Document:

<PAGE>

                                                                    EXHIBIT 10.1

                              AMENDED AND RESTATED
                               OPERATING AGREEMENT
                                       OF
                             APPLE SUITES - MO, LLC

     This Amended and Restated Operating Agreement (this "Agreement") is made as
of December 20, 2001 by and between Apple Suites - MO, LLC, a Virginia limited
liability company (the "Company"), and Apple Suites SPE Holding, Inc., a
Virginia corporation (the "Sole Member").

                                    RECITALS

     The Company was formed as a Virginia limited liability company and a
wholly-owned subsidiary of Apple Suites, Inc., a Virginia corporation, on June
11, 2001 and was governed by an Operating Agreement dated as of such date (the
"Prior Agreement"). On December 20, 2001, in connection with financing to be
provided by First Union National Bank, Apple Suites, Inc. formed another
wholly-owned subsidiary, Apple Suites SPE Holding, Inc., a Virginia corporation,
which became the Sole Member of the Company as of such date. The Company has no
intention of admitting additional members. Accordingly, the parties desire to
amend, restate and replace the Prior Agreement, on the terms and conditions set
forth below.

                                    ARTICLE I
                    DEFINITIONS, PURPOSE AND GENERAL MATTERS

     1.1 Purpose. The purpose of the Company is to engage in any lawful
activity. Without limiting the scope of the foregoing, the Company is authorized
to own, hold, sell, assign, transfer, operate, lease, mortgage, pledge and
otherwise deal with that certain parcel of real property listed on Exhibit A
                                                                   ---------
hereto, together with all improvements located thereon (collectively, the
"Property").

     1.2 Operating Names. The Company may operate under its own name and under
such assumed names as it deems appropriate or convenient.

     1.3 Qualifications in Other Jurisdictions. If required by law, the Company
shall promptly qualify or register to transact business in all jurisdictions in
which it transacts business as a foreign limited liability company.

     1.4 Limited Liability. No member or manager of the Company shall be
personally obligated for any debt, obligation or liability of the Company solely
by reason of being a member or acting as a manager, except as may be required by
applicable law. Such elimination of liability or limitation of liability, as the
case may be, shall exist to the maximum extent permitted by the Virginia Limited
Liability Company Act, as it may be amended or replaced from time to time (the
"Act").

<PAGE>

                                   ARTICLE II
                                   MEMBERSHIP

     2.1 Admission of Additional Members. The Company shall not admit a member
in addition to the Sole Member unless all of the following requirements are
satisfied: (a) the Sole Member grants prior written consent to the admission of
the additional member; (b) the Company and the Sole Member amend or replace this
Agreement as may be necessary or appropriate for the purpose of addressing any
issues raised by joint or multiple ownership of the Company; and (c) each person
or entity who seeks to be admitted as a member of the Company executes the
current Operating Agreement of the Company, as amended or replaced in accordance
with the preceding clause , and makes any required capital contributions to the
Company in full.

     2.2 Resignation. The Sole Member shall not resign or withdraw from the
Company, except by operation of law or by transferring its entire interest in
the Company in accordance with this Agreement.

                                   ARTICLE III
          MANAGEMENT, PROHIBITED ACTIVITIES AND SEPARATENESS COVENANTS

     3.1 Appointment of Manager. The Company shall be managed by a single
manager (the "Manager"). The Manager may be a person or an entity. The initial
Manager of the Company shall be the Sole Member, who shall not resign as the
Manager unless a qualified replacement Manager has agreed to become the Manager
upon such resignation.

     3.2 Term of Manager. The Manager's term shall continue until the Manager's
resignation, termination by operation of law or death (as applicable for the
then current Manager), or removal by the Company. The Company shall be entitled,
in its sole discretion, to remove or replace the Manager at any time and for any
reason.

     3.3 Authority of Manager. The Manager shall have the authority to act on
behalf of the Company to the maximum extent permitted by the Act. Without
limiting the scope of the foregoing, the Manager shall be entitled to appoint
any officers of the Company (the "Officers") and to establish the authority,
duties, terms and compensation (if any) of the Officers. The parties acknowledge
and agree that the Officers also may hold offices in corporations, including but
not limited to corporations affiliated with the Sole Member.

     3.4 Expenses and Reimbursement. The Company shall be responsible for all
expenses, costs and liabilities arising from the management, organization or
operation of the Company in accordance with this Agreement ("Company Expenses").
The Manager and the Officers shall be entitled to receive prompt reimbursement
from the Company to the extent, if any, that they incur any Company Expenses,
unless such Company Expenses arose from a violation of this Agreement, willful
misconduct or knowing violation of criminal law.

     3.5 Management Compensation. No salary or other compensation shall be paid
to the Manager for the Manager's actions on behalf of the Company.

                                      -2-

<PAGE>

     3.6 Certain Prohibited Activities. Notwithstanding any provision hereof to
the contrary, the following shall govern:

          (a) The indebtedness of the Company shall consist only of a first lien
mortgage on the Property arising from financing by First Union National Bank
(the "Mortgage"), any other indebtedness permitted under the Mortgage, and
normal trade accounts payable in the ordinary course of business. For so long as
any obligation secured by the Mortgage remains outstanding and not paid in full,
the Company shall not incur, assume, or guaranty any indebtedness not permitted
hereunder.

          (b) The Company shall not consolidate or merge with or into any other
entity, or convey or transfer its properties and assets substantially as an
entirety to any entity, unless:

               (i) the entity that is formed upon such consolidation, that
survives such merger (if other than the Company), or that acquires by conveyance
or transfer the properties and assets of the Company substantially as an
entirety, shall: (A) be organized and existing under the laws of the United
States of America or any State or the District of Columbia, (B) include in its
organizational documents the same limitations set forth in this Article II and
in Section 2.4 hereof (Separateness Covenants), and (C) expressly assume the due
and timely performance of the Company's obligations; and

               (ii) immediately after giving effect to such transaction, no
default or event of default will have occurred under any agreement to which the
Company is a party.

          (c) For so long as any obligation secured by the Mortgage remains
outstanding and not paid in full, the Company shall not voluntarily commence a
case with respect to itself, as debtor, under the Federal Bankruptcy Code or any
similar federal or state statute without the unanimous consent of the Sole
Member's Board of Directors. For so long as any obligation secured by the
Mortgage remains outstanding and not paid in full, no material amendment to this
Company Agreement may be made without the prior approval of the mortgagee
holding the Mortgage.

     3.7 Separateness Covenants. Notwithstanding any provision hereof to the
contrary, the following shall govern: For so long as any obligation secured by
the Mortgage remains outstanding and not paid in full, in order to preserve and
ensure the Company's separate and distinct identity, in addition to the other
provisions set forth in this Agreement, the Company shall conduct its affairs in
accordance with the following provisions:

          (a) It shall establish and maintain an office through which its
business shall be conducted separate and apart from those of the Sole Member and
any affiliate and it shall allocate fairly and reasonably any overhead for
shared office space.

          (b) It shall maintain separate records and books of account from those
of the Sole Member and any affiliate.

          (c) All actions by the Company shall be authorized by the Sole Member,
who shall observe all necessary formalities in connection with such
authorization.

                                      -3-

<PAGE>

          (d) It shall not commingle assets with those of the Sole Member or any
affiliate.

          (e) It shall conduct its own business in its own name.

          (f) It shall maintain financial statements separate from the Sole
Member and any affiliate.

          (g) It shall pay any liabilities out of its own funds, including
salaries of any employees, not funds of the Sole Member or any affiliate.

          (h) It shall maintain an arm's length relationship with the Sole
Member and any affiliate.

          (i) It shall not guarantee or become obligated for the debts of any
other person or entity (including, without limitation, the Sole Member or any
affiliate) and shall not hold out its credit as being available to satisfy the
obligations of others.

          (j) It shall use stationery, invoices and checks separate from the
Sole Member and any affiliate.

          (k) It shall not pledge its assets for the benefit of any other person
or entity (including, without limitation, the Sole Member or any affiliate).

          (l) It shall hold itself out as an entity separate from the Sole
Member and any affiliate.

          (m) It shall not make any loans or advances to any third party
(including, without limitation, any affiliate).

          (n) It shall comply with its obligations under the agreements and
instruments evidencing the Mortgage.

     3.8 Definitions. For purpose of this Article III, the following terms shall
have the indicated meanings:

          (a) "affiliate" means, with respect to a specified person or entity:

               (i) any person or entity directly or indirectly owning,
controlling or holding with power to vote ten percent (10%) or more of the
outstanding voting securities or interests of the specified entity;

               (ii) any person or entity ten percent (10%) or more of whose
outstanding voting securities or interests are directly or indirectly owned,
controlled or held with power to vote by the specified person or entity;

                                      -4-

<PAGE>

               (iii) any person or entity directly or indirectly controlling,
controlled by or under common control with the specified person or entity;

               (iv) any officer, director or partner of the specified person or
entity;

               (v) if the specified person or entity is an officer, director or
partner, any company for which the specified person or entity acts in any such
capacity; and

               (vi) any close relative or spouse of the specified person.

          (b) "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person or entity, whether through ownership of voting securities, by contract or
otherwise.

          (c) "person or entity" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization,
government or any agency or political subdivision thereof.

                                   ARTICLE IV
                            CAPITAL AND DISTRIBUTIONS

     4.1 Capital Contributions. The Sole Member shall be entitled, in its sole
discretion, to make capital contributions to the Company from time to time. Any
and all such capital contributions shall be recorded in the books and records of
the Company.

     4.2 Loans. Any loans from the Sole Member to the Company shall be made on
commercially reasonable terms and conditions, and shall not be considered
capital contributions.

     4.3 Distributions. The Company shall make annual distributions of any cash
amounts that, in the reasonable determination of the Manager, are not necessary
for the Company's operations, expenses or reserves. The Manager is entitled to
authorize more frequent distributions of such cash amounts in the Manager's sole
discretion.

                                    ARTICLE V
                              TRANSFER OF INTEREST

     5.1 Restriction. The Sole Member shall be prohibited from assigning,
selling, exchanging or otherwise transferring its interest in the Company unless
all of the following requirements are satisfied: (a) the proposed transaction
would apply to the entire interest of the Sole Member in the Company; (b) the
proposed transaction would involve one transferee; (c) the prospective
transferee tenders full payment of the required purchase price and executes a
counterpart signature page to this Agreement as a member of the Company; and (d)
the Company receives an opinion from its legal counsel, satisfactory to the
Company in form and substance, confirming that the proposed transaction would
not violate any federal or state securities laws or any other applicable laws.

                                      -5-

<PAGE>

     5.2 Effect of Transfer. If the Sole Member transfers its entire interest in
the Company in accordance with this Agreement, such transfer shall operate, upon
completion, as the complete resignation or withdrawal of the Sole Member from
the Company.

     5.3 Related Matters. Any transaction that is subject to this Article and
that fails in any way to comply with its provisions shall be ineffective and
void.

                                   ARTICLE VI
                                   TAX MATTERS

     6.1 Tax Classification. The Company shall be disregarded as an entity
separate from the Sole Member for federal income tax purposes in accordance with
the Internal Revenue Code of 1986, as amended, and section 301.7701-3(b)(1)(ii)
of the Treasury Regulations thereunder (or any successor provisions thereof).

     6.2 Tax Filings. The Company shall make such filings as may be required to
maintain its tax classification as a disregarded entity for income tax purposes.
The Company may obtain a federal tax identification number for business
purposes, and such action shall not be construed as a change to the Company's
tax classification as a disregarded entity.

                                   ARTICLE VII
                        INDEMNIFICATION AND REIMBURSEMENT

     7.1 Definitions. As used in this Article, the term "Indemnified Person"
shall refer to the Sole Member, the Manager (if different from the Sole Member)
and the Officers, and each employee, director and officer of the Sole Member or
the Manager.

     7.2 Indemnification. The Company shall indemnify each Indemnified Person
against any and all claims, liabilities, costs and expenses (including but not
limited to reasonable legal fees and costs) arising directly or indirectly from
any suit, action, investigation or other proceeding (whether formal or informal)
that (a) is brought or threatened against an Indemnified Person; and (b) is
based on the acts or omissions of such Indemnified Person on behalf of the
Company, unless such acts or omissions violated this Agreement, constituted
willful misconduct or resulted from a knowing violation of criminal law. The
Company shall have no obligation to indemnify an Indemnified Person to the
extent, if any, that the Indemnified Person is entitled to be indemnified by
another source, such as, without limitation, an insurance company.

     7.3 Reimbursement. If an Indemnified Person incurs or pays any indemnified
cost, the Company shall reimburse the Indemnified Person for the full amount of
such indemnified cost. Such reimbursement shall be due promptly after the
Company receives (a) a written request for reimbursement from the Indemnified
Person; (b) all information necessary to establish the nature and amount of the
indemnified cost that was incurred or paid by the Indemnified Person; and (c) a
written agreement by the Indemnified Person to repay such reimbursement if the
Company subsequently determines that the Indemnified Person was not

                                      -6-

<PAGE>

entitled to indemnification or if the Indemnified Person subsequently receives
reimbursement from another source, such as, without limitation, an insurance
company.

                                  ARTICLE VIII
                                   DISSOLUTION

     8.1 Events of Dissolution. The Company shall dissolve upon the occurrence
of any of the following events: (a) the written instruction of the Sole Member;
or (b) any event requiring dissolution under the Act.

     8.2 Winding Up of Affairs. Upon the dissolution of the Company, the Manager
shall wind up the affairs of the Company. The Manager shall determine the time,
place, manner and other terms of any sales involving the Company's assets, with
due regard to the activity and the condition of the Company and the relevant
market and economic conditions.

     8.3 Final Distributions. Upon the dissolution of the Company, and subject
to the requirements of the Act, the Manager shall distribute the assets of the
Company in the following order of priority:

          (a) first, to any creditors of the Company;

          (b) second, to known and reasonably estimated costs of dissolution and
winding up;

          (c) third, to any reserves established by the Manager, in the sole
discretion thereof, for contingent liabilities of the Company; and

          (d) fourth, to the Sole Member.

     8.4 Filing of Certificate of Cancellation. Following the winding up of the
Company, the Manager shall be responsible for filing, if necessary, a
Certificate of Cancellation on behalf of the Company with the Virginia State
Corporation Commission, together with any other documents required to terminate
the Company and its legal existence.

                                   ARTICLE IX
                                 ADMINISTRATION

     9.1 Offices. The Company's initial registered office and registered agent
shall be as designated in its Articles of Organization. The Manager shall be
entitled to change such designations from time to time, in the Manager's sole
discretion, subject to any requirements of the Act.

     9.2 Information and Records. The Company shall keep accurate and complete
information and records at its principal office (the "Company Records").

                                      -7-

<PAGE>

     9.3 Inspection. Upon prior notice to the Company of at least two (2)
business days, any designated representative of the Sole Member shall be
entitled, during ordinary business hours, to inspect the Company Records and to
copy them at the expense of the Sole Member.

                                    ARTICLE X
                            MISCELLANEOUS PROVISIONS

     10.1 Governing Law. The laws of the Commonwealth of Virginia (without
regard to any provisions or principles involving choice of law) shall govern
this Agreement and all matters relating to its interpretation or enforcement.

     10.2 Other Agreements. Any prior operating agreements with respect to the
Company, whether oral or written, have been merged and integrated into this
Agreement and are superseded by this Agreement.

     10.3 Modifications and Waivers. Modifications of this Agreement shall not
be binding, valid or enforceable unless they are approved in writing by each of
the parties. Any modification or waiver of a provision in this Agreement shall
be limited to that provision and the occasion on which it occurred, and shall
not be construed as a modification or waiver with respect to any other provision
or occasion.

     10.4 Enforceable Provisions. All provisions in this Agreement are severable
and each valid and enforceable provision shall remain in full force and effect,
regardless of any judicial or other official declaration that certain provisions
are invalid or unenforceable.

     10.5 Captions and Headings. Captions and headings are used in this
Agreement for convenience only and shall not affect its interpretation or
enforcement. Terms such as "hereof," "hereby," "hereto," "herein" and
"hereunder" shall be deemed to refer to this Agreement as a whole, rather than
to any particular provision.

     10.6 Successors. This Agreement shall be binding upon, and enforceable
against, the parties and all of their permitted assignees and successors in
title or interest.

     10.7 Exclusion of Third Party Benefit. This Agreement is not intended for
the benefit of any person or entity who is not a party to this Agreement (such
as, without limitation, a creditor of the Company or of the Sole Member), and no
such person or entity shall have any rights in connection with this Agreement,
whether for enforcement or otherwise.

     10.8 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which shall constitute, when taken
together, a single instrument.

                                      -8-

<PAGE>

WITNESS the following signatures:

COMPANY:                          APPLE SUITES - MO, LLC
-------                           a Virginia limited liability company

                                  By:      Apple Suites SPE Holding, Inc.
                                  Its:     Sole Member

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

SOLE MEMBER:                      Apple Suites SPE Holding, Inc.
-----------                       a Virginia corporation

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

                                      -9-

<PAGE>

                                    Exhibit A
                                    ---------

                                   (Property)

The Property consists of that certain parcel of real property, together with all
improvements thereon, located at the following address:

         Homewood Suites by Hilton St. Louis-Chesterfield
         840 Chesterfield Parkway West
         Chesterfield, Missouri  63017<PAGE>

                                                                    EXHIBIT 10.2

                              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, Inc., a Virginia corporation ("Fee Owner") and leased to Owner
pursuant to a lease between Fee Owner and Owner with a commencement date of even
date herewith covering the Hotel (hereinafter the "Percentage Lease"). The
License Agreement shall exclusively govern Owner's right to use the Homewood
Suites "System" (as defined in the License Agreement) in the operation of the
Hotel. Fee Owner shall have no right to use the Homewood Suites "System" except
as expressly set forth in the License Agreement. Owner hereby expressly
acknowledges that neither it nor Fee Owner shall derive any rights in or to the
use of the "Homewood Suites 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>
$END

                                    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

<PAGE>

          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

Page 9

<PAGE>

          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

<PAGE>

     (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.

Page 11

<PAGE>

                                    ARTICLE 4

                               OWNER'S OBLIGATIONS

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

     (i)  License Agreement. Owner shall comply with all the terms and
          -----------------
          conditions of the License Agreement (specifically including, but not
          limited to, Licensee's obligation to pay the fees, charges and
          contributions set forth in 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

Page 12

<PAGE>

          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

Page 14

<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

<PAGE>

                                   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 Fee
Owner, as buyer (the "Purchase Agreement"), Promus Hotels, Inc. (in

Page 28

<PAGE>

its capacity as lender, the "Acquisition Lender") has loaned to Fee Owner and to
Apple Suites-Mo, LLC, a Virginia limited liability company (a wholly-owned
subsidiary of 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 $7,875,000, and (ii) a note of Fee Owner and Apple Suites-Mo, LLC,
dated                 , 2001, in the amount of $8,625,000, 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 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

Page 29

<PAGE>

Manager. The foregoing shall be applicable both to original financing and to any
refinancing, 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

Page 30

<PAGE>

allocated among, and distributed to, the Hotel and the Other Managed Hotels, in
Manager's sole and reasonable discretion.

     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/ Jacquelyn B. Owens               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:                   With respect to any calendar year,
----------------                    ninety-five percent (95%) of the arithmetic
                                    mean of the average annual Yield Index of
                                    each hotel within the Competitive Set for
                                    such calendar year, as measured and reported
                                    by Smith Travel Services

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

                                      B-1

<PAGE>

          on the insurance coverages specified in Exhibit "D" incurred after the
                                                  -----------
          Effective Date. There shall be excluded from the operating costs of
          the Hotel the following, which shall be ownership costs of the Hotel:
          (i) depreciation of the Hotel, furnishings, fixtures and equipment;
          (ii) rental pursuant to a ground lease, if any, or the Percentage
          Lease or any other lease payments; (iii) debt service (interest and
          principal) on any mortgage(s) encumbering Owner's leasehold interest
          in, and/or Fee Owner's fee interest in the Hotel; (iv) property taxes
          and assessments; (v) expenditures for Capital 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 $1,268,830; (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
procure 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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}]]