WINSTON HOTELS INC
8-K, 1997-09-15
REAL ESTATE INVESTMENT TRUSTS
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                       SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549



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


                                    FORM 8-K

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

       Date of Report (Date of earliest event reported) September 8, 1997
                                                        -----------------

                              Winston Hotels, Inc.
                              --------------------

             (Exact name of registrant as specified in its charter)

    North Carolina                     0-23732                 56-1872141
- ----------------------------      ----------------      ----------------------
(State or other jurisdiction         (Commission             (IRS Employer
     of incorporation)               File Number)          Identification No.)

     2209 Century Drive, Raleigh, North Carolina                27612
- --------------------------------------------------------------------------------
      (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code  (919) 510-6010

                    

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Item 5.  Other Events

         On September 8, 1997, Winston Hotels, Inc. (the "Company") made a
public offering of 3,000,000 shares of the Company's 9.25% Series A Cumulative
Preferred Stock, par value $.01 per share. The Company is filing this Current
Report on Form 8-K so as to file with the Securities and Exchange Commission
certain items that are to be incorporated by reference into its Registration
Statement on Form S-3 (Registration No. 333-32713).

Item 7.  Financial Statements and Exhibits.

         (c)      Exhibits.

                 1.1     -     Underwriting Agreement

                 4.1     -     Form of Temporary Stock Certificate for 9.25% 
                               Series A Cumulative Preferred Stock

                 4.2     -     Articles of Amendment to the Articles of 
                               Incorporation of Winston Hotels, Inc.

                 8.1     -     Tax Opinion of Hunton & Williams

                99.1     -     Amendment No. 1 dated September 11, 1997 to 
                               Second Amended and Restated Agreement of Limited 
                               Partnership of WINN Limited Partnership

                                       -2-


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                                    SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                               WINSTON HOTELS, INC.
                                               (Registrant)

Date: September 15, 1997                       By: /s/ Philip R. Alfano
                                                   ----------------------------
                                                       Philip R. Alfano
                                                       Senior Vice President and
                                                       Chief Financial Officer

                                       -3-


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                                  EXHIBIT INDEX

Exhibit Number and Description
- ------------------------------

         1.1 -   Underwriting Agreement

         4.1 -   Form of Stock Certificate for 9.25% Series A Cumulative 
                 Preferred Stock

         4.2 -   Articles of Amendment to the Articles of Incorporation of 
                 Winston Hotels, Inc.

         8.1 -   Tax Opinion of Hunton & Williams

        99.1 -   Amendment No. 1 dated September 11, 1997 to Second Amended and
                 Restated Agreement of Limited Partnership of WINN Limited
                 Partnership

                                       -4-



<PAGE>   1
                              WINSTON HOTELS, INC.

                    9.25% SERIES A CUMULATIVE PREFERRED STOCK

                             UNDERWRITING AGREEMENT
                             ----------------------

                                September 8, 1997

MORGAN KEEGAN & COMPANY, INC.
J.C. BRADFORD & CO.
RAYMOND JAMES & ASSOCIATES, INC.
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103

Dear Sirs:

         Winston Hotels, Inc., a North Carolina corporation (the "Company"),
proposes to issue and sell to Morgan Keegan & Company, Inc., J. C. Bradford &
Co. and Raymond James & Associates, Inc. (the "Underwriters," which term shall
also include any underwriters substituted as provided in Section 10 hereof) an
aggregate of 3,000,000 shares of 9.25% Series A Cumulative Preferred Stock, $.01
par value per share (the "Preferred Stock") of the Company (the "Shares"). The
Shares are to be sold to each Underwriter, acting severally and not jointly, in
such amounts as are set forth in Schedule A opposite the name of such
Underwriter. Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Registration Statement, as defined below.

         Upon consummation of the transactions contemplated hereby and
application of the net proceeds from the sale of the Shares, the Company will
own an approximate 89.77% general partnership interest in WINN Limited
Partnership, a North Carolina limited partnership (the "Partnership") and will
own 100% of the Preferred Units (as defined herein) of the Partnership. The
Company currently owns one hotel directly and the Partnership currently owns 34
hotels as described in the Prospectus (individually, a "Hotel" and collectively,
the "Hotels"). The Partnership has entered into agreements (the "Acquisition
Agreements") as described in the Prospectus to acquire three additional hotels
(the "Acquisition Hotels"). The Partnership or the Company, as applicable,
leases the Hotels to Winston Hospitality, Inc., a North Carolina corporation
(the "Lessee"), pursuant to separate leases (the "Leases"). The Partnership will
lease the Acquisition Hotels to the Lessee pursuant to leases (the "Proposed
Leases") substantially similar to the Leases. Twenty-five of the Hotels are
operated by the Lessee pursuant to the terms of the Leases. Nine of the Hotels
are operated by Interstate Management and Investment Company, a South Carolina
corporation ("IMIC"), and one Hotel is managed by Promus Hotels, Inc ("Promus")
pursuant to separate management agreements (the "Management Agreements").

         Section 1. Representations and Warranties of the Company. The Company
and the Partnership jointly and severally represent and warrant to each of the
Underwriters as follows:

                  (a) The Company has filed with the Securities and Exchange
         Commission (the "Commission") a Registration Statement on Form S-3
         (Commission File No. 333-32713) and Amendment No. 1 thereto, with
         respect to the Shares, including the related preliminary prospectus
         included in the Registration Statement, for the registration under the
         Securities Act of 1933, as amended (the "1933 Act"), and the rules and
         regulations of the Commission thereunder (the "1933 Act Regulations"),
         of the offering and sale of up to $200,000,000 aggregate issue price of
         securities, including the Shares. The Company has filed with, or shall
         promptly hereafter file with the Commission a final prospectus
         supplement specifically relating to the Shares pursuant to Rule 424
         under the 1933 Act. The Company has included in such Registration
         Statement and the Preliminary Prospectus (as defined herein), each as
         amended or supplemented at the time of execution of this Agreement (the
         "Execution Time"), and has included or will include in the Prospectus
         (as defined herein) all information required by the 1933 Act to be
         included therein with respect to the


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         Shares and the offering thereof, which information, except to the
         extent the Underwriters shall agree in writing to a modification, shall
         be in all substantive respects in the form furnished to the
         Underwriters prior to the Execution Time or, to the extent not
         completed at the Execution Time, shall contain only such additional
         information and other changes as the Company has advised the
         Underwriters, prior to the Execution Time, will be included or made
         therein.

                  The term "Registration Statement" as used in this Agreement
         shall mean such registration statement at the time such registration
         statement became effective (the "Effective Time") including any
         prospectus included with such Registration Statement, each document
         incorporated therein by reference and, in the event any post-effective
         amendment thereto becomes effective prior to the Closing Time (as
         hereinafter defined), shall also mean such registration statement as so
         amended; provided, however, that such term shall also include (i) all
         Rule 430A Information (as hereinafter defined) deemed to be included in
         such registration statement at the time such registration statement
         becomes effective as provided by Rule 430A of the 1933 Act Regulations
         and (ii) the information contained in the form of any final prospectus
         or prospectus supplement filed with the Commission pursuant to Rule
         424(b) of the 1933 Act. The term "Preliminary Prospectus" shall mean
         any preliminary prospectus supplement describing the Shares and the
         form of base prospectus included in the Registration Statement at the
         Effective Time and each document incorporated therein by reference. The
         term "Prospectus" as used in this Agreement shall mean the final
         prospectus supplement relating to the Shares, accompanied by such base
         prospectus, in the form in which it is filed with the Commission after
         the Execution Time pursuant to Rule 424(b) of the 1933 Act Regulations
         and each document incorporated therein by reference. The term "Rule
         430A Information" means information with respect to the Shares and the
         offering thereof permitted pursuant to Rule 430A of the 1933 Act
         Regulations to be omitted from the Registration Statement when it
         becomes effective.

                  (b) No order preventing or suspending the use of any
         Preliminary Prospectus has been issued by the Commission, and no
         proceedings for that purpose have been instituted or, to the knowledge
         of the Company, threatened by the Commission or the state securities or
         blue sky authority of any jurisdiction, and each Preliminary
         Prospectus, at the time of filing thereof, conformed in all material
         respects to the requirements of the 1933 Act and the 1933 Act
         Regulations, and did not contain any untrue statement of a material
         fact or omit to state a material fact required to be stated therein or
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading; provided,
         however, that this representation and warranty shall not apply to any
         statements or omissions made in reliance upon and in conformity with
         information furnished in writing to the Company by an Underwriter
         expressly authorizing its use in the Registration Statement.

                  (c) The Registration Statement has been declared effective by
         the Commission under the 1933 Act; no stop order suspending the
         effectiveness of the Registration Statement has been issued and no
         proceeding for that purpose has been instituted or, to the knowledge of
         the Company, threatened by the Commission.

                  (d) When the Prospectus is first filed pursuant to Rule 424(b)
         of the 1933 Act Regulations, when any amendment to the Registration
         Statement becomes effective, when any amendment or supplement to the
         Prospectus is filed with the Commission and at the Closing Time (as
         hereinafter defined), (i) the Registration Statement, the Prospectus
         and any amendments thereof and supplements thereto will conform in all
         material respects with the applicable requirements of the 1933 Act and
         the 1933 Act Regulations, and (ii) neither the Registration Statement,
         the Prospectus nor any amendment or supplement thereto will contain any
         untrue statement of a material fact or omit to state a material fact
         required to be stated therein or necessary in order to make the
         statements therein not misleading; provided, however, that this
         representation and warranty shall not apply to any statements or
         omissions made in reliance upon and in conformity with information
         furnished in writing to the Company by an Underwriter expressly
         authorizing its use in the Registration Statement.

                                      - 2 -


<PAGE>   3



                  (e) Each document incorporated by reference in the
         Registration Statement (an "Incorporated Document"), as of the date
         such Incorporated Document became effective with or was filed with the
         Commission, as the case may be, conformed in all material respects to
         the requirements of the 1933 Act or the Securities Exchange Act of
         1934, as amended, and the rules and regulations of the Commission
         thereunder (the "Exchange Act") (as applicable), and when read together
         with the other information in the Preliminary Prospectus or Prospectus
         (as applicable), as of the Execution Time and at the Closing Date, did
         not and will not contain any untrue statement of a material fact or
         omit to state a material fact necessary to make the statements therein,
         in the light of the circumstances under which they were made, not
         misleading; and any further documents so filed and incorporated by
         reference in the Prospectus, when such documents become effective with
         or are filed with the Commission, as the case may be, will conform in
         all material respects to the requirements of the 1933 Act or the
         Exchange Act, as applicable, and the rules and regulations of the
         Commission thereunder, and when read together with the other
         information in the Prospectus, as of the Execution Time and at the
         Closing Date, did not and will not contain any untrue statement of a
         material fact or omit to state a material fact necessary to make the
         statements therein, in the light of the circumstances under which they
         were made, not misleading; provided, however, that this representation
         and warranty shall not apply to any statements or omissions made in
         reliance upon and in conformity with information furnished in writing
         to the Company by an Underwriter expressly authorizing its use therein.

                  (f) The conditions for the use by the Company of a
         registration statement on Form S-3 set forth in the General
         Instructions to Form S-3 have been satisfied and the Company is
         entitled to use such form for the transactions contemplated herein.

                  (g) The Company has been duly incorporated and is validly
         existing as a corporation in good standing under the laws of the State
         of North Carolina with all requisite corporate power and authority to
         own, lease and operate its properties and the properties it proposes to
         own, lease and operate as described in the Registration Statement and
         the Prospectus and to conduct its business as now conducted and as
         proposed to be conducted as described in the Registration Statement and
         the Prospectus. The Company has been duly qualified to do business and
         is in good standing as a foreign corporation in each jurisdiction in
         which the ownership or leasing of its properties or the nature or
         conduct of its business as now conducted requires such qualification,
         except where the failure to do so would not have a material adverse
         effect on the Company, the Partnership or any Hotel. The Company will
         be duly qualified (at the time of closing of the acquisition of the
         Acquisition Hotels) in each jurisdiction in which the ownership or
         leasing of its properties or the nature or conduct of its business as
         proposed to be conducted as described in the Registration Statement and
         the Prospectus requires such qualification, except where the failure to
         do so would not have a material adverse effect on the Company, the
         Partnership, any Hotel or any Acquisition Hotel. Except for the
         Partnership, the Company does not own or control, directly or
         indirectly, or own any capital stock or other beneficial interest in,
         any corporation, association or other entity.

                  (h) The Partnership has been duly formed and is validly
         existing as a limited partnership in good standing under the North
         Carolina Revised Uniform Limited Partnership Act (the "North Carolina
         Act") with all requisite partnership power and authority to own, lease
         and operate its properties and the properties it proposes to own, lease
         and operate as described in the Registration Statement and the
         Prospectus and to conduct its business as now conducted and as proposed
         to be conducted as described in the Registration Statement and the
         Prospectus. The Partnership has been duly qualified or registered to do
         business and is in good standing as a foreign partnership in each other
         jurisdiction in which the ownership or leasing of its properties or the
         nature or conduct of its business as now conducted or proposed to be
         conducted as described in the Registration Statement and the Prospectus
         requires such qualification, except where the failure to do so would
         not have a material adverse effect on the Company, the Partnership or
         any Hotel. The Partnership will be duly qualified (at the time of
         closing of the acquisition of the Acquisition Hotels) in each
         jurisdiction in which the ownership or leasing of its properties or the
         nature or conduct of its business as proposed to be conducted as
         described in the Registration Statement and the

                                      - 3 -


<PAGE>   4



         Prospectus requires such qualification, except where the failure to do
         so would not have a material adverse effect on the Company, the
         Partnership, any Hotel or any Acquisition Hotel. The Company is the
         sole general partner of the Partnership, and at the Closing Time, will
         be the sole general partner of the Partnership and will be the holder
         of 15,523,864 units of limited partnership interest in the Partnership
         ("Units") or approximately 89.77% of the outstanding Units, and the
         holder of 3,000,000 9.25% Series A Cumulative Preferred Units of
         Partnership ("Preferred Units"), or 100% of the outstanding Preferred
         Units.

                  (i) The Lessee has been duly incorporated and is validly
         existing as a corporation in good standing under the laws of the State
         of North Carolina. The Lessee has all requisite corporate power and
         authority to own, lease and operate its properties and conduct its
         business now conducted and as proposed to be conducted as described in
         the Registration Statement and the Prospectus. The Lessee has been duly
         qualified to do business and is in good standing as a foreign
         corporation in each other jurisdiction in which the ownership or
         leasing of its properties or the nature or conduct of its business as
         now conducted requires such qualification, except where the failure to
         do so would not have a material adverse effect on the Lessee. The
         Lessee will be duly qualified (at the time of closing of the
         acquisition of the Acquisition Hotels) in each jurisdiction in which
         the ownership or leasing of its properties or the nature or conduct of
         its business as proposed to be conducted as described in the
         Registration Statement or the Prospectus requires such qualification,
         except where the failure to do so would not have a material adverse
         effect on the Lessee.

                  (j) The Company has full corporate right, power and authority
         to enter into and perform its obligations under this Agreement, to
         issue, sell and deliver the Shares as provided herein and to consummate
         the transactions contemplated herein. This Agreement has been duly
         authorized, executed and delivered by the Company and constitutes a
         valid and binding agreement of the Company, enforceable in accordance
         with its terms, except to the extent that enforceability may be limited
         by bankruptcy, insolvency, reorganization or other laws of general
         applicability relating to or affecting creditors' rights, or by general
         equity principles and except to the extent the indemnification
         provisions set forth in Section 6 of this Agreement may be limited by
         federal or state securities laws or the public policy underlying such
         laws.

                  (k) The Partnership has full partnership right, power and
         authority to enter into and perform this Agreement and to consummate
         the transactions contemplated herein. This Agreement has been duly
         authorized, executed and delivered by the Partnership and constitutes a
         valid and binding agreement of the Partnership enforceable in
         accordance with its terms, except to the extent that enforceability may
         be limited by bankruptcy, insolvency, reorganization or other laws of
         general applicability relating to or affecting creditors' rights, or by
         general equity principles and except to the extent the indemnification
         provisions set forth in Section 6 of this Agreement may be limited by
         federal or state securities laws or the public policy underlying such
         laws.

                  (l) The Second Amended and Restated Agreement of Limited
         Partnership of the Partnership (the "Partnership Agreement") has been
         duly authorized, executed and delivered by the Company, as general
         partner, and by the limited partners named therein, and constitutes a
         valid and binding agreement of the parties thereto, enforceable in
         accordance with its terms; provided, however, that the enforceability
         of the Partnership Agreement may be limited by bankruptcy, insolvency,
         reorganization or other laws of general applicability relating to or
         affecting creditors' rights or by general equity principles. Each of
         the Proposed Leases, when duly authorized, executed and delivered by
         the parties thereto, will constitute valid and binding agreements,
         enforceable in accordance with their respective terms, except to the
         extent enforceability may be limited by bankruptcy, insolvency,
         reorganization or other laws of general applicability relating to or
         affecting creditors' rights or by general equity principles. (This
         Agreement, the Partnership Agreement, the Leases and the Proposed
         Leases sometimes are hereinafter referred to as the "Operative
         Documents.")

                                      - 4 -


<PAGE>   5



                  (m) The Partnership and, to the best of the Company's
         knowledge, each of the other parties to the Acquisition Agreements has
         full legal right, power and authority to enter into and perform such
         agreements and to consummate the transactions contemplated thereby. The
         Acquisition Agreements, without qualification with respect to the
         Partnership and to the best of the Company's knowledge with respect to
         each other party thereto, have been duly and validly authorized,
         executed and delivered by the parties thereto and constitute valid and
         binding agreements of the parties thereto, enforceable in accordance
         with their terms, except to the extent enforceability may be limited by
         bankruptcy, insolvency, reorganization or other laws of general
         applicability relating to or affecting creditors' rights or by general
         equity principles.

                  (n) The amendment to the Company's articles of incorporation
         creating the 9.25% Series A Cumulative Preferred Stock, $.01 par value
         per share and designating the rights, preferences and restrictions
         thereof (the "Designating Amendment") has been duly and validly
         authorized by all necessary corporation action on behalf of the
         Company. Each consent, approval, authorization, order, license,
         certificate, permit, registration, designation or filing by or with any
         governmental agency or body necessary for the valid authorization,
         issuance, sale and delivery of the Shares and the execution, delivery
         and performance of this Agreement and the consummation by the Company
         and the Partnership of the transactions contemplated hereby has been
         made or obtained and is in full force and effect.

                  (o) Neither the issuance, sale and delivery by the Company of
         the Shares, nor the execution, delivery and performance of this
         Agreement, nor the consummation of the transactions contemplated hereby
         by the Company or the Partnership, as applicable, will conflict with or
         result in a breach or violation of any of the terms and provisions of,
         or (with or without the giving of notice or the passage of time or
         both) constitute a default under, the articles of incorporation,
         by-laws, certificate of limited partnership or Partnership Agreement,
         as the case may be, of the Company or the Partnership; any indenture,
         mortgage, deed of trust, loan agreement, note, lease or other agreement
         or instrument to which the Company or the Partnership is a party or to
         which they, either of them, any of their respective properties or other
         assets or any Hotel or Acquisition Hotel is subject; or any applicable
         statute, judgment, decree, order, rule or regulation of any court or
         governmental agency or body applicable to the Company or the
         Partnership or any of their respective properties; or result in the
         creation or imposition of any lien, charge, claim or encumbrance upon
         any property or asset of the Company or the Partnership.

                  (p) The issuance and sale of the Shares to the Underwriters
         hereunder have been duly authorized by the Company. When issued and
         delivered against payment therefor as provided in this Agreement, the
         Shares will be duly authorized and validly issued, fully paid and
         nonassessable. No preemptive rights of shareholders exist with respect
         to any of the Shares. The Shares conform to the description of the
         Preferred Stock contained in the Prospectus. No person or entity holds
         a right to require or participate in the registration under the 1933
         Act of the Shares pursuant to the Registration Statement; and no person
         holds a right to require registration under the 1933 Act of any shares
         of Preferred Stock of the Company at any other time. No person or
         entity has a right of participation or first refusal with respect to
         the sale of the Shares by the Company. The form of certificates
         evidencing the Shares complies with all applicable requirements of
         North Carolina law.

                  (q) The Company has an authorized, issued and outstanding
         capitalization as set forth in the Prospectus under the caption
         "Capitalization." Immediately after the Closing Time, 16,194,480 shares
         of Common Stock will be issued and outstanding, 3,000,000 shares of
         Preferred Stock will be issued and outstanding and no shares of any
         other class of capital stock will be issued and outstanding. The
         Designating Amendment has been approved by all necessary corporate
         action. All of the issued and outstanding shares of capital stock of
         the Company have been duly authorized and validly issued, are fully
         paid and nonassessable and conform to the description of the Common
         Stock and Preferred Stock contained in the Prospectus. None of the
         issued shares of capital stock of the Company have been issued or are

                                      - 5 -


<PAGE>   6



         owned or held in violation of any preemptive or similar rights of
         shareholders. Except as disclosed in the Prospectus, there is no
         outstanding option, warrant or other right calling for the issuance 
         of, and no commitment, plan or arrangement to issue, any shares of 
         capital stock of the Company or any security convertible into or 
         exchangeable for capital stock of the Company.

                  (r) All offers and sales of the Company's capital stock prior
         to the date hereof were at all relevant times duly registered under 
         the 1933 Act or exempt from the registration requirements of the 1933
         Act by reason of Sections 3(b), 4(2) or 4(6) thereof and were duly
         registered or the subject of an available exemption from the 
         registration requirements of the applicable state securities or blue
         sky laws.

                  (s) All of the issued Units have been duly and validly
         authorized and issued and are fully paid. None of the issued Units has
         been issued or is owned or held in violation of any preemptive or
         similar right. The issuance of the Preferred Units to the Company has
         been approved by all necessary action on behalf of the Partnership and
         its partners. Immediately after the Closing Time, 17,293,257 Units and
         3,000,000 Preferred Units will be issued and outstanding and all of
         such Units and Preferred Units will be validly issued, fully paid and
         nonassessable. None of the issued Units or Preferred Units has been or
         will be issued, or is owned or held, in violation of any preemptive
         right. The Units and Preferred Units have been or will be offered, 
         sold and issued by the Partnership in compliance with all applicable 
         laws (including, without limitation, federal and state securities 
         laws).

                  (t) The financial statements (including the related notes)
         included or incorporated by reference in the Registration Statement and
         the Prospectus present fairly the financial position of the Company and
         the Lessee as of the dates indicated and the results of operations and
         cash flows for the Company and the Lessee for the periods specified,
         all in conformity with generally accepted accounting principles applied
         on a consistent basis throughout the periods specified. The financial
         statement schedules included in the Registration Statement and the
         amounts in the Prospectus under the caption "Prospectus Summary -
         Summary Financial Data" present fairly the information required to be
         shown therein and have been compiled on a basis consistent with the
         financial statements included or incorporated by reference in the
         Registration Statement and the Prospectus. No other financial
         statements or schedules are required by Form S-3 or otherwise to be
         included in the Registration Statement or the Prospectus. The 
         unaudited pro forma combined financial information (including the 
         related notes) included in the Prospectus complies as to form in all 
         material respects to the applicable accounting requirements of the 
         1933 Act and the 1933 Act Regulations and management of the Company 
         believes that the assumptions underlying the pro forma adjustments are 
         reasonable. Such pro forma adjustments have been properly applied to 
         the historical amounts in the compilation of the information and such
         information fairly presents with respect to the Company and the Lessee 
         the financial position, results of operations and other information
         purported to be shown therein at the respective dates and for the
         respective periods specified.

                  (u) Coopers & Lybrand L.L.P., who have examined and reported
         upon the audited financial statements and schedules included or
         incorporated by reference in the Registration Statement, are, and were
         during the periods covered by their reports included or incorporated by
         reference in the Registration Statement and the Prospectus, independent
         public accountants within the meaning of the 1933 Act and the 1933 Act
         Regulations.

                  (v) Neither the Company, the Partnership nor the Lessee has
         sustained, since December 31, 1996, any material loss or interference
         with its business from fire, explosion, flood, hurricane, accident or
         other calamity, whether or not covered by insurance, or from any labor
         dispute or arbitrators' or court or governmental action, order or
         decree, otherwise than as set forth or contemplated in the Prospectus;
         and, since the respective dates as of which information is given in the
         Registration Statement and the Prospectus, and except as otherwise
         stated in the Registration Statement and Prospectus, there has not been
         (i) any material change in the capital stock or partnership interests,
         as applicable, long-term debt, obligations under capital leases or
         short-term borrowings of the Company and the Partnership, taken as a
         whole, (ii) any

                                      - 6 -


<PAGE>   7



         material adverse change, or any development involving a prospective
         material adverse change, in or affecting the business, prospects,
         properties, assets, results of operations or condition (financial or
         other) of the Company, the Partnership or the Lessee, (iii) any
         liability or obligation, direct or contingent, incurred or undertaken
         by the Company, the Partnership or the Lessee, which is material to the
         business or condition (financial or other) of the Company and the
         Partnership, taken as a whole, except for liabilities or obligations
         incurred in the ordinary course of business, (iv) any declaration or
         payment of any dividend or distribution of any kind on or with respect
         to the capital stock of the Company or with respect to the partnership
         interests of the Partnership, or (v) any transaction that is material
         to the Company and the Partnership, except transactions in the ordinary
         course of business or as otherwise disclosed in the Registration
         Statement and the Prospectus.

                  (w) The Company or the Partnership, as applicable, will have,
         at the Closing Time, and with respect to the Acquisition Hotels, will
         have at the time of closing of the acquisition of the Acquisition
         Hotels, good and marketable title in fee simple to all real property
         and the improvements located thereon owned by them and described in the
         Prospectus, free and clear of all liens, encumbrances, claims, security
         interests, restrictions and defects except such as are described in the
         Prospectus. Upon consummation of the transactions contemplated by the
         Acquisition Agreements, the Partnership will have good and marketable
         title in fee simple to the Acquisition Hotels and all real property,
         free and clear of all liens, encumbrances, claims, security interests,
         restrictions and defects. Neither the Company nor the Partnership owns
         or leases any real property as lessee. No person has an option or right
         of first refusal to purchase all or part of any Hotel, any Acquisition
         Hotel or any interest therein. Each of the Hotels and the Acquisition
         Hotels complies with all applicable codes, laws and regulations
         (including, without limitation, building and zoning codes, laws and
         regulations and laws relating to access to the Hotels and the
         Acquisition Hotels), except to the extent disclosed in the Prospectus
         and except for such failures to comply that would not individually or
         in the aggregate have a material adverse impact on the condition,
         financial or otherwise, or on the earnings, assets, business affairs or
         business prospects of such hotel, the Company or the Partnership.
         Neither the Company nor the Partnership has knowledge of any pending or
         threatened condemnation proceedings, zoning change, or other proceeding
         or action that will in any manner affect the size of, use of,
         improvements on, construction on or access to any Hotel or any
         Acquisition Hotel, except such proceedings or actions that would not
         have a material adverse effect on the condition, financial or
         otherwise, or on the earnings, assets, business affairs or business
         prospects of such hotel, the Company or the Partnership.

                  (x) None of the Company, the Partnership or the Lessee is in
         violation of its articles of incorporation, by-laws, certificate of
         limited partnership or partnership agreement, as the case may be, and
         except as disclosed in the Prospectus, no default exists, and no event
         has occurred, nor state of facts exists, which, with notice or after
         the lapse of time to cure or both, would constitute a default in the
         due performance and observance of any obligation, agreement, term,
         covenant, consideration or condition contained in any material
         indenture, mortgage, deed of trust, loan agreement, note, lease or
         other agreement or instrument to which any such entity is a party or to
         which any such entity or any of its properties is subject. Neither the
         Company nor the Partnership is in violation of, or in default with
         respect to, any statute, rule, regulation, order, judgment or decree,
         except as may be properly described in the Prospectus or such as in the
         aggregate do not now have and will not in the future reasonably be
         expected to have a material adverse effect on the financial position,
         results of operations or business of each such entity, respectively.

                  (y) Except as described in the Prospectus, there is not
         pending or, to the knowledge of the Company or the Partnership,
         threatened, any action, suit, proceeding, inquiry or investigation
         against the Company, the Partnership or the Lessee or any of their
         respective officers, directors or partners, or to which the properties,
         assets or rights of such entities are subject, before or brought by any
         court or governmental agency or body or board of arbitrators, which
         could result in any material adverse change in the business, prospects,
         properties, assets, results of operations or condition (financial or
         otherwise) of

                                      - 7 -


<PAGE>   8



         any of such entities or which could adversely affect the consummation
         of the transactions contemplated by this Agreement and the Acquisition
         Agreements.

                  (z)  The descriptions in the Registration Statement and the
         Prospectus of the contracts, leases and other legal documents therein
         described present fairly the information required to be shown, and
         there are no contracts, leases, or other documents of a character
         required to be described in the Registration Statement or the
         Prospectus or to be filed as exhibits to the Registration Statement
         which are not described or filed as required. To the knowledge of the
         Company and the Partnership, there are no statutes or regulations
         applicable to the Company or the Partnership or certificates, permits
         or other authorizations from governmental regulatory officials or
         bodies required to be obtained or maintained by the Company or the
         Partnership of a character required to be disclosed in the Registration
         Statement or the Prospectus which have not been so disclosed and
         properly described therein. All agreements between the Company or the
         Partnership and third parties expressly referenced in the Prospectus
         are legal, valid and binding obligations of the Company or the
         Partnership, enforceable in accordance with their respective terms,
         except to the extent enforceability may be limited by bankruptcy,
         insolvency, reorganization or other laws of general applicability
         relating to or affecting creditors' rights or by general equity
         principles.

                  (aa) Except as disclosed in the Prospectus, the Company, the
         Partnership, the Lessee or IMIC owns, possesses or has obtained all
         material permits, licenses, franchises, certificates, consents, orders,
         approvals and other authorizations of governmental or regulatory
         authorities or other entities as are necessary to own or lease, as the
         case may be, and to operate its respective properties (limited, with
         respect to IMIC, to the Hotels managed by IMIC) and to carry on its
         business as presently conducted, or as contemplated in the Prospectus
         to be conducted, and neither the Company, the Partnership nor the
         Lessee nor, to the knowledge of the Company or the Partnership, IMIC,
         has received any notice of proceedings relating to revocation or
         modification of any such licenses, permits, certificates, consents,
         orders, approvals or authorizations.

                  (ab) Each of the Company, the Partnership, the Lessee and IMIC
         owns or possesses adequate license or other rights to use all patents,
         trademarks, service marks, trade names, copyrights, software and design
         licenses, trade secrets, manufacturing processes, other intangible
         property rights and know-how (collectively "Intangibles") necessary to
         entitle any of them to conduct their respective businesses now, and as
         proposed to be, conducted or operated as described in the Prospectus
         (limited, with respect to IMIC, to the Hotels managed by IMIC), and
         none of the Company, the Partnership, the Lessee or IMIC has received
         notice of infringement upon or of conflict with (and the Company and
         the Partnership know of no such infringement upon or of conflict with)
         asserted rights of others with respect to any Intangibles which could
         materially and adversely affect the business, prospects, properties,
         assets, results of operation or condition (financial or otherwise) of
         the Company, the Partnership, the Lessee or IMIC (limited, with respect
         to IMIC, to the Hotels managed by IMIC).

                  (ac) To the Company's and the Partnership's knowledge, the
         Company's, the Partnership's and the Lessee's system of internal
         accounting controls taken as a whole is sufficient to meet the broad
         objectives of internal accounting controls insofar as those objectives
         pertain to the prevention or detection of errors or irregularities in
         amounts that would be material in relation to the Company's, the
         Partnership's or the Lessee's financial statements; and, to the
         Company's and the Partnership's knowledge, none of the Company, the
         Partnership or the Lessee, nor any employee or agent thereof, has made
         any payment of funds of the Company, the Partnership or the Lessee, as
         the case may be, or received or retained any funds, and no funds of the
         Company, the Partnership or the Lessee, as the case may be, have been
         set aside to be used for any payment, in each case in violation of any
         law, rule or regulation.

                  (ad) Each of the Company and the Partnership (to the extent
         not consolidated with the Company) and the Lessee has filed on a timely
         basis all necessary federal, state, local and foreign income and
         franchise tax returns required to be filed through the date hereof and
         has paid all taxes shown as due

                                      - 8 -


<PAGE>   9



         thereon; and no tax deficiency has been asserted against either such
         entity, nor does either such entity know of any tax deficiency which is
         likely to be asserted against any such entity which, if determined
         adversely to any such entity, could materially adversely affect the
         business, prospects, properties, assets, results of operations or
         condition (financial or otherwise) of any such entity. All tax
         liabilities are adequately provided for on the respective books of such
         entities.

                  (ae) The Company, the Partnership, the Lessee and IMIC
         maintain insurance (issued by insurers of recognized financial
         responsibility) of the types and in the amounts generally deemed
         adequate for their respective businesses (limited, with respect to
         IMIC, to the Hotels managed by IMIC) and, to the Company's and the
         Partnership's knowledge, consistent with insurance coverage maintained
         by similar companies in similar businesses, including, but not limited
         to, insurance covering real and personal property owned or leased by
         the Company, the Partnership, the Lessee and IMIC against theft,
         damage, destruction, acts of vandalism and all other risks, including
         liability for personal injury, customarily insured against, all of
         which insurance is in full force and effect.

                  (af) To the best of the Company's knowledge, no general labor
         problem exists or is imminent with the employees of the Company or the
         Lessee. The Partnership has no employees.

                  (ag) Each of the Company and the Partnership, and each of
         their officers, directors and controlling persons, has not taken and
         will not take, directly or indirectly, any action resulting in a
         violation of Rule 102 under Regulation M promulgated under the Exchange
         Act, or designed to, or that might reasonably be expected to, cause or
         result in or that has constituted or that reasonably might be expected
         to constitute the stabilization or manipulation of the price of any
         security of the Company or to facilitate the sale (other than to the
         Underwriters pursuant to this Agreement) or resale of the Shares.

                  (ah) The Company has not incurred any liability for a fee,
         commission or other compensation on account of the employment of a
         broker or finder in connection with the transactions contemplated by
         this Agreement other than as contemplated hereby.

                  (ai) Except as otherwise disclosed in the Prospectus, neither
         the Company, the Partnership, the Lessee nor, to the knowledge of the
         Company and the Partnership, any entity ("Selling Entity") from which
         the Company or the Partnership acquired a Hotel or from which the
         Partnership proposes to,acquire an Acquisition Hotel has authorized or
         conducted or has knowledge of the generation, transportation, storage,
         presence, use, treatment, disposal, release, or other handling of any
         hazardous substance, hazardous waste, hazardous material, hazardous
         constituent, toxic substance, pollutant, contaminant, asbestos, radon,
         polychlorinated biphenyls ("PCBs"), petroleum product or waste
         (including crude oil or any fraction thereof), natural gas, liquefied
         gas, synthetic gas or other material defined, regulated, controlled or
         potentially subject to any remediation requirement under any
         environmental law (collectively, "Hazardous Materials"), on, in, under
         or affecting (i) any real property currently leased or owned or by any
         means controlled by the Company or the Partnership, including the
         Hotels, or (ii) the Acquisition Hotels (the "Real Property") except in
         material compliance with applicable laws; to the knowledge of the
         Company and the Partnership, the Real Property and the Company's, the
         Partnership's, the Lessee's and the Selling Entities' operations with
         respect to the Real Property are in compliance with all federal, state
         and local laws, ordinances, rules, regulations and other governmental
         requirements relating to pollution, control of chemicals, management of
         waste, discharges of materials into the environment, health, safety,
         natural resources, and the environment (collectively, "Environmental
         Laws"), and the Company, the Partnership, the Lessee and the Selling
         Entities (as relates to the Acquisition Hotels) have, and are in
         compliance with, all licenses, permits, registrations and government
         authorizations necessary to operate under all applicable Environmental
         Laws. Except as otherwise disclosed in the Prospectus, none of the
         Company, the Partnership, the Lessee or, to the knowledge of the
         Company or the Partnership, any Selling Entity (as relates to the
         Acquisition Hotels) has received any written or oral notice from any
         governmental entity or any other person and there is no pending or
         threatened claim, litigation or any administrative

                                      - 9 -


<PAGE>   10



         agency proceeding that: alleges a violation of any Environmental Laws
         by the Company, the Partnership, the Lessee or any Selling Entity;
         alleges that the Company, the Partnership, the Lessee or any Selling
         Entity is a liable party or a potentially responsible party under the
         Comprehensive Environmental Response, Compensation and Liability Act,
         42 U.S.C. Section 9601, et seq., or any state superfund law; has       
         resulted in or could result in the attachment of an environmental lien
         on any of the Real Property; or alleges that the Company, the
         Partnership, the Lessee or any Selling Entity is liable for any
         contamination of the environment, contamination of the Real Property,
         damage to natural resources, property damage, or personal injury based
         on their activities or the activities of their predecessors or third
         parties (whether at the Real Property or elsewhere) involving
         Hazardous Materials, whether arising under the Environmental Laws,
         common law principles, or other legal standards.

                  (aj) The Company is organized in conformity with the
         requirements for qualification as a real estate investment trust under
         the Internal Revenue Code of 1986, as amended (the "Code"), and the
         Company's method of operation will enable it to meet the requirements
         for taxation as a real estate investment trust under the Code. The
         Partnership is treated as a partnership for federal income purposes and
         not as a corporation or a association taxable as a corporation.

                  (ak) None of the Company, the Partnership or the Lessee will
         become as a result of the transactions contemplated hereby, or will
         conduct their respective businesses in a manner in which any such
         entity would become, "an investment company," or a company "controlled"
         by an "investment company," within the meaning of the Investment
         Company Act of 1940, as amended (the "1940 Act") and is not required to
         be registered under the 1940 Act.

                  (al) The Partnership is not currently prohibited, directly or
         indirectly, from making distributions to the Company, from repaying to
         the Company any loans or advances to the Partnership or from
         transferring any of the Partnership's property or assets to the
         Company, except as disclosed in the Prospectus.

                  (am) The Company has applied to list the Shares on The New
         York Stock Exchange (the "NYSE") and knows of no reason why trading of
         the Shares on the NYSE will not commence within a 30- day period after
         the Closing Time.

                  (an) The statements set forth in the Prospectus under the
         caption "Federal Income Tax Considerations," insofar as they purport to
         describe the provisions of the laws and documents referred to therein,
         are accurate and complete in all material respects.

                  (ao) The Proposed Leases, except for their economic terms,
         will be in substantially the same form as the Leases.

                  (ap) Neither the Company nor the Partnership, nor any of their
         respective affiliates, does no business with the Government of Cuba or
         with any person or affiliate located in Cuba within the meaning of
         Section 517.075 of the Florida Securities and Investor Protection Act,
         and all regulations thereunder relating to issuers doing business with
         Cuba.

         Any certificate signed by any officer of the Company on behalf of the
Company or the Partnership and delivered to you or to counsel for the
Underwriters shall be deemed a representation and warranty by such entity to
each Underwriter as to the matters covered thereby.

                                     - 10 -


<PAGE>   11



         Section 2.    Sale and Delivery of the Shares to the Underwriters; 
                       Closing.

         (a)   On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company the number of Shares set forth
opposite the name of such Underwriter in Schedule A (the proportion which each
Underwriter's share of the total number of the Shares bears to the total number
of Shares is hereinafter referred to as such Underwriter's "underwriting
obligation proportion"), at a purchase price of $24.03125 per share.

         (b)   Payment of the purchase price for and delivery of certificates in
definitive form representing the Shares shall be made at the offices of Morgan
Keegan & Company, Inc., 50 Front Street, Memphis, Tennessee 38103 or at such
other place as shall be agreed upon by the Company and you, at 10:00 a.m.
E.D.T., on September 11, 1997 (the "Closing Time"). The place of closing for the
Shares and the Closing Time may be varied by agreement between you and the
Company. Payment for the Shares shall be made to the Company by next day funds
payable to the order of the Company, against delivery to you for the respective
accounts of the Underwriters of the Shares to be purchased by them.

         (c)   The certificates representing the Shares to be purchased by the
Underwriters shall be in such denominations and registered in such names as you
may request in writing at least two full business days before the Closing Time.
The certificates representing the Shares will be made available at the offices
of Morgan Keegan & Company, Inc. or at such other place as Morgan Keegan &
Company, Inc. may designate for examination and packaging not later than 10:00
a.m. on the last business day prior to the Closing Time.

         (d)   You intend to offer the Shares to the public as set forth in the
Prospectus, but after the initial public offering of such Shares you may in your
discretion vary the public offering price.

         Section 3.    Certain Covenants of the Company and the Partnership. The
Company and the Partnership covenant and agree with each Underwriter as follows:

                 (a)   To file with the Secretary of State of North Carolina and
         cause to become effective prior to the Closing Time the Designating
         Amendment in such form as has been approved by the Underwriters and
         their counsel.

                 (b)   To amend the Partnership Agreement to create the 
Preferred Units effective upon issuance of the Shares.

                 (c)   If the Company elects to rely upon Rule 430A of the 1933
         Act Regulations or the filing of the Prospectus is otherwise required
         under Rule 424(b) of the 1933 Act Regulations, the Company will comply
         with the requirements of Rule 430A and will file the Prospectus,
         properly completed, pursuant to the applicable provisions of Rule
         424(b) within the time period prescribed. The Company will notify you
         immediately, and confirm the notice in writing, (i) when any
         post-effective amendment to the Registration Statement shall have
         become effective, or any amended Prospectus shall have been filed, (ii)
         of any request by the Commission to amend the Registration Statement or
         amend or supplement the Prospectus or for additional information, and
         (iii) of the issuance by the Commission of any stop order suspending
         the effectiveness of the Registration Statement or of any order
         preventing or suspending the use of any Preliminary Prospectus or the
         Prospectus or the suspension of the qualification of the Shares for
         offering or sale in any jurisdiction, or of the institution or
         threatening of any proceeding for any such purposes. The Company will
         use every reasonable effort to prevent the issuance of any such stop
         order or of any order preventing or suspending such use and, if any
         such order is issued, to obtain the withdrawal thereof at the earliest
         possible moment.

                                     - 11 -


<PAGE>   12



                  (d) The Company will not at any time file or make any
         amendment to the Registration Statement or any amendment or supplement
         to the Prospectus if you shall not have previously been advised and
         furnished a copy thereof a reasonable time prior to the proposed
         filing, or if you or counsel for the Underwriters shall reasonably
         object to such amendment or supplement.

                  (e) The Company has furnished or will furnish to you, at its
         expense, as soon as available, one signed and two conformed copies of
         the Registration Statement as originally filed and of all amendments
         thereto, whether filed before or after the Registration Statement
         became effective, copies of all exhibits and documents filed therewith
         and signed copies of all consents and certificates of experts, as you
         may reasonably request, and has furnished or will furnish to each
         Underwriter one (1) conformed copy of the Registration Statement as
         originally filed and of each amendment thereto (but without exhibits).

                  (f) The Company will deliver to each Underwriter, at the
         Company's expense, from time to time, as many copies of each
         Preliminary Prospectus as such Underwriter may reasonably request, and
         the Company hereby consents to the use of such copies for purposes
         permitted by the 1933 Act. The Company will deliver to each
         Underwriter, at the Company's expense, from time to time as requested
         during the period when the Prospectus is required to be delivered under
         the 1933 Act, such number of copies of the Prospectus (as supplemented
         or amended) as each Underwriter may reasonably request. The Company
         will comply to the best of its ability with the 1933 Act and the 1933
         Act Regulations so as to permit the completion of the distribution of
         the Shares as contemplated in this Agreement and in the Prospectus. If
         the delivery of a prospectus is required at any time prior to the
         expiration of nine months after the time of issue of the Prospectus in
         connection with the offering or sale of Shares and if at such time any
         event shall have occurred as a result of which the Prospectus as then
         amended or supplemented would include any untrue statement of a
         material fact or omit to state any material fact necessary in order to
         make the statements therein, in light of the circumstances existing at
         the time such Prospectus is delivered to a purchaser, not misleading,
         or, if for any reason it shall be necessary to amend or supplement the
         Prospectus in order to comply with the 1933 Act or the Exchange Act,
         the Company will notify you and, upon your request, prepare and furnish
         without charge to each Underwriter and to any dealer in securities as
         many copies as you may from time to time reasonably request of an
         amended Prospectus or a supplement to the Prospectus (in form and
         substance reasonably satisfactory to counsel for the Underwriters)
         which will amend or supplement the Prospectus so that it will not
         contain an untrue statement or omit to state a material fact necessary
         in order to make the statements therein, in light of the circumstances
         existing at the time it is delivered to a purchaser, not misleading,
         and in case any Underwriter is required to deliver a prospectus in
         connection with the sale of any Shares at any time nine months or more
         after the time of issue of the Prospectus, upon your request but at the
         expense of such Underwriter the Company will prepare and deliver to the
         Underwriters a reasonable number of an amended or supplemented
         Prospectus complying with Section 10(a)(3) of the 1933 Act.

                  (g) To timely file all reports and any definitive proxy or
         information statements required to be filed by the Company with the
         Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
         Exchange Act for so long as the delivery of a Prospectus is required in
         connection with the offering or sale of the Shares.

                  (h) The Company will use its best efforts to qualify the
         Shares for offering and sale under the applicable securities laws and
         real estate syndication laws of such states and other jurisdictions as
         you may designate. In each jurisdiction in which the Shares have been
         so qualified, the Company will file such statements and reports as may
         be required by the laws of such jurisdiction to continue such
         qualification in effect for a period of not less than one year from the
         effective date of the Registration Statement; provided, however, that
         the Company shall not be obligated to file any general consent to
         service of process or to qualify as a foreign corporation in any
         jurisdiction in which it is not so qualified or to make any
         undertakings in respect of doing business in any jurisdiction in which
         it is not otherwise so subject.

                                     - 12 -


<PAGE>   13



         The Company will file such statements and reports as may be required by
         the laws of each jurisdiction in which the Shares have been qualified
         as above provided.

                  (i) The Company will make generally available to its security
         holders as soon as practicable, but in any event not later than the end
         of the fiscal quarter first occurring after the first anniversary of
         the effective date of the Registration Statement, an earnings statement
         complying with the provisions of Rule 158 of the 1933 Act Regulations
         and covering a period of twelve (12) months beginning not later than
         the first day of the Company's fiscal quarter next following the
         effective date (as defined in Rule 158) of the Registration Statement.

                  (j) The Company and the Partnership will use the net proceeds 
         received from the sale of the Shares in the manner specified in the
         Prospectus under the caption "Use of Proceeds."

                  (k) The Company will furnish to its security holders, as soon
         as practicable after the end of each respective period, annual reports
         (including financial statements audited by independent public
         accountants) and unaudited quarterly reports of operations for each of
         the first three quarters of the fiscal year. During a period of five
         years after the date hereof, the Company will furnish to you promptly
         upon becoming available: (i) statements of operations of the Company
         for each of the first three quarters in the form furnished to the
         Company's security holders; (ii) a balance sheet of the Company as of
         the end of such fiscal year, together with statements of operations, of
         cash flows and of security holders' equity of the Company for such
         fiscal year, accompanied by a copy of the certificate or report thereon
         of independent public accountants; (iii) copies of all reports
         (financial or otherwise) mailed to security holders; (iv) copies of all
         reports and financial statements furnished to or filed with the
         Commission or any securities exchange; (v) every material press release
         in respect of the Company or its affairs which is released or prepared
         by the Company, and (vi) any additional information of a public nature
         concerning the Company, the Partnership or the Hotels that you may
         reasonably request. During such five-year period, the foregoing
         financial statements shall be on a consolidated basis to the extent
         that the accounts of the Company are consolidated with any
         subsidiaries, and shall be accompanied by similar financial statements
         for any significant subsidiary that is not so consolidated.

                  (l) For a period of 90 days from the date hereof, the Company
         will not, without your prior written consent, directly or indirectly,
         sell, offer to sell, grant any option for the sale of, or otherwise
         dispose of, any shares of capital or securities convertible into
         Preferred Stock, other than (i) to the Underwriters pursuant to this
         Agreement; or (ii) the issuance of Units or of other securities
         convertible into Preferred Stock issued in connection with the
         acquisition of hotel properties.

                  (m) The Company will maintain a transfer agent and, if
         necessary under the jurisdiction of incorporation of the Company, a
         registrar (which may be the same entity as the transfer agent) for its
         Preferred Stock.

                  (n) The Company will use its best efforts to maintain the 
         listing of the Shares on the NYSE.

                  (o) The Company will comply with all the provisions of any 
         undertakings contained in the Registration Statement.

                  (p) The Company and the Partnership will conduct their affairs
         in such a manner so as to ensure that neither the Company nor the
         Partnership will be an "investment company" or an entity "controlled"
         by an "investment company" within the meaning of the 1940 Act.

                  (q) The Company will not, and will use its best efforts to
         cause its officers, directors and affiliates not to (i) take, directly
         or indirectly, prior to completion of the distribution of the Shares
         contemplated by this Agreement, any action resulting in a violation of
         Rule 102 under Regulation M

                                     - 13 -


<PAGE>   14



         promulgated under the Exchange Act, or designed to, or that might
         reasonably be expected to, cause or result in or that has constituted
         or that reasonably might be expected to constitute the stabilization or
         manipulation of the price of any security of the Company or to
         facilitate the sale (other than to the Underwriters pursuant to this
         Agreement) or resale of the Shares, (ii) sell, bid for, purchase or pay
         anyone any compensation for soliciting purchases of the Shares, or
         (iii) pay or agree to pay to any person any compensation for soliciting
         any order to purchase any other securities of the Company.

                  (r) If at any time during the 30-day period after the
         Registration Statement became effective, any rumor, publication or
         event relating to or affecting the Company shall occur as a result of
         which in your reasonable opinion the market price of the Preferred
         Stock has been or is likely to be materially affected (regardless of
         whether such rumor, publication or event necessitates a supplement to
         or amendment of the Prospectus) and after written notice from you
         advising the Company to the effect set forth above, the Company agrees
         to forthwith prepare, consult with you concerning the substance of, and
         disseminate a press release or other public statement, reasonably
         satisfactory to you, responding to or commenting on such rumor,
         publication or event.

                  (s) The Company will use its best efforts (i) to meet the
         requirements to qualify as a real estate investment trust under the
         Code and (ii) to cause the Partnership to be treated as a partnership
         for federal income tax purposes.

                  (t) Subject to the terms hereof, the Company and the
         Partnership will do and perform their respective obligations to the
         extent required to consummate the transactions contemplated hereby.

                  (u) Prior to the Closing Time, the Company and the Partnership
         will notify you in writing immediately if any event occurs that renders
         any of the representations and warranties of the Company or the
         Partnership contained herein inaccurate or incomplete in any respect.

                  (v) The Company will endeavor to comply with all provisions of
         Section 517.075 of the Florida Securities and Investor Protection Act,
         and all regulations thereunder relating to issuers doing business with
         Cuba.

         Section 4.   Payment of Expenses. The Company will pay and bear all
costs, fees and expenses incident to the performance of its obligations under
this Agreement (excluding fees and expenses of counsel for the Underwriters,
except as specifically set forth below), including (a) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits), as originally filed and as amended, the Preliminary Prospectuses and
the Prospectus and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Underwriters, (b) the preparation, printing and
distribution of this Agreement, any Selected Dealers Agreement, the certificates
representing the Shares and any instruments relating to any of the foregoing,
(c) the issuance and delivery of the Shares to the Underwriters, including any
transfer taxes payable upon the sale of the Shares to the Underwriters (other
than transfer taxes on resales by the Underwriters), (d) the fees and
disbursements of the Company's counsel and accountants, (e) all costs, fees and
expenses in connection with the application for listing the Shares on the NYSE,
(f) the transfer agent's and registrar's fees and all miscellaneous expenses
referred to in Item 14 of the Registration Statement, (g) costs related to
travel and lodging incurred by the Company and its representatives relating to
meetings with and presentations to prospective purchasers of the Shares
reasonably determined by the Underwriters to be necessary or desirable to effect
the sale of the Shares to the public, and (h) all other costs and expenses
incident to the performance of the Company's obligations hereunder that are not
otherwise specifically provided for in this section.

         If the sale of the Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 5 hereof is not satisfied, because of any termination pursuant to
Section 9 hereof or because of any refusal, inability or failure on the part of
the Company to perform any agreement herein or comply with any provision hereof
other than by reason of default by any of the Underwriters, the Company will

                                     - 14 -


<PAGE>   15



reimburse the Underwriters severally on demand for all reasonable out-of-pocket
expenses, including fees and disbursements of Underwriters' counsel, reasonably
incurred by the Underwriters in reviewing the Registration Statement and the
Prospectus, and in investigating and making preparations for the marketing of
the Shares.

         Section 5.  Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Shares that they have respectively
agreed to purchase pursuant to this Agreement are subject to the accuracy of the
representations and warranties of the Company and the Partnership contained
herein or in certificates of any officer of the Company and the Partnership
delivered pursuant to the provisions hereof, to the performance by the Company
and the Partnership of their obligations hereunder, and to the following further
conditions:

                 (a) The Prospectus shall have been filed with the Commission
         pursuant to Rule 424 within the applicable time prior prescribed for
         such filing by such Rule.

                 (b) At the Closing Time no stop order suspending the
         effectiveness of the Registration Statement shall have been issued
         under the 1933 Act and no proceedings for that purpose shall have been
         instituted or shall be pending or, to your knowledge or the knowledge
         of the Company, shall be contemplated by the Commission, and any
         request on the part of the Commission for additional information shall
         have been complied with to the satisfaction of counsel for the
         Underwriters.

                 (c) The Designating Amendment shall have been filed with the
         Secretary of State of North Carolina and become effective.

                 (d) At the Closing Time, you shall have received a favorable
         opinion of King & Spalding, counsel for the Company and the
         Partnership, dated as of the Closing Time in form and substance
         satisfactory to counsel for the Underwriters, to the effect that:

                     (i)   The Company has been duly incorporated and is 
                 validly existing as a corporation in good standing under the 
                 laws of the State of North Carolina, with power and authority
                 (corporate and other) to own its properties and conduct its
                 business as described in the Prospectus.

                     (ii)  The Company has an authorized capitalization as
                  set forth in the Prospectus, and all of the issued shares of
                  capital stock of the Company (including the Shares being
                  delivered at the Closing Time) have been duly and validly
                  authorized and issued and are fully paid and non-assessable;
                  and the Shares conform to the description thereof contained in
                  the Prospectus.

                     (iii) The Company has been duly qualified as a foreign 
                  corporation for the transaction of business and is in good 
                  standing under the laws of each other jurisdiction in which it
                  or the Partnership owns Hotels or other material property or
                  is subject to no material liability or disability by reason of
                  failure to be so qualified in any such jurisdiction (such
                  counsel being entitled to rely in respect of the opinion in
                  this clause with respect to matters of fact upon certificates
                  of officers of the Company and public officials in such
                  jurisdictions, provided that such counsel shall state that
                  they believe that both you and they are justified in relying
                  upon such opinions and certificates)).

                     (iv)  The Partnership is a limited partnership duly formed 
                  and validly existing under the North Carolina Act, with the
                  partnership power and authority to own and lease its
                  properties and to conduct its business as described in the
                  Prospectus. The Partnership has been qualified as a foreign
                  partnership for the transaction of business under the laws of
                  each other jurisdiction in which it owns Hotels or other
                  material property or is subject to no material liability or
                  disability by reason of failure to be so qualified in any such
                  jurisdiction (such counsel being entitled to rely in respect
                  of the opinion in this sentence with respect to matters of
                  fact upon certificates of

                                     - 15 -


<PAGE>   16



                  officers of the Company, the general partner of the 
                  Partnership, and of public officials of such jurisdictions
                  provided that such counsel shall state that they believe that
                  both you and they are justified in relying upon such opinions
                  and certificates). Based solely on a review of the Partnership
                  Agreement, the Company is the sole general partner of the
                  Partnership, and at the Closing Time, will be the sole general
                  partner of the Partnership and hold approximately 89.77% of
                  the Units and 100% of the outstanding Preferred Units. To such
                  counsel's knowledge, the Company has no other subsidiaries.

                     (v)    The Lessee has been duly incorporated and is validly
                  existing as a corporation in good standing under the laws of
                  the State of North Carolina. The Lessee has all requisite
                  power and authority to own, lease and operate its properties
                  and conduct its business as described in the Prospectus. The
                  Lessee has been qualified as a foreign corporation for the
                  transaction of business and is in good standing under the laws
                  of each other jurisdiction in which it leases Hotels or owns
                  material property or is subject to no material liability or
                  disability by reason of failure to be so qualified in any such
                  jurisdiction (such counsel being entitled to rely in respect
                  of the opinion in this sentence with respect to matters of
                  fact upon certificates of officers of the Company and of
                  public officials of such jurisdictions, provided that such
                  counsel shall state that they believe that both you and they
                  are justified in relying upon such opinions and certificates).

                     (vi)   To the best of such counsel's knowledge and other 
                  than as set forth in the Prospectus, there are no legal or
                  governmental proceedings pending to which the Company, the
                  Partnership or the Lessee is a party or of which any property
                  of the Company, the Partnership or the Lessee is the subject
                  which, if determined adversely to the Company, the Partnership
                  or the Lessee would individually or in the aggregate have a
                  material adverse effect on the current or future consolidated
                  financial position, shareholders' equity (or, in the case of
                  the Partnership, partners' capital) or results of operations
                  of the Company, the Partnership or the Lessee; and, to the
                  best of such counsel's knowledge, no such proceedings are
                  threatened or contemplated by governmental authorities or
                  threatened by others.

                     (vii)  This Agreement has been duly authorized, executed 
                  and delivered by the Company and the Partnership and, assuming
                  due authorization, execution and delivery by the other parties
                  hereto, constitutes a valid and binding agreement of the
                  Company and the Partnership, respectively, enforceable in
                  accordance with its terms, except to the extent enforceability
                  may be limited by bankruptcy, insolvency, reorganization or
                  other laws of general applicability relating to or affecting
                  creditors' rights and by general equity principles and except
                  to the extent that enforcement of the indemnification
                  provisions set forth in Section 6 of this Agreement may be
                  limited by federal or state securities laws or the public
                  policy underlying such laws.

                     (viii) The issue and sale of the Shares being delivered at 
                  the Closing Time by the Company and the compliance by the
                  Company and the Partnership with all of the provisions of this
                  Agreement and the consummation of the transactions herein
                  contemplated will not conflict with or result in a breach or
                  violation of any of the terms or provisions of, or constitute
                  a default under, any indenture, mortgage, deed of trust, loan
                  agreement or other material agreement or instrument known to
                  such counsel to which the Company or the Partnership is a
                  party or by which the Company or the Partnership is bound or
                  to which any of the property or assets of the Company or the
                  Partnership is subject (except any conflict, breach, violation
                  or default that (i) would not affect the issuance and sale of
                  the Shares or consummation of the transactions herein
                  contemplated or (ii) individually or in the aggregate would
                  not have a material adverse effect on the current or future
                  consolidated financial position, shareholders' equity (or in
                  the case of the Partnership, partners' capital) or results of
                  operations of the Company or Partnership), nor will such
                  action result in any violation of the provisions of the
                  Articles of Incorporation or Bylaws of the Company, the
                  certificate of limited partnership and the Partnership
                  Agreement of the

                                     - 16 -


<PAGE>   17



                  Partnership or any statute or any order, rule or regulation
                  known to such counsel of any court or governmental agency or
                  body having jurisdiction over the Company or the Partnership
                  or any of their properties.

                     (ix)   The Designating Amendment has been approved by all 
                  necessary corporate action on behalf of the Company, has been
                  duly executed on behalf of the Company and has been duly filed
                  with the Secretary of State of the State of North Carolina. No
                  other filing, consent, approval, authorization, order,
                  license, certificate, permit, registration, designation or
                  filing with any such court or governmental agency or body is
                  required for the valid authorization, issue, delivery and sale
                  of the Shares or the consummation by the Company and the
                  Partnership of the transactions contemplated by this
                  Agreement, except the registration under the 1933 Act of the
                  Shares, and such consents, approvals, authorizations,
                  registrations or qualifications as may be required under state
                  securities or Blue Sky laws in connection with the purchase
                  and distribution of the Shares by the Underwriters.

                     (x)    To such counsel's knowledge, neither the Company 
                  nor the Partnership is in violation of its Articles of
                  Incorporation or Bylaws or certificate of limited partnership
                  and Partnership Agreement, as applicable.

                     (xi)   Neither the Company nor the Partnership is an 
                  "investment company" or an entity "controlled" by an
                  "investment company", as such terms are defined in the
                  Investment Company Act.

                     (xii)  The documents incorporated by reference in the 
                  Prospectus or any further amendment or supplement thereto made
                  by the Company prior to the Closing Time (other than the
                  financial statements and related schedules therein, as to
                  which such counsel need express no opinion), when they became
                  effective or were filed with the Commission, as the case may
                  be, complied as to form in all material respects with the
                  requirements of the 1933 Act or the Exchange Act, as
                  applicable, and the rules and regulations of the Commission
                  thereunder; and they have no reason to believe that any of
                  such documents, when such documents became effective or were
                  so filed, as the case may be, contained, in the case of a
                  registration statement which became effective under the 1933
                  Act, an untrue statement of a material fact or omitted to
                  state a material fact required to be stated therein or
                  necessary to make the statements therein not misleading, or,
                  in the case of other documents which were field under the
                  Exchange Act with the Commission, an untrue statement of a
                  material fact or omitted to state a material fact necessary in
                  order to make the statements therein, in the light of the
                  circumstance under which they were made when such documents
                  were so field, not misleading.

                     (xiii) The Registration Statement and the Prospectus
                  and any further amendments and supplements thereto made by the
                  Company prior to the Closing Time (other than the financial
                  statements and related schedules and other financial,
                  statistical and operating data included therein, as to which
                  such counsel need express no opinion) comply as to form in all
                  material respects with the requirements of the 1933 Act and
                  the rules and regulations thereunder; although they do not
                  assume any responsibility for the accuracy, completeness or
                  fairness of the statements contained in the Registration
                  Statement or the Prospectus, they have no reason to believe
                  that, as of its effective date, the Registration Statement or
                  any further amendment thereto made by the Company prior to the
                  Closing Time (other than the financial statements and related
                  schedules and other financial, statistical and operating data
                  included therein, as to which such counsel need express no
                  opinion) contained an untrue statement of a material fact or
                  omitted to state a material fact required to be stated therein
                  or necessary to make the statements therein no misleading or
                  that, as of its date, the Prospectus or any further amendment
                  or supplement thereto made by the Company prior to the Closing
                  Time (other than the financial statements and related
                  schedules and

                                     - 17 -


<PAGE>   18



                  other financial, statistical and operating data included
                  therein, as to which such counsel need express no opinion)
                  contained an untrue statement of a material fact or omitted to
                  state a material fact necessary to make the statements
                  therein, in the light of the circumstances under which they
                  were made, not misleading or that, as of the Closing Time,
                  either the Registration Statement or the Prospectus or any
                  further amendment or supplement thereto made by the Company
                  prior to the Closing Time (other than the financial statements
                  and related schedules and other financial, statistical and
                  operating data included therein, as to which such counsel need
                  express no opinion) contains an untrue statement of a material
                  fact or omits to state a material fact necessary to make the
                  statements therein, in the light of the circumstances under
                  which they were made, not misleading; and they do not know of
                  any amendment to the Registration Statement required to be
                  filed or of any contracts or other documents of a character
                  required to be filed as an exhibit to the Registration
                  Statement or required to be incorporated by reference into the
                  Prospectus or required to be described in the Registration
                  Statement or the Prospectus which are not filed or
                  incorporated by reference or described as required.

                           (xiv)   The Company has all requisite corporate power
                  and authority to execute, deliver and perform this Agreement,
                  to issue, sell and deliver the Shares as provided herein and
                  to consummate the transactions contemplated herein.

                           (xv)    The Partnership has the partnership power and
                  authority to execute this Agreement and to consummate the
                  transactions contemplated herein.

                           (xvi)   The Partnership has partnership power and
                  authority to enter into the Acquisition Agreements and to
                  consummate the transactions contemplated therein. The
                  Acquisition Agreements have been duly authorized, executed and
                  delivered by the Partnership and, assuming due authorization,
                  execution and delivery by the other parties thereto,
                  constitute valid and binding agreements, enforceable in
                  accordance with their respective terms, except to the extent
                  enforceability may be limited by bankruptcy, insolvency,
                  reorganization or other laws of general applicability relating
                  to or affecting creditors' rights and by general principles of
                  equity whether considered at law or in equity. Assuming due
                  authorization, execution and delivery by the parties thereto,
                  the Lease for the Newly Acquired Hotel in Massachusetts and
                  the Proposed Leases for the Acquisition Hotels in Michigan
                  will effect valid and binding agreements, enforceable in
                  accordance with their terms in Massachusetts and Michigan,
                  respectively, except to the extent enforceability may be
                  limited by bankruptcy, insolvency, reorganization or other
                  laws of general applicability relating to or affecting
                  creditors' rights and by principles of equity whether
                  considered at law or in equity.

                           (xvii)  All of the issued Units of the Partnership
                  have been duly and validly authorized and issued by the
                  Partnership and are fully paid. The Preferred Units to be
                  issued to the Company at the Closing Time have been duly and
                  validly authorized by the Partnership. When issued and
                  delivered against payment therefor as provided in the
                  Partnership Agreement, such Preferred Units will be duly and
                  validly issued and fully paid.

                           (xviii) The Registration Statement has become
                  effective under the 1933 Act and, to the knowledge of such
                  counsel, no stop order suspending the effectiveness of the
                  Registration Statement has been issued and no proceeding for
                  that purpose has been instituted or is pending or contemplated
                  under the 1933 Act.

                           (xix)   To such counsel's knowledge, the conditions 
                  for use of a Registration Statement on Form S-3 have been
                  satisfied with respect to the Company and the transactions
                  contemplated by this Agreement and the Registration Statement.

                                     - 18 -


<PAGE>   19




                           In rendering the foregoing opinion, such counsel may
                           rely on the following:

                                    (A) as to matters involving the application
                           of laws other than the laws of the United States and
                           jurisdictions in which they are admitted, to the
                           extent such counsel deems proper and to the extent
                           specified in such opinion, upon an opinion or
                           opinions of other counsel familiar with the
                           applicable laws (in form and substance and from
                           counsel reasonably satisfactory to Underwriters'
                           counsel),

                                    (B) as to matters of fact, to the extent
                           they deem proper, on certificates of responsible
                           officers of the Company, the Lessee and the
                           Partnership. The opinion of counsel for the Company
                           shall state that the opinion of any other counsel, or
                           certificate or written statement, on which such
                           counsel is relying is in form satisfactory to such
                           counsel and that you and they are justified in
                           relying thereon. Copies of all such opinions or
                           certificates shall be delivered to Underwriters'
                           counsel.

                  (e) At the Closing Time, you shall have received a favorable
         opinion from Hunton & Williams, counsel for the Underwriters, dated as
         of the Closing Time, with respect to (i) the incorporation of the
         Company, the issuance and sale of the Shares, the Registration
         Statement, the Prospectus and other related matters as the Underwriters
         may reasonably require, and the Company shall have furnished to such
         counsel such documents as they may reasonably request for the purpose
         of enabling them to pass on such matters; and (ii) that (A) the Company
         is organized in conformity with the requirements for qualification as a
         real estate investment trust pursuant to Sections 856 through 860 of
         the Code, and the Company's proposed method of operation will enable it
         to meet the requirements for qualification and taxation as a real
         estate investment trust under the Code and (B) the Partnership will be
         treated as a partnership for federal income purposes and not as a
         corporation or an association taxable as a corporation.

                  (f) At the Closing Time, (i) the Registration Statement and
         the Prospectus, as they may then be amended or supplemented, shall
         contain all statements that are required to be stated therein under the
         1933 Act and the 1933 Act Regulations and shall conform to the
         requirements of the 1933 Act and the 1933 Act Regulations; the Company
         shall have complied with Rule 430A and neither the Registration
         Statement nor the Prospectus, as they may then be amended or
         supplemented, shall contain an untrue statement of a material fact or
         omit to state a material fact required to be stated therein or
         necessary to make the statements therein not misleading, (ii) there
         shall not have been, since the respective dates as of which information
         is given in the Registration Statement, any material adverse change in
         the business, prospects, properties, assets, results of operations or
         condition (financial or otherwise) of the Company, the Lessee, the
         Partnership or the Lessee, whether or not arising in the ordinary
         course of business, (iii) no action, suit or proceeding at law or in
         equity shall be pending or, to the best of the Company's knowledge,
         threatened against the Company, the Lessee or the Partnership that
         would be required to be set forth in the Prospectus other than as set
         forth therein and no proceedings shall be pending or, to the best
         knowledge of the Company, threatened against the Company, the Lessee or
         the Partnership before or by any federal, state or other commission,
         board or administrative agency wherein an unfavorable decision, ruling
         or finding could materially adversely affect the business, prospects,
         assets, results of operations or condition (financial or otherwise) of
         the Company or the Partnership, other than as set forth in the
         Prospectus, (iv) the Company and the Partnership shall have complied
         with all agreements and satisfied all conditions on their part to be
         performed or satisfied at or prior to the Closing Time, and (v) the
         representations and warranties of the Company and the Partnership set
         forth in Section 1 shall be accurate as though expressly made at and as
         of the Closing Time. At the Closing Time, you shall have received a
         certificate executed by the President and Chief Financial Officer of
         the Company and the general partner of the Partnership, dated as of the
         Closing Time, to such effect and with respect to the following
         additional matters: (A) the Registration Statement has become effective
         under the 1933 Act and no stop order suspending the effectiveness of
         the Registration Statement or preventing or suspending the use of the
         Prospectus has been issued, and no proceedings for that purpose have
         been instituted or are pending or, to the best of their

                                     - 19 -


<PAGE>   20



         knowledge, threatened under the 1933 Act; (B) they have reviewed the
         Registration Statement and the Prospectus and, when the Registration
         Statement became effective and at all times subsequent thereto up to
         the delivery of such certificate, the Registration Statement and the
         Prospectus and any amendments or supplements thereto contained all
         statements and information required to be included therein or necessary
         to make the statements therein not misleading and neither the
         Registration Statement nor the Prospectus nor any amendment or
         supplement thereto included any untrue statement of a material fact or
         omitted to state any material fact required to be stated therein or
         necessary to make the statements therein not misleading, and, since the
         effective date of the Registration Statement, there has occurred no
         event required to be set forth in an amended or supplemented Prospectus
         that has not been so set forth; and (C) certain other factual matters
         specified by you.

                  (g) At the time that this Agreement is executed by the
         Company, you shall have received from Coopers & Lybrand L.L.P. a
         letter, dated the date hereof, in form and substance satisfactory to
         you, confirming that they are independent public accountants with
         respect to the Company, the Partnership and the Lessee within the
         meanings of the 1933 Act and 1933 Act Regulations, and stating in
         effect that:

                      (i)  in their opinion, the financial statements and any 
                  supplementary financial information and schedules included or
                  incorporated by reference in the Registration Statement and
                  covered by their opinion therein comply as to form in all
                  material respects with the applicable accounting requirements
                  of the 1933 Act and the 1933 Act Regulations;

                      (ii) on the basis of limited procedures (set forth in
                  detail in such letter and made in accordance with such
                  procedures as may be specified by you) not constituting an
                  audit in accordance with generally accepted auditing
                  standards, consisting of (but not limited to) a reading of the
                  latest available unaudited financial statements of the
                  Company, a reading of the minute books of the Company,
                  inquiries of officials of the Company responsible for
                  financial and accounting matters, a reading of the unaudited
                  pro forma financial statements included or incorporated by
                  reference in the Registration Statement and Prospectus, and
                  such other inquiries and procedures as may be specified in
                  such letter, nothing came to their attention that caused them
                  to believe that:

                                    (A) the unaudited financial statements and
                           supporting schedules and other unaudited financial
                           data of the Company included or incorporated by
                           reference in the Registration Statement do not comply
                           as to form in all material respects with the
                           applicable accounting requirements of the 1933 Act
                           and the 1933 Act Regulations or that any material
                           modifications should be made to such financial
                           information for them to be in conformity with
                           generally accepted accounting principles ;

                                    (B) any other unaudited income statement
                           data and balance sheet items included or incorporated
                           by reference in the Prospectus do not agree with the
                           corresponding items in the unaudited financial
                           statements from which such data and items were
                           derived or that any such unaudited data and items
                           were not determined on a basis substantially
                           consistent with the basis for the corresponding items
                           in the audited financial statements included in the
                           Prospectus;

                                    (C) any unaudited pro forma financial
                           information included in the Prospectus does not
                           comply as to form in all material respects with the
                           applicable accounting requirements of the 1933 Act
                           and the 1933 Act Regulations or that the pro forma
                           adjustments have not been properly applied to
                           historical amounts in the compilation of that
                           information;

                                     - 20 -


<PAGE>   21



                                    (D) at a specified date not more than three
                           (3) days prior to the date of delivery of such
                           letter, there was any change in the Company's capital
                           stock, any increase in the Company's notes payable or
                           any decrease in shareholders' equity or in the
                           Company's real estate assets less accumulated
                           depreciation (except for normal depreciation) or
                           total assets from that set forth in the Company's
                           balance sheet at June 30, 1997, or changes in any
                           other items specified by the Underwriters, from that
                           set forth in the Company's consolidated balance sheet
                           as of June 30, 1997, except as described in such
                           letter, and

                                    (E) for the period from June 30, 1997 to a
                           specified date not more than three (3) days prior to
                           the date of delivery of such letter, there were any
                           decreases in total revenues or net income for the
                           Company, in each case as compared with the
                           corresponding period of the preceding year, except in
                           each case for decreases which the Prospectus
                           discloses have occurred or may occur or which are
                           described in such letter; and

                           (iii) in addition to the procedures referred to in
                  clause (ii) above and the examination referred to in their
                  reports included or incorporated by reference in the
                  Registration Statement, they have carried out certain
                  specified procedures, not constituting an audit in accordance
                  with generally accepted auditing standards, with respect to
                  certain amounts, percentages and financial information
                  specified by you which are derived from the general accounting
                  records of the Company, which appear or are incorporated by
                  reference in the Registration Statement or the exhibits or
                  schedules thereto or the Prospectus and are specified by you,
                  and have compared such amounts, percentages and financial
                  information with the accounting records of the Company and
                  with material derived from such records and have found them to
                  be in agreement for a period of three (3) years.

                  (h)      At the Closing Time, you shall have received from 
         Coopers & Lybrand L.L.P. a letter, in form and substance satisfactory
         to you and dated as of the Closing Time, to the effect that they
         reaffirm the statements made in the letter furnished pursuant to
         subsection (h) above, except that the specified date referred to shall
         be a date not more than three days prior to the Closing Time.

                  (i)      In the event that either of the letters to be 
         delivered pursuant to subsections (h) and (i) above sets forth any such
         changes, decreases or increases, it shall be a further condition to
         your obligations that you shall have reasonably determined, after
         discussions with officers of the Company responsible for financial and
         accounting matters and with Coopers & Lybrand L.L.P. that such changes,
         decreases or increases as are set forth in such letters do not reflect
         a material adverse change in the capital stock, long-term debt, total
         assets, real estate assets less accumulated depreciation, net current
         assets or shareholders' equity of the Company as compared with the
         amounts shown in the condensed consolidated balance sheet of the
         Company at June 30, 1997, or a material adverse change in revenues or
         net income for the Company, in each case as compared with the results
         of the Company for the corresponding period of the prior year.

                  (j)      At the Closing Time, counsel for the Underwriters 
         shall have been furnished with all such letters, documents,
         certificates and opinions as they may request for the purpose of
         enabling them to pass upon the issuance and sale of the Shares as
         contemplated in this Agreement and the matters referred to in Section
         5(e) and in order to evidence the accuracy and completeness of any of
         the representations, warranties or statements of the Company or the
         Partnership, the performance of any of the covenants of the Company or
         the Partnership, or the fulfillment of any of the conditions herein
         contained; and all proceedings taken by the Company at or prior to the
         Closing Time in connection with the authorization, issuance and sale of
         the Shares as contemplated in this Agreement shall be satisfactory in
         form and substance to you and to counsel for the Underwriters. The
         Company and the Partnership will furnish you

                                     - 21 -


<PAGE>   22



         with such number of conformed copies of such opinions, certificates,
         letters and documents as you shall reasonably request.

                  (k) Subsequent to the date hereof there shall not have
         occurred any of the following: (i) a suspension or material limitation
         in trading in securities generally or in securities of the Company on
         the New York Stock Exchange, on the American Stock Exchange or in the
         over-the-counter market, (ii) a general moratorium on commercial
         banking activities in North Carolina or New York declared by either
         federal or state authorities, as the case may be, or (iii) the outbreak
         or escalation of hostilities involving the United States or the
         declaration by the United States of a national emergency or war if the
         effect of any such event specified in this clause (iii) in your
         reasonable judgment makes it impracticable or inadvisable to proceed
         with the public offering or the delivery of the Shares on the terms and
         in the manner contemplated in the Prospectus.

                  (l) The Partnership shall have provided to the Underwriters
         copies of owner's title insurance commitments for title insurance
         policies relating to each of the Acquisition Hotels.

         If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company at any time at or
prior to the Closing Time, and such termination shall be without liability of
any party to any other party, except as provided in Section 4. Notwithstanding
any such termination, the provisions of Section 6 shall remain in effect.

         Section 6.   Indemnification and Contribution. (a) The Company and the
Partnership, jointly and severally, will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject under the 1933 Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
breach of any warranty or covenant of the Company or the Partnership herein
contained or any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company or the Partnership shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
expressly for use therein, provided, further, that the indemnity agreement
contained in this Section 6(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased the Shares which are the
subject thereof (or to the benefit of any person controlling such Underwriter),
if such Underwriter failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares to
such person in any case where delivery is required by the 1933 Act of the 1933
Act Regulations and if the Prospectus would have cured any untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability. In addition to their other obligations under
this Section 6(a), the Company and the Partnership agree that, as an interim
measure during the pendency of any such claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 6(a), they will
reimburse the Underwriters on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's and the Partnership's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to an Underwriter within thirty (30)
days of a request for reimbursement shall bear interest at the prime rate (or
reference rate or other commercial

                                     - 22 -


<PAGE>   23



lending rate for borrowers of the highest credit standing) published from time
to time by The Wall Street Journal (the "Prime Rate") from the date of such
request. This indemnity agreement shall be in addition to any liabilities that
the Company and the Partnership may otherwise have. Neither the Company nor the
Partnership will, without the prior written consent of each Underwriter, settle
or compromise or consent to the entry of any judgment in any pending or
threatened action or claim or related cause of action or portion of such cause
of action in respect of which indemnification may be sought hereunder (whether
or not such Underwriter is a party to such action or claim), unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter from all liability arising out of such action or claim (or related
cause of action or portion thereof).

         The indemnity agreement in this Section 6(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter within the meaning of the 1933 Act or the Exchange
Act to the same extent as such agreement applies to the Underwriters.

         (b) Each Underwriter, severally, but not jointly, and in proportion to
their respective underwriting commitments, will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the 1933 Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any breach of any warranty or covenant by such
Underwriters herein contained or any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter expressly for use therein; and will reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action. In addition to its other obligations under this Section
6(b), the Underwriters agree that, as an interim measure during the pendency of
any such claim, action, investigation, inquiry or other proceeding arising out
of or based upon any statement or omission, or any alleged statement or
omission, described in this Section 6(b), they will reimburse the Company on a
monthly basis for all reasonable legal and other expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of their obligation to reimburse the Company
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to the Company within 30 days of a
request for reimbursement shall bear interest at the Prime Rate from the date of
such request. This indemnity agreement shall be in addition to any liabilities
that the Underwriters may otherwise have.

         The indemnity agreement in this Section 6(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer and
director of the Company and each person, if any, who controls the Company within
the meaning of the 1933 Act or the Exchange Act to the same extent as such
agreement applies to the Company.

         (c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; no indemnification provided for in Section 6(a) or 6(b)
shall be available to any party who shall fail to give notice as provided in
this Section 6(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially prejudiced
by the failure to give such notice, but the failure so to notify the
indemnifying party will not relieve the indemnifying party from any liability
that it may have to any indemnified party otherwise than under this Section 6.
In case any such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party

                                     - 23 -


<PAGE>   24



shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party), except that if the indemnified party has been advised by
counsel in writing that there are one or more defenses available to the
indemnified party which are different from or additional to those available to
the indemnifying party, then the indemnified party shall have the right to
employ separate counsel and in that event the reasonable fees and expenses of
such separate counsel for the indemnified party shall be paid by the
indemnifying party; provided, however, that if the indemnifying party is the
Company, the Company shall only be obligated to pay the reasonable fees and
expenses of a single law firm (in addition to those of its own counsel and any
reasonably necessary local counsel) employed by all of the indemnified parties
and the persons referred to in Section 6(a) hereof. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.

         (d) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Section 6(a) and 6(b)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. ("NASD") Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. In the event
the party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Any such arbitration will be limited to the
operation of the interim reimbursement provisions contained in Sections 6(a) and
6(b) hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses that is created by the provisions of
Sections 6(a) and 6(b).

         (e) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 6 is for
any reason judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the right of appeal) to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and the
Partnership, on the one hand, and the Underwriters, on the other hand, shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity incurred by the Company and the
Partnership and one or more of the Underwriters, as incurred, in such
proportions that (a) the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial public offering price (before
deducting expenses) appearing thereon, and (b) the Company and the Partnership
are responsible for the balance, provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation; provided, further, that if the allocation
provided above is not permitted by applicable law, the Company and the
Partnership, on the one hand, and the Underwriters, on the other, shall
contribute to the aggregate losses in such proportion as is appropriate to
reflect not only the relative benefits referred to above but also the relative
fault of the Company and the Partnership, on the one hand, and the Underwriters,
on the other, in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Company or the Partnership, on the one hand, or by the Underwriters, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Partnership and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 6(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 6(e). The amount paid
or payable by a party as a result of the losses, claims, damages or liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by

                                     - 24 -


<PAGE>   25



such party in connection with investigating or defending such action or claim.
Notwithstanding the provisions of this Section 6(e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Underwriters' obligations in this
Section 6(e) to contribute are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 6(e), each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.

         Section 7.  Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Company or the Partnership or officers of the Company set
forth in or made pursuant to this Agreement will remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Company, the Partnership or any Underwriter or controlling person, with respect
to an Underwriter or the Company or the Partnership, and will survive delivery
of and payment for the Shares or termination of this Agreement.

         Section 8.  Effective Date of Agreement and Termination. (a) This
Agreement shall become effective immediately as to Sections 4 and 6 and, as to
all other provisions at 10:00 a.m. E.D.T. on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time as you may determine on and
by notice to the Company or by release of any of the Shares for sale to the
public. For the purposes of this Section 8, the Shares shall be deemed to have
been so released upon the release of publication of any newspaper advertisement
relating to the Shares or upon the release by you of telegrams or facsimile
transmission (i) advising the Underwriters that the Shares are released for
public offering, or (ii) offering the Shares for sale to securities dealers,
whichever may occur first. By giving notice before the time this Agreement
becomes effective, you or the Company, may prevent this Agreement from becoming
effective, without liability of any party to any other party, except that the
Company shall remain obligated to pay costs and expenses to the extent provided
in Section 4 hereof.

         (b) You may terminate this Agreement, by notice to the Company, at any
time at or prior to the Closing Time (i) in accordance with the last paragraph
of Section 5 of this Agreement, or (ii) if there has been since the respective
dates as of which information is given in the Registration Statement, any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the business, prospects, management, properties,
assets, results of operations or condition (financial or otherwise) of the
Company and the Partnership, whether or not arising in the ordinary course of
business, or (iii) if there has occurred or accelerated any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions the effect of which on the financial markets of
the United States is such as to make it, in your judgment, impracticable to
market the Shares or enforce contracts for the sale of the Shares, or (iv) if
trading in any securities of the Company has been suspended by the Commission or
by the NASD, or if trading generally on the New York Stock Exchange, the
American Stock Exchange or in the over-the-counter market has been suspended, or
limitations on prices for trading (other than limitations on hours or numbers of
days of trading) have been fixed, or minimum or maximum ranges for prices for
securities have been required, by the New York Stock Exchange, the American
Stock Exchange or the NASD or by order of the Commission or any other
governmental authority, or (v) if a banking moratorium has been declared by
federal or New York or North Carolina authorities, or (vi) any federal or state
statute, regulation, rule or order of any court or other governmental authority
has been enacted, published, decreed or otherwise promulgated which in your
reasonable opinion materially adversely affects or will materially adversely
affect the business or operations of the Company or the Partnership, or
(vii) any action has been taken by any federal, state or local government or
agency in respect of its monetary or fiscal affairs which in your reasonable
opinion has a material adverse effect on the securities markets in the United
States.

                                     - 25 -


<PAGE>   26



         (c) If this Agreement is terminated pursuant to this Section 8, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4. Notwithstanding any such termination, the
provisions of Section 6 shall remain in effect.

         Section 9.  Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time to purchase the Shares that
it or they are obligated to purchase pursuant to this Agreement (the "Defaulted
Securities"), you shall have the right, within 36 hours thereafter, to make
arrangements for the non-defaulting Underwriters or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms set forth in this Agreement; if,
however, you have not completed such arrangements within such 36-hour period,
then:

                 (a) If the aggregate number of Shares which are Defaulted
         Securities does not exceed 10% of the aggregate number of Shares to be
         purchased pursuant to this Agreement, the non-defaulting Underwriter
         shall be obligated to purchase the full amount thereof in the
         proportions that their respective underwriting obligation proportions
         bear to the aggregate underwriting obligation proportions of all
         non-defaulting Underwriters, and

                 (b) If the aggregate number of Shares which are Defaulted
         Securities exceeds 10% of the aggregate number of Shares to be
         purchased pursuant to this Agreement, this Agreement shall terminate
         without liability on the part of the non-defaulting Underwriter.

                 No action taken pursuant to this Section 9 shall relieve the
         defaulting Underwriter from liability in respect of its default.

                 In the event of any such default that does not result in a
         termination of this Agreement, either you or the Company shall have the
         right to postpone the Closing Time for a period not exceeding seven
         days in order to effect any required changes in the Registration
         Statement or Prospectus or in any other documents or arrangements, and
         the Company agrees promptly to file any amendments to the Registration
         Statement or supplements to the Prospectus that may thereby be made
         necessary. As used in this Agreement, the term "Underwriter" includes
         any person substituted for an Underwriter under this Section 9.

         Section 10. Default by the Company. If the Company shall fail at the
Closing Time to sell and deliver the aggregate number of Shares that it is
obligated to sell, then this Agreement shall terminate without any liability on
the part of any non-defaulting party, except to the extent provided in Section 4
and except that the provisions of Section 6 shall remain in effect.

         No action taken pursuant to this Section 10 shall relieve the Company
from liability, if any, in respect to such default.

         Section 11. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed c/o Morgan Keegan & Company, Inc.,
50 Front Street, Memphis, Tennessee 38103, Attention: Randolph C. Coley,
Managing Director (with a copy sent in the same manner to Hunton & Williams,
Riverfront Plaza, East Tower, 951 East Byrd Street, Richmond, Virginia 23219-
4074, Attention: David C. Wright, Esq.); and notices to the Company and the
Partnership shall be directed to them at Winston Hotels, Inc., 2209 Century
Drive, Suite 300, Raleigh, North Carolina 27612, Attention: Robert W. Winston,
III (with a copy sent in the same manner to King & Spalding, 191 Peachtree
Street, Atlanta, Georgia 30303, Attention: Alan J. Prince, Esq.).

         Section 12. Parties.  This Agreement is made solely for the benefit of 
and is binding upon the Underwriters, the Company and the Partnership and, to
the extent provided in Section 6, any person controlling the

                                     - 26 -


<PAGE>   27



Company, the Partnership, or any of the Underwriters, the officers and directors
of the Company, and their respective executors, administrators, successors and
assigns and, subject to the provisions of Section 10, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Shares.

         All of the obligations of the Underwriters hereunder are several and
not joint.

         Section 13.  Governing Law and Time.  This Agreement shall be governed 
by the laws of the State of Tennessee. Specified time of the day refers to
United States Eastern Time. Time shall be of the essence of this Agreement.

         Section 14.  Counterparts.  This Agreement may be executed in one or 
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.

         Section 15.  Power of Attorney.  Each of J.C. Bradford & Co. and 
Raymond James & Associates, Inc.
hereby confer upon Morgan Keegan & Company, Inc. full power and authority to act
for it in connection with all matters pertaining to this Agreement.

                      [Signatures Appear on Following Page]

                                    - 27 -


<PAGE>   28



         If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company, the Partnership
and the several Underwriters in accordance with its terms.

                        Very truly yours,                                      
                                                                               
                        WINSTON HOTELS, INC.                                   
                                                                               
                        By:/S/ Philip Alfano                                   
                           ------------------------------                   
                        Name: Philip Alfano                                     
                             ----------------------------                  
                        Title: Senior Vice President 
                              ---------------------------
                              and Chief Financial Officer
                              ---------------------------
                                                                               
                        WINN LIMITED PARTNERSHIP                               
                                                                               
                        By:/s/ Philip Alfano                                    
                           -------------------------------                 
                        Name: Philp Alfano                                     
                             -----------------------------                 
                        Title: Senior Vice President 
                              ----------------------------                  
                              and Chief Financial Officer
                              ----------------------------

Confirmed and accepted as of the date first above written:

MORGAN KEEGAN & COMPANY, INC.

By: /s/ Randolph C. Coley
   ----------------------
Name: Randolph C. Coley
     --------------------
Title: Managing Director
      -------------------

J.C. BRADFORD & CO.

By: /s/ Melinda K. Menzal
   ----------------------
Name: Melinda K. Menzal
     --------------------
Title: Vice President
      -------------------

RAYMOND JAMES & ASSOCIATES, INC.

By: /s/ Todd W. Sheets
   ----------------------
Name: Todd W. Sheets
     --------------------
Title: Managing Director
      -------------------
                                     - 28 -


<PAGE>   29
                                                                      SCHEDULE A


<TABLE>
<CAPTION>
 
                                                                       NUMBER OF
                                                                       SHARES
         UNDERWRITERS                                                  TO BE PURCHASED
         ------------                                                  ---------------
<S>                                                                    <C>      
Morgan Keegan & Company, Inc...............................                1,200,000
J.C. Bradford & Co.. . . . . . . . . . . . . . . . . ......                  900,000
Raymond James & Associates, Inc. . . . . . . . . . . ......                  900,000
                                                                           ---------

                           Total...........................                3,000,000
                                                                          ==========
</TABLE>




<PAGE>   1

                                                                     EXHIBIT 4.1

<TABLE>

                  TEMPORARY CERTIFICATE-EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY.

        <S>     <C>                      <C>                                                     <C>
                NUMBER                          INCORPORATED UNDER THE LAWS                            SHARES
                                               OF THE STATE OF NORTH CAROLINA

                                          9.25% SERIES A CUMULATIVE PREFERRED STOCK

                                                       WINSTON HOTELS, INC.

            SEE REVERSE FOR                                                                      CUSIP 97563A 20 1
          CERTAIN DEFINITIONS

                          THIS CERTIFICATE IS TRANSFERABLE IN WINSTON-SALEM, NC, BOSTON, MA OR NEW YORK, NY


        THIS CERTIFIES THAT




        IS THE OWNER OF

          FULLY PAID AND NONASSESSABLE SHARES OF 9.25% SERIES A CUMULATIVE PREFERRED STOCK, $.01 PAR VALUE PER SHARE, OF
                                                       WINSTON HOTELS, INC.

(the "Corporation"), a North Carolina corporation.  The shares represented by this Certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof in person or by duly authorized attorney or legal representative
upon surrender of this Certificate properly endorsed.  This Certificate is not valid until countersigned and registered by the
Corporation's transfer agent and registrar.


                                                       CERTIFICATE OF STOCK

        Dated:


        COUNTERSIGNED AND REGISTERED                                                                /s/
                               WACHOVIA BANK, N.A.     TRANSFER AGENT     [SEAL]                 CHAIRMAN OF THE BOARD
                               (WINSTON-SALEM,NC)      AND REGISTRAR


                                                                                                    /s/
        BY                           AUTHORIZED SIGNATURE                                                PRESIDENT

</TABLE>
<PAGE>   2

                             WINSTON HOTELS, INC.

        TO PRESERVE THE QUALIFICATIONS OF THE COMPANY AS A "REAL ESTATE 
INVESTMENT TRUST" UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, UNDER
THE COMPANY'S ARTICLES OF INCORPORATION. TRANSFER OF THE SHARES REPRESENTED
HEREBY IS RESTRICTED AND MAY BE STOPPED IF A PERSON OR GROUP OF PERSONS
DIRECTLY OR THROUGH THE OPERATION OF CERTAIN ATTRIBUTION RULES WOULD OWN IN
EXCESS OF 9.9% OF ANY CLASS OF THE OUTSTANDING STOCK OF THE COMPANY AFTER THE
TRANSFER.

        THE COMPANY MAY REQUIRE EVIDENCE OF A PROPOSED TRANSFEREE'S STATUS AND
OWNERSHIP INTEREST BEFORE PERMITTING ANY TRANSFER AND MAY REDEEM ANY SHARES
HELD IN VIOLATION OF THE PRECEEDING PARAGRAPH. THE COMPANY WILL FURNISH TO ANY
SHAREHOLDER WITHOUT CHARGE A FULL STATEMENT OF THE TRANSFER RESTRICTIONS UPON
REQUEST TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE.

        THE SHARES REPRESENTED HEREBY ARE SUBJECT TO ALL OF THE PROVISIONS OF
THE ARTICLES OF INCORPORATION AND BYLAWS OF THE COMPANY, EACH AS AMENDED FROM
TIME TO TIME, TO ALL OF WHICH THE HOLDER BY ACCEPTANCE HEREOF ASSENTS. THE
COMPANY WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE, A FULL
STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF
THE SHARES OF EACH CLASS AUTHORIZED TO BE ISSUED, AS WELL AS VARIATIONS IN THE
RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, SO FAR AS THE
SAME HAS BEEN DETERMINED BY THE BOARD OF DIRECTORS UNDER ITS AUTHORITY.

        The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.


<TABLE>
        <S>                                              <C>
        TEN COM -  as tenants in common                  UNIF TRANSFER MIN ACT --              Custodian
        TEN ENT -  as tenants by the entireties                                   -------------          -----------
        JT TEN  -  as joint tenants with right                                        (Cust)                (Minor)
                   of survivorship and not as tenants                             Under Uniform Transfers to Minors
                   in common                                                      Act
                                                                                     ---------------------
                                                                                            (State)
</TABLE>

    Additional abbreviations may also be used though not in the above list.


For value received                                           hereby sell,
                  -------------------------------------------
assign and transfer unto

      PLEASE INSERT SOCIAL SECURITY OR OTHER
         IDENTIFYING NUMBER OF ASSIGNEE

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

- --------------------------------------------------------------------------------
        PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP
                               CODE OF ASSIGNEE

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

                                                                          shares
- ------------------------------------------------------------------------- 
represented by this Certificate, and do hereby irrevocably constitute and 
appoint

                                                                        Attorney
- ------------------------------------------------------------------------
to transfer the said shares on the books of the Corporation with full power of
substitution in the premises.

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

Signature(s) Guaranteed:
                                              ----------------------------------
                                                          Signature(s)



<TABLE>
<S>                                                     <C>                                                            
- -----------------------------------------------         -------------------------------------------                    
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN             NOTICE: THE SIGNATURE(S) ON THIS ASSIGNMENT                    
ELIGIBLE GUARANTOR INSTITUTION AS DEFINED IN            MUST CORRESPOND WITH THE NAME(S) AS WRITTEN                    
RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE              UPON THE FACE OF THE CERTIFICATE, IN EVERY                     
ACT OF 1934, AS AMENDED.                                PARTICULAR, WITHOUT ALTERATION OR                              
                                                        ENLARGEMENT, OR ANY CHANGE WHATEVER.                           
</TABLE>

<PAGE>   1
                                                                   EXHIBIT 4.2

                              ARTICLES OF AMENDMENT

                                       TO

                            ARTICLES OF INCORPORATION

                                       OF

                              WINSTON HOTELS, INC.


         The undersigned corporation hereby submits these Articles of Amendment
for the purpose of amending its Amended and Restated Articles of Incorporation:

         1.    The name of the corporation is Winston Hotels, Inc. (the
"Corporation").

         2.    The Corporation's Amended and Restated Articles of Incorporation 
are hereby amended by adding the following subsection (a) of Article 5:

(a)      Series A Preferred Stock

         (i)   TITLE. The series of Preferred Stock is hereby designated as the
"9.25% Series A Cumulative Preferred Stock" (the "Series A Preferred Stock").

         (ii)  NUMBER. The maximum number of authorized shares of the Series A
Preferred Stock shall be 3,000,000.

         (iii) RELATIVE SENIORITY. In respect of rights to receive dividends and
to participate in distributions of payments in the event of any liquidation,
dissolution or winding up of the Corporation, the Series A Preferred Stock shall
rank (i) senior to all classes or series of Common Stock of the Corporation, and
to all equity securities ranking junior to the Series A Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Corporation; (ii) on a parity with all equity securities issued by the
Corporation, the terms of which specifically provide that such equity securities
rank on a parity with the Series A Preferred Stock with respect to dividend
rights or rights upon liquidation, dissolution or winding up of the Corporation;
and (iii) junior to all existing and future indebtedness of the Corporation. The
term "equity securities" does not include convertible debt securities, which
will rank senior to the Series A Preferred Stock prior to conversion.






<PAGE>   2



         (iv)  DIVIDENDS.

         (A)   The holders of the then outstanding Series A Preferred Stock 
shall be entitled to receive, when and as declared by the Board of Directors out
of any funds legally available therefor, preferential cumulative cash dividends
at the rate of 9.25% per annum of the Liquidation Preference (as defined herein)
per share (equivalent to a fixed annual amount of $2.3125 per share).

         Dividends on the Series A Preferred Stock shall be cumulative from the
date of original issue and shall be payable quarterly in arrears on or before
the sixteenth day of January, April, July and October of each year, or, if not a
Business Day (as defined below), the next succeeding Business Day (each, a
"Dividend Payment Date"). The first dividend will be paid on or before January
16, 1998. Dividends payable on the Series A Preferred Stock for any partial
dividend period will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Dividends will be payable to holders of record as they
appear in the stock records of the Corporation at the close of business on the
applicable record date, which shall be the last Business Day of March, June,
September and December, respectively, or on such other date designated by the
Board of Directors of the Corporation for the payment of dividends that is not
more than 30 nor less than 10 days prior to the applicable Dividend Payment Date
(each, a "Dividend Record Date").

         "Business Day" shall mean any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions in New
York City are authorized or required by law, regulation or executive order to
close.

         (B)   The amount of any dividends accrued on any Series A Preferred 
Stock at any Dividend Payment Date shall be the amount of any unpaid dividends
accumulated thereon, to and including such Dividend Payment Date, whether or not
earned or declared, and the amount of dividends accrued on any shares of Series
A Preferred Stock at any date other than a Dividend Payment Date shall be equal
to the sum of the amount of any unpaid dividends accumulated thereon, to and
including the last preceding Dividend Payment Date, whether or not earned or
declared, plus an amount calculated on the basis of the annual dividend rate of
$2.3125 per share for the period after such last preceding Dividend Payment Date
to and including the date as of which the calculation is made based on a 360-day
year of twelve 30-day months.

         (C)   Except as provided in this subsection (a) of Article 5, the 
Series A Preferred Stock will not be entitled to any dividends in excess of full
cumulative dividends as described above and shall not be entitled to participate
in the earnings or assets of the Corporation, and no interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Stock which may be in arrears.

         (D)   Any dividend payment made on the Series A Preferred Shares shall 
be first credited against the earliest accrued but unpaid dividend due with
respect to such shares which remains payable.


                                       2


<PAGE>   3




         (E)   No dividends on shares of Series A Preferred Stock shall be
declared by the Board of Directors or paid or set apart for payment by the
Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law. Notwithstanding the foregoing, dividends on the
Series A Preferred Stock will accrue whether or not the Corporation has
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are declared. Accrued but
unpaid dividends on the Series A Preferred Stock will not bear interest and
holders of the Series A Preferred Stock will not be entitled to any
distributions in excess of full cumulative distributions described above.

         (F)   Except as set forth in the next sentence, no dividends will be
declared or paid or set apart for payment on any capital stock of the
Corporation or any other series of Preferred Stock ranking, as to dividends, on
a parity with or junior to the Series A Preferred Stock (other than a dividend
in shares of the Corporation's Common Stock or in shares of any other class of
stock ranking junior to the Series A Preferred Stock as to dividends and upon
liquidation) for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for such payment on the Series A Preferred Stock
for all past dividend periods and the then current dividend period. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon the Series A Preferred Stock and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Series A
Preferred Stock, all dividends declared upon the Series A Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends with the
Series A Preferred Stock shall be declared pro rata so that the amount of
dividends declared per share of Series A Preferred Stock and such other series
of Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Series A Preferred Stock and such other
series of Preferred Stock (which shall not include any accrual in respect of
unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) bear to each other.

         (G)   Except as provided in the immediately preceding paragraph, 
unless full cumulative dividends on the Series A Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past dividend periods and the
then current dividend period, no dividends (other than in shares of Common Stock
or other shares of capital stock ranking junior to the Series A Preferred Stock
as to dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock or any other capital stock of the Corporation ranking junior to or on a
parity with the Series A Preferred Stock as to dividends or upon liquidation,
nor shall any shares of Common Stock, or any other shares of capital stock of
the Corporation ranking junior to or on a parity with the Series A Preferred
Stock as to dividends or upon liquidation, be redeemed, purchased or otherwise
acquired for any consideration (or any monies be paid to or made


                                       3


<PAGE>   4



available for a sinking fund for the redemption of any such shares) by the
Corporation (except by conversion into or exchange for other capital stock of
the Corporation ranking junior to the Series A Preferred Stock as to dividends
and upon liquidation or redemptions for the purpose of preserving the
Corporation's qualification as a real estate investment trust ("REIT")). Holders
of shares of the Series A Preferred Stock shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends on the Series A Preferred Stock as provided above. Any dividend
payment made on shares of the Series A Preferred Stock shall first be credited
against the earliest accrued but unpaid dividend due with respect to such shares
which remains payable.

         (v)   LIQUIDATION RIGHTS.

         (A)   Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of shares of Series A
Preferred Stock are entitled to be paid out of the assets of the Corporation
legally available for distribution to its shareholders a liquidation preference
of $25.00 per share (the "Liquidation Preference"), plus an amount equal to any
accrued and unpaid dividends to the date of payment, but without interest,
before any distribution of assets is made to holders of Common Stock or any
other class or series of capital stock of the Corporation that ranks junior to
the Series A Preferred Stock as to liquidation rights. Holders of Series A
Preferred Stock will be entitled to written notice of any event triggering the
right to receive such Liquidation Preference.

         (B)   After the payment to the holders of the Series A Preferred Stock
of the full preferential amounts provided for in this subsection (a) of Article
5, the holders of the Series A Preferred Stock, as such, shall have no right or
claim to any of the remaining assets of the Corporation.

         (C)   If, upon any voluntary or involuntary dissolution, liquidation, 
or winding up of the Corporation, the amounts payable with respect to the
Liquidation Preference, plus an amount equal to any accrued and unpaid dividends
to the date of payment, of the Series A Preferred Stock and any other shares of
the Corporation ranking as to any such distribution on a parity with the Series
A Preferred Stock are not paid in full, the holders of the Series A Preferred
Stock and of such other shares will share ratably in any such distribution of
assets of the Corporation in proportion to the full respective preference
amounts to which they are entitled.

         (D)   The consolidation, share exchange or merger of the Corporation 
with or into any other corporation, trust or entity or of any other corporation
with or into the Corporation, or the sale, lease or conveyance of all or
substantially all of the property or business of the Corporation, shall not be
deemed to constitute a liquidation, dissolution or winding up of the Corporation
for the purposes of this subsection (a) of Article 5.

         (vi)  REDEMPTION.



                                       4


<PAGE>   5



         (A)   OPTIONAL REDEMPTION. On and after September 28, 2001, the
Corporation may, at its option, redeem at any time from time to time, in whole
or in part, the Series A Preferred Stock at a price per share (the " Redemption
Price"), payable in cash, of $25.00, together with all accrued and unpaid
dividends to and including the date fixed for redemption (the "Redemption
Date"), without interest, to the full extent the Corporation has funds legally
available therefor. The shares of Series A Preferred Stock have no stated
maturity, except as provided for in subparagraph (ix) below, and will not be
subject to any sinking fund or mandatory redemption provisions.

         (B)   REDEMPTION UPON A CHANGE OF CONTROL.

               (1)   At any time prior to September 28, 2001, the Corporation
         may, at its option, upon the occurrence of a Change of Control Event
         (as defined below) redeem all of the outstanding Series A Preferred
         Stock at the applicable redemption price reflected below, plus accrued
         and unpaid dividends (if any) to the date of redemption. The redemption
         price shall be as follows:

<TABLE>
<CAPTION>

                DATE OF REDEMPTION                                                                       PURCHASE
                                                                                                       -------------
<S>                     <C>                           <C>                                              <C>  
September 11, 1997      December 31, 1997             ...........................................         $25.80
January 1, 1998         March 31, 1998                ...........................................          25.75
April 1, 1998           June 30, 1998                 ...........................................          25.70
July 1, 1998            September 30, 1998            ...........................................          25.65
October 1, 1998         December 31, 1998             ...........................................          25.60
January 1, 1999         March 31, 1999                ...........................................          25.55
April 1, 1999           June 30, 1999                 ...........................................          25.50
July 1, 1999            September 30, 1999            ...........................................          25.45
October 1, 1999         December 31, 1999             ...........................................          25.40
January 1, 2000         March 31, 2000                ...........................................          25.35
April 1, 2000           June 30, 2000                 ...........................................          25.30
July 1, 2000            September 30, 2000            ...........................................          25.25
October 1, 2000         December 31, 2000             ...........................................          25.20
January 1, 2001         March 31, 2001                ...........................................          25.15
April 1, 2001           June 30, 2001                 ...........................................          25.10
July 1, 2001            September 27, 2001            ...........................................          25.05
</TABLE>

               Such redemption may be consummated at any time prior to,
         contemporaneously with or after the Change of Control (as defined
         below), provided that notice of any such redemption pursuant to this
         paragraph is given no later than 90 days following the date upon which
         the Change of Control Event occurred, the redemption date must be
         within 60 days of the date of notice and a sum sufficient to redeem the
         shares must be deposited in trust to effect the redemption.

               (2)   Definitions.

                     (a) A "Change of Control Event" shall mean the
                  execution by the Corporation or any of its subsidiaries or
                  affiliates of any agreement with respect to


                                       5


<PAGE>   6



                  any proposed transaction or event or series of transactions or
                  events which, individually or in the aggregate, may reasonably
                  be expected to result in a Change of Control.

                           (b) A "Change of Control" shall be deemed to have
                  occurred at such time as (i) a "person" or "group" (within the
                  meaning of Sections 13(d) and 14(d) of the Securities Exchange
                  Act of 1934, as amended (the "Exchange Act")) becomes the
                  ultimate "beneficial owner" (as defined in Rules 13d-3 and
                  13d-5 under the Exchange Act, except that a person or group
                  shall be deemed to have beneficial ownership of all shares of
                  Voting Stock that such person or group has the right to
                  acquire regardless of when such right is first exercisable),
                  directly or indirectly, of Voting Stock representing more than
                  35% of the total voting power of the total Voting Stock of the
                  Corporation on a fully diluted basis; (ii) the date the
                  Corporation sells, transfers or otherwise disposes of all or
                  substantially all of the assets of the Corporation; and (iii)
                  the date of the consummation of a merger or share exchange of
                  the Corporation with another corporation where the
                  shareholders of the Corporation immediately prior to the
                  merger or share exchange would not beneficially own
                  immediately after the merger or share exchange, shares
                  entitling such shareholders to 50% or more of all votes
                  (without consideration of the rights of any class of stock to
                  elect directors by a separate group vote) to which all
                  shareholders of the corporation issuing cash or securities in
                  the merger or share exchange would be entitled in the election
                  of directors, or where members of the Board of Directors of
                  the Corporation immediately prior to the merger or share
                  exchange would not immediately after the merger or share
                  exchange constitute a majority of the board of directors of
                  the corporation issuing cash or securities in the merger or
                  share exchange.

                           (c) "Voting Stock" shall mean capital stock of any
                  class or kind having the power to vote generally for the
                  election of directors of the Corporation.

         (C)      PROCEDURES OF REDEMPTION.

                  (1) Notice of redemption will be given by publication in a
         newspaper of general circulation in the City of New York, such
         publication to be made once a week for two successive weeks commencing
         not less than 30 nor more than 60 days prior to the Redemption Date. A
         similar notice will be mailed by the Corporation, postage prepaid, not
         less than 30 nor more than 60 days prior to the Redemption Date,
         addressed to the respective holders of record of the Series A Preferred
         Stock to be redeemed at their respective addresses as they appear on
         the stock transfer records of the Corporation. No failure to give such
         notice or any defect therein or in the mailing thereof shall affect the
         validity of the proceedings for the redemption of any shares of Series
         A Preferred Stock except as to the holder to whom the Corporation has
         failed to give notice or except as to the holder to whom


                                       6


<PAGE>   7



         notice was defective. In addition to any information required by law or
         by the applicable rules of any exchange upon which the Series A
         Preferred Stock may be listed or admitted to trading, each such notice
         shall state: (a) the Redemption Date; (b) the Redemption Price; (c) the
         number of shares of Series A Preferred Stock to be redeemed; (d) the
         place or places where certificates for such shares are to be
         surrendered for payment of the Redemption Price; and (e) that dividends
         on the shares to be redeemed will cease to accumulate on the Redemption
         Date. If less than all of the shares of Series A Preferred Stock held
         by any holder are to be redeemed, the notice mailed to such holder
         shall also specify the number of shares of Series A Preferred Stock to
         be redeemed from such holder.

                  (2) If notice has been mailed in accordance with subparagraph
         (vi)(C)(1) above and provided that on or before the Redemption Date
         specified in such notice all funds necessary for such redemption shall
         have been irrevocably set aside by the Corporation, separate and apart
         from its other funds in trust for the pro rata benefit of the holders
         of the Series A Preferred Stock so called for redemption, so as to be,
         and to continue to be available therefor, then, from and after the
         Redemption Date, dividends on the Series A Preferred Stock so called
         for redemption shall cease to accumulate, and said shares shall no
         longer be deemed to be outstanding and shall not have the status of
         Series A Preferred Stock and all rights of the holders thereof as
         shareholders of the Corporation shall cease, except the right to
         receive the Redemption Price. Upon surrender, in accordance with such
         notice, of the certificates for any Series A Preferred Stock so
         redeemed (properly endorsed or assigned for transfer, if the
         Corporation shall so require and the notice shall so state), such
         Series A Preferred Stock shall be redeemed by the Corporation at the
         Redemption Price. In case fewer than all the shares of Series A
         Preferred Stock represented by any such certificate are redeemed, a new
         certificate or certificates shall be issued representing the unredeemed
         shares of Series A Preferred Stock without cost to the holder thereof.

                  (3) Any funds deposited with a bank or trust corporation for
         the purpose of redeeming Series A Preferred Stock shall be irrevocable
         except that:

                      (a) the Corporation shall be entitled to receive from
                  such bank or trust corporation the interest or other earnings,
                  if any, earned on any money so deposited in trust, and the
                  holders of any shares redeemed shall have no claim to such
                  interest or other earnings; and

                      (b) any balance of monies so deposited by the
                  Corporation and unclaimed by the holders of the Series A
                  Preferred Stock entitled thereto at the expiration of two
                  years from the applicable Redemption Date shall be repaid,
                  together with any interest or other earnings earned thereon,
                  to the Corporation, and after any such repayment, the holders
                  of the shares entitled to the funds so repaid to the
                  Corporation shall look only to the Corporation for payment
                  without interest or other earnings.


                                       7



<PAGE>   8



                  (4) Unless full cumulative dividends on all shares of Series A
         Preferred Stock shall have been or contemporaneously are declared and
         paid or declared and a sum sufficient for the payment thereof set apart
         for payment for all past dividend periods and the then current dividend
         period, no shares of Series A Preferred Stock shall be redeemed unless
         all outstanding shares of Series A Preferred Stock are simultaneously
         redeemed and the Corporation shall not purchase or otherwise acquire
         directly or indirectly any shares of Series A Preferred Stock (except
         by exchange for capital stock of the Corporation ranking junior to the
         Series A Preferred Stock as to dividends and upon liquidation);
         provided, however, that the foregoing shall not prevent the redemption
         by the Corporation of shares of Series A Preferred Stock in order to
         ensure that the Corporation continues to meet the requirements for
         qualification as a REIT, or the purchase or acquisition of shares of
         Series A Preferred Stock pursuant to a purchase or exchange offer made
         on the same terms to holders of all outstanding shares of Series A
         Preferred Stock. So long as no dividends are in arrears, the
         Corporation shall be entitled at any time and from time to time to
         repurchase shares of Series A Preferred Stock in open-market
         transactions duly authorized by the Board of Directors and effected in
         compliance with applicable laws.

                  (5) Immediately prior to any redemption of Series A Preferred
         Stock, the Corporation shall pay, in cash, any accumulated and unpaid
         dividends through the Redemption Date, unless a Redemption Date falls
         after a Dividend Record Date and prior to the corresponding Dividend
         Payment Date, in which case each holder of Series A Preferred Stock at
         the close of business on such Dividend Record Date shall be entitled to
         the dividend payable on such shares on the corresponding Dividend
         Payment Date notwithstanding the redemption of such shares before such
         Dividend Payment Date.

                  (6) If less than all of the outstanding Series A Preferred
         Stock is to be redeemed, the Series A Preferred Stock to be redeemed
         shall be selected pro rata (as nearly as may be practicable without
         creating fractional shares) or by any other equitable method determined
         by the Corporation.

         (vii)    VOTING RIGHTS. Except as required by law, and as set forth 
below, the holders of the Series A Preferred Stock shall not be entitled to
vote at any meeting of the shareholders for election of directors or for any
other purpose or otherwise to participate in any action taken by the 
Corporation or the shareholders thereof, or to receive notice of any meeting of
shareholders.

         (A)      Whenever dividends on any shares of Series A Preferred Stock
shall be in arrears for six or more quarters, whether consecutive or not (a
"Preferred Dividend Default"), the holders of such shares of Series A Preferred
Stock (voting separately as a voting group with all other series of Preferred
Stock ranking on a parity with the Series A Preferred Stock as to dividends or
upon liquidation ("Parity Preferred") upon which like voting rights have been
conferred and are exercisable) will be entitled to vote separately as a voting
group for the election of a total of two additional directors to serve on the
Board of Directors of the Corporation (the "Preferred Stock


                                       8


<PAGE>   9



Directors") at a special meeting called by the holders of record of at least 20%
of the Series A Preferred Stock and the holders of record of at least 20% of any
series of Parity Preferred so in arrears (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting until all dividends accumulated on such shares of
Series A Preferred Stock for the past dividend periods and the dividend for the
then current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. A quorum for any such
meeting shall exist if at least a majority of the outstanding shares of Series A
Preferred Stock and shares of Parity Preferred upon which like voting rights
have been conferred and are exercisable are represented in person or by proxy at
such meeting. Such Preferred Stock Directors shall be elected upon the
affirmative vote of a plurality of the shares of Series A Preferred Stock and
such Parity Preferred present and voting in person or by proxy at a duly called
and held meeting at which a quorum is present. If and when all accumulated
dividends and the dividend for the then current dividend period on the Series A
Preferred Stock shall have been paid in full or set aside for payment in full,
the holders thereof shall be divested of the foregoing voting rights (subject to
revesting in the event of each and every Preferred Dividend Default) and, if all
accumulated dividends and the dividend for the then current dividend period have
been paid in full or declared and set aside for payment in full on all series of
Parity Preferred upon which like voting rights have been conferred and are
exercisable, the term of office of each Preferred Stock Director so elected
shall terminate. Any Preferred Stock Director may be removed at any time with or
without cause by, and shall not be removed otherwise than by the vote of, the
holders of record of a majority of the outstanding shares of the Series A
Preferred Stock and such Parity Preferred when they have the voting rights
described above (voting separately as a voting group with all series of Parity
Preferred upon which like voting rights have been conferred and are
exercisable). So long as a Preferred Dividend Default shall continue, any
vacancy in the office of a Preferred Stock Director may be filled by written
consent of the Preferred Stock Director remaining in office, or if none remains
in office, by a vote of the holders of record of a majority of the outstanding
shares of Series A Preferred Stock and such Parity Preferred when they have the
voting rights described above (voting separately as a voting group with all
series of Parity Preferred upon which like voting rights have been conferred and
are exercisable). The Preferred Stock Directors shall each be entitled to one
vote per director on any matter.

         (B) So long as any shares of Series A Preferred Stock remain
outstanding, the Corporation will not, without the affirmative vote or consent
of the holders of at least two-thirds of the shares of Series A Preferred Stock
outstanding at the time, given in person or by proxy, either in writing or at a
meeting (such series voting separately as a voting group), amend, alter or
repeal the provisions of the Amended and Restated Articles of Incorporation or
this subsection (a) of Article 5 thereof, whether by merger, share exchange or
otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series A Preferred Stock or the
holders thereof; provided, however, that with respect to the occurrence of any
Event set forth above, so long as the Series A Preferred Stock remains
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event, the Corporation might not be


                                       9


<PAGE>   10



the surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
power of holders of the Series A Preferred Stock, and provided further that (i)
any increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (ii) any increase in the
amount of authorized shares of such series, in each case ranking on a parity
with or junior to the Series A Preferred Stock with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up, shall not be deemed to affect materially and adversely such rights,
preferences, privileges or voting powers.

         The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Series A Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.

         (C)    On each matter submitted to a vote of the holders of Series A
Preferred Stock in accordance with this paragraph (vii), or as otherwise
required by law, each share of Series A Preferred Stock shall be entitled to one
vote. With respect to each share of Series A Preferred Stock, the holder thereof
may designate a proxy, with each such proxy having the right to vote on behalf
of the holder.

         (viii) CONVERSION. The shares of Series A Preferred Stock are not
convertible into or exchangeable for any other property or securities of the
Corporation.

         (ix)   RESTRICTIONS ON OWNERSHIP AND TRANSFER.

         (A)    Definitions.  The following terms shall have the following
 meanings:

                "Affiliate" shall mean, with respect to any person, (i)any
person directly or indirectly owning, controlling, or holding, with power to
vote ten percent or more of the outstanding voting securities of such other
person, (ii) any person ten percent or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held, with power to
vote, by such other person, (iii) any person directly or indirectly controlling,
controlled by, or under common control with such other person, (iv) any
executive officer, director, trustee or general partner of such other person,
and (v) any legal entity for which such person acts as an executive officer,
director, trustee or general partner. The term "person" means and includes any
natural person, corporation, partnership, association, limited liability company
or any other legal entity. An indirect relationship shall include circumstances
in which a person's spouse, children, parents, siblings or mothers-, fathers-,
sisters- or brothers-in-law is or has been associated with a person.

                "Beneficial Ownership" shall mean ownership of shares of
Equity Stock by a Person who would be treated as an owner of such shares of
Equity Stock either directly or indirectly through the application of Section
544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The


                                       10


<PAGE>   11



terms "Beneficial Owner," "Beneficially Owns," and "Beneficially Owned" shall
have correlative meanings.

                  "Beneficiary" shall mean, with respect to any Trust, one or
more organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) or (viii) thereof) and Section 170(c)(2) of the Code that are named by the
Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 2(a)(ix)(I)(1) hereof.

                  "Board of Directors" shall mean the Board of Directors of the
Corporation.

                  "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

                  "Common Stock" shall mean the shares of common stock, par
value $0.01 per share, of the Corporation.

                  "Constructive Ownership" shall mean ownership of shares of
Equity Stock by a Person who would be treated as an owner of such shares of
Equity Stock either directly or indirectly through the application of Section
318 of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns," and "Constructively Owned" shall
have correlative meanings.

                  "Equity Stock" shall mean the Common Stock and the Series A
Preferred Stock of the Corporation. The term "Equity Stock" shall include all
shares of Common Stock and Series A Preferred Stock of the Corporation that are
held as Shares-in-Trust in accordance with the provisions of Section 2(a)(ix)(I)
hereof.

                  "Offering" means the offering and sale of shares of Series A
Preferred Stock pursuant to the Corporation's first effective registration
statement for such shares of Series A Preferred Stock filed under the Securities
Act of 1933, as amended.

                  "Market Price" on any date shall mean the average of the
Closing Price for the five consecutive Trading Days ending on such date. The
"Closing Price" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange ("NYSE"), or, if the Equity
Stock is not listed or admitted to trading on the NYSE, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Equity Stock
is listed or admitted to trading, or, if the Equity Stock is not listed or
admitted to trading on any national securities exchange, the last quoted price,
or if not so quoted, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System, or, if such system is no longer in
use, the principal other automated quotations system that may then be in use or,
if the shares of Equity Stock


                                       11


<PAGE>   12



are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
shares of Equity Stock selected by the Board of Directors.

                  "Non-Transfer Event" shall mean an event other than a
purported Transfer that would cause any Person to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limitation,
including, but not limited to, the granting of any option or entering into any
agreement for the sale, transfer or other disposition of shares of Equity Stock
or the sale, transfer, assignment or other disposition of any securities or
rights convertible into or exchangeable for shares of Equity Stock.

                  "Ownership Limitation" shall mean the restriction on ownership
by any stockholder of (a) more than 9.9% of the number of outstanding shares of
Series A Preferred Stock and (b) if the stockholder owns both Series A Preferred
Stock and Common Stock, more than 9.9% of the number of outstanding shares of
Common Stock.

                  "Permitted Transferee" shall mean any Person designated as a
Permitted Transferee in accordance with the provisions of Section 2(a)(ix)(I)(5)
hereof.

                  "Person" shall mean an individual, corporation, partnership,
estate, trust, a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a "group" as that
term is used for purposes of Section 12(d)(3) of the Securities Exchange Act of
1934, as amended.

                  "Prohibited Owner" shall mean, with respect to any purported
Transfer or Non- Transfer Event, any Person who, but for the provisions of
Section 2(a)(ix)(C) hereof, would own record title to shares of Equity Stock.

                  "Restriction Termination Date" shall mean the first day after
the date of the Offering on which (i) the Board of Directors determines that it
is no longer in the best interests of the Corporation to attempt to, or continue
to, qualify as a REIT and (ii) there is an affirmative vote of two-thirds of the
number of shares of Common Stock entitled to vote on such matter at a regular or
special meeting of the shareholders of the Corporation.

                  "Shares-in-Trust" shall mean any shares of Equity Stock
designated Shares-in-Trust pursuant to Section 2(a)(ix)(C) hereof.

                  "Trading Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.


                                       12



<PAGE>   13



                  "Transfer" (as a noun) shall mean any sale, transfer, gift,
assignment, devise or other disposition of shares of Equity Stock, whether
voluntary or involuntary, whether of record, constructively or beneficially and
whether by operation of law or otherwise. "Transfer" (as a verb) shall have the
correlative meaning.

                  "Trust" shall mean any separate trust created pursuant to
Section 2(a)(ix)(C) hereof and administered in accordance with the terms of
Section 2(a)(ix)(I) hereof, for the exclusive benefit of any Beneficiary.

                  "Trustee" shall mean any Person or entity that is not an
Affiliate of either the Corporation or any Prohibited Owner, such Trustee to be
designated by the Corporation to act as trustee of any Trust, or any successor
trustee thereof.

         (B)      Restriction on Transfers.

                  (1) Except as provided in Section 2(a)(ix)(G) hereof, from the
date of the Offering and prior to the Restriction Termination Date, (i) no
Person shall Beneficially Own or Constructively Own outstanding shares of Equity
Stock in excess of the Ownership Limitation and (ii) any Transfer that, if
effective, would result in any Person Beneficially Owning or Constructively
Owning shares of Equity Stock in excess of the Ownership Limitation shall be
void ab initio as to the Transfer of that number of shares of Equity Stock which
would be otherwise Beneficially Owned or Constructively Owned by such Person in
excess of the Ownership Limitation, and the intended transferee shall acquire no
rights in such shares of Equity Stock.


                                       13



<PAGE>   14



                  (2) Except as provided in Section 2(a)(ix)(G) hereof, from the
date of the Offering and prior to the Restriction Termination Date, any Transfer
of shares of Series A Preferred Stock that, if effective, would result in shares
of Equity Stock being Beneficially Owned by fewer than 100 Persons (determined
without reference to any rules of attribution) shall be void ab initio as to the
Transfer of that number of shares which otherwise would be Beneficially Owned
(determined without reference to any rules of attribution) by the transferee,
and the intended transferee shall acquire no rights in such shares of Series A
Preferred Stock.

                  (3) From the date of the Offering and prior to the Restriction
Termination Date, any Transfer of shares of Series A Preferred Stock that, if
effective, would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer
of that number of shares of Equity Stock which would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the Code, and the
intended transferee shall acquire no rights in such shares of Series A Preferred
Stock.

                  (4) From the date of the Offering and prior to the Restriction
Termination Date, any Transfer of shares of Series A Preferred Stock that, if
effective, would cause the Corporation to Constructively Own 10% or more of the
ownership interests in a tenant of the Corporation's or a subsidiary's real
property, within the meaning of Section 856(d)(2)(B) of the Code, shall be void
ab initio as to the Transfer of that number of shares of Equity Stock which
would cause the Corporation to Constructively Own 10% or more of the ownership
interests in a tenant of the Corporation's or a subsidiary's real property,
within the meaning of Section 856(d)(2)(B) of the Code, and the intended
transferee shall acquire no rights in such shares of Series A Preferred Stock.

         (C)      Transfer to Trust.

                  (1) If, notwithstanding the other provisions contained in this
Section 2(a)(ix), at any time after the Offering and prior to the Restriction
Termination Date, there is a purported Transfer or Non-Transfer Event such that
any Person would either Beneficially Own or Constructively Own shares of Equity
Stock in excess of the Ownership Limitation, then, (i) except as otherwise
provided in Section 2(a)(ix)(G) hereof, the purported transferee shall acquire
no right or interest (or, in the case of a Non-Transfer Event, the Person
holding record title to the shares of Equity Stock Beneficially Owned or
Constructively Owned by such Beneficial Owner or Constructive Owner, shall cease
to own any right or interest) in such number of shares of Equity Stock which
would cause such Beneficial Owner or Constructive Owner to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limitation,
(ii) such number of shares of Equity Stock in excess of the Ownership Limitation
(rounded up to the nearest whole share) shall be designated Shares-in-Trust and
transferred automatically and by operation of law to a Trust to be held in
accordance with that Section 2(a)(ix)(I), and (iii) the Prohibited Owner shall
submit such number of shares of Equity Stock to the Corporation for registration
in the name of the Trustee. Such transfer to a Trust and the designation of
shares as Shares-in-Trust shall be effective as of the close of business on the
business day prior to the date of the Transfer or Non-Transfer


                                       14


<PAGE>   15



Event, as the case may be. There shall be a separate Trust with respect to each
designation and transfer of Shares-in-Trust.

                  (2) If, notwithstanding the other provisions contained in this
Section 2(a)(ix), at any time after the Offering and prior to the Restriction
Termination Date, there is a purported Transfer or Non-Transfer Event that, if
effective, would (i) result in shares of Equity Stock being Beneficially Owned
by fewer than 100 Persons (determined without reference to any rules of
attribution), (ii) result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code, or (iii) cause the Corporation to
Constructively Own 10% or more of the ownership interests in a tenant of the
Corporation's or a subsidiary's real property, within the meaning of Section
856(d)(2)(B) of the Code, then (x) the purported transferee shall not acquire
any right or interest (or, in the case of a Non-Transfer Event, the Person
holding record title of the shares of Series A Preferred Stock with respect to
which such Non-Transfer Event occurred, shall cease to own any right or
interest) in such number of shares of Series A Preferred Stock, the ownership of
which by such purported transferee or record holder would (A) result in shares
of Equity Stock being Beneficially Owned by fewer than 100 Persons, (B) result
in the Corporation being "closely held" within the meaning of Section 856(h) of
the Code, or (C) cause the Corporation to Constructively Own 10% or more of the
ownership interests in a tenant of the Corporation's or a subsidiary's real
property, within the meaning of Section 856(d)(2)(B) of the Code, (y) such
number of shares of Series A Preferred Stock (rounded up to the nearest whole
share) shall be designated Shares-in-Trust and transferred automatically and by
operation of law to a Trust to be held in accordance with that Section
2(a)(ix)(I), and (z) the Prohibited Owner shall submit such number of shares of
Series A Preferred Stock to the Corporation for registration in the name of the
Trustee. Such transfer to a Trust and the designation of shares as
Shares-in-Trust shall be effective as of the close of business on the business
day prior to the date of the Transfer or Non-Transfer Event, as the case may be.
There shall be a separate Trust with respect to each designation and transfer of
Shares-in-Trust.

         (D)      Remedies For Breach. If the Corporation, or its designees, 
shall at any time determine in good faith that a Transfer has taken place in
violation of Section 2(a)(ix)(B) hereof or that a Person intends to acquire
or has attempted to acquire Beneficial Ownership or Constructive Ownership of
any shares of Equity Stock in violation of Section 2(a)(ix)(B) hereof, the
Corporation shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer or acquisition, including, but not
limited to, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin such Transfer or acquisition.

         (E)      Notice of Restricted Transfer. Any Person who acquires or 
attempts to acquire shares of Equity Stock in violation of Section 2(a)(ix)(B)
hereof, or Any Person who owned shares of Equity Stock that were transferred 
to a Trust pursuant to the provisions of Section 2(a)(ix)(C) hereof, shall
immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such Transfer or
Non-Transfer Event, as the case may be, on the Corporation's status as a REIT.


                                       15


<PAGE>   16



         (F)      Owners Required To Provide Information.  From the date of the 
Offering and prior to the Restriction Termination Date:

                  (1) Every Beneficial Owner or Constructive Owner of more than
         5%, or such lower percentages as required pursuant to regulations under
         the Code, of the outstanding shares of all classes of capital stock of
         the Corporation shall, within 30 days after January 1 of each year,
         provide to the Corporation a written statement or affidavit stating the
         name and address of such Beneficial Owner or Constructive Owner, the
         number of shares of Equity Stock Beneficially Owned or Constructively
         Owned, and a description of how such shares are held. Each such
         Beneficial Owner or Constructive Owner shall provide to the Corporation
         such additional information as the Corporation may request in order to
         determine the effect, if any, of such Beneficial Ownership or
         Constructive Ownership on the Corporation's status as a REIT and to
         ensure compliance with the Ownership Limitation.

                  (2) Each Person who is a Beneficial Owner or Constructive
         Owner of shares of Equity Stock and each Person (including the
         stockholder of record) who is holding shares of Equity Stock for a
         Beneficial Owner or Constructive Owner shall provide to the Corporation
         a written statement or affidavit stating such information as the
         Corporation may request in order to determine the Corporation's status
         as a REIT and to ensure compliance with the Ownership Limitation.

         (G)      Exception. The Ownership Limitation shall not apply to the
acquisition of shares of Equity Stock by an underwriter that participates in a
public offering of such shares for a period of 90 days following the purchase by
such underwriter of such shares provided that the restrictions contained in
Section 2(a)(ix)(B) hereof will not be violated following the distribution by
such underwriter of such shares. In addition, the Board of Directors, upon
receipt of a ruling from the Internal Revenue Service or an opinion of counsel
in each case to the effect that the restrictions contained in Section
2(a)(ix)(B) hereof will not be violated, may exempt a Person from the Ownership
Limitation provided that (i) the Board of Directors obtains such representations
and undertakings from such Person as are reasonably necessary to ascertain that
no individual's Beneficial Ownership or Constructive Ownership of shares of
Equity Stock will violate the Ownership Limitation and (ii) such Person agrees
in writing that any violation or attempted violation of such representations or
undertakings will result in such transfer to a Trust of shares of Equity Stock
pursuant to Section 2(a)(ix)(C) hereof.

         (H)      Removal of Ownership Limitation. The Ownership Limitation 
will not be removed until (i) the Board of Directors determines that it is no
longer in the best interest of the Corporation to attempt to qualify, or
to continue to qualify, as a REIT and (ii) there is an affirmative vote of
two-thirds of the number of shares of Common Stock entitled to vote on such
matter at a regular or special meeting of the stockholders of the Corporation.

         (I)      Shares-in-Trust.


                                       16


<PAGE>   17



                  (1) Trust. Any shares of Equity Stock transferred to a Trust
and designated Shares-in-Trust pursuant to Section 2(a)(ix)(C) hereof shall be
held for the exclusive benefit of the Beneficiary. The Corporation shall name a
Beneficiary for each Trust within five days after discovery of the existence
thereof. No Beneficiary shall be a Beneficiary of more than one Trust at any
time. Any transfer to a Trust, and subsequent designation of shares of Equity
Stock as Shares- in-Trust, pursuant to Section 2(a)(ix)(C) hereof shall be
effective as of the close of business on the business day prior to the date of
the Transfer or Non-Transfer Event that results in the transfer to the Trust.
Shares-in-Trust shall remain issued and outstanding shares of Equity Stock of
the Corporation and shall be entitled to the same rights and privileges on
identical terms and conditions as are all other issued and outstanding shares of
Equity Stock of the same class and series. When transferred to a Permitted
Transferee in accordance with the provisions of Section 2(a)(ix)(I)(5) hereof,
such Shares-in-Trust shall cease to be designated as Shares-in-Trust.

                  (2) Dividend Rights. The Trust, as record holder of
Shares-in-Trust, shall be entitled to receive all dividends and distributions as
may be declared by the Board of Directors on such shares of Equity Stock and
shall hold such dividends or distributions in trust for the benefit of the
Beneficiary. The Prohibited Owner with respect to Shares-in-Trust shall repay to
the Trust the amount of any dividends or distributions received by it that (i)
are attributable to any shares of Equity Stock designated Shares-in-Trust and
(ii) the record date of which was on or after the date that such shares became
Shares-in-Trust. The Corporation shall take all measures that it determines
reasonably necessary to recover the amount of any such dividend or distribution
paid to a Prohibited Owner, including, if necessary, withholding any portion of
future dividends or distributions payable on shares of Equity Stock Beneficially
Owned or Constructively Owned by the Person who, but for the provisions of
Section 2(a)(ix)(C) hereof, would Constructively Own or Beneficially Own the
Shares-in-Trust; and, as soon as reasonably practicable following the
Corporation's receipt or withholding thereof, shall pay over to the Trust for
the benefit of the Beneficiary the dividends so received or withheld, as the
case may be.

                  (3) Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution of
the assets of, the Corporation, each holder of Shares-in-Trust shall be entitled
to receive, ratably with each other holder of shares of Equity Stock of the same
class or series, that portion of the assets of the Corporation which is
available for distribution to the holders of such class and series of shares of
Equity Stock. The Trust shall distribute to the Prohibited Owner the amounts
received upon such liquidation, dissolution, or winding up, or distribution;
provided, however, that the Prohibited Owner shall not be entitled to receive
amounts pursuant to this Section 2(a)(ix)(I)(3) in excess of, in the case of a
purported Transfer in which the Prohibited Owner gave value for shares of Equity
Stock and which Transfer resulted in the transfer of the shares to the Trust,
the price per share, if any, such Prohibited Owner paid for the shares of Equity
Stock and, in the case of a Non-Transfer Event or Transfer in which the
Prohibited Owner did not give value for such shares (e.g., if the shares were
received through a gift or devise) and which Non-Transfer Event or Transfer, as
the case may be, resulted in the transfer of shares to the Trust, the price per
share equal to the Market Price on the date of such Non-Transfer


                                       17


<PAGE>   18



Event or Transfer.  Any remaining amount in such Trust shall be distributed to
the Beneficiary.

                  (4) Voting Rights. The Trustee shall be entitled to vote all
Shares-in-Trust. Any vote by a Prohibited Owner as a holder of shares of Equity
Stock prior to the discovery by the Corporation that the shares of Equity Stock
are Shares-in-Trust shall, subject to applicable law, be rescinded and shall be
void ab initio with respect to such Shares-in-Trust and the Prohibited Owner
shall be deemed to have given, as of the close of business on the business day
prior to the date of the purported Transfer or Non-Transfer Event that results
in the transfer to the Trust of shares of Equity Stock under Section 2(a)(ix)(C)
hereof, an irrevocable proxy to the Trustee to vote the Shares-in- Trust in the
manner in which the Trustee, in its sole and absolute discretion, desires.

                  (5) Designation of Permitted Transferee. The Trustee shall
have the exclusive and absolute right to designate a Permitted Transferee of any
and all Shares-in-Trust. In an orderly fashion so as not to materially adversely
affect the Market Price of the Shares-in-Trust, the Trustee shall designate any
Person as Permitted Transferee, provided, however, that (i) the Permitted
Transferee so designated purchases for valuable consideration (whether in a
public or private sale) the Shares-in-Trust and (ii) the Permitted Transferee so
designated may acquire such Shares-in-Trust without such acquisition resulting
in a transfer to a Trust and the redesignation of such shares of Equity Stock so
acquired as Shares-in-Trust under Section 2(a)(ix)(C) hereof. Upon the
designation by the Trustee of a Permitted Transferee in accordance with the
provisions of this Section 2(a)(ix)(I)(5), the Trustee shall (i) cause to be
transferred to the Permitted Transferee that number of Shares-in-Trust acquired
by the Permitted Transferee, (ii) cause to be recorded on the books of the
Corporation that the Permitted Transferee is the holder of record of such number
of shares of Equity Stock, (iii) cause the Shares-in-Trust to be canceled, and
(iv) distribute to the Beneficiary any and all amounts held with respect to the
Shares-in-Trust after making that payment to the Prohibited Owner pursuant to
Section 2(a)(ix)(I)(6) hereof.

                  (6) Compensation to Record Holder of Shares of Equity Stock
that Become Shares-in-Trust. Any Prohibited Owner shall be entitled (following
discovery of the Shares-in-Trust and subsequent designation of the Permitted
Transferee in accordance with Section 2(a)(ix)(I)(5) hereof or following the
acceptance of the offer to purchase such shares in accordance with Section
2(a)(ix)(I)(7) hereof) to receive from the Trustee following the sale or other
disposition of such Shares-in-Trust the lesser of (i) in the case of (a) a
purported Transfer in which the Prohibited Owner gave value for shares of Equity
Stock and which Transfer resulted in the transfer of the shares to the Trust,
the price per share, if any, such Prohibited Owner paid for the shares of Equity
Stock, or (b) a Non-Transfer Event or Transfer in which the Prohibited Owner did
not give value for such shares (e.g., if the shares were received through a gift
or devise) and which Non-Transfer Event or Transfer, as the case may be,
resulted in the transfer of shares to the Trust, the price per share equal to
the Market Price on the date of such Non-Transfer Event or Transfer, and (ii)
the price per share received by the Trustee from the sale or other disposition
of such Shares-in-Trust in accordance with Section 2(a)(ix)(I) hereof. Any
amounts received by the Trustee in respect of such Shares-in-Trust and in excess
of such amounts to be paid the Prohibited Owner pursuant to this Section
2(a)(ix)(I)(6)


                                       18


<PAGE>   19



shall be distributed to the Beneficiary in accordance with the provisions of
Section 2(a)(ix)(I) hereof. Each Beneficiary and Prohibited Owner waive any and
all claims that they may have against the Trustee and the Trust arising out of
the disposition of Shares-in-Trust, except for claims arising out of the gross
negligence or willful misconduct of, or any failure to make payments in
accordance with this Section 2(a)(ix)(I), by such Trustee or the Corporation.

                  (7) Purchase Right in Shares-in-Trust. Shares-in-Trust shall
be deemed to have been offered for sale to the Corporation, or its designee, at
a price per share equal to the lesser of (i) the price per share in the
transaction that created such Shares-in-Trust (or, in the case of devise, gift
or Non-Transfer Event, the Market Price at the time of such devise, gift or
Non-Transfer Event) and (ii) the Market Price on the date the Corporation, or
its designee, accepts such offer. The Corporation shall have the right to accept
such offer for a period of ninety days after the later of (i) the date of the
Non-Transfer Event or purported Transfer which resulted in such Shares-in-Trust
and (ii) the date the Corporation determines in good faith that a Transfer or
Non-Transfer Event resulting in Shares-in-Trust has occurred, if the Corporation
does not receive a notice of such Transfer or Non- Transfer Event pursuant to
Section 2(a)(ix)(I)(E) hereof.

         (J)      Remedies Not Limited. Nothing contained in this Section 2(a)
(ix) shall limit the authority of the Corporation to take such other action
as it deems necessary or advisable to protect the Corporation and the interests
of its shareholders by preservation of the Corporation's status as a REIT and
to ensure compliance with the Ownership Limitation.

         (K)      Ambiguity. In the case of an ambiguity in the application of
any of the provisions of this Section 2(a)(ix), including any definition
contained in Section 2(a)(ix)(A) hereof, the Board of Directors shall have
the power to determine the application of the provisions of this Section
2(a)(ix) with respect to any situation based on the facts known to it.

         (L)      Legend. Each certificate for shares of Equity Stock shall 
bear the following legend:

         "The shares of Series A Preferred Stock represented by this certificate
         are subject to restrictions on transfer for the purpose of the
         Corporation's maintenance of its status as a real estate investment
         trust under the Internal Revenue Code of 1986, as amended (the "Code").
         No Person may (i) Beneficially Own or Constructively Own (a) more than
         9.9% of the number of outstanding shares of Series A Preferred Stock
         and (b) if the stockholder owns both Series A Preferred Stock and
         Common Stock, more than 9.9% of the number of outstanding shares of
         Common Stock, (ii) Beneficially Own shares of Equity Stock that would
         result in the shares of Equity Stock being beneficially owned by fewer
         than 100 Persons (determined without reference to any rules of
         attribution), (iv) Beneficially Own shares of Equity Stock that would
         result in the Corporation being "closely held" under Section 856(h) of
         the Code, or (v) Constructively Own shares of Equity Stock that would
         cause the Corporation to Constructively Own 10% or more of the
         ownership interests in a tenant of the Corporation's or a subsidiary's
         real property, within the meaning of Section


                                       19


<PAGE>   20



         856(d)(2)(B) of the Code. Any Person who attempts to Beneficially Own
         or Constructively Own shares of Equity Stock in excess of the above
         limitations must immediately notify the Corporation in writing. If the
         restrictions above are violated, the shares of Equity Stock represented
         hereby will be transferred automatically and by operation of law to a
         Trust and shall be designated Shares-in-Trust. All capitalized terms in
         this legend have the meanings defined in the Corporation's Amended and
         Restated Articles of Incorporation, as the same may be further amended
         from time to time, a copy of which, including the restrictions on
         transfer, will be sent without charge to each shareholder who so
         requests."

         (M) Severability. If any provision of this Section 2(a)(ix) or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.

         3.  The foregoing amendment was duly adopted by the Board of Directors
on September 2, 1997 without shareholder approval in accordance with Section
55-6-02 of the North Carolina General Statutes.

         4.  These articles will become effective upon filing.


                                       20



<PAGE>   21


         IN WITNESS WHEREOF, Winston Hotels, Inc. has caused these Articles of
Amendment to be executed by its duly authorized officer this 10th day of
September, 1997.


                                    WINSTON HOTELS, INC.


                                    By:/s/ Robert W. Winston, III
                                       ----------------------------------------
                                       Robert W. Winston, III
                                       President and Chief Executive Officer



                                       21

<PAGE>   1









                               September 8, 1997



Winston Hotels, Inc.
2209 Century Drive, Suite 300
Raleigh, North Carolina  27612


                              Winston Hotels, Inc.
                                Qualification as
                          Real Estate Investment Trust

Ladies and Gentlemen:

     We have acted as special tax counsel to Winston Hotels, Inc., a North
Carolina corporation (the "Company"), in connection with (i) the preparation of
a Form S-3 registration statement filed with the Securities and Exchange
Commission ("SEC") on September 2, 1997 (No. 333-32713), as amended through the
date hereof (the "Registration Statement"), (ii) the offering and sale (the
"Offering") of 3,000,000 shares of 9 1/4% Series A Cumulative Preferred Stock,
par value $0.01 per share, Liquidation Preference $25 per Share, of the Company
(the "Preferred Stock") pursuant to a prospectus dated September 4, 1997 (the
"Prospectus") and a related prospectus supplement dated September 8, 1997 (the
"Prospectus Supplement") relating to the Registration Statement, and (iii) the
Company's contribution of the net proceeds of the Offering to WINN Limited
Partnership, a North Carolina limited partnership (the "Partnership"), in
exchange for preferred partnership interests in the Partnership. You have 
requested our opinion regarding certain U.S. federal income tax matters in 
connection with the Offering.

     The Company, either directly or through the Partnership, currently owns 35
hotels and associated personal property (the "Current Hotels") and has
contracted to acquire three additional hotels and associated personal property
(the "Acquisition Hotels").  The Company leases the Current Hotels to Winston
Hospitality, Inc., a North

<PAGE>   2




Winston Hotels, Inc.
September 8, 1997
Page 2


Carolina corporation (the "Lessee"), pursuant to substantially similar 
operating leases (collectively, the "Leases").  The Lessee operates 25 of the
Current Hotels.  Interstate Management & Investment Corporation operates nine
of the Current Hotels on behalf of the Lessee and Promus Hotels, Inc.
("Promus") operates one of the Current Hotels on behalf of the Lessee pursuant
to management agreements (collectively, the "Management Agreements") with the
Lessee.  Upon the acquisition of the Acquisition Hotels, the Partnership plans
to enter into lease agreements with the Lessee with respect to the Acquisition
Hotels that are substantially similar to the Leases.  The Lessee plans to
operate two of the Acquisition Hotels and plans to enter into a management
agreement with Promus with respect to one Acquisition Hotel pursuant to which
Promus will operate such Acquisition Hotel on behalf of the Lessee.

     In giving the opinion rendered below, we have examined the following:

1. the Company's Amended and Restated Articles of Incorporation, as filed with
the Secretary of State of the State of North Carolina on May 17, 1994;

2. the Articles of Amendment to the Company's Amended and Restated Articles of
Incorporation, in the form filed as an exhibit to the Company's Current Report
on Form 8-K, dated September 8, 1997 (the "September 8-K");

3. the Company's Amended and Restated Bylaws;

4. the Prospectus and the Prospectus Supplement;

5. the Second Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of July 11, 1997 (the "Partnership Agreement"), among the
Company, as general partner, and several limited partners;

6. Amendment No. 1 to the Partnership Agreement, in the form filed as an exhibit
to the September 8-K;

7. the appraisal performed by Hospitality Appraisal Services, LLC, a Tennessee
limited liability company, dated April 21, 1997, of the personal property
contained in the Orlando, Florida Comfort Suites (the "Personal Property
Appraisal");

8. the Leases;

<PAGE>   3


Winston Hotels, Inc.
September 8, 1997
Page 3




9.  the Management Agreements; and

10. such other documents as we have deemed necessary or appropriate for purposes
of this opinion.

      In connection with the opinion rendered below, we have assumed, with your
consent, generally that: 

1.  each of the documents referred to above has been duly authorized, executed,
and delivered; is authentic, if an original, or is accurate, if a copy; and has
not been amended;

2.  during its taxable year ending December 31, 1997 and subsequent taxable
years, the Company has operated and will continue to operate in such a manner
that makes and will continue to make the representations contained in a
certificate, dated the date hereof and executed by a duly appointed officer of
the Company (the "Officer's Certificate"), true for such years;

3.  the Company will not make any amendments to its organizational documents or
to the Partnership Agreement after the date of this opinion that would affect
its qualification as a real estate investment trust (a "REIT") for any taxable
year;

4.  each partner of the Partnership (a "Partner") that is a corporation or other
entity has a valid legal existence;

5.  each Partner has full power, authority, and legal right to enter into and to
perform the terms of the Partnership Agreement and the transactions
contemplated thereby;

6.  no action will be taken by the Company, the Partnership, or the Partners
after the date hereof that would have the effect of altering the facts upon
which the opinion set forth below is based; and

7.  the Personal Property Appraisal accurately determines the fair market value
of the personal property contained in the Orlando, Florida Comfort Suites and
purchased by the Partnership at the time of the Partnership's acquisition of
such personal property.


<PAGE>   4



Winston Hotels, Inc.
September 8, 1997
Page 4


     In connection with the opinion rendered below, we also have relied upon
the correctness of the representations contained in the Officer's Certificate
and we have no reason to believe such reliance is not reasonable.  Where such
representations involve matters of law, we have explained to the Company's
representatives the relevant and material sections of the Internal Revenue Code
of 1986, as amended (the "Code"), the Treasury regulations thereunder (the
"Regulations"), published rulings of the Internal Revenue Service (the
"Service"), and other relevant authority to which such representations relate
and are satisfied that the Company's representatives understand such provisions
and are capable of making such representations.

     For purposes of our opinion, we made no independent investigation of the
facts contained in the documents and assumptions set forth above, the
representations set forth in the Officer's Certificate, or the Prospectus.
Consequently, we have relied on the Company's representations that the
information presented in such documents, or otherwise furnished to us,
accurately and completely describes all material facts relevant to our opinion.
No facts have come to our attention, however, that would cause us to question
the accuracy and completeness of such facts or documents in a material way.


     Based on the documents and assumptions set forth above, the 
representations set forth in the Officer's Certificate, and the discussions in
the Prospectus and in the Prospectus Supplement under the captions "Federal
Income Tax Considerations" and "Certain Federal Income Tax Considerations,"
respectively (which are incorporated herein by reference), we are of the
opinion that the Company qualified to be taxed as a REIT pursuant to sections
856 through 860 of the Code for its taxable years ended December 31, 1994
through December 31, 1996, and the Company's organization and current and
proposed method of operation will enable it to continue to qualify as a REIT
for its taxable year ending December 31, 1997, and in the future.  We will not
review on a continuing basis the Company's compliance with the documents or
assumptions set forth above, or the representations set forth in the Officer's
Certificate.  Accordingly, no assurance can be given that the actual results of
the Company's operations for its 1997 and subsequent taxable years will satisfy
the requirements for qualification and taxation as a REIT.

     The foregoing opinion is based on current provisions of the Code and the
Regulations, published administrative interpretations thereof, and published
court decisions.  The Service has not issued Regulations or administrative
interpretations with respect to various provisions of the Code relating to REIT
qualification.  No assurance

<PAGE>   5



Winston Hotels, Inc.
September 8, 1997
Page 5


can be given that the law will not change in a way that will prevent the
Company from qualifying as a REIT.

     We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.  In addition, we consent to the references to Hunton &
Williams under the captions "Federal Income Tax Considerations" and "Certain
Federal Income Tax Considerations" in the Prospectus and the Prospectus
Supplement.  In giving this consent, we do not admit that we are in the
category of persons whose consent is required by Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations promulgated thereunder by
the SEC.

     The foregoing opinion is limited to the U.S. federal income tax matters
addressed herein, and no other opinions are rendered with respect to other
federal tax matters or to any issues arising under the tax laws of any other
country, or any state or locality.  We undertake no obligation to update the
opinions expressed herein after the date of this letter.  This opinion letter
is solely for the information and use of the addressee, and it may not be
distributed, relied upon for any purpose by any other person, quoted in whole
or in part or otherwise reproduced in any document, or filed with any
governmental agency without our express written consent.

                              Very truly yours,


                              /s/ Hunton & Williams




<PAGE>   1
                                                                EXECUTION COPY

                      AMENDMENT NO. 1 TO THE SECOND AMENDED
                  AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                            WINN LIMITED PARTNERSHIP


         This Amendment No. 1 (the "Amendment") to the Second Amended and
Restated Agreement of Limited Partnership of WINN Limited Partnership dated July
11, 1997 (the "Partnership Agreement") is entered into as of September 11, 1997,
by and among Winston Hotels, Inc. (the "General Partner") and the Limited
Partners of WINN Limited Partnership (the "Partnership"). All capitalized terms
used herein and not otherwise defined shall have the meanings assigned to them
in the Partnership Agreement.

         WHEREAS, the General Partner, on even date herewith, has issued
3,000,000 shares of its 9.25% Series A Cumulative Preferred Stock, par value
$.01 per share, having a liquidation preference equivalent to $25.00 per share
(the "Series A Preferred Stock"), and has sold such Series A Preferred Stock in
a public offering;

         WHEREAS, the General Partner desires to contribute the net proceeds of
the sale of the Series A Preferred Stock to the Partnership in exchange for
preferred partnership interests in the Partnership as set forth herein;

         WHEREAS, the General Partner is authorized to cause the Partnership to
issue interests in the Partnership to the General Partner in exchange for such
contribution;

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
the Partnership Agreement as follows:

         Section 1.        Contribution.

         The General Partner hereby contributes to the Partnership the entire
net proceeds received by the General Partner from the issuance of the Series A
Preferred Stock. As provided in Section 4.02(g) of the Partnership Agreement,
the General Partner shall be deemed to have made a Capital Contribution to the
Partnership in an amount equal to the gross proceeds raised in connection with
the issuance of such shares of Series A Preferred Stock, which is $75,000,000,
and the Partnership shall be deemed simultaneously to have paid, pursuant to
Section 6.05(b) of the Partnership Agreement, for the costs and expenses
relating to the offer, registration and sale of the Series A Preferred Stock.



<PAGE>   2



         Section 2.        Issuance of Series A Preferred Units.

         In consideration of the contribution to the Partnership made by the
General Partner pursuant to Section 1 hereof, the Partnership hereby issues to
the General Partner 3,000,000 Series A Preferred Units (as defined herein).

         Section 3.        Definitions.

         Article I of the Partnership Agreement is hereby amended by inserting
in the logical alphabetical locations the following definitions of Common Units,
Preferred Units and Series A Preferred Units, as follows:

         "Common Units" means all Partnership Interests that are not
specifically designated as Preferred Units pursuant to Section 4.02(c).

         "Preferred Units" means all Partnership Interests designated and issued
by the Partnership from time to time in accordance with the provisions of
Section 4.02(c).

         "Series A Preferred Stock" means the 9.25% Series A Cumulative
Preferred Stock, par value $.01 per share, of the General Partner.

         "Series A Preferred Units" means the Preferred Units issued to the
General Partner in exchange for the net proceeds of the issuance by the General
Partner of its 9.25% Series A Cumulative Preferred Units, which Series A
Preferred Units shall have the designations, preferences, privileges,
limitations and relative rights set forth in Section 4.02(c)(i) hereof.

         Section 4.        Creation of 9.25% Series A Cumulative Preferred 
Units.

         Article IV of the Partnership Agreement is hereby amended by adding
Section 4.02(c)(i) as follows:

                  "(i)     9.25% SERIES A CUMULATIVE PREFERRED UNITS.

         1.       DESIGNATION AND NUMBER. A series of Preferred Units,
                  designated the "9.25% Series A Cumulative Preferred Units"
                  (the "Series A Preferred Units"), is hereby established. The
                  number of Series A Preferred Units shall be 3,000,000.

         2.       MATURITY. The Series A Preferred Units have no stated maturity
                  and will not be subject to any sinking fund or mandatory
                  redemption.

         3.       RANK. The Series A Preferred Units will, with respect to
                  distribution rights and rights upon liquidation, dissolution
                  or winding up of the Partnership, rank

                                        2

<PAGE>   3



                  (i) senior to all classes or series of Common Units of the
                  Partnership, and to all Partnership Interests ranking junior
                  to the Series A Preferred Units with respect to distribution
                  rights or rights upon liquidation, dissolution or winding up
                  of the Partnership; (ii) on a parity with all Partnership
                  Interests issued by the Partnership the terms of which
                  specifically provide that such Partnership Interests rank on a
                  parity with the Series A Preferred Units with respect to
                  distribution rights or rights upon liquidation, dissolution or
                  winding up of the Partnership; and (iii) junior to all
                  existing and future indebtedness of the Partnership. The term
                  "Partnership Interests" does not include convertible debt
                  securities, which will rank senior to the Series A Preferred
                  Units prior to conversion.

         4.       DISTRIBUTIONS.

                  (a) Holders of the Series A Preferred Units are entitled to
         receive, when and as distributed by the General Partner out of
         available cash flow, preferential cumulative cash distributions at the
         rate of 9.25% per annum of the Liquidation Preference (as defined
         below) per Series A Preferred Unit (equivalent to a fixed annual amount
         of $2.3125 per Series A Preferred Unit). Distributions on the Series A
         Preferred Units shall be cumulative from the date of original issue and
         shall be payable quarterly in arrears on or before the 16th day of
         January, April, July and October, or, if not a Business Day (as defined
         below), the next succeeding business day (each, a "Distribution Payment
         Date"). The first distribution will be paid on or before January 16,
         1998. Any distribution payable on the Series A Preferred Units for any
         partial distribution period will be computed on the basis of a 360-day
         year consisting of twelve 30-day months. Distributions will be payable
         to holders of record as they appear in the ownership records of the
         Partnership at the close of business on the applicable record date,
         which shall be the last Business Day of March, June, September and
         December, respectively, or on such other date designated by the General
         Partner of the Partnership for the payment of distributions that is not
         more than 30 nor less than 10 days prior to such Distribution Payment
         Date (each, a "Distribution Record Date").

                  "Business Day" shall mean any day, other than a Saturday or
         Sunday, that is neither a legal holiday nor a day on which banking
         institutions in New York City are authorized or required by law,
         regulation or executive order to close.

                  (b) The amount of any distributions accrued on any Series A
         Preferred Units at any Distribution Payment Date shall be the amount of
         any unpaid distributions accumulated thereon, to and including such
         Distribution Payment Date, whether or not earned or declared, and the
         amount of distributions accrued on any shares of Series A Preferred
         Units at any date other than a Distribution Payment Date shall be equal
         to the sum of the amount of any unpaid distributions accumulated

                                        3

<PAGE>   4



         thereon, to and including the last preceding Distribution Payment Date,
         whether or not earned or declared, plus an amount calculated on the
         basis of the annual distribution rate of $2.3125 per unit for the
         period after such last preceding Distribution Payment Date to and
         including the date as of which the calculation is made based on a
         360-day year of twelve 30-day months.

                  (c) Except as provided in subsection (a) hereof, the holder of
         the Series A Preferred Units will not be entitled to any distributions
         in excess of full cumulative distributions as described above and shall
         not be entitled to participate in the earnings or assets of the
         Partnership, and no interest, or sum of money in lieu of interest,
         shall be payable in respect of any distribution payment or payments on
         the Series A Preferred Units which may be in arrears.

                  (d) Any distribution payment made on the Series A Preferred
         Units shall be first credited against the earliest accrued but unpaid
         distribution due with respect to such units which remains payable.

                  (e) No distributions on Series A Preferred Units shall be
         declared by the General Partner or paid or set apart for payment by the
         Partnership if the terms and provisions of any agreement of the
         Partnership, including any agreement relating to its indebtedness,
         prohibit such declaration, payment or setting apart for payment or
         provide that such declaration, payment or setting apart for payment
         would constitute a breach thereof or a default thereunder, or if such
         declaration or payment shall be restricted or prohibited by law.
         Notwithstanding the foregoing, distributions on the Series A Preferred
         Units will accrue whether or not the Partnership has earnings, whether
         or not there is available cash flow for the payment of such
         distributions and whether or not such distributions are declared.
         Accrued but unpaid distributions on the Series A Preferred Units will
         not bear interest and holders of the Series A Preferred Units will not
         be entitled to any distributions in excess of full cumulative
         distributions described above.

                  (f) Except as set forth in the next sentence, no distributions
         will be declared or paid or set apart for payment on any Partnership
         Interests or any other series of Preferred Units ranking, as to
         distributions, on a parity with or junior to the Series A Preferred
         Units (other than a distribution of the Partnership's Common Units or
         any other class of Partnership Interests ranking junior to the Series A
         Preferred Units as to distributions and upon liquidation) for any
         period unless full cumulative distributions have been or
         contemporaneously are declared and paid or declared and a sum
         sufficient for the payment thereof is set apart for such payment on the
         Series A Preferred Units for all past distribution periods and the then
         current distribution period. When distributions are not paid in full
         (or a sum sufficient for such full payment is not so set apart) upon
         the Series A Preferred Units and any other series of Preferred Units
         ranking on a parity as to distributions with the Series A Preferred

                                        4

<PAGE>   5



         Units, all distributions declared upon the Series A Preferred Units and
         any other series of Preferred Units ranking on a parity as to
         distributions with the Series A Preferred Units shall be declared pro
         rata so that the amount of distributions declared per Series A
         Preferred Unit and such other series of Preferred Units shall in all
         cases bear to each other the same ratio that accrued distributions per
         Series A Preferred Unit and such other series of Preferred Units (which
         shall not include any accrual in respect of unpaid distributions for
         prior distribution periods if such Preferred Units do not have a
         cumulative distribution) bear to each other.

                  (g) Except as provided in the immediately preceding paragraph,
         unless full cumulative distributions on the Series A Preferred Units
         have been or contemporaneously are declared and paid or declared and a
         sum sufficient for the payment thereof is set apart for payment for all
         past distribution periods and the then current distribution period, no
         distributions (other than in the form of issuance of Common Units or
         other Partnership Interests ranking junior to the Series A Preferred
         Units as to distributions and upon liquidation) shall be declared or
         paid or set aside for payment nor shall any other distribution be
         declared or made upon the Common Units, or any other Partnership
         Interests in the Partnership ranking junior to or on a parity with the
         Series A Preferred Units as to distributions or upon liquidation, nor
         shall any Common Units, or any other Partnership Interests in the
         Partnership ranking junior to or on a parity with the Series A
         Preferred Units as to distributions or upon liquidation be redeemed,
         purchased or otherwise acquired for any consideration (or any monies be
         paid to or made available for a sinking fund for the redemption of any
         such units) by the Partnership. Holders of Series A Preferred Units
         shall not be entitled to any distribution, whether payable in cash,
         property or securities in excess of full cumulative distributions on
         the Series A Preferred Units as provided above. Any distribution
         payment made on Series A Preferred Units shall first be credited
         against the earliest accrued but unpaid distribution due with respect
         to such Series A Preferred Units which remains payable.

         5.       LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
         liquidation, dissolution or winding up of the affairs of the
         Partnership, the holders of Series A Preferred Units are entitled to be
         paid out of the assets of the Partnership legally available for
         distribution to its partners a liquidation preference of $25.00 per
         Series A Preferred Unit (the "Liquidation Preference"), plus an amount
         equal to any accrued and unpaid distributions to the date of payment,
         but without interest, before any distribution of assets is made to
         holders of Common Units or any other class or series of Partnership
         Interests in the Partnership that ranks junior to the Series A
         Preferred Units as to liquidation rights. The Partnership will promptly
         provide to the holders of Series A Preferred Units written notice of
         any event triggering the right to receive such Liquidation Preference.
         After payment of the full amount of the Liquidation Preference, the
         holders of Series A Preferred Units will have no right or claim to any
         of the remaining assets of the Partnership. If, upon any voluntary or
         involuntary

                                        5

<PAGE>   6



         dissolution, liquidation, or winding up of the Partnership, the amounts
         payable with respect to the Liquidation Preference, plus an amount
         equal to any accrued and unpaid distributions to the date of payment,
         of the Series A Preferred Units and any other units of the Partnership
         ranking as to any such distribution on a parity with the Series A
         Preferred Units are not paid in full, the holders of the Series A
         Preferred Units and of such other units will share ratably in any such
         distribution of assets of the Partnership in proportion to the full
         respective preference amounts to which they are entitled. The
         consolidation or merger of the Partnership with or into any other
         partnership, corporation, trust or entity or of any other partnership
         or corporation with or into the Partnership, or the sale, lease or
         conveyance of all or substantially all of the property or business of
         the Partnership, shall not be deemed to constitute a liquidation,
         dissolution or winding up of the Partnership.

         6.       REDEMPTION.

                  (a) Except as provided in clause (b) hereof, the Series A
         Preferred Units are not redeemable by the Partnership prior to
         September 28, 2001. On and after September 28, 2001, the Partnership,
         at its option upon not less than 30 nor more than 60 days' written
         notice, may redeem the Series A Preferred Units, in whole or in part,
         at any time or from time to time, for cash at a redemption price of
         $25.00 per Series A Preferred Unit, plus all accrued and unpaid
         distributions thereon to the date fixed for redemption, with out
         interest. The General Partner shall surrender such Series A Preferred
         Units at the place designated in such notice and shall be entitled to
         the redemption price and any accrued and unpaid distributions payable
         upon such redemption following such surrender. If notice of redemption
         of any Series A Preferred Units has been given and if the funds
         necessary for such redemption have been set aside by the Partnership in
         trust for the benefit of the holders of any Series A Preferred Units so
         called for redemption, then from and after the redemption date
         distributions will cease to accrue on such Series A Preferred Units,
         such Series A Preferred Units shall no longer be deemed outstanding and
         all rights of the holders of such Series A Preferred Units will
         terminate, except the right to receive the redemption price. If less
         than all of the outstanding Series A Preferred Units are to be
         redeemed, the Series A Preferred Units to be redeemed shall be selected
         pro rata (as nearly as may be practicable without creating fractional
         Series A Preferred Units) or by any other equitable method determined
         by the General Partner.

         (b)(i) At any time prior to September 28, 2001, the Partnership may, at
         its option, upon the occurrence of a Change of Control Event (as
         defined below) redeem all of the outstanding Series A Preferred Units
         at the applicable redemption price reflected below, plus accrued and
         unpaid distributions (if any) to the date of redemption. The redemption
         price shall be as follows:

                                        6

<PAGE>   7



<TABLE>
<CAPTION>


                        DATE OF REDEMPTION                                                            PURCHASE
                     ------------------------                                                      ---------------
<S>                                    <C>                                                         <C>
September 11, 1997                     December 31, 1997         .................................        $25.80
January 1, 1998                        March 31, 1998            .................................         25.75
April 1, 1998                          June 30, 1998             .................................         25.70
July 1, 1998                           September 30, 1998        .................................         25.65
October 1, 1998                        December 31, 1998         .................................         25.60
January 1, 1999                        March 31, 1999            .................................         25.55
April 1, 1999                          June 30, 1999             .................................         25.50
July 1, 1999                           September 30, 1999        .................................         25.45
October 1, 1999                        December 31, 1999         .................................         25.40
January 1, 2000                        March 31, 2000            .................................         25.35
April 1, 2000                          June 30, 2000             .................................         25.30
July 1, 2000                           September 30, 2000        .................................         25.25
October 1, 2000                        December 31, 2000         .................................         25.20
January 1, 2001                        March 31, 2001            .................................         25.15
April 1, 2001                          June 30, 2001             .................................         25.10
July 1, 2001                           September 27, 2001        .................................         25.05

</TABLE>

                  Such redemption may be consummated at any time prior to,
         contemporaneously with or after the Change of Control (as defined
         below), provided that notice of any such redemption pursuant to this
         paragraph is given no later than 90 days following the date upon which
         the Change of Control Event occurred, the repurchase date must be
         within 60 days of the date of notice and a sum sufficient to redeem the
         shares must be set apart to effect the redemption.

                           (ii) For purposes of this clause (b), the terms
                  "Change of Control" and "Change of Control Event" shall mean a
                  Change of Control or Change of Control Event with respect to
                  the General Partner, each as defined in the Articles of
                  Amendment to the Articles of Incorporation of the General
                  Partner, as filed with the Secretary of State of the State of
                  North Carolina on September 10, 1997.

                           (c) Notice of redemption will be mailed to the
                  General Partner not less than 30 nor more than 60 days prior
                  to the redemption date. In addition to any information
                  required by law, each notice shall state: (i) the Redemption
                  Date; (ii) the Redemption Price; (iii) the number of Series A
                  Preferred Units to be redeemed; (iv) the place or places where
                  the Series A Preferred Units are to be surrendered for payment
                  of the redemption price; and (v) that distributions on the
                  shares to be redeemed will cease to accrue on such redemption
                  date. If less than all of the Series A Preferred Units held by
                  any holder are to be redeemed, the notice mailed to such
                  holder shall also specify the number of Series A Preferred
                  Units held by such holder to be redeemed.

                                        7

<PAGE>   8



                  (d) Immediately prior to any redemption of Series A Preferred
         Units, the Partnership shall pay, in cash, any accumulated and unpaid
         distributions through the redemption date, unless a redemption date
         falls after a Distribution Record Date and prior to the corresponding
         Distribution Payment Date, in which case each holder of Series A
         Preferred Units at the close of business on such Distribution Record
         Date shall be entitled to the distribution payable on such shares on
         the corresponding Distribution Payment Date notwithstanding the
         redemption of such shares before such Distribution Payment Date.

         7.       VOTING RIGHTS. Except as required by law, the General
         Partner, in its capacity as the holder of the Series A Preferred Units,
         shall not be entitled to vote for any purpose or otherwise to
         participate in any action taken by the Partnership or the Partners.

         8.       CONVERSION. The Series A Preferred Units are not redeemable
         for, convertible into or exchangeable for any other property or
         securities of the Partnership or the General Partner."

         Section 5.        Allocation of Profit and Loss.

         Article V, Section 5.01 is hereby deleted in its entirety and the
following new Section 5.01 is inserted in its place:

                 "(a) Allocation of Profit and Loss. After giving effect to the
         special allocations set forth in Sections 5.01(c), (d) and (e) hereof,
         and subject to Section 5.01(b) hereof, the Partnership's Profit and
         Loss shall be allocated among the Partners for each fiscal year (or
         portion thereof) in proportion to their respective Percentage Interests
         (determined solely on the basis of the Partners' respective Common
         Units); provided, however, that notwithstanding the foregoing clause,
         any Profit shall first be allocated to the General Partner in an amount
         equal to the excess, if any, of the General Partner's unpaid
         Liquidation Preference with respect to its Preferred Units as of the
         end of such fiscal year over the balance of its Capital Account as of
         the end of such fiscal year (for this purpose, such Capital Account
         balance shall be increased by the General Partner's shares of
         Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain as
         of the end of the fiscal year).

                  (b) Capital Account Deficits. Loss shall not be allocated to a
         Limited Partner to the extent that such allocation would cause a
         deficit in such Partner's Capital Account (after reduction to reflect
         the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4),
         (5), and (6)) in excess of the sum of such Partner's

                                        8

<PAGE>   9



         shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum
         Gain. Any Loss in excess of that limitation shall be allocated to the
         General Partner. After the occurrence of an allocation of Loss to the
         General Partner in accordance with this Section 5.01(b), to the extent
         permitted by Regulations Section 1.704-1(b), Profit shall be specially
         allocated to the General Partner in an amount necessary to offset the
         Loss previously allocated to the General Partner under this Section
         5.01(b).

                  (c) Minimum Gain Chargeback. Notwithstanding any provision
         herein to the contrary, (i) any expense of the Partnership that is a
         "nonrecourse deduction" within the meaning of Regulations Section
         1.704-2(b)(1) shall be allocated in accordance with the Partners'
         respective Percentage Interests (determined solely on the basis of
         their respective Common Units), (ii) any expense of the Partnership
         that is a "partner nonrecourse deduction" within the meaning of
         Regulations Section 1.704-2(i)(2) shall be allocated in accordance with
         Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in
         Partnership Minimum Gain within the meaning of Regulations Section
         1.704-2(f)(1) for any Partnership fiscal year, items of gain and income
         shall be allocated among the Partners in accordance with Regulations
         Section 1.704-2(f) and the ordering rules contained in Regulations
         Section 1.704-2(j), and (iv) if there is a net decrease in Partner
         Nonrecourse Debt Minimum Gain within the meaning of Regulations Section
         1.704-2(i)(4) for any Partnership fiscal year, items of gain and income
         shall be allocated among the Partners in accordance with Regulations
         Section 1.704-2(i)(4) and the ordering rules contained in Regulations
         Section 1.704-2(j). A Partner's "interest in partnership profits" for
         purposes of determining its share of the nonrecourse liabilities of the
         Partnership within the meaning of Regulations Section 1.752-3(a)(3)
         shall be such Partner's Percentage Interest (determined solely on the
         basis of the Partners' respective Common Units).

                  (d) Qualified Income Offset. If a Limited Partner receives in
         any fiscal year an adjustment, allocation, or distribution described in
         subparagraphs (4), (5), or (6) of Regulations Section
         1.704-1(b)(2)(ii)(d) that causes or increases a negative balance in
         such Partner's Capital Account that exceeds the sum of such Partner's
         shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum
         Gain, as determined in accordance with Regulations Sections 1.704-2(g)
         and 1.704-2(i), such Partner shall be allocated specially for such
         fiscal year (and, if necessary, later fiscal years) items of income and
         gain in an amount and manner sufficient to eliminate such negative
         Capital Account balance as quickly as possible as provided in
         Regulations Section 1.704-1(b)(2)(ii)(d). After the occurrence of an
         allocation of income or gain to a Limited Partner in accordance with
         this Section 5.01(d), to the extent permitted by Regulations Section
         1.704-1(b) and Section 5.01(b), items of expense or loss shall be
         allocated to such Partner in an amount necessary to offset

                                        9

<PAGE>   10



         the income or gain previously allocated to such Partner under this
         Section 5.01(d).

                  (e) Priority Allocation With Respect To Preferred Units. After
         making the allocations required in Sections 5.01(b), (c), and (d)
         hereof, but before making the allocations required in Section 5.01(a),
         all or a portion of the remaining items of Partnership gross income or
         gain for the fiscal year, if any, shall be specially allocated to the
         General Partner in an amount equal to the excess, if any, of the
         cumulative distributions received by the General Partner in respect of
         its Preferred Units for the current fiscal year and all prior fiscal
         years (other than any distributions that are treated as being in
         satisfaction of the Liquidation Preference of such Preferred Units)
         over the cumulative allocations of Partnership gross income and gain to
         the General Partner under this Section 5.01(e) for all prior fiscal
         years.

                  (f) Allocations Between Transferor and Transferee. If a
         Partner transfers any part or all of its Partnership Interest, the
         distributive shares of the various items of Profit and Loss allocable
         among the Partners during such taxable year of the Partnership shall be
         allocated between the transferor and the transferee either (i) as if
         the Partnership's fiscal year had ended on the date of the transfer, or
         (ii) based on the number of days of such fiscal year that each was a
         Partner without regard to the results of Partnership activities in the
         respective portions of such fiscal year in which the transferor and the
         transferee were Partners. The General Partner, in its sole discretion,
         shall determine which method shall be used to allocate the distributive
         shares of the various items of Profit and Loss between the transferor
         and transferee.

                  (g) Definition of Profit and Loss. "Profit" and "Loss" and
         items of income, gain, expense, or loss referred to in this Agreement
         shall be determined in accordance with federal income tax accounting
         principles, as modified by Regulations Section 1.704-1(b)(2)(iv),
         except that Profit and Loss shall not include items of income, gain and
         expense that are specially allocated pursuant to Sections 5.01(b), (c),
         (d) and (e). All allocations of income, Profit, gain, Loss, and expense
         (and all items contained therein) for federal income tax purposes shall
         be identical to all allocations of such items set forth in this Section
         5.01, except as otherwise required by Section 704(c) of the Code and
         Regulations Section 1.704-1(b)(4). The General Partner shall have the
         authority to elect the method to be used by the Partnership for
         allocating items of income, gain and expense required by Section 704(c)
         of the Code, and such election shall be binding on all Partners."

         Section 6.        Distribution of Cash.

         Article V, Section 5.02 is hereby amended by adding the following new
subsection (d):

                                       10

<PAGE>   11



                  "(d) Notwithstanding the discretion given to the General
         Partner in subsection (a) above, the General Partner shall, prior to
         any distributions to the holders of Common Units, make any
         distributions required to be made to the holders of the Preferred
         Units, to the extent of the Partnership's available cash flow."

         Section 7.        Redemption Right.

         The Partnership Agreement is hereby amended by adding the following new
Section 8.05(f) to the Partnership Agreement, immediately following Section
8.05(e):

                  "(f) Preferred Units shall be redeemed, if at all, only in
         accordance with such redemption rights or options as are set forth with
         respect to such Preferred Units (or class or series thereof) in the
         instruments designating such Preferred Units (or class or series
         thereof)."

         Section 8.        General Amendments to Partnership Agreement.

         Notwithstanding anything contained herein, all references to
Partnership Units in Sections 6.06(b) and 7.01 of the Partnership Agreement
shall be deemed to refer solely to Common Units, and not to Preferred Units. In
addition, references in Article XI of the Partnership Agreement to Percentage
Interests of the Limited Partners shall be deemed to refer solely to Percentage
Interests of Limited Partners with respect to Common Units.



                                       11

<PAGE>   12



         IN WITNESS WHEREOF, the foregoing Amendment No. 1 to the Second Amended
and Restated Agreement of Limited Partnership of WINN Limited Partnership has
been signed and delivered as of this 11th day of September, 1997 by the
undersigned as general partner of the Partnership.

                                     WINSTON HOTELS, INC.,
                                     as General Partner


                                     By: /s/ Philip Alfano
                                        -----------------------------------

                                     Title: Senior Vice President and 
                                            -------------------------------
                                            Chief Financial Officer
                                            -------------------------------



                                       12

<PAGE>   13
                                    EXHIBIT A

                               September 11, 1997
 (reflecting issuance of 9.25% Series A Preferred Units to Winston Hotels, Inc.)


                                  COMMON UNITS

<TABLE>
<CAPTION>

                                                                AGREED VALUE
                                                                 OF CAPITAL 
PARTNER AND ADDRESS                CASH CONTRIBUTION            CONTRIBUTION           PREFERRED UNITS         PERCENTAGE INTEREST
- -------------------                -----------------            ------------           ---------------         -------------------
<S>                                <C>                          <C>                    <C>                     <C>   

GENERAL PARTNER:

Winston Hotels, Inc.               $  103,524,120               $   2,693,610             15,523,864                  89.77%
2209 Century Drive
Raleigh, NC 27612

LIMITED PARTNERS:

Hotel I, Inc.                       -------------               $   2,975,000                297,500                   1.72% 
2209 Century Drive                                                                                                            
Raleigh, NC 27612                                                                                                             
                                                    
Charles M. Winston                  -------------               $   1,056,430                105,643                    .61% 
Winston Hotels, Inc.                                                                                                          
2209 Century Drive                                                                                                            
Raleigh, NC 27612                                                                                                             
                                                    
John B. Harris, Jr                  -------------               $     308,130                 30,813                    .18% 
Winston Hotels, Inc.                                                                                                          
2209 Century Drive                                                                                                            
Raleigh, NC 27612                                                                                                             
                                                    
Cary Suites, Inc.                   -------------               $   6,947,215                606,413                   3.51% 
2209 Century Drive                                                                                                            
Raleigh, NC 27612                                                                                                             
                                                                                                                              
RWW, Inc.                           -------------               $     788,365                 69,960                    .41% 
2209 Century Drive                                                                                                            
Raleigh, NC 27612                                                                                                             
                                                                                                                              
WJS Associates-Perimeter II,        -------------               $   1,230,000                109,516                    .63% 
Inc.                                                                                                                          
2209 Century Drive                                  
Raleigh, NC 27612                                   
                                                    
Hotel II, Inc.                      -------------               $     590,042                 45,651                    .26% 
2209 Century Drive                                                                                                                 
Raleigh, NC  27612                                                                                                                 
                                                                                                                                   
Quantum Realty                      -------------               $   5,633,280                440,100                   2.54% 
Partners II, L.P.                                                                                                                  
100 Crescent Court                                                                                                                 
Suite 100                                                                                                                          
Dallas, Texas 75241                                                                                                                
                                                                                                                                   
Hubbard Realty of Winston-          -------------               $     855,871                 63,797                    .37% 
Salem, Inc. 
85 South Stratford Road
Winston-Salem, NC 27103
                                                                                       -------------           ------------
                                                                                          17,293,257                  100.0%
                                                                                       =============           ============


</TABLE>

<PAGE>   14








                               PREFERRED UNITS

<TABLE>
<CAPTION>

                                                                AGREED VALUE
                                                                 OF CAPITAL 
PARTNER ND ADDRESS                 CASH CONTRIBUTION            CONTRIBUTION           PREFERRED UNITS         PERCENTAGE INTEREST
- ------------------                 -----------------            ------------           ---------------         -------------------
<S>                                <C>                          <C>                    <C>                     <C>   

GENERAL PARTNER:

Winston Hotels, Inc.               $75,000,000                   -------------             3,000,000(1)               100.0%     
2209 Century Drive                                                                                                               
Raleigh, NC  27612                                                                                                               
                                                                                                                                 
                                                                                           3,000,000                  100.0%     
                                                                                           =========                  =====      

</TABLE>

- ------------------
(1)      9.25% Series A Cumulative Preferred Units



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