Document:

EXHIBIT 10.3

                           APPLE HOSPITALITY TWO, INC.

                               2001 INCENTIVE PLAN

                                                         Effective _______, 2001

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                           APPLE HOSPITALITY TWO, INC.

                               2001 INCENTIVE PLAN

PURPOSE.  The purpose of this Apple  Hospitality  Two, Inc. 2001  Incentive Plan
(the  "Plan") is to further the long term  stability  and  financial  success of
Apple  Hospitality  Two,  Inc. (the  "Company") by attracting  and retaining key
employees of the Company and its affiliates through the use of stock incentives.
It is believed  that  ownership of Company  Stock will  stimulate the efforts of
those  employees  of the  Company and its  affiliates  upon whose  judgment  and
interest the Company is and will be largely dependent for the successful conduct
of its  business.  It is also  believed that  Incentive  Awards  granted to such
employees  under  this  Plan will  strengthen  their  desire to remain  with the
Company  and its  affiliates  and  will  further  the  identification  of  those
employees'  interests  with  those of the  Company's  shareholders.  The Plan is
intended to conform to the provisions of Securities and Exchange Commission Rule
16b-3.

DEFINITIONS.  As used  in the  Plan,  the  following  terms  have  the  meanings
indicated:

"Act" means the Securities Exchange Act of 1934, as amended.

"Applicable  Withholding Taxes" means the aggregate amount of federal, state and
local  income and  payroll  taxes that the  Employer  is required to withhold in
connection  with any  exercise  of an  Option or any  lapse of  restrictions  on
Restricted Stock.

"Board" means the board of directors of the Company.

"Change of Control" means: The acquisition,  other than from the Company, by any
individual,  entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the  Act),  of  beneficial  ownership  (within  the  meaning  of  Rule  13d-3
promulgated under the Act) of 20% or more of either the then outstanding  shares
of  common  stock  of the  Company  or the  combined  voting  power  of the then
outstanding  voting  securities of the Company entitled to vote generally in the
election of directors,  but excluding for this purpose,  any such acquisition by
the Company or any of its subsidiaries, or any employee benefit plan (or related
trust) of the Company or its  subsidiaries,  or any corporation  with respect to
which,  following such  acquisition,  more than 50% of,  respectively,  the then
outstanding  shares of common stock of such  corporation and the combined voting
power of the then outstanding voting securities of such corporation  entitled to
vote generally in the election of directors is then beneficially owned, directly
or indirectly,  by the individuals and entities who were the beneficial  owners,
respectively,  of  the  common  stock  and  voting  securities  of  the  Company
immediately  prior to such acquisition in  substantially  the same proportion as
their ownership,  immediately prior to such acquisition, of the then outstanding
shares of common stock of the Company or the  combined  voting power of the then
outstanding  voting  securities of the Company entitled to vote generally in the
election of directors, as the case may be; or

<PAGE>

Individuals  who, as of the date  hereof,  constitute  the Board (as of the date
hereof the  "Incumbent  Board")  cease for any reason to  constitute  at least a
majority  of the  Board,  provided  that  any  individual  becoming  a  director
subsequent to the date hereof whose  election or nomination  for election by the
Company's  shareholders  was  approved  by a vote of at least a majority  of the
directors  comprising  the  Incumbent  Board shall be  considered as though such
individual  were a  member  of the  Incumbent  Board,  but  excluding,  for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened  election  contest  relating to the election of the
Directors  of the Company  (as such terms are used in Rule 14a-11 of  Regulation
14A promulgated under the Act); or

Approval  by the  shareholders  of the  Company of a  reorganization,  merger or
consolidation,  in each case, with respect to which the individuals and entities
who were the  respective  beneficial  owners  of the  common  stock  and  voting
securities of the Company  immediately prior to such  reorganization,  merger or
consolidation do not,  following such  reorganization,  merger or consolidation,
beneficially own, directly or indirectly,  more than 50% of,  respectively,  the
then  outstanding  shares of common stock and the  combined  voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors,  as  the  case  may  be,  of  the  corporation  resulting  from  such
reorganization,   merger  or  consolidation,   or  a  complete   liquidation  or
dissolution  of  the  Company  or  a  sale  or  other   disposition  of  all  or
substantially all of the assets of the Company.

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee"  means  the  committee  appointed  by the Board as  described  under
Section 13.

"Company" means Apple Hospitality Two, Inc., a Virginia corporation.

"Company  Stock" means common stock,  no par value,  of the Company.  If the par
value  of the  Company  Stock is  changed,  or in the  event of a change  in the
capital  structure  of the  Company  (as  provided  in Section  12),  the shares
resulting  from such a change  shall be deemed to be  Company  Stock  within the
meaning of the Plan.

"Date of Grant"  means the date on which an  Incentive  Award is  granted by the
Committee.

"Disability"  or "Disabled"  means a physical or mental  condition that prevents
the  Participant  from  performing his customary  duties with the Employer.  The
Committee shall determine  whether a Disability exists on the basis of competent
medical evidence, and such determination shall be conclusive.

"Employer"  means the Company,  Apple Suites  Advisors,  Inc.,  and Apple Suites
Realty Group, Inc.

"Fair Market Value" means, on any given date, (i) if the Company Stock is traded
on an exchange, the closing registered sales prices of the Company Stock on such
day on the exchange on which it generally has the greatest trading volume,  (ii)
if the  Company  Stock is traded on the  over-the-counter  market,  the  average
between the closing bid and asked  prices on such day as reported by NASDAQ,  or
(iii) if the Company  Stock is not traded on any  exchange  or  over-the-counter
market,  the fair market value shall be determined  by the  Committee  using any
reasonable method in good faith.

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"Incentive  Award"  means,  collectively,  the award of an Option or  Restricted
Stock under the Plan.

"Initial  Closing" means the first closing of the Offering that will occur after
the Minimum Offering is achieved.

"Insider" means a person subject to Section 16(b) of the Act.

"Minimum  Offering" means the sale of the first $10,000,000 in shares of Company
Stock pursuant to the Offering.

"Nonstatutory  Stock Option" means an Option that does not meet the requirements
of Code section 422, or, even if meeting the  requirements  of Code section 422,
is not intended to be an incentive stock option and is so designated.

"Offering" means, collectively,  (1) the sale of up to $200,000,000 in shares of
Company  Stock  to the  public  and the  registration  of such  shares  with the
Securities  and Exchange  Commission,  as authorized by resolutions of the Board
dated  __________,  2001  (the  "Initial  Offering"),  and (2)  the  sale of any
additional  shares of Company Stock to the public and the  registration  of such
shares with the Securities and Exchange Commission, as authorized by resolutions
of the Board from time to time,  which sales occur before the expiration of five
years from ________, 2001 (the "Additional Offerings").

"Option"  means a right to purchase  Company  Stock granted under the Plan, at a
price determined in accordance with the Plan.

"Participant" means any employee of the Employer who receives an Incentive Award
under the Plan.

"Restricted Stock" means Company Stock awarded upon the terms and subject to the
restrictions set forth in Section 6.

"Rule  16b-3"  means  Rule  16b-3  of the  Securities  and  Exchange  Commission
promulgated under the Act. A reference in the Plan to Rule 16b-3 shall include a
reference to any corresponding rule (or number  redesignation) of any amendments
to Rule 16b-3 enacted after the effective date of the Plan's adoption.

"Window Period" means the period  beginning on the third business day and ending
on the twelfth  business day following the release for  publication of quarterly
or annual summary  statements of the Company's  sales and earnings.  The release
for publication shall be deemed to have occurred if the specified financial data
(i) appears on a wire service,  (ii) appears in a financial news service,  (iii)
appears  in a  newspaper  of  general  circulation,  or (iv) is  otherwise  made
publicly available.

<PAGE>

GENERAL.  The following types of Incentive Awards may be granted under the Plan:
Options  and  Restricted  Stock.   Options  granted  under  the  Plan  shall  be
Nonstatutory Stock Options.

STOCK.  Subject to Section 12 of the Plan,  there shall be reserved for issuance
under the Plan an  aggregate  of (1)  35,000  shares of  Company  Stock plus (2)
4.625% of the number of shares of Company Stock sold in the Initial  Offering in
excess of the Minimum  Offering  plus (3) 4.4% of the total  number of shares of
Company Stock sold in the Additional Offerings,  which shall be authorized,  but
unissued  shares.  Shares allocable to Options or portions thereof granted under
the Plan that expire or otherwise  terminate  unexercised may again be subjected
to an Option under the Plan.  The  Committee is expressly  authorized to make an
Incentive Award to a Participant conditioned upon the surrender for cancellation
of an  option  granted  under an  existing  Incentive  Award.  For  purposes  of
determining  the number of shares that are available for Incentive  Awards under
the Plan, such number shall, to the extent permissible under Rule 16b-3, include
the number of shares  surrendered  by an  optionee or retained by the Company in
payment of Applicable Withholding Taxes.

ELIGIBILITY. All present and future employees of the Employer who hold positions
with management  responsibilities with the Employer (or any parent or subsidiary
of the Company,  whether now existing or hereafter created or acquired) shall be
eligible to receive  Incentive  Awards under the Plan. The Committee  shall have
the power and complete discretion, as provided in Section 13, to select eligible
employees to receive  Incentive  Awards and to determine  for each  employee the
terms and  conditions,  the  nature of the award and the  number of shares to be
allocated to each employee as part of each Incentive Award.

The grant of an Incentive Award shall not obligate the Employer or any parent or
subsidiary  of  the  Company  to  pay  an  employee  any  particular  amount  of
remuneration,  to continue the  employment of the employee after the grant or to
make further grants to the employee at any time thereafter.

RESTRICTED  STOCK AWARDS.  Whenever the Committee  deems it appropriate to grant
Restricted Stock, notice shall be given to the Participant stating the number of
shares of  Restricted  Stock  granted and the terms and  conditions to which the
Restricted  Stock is  subject.  This  notice,  when  accepted  in writing by the
Participant  shall  become  an  award  agreement  between  the  Company  and the
Participant  and  certificates  representing  the  shares  shall be  issued  and
delivered to the  Participant.  Restricted Stock may be awarded by the Committee
in its discretion without cash consideration.

Restricted  Stock issued  pursuant to the Plan shall be subject to the following
restrictions:

No shares of Restricted Stock may be sold, assigned,  transferred or disposed of
by an Insider  within a six-month  period  beginning  on the Date of Grant,  and
Restricted Stock may not be pledged, hypothecated or otherwise encumbered within
a  six-month  period  beginning  on the Date of Grant  if such  action  would be
treated as a sale or disposition under Rule 16b-3.

<PAGE>

No  shares of  Restricted  Stock may be sold,  assigned,  transferred,  pledged,
hypothecated,  or otherwise  encumbered or disposed of until the restrictions on
such shares as set forth in the  Participant's  award  agreement  have lapsed or
been removed pursuant to paragraph (d) or (e) below.

If a Participant ceases to be employed by the Employer or a parent or subsidiary
of the  Company,  the  Participant  shall  forfeit to the  Company any shares of
Restricted  Stock on which the  restrictions  have not  lapsed  or been  removed
pursuant to paragraph (d) or (e) below on the date such Participant  shall cease
to be so employed.

Upon the  acceptance by a  Participant  of an award of  Restricted  Stock,  such
Participant shall, subject to the restrictions set forth in paragraph (b) above,
have all the rights of a  shareholder  with respect to such shares of Restricted
Stock,  including,  but not  limited  to,  the  right  to vote  such  shares  of
Restricted Stock and the right to receive all dividends and other  distributions
paid thereon.  Certificates  representing  Restricted  Stock shall bear a legend
referring to the restrictions set forth in the Plan and the Participant's  award
agreement.

The Committee shall establish as to each award of Restricted Stock the terms and
conditions  upon which the  restrictions  set forth in paragraph (b) above shall
lapse. Such terms and conditions may include, without limitation, the lapsing of
such  restrictions  as a result of the  Disability,  death or  retirement of the
Participant or the occurrence of a Change of Control.

Notwithstanding  the  provisions  of  paragraphs  (b)(ii) and (iii)  above,  the
Committee may at any time, in its sole discretion,  accelerate the time at which
any or all restrictions will lapse or remove any and all such restrictions.

Each Participant shall agree at the time his Restricted Stock is granted, and as
a condition thereof, to pay to the Company, or make arrangements satisfactory to
the Company  regarding  the payment to the  Company of,  Applicable  Withholding
Taxes.  Until such  amount  has been paid or  arrangements  satisfactory  to the
Company have been made, no stock  certificate  free of a legend  reflecting  the
restrictions  set  forth  in  paragraph  (b)  above  shall  be  issued  to  such
Participant.

STOCK  OPTIONS.  Whenever the Committee  deems it  appropriate to grant Options,
notice shall be given to the Participant  stating the number of shares for which
Options are granted, the Option price per share, and the conditions to which the
grant and exercise of the Options are subject.  This notice,  when duly accepted
in writing by the Participant, shall become a stock option agreement between the
Company and the Participant.

The exercise  price of shares of Company Stock covered by an Option shall be not
less than 100% of the Fair Market Value of such shares on the Date of Grant.

Options may be  exercised  in whole or in part at such times as may be specified
by the Committee in the Participant's stock option agreement; provided that, the
exercise provisions for Options shall in all events not be more liberal than the
following provisions:

No Option may be exercised after ten years from the Date of Grant.

<PAGE>

Except as  otherwise  provided  in this  paragraph,  no Option may be  exercised
unless the  Participant is employed by the Employer or a parent or subsidiary of
the  Company at the time of the  exercise  and has been so employed at all times
since the Date of Grant. If a Participant's  employment is terminated other than
by reason of his  Disability  or death at a time when the  Participant  holds an
Option that is exercisable  (in whole or in part),  the Participant may exercise
any or all of the exercisable  portion of the Option (to the extent  exercisable
on the date of termination)  within 60 days after the Participant's  termination
of  employment.  If a  Participant's  employment  is terminated by reason of his
Disability at a time when the  Participant  holds an Option that is  exercisable
(in  whole  or in  part),  the  Participant  may  exercise  any  or  all  of the
exercisable  portion of the Option  (to the  extent  exercisable  on the date of
Disability)  within 180 days after the Participant's  termination of employment.
If a  Participant's  employment  is  terminated by reason of his death at a time
when the Participant  holds an Option that is exercisable (in whole or in part),
the Option may be  exercised  (to the extent  exercisable  on the date of death)
within  180  days  after  the  Participant's  death  by the  person  to whom the
Participant's  rights  under the Option shall have passed by will or by the laws
of descent and distribution.

Notwithstanding  the  foregoing,  no Option shall be  exercisable  by an Insider
within  the first six  months  after it is  granted  (as  determined  under Rule
16b-3);  provided  that,  this  restriction  shall not apply if the  Participant
becomes Disabled or dies during the six-month period.

The Committee may, in its  discretion,  grant Options that by their terms become
fully exercisable upon a Change of Control,  notwithstanding other conditions on
exercisability in the stock option agreement.

METHOD OF EXERCISE  OF OPTIONS.  Options  may be  exercised  by the  Participant
giving  written  notice of the  exercise to the  Company,  stating the number of
shares the  Participant  has elected to purchase  under the Option.  Such notice
shall be effective  only if  accompanied  by the exercise price in full in cash;
provided  that,  if the terms of an Option so permit,  the  Participant  may (i)
deliver  shares of Company  Stock (valued at their Fair Market Value on the date
of exercise) in  satisfaction  of all or any part of the  exercise  price,  (ii)
deliver  a  properly   executed   exercise  notice  together  with   irrevocable
instructions  to a broker to deliver  promptly to the Company,  from the sale or
loan  proceeds  with  respect to the sale of Company  Stock or a loan secured by
Company Stock,  the amount  necessary to pay the exercise price and, if required
by the Committee,  Applicable  Withholding  Taxes,  or (iii) deliver an interest
bearing  promissory note,  payable to the Company,  in payment of all or part of
the  exercise  price  together  with such  collateral  as may be required by the
Committee at the time of exercise.  The interest rate under any such  promissory
note shall be  established  by the  Committee and shall be at least equal to the
minimum  interest rate required at the time to avoid imputed  interest under the
Code.

The Company may place on any certificate  representing Company Stock issued upon
the exercise of an Option any legend deemed  desirable by the Company's  counsel
to comply with federal or state  securities  laws, and the Company may require a
customary written indication of the Participant's  investment intent.  Until the
Participant has made any required payment,  including any Applicable Withholding
Taxes,  and has had  issued  a  certificate  for the  shares  of  Company  Stock
acquired, he shall possess no shareholder rights with respect to the shares.

<PAGE>

As an alternative to making a cash payment to the Company to satisfy  Applicable
Withholding  Taxes, if the Option so provides,  the Participant  may, subject to
the  provisions  set forth below,  elect to (i) deliver  shares of already owned
Company  Stock or (ii) have the Company  retain that number of shares of Company
Stock  that  would  satisfy  all  or  a  specified  portion  of  the  Applicable
Withholding  Taxes.  The  Committee  shall  have sole  discretion  to approve or
disapprove any such election.  If the  Participant is an Insider,  the following
provisions apply to elections to satisfy  Applicable  Withholding  Taxes, to the
extent required by Rule 16b-3:

The Participant's election to have the Company retain from the shares of Company
Stock to be issued  upon  exercise  of an Option the number of shares of Company
Stock that would satisfy Applicable  Withholding Taxes must be made at least six
months after the Option was granted and either:

(x) during a Window Period; or

(y) at least six months  before the amount of  Applicable  Withholding  Taxes is
calculated.

The Participant's election must be irrevocable.

Notwithstanding  any of the  foregoing  provisions,  the  manner  and  timing of
elections may be varied from those  provided,  and elections  previously made as
irrevocable may be revoked,  if such variance or revocation is permissible under
Rule 16b-3.

Notwithstanding anything herein to the contrary, Options shall always be granted
and exercised in such a manner as to conform to the provisions of Rule 16b-3.

NONTRANSFERABILITY OF OPTIONS.  Options by their terms shall not be transferable
except by will or by the laws of descent and  distribution  or, if  permitted by
Rule 16b-3, pursuant to a qualified domestic relations order (as defined in Code
section  414(p))  ("QDRO") and shall be  exercisable,  during the  Participant's
lifetime,  only by the  Participant or, if permitted by Rule 16b-3, an alternate
payee under a QDRO,  or by his guardian,  duly  authorized  attorney-in-fact  or
other legal representative.

EFFECTIVE DATE OF THE PLAN. This Plan is effective on _______, 2001, having been
approved by the shareholders of the Company on such date. Until the requirements
of any  applicable  state or federal  securities  laws have been met,  no Option
shall be exercisable.

TERMINATION,  MODIFICATION,  CHANGE. If not sooner terminated by the Board, this
Plan,  as amended  and  restated,  shall  terminate  at the close of business on
________,  2001.  No  Incentive  Awards  shall be made  under the Plan after its
termination.  The  Board  may  terminate  the Plan or may amend the Plan in such
respects  as it  shall  deem  advisable;  provided  that,  if and to the  extent
required by Rule 16b-3,  no change shall be made that increases the total number
of shares of Company Stock  reserved for issuance  pursuant to Incentive  Awards
granted under the Plan

<PAGE>

(except  pursuant to Section 12),  materially  modifies the  requirements  as to
eligibility for participation in the Plan, or materially  increases the benefits
accruing to Participants under the Plan, unless such change is authorized by the
shareholders  of the  Company.  Notwithstanding  the  foregoing,  the  Board may
unilaterally  amend the Plan and  Incentive  Awards as it deems  appropriate  to
ensure compliance with Rule 16b-3. Except as provided in the preceding sentence,
a  termination  or amendment  of the Plan shall not,  without the consent of the
Participant,  adversely affect the Participant's rights under an Incentive Award
previously granted to him.

<PAGE>

CHANGE IN CAPITAL  STRUCTURE.  In the event of a stock dividend,  stock split or
combination  of shares,  recapitalization  or merger in which the Company is the
surviving corporation or other change in the Company's capital stock (including,
but not limited  to, the  creation or  issuance  to  shareholders  generally  of
rights,  options or warrants for the purchase of common stock or preferred stock
of the  Company),  the number and kind of shares of stock or  securities  of the
Company  to be  subject to the Plan and to  Options  then  outstanding  or to be
granted  thereunder,  the maximum  number of shares or  securities  which may be
delivered under the Plan, the exercise price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons.  If the adjustment would produce  fractional shares with respect
to any unexercised Option, the Committee may adjust  appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.

If the Company is a party to a consolidation or a merger in which the Company is
not the surviving corporation,  a transaction that results in the acquisition of
substantially  all of the  Company's  outstanding  stock by a single  person  or
entity, or a sale or transfer of substantially all of the Company's assets,  the
Committee may take such actions with respect to outstanding  Incentive Awards as
the Committee deems appropriate.

Notwithstanding anything in the Plan to the contrary, the Committee may take the
foregoing  actions without the consent of any  Participant,  and the Committee's
determination shall be conclusive and binding on all persons for all purposes.

ADMINISTRATION  OF THE PLAN.  The Plan shall be  administered  by the Committee,
which  shall  consist of not less than two  members  of the Board,  who shall be
appointed by the Board. The Committee shall have general authority to impose any
limitation or condition upon an Incentive Award the Committee deems  appropriate
to achieve  the  objectives  of the  Incentive  Award and the Plan and,  without
limitation and in addition to powers set forth elsewhere in the Plan, shall have
the following specific authority:

The  Committee  shall have the power and complete  discretion  to determine  (i)
which eligible  employees shall receive  Incentive Awards and the nature of each
Incentive  Award,  (ii) the number of shares of  Company  Stock to be covered by
each Incentive  Award,  (iii) the Fair Market Value of Company  Stock,  (iv) the
time or times when an Incentive Award shall be granted, (v) whether an Incentive
Award  shall  become  vested  over a  period  of time and when it shall be fully
vested,  (vi) when Options may be exercised,  (vii) whether a Disability exists,
(viii) the manner in which  payment  will be made upon the  exercise of Options,
(ix)  conditions  relating to the length of time before  disposition  of Company
Stock received upon the exercise of Options is permitted, (x) whether to approve
a Participant's elections under the Plan, (xi) notice provisions relating to the
sale of  Company  Stock  acquired  under  the Plan,  and  (xii)  any  additional
requirements  relating to Incentive Awards that the Committee deems appropriate.
The  Committee  shall  have the power to amend the terms of  previously  granted
Incentive  Awards so long as the terms as amended are consistent  with the terms
of the Plan and provided  that the consent of the  Participant  is obtained with
respect to any  amendment  that would be  detrimental  to him,  except that such
consent  will not be required if such  amendment is for the purpose of complying
with Rule 16b-3.

<PAGE>

The Committee  may adopt rules and  regulations  for carrying out the Plan.  The
interpretation  and  construction  of any provision of the Plan by the Committee
shall be final and conclusive.  The Committee may consult with counsel,  who may
be  counsel to the  Company,  and shall not incur any  liability  for any action
taken in good faith in reliance upon the advice of counsel.

A majority of the members of the Committee  shall  constitute a quorum,  and all
actions of the  Committee  shall be taken by a majority of the members  present.
Any action may be taken by a written  instrument  signed by all of the  members,
and any action so taken  shall be fully  effective  as if it had been taken at a
meeting.

The Board from time to time may appoint  members  previously  appointed  and may
fill vacancies,  however caused, in the Committee. Insofar as it is necessary to
satisfy the requirements of Section 16(b) of the Act, no member of the Committee
shall be eligible to participate in the Plan or in any other plan of the Company
or any parent or subsidiary of the Company that entitles participants to acquire
stock, stock options or stock  appreciation  rights of the Company or any parent
or  subsidiary  of the  Company,  and no  person  shall  become a member  of the
Committee if, within the preceding  one-year period,  the person shall have been
eligible  to  participate  in  such a plan  (other  than a  "safe  harbor  plan"
permitted under Rule 16b-3(c)(2)(i) and (ii)).

NOTICE. All notices and other  communications  required or permitted to be given
under this Plan shall be in writing  and shall be deemed to have been duly given
if delivered  personally or mailed first class,  postage prepaid, as follows (a)
if to the Company - at its  principal  business  address to the attention of the
President;  (b) if to any  Participant - at the last address of the  Participant
known to the sender at the time the notice or other communication is sent.

GOVERNING  LAW.  The terms of this  Plan  shall be  governed  by the laws of the
Commonwealth of Virginia.

<PAGE>

         IN WITNESS  WHEREOF,  the  Company  has caused this Plan to be executed
this __th day of ________, 2001.

                                                     APPLE HOSPITALITY TWO, INC.

                                                     By
                                                        ------------------------
                                                         Glade M. Knight,
                                                         Chairman of the BoardEXHIBIT 10.4

                           APPLE HOSPITALITY TWO, INC.

                  2001 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

                                                          Effective _______,2001

<PAGE>

                           APPLE HOSPITALITY TWO, INC.

                  2001 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

PURPOSE.  The purpose of this Apple  Hospitality  Two,  Inc.  2001  Non-Employee
Directors  Stock  Option Plan (the  "Plan") is to  encourage  ownership in Apple
Hospitality  Two, Inc. (the "Company") by non-employee  members of the Board, in
order to promote long-term stockholder value and to provide non-employee members
of the Board with an incentive to continue as directors of the Company.

DEFINITIONS.  As used  in the  Plan,  the  following  terms  have  the  meanings
indicated:

"Act" means the Securities Exchange Act of 1934, as amended.

"Board" means the board of directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended.

"Company" means Apple Hospitality Two, Inc., a Virginia corporation.

"Company  Stock" means common stock,  no par value,  of the Company.  If the par
value  of the  Company  Stock is  changed,  or in the  event of a change  in the
capital  structure  of the  Company  (as  provided  in Section  12),  the shares
resulting  from such a change  shall be deemed to be  Company  Stock  within the
meaning of the Plan.

"Date of Grant" means the date as of which an Eligible Director is automatically
awarded an Option pursuant to Section 7.

"Disability"  or "Disabled"  means a physical or mental  condition that prevents
the director from  performing his customary  duties with the Company.  The Board
shall determine  whether a Disability  exists on the basis of competent  medical
evidence, and such determination shall be conclusive.

"Eligible Director" means a director described in Section 4.

"Employer"  means the Company,  Apple Suites  Advisors,  Inc.,  and Apple Suites
Realty Group, Inc.

"Fair Market Value" means, on any given date, (i) if the Company Stock is traded
on an exchange, the closing registered sales prices of the Company Stock on such
day on the exchange on which it generally has the greatest trading volume,  (ii)
if the  Company  Stock is traded on the  over-the-counter  market,  the  average
between the closing bid and asked  prices on such day as reported by NASDAQ,  or
(iii) if the Company  Stock is not traded on any  exchange  or  over-the-counter
market,  the fair  market  value  shall be  determined  by the  Board  using any
reasonable method in good faith.

"Initial  Closing" means the first closing of the Offering that will occur after
the Minimum Offering is achieved.

"Insider" means a person subject to Section 16(b) of the Act.

"Minimum Offering" means the sale of the initial 10,000,000 in shares of Company
Stock pursuant to the Offering.

<PAGE>

"Offering" means, collectively,  (1) the sale of up to $200,000,000 in shares of
Company  Stock  to the  public  and the  registration  of such  shares  with the
Securities  and Exchange  Commission,  as authorized by resolutions of the Board
dated  ___________,  2001  (the  "Initial  Offering"),  and (2) the  sale of any
additional  shares of Company Stock to the public and the  registration  of such
shares with the Securities and Exchange Commission, as authorized by resolutions
of the Board from time to time,  which sales occur before the expiration of five
years from ________, 2001 (the "Additional Offerings").

"Option"  means a right to acquire  Company  Stock  granted under the Plan, at a
price determined in accordance with the Plan.

Administration.  The Plan shall be administered  by the Board.  Options shall be
granted as  described  in Section 7.  However,  the Board  shall have all powers
vested  in it by the  terms of the  Plan,  including,  without  limitation,  the
authority (within the limitations described herein) to prescribe the form of the
agreement embodying the grant of Options, to construe the Plan, to determine all
questions  arising under the Plan, and to adopt and amend rules and  regulations
for the administration of the Plan as it may deem desirable. Any decision of the
Board in the administration of the Plan, as described herein, shall be final and
conclusive.  The Board may act only by a  majority  of its  members  in  office,
except that members thereof may authorize any one or more of their number or any
officer of the Company to execute and deliver  documents on behalf of the Board.
No member of the Board shall be liable for  anything  done or omitted to be done
by him or any other member of the Board in connection with the Plan,  except for
his own willful misconduct or as expressly provided by statute. Participation in
the Plan.  Each  director of the Company who is not otherwise an employee of the
Employer  or any  subsidiary  of the  Company  and  was not an  employee  of the
Employer  or  subsidiary  for a period of at least one year  before  the Date of
Grant shall be eligible to participate in the Plan.

Stock  Subject to the Plan.  Subject to Section 12 of the Plan,  there  shall be
reserved  for issuance  under the Plan an aggregate of 45,000  shares of Company
Stock  plus 1.8% of the total  number of  shares of  Company  Stock  sold in the
Offering  in excess of the Minimum  Offering,  which  shall be  authorized,  but
unissued  shares.  Shares allocable to Options or portions thereof granted under
the Plan that expire or otherwise  terminate  unexercised may again be subjected
to an Option under the Plan.

Non-Statutory  Stock  Options.  All  options  granted  under  the Plan  shall be
non-statutory in nature and shall not be entitled to special tax treatment under
Code section 422.

Award, Terms,  Conditions and Form of Options. Each Option shall be evidenced by
a written  agreement in such form as the Board shall from time to time  approve,
which  agreement  shall  comply with and be subject to the  following  terms and
conditions:

Automatic Award of Option.

As of the Initial Closing, each Eligible Director shall automatically receive an
Option to purchase  5,500 shares of Company  Stock plus 0.0125% of the number of
shares of Company  Stock in excess of the Minimum  Offering  sold by the Initial
Closing.

As of each June 1 during the years 2002 through 2006 (inclusive),  each Eligible
Director  shall  automatically  receive an Option to purchase 0.02% of the total
number of shares of Company Stock issued and outstanding on that date. As of the
election as a director of any new person who qualifies as an Eligible  Director,
such Eligible Director shall  automatically  receive an Option to purchase 5,000
shares of Company Stock.

<PAGE>

If at any time under the Plan there are not sufficient shares available to fully
permit the  automatic  Option  grants  described in this  paragraph,  the Option
grants shall be reduced pro rata (to zero if  necessary) so as not to exceed the
number of shares available.

Option Exercise Price.  The Option exercise price shall be the Fair Market Value
of the shares of Company Stock subject to the Option on the Date of Grant.

Options Not  Transferable.  An Option shall not be  transferable by the optionee
otherwise than by will, or by the laws of descent and distribution, and shall be
exercised during the lifetime of the optionee only by him. An Option transferred
by will or by the laws of  descent  and  distribution  may be  exercised  by the
optionee's personal representative within one year of the date of the optionee's
death to the extent the optionee  could have exercised the Option on the date of
his death. No Option or interest therein may be transferred,  assigned,  pledged
or hypothecated by the optionee during his lifetime, whether by operation of law
or otherwise, or be made subject to execution, attachment or similar process.

Exercise of Options. In no event shall an Option be exercisable earlier than six
months  from the later of the Date of Grant or the date of  approval of the Plan
by stockholders of the Company.  Furthermore, no Option may be exercised: unless
at such time the  optionee  is a director  of the  Company,  except  that he may
exercise the Option within three years of the date he ceases to be a director of
the Company if he ceased to be a director more than six months after the Date of
Grant of the Option;  after the  expiration of ten years from the Date of Grant;
and except by written notice to the Company at its principal office, stating the
number of shares the optionee has elected to purchase, accompanied by payment in
cash and/or by delivery  to the  Company of shares of Company  Stock  (valued at
Fair  Market  Value on the date of  exercise)  in the amount of the full  Option
exercise price for the shares of Company Stock being acquired thereunder.

Withholding.  If the Company is  required  by law to  withhold  federal or state
income taxes when an Option is  exercised,  the Company  shall have the right to
retain or sell without notice shares of Company Stock having a Fair Market Value
sufficient on such date or dates as may be determined by the Board (but not more
than five business  days prior to the date on which such shares would  otherwise
have been  delivered)  to cover the amount of any  federal  or state  income tax
required to be  withheld or  otherwise  deducted  and paid with  respect to such
payment and the exercise of the Option,  remitting  any balance to the optionee;
provided,  however,  that  the  optionee  shall  have the  right  to make  other
arrangements  satisfactory  to the Company or to provide  the  Company  with the
funds to enable it to pay such tax.  Notwithstanding the foregoing,  the Company
shall not sell  shares of Company  Stock if the  Optionee is an Insider and such
sale will cause the  Optionee to incur a liability  under  Section  16(b) of the
Exchange Act.  Modification,  Extension and Renewal of Options.  The Board shall
have the power to modify,  extend or renew outstanding  Options and to authorize
the grant of new Options in substitution therefor, provided that any such action
may not enhance the rights of the optionee without stockholder  approval or have
the effect of altering,  enhancing or impairing any rights or obligations of any
person under any Option previously granted without the consent of the optionee.

Termination.  The Plan shall  terminate  upon the earlier of: the  adoption of a
resolution of the Board terminating the Plan; or _________, 2011.

<PAGE>

No  termination  of the Plan shall without his consent  materially and adversely
affect  any of  the  rights  or  obligations  of any  person  under  any  Option
previously granted under the Plan.

Limitation of Rights.

No Right to  Continue as a  Director.  Neither  the Plan nor the  granting of an
Option nor any other action taken  pursuant to the Plan shall  constitute  or be
evidence of any agreement or understanding, express or implied, that the Company
will retain any person as a director for any period of time.

No  Stockholders  Rights Under  Options.  An optionee  shall have no rights as a
stockholder  with  respect to shares  covered  by his  Option  until the date of
exercise of the  Option,  and,  except as provided in Section 12, no  adjustment
will be made for dividends or other rights for which the record date is prior to
the date of such exercise.

Changes in Capital Structure.

In the  event  of a stock  dividend,  stock  split  or  combination  of  shares,
recapitalization or merger in which the Company is the surviving  corporation or
other change in the Company's capital stock (including,  but not limited to, the
creation or issuance to  shareholders  generally of rights,  options or warrants
for the purchase of common stock or preferred stock of the Company),  the number
and kind of shares of stock or  securities  of the  Company to be subject to the
Plan and to Options then  outstanding or to be granted  thereunder,  the maximum
number of shares  or  securities  which  may be  delivered  under the Plan,  the
exercise price and other relevant provisions shall be appropriately  adjusted by
the  Board,  whose  determination  shall  be  binding  on  all  persons.  If the
adjustment  would  produce  fractional  shares with  respect to any  unexercised
Option,  the Board may adjust  appropriately the number of shares covered by the
Option so as to eliminate the fractional shares.

If the Company is a party to a consolidation or a merger in which the Company is
not the surviving corporation,  a transaction that results in the acquisition of
substantially  all of the  Company's  outstanding  stock by a single  person  or
entity, or a sale or transfer of substantially all of the Company's assets,  the
Board may take such  actions with  respect to  outstanding  Options as the Board
deems appropriate.

Notwithstanding  anything  in the Plan to the  contrary,  the Board may take the
foregoing   actions  without  the  consent  of  any  optionee  and  the  Board's
determination shall be conclusive and binding on all persons for all purposes.

Amendment  of the Plan.  The Board  (except as  provided  below) may  suspend or
discontinue  the Plan or  revise  or amend  the Plan in any  respect;  provided,
however, that without approval of the stockholders of the Company no revision or
amendment  shall  increase  the number of shares  subject to the Plan (except as
provided  in  Section  12) or  materially  increase  the  benefits  accruing  to
participants  under the Plan. The Plan shall not be amended more than once every
six months  other  than an  amendment  required  to comply  with  changes in the
Internal Revenue Code or the Employee  Retirement Income Security Act of 1974 or
regulations thereunder.

Notwithstanding the foregoing, the Board may unilaterally amend the Plan and the
terms of Options granted  hereunder to ensure  compliance with Rule 16b-3 of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended.

<PAGE>

Notice. All notices and other  communications  required or permitted to be given
under this Plan shall be in writing  and shall be deemed to have been duly given
if delivered  personally or mailed first class, postage prepaid, as follows: (a)
if the  Company - at its  principal  business  address to the  attention  of the
President;  (b) if to any  participant - at the last address of the  participant
know to the sender at the time the notice or other communication is sent.

Governing  Law.  The terms of this  Plan  shall be  governed  by the laws of the
Commonwealth of Virginia.

<PAGE>

         IN WITNESS  WHEREOF,  the  Company  has caused this Plan to be executed
this __th day of __________, 2001.

                                      APPLE HOSPITALITY TWO, INC.

                                      By
                                        -------------------------
                                           Glade M. Knight,
                                           Chairman of the Board

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