Document:

EXHIBIT 10.3

[LOGO]                                                      JACKSON, MISSISSIPPI
                                                              PROMUS HOTELS, INC
                                                              755 CROSSOVER LANE
                                                       MEMPHIS, TENNESSEE  38117
                                                                       99-hom/co

                                 HOMEWOOD SUITES
                                LICENSE AGREEMENT

DATED  JANUARY 4, 2000  BETWEEN  PROMUS  HOTELS,  INC.,  A DELAWARE  CORPORATION
      -----------------
("LICENSOR"),   AND  APPLE  SUITES  MANAGEMENT,  INC.,  A  VIRGINIA  CORPORATION
                     -----------------------------------------------------------
("LICENSEE"), WHOSE ADDRESS IS 306 EAST MAIN STREET, RICHMOND, VIRGINIA 23219 .
                               -------------------------------------------------

                          THE PARTIES AGREE AS FOLLOWS:

1.       THE LICENSE.

         Licensor  owns,  operates and  licenses a system  designed to provide a
         distinctive,  high quality  hotel  service to the public under the name
         "Homewood  Suites"  (the  "SYSTEM").   High  standards  established  by
         Licensor  are the  essence of the  System.  Future  investments  may be
         required  of  Licensee  under  this  License  Agreement  ("AGREEMENT").
         Licensee has independently investigated the risks of the business to be
         operated hereunder,  including current and potential market conditions,
         competitive factors and risks, has read Licensor's  "Franchise Offering
         Circular,"  and has made an  independent  evaluation of all such facts.
         Aware of the  relevant  facts,  Licensee  desires  to enter  into  this
         Agreement  in  order to  obtain  a  license  to use the  System  in the
         operation  of a Homewood  Suites  hotel  located at 853 CENTRE  STREET,
         JACKSON,  MISSISSIPPI  39157 (the "HOTEL") subject to the terms of this
         Agreement.

         a.     THE  HOTEL.  The Hotel  comprises  all  structures,  facilities,
                appurtenances,  furniture, fixtures, equipment, and entry, exit,
                parking  and other  areas from time to time  located on the site
                approved  for  the  Hotel  and   acknowledged   by  Licensor  in
                anticipation of the execution of this  Agreement,  or located on
                any land from time to time  approved by Licensor for  additions,
                signs or other  facilities.  No change in the number of approved
                guest suites  ("GUEST  SUITES")  reflected on  Attachment B (the
                "RIDER")  and no other  significant  change  in the Hotel may be
                made without  Licensor's prior approval.  Redecoration and minor
                structural  changes that comply with  Licensor's  standards  and
                specifications  will  not be  considered  significant.  Licensee
                represents that it is entitled to possession of the Hotel during
                the  entire  License  Term  without   restrictions   that  would
                interfere with anything contemplated in this Agreement.

         b.     THE SYSTEM.  The System is composed of elements,  as  designated
                from time to time by  Licensor,  designed to identify  "Homewood
                Suites  hotels" to the consuming  public and/or to contribute to
                such  identification and its association with quality standards.
                The  System at  present  includes  the  service  mark  "Homewood
                Suites"  and such  other  service  marks  and  such  copyrights,
                trademarks and similar property rights as may be designated from
                time to time by Licensor  to be part of the System;  access to a
                reservation service; distribution of advertising,  publicity and
                other  marketing  programs  and  materials;  the  furnishing  of
                training programs and materials,  standards,  specifications and
                policies for construction, furnishing, operation, appearance and
                service  of the  Hotel,  and  other  requirements  as  stated or

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                referred  to in  this  Agreement  and  from  time to time in the
                Manual  (as  defined  herein)  or  in  other  communications  to
                Licensee;  and programs for  inspecting the Hotel and consulting
                with  Licensee.  Licensor  may add  elements  to the  System  or
                modify,  alter or delete  elements of the System  (including the
                trade  name  and/or  brand  name  of  the  Hotel)  at  its  sole
                discretion from time to time. Licensee is only authorized to use
                "Homewood  Suites"  service  marks  and trademarks  at  or    in
                connection with the Hotel.

         c.     THE  MANUAL.  Licensee  acknowledges  the  receipt  of a current
                Homewood  Suites   Standards  Manual   ("MANUAL").   The  Manual
                contains,   among   other   matters,   minimum   standards   and
                requirements for constructing, equipping, furnishing, supplying,
                operating,  maintaining and marketing the Hotel.  Licensor shall
                have the  right  to  change  the  Manual  from  time to time and
                Licensee  agrees to abide by the Manual as  changed.  The Manual
                shall  at all  times  remain  the  sole  property  of  Licensor.
                Licensee  shall  use all  reasonable  efforts  to  maintain  the
                confidentiality  of the  Manual.  Licensee  shall  not  make  or
                distribute copies of the Manual or any portion thereof.

         d.     APPLICATION  OF MANUAL.  All hotels  operated  within the System
                will be  subject to the  Manual,  as it may from time to time be
                modified  or  revised by  Licensor.  Licensor  may,  in its sole
                discretion,  grant limited  exceptions  from compliance with the
                Manual  which may be made based on local  conditions  or special
                circumstances.  Each  material  change  in the  Manual  will  be
                explained in writing to Licensee at least 30 days before it goes
                into  effect.   Licensee  is   responsible   for  the  costs  of
                implementing all changes required because of modification to the
                Manual.

                Licensor  may  require  that  particular  models  or  brands  of
                furniture,   fixtures,   equipment,   food,   and  other   items
                (collectively,  the  "SUPPLIES") be used in the operation of the
                Hotel or be purchased from Licensor or from a source  designated
                by Licensor.  Otherwise, Licensee may purchase all Supplies from
                any source as long as the  standards and  specifications  in the
                Manual  are  met,  which  standards  and  specifications  may be
                changed  by  Licensor  from  time  to  time.  Licensee  will  be
                responsible for the costs, if any,  associated with the purchase
                of Supplies or changing brands, models or sources of supply.

2.       GRANT OF LICENSE.

         Licensor  hereby  grants  to  Licensee  a  nonexclusive   license  (the
         "LICENSE") to use the System only at the Hotel, only in connection with
         the operation of a Homewood Suites hotel,  only in accordance with this
         Agreement and only during the "License  Term"  beginning  with the date
         hereof and terminating as provided in Paragraph 13. The License applies
         to the  location  of the Hotel  specified  herein  and no  other.  This
         Agreement does not limit Licensor's right, or the rights of any parent,
         subsidiary,  division or affiliate of Licensor ("ENTITIES"),  to use or
         license  to others  the  System or any part  thereof or to engage in or
         license  any  business   activity  at  any  other  location.   Licensee
         acknowledges  that  Licensor and its Entities are and may in the future
         be engaged in other business activities  including activities involving
         transient lodging and related  activities which may be or may be deemed
         to be competitive with the System; that facilities,  programs, services
         and/or personnel used in connection with the System may also be used in
         connection  with such other  business  activities  of Licensor  and its
         Entities; and that Licensee is acquiring no rights hereunder other than
         the non-exclusive right to use the System in connection with a Homewood
         Suites hotel as  specifically  defined  herein in  accordance  with the
         terms of this Agreement.

3.       LICENSOR'S RESPONSIBILITIES.

         a.       TRAINING.  During the  License  Term,  Licensor  will  specify
                  required and  optional  training  programs  and provide  these
                  programs at various locations. Licensee may be charged for (i)
                  required training services and materials and (ii) for optional
                  training  services  and  materials  if provided  to  Licensee.
                  Travel,  lodging  and  other  expenses  of  Licensee  and  its
                  employees will be borne by Licensee.

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         b.       RESERVATION  SERVICES.  During the  License  Term,  so long as
                  Licensee is in full  compliance with the obligations set forth
                  in this  Agreement,  Licensor will afford  Licensee  access to
                  reservation services for the Hotel.

         c.       CONSULTATION.  Licensor will,  from time to time at Licensor's
                  sole discretion,  make available to Licensee  consultation and
                  advice  in  connection   with   operations,   facilities   and
                  marketing.  Licensor shall have the right to establish fees in
                  advance for its advice and consultation on a  projectbyproject
                  basis.

         d.       ARRANGEMENTS  FOR  MARKETING,   ETC.  Licensor  will  use  the
                  Marketing/Reservation  Contribution  for costs associated with
                  advertising,  promotion,  publicity, market research and other
                  marketing   programs   and   related   activities,   including
                  reservation  programs  and  services.  Licensor may enter into
                  arrangements   for   development,    marketing,    operations,
                  administrative,  technical and support functions,  facilities,
                  programs,  services and/or personnel with any other entity and
                  may use any facilities,  programs,  services and/or  personnel
                  used in  connection  with the  System in  connection  with any
                  business activities of its Entities. Licensor is not obligated
                  to expend  funds for  marketing  or  reservation  services  in
                  excess  of the  amounts  received  from  Licensees  using  the
                  System. Licensor and its designees shall have no obligation in
                  administering any marketing and reservation activities to make
                  expenditures    for   Licensee   which   are   equivalent   or
                  proportionate  to Licensee's  payments,  or to ensure that any
                  particular  hotel benefits  directly or  proportionately  from
                  such expenditures.

         e.       INSPECTIONS/COMPLIANCE  ASSISTANCE.  Licensor has the right to
                  inspect  the  Hotel at any  time,  with or  without  notice to
                  Licensee,  to determine if the Hotel is in compliance with the
                  standards and rules of operation  set forth in the Manual.  If
                  the Hotel  fails to comply  with such  standards  and rules of
                  operation, Licensor may, at its option and at Licensee's cost,
                  require an action plan to correct the  deficiencies.  Licensee
                  must then take all steps necessary to correct any deficiencies
                  within the times established by Licensor.  Licensor's approval
                  of an action  plan does not waive any rights it may have under
                  this Agreement nor does it relieve Licensee of any obligations
                  under this Agreement.

4.       PROPRIETARY RIGHTS.

         a.       OWNERSHIP OF THE SYSTEM.  Licensee  acknowledges  and will not
                  contest,  either  directly or  indirectly,  Licensor's (or its
                  affiliates,  as the case may be)  unrestricted  and  exclusive
                  ownership  of the System and any  element(s)  or  component(s)
                  thereof,  and acknowledges that Licensor has the sole right to
                  grant licenses to use all or any element(s) or component(s) of
                  the System. Licensee specifically agrees and acknowledges that
                  Licensor (or its affiliates) is the owner of all right,  title
                  and interest in and to the service mark "Homewood Suites", its
                  distinguishing  characteristics,  trade names,  service marks,
                  trademarks,  logos,  copyrights,  slogans, etc., and all other
                  marks associated with the System  ("MARKS")  together with the
                  goodwill symbolized thereby and that Licensee will not contest
                  directly or indirectly  the validity or ownership of the Marks
                  either  during  the  term of  this  Agreement  or at any  time
                  thereafter. All improvements and additions whenever made to or
                  associated with the System by the parties to this Agreement or
                  anyone else,  and all service marks,  trademarks,  copyrights,
                  and service mark and trademark registrations at any time used,
                  applied for or granted in connection with the System,  and all
                  goodwill  arising from Licensee's use of the Marks shall inure
                  to the benefit of and become the  property of Licensor (or its
                  applicable affiliate).  Upon expiration or termination of this
                  Agreement,   no   monetary   amount   shall  be   assigned  as
                  attributable to any goodwill associated with Licensee's use of
                  the System or any  element(s)  or  component(s)  of the System
                  including the name or Marks.

         b.       USE OF NAME.  Licensee  will not use the  word  "Homewood"  or
                  "Homewood  Suites" or any similar  word(s)  in its  corporate,
                  partnership,  business  or  trade  name,  or in  any  Internet
                  related  name  (including a domain name) except as provided in
                  this  Agreement  or the Manual,  nor  authorize or permit such
                  word(s) to be used by anyone else.

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5.       TRADEMARK AND SERVICE MARK.

         a.       TRADEMARK  DISPUTES.  Licensor  will  have the sole  right and
                  responsibility   to  handle   disputes   with  third   parties
                  concerning use of all or any part of the System,  and Licensee
                  will, at its reasonable  expense,  extend its full cooperation
                  to  Licensor in all such  matters.  All  recoveries  made as a
                  result of disputes  with third  parties  regarding  use of the
                  System  or any  part  thereof  shall  be for  the  account  of
                  Licensor.  Licensor  need not initiate  suit  against  alleged
                  imitators or infringers and may settle any dispute by grant of
                  a license or otherwise. Licensee will not initiate any suit or
                  proceeding  against  alleged  imitators or  infringers  or any
                  other suit or proceeding to enforce or protect the System.

         b.       PROTECTION  OF NAMES AND MARKS.  Both  parties will make every
                  effort  consistent  with the foregoing to protect and maintain
                  the Marks and name  "Homewood  Suites" and its  distinguishing
                  characteristics  as  standing  for the  System  and  only  the
                  System.  Licensee  agrees  to  execute  any  documents  deemed
                  necessary by Licensor or its counsel to obtain  protection for
                  Licensor's  Marks or to maintain their continued  validity and
                  enforceability.  Licensee  agrees to use such  names and Marks
                  only in  connection  with the  operation of a Homewood  Suites
                  hotel  and in the  manner  authorized  by  Licensor.  Licensee
                  acknowledges  that any  unauthorized use of the names or Marks
                  shall constitute  infringement of Licensor's rights.  Licensee
                  must  notify  Licensor   immediately,   in  writing,   of  any
                  infringement or challenge to Licensee's use of the Marks or of
                  any unauthorized use or possible misuse of Licensor's Marks or
                  Licensor's proprietary information.

6.       LICENSEE'S RESPONSIBILITIES.

         a.       OPERATIONAL AND OTHER  REQUIREMENTS.  During the License Term,
                  Licensee will:

                  (1)   promptly  pay to Licensor  all amounts due  Licensor and
                        its  Entities  as  royalties  or  fees or for  goods  or
                        services purchased by Licensee;

                  (2)   maintain the Hotel in a clean,  safe and orderly  manner
                        and in first class condition;

                  (3)   provide efficient, courteous and high-quality service to
                        the public;

                  (4)   operate  the Hotel 24 hours a day every  day,  except as
                        otherwise   permitted  by  Licensor   based  on  special
                        circumstances;

                  (5)   strictly comply in all respects with the Manual and with
                        all  other  policies,  procedures  and  requirements  of
                        Licensor which may be from time to time  communicated to
                        Licensee;

                  (6)   strictly comply with Licensor's reasonable  requirements
                        to protect  the  System  and the Hotel  from  unreliable
                        sources of supply;

                  (7)   strictly comply with Licensor's requirements as to:

                        (a)   the types of  services  and  products  that either
                              must or may be used,  promoted  or  offered at the
                              Hotel;

                        (b)   use, display, style and type of signage;

                        (c)   directory and reservation  service listings of the
                              Hotel;

                        (d)   training   of  persons  to  be   involved  in  the
                              operation of the Hotel;

                        (e)   participation   in  all   marketing,   reservation
                              service,   advertising,   training  and  operating
                              programs designated by Licensor as System-wide (or
                              areawide)  programs based on Licensors  assessment
                              of the  long-term

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                              best   interests  of  hotels  using  the   System,
                              considering the interest of the System overall;

                        (f)   maintenance,   appearance  and  condition  of  the
                              Hotel;

                        (g)   quality and types of services offered to customers
                              at the Hotel, and

                        (h)   its 100% Satisfaction Guarantee rule of operation,
                              and any  similar  rules of  operation  designed to
                              maintain  or  improve   relationships  with  past,
                              present  and  potential  guests  and  other  hotel
                              customers,  as such rule or rules are in effect or
                              as they may be established or revised hereafter;

                  (8)   use such automated guest service and/or hotel management
                        and/or telephone system(s) which Licensor deems to be in
                        the best  interests of the  System  based on  Licensor's
                        assessment  of the  long-term  best  interests of hotels
                        using  the  System,  considering  the  interests  of the
                        System overall,  including any additions,  enhancements,
                        supplements  or variants  thereof which may be developed
                        during the term hereof;

                  (9)   participate in and use those reservation  services which
                        Licensor deems to be in the best interests of the System
                        based on  Licensors  assessment  of the  long-term  best
                        interests  of hotels using the System,  considering  the
                        interests   of  the  System   overall,   including   any
                        additions, enhancements, supplements or variants thereof
                        which may be developed during the term hereof;

                  (10)  adopt  improvements  or  changes to the System as may be
                        from time to time designated by Licensor;

                  (11)  strictly  comply  with  all  governmental  requirements,
                        including  the filing and  maintenance  of any  required
                        trade name or fictitious name registrations,  paying all
                        taxes,  and  maintaining all  governmental  licenses and
                        permits  necessary  to operate  the Hotel in  accordance
                        with the System;

                  (12)  permit   inspection   of   the   Hotel   by   Licensor's
                        representatives  at any time and give them free  lodging
                        for such time as may be reasonably necessary to complete
                        their inspections;

                  (13)  upon request by Licensor, provide to Licensor statistics
                        on Hotel  operations  in the form  specified by Licensor
                        and using definitions specified by Licensor;

                  (14)  promote the Hotel on a local or regional  basis  subject
                        to Licensor's requirements as to form, content and prior
                        approvals;

                  (15)  ensure  that no part of the  Hotel or  System is used to
                        further  or  promote  another  lodging  facility  or any
                        business that competes with any business  Licensor or an
                        affiliate  engages in at any time  during the  Agreement
                        (including,  but not limited to, the timeshare resort or
                        vacation ownership business),  except for those approved
                        by Licensor, its parent, subsidiaries or affiliates;

                  (16)  use every  reasonable means to encourage use of Homewood
                        Suites  facilities  everywhere by the public;  provided,
                        however,  this will not prohibit Licensor from requiring
                        Licensees  participation  in programs  designed to refer
                        prospective  customers to other hotels (in the System or
                        otherwise);

                  (17)  in all respects use  Licensee's  best efforts to reflect
                        credit upon and create  favorable public response to the
                        name "Homewood Suites";

                  (18)  comply   with   Licensor's    requirements    concerning
                        confidentiality of information;

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                  (19)  not at any  time  during  the  term of  this  Agreement,
                        through itself or any member of an affiliated  group (as
                        defined by the Internal  Revenue  Code) own, in whole or
                        in  part,   or  be  the  licensor  of,  a  hotel  brand,
                        tradename,  system or chain without the written  consent
                        of  Licensor  in its  sole  discretion.  Hereafter,  any
                        entity that,  through itself or any  affiliate,  owns in
                        whole or in part,  or is the  licensor of a hotel brand,
                        tradename,  system or chain  shall be  referred  to as a
                        COMPETITOR; and

                  (20)  maintain  possession  and control of the Hotel and Hotel
                        site.

         b.       UPGRADING  OF THE HOTEL.  Licensor  may at any time during the
                  License Term require substantial modernization, rehabilitation
                  and  other  upgrading  of the  Hotel to meet the then  current
                  standards  specified in the Manual as long as those  standards
                  apply to a majority of the hotels operated by Licensor and its
                  licensees in the same brand or category as the Hotel.  Nothing
                  in this paragraph shall be construed to relieve  Licensee from
                  the obligation to maintain  acceptable product quality ratings
                  at the Hotel and  maintain  the Hotel in  accordance  with the
                  Manual at all times during the Agreement.  Limited  exceptions
                  from those  standards  may be made by Licensor  based on local
                  conditions   or  special   circumstances.   If  the  upgrading
                  requirements  contained in this  Paragraph  6b cause  Licensee
                  undue  hardship,  Licensee  may  terminate  this  Agreement by
                  paying a fee computed according to Paragraph 13f.

         c.       STAFF AND MANAGEMENT. Licensee is at all times responsible for
                  the management of the Hotel's  business.  Licensee may fulfill
                  this  responsibility  by  retaining a third  party  management
                  company  ("MANAGER");  provided,  however,  Licensee shall not
                  enter into any lease,  management  agreement or other  similar
                  arrangement for the operation of the Hotel or any part thereof
                  with any entity without the prior written  consent of Licensor
                  in Licensors sole discretion (there being no obligation on the
                  part of Licensor to approve a third party management company).
                  Licensee understands that Licensor will not normally approve a
                  Competitor  to manage the Hotel,  or any entity that  (through
                  itself  or  an  affiliate)  is  the  exclusive  manager  for a
                  Competitor.  If a  Manager  becomes a  Competitor  at any time
                  during the term of the Agreement,  Licensee shall have 90 days
                  to retain a  substitute  manager  suitable to  Licensor.  As a
                  prerequisite  for  Licensor's  approval  of  a  Manager,   the
                  proposed  management  agreement  must  provide  (1)  that  the
                  Manager has  authority  for the  day-to-day  management of the
                  Hotel;  (2) that the Manager has the  authority to perform the
                  obligations of the Licensee under this Agreement; and (3) that
                  in the case of any  conflict  between this  Agreement  and the
                  management agreement, this Agreement prevails.

7.       FEES.

         a.       Commencing  on the  opening  date of the  Hotel as a  Homewood
                  Suites  hotel  and  continuing  for  the  full  term  of  this
                  Agreement,  for each month (or part of a month), Licensee will
                  pay to Licensor by the 15th of the following month:

                  (1)    a royalty fee equal to 4 percent of the gross  revenues
                         attributable  to or payable for rental of Guest  Suites
                         at the Hotel with  deductions  for sales and room taxes
                         only ("GROSS SUITES REVENUE"); and

                  (2)    a  "MARKETING/RESERVATION   CONTRIBUTION"  equal  to  4
                         percent     of    Gross     Suites     Revenue.     The
                         Marketing/Reservation Contribution is subject to change
                         by    Licensor    from    time    to    time,     which
                         Marketing/Reservation  Contributions do not include the
                         cost,   installation   or  maintenance  of  reservation
                         services equipment or training; and

                  (3)    all amounts due  Licensor  for any other  miscellaneous
                         fees or invoices or for goods or services  purchased by
                         or   provided  to  Licensee  or  paid  by  Licensor  on
                         Licensee's behalf; and

                  (4)    an amount equal to any sales, gross receipts or similar
                         tax imposed on Licensor for the receipt of the payments
                         required in (1), (2) and (3) of this  Paragraph  above,

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<PAGE>

                         unless the tax is an optional  alternative to an income
                         tax otherwise payable by Licensor.

         b.       Licensee will operate the Hotel so as to maximize Gross Suites
                  Revenue  consistent with sound marketing and industry practice
                  and will not engage in any  conduct  which is likely to reduce
                  Gross  Suites  Revenue  in order  to  further  other  business
                  activities.

         c.       Royalties may be charged on revenues (or upon any other basis,
                  if so determined by Licensor)  from any activity  conducted at
                  the Hotel if added by  mutual  agreement  and if:  (i) not now
                  offered at hotels within the System generally and is likely to
                  benefit significantly from or be identified significantly with
                  the  Homewood  Suites  name or other  aspects of the System or
                  (ii) designed or developed by or for Licensor.

         d.       Licensor may charge for optional products or services accepted
                  by Licensee  from Licensor  either in accordance  with current
                  practice or as developed in the future.

         e.       A Guest  Suite  addition  fee for guest suite  additions  to a
                  hotel set forth in Licensor's then current "FRANCHISE OFFERING
                  CIRCULAR"  shall be paid by Licensee to Licensor on Licensee's
                  submission  of an  application  to add any Guest Suites to the
                  Hotel.  As a condition  to Licensor  granting  its approval of
                  such application, Licensor may require Licensee to upgrade the
                  Hotel, subject to Paragraph 6b.

         f.       Local and regional  marketing  programs and related activities
                  may be conducted by Licensee,  but only at Licensee's  expense
                  and subject to Licensor's requirements. Reasonable charges may
                  be made by Licensor for optional advertising materials ordered
                  or used by Licensee for such programs and activities.

         g.       Licensee  shall   participate   in  Licensor's   travel  agent
                  commission  program(s) as it may be modified from time to time
                  and shall  reimburse  Licensor  on or before  the 15th of each
                  month for call costs associated with such programs  including,
                  but not limited to, travel agent  commissions  and third party
                  reservation  service  charges  (such  as  airline  reservation
                  systems).

         h.       Each payment paid by Licensor  under this Paragraph 7 shall be
                  accompanied by the monthly statement  referred to in Paragraph
                  8.  Licensor  may  apply  any  amounts   received  under  this
                  Paragraph 7 to any amounts  due under this  Agreement.  If any
                  amounts  are  not  paid  when  due,  such  non-payment   shall
                  constitute a breach of this Agreement  and, in addition,  such
                  unpaid amounts will accrue a service  charge  beginning on the
                  first day of the month following the due date of 1 1/2 percent
                  per month but not to exceed the maximum  amount  permitted  by
                  applicable law.

8.       RECORDS AND AUDITS.

         a.       DAILY  AND  MONTHLY  REPORTS.  At  the  request  of  Licensor,
                  Licensee  shall prepare and deliver daily reports to Licensor,
                  which reports will contain information reasonably requested by
                  Licensor  on a  daily  basis,  such as  daily  rate  and  room
                  occupancy,   and  which  may  be  used  by  Licensor  for  its
                  reasonable purposes. At least monthly,  Licensee shall prepare
                  a  statement  which will  include all  information  concerning
                  Gross Suites Revenue,  other revenues  generated at the Hotel,
                  suite occupancy rates,  reservation data and other information
                  required  by  Licensor   (the   "DATA").   The  Data  will  be
                  permanently   recorded  and  retained  as  may  be  reasonably
                  required by Licensor. By the 15th of each month, Licensee will
                  submit to Licensor a statement  setting forth the Data for the
                  previous month and  reflecting the  computation of the amounts
                  then due under Paragraph 7. The statement will be in such form
                  and detail as Licensor  may  reasonably  request  from time to
                  time, and may be used by Licensor for its reasonable purposes.

         b.       MAINTENANCE OF RECORDS.  Licensee  shall, in a manner and form
                  satisfactory   to  Licensor  and  utilizing   accounting   and
                  reporting   standards  as  reasonably  required  by  Licensor,
                  prepare on a current basis (and preserve for no less than four
                  years),  complete and

                                       7

<PAGE>
                  accurate  records  concerning  Gross  Suites  Revenue  and all
                  financial,  operating,  marketing  and  other  aspects  of the
                  Hotel,  and  maintain  an  accounting  system  which fully and
                  accurately reflects all financial aspects of the Hotel and its
                  business.  Such records shall  include  books of account,  tax
                  returns,  governmental reports, register tapes, daily reports,
                  and complete quarterly and annual financial statements (profit
                  and loss statements, balance sheets and cash flow statements).

         c.       AUDIT.  Licensor may require Licensee to have the Gross Suites
                  Revenue or other monies due  hereunder  computed and certified
                  as  accurate  by a  certified  public  accountant.  During the
                  License  Term and for two years  thereafter,  Licensor and its
                  authorized  agents shall have the right to verify  information
                  required  under  this  Agreement  by  requesting,   receiving,
                  inspecting and auditing,  at all reasonable times, any and all
                  records  referred  to above  wherever  they may be located (or
                  elsewhere if reasonably  requested by  Licensor).  If any such
                  inspection or audit discloses a deficiency in any payments due
                  hereunder,  Licensee shall immediately pay to Licensor (i) the
                  deficiency,  (ii) a service  charge  thereon  as  provided  in
                  Paragraph  7h,  and  (iii)  all  inspection  and  audit  costs
                  (including travel, lodging, meals, salaries and other expenses
                  of  the   inspecting   or  auditing   personnel).   Licensor's
                  acceptance of Licensee's payment of any deficiency as provided
                  for herein shall not waive  Licensor's right to terminate this
                  Agreement as provided for herein in Paragraph 13. If the audit
                  discloses   an   overpayment,   Licensor   shall   refund  the
                  overpayment to Licensee within 30 days.

         d.       ANNUAL FINANCIAL STATEMENTS.  Licensee will submit to Licensor
                  complete year-end financial statements for the Hotel, Licensee
                  and/or any  guarantors as soon as available but not later than
                  90 days after the end of Licensee's fiscal year. Licensee will
                  certify them to be true and correct and to have been  prepared
                  in accordance with generally  accepted  accounting  principles
                  consistently  applied,  and any false  certification will be a
                  breach of this Agreement.

         e.       All of the information  provided to Licensor  pursuant to this
                  paragraph or any other part of this Agreement,  or pursuant to
                  any   agreement   ancillary  to  this   Agreement   (including
                  agreements  relating to the System 21 business system or other
                  property   management   system   provided  by  Licensor)  (the
                  "INFORMATION"),  shall be the property of  Licensor.  HOWEVER,
                  NOTWITHSTANDING  ANYTHING TO THE  CONTRARY IN THIS  AGREEMENT,
                  INFORMATION,  SUCH AS FINANCIAL  STATEMENTS,  PREPARED FOR THE
                  HOTEL, LICENSEE AND/OR GUARANTORS,  WHICH ANY SUCH PARTIES ARE
                  REQUIRED BY LAW OR BY THEIR NORMAL  BUSINESS  PRACTICES TO USE
                  FOR OTHER PURPOSES (SUCH AS IN FILINGS WITH THE SECURITIES AND
                  EXCHANGE  COMMISSION OR OTHER GOVERNMENTAL  AUTHORITIES OR FOR
                  TRANSMISSION  TO  SHAREHOLDERS)  MAY BE USED BY THEM  FOR SUCH
                  PURPOSES,  AND SUCH  PARTIES  SHALL  RETAIN  OWNERSHIP IN SUCH
                  INFORMATION  TO THE  EXTENT  NECESSARY  TO  PERMIT  SUCH  USE.
                  NEVERTHELESS,  LICENSOR  SHALL  OWN  THE  COPIES  OF ANY  SUCH
                  INFORMATION  PROVIDED BY ANY SUCH PARTIES IN  ACCORDANCE  WITH
                  THE  TERMS OF THIS  AGREEMENT.  Licensor  will use  reasonable
                  efforts to sort,  categorize,  classify and otherwise  analyze
                  the  information  to help licensees  market their hotels.  The
                  Information   will  remain  the  proprietary   information  of
                  Licensor  which  Licensor  will share with  licensees  only as
                  determined  by Licensor in its sole  discretion.  Licensor and
                  its  affiliates  may  use  the   Information  for  any  reason
                  whatsoever,  including an earnings claim in Licensors offering
                  circular.

9.       INDEMNITY.

         SUBJECT TO THE PROVISIONS OF ANY MANAGEMENT  AGREEMENT BETWEEN LICENSOR
         (AS MANAGER  THEREUNDER) AND LICENSEE (AS OWNER  THEREUNDER),  Licensee
         will indemnify,  during and after the term of this Agreement,  Licensor
         and  its  affiliates,   and  their  respective   officers,   directors,
         employees, agents,  predecessors,  successors and assigns ("INDEMNIFIED
         PARTIES") against, hold them harmless from, and promptly reimburse them
         for, all payments of money (fines, damages, legal fees, expenses, etc.)
         by  reason  of  any  claim,   demand,  tax,  penalty,  or  judicial  or
         administrative  investigation  or proceeding  (even where negligence of
         Licensor and/or its Entities and/or their Indemnified Parties is actual
         or alleged) arising from any claimed occurrence at the Hotel or arising
         from,  as a  result  of,  or in  connection  with  the  development  or
         operation  of the Hotel  (including,  but

                                       8
<PAGE>

         not  limited  to,  the  design,  construction,  financing,  furnishing,
         equipment,  acquisition  of supplies or  operation  of the Hotel in any
         way),  or any other of Licensee's  acts,  omissions or  obligations  or
         those of anyone  associated or affiliated with Licensee or the Hotel in
         any way arising out of or related to this Agreement. At the election of
         Licensor, Licensee will also defend Licensor and/or its Entities and/or
         their Indemnified Parties against the same. In any event, Licensor will
         have the right, through counsel of its choice, to control any matter to
         the extent it could directly or indirectly  affect  Licensor and/or its
         Entities and/or their Indemnified  Parties  financially.  Licensee will
         also reimburse Licensor for all expenses, including attorneys' fees and
         court costs,  reasonably  incurred by Licensor to protect itself and/or
         its  Entities  and/or  their  Indemnified  Parties  from,  or to remedy
         Licensee's defaults or to collect any amounts due under this Agreement.

10.      INSURANCE.

         a.       Licensee  will  comply  with  Licensor's   specifications  for
                  insurance  as to  amount  and  type  of  coverage  as  may  be
                  reasonably  specified by Licensor from time to time in writing
                  and will in any  event  maintain  as a minimum  the  following
                  insurance underwritten by an insurer approved by Licensor:

                  (1)      employer's   liability   and  workers'   compensation
                           insurance as prescribed by applicable law; and

                  (2)      liquor  liability  insurance,  if applicable,  naming
                           Licensor  and its then  current  Entities  and  their
                           predecessors,  successors  and assigns as  additional
                           insureds with single-limit  coverage for personal and
                           bodily  injury  and  property   damage  of  at  least
                           $10,000,000 for each occurrence; and

                  (3)      commercial   general   liability    insurance   (with
                           products,   completed   operations  and   independent
                           contractors  coverage) and  comprehensive  automobile
                           liability  insurance,  all on an  occurrence  and per
                           location  basis  naming  Licensor,  its  Entities and
                           their   predecessors,   successors   and  assigns  as
                           additional  insureds and  underwritten  by an insurer
                           approved by Licensor,  with single-limit coverage for
                           personal and bodily injury and property  damage of at
                           least $10,000,000 for each occurrence; and

                  (4)      in  connection  with all  construction  at the  Hotel
                           during  the  License  Term,  Licensee  will cause the
                           general   contractor  to  maintain  with  an  insurer
                           approved by  Licensor  commercial  general  liability
                           insurance (with products,  completed operations,  and
                           independent  contractors  coverage including workers'
                           compensation and automobile  liability  insurance for
                           such independent  contractors) in at least the amount
                           of $10,000,000  for each  occurrence for personal and
                           bodily injury and property damage with Licensor,  its
                           Entities  and  their  predecessors,   successors  and
                           assigns as additional insureds.

         b.       EVIDENCE  OF   INSURANCE/CHANGES.   This  coverage   shall  be
                  evidenced by original  certificates of insurance  submitted to
                  Licensor simultaneously herewith,  annually hereafter and each
                  time a change is made in any  insurance or insurance  carrier,
                  Licensee  will furnish to Licensor  certificates  of insurance
                  including the term and coverage of the insurance in force, the
                  persons insured,  and a statement that the coverage may not be
                  cancelled,  altered or permitted to lapse or expire without 30
                  days advance  written  notice to Licensor.  Licensor will send
                  Licensee notice of any policy or coverage which  Licensor,  in
                  its sole  discretion,  finds  unacceptable and upon receipt of
                  such notice,  Licensee will promptly  undertake to change such
                  policy or coverage.

         c.       If  Licensee  fails or  neglects  to  obtain or  maintain  the
                  insurance  or  policy  limits   required  by  this  Agreement,
                  Licensor shall have the option,  without notice, to obtain and
                  maintain such  insurance for Licensee,  and Licensee shall pay
                  immediately upon demand  therefore,  the premiums and the cost
                  incurred by Licensor in taking such action.

11.      TRANSFER.

                                       9
<PAGE>

         a.       TRANSFER OF THIS  AGREEMENT BY LICENSOR.  Licensor  shall have
                  the right to  transfer  or  assign  this  Agreement  or any of
                  Licensor's rights, obligations, or assets under this Agreement
                  to any person or legal  entity  provided  that the  transferee
                  assumes all of Licensor's  obligations  to Licensee under this
                  Agreement.

         b.       TRANSFERS BY LICENSEE.

                  (1)      General Statement of Explanation and Intent.

                           This Agreement is not transferable by Licensee, and a
                           change  in  ownership  of the  Hotel or the  licensed
                           business (i.e.,  either this Agreement,  the Licensee
                           or any indirect  ownership  interest in the Licensee)
                           is  not  allowed   under  this   Agreement.   Certain
                           intra-family  transfers  of interest and (in the case
                           of corporate licensees) corporate  restructurings are
                           permitted as long as the requirements described below
                           are met.  However,  Licensor  has  entered  into this
                           Agreement  with a particular  Licensee or its owners.
                           If the  Licensee  wants to transfer  the Hotel or its
                           interest in the  licensed  business,  such a transfer
                           will  constitute  a "change  of  ownership".  If  the
                           transferee  wants to continue to operate the Hotel as
                           a Homewood Suites hotel,  the transferee will have to
                           apply for a new license which, if approved, will last
                           at  most  for  the   balance  of  the  term  of  this
                           Agreement.   If  the  change  of   ownership  is  not
                           approved,  or if the  transferee  does  not  want  to
                           continue  to operate  the Hotel as a Homewood  Suites
                           hotel,   Licensor   may  refuse  to  consent  to  the
                           termination  of  this  Agreement.  If  Licensor  does
                           consent to termination, this Agreement will terminate
                           and  Licensee  will  owe   liquidated   damages.   In
                           addition,   if  the  transfer  is  to  a  Competitor,
                           Licensor  has  the  right  to  buy  the  Hotel.   The
                           foregoing  explanation  is more fully  described  and
                           qualified by the following specific provisions.

                  (2)      Licensee understands and acknowledges that the rights
                           and duties set forth in this  Agreement  are personal
                           to Licensee,  and that Licensor has entered into this
                           Agreement   in  reliance  on  the   business   skill,
                           financial   capacity,   and  personal   character  of
                           Licensee (if Licensee is an individual),  and that of
                           the partners,  members,  or  stockholders of Licensee
                           (if Licensee is a partnership,  company, corporation,
                           or other  legal  entity).  Accordingly,  no direct or
                           indirect  interest in the Hotel or in this Agreement,
                           and no direct or indirect Equity Interest (as defined
                           herein) in Licensee may be sold, leased, assigned, or
                           transferred,  (such instances  hereafter  referred to
                           collectively as a "TRANSFER"), without the consent of
                           the Licensor.  Nothing herein shall require Licensors
                           approval for any pledge,  mortgage,  or hypothecation
                           of all or any  part  of the  assets  of the  licensed
                           business  (other  than this  Agreement  or any Equity
                           Interest  in  Licensee)  to banks  or  other  lending
                           institutions.

                  (3)      Any  purported  Transfer,  by  operation  of  law  or
                           otherwise,  not in accordance  with the provisions of
                           this  Agreement  shall be null  and  void  and  shall
                           constitute  a breach  of this  Agreement,  for  which
                           Licensor may  terminate  this  Agreement  upon notice
                           without  opportunity  to cure  pursuant to  Paragraph
                           13d,  and as a  result  of  which  Licensee  will owe
                           liquidated damages.

                  (4)      References  in this  Agreement to "EQUITY  INTERESTS"
                           shall mean any direct or indirect beneficial interest
                           in Licensee (an "INDIRECT" interest is an interest in
                           an entity other than the Licensee that either itself,
                           or through others,  has an interest in the Licensee).
                           In addition,  "PUBLICLY-TRADED EQUITY INTEREST" shall
                           mean  any  Equity  Interest  which is  traded  on any
                           securities  exchange or is quoted in any  publication
                           or  electronic  reporting  service  maintained by the
                           National  Association of Securities Dealers,  Inc. or
                           any of its successors. In computing changes of Equity
                           Interests, limited partners will not be distinguished
                           from general  partners.  Licensor's  judgment will be
                           final if there is any  question as to the  definition
                           of  Equity  Interest  or as  to  the  computation  of
                           relative Equity Interests, the principal

                                       10
<PAGE>
                           considerations  being:  direct and indirect (i) power
                           to exercise  control  over the  affairs of  Licensee;
                           (ii) right to share in Licensee's profits;  and (iii)
                           exposure to risk in the Licensee's business.

                  (5)      Licensee  represents  that the Equity  Interests  are
                           directly  and (if  applicable)  indirectly  owned  as
                           shown on the Rider.

         c.       PROCEDURES FOR TRANSFERS. Licensee must provide written notice
                  to Licensor in advance of any  proposed  Transfer  stating the
                  identity of the prospective  transferee,  purchaser, or lessee
                  and the terms and conditions of the conveyance. As a condition
                  to consenting to the transfer, Licensor may require any one or
                  more of the following to be met:

                  (1)      Licensee  will  upon  request  provide  a copy of any
                           proposed   agreement   of  transfer   and  all  other
                           information  with respect  thereto which Licensor may
                           reasonably require;

                  (2)      Licensee will upon request provide  documents showing
                           ownership structure of the Licensee,  site control by
                           the Licensee, possession or management control by the
                           Licensee,  financial  statements of any participants,
                           and  any  other  documents  reasonably  requested  by
                           Licensor;

                  (3)      Licensee  will upon request pay a  processing  fee to
                           Licensor of up to $5,000 to cover Licensor's costs to
                           review and consent to the Transfer; provided however,
                           in the case of a transfer of Equity  Interests  which
                           require  registration  under  any  federal  or  state
                           securities  law,  Licensee will pay a processing  fee
                           that will not exceed $25,000;

                  (4)      Licensee and all  participants in any proposed public
                           offering   (including  the  sale  of  partnership  or
                           membership  interests)  (i) agree to fully  indemnify
                           Licensor in connection  with the  registration,  (ii)
                           furnish Licensor with all information requested,  and
                           (iii)  avoid  using   Licensors   service   marks  or
                           trademarks    or   otherwise    implying   Licensor's
                           participation in or endorsing of any public offering;

                  (5)      Licensee will at all times adequately provide for the
                           management of the Hotel during any Transfer; or

                  (6)      Licensor  may  require  the  transferee  to  promptly
                           execute a new license  agreement  on  Licensor's then
                           current  license  agreement for the unexpired term of
                           this   Agreement,   and   Licensor  may  require  the
                           guarantee  of the new license  agreement  by the same
                           guarantors   of   this   Agreement   (or   substitute
                           guarantors   approved   by   Licensor   in  its  sole
                           discretion).

         d.       PERMITTED TRANSFERS.  Licensor will not unreasonably  withhold
                  consent to any of the following  Transfers  provided  Licensee
                  complies  with  all the  requirements  specified  by  Licensor
                  pursuant to Subparagraph c above (it being  understood that if
                  Licensee  is in  default of any of its  obligations  under the
                  Agreement,  it will not be unreasonable for Licensor to refuse
                  to consent to any of these Transfers):

                  (1)      Equity Interests which are not publicly-traded may be
                           transferred,  if  after  the  transaction,  Glade  M.
                           Knight  owns,  directly or  indirectly,  a beneficial
                           interest  in the  general  partner  of  Licensee  and
                           controls the  management and policies of such general
                           partner and not less than 50% of all Equity Interests
                           are owned, directly or indirectly, by Glade M. Knight
                           and, in the case of any such permitted transfer,  the
                           requirements  of clauses (3) and (6) of  subparagraph
                           c. above need not be complied with by Licensee.

                  (2)      Publicly-traded  equity  interests may be transferred
                           (without Licensor's consent and without notification)
                           if such  transfer is exempt from  registration  under
                           federal  securities law and if immediately before and
                           after the transfer,  the  transferor

                                       11
<PAGE>
                           and  transferee  respectively  each own less  than 25
                           percent of the Equity Interests in Licensee.

                  (3)      Licensee,  if a  natural  person,  may  transfer  its
                           interest  in the  License or Equity  Interest  in the
                           Licensee  to  one  or  more  of  Licensee's   spouse,
                           parents, siblings,  nephews,  descendants or spouses'
                           descendants  or to a  corporation  entirely  owned by
                           Licensee ("PERMITTED TRANSFEREES").

                  (4)      If Licensee is a natural person,  upon the Licensee's
                           death,  the License or Licensee's Equity  Interest in
                           the Licensee will pass in accordance  with Licensee's
                           will, or, if Licensee dies  intestate,  in accordance
                           with laws of intestacy  governing the distribution of
                           the Licensee's  estate,  as the case may be, provided
                           the  transferee  is one  or  more  of the  decedent's
                           Permitted   Transferees    (excluding    corporations
                           formerly  owned by the  Licensee) and within one year
                           after the death the  Permitted  Transferees  meet all
                           Licensors   normal   requirements   of  an   approved
                           applicant.

                  (5)      Licensee may sell or lease the Hotel, the Hotel site,
                           or any portion thereof if, in the reasonable judgment
                           of  Licensor,  after  such  transfer,  Licensee  will
                           retain  possession  and control of the Hotel site and
                           management control of the Hotel operations (which may
                           be via third party  management  contract  pursuant to
                           Paragraph  6c).  If, in the  reasonable  judgment  of
                           Licensor,  the  transfer  of the Hotel will result in
                           the loss of  possession  or  control  of the Hotel or
                           Hotel site or management  of the Hotel,  the transfer
                           will constitute a change of ownership as described in
                           Subparagraph e.

         e.       CHANGE OF OWNERSHIP.

                  (1)      Any  Transfer  that does not  qualify as a  permitted
                           transfer under  Subparagraph d above shall constitute
                           a change of ownership.  If in the case of a change of
                           ownership,  the  transferee  desires to  continue  to
                           operate  the Hotel as a Homewood  Suites  hotel,  the
                           transferee  must  submit  an  application  for  a new
                           license agreement. The new license, if approved, will
                           be at most for the unexpired term of this  Agreement.
                           The transferee  shall be  responsible  for all normal
                           fees and costs (including  application fees and costs
                           of improvements to the Hotel).

                  (2)      Licensor  shall  process  such  change  of  ownership
                           application  in good  faith  and in  accordance  with
                           Licensor's  then  current  procedures,  criteria  and
                           requirements   regarding   upgrading  of  the  Hotel,
                           credit, operational abilities and capabilities, prior
                           business dealings,  market  feasibility,  guarantees,
                           and other  factors  deemed  relevant by Licensor.  If
                           such change of  ownership  application  is  approved,
                           Licensor and the new owner shall,  upon  surrender of
                           this Agreement,  enter into a new license  agreement.
                           The new license agreement shall be on Licensor's then
                           current  form and  contain  Licensor's  then  current
                           terms (except for duration),  and if applicable,  the
                           new  license   agreement   will   contain   specified
                           upgrading and other requirements.  If the application
                           is approved, Licensee submits a voluntary termination
                           of this  Agreement  and  signs a  release  (in a form
                           satisfactory  to  Licensor)  of  all  claims  against
                           Licensor,  and the proposed new owner  executes a new
                           license  within 30 days of the sale of the Hotel,  no
                           liquidated  damages described in Paragraph 13 will be
                           owed  by  Licensee  for  the   termination   of  this
                           Agreement.

                  (3)      If a change of ownership application for the proposed
                           transferee   is  not  approved  by  Licensor  or  the
                           transferee  does not want to  continue to operate the
                           Hotel as a Homewood Suites hotel, Licensor may refuse
                           consent to the transfer and reserve all remedies;  if
                           Licensee does consent and the Transfer  occurs,  then
                           this Agreement shall terminate  pursuant to Paragraph
                           13d hereof and  Licensor  shall be entitled to all of
                           its remedies including liquidated damages.
                                       12
<PAGE>

         f.       TRANSFER TO COMPETITOR.  Notwithstanding any of the foregoing,
                  if the  Licensee  receives a bona fide offer from a Competitor
                  to purchase or lease the Hotel or to purchase  Licensee or any
                  entity that controls  Licensee,  or to purchase an interest in
                  either,  and  Licensee  or any  person or entity  that owns or
                  controls Licensee wishes to accept such offer,  Licensee shall
                  give written notice thereof to Licensor,  stating the name and
                  full identity of the prospective  purchaser or tenant,  as the
                  case may be,  including  the names and addresses of the owners
                  of  the  capital   stock,   partnership   interests  or  other
                  proprietary interests of such prospective purchaser or tenant,
                  the price or  rental  and all  terms  and  conditions  of such
                  proposed transaction, together with all other information with
                  respect  thereto which is requested by Licensor and reasonably
                  available  to  Licensee.  Within  60  days  after  receipt  by
                  Licensor of such written notice from Licensee,  Licensor shall
                  elect by written  notice to Licensee one of the following four
                  alternatives:

                  (1)      If the proposed transaction is a sale or lease of the
                           Hotel,  Licensor  (or its  designee)  shall  have the
                           right to  purchase  or lease the Hotel  premises  and
                           related property at the same price or rental and upon
                           the same terms and  conditions  as those set forth in
                           such bona fide offer from a Competitor. In such event
                           Licensee  and  Licensor  (or  its   designee)   shall
                           promptly enter into an agreement for sale or lease at
                           the price or rental and on terms consistent with such
                           bona fide offer.

                  (2)      If the proposed transaction is a purchase of all or a
                           portion of the stock or assets  (which  includes  the
                           Hotel)  of  Licensee  or  the  person  that  owns  or
                           controls  Licensee,  Licensor (or its designee) shall
                           have the right to  purchase  the Hotel  premises  and
                           related property.  If the parties are unable to agree
                           as to a purchase  price and terms within  thirty days
                           of Licensor's election,  the fair market value of the
                           Hotel   premises  and  related   property   shall  be
                           determined by  arbitration  as follows:  Either party
                           may  by  written  notice  to  the  other  appoint  an
                           arbitrator.  Thereupon,  within  15  days  after  the
                           giving of such  notice,  the other  shall by  written
                           notice to the former appoint another arbitrator,  and
                           in default of such second  appointment the arbitrator
                           first  appointed shall be the sole  arbitrator.  When
                           any two arbitrators have been appointed as aforesaid,
                           they  shall,   if   possible,   agree  upon  a  third
                           arbitrator   and  shall  appoint  him  by  notice  in
                           writing, signed by both of them in triplicate, one of
                           which triplicate notices shall be given to each party
                           hereto;  but  if 15  days  shall  lapse  without  the
                           appointment  of the third  arbitrator  as  aforesaid,
                           then such third  arbitrator shall be appointed by the
                           American  Arbitration  Association from its qualified
                           panel of arbitrators, and shall be a person having at
                           least ten (10) years' recent  professional experience
                           as  to  the   subject   matter  in   question.   Upon
                           appointment  of the third  arbitrator  (whichever way
                           appointed as aforesaid),  the three arbitrators shall
                           meet and render  their  decision.  The  decision of a
                           majority  of  the  arbitrators  so  chosen  shall  be
                           conclusive. Licensor (or its designee) shall have the
                           right,  at any time within 30 days of being  notified
                           in  writing of the  decision  of the  arbitrators  as
                           aforesaid, to purchase the Hotel premises and related
                           property at the valuation  fixed by the  arbitrators.
                           The parties  shall share  equally the expense of such
                           arbitration.

                  (3)      To terminate this Agreement,  in which event Licensee
                           shall  be  obligated  to pay to  Licensor  liquidated
                           damages  pursuant  to a  Special  Termination  as set
                           forth in Paragraph 13f.

                  (4)      To refuse to consent to the  Transfer,  reserving all
                           remedies under the applicable law.

         g.       FINANCING.  The construction and/or operation of the Hotel may
                  not be  financed by a public  offering of any right,  title or
                  interest in the Hotel,  the property upon which it is built or
                  the receipts from its  operation  without the prior review and
                  approval of the applicable documentation by Licensor. Licensee
                  shall   submit  a   non-refundable   $25,000   fee  with  said
                  documentation.

12.      CONDEMNATION AND CASUALTY.

                                       13
<PAGE>
         a.       CONDEMNATION.  Licensee shall, at the earliest  possible time,
                  give Licensor notice of any proposed taking by eminent domain.
                  If  Licensor  agrees  that  the  Hotel or a  substantial  part
                  thereof is to be taken,  Licensor may, in its sole  discretion
                  and  within  a  reasonable  time of the  taking  (within  four
                  months) transfer this Agreement to a nearby location  selected
                  by  Licensee.  If  Licensor  approves  the  new  location  and
                  authorizes  the transfer and if within one year of the closing
                  of the Hotel Licensee opens a new hotel at the new location in
                  accordance with Licensor's specifications,  then the new hotel
                  will be deemed to be the Hotel licensed under this  Agreement.
                  If a  condemnation  takes place and a new hotel does not,  for
                  whatever  reason,  become the Hotel  under this  Agreement  in
                  strict  accordance with this paragraph (or if it is reasonably
                  evident  to  Licensor  that  such  will  be  the  case),  this
                  Agreement  will terminate  immediately  upon notice thereof by
                  Licensor  to  Licensee,  without  the  payment  of  liquidated
                  damages as calculated in Paragraph 13f.

         b.       CASUALTY.  If the Hotel is damaged by fire or other  casualty,
                  Licensee will  expeditiously  repair the damage. If the damage
                  or  repair   requires   closing  the  Hotel,   Licensee   will
                  immediately notify Licensor,  will repair or rebuild the Hotel
                  according   to    Licensor's    standards,    will    commence
                  reconstruction  within four  months  after  closing,  and will
                  reopen the Hotel for continuous business operations as soon as
                  practicable  (but in any  event  within  one  year  after  the
                  closing of the Hotel), giving Licensor ample advance notice of
                  the date of reopening.  If the Hotel is not reopened according
                  to this Paragraph,  this Agreement will terminate immediately,
                  upon notice thereof by Licensor to Licensee,  with the payment
                  of liquidated damages as calculated in Paragraph 13f, provided
                  however,  if Licensee's  insurer  fails to pay the  applicable
                  insurance  policy  proceeds  to  Licensee,  or  if  Licensee's
                  lender,  pursuant to a valid agreement with Licensee,  refuses
                  to allow  the  insurance  proceeds  to be used for  repair  or
                  rebuilding,  the  Agreement  may  be  terminated  by  Licensee
                  without payment of the liquidated damages in Paragraph 13f. In
                  such case  Licensee  shall  notify  Licensor  and  provide any
                  reasonable proof requested by Licensor.

         c.       NO  EXTENSIONS  OF TERM.  Nothing  in this  Paragraph  12 will
                  extend the License Term but Licensee  shall not be required to
                  make any payments  pursuant to Paragraph 7 for periods  during
                  which  the  Hotel is  closed  by  reason  of  condemnation  or
                  casualty.

13.      TERMINATION.

         a.       EXPIRATION OF TERM. Unless terminated earlier,  this Agreement
                  will expire without notice 20 YEARS FROM THE EFFECTIVE DATE OF
                  THIS AGREEMENT, AS DEFINED ON ATTACHMENT B HEREIN.

         b.       PERMITTED  TERMINATION  PRIOR TO EXPIRATION OF TERM.  Licensee
                  may  terminate  this  Agreement  on  the  tenth  or  fifteenth
                  anniversary  date of the  opening  of the  Hotel by  giving at
                  least  12 but  not  more  than 15  months  advance  notice  to
                  Licensor  accompanied  by the payment as provided in Paragraph
                  13f herein.

         c.       TERMINATION OR SUSPENSION BY LICENSOR ON ADVANCE NOTICE.  This
                  Agreement may be  terminated if Licensee  fails to satisfy any
                  obligations  under this  Agreement or any  attachment  hereto.
                  Except in the case of an immediate  termination as provided in
                  subparagraph  13d below,  this  Agreement  shall  terminate if
                  Licensee  fails to cure an Event of Default after the Licensor
                  furnishes adequate notice of termination based on the Event of
                  Default.

                  (1)      An "EVENT OF  DEFAULT"  shall  occur if the  Licensee
                           fails  to   satisfy   or  comply   with  any  of  the
                           requirements,  conditions,  or terms set forth in (i)
                           this Agreement or any attachment  including,  but not
                           limited to, any provisions regarding: any transfer of
                           the Hotel, or any direct or indirect  interest in the
                           Agreement  or   Licensee,   any   representation   or
                           warranty,   any  fee   obligation,   any  operational
                           requirements (including the standards in the Manual);
                           trademarks usage;  maintenance of records,  insurance
                           and indemnity;  or (ii) any other  agreement  between
                           Licensor (or

                                       14
<PAGE>
                           an  affiliate)  and  Licensee  relating to the Hotel,
                           including,   but  not   limited   to,  any   property
                           management  system  agreement,  such as the System 21
                           business system agreement, or any agreement to manage
                           the Hotel.

                  (2)      Notice of  termination  shall be adequate,  if mailed
                           thirty (30) days (or such longer  period  required by
                           applicable law) in advance of the termination date.

                  (3)      Licensor's  notice of  termination  shall not relieve
                           Licensee of its  obligations  under this Agreement or
                           any attachment.

                  (4)      As a result of Licensee's  efforts to comply with the
                           terms and  conditions  contained on  Attachment A and
                           elsewhere  in this  Agreement,  Licensee  will  incur
                           substantial  expense and expend  substantial time and
                           effort.   Licensee   acknowledges   and  agrees  that
                           Licensor  shall have no  liability or  obligation  to
                           Licensee for any losses, obligations,  liabilities or
                           expenses incurred by Licensee if (i) Licensee commits
                           an Event of Default as described in Paragraph 13c(1);
                           (ii) the Hotel is not  authorized by Licensor to Open
                           as defined in Attachment A or (iii) this Agreement is
                           terminated because Licensee has not complied with the
                           terms and conditions of this Agreement.

                  (5)      Notwithstanding the foregoing,  following an Event of
                           Default,  Licensor  may at  any  time,  in  its  sole
                           discretion,   suspend  its  obligations   under  this
                           Agreement (including reservation services).

         d.       IMMEDIATE   TERMINATION  BY  LICENSOR.   Notwithstanding   the
                  foregoing   paragraph,   this  Agreement  may  be  immediately
                  terminated  (or  terminated at the earliest time  permitted by
                  applicable  law)  if one or  more  of the  following  material
                  breaches to this Agreement or any Attachment occur:

                  (1)      Any Event of Default  where a prior  Event of Default
                           had also occurred during the preceding 12 months, but
                           the License was not terminated because Licensee cured
                           the prior Event of Default;

                  (2)      Licensee or any guarantor of  Licensee's  obligations
                           hereunder shall:

                           (a)      generally  not pay its debts as they  become
                                    due or shall admit in writing its  inability
                                    to pay its  debts,  or shall  make a general
                                    assignment for the benefit of creditors; or

                           (b)      commence  any  case,   proceeding  or  other
                                    action seeking reorganization,  arrangement,
                                    adjustment,   liquidation,   dissolution  or
                                    composition of it or its debts under any law
                                    relating    to    bankruptcy,    insolvency,
                                    reorganization  or  relief  of  debtors,  or
                                    seeking appointment of a receiver,  trustee,
                                    custodian or other  similar  official for it
                                    or for  all or any  substantial  part of its
                                    property; or

                           (c)      take  any   corporate  or  other  action  to
                                    authorize any of the actions set forth above
                                    in Paragraphs (a) or (b).

                  (3)      Any case, proceeding or other action against Licensee
                           or any such guarantor  shall be commenced  seeking to
                           have  an  order  for  relief  entered  against  it as
                           debtor,  or  seeking   reorganization,   arrangement,
                           adjustment,  liquidation,  dissolution or composition
                           of  it  or  its  debts  under  any  law  relating  to
                           bankruptcy,  insolvency,  reorganization or relief of
                           debtors,   or  seeking  appointment  of  a  receiver,
                           trustee,  custodian or other similar  official for it
                           or for all or any  substantial  part of its property,
                           and such case, proceeding or other action (i) results
                           in the entry of an order for relief  against it which
                           is not fully stayed within seven  business days after
                           the entry thereof or (ii) remains  undismissed  for a
                           period of 45 days; or
                                       15
<PAGE>
                  (4)      an attachment remains on all or a substantial part of
                           the  Hotel or of  Licensee's  or any such  guarantors
                           assets for 30 days; or

                  (5)      Licensee or any such  guarantor  fails within 60 days
                           of the entry of a final judgment  against Licensee in
                           any amount exceeding $50,000 to discharge,  vacate or
                           reverse the judgment,  or to stay execution of it, or
                           if appealed, to discharge the judgment within 30 days
                           after a final adverse decision in the appeal; or

                  (6)      Licensee loses  possession or the right to possession
                           of all or a  significant  part of the  Hotel or Hotel
                           site; or

                  (7)      Licensee  fails to continue to identify  the Hotel to
                           the public as a Homewood Suites hotel; or

                  (8)      Licensee   contests   in  any  court  or   proceeding
                           Licensor's ownership of the System or any part of the
                           System,  or the  validity  of any  service  marks  or
                           trademarks associated with Licensor's business; or

                  (9)      Any action is taken toward  dissolving or liquidating
                           Licensee   or  any  such   guarantor,   if  it  is  a
                           corporation  or  partnership,  except  for death of a
                           partner; or

                  (10)     Licensee  or  any  of  its   principals   is,  or  is
                           discovered to have been convicted of a felony (or any
                           other  offense if it is likely to  adversely  reflect
                           upon or affect the Hotel,  the System,  the  Licensor
                           and/or its Entities in any way; or

                  (11)     Licensee   maintains   false  books  and  records  of
                           accounts or submits false reports or  information  to
                           Licensor.

                  (12)     Licensee   becomes  a   Competitor   (as  defined  in
                           Paragraph 6a(19).

         e.       DE-IDENTIFICATION OF HOTEL UPON TERMINATION.  Upon termination
                  or expiration of the term,  Licensee will take whatever action
                  is  necessary to assure that no use is made of any part of the
                  System  (including  but not  limited  to the  Marks)  at or in
                  connection with the Hotel or otherwise.  Licensee shall return
                  to Licensor  the Manual and all other  proprietary  materials,
                  remove all distinctive System features of the Hotel, including
                  the primary  freestanding  sign down to the structural  steel,
                  and  take  all  other  actions  ("DE-IDENTIFICATION  ACTIONS")
                  required to preclude any  possibility of confusion on the part
                  of the public that the Hotel is still using all or any part of
                  the System or is otherwise holding itself out to the public as
                  a Homewood Suites hotel.  If within 30 days after  termination
                  of  this   Agreement   Licensee  fails  to  comply  with  this
                  paragraph,  Licensor or its agents at Licensee's expense,  may
                  enter   the   premises   of   the   Hotel   to   perform   the
                  De-identification Actions. The preceding sentence shall not in
                  any way limit  Licensor's  other rights or remedies under this
                  Agreement.

         f.       LIQUIDATED  DAMAGES.  The parties  recognize the difficulty of
                  ascertaining  damages to  Licensor  resulting  from  premature
                  termination   of  this   Agreement,   and  have  provided  for
                  liquidated damages, which represent the parties' best estimate
                  as to the damages arising from the circumstances in which they
                  are  provided  and which are only  damages  for the  premature
                  termination  of this  Agreement,  and not as a  penalty  or as
                  damages for breaching  this  Agreement or in lieu of any other
                  payment.  If this  Agreement is  terminated  other than by the
                  expiration of the term  described in Paragraph  13a,  Licensee
                  will pay Licensor,  within 10 days of termination,  liquidated
                  damages in an amount determined as follows:

                  (1)      an amount equal to the amount payable under Paragraph
                           7  (regarding  Fees)  for the  three  years  prior to
                           termination; or

                  (2)      if the Hotel  opened  but has been Open for less than
                           three  years,  an amount equal to the greater of: (i)
                           36 times the monthly  average payable under Paragraph
                           7,  or  (ii)  36  times  the  amount   payable  under
                           Paragraph   7  for  the  last  full  month  prior  to
                           termination; or
                                       16
<PAGE>

                  (3)      if the Hotel  opened,  but has not been in  operation
                           for one full  month,  an amount  equal to $3,000  per
                           Guest Suite in the Hotel; or

                  (4)      if   the   Agreement   is   terminated   before   the
                           commencement  of  construction  or of  the  Work  (as
                           described in the  applicable  attachment),  an amount
                           equal to the  initial  application  fee that would be
                           due for a license application according to Licensor's
                           then current franchise offering circular (in addition
                           to any initial application fee already paid); or

                  (5)      if the Agreement is terminated after  commencement of
                           construction or of the Work but before opening of the
                           Hotel,  an  amount  equal to two  times  the  initial
                           application fee; or

                  (6)      if the Agreement is terminated  pursuant to Paragraph
                           13b (permitted  termination  after 10th or 15th year)
                           only,  an amount  equal to the amount  payable  under
                           Paragraph  7 for the two  years  prior to  notice  of
                           termination.

                  Furthermore, Licensee recognizes the additional harm by way of
                  confusion   with   respect  to  national   accounts,   greater
                  difficulty in re-entering  the market,  and damage to goodwill
                  of the Marks that  Licensor  will  suffer in the case of (i) a
                  Licensee who  terminates two or more license  agreements  with
                  Licensor at approximately the same time (between either itself
                  or  its  affiliates  and  Licensor)  or  (ii) a  license  that
                  terminates as a result of the Hotel or Licensee being acquired
                  by a  Competitor,  and the Licensor is unable or elects not to
                  buy the Hotel pursuant to Paragraph 11f (each of these will be
                  referred to as a "SPECIAL TERMINATION").  Licensee agrees that
                  in the case of a Special Termination, the amount of liquidated
                  damages as calculated above will be doubled.

14.      RENEWAL.

         This Agreement is non-renewable.

15.      RELATIONSHIP OF PARTIES.

         a.       NO AGENCY RELATIONSHIP. Licensee is an independent contractor.
                  Neither party is the legal  representative or agent of, or has
                  the power to obligate (or has the right to direct or supervise
                  the daily  affairs of) the other for any  purpose  whatsoever.
                  Licensor  and   Licensee   expressly   acknowledge   that  the
                  relationship intended by them is a business relationship based
                  entirely  on, and defined by, the express  provisions  of this
                  Agreement  and that no  partnership,  joint  venture,  agency,
                  fiduciary or employment relationship is intended or created by
                  reason of this Agreement.

         b.       LICENSEE'S  NOTICES TO PUBLIC CONCERNING  INDEPENDENT  STATUS.
                  Licensee  will  take  all  necessary   steps  including  those
                  reasonably  requested  by Licensor to minimize the chance of a
                  claim being made against  Licensor for anything that occurs at
                  the Hotel,  or for acts,  omissions or obligations of Licensee
                  or anyone associated or affiliated with Licensee or the Hotel.
                  Such steps may, for example,  include  giving  notice in Guest
                  Suites, public rooms and advertisements, on business forms and
                  stationery,  etc., making clear to the public that Licensor is
                  not the owner or operator of the Hotel and is not  accountable
                  for  what  happens  at the  Hotel.  Unless  required  by  law,
                  Licensee will not use the words "Homewood",  "Homewood Suites"
                  or any other names or mark associated with the System to incur
                  any obligation or indebtedness on behalf of Licensor. Licensee
                  shall not enter  into or  execute  any  contracts  in the name
                  "Homewood  Suites  hotel",  and all  contracts for the Hotel's
                  operations  and  services at the Hotel shall be in the name of
                  Licensee or Licensee's management company. Likewise, the words
                  "Homewood",  "Homewood Suites",  or any similar words will not
                  be  used  to  name or  identify  developments  adjacent  to or
                  associated with the Hotel, nor will Licensee use such names in
                  its general business in any manner separated from the business
                  of the Hotel.

                                       17
<PAGE>
16.      MISCELLANEOUS.

         a.       SEVERABILITY AND INTERPRETATION. The remedies provided in this
                  Agreement  are  not  exclusive.   If  any  provision  of  this
                  Agreement  is held to be  unenforceable,  void or  voidable as
                  being contrary to the law or public policy of the jurisdiction
                  entitled  to  exercise  authority  hereunder,   all  remaining
                  provisions  shall  nevertheless  continue  in full  force  and
                  effect  unless  deletion  of  such  provision(s)  impairs  the
                  consideration  for this Agreement in a manner which frustrates
                  the purpose of the parties or makes  performance  commercially
                  impracticable.  The  provisions  of this  Agreement  shall  be
                  interpreted  based on the reasonable  intention of the parties
                  in the context of this  transaction  without  interpreting any
                  provision in favor of or against any party whether or not such
                  party  was the  drafting  party  or by such  party's  position
                  relative to the other party.  Any covenant,  term or provision
                  of this Agreement  which, in order to effect the intent of the
                  parties, must survive the termination of this Agreement, shall
                  survive any such termination.

         b.       CONTROLLING LAW. This Agreement shall become valid when signed
                  by the  parties  hereto.  It shall be deemed  made and entered
                  into in the  State of  Tennessee  and  shall be  governed  and
                  construed  under and in accordance  with the laws of the State
                  of  Tennessee.  In  entering  into  this  Agreement,  Licensee
                  acknowledges  that it has  sought,  voluntarily  accepted  and
                  become  associated  with  Licensor  who  is  headquartered  in
                  Memphis,  Tennessee,  and that this Agreement contemplates and
                  will  result  in  business   relationships   with   Licensor's
                  headquarter's   personnel.   The  choice  of  law  designation
                  permits,  but does not require that all suits  concerning this
                  Agreement be filed in the State of Tennessee.

         c.       EXCLUSIVE  BENEFIT.  This  Agreement  is  exclusively  for the
                  benefit  of the  parties  hereto,  and it may not give rise to
                  liability to a third party,  except as otherwise  specifically
                  set forth  herein.  No agreement  between  Licensor and anyone
                  else is for the benefit of Licensee.

         d.       ENTIRE  AGREEMENT.  Licensor and the Licensee each acknowledge
                  and  warrant to each other that they wish to have all terms of
                  this business  relationship defined in this written agreement.
                  Neither  Licensor nor Licensee wishes to enter into a business
                  relationship  with the other in which any terms or obligations
                  are the subject of alleged  oral  statements  or in which oral
                  statements   serve  as  the  basis  for  creating   rights  or
                  obligations  different than or supplementary to the rights and
                  obligations set forth in this Agreement. Accordingly, Licensor
                  and Licensee  agree that this  Agreement  and any  Attachments
                  hereto  and  the  documents  referred  to  herein,   shall  be
                  construed  together and shall  supersede  and cancel any prior
                  and/or   contemporaneous   discussions  or  writings  (whether
                  described   as   representations,    inducements,    promises,
                  agreements  or any  other  term)  between  Licensor  or anyone
                  acting on its behalf and Licensee or anyone acting on his, her
                  or its behalf, which might be taken to constitute  agreements,
                  representations,  inducements,  promises or understandings (or
                  any  equivalent to such terms) with respect to this  Agreement
                  or the  relationship  between  the parties  and  Licensor  and
                  Licensee each agree that they have placed,  and will place, no
                  reliance on any such  discussions or writings.  This Agreement
                  (including  any  Attachments  and the  documents  referred  to
                  herein),  is the entire  agreement  between  the  parties  and
                  contains all of the terms, conditions,  rights and obligations
                  of the parties  with  respect to the Hotel or any other aspect
                  of the relationship  between the parties. No future license or
                  offer of a  license  for  additional  locations  or any  other
                  business  activity  have been promised to Licensee and no such
                  license or offer shall come into existence, except by means of
                  a separate  writing,  executed by  Licensor's  officer or such
                  other entity granting the license and specifically  identified
                  as a License Agreement. No change, modification,  amendment or
                  waiver  of any of the  provisions  of this  Agreement  will be
                  effective and binding upon  Licensor  unless it is in writing,
                  specifically  identified as an amendment to this Agreement and
                  signed by Licensor's officer.

         e.       LICENSOR'S  WITHHOLDING  CONSENT.  Licensor  may  withhold its
                  consent,  wherever  required  under  this  Agreement,  if  any
                  default or breach by  Licensee  exists  under this  Agreement.
                  Approvals  and  consents  by  Licensor  will not be  effective
                  unless  evidenced  by a  writing  duly  executed  on behalf of
                  Licensor.
                                       18
<PAGE>

         f.       NOTICES.  Any notice must be in writing and will be  effective
                  on  either  (1)  the  day  it is  sent  via  facsimile  with a
                  confirmation  of  receipt;  or (2) the  third  day after it is
                  mailed by first class mail;  or (3) the day it is delivered by
                  express  delivery  service;  or (4) the  third day after it is
                  sent by certified mail to the appropriate party at its address
                  first  stated  above or to such person and at such  address as
                  may be designated by notice hereunder.

         g.       GENERAL   RELEASE.   Licensee   and  its   respective   heirs,
                  administrators,  executors, agents,  representatives and their
                  respective  successors and assigns,  hereby  release,  remise,
                  acquit and forever  discharge  Licensor  and its  Entities and
                  their officers, directors,  employees, agents, representatives
                  and their  respective  successors and assigns from any and all
                  actions,  claims,  causes of  action,  suits,  rights,  debts,
                  liabilities,   accounts,  agreements,   covenants,  contracts,
                  promises, warrants, judgments,  executions,  demands, damages,
                  costs and expenses,  whether known or unknown at this time, of
                  any kind or nature, absolute or contingent,  if any, at law or
                  in equity, on account of any matter, cause or thing whatsoever
                  which has happened, developed or occurred at any time from the
                  beginning  of time to and  including  the  date of  Licensee's
                  execution and delivery to Licensor of this  Agreement and that
                  they will not institute any suit or action at law or otherwise
                  against Licensor directly or indirectly  relating to any claim
                  released hereby by Licensee.  This release and covenant not to
                  sue shall survive the termination of this Agreement.  Licensee
                  shall take  whatever  steps are  necessary or  appropriate  to
                  carry out the terms of this release upon Licensor's request.

         h.       DESCRIPTIVE   HEADINGS.   The  descriptive  headings  in  this
                  Agreement  are for  convenience  only and shall not control or
                  affect the meaning or  construction  of any  provision in this
                  Agreement.

         i.       WARRANTIES.  Licensee warrants, represents and agrees that all
                  statements  made by Licensee in the  Application  submitted to
                  Licensor  in  anticipation  of this  Agreement  and all  other
                  documents  and  information  submitted  by Licensee  are true,
                  correct and  complete as of the date hereof and will  continue
                  to be updated  so that they are true,  correct  and  complete.
                  This warranty and representation shall survive the termination
                  of this Agreement.

         j.       TIME.  Time is of the essence in this Agreement.

         k.       INCLUDING. Including shall mean including, without limitation.

         l.       COUNTERPARTS.  This Agreement may be executed in counterparts,
                  and each copy so  executed  and  delivered  shall be deemed an
                  original.

         m.       AMENDMENTS.  If an  amendment  to this  Agreement  is required
                  prior to its execution, said amendment shall be made a part of
                  this  Agreement  as an  Attachment.  If an  amendment  to this
                  Agreement is necessary  after its  execution,  said  amendment
                  shall  be  made a part  of  this  Agreement  in the  form of a
                  separate document.

         n.       PERFORMANCE  REQUIREMENTS/RESPONSIBILITIES.  Attachment  A  is
                  hereby  incorporated  by  reference  and  made a part  of this
                  Agreement  to set  forth  certain  of  Licensee's  performance
                  conditions and requirements.

         o.       BUSINESS  JUDGMENT.  The  parties  hereto  recognize,  and any
                  mediator  or  judge is  affirmatively  advised,  that  certain
                  provisions of this Agreement describe the right of Licensor to
                  take (or refrain from taking)  certain actions in the exercise
                  of its  assessment of the long-term  best  interests of hotels
                  using the  System,  considering  the  interests  of the System
                  overall.  Where such decisions have been taken by Licensor and
                  are supported by the business judgment of Licensor,  neither a
                  mediator  nor a judge  nor any  other  person  reviewing  such
                  decisions  shall  substitute  his, her or its judgment for the
                  judgment so exercised by Licensor.

17.      EXPIRATION OF OFFER.

                                       19
<PAGE>

         This  Agreement  constitutes  an offer  which must be  accepted  by the
         Licensee  named on the signature  page hereof by dating,  executing and
         returning to Licensor two copies  hereof (and all  attachments  hereto,
         including,  if required,  the Guaranty) on or before the date specified
         on the Rider.

IN WITNESS  WHEREOF,  the parties have  executed  this  Agreement as of the date
first stated above.

LICENSEE:                                  LICENSOR:

APPLE SUITES MANAGEMENT, INC.              PROMUS HOTELS, INC.

BY:    /S/  GLADE M. KNIGHT                BY:
    -------------------------------            ---------------------------------
NAME:  GLADE KNIGHT                        NAME:  THOMAS P. POWELL
      -----------------------------              -------------------------------
TITLE: CHIEF EXECUTIVE OFFICER             TITLE: SR. VICE PRESIDENT-DEVELOPMENT
      -----------------------------              -------------------------------
WITNESS:  /S/  C. DOUGLAS SCHEPKER         WITNESS:
        ---------------------------                -----------------------------
DATE:                                      DATE:
      -----------------------------               ------------------------------

                                       20
<PAGE>

                                    GUARANTY

Location:   853 CENTRE STREET, JACKSON, MISSISSIPPI
--------------------------------------------------------------------------------

As an  inducement  to Promus  Hotels,  Inc.  ("LICENSOR")  to execute  the above
License   Agreement,   the   undersigned,    jointly   and   severally,   hereby
unconditionally  warrant to Licensor and its  successors and assigns that all of
Licensee's   representations  in  the  License  Agreement  and  the  application
submitted  by Licensee to obtain the License  Agreement  are true and  guarantee
that all of Licensee's obligations under the above License Agreement,  including
any amendments thereto whenever made (the "AGREEMENT"),  will be punctually paid
and performed.

Upon  default  by  Licensee  or  notice  from  Licensor,  the  undersigned  will
immediately make each payment required of Licensee under the Agreement.  Without
affecting the obligations of the undersigned  under this Guaranty,  Licensor may
without notice to the undersigned extend,  modify or release any indebtedness or
obligation  of Licensee,  or settle,  adjust or  compromise  any claims  against
Licensee.  The undersigned waive notice of amendment of the Agreement and notice
of demand for payment or performance by Licensee.

Upon the death of an individual guarantor,  the estate of such guarantor will be
bound by this Guaranty but only for defaults and obligations  hereunder existing
at the time of death,  and the obligations of the other guarantors will continue
in full force and effect.

The Guaranty  constitutes a guaranty of payment and not of collection,  and each
of the  guarantors  specifically  waives any  obligation  of Licensor to proceed
against  Licensee  on any money or  property  held by  Licensee  or by any other
person or entity as collateral  security,  by way of set off or  otherwise.  The
undersigned  further agree that this Guaranty  shall continue to be effective or
be  reinstated  as the  case  may  be,  if at  any  time  payment  or any of the
guaranteed obligations is rescinded or must otherwise be restored or returned by
Licensor upon the insolvency, bankruptcy or reorganization of Licensee or any of
the undersigned, all as though such payment has not been made.

This Guaranty shall be governed and construed  under and in accordance  with the
laws of the State of Tennessee.

IN WITNESS  WHEREOF,  each of the undersigned has signed this Guaranty as of the
date of the above Agreement.

Witnesses:                              Guarantors:

                                        Apple Suites, Inc.

/s/  C. Douglas Schepker                By: /s/  Glade M. Knight          (Seal)
----------------------------               -------------------------------
                                            Glade Knight, President

                                       21
<PAGE>

                      ATTACHMENT A - PERFORMANCE CONDITIONS
                               CHANGE OF OWNERSHIP

I.       CONSULTATION.   Licensee  or  its  representative(s)  shall  meet  with
         Licensor at a location  selected by Licensor,  within 30 days following
         the  date  of  Licensee's  receipt  of  a  request  from  Licensor  for
         consultation  and  coordination  with the project  manager  assigned to
         Licensee by Licensor.

II.      WORK AND PURCHASE  REQUIREMENT.  Attachment C, the Product  Improvement
         Plan (the "PIP"), is incorporated by reference,  attached to and made a
         part of this  Agreement.  Licensee shall perform the renovation  and/or
         construction  work and  purchase  the items  described  on the PIP (the
         "WORK")  on or before  the  completion  date  specified  on the  Rider.
         Whether or not indicated on the PIP, the Work shall include  Licensee's
         purchasing  and/or  leasing and  installing  all  fixtures,  equipment,
         furnishings,   furniture,   signs,   computer   terminals  and  related
         equipment,  supplies  and other  items which would be required of a new
         Homewood  Suites  licensee  under the Manual and such other  equipment,
         furnishings  and  supplies  as may be  required by Licensor in order to
         operate the Hotel.  Licensee shall be solely  responsible for obtaining
         all necessary  licenses,  permits and zoning variances required for the
         Hotel.

III.     APPROVAL OF ARCHITECT/ENGINEER AND CONTRACTOR.  Licensor shall have the
         right to approve the  architect/engineer,  general contractor and major
         subcontractors  for the Work.  The Work shall not  commence  until such
         approval  has been  granted,  which  approvals  may be  conditioned  on
         bonding  of the  contractors.  Prior to  commencement  of the Work,  if
         requested by Licensor,  Licensee shall submit to Licensor,  resumes and
         financial statements of the architect/engineer,  general contractor and
         any major sub-contractors for the Work and such additional  information
         concerning  their experience and financial  responsibility  as Licensor
         may request.

IV.      APPROVAL OF PLANS. On or before the Plans  submission date specified on
         the Rider,  Licensee  shall  submit to Licensor,  Licensee's  plans and
         specifications  and  drawings  for the  Work,  including  the  proposed
         furnishings, fixtures, equipment and signs (collectively,  "PLANS") for
         approval.  Licensor may supply Licensee with  representative  prototype
         Guest Room and  public  area plans and  schematic  building  plans as a
         guide for preparation of plans and  specifications  for the Hotel. Once
         Licensor has  approved the Plans,  no change shall be made to the Plans
         without  the  advance  consent of  Licensor.  In  approving  the Plans,
         Licensor  does not in any manner  warrant the depth of its  analysis or
         assume  any  responsibility  for  the  efficacy  of  the  Plans  or the
         resulting  construction.  Licensee  shall  cause the  Hotel  renovation
         and/or  construction  to be in  accordance  with  this  Agreement,  the
         approved Plans, the Manual and the PIP.

V.       COMMENCEMENT; COMPLETION. Licensee shall commence the Work on or before
         the  date   specified  on  the  Rider  and  shall   continue  the  Work
         uninterrupted (except for interruption by reason of events constituting
         force majeure) until it is completed. Notwithstanding the occurrence of
         any events  constituting  force majeure,  or any other cause,  the Work
         shall be  completed  and the Hotel shall be  furnished,  equipped,  and
         shall otherwise be in compliance with this Agreement not later than the
         date  specified  on the  Rider.  Licensor  shall have the sole right to
         determine  whether the Work has been completed in accordance  with this
         Agreement, the approved Plans, the Manual and the PIP.

VI.      INSPECTION. During the course of the Work, Licensee shall, and Licensee
         shall cause the architect, engineer, contractors, and subcontractors to
         cooperate fully with Licensor for the purpose of permitting Licensor to
         inspect the Hotel in order to determine  whether the Work is being done
         in  accordance  with this  Agreement  and shall  provide  Licensor with
         samples of construction materials, etc. as Licensor may request.

VII.     REPORTS.  Licensee  shall submit to Licensor  each month after the date
         hereof  (or more  frequently  if  Licensor  shall so  request) a report
         showing progress made toward fulfilling the terms of this Agreement.

                                 Attachment A-1
<PAGE>

VIII.    ACQUISITION OF EQUIPMENT, FURNISHINGS, AND SUPPLIES/STAFFING.  Licensee
         shall order, purchase and/or lease and install all fixtures, equipment,
         furnishings,   furniture,   signs,   computer   terminals  and  related
         equipment,   supplies  and  other  items  required  by  Licensor,  this
         Agreement, the approved Plans, the Manual and the PIP.

         In  accordance  with the  Manual  and such  other  instructions  as are
         furnished to Licensee by Licensor,  Licensee  shall cause to be hired a
         staff to operate the Hotel,  and all such personnel shall be trained as
         required by the Manual.  All costs and  expenses  incurred  directly or
         indirectly in hiring and training such staff shall be paid by Licensee,
         except as expressly provided otherwise in the Manual.

IX.      COST OF CONSTRUCTION AND EQUIPPING. Licensee shall bear the entire cost
         of the  Work,  including  the  cost of the  plans,  professional  fees,
         licenses and permits, equipment, furniture, furnishings and supplies.

X.       LIMITATION  OF  LIABILITY.  Notwithstanding  the right of  Licensor  to
         approve the Plans, the architect, engineer and certain contractors, and
         to inspect the Work and the Hotel,  Licensor shall have no liability or
         obligation with respect to the Work, or the design and  construction of
         the Hotel, as the rights of Licensor are being exercised solely for the
         purpose of assuring  compliance  with the terms and  conditions of this
         Agreement.  Licensor  does  not  undertake  to  approve  the  Hotel  as
         complying with governmental requirements or as being safe for guests or
         other third parties.  Licensee should not rely upon Licensor's approval
         for any purpose  whatsoever  except  compliance  with  Licensor's  then
         prevailing standards and requirements of the Manual.

XI.      CONDITIONAL   AUTHORIZATION.   Licensor  may  conditionally   authorize
         Licensee to continue  to operate the Hotel as a Homewood  Suites  hotel
         even  though  Licensee  has not fully  complied  with the terms of this
         Agreement.  Under certain circumstances,  Licensor may suspend services
         to the Hotel (including  reservation  services) while the Work is being
         performed by Licensee.

XII.     PERFORMANCE OF AGREEMENT.  Licensee  agrees to satisfy all of the terms
         and conditions of this  Agreement,  and to equip,  supply and staff the
         Hotel in accordance  with this Agreement and to cooperate with Licensor
         in connection  therewith.  As a result of Licensee's  efforts to comply
         with the terms and  conditions of this  Agreement,  Licensee will incur
         substantial  expense and expend  substantial time and effort.  Licensee
         acknowledges  and  agrees  that  Licensor  shall have no  liability  or
         obligation  to Licensee  for any losses,  obligations,  liabilities  or
         expenses  incurred by Licensee if this Agreement is terminated  because
         Licensee  has not  complied  with  the  terms  and  conditions  of this
         Agreement.

                                 Attachment A-2
<PAGE>

                                  ATTACHMENT B
                           RIDER TO LICENSE AGREEMENT

<TABLE>
<S>                                                           <C>
1.       Name and Address of Licensee:                        Apple Suites Management, Inc.
                                                              Attn:  Glade M. Knight
                                                              306 East Main Street
                                                              Richmond, Virginia  23219

2.       Location of Hotel:                                   853 Centre Street
                                                              Jackson, Mississippi  39157

3.       Number of Approved Guest Rooms:                      91

4.       Effective Date of License:                           Date Apple  Suites,  Inc.  closes the  purchase of and obtains
                                                              possession and control of the Hotel ("Closing")

                                                              It shall be a  condition  precedent  to the  validity  of this
                                                              Agreement,  and this Agreement shall be of no force and effect
                                                              and Licensee shall have no rights  hereunder  unless and until
                                                              on or before  December 6, 1999,  Licensee shall have submitted
                                                              to Licensor,  written verification,  in a form satisfactory to
                                                              Licensor,  that  Closing  has  occurred.  Within  five days of
                                                              Closing,  Licensee  shall submit to Licensor (i) a copy of the
                                                              deed,  as recorded,  transferring  the Hotel to Apple  Suites,
                                                              Inc., (ii) a copy of the lease agreement  between Licensee and
                                                              Apple Suites, Inc., and (iii) the franchise application fee in
                                                              the amount of $45,000

5.       Term of License to Expire:                           20 years from the date of Closing

6.       Plans Submission Dates:                              as required under the Product Improvement Plan (Attachment C)

7.       Construction or Work Commencement Date:              upon Closing

8.       Construction or Work Completion Date:                within 90 days of  Closing  but not later  than March 1, 2000

9.       Offer Expiration Date [Paragraph 17]:                December 6, 1999

10.      Ownership of Licensee:                               Apple Suites Management, Inc.                    100%

                                                              Stockholder:
                                                              Glade Knight                            100%
</TABLE>

                                 Attachment B-1EXHIBIT 10.4

                                                                   [Mississippi]

                              MANAGEMENT AGREEMENT

         This  Management  Agreement  (as the same may be  amended,  modified or
supplemented from time to time, this "Agreement") is made and entered into as of
the  22nd  day  of  December,  1999  ("Effective  Date")  between  Apple  Suites
Management, Inc., a Virginia corporation, whose address is 306 East Main Street,
Richmond,   Virginia  23219  ("Owner")  and  Promus  Hotels,  Inc.,  a  Delaware
corporation,  whose  address is 755 Crossover  Lane,  Memphis,  Tennessee  38117
("Manager").

                                    ARTICLE 1

                                    THE HOTEL

         Section 1.01.  The Hotel.  The subject  matter of this Agreement is the
management of the "Hotel",  as defined in the Homewood Suites License  Agreement
attached  hereto as Exhibit  "A"  (hereinafter  collectively  referred to as the
"License  Agreement"),  by Manager.  The Hotel is owned in fee by Apple  Suites,
Inc., a Virginia  corporation  ("Fee  Owner") and leased to Owner  pursuant to a
lease between Fee Owner and Owner with a commencement date of even date herewith
covering the Hotel (hereinafter the "Percentage  Lease").  The License Agreement
shall  exclusively  govern Owner's right to use the Homewood Suites "System" (as
defined in the License Agreement) in the operation of the Hotel. Fee Owner shall
have no right to use the Homewood  Suites "System" except as expressly set forth
in the License  Agreement.  Owner hereby expressly  acknowledges that neither it
nor Fee Owner shall derive any rights in or to the use of the "Homewood  Suites"
name or the Homewood Suites "System" from this Agreement.

                                    ARTICLE 2

                                      TERM

         Section 2.01.  Term.  The term shall commence on the Effective Date and
continue for the term of years from the Effective  Date set forth on Exhibit "B"
("Term").

                                    ARTICLE 3

                              MANAGER'S OBLIGATIONS

         Section 3.01. Manager's Obligations.  Manager shall, on behalf of Owner
and at Owner's expense,  direct the operation of the Hotel pursuant to the terms
of this  Agreement  and the  License  Agreement.  Manager  shall be  exclusively
responsible for

<PAGE>

directing the day-to-day  activities of the Hotel and  establishing all policies
and procedures  relating to the management and operation of the Hotel. Except as
specifically  otherwise provided, all cost(s) and expense(s) incurred by Manager
in association  with the  performance of the  obligations  hereinafter set forth
shall be,  regardless of the  designation of a portion  thereof as Fee Ownership
Costs (as herein  defined),  operating costs and shall  accordingly be paid from
the Bank Account(s) as hereinafter  defined in Section 3.01(iv) below.  Manager,
during the Term, shall have the following obligations:

         (i)      Costs of Fee Owner  and  Owner.  Pursuant  to the terms of the
                  Percentage  Lease,  Manager  understands  that Fee  Owner  has
                  agreed to pay,  among  other  things  (i) land,  building  and
                  personal  property  taxes and  assessments  applicable  to the
                  Hotel,  (ii)  premiums and charges for the casualty  insurance
                  coverages  specified on Exhibit "D",  (iii)  expenditures  for
                  capital  replacements,  (iv)  expenditures for maintenance and
                  repair of underground utilities and structural elements of the
                  Hotel and (v) the  payments of  principal,  interest and other
                  sums payable under the  Acquisition  Loan (as herein  defined)
                  (collectively,  "Fee  Ownership  Costs").  To the extent  this
                  Agreement  obligates or authorizes Manager to pay any such Fee
                  Ownership Costs, Manager shall pay such Fee Ownership Costs on
                  behalf  of Fee  Owner  to the  extent  of  funds  in the  Bank
                  Account(s)  (as herein  defined) in the order of priority  set
                  forth in Exhibit B or the Reserve Fund (as herein defined) and
                  Fee Owner and Owner shall make such  adjustments  and payments
                  to each  other as may be  necessary  from time to time to take
                  into account any such payments by Manager.  Manager shall have
                  no duty,  obligation or liability to Fee Owner or Owner (i) to
                  make any  determination  as to whether any expense required to
                  be paid by Manager hereunder is a Fee Ownership Cost or a cost
                  of Owner,  (ii) to make any  determination as to whether funds
                  in the Bank Account(s) or the Reserve Fund belong to Fee Owner
                  or Owner or (iii) to require that Fee Ownership  Costs be paid
                  from funds which can be  identified as belonging to Fee Owner,
                  or that other costs and expenses  required to be paid by Owner
                  be paid from funds which can be  identified  as  belonging  to
                  Owner;  it being the intent of the  parties to this  Agreement
                  that (i) Owner and Fee Owner shall look only to each other and
                  not to Manager  with respect to moneys that may be owed one to
                  the other as a consequence of Manager's performance under this
                  Agreement  and (ii)  Manager  need  only  look to Owner to pay
                  operating  costs,   including,   without   limitation,   those
                  designated herein as Fee Ownership Costs;

         (ii)     Personnel.  Manager shall be the sole judge of the fitness and
                  qualification  of all  personnel  working at the Hotel ("Hotel
                  Personnel")  and  shall  have the sole and  absolute  right to
                  hire, supervise, order, instruct,  discharge and determine the
                  compensation,  benefits and terms of  employment  of all Hotel
                  Personnel.  All Hotel Personnel shall be employees of Manager.
                  Manager shall also have the right to use employees of Manager,
                  Manager's parent and subsidiary and affiliated companies,  not
                  located  at  the  Hotel  to  provide  services  to  the  Hotel
                  ("Off-Site Personnel") and the right to have

                                       2
<PAGE>

                  the general manager of the hotel serve as the regional manager
                  for other  hotels  managed by  Manager.  All  expenses,  costs
                  (including,  but  not  limited  to,  salaries,   benefits  and
                  severance  pay),  liabilities  and claims which are related to
                  Hotel  Personnel  and  Off-Site  Personnel  shall be operating
                  costs; provided,  however, with respect to any moving expenses
                  for any Hotel  Personnel  who has not been an  employee at the
                  Hotel for at least  twelve (12)  months,  only that portion of
                  such moving  expenses  equal to Owner's Share (as  hereinafter
                  defined)  shall  constitute  operating  costs and the  balance
                  shall be paid by Manager and/or such  employee.  Manager shall
                  also  have the  right to have  Off-Site  Personnel  performing
                  regional or area duties relating to the Hotel and other hotels
                  managed by Manager  lodged at the Hotel from time to time free
                  of charge. "Owner's Share" shall mean a fraction having twelve
                  (12) as its  denominator  and the  number  of  months  or part
                  thereof such person has been one of the Hotel Personnel as its
                  numerator.  All  expenses  for  Off-Site  Personnel  shall  be
                  included  as a  separate  category  or item  of the  Operating
                  Budgets or shall otherwise be approved by Owner.

                  Manager  agrees that it will consult with Owner  regarding the
                  hiring,  transferring,  or terminating of the general  manager
                  and  director of sales for the Hotel.  Owner shall be afforded
                  an opportunity to review the resumes of, and to interview, the
                  candidates  for  these  positions,  all  within  a time  frame
                  established  by Manager,  which shall be reasonable  under the
                  circumstances  in  question.  Manager and Owner shall  consult
                  with each other  concerning  such decisions and Manager agrees
                  to give serious  consideration  to the views of Owner prior to
                  Manager's  making a final  decision  with  respect to any such
                  individual;

         (iii)    Hotel  Policies.  Manager  shall  determine the terms of guest
                  admittance  to the Hotel,  establish  room  rates,  and use of
                  rooms for commercial purposes;

         (iv)     Bank Accounts. Manager shall open and operate the Hotel's bank
                  accounts.  All sums  received  from the operation of the Hotel
                  and all items paid by Manager  arising by virtue of  Manager's
                  operation  of the Hotel  shall pass  through  bank  account(s)
                  established  by  Manager  in  Owner's  name at such  banks  as
                  Manager and Owner shall  mutually  agree ("Bank  Account(s)");
                  only Manager's  designees  shall be exclusively  authorized to
                  operate and draw from the Bank  Account(s).  Each fiscal month
                  Manager,  on behalf of Owner,  shall  disburse  funds from the
                  Bank  Account(s)  in the order of  priority  and to the extent
                  available in accordance  with the priority  schedule set forth
                  on Exhibit "B";

         (v)      Operating Budgets. Manager has submitted to Owner, for Owner's
                  approval,  a proposed operating budget for the ensuing full or
                  partial fiscal year, as the case may be ("Operating  Budget").
                  Hereafter,  Manager shall,  not less than forty-five (45) days
                  prior to the commencement of each full

                                       3
<PAGE>

                  fiscal year, submit to Owner, for Owner's approval, a proposed
                  Operating  Budget for the ensuing full or partial fiscal year,
                  as the case may be. Each Operating Budget shall be accompanied
                  by, and shall  include,  a business plan which shall  describe
                  business  objectives  and strategies for the period covered by
                  the Operating Budget. The business plan 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.  Fee  Owner  shall  have no right to  approve  any
                  Operating Budget.

                  Owner's   approval  of  the  Operating  Budget  shall  not  be
                  unreasonably  withheld  and  shall be  deemed  given  unless a
                  specific  written  objection  thereto is delivered by Owner to
                  Manager within fifteen (15) days after submission. Owner shall
                  review the Operating  Budget on a  line-by-line  basis.  To be
                  effective,  any notice which disapproves a proposed  Operating
                  Budget must contain specific  objections in reasonable  detail
                  to individual line items.

                  If the  initial  Operating  Budget  contains  disputed  budget
                  item(s),  said item(s) shall be deemed adopted until Owner and
                  Manager have resolved the item(s)  objected to by Owner or the
                  Accountant(s)  (hereinafter  defined  in Section  10.02)  have
                  resolved  the  item(s)  objected to by Owner.  Thereafter,  if
                  Owner disapproves or raises objections to a proposed Operating
                  Budget in the  manner  and  within  the time  period  provided
                  therefor,  and Owner and  Manager  are unable to  resolve  the
                  disputed or objectionable  matters submitted by Owner prior to
                  the commencement of the applicable fiscal year, the undisputed
                  portions of the proposed  Operating  Budget shall be deemed to
                  be  adopted  and  approved  and the  corresponding  line  item
                  contained in the  Operating  Budget for the  preceding  fiscal
                  year  shall be  adjusted  as set  forth  herein  and  shall be
                  substituted  in lieu of the  disputed  items  in the  proposed
                  Operating Budget.  Those line items which are in dispute shall
                  be  determined  by  increasing  the  preceding  fiscal  year's
                  corresponding  line items by an amount  determined  by Manager
                  which does not exceed the  Consumer  Price Index for All Urban
                  Consumers  published by the Bureau of Labor  Statistics of the
                  United  States  Department of Labor,  U.S.  City Average,  all
                  items  (1984-1986=100) for the fiscal year prior to the fiscal
                  year with respect to which the  adjustment to the line item is
                  being  calculated  or  any  successor  or  replacement   index
                  thereto. The resulting Operating Budget obtained in accordance
                  with  the  preceding  sentence  shall  be  deemed  to  be  the
                  Operating  Budget in effect  until  such time as  Manager  and
                  Owner have resolved the items objected to by Owner.

                  Manager shall revise the  Operating  Budget from time to time,
                  as necessary,  to reflect any unpredicted significant changes,
                  variables  or

                                       4
<PAGE>

                  events or to include  significant,  additional,  unanticipated
                  items  of  income  or  expense.  Any  such  revision  shall be
                  submitted to Owner for approval,  which  approval shall not be
                  unreasonably withheld,  delayed or conditioned.  Manager shall
                  be permitted to reallocate  part or all of the amount budgeted
                  with respect to any line item to another line item and to make
                  such other  modifications  to the Operating  Budget as Manager
                  deems  necessary,  provided,  however,  that  Manager  may not
                  reallocate  from one  Department  to another  without  Owner's
                  consent,  which shall not be unreasonably withheld or delayed.
                  The term  "Department"  shall mean and refer to those  general
                  divisional  categories  shown in the  Operating  Budget (e.g.,
                  Guest Services Department or Administration  Department),  but
                  shall  not  mean  or  refer  to  subcategories   (e.g.,  linen
                  replacement or uniforms)  appearing in a divisional  category.
                  In addition,  in the event actual  Adjusted Gross Revenues (as
                  defined in Exhibit  "C" hereto)  for any  calendar  period are
                  greater than those provided for in the Operating  Budget,  the
                  amounts   approved   in  the   Operating   Budget   for  suite
                  maintenance,  guest  services,  food and beverage,  telephone,
                  utilities,  marketing and hotel repair and maintenance for any
                  calendar month shall be  automatically  deemed to be increased
                  to an amount that bears the same  relationship  (ratio) to the
                  amounts  budgeted  for such  items as  actual  Adjusted  Gross
                  Revenue for such month bears to the projected  Adjusted  Gross
                  Revenue for such month.  Owner acknowledges that the Operating
                  Budget is  intended  only to be a  reasonable  estimate of the
                  Hotel's  income and  expenses  for the  ensuing  fiscal  year.
                  Manager  shall  not be  deemed  to have  made  any  guarantee,
                  warranty or  representation  whatsoever in connection with the
                  Operating Budget;

         (vi)     Operating Statement.  Manager shall prepare and furnish Owner,
                  on or before the  twentieth  (20th)  day of the  fiscal  month
                  immediately  following  the  close of a fiscal  month,  with a
                  detailed operating  statement setting forth the results of the
                  Hotel's  operations.  Within ninety (90) days after the end of
                  each fiscal year,  Manager shall furnish Owner with a detailed
                  operating  statement  setting forth the results of the Hotel's
                  operations for the fiscal year;

         (vii)    Capital Budgets.  Manager shall, not less than forty-five (45)
                  days prior to the commencement of each fiscal year,  submit to
                  Owner, for Owner's  approval,  a recommended  "Capital Budget"
                  for the ensuing full or partial  fiscal year,  as the case may
                  be, for  furnishings,  equipment,  and ordinary  Hotel capital
                  replacement items as shall be required to operate the Hotel in
                  accordance  with  the  standards  referred  to in the  License
                  Agreement.  Manager, to the extent it is able to do so without
                  compromising  compliance with the minimum  standards  required
                  under  the terms of the  License  Agreement,  shall  take into
                  consideration,  among  other  factors,  the  amount  of  funds
                  available  to  pay  for  the  proposed  capital  expenditures.
                  Manager shall also identify for Owner those  projects that are
                  required  to  meet  the  minimum   standards  of  the  License
                  Agreement and give  priority

                                       5
<PAGE>

                  to such  items.  Owner and  Manager  shall meet to discuss the
                  proposed  Capital  Budget and Owner  shall be required to make
                  specific  written  objections to a proposed  Capital Budget in
                  the  manner  and within  the same time  periods  specified  in
                  Section  3.01(v) with respect to an  Operating  Budget.  Owner
                  agrees not to unreasonably  withhold or delay its consent.  If
                  Owner does not approve the  Capital  Budget,  Manager (i) with
                  respect to Capital  Improvements (as herein defined)  required
                  to meet the minimum standards of the License  Agreement,  will
                  be entitled  to spend such  amounts as are  necessary  to meet
                  such  minimum  standards  and (ii) with  respect  to any other
                  Capital  Improvements,  will only  spend  such  amounts as are
                  approved by Owner, acting reasonably,  provided, however, that
                  in any event  Manager  shall be  entitled  to spend up to five
                  percent (5%) of Gross Revenue for capital  expenditures  after
                  the date hereof until the disputed Capital Budget item(s) have
                  been resolved in accordance with Section 10.02.1(e).  Manager,
                  at Owner's  expense,  shall be responsible for supervising the
                  design,   installation  and  construction  of  alterations  or
                  additions  to, or  rebuilding  or  renovation  of,  the Hotel,
                  including  any  additions to Hotel  furnishings  and equipment
                  (collectively,  "Capital Improvements").  Owner shall have the
                  right to approve and inspect the installation and construction
                  of Capital  Improvements and any mortgagee having a first lien
                  on Owner's  leasehold estate in the Hotel ("Owner's  Leasehold
                  Mortgagee")  or a first lien on Fee  Owner's fee estate in the
                  Hotel (the "Fee Owner's  Mortgagee") shall also have any right
                  of approval or inspection of the installation and construction
                  of the  Capital  Improvements  to the  extent set forth in the
                  mortgage, deed of trust or other loan documents (collectively,
                  the "Mortgage  Documents")  (but only if and to the extent the
                  Manager  has  been   provided  with  copies  of  the  Mortgage
                  Documents).  Fee Owner shall not have the right to approve any
                  Capital Budget.

                  After a Capital  Budget has been adopted,  it shall be subject
                  to  review  and  modification  in  the  event  unpredicted  or
                  unanticipated  capital  expenditures  are required  during any
                  calendar   year.   Manager   and  Owner   each  agree  not  to
                  unreasonably  withhold  or delay  its  consent  to a  proposed
                  modification  of a  Capital  Budget.  Any  amendment  that  is
                  mutually  agreed upon shall be set forth in writing and signed
                  by both  parties.  It is  acknowledged  by Owner that  capital
                  expenditures  required as a result of an  emergency  situation
                  shall not reduce  amounts  available  pursuant  to the Capital
                  Budget or  otherwise  hereunder,  other  than to the  extent a
                  Capital   Budget   item  is   subsumed   within  the   capital
                  expenditures  required  as a result of the  occurrence  of the
                  emergency;

         (viii)   General Maintenance  Non-Capital  Replacements.  Manager shall
                  supervise  the   maintenance,   repair  and   replacement   of
                  non-capital replacements;

                                       6
<PAGE>

         (ix)     Operating  Equipment.  Manager  shall  select and purchase all
                  operating  equipment  for the Hotel such as linens,  utensils,
                  uniforms and other similar items,  provided,  however, that if
                  Owner determines that it can purchase operating equipment of a
                  quality at least equal to that which Manager generally uses at
                  a price  lower than the price  obtained  by  Manager,  Manager
                  shall  purchase  such  operating  equipment  from  the  vendor
                  designated by Owner;

         (x)      Operating  Supplies.  Manager  shall  select and  purchase all
                  operating  supplies  for the  Hotel  such as food,  beverages,
                  fuel, soap,  cleansing items,  stationery and other consumable
                  items, provided, however, that if Owner determines that it can
                  purchase  operating  supplies  of a quality at least  equal to
                  that which  Manager  generally  uses at a price lower than the
                  price  obtained  by  Manager,   Manager  shall  purchase  such
                  operating supplies from the vendor designated by Owner;

         (xi)     Accounting  Standards.  Manager  shall  maintain the books and
                  records  reflecting  the operations of the Hotel in accordance
                  with the  accounting  practices of Manager in conformity  with
                  generally accepted accounting  practices  consistently applied
                  and shall  adopt and  follow  the  fiscal  accounting  periods
                  utilized  by  Manager in its normal  course of  business.  The
                  Hotel level generated  accounting records reflecting  detailed
                  day-to-day  transactions of the Hotel's  operations,  shall be
                  kept by Manager at the Hotel or at Manager's  regional offices
                  or  corporate  headquarters,  or at  such  other  location  as
                  Manager shall  reasonably  determine.  Manager shall receive a
                  monthly  fee for  accounting  services  provided  to the Hotel
                  ("Accounting Fee"). The current Accounting Fee is set forth on
                  Exhibit "B". The  Accounting  Fee shall be adjusted by Manager
                  from  time  to time  and set  forth  in the  annual  Operating
                  Budget;

         (xii)    Marketing and Advertising. Manager shall advertise and promote
                  the  Hotel  in  coordination  with  the  sales  and  marketing
                  programs of Manager and other Homewood Suites hotels.  Manager
                  may  participate  in  sales  and  promotional   campaigns  and
                  activities   involving   complimentary   rooms.   Manager,  in
                  marketing and advertising  the Hotel,  shall have the right to
                  use marketing and advertising services of employees of Manager
                  and its parent and  affiliated  companies  not  located at the
                  Hotel.  Manager may charge the Hotel for  personnel  and other
                  costs  and  expenses  incurred  in  providing  such  services;
                  provided  that (i)  Manager's  allocation  of such  costs  and
                  expenses among hotels, including the Hotel, shall be pro rated
                  among all hotels  owned or  managed  by  Manager  and (ii) the
                  annual  allocation  of such  costs and  expenses  to the Hotel
                  shall not exceed $10,000.00.  Such costs and expenses shall be
                  reflected in the budgets and operating  statements required to
                  be prepared and submitted by Manager under this Agreement;

                                       7
<PAGE>

         (xiii)   Permits and  Licenses.  Manager  shall obtain and maintain the
                  various permits and licenses  required or permitted to be held
                  in its name that are  necessary  to enable  Manager to operate
                  the Hotel in accordance  with the terms of this  Agreement and
                  the License Agreement,  provided,  however, that Manager shall
                  only hold liquor licenses and alcoholic  beverage  licenses if
                  required by the laws of the jurisdiction in which the Hotel is
                  located.  In addition,  Manager  shall upon request  cooperate
                  with and assist  Owner in  obtaining  the various  permits and
                  licenses that are required to be held in the name of either or
                  both of Owner  and Fee  Owner  that are  necessary  to  enable
                  Manager to operate  the Hotel.  Manager,  at Owner's  cost and
                  expense,  shall  use all  reasonable  efforts,  to the  extent
                  within its control, to comply with the terms and conditions of
                  all licenses and permits  issued with respect to the Hotel and
                  the  business  conducted  at  the  Hotel,  including,  without
                  limitation, the terms and conditions of the License Agreement;

         (xiv)    Owner  Meetings.  The Hotel's  general manager shall meet with
                  Owner's  Representative  as  hereinafter  defined  in  Section
                  4.01(viii)  quarterly  to review and discuss the  previous and
                  future month's operating statement, cash flow, budget, capital
                  expenditures,  important  personnel  matters  and the  general
                  concerns of Owner and Manager.  In addition,  a representative
                  of   Manager's   corporate   staff  shall  meet  with  Owner's
                  Representative  quarterly  to review and discuss the  previous
                  and future quarter's operating  statement,  cash flow, budget,
                  capital  expenditures,  important  personnel  matters  and the
                  general  concerns of Owner and  Manager.  Except to the extent
                  otherwise  mutually  agreed  upon by Owner  and  Manager,  the
                  quarterly  meetings  described  in this clause  (xiv) shall be
                  held at the Hotel;

         (xv)     Insurance.  Manager shall procure and maintain  throughout the
                  Term the insurance coverages set forth on Exhibit "D";

         (xvi)    Compliance  with Law.  Manager,  at Owner's  cost and expense,
                  shall use all  reasonable  efforts  to  comply  with all laws,
                  ordinances, regulations and requirements of any federal, state
                  or municipal  government  that are  applicable  to the use and
                  operation  of the  Hotel,  as  well  as with  all  orders  and
                  requirements  of the local fire  department,  of which Manager
                  has knowledge;  provided,  however,  that Owner shall have the
                  right to contest by proper legal proceedings,  the validity of
                  any such law, ordinance, rule, regulation,  order, decision or
                  requirement  and  may  postpone  compliance  therewith  to the
                  extent  and  in  the  manner   provided  by  law  until  final
                  determination of any such proceedings.  Manager promptly shall
                  notify  Owner in writing of all notices of legal  requirements
                  applicable to the Hotel that are received by Manager;

         (xvii)   Satisfaction of Obligations.  Manager agrees to pay, when due,
                  all  amounts  due under  any  equipment  leases  and all other
                  contracts  and   agreements   relating  to  the  operation  or
                  maintenance  of the Hotel,  and, if

                                       8
<PAGE>

                  requested  by Owner,  any Mortgage  Documents  relating to the
                  loan  from  Owner's  Leasehold  Mortgagee  ("Owner's  Mortgage
                  Documents"),  but solely from and to the extent that funds are
                  available in the Bank  Account(s),  and to comply,  at Owner's
                  cost and expense,  with all other  covenants  and  obligations
                  contained in the equipment  leases and all utility  contracts,
                  concession agreements,  and service and maintenance contracts,
                  and, if requested by Owner,  Owner's Mortgage Documents to the
                  extent  that  compliance  therewith  is within the  reasonable
                  control of Manager by reason of its  management  and operation
                  of the Hotel pursuant to this  Agreement;  provided,  however,
                  Manager shall have no obligation to comply with any provisions
                  in the Mortgage  Documents  that  conflict with its rights and
                  obligations  under  this  Agreement.  Manager  shall  have  no
                  obligation  to perform or comply with any  obligations  of (i)
                  Fee  Owner or Owner  under  the  Percentage  Lease or (ii) Fee
                  Owner under any Mortgage  Documents  relating to the loan from
                  Fee  Owner's  Mortgagee  (other  than any right to  approve or
                  inspect Capital Improvements contemplated by Section 3.01(vii)
                  above);

         (xviii)  Requests  for   Information.   Manager  shall  respond,   with
                  reasonable promptness,  to any information requests by Owner's
                  Leasehold   Mortgagee  in  accordance  with  Owner's  Mortgage
                  Documents,  to the extent such  information  is required to be
                  furnished by Manager to Owner pursuant to this Agreement.  Any
                  additional   information  or  reports   requested  by  Owner's
                  Leasehold Mortgagee shall be provided by Manager only if Owner
                  so  directs  Manager  in  writing  and,  to  the  extent  such
                  information or reports are not being prepared for Owner in the
                  ordinary course of business pursuant to this Agreement,  Owner
                  agrees  to pay  the  reasonable  expenses  of  preparing  such
                  information and reports;

         (xix)    Tax and  Insurance  Accruals.  If requested by Owner,  Manager
                  shall  accrue  and set aside on a  monthly  basis  funds  from
                  Adjusted Gross Revenues if available in the priority set forth
                  on  Exhibit  B for  the  payment  of  real  estate  taxes  and
                  insurance premiums,  and such accruals shall be deposited in a
                  separate  account  and not  commingled  with  other  operating
                  accounts for Hotel operations  generally,  provided,  however,
                  that to the extent such accruals  exceed the amount  necessary
                  to pay the actual  amount of real estate  taxes and  insurance
                  premiums,  such excess shall be available for operating costs,
                  ownership  costs,   Owner's  Basic  Return,  the  Subordinated
                  Management  Fee and the others  items set forth on, and in the
                  priority  set forth on,  Exhibit  B. If such  accruals  do not
                  exceed the actual  amounts due in respect of real estate taxes
                  and insurance premiums but Owner and Manager agree in writing,
                  the tax and  insurance  accruals  on deposit  may be used from
                  time to time to pay operating costs if Adjusted Gross Revenues
                  are not otherwise sufficient to pay such operating costs.

                                       9
<PAGE>

                                    ARTICLE 4

                               OWNER'S OBLIGATIONS

         Section 4.01.  Owner's  Obligations.  During the Term, Owner shall have
the obligations set forth below:

         (i)      License  Agreement.  Owner shall comply with all the terms and
                  conditions of the License Agreement  (specifically  including,
                  but not limited  to,  Licensee's  obligation  to pay the fees,
                  charges and  contributions  set forth in paragraphs 3.c. and 7
                  of the License  Agreement)  and keep the License  Agreement in
                  full force and effect  from the  Effective  Date  through  the
                  remainder  of the Term.  Nothing  in this  Agreement  shall be
                  interpreted  in a manner which would  relieve  Owner of any of
                  its obligations under the License Agreement;

         (ii)     Licenses and Permits.  Owner shall obtain and  maintain,  with
                  Manager's   assistance  and   cooperation,   all  governmental
                  permissions,  licenses  and  permits  required  to be  held in
                  Owner's  and/or Fee Owner's name that are  necessary to enable
                  Manager to operate the Hotel in  accordance  with the terms of
                  this Agreement and the License Agreement;

         (iii)    Insurance.  Owner shall  procure and maintain  throughout  the
                  Term the insurance coverages set forth on Exhibit "E";

         (iv)     Intentionally Omitted;

         (v)      Operating  Funds.  Owner shall provide all funds  necessary to
                  enable  Manager to manage and operate the Hotel in  accordance
                  with the terms of this  Agreement  and the License  Agreement,
                  regardless  of the  designation  of a portion of the operating
                  costs as Fee  Ownership  Costs.  Owner  agrees to  deliver  to
                  Manager for deposit into the Bank  Account(s) on the Effective
                  Date the amount specified on Exhibit "B" which amount shall be
                  the  "Minimum  Balance" to be  maintained  by Owner during the
                  first  year of the  Hotel's  operation.  The  Minimum  Balance
                  thereafter  shall be no less than the Hotel's  operating costs
                  for the  preceding  fiscal  month.  The Minimum  Balance shall
                  serve as working  capital  for the Hotel's  operations.  Owner
                  agrees, upon Manager's written request, to immediately furnish
                  Manager with sufficient funds to make up any deficiency in the
                  Minimum Balance;

         (vi)     Capital Funds.  Owner shall expend such amounts for renovation
                  programs,  furnishings,  equipment and ordinary  Hotel capital
                  replacement  items as are  required  from  time to time to (a)
                  maintain  the Hotel in good order and repair,  (b) comply with
                  the standards  referred to in the License  Agreement,  and (c)
                  comply with governmental  regulations and orders.  Owner shall
                  cooperate  fully  with  Manager  in  establishing  appropriate

                                       10
<PAGE>

                  procedures  and  timetables  for  Owner to  undertake  capital
                  replacement projects.

                  It is recognized that  expenditures  for capital  replacements
                  are incapable of precise  calculation  in advance.  Therefore,
                  five  percent (5%) of Gross  Revenues  each year shall be paid
                  over in cash in each calendar  month after the Effective  Date
                  into a  Reserve  Fund  (as  hereinafter  defined)  to pay  for
                  capital  replacements.  In lieu of  funding  monthly  into the
                  Reserve  Fund as  contemplated  above,  Owner  shall  have the
                  right,  but not the  obligation,  to deposit  into the Reserve
                  Fund,  on or about the  commencement  of each  year,  the full
                  amount  set  forth  in  the  Capital  Budget.   Manager  shall
                  establish a reserve for capital  replacements  on the books of
                  account for the Hotel and the cash  amounts  required for such
                  reserve shall be placed into an interest-bearing  account (the
                  "Reserve Fund") established in the Hotel's name at the bank at
                  which the Bank  Account(s)  are  established,  with  Manager's
                  designees  being  the  only  authorized  signatories  on  said
                  account.  All amounts on deposit in the Reserve  Fund shall be
                  Owner's.  Any expenditures for capital replacements during any
                  calendar year which have been included in an approved  Capital
                  Budget may be made without  Owner's or Fee Owner's  additional
                  approval  and,  to the  extent  available,  shall  be  made by
                  Manager from the Reserve Fund (including  accrued interest and
                  unused  accumulations  from prior calendar years). Any amounts
                  remaining  in the Reserve  Fund at the close of each  calendar
                  year shall be carried forward and retained in the Reserve Fund
                  until fully used as herein provided. To the extent the Reserve
                  Fund is insufficient at a particular time or to the extent the
                  Reserve Fund plus  anticipated  contributions  for the ensuing
                  calendar year is less than the budgeted expenditures set forth
                  in the approved  Capital Budget for the ensuing  calendar year
                  then in either such event,  Manager  shall give Owner  written
                  notice thereof at least sixty (60) days before the anticipated
                  date  such  funds  will be  needed.  Owner  shall  supply  the
                  necessary  funds  by  deposit  to the  Reserve  Fund at  least
                  fifteen (15) days before the anticipated  date such funds will
                  be needed.  All  proceeds  from the sale of  capital  items no
                  longer  needed  for  the  operation  of  the  Hotel  shall  be
                  deposited to the Reserve Fund.  Sale of such items shall be at
                  the  discretion of Manager,  and  conducted in a  commercially
                  reasonable  manner.  Manager  shall not dispose of any capital
                  item or group of capital items having a value in excess of ten
                  thousand  dollars  ($10,000)  without  Owner's  prior  written
                  consent  unless the  replacement of such capital item or group
                  of  capital  items  has been  contemplated  in the  applicable
                  Capital  Budget.  Manager  also shall  obtain  the  consent of
                  Owner's Leasehold  Mortgagee when required for any disposition
                  of  capital  items  otherwise  prohibited  under  the terms of
                  Owner's Mortgage  Documents,  provided,  however,  that to the
                  extent a capital  item is being  replaced  because the same is
                  defective  or  obsolete  or with an item of equal  or  greater
                  value no such consent need be obtained from Owner's  Leasehold
                  Mortgagee.  Upon  termination  of this  Agreement for whatever
                  reason or upon sale of the  Hotel,  Manager's  right

                                       11
<PAGE>

                  to  expend  any  unused  portion  of the  Reserve  Fund  shall
                  terminate  and the  balance  of the fund shall be paid over to
                  Owner, less any sums then due Manager.

                  To the extent any  expenditure  under  this  Section  4.01(vi)
                  shall exceed twenty thousand dollars ($20,000),  Manager shall
                  first solicit bids from at least three different reputable and
                  qualified  third parties,  and the lowest of the bidders shall
                  be  selected  unless  acceptance  of a  higher  bid  has  been
                  approved  by Owner in  writing  or unless  Manager  provides a
                  reasonably  detailed  explanation  for its  selection of a bid
                  higher than the lowest of the bidders;

         (vii)    Payments to Manager.  Owner shall  promptly pay to Manager all
                  amounts due Manager under this Agreement;

         (viii)   Owner's  Representative.  Owner shall appoint a representative
                  to represent  Owner in all matters  relating to this Agreement
                  and/or the Hotel ("Owner's  Representative").  Owner's initial
                  Owner's  Representative  shall  be  the  individual  named  on
                  Exhibit "B".  Manager shall have the right to deal solely with
                  the Owner's  Representative  on all such matters.  Manager may
                  rely  upon   statements   and   representations   of   Owner's
                  Representative as being from and binding upon Owner. Owner may
                  change  its  Owner's  Representative  from  time  to  time  by
                  providing written notice to Manager in the manner provided for
                  herein. Owner shall cause the Owner's Representative to attend
                  all quarterly meetings referred to in Section 3.01(xiv);

         (ix)     Owner's  Audits.  Owner  shall  have  the  right  to have  its
                  independent  accounting  firm examine the books and records of
                  the Hotel at any reasonable time upon  forty-eight  (48) hours
                  notice to Manager;

         (x)      Right of  Inspection  and  Review.  Owner,  Owner's  Leasehold
                  Mortgagee,  Fee  Owner  and Fee  Owner's  Mortgagee  and their
                  respective   accountants,    attorneys,   agents   and   other
                  representatives  and  invitees,  shall have the right to enter
                  upon any  part of the  Hotel at all  reasonable  times  during
                  normal  business  hours and during the term of this  Agreement
                  upon  reasonable  prior  notice to Manager  for the purpose of
                  examining  or  inspecting  the  Hotel,  showing  the  Hotel to
                  prospective purchasers or mortgagees,  or auditing,  examining
                  or making  extracts of books and records of the Hotel,  or for
                  any other purpose which Owner,  in its reasonable  discretion,
                  shall deem necessary or advisable,  but the same shall be done
                  with as  little  disruption  to the  business  of the Hotel as
                  under the circumstances is reasonable; and

         (xi)     Quiet and Peaceable Operation. Owner shall ensure that Manager
                  is  able  to  peaceably  and  quietly  operate  the  Hotel  in
                  accordance  with  the  terms  of  this  Agreement,  free  from
                  molestation, eviction and disturbance by Owner

                                       12
<PAGE>

                  or by any other  person or  persons  claiming  by,  through or
                  under  Owner.   Owner  shall   undertake   and  prosecute  all
                  reasonable  and  appropriate  actions,  judicial or otherwise,
                  required  to assure  such quiet and  peaceable  operations  by
                  Manager.

                                    ARTICLE 5

                                 MANAGEMENT FEE

         Section  5.01.  Management  Fee. On the first day of each fiscal  month
after the Effective Date,  Manager is authorized by Owner to pay itself from the
Bank  Account(s)  the  Management  Fees  calculated  in the  manner set forth on
Exhibit "C".

                                    ARTICLE 6

                              CLAIMS AND LIABILITY

         Section 6.01.  Claims and Liability.  Owner and Manager  mutually agree
for  the  benefit  of each  other  to look  only  to the  appropriate  insurance
coverages in effect  pursuant to this Agreement in the event any demand,  claim,
action,  damage,  loss,  liability  or  expense  occurs as a result of injury to
person or damage to property regardless whether any such demand,  claim, action,
damage,  loss,  liability or expense is caused or contributed  to, by or results
from the  negligence  of Owner or  Manager  or their  subsidiaries,  affiliates,
employees, directors, officers, agents or independent contractors and regardless
whether the injury to person or damage to property occurs in and about the Hotel
or elsewhere as a result of the performance of this Agreement.  Nevertheless, in
the event the  insurance  proceeds  are  insufficient  or there is no  insurance
coverage to satisfy the demand,  claim,  action,  loss, liability or expense and
the same did not arise out of the gross  negligence  or  willful  misconduct  of
Manager,  Owner  agrees,  at its expense,  to indemnify and hold Manager and its
subsidiaries,  affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability.

         Section 6.02. Survival.  The provisions of this Article 6 shall survive
any  cancellation,  termination or expiration of this Agreement and shall remain
in full force and effect until such time as the applicable statute of limitation
shall cut off all demands,  claims,  actions,  damages,  losses,  liabilities or
expenses which are the subject of the provisions of this Article 6.

                                    ARTICLE 7

                         CLOSURE, EMERGENCIES AND DELAYS

         Section 7.01.  Events of Force Majeure.  If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease operation
of the Hotel in order to protect the Hotel and/or the health, safety and welfare
of the guests

                                       13
<PAGE>

and/or  employees  of the Hotel for  reasons  beyond the  reasonable  control of
Manager,  such as, but not limited to, acts of war,  insurrection,  civil strife
and commotion,  labor unrest,  governmental  regulations and orders, shortage or
lack of adequate supplies or lack of skilled or unskilled employees,  contagious
illness,  catastrophic  events or acts of God, which shall not include Manager's
computer systems and software not being able to accurately process date data and
information,   including,  but  not  limited  to,  calculating,   comparing  and
sequencing from, into and between the twentieth  century,  the year 2000 and the
twenty-first  century  ("Force  Majeure"),  then in such event or similar events
Manager may close and cease operation of all or any part of the Hotel, reopening
and  commencing  operation  when  Manager  deems  that such may be done  without
jeopardy to the Hotel, its guests and employees.

         Manager and Owner agree,  except as otherwise provided herein, that the
time within  which a party is required to perform an  obligation  and  Manager's
right to manage the Hotel under this Agreement shall be extended for a period of
time equivalent to the period of delay caused by an event of Force Majeure.

         Section 7.02. Emergencies. If a condition of an emergency nature should
exist which requires that  immediate  repairs be made for the  preservation  and
protection  of the Hotel,  its guests or  employees,  or to assure the continued
operation of the Hotel,  Manager is  authorized  to take all actions and to make
all  expenditures  necessary  to repair and correct such  condition,  regardless
whether  provisions  have been made in the applicable  budget for such emergency
expenditures. Expenditures made by Manager in connection with an emergency shall
be paid, in Manager's sole discretion,  out of the Bank Account(s).  Owner shall
immediately  replenish such funds paid from the Bank  Account(s).  Manager shall
endeavor to communicate  with Owner prior to making any  expenditures to correct
an emergency  condition,  but in any event shall promptly notify Owner after the
emergency expenditures have been made.

                                    ARTICLE 8

                            CONDEMNATION AND CASUALTY

         Section  8.01.  Condemnation.  If the  Hotel is  taken  in any  eminent
domain,   expropriation,   condemnation,   compulsory   acquisition  or  similar
proceeding  by  a  competent  authority,   this  Agreement  shall  automatically
terminate as of the date of taking or  condemnation.  Any  compensation  for the
taking or  condemnation of the physical  facility  comprising the Hotel shall be
paid to Owner. Manager,  however, with the full cooperation of Owner, shall have
the  right to file a claim  with  the  appropriate  authorities  for the loss of
Management  Fee income for the remainder of the Term and any  extension  thereof
because  of the  condemnation  or  taking.  If only a portion of the Hotel is so
taken and the taking does not make it  unreasonable  or imprudent,  in Manager's
and Owner's opinion, to operate the remainder as a hotel of the type immediately
preceding such taking,  this Agreement  shall not  terminate.  Any  compensation
shall be used,  however, in whole or in part, to render the Hotel a complete and
satisfactory  architectural unit as a hotel of the same type and class as it was
immediately preceding such taking or condemnation.

                                       14
<PAGE>

         Section 8.02. Casualty. In the event of a fire or other casualty, Owner
shall comply with the terms of the License  Agreement and this  Agreement  shall
remain in full force and effect so long as the License Agreement remains in full
force and effect.

                                    ARTICLE 9

                               TERMINATION RIGHTS

         Section  9.01.   Bankruptcy  and   Dissolution.   If  either  party  is
voluntarily  or  involuntarily  dissolved or declared  bankrupt,  insolvent,  or
commits an act of bankruptcy,  or if a company enters into  liquidation  whether
compulsory  or  voluntary  otherwise  than for the  purpose of  amalgamation  or
reconstruction,  or compounds  with its creditors,  or has a receiver  appointed
over all or any part of its assets, or passes title in lieu of foreclosure,  the
other party may terminate this Agreement  immediately upon serving notice to the
other party, without liability on the part of the terminating party.

         Section  9.02.  Manager's  Termination  Right Upon the  Termination  of
License  Agreement.  If the  License  Agreement  is  terminated  for any reason,
Manager may terminate this Agreement  immediately  upon serving notice to Owner,
without  liability  on the  part  of  Manager.  Upon  such  termination,  unless
specifically provided otherwise herein, Manager shall be entitled to receive the
Sale  Termination  Fee  calculated  in the  manner  set  forth on  Exhibit  "B".
Notwithstanding  anything  contained  herein,  Manager  shall not be entitled to
receive the Sale Termination Fee if the License Agreement is terminated  because
of Manager's failure to perform its obligations  hereunder and Manager's failure
was not caused by the failure of Owner to perform its obligations hereunder.

         Section 9.03. (a) Owner's Default. The following shall, at the election
of Manager,  constitute  events of default by Owner under this  Agreement  (each
such event being referred to herein as an "Owner's Default"):

         (i)      The failure of Owner to pay any amount to Manager provided for
                  herein for a period of ten (10) days after  written  notice by
                  Manager of such failure to pay.

         (ii)     Failure  of Owner to keep or  perform  any  duty,  obligation,
                  covenant or  agreement  of Owner under this  Agreement  (other
                  than the  obligation  to pay that is the subject of  paragraph
                  (i) above) and such failure  continues  for a period of thirty
                  (30)  days  after  receipt  of  written  notice  thereof  from
                  Manager; provided,  however, if such failure cannot reasonably
                  be remedied or  corrected  within such thirty (30) day period,
                  then such  thirty (30) day period  shall be extended  for such
                  additional  period as may be reasonably  required to cure such
                  default  but only if Owner  promptly  commences  to cure  such
                  default and  continues  thereafter  with all due  diligence to
                  complete such a cure to the satisfaction of Manager.

                                       15
<PAGE>

         (iii)    The occurrence of a default under or other  termination of the
                  Percentage Lease.

         (iv)     Failure of Fee Owner to keep or perform any duty,  obligation,
                  covenant or agreement of Fee Owner under the "Comfort  Letter"
                  of even date  herewith from Manager to Fee Owner agreed to and
                  accepted by Fee Owner (the "Comfort  Letter")  relating to the
                  Hotel and such failure  continues  for a period of thirty (30)
                  days after  receipt of written  notice  thereof from  Manager;
                  provided,  however,  if  such  failure  cannot  reasonably  be
                  remedied or corrected within such thirty (30) day period, then
                  such  thirty  (30)  day  period  shall  be  extended  for such
                  additional  period as may be reasonably  required to cure such
                  default, but only if Fee Owner promptly commences to cure such
                  default and  continues  thereafter  with all due  diligence to
                  complete such a cure to the satisfaction of Manager.

         (v)      The  occurrence  of an "Event of  Default"  (as defined in the
                  Acquisition  Mortgage Documents (as herein defined)) under the
                  Acquisition Mortgage Documents.

         On the occurrence of any Owner's Default,  Manager shall have the right
to  terminate  this  Agreement  by written  notice to Owner,  in addition to its
rights to seek damages or other remedies available to it at law or in equity.

         (b) Manager  Default.  The following  shall,  at the election of Owner,
constitute an event of default by Manager under this Agreement (such event being
referred  to herein as the  "Manager  Default"):  Failure  of Manager to keep or
perform  any duty,  obligation,  covenant  or  agreement  of Manager  under this
Agreement and such failure shall continue for a period of thirty (30) days after
receipt of written notice thereof from Owner; provided, however, if such failure
cannot  reasonably be remedied or corrected  within such thirty (30) day period,
then such thirty (30) day period shall be extended for such additional period as
may be reasonably  required to cure such default  provided that Manager promptly
commences to cure such default and continues  thereafter  with all due diligence
to complete such cure to the  satisfaction of Owner.  Upon the occurrence of the
Manager  Default,  Owner shall have the right to  terminate  this  Agreement  by
written  notice to Manager,  in  addition to its right to seek  damages or other
remedies available to it at law or in equity.

         Section 9.04. Owner's -- Termination  Rights. (a) Provided Owner is not
in default  under this  Agreement  at the time of  delivery  of the  Termination
Notice (as defined herein) or on the Termination Date (as defined herein), Owner
shall have the right,  after the tenth  anniversary  of the  Effective  Date, to
terminate this Agreement by giving  written notice (a  "Termination  Notice") to
Manager setting forth an effective  termination date which shall be the last day
of a month (the  "Termination  Date")  and which  shall be not less than six (6)
months  nor more than  twelve  (12)  months  after the date of such  Termination
Notice and shall in no event be prior to the tenth  anniversary of the Effective
Date. If Owner terminates this Agreement  pursuant to this Section  9.04(a),  in
addition  to payment of all other fees and  reimbursable  sums due to Manager on
the

                                       16
<PAGE>

Termination  Date,  Manager  shall  have the right to receive  the  Cancellation
Termination  Fee  calculated  in the  manner  set  forth on  Exhibit  "B".  Such
termination  shall be effective so long as on or before the Termination Date (x)
Owner  pays  to  Manager  the  Cancellation  Termination  Fee  and  all  amounts
determined by Owner and Manager, each acting reasonably and in good faith, to be
due and owing to Manager  pursuant to the terms and provisions of this Agreement
and (y) all sums then  outstanding  under the  Acquisition  Loan shall have been
paid in full.

         (b) (i) Provided  Owner is not in default under this  Agreement,  Owner
shall have the right to terminate this Agreement if, beginning in the first full
calendar  year  of  Hotel  operations,  Manager  fails  to  achieve,  in any two
consecutive  calendar years, a Gross Operating  Profit (as herein defined) which
is at least eighty-five  percent (85%) of the amount set forth in the respective
annual Operating Budget for Gross Operating Profit ("Budgeted  GOP");  provided,
however,  that, if within sixty (60) days of receipt of a notice from Owner that
Owner intends to terminate this Agreement  pursuant to this Section  9.04(b)(i),
Manager  pays in  cash to  Owner  the  difference  between  the  achieved  Gross
Operating  Profit and  eighty-five  percent  (85%) of the  Budgeted  GOP for the
second of the two consecutive calendar years in which shortfalls occurred,  then
Owner shall not be entitled to terminate this Agreement. If Owner is entitled to
and elects to  terminate  this  Agreement,  Owner shall give  written  notice to
Manager  within  ninety  (90) days  following  delivery  to Owner of the  annual
financial  statements  for the calendar  year. If such notice is not provided by
Owner to Manager  within such  ninety (90) day period,  Owner shall be deemed to
have waived its right  hereunder to terminate this Agreement with respect to the
calendar year as to which the failure occurred. In the event Owner has the right
to  terminate  with  respect to a calendar  year but waives such right,  Owner's
right to  terminate  shall  carry  forward and shall be  applicable  to the next
succeeding  calendar year if Manager fails to achieve  eighty-five percent (85%)
of Budgeted GOP for the next succeeding year, subject to Manager's right to cure
for such calendar year. For purposes of this section,  the term "Gross Operating
Profit" shall mean the amount,  if any, by which Adjusted Gross Revenues for any
calendar year exceed operating costs for such calendar year.

         (ii) The  provisions  of  clause  (b)(i)  above  shall not apply in any
calendar  year in which the  operation  of the Hotel,  or the use of the Hotel's
facilities,  are  significantly  disrupted  by casualty  loss,  strike,  eminent
domain, or other events of Force Majeure that are beyond the reasonable  control
of Manager,  or major  repairs to or  refurbishment  of the Hotel.  In the event
Owner  exercises the right of termination  contemplated  in clause (b)(i) above,
(a) Owner shall have no obligation to pay any  termination  fee or other damages
to Manager as a  consequence  of such  termination,  except  that Owner shall be
liable to  Manager  and shall pay  immediately  upon such  termination  all fees
earned  and other  amounts  and  expenses  payable  or  reimbursable  to Manager
pursuant to this  Agreement  and (b) the  exercise  of the right of  termination
shall only be valid if on or prior to the termination  date all sums outstanding
under the Acquisition Loan shall have been paid in full.

         Section 9.05. Manager's Right to Terminate Upon Sale. If there is to be
a "Change in Ownership" as defined in the License Agreement and the new owner of
the

                                       17
<PAGE>

Hotel has not received a Homewood Suites License  Agreement for the operation of
the Hotel (for purposes of this Section 9.05,  said agreement  shall be referred
to as the "License Agreement"),  Manager shall have the right upon giving notice
to Owner to terminate this Agreement on the date the Change of Ownership occurs.
If there is a Change of  Ownership  and the new owner of the  Hotel  receives  a
License Agreement, but does not enter into an assumption agreement,  pursuant to
which the new owner assumes all of Owner's obligations  hereunder,  with Manager
prior to the date the Change of Ownership occurs,  Manager shall have the right,
upon giving notice to Owner,  to terminate this Agreement on the date the Change
of Ownership  occurs.  If Manager  terminates  this  Agreement  pursuant to this
Section 9.05 (in addition to payment of all other fees and reimbursable sums due
to Manager to the date of termination),  Manager shall have the right to receive
the Sale Termination Fee calculated in the manner set forth on Exhibit "B". If a
Change of Ownership  occurs,  and the new owner obtains a License  Agreement and
the new owner and Manager enter into an assumption  agreement  pursuant to which
this  Agreement  remains in full force and effect,  Manager  shall not receive a
Termination  Fee and references in this Agreement to License  Agreement shall be
to the License Agreement with such new owner.

         Section  9.06.  Delays.  Notwithstanding  any other  provision  of this
Agreement, if any event of the type described in Article 7 or 8 occurs after the
Effective Date and Manager is unable to operate the Hotel for a period of ninety
(90) days, Manager shall have the option to terminate this Agreement upon thirty
(30) days'  prior  written  notice to Owner,  without  liability  on the part of
Manager,  its  parent  or  their  subsidiaries  or  affiliates.  Under  any such
circumstances, the Acquisition Loan shall be repaid in full.

         Section 9.07.  Employment  Solicitation  Restriction Upon  Termination.
Owner and its affiliates and subsidiaries and their successors  hereby agree not
to solicit  the  employment  of the Hotel  general  manager,  assistant  general
manager  or  director  of sales at any time  during  the term of this  Agreement
without Manager's prior written approval.  Furthermore, Owner and its affiliates
and subsidiaries and successors agree not to employ the Hotel's general manager,
assistant  general  manager  or  director  of sales for a period of twelve  (12)
months after the termination or expiration of this Agreement,  without Manager's
prior written approval.

         Section 9.08. Transition Upon Termination. Upon any termination of this
Agreement,  all fees and  payments  due to Manager as of the  effective  date of
termination,  including all accrued and unpaid fees and reimbursable charges and
expenses,  shall be paid to Manager within ten (10) days after delivery to Owner
of an itemized statement of such fees and payments. Manager shall be entitled to
exercise  the right of setoff  provided in Section  11.16 hereof with respect to
such fees,  charges and expenses.  Manager shall deliver to Owner, or such other
person or persons as Owner may designate, copies of all books and records of the
Hotel and all funds in the possession of Manager  belonging to Owner or received
by Manager pursuant to the terms of this Agreement,  and shall assign,  transfer
or convey to such person or persons all service  contracts and personal property
relating to or used in the operation and  maintenance  of the Hotel,  except any
personal property which is owned by Manager. Manager also shall, for a period of
thirty (30) days

                                       18
<PAGE>

after such expiration or termination,  make itself available to consult with and
advise  Owner or such  other  person or  persons  regarding  the  operation  and
maintenance of the Hotel at a consultation fee to be agreed upon between Manager
and Owner.

                                   ARTICLE 10

                         APPLICABLE LAW AND ARBITRATION

         Section  10.01.  Applicable  Law.  The  interpretation,   validity  and
performance  of  this  Agreement   shall  be  governed  by  the  procedural  and
substantive  laws of the state of  Tennessee  and any and all  disputes,  except
those  specifically  referred to below,  shall be brought and maintained  within
that state. If any judicial  authority holds or declares that the law of another
jurisdiction is applicable,  this Agreement shall remain  enforceable  under the
laws of that jurisdiction.

         Section 10.02. Arbitration of Financial Matters.

                  Subsection 10.02.1. Matters to be Submitted to Arbitration. In
         the case of a dispute  with  respect to any of the  following  matters,
         either  party may submit  such  matter to  arbitration  which  shall be
         conducted by the  Accountants  (as  hereinafter  defined in  Subsection
         10.02.2):  (a) computation of the Management  Fees; (b)  reimbursements
         due  to  Manager  under  the  provisions  of  Section  11.15;  (c)  any
         adjustment  in the  Minimum  Balance  under the  provisions  of Section
         4.01(v);  (d) any adjustment in dollar  amounts of insurance  coverages
         required to be maintained;  and (e) any dispute concerning the approval
         of an Operating Budget.

                  All disputes  concerning  the above matters shall be submitted
         to the Accountants. The decision of the Accountants with respect to any
         matters  submitted  to them  under  this  Subsection  10.02.1  shall be
         binding on both parties hereto.

                  Subsection 10.02.2.  The Accountants.  The "Accountants" shall
         be one of three (3) firms of certified public accountants of recognized
         national  standing in the hotel industry.  Until otherwise agreed to by
         the  parties,  the  three (3) firms  shall be  Arthur  Andersen  & Co.,
         PriceWaterhouseCoopers, and Ernst & Young, notwithstanding any existing
         relationships  which may exist between Owner and such accounting  firms
         or Manager and such accounting  firms. The party desiring to submit any
         matter to arbitration  under Subsection  10.02.1 shall do so by written
         notice to the other party, which notice shall set forth the items to be
         arbitrated  and such party's  choice of one of the three (3) accounting
         firms.  The party  receiving such notice shall within fifteen (15) days
         after receipt of such notice either  approve such choice,  or designate
         one of the remaining two (2) firms by written  notice back to the first
         party, and the first party shall within fifteen (15) days after receipt
         of such notice either  approve such choice or  disapprove  the same. If
         both parties  shall have  approved one of the three (3) firms under the
         preceding  sentence,  then such firm shall be the "Accountants" for the
         purposes of arbitrating

                                       19
<PAGE>

         the dispute;  if the parties are unable to agree on an accounting firm,
         then the third firm, which was not designated by either party, shall be
         the "Accountants"  for such purpose.  The Accountants shall be required
         to render a decision in  accordance  with the  procedures  described in
         Subsection  10.02.3  within  fifteen (15) days after being  notified of
         their selection.  The fees and expenses of the Accountants will be paid
         by the non-prevailing party.

                  Subsection 10.02.3. Procedures. In all arbitration proceedings
         submitted  to the  Accountants,  the  Accountants  shall be required to
         agree upon and approve the substantive  position  advocated by Owner or
         Manager with respect to each disputed  item.  Any decision  rendered by
         the Accountants  that does not reflect the position  advocated by Owner
         or  Manager  shall be beyond  the  scope of  authority  granted  to the
         Accountants and,  consequently,  may be overturned by either party. All
         proceedings by the  Accountants  shall be conducted in accordance  with
         the Uniform  Arbitration  Act,  except to the extent the  provisions of
         such act are modified by this Agreement or the mutual  agreement of the
         parties.  Unless otherwise agreed, all arbitration proceedings shall be
         conducted at the Hotel.

         Section 10.03.  Performance During Disputes. It is mutually agreed that
during any kind of  controversy,  claim,  disagreement  or dispute,  including a
dispute as to the validity of this Agreement, Manager shall remain in possession
of the Hotel as Manager;  and Owner and Manager shall continue their performance
of the provisions of this Agreement and its exhibits.  Manager shall be entitled
to injunctive relief from a civil court or other competent authority to maintain
possession  in  the  event  of  a  threatened   eviction   during  any  dispute,
controversy, claim or disagreement arising out of this Agreement.

                                   ARTICLE 11

                               GENERAL PROVISIONS

         Section 11.01.  Authorization.  Owner and Manager represent and warrant
to each other that their respective  corporations  have full power and authority
to execute this  Agreement and to be bound by and perform the terms  hereof.  On
request, each party shall furnish the other evidence of such authority.

         Section 11.02.  Relationship.  Manager and Owner shall not be construed
as joint  venturers  or partners of each other by reason of this  Agreement  and
neither  shall have the power to bind or obligate  the other except as set forth
in this Agreement.

         Section 11.03.  Manager's  Contractual  Authority in the Performance of
this  Agreement.  Manager is authorized  to make,  enter into and perform in the
name of and for the account of Owner any contracts  deemed  necessary by Manager
to perform its  obligations  under this  Agreement.  In exercising its authority
hereunder, Manager shall be entitled to execute and enter into contracts without
the specific  approval of Owner and Fee Owner so long as each such  contract (i)
requires expenditures or otherwise establishes liability of twenty-five thousand
dollars  ($25,000)  or less and (ii) has a term

                                       20
<PAGE>

(excluding  options in favor of  Manager  and Owner to renew) of one (1) year or
less or can be cancelled  without  penalty upon sixty (60) days' notice or less,
provided, however, that any contract entered into pursuant to the last paragraph
of  Section  4.01(vi)  shall  be  governed  by the  provisions  of said  Section
4.01(vi).  Any contract  that does not satisfy the  conditions  set forth in the
preceding  sentence  shall require the prior approval in each instance of Owner,
regardless  whether such  expenditure  is authorized  in an  applicable  budget,
unless the form of the contract proposed to be entered into has been approved in
advance by Owner.  Owner agrees to promptly  respond to any request for approval
and  further  agrees  that its  consent  shall not be  unreasonably  withheld or
delayed.  Manager shall be authorized to enter into contracts with affiliates of
Manager,  but only so long as Owner  shall have  approved in advance the cost of
the service or product to be provided.

         Section 11.04. Further Actions.  Owner and Manager agree to execute all
contracts,  agreements and documents and to take all actions necessary to comply
with the provisions of this Agreement and the intent hereof.

         Section  11.05.  Successors and Assigns.  Owner's  consent shall not be
required for Manager to assign any of its rights,  interests or  obligations  as
Manager  hereunder to any parent,  subsidiary  or affiliate of Manager or Promus
Hotel  Corporation,  provided that any such  assignee  agrees to be bound by the
terms and conditions of this Agreement and provided, further, that such assignee
has  received  an  assignment  of all  or  substantially  all of the  management
agreements entered into by Manager with respect to other Homewood Suites hotels.
The  acquisition  of Manager or its parent  company by a third  party  shall not
constitute an assignment of this Agreement by Manager and this  Agreement  shall
remain in full  force and effect  between  Owner and  Manager.  Except as herein
provided,  Manager shall not assign any of its obligations hereunder without the
prior  written  consent of Owner,  which shall not be  unreasonably  withheld or
delayed.  Owner shall be deemed to have  consented to such an assignment of this
Agreement  if Owner has not notified  Manager in writing to the contrary  within
fifteen (15) days after Owner has received Manager's request for Owner's consent
to an assignment.  Manager shall have the right to pledge or assign its right to
receive the  Management  Fees  hereunder  without the prior  written  consent of
Owner.

         Owner  shall have the right to assign this  Agreement  to the person or
entity which has obtained (i) leasehold  title to the Hotel in  accordance  with
the Comfort Letter and (ii) a Homewood  Suites License  Agreement for the Hotel.
Except as  hereinabove  provided,  Owner shall not have the right to assign this
Agreement.

         Section 11.06.  Notices. All notices or other  communications  provided
for in this  Agreement  shall be in writing and shall be either hand  delivered,
delivered  by  certified  mail,  postage  prepaid,   return  receipt  requested,
delivered by an overnight  delivery  service,  or delivered by facsimile machine
(with an executed original sent the same day by an overnight  delivery service),
addressed as set forth on Exhibit "B".  Notices shall be deemed delivered on the
date that is four (4)  calendar  days after the notice is  deposited in the U.S.
mail (not  counting  the mailing  date) if sent by certified  mail,  or, if hand
delivered,  on the date the hand  delivery is made, or if delivered by facsimile
machine, on the date the transmission is made. If given by an overnight

                                       21
<PAGE>

delivery service,  the notice shall be deemed delivered on the next business day
following  the date that the notice is  deposited  with the  overnight  delivery
service.  The addresses  given above may be changed by any party by notice given
in the manner provided herein.

         Section  11.07.  Documents.  Owner shall furnish  Manager copies of all
leases, title documents,  property tax receipts and bills, insurance statements,
all financing  documents  (including notes and mortgages)  relating to the Hotel
and such other documents pertaining to the Hotel as Manager shall request.

         Section 11.08. Defense. Manager shall defend and/or settle any claim or
legal  action  brought  against  Manager  or  Owner,  individually,  jointly  or
severally in connection  with the  operation of the Hotel.  Manager shall retain
and  supervise  legal  counsel,   accountants  and  such  other   professionals,
consultants and specialists as Manager deems appropriate to defend and/or settle
any such claim or cause of  action.  Owner  shall have the right to  participate
actively in the defense of any such claim or cause of action in which Owner is a
named defendant. Owner's approval shall be required with respect to any proposed
settlement  of any claim or cause of action in which  Owner is a named  party or
that is not covered by insurance  (excluding any deductible  amount specified in
the applicable policy of insurance).  Manager shall confer with Owner concerning
any  settlement  proposal that Manager is considering  accepting,  regardless of
whether Owner is a named party,  but Owner's  approval  shall not be required if
Owner is not a named  party and the  settlement  is  covered by  insurance.  All
liabilities,  costs, and expenses,  including attorneys' fees and disbursements,
incurred in defending  and/or  settling any such claim or legal action which are
not covered by insurance shall be paid by Owner.

         Section  11.09.  Waivers.  No  failure  or delay by Manager or Owner to
insist upon the strict performance of any covenant, agreement, term or condition
of this Agreement, or to exercise any right or remedy consequent upon the breach
thereof,  shall constitute a waiver of any such breach or any subsequent  breach
of such covenant, agreement, term or condition. No covenant, agreement, term, or
condition of this  Agreement and no breach  thereof shall be waived,  altered or
modified except by written  instrument.  No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this  Agreement  shall  continue in full force and effect with respect to any
other then existing or subsequent breach thereof.

         Section  11.10.   Changes.  Any  change  to  or  modification  of  this
Agreement,  including, without limitation, any change in the application of this
Agreement to the Hotel,  must be evidenced by a written  document signed by both
parties hereto.

         Section 11.11.  Captions. The captions for each Article and Section are
intended for convenience only.

         Section 11.12. Severability.  If any of the terms and provisions hereof
shall be held invalid or  unenforceable,  such  invalidity  or  unenforceability
shall not affect any of the other terms or provisions hereof.  If, however,  any
material part of a party's rights under this Agreement shall be declared invalid
or  unenforceable   (specifically  including  Manager's  right  to  receive  its
Management Fees), the party whose rights have been

                                       22
<PAGE>

declared  invalid  or  unenforceable  shall have the  option to  terminate  this
Agreement  upon thirty (30) days'  written  notice to the other  party,  without
liability on the part of the terminating party.

         Section 11.13.  Interest. Any amount payable to Manager or Owner by the
other which has not been paid when due shall  accrue  interest at the lesser of:
(a) the highest legal limit in the state in which the Hotel is located,  (b) the
highest legal limit in the state of Tennessee, or (c) two percentage points (2%)
over the published  base rate of interest  charged by Citibank,  N.A., New York,
New York, to borrowers on ninety (90) day  unsecured  commercial  loans,  as the
same may be changed from time to time.

         Section  11.14.  Reimbursement.  The  performance  by  Manager  of  its
responsibilities  under this  Agreement  are  conditioned  upon Owner  providing
sufficient  funds to Manager on a timely basis to enable  Manager to perform its
obligations hereunder.  Nevertheless,  Manager shall be entitled, at its option,
after first providing not less than ten (10) days' prior written notice to Owner
specifying  the  obligations  to be  satisfied  and the  amount  of  money to be
advanced,  to advance funds or contribute  property,  on behalf of the Owner, to
satisfy  obligations of Owner in connection  with the Hotel and this  Agreement.
Manager shall keep  appropriate  records to document all  reimbursable  expenses
paid by Manager,  which records shall be made  available for inspection by Owner
or its agents upon request. Owner agrees to reimburse Manager with interest upon
demand for money paid or property  contributed by Manager to satisfy obligations
of Owner in  connection  with the Hotel and this  Agreement.  Interest  shall be
calculated  at the rate set  forth in  Section  11.13  from the date  Owner  was
obligated to remit the funds or contribute the property for the  satisfaction of
such obligation to the date reimbursement is made.

         Section  11.15.  Travel and  Out-of-Pocket  Expenses.  Manager shall be
reimbursed for all  reasonable  travel and  out-of-pocket  expenses of Manager's
employees  reasonably  incurred in the performance of this Agreement,  provided,
however,  that travel and  out-of-pocket  expenses  of officers of Manager,  its
parent and affiliates  shall not be  reimbursable  by Owner.  Manager shall have
sole  discretion,  which shall not be unreasonably  exercised,  to determine the
necessity for such travel or other expenses.

         Section  11.16.  Set  off.  Without  prejudice  to  Manager's  right to
terminate this Agreement  pursuant to the provisions of this Agreement,  Manager
may at any time and without  notice to Owner set off or transfer any sum or sums
held by Manager or other  affiliate  of Promus  Hotels,  Inc. to the order or on
behalf of Owner or Fee Owner or  standing to the credit of Owner or Fee Owner in
the Bank Account(s) in or towards  satisfaction of any of Owner's liabilities to
Manager in respect of all sums due to Manager under the terms of this Agreement.

         Section 11.17. Third Party  Beneficiary.  This Agreement is exclusively
for the  benefit of the  parties  hereto and it may not be enforced by any party
other than the parties to this Agreement and shall not give rise to liability to
any third party other than the authorized  successors and assigns of the parties
hereto.

                                       23
<PAGE>

         Section 11.18.  Brokerage.  Manager and Owner  represent and warrant to
each other that neither has sought the services of a broker,  finder or agent in
this transaction,  and neither has employed, nor authorized, any other person to
act in such capacity. Manager and Owner each hereby agrees to indemnify and hold
the other harmless from and against any and all claims, loss, liability,  damage
or expenses (including  reasonable  attorneys' fees) suffered or incurred by the
other  party as a result of a claim  brought  by a person or entity  engaged  or
claiming to be engaged as a finder, broker or agent by the indemnifying party.

         Section 11.19. Survival of Covenants.  Any covenant,  term or provision
of this Agreement which, in order to be effective,  must survive the termination
of this Agreement, shall survive any such termination.

         Section 11.20. Estoppel Certificate. Manager and Owner agree to furnish
to the other party, from time to time upon request,  an estoppel  certificate in
such reasonable  form as the requesting  party may request stating whether there
have been any defaults  under this Agreement  known to the party  furnishing the
estoppel  certificate and such other information relating to the Hotel as may be
reasonably requested.

         Section  11.21.  Other  Agreements.  Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall be
deemed to modify any other  agreement  between Owner and Manager with respect to
the Hotel or any other  property.  This  Agreement,  together  with the  Comfort
Letter,  contains the entire agreement  between Owner and Manager  regarding the
management of the Hotel.

         Section 11.22.  Periods of Time.  Whenever any  determination  is to be
made or action is to be taken on a date  specified  in this  Agreement,  if such
date shall fall on a  Saturday,  Sunday or legal  holiday  under the laws of the
states of Tennessee and Virginia and/or the state in which the Hotel is located,
then in such event said date  shall be  extended  to the next day which is not a
Saturday, Sunday or legal holiday.

         Section 11.23.  Preparation of Agreement.  This Agreement  shall not be
construed more strongly  against  either party  regardless of who is responsible
for its preparation.

         Section 11.24.  Exhibits. All exhibits attached hereto are incorporated
herein by reference  and made a part hereof as if fully  rewritten or reproduced
herein.

         Section  11.25.  Attorneys'  Fees and Other Costs.  The parties to this
Agreement  shall bear their own attorneys'  fees in relation to negotiating  and
drafting this Agreement. Should Owner or Manager engage in litigation to enforce
their respective  rights pursuant to this Agreement,  the prevailing party shall
have the right to indemnity by the  non-prevailing  party for an amount equal to
the prevailing  party's  reasonable  attorneys'  fees,  court costs and expenses
arising therefrom.

         Section  11.26.  Agreement  Not an  Interest  in  Real  Property.  This
Agreement  is not,  and shall not be deemed at any time to be or to  create,  an
interest in real estate or a

                                       24
<PAGE>

lien or other  encumbrance of any kind whatsoever  against the Hotel or the land
on which it is erected.

         Section 11.27.  Acquisition Loan;  Agency Coupled With an Interest;  No
Termination While the Acquisition Loan Remains  Outstanding.  In accordance with
the Purchase Agreement (as herein defined), that certain Agreement of Sale dated
August 6, 1999 by and among Hampton Inns, Inc., Promus Hotels Florida,  Inc. and
Promus  Hotels,  Inc.,  as sellers,  and Fee Owner,  as buyer,  and that certain
Agreement of Sale dated October 5, 1999 between  Hampton Inns,  Inc., as seller,
and Fee  Owner,  as buyer  (as the same  have been  amended,  collectively,  the
"Existing Purchase Agreement"),  Promus Hotels, Inc. (in its capacity as lender,
the  "Acquisition  Lender") has loaned to Fee Owner the sum of $68,569,500  (the
"Acquisition  Loan") as purchase  money  financing  for the  acquisition  of the
properties (the  "Properties")  conveyed pursuant to the Purchase  Agreement and
the Existing Purchase Agreement. The Acquisition Loan is evidenced by (i) a note
of Fee Owner dated September 20, 1999 in the amount of $26,625,000,  (ii) a note
of Fee Owner dated October 5, 1999 in the amount of $7,350,000,  (iii) a note of
Fee Owner dated November 29, 1999 in the amount of  $30,210,000  and (iv) a note
of Fee Owner of even date  herewith in the amount of  $4,384,500  and is secured
by, among other things, mortgage(s),  deed(s) of trust or deed(s) to secure debt
dated  September  20, 1999,  October 5, 1999,  November 29, 1999 or of even date
herewith from Fee Owner or its  wholly-owned  subsidiary which encumbers some or
all of the Properties, which may include the Hotel (the documents evidencing and
securing the Acquisition  Loan herein referred to as the  "Acquisition  Mortgage
Documents").  Owner and  Manager  specifically  acknowledge  and agree  that (i)
Acquisition  Lender has been induced,  in part, to make the Acquisition  Loan to
Fee Owner  based  upon  Owner's  agreement  to enter  into this  Agreement  with
Manager,  (ii)  Acquisition  Lender  required Owner to enter into this Agreement
with Manager as a condition to making the Acquisition  Loan so that (inter alia)
Manager could  facilitate  the repayment of the  Acquisition  Loan in accordance
with its terms by managing and operating the Hotel in accordance  with the terms
of this Agreement, and (iii) it is the parties' intention that Owner's retention
of Manager to  operate  the Hotel  pursuant  to the terms of this  Agreement  is
intended to, and shall,  create an "agency coupled with an interest" in favor of
Manager, which agency shall be irrevocable unless and until the Acquisition Loan
is  repaid  in full.  Manager  shall be  entitled  to the  legal  and  equitable
protections  that the status of an agent  coupled  with an  interest  confers on
Manager for so long as the Acquisition  Loan remains  outstanding.  Accordingly,
(x) no  purported  termination  of  this  Agreement  by  Owner  for  any  reason
whatsoever (including, without limitation, any purported termination pursuant to
Article 8 or Article 9) shall be effective unless and until the Acquisition Loan
shall have been repaid in full,  and (y) Manager shall have the right and option
to extend the Term of this Agreement indefinitely for so long as the Acquisition
Loan remains  outstanding.  The  provisions  of this  Section  shall take effect
notwithstanding anything to the contrary set forth in this Agreement.

         Section 11.28. Counterparts.  This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original.

                                       25
<PAGE>

         The parties have  respectively  caused this Agreement to be executed as
of the respective dates shown below.

                                           OWNER:

  /s/ Tina R. Hansen                       APPLE SUITES MANAGEMENT,
---------------------------                INC., a Virginia corporation
Witness:

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

                                              Date: 12/22/99

                                           MANAGER:

  /s/ Glenda Long                          PROMUS HOTELS, INC.
---------------------------
Witness:

                                           By  /s/ Joseph P. Pidkowicz
                                             -------------------------------
                                              Joseph P. Pidkowicz
                                              Vice President

                                              Date: 12/16/99

<PAGE>

                                   EXHIBIT "A"

                                LICENSE AGREEMENT

                                       A-1

<PAGE>

                                   EXHIBIT "B"

                               DEAL SPECIFIC TERMS

TERM:                                 Fifteen (15) years from the Effective Date

INITIAL MINIMUM BALANCE
FOR THE BANK ACCOUNT(S)  :            $75,000

INITIAL OWNER'S REPRESENTATIVE:       Doug Schepker

DISBURSEMENT PRIORITY SCHEDULE:

         Each fiscal month  Manager,  on behalf of Owner,  shall  disburse funds
from the Bank  Account(s) in the  following  order of priority and to the extent
available:

         (a)      all fees,  assessments  and charges due and payable  under the
                  License Agreement when issued;

         (b)      the  Management  Fee,  but  excluding,   to  the  extent  then
                  applicable, the Subordinated Management Fee;

         (c)      all reimbursable expenses due Manager;

         (d)      all other Hotel  operating  costs (herein and in the Agreement
                  referred to as "operating  costs"), as such costs and expenses
                  are  defined  under the  accounting  practices  of  Manager in
                  conformity  with  generally  accepted   accounting   practices
                  consistently applied,  specifically including, but not limited
                  to,  (i)  the  cost  of  operating   equipment  and  operating
                  supplies,   wages,  salaries  and  employee  fringe  benefits,
                  advertising  and promotional  expenses,  the cost of personnel
                  training  programs,   utility  and  energy  costs,   operating
                  licenses  and  permits,  grounds and  landscaping  maintenance
                  costs  and  equipment   rentals  approved  by  Manager  as  an
                  operating cost; (ii) all expenditures made for maintenance and
                  repairs  to keep  the  Hotel  in good  condition  and  repair,
                  specifically  excluding expenditures for Capital Replacements;
                  and (iii)  premiums  and  charges on the  insurance  coverages
                  specified in Exhibit "D" incurred  after the  Effective  Date.
                  There shall be excluded from the operating  costs of the Hotel
                  the  following,  which shall be ownership  costs of the Hotel:
                  (i)  depreciation  of the  Hotel,  furnishings,  fixtures  and
                  equipment;  (ii) rental pursuant to a ground lease, if any, or
                  the Percentage  Lease or any other lease payments;  (iii) debt
                  service   (interest   and   principal)   on  any   mortgage(s)
                  encumbering  Owner's leasehold interest in, and/or Fee Owner's
                  fee  interest  in,  the  Hotel;   (iv)   property   taxes  and
                  assessments;  (v) expenditures for Capital Replacements;  (vi)
                  audit,  legal and other  professional  or special fees;  (vii)
                  premiums  for  insurance

                                      B-1
<PAGE>

                  coverages specified in Exhibit "E"; (viii)  administrative and
                  general  expenses  and   disbursements  of  Owner,   including
                  compensation  of employees of Owner;  (ix) Federal,  State and
                  local  Franchise and Income Taxes;  (x)  amortization  of bond
                  discounts  and  mortgage  expenses;  (xi)  deposits  into  the
                  Reserve  Fund or amounts held  pursuant to Section  3.01(xix);
                  and (xiii)  such other costs or  expenses  which are  normally
                  treated as ownership  costs under the accounting  practices of
                  Manager  in  conformity  with  generally  accepted  accounting
                  practices consistently applied;

         (e)      the  following  ownership  costs,  disbursed in the  following
                  order of priority and to the extent available:

                  (i)      an amount  (annualized) to satisfy land, building and
                           personal property taxes and assessments;

                  (ii)     an amount  (annualized)  to satisfy the  premiums for
                           the  insurance  required  to be  obtained by Owner in
                           accordance with Exhibit "E";

                  (iii)    the  amount  to be  deposited  in  the  Reserve  Fund
                           pursuant to Section 4.01(d); and

                  (iv)     any   ground   lease   payments,   but   specifically
                           excluding, except as specifically itemized above, any
                           sums  payable by Owner to Fee Owner  pursuant  to the
                           Percentage Lease;

         (f)      Owner's Basic Return;

         (g)      the Subordinated Management Fee;

         (h)      payments of  principal,  interest and other sums payable under
                  the Acquisition Loan;

         (i)      any payments  not  specifically  contemplated  above which are
                  required  to be paid by Owner  to Fee  Owner  pursuant  to the
                  Percentage Lease; and

         (j)      except as provided  above,  debt service upon any  mortgage(s)
                  encumbering the Hotel and any capital lease payments.

         After the  disbursements set forth above, any excess funds remaining in
the Bank  Account(s)  over the Minimum Balance shall be distributed to Owner. If
after making the disbursements  set forth above,  there shall be a deficiency in
the  Minimum  Balance,  Owner  shall  immediately  provide  such funds as may be
required to maintain the Minimum Balance in the Bank Account(s).

                                      B-2
<PAGE>

                  NOTICES:

                  Owner:                    Apple Suites Management, Inc.
                                            306 East Main Street
                                            Richmond, Virginia 23219
                                            Fax:     804/782-9302
                                            Attention:   Mr. Glade M. Knight

                                                     with a copy to:

                                            Jenkens & Gilchrist
                                            1445 Ross Avenue, Suite 3200
                                            Dallas, Texas 75202-2799
                                            Fax:     214/855-4300
                                            Attention:   Thomas E. Davis, Esq.

                  Manager:                  Promus Hotels, Inc.
                                            755 Crossover Lane
                                            Memphis, Tennessee 38117
                                            Fax:     901/374-5050
                                            Attention:   Corporate Secretary

                                                     with a copy to:

                                            Dewey Ballantine LLP
                                            1301 Avenue of the Americas
                                            New York, New York 10019-6092
                                            Fax:     212/259-6333
                                            Attention:   Graham R. Hone, Esq.

SALE TERMINATION FEE:

         The "Sale  Termination  Fee" shall be: (i) if the  termination  of this
Agreement occurs on or before the second  anniversary of the Effective Date, the
sum of $449,143;  (ii) if the  termination  of this  Agreement  occurs after the
second  anniversary  of the  Effective  Date but on or before  the tenth  (10th)
anniversary  of the Effective  Date, an amount equal to the product of (x) three
(3) times (y) the quotient of the aggregate of the Management Fees earned during
the preceding  twenty-four  (24) month period  divided by two (2);  (iii) if the
termination of this Agreement  occurs after the tenth (10th)  anniversary of the
Effective  Date  but on or  before  the  fourteenth  (14th)  anniversary  of the
Effective  Date,  an amount equal to the product of (x) one and  one-half  (1.5)
times (y) the  aggregate  of the  Management  Fees earned  during the  preceding
twenty-four month period divided by two (2); and (iv) if the termination of this
Agreement occurs after the fourteenth (14th)  anniversary of the Effective Date,
an amount  equal to the  product of (x) the  aggregate  of the  Management  Fees
earned during the preceding  twenty-four  (24) month period  divided by 24 times
(y) the number of full calendar months remaining in the Term.

                                      B-3
<PAGE>

CANCELLATION TERMINATION FEE:

         The "Cancellation  Termination Fee" shall be: (i) if the termination of
this Agreement  occurs after the tenth (10th)  anniversary of the Effective Date
but on or before the fourteenth  (14th)  anniversary  of the Effective  Date, an
amount  equal to the  product  of (x) two (2)  times  (y) the  aggregate  of the
Management Fees earned during the preceding  twenty-four month period divided by
two  (2);  and  (ii) if the  termination  of this  Agreement  occurs  after  the
fourteenth  (14th)  anniversary  of the  Effective  Date, an amount equal to the
product of (x) the aggregate of the Management  Fees earned during the preceding
twenty-four  (24)  month  period  divided  by 24 times  (y) the  number  of full
calendar months remaining in the Term.

ACCOUNTING FEE:   $1,000/month

                                      B-4
<PAGE>

                                   EXHIBIT "C"

                                 MANAGEMENT FEES

         The  "Management  Fee"  shall  mean and  refer  to a fee  equal to four
percent (4%) of Adjusted Gross Revenues (as hereinafter defined) with respect to
each fiscal month during the term of this Agreement, provided, however, that for
the first two years of the term of this  Agreement  a portion of the  Management
Fee equal to one percent (1%) of Adjusted  Gross  Revenues  (such  portion,  the
"Subordinated Management Fee") shall be subordinated to Owner's Basic Return (as
hereinafter  defined).  Manager  and Owner  agree  that,  in light of  Manager's
agreement to  subordinate  the  Subordinated  Management  Fee, the  Subordinated
Management  Fee,  while payable  monthly to the extent  proceeds are  available,
shall be adjusted annually and paid, to the extent Adjusted Gross Revenues after
payment of Owner's Basic Return are available therefor,  within thirty (30) days
of Manager's delivery of the operating  statements  required pursuant to Section
3.01(vi) of the Agreement.  Any Subordinated Management Fee not so paid pursuant
to the provisions of the immediately  preceding sentence shall not thereafter be
payable by Owner.

         The term "Gross  Revenues"  shall be defined as all revenues and income
of any nature derived  directly or indirectly  from the Hotel or from the use or
operation thereof,  whether on or off the Site, including total room sales, food
and beverage sales, if any,  laundry,  telephone,  telegraph and telex revenues,
other income, rental or other payments from lessees,  sublessees,  licensees and
concessionaires  (but  not  the  gross  receipts  of such  lessees,  sublessees,
licensees or concessionaires)  and the proceeds of business  interruption,  use,
occupancy or similar insurance.

         The term "Adjusted  Gross  Revenues" shall be defined as Gross Revenues
less the following revenues actually received by the Hotel and included in Gross
Revenues: (i) any gratuities or service charges added to a customer's bill; (ii)
any credits or refunds made to customers,  guests or patrons; (iii) any sums and
credits received by Owner for lost or damaged merchandise; (iv) any sales taxes,
excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist
taxes or charges;  (v) any proceeds  from the sale or other  disposition  of the
Hotel,  furnishings  and  equipment or other capital  assets;  (vi) any fire and
extended coverage insurance proceeds;  (vii) any condemnation awards; (viii) any
proceeds of financing or refinancing of the Hotel;  and (ix) any interest on the
Bank Account(s).

         The term  "Owner's  Investment"  shall mean the sum of (x) the purchase
price for the Hotel  ("Purchase  Price") as set forth in the  Agreement  of Sale
dated  November 22, 1999 by and between Fee Owner,  as buyer,  and Hampton Inns,
Inc.,  Promus  Hotels  Florida,  Inc.  and Promus  Hotels,  Inc. as sellers (the
"Purchase Agreement") plus (y) all reasonable costs and expenses incurred by Fee
Owner in connection  with  performing  its due diligence in connection  with the
Purchase  Agreement and consummating  the purchase  contemplated by the Purchase
Agreement,  including,  without  limitation,  title and survey fees and charges,
real estate transfer taxes and reasonable attorneys' fees and

                                      C-1
<PAGE>

charges, which shall be deemed to include any such reasonable costs and expenses
incurred or advanced by Cornerstone Realty Income Trust, Inc. or Glade M. Knight
for the benefit of Apple  Suites,  Inc. or Owner and  reimbursed to it or him by
any of Apple Suites,  Inc. or Owner and which are specifically  allocable to the
Hotel or if not  specifically  allocable  allocated on a pro rata basis based on
the  purchase  prices  set  forth in the  Existing  Purchase  Agreement  and the
Purchase  Agreement,  including  the  purchase  price  of any  other  properties
acquired by Fee Owner or its directly or  indirectly  wholly-owned  affiliate(s)
from Manager or its directly or indirectly wholly-owned affiliate(s) pursuant to
the  Purchase  Agreement  after the date hereof but on or prior to December  31,
1999, but specifically excluding fees and charges paid to Apple Suites Advisors,
Inc., Apple Suites Realty Group,  Inc. or any other affiliate of Glade M. Knight
or any fees and charges paid in connection  with offering of common stock in Fee
Owner plus (z) amounts advanced by any of Apple Suites, Inc. or Owner in respect
of the PIP (as defined in the License Agreement) and in respect of Hotel capital
replacement items which are in excess of amounts required to be deposited in the
Reserve Fund from Gross Revenues.

         The term  "Owner's  Basic  Return"  shall mean for the first and second
years, eleven percent (11%) of Owner's Investment.

         Attached  hereto and made a part hereof,  as Exhibit C-1, is an example
of the calculation of, and payment of, the Management Fee (less the Subordinated
Management Fee), the Owner's Basic Return and the Subordinated Management Fee.

                                      C-2
<PAGE>

                                  EXHIBIT "C-1"

                                 MANAGEMENT FEE

                                      C-1-1
<PAGE>

                                   EXHIBIT "D"

                                    INSURANCE

         In accordance with Section 3.01(xv),  Manager shall, on behalf of Owner
and at Owner's expense,  procure the insurance  coverages  hereinafter set forth
and ensure that they are in full force and effect as of the  Effective  Date and
that they remain in full force and effect throughout the Term of this Agreement.
All  cost(s)  and  expense(s)  incurred by Manager in  procuring  the  following
insurance  coverages  shall be  operating  costs and shall be paid from the Bank
Account(s):

<TABLE>
<CAPTION>
Coverages:                                                        Amounts of Insurance
----------                                                        --------------------
<S>                                                               <C>
         Comprehensive General Liability                          $10,000,000 per location

              Including -
              Premises - Operations
              Products/Completed Operations
              Contractual
              Personal Injury
              Liquor Liability/Dram Shop (if applicable)
              Elevators and Escalators

         Automotive Liability                                     $10,000,000

              Owned Vehicles
              Non-Owned Vehicles
              Uninsured Motorist where Required by Statute

         Automobile Physical Damage (Optional)

              Comprehensive                                       (To Value if insured)
              Collision

         Workers' Compensation                                    Statutory

         Employer's Liability                                     $1,000,000

         Fidelity (Employee Dishonesty)                           As required

         Money and Securities                                     As required
</TABLE>

         All  insurance  coverages  provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is  located;  and (ii) that are of good
reputation and of sound and

                                      D-1
<PAGE>

adequate financial responsibility, having a Bests Rating of B+ VI, or better, or
a comparable rating if Bests ceases to publish its ratings or materially changes
its rating standards or procedures.

         Manager shall deliver to Owner duly executed  certificates of insurance
with respect to all of the policies of insurance  procured,  including existing,
additional and renewal policies.

         Each policy of insurance  maintained  in  accordance  with this Exhibit
"D," to the extent  obtainable,  shall specify that such  policies  shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.

         Except as otherwise  provided in the Agreement,  Manager and Owner each
waives,  releases and discharges the other from all claims or demands which each
may have or acquire  against the other,  or against each  other's  subsidiaries,
affiliates,  directors, officers, agents, employees,  independent contractors or
partners,  with respect to any claims for any losses,  damages,  liabilities  or
expenses (including  attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property  or  business  arising out of
the ownership,  management,  operation and maintenance of the Hotel,  regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or  independent  contractors.  Each  policy of  insurance  maintained  in
accordance  with this Exhibit "D" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.

         All policies of insurance  provided for under this Exhibit "D" shall be
carried  in the name of the  Manager.  Owner's  interest  and that of any  other
applicable  party will be included  in the  coverage  by an  additional  insured
endorsement.

         All such  policies  of  insurance  shall be written on an  "occurrence"
basis, with no per location aggregate limitation.

         Either Manager or Owner,  by notice to the other,  shall have the right
to require that the minimum amount of insurance to be maintained with respect to
the Hotel under this Exhibit "D" be increased to make such insurance  comparable
with prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.

         Owner hereby authorizes Manager to utilize the services of and/or place
the  insurance  set  forth  in this  Exhibit  "D"  with  (i) any  subsidiary  or
affiliated  company of Promus Hotels,  Inc. in the insurance business as Manager
deems  appropriate;  or  (ii)  a  third  party  insurance  carrier  meeting  the
specifications set forth above.

                                      D-2
<PAGE>

                                   EXHIBIT "E"

                                    INSURANCE

         In accordance with Section 4.01(iii),  Owner agrees, at its expense, to
procure and maintain the following insurance  coverages,  as reasonably adjusted
from time to time, throughout the Term of this Agreement:

<TABLE>
<CAPTION>
Coverages:                                                    Amounts of Insurance
----------                                                    --------------------
<S>                                                           <C>
         Builders Risk                                        Completed value of the Hotel

              All  risk  for  term  of the  initial  and  any  subsequent  Hotel
              construction and renovation.

         Real and Personal Property                           100% replacement value of building and contents

              Blanket Coverage
              Replacement Cost - all risk
              Boiler Machinery - written on a comprehensive form

         Business Interruption                                Calculated yearly based on estimated Hotel revenues

              Blanket  Coverage for the perils  insured  against  under Real and
              Personal  Property  in  this  Exhibit  "E".  This  coverage  shall
              specifically cover Manager's loss of Management Fees. The business
              interruption  insurance shall be for a twelve (12) month indemnity
              period.

         Owner's Protective Liability                         $10,000,000

              All risks from construction and renovation  occurring prior to the
              Opening Date and all risks from Hotel  construction and renovation
              projects  costing more than $250,000  occurring  after the Opening
              Date.
</TABLE>

         All  insurance  coverages  provided for under this Exhibit "E" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is  located;  and (ii) that are of good
reputation and of sound and adequate  financial  responsibility,  having a Bests
Rating of B+ VI, or better,  or a  comparable  rating if Bests ceases to publish
its ratings or materially changes its rating standards or procedures.

         Owner shall  deliver to Manager  duplicate  copies of either  insurance
policies or certificates of insurance (at Manager's  option) with respect to all
of the  policies of  insurance  procured,  including  existing,  additional  and
renewal policies, and in the case of insurance nearing expiration, shall deliver
duplicate  copies of the insurance  policies or

<PAGE>

certificates  of insurance  with respect to the renewal  policies to Manager not
less than thirty (30) days prior to the respective dates of expiration.

         Each policy of insurance  maintained  in  accordance  with this Exhibit
"E," to the extent  obtainable,  shall specify that such  policies  shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.

         Except as otherwise provided in this Agreement,  Manager and Owner each
waives,  releases and discharges the other from all claims or demands which each
may have or acquire  against the other,  or against each  other's  subsidiaries,
affiliates,  directors, officers, agents, employees,  independent contractors or
partners,  with respect to any claims for any losses,  damages,  liabilities  or
expenses (including  attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property  or  business  arising out of
the ownership,  management,  operation and maintenance of the Hotel,  regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or  independent  contractors.  Each  policy of  insurance  maintained  in
accordance  with this Exhibit "E" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.

         All policies of insurance  provided for under this Exhibit "E" shall be
carried in the name of the Owner and  Manager,  and losses  thereunder  shall be
payable to the parties as their respective  interests may appear.  All liability
policies  shall  name  the  Owner  and  Manager,  and in each  case any of their
affiliated or subsidiary  companies which they may specify, and their respective
directors,   officers,  agents,  employees  and  partners  as  additional  named
insureds.

         All such  policies  of  insurance  shall be written on an  "occurrence"
basis.

         Either Manager or Owner,  by notice to the other,  shall have the right
to require the minimum amount of insurance to be maintained  with respect to the
Hotel under this Exhibit "E" be increased to make such insurance comparable with
prudent  industry  standards  and to reflect  increases in liability  exposures,
taking into account the size and location of the Hotel.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00000-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00000-of-00352.parquet"}]]