Document:

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                                                                    EXHIBIT 10.5

                   AMENDED AND RESTATED HOTEL LEASE AGREEMENT

                          DATED AS OF DECEMBER 28, 2001

                                     BETWEEN

                            APPLE SUITES SPE V, INC.,
                             A VIRGINIA CORPORATION

                                    AS LESSOR

                                       AND

                          APPLE SUITES MANAGEMENT, INC.
                             A VIRGINIA CORPORATION

                                    AS LESSEE

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                                TABLE OF CONTENTS
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ARTICLE 1 LEASED PROPERTY; OTHER DEFINITIONS........................................................................1
---------
   1.1.  Leased Property............................................................................................1
   1.2.  Definitions................................................................................................2
ARTICLE 2 TERM; TERMINATION........................................................................................14
---------
   2.1.  Term......................................................................................................14
   2.2.  Lessor's Option to Terminate Lease........................................................................15
   2.3.  Transition Procedures.....................................................................................16
   2.4.  Holding Over..............................................................................................17
ARTICLE 3 RENT; RENT ADJUSTMENTS...................................................................................17
---------
   3.1.  Rent......................................................................................................17
   3.2.  Confirmation of Percentage Rent and Sundry Rent...........................................................21
   3.3.  Additional Charges........................................................................................22
   3.4.  Net Lease; No Termination, Abatement, Etc.................................................................22
   3.5.  Material Changes in Economic Climate......................................................................23
   3.6.  Rent Adjustment:  Basic Assumptions Incorrect.............................................................24
ARTICLE 4 ANNUAL BUDGETS; BOOKS AND RECORDS........................................................................25
---------
   4.1.  Annual Budget.............................................................................................25
   4.2.  Books and Records.........................................................................................26
ARTICLE 5 IMPOSITIONS; HOTEL COSTS.................................................................................26
---------
   5.1.  Payment of Impositions....................................................................................26
   5.2.  Notice of Impositions.....................................................................................27
   5.3.  Adjustment of Impositions.................................................................................27
   5.4.  Utility Charges...........................................................................................27
   5.5.  Insurance Premiums........................................................................................27
   5.6.  Franchise Fees............................................................................................27
   5.7.  Ground Rent...............................................................................................27
ARTICLE 6 LEASED PROPERTY; LESSEE'S PERSONAL PROPERTY..............................................................28
---------
   6.1.  Ownership of the Leased Property..........................................................................28
   6.2.  Lessee's Personal Property................................................................................28
   6.3.  Lessor's Lien.............................................................................................28
   6.4.  Lessor's Option to Purchase Assets of Lessee..............................................................29
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY.....................................................................29
---------
   7.1.  Condition of the Leased Property..........................................................................29
   7.2.  Use of the Leased Property................................................................................29
   7.3.  Lessor to Grant Easements, Etc............................................................................30
ARTICLE 8 LESSEE'S COMPLIANCE WITH LAW; ENVIRONMENTAL COVENANTS....................................................31
---------
   8.1.  Compliance with Legal and Insurance Requirements, Etc.....................................................31
   8.2.  Legal Requirement Covenants...............................................................................31
   8.3.  Environmental Covenants...................................................................................32
ARTICLE 9 MAINTENANCE AND REPAIRS; ENCROACHMENTS AND RESTRICTIONS..................................................34
---------
   9.1.  Maintenance and Repairs...................................................................................34
   9.2.  Encroachments, Restrictions, Etc..........................................................................35
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ARTICLE 10 ALTERATIONS AND IMPROVEMENTS; FF&E RESERVE..............................................................36
----------
   10.1.    Alterations............................................................................................36
   10.2.    Salvage................................................................................................36
   10.3.    Joint Use Agreements...................................................................................37
   10.4.    Reserved...............................................................................................37
   10.5.    Furniture, Fixture and Equipment Allowance.............................................................37
ARTICLE 11 COMPLIANCE WITH FRANCHISE...............................................................................37
----------
   11.1.    Compliance with Franchise Agreement and Management Agreement...........................................37
ARTICLE 12 PERMITTED LIENS AND CONTESTS............................................................................38
----------
   12.1.    Liens..................................................................................................38
   12.2.    Permitted Contests.....................................................................................38
ARTICLE 13 INSURANCE REQUIREMENTS..................................................................................39
----------
   13.1.    General Insurance Requirements.........................................................................39
   13.2.    Replacement Cost.......................................................................................40
   13.3.    Waiver of Subrogation..................................................................................41
   13.4.    Form Satisfactory, Etc.................................................................................41
   13.5.    Increase in Limits.....................................................................................41
   13.6.    Blanket Policy.........................................................................................42
   13.7.    No Separate Insurance..................................................................................42
   13.8.    Reports On Insurance Claims............................................................................42
ARTICLE 14 CASUALTY INSURANCE PROCEEDS; RECONSTRUCTION.............................................................42
----------
   14.1.    Insurance Proceeds.....................................................................................42
   14.2.    Reconstruction in the Event of Damage or Destruction Covered by Insurance..............................43
   14.3.    Reconstruction in the Event of Damage or Destruction Not Covered by Insurance..........................44
   14.4.    Lessee's Property......................................................................................44
   14.5.    Abatement of Rent......................................................................................44
   14.6.    Damage Near End of Term................................................................................44
   14.7.    Waiver.................................................................................................44
ARTICLE 15 CONDEMNATION; AWARD ALLOCATION..........................................................................45
----------
   15.1.    Definitions............................................................................................45
   15.2.    Parties' Rights and Obligations........................................................................45
   15.3.    Total Taking...........................................................................................45
   15.4.    Allocation of Award....................................................................................45
   15.5.    Partial Taking.........................................................................................45
   15.6.    Temporary Taking.......................................................................................46
ARTICLE 16 DEFAULT BY LESSEE; LESSOR'S REMEDIES....................................................................46
----------
   16.1.    Events of Default......................................................................................46
   16.2.    Surrender..............................................................................................48
   16.3.    Damages................................................................................................48
   16.4.    Waiver.................................................................................................49
   16.5.    Application of Funds...................................................................................49
   16.6.    Lessor's Right to Cure Lessee's Default................................................................49
ARTICLE 17 DEFAULT BY LESSOR; LESSEE'S REMEDIES....................................................................50
----------
   17.1.    Breach by Lessor.......................................................................................50
   17.2.    Lessee's Right to Cure.................................................................................50
   17.3.    Provisions Relating to Purchase of the Leased Property by Lessee.......................................51
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ARTICLE 18 INDEMNIFICATION.........................................................................................51
----------
   18.1.    Indemnification........................................................................................51
ARTICLE 19 REIT REQUIREMENTS AND RESTRICTIONS......................................................................52
----------
   19.1.    Personal Property Limitation...........................................................................52
   19.2.    Sublease Rent Limitation...............................................................................52
   19.3.    Sublease Tenant Limitation.............................................................................53
   19.4.    Lessee Ownership Limitations...........................................................................53
   19.5.    Lessee Officer and Employee Limitation.................................................................53
   19.6.    Payments to Affiliates of Lessee.......................................................................53
ARTICLE 20 SUBLETTING AND ASSIGNMENT...............................................................................53
----------
   20.1.    Subletting and Assignment..............................................................................53
   20.2.    Attornment.............................................................................................54
   20.3.    Conveyance by Lessor...................................................................................54
ARTICLE 21 QUIET ENJOYMENT; RISK OF LOSS...........................................................................54
----------
   21.1.    Quiet Enjoyment........................................................................................54
   21.2.    Risk of Loss...........................................................................................55
ARTICLE 22 LESSOR MORTGAGES; SUBORDINATION OF LEASE................................................................55
----------
   22.1.    Lessor May Grant Liens.................................................................................55
   22.2.    Subordination of Lease.................................................................................55
ARTICLE 23 ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS; INSPECTION RIGHTS..........................................56
----------
   23.1.    Estoppel Certificates; Financial Statements............................................................56
   23.2.    Lessor's Right to Inspect..............................................................................57
ARTICLE 24 APPRAISERS..............................................................................................57
----------
   24.1.    Appraisers.............................................................................................57
ARTICLE 25 ARBITRATION AND DISPUTE RESOLUTION PROCEDURES...........................................................58
----------
   25.1.    Arbitration............................................................................................58
   25.2.    Alternative Arbitration................................................................................58
   25.3.    Arbitration Procedure..................................................................................58
ARTICLE 26 NOTICES.................................................................................................59
----------
   26.1.    Notices................................................................................................59
ARTICLE 27 MISCELLANEOUS...........................................................................................59
----------
   27.1.    No Waiver..............................................................................................59
   27.2.    Remedies Cumulative....................................................................................59
   27.3.    Waiver of Trial by Jury................................................................................60
   27.4.    Acceptance of Surrender................................................................................60
   27.5.    No Merger of Title.....................................................................................60
   27.6.    Waiver of Presentment, Etc.............................................................................60
   27.7.    Action for Damages.....................................................................................60
   27.8.    Lease Assumption in Bankruptcy Proceeding..............................................................60
   27.9.    Enforceability.........................................................................................60
   27.10.   Memorandum of Lease....................................................................................61
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Exhibit A - Legal Description
Schedule 3.1(b) - Suite Revenue Breakpoint

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                   AMENDED AND RESTATED HOTEL LEASE AGREEMENT

     THIS AMENDED AND RESTATED HOTEL LEASE AGREEMENT (hereinafter called
"Lease"), made as of the 28th day of December, 2001, by and between Apple Suites
SPE V, Inc., a Virginia corporation (hereinafter called "Lessor"), and Apple
Suites Management, Inc., a Virginia corporation (hereinafter called "Lessee"),
provides as follows:

     WHEREAS Apple Suites, Inc., a Virginia corporation ("Apple Suites"), and
Apple Suites Management, Inc., a Virginia corporation entered into a Master
Hotel Lease Agreement dated as of June 15, 2001, whereby Apple Suites agreed to
rent and lease to Lessee the Leased Property commencing June 15, 2001;

     WHEREAS Lessor entered into a loan with First Union National Bank, a
national banking association (the "Bank") as of December 28, 2001, whereby Apple
Suites refinanced existing debt with respect to the Leased Property;

     WHEREAS in connection with such refinancing the Bank has required Apple
Suites to transfer its interest in the Leased Property to Lessor and Lessor to
enter into this Lease with Lessee;

     NOW THEREFORE, Lessor and Lessee have agreed as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

          Affiliate: As used in this Lease the term "Affiliate" of a Person
          ---------
shall mean (a) any Person that, directly or indirectly, controls or is
controlled by or is under common control with such Person, (b) any other Person
that owns, beneficially, directly or indirectly, ten percent (10%) or more of
the outstanding capital stock, shares or equity interests of such Person, or (c)
any officer, director, employee, partner, manager or trustee of such Person or
any Person controlling, controlled by or under common control with such Person
or any Person that owns, beneficially, directly or indirectly, ten percent (10%)
or more of the outstanding capital stock, shares or equity interests of such
Person (excluding trustees and Persons serving in similar capacities who are not
otherwise an

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Affiliate of such Person). For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.

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

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

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

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

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

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

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

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

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

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

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

          Competitive Set: As defined in the STR Reports. Lessor and Lessee
          ---------------
shall work in good faith to determine any additions and deletions to the Hotel's
Competitive Set, on or before November 15th of each year, with such changes to
be applicable for the following Fiscal Year. In

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the event Lessor and Lessee cannot agree to the Hotel's Competitive Set by
November 15th of any year, such unagreed items shall be determined by Smith
Travel Research (or, if it refuses or is unable to do so, by arbitration
pursuant to Section 25.2). The costs of resetting the Hotel's Competitive Set
shall be borne equally by the parties.

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

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

          Consolidated Financials: For any fiscal year or other accounting
          -----------------------
period for Lessee and its consolidated subsidiaries, if any, statements of
earnings and retained earnings and of changes in financial position for such
period and for the period from the beginning of the respective fiscal year to
the end of such period and the related balance sheet as at the end of such
period, together with the notes thereto, all in reasonable detail and setting
forth in comparative form the corresponding figures for the corresponding period
in the preceding fiscal year, and prepared in accordance with generally accepted
accounting principles and audited by independent certified public accountants
acceptable to Lessor in its sole discretion.

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

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

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

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

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

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

          Environmental Laws: All applicable federal, state, local and foreign
          ------------------
laws and regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including without limitation laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous

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Materials or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.
Environmental Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and
TSCA.

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

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

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

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

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

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

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

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

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

          Fair Market Value: The fair market value of the Leased Property means
          -----------------
an amount equal to the price that a willing buyer not compelled to buy would pay
a willing seller not compelled to sell for such Leased Property, (a) assuming
the same is unencumbered by this Lease,

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(b) determined in accordance with the appraisal procedures set forth in Article
24 or in such other manner as shall be mutually acceptable to Lessor and Lessee,
(c) assuming that such seller must pay customary closing costs and title
premiums, and (d) taking into account the positive or negative effect on the
value of the Leased Property attributable to the interest rate, amortization
schedule, maturity date, prepayment penalty and other terms and conditions of
any encumbrance that is assumed by the transferee. In addition, in determining
the Fair Market Value with respect to damaged or destroyed Leased Property such
value shall be determined as if such Leased Property had not been so damaged or
destroyed.

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

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

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

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

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

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

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

          Gross Operating Expenses: The term "Gross Operating Expenses" shall
          ------------------------
include (i) all costs and expenses of operating the Hotel included within the
meaning of the term "Total Costs and Expenses" contained in the Uniform System
and, (ii) without duplication, the following: all salaries and employee expense
and payroll taxes (including salaries, wages, bonuses and other compensation of
all employees of the Hotel, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Lease, governmental fees and assessments, common area maintenance
costs and other common area fees and assessments, food, beverages, laundry
service expense, the cost of Inventories, license fees, advertising, marketing,
reservation systems and any and all other operating expenses as are reasonably
necessary for the proper and efficient operation of the Hotel and the Leased
Property incurred by Lessee in accordance with the provisions hereof (excluding,
however, (i) federal, state and municipal excise,

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sales and use taxes collected directly from patrons and guests or as a part of
the sales price of any goods, services or displays, such as gross receipts,
admissions, cabaret or similar or equivalent taxes paid over to federal, state
or municipal governments, (ii) the cost of insurance to be provided under
Article 13, (iii) expenditures by Lessor pursuant to Article 13 and (iv)
payments on any Mortgage or other mortgage or security instrument on the Hotel);
all determined in accordance with generally accepted accounting principles. No
part of Lessee's central office overhead or general or administrative expense
(as opposed to that of the Hotel) shall be deemed to be a part of Gross
Operating Expenses, as herein provided. Reasonable out-of-pocket expenses of
Lessee incurred for the account of or in connection with the Hotel operations,
including but not limited to postage, telephone charges and reasonable travel
expenses of employees, officers and other representatives and consultants of
Lessee and its Affiliates, shall be deemed to be a part of Gross Operating
Expenses and such Persons shall be afforded reasonable accommodations, food,
beverages, laundry, valet and other such services by and at the Hotel without
charge to such Persons or Lessee.

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

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

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

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

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

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

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

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

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

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

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

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

                                       8

<PAGE>

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

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

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

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

          Lease: This Lease.
          -----

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

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

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

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

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

                                       9

<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       10

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

          Regional Market Decline: A period of six (6) consecutive calendar
          -----------------------
months during which there is a twenty percent (20%) decline in average hotel
occupancy from hotel occupancy levels for the same period during the then prior
calendar year, for all open and operating hotels in the Smith Travel Research
Region in which the Hotel is located, as determined from applicable

                                       11

<PAGE>

STR Reports or, if the STR Reports are no longer published, other reputable
regional economic data regarding the hospitality industry.

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

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

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

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

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

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

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

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

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

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

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

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

                                       12

<PAGE>

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

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

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

          (e) Sundry Revenues.

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

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

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

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

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

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

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

          Uneconomic for its Primary Intended Use: A state or condition of the
          ---------------------------------------
Hotel such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of

                                       13

<PAGE>

the board of directors or other governing body of Lessee, the Hotel cannot be
operated on a commercially practicable basis for its Primary Intended Use,
taking into account, among other relevant factors, the number of usable rooms
and projected revenues, such that Lessee intends to, and shall, complete the
cessation of operations from the Leased Hotel.

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

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

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

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

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

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

     2.1. Term.
          -----

          (a) The term of the Lease (the "Term") shall commence June 15, 2001
(the "Commencement Date"), and shall end on the tenth (10th) anniversary of the
Commencement Date, unless sooner terminated in accordance with the provisions
hereof or extended to an anniversary of the initial expiration date pursuant to
this Article 2.

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

                                       14

<PAGE>

of the original Term. The First Extension shall be upon the same terms,
conditions and rentals as set forth herein for the original Term.

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

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

                                       15

<PAGE>

and Lessee are unable to agree upon the fair market value of an original or
replacement leasehold estate, it shall be determined by appraisal using the
appraisal procedure set forth in Article 24.

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

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

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

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

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

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

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

                                       16

<PAGE>

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

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

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

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

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

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

          (a) Base Rent: The annual sum of Eight Hundred Sixty-Nine Thousand
              ---------
Eight-Hundred Fifty-Eight Dollars ($869,858) (prorated for fiscal year 2001), as
adjusted pursuant to Subsection 3.1(d) hereof, payable in advance in equal,
consecutive monthly installments, on or before the tenth day of each calendar
month of the Term ("Base Rent"); provided, however, that the first monthly
payment of Base Rent shall be payable during the second calendar month of the
Term, and that the first and last monthly payments of Base Rent shall be pro
rated as to any partial month (subject to adjustment as provided in Sections
14.5, 15.3 and 15.5).

                                       17

<PAGE>

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

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

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

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

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

For the purpose of the above formula:

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

The Percentage Rent shall be payable as follows:

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

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

                                       18

<PAGE>

          than the amount determined pursuant to the Quarterly Revenues
          Computation for such calendar quarter; and

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

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

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

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

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

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

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

                                       19

<PAGE>

     In addition, on or before March 1 of each year, commencing with March 1,
2002, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor setting forth the computation of the actual Percentage Rent
and Sundry Rent that accrued for each quarter of the Fiscal Year that ended on
the immediately preceding December 31 and shall pay to Lessor Percentage Rent
and Sundry Rent, if due and payable, for the last quarter of the applicable
Fiscal Year. Additionally, if the annual Percentage Rent or Sundry Rent due and
payable for any Fiscal Year (as shown in the applicable Officer's Certificate)
exceeds the amount actually paid as Percentage Rent or Sundry Rent by Lessee for
such year, Lessee also shall pay such excess to Lessor at the time such
certificate is delivered. If the Percentage Rent or Sundry Rent actually due and
payable for such Fiscal Year is shown by such certificate to be less than the
amount actually paid as Percentage Rent or Sundry Rent for the applicable Fiscal
Year, Lessor, at its option, shall reimburse such amount to Lessee or credit
such amount against subsequent months' Base Rent or Sundry Rent, as applicable,
and with respect to Percentage Rent, to the extent necessary, subsequent
quarters' Percentage Rent payments. Any such credit to Base Rent shall not be
applied for purposes of calculating Percentage Rent payable for any subsequent
quarter.

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

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

          (e) CPI Adjustments to Base Rent and Percentage Rent. For each year of
              ------------------------------------------------
the Term beginning on or after January 1, 2002, the Base Rent shall be adjusted
from time to time as follows:

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

                    (A) The difference between the Consumer Price Index for the
          most recent Comparison Month and the average Consumer Price Index for
          the twelve (12) month

                                       20

<PAGE>

          period prior thereto shall be divided by the average Consumer Price
          Index for the twenty four (24) month period prior thereto.

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

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

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

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

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

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

     3.2. Confirmation of Percentage Rent and Sundry Rent. Lessee shall utilize,
          -----------------------------------------------
or cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices, and in accordance with
generally accepted accounting principles, that will accurately record all data
necessary to compute Percentage Rent and Sundry Rent, and Lessee shall retain,
for at least four (4) years after the expiration of each Fiscal Year (and in any
event until the reconciliation described in Subsection 3.1(c) for such Fiscal
Year has been made), reasonably adequate records conforming to such accounting
system showing all data necessary to compute Percentage Rent and Sundry Rent for
the applicable Fiscal Years. Lessor, at its expense (except as provided
hereinbelow), shall have the right from time to time, upon prior written notice
to Lessee and Manager, by its accountants or representatives to audit the
information that formed the basis

                                       21

<PAGE>

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

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

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

                                       22

<PAGE>

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

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

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

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

                                       23

<PAGE>

documentation to support such assertion), the matter may be submitted by either
party to arbitration under Section 25.2 hereof for resolution (during which
period Lessee shall continue to pay Base Rent and Percentage Rent as required
under Section 3.1 of this Lease). If, within ninety (90) days (during which
period Lessee shall continue to pay Base Rent and Percentage Rent as required
under Section 3.1 of this Lease) following the date of such written
certification from Lessee (or the date of a decision of an arbitrator if
required hereunder to determine that a Force Majeure and Hotel Market Decline
has occurred), Lessor and Lessee are unable to agree upon the amount of
reduction in Base Rent and Percentage Rent contemplated hereby, Lessee shall
have the option to terminate this Lease upon not less than thirty (30) days
prior written notice to Lessor.

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

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

                                       24

<PAGE>

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

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

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

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

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

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

          (d) A cash flow projection.

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

                                       25

<PAGE>

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

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

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

                                       26

<PAGE>

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

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

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

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

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

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

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

                                       27

<PAGE>

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

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

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

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

                                       28

<PAGE>

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

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

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

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

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

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

                                       29

<PAGE>

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

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

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

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

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

                                       30

<PAGE>

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

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

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

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

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

                                       31

<PAGE>

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

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

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

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

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

                                       32

<PAGE>

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

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

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

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

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

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

                                       33

<PAGE>

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

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

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

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

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

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

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

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

                                       34

<PAGE>

9.1(b), Article 14 or Article 15, with reasonable promptness, make all necessary
and appropriate repairs replacements, and improvements thereto of every kind and
nature, whether interior or exterior ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
commencement of the Term of this Lease (concealed or otherwise), or required by
any governmental agency having jurisdiction over the Leased Property, except as
to the structural elements of the Leased Improvements. Lessee, however, shall be
permitted to prosecute claims against Lessor's predecessors in title for breach
of any representation or warranty or for any latent defects in the Leased
Property to be maintained by Lessee unless Lessor is already diligently pursuing
such a claim. All repairs shall, to the extent reasonably achievable, be at
least equivalent in quality to the original work. Lessee will not take or omit
to take any action, the taking or omission of which might materially impair the
value or the usefulness of the Leased Property or any part thereof for its
Primary Intended Use.

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

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

     9.2. Encroachments, Restrictions, Etc. Lessor represents and warrants that
          --------------------------------
the Leased Improvements do not materially encroach upon any property, street or
right-of-way adjacent to the

                                       35

<PAGE>

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

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

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

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

                                       36

<PAGE>

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

     10.4. Reserved.
           ---------

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

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

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

                                       37

<PAGE>

a Franchise Agreement or Management Agreement, for whatever reason, Lessor will
have the right, in the exercise of its sole discretion, to approve any new
Franchise Agreement or Management Agreement for the Hotel.

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

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

     12.2. Permitted Contests. Lessee shall have the right to contest the amount
           -------------------
or validity of any Imposition to be paid by Lessee or any Legal Requirement or
Insurance Requirement or any lien, attachment, levy, encumbrance, charge or
claim ("Claims") not otherwise permitted by Section 12.1, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Section provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon will be paid, or (b)
deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security for
the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all Claims
which may be assessed against or become a Claim on the Leased Property, or any
part thereof, in said legal proceedings. Lessee shall furnish Lessor and any
lender of Lessor with reasonable evidence of such deposit within five (5) days
of the same. Lessor agrees to join in any

                                       38

<PAGE>

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

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

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

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

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

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

                                       39

<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       40

<PAGE>

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

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

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

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

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

                                       41

<PAGE>

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

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

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

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

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

                                       42

<PAGE>

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

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

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

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

                                       43

<PAGE>

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

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

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

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

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

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

                                       44

<PAGE>

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

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

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

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

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

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

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

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

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

     15.5. Partial Taking. If title to less than the whole of the Leased
           ---------------
Property is condemned, and the Leased Property is not Unsuitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as

                                       45

<PAGE>

provided in Section 15.3, Lessee at its cost shall with all reasonable dispatch
restore the untaken portion of any Leased Improvements so that such Leased
Improvements constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as the Leased Improvements existing immediately prior to the Condemnation.
Lessor shall contribute to the cost of restoration that part of its Award
specifically allocated to such restoration, if any, together with severance and
other damages awarded for the taken Leased Improvements; provided, however, that
the amount of such contribution shall not exceed such cost. In the event of such
a partial Taking, this Lease shall not terminate, but the Base Rent shall be
abated in the manner and to the extent that is fair, just and equitable to both
Lessee and Lessor, taking into consideration, among other relevant factors, the
number of usable rooms, the amount of square footage, or the revenues affected
by such partial Taking. If Lessor and Lessee are unable to agree upon the amount
of such abatement within thirty (30) days after such partial Taking, the matter
may be submitted by either party to a court of competent jurisdiction for
resolution.

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

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

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

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

                                       46

<PAGE>

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

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

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

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

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

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

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

          (i) if an event of default has been declared by the franchisor under
the Franchise Agreement with respect to the Hotel as a result of any action or
failure to act by Lessee or any Person with whom Lessee contracts for management
services at the Hotel, and such default is not

                                       47

<PAGE>

cured by the earlier of (A) ten (10) days following notice from Lessor or (B)
such earlier date as is required for Lessee to avoid termination of the
Franchise Agreement by the franchisor;

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

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

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

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

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

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

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

                                       48

<PAGE>

               (ii) the sum of:

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

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

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

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

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

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

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

                                       49

<PAGE>

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

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

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

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

                                       50

<PAGE>

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

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

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

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

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

                                       51

<PAGE>

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

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

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

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

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

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

                                       52

<PAGE>

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

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

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

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

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

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

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

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

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

                                       53

<PAGE>

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

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

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

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

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

                                       54

<PAGE>

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

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

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

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

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

                                       55

<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       56

<PAGE>

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

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

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

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

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

                                       57

<PAGE>

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

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

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

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

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

                                       58

<PAGE>

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

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

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

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

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

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

                                       59

<PAGE>

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

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

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

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

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

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

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

                                       60

<PAGE>

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

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

                                       61

<PAGE>

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

                                             "LESSOR"

                                             APPLE SUITES SPE V, INC.

                                             By:    /s/ Stanley J. Olander, Jr.
                                                   ---------------------------
                                             Name:  Stanley J. Olander, Jr.
                                             Title: Vice President

                                             "LESSEE"

                                             APPLE SUITES MANAGEMENT, INC.

                                             By:    /s/ Stanley J. Olander, Jr.
                                                   ---------------------------
                                             Name:  Stanley J. Olander, Jr.
                                             Title: Vice President

<PAGE>

                                    EXHIBIT A
                                    ---------

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

                                    [OMITTED]

<PAGE>

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

         Homewood Suites(R) Portland
         Beaverton, Oregon

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
 Quarters         2001          2002          2003          2004          2005
-----------    ----------    ----------    ----------    ----------    ----------
<S>            <C>           <C>           <C>           <C>           <C>
1st Quarter    $       --    $  283,595    $  292,103    $  300,866    $  309,892

2nd Quarter    $   47,658    $  567,191    $  584,207    $  601,733    $  619,785

3rd Quarter    $  339,959    $  850,786    $  876,310    $  902,599    $  929,677

4th Quarter    $  632,261    $1,134,382    $1,168,413    $1,203,465    $1,239,569
---------------------------------------------------------------------------------

<CAPTION>
---------------------------------------------------------------------------------
 Quarters         2006          2007          2008          2009          2010
-----------    ----------    ----------    ----------    ----------    ----------
<S>            <C>           <C>           <C>           <C>           <C>
1st Quarter    $  319,189    $  328,765    $  338,628    $  348,787    $  359,250

2nd Quarter    $  638,378    $  657,530    $  677,255    $  697,573    $  718,500

3rd Quarter    $  957,567    $  986,294    $1,015,883     1,046,360    $1,077,750

4th Quarter    $1,276,756    $1,315,059    $1,354,511    $1,395,146    $1,437,001
---------------------------------------------------------------------------------
</TABLE><PAGE>

                                                                    EXHIBIT 10.6

                              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 15th day of June, 2001 ("Effective Date") between APPLE SUITES MANAGEMENT,
    ----        ----
INC., a Virginia corporation, whose address is 9 North Third Street, Richmond,
Virginia 23219 ("Owner") and PROMUS HOTELS, INC., a Delaware corporation, whose
address is 9336 Civic Center Drive, Beverly Hills, California 90210 ("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 by Hilton(R)
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-Mo, LLC, a Virginia limited liability company ("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 by Hilton(R)" 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"). Manager shall have the right and option to extend the Term of this
Agreement for the Option Terms specified in the Term Sheet upon the following
terms and conditions: (i) Manager shall give written notice, which shall be
irrevocable, to Owner of its desire to extend (the "Extension Notice") not less
than one hundred eighty (180) days nor more than two hundred seventy (270) days
prior to the end of the Initial Term or the Option Term, as applicable; and (ii)
at the end of the Initial Term or the First Option Term, as applicable, no event
of default on the part of Manager has occurred that is continuing beyond any
applicable cure period under this Agreement, and any then existing event of
default shall be cured within the applicable cure period.

Page 1

<PAGE>

                                    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 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.
          ---------

          (a)  Hotel Personnel. Manager shall be the sole judge of the fitness
               ---------------
               and qualification of all personnel working at the Hotel ("Hotel
               Personnel")

Page 2

<PAGE>

               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 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.

          (b)  General Manager & Director of Sales. 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. Notwithstanding the foregoing, Owner shall
               be deemed to have approved the appointment of any such individual
               unless Owner delivers notice of its disapproval of such
               appointment within ten (10) business days after Manager's
               delivery to Owner of (a) a written summary of such individual's
               professional experience and qualifications and (b) notice of
               Manager's desire to arrange an interview between Owner and such
               individual at the Hotel or at another mutually acceptable
               location (it being agreed that Owner will forego its right to
               interview any such individual if Owner is unwilling or unable to
               have an authorized representative participate in the interview
               within ten (10) business days following Manager's notice to Owner
               of Manager's desire to arrange such an interview). Moreover,
               Owner acknowledges that it may not reject more than three (3)
               candidates proposed by Manager for the positions of general

Page 3

<PAGE>

               manager or director of sales each time either of such positions
               is being filled.

          (c)  Labor Relations. Manager shall negotiate for the best interest of
               ---------------
               Owner with any labor unions representing employees of the Hotel,
               but any collective bargaining agreement or labor contract
               resulting therefrom will be executed by Manager as the employer.
               Manager shall, to the extent practicable, keep Owner informed of
               negotiations with any labor union.

          (d)  Business Expenses. The Executive Staff and other appropriate
               -----------------
               employees of the Hotel shall also be reimbursed for all
               reasonable business expenses, including business entertainment
               and travel expenses, in accordance with the standard practices in
               effect at other Homewood Suites by Hilton(R) managed by Manager
               ("Other Managed Hotels").

          (e)  Benefit Plans, etc. Manager shall have the right to provide to
               ------------------
               the employees of the Hotel who are eligible therefor and who are
               not covered by collective bargaining or similar arrangements,
               with benefits of the incentive plans, and the pension, profit
               sharing or other employee retirement, disability, health or
               welfare or other benefit plan or plans now or hereafter
               applicable to employees of Other Managed Hotels, and to charge
               the Hotel with the Hotel's pro rata share of the costs and
               expenses of such plan or plans allocated to the Hotel on the same
               basis as allocated to participating Other Managed Hotels.

               The parties agree and acknowledge that Manager may (but shall not
               be required to) provide benefits and allow participation in such
               plans on whatever modified basis as it may determine appropriate
               under the circumstances, and may waive any waiting period or any
               preconditions to coverage or participation otherwise applicable
               to such employees. No statement, promise, representation or
               warranty regarding the terms of such plans or the participation
               or coverage of employees shall be enforceable, binding or
               effective in any way unless made in writing and signed by an
               authorized representative of Manager. Notwithstanding the
               foregoing, in no event shall Manager initiate or adopt any plans,
               programs or benefits for Hotel employees not otherwise in effect
               at Other Managed Hotels unless required by applicable collective
               bargaining agreements.

     (iii) Hotel Policies. Manager shall determine the terms of guest admittance
           --------------
          to the Hotel, establish room rates, and use of rooms for commercial
          purposes. Other employees of Owner or Manager, or their respective
          affiliates, shall be permitted to stay at the Hotel for non-business
          purposes, subject to availability, at reduced rates in accordance with
          policies with respect to such stays in effect from time to time at
          Other Managed Hotels.

     (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

Page 4

<PAGE>

          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 partial fiscal
          year ("Operating Budget"). Hereafter, Manager shall, not less than
          forty-five (45) days prior to the commencement of each full 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

Page 5

<PAGE>

          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 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 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 Gross Revenue for such month
          bears to the projected 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 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
          Improvements (as herein defined). Manager shall also identify for
          Owner those projects that are required to meet the

Page 6

<PAGE>

          minimum standards of the License Agreement and give priority 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 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 Revenues for Capital Improvements and FF&E
          Replacements 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 (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) FF&E 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 "FF&E Budget" for the FF&E
          Replacements (as herein defined) 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 FF&E
          Replacements. Manager shall also identify for Owner those projects
          that are required to meet the minimum

Page 7

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          standards of the License Agreement and give priority to such items.
          Owner and Manager shall meet to discuss the proposed FF&E Budget and
          Owner shall be required to make specific written objections to a
          proposed FF&E 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 FF&E Budget, Manager (i) with respect to
          FF&E Replacements 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 FF&E Replacements, 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 Improvements and FF&E Replacements after the date
          hereof until the disputed FF&E Budget item(s) have been resolved in
          accordance with Section 10.02.1(f). Manager, at Owner's expense, shall
          be responsible for supervising the design, installation, repair and
          replacement of fixtures, furniture, furnishings and equipment (not
          including operating equipment or operating supplies), including,
          without limitation, office furnishings and equipment, specialized
          hotel equipment necessary for the operation of any portion of the
          Hotel, including equipment for kitchens, laundries, dry cleaning
          facilities, bars, restaurants, public rooms, commercial and parking
          space, and recreational facilities, and any other furnishings and
          equipment required to operate the Hotel (collectively, "FF&E
          Replacements"). Owner shall have the right to approve and inspect the
          installation and construction of FF&E Replacements and any Owner's
          Leasehold Mortgagee or Fee Owner's Mortgagee shall also have any right
          of approval or inspection of the installation and construction of the
          FF&E Replacements to the extent set forth in 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 FF&E Budget;

     (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

Page 8

<PAGE>

          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) 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;

     (xiii) 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;

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

     (xv) 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

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          notify Owner in writing of all notices of legal requirements
          applicable to the Hotel that are received by Manager;

     (xvi) 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 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 or FF&E
          Replacements contemplated by Section 3.01(viii) above);

     (xvii) 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;

     (xviii) Tax and Insurance Accruals. If requested by Owner, Manager shall
             --------------------------
          accrue and set aside on a monthly basis funds from 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, and
          the other 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 Gross Revenues
          are not otherwise sufficient to pay such operating costs; and

Page 10

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     (xix) Additional Responsibilities of Manager. Manager shall, as agent of
           --------------------------------------
          Owner either in its own name, or in the name of Owner, perform the
          following additional services, or cause the same to be performed for
          the Hotel:

          (a)  subject to the other terms and conditions of this Agreement,
               establish and revise, as necessary, administrative policies and
               procedures, including policies and procedures for the control of
               revenue and expenditures, for the purchasing of supplies and
               services (except as otherwise provided herein), for the control
               of credit, and for the scheduling of maintenance, and verify that
               the foregoing procedures are operating in a sound manner;

          (b)  consummate leases with respect to any commercial and office space
               in the Hotel and concession or other arrangements with respect to
               other space and facilities in the Hotel or on the Hotel grounds,
               provided that Owner's prior written approval shall be required
               for any lease having a term in excess of one (1) year and not
               terminable, without premium or penalty, upon not more than thirty
               (30) days' notice;

          (c)  enter into any contracts for goods or services to the Hotel,
               provided that Owner's prior written approval shall be required
               for any contract (x) which provides for aggregate payments by
               Owner over the life of the contract (taking into account Owner's
               early termination rights, if any) in excess of $25,000, or (y)
               which has a term in excess of two (2) years;

          (d)  subject to the prior written approval of Owner, retain legal
               counsel for the Hotel, which legal counsel shall perform legal
               services under the direction of Manager; and

          (e)  as a part of Group Services (as herein defined), advertise and
               promote the Hotel in coordination with the sales and marketing
               programs of Manager and other Homewood Suites by Hilton(R)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
               affiliates not located at the Hotel. Manager may charge the Hotel
               for personnel and other costs and expenses incurred in providing
               such marketing and advertising services; provided that (i)
               Manager's allocation of such marketing and advertising costs and
               expenses among the hotels, including the Hotel, shall be pro
               rated among all hotels owned or managed by Manager and (ii) the
               annual allocation of any costs and expenses to the Hotel relating
               specifically to marketing and advertising shall not exceed
               $10,000.00 (which $10,000.00 amount is based upon the purchasing
               power of the United States dollar as of the Effective Date and
               shall be annually increased, if necessary, on each anniversary of
               the Effective Date to reflect an amount which shall have the
               equivalent purchasing power to said $10,000.00), without Owner's
               prior written consent, which shall not be unreasonably withheld.

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                                    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 Sections 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) 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;

     (v)  Capital Funds. Owner shall expend such amounts for Capital
          -------------
          Improvements and FF&E Replacements 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 procedures and timetables for
          Owner to undertake Capital Improvements and FF&E Replacements.

          It is recognized that expenditures for Capital Improvements and FF&E
          Replacements are incapable of precise calculation in advance.
          Therefore, five percent (5%) of Gross Revenues shall be paid over in
          cash in each calendar month

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          after the Effective Date into a Reserve Fund (as hereinafter defined)
          to pay for Capital Improvements and FF&E 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 and FF&E Budget. Manager shall
          establish a reserve for Capital Improvements and FF&E 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 Improvements and FF&E Replacements during any calendar year
          which have been included in an approved Capital Budget or FF&E 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. All proceeds from the sale of fixtures, furniture or
          equipment no longer needed for the operation of the Hotel shall be
          allocated primarily to the cost of replacement of such fixtures,
          furniture or equipment, and, secondarily, in the event of proceeds in
          excess of such cost, to the Reserve Fund to the extent necessary to
          satisfy Owner's obligation to fund the same in accordance herewith,
          and, thirdly, if the Reserve Fund is fully funded in accordance
          herewith, any remaining proceeds shall be paid directly to Owner. (The
          parties hereby confirm that proceeds from the sale of capital items or
          fixtures, furniture or equipment shall be excluded from the
          computation of Gross Revenues hereunder). 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 or FF&E 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 any 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

Page 13

<PAGE>

          Owner's Leasehold Mortgagee. Upon termination of this Agreement for
          whatever reason or upon sale of the Hotel, Manager's right to expend
          any unused portion of the Reserve Fund shall terminate and the balance
          of the Reserve Fund shall be paid over to Owner, less any sums then
          due Manager.

          To the extent any expenditure under this Section 4.01(v) 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;

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

     (vii) 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(xiii);

     (viii) 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;

     (ix) 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

     (x)  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 or by any other person or persons claiming by,
          through or under Owner. Owner shall

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<PAGE>

          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".
---

     Section 5.02. Reimbursements to Manager. Without limiting any other
                   -------------------------
provision of this Agreement, and in addition to the Management Fee provided for
above, Manager and its Affiliates shall be entitled to be reimbursed for the
following costs and expenses incurred in rendering services to the Hotel:

     (a)  subject to the limitations provided in Section 3.01(xix)(e) of this
          Agreement, the Hotel's pro rata share of all costs and expenses
          incurred in connection with the rendition of Group Services, allocated
          on the same basis as allocated to Other Managed Hotels. Such
          allocations shall be certified to Owner by Manager's independent
          accounting firm on an annual basis. As used herein, the term "Group
          Services" refers to (a) group advertising, (b) sales and business
          promotion services on the same basis as furnished to Other Managed
          Hotels, (c) national marketing programs (including the any guest
          frequency or loyalty programs), (d) centralized reservation services,
          (e) credit card services, (f) software in use at one or more Other
          Managed Hotels and all source and object code versions thereof and all
          related documentation, flow charts, user manuals, listing, and
          service/operator manuals and any enhancements, modifications or
          substitutions thereof and (g) such additional group or regional
          services and facilities as Manager shall hereafter furnish to Other
          Managed Hotels as a group or regionally. Subject to the limitations
          provided in Section 3.01(xix)(e) of this Agreement, Owner agrees that
          the Hotel shall participate fully in all of the Group Services made
          available to the Hotel by Manager. Owner further agrees that the Hotel
          shall honor all credit cards issued by Manager and its Affiliates, and
          that the Hotel's policy regarding association with any other credit
          card system shall be in conformity with Manager's general policy at
          the time in effect;

     (b)  the compensation paid by Manager or its Affiliates to Hotel employees;

     (c)  reasonable travel and out-of-pocket expenses of (i) all employees of
          Manager and its Affiliates, and (ii) all regional officers of Manager
          and its Affiliates who are not assigned to the Hotel, while working on
          an assignment for the specific benefit of the Hotel, which are
          incurred in performing their duties hereunder in connection with any
          phase of the operation of the Hotel in accordance with the policies of
          Manager then in effect, or as otherwise approved in writing by Owner;

Page 15

<PAGE>

     (d)  the compensation and expenses paid or reimbursed by Manager or its
          Affiliates to all independent consultants rendering services to the
          Hotel if and to the extent contemplated in the Operating Budget,
          Capital Budget or FF&E Budget for such operating year or as otherwise
          approved in writing by Owner;

     (e)  the costs and expenses of centralized accounting services, subject to
          any limitations thereon provided in Exhibit "B"; and
                                              -----------

     (f)  all other expenditures which are authorized, permitted or required
          under the provisions of this Agreement which have been paid or funded
          by Manager on Owner's behalf.

     It is agreed that, to the extent the entire amount of expenses reimbursable
     to Manager or its Affiliates under the provisions of this Section 5.02, or
     under any other provisions of this Agreement, is not incurred solely for
     the benefit of the Hotel, then such amount or expense shall be fairly and
     appropriately allocated.

     Except as otherwise provided in this Agreement, Manager shall be entitled
     to reimburse itself and its Affiliates for the above items out of the Bank
     Accounts, or, if the Bank Accounts do not contain adequate funds to pay
     such amounts, Manager may submit statements covering such items to Owner,
     and Owner will pay to Manager or its Affiliate(s), as applicable, the
     amount indicated thereon promptly upon the receipt of such statements.

                                    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.

Page 16

<PAGE>

                                    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 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 accurately to process
date data and information ("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

Page 17

<PAGE>

architectural unit as a hotel of the same type and class as it was immediately
preceding such taking or condemnation.

     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.

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

Page 18

<PAGE>

     (iv) The occurrence of a material default under the Mortgage Documents,
          which default is not cured and results in acceleration of the
          indebtedness secured thereby, or the exercise of any possessory rights
          or rights to the appointment of a receiver in favor of the Leasehold
          Mortgagee.

     (v)  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.

     (vi) The occurrence of an "Event of Default" (as defined in the Acquisition
          Mortgage Documents (as herein defined)) under the Acquisition Mortgage
          Documents, which Event of Default is not cured and results in
          acceleration of the indebtedness secured thereby.

     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, and provided the Acquisition Loan has been paid in full, 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), and provided
the Acquisition Loan has been paid in full, 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

Page 19

<PAGE>

payment of all other fees and reimbursable sums due to Manager on the
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, and provided
the Acquisition Loan is paid in full, Owner shall have the right to terminate
this Agreement if, beginning in the first full calendar year of Hotel
operations, Manager fails to (A) 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") and (B) during each of the two (2)
immediately preceding calendar years, the Hotel's Yield Index (as reported in
the "Star Report" published by Smith Travel Services) versus the Competitive Set
is below the agreed upon Base Yield Index of the Hotel for each of the
applicable calendar years; provided, however, that, in the case of (A) 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 after the later of (x) Owner's receipt of the annual financial
statements for the calendar year pursuant to Section 3.01(vi) and the date of
publication of information regarding the Yield Index of the hotels within the
Competitive Set by Smith Travel Services. 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 the Budgeted GOP and Competitive Set tests 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 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.

Page 20

<PAGE>

     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 Hotel has not received a Homewood Suites by Hilton(R) 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 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.

Page 21

<PAGE>

     Section 9.09. Loss of Alcohol License. If for any reason not caused by the
                   -----------------------
act or omission of Manager, any required licenses for the sale of alcoholic
beverages are at any time suspended, terminated or revoked and such suspension,
termination or revocation shall continue for a period of sixty (60) consecutive
days, or if, for any reason not caused by the act or omission of Manager, the
right to serve alcoholic beverages in the Hotel shall otherwise be suspended for
a period of sixty (60) consecutive days, then Manager shall have the right to
terminate this Agreement upon written notice to Owner given at any time
following the occurrence of any such event, and this Agreement shall terminate
upon the date specified therein, which date shall be not less than thirty (30)
days nor more than seventy-five (75) days after the date of the giving of such
notice.

     Section 9.10. Indemnification re Future Business. Owner shall indemnify and
                   ----------------------------------
hold Manager and its Affiliates harmless from all costs, expenses, claims and
liabilities, including reasonable attorneys' fees, arising or resulting from the
failure of Owner, following the expiration or earlier termination (for whatever
cause) of this Agreement, (i) to provide all of the services contracted for
within the scope and terms of this Agreement in connection with the business
booked in the ordinary course of business at any time prior to the date of such
expiration or termination, (ii) if and to the extent required by any contracts
or leases entered into in the ordinary course of business of the Hotel by
Manager as agent of Owner within the scope and terms of this Agreement prior to
such expiration or termination, to honor and fulfill all obligations of Owner
thereunder with respect to the Hotel, or (iii) to honor all purchase orders and
to pay all payables arising out of the operation by Manager of the Hotel in the
ordinary course of business in accordance with the provisions of this Agreement
prior to such expiration or termination, (iv) to pay or reimburse Manager for
all Compensation due to the employees of the Hotel or to make, or reimburse
Manager for, all contributions or other payments required to meet its
obligations under or with respect to all employee benefit plans for the period
prior to such expiration or termination, or (v) if and to the extent applicable
pursuant to the provisions of Section 9.11 hereinbelow, (A) to reimburse Manager
for any liabilities arising under the WARN Acts, and (B) to the extent Owner or
its new manager hires Hotel employees, to pay all Compensation due to such
employees of the Hotel from the after such expiration or termination of this
Agreement.

     Section 9.11. Extension Date of Termination. Notwithstanding any contrary
                   -----------------------------
provision of this Agreement, the date of termination of this Agreement, other
than upon expiration pursuant to Section 2.01, shall be extended so that the
date of termination after notice of termination is given to or by Manager shall
be on a date which is not earlier than fifteen (15) days plus the number of
days, if any, Manager is required to give its employees advance notice of
termination of employment as required by the Worker Adjustment and Retraining
Act, 29 U.S.C., ss.2101 et. seq., as hereafter amended, or any similar federal
or state statute ("WARN Acts"); provided, however, that this provision shall not
be applicable if Owner or its new hotel manager hires a sufficient number of
Hotel employees in order for Manager to avoid incurring liability under the WARN
Acts in connection with such termination, and Owner shall indemnify and hold
Manager and its Affiliates harmless from all costs, expenses, claims and
liabilities, including reasonable attorneys' fees, arising or resulting from any
such liability under the WARN Acts.

Page 22

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                                   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 or Commonwealth in which the Hotel is located, 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 this
     Agreement; (c) any adjustment in the Minimum Balance under the provisions
     of Section 4.01(iv); (d) any adjustment in dollar amounts of insurance
     coverages required to be maintained; (e) any dispute concerning the
     apportionment of compensation for any taking contemplated under Section
     8.01 of this Agreement; and (f) any dispute concerning the approval of an
     Operating Budget, Capital Budget or FF&E 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. The parties hereby agree and acknowledge that disputes
     relating to the Group Services, or the allocation or computation of costs
     or expenses relating thereto, shall not be subject to the terms of this
     Section 10.02 and may not be submitted to the Accountants for arbitration.

          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 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

Page 23

<PAGE>

     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 (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 Section of Section 4.01(vi) shall be
governed by the provisions of said Section 4.01(vi). Any contract that does not

Page 24

<PAGE>

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 Hilton
Hotels 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 by
Hilton(R) 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, as
long as the third party acquirer shall continue to own and operate the Homewood
Suites "System". 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 by Hilton(R) License Agreement for the
Hotel. Except as hereinabove provided, Owner shall not have the right to assign
this Agreement.

     Notwithstanding the foregoing, neither any transfer of publicly traded
stock nor any public offering of equity ownership interests (whether partnership
interest, corporate stock, shares, or otherwise) in either party or by its
parent company or other owner of such party, or entity that itself or through
its ownership of legal or beneficial interests in one or more other entities
holds legal or beneficial interests or voting power in such an owner shall be
deemed to be an sale, lease or assignment under the provisions of this Section
11.05.

     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

Page 25

<PAGE>

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 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 reasonably
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

Page 26

<PAGE>

receive its Management Fees), the party whose rights have been 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 or (b)
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 all regional
officers and employees of Manager and its Affiliates reasonably incurred in the
performance of this Agreement, provided, however, that travel and out-of-pocket
expenses of non-regional corporate officers, Senior Vice Presidents and higher
ranking executive 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.

     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

Page 27

<PAGE>

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 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
----------------------------------------------------------
that certain Agreement of Sale dated June 7, 2001, by and among Hilton
Hospitality, Inc. and Chesterfield Village Hotel, LLC, as sellers, and Apple
Suites, Inc., as buyer (the "Purchase Agreement"), Promus Hotels,

Page 28

<PAGE>

Inc. (in its capacity as lender, the "Acquisition Lender") has loaned to Apple
Suites, Inc. and the Fee Owner the sum of $16,500,000 (the "Acquisition Loan")
as purchase money financing for the acquisition of the properties (the
"Properties") conveyed pursuant to the Purchase Agreement. The Acquisition Loan
is evidenced by (i) a note of Fee Owner dated                 , 2001, in the
                                              ----------------
amount of $8,625,000, and (ii) a note of Apple Suites, Inc. dated
                , 2001, in the amount of $7,875,000, and is secured by, among
----------------
other things, mortgage(s), deed(s) of trust or deed(s) to secure debt dated
                , 2001, or of even date herewith from Fee Owner, Apple Suites,
----------------
Inc., 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. Permitted Mortgages. Owner shall not grant any mortgage,
                    -------------------
deed of trust or trust deed, pledge or encumbrance of or other security interest
in the Hotel or any part thereof or interest therein (a "Mortgage") unless and
until the Acquisition Loan is paid in full, and thereafter, only to a Permitted
Mortgage (as hereinafter defined). As used herein, the holders of, or trustee
under, any such Mortgage, and the holder of any indebtedness secured thereby
herein collectively referred to as the "Mortgagee". As used herein, a "Permitted
Mortgage" shall mean any Mortgage which (as such Mortgage is amortized pursuant
to its existing terms) or any future Mortgage which shall hereafter be approved
in advance and in writing by Manager, such approval of Manager not to be
unreasonably withheld; provided, among other things, that the: (i) principal
amount of the indebtedness secured by such future Mortgage as it relates to the
Hotel when aggregated with all other remaining indebtedness secured by liens
against the Hotel is not in excess of the greater of (A) 75% of the then
appraised value of the Hotel as determined by Mortgagee in connection with its
underwriting of the loan secured by such future Mortgage, or (B) the principal
amount of the indebtedness secured by any current Mortgage; (ii) a copy of the
Mortgage and other loan documents shall be delivered to Manager upon execution
thereof; (iii) the related financing is obtained from an Institutional Lender
(as hereinafter defined) which is not an Affiliate of Owner; and (iv) Mortgagee
enters into a Subordination, Attornment and Non-Disturbance Agreement with
Manager in a form and substance reasonably acceptable to Manager. The foregoing
shall be applicable both to original financing and to any refinancing,

Page 29

<PAGE>

and, except as may be provided in the Subordination, Attornment and
Non-Disturbance Agreement between the Manager and Mortgagee, this Agreement
shall survive the foreclosure of any such Mortgage, or the granting of a deed in
lieu thereof, and shall be binding upon the purchaser at any such foreclosure,
or the grantee of a deed in lieu thereof, and their respective successors and
assigns, except any such third-party purchaser at foreclosure or any third-party
grantee of a deed in lien which in either case is unaffiliated with such lender.
The term "Institutional Lender" shall mean a commercial bank, a trust company, a
savings bank, a savings and loan association, an insurance company, a college or
university, a pension fund of a corporation whose shares are listed on a
recognized national stock exchange, or a real estate investment trust whose
shares are listed on such an exchange, in each case having assets of no less
than $500,000,000.00 (which amount is based upon the purchasing power of the
United States dollar as of the Effective Date and shall be annually increased,
if necessary, on each anniversary of the Effective Date to reflect an amount
which shall have the equivalent purchasing power to said $500,000,000.00) and
which is regularly engaged in the business of making commercial loans.

     Section 11.29. Intellectual Property. Owner acknowledges that Manager or
                    ---------------------
one of its Affiliates is or will become the owner or licensee of certain
intellectual property including its (i) software in use at one or more Other
Managed Hotels and all source and object code versions thereof and all related
documentation, flow charts, user manuals, listing, and service/operator manuals
and any enhancements, modifications or substitutions thereof ("Manager
Software"), and (ii) trade secrets, know-how and other proprietary information
relating to the operating methods, procedures and policies distinctive to Other
Managed Hotels (herein collectively called "Intellectual Property"). Manager
shall utilize the Intellectual Property in connection with the operation of the
Hotel to the extent that it deems appropriate for the purpose of carrying out
its agreements and obligations hereunder, but such use shall be strictly on a
non-exclusive basis, and neither such use nor anything contained in this
Agreement shall confer any proprietary license or other rights in the
Intellectual Property upon Owner or any third parties, provided it is given
prompt notice, reasonable assistance and sole authority to defend or settle the
claim. Manager shall indemnify, defend and hold harmless Owner and its
affiliates from and against any and all claims, costs, expenses, liabilities,
charges and fees directly incurred by Owner and its affiliates to the extent
arising from any copyright or patent infringement claim by any third party and
relating to the use by Manager of the Manager Software and Intellectual
Property.

     Section 11.30. Purchases from Manager and Manager's Affiliates. In
                    -----------------------------------------------
purchasing goods, supplies, equipment and services for the Hotel, including,
without limitation, Operating Supplies, Operating Equipment, insurance and long
distance telephone services, Manager may utilize purchasing procurement services
of affiliates of Manager and/or other group buying techniques involving Other
Managed Hotels, as well as other hotels operated by Manager and its Affiliates,
provided that the cost thereof shall be competitive with that which would be
charged by non-affiliated third party vendors in an arms-length transaction. In
such event, such affiliates and/or Manager (as the case may be) shall be
entitled and authorized to collect any rebates provided by vendors and service
providers to the Hotel and the Other Managed Hotels ("Group Rebates"). Any Group
Rebates collected and aggregated by Manager or an affiliate of Manager (as the
case may be) through the group buying techniques described herein shall be
equitably allocated among, and distributed to, the Hotel and the Other Managed
Hotels, in Manager's sole and reasonable discretion.

Page 30

<PAGE>

     Section 11.31. Indemnification to Manager. Owner shall indemnify and hold
                    --------------------------
Manager harmless from and against any and all actions, suits, claims, penalties,
losses, damages and expenses, including reasonable attorneys' fees, based upon
or arising out of Manager's performance of its services hereunder, or out of any
occurrence or event happening in or about the Hotel or occurring in connection
with the operation thereof, or investigation relating to a possible breach, of
any Legal Requirement (collectively "Claims"), except to the extent such Claims
are based upon Manager's gross negligence, willful misconduct, breach of
contract or failure to act in good faith; provided, however, that Owner shall
not be required to indemnify Manager for any liability arising under applicable
environmental laws, to the extent arising from Manager's negligence or failure
to comply with such applicable environmental laws.

     Section 11.32. Confidentiality. Owner and Manager agree that the matters
                    ---------------
set forth in this Agreement are strictly confidential. In addition, Owner and
Manager agree to keep strictly confidential all information of a proprietary or
confidential nature about or belonging to either party or to any affiliate of
either party to which the other party gains or has access by virtue of the
relationship between Owner and Manager. Except as disclosure may be required to
obtain the advice of professionals or consultants, or financing for the Hotel,
or in furtherance of a permitted assignment of this Agreement, or as may be
required by law or by the order of any government, regulatory authority, or
tribunal or otherwise to comply with applicable legal requirements (including
reporting requirements applicable to public companies), Owner and Manager shall
make every effort to ensure that such information is not disclosed to the press
or to any other third person without the prior consent of the other party. The
obligations set forth in this Section 11.31 shall survive any termination or
expiration of this Agreement. Owner and Manager shall cooperate with one another
on all public statements, whether written or oral and no matter how
disseminated, regarding their contractual relationship as set forth in this
Agreement or the performance of their respective obligations under this
Agreement.

     Section 11.33. Hotel Reservations Honored. Upon termination of this
                    --------------------------
Agreement for any reason, Owner agrees that Hotel reservations made by Manager
in the ordinary course of business in accordance with this Agreement, for dates
not more than two (2) years after the date of termination and at rates
prevailing for such reservations at the time they were made, shall be honored
and remain in effect after the date of termination of this Agreement.

     Section 11.34. Prohibition on Casinos. No casino shall be operated at the
                    ----------------------
Hotel, or built and operated as a separate structure on the Hotel site, without
the consent of Owner and Manager, and in accordance with any applicable legal
requirements.

     Section 11.35. Counterparts. This Agreement may be executed in two (2) or
                    ------------
more counterparts, each of which shall be deemed an original.

                             SIGNATURE PAGE FOLLOWS

Page 31

<PAGE>

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

                                     OWNER:

/s/ Gus Remppies                     APPLE SUITES MANAGEMENT,
-------------------------            INC., a Virginia corporation
Witness:

                                     By /s/Glade M. Knight
                                       -----------------------------------------
                                             Glade M. Knight, President

                                       Date:
                                            ------------------------------------

                                     MANAGER:

/s/ Laura B. Cady                    PROMUS HOTELS, INC., a Delaware corporation
 ------------------------
Witness:

                                     By  /s/ Mariel C. Albrecht
                                       -----------------------------------------
                                             Mariel C. Albrecht
                                             Senior Vice President

                                       Date: June 15, 2001

Page 32

<PAGE>

                                   EXHIBIT "A"

                                LICENSE AGREEMENT
                                -----------------

                         [filed herewith as Exhibit     ]
                                                    ----

                                      A-1

<PAGE>

                                   EXHIBIT "B"

                               DEAL SPECIFIC TERMS
                               -------------------

INITIAL TERM:                       Fifteen (15) years from the Effective Date
------------

OPTION TERMS:                       Two (2) periods of five (5) years each,
------------                        exercisable as provided in Article 2.01

COMPETITIVE SET:                    As reported, from time to time, in the "Star
---------------                     Competitive Set Response Report" published
                                    by Smith Travel Services

BASE YIELD INDEX:                   [TBD]
----------------

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

INITIAL OWNER'S REPRESENTATIVE:     Justin Knight
------------------------------

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;

     (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 Improvements
          and FF&E 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,

                                      B-1

<PAGE>

          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 Improvements and FF&E Replacements; (vi) audit, legal and
          other professional or special fees; (vii) premiums for insurance
          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(xviii); and (xii) 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)  payments of principal, interest and other sums due and payable under
          the Acquisition Loan;

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

     (h)  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:

               To Manager:

               Hilton Hotels Corporation
               755 Crossover Lane
               Memphis Tennessee 38117-4906
               Attn: Richard Schultz - Senior Vice President - Operations
               Tel: 901-374-5523
               Fax: 901-374-5521

               with copies at the same time to:

               Hilton Hotels Corporation
               9336 Civic Center Drive
               Beverly Hills, CA 90210
               Attn: General Counsel
               Tel: 310-205-7687
               Fax: 310-205-4611

               and

               Greenberg Traurig, P.A.
               111 North Orange Avenue, 20th Floor
               Orlando, Florida 32801
               Attn: Michael J. Sullivan, Esq.
               Tel: 407-420-1000
               Fax: 407-420-5909

               To Owner:

               Apple Suites Management, Inc.
               9 North Third Street
               Richmond, Virginia 23219
               Attention:  Mr. Glade M. Knight
               Tel:     804-643-4964
               Fax:     804-782-9302

               with copies at the same time to:

               Jenkens & Gilchrist
               1445 Ross Avenue, Suite 3200
               Dallas, Texas 75202-2799
               Attention:  Thomas E. Davis, Esq.
               Tel:     214-855-4500
               Fax:     214-855-4300

                                      B-3

<PAGE>

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 $1,505,460; (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.

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 per month (which $1,000 amount is based upon the purchasing power of
the United States dollar as of the Effective Date and shall be annually
increased, if necessary, on each anniversary of the Effective Date to reflect an
amount which shall have the equivalent purchasing power to said $1,000).

RIGHT OF FIRST REFUSAL.
-----------------------

     If Owner shall have received a bona fide written offer to purchase or lease
the Hotel and Owner, pursuant to the terms of such offer, desires to sell or
lease the Hotel to any person, firm or corporation other than an affiliate of
Owner or Fee Owner (following which this Agreement shall continue unaltered),
Owner shall give written notice thereof to Manager, stating the name and full
identity of the prospective purchaser or tenant, as the case may be, including
(if known) the names and addresses of the owners of the capital stock,
partnership interests, or other proprietary interests of a privately-held
purchaser or tenant, the price or rental, and all terms and

                                      B-4

<PAGE>

conditions of such proposed sale or lease, together with all other information
with respect thereto which is reasonably requested by Manager and readily
available to Owner. Within thirty (30) days after the date of receipt by Manager
of such written notice from Owner (or if additional information is requested,
then ten (10) days after receipt by Manager of such information, if later),
Manager shall elect, by written notice to Owner, one of the following
alternatives:

               (a) To purchase or lease the Hotel or to have its designee or
     designees (which, in Manager's sole discretion, may be any entity,
     including, but not limited to, an unrelated third party) purchase or lease
     the Hotel at the same price or rental and upon substantially the same terms
     and conditions as those set forth in the written notice from Owner to
     Manager; provided that Manager or its designee(s) may substitute cash for
     the fair market value of any non-cash compensation offered. In the event
     that Manager shall have elected to so purchase or lease or have its
     designee(s) so purchase or lease the Hotel in accordance with the
     provisions of the preceding sentence, Owner and Manager (or its designee(s)
     as the case may be) shall promptly thereafter enter into an agreement for
     sale or lease at the price or rental and on substantially the same terms
     aforesaid, and otherwise reasonably acceptable to Owner and such purchaser,
     and shall consummate such transaction subject to and in accordance with the
     terms and conditions thereof.

               (b) To reasonably consent or withhold consent to such sale or
     lease and to the assignment of this Agreement to such purchaser or tenant
     if such sale or lease is in fact consummated; provided that Manager
     expressly reserves the right to disapprove such sale, lease or assignment,
     if (A) the proposed transferee, or any of its Affiliates, is the owner of a
     trade name of a chain of hotels which competes with Manager's other owned
     or operated hotels, irrespective of the number of hotels comprising the
     competitive chain; (B) the proposed transferee or any of its Affiliates is
     generally recognized in the community as being of ill repute or is in any
     other manner a person with whom a prudent business person would not wish to
     associate in a commercial venture or a person that, in Manager's reasonable
     determination, would be considered by regulators in the gaming industry in
     any jurisdiction where Manager or any of its Affiliates holds a gaming
     license to be an unsuitable business associate of Manager and its
     Affiliates; (C) the proposed transferee does not have the ability to
     fulfill Owner's financial obligations hereunder; (D) the proposed
     transferee or any of its Affiliates maintained a prior unsatisfactory
     business relationship with Manager, or any of its Affiliates or (E) for so
     long as the Acquisition Loan remains outstanding.

               Manager may, at its sole option, subject its consent to
     satisfaction of certain conditions, including without limitation, the
     following: (i) the cure of any existing defaults or events which would
     become defaults with the giving of notice and passage of time, including
     without limitation, the payment in full at the closing of such sale or
     lease, and assignment (the "Closing"), of all unpaid obligations owed
     Manager and its Affiliates by Owner; (ii) receipt of evidence from the
     purchaser or tenant that insurance coverage, as required by Exhibit D
     hereof, is in full force and effect on the Closing date; and (iii) payment
     of the amount of any estimated fees and charges which will accrue to
     Manager and its Affiliates through the date of Closing, which amounts
     cannot be calculated in full prior to or at the Closing. To the fullest
     practical extent, Owner shall give to Manager sufficient written notice of
     the date on and place at which

                                      B-5

<PAGE>

     such sale or lease is to be consummated in order to give Manager an
     opportunity to prepare appropriate transfer documents and to be present at
     such time.

               Manager agrees that, upon the terms and conditions set forth in
     this Section, it shall elect one of the alternatives set forth above. If
     Manager shall fail, neglect or refuse to so exercise any of said
     alternatives within said thirty (30) day period, the same shall be
     conclusively deemed to constitute an election and consent under Subsection
     (b), and the provisions thereof shall prevail as if Manager had in writing
     consented pursuant thereto.

               (c) Notwithstanding the provisions of (b) above, but subject to
     the terms of the Comfort Letter, the Hotel shall not be sold or leased
     unless (i) the purchaser or tenant, as the case may be, shall have first
     delivered to Manager an executed written instrument, reasonably
     satisfactory in form and substance to Manager and its counsel, expressly
     assuming and agreeing to perform all of the terms and provisions of this
     Agreement, and (ii) such purchaser or tenant shall in all respects be
     acceptable to, and approved by, Manager, which approval shall not be
     unreasonably withheld. Upon any such sale or lease of the Hotel in
     accordance with the provisions of this Section, all of the rights and
     obligations of Owner hereunder shall vest in the purchaser or tenant, as
     the case may be, and all such rights and obligations of the seller or
     lessor shall thereupon terminate (with the exception of any liabilities or
     obligations incurred prior to the date of such sale or lease, as to which
     the seller or lessor shall remain fully liable). In the event of any
     failure by Owner to satisfy any terms and conditions of this Section,
     consent to any sale, lease or transfer of the Hotel and/or assignment of
     this Agreement shall be deemed withheld by Manager and any such sale,
     lease, transfer and/or assignment shall be a default hereunder.

                                      B-6

<PAGE>

                                   EXHIBIT "C"

                                 MANAGEMENT FEES
                                 ---------------

A.   In consideration of Manager's services, Owner shall pay to Manager a
     management fee (the "Management Fee") equal to (i) during the period from
     the Effective Date to and including the last day of the month in which the
     5th anniversary of the Effective Date occurs, two percent (2.0%) of the
     Gross Revenues (determined as hereinafter provided) from the operation of
     the Hotel with respect to each month (or a portion thereof) from the
     Effective Date through the date which is the 5th anniversary of the
     Effective Date, and (ii) during the period from and after the 5th
     anniversary of the Effective Date to and including the end of the Term or
     Option Term, as applicable, three percent (3%) of Gross Revenues with
     respect to each month (or portion thereof) during such period (such fees
     being herein called the "Fixed Management Fee") and (iii) ten percent (10%)
     of an amount equal to Operating Cash Flow (determined as hereinafter
     provided) from the operation of the Hotel for each operating year (herein
     called the "Incentive Management Fee").

B.   For the purpose of determining the Fixed Management Fee, the term "Gross
     Revenues" shall mean Net Revenues of Total Operated Departments of the
     Hotel for each operating year, determined in accordance with the Uniform
     System of Accounts For Hotels (9th Revised Edition 1996), as published by
     the Hotel Association of New York City, Inc., on an accrual basis in
     accordance with generally accepted accounting principles consistently
     applied, excluding interest income. As used herein, the "Uniform System of
     Accounts for Hotels" shall mean the Uniform System of Accounts For Hotels
     (9th Revised Edition 1996), as published by the Hotel Association of New
     York City, Inc.

C.   For the purpose of determining the Incentive Management Fee, the term
     "Operating Cash Flow" shall mean the Income Before Income Taxes of the
     Hotel for each operating year as referred to and determined in accordance
     with the Uniform System of Accounts For Hotels (as illustrated on page 33
     thereof) on an accrual basis in accordance with generally accepted
     accounting principles consistently applied, excluding interest income and
     expense, depreciation and amortization, but after deducting (i) an amount
     equal to the percentage of the Gross Revenues of the Hotel to be deposited
     for the operating year in the Reserve Fund pursuant to Subsection 4.01(vi),
     and (ii) amounts in excess of the balance of the Reserve Fund (including
     deposits under clause (i) above for such operating year) that Owner has
     paid, or is required to pay, with respect to such operating year for
     Capital Improvements which materially enhance or add to the value of the
     Hotel in excess of its value on the date of the expenditure, but shall not
     include expenditures for Capital Improvements, of whatever magnitude, if
     the purpose is primarily to maintain the value of the Hotel. By way of
     illustration only, the conversion of guest rooms to meeting rooms or the
     addition of new facilities would be considered a Capital Improvement which
     materially enhances or adds to the value of the Hotel, while the periodic
     replacement of FF&E would not be considered a Capital Improvement which
     materially enhances or adds to the value of the Hotel.

                                      C-1

<PAGE>

D.   Proceeds from business interruption insurance, net of any and all expenses
     incurred in collecting such proceeds, shall be included both for the
     purpose of determining Gross Revenues and Operating Cash Flow.

E.   The Management Fee shall be payable in monthly installments concurrently
     with the delivery to Owner of the monthly report under Section 3.01(vi),
     the installments of the Fixed Management Fee to be the percentages of Gross
     Revenues from the operation of the Hotel, as described in A above for the
     preceding month, and the installments of the Incentive Management Fee to be
     an amount equal to the difference found by subtracting (i) the aggregate of
     the monthly installments of the Incentive Management Fee theretofore paid
     with respect to the preceding months in the then current operating year,
     from (ii) ten (10%) of Operating Cash Flow from the operation of the Hotel
     for the then current operating year through the end of the preceding month.
     The monthly installments of the Management Fee will be reduced or omitted
     to the extent necessary to avoid or eliminate an overpayment of the
     installments of the monthly Management Fee which may result from
     overpayments of the Incentive Management Fee due to changes in operational
     levels during a given operating year.

F.   If any annual report to be delivered by Manager to Owner under Section
     3.01(vi) shall show that the aggregate of the monthly installments of the
     Management Fee paid with respect to the preceding operating year shall
     exceed or be less than the Management Fee as shown in such annual report
     for such operating year, then Manager shall deposit into or withdraw from
     the Bank Accounts, the amount of such overpayment or underpayment, as the
     case may be.

                                      C-2

<PAGE>

                                   EXHIBIT "D"

                                    INSURANCE
                                    ---------

     In accordance with Section 3.01(xiv), 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):

Coverages:                                             Amounts of Insurance
---------                                              --------------------

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

     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 adequate financial

                                      D-1

<PAGE>

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
aprocure and maintain the following insurance coverages, as reasonably adjusted
from time to time, throughout the Term of this Agreement:

Coverages:                                          Amounts of Insurance
----------                                          --------------------

     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.

     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 certificates of

                                      E-1

<PAGE>

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.

                                      E-2

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