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                                   EXHIBIT 4.2

                           CERTIFICATE OF DESIGNATION

                                       OF

                          COUNTRY MAID FINANCIAL, INC.

                            A WASHINGTON CORPORATION

Country Maid Financial, Inc. ("Company"), a corporation organized and existing
under and by virtue of the Washington Business Corporation Act,

        DOES HEREBY CERTIFY:

A. That the Board of Directors of the Company, by unanimous vote at a special
meeting of directors, adopted a resolution on April 29, 1999 proposing and
declaring advisable the following:

        RESOLVED, that the Board of Directors pursuant to the authority
        expressly vested in it by the Articles of Amendment to the Company's
        Articles of Incorporation, filed with the Secretary of State on
        September 23, 1998, designate 500,000 shares of Convertible Class A
        Series I Preferred Stock. The powers, designations, preferences and
        rights are as follows:

        CLASS A SERIES I PREFERRED

        1.0 DIVIDENDS

        1.1 The holders of Class A Series I Preferred Stock are entitled to
cumulative dividends from the date of issue, when and if declared by the Board
of Directors, out of profits or capital legally available for that purpose
according to RCW 23B.06.400, at a rate of eight percent (8%) per annum of the
subscription price which is the amount paid by the holder to the Company as
consideration for the certain number of preferred stock received as recognized
by the Board of Directors ("Subscription Price"). The dividend will be payable
monthly beginning thirty days after the first date of issue. The Board of
Directors has no right to declare a dividend to common shareholders or other
securities ranking junior to the Preferred Stock unless all prior dividends on
the Class A Series I Preferred Stock are paid in full. Distribution by the
Company of dividends on capital stock may result in certain tax effects to
shareholders. No right to any dividends shall accrue to holder under this
paragraph in the event the Company shall fail to declare dividends.

        2.0 CONVERSION

               2.1 The Class A Series I Preferred Stock is convertible at the
option of the holder, but not earlier than twelve (12) months after the date of
the holder's subscription of the Preferred Stock ("Subscription Date"), unless
previously redeemed by the Company, into the nearest whole number of common
stock ("Conversion Shares") the Subscription Price would be able to purchase at
the Company's average common stock price ("Average Stock Price") which will be
equivalent to the mean between the closing bid and asked quotations for the
Company's common stock in the over-the-counter market as quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or any
other reliable quotation system if the common stock is not listed on NASDAQ, for

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the 60 trading days last preceding the date of conversion.

        2.2 Unless the Company, at its election, acts to obtain effectiveness of
a registration statement under the Securities Act covering the Conversion
Shares, the Class A Series I Preferred Stock shall be converted into restricted
common stock as the term "restricted" is defined in Rule 144 under the
Securities Act. The Company has no obligation to register the Conversion Shares.

        2.3 Conversion eliminates all rights and preferences resulting from the
Class A Series I Preferred Stock. The Company covenants that the Conversion
Shares, when issued, will be validly issued, fully paid and non-assessable.

        2.4 No fractional share of common stock will be issued upon conversion
of the Class A Series I Preferred Stock, but if the conversion results in a
fractional share, the Company will, at its option, either round the fractional
share upward to the next whole integer or pay to the converting holder an
amount, in U.S. funds, not less than the cash conversion value of the fractional
interest.

        2.5 In the event the Board of Directors of the Company acts to convert
Class A Series I Preferred Stock, the Company will take all steps reasonably
necessary to permit the conversion of the Class A Series I Preferred Stock and
the issuance of the Conversion Shares under the applicable state securities laws
of those states in which the Class A Series I Preferred Stock is originally
sold. The Company will take any reasonable steps which it determines, in its
sole discretion, are necessary to permit the conversion of the Class A Series I
Preferred Stock and the issuance of the Conversion Shares under the laws of any
other state in which the holder then resides, on the written request to do so by
the holder, but in no event shall the Company be required to consent to the
general service of process in any state other than those states in which the
Class A Series I Preferred Stock being offered is originally sold. If the holder
resides in any state where the Company cannot, with the exercise of reasonable
diligence and without consenting to general service of process, obtain an
exemption for the issuance of the Conversion Shares, the holder may not, as a
result, be able to receive the Conversion Shares in exchange for Class A Series
I Preferred Stock and the Company is under no obligation to issue the Conversion
Shares in those circumstances.

        3.0 REDEMPTION

        3.1 The Class A Series I Preferred Stock is redeemable at any time at
the option of the Company, in whole or in part, upon payment by the Company, in
its sole discretion, of the redemption price consisting of the Average Stock
Price of the Conversion Shares as described above in paragraph 2.1 plus an
amount equal to all declared and accrued dividends ("Redemption Price"). Upon
notice of redemption, Preferred Stockholders shall have a 30-day period after
delivery of the Company's notice to convert the Preferred Stock into Conversion
Shares.

        3.2 No mandatory sinking fund payments or other similar provisions have
been established to redeem the aggregate principal amount of the Class A Series
I Preferred Stock issued, together with dividends, if any.

        4.0 LIQUIDATION

        4.1 If there is a liquidation of the Company, a holder of Class A Series
I Preferred Stock is entitled to a pro rata liquidation preference in an amount
equal to the Subscription Price plus any accrued dividends to the date of
distribution, before any distribution or payment to the holders of common stock
or any other security ranking junior to this class and series of Class A Series
I Preferred Stock .

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        5.0 VOTING

        5.1 The Class A Series I Preferred Stock is entitled to one vote per
share together as one class with common shareholders on all matters upon which
common shareholders are entitled to vote.

        6.0 MISCELLANEOUS

        6.1 There are no restrictions on the Company's ability to sell, lease,
or encumber the assets of the Company. There are no restrictions requiring the
maintenance of any asset ratio or the creation or maintenance of reserves by the
Company. Holders of Class A Series I Preferred Stock have no preemptive rights.
The Class A Series I Preferred Stock, on issuance against full payment of the
purchase price, will be fully paid and nonassessable.

B. That the Board of Directors of the Company, by unanimous vote at a special
meeting of directors, adopted a resolution on April 29, 1999, proposing and
declaring advisable the following:

        RESOLVED, that the Board of Directors pursuant to the authority
        expressly vested in it by the Certificate of Incorporation, designate
        500,000 shares of Convertible Class B Series I Preferred Stock. The
        powers, designations, preferences and rights are as follows:

        CLASS B SERIES I PREFERRED

        1.0 STOCK DIVIDENDS

        1.1 The holders of Class B Series I Preferred Stock are entitled to
cumulative stock dividends from the date of issue, at a rate of eight percent
(8.0%) per annum of the Subscription Price, payable quarterly, by the issuance
of the common stock of the Company based on the Average Stock Price, which will
be equivalent to the mean between the closing bid and asked quotations for the
Company's common stock in the over-the-counter market as quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or any
other reliable quotation system if the common stock is not listed on NASDAQ, for
the 30 trading days last preceding the date of conversion. The Board of
Directors has no right to declare a dividend to common shareholders or other
securities ranking junior to the Class B Series I Preferred Stock unless all
prior dividends on the Class B Series I Preferred Stock have been paid in full.
No right to any dividends shall accrue to holder under this paragraph in the
event the Company shall fail to declare dividends.

        2.0 CONVERSION

        2.1 The Class B Series I Preferred Stock is convertible at the option of
the holder, but not earlier than twelve (12) months after the date of the
holder's subscription of the Preferred Stock ("Subscription Date"), unless
previously redeemed by the Company, into the nearest whole number of common
stock ("Conversion Shares") the Subscription Price would be able to purchase at
the Company's average common stock price ("Average Stock Price") which will be
equivalent to the mean between the closing bid and asked quotations for the
Company's common stock in the over-the-counter market as quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or any
other reliable quotation system if the common stock is not listed on NASDAQ, for
the 60 trading days last preceding the date of conversion.

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        2.2 Unless the Company, at its election, acts to obtain effectiveness of
a registration statement under the Securities Act covering the Conversion
Shares, the Class B Series I Preferred Stock shall be converted into restricted
common stock as the term "restricted" is defined in Rule 144 under the
Securities Act. The Company has no obligation to register the Conversion Shares.

        2.3 Conversion eliminates all rights and preferences resulting from the
Class B Series I Preferred Stock. The Company covenants that the Conversion
Shares, when issued, will be validly issued, fully paid and non-assessable.

        2.4 No fractional share of common stock will be issued upon conversion
of the Class B Series I Preferred Stock, but if the conversion results in a
fractional share, the Company will, at its option, either round the fractional
share upward to the next whole integer or pay to the converting holder an
amount, in U.S. funds, not less than the cash conversion value of the fractional
interest.

        2.5 In the event the Board of Directors of the Company acts to convert
Class B Series I Preferred Stock, the Company will take all steps reasonably
necessary to permit the conversion of the Class B Series I Preferred Stock and
the issuance of the Conversion Shares under the applicable state securities laws
of those states in which the Class B Series I Preferred Stock is originally
sold. The Company will take any reasonable steps which it determines, in its
sole discretion, are necessary to permit the conversion of the Class B Series I
Preferred Stock and the issuance of the Conversion Shares under the laws of any
other state in which the holder then resides, on the written request to do so by
the holder, but in no event shall the Company be required to consent to the
general service of process in any state other than those states in which the
Class B Series I Preferred Stock being offered is originally sold. If the holder
resides in any state where the Company cannot, with the exercise of reasonable
diligence and without consenting to general service of process, obtain an
exemption for the issuance of the Conversion Shares, the holder may not, as a
result, be able to receive the Conversion Shares in exchange for Class B Series
I Preferred Stock and the Company is under no obligation to issue the Conversion
Shares in those circumstances.

        3.0 REDEMPTION

        3.1 The Class B Series I Preferred Stock is redeemable at any time at
the option of the Company, in whole or in part, upon payment by the Company in
its sole discretion of the redemption price consisting of the Average Stock
Price of the Conversion Shares as described above in paragraph 2.1 plus an
amount equal to all declared and accrued dividends ("Redemption Price"). Upon
notice of redemption, Preferred Stockholders shall have a 30-day period after
delivery of the Company's notice to convert the Preferred Stock into Conversion
Shares.

        3.2 No mandatory sinking fund payments or other similar provisions have
been established to redeem the aggregate principal amount of the Class B Series
I Preferred Stock issued, together with dividends, if any.

        4.0 LIQUIDATION

        4.1 If there is a liquidation of the Company, holder of Class B Series I
Preferred Stock is entitled to a pro rata liquidation preference in an amount
equal to the Subscription Price per share plus any amount equal to the value of
the declared and accrued stock dividends to the date of distribution, before any
distribution or payment to the holders of common stock or any other security
ranking junior to this class and series of Class B Series I Preferred Stock.

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        5.0 VOTING RIGHTS

        5.1 The Class B Series I Preferred Stock is entitled to one vote per
share together as one class with common shareholders on all matters upon which
common shareholders are entitled to vote.

        6.0 MISCELLANEOUS

        6.1 There are no restrictions on the Company's ability to sell, lease,
or encumber the assets of the Company. There are no restrictions requiring the
maintenance of any asset ratio or the creation or maintenance of reserves by the
Company. Holders of Class B Series I Preferred Stock have no preemptive rights.
The Class B Series I Preferred Stock, on issuance against full payment of the
purchase price, will be fully paid and nonassessable.

C. That the Board of Directors of the corporation, by unanimous vote at a
special meeting of directors, adopted a resolution on April 29, 1999, proposing
and declaring advisable the following:

        RESOLVED, that the Board of Directors pursuant to the authority
        expressly vested in it by the Certificate of Incorporation, designate
        500,000 shares of Convertible Class C Series I Preferred Stock. The
        powers, designations, preferences and rights are as follows:

        CLASS C SERIES I PREFERRED

        1.0 NO DIVIDENDS

        1.1 The holders of Class C Series I Preferred Stock are not entitled to
dividends.

        2.0 CONVERSION

        2.1 The Class C Series I Preferred Stock is convertible at the option of
the holder, but not earlier than twelve (12) months after the date of the
holder's subscription of the Preferred Stock ("Subscription Date"), unless
previously redeemed by the Company, into the nearest whole number of common
stock ("Conversion Shares") the Subscription Price would be able to purchase at
the Company's average common stock price ("Average Stock Price") which will be
equivalent to the mean between the closing bid and asked quotations for the
Company's common stock in the over-the-counter market as quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or any
other reliable quotation system if the common stock is not listed on NASDAQ, for
the 60 trading days last preceding the date of conversion.

        2.2 Unless the Company, at its election, acts to obtain effectiveness of
a registration statement under the Securities Act covering the Conversion
Shares, the Class C Series I Preferred Stock shall be converted into restricted
common stock as the term "restricted" is defined in Rule 144 under the
Securities Act. The Company has no obligation to register the Conversion Shares.

        2.3 Conversion eliminates all rights and preferences resulting from the
Class C Series I Preferred Stock. The Company covenants that the Conversion
Shares, when issued, will be validly issued, fully paid and non-assessable.

        2.4 No fractional share of common stock will be issued upon conversion
of the Class C

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Series I Preferred Stock, but if the conversion results in a fractional share,
the Company will, at its option, either round the fractional share upward to the
next whole integer or pay to the converting holder an amount, in U.S. funds, not
less than the cash conversion value of the fractional interest.

        2.5 In the event the Board of Directors of the Company acts to convert
Class C Series I Preferred Stock, the Company will take all steps reasonably
necessary to permit the conversion of the Class C Series I Preferred Stock and
the issuance of the Conversion Shares under the applicable state securities laws
of those states in which the Class C Series I Preferred Stock is originally
sold. The Company will take any reasonable steps which it determines, in its
sole discretion, are necessary to permit the conversion of the Class C Series I
Preferred Stock and the issuance of the Conversion Shares under the laws of any
other state in which the holder then resides, on the written request to do so by
the holder, but in no event shall the Company be required to consent to the
general service of process in any state other than those states in which the
Class C Series I Preferred Stock being offered is originally sold. If the holder
resides in any state where the Company cannot, with the exercise of reasonable
diligence and without consenting to general service of process, obtain an
exemption for the issuance of the Conversion Shares, the holder may not, as a
result, be able to receive the Conversion Shares in exchange for Class C Series
I Preferred Stock and the Company is under no obligation to issue the Conversion
Shares in those circumstances.

        3.0 REDEMPTION

        3.1 The Class C Series I Preferred Stock is redeemable at any time at
the option of the Company, in whole or in part, upon payment by the Company in
its sole discretion of the redemption price consisting of the Average Stock
Price of the Conversion Shares as described above in paragraph 2.1 ("Redemption
Price"). Upon notice of redemption, Preferred Stockholders shall have a 30-day
period after delivery of the Company's notice to convert the Preferred Stock
into Conversion Shares.

        3.2 No mandatory sinking fund payments or other similar provisions have
been established to redeem the aggregate principal amount of the Class C Series
I Preferred Stock issued.

        4.0 LIQUIDATION

        4.1 If there is a liquidation of the Company, holder of Class C Series I
Preferred Stock is entitled to a pro rata liquidation preference in an amount
equal to the Subscription Price per share, before any distribution or payment to
the holders of common stock or any other security ranking junior to this class
and series of Class C Series I Preferred Stock.

        5.0 VOTING RIGHTS.

        5.1 The Class C Series I Preferred Stock is entitled to one vote per
share together as one class with common shareholders on all matters upon which
common shareholders are entitled to vote.

        6.0 MISCELLANEOUS

        6.1 There are no restrictions on the Company's ability to sell, lease,
or encumber the assets of the Company. There are no restrictions requiring the
maintenance of any asset ratio or the creation or maintenance of reserves by the
Company. Holders of Class C Series I Preferred Stock have no preemptive rights.
The Class C Series I Preferred Stock, on issuance against full payment of the
purchase price, will be fully paid and nonassessable.

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        IN WITNESS WHEREOF, the Company has caused this certificate to be signed
by C. Richard Kearns, its Chief Executive Officer.

                                COUNTRY MAID FINANCIAL, INC.
                                a Washington corporation

                                By: C. Richard Kearns, Chief Executive Officer

                                State of Oregon
                                County of

                                I certify that I know or have satisfactory
                                evidence that C. Richard Kearns is the
                                person who appeared before me, and said
                                person acknowledged that he signed this
                                instrument, on oath stated that he was
                                authorized to execute the instrument and
                                acknowledged it as the Chief Executive
                                Officer of Country Maid Financial, Inc. to
                                be the free and voluntary act of such party
                                for the uses and purposes mentioned in the
                                instrument.

                                Dated:

                                Signature

                                        Title
                                        My appointment expires

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                                  EXHIBIT 10.1

                              MANAGEMENT AGREEMENT

DATED:

BETWEEN: Territorial Inns Management, Inc.                     ("MANAGER")
         a Nevada corporation

AND:                                , Inc.,                     ("OWNER")
               a                     corporation

1.0 RECITALS

        1.1 MANAGER has experience in the field of motel management and has
operated motels in various areas throughout the United States for several years.

        1.2 OWNER is the owner of the motel properties listed on Exhibit A
attached hereto and made a part hereof (individually, a "PROPERTY" and
collectively, the "PROPERTIES"), and is desirous of engaging the Manager for the
purposes of applying its knowledge and experience in the field of motel
management and as advisor of the Properties.

2.0 SERVICES

        2.1 MANAGER does hereby agree to apply its knowledge and experience in
the field of motel management for the benefit of OWNER, as those abilities may
be applied to the PROPERTIES. The services shall be evidenced by application of
market criteria, cost criteria, purchasing criteria and employment criteria
available to MANAGER and developed by the MANAGER, all for the purposes of
managing the PROPERTIES. The MANAGER shall also act in an advisory capacity to
OWNER in the event any recommendations of MANAGER would have the effect of
requiring an administrative and/or corporate action to implement the operations
of OWNER.

        2.2 The specific services to be performed by the MANAGER and the powers
conferred to MANAGER for the performance of the services, are as follows:

        (a)    to oversee the application of budgetary controls and criteria in
               the operation of the PROPERTIES in accordance with an approved
               budget.

(b) to set up and oversee all financial reporting procedures necessary for
proper, expeditious and usable monthly, quarterly or annual accounting for the
PROPERTIES.

(c) to set up and oversee the analysis of all financial reports relative to
operation, and report to OWNER as to deficiencies in the operation which result
in certain operational expenses or income as a result of operation being
adversely in deviation with the budgetary criteria set up for each specific
category.

(d) to pay all operational bills, including but not limited to, rent, taxes,
payroll, insurance and disposable operational items from amounts authorized to
be disbursed from the concentration accounts

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and certain other bank accounts of OWNER in accordance with an approved budget.

(e) to have full power, authority and responsibility to, on behalf of OWNER,
operate the PROPERTIES in the following particulars:

                (1)     including the staffing of the PROPERTIES with adequate
                        personnel, with complete authority to hire and discharge
                        said personnel at the sole discretion of MANAGER All
                        personnel so hired, including an on site manager shall
                        be hired for or in behalf of OWNER and payment for their
                        compensation shall be paid out of the funds of OWNER as
                        earlier set out herein;

                (2)     to order supplies and other materials from any
                        designated source, at the sole discretion of the
                        MANAGER;

                (3)     to determine the type and amount of promotional sales
                        aids to be used for the PROPERTIES;

                (4)     to determine and contract for, on behalf of OWNER any
                        and all work to be performed at the PROPERTIES in
                        connection with the capital improvement program and any
                        and all other necessary repairs required on the
                        PROPERTIES in accordance with an approved budget;

                (5)     to keep OWNER advised as to any necessary compliance
                        with all local, state and federal laws which govern the
                        operation of the PROPERTIES;

                (6)     to do any and all other things not herein enumerated
                        which are required for the successful and economical
                        operation of the PROPERTIES.

(f) to contract for and maintain property damage, liability, workmen's
compensation and all other necessary insurance to adequately protect OWNER and
its property. The amount of insurance to be carried shall be jointly determined
by MANAGER and OWNER. All insurance premiums shall be paid for out of OWNERS
funds;

(g) to hire and contract for services, on OWNERS behalf, of accountants,
attorneys and any and all other professional services required, not only for the
operation of the PROPERTIES but for the protection of any and all other
professional services required but for the protection of any and all legal
rights arising therefrom. Any and all employment so contracted shall be at the
sole expense of OWNER and the OWNER shall be liable for the fees incurred for
said performances.

        2.3 All of the above-outlined services and the advice pertaining thereto
shall be rendered in consideration for the management fee provided for herein,
but in no respect by the rendering of these services shall any of the costs of
performance of those services not directly employed by the MANAGER as employees
of the MANAGER be the responsibility of or be paid by the MANAGER, i.e.,
accountants, lawyers, operational employees and on site manager.

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3.0     MANAGEMENT FEE

        3.1 OWNER does hereby engage the services of the MANAGER for the purpose
of managing the PROPERTIES and for those services shall pay to MANAGER the
following amounts only, which fees shall be based upon the aggregate performance
of the PROPERTIES as a group:

(a) a base management fee payable monthly equal to ___% per annum of gross
revenues after the payment of all sales taxes ("ADJUSTED GROSS REVENUES") (the
"BASE MANAGEMENT FEE");

        [THE COMPANY MAY ELECT TO INCLUDE AN INCENTIVE FEE]

(b) a first level incentive fee equal to ___% of ADJUSTED GROSS REVENUES (to a
total of 5.0% of ADJUSTED GROSS REVENUES) payable monthly with any necessary
adjustments at the end of the calendar year in question, if the Properties have
achieved a level of net operating income (without deduction for a first level
incentive fee) sufficient to pay debt service on the loan as set forth in the
loan agreement (the "FIRST LEVEL INCENTIVE FEE"); and

(c) a second level incentive fee equal to ___% of ADJUSTED GROSS REVENUES (to a
total of 6.0% of ADJUSTED GROSS REVENUES) payable at the end of the calendar
year in question, if the PROPERTIES have achieved a level of net operating
income equal to the projections prepared by the noteholders as set forth in the
loan agreement (the "SECOND LEVEL INCENTIVE FEE"). The SECOND LEVEL INCENTIVE
FEE shall be payable thirty (30) days following the delivery of audited
financial statements to the noteholders for the calendar year to which said
installment relates.

        3.2 The amount to be paid MANAGER under this AGREEMENT shall be the
total compensation received by MANAGER and shall be used by MANAGER to pay all
the employees of MANAGER as well as any and all expenses of MANAGER incurred in
the performance of its duties hereunder. All employees necessary for the
operation of the PROPERTIES, including on site motel managers, shall be the
expense of OWNER and shall not be a setoff in any manner against the management
fee to be paid MANAGER under the terms of this AGREEMENT. It is contemplated
under the terms of this AGREEMENT that the employees of the MANAGER will operate
out of the offices of the MANAGER located in Lebanon, Oregon, and will be
separate and distinct from the operational employees necessary for the direct
management and operations of the PROPERTIES.

4.0 TERM OF AGREEMENT

        4.1 All parties to this AGREEMENT are aware of the costs and expenses
which will necessarily be incurred by MANAGER in preparation for and beginning
the performance required of it under the terms and conditions of this AGREEMENT,
and it is therefore agreed by the parties that the primary term of this
AGREEMENT shall be for a term of not less than five (5) years and that OWNER
may, at its sole option, extend the term of this AGREEMENT for one (1)
additional period of not less than five (5) years by giving verbal or written
notice of its intention to so exercise its option, thirty (30) days prior to the
expiration of the primary term of this AGREEMENT.

        4.2 The parties may terminate this AGREEMENT for a material breach of
the AGREEMENT.

5.0 MANAGER/OWNER RELATIONSHIP

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        5.1 Nothing contained in this AGREEMENT, nor any the definitions or
designations contained in this AGREEMENT, shall make the relationship created by
this AGREEMENT of MANAGER to OWNER anything other than that of an independent
contractor. The acts of MANAGER shall not be binding upon or criteria liability
for or on behalf of OWNER without OWNER'S express consent; except, that neither
the acts of the employees of the OWNER, nor the acts of any persons who were or
are hired by the MANAGER on behalf of OWNER, nor the acts of those whose
services are contracted for by the MANAGER on behalf of the OWNER, shall in
anyway be the responsibility of or create any liability on the part of the
MANAGER to the OWNER or to any third persons. OWNER shall indemnify and hold
harmless the MANAGER from any liability or responsibility of the acts of all
persons other than MANAGER or MANAGER'S employees.

6.0     LIMITATION OF MANAGER AUTHORITY

        6.1 MANAGER shall have no authority and shall not without the consent of
the OWNER:

        (a)     obligate OWNER for, or otherwise purchase or lease any capital
                item costing more than five thousand dollars ($5,000), including
                but not limited to equipment or redecorating or structural
                changes;

        (b)     utilize any company funds for any purpose not directly connected
                with the operation of the PROPERTIES;

7.0 COVENANTS

        7.1 MANAGER will comply with all the rules and regulations of the OWNER
and shall be governed by the decisions of the OWNER and shall follow such
instructions and directives that may be given to it by OWNER from time to time.

        7.2 OWNER acknowledges that MANAGER will reveal to it various trade
secrets and confidential information including but not limited to methods of
operation and training methods. OWNER covenants that it will not disclose to
anyone, either during or after the term of this AGREEMENT, any trade secrets or
confidential information disclosed by MANAGER by virtue of its association with
OWNER under the terms of this AGREEMENT.

8.0 NOTICES

        8.1 Any notice required or permitted to be given under this AGREEMENT
shall be in writing and shall be deemed to have been given when deposited in the
United States Postal Service, registered or certified mail, postage prepaid,
return receipt requested, and addressed as follows:

        If to MANAGER:                             With a copy to

        Territorial Inns Management, Inc.          Jones Law Group, P.L.L.C.
        P.O. Box 942                               2300 130th Avenue N.E.
        Lebanon, OR  97355                         Bellevue, WA  98005

        If to OWNER:                               With a copy to:

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

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

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

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        8.2 Either party may, from time to time by notice, as provided,
designate a different address or addresses to which notice shall be sent.

9.0 GENERAL PROVISIONS

        9.1 Entire Agreement. This AGREEMENT constitutes the sole and only
agreement between the parties and supersedes any prior understanding either oral
or written between the parties. This AGREEMENT cannot be amended, altered or
abridged in any paragraph, unless it is done in writing signed by both parties.

        9.2 Severability. If any term or provision of this AGREEMENT or the
application to any person or circumstance shall to any extent be invalid or
unenforceable in any jurisdiction, the remainder of this AGREEMENT and
application of such term or provision to persons or circumstances other than
those to which it is held invalid or unenforceable or in any other jurisdiction
shall not be affected, and each term or provision of this AGREEMENT shall be
valid and enforceable to the fullest extent permitted by law.

        9.3 No Waiver. No waiver or modification of any of the provisions of
this AGREEMENT shall be valid unless in writing and signed by or on behalf of
the party granting such waiver or modification. No waiver by any party of any
breach or default hereunder shall be deemed a waiver of any repetition of such
breach or default or shall be deemed a waiver of any other breach or default,
nor shall it in any way affect any of the other terms or conditions of this
AGREEMENT or the enforceability thereof.

        9.4 Non Assignment and Successors. Neither this AGREEMENT nor any of the
rights or duties hereunder may be assigned, transferred, or delegated without
prior written agreement of both parties. This AGREEMENT shall be binding upon
and, shall inure to the benefit of the parties and their respective successors
and permitted assigns.

        9.5 Attorneys' Fees. If any party brings any suit or action against the
other for relief, declaratory or otherwise, arising out of this AGREEMENT, the
prevailing party shall have and recover against the other party all costs and
disbursements, including reasonable attorneys fees, in the action and on appeal.

        9.6 Choice Of Law/Venue. This AGREEMENT shall be governed by the laws of
the State of Oregon. Any legal disputes resulting from the execution or
performance of this AGREEMENT shall be brought solely in the Courts of the State
of Oregon, Linn County.

        9.7 Counterparts. This AGREEMENT may be signed in counterparts.

                                       5
<PAGE>   6

10.0 EXECUTING SIGNATURES

        10.1 IN WITNESS WHEREOF, the parties have signed this AGREEMENT.

MANAGER:                                       OWNER:

TERRITORIAL INNS MANAGEMENT, INC.

---------------------------------              ---------------------------------
By:                                            By:
   ------------------------------                 ------------------------------
Its:                                           Its:
    -----------------------------                  -----------------------------

                                       6
<PAGE>   7

                                    EXHIBIT A

                                 THE PROPERTIES

                                       7

<PAGE>   8

                             SCHEDULE OF PROPERTIES
                UNDER FORM OF MANAGEMENT AGREEMENT (EXHIBIT 10.1)

Best Western I-35 Inn
4014 Miller St.
Bethany, MO  64424
Owner:  Territorial Inns, an Oregon
        partnership

Select Inn
100 Bulldog Blvd.
Borger, TX  79007
Owner: LHA, LLC

Willow Springs
5 "B" Street
Cheney, WA  99004
Owner:  C.R. Kearns

Select Inns
Rt. 1 Box 60
Tulia, TX  79088
Owner:  LHA, LLC

The terms for each of the above referenced properties are the same.

                                       8

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