APPLE HOSPITALITY FIVE INC
EXHIBIT 10.1
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>5
<FILENAME>dex101.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<PAGE>


                                                                    EXHIBIT 10.1

                                                    [Colorado Springs, Colorado]

                              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 26th day of September, 2003 ("Effective Date") between APPLE HOSPITALITY
FIVE MANAGEMENT, INC., a Virginia corporation, whose address is 10 South 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 referred to as the
"License Agreement"), by Manager. The Hotel is owned in fee by Apple Hospitality
Five, 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.

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                                    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, and (iv) expenditures for maintenance and repair
                of underground utilities and structural elements of the Hotel
                (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") and shall have the sole
                        and absolute right to hire, supervise, order, instruct,

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                        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 (as hereinafter defined) 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

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                        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

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                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

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                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

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                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

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                standards of the License Agreement and give priority to such
                items. Owner and Manager shall meet to discuss the proposed FF&E
                Budget and Owner shall be required to make specific written
                objections to a proposed FF&E Budget in the manner and within
                the same time periods specified in Section 3.01(v) with respect
                to an Operating Budget. Owner agrees not to unreasonably
                withhold or delay its consent. If Owner does not approve the
                FF&E Budget, Manager (i) with respect to FF&E Replacements
                required to meet the minimum standards of the License Agreement,
                will be entitled to spend such amounts as are necessary to meet
                such minimum standards and (ii) with respect to any other FF&E
                Replacements, will only spend such amounts as are approved by
                Owner, acting reasonably, provided, however, that in any event
                Manager shall be entitled to spend up to five percent (5%) of
                Gross Revenue for Capital Improvements and FF&E Replacements
                after the date hereof until the disputed FF&E Budget item(s)
                have been resolved in accordance with Section 10.02.1(f).
                Manager, at Owner's expense, shall be responsible for
                supervising the design, installation, repair and replacement of
                fixtures, furniture, furnishings and equipment (not including
                operating equipment or operating supplies), including, without
                limitation, office furnishings and equipment, specialized hotel
                equipment necessary for the operation of any portion of the
                Hotel, including equipment for kitchens, laundries, dry cleaning
                facilities, bars, restaurants, public rooms, commercial and
                parking space, and recreational facilities, and any other
                furnishings and equipment required to operate the Hotel
                (collectively, "FF&E Replacements"). Owner shall have the right
                to approve and inspect the installation and construction of FF&E
                Replacements and any Owner's Leasehold Mortgagee or Fee Owner's
                Mortgagee shall also have any right of approval or inspection of
                the installation and construction of the FF&E Replacements to
                the extent set forth in the Mortgage Documents (but only if and
                to the extent 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

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                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(vii)) 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 (xiii) shall be held at the
                Hotel;

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

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

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

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

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

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

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

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

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

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

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

                (e)     as part of Group Services (as hereinafter defined)
                        advertise and promote the Hotel in coordination with the
                        sales and marketing programs of Manager and other
                        Homewood Suites by Hilton(R)hotels. In performing such
                        Group Services Manager may participate in sales and
                        promotional campaigns and activities involving
                        complimentary rooms. Further, in marketing and
                        advertising the Hotel, Manager 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

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                        said $10,000.00), without Owner's prior written consent,
                        which shall not be unreasonably withheld.

                                    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: (i) 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); (ii) not perform any act or do anything
                which would limit Manager's ability to operate the Hotel
                pursuant to the terms of the License Agreement; and (iii) 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" ($10,000 of which shall be
                funded by Manager pursuant to the Agreement of Sale, dated
                February ___, 2003, by and between Promus Hotels, Inc. and
                Promus Hotels Florida, Inc., collectively, as Seller and Apple
                Suites Realty Group, Inc., as Buyer, as subsequently assigned to
                Fee Owner) 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

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                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 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

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                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 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 (3) 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

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                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
                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 (except to the
                extent the fees for such services are reimbursed by licensee to
                licensor under the License Agreement). 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
                Personnel;

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        (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;

        (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";

        (f)     all fees, charges and contributions to licensor and its
                affiliates under the License Agreement; and

        (g)     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

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property occurs in and about the Hotel or elsewhere as a result of the
performance of this Agreement. Nevertheless, in the event the insurance proceeds
are insufficient or there is no insurance coverage to satisfy the demand, claim,
action, loss, liability or expense and the same did not arise out of the gross
negligence or willful misconduct of Manager, Owner agrees, at its expense, to
indemnify and hold Manager and its subsidiaries, affiliates, officers,
directors, employees, agents or independent contractors harmless to the extent
of the excess liability.

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

                                    ARTICLE 7

                         CLOSURE, EMERGENCIES AND DELAYS

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

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                                    ARTICLE 8

                            CONDEMNATION AND CASUALTY

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

        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 party 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 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 Default"):

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        (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.

        (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)     Intentionally Omitted.

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

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

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Section 9.04(a), in addition to 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 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.

        (b) (i) Provided Owner is not in default under this Agreement, Owner
shall have the right to terminate this Agreement if, beginning in the first full
calendar year of Hotel operations, Manager fails to (A) achieve, in any two (2)
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 (2) 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
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.

        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

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purposes of this Section 9.05, said agreement shall be referred to as the "New
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 New 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 New 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 New 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.

        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.

        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

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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 Personnel, to pay all Compensation due to such Hotel
Personnel 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., Section 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 Personnel 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.

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                                   ARTICLE 10

                         APPLICABLE LAW AND ARBITRATION

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

        Section 10.02. Arbitration of Financial Matters.

                Subsection 10.02.1. Matters to be Submitted to Arbitration. In
        the case of a dispute with respect to any of the following matters,
        either party may submit such matter to arbitration which shall be
        conducted by the Accountants (as hereinafter defined in Subsection
        10.02.2): (a) computation of the Management Fees; (b) reimbursements due
        to Manager under this Agreement; (c) any adjustment in the Minimum
        Balance under the provisions of Section 4.01(iv); (d) any adjustment in
        dollar amounts of insurance coverages required to be maintained; (e) any
        dispute concerning the apportionment of compensation for any taking
        contemplated under Section 8.01 of this Agreement; and (f) any dispute
        concerning the approval of an Operating Budget, Capital Budget or FF&E
        Budget.

                All disputes concerning the above matters shall be submitted to
        the Accountants. The decision of the Accountants with respect to any
        matters submitted to them under this Subsection 10.02.1 shall be binding
        on both parties hereto. The parties hereby agree and acknowledge that
        disputes relating to the Group Services, or the allocation or
        computation of costs or expenses relating thereto, shall not be subject
        to the terms of this Section 10.02 and may not be submitted to the
        Accountants for arbitration.

                Subsection 10.02.2. The Accountants. The "Accountants" shall be
        one of three (3) firms of certified public accountants of recognized
        national standing in the hotel industry. Until otherwise agreed to by
        the parties, the three (3) firms shall be PriceWaterhouseCoopers, Ernst
        & Young, and Deloitte and Touche, 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

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

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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 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 a 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 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

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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 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.

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        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 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 its affiliates 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 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.

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        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 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. Intentionally Omitted.

        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 it is
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

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advance and in writing by Manager, such approval of Manager not to be
unreasonably withheld; provided, among other things, that the: (i) principal
amount of the indebtedness secured by such future Mortgage as it relates to the
Hotel when aggregated with all other remaining indebtedness secured by liens
against the Hotel is not in excess of the greater of (A) 75% of the then
appraised value of the Hotel as determined by Mortgagee in connection with its
underwriting of the loan secured by such future Mortgage, or (B) the principal
amount of the indebtedness secured by any current Mortgage; (ii) a copy of the
Mortgage and other loan documents shall be delivered to Manager upon execution
thereof; (iii) the related financing is obtained from an Institutional Lender
(as hereinafter defined) which is not an affiliate of Owner; and (iv) Mortgagee
enters into a Subordination, Attornment and Non-Disturbance Agreement with
Manager in a form and substance reasonably acceptable to Manager. The foregoing
shall be applicable both to original financing and to any refinancing, 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.

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        Section 11.30. Purchases from Manager and Manager's Affiliates.

        (i)     Group Discounts and Rebates. 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 and procurement services of affiliates of Manager
                and/or other group buying techniques or purchasing programs
                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. For purposes of this section, purchasing or
                procurement services provided by any affiliate of Manager shall
                be considered provided by Manager. In providing such group
                purchasing or procurement services, Manager may mark up its
                costs or receive and retain a fee or other compensation from
                vendors and service providers for its services in making the
                benefit of volume purchases available to the Hotel or
                negotiating and implementing the arrangements with such vendors
                or providers, and Manager shall also be entitled and authorized
                to collect any rebates provided by vendors or service providers;
                provided, however, that (i) the total cost of the goods and
                services (including such mark-up, fee or other compensation
                charged or retained by Manager) so provided to the Hotel by
                Manager shall be competitive as aforesaid, and (ii) Manager
                shall, on a yearly basis, remit to Owner the proportionate share
                of the pre-tax profits earned by Manager through such mark-ups,
                fees, or other compensation, after deducting all operating
                expenses and capital costs attributable to providing such
                services. For purposes of calculating Owner's proportionate
                share of such pre-tax profits, Manager shall use the number of
                available rooms at the Hotel divided by the total number of
                available rooms in all hotels participating in such services, or
                any other manner that reasonably approximates the proportionate
                share of purchases made by the Hotel in relation to the total
                purchases made by all hotels participating in Manager's
                purchasing services.

        (ii)    Owner's Opt-Out Rights. Notwithstanding the foregoing, Owner
                shall not be obligated to purchase such volume or services items
                from the vendors or service providers recommended by Manager or
                its affiliates, provided that prior to purchasing from other
                sources, Owner shall submit to Manager such samples and/or other
                information with respect to the proposed purchases as shall be
                necessary to assure Manager that the quality of such items is at
                least equal to that available from the sources recommended by
                Manager and that such items are consistent with the policies and
                procedures established by Manager pursuant to this Agreement and
                the operation of the Hotel at a first-class standard comparable
                to the majority of the Other Managed Hotels.

        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

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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. 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): (i) 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; and (ii) 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.
Notwithstanding the foregoing, Owner and Manager acknowledge and agree that to
the extent that Owner or any of its affiliates, as a public company, determines
that it is required by the U.S. Securities and Exchange Commission or other
applicable governmental agency to file a copy of this Agreement in connection
with its filings with such agency, such filing shall not be deemed a violation
of this provision. The obligations set forth in this Section 11.32 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:

                                     APPLE HOSPITALITY FIVE MANAGEMENT,
/s/ Robin M. Brougton                INC., a Virginia corporation
----------------------
Witness:


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


                                     MANAGER:
/s/ Jodi L. Benedette
-----------------------              PROMUS HOTELS, INC., a Delaware corporation
Witness:

                                     By:  /s/ Mariel A. Joliet
                                         ---------------------------------------
                                     Name: Mariel A. Joliet
                                           -------------------------------------
                                     Title:  Senior Vice President and Treasurer
                                             -----------------------------------
                                     Date:
                                           -------------------------------------

Page 32

<PAGE>

                                   EXHIBIT "A"

                                LICENSE AGREEMENT

                               [See Exhibit 10.2]














                                       A-1

<PAGE>

                                   EXHIBIT "B"

                               DEAL SPECIFIC TERMS

INITIAL TERM:                         Twenty (20) 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(v); 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)     any payments not specifically contemplated above which are
                required to be paid by Owner to Fee Owner pursuant to the
                Percentage Lease; and

        (g)     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: Rick 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.
                450 South Orange Avenue, Suite 650
                Orlando, Florida 32801
                Attn: Michael J. Sullivan, Esq.
                Tel: 407-420-1000
                Fax: 407-420-5909

                To Owner:

                Apple Hospitality Five Management, Inc.
                10 South Third Street
                Richmond, Virginia 23219
                Attention:  __________________
                Tel:     804-______________________
                Fax:     804-______________________

                with copies at the same time to:

                McGuire Woods LLP
                One James Center
                Richmond, Virginia 23219
                Attention:  Nancy R. Little, Esq.
                Tel:     804-775-1000
                Fax:     804-698-2101

                                       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 (2nd) anniversary of the Effective
Date, the sum of $1,268,830; (ii) if the termination of this Agreement occurs
after the second (2nd) 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 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 (24) month period divided by two (2); (iv) if the termination of
this Agreement occurs after the fourteenth (14th) anniversary of the Effective
Date but on or before the nineteenth (19th) anniversary of the Effective Date,
an amount equal to the aggregate of the Management Fees earned during the
preceding twenty-four (24) month period divided by two (2); and (v) if the
termination of this Agreement occurs after the nineteenth (19th) 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 twenty-four (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 nineteenth (19th) 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 (24) month period
divided by two (2); and (ii) if the termination of this Agreement occurs after
the nineteenth (19th) 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 twenty-four (24) times (y) the number
of full calendar months remaining in the Term.

ACCOUNTING FEE:

        $1,100 per month (which $1,100 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 $1,100).

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; or (D) the proposed transferee or any of its
        affiliates maintained a prior unsatisfactory business relationship with
        Manager, or any of its affiliates.

                        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, 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) (a) during the period
        from and after the Effective Date to and including the last day of the
        month in which the 2nd 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) during such period and (b) during the period from and
        after the first day of the month immediately following the 2nd
        anniversary of the Effective Date to and including the last day of the
        month in which the 3rd anniversary of the Effective Date occurs, two and
        one-half percent (2.5%) of the Gross Revenues (determined as hereinafter
        provided) from the operation of the Hotel with respect to each month (or
        a portion thereof) during such period, and (ii) during the period from
        and after the first day of the month immediately following the 3rd
        anniversary of the Effective Date to and including end of the Term or
        Option Term, as applicable, three percent (3.0%) of the Gross Revenues
        (determined as hereinafter provided) from the operation of the Hotel
        with respect to each month (or a portion thereof) during such period
        (such fees being herein called the "Fixed 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 the Lodging Industry (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" shall mean the Uniform System
        of Accounts for the Lodging Industry (9th Revised Edition 1996), as
        published by the Hotel Association of New York City, Inc.

C.      Intentionally Omitted.

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),
        and 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.

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-1

<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                    $15,000,000 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

         Comprehensive Crime Insurance                      $5,000,000

         Employment Practices Liability Insurance           $1,000,000

         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, where possible.

        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 A- VIII, 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

                                       E-1

<PAGE>

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

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

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

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

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

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

                                       E-2

</TEXT>
</DOCUMENT>
