section at least two Business Days
prior to the date upon which by the terms hereof any monies may become payable
for any purpose (including, the payment of the principal of (and premium, if
any, on) or interest (including any Additional Interest) on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such monies and to apply the same to
the purpose for which they were received and shall not be affected by any notice
to the contrary that may be received by it within two Business Days prior to
such date.

     Subject to the provisions of Section 6.1, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
or herself to be a holder of Senior Indebtedness (or a trustee or attorney-in-
fact therefor) to establish that such notice has been given by a holder of
Senior Indebtedness (or a trustee or attorney-in-fact therefor).  In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article, the Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article, and if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.

Section 13.9.  Reliance on Judicial Order or Certificate of Liquidating Agent.

     Upon any payment or distribution of assets of the Corporation referred to
in this Article, the Trustee, subject to the provisions of Section 6.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Corporation, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.

                                      75
<PAGE>

Section 13.10.  Trustee Not Fiduciary for Holders of Senior Indebtedness.

     The Trustee, in its capacity as trustee under this Indenture, shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall
not be liable to any such holders if it shall in good faith mistakenly pay over
or distribute to Holders of Securities or to the Corporation or to any other
Person cash, property or securities to which any holders of Senior Indebtedness
shall be entitled by virtue of this Article or otherwise.

Section 13.11.  Rights of Trustee as Holder of Senior Indebtedness; Preservation
     of Trustee's Rights.

     The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article with respect to any Senior Indebtedness that may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.

Section 13.12.  Article Applicable to Paying Agents.

     If at any time any Paying Agent other than the Trustee shall have been
appointed by the Corporation and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee.

                                      76
<PAGE>

     This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested.

                                             BB&T Corporation

                                             By:  __________________________
                                                  Name:
                                                  Title:

Attest:

____________________

                                             State Street Bank and Trust
                                             Company, as Trustee

                                             By:  __________________________
                                                  Name:
                                                  Title:

Attest:

____________________

                                      77
<PAGE>

STATE OF                      )
                              ) ss.:
COUNTY OF                     )

     On _______________, 20__ before me, the undersigned, a Notary Public in and
for the State of _________, personally appeared _________________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument, and acknowledged to me
that he/she executed the same in his/her authorized capacity, and that the
foregoing instrument is the free act and deed of the entity upon behalf of which
such person acted.

     WITNESS my hand and official seal.

     SIGNATURE: ________________________  (This area for official notarial seal)
                Name:
                Address:

                                      78
<PAGE>

STATE OF                      )
                              ) ss.:
COUNTY OF                     )

     On _______________, 20__ before me, the undersigned, a Notary Public in and
for the State of ___________, personally appeared ________________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument, and acknowledged to me
that he/she executed the same in his/her authorized capacity, and that the
foregoing instrument is the free act and deed of the entity upon behalf of which
such person acted.

     WITNESS my hand and official seal.

     SIGNATURE: ________________________  (This area for official notarial seal)
                Name:
                Address:

                                      79
<PAGE>

                                                                       EXHIBIT A

                  [Form of Restricted Securities Certificate]

                       RESTRICTED SECURITIES CERTIFICATE

                   (For transfers pursuant to Section 3.6(b)
                      of the Indenture referred to below)

[________________________________],
as Securities Registrar [address]

          Re: [Title of Securities] of BB&T Corporation (the "Securities")

     Reference is made to the Junior Subordinated Indenture, dated as of ______,
20__ (the "Indenture"), between BB&T Corporation, a North Carolina corporation,
and State Street Bank and Trust Company, as Trustee.  Terms used herein and
defined in the Indenture or in Regulation S, Rule 144A or Rule 144 under the
U.S. Securities Act of 1933 (the "Securities Act") are used herein as so
defined.

     This certificate relates to $_____________ aggregate principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):

     CUSIP No(s). ____________________
     CERTIFICATE No(s). ______________
     CURRENTLY IN BOOK-ENTRY FORM:  Yes ___  No ___ (check one)

     The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner".  If the Specified Securities are represented by a Global Security, they
are held through a Depositary (except in the name of the "The Depository Trust
Company") or an Agent Member in the name of the Undersigned, as or on behalf of
the Owner. If the Specified Securities are not represented by a Global Security,
they are registered in the name of the Undersigned, as or on behalf of the
Owner.

     The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of a Restricted
Security.  In connection with such transfer, the Owner hereby certifies that,
unless such transfer is being effected pursuant to an effective registration
statement under the Securities Act, it is being effected in accordance with Rule
144A, Rule 904 of Regulation S or Rule 144 under the Securities Act and all
applicable securities laws of the states of the United States and other
jurisdictions.  Accordingly, the Owner hereby further certifies as:

                                      A-1
<PAGE>

     (1)  Rule 144A Transfers.  If the transfer is being effected in accordance
          -------------------
with Rule 144A:

          (A) the Specified Securities are being transferred to a person that
     the Owner and any person acting on its behalf reasonably believe is a
     "qualified institutional buyer" within the meaning of Rule 144A, acquiring
     for its own account or for the account of a qualified institutional buyer;
     and

          (B) the Owner and any person acting on its behalf have taken
     reasonable steps to ensure that the Transferee is aware that the Owner may
     be relying on Rule 144A in connection with the transfer; and

     (2)  Rule 904 Transfers.  If the transfer is being effected in accordance
          ------------------
with Rule 904:

          (A)  the Owner is not a distributor of the Securities, an affiliate of
     the Corporation or any such distributor or a person acting in behalf of any
     of the foregoing;

          (B)  the offer of the Specified Securities was not made to a person in
     the United States;

          (C)  either;

               (i)  at the time the buy order was originated, the Transferee was
          outside the United States or the Owner and any person acting on its
          behalf reasonably believed that the Transferee was outside the United
          States, or

               (ii) the transaction is being executed in, on or through the
          facilities of the Eurobond market, as regulated by the Association of
          International Bond Dealers, or another designated offshore securities
          market and neither the Owner nor any person acting on its behalf knows
          that the transaction has been prearranged with a buyer in the United
          States;

          (D)  no directed selling efforts have been made in the United States
     by or on behalf of the Owner or any affiliate thereof; and

          (E)  the transaction is not part of a plan or scheme to evade the
     registration requirements of the Securities act.

     (3)  Rule 144 Transfers.  If the transfer is being effected pursuant  to
          ------------------
Rule 144:

          (A)  the transfer is occurring after a holding period of at least one
     year (computed in accordance with paragraph (d) of Rule 144) has elapsed
     since the date the Specified Securities were acquired from the Corporation
     or from an affiliate (as such term is defined in Rule 144) of the
     Corporation, whichever is later, and is being effected in accordance with
     the applicable amount, manner of sale and notice requirements of paragraphs
     (e), (f) and (h) of Rule 144;

                                      A-2
<PAGE>

          (B)  the transfer is occurring after a holding period by the Owner of
     at least two years has elapsed since the date the Specified Securities were
     acquired from the Corporation or from an affiliate (as such term is defined
     in Rule 144) of the Corporation, whichever is later, and the Owner is not,
     and during the preceding three months has not been, an affiliate of the
     Corporation; or

          (C)  the Owner is a qualified institutional buyer within the meaning
     of Rule 144a, and is transferring the Securities to an institution that is
     an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or
     (7) of Regulation D under the Securities Act in a transaction exempt from
     the registration requirements of the Securities Act.

     This certificate and the statements contained herein are made for your
benefit and the benefit of the Corporation and the "Initial Purchaser" (as
defined in the Trust Agreement relating to the Issuer Trust to which the
Securities were initially issued).

Dated:
                              _____________________________________________
                              (Print the name of the Undersigned, as such
                              term is defined in the second paragraph of
                              this certificate.)

                              By:__________________________________________
                                 Name:
                                 Title:
                              (If the Undersigned is a corporation,
                              partnership or fiduciary, the title of the
                              person signing on behalf of the Undersigned
                              must be stated.)

                                      A-3

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