FELCOR SUITE HOTELS INC, 8-K, 1997-07-11

FELCOR SUITE HOTELS INC
8-K, 1997-07-11
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

UNITED STATES
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): JULY 11, 1997 (June 30, 1997)

FELCOR SUITE HOTELS, INC.
(Exact name of registrant specified in its charter)

MARYLAND 0-24250 72-2541756
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)

545 E. JOHN CARPENTER FREEWAY, SUITE 1300, IRVING, TEXAS 75062
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (972) 444-4900
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

This Current Report on Form 8-K is filed to report the purchase of
five hotels from ITT Sheraton Corporation, an unrelated party, on June 30, 1997
by FelCor Suites Limited Partnership (the "Partnership"), of which FelCor Suite
Hotels, Inc. (the "Company") is the sole general partner. The aggregate
purchase price for the five hotels was $200 million. These funds were provided
from a public offering of the Company's Common Stock, as further described
below.

Upon their acquisition, each of the five hotels was leased to FCH/SH
Leasing, L.L.C. (the "Lessee") pursuant to a percentage lease that is
substantially similar to the Partnership's other hotel leases. The hotels will
continue to be operated as Sheraton(R) hotels, and the Lessee has engaged an
affiliate of ITT Sheraton Corporation to manage such hotels on its behalf and
under its supervision.

The following sets forth a brief description of each of the five
hotels purchased:

Atlanta (Airport), Georgia . . . . . . . This 12-story, 395-room Sheraton
Gateway hotel is located near
Hartsfield International Airport in
Atlanta, Georgia and was opened in
1986. This hotel is attached to the
Georgia International Convention
Center.

Atlanta (Galleria), Georgia . . . . . . . This 17-story, 278-suite Sheraton
Suites hotel is located adjacent to
the Cumberland Mall and Cobb
Galleria Convention Centre in
Atlanta, Georgia. The hotel opened
in 1990.

Chicago (O'Hare Airport), Illinois . . . This 11-story, 297-suite Sheraton
Suites Hotel is located in Rosemont,
Illinois near Chicago's O'Hare
International Airport. The hotel
opened in 1986.

Dallas, (Park Central), Texas . . . . . . This 20-story, 545 room Sheraton
hotel is located near the
intersection of I-635 and U.S. 75 in
Dallas, Texas. The hotel opened in
1983 and offers 28 meeting rooms with
an aggregate of approximately 28,000
sq. ft. of meeting space. The Grand
Ballroom will accommodate up to 2,000
guests.

Phoenix (Crescent), Arizona . . . . . . . This eight-story, 342-room Sheraton
Crescent hotel is located adjacent to
Metrocenter, one of Arizona's largest
shopping and entertainment complexes,
in Phoenix, Arizona. The hotel opened
in 1986. This hotel offers 17
meeting rooms with an aggregate of
approximately 28,000 sq. ft. of
meeting space and can accommodate
groups of up to 1,000.

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<PAGE> 3
The purchase price of these five hotels was funded primarily from the
net proceeds of the Company's underwritten public offering of 10,200,000 shares
of its Common Stock pursuant to its Prospectus Supplement dated June 24, 1997
to Prospectus dated May 14, 1997. The shares were sold at a price to the
public of $35.625 per share, resulting in net proceeds to the Company of
approximately $354 million. The net proceeds from the public offering,
exclusive of approximately $41.7 million used to repurchase 1.2 million
previously outstanding shares of Common Stock, were contributed by the Company
to the Partnership in exchange for additional units of general partner interest
in the Partnership. Of the 10,200,000 shares sold in the public offering,
8,160,000 were initially offered in the United States and Canada by certain
U.S. Underwriters, for whom Morgan Stanley & Co. Incorporated, Smith Barney
Inc., Alex. Brown & Sons Incorporated, Montgomery Securities, PaineWebber
Incorporated and Salomon Brothers, Inc. acted as U.S. Representatives, and
2,040,000 were initially offered outside the United States and Canada by
certain International Underwriters, for whom Morgan Stanley & Co. International
Limited, Smith Barney Inc., Alex. Brown and Sons Incorporated, Montgomery
Securities, PaineWebber International (U.K.) Ltd. and Salomon Brothers
International Limited acted as International Representatives. A copy of the
Underwriting Agreement relating to such public offering has been filed as an
exhibit to this Form 8-K.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.

Pursuant to Item 7(a)(4), the Company hereby reports that it is unable
to provide herewith the required financial statements for the acquisition of
the hotels described in Item 2 above and that it will file such required
financial statements as soon as they are available. The Company expects to
file the required financial statements as an amendment to this Form 8-K as soon
as practicable, but in any event not later than August 29, 1997.

(b) PRO FORMA FINANCIAL INFORMATION.

Pursuant to Item 7(b)(2), the Company hereby reports that it is unable
to provide herewith the required pro forma financial information relative to
the hotels acquired as described in Item 2 above. The Company will provide
such pro forma financial information at the same time it provides the financial
information required by Item 7(a) above.

<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C> <C>
1 -- Underwriting Agreement dated June 24, 1997, between the
Company and the underwriters named therein.

3.1.2 -- Articles of Amendment dated June 16, 1997.

10.24 -- Contract for Purchase and Sale of Hotels, dated as of
June 5, 1997, by and among ITT Sheraton Corporation,
Sheraton Savannah Corp., Sheraton Peachtree Corp.,
Sheraton Crescent Corp., Sheraton Dallas Corp., Sheraton
Gateway Suites O'Hare Investment Partnership and FelCor
Suites Limited Partnership.
</TABLE>

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SIGNATURES

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 hereunto duly authorized.

Dated: July 11, 1997

FELCOR SUITE HOTELS, INC.

By: /s/ Lester C. Johnson
-----------------------------------
Lester C. Johnson
Vice President/Controller

<PAGE> 5

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C>
1 -- Underwriting Agreement dated June 24, 1997, between the
Company and the underwriters named therein.

3.1.2 -- Articles of Amendment dated June 16, 1997.

<PAGE> 1
EXHIBIT 1

10,200,000 Shares

FELCOR SUITE HOTELS, INC.

COMMON STOCK, PAR VALUE $.01 PER SHARE

UNDERWRITING AGREEMENT

June 24, 1997
<PAGE> 2
June 24, 1997

Morgan Stanley & Co. Incorporated
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Montgomery Securities
PaineWebber Incorporated
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

Morgan Stanley & Co. International Limited
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Montgomery Securities
PaineWebber International (U.K.) Ltd.
Salomon Brothers International Limited
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England

Dear Sirs and Mesdames:

FelCor Suite Hotels, Inc., a Maryland corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters"), an aggregate of 10,200,000 shares of the common
stock, $.01 par value per share of the Company (the "Firm Shares").

It is understood that, subject to the conditions hereinafter stated,
8,160,000 Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. Underwriters") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 2,040,000 Firm Shares (the "International Shares") will be sold to the
several International Underwriters named in Schedule II hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated, Smith
Barney Inc., Alex. Brown & Sons Incorporated, Montgomery Securities,
PaineWebber Incorporated and Salomon Brothers Inc shall act as representatives
(the "U.S. Representatives") of the several U.S. Underwriters, and Morgan
<PAGE> 3
Stanley & Co. International Limited, Smith Barney Inc., Alex. Brown & Sons
Incorporated, Montgomery Securities, PaineWebber International (U.K.) Ltd. and
Salomon Brothers International Limited shall act as representatives (the
"International Representatives") of the several International Underwriters. The
U.S. Underwriters and the International Underwriters are hereinafter
collectively referred to as the Underwriters.

The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional 1,530,000 shares of its common stock,
par value $.01 per share (the "Additional Shares") if and to the extent that
the U.S. Representatives shall have determined to exercise, on behalf of the
U.S. Underwriters, the right to purchase such shares of common stock granted to
the U.S. Underwriters in Section 2 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "Shares." The shares of
common stock, par value $.01 per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "Common Stock."

Upon consummation of the transactions contemplated hereby and upon the
Company's contribution of the net proceeds from the sale of the Firm Shares, in
exchange for units of partnership interest (the "Units") in FelCor Suites
Limited Partnership, (the "Partnership"), a Delaware limited partnership, the
Company will own an approximate 92.5% general partnership interest in the
Partnership. As of June 1, 1997, the Partnership, directly or indirectly, owned
interests in 59 hotels as described in the Prospectus, as defined herein
(collectively, the "Current Hotels"). The Partnership has entered into
agreements (the "Acquisition Agreements") as described in the Prospectus to
acquire interests in eleven additional hotels from various sellers (such eleven
additional hotels being hereinafter referred to as the "Acquisition Hotels")
(the Current Hotels and the Acquisition Hotels hereinafter referred to as the
"Hotels"). The Company also has entered into an agreement (the "Repurchase
Agreement") with Promus Hotels, Inc. ("Promus") pursuant to which the Company
will use a portion of the proceeds from the sale of the Shares to repurchase
(the "Repurchase") 1,200,000 shares of Common Stock currently owned by Promus
(the "Promus Shares") at a price per share as set forth in Prospectus.

The Partnership leases the Current Hotels, and upon the purchase
thereof will lease the Acquisition Hotels, to DJONT Operations, L.L.C. or a
subsidiary thereof (collectively, the "Lessee"), pursuant to separate leases
providing for the payment of certain base amounts (the "Percentage Leases").
The Current Hotels are managed pursuant to separate management agreements
(collectively, the "Management Agreements"). The Partnership will lease the
Acquisition Hotels to the Lessee pursuant to leases substantially similar to
the Percentage Leases. The Current Hotels are operated, and the Acquisition
Hotels will be operated, by the Lessee pursuant to the terms of the Percentage
Leases. Other capitalized terms used herein and not otherwise defined herein
shall have the meaning set forth in the Registration Statement (as hereinafter
defined).

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to
debt securities, preferred stock, Common Stock and common stock warrants and
has filed with, or transmitted for filing to, or shall promptly hereafter file
with or transmit for filing to, the Commission a prospectus supplement (the
"Prospectus Supplement") specifically relating to the Shares pursuant to Rule
424 under the Securities Act of

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1933, as amended (the "Securities Act"). The Prospectus Supplement contains two
prospectus supplements to be used in connection with the offering and sale of
the Shares: the U.S. prospectus supplement to be used in connection with the
offering and sale of Shares in the United States and Canada to United States
and Canadian Persons, and the international prospectus supplement to be used in
connection with the offering and sale of Shares outside the United States and
Canada to persons other than United States and Canadian Persons. The
international prospectus supplement is identical to the U.S. prospectus
supplement except for the outside front cover page. The term "Registration
Statement" means the registration statement, including the exhibits thereto, as
amended to the date of this Agreement. The term "Basic Prospectus" means the
prospectus included in the Registration Statement. The term "Prospectus" means
the Basic Prospectus together with the Prospectus Supplement, which includes
the U.S. prospectus supplement and the international prospectus supplement. The
term "Preliminary Prospectus" means a preliminary prospectus supplement
specifically relating to the Shares, which includes the preliminary U.S.
prospectus supplement and the preliminary international prospectus supplement,
together with the Basic Prospectus. As used herein, the terms "Basic
Prospectus," "Prospectus" and "Preliminary Prospectus" shall include in each
case the documents, if any, incorporated by reference therein. The terms
"supplement" and "amendment" or "amend" as used herein shall include all
documents deemed to be incorporated by reference in the Prospectus that are
filed subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). As used herein, the term "Incorporated Documents" means the
documents which at the time are incorporated by reference in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto.

1. REPRESENTATIONS AND WARRANTIES. The Company and the
Partnership, jointly and severally, represent and warrant to and agree with
each of the Underwriters that:

(a) The Registration Statement has become
effective; no order preventing or suspending the use of any Preliminary
Prospectus has been issued and no proceeding for that purpose has been
instituted or threatened by the Commission or the securities authority of any
state or other jurisdiction. No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no proceeding
for that purpose has been instituted or threatened or, to the best knowledge of
the Company, contemplated by the Commission or the securities authority of any
state or other jurisdiction.

(b) The Company and the transactions contemplated
by this Agreement meet the requirements and conditions for using a registration
statement on Form S-3 under the Securities Act, set forth in the General
Instructions to Form S-3. When any Preliminary Prospectus was filed with the
Commission it (i) contained all statements required to be stated therein in
accordance with, and complied in all material respects with the requirements
of, the Securities Act and the rules and regulations of the Commission
thereunder and (ii) did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. When the Registration Statement or any amendment thereto was
declared effective, and on the Closing Date (or the Option Closing Date, as the
case may be, both as defined below) it (i) contained or will contain all
statements required to be stated therein in accordance with, and complied or
will comply in all material respects

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with the requirements of, the Securities Act and the rules and regulations of
the Commission thereunder and (ii) did not or will not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the Commission pursuant to Rule
424(b) and at the Closing Date (or the Option Closing Date, as the case may
be), the Prospectus, as amended or supplemented at any such time, (i) contained
or will contain all statements required to be stated therein in accordance
with, and complied or will comply in all material respects with the
requirements of, the Securities Act and the rules and regulations of the
Commission thereunder and (ii) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The representation and warranty in this paragraph
(b) does not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein.

(c) The Incorporated Documents heretofore filed,
when they were filed (or, if any amendment with respect to any such document
was filed, when such amendment was filed), conformed in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, any further Incorporated Documents so filed will, when they are
filed, conform in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder; no such document when it was
filed (or, if an amendment with respect to any such document was filed, when
such amendment was filed), contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and no such further
document, when it is filed, will contain an untrue statement of a material fact
or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.

(d) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the state
of Maryland with all requisite corporate power and authority to own and lease
its properties and to conduct its business. The Company 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
Company, the Partnership or the Hotels taken as a whole. The Company will be
duly qualified (at the time of the 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 requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Company, the Partnership or any Hotels, taken as a whole.
Except for the entities listed on Schedule III hereto, the Company does not own
or control, directly or indirectly, any corporation, association or other
entity.

(e) The Partnership has been duly formed and is
validly existing as a limited partnership in good standing under the Delaware
Revised Uniform Limited Partnership Act (the "Delaware Act") with all requisite
partnership power and authority to own and lease its properties and to conduct
its business. Each subsidiary of the Partnership has been duly formed and is
validly

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existing as a corporation, limited partnership or limited liability company in
good standing under the laws of its respective jurisdiction of formation,
except where the failure to do so would not have a material adverse effect on
the Company, the Partnership or the Hotels, taken as a whole. The Partnership
and its subsidiaries have been duly qualified or registered to do business and
are in good standing as foreign partnerships in each other jurisdiction in
which the ownership or leasing of their properties or the nature or conduct of
their 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 the Hotels taken as a whole. The Partnership will be duly
qualified (at the time of the 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 requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Company, the Partnership or the Hotels, taken as a whole.
The Company is the sole general partner of the Partnership, and at the Closing
Date, will be the sole general partner of the Partnership and will own an
approximate 92.5% interest in the Partnership (assuming no exercise of the
option to purchase the Option Shares).

(f) DJONT Operations, L.L.C. has been duly formed
and is validly existing as a limited liability company in good standing under
the Delaware Limited Liability Company Act. FCOAM, Inc. has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the State of Texas. The Lessee has all requisite limited liability
company or corporate power and authority to own, lease and operate its
properties and conduct its business. Each subsidiary of DJONT Operations,
L.L.C. has been duly formed, is validly existing and is in good standing under
the laws of the State of Delaware. The Lessee and its subsidiaries have been
duly qualified to do business and are in good standing as a foreign limited
liability company or corporation in each other jurisdiction in which the
ownership or leasing of their properties or the nature or conduct of their
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 the 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 requires such
qualification, except where the failure to do so would not have a material
adverse effect on the Lessee or the Hotels, taken as a whole.

(g) The Company has full legal right, power and
authority to enter into 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.

(h) The Partnership has full legal right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated herein. This Agreement has been duly authorized, executed and
delivered by the Partnership.

(i) The Company, the Partnership, and to the
knowledge of the Company and the Partnership, each of the other parties to the
Amended and Restated Agreement of Limited Partnership of the Partnership (the
"Partnership Agreement"), the Percentage Leases and the Management Agreements
has full legal right, power and authority to enter into each such agreement and
to consummate the transactions contemplated therein. Each such agreement has
been duly

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authorized, executed and delivered by the Company, the Partnership, and to the
knowledge of the Company and the Partnership, each of the other parties. (This
Agreement, the Partnership Agreements, the new Percentage Leases and the
Management Agreements sometimes are hereinafter referred to collectively as the
"Operative Documents").

(j) The Partnership and, to the knowledge of the
Company and the Partnership, each of the other parties to the Acquisition
Agreements has full legal right, power and authority to enter into such
agreements and to consummate the transactions contemplated thereby. To the
knowledge of the Company and the Partnership, the Acquisition Agreements have
been duly authorized, executed and delivered by the Partnership and, to the
Company's and the Partnership's knowledge, the other parties thereto and
constitute valid and binding agreements, 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.

(k) 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, the execution, delivery and
performance of this Agreement and the consummation by the Company and the
Partnership of the transactions contemplated hereby and thereby has been made
or obtained and is in full force and effect.

(l) 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 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, any of the Operative Documents, the
articles of incorporation, bylaws, 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, any of them, any of their respective properties or other assets
or any Current Hotel or the Acquisition Hotels is subject; or any applicable
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to any of the foregoing 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 any of the
foregoing.

(m) The Shares to be issued and sold to the
Underwriters hereunder have been validly authorized by the Company. When issued
and delivered against payment therefor as provided in this Agreement, the
Shares will be duly and validly issued, fully paid and nonassessable. No
statutory or other preemptive rights of shareholders exist with respect to any
of the Shares. No person or entity holds a right to require or participate in
the registration under the Securities Act of the Shares pursuant to the
Registration Statement other than those persons who have expressly waived such
rights; and, except for Cleveland Finance Associates Limited Partnership,
Robert E. Woolley, Charles M. Sweeney, MarRay-Lex Green, Inc.,
Piscataway-Centennial Associates Limited Partnership and PMB Associates, Ltd.
or as set forth in the Prospectus, no person holds a right to

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require registration under the Securities Act of any shares of Common 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 Maryland law.

(n) The Company's authorized, issued and
outstanding capital stock is as disclosed in the Prospectus. All of the issued
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 the Series A Preferred Stock contained in the Prospectus. None
of the issued and outstanding shares of capital stock of the Company has been
issued or is owned or held in violation of any preemptive rights of
shareholders. The Company has no other issued and outstanding capital stock.
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.

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

(p) All of the issued Units have been duly and
validly authorized and issued and are fully paid and nonassessable. None of the
issued Units has been issued or is owned or held in violation of any preemptive
right. The Units to be issued to the Company at the Closing Date have been duly
and validly authorized by the Partnership. At the Closing Date, such Units will
be validly issued, fully paid and nonassessable. All of the outstanding Units
have been issued, offered and sold in compliance with all applicable laws
(including, without limitation, federal and state securities laws). The Units
to be issued to the Company at the Closing Date will be issued, offered and
sold in compliance with all applicable laws (including, without limitation,
federal and state securities laws).

(q) The financial statements of the Company, the
Lessee, Promus/GE EPT Combined Limited Partnership, EPT Meadowlands Limited
Partnership, AEW Doubletree Portfolio, PSH Master L.P. I, DS Hotels, and
Barshop- HII Joint Venture incorporated by reference in the Registration
Statement and Prospectus, together with related schedules and notes (and any
amendment or supplement thereto), present fairly the financial position of each
entity, as of the dates indicated, and the results of operations and cash flows
of such entity for the periods specified, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods specified. No other financial statements or schedules are required by
Form S-3 or otherwise to be included or incorporated by reference in the
Registration Statement, the Prospectus, or any Preliminary Prospectus.

(r) Each of Coopers & Lybrand L.L.P., Deloitte &
Touche LLP, Arthur Andersen LLP and Ernst & Young, LLP, who have examined and
are reporting upon the audited

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financial statements and schedules included or incorporated by reference in the
Registration Statement, are and were, during the periods covered by their
reports included in the Registration Statement and the Prospectus, independent
public accountants within the meaning of the Act.

(s) Since January 28, 1997, neither the Company,
the Partnership, nor the Lessee has sustained 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; 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, the
Partnership, or the Lessee, (ii) any material adverse change, or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company, the Partnership or the Lessee and their respective subsidiaries, taken
as a whole, from that set forth in the Prospectus, exclusive of any amendments,
or supplements thereto subsequent to the date of this Agreement, (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 such entity, 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 or partnership interests, as applicable, of the Company or
the Partnership, or (v) any transaction that is material to the Company, the
Partnership or the Lessee, except transactions in the ordinary course of
business or as otherwise disclosed in the Registration Statement and the
Prospectus.

(t) The Partnership has good and indefeasible
title in fee simple to all real property and the improvements thereon owned by
it free and clear of all liens, encumbrances, claims, security interests,
restrictions and defects except (i) such as are described in the Prospectus,
(ii) such matters reflected in the owner's title insurance policies relating to
such properties and (iii) such as do not materially adversely affect the value
of the properties or the use proposed to be made of the property by the
Partnership. Upon consummation of the transactions contemplated by the
Acquisition Agreements, the Partnership will have good and indefeasible title
in fee simple to the Acquisition Hotels, and all related real property, free
and clear of all liens, encumbrances, claims, security interests, restrictions
and defects except such as are described in the proposed title commitments for
the Acquisition Hotels or which do not materially adversely affect the value of
the property or the use proposed to be made of the property by the Partnership.
Except as disclosed in the Prospectus, neither the Company nor the Partnership
owns or leases any real property as lessee other than (i) the Partnership is
the owner of a leasehold interest in certain air space related to its Current
Hotel in New Orleans, Louisiana, (ii) FelCor/CSS Holdings, L.P. ("Holdings") is
the lessee for two hotels leased under ground leases, located in Burlingame (SF
Airport), California and Phoenix, Arizona and the lessee of certain room space
in the hotel located in Cleveland, Ohio; (iii) FelCor/St. Paul Holdings, L.P.
is the lessee for one hotel and one restaurant leased under ground leases
located in St. Paul, Minnesota; (iv) EPT Kansas City (Country Club Plaza),
Missouri L.P. is the lessee for a hotel, leased under a ground lease, located
in Kansas City, Missouri; (v) EPT Meadowlands Limited Partnership is the lessee
for a hotel, leased under a ground lease, located in

8
<PAGE> 10
Secaucus, New Jersey; (vi) EPT San Antonio Limited Partnership is the lessee
for a hotel, leased under a ground lease, located in San Antonio, Texas; (vii)
the Partnership is the lessee of a parking lot relating to a hotel in San
Antonio, Texas; and (viii) the Company and/or the Partnership are lessees of
office space in which the Company's executive offices are located. Except as
disclosed in the Prospectus, no person other than the Partnership has an option
or right of first refusal to purchase all or part of any Current Hotel or any
interest therein other than certain rights of first refusal contained in
partnership agreements to which the Partnership or its subsidiaries are
parties. Each of the 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), except if and to the
extent disclosed in the Prospectus and except for such failures to comply that
would not 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 the Partnership, the Company or the Hotels, taken as a
whole. 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 the Hotels, 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 or with respect to the Partnership, the Company or the Hotels, taken as a
whole.

(u) Neither the Company nor the Partnership is in
violation of its respective articles of incorporation, bylaws, certificate of
limited partnership or partnership agreement, as the case may be, and 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 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 have a material adverse effect on the financial position, results of
operations or business of each such entity, respectively.

(v) 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, the Lessee or any of their respective officers and
directors or to which the properties, assets or rights of any such entity 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 any such entity or which could adversely affect the
consummation of the transactions contemplated by this Agreement.

(w) 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

9
<PAGE> 11
Statement which are not described or filed as required. To the best 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, the Partnership, the Lessee, respectively, and third
parties expressly referenced in the Prospectus are legal, valid and binding
obligations of the Company, the Partnership and the Lessee, respectively,
enforceable against such parties 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 equitable principles.

(x) Except as described in the Prospectus, the
Company, the Partnership or the Lessee owns, possesses or has obtained or has
taken all necessary action to obtain (and will obtain) all material permits,
licenses, franchises (including, with respect to the Lessee, the franchises
relating to the Hotels), 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 and to carry on its business, and neither the Company,
the Partnership nor the Lessee has received any notice of proceedings relating
to revocation or modification of any such licenses, permits, franchises,
certificates, consents, orders, approvals or authorizations.

(y) Except as described in the Prospectus, the
Company, the Partnership, and the Lessee own or possess or have the right to
acquire (and will acquire) 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 the
Company, the Partnership, and the Lessee to conduct their respective businesses
as presently conducted, and neither the Company, the Partnership, nor the
Lessee has received notice of infringement or of conflict with (and knows of no
such infringement of or 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 or the Lessee.

(z) The Company's, the Partnership's and to the
best of the Company's and the Partnership's knowledge, the Lessee's, system of
internal accounting controls taken as a whole is sufficient to meet the broad
objectives of internal accounting control 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 best of the Company's and the
Partnership's knowledge, neither the Company, the Partnership, nor the Lessee,
nor any employee or agent thereof, has made any payment of funds of the
Company, the Partnership, the Lessee, as the case may be, or received or
retained any funds, and no funds of the Company, the Partnership, 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.

10
<PAGE> 12
(aa) Each of the Company, 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 thereon; and no tax deficiency has been asserted against any such
entity, nor does any such entity know of any tax deficiency which is likely to
be asserted against any such entity and 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, respectively. All tax liabilities are adequately provided
for on the respective books of such entities.

(bb) The Company, the Partnership, and the Lessee
maintain insurance (issued by insurers of recognized financial responsibility)
of the types and in the amounts generally deemed adequate for their respective
businesses and, to the best of 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 and the Lessee against
theft, damage, destruction, acts of vandalism, and all other risks customarily
insured against, all of which insurance is in full force and effect.

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

(dd) The Company has obtained the agreement of
Messrs. Feldman and Corcoran that, for a period of 90 days after the date of
the Prospectus, such persons will not, without Morgan Stanley & Co.
Incorporated's prior written consent (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of such shares
of Common Stock.

(ee) Each of the Company, the Partnership, and
their officers, directors or affiliates has not taken and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in or constitute the stabilization or manipulation
of any security of the Company or to facilitate the sale or resale of the
Shares.

(ff) The Shares are and the Common Stock is
registered pursuant to Section 12(b) of the Exchange Act, and the Common Stock
is, and the Shares will be upon issuance, listed on the New York Stock
Exchange.

(gg) 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 or as described in the Registration
Statement.

11
<PAGE> 13
(hh) Except as otherwise disclosed in the
Prospectus, neither the Company, the Partnership, Holdings, nor, to the best
knowledge of the Company and the Partnership, any entity from whom the
Partnership acquired or will acquire the Hotels 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 any real property currently leased or owned (or proposed to be leased
or owned) or by any means controlled by the Company or the Partnership,
including the Hotels (the "Real Property"), except as in material compliance
with applicable laws; to the knowledge of the Company and the Partnership, the
Real Property and the Company's and the Partnership's 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 and the Partnership have
complied with, 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,
neither the Company nor the Partnership 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 agency proceeding that
alleges a violation of any Environmental Laws by the Company or the
Partnership; alleges that: the Company or the Partnership 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 or
the Partnership 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.

(ii) 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 enables 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 an
association taxable as a corporation.

(jj) None of the Company, the Partnership, or the
Lessee is, will become as a result of the transactions contemplated hereby, or
will conduct its respective business 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.

12
<PAGE> 14
(kk) No real estate appraisal firm which prepared
appraisals of the Hotels, nor any environmental engineering firm which prepared
Phase I environmental assessment reports with respect to the Hotels, was
employed for such purpose on a contingent basis or has any substantial interest
in the Company, the Partnership, the Lessee, or any selling entity.

(ll) The Repurchase will not (i) render the
Company unable to pay its indebtedness as such indebtedness becomes due in the
ordinary course of business or (ii) result in the Company's total assets being
less than the sum of the Company's total liabilities plus the amount that would
be needed, if the Company were to be dissolved at the time of the Repurchase,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights on dissolution are superior to those of Promus.

(mm) Neither the Repurchase nor the execution,
delivery and performance of the agreement between the Company and Promus 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, any of the Operative Documents, 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, mortgagee, 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, any of them, any of their respective properties or other assets
or any Current Hotel or the Acquisition Hotels is subject; or any applicable
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to any of the foregoing 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 any of the
foregoing.

(nn) The Company and, to the knowledge of the
Company and the Partnership, Promus have full legal right, power and authority
to enter into the Repurchase Agreement and to consummate the transactions
contemplated thereby. The Repurchase Agreement has been duly authorized,
executed and delivered by the Company and, to the Company's and the
Partnership's knowledge, Promus and constitutes the valid and binding
agreement, 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
or by general equity principles.

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

(pp) The Company has not, directly or indirectly
(i) taken any action designed to cause or to result in, or that has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares or (ii) since the filing of the Registration Statement
(A) sold, bid for, purchased, or paid anyone any compensation for soliciting
purchases of, the Shares or (B) paid or agreed to pay

13
<PAGE> 15
to any person any compensation for soliciting another to purchase any other
securities of the Company.

(qq) To the Company's knowledge, neither the
Company nor any of its subsidiaries nor any employee or agent of the Company or
any Subsidiary has made any payment of funds of the Company or any Subsidiary
or received or retained any funds in violation of any law, rule, or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.

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.

2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedules I and II
hereto opposite its name at U.S. $34.755 a share (the "Purchase Price").

On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 1,530,000
Additional Shares at the Purchase Price. If the U.S. Representatives, on
behalf of the U.S. Underwriters, elect to exercise such option, the U.S.
Representatives shall so notify the Company in writing not later than 30 days
after the date of this Agreement, which notice shall specify the number of
Additional Shares to be purchased by the U.S. Underwriters and the date on
which such shares are to be purchased. Such date may be the same as the Closing
Date (as defined below) but not earlier than the Closing Date nor later than
ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule
I hereto opposite the name of such Underwriter bears to the total number of
U.S. Firm Shares.

The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise.

14
<PAGE> 16
The foregoing sentence shall not apply to (A) the Shares to be sold hereunder,
(B) the issuance by the Company of shares of Common Stock upon the exercise of
outstanding options or additional stock options granted under the Company's
stock option plans consistent with past practices, the conversion of
outstanding shares of the Company's $1.95 Series A Cumulative Convertible
Preferred Stock, the redemption of Units outstanding as of the date of the
Prospectus, (C) the issuance of Common Stock and/or Units in connection with
the acquisition of hotels or (D) transactions by any person other than the
Company relating to shares of Common Stock or other securities acquired in open
market transactions after the completion of the offering of the Shares.

3. TERMS OF PUBLIC OFFERING. The Company is advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Company
is further advised by you that the Shares are to be offered to the public
initially at U.S. $36.625 a share (the "Public Offering Price") and to certain
dealers selected by you at a price that represents a concession not in excess
of U.S. $1.13 a share under the Public Offering Price, and that any Underwriter
may allow, and such dealers may reallow, a concession, not in excess of U.S.
$.10 a share, to any Underwriter or to certain other dealers.

4. PAYMENT AND DELIVERY. Payment for the Firm Shares to
be sold by the Company shall be made in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on June 30, 1997, or at such other time on the same or such other date,
not later than July 8, 1997, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "Closing Date."

Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such
other date, in any event not later than August 7, l997, as shall be designated
in writing by you. The time and date of such payment are hereinafter referred
to as the "Option Closing Date."

Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the Underwriters duly
paid, against payment of the Purchase Price therefor.

5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The
obligations of the Company to sell the Shares to the Underwriters and the
several obligations of the Underwriters to purchase and pay for the Shares on
the Closing Date are subject to the following conditions:

15
<PAGE> 17
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:

(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and

(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company, the Partnership and their respective subsidiaries, taken
as a whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.

(b) The Underwriters shall have received on the Closing Date (i) a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in clause (a)(i) above and (ii) a certificate,
dated the Closing Date and signed by an executive officer of the Company and
the general partner of the Partnership to the effect that the representations
and warranties of the Company and the Partnership contained in this Agreement
are true and correct as of the Closing Date and that the Company and the
Partnership have complied with all of the agreements and satisfied all of the
conditions on their part to be performed or satisfied hereunder on or before
the Closing Date.

The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.

(c) The Underwriters shall have received on the Closing Date, an
opinion of Bracewell & Patterson, L.L.P., counsel for the Company and the
Partnership, dated the Closing Date and addressed to the Underwriters, to the
effect that:

(i) The Company has been duly
incorporated and is validly existing as a corporation in good standing under
Maryland law with all requisite corporate power and authority to own, lease and
operate its properties and to conduct its business. The Company has been duly
qualified to do business and is in good standing as a foreign corporation in
the states of Arizona, California, Colorado, Florida, Georgia, Illinois,
Indiana, Kentucky, Louisiana, Massachusetts, Minnesota, Nebraska, New Jersey,
North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Utah. To such
counsel's knowledge, there are no other jurisdictions in which the ownership or
leasing the Company's properties or the nature or conduct of its business
requires such qualification, except where the failure to do so would not have a
material adverse effect on the financial condition, business, prospects, net
worth or results of operations of the Company and the Partnership, taken as a
whole. To such counsel's knowledge, except for the entities listed on Schedule
II to this

16
<PAGE> 18
Agreement, the Company does not own or control, directly or indirectly, any
corporation, association or control, directly or indirectly, any corporation,
association or other entity.

(ii) The Partnership has been
duly formed and validly existing under the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act") with all requisite partnership power and
authority to own, lease and operate its properties and to conduct its business.
The Partnership has been duly qualified or registered to do business and is in
good standing as a foreign partnership in the states of Arizona, California,
Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana,
Massachusetts, Minnesota, Nebraska, New Jersey, North Carolina, Oklahoma, South
Carolina, Tennessee, Texas and Utah. To such counsel's knowledge, there are no
other jurisdictions in which the ownership or leasing of the Partnership's
properties or the nature or conduct of its business requires such
qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business, prospects, net worth or
results of operations of the Company and the Partnership, taken as a whole.
The Company is the sole general partner of the Partnership and upon its
delivery to the Partnership of the net proceeds from the sale of the Shares
pursuant hereto, will own an approximate 92.5% interest in the Partnership
(92.7% if the Additional Shares are sold).

(iii) DJONT Operations, L.L.C. has
been duly formed and is validly existing as a limited liability company in good
standing under the Delaware Limited Liability Company Act. FCOAM, Inc. has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Texas. DJONT Operations, L.L.C. has all
requisite limited liability company or corporate power and authority to own,
lease and operate its properties and conduct its business. DJONT Operations,
L.L.C. has been duly qualified to do business and is in good standing as a
foreign limited liability company or corporation in the states of Alabama,
Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Kansas,
Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, New Jersey, North
Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Utah. To such
counsel's knowledge, there are no other jurisdictions in which the ownership or
leasing of its properties or the nature or conduct of its business requires
such qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business, prospects, net worth or
results of the Lessee.

(iv) Holdings has been duly
formed and is validly existing as a limited liability company in good standing
under the Delaware Limited Liability Company Act. It has all requisite limited
liability company or corporate power and authority to own, lease and operate
its properties and conduct its business. It has been duly qualified to do
business and is in good standing as a foreign limited liability company or
corporation in the states of Delaware, Alabama, Arizona, California, Florida,
Louisiana, Minnesota, Ohio and Texas. To such counsel's knowledge, there are no
other jurisdictions in which the ownership or leasing of its properties or the
nature or conduct of its business requires such qualification, except where the
failure to do so would not have a material adverse effect on the financial
condition, business, prospects, net worth or results of it or the Lessee.

(v) FCH/DT Leasing, L.L.C. has
been duly formed and is validly existing as a limited liability company in good
standing under the Delaware Limited Liability Company Act. It has all requisite
limited liability company or corporate power and authority to own, lease and

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<PAGE> 19
operate its properties and conduct its business. It has been duly qualified to
do business and is in good standing as a foreign limited liability company or
corporation in the states of Delaware, Maryland, Michigan and Texas. To such
counsel's knowledge, there are no other jurisdictions in which the ownership or
leasing of its properties or the nature or conduct of its business requires
such qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business, prospects, net worth or
results of it or the Lessee.

(vi) FCH/DT Leasing II, L.L.C.
has been duly formed and is validly existing as a limited liability company in
good standing under the Delaware Limited Liability Company Act. It has all
requisite limited liability company or corporate power and authority to own,
lease and operate its properties and conduct its business. It has been duly
qualified to do business and is in good standing as a foreign limited liability
company or corporation in the states of Florida, North Carolina and Tennessee.
To such counsel's knowledge, there are no other jurisdictions in which the
ownership or leasing of its properties or the nature or conduct of its business
requires such qualification, except where the failure to do so would not have a
material adverse effect on the financial condition, business, prospects, net
worth or results of it or the Lessee.

(vii) FCH/SH Leasing, L.L.C. has
been duly formed and is validly existing as a limited liability company in good
standing under the Delaware Limited Liability Company Act. It has all requisite
limited liability company or corporate power and authority to own, lease and
operate its properties and conduct its business. It has made application for
qualification to do business as a foreign limited liability company or
corporation in the states of Arizona, Georgia, Illinois and Texas. To such
counsel's knowledge, there are no other jurisdictions in which the ownership or
leasing of its properties or the nature or conduct of its business requires
such qualification, except where the failure to do so would not have a material
adverse effect on the financial condition, business, prospects, net worth or
results of it or the Lessee.

(viii) DJONT Leasing, L.L.C. has
been duly formed and is validly existing as a limited liability company in good
standing under the Delaware Limited Liability Company Act. It has all requisite
limited liability company or corporate power and authority to own, lease and
operate its properties and conduct its business. It has been duly qualified to
do business and is in good standing as a foreign limited liability company or
corporation in the states of California, Georgia, Kansas, Illinois, Indiana,
Minnesota, Missouri, Nebraska, New Jersey, North Carolina, South Carolina and
Texas. To such counsel's knowledge, there are no other jurisdictions in which
the ownership or leasing of its properties or the nature or conduct of its
business requires such qualification, except where the failure to do so would
not have a material adverse effect on the financial condition, business,
prospects, net worth or results of it or the Lessee.

(ix) The Company has full
corporate right, power and authority to enter into, deliver and perform 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.

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<PAGE> 20
(x) The Partnership has full
partnership right, power and authority to enter into this Agreement and to
consummate the transactions contemplated herein. This Agreement has been duly
authorized, executed and delivered by the Partnership.

(xi) The Partnership has full
partnership right, power and authority to enter into, either for itself or on
behalf of a general partnership, each of the Percentage Leases relating to the
Current Hotels acquired since January 28, 1997 and the Acquisition Hotels. Each
Percentage Lease relating to the Current Hotels acquired since January 28, 1997
has been duly authorized, executed and delivered by the Partnership. Each
Percentage Lease should be construed to create a valid leasehold interest in
favor of the Lessee.

(xii) The Lessee has full limited
liability company right, power and authority to enter into each of the
Percentage Leases and the Management Agreements relating to the Current Hotels
acquired since January 28, 1997 and the Acquisition Hotels and to consummate
the transactions contemplated therein. Each such agreement relating to the
Current Hotels acquired since January 28, 1997 has been duly authorized,
executed and delivered by the Lessee.

(xiii) 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, the execution,
delivery and performance of this Agreement and the consummation by the Company
and the Partnership of the transactions contemplated hereby, the execution,
delivery and performance of the other Operative Documents to which either the
Company or the Partnership is a party and the consummation by the Company
and/or the Partnership, as applicable, of the transactions contemplated
thereby, including without limitation the issuance of Units, has been made or
obtained and is in full force and effect, except such (i) as may be necessary
under state securities or real estate syndication laws or by the NASD in
connection with the purchase and distribution of the Shares by the
Underwriters, as to which such counsel need express no opinion, or (ii) solely
as the same may relate to the Operative Documents, the lack of which would not
have a material adverse effect on the financial condition, business, prospects,
net worth or results of operations of the Company and the Partnership, taken as
a whole.

(xiv) Each consent, approval,
authorization, order, license, certificate, permit, registration, designation
or filing by or with any governmental agency or body necessary for the
execution, delivery and performance of the Operative Documents by the Lessee,
and the consummation by the Lessee of the transactions contemplated thereby,
has been made or obtained or filed and is in full force and effect, except such
(i) as may be necessary under state securities or real estate syndication laws
or by the NASD in connection with the purchase and distribution of the Shares
by the Underwriters, as to which such counsel need express no opinion, or (ii)
the lack of which would not have a material adverse effect on the financial
condition, business, prospects, net worth or results of operations of the
lessee.

(xv) Neither the issuance, sale
and delivery by the Company of the Shares, nor the execution, delivery and
performance of this Agreement by the Company and the Partnership, nor the
consummation of the transactions contemplated hereby by the Company or the
Partnership,

19
<PAGE> 21
will violate any of the terms and provisions of, or constitute a default under,
any of the Operative Documents, the articles of incorporation, bylaws,
certificate of limited partnership or partnership agreement, as the case may
be, of any such entity, as applicable; or, to such counsel's knowledge, under
any material 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 Current Hotel owned by the Partnership or Holdings as of
the date hereof is subject, except for violations or defaults under agreements
or instruments which have since been terminated, cured or otherwise satisfied
or such violations or defaults as would not have a material adverse effect on
the financial condition, business, prospects, net worth or results of
operations of the Company and the Partnership, taken as a whole; or, to such
counsel's knowledge, violate any applicable statute, judgment, decree, order,
rule or regulation of any court or governmental agency or body; or, to such
counsel's knowledge, result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of any of the foregoing, except
for liens, charges, claims or encumbrances which are created by the Operative
Documents or which have since been terminated, cured or otherwise would not
have a material adverse effect on the financial condition, business, prospects,
net worth or results of operations of the Company and the Partnership, taken as
a whole.

(xvi) The Shares to be issued and
sold to the Underwriters hereunder have been validly authorized by the Company.
When issued and delivered against payment therefor as provided in this
Agreement, such Shares will be validly issued, fully paid and nonassessable. No
preemptive rights of shareholders exist with respect to any of the Shares. To
such counsel's knowledge, no person holds a right to require or participate in
the registration under the Securities Act of the Shares pursuant to the
Registration Statement other than persons who have expressly waived such
rights; and, except for Cleveland Finance Associates Limited Partnership,
Robert E. Woolley, Charles M. Sweeney, MarRay-Lex Green, Inc.,
Piscataway-Centennial Associates Limited Partnership and PMB Associates, Ltd.
or as otherwise set forth in the Prospectus, no person holds a right to require
registration under the Securities Act of any shares of Common Stock at any
other time. To such counsel's knowledge, 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 comply in all material
respects with all applicable requirements of Maryland law. All offers and sales
of the Company's capital stock prior to the date hereof were at all relevant
times duly registered under the Securities Act or exempt from the registration
requirements of the Securities Act by reason of Sections 3(b), 4(2) or 4(6)
thereof, and (with the exception of shares of Common Stock and Series A
Preferred Stock registered under the Securities Act, as to which such counsel
need not opine) were duly registered or the subject of an available exemption
from the registration requirements of the applicable state securities or blue
sky laws.

(xvii) The Company's authorized,
issued and outstanding capital stock is as disclosed in the Prospectus. All of
the issued shares of capital stock of the Company have been duly authorized and
validly issued, fully paid and nonassessable. To the knowledge of such counsel,
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.

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<PAGE> 22
(xviii) All of the issued Units have
been duly and validly authorized and issued and are fully paid. None of the
issued Partnership Units have been issued or is owned or held in violation of
any preemptive rights. The Partnership Units to be issued to the Company at the
Closing Time has been duly and validly authorized by the Partnership. When
issued and delivered against payment thereof as provided in the Partnership
Agreement, such Units will be duly and validly issued and fully paid. The
outstanding Partnership Units have been issued, offered and sold in compliance
with all applicable laws (including, without limitation, federal and state
securities laws). The Partnership Units to be issued to the Company at the
Closing Time will be issued, offered and sold in compliance with all applicable
laws (including, without limitation, federal and state securities laws).

(xix) To the knowledge of such
counsel and except as disclosed in the Prospectus, neither the Company nor the
Partnership leases any real property as lessee other than (i) the Partnership
is the owner of a leasehold interest in certain air space related to its hotel
in New Orleans, Louisiana; (ii) Holdings is the lessee for two hotels leased
under ground leases, located in Burlingame (SF Airport), California and
Phoenix, Arizona and the lessee of certain room space in the hotel located in
Cleveland, Ohio; (iii) FelCor/St. Paul Holdings, L.P. is the lessee for one
hotel and one restaurant leased under ground leases located in St. Paul,
Minnesota; (iv) EPT Kansas City (Country Club Plaza), Missouri L.P. is the
lessee for a hotel, leased under a ground lease, located in Kansas City,
Missouri; (v) EPT Meadowlands Limited Partnership is the lessee for a hotel,
leased under a ground lease, located in Secaucus, New Jersey; (vi) EPT San
Antonio Limited Partnership is the lessee for a hotel, leased under a ground
lease, located in San Antonio, Texas; (vii) the Partnership is the lessee of a
parking lot relating to a hotel in San Antonio, Texas; and (viii) the Company
and/or the Partnership are lessees of office space in which the Company's
executive offices are located.

(xx) Neither the Company, the
Partnership nor the Lessee is in violation of its respective articles of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, or limited liability company agreement, as the case may be, and to
the knowledge of such counsel no material default exists and no event has
occurred which, with notice or after the lapse of time to cure or both, would
constitute a material default in the due performance and observance of any
obligation, agreement, term, covenant, or condition contained in any indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement or
instrument known to such counsel to which any such entity is a party or by
which any such entity or any of its properties is subject. To the knowledge of
such counsel, neither the Company, the Partnership nor the Lessee 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 have a material adverse effect on the financial position, results of
operations or business of each such entity, respectively.

(xxi) To such counsel's knowledge
and except as described in the Prospectus, there is not pending or threatened,
any action, suit, proceeding, inquiry or investigation against the Company, the
Partnership, the Lessee or Holdings or any of their respective officers and
directors or to which the properties, assets or rights of any such entity are
subject, which, if determined adversely to any such entity, would individually
or in the aggregate have a material

21
<PAGE> 23
adverse effect on the financial position, results of operations or business of
the Company and the Partnership, taken as a whole.

(xxii) There are no contracts,
leases or other documents known to such counsel 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 such counsel's knowledge, there are no statutes or regulations
applicable to the Company, the Partnership or the Lessee or certificates,
permits or other authorizations from governmental regulatory officials or
bodies required to be obtained or maintained by any such entity, known to such
counsel, of a character required to be disclosed in the Registration Statement
or the Prospectus which have not been so disclosed and properly described
therein. To such counsel's knowledge, all material agreements between the
Company, the Partnership or the Lessee, respectively, and third parties
expressly referenced in the Prospectus, assuming due authorization, execution
and delivery thereof by each other party thereto, are legal, valid and binding
obligations of each such entity, respectively, enforceable against such entity
in accordance with their respective terms, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws of general applicability relating to or affecting creditors' rights and to
general equitable principles.

(xxiii) The Common Stock is listed
for trading on the New York Stock Exchange and the Shares are approved for
listing on the New York Stock Exchange subject to notice of issuance.

(xxiv) The Registration Statement
has become effective under the Securities 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 Securities Act. Other than
financial statements and other financial and operating information data and
schedules contained therein, as to which counsel need express no opinion, the
Registration Statement, all Preliminary Prospectuses, the Prospectus and any
amendment or supplement thereto, appear on their face to conform as to form in
all material respects with the requirements of Form S-3 under the Securities
Act.

(xxv) Such counsel has no reason
to believe that the Registration Statement including the Incorporated
Documents, or any further amendment thereto made prior to the Closing Time, on
its effective date and as of the Closing Time, contained or contains any untrue
statement of a material fact or omitted or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, or any amendment or supplement thereto made
prior to the Closing Time, as of its issue date and as of the Closing Time,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (provided that such counsel need express no belief regarding the
financial statements and related schedules and other financial data contained
in the Registration Statement, any amendment thereto, or the Prospectus, or any
amendment or supplement thereto).

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<PAGE> 24
(xxvi) The Incorporated Documents
(other than the financial statements and related schedules therein, as to which
such counsel need express no opinion), when they were filed with the
Commission, complied on their face as to conform in all material respects with
the requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder; and nothing has come to such counsel's attention which
causes them to believe that any of such Incorporated Documents (other than the
financial statements and related schedules therein, as to which such counsel
need express no belief), when such Incorporated Documents were so filed,
contained an untrue statement of material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made when such documents were so filed, not
misleading.

(xxvii) None of the Company, the
Partnership or the Lessee is, or solely as a result of the consummation of the
transactions contemplated hereby will become, an "investment company," or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.

(xxviii) The descriptions in
or incorporated by reference in the Prospectus or the Preliminary Prospectus of
statutes, regulations, legal or governmental proceedings, the Percentage
Leases, and the Management Agreements therein described present fairly a
summary of the information required to be shown under the Act. The descriptions
in the Registration Statement and the Prospectus or the Preliminary Prospectus
of the contracts, leases and other legal documents therein described present
fairly the information required to be shown.

In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
and jurisdictions in which they are admitted, provided that (1) each such local
counsel is acceptable to the Underwriters, (2) such reliance is expressly
authorized by each opinion so relied upon and a copy of each such opinion is
delivered to the Underwriters and is, in form and substance satisfactory to
them and their counsel, and (3) counsel shall state in their opinion that they
believe that they and the Underwriters are justified in relying thereon. In
addition, in rendering the foregoing opinion, such counsel may rely on, as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company, the Partnership and the Lessee and certificates or
other written statements of officers or departments of various jurisdictions,
having custody of documents respecting the existence or good standing of the
Company, the Partnership and the Lessee provided that copies of all such
opinions, statements or certificates shall be delivered to Underwriters'
counsel. 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.

(d) The Underwriters shall have received on the Closing
Date, an opinion of Hunton & Williams, tax counsel for the Company and the
Partnership, dated the Closing Date and addressed to the Underwriters, to the
effect that the Company is organized in conformity with the requirements for
qualification as a real estate investment trust ("REIT"), pursuant to Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"),
and that the

23
<PAGE> 25
Company's proposed method of operation enables it to meet the requirements for
qualification and taxation as a REIT under the Code. The Company has taken all
necessary action to be treated, effective beginning with the year ended
December 31, 1994, as a REIT under the Code. The Partnership will be treated as
a partnership for federal income purposes and not as a corporation or an
association taxable as a corporation. In rendering the foregoing opinion, such
counsel may rely on, as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company, the Partnership and the
Lessee and certificates or other written statements of officers or departments
of various jurisdictions, having custody of documents respecting the existence
or good standing of the Company, the Partnership and the Lessee provided that
copies of all such opinions, statements or certificates shall be delivered to
Underwriters' counsel.

(e) The Underwriters shall have received on the Closing
Date an opinion of King & Spalding, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in subparagraphs (ix), (xvi)
(but only with respect to the due authorization, issuance and delivery of the
Shares), (xxiv) and (xxv) of paragraph (c) above, and to the effect that the
statements in the Prospectus under the captions "Description of Common Stock"
and "Underwriting" fairly present the information called for with respect to
such legal matters, documents and proceedings and fairly summarize the matters
referred to therein.

With respect to subparagraph (xxv) of paragraph (c) above, Bracewell &
Patterson, L.L.P. and King & Spalding may state that their opinion and belief
are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and review
and discussion of the contents thereof, but are without independent check or
verification, except as specified.

The opinions of Bracewell & Patterson, L.L.P. and Hunton & Williams
described in paragraphs (c) and (d) above shall be rendered to the Underwriters
at the request of the Company and shall so state therein.

(f) The Underwriters shall have received, on each of the
date hereof and the Closing Date, a letter dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the
Underwriters, from each of Coopers & Lybrand L.L.P., Deloitte & Touche LLP,
Arthur Andersen LLP and Ernst & Young LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus; provided that the letter delivered on the Closing
Date shall use a "cut-off date" not earlier than the date hereof.

(g) The "lock-up" agreements, each substantially in the
form of Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions of
shares of Common Stock or certain other securities, delivered to you on or
before the date hereof, shall be in full force and effect on the Closing Date.

The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably

24
<PAGE> 26
request with respect to the good standing of the Company, the due authorization
and issuance of the Additional Shares and other matters related to the issuance
of the Additional Shares.

6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with
each Underwriter as follows:

(a) To furnish to you, without charge, seven conformed
copies of the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York City,
without charge, prior to 3:00 p.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
paragraph (c) below, as many copies of the Prospectus and any supplements and
amendments thereto or to the Registration Statement as you may reasonably
request.

(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such proposed
amendment or supplement and not to file any such proposed amendment or
supplement to which you reasonably object, and to file with the Commission
within the applicable period specified in Rule 424(b) under the Securities Act
any prospectus required to be filed pursuant to such Rule.

(c) If, during such period after the first date of the
public offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales by
an Underwriter or dealer, any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances when the Prospectus
is delivered to a purchaser, not misleading, or if, in the opinion of counsel
for the Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the Commission and
furnish, at its own expense, to the Underwriters and to the dealers (whose
names and addresses you will furnish to the Company) to which Shares may have
been sold by you on behalf of the Underwriters and to any other dealers upon
request, either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will comply
with law.

(d) To endeavor to qualify the Shares for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.

(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering the
twelve-month period ending June 30, 1998 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.

(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to
be paid all expenses incident to the performance of their obligations under
this Agreement, including: (i) the fees, disbursements and

25
<PAGE> 27
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any Preliminary Prospectus, each Preliminary Prospectus
Supplement, the Prospectus Supplement and amendments and supplements to any of
the foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in
the quantities hereinabove specified, (ii) all costs and expenses related to
the transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under state
securities laws as provided in Section 6(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky or Legal
Investment memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of the
offering of the Shares by the National Association of Securities Dealers, Inc.,
(v) all fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all costs
and expenses incident to listing the Shares on the NYSE, (vi) the cost of
printing certificates representing the Shares, (vii) the costs and charges of
any transfer agent, registrar or depositary, (viii) the costs and expenses of
the Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any
such consultants, and the cost of any aircraft chartered in connection with the
road show, and (ix) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided in
this Section, Section 7 entitled "Indemnity and Contribution", and the last
paragraph of Section 9 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock transfer
taxes payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.

7. INDEMNITY AND CONTRIBUTION. (a) The Company and the
Partnership, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any amendment
thereof, any Preliminary Prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon

26
<PAGE> 28
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.

(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Partnership, their respective
directors and officers who sign the Registration Statement and each person, if
any, who controls the Company or the Partnership within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any Preliminary Prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendments or supplements thereto.

(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to paragraph (a) or (b) of this Section 7,
such person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Underwriters and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act and (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, the Partnership, their
respective directors and officers who sign the Registration Statement and each
person, if any, who controls the Company or the Partnership within the meaning
of either such Section. In the case of any such separate firm for the
Underwriters and such control persons of any Underwriters, such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated. In the case of any
such separate firm for the Company and the Partnership, and such directors,
officers and control persons of the Company and the Partnership, such firm
shall be designated in writing by the Company. 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

27
<PAGE> 29
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. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.

(d) To the extent the indemnification provided for in paragraph
(a) or (b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Partnership on the one hand and the Underwriters on the
other hand in connection with the offering of the Shares shall be deemed to be
in the same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by the Company and the Partnership
and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Shares. The
relative fault of the Company and the Partnership on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company, the Partnership or by the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective number of Shares they have purchased hereunder, and not
joint.

(e) The Company, the Partnership and the Underwriters agree that
it would not be just or equitable if contribution pursuant to this Section 7
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 that does
not take account of the equitable considerations referred to in paragraph (d)
of this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims,

28
<PAGE> 30
damages and liabilities referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, 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 that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.

(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company and the Partnership contained in this Agreement shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, or the Company, the Partnership, their
respective officers or directors or any person controlling the Company or the
Partnership and (iii) acceptance of and payment for any of the Shares.

8. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a) (i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus.

9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.

If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I or Schedule
II bears to the aggregate number of Firm Shares set forth opposite the

29
<PAGE> 31
names of all such non-defaulting Underwriters, or in such other proportions as
you may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or
the Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on
the Option Closing Date, any Underwriter or Underwriters shall fail or refuse
to purchase Additional Shares and the aggregate number of Additional Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Additional Shares to be purchased, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting Underwriters would have been
obligated to purchase in the absence of such default. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.

If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.

10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.

11. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.

12. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.

30
<PAGE> 32
Very truly yours,

FELCOR SUITE HOTELS, INC.

By:
--------------------------------
Lawrence D. Robinson
Senior Vice President and
General Counsel

FELCOR SUITES LIMITED PARTNERSHIP

By: FELCOR SUITE HOTELS, INC., General
Partner

By:
--------------------------------
Lawrence D. Robinson
Senior Vice President
and General Counsel

<PAGE> 33
Accepted as of the date hereof

Morgan Stanley & Co. Incorporated
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Montgomery Securities
PaineWebber Incorporated
Salomon Brothers Inc

Acting severally on behalf
of themselves and the several
U.S. Underwriters named in
Schedule I hereto.

By Morgan Stanley & Co.
Incorporated

By
------------------------------
Name:
Title:

Morgan Stanley & Co. International Limited
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Montgomery Securities
PaineWebber International (U.K.) Ltd.
Salomon Brothers International Limited

Acting severally on behalf
of themselves and the several
International Underwriters
named in Schedule II hereto.

By Morgan Stanley & Co.
International Limited

By
------------------------------
Name:
Title:
<PAGE> 34
SCHEDULE I

U.S. Underwriters

<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated 1,267,200
Smith Barney Inc. 1,267,200
Alex. Brown & Sons Incorporated 806,400
Montgomery Securities 806,400
PaineWebber Incorporated 806,400
Salomon Brothers Inc 806,400
Chase Securities Inc. 400,000
CIBC Wood Gundy Securities Corp. 200,000
EVEREN Securities, Inc. 200,000
Legg Mason Wood Walker, Incorporated 200,000
Lehman Brothers Inc. 400,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 400,000
Morgan Keegan & Company, Inc. 200,000
Societe Generale Securities Corporation 400,000

---------
Total U.S. Firm Shares 8,160,000
=========
</TABLE>
<PAGE> 35
SCHEDULE II

International Underwriters

<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. International Limited 448,800
Smith Barney Inc. 448,800
Alex. Brown & Sons Incorporated 285,600
Montgomery Securities 285,600
PaineWebber International (U.K.) Ltd. 285,600
Salomon Brothers International Limited 285,600

---------
Total International Firm Shares 2,040,000
=========
</TABLE>
<PAGE> 36
SCHEDULE III

Subsidiaries of FelCor Suite Hotels, Inc.

Subsidiaries of FelCor Suites Limited Partnership
<PAGE> 37
Exhibit A

Form of Lockup Agreement

<PAGE> 1
EXHIBIT 3.1.2

ARTICLES OF AMENDMENT
OF
FELCOR SUITE HOTELS, INC.

FelCor Suite Hotels, Inc., a Maryland corporation (the "Corporation"),
certifies as follows:

FIRST: The Corporation desires to amend its Charter as currently in
effect.

SECOND: Article IX of the Charter of the Corporation is hereby amended
as set forth below:

The following shall be deleted:

ARTICLE IX.
Limitation on Indebtedness

The Corporation may not incur or suffer to exist as of the end of any
month Indebtedness (as defined below) in an amount in excess of 40% of
the Corporation's investment in hotel properties, at its cost, after
giving effect to the Corporation's use of proceeds from any
Indebtedness. The Corporation's investment in hotel properties shall
include all investments by the Corporation constituting, evidencing or
secured by an interest in property, whether tangible or intangible and
whether real, personal or mixed, that is used or intended for use in,
or in any manner connected with or relating to, the ownership or
leasing of hotels. In determining its cost of such investments, there
shall be included (1) the amount of all cash paid and the value (as
determined by the Board of Directors for purposes of such investment)
of any other property transferred therefor by the Corporation, (2) the
amount of all Indebtedness and other obligations assumed or incurred
by the Corporation or to which the Corporation takes subject, and (3)
the value (as determined by the Board of Directors for the purposes of
such investment) of all equity securities of which the issuer is an
entity that is, or upon such investment will be, included within the
Corporation and which are issued (otherwise than for cash) to, or
retained by, any person other than the Corporation in connection with
such investment. For purposes of the foregoing restriction, (A)
"Indebtedness" of the Corporation shall mean the consolidated
liabilities of the Corporation for borrowed money (including all notes
payable and drafts accepted representing extensions of credit) and all
obligations evidenced by bonds, debentures, notes or similar
instruments on which interest charges are customarily paid, including
obligations under capital leases, and (B) "Corporation" shall mean
this Corporation and any subsidiary entity consolidated therewith,
under generally accepted accounting principals.
<PAGE> 2
THIRD: The amendment of the Corporation's Charter set forth in
these Articles of Amendment was advised by the Board of Directors of
the Corporation and was approved by the shareholders of the
Corporation.

-2-
<PAGE> 3
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed in its name and on its behalf on the 16th day of June,
1997, by its Senior Vice President, who acknowledges that these Articles of
Amendment are the act of the Corporation and certifies that, to the best of his
knowledge, information and belief and under penalties for perjury, all matters
and facts contained in these Articles of Amendment are true in all material
respects.

ATTEST: FELCOR SUITE HOTELS, INC.

/s/ Thomas L. Wiese By: /s/ Lawrence D. Robinson (SEAL)
- --------------------------------- -------------------------------
Thomas L. Wiese Lawrence D. Robinson
Assistant Secretary Senior Vice President

-3-

<PAGE> 1
EXHIBIT 10.24

================================================================================

CONTRACT FOR PURCHASE AND SALE OF HOTELS

by and Among

ITT SHERATON CORPORATION,
SHERATON SAVANNAH CORP.,
SHERATON PEACHTREE CORP.,
SHERATON CRESCENT CORP.,
SHERATON DALLAS CORP.,
SHERATON GATEWAY SUITES O'HARE
INVESTMENT PARTNERSHIP

and

FELCOR SUITES LIMITED PARTNERSHIP

Dated as of June 5, 1997

==============================-=================================================

<PAGE> 2
TABLE OF CONTENTS

ARTICLE I

Definitions
-----------

SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Definitions Generally . . . . . . . . . . . . . . . . . . 7

ARTICLE II

Purchase and Sale; Assumption of Liabilities
--------------------------------------------

SECTION 2.01. Purchase and Sale . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.02. Assumed Liabilities . . . . . . . . . . . . . . . . . . . 8

ARTICLE III

Purchase Price
--------------

SECTION 3.01. Deposit . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.02. Cash to Close . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.03. Allocations . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE IV

Seller's Deliveries; Buyer's Due Diligence
------------------------------------------

SECTION 4.01. Property Records . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.02. Inspection of Hotels;
Confidentiality Agreements . . . . . . . . . . . . . . 10
SECTION 4.03. Estoppel Certificates . . . . . . . . . . . . . . . . . 12
SECTION 4.04. Access to Hotels . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.05. Access to Financial Information . . . . . . . . . . . . . 13

ARTICLE V

Seller's Representations
------------------------

SECTION 5.01. Seller's Existence . . . . . . . . . . . . . . . . . . . 13
</TABLE>

-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.02. Survival of Representations and Covenants . . . . . . . . 16

SECTION 5.03. No Other Representations and
Warranties by Seller . . . . . . . . . . . . . . . . . 17
SECTION 5.04. Obligation To Update . . . . . . . . . . . . . . . . . . 17

ARTICLE VI

Covenants and Affirmative Obligations
-------------------------------------

SECTION 6.01. Maintenance of Property . . . . . . . . . . . . . . . . . 18
SECTION 6.02. Assumed Contracts . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.03. No Further Encumbrances . . . . . . . . . . . . . . . . . 18
SECTION 6.04. Compliance with Obligations . . . . . . . . . . . . . . . 18
SECTION 6.05. Notice of Change in Governmental
Requirements . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.06. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.07. Liquor License . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.08. Capital Expenditures; Dallas
Hotel . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.09. Seller's Indemnity . . . . . . . . . . . . . . . . . . . 20
SECTION 6.10. Buyer's Indemnity . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.11. Indemnity Procedures Relating to
Third Party Claims; Exclusivity . . . . . . . . . . . . 20
SECTION 6.12. Additional Buyer Obligations . . . . . . . . . . . . . . 21
SECTION 6.13. Seller Approval Rights . . . . . . . . . . . . . . . . . 22

ARTICLE VII

Conditions
----------

SECTION 7.01. Conditions to Buyer's Obligation
To Close . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 7.02. Failure of Buyer's Conditions . . . . . . . . . . . . . . 23
SECTION 7.03. Conditions to Seller's Obligation to Close . . . . . . . 24
SECTION 7.04. Failure of Seller's Conditions . . . . . . . . . . . . . 24
</TABLE>

-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII

Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE IX

Closing Documents
-----------------

SECTION 9.01. Seller's Closing Documents . . . . . . . . . . . . . . . 25
SECTION 9.02. Buyer's Closing Documents . . . . . . . . . . . . . . . 26

ARTICLE X

Closing Procedure
-----------------

SECTION 10.01. Transfer of Funds . . . . . . . . . . . . . . . . . . . . 26
SECTION 10.02. Delivery of Documents . . . . . . . . . . . . . . . . . . 26
SECTION 10.03. Disbursement of Funds and
Documents . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE XI

Prorations and Closing Costs
----------------------------

SECTION 11.01. Prorations . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.02. Seller's Closing Costs . . . . . . . . . . . . . . . . . 32
SECTION 11.03. Buyer's Closing Costs . . . . . . . . . . . . . . . . . . 32
SECTION 11.04. Accounts Payable . . . . . . . . . . . . . . . . . . . . 32

ARTICLE XII

Possession; Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>

-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XIII

Condemnation and Damage by Casualty
-----------------------------------

SECTION 13.01. Condemnation . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 13.02. Damage by Casualty . . . . . . . . . . . . . . . . . . . 33

ARTICLE XIV

Default
-------

SECTION 14.01. Buyer's Default; Liquidated
Damages . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 14.02. Seller's Default . . . . . . . . . . . . . . . . . . . . 34

ARTICLE XV

Real Estate and Other Commissions and Fees . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE XVI

Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

ARTICLE XVII

Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

ARTICLE XVIII

Escrow Agent
------------

SECTION 18.01. Duties and Authorization . . . . . . . . . . . . . . . . 37
SECTION 18.02. Liability . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 18.03. Hold Harmless . . . . . . . . . . . . . . . . . . . . . 38
SECTION 18.04. FDIC Coverage . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>

-iv-
<PAGE> 6

<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XIX

Miscellaneous
-------------

SECTION 19.01. Counterparts . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 19.02. Section and Paragraph Headings . . . . . . . . . . . . . 38
SECTION 19.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 19.04. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . 39
SECTION 19.05. Governing Law . . . . . . . . . . . . . . . . . . . . . 39
SECTION 19.06. Entire Contract . . . . . . . . . . . . . . . . . . . . . 39
SECTION 19.07. Time of the Essence . . . . . . . . . . . . . . . . . . 39
SECTION 19.08. Computation of Time . . . . . . . . . . . . . . . . . . . 39
SECTION 19.09. Successors and Assigns . . . . . . . . . . . . . . . . . 40
SECTION 19.10. No Party Draftsman . . . . . . . . . . . . . . . . . . . 40
SECTION 19.11. No Third Party Benefitted . . . . . . . . . . . . . . . . 40
</TABLE>

EXHIBIT A Title Description
EXHIBIT B Liens and Exceptions
EXHIBIT C Assumed Contracts
EXHIBIT D Opinions on Property
EXHIBIT E Delivered Records
EXHIBIT F Form of Estoppel Certificate
EXHIBIT G Litigation
EXHIBIT H 1997 Capital Budget
EXHIBIT I 1997 and 1998 Operating Forecast
EXHIBIT J [Intentionally Omitted]
EXHIBIT K Form of Management Agreement
EXHIBIT L Form of Lease Agreement
EXHIBIT M Form of Loan Agreement
EXHIBIT N Nondisturbance Agreement

-v-
<PAGE> 7

This CONTRACT FOR PURCHASE AND SALE OF HOTELS (this
"Contract") is made and entered into as of June 5, 1997
(the "Effective Date"), by and among ITT SHERATON
CORPORATION, a Delaware corporation ("Sheraton"), the
Subsidiaries of ITT Sheraton Corporation listed in the
signature pages hereto (the "Sheraton Subsidiaries")
and FELCOR SUITES LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Buyer").

In consideration of the mutual agreements herein set forth,
the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Definitions. The following terms when used in
this Contract shall have the following meanings:

Affiliate. With respect to any Person means any other Person
directly or indirectly controlling, controlled by or under common control with
such specified Person or which is a director, officer, general partner or
managing member of such specified Person.

Assignment. The Assignment and Bill of Sale which conveys all
of Seller's right, title and interest in and to the Personal Property to Buyer
or its designee, with full guaranty of title, subject only to Permitted
Exceptions and Permitted Liens.

Assumed Contracts. All service contracts, leases, installment
sales contracts, sales and purchase orders, maintenance agreements, employment
agreements and other agreements relating to the Property or the use and
operation of the Hotels, including those listed on the attached Exhibit C.

Attorneys' Fees. All reasonable fees charged by attorneys or
law firms for legal services and the services of any paralegals, legal
assistant or law clerks, including without limitation fees charged for
representation in negotiations, at the trial level and in all appeals.
<PAGE> 8
2

Buyer's Address. 545 East John Carpenter Freeway, Suite 1300,
Irving, Texas 75062. Telephone: (972) 444-4900; Telecopy: (972) 444-4949.

Buyer's Attorney. Thomas E. Davis. Buyer's attorney's
address is: Bracewell & Patterson LLP, Lincoln Plaza, 500 North Akard Street,
Suite 4000, Dallas, Texas 75201-3387. Telephone: (214) 740-4000; Telecopy:
(214) 740- 4010.

Cash to Close. The Purchase Price plus all of Buyer's closing
costs specified herein, subject to the adjustments and prorations set forth
herein, less the Deposit.

Closing. The delivery of the Assignment and the Deeds to
Buyer concurrently with the delivery of the Purchase Price to Seller and the
consummation of the other transactions contemplated hereby.

Closing Date. The date of consummation of the transactions
contemplated hereby in accordance with the terms of this Contract; provided
that in no event shall the Closing Date occur later than August 1, 1997.

control. With respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have correlative meanings.

Deeds. Collectively, the special warranty deeds (or
equivalent) by which Seller conveys the Hotels, together with the respective
Improvements thereon to Buyer.

Deposit. At Buyer's sole option, either (i) an irrevocable
letter of credit in the face amount of $5,000,000 naming Sheraton as the payee,
in a form and from a financial institution acceptable to Seller and Buyer or
(ii) the sum of $5,000,000 cash, together with all interest earned on said sum
while it is held in escrow by Escrow Agent in accordance with this Contract.
Except as specifically provided herein, any interest earned on the Deposit
shall be paid to Buyer at Closing.

Effective Date. The date this Contract is fully executed by
all parties hereto (including the Escrow Agent) and a fully executed
counterpart thereof is delivered to Buyer and Buyer's Attorney.
<PAGE> 9
3

Escrow Agent. The Title Company.

Governmental Authority. Any Federal, state, county, municipal
or other governmental department, entity, authority, commission, board, bureau,
court, agency or any instrumentality of any of them.

Governmental Requirement. Any law, statute, code, ordinance,
rule, regulation, permit, certificate, license, authorization, agreement or
requirement now existing of any Governmental Authority.

Hazardous Material. Any flammable or explosive materials,
petroleum or petroleum products, oil, crude oil, natural gas or synthetic gas
usable for fuel, radioactive materials, asbestos, polychlorinated biphenyls
(PCB's), hazardous wastes or substances or toxic wastes or substances,
including, without limitation, any substances now or hereafter defined as or
included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "toxic materials" or "toxic substances" under any
applicable Governmental Requirement.

Hotels. Collectively, the existing (i) 395-room hotel located
on the College Park Land, (ii) 277-room hotel located on the Atlanta Land,
(iii) 297-room hotel located on the Rosemont Land, (iv) 342-room hotel located
on the Phoenix Land and (v) 545-room hotel located on the Dallas Land together,
in each case, with all Land, Improvements and Personal Property related
thereto. Each of the foregoing is referred to individually herein as a
"Hotel".

Improvements. The Hotels together with and including all
structures, fixtures or other improvements on, over or beneath the Land.

Land. Collectively, the real property located in (i) College
Park, Clayton County, Georgia (the "College Park Land"), more particularly
described in the attached Exhibit A-1, (ii) Atlanta, Cobb County, Georgia (the
"Atlanta Land"), more particularly described in the attached Exhibit A-2, (iii)
Rosemont, Cook County, Illinois (the "Rosemont Land"), more particularly
described in the attached Exhibit A-3 (iv) Phoenix, Maricopa County, Arizona
(the "Phoenix Land"), more particularly described in the attached Exhibit A-4
and (v) Dallas, Dallas County, Texas, more particularly described in the
attached Exhibit A-5.
<PAGE> 10
4

Lease Agreements. The lease agreements to be entered into
with respect to each Hotel substantially in the form of Exhibit L hereto.

Lessee. The lessee under the Lease Agreements or any
successor to such entity as the holder of the lessee's interest under the Lease
Agreements.

Loan Agreement. A revolving credit agreement substantially in
the form of Exhibit M hereto.

Management Agreement. The Management Agreements to be entered
into with respect to each Hotel substantially in the form of Exhibit K hereto.

Manager. ITT Sheraton Operating Corporation, as Manager under
the Management Agreement.

Material Damage. Unrepaired damage as a result of fire or
other casualty to all or any portion of any Hotel having an aggregate value in
excess of $4,000,000.

Material Portion. All or any portion of any Hotel that
represents at least 25% of the assessed value for Tax purposes of such Hotel.

Net Operating Income. The "Net Operating Income" for the
Hotel located on the Dallas Land, as such term is defined in the Lease
Agreement for such Hotel as in effect on the Closing Date.

1997 Capital Budget. The 1997 Budget of Capital Expenditures
for the each of Hotels attached as Exhibit H.

1997 Operating Budget. The 1997 Budget of operating expenses
for each of the Hotels attached as Exhibit I.

NonDisturbance Agreement. A Nondisturbance and Attornment
Agreement substantially in the form of Exhibit N hereto.

Permitted Exceptions. The title exceptions (including those
described in Exhibits B-1 through B-5 hereto) described in the Delivered
Records or otherwise identified by Buyer prior to the Review Period (including
the pending condemnation proceeding with respect to a road widening at the
Phoenix Land) if not objected to in writing by Buyer prior to, or concurrent
with, Buyer's termination of this Contract pursuant to Section 4.02(b).
<PAGE> 11
5

Permitted Liens. All liens, security interests, claims,
charges and encumbrances (i) pertaining to the Assumed Contracts, (ii) which
are mechanics', carriers', workmen's, repairmen's or other like liens arising
or incurred in the ordinary course of business for amounts not due and payable,
(iii) arising under conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business, (iv) for Taxes,
assessments and other governmental charges (A) which are not due and payable,
(B) which may thereafter be paid without penalty or (C) which are being
contested in good faith by appropriate proceedings and (v) which are other
imperfections of title or encumbrances expressly permitted hereunder or which
do not materially impair the continued use and operation of the Hotel to which
they relate.

Personal Property. All items of personal property located on
the Land or owned by Seller and used in connection with the operation of the
Hotels, but excluding therefrom the personal property that belongs to tenants,
guests, contracting parties under the Assumed Contracts and vending
arrangements, and employees. Such items of personal property shall include,
but not be limited to: (i) all fixtures, furnishings, building materials,
machinery, equipment, telephones, televisions, computers, glass, tools, silver,
china, glassware, utensils, towels, linens, signs, transferable licenses and
permits, telephone numbers, trade names (but excluding the words "Sheraton",
"Sheraton Suites" and any other trade names currently used in respect of the
Property that are also currently used in respect of other property owned by
Seller), motor vehicles, inventories, food and beverages in process and all
other articles of personal property now or hereafter attached or appurtenant to
the Land and Improvements or used in connection with the use or operation
thereof, including any Property Records, drawings, as-built plans and
specifications and all permits and warranties in the possession of Seller, (ii)
all attachments, appliances, fittings, lighting fixtures, doors, cabinets,
elevators, flagpoles, sprinkler, plumbing, heating, air conditioning,
electrical, ventilating, lighting, incinerating, vacuum cleaning, refrigerating
and cooling systems, vaults, safes, carpets, floor coverings, together with all
parts and supplies pertaining thereto, and (iii) the Property Records.

Property. Collectively, the Hotels, the Land, the
Improvements and the Personal Property.
<PAGE> 12
6

Property Records. The Property Records shall be each of the
following, to the extent such is in the Seller's possession or control:

(a) all operating statements (including income and expense
statements) and financial statements (for the most recent three-year
period), existing operating capital expenditure budgets and other
books and records for the Property, including all guest registration
cards, guest transcripts, guest histories and all other available
guest information;

(b) all engineering and architectural plans, specifications
and drawings and as-built plans pertaining to the Property (the
"Plans");

(c) all advance reservations and trade-out agreements for
hotel rooms, meetings, conventions, and the use of facilities for
banquets, parties, affairs and the like which extend to a period
beyond the Closing Date;

(d) copies of all assignable guarantees and warranties issued
or made in connection with the construction, improvement, alteration,
equipment and repair of any improvements comprising a part of the
Property, schedule of work currently in progress and expected
completion dates;

(e) copies of all certificates of occupancy, licenses,
permits, authorizations and approvals required by law for the current
operation of the Property, and issued by all Governmental Authorities
having jurisdiction and copies of all certificates issued by the local
board of fire underwriters (or other body exercising similar
functions);

(f) copies of all Assumed Contracts;

(g) all existing environmental audits, engineering reports,
ADA compliance reports, similar studies, notices and information
concerning the condition of the Improvements and any Hazardous
Material on or about the Property; and

(h) copies of all existing title reports, surveys and
engineering and structural reports in respect of the Property.
<PAGE> 13
7

Purchase Price. Two hundred million Dollars ($200,000,000).

Seller. With respect to each Hotel, each Sheraton Subsidiary
which has any right, title or interest in or to such Hotel and Sheraton (it
being understood that wherever the term "Seller" is used, Sheraton and such
Sheraton Subsidiary are jointly and severally responsible and liable with
respect to the statement, agreement covenant, representation and/or warranty
being made pursuant to the terms of this Contract).

Seller's Address. ITT Sheraton Corporation, 60 State Street,
Boston, Massachusetts 02109 (Telephone: (617) 367-3600) Attention: General
Counsel.

Seller's Attorney. Kevin J. Grehan at the following mailing
address: Cravath, Swaine & Moore, 825 Eighth Avenue, New York, NY 10019
(Telephone: (212) 474-1490) and Patrick Donnelly at the following mailing
address: ITT Corporation, 1330 Avenue of the Americas, New York 10019
(Telephone: (212) 258-1730).

Tax. Any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, franchise, capital, paid-up
capital, profits, greenmail, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any governmental
authority (domestic or foreign) responsible for the imposition of any such tax.

Title Company. Commonwealth Land Title Insurance Company,
14643 Dallas Parkway, Suite 101, LB 61, Dallas Texas 75240, Attention: Rick
Wilson or LeAnn Turrentine.

SECTION 1.02. Definitions Generally. Definitions in this
Contract apply equally to both the singular and plural forms of the defined
terms. The words "include" and "including" shall be deemed to be followed by
the phrase "without limitation" when such phrase does not otherwise appear.
The terms "herein", "hereof" and "hereunder" and other words of similar import
refer to this Contract as a whole and not to any particular section, paragraph
or subdivision. All article, section, paragraph, clause, exhibit or schedule
references not attributed to a
<PAGE> 14
8

particular document shall be references to such parts of this Contract.

ARTICLE II

Purchase and Sale; Assumption of Liabilities

SECTION 2.01. Purchase and Sale. On the terms and subject to
the conditions set forth herein, Seller agrees to sell and convey the Property
to Buyer and Buyer agrees to purchase and acquire the Property from Seller.

SECTION 2.02. Assumed Liabilities. (a) Buyer shall assume as
of the Closing Date and shall pay, perform and discharge when due, and shall
indemnify Seller and its Affiliates against and hold them harmless from, all
obligations and liabilities of whatever kind and nature, primary or secondary,
direct or indirect, absolute or contingent, known or unknown, of the Seller
arising out of or attributable to the ownership or operation of the Property
(including the use or operation of each Hotel) on or after the Closing Date
(the "Assumed Liabilities"), including, without limitation, the following:

(i) all obligations and liabilities of the Seller under the
Assumed Contracts that have not accrued prior to the Closing Date;

(ii) all liabilities to customers with respect to all
unrefunded cash deposits paid by such customers to Seller prior to the
Closing Date and paid by Seller to Buyer pursuant to Section 11.01
hereof.

(iii) all claims, obligations and liabilities relating to the
use or operation of the Hotels or arising out of Property at any time
on or after the Closing Date;

(iv) all obligations and liabilities with respect to Taxes
relating to the Property with respect to any period that is not a
Pre-Closing Tax Period; provided, however, that the Buyer will not
assume liability for any Taxes relating to the Property with respect
to any Pre-Closing Tax Period except as set forth in Section 11.01 of
this Contract. A "Pre-Closing Tax Period" shall mean all taxable
periods ending on or before the Closing Date and the portion ending on
the Closing Date of any taxable
<PAGE> 15
9

period that includes (but does not end on) such day. In the case of
any taxable period that includes (but does not end on) the Closing
Date (a "Straddle Period"): (i) real, personal and intangible
property Taxes ("Property Taxes") relating to the Property with
respect to the Pre-Closing Tax Period shall be equal to the amount of
such Property Taxes for the entire Straddle Period multiplied by a
fraction, the numerator of which is the number of days in the
Pre-Closing Tax Period and the denominator of which is the number of
days in the applicable Straddle Period and (ii) Taxes (other than
Property Taxes) relating to the Property with respect to the
Pre-Closing Tax Period shall be computed as if such taxable period
ended as of the close of business on the Closing Date; and

(v) all capital expenditures made or incurred by Seller (or
to be made by Seller) from and after January 1, 1997 in accordance
with the 1997 Capital Budget to the extent that such amounts exceed
$3,000,000, regardless of whether such amount was paid or incurred
prior to the Closing Date.

Buyer's obligations under this Section 2.02 will not be subject to offset or
reduction by reason of any actual or alleged breach of any representation,
warranty or covenant contained in this Contract or any document delivered in
connection herewith or any right or alleged right to indemnification hereunder.

ARTICLE III

Purchase Price

The Purchase Price shall be paid as follows:

SECTION 3.01. Deposit. Concurrently with the execution of
this Contract by Buyer, Buyer shall deliver to Escrow Agent the Deposit,
together with a completed and executed W-9 Form for the Buyer. Provided that
Buyer has not terminated this Contract pursuant to Section 4.02(b) on or before
the last day of the Review Period (as defined below), the Deposit shall become
nonrefundable to Buyer except as expressly set forth in Section 7.02, Article
XIII or Article XIV hereof.

SECTION 3.02. Cash to Close. The Cash to Close shall be paid
to Seller in accordance with the closing procedure hereinafter set forth.
<PAGE> 16
10

SECTION 3.03. Allocations. Seller shall determine, in its
sole discretion, the allocation of the Purchase Price among the Hotels
consistent with Section 1060 of the Internal Revenue Code, as amended and the
regulations thereunder. Seller shall deliver to Buyer the allocation of the
Purchase Price among the Hotels and, as a component thereof, a proposed
allocation between the real property and Personal Property at each Hotel (the
"Proposed Allocation") as soon as practicable after the Closing Date. Within
10 days after the receipt of such Proposed Allocation, Buyer shall propose any
changes to such Proposed Allocation (but not with respect to any allocation
other than Seller's allocation among Land, Improvements and Personal Property).
Any disputes with respect to the Proposed Allocation which Buyer and Seller,
acting in good faith, are thereafter unable to resolve shall be conclusively
resolved by an independent appraisal firm mutually acceptable to Buyer and
Seller. The fees and expenses of such appraisal firm shall be borne equally by
Seller and Buyer. Neither Buyer nor Seller (nor any of their respective
affiliates or representatives) shall take any position on any tax return,
including Form 8594, or with any taxing authority or in any judicial proceeding
that is inconsistent with the allocation of the Purchase Price as finally
determined pursuant to this Section 3.03. Buyer shall deliver to Seller, and
Seller shall deliver to Buyer, a signed copy of Form 8594 at least 10 days
prior to the filing thereof.

ARTICLE IV

Seller's Deliveries; Buyer's Due Diligence

SECTION 4.01. Property Records. Seller has previously
delivered or made available to Buyer the items described on the attached
Exhibit E (the "Delivered Records"), which items have been reviewed by Buyer.
If Seller obtains or becomes aware of any additional Property Records, Seller
shall deliver or make available such additional Property Records to Buyer as
soon as practicable, but in no event later than June 15, 1997, and such records
shall thereupon become, and be deemed to be part of, the Delivered Records.

SECTION 4.02. Inspection of Hotels; Confidentiality
Agreements. (a) During the period from the Execution Date through and
including June 20, 1997 (the "Review Period"), Buyer and Buyer's agents and
representatives shall be given reasonable access to the Hotels during normal
business hours and shall have the right
<PAGE> 17
11

to physically inspect the Property and to conduct, at Buyer's sole cost and
expense, soil tests and other nondestructive inspections provided that such
tests and inspections shall be (i) coordinated through Seller in advance, (ii)
performed by persons reasonably satisfactory to Seller and who shall have
obtained or be otherwise covered by adequate insurance for any costs, losses or
damages arising while on Seller's property and (iii) performed in a manner that
does not unreasonably interfere with the use and occupancy of the Hotels by
Seller, by guests or patrons of the Hotels, or by tenants. In the event that
the Closing does not occur for any reason, Buyer shall have the obligation
promptly to restore (at Buyer's expense) the Property to the condition of such
Property prior to Buyer's entry (other than changes in the condition of the
Property not caused by Buyer's entry), which obligation shall survive any
termination of this Contract. Buyer covenants and agrees that the Property
shall not be damaged or impaired in any way as the result of its activities on
the Hotels' premises, and hereby agrees to indemnify and hold Seller and its
Affiliates harmless from and against any claims, causes of action, damages and
expenses (including attorneys' fees) to the extent incident to, resulting from
or in any way arising out of (i) Buyer's presence (or the presence of) Buyer's
agents or representatives in, on or about the Property, or (ii) out of any test
or inspection conducted by Buyer on the Property. Such indemnity shall survive
the Closing or any termination of this Contract and not be merged therein.

(b) Buyer shall have until the end of the Review Period to
notify Seller in writing of any material adverse conditions relating solely to
(i) the state of title with respect to the Property,(ii) the status of
environmental compliance of the Property or (iii) the structural or engineering
aspects of the Improvements (including the Hotels) as the property that Buyer
has discovered as a result of Buyer's inspections pursuant to Section 4.02(a)
or Buyer's review of the Delivered Records. If, on or before the end of the
Review Period, Buyer shall notify Seller of any
<PAGE> 18
12

such conditions, Seller may elect to cure such conditions within 10 days after
the date on which Seller received notice of Buyer's objections and, following
such election, shall use reasonable efforts to cure such conditions no more
than 90 days following such election. If Seller shall not have cured such
conditions within such 90 days (the "Cure Period") to Buyer's reasonable
satisfaction, Buyer may terminate this Contract by written notice to Seller at
any time within 10 days after the expiration of the Cure Period. If Buyer
fails to notify Seller of any such conditions on or before the end of the
Review Period or if Buyer fails to notify Seller that it is not satisfied with
the cure of any adverse conditions within 10 days after the Cure Period, Buyer
shall be deemed to have approved all such matters and to have waived its right
to terminate this Contract under this Section 4.02. If Buyer terminates this
Contract pursuant to this Section, Seller shall be entitled to retain (and, to
the extent it has not already done so, Buyer shall deliver to Seller) all
Delivered Records, including all reports and studies prepared by third parties
relating to the Property resulting from the inspection of the Property and all
documents delivered to Buyer pursuant to Section 4.01 hereof. The Deposit
shall be returned to Buyer within five days after any such termination and
neither party shall have any further rights or obligations one to the other,
except for the indemnity set forth in Section 4.02(a). If Buyer does not
terminate this Contract as provided herein, Buyer shall be deemed to have
waived the right to terminate this Contract under this Section and shall be
deemed to have accepted and approved the condition of the Property, subject to
the remaining terms of this Contract and the Deposit shall become nonrefundable
to Buyer, subject only to Section 7.02, Article XIII and Article XIV hereof.

(c) The terms of this Contract and all information furnished
by Seller to Buyer in accordance with the provisions of this Contract or
obtained by Buyer in the course of its investigations shall be treated as
confidential information by Buyer, except that Buyer may disclose such
information to prospective investors and lenders, as well as attorneys and
other parties assisting or representing Buyer in connection with the subject
transaction (so long as all such persons agree to be bound by the provisions of
this Section 4.02(c)). The foregoing obligation to treat such information as
confidential shall survive any termination of this Contract but shall not
survive the Closing.

SECTION 4.03. Estoppel Certificates. Seller shall employ
reasonable good-faith efforts to obtain from each tenant under any space lease
affecting the Property (but not from current or prospective occupants of hotel
rooms and suites within the Hotels) that is binding upon Seller for a period of
one year or more after the Closing Date or is otherwise material to the
Property and to deliver to Buyer not less than five days before the Closing
Date, an estoppel letter substantially in the form attached to this Contract as
Exhibit F. In the event that Seller is unable to obtain an estoppel letter
from any such tenant before the
<PAGE> 19
13

Closing Date, Seller shall deliver to Buyer a certificate in which Seller
certifies, to the best of Seller's actual knowledge, the information required
by the form of estoppel letter attached to the Contract as Exhibit F.

SECTION 4.04. Access to Hotels. After the Review Period,
Buyer and Buyer's authorized representatives and employees shall have the
right, at Buyer's sole cost, risk and expense, from time to time to enter upon
and pass through the Hotels during normal business hours and upon reasonable
prior notice to Seller to view the physical condition of the Hotels solely for
the purpose of confirming the satisfaction of the conditions described in
Sections 7.01(a) and 7.01(c). Buyer and its representatives and employees
shall not unreasonably interfere with the operation of the Hotels or the right
to privacy of guests of the Hotels. Nothing contained herein is deemed to
create a right of the Buyer to terminate this Contract after the Review Period.

SECTION 4.05. Access to Financial Information. Buyer's
representatives shall have access to all financial and other information
relating to the Hotels to enable them to prepare, at Buyer's expense, audited
financial statements in conformity with Regulation S-X (as applicable to FelCor
Suite Hotels, Inc.) of the Securities and Exchange Commission (the "SEC") and
to enable them to prepare a registration statement, report or disclosure
statement for filing with the SEC on behalf of FelCor Suite Hotels, Inc.,
Buyer's general partner. Seller shall also provide to Buyer's representatives
a signed representation letter sufficient to enable an independent public
accountant to render an opinion on the financial statements related to the
Hotels. Buyer will indemnify Seller and its Affiliates (under a customary form
of indemnity) with respect to any use of such information.
<PAGE> 20
14

ARTICLE V

Seller's Representations

Each Sheraton Subsidiary represents and warrants to Buyer with
respect to the Property to be transferred by such Sheraton Subsidiary, and
Sheraton represents and warrants to Buyer with respect to all of the Property,
as of the date hereof and as of the Closing Date, as follows (to the extent
that such representations and warranties are expressly qualified by reference
to Seller's knowledge, then, unless otherwise indicated, such reference shall
be to the current, actual knowledge of William Hines, Tom Curley or the general
manager or chief engineer of each Hotel (without any inquiry by Seller other
than of such persons) and the relevant representation and warranty shall be the
joint and several representation and warranty of Sheraton and the applicable
Sheraton Subsidiary as to the particular Property).

SECTION 5.01. (a) Seller's Existence. Sheraton is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware. Each Sheraton Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation as indicated on Schedule I hereto. Seller
has the corporate power and authority to execute, deliver and perform this
Contract and the other documents and agreements contemplated hereby. Each
Sheraton Subsidiary is duly licensed or qualified to do business and is in good
standing in the state in which its respective Hotel is located.

(b) Litigation. Except as set forth on Exhibit G, there are
no actions, suits, proceedings or investigations (including condemnation
proceedings) that are material in relation to any Hotel pending or, to the
knowledge of Seller, threatened against the Property and Seller is not aware of
any facts which might result in any such action, suit or proceeding. If Seller
is served with process or receives notice that any such material litigation may
be commenced against the Property, Seller shall promptly notify Buyer.

(c) Hazardous Material. Except for (i) those matters
specified in Seller's existing environmental reports which form a part of the
Delivered Records and (ii) the handling, use and storage of Hazardous Material
in the ordinary course of operating the Hotels, which in each instance has been
and shall be in material compliance with
<PAGE> 21
15

all applicable Governmental Requirements, (A) Seller has received no written
notice, and has no knowledge, of any discharge, spill, or disposal of any
Hazardous Material on or under the Property and (B) Seller has received no
written notice from any Governmental Authority or any other party, and has no
knowledge, of any violations of Governmental Requirements regarding Hazardous
Materials concerning the Property or any portion thereof.

(d) No Rights To Purchase. Except as set forth in the
Delivered Records or Exhibit D, no other person, firm, corporation, or other
entity has any right of first refusal or option to acquire the Property or any
portion thereof or lease any space therein.

(e) Assumed Contracts. The schedule of Assumed Contracts
attached to this Contract as Exhibit C (copies of which are included in the
Delivered Records) constitutes a list of all of the material agreements,
leases, or other material contracts affecting the Property and there are no
other agreements, leases or other material contracts with respect to the
Property that (i) are not terminable without penalty on 30 days' notice or less
or (ii) subject Seller or the Property to an aggregate liability in excess of
$50,000. All of the foregoing agreements, leases, or other contracts are in
full force and effect, and to the best of Seller's knowledge, there is no
material default by any party under any Assumed Contract and no event has
occurred that, with the giving of notice or passage of time, or both, would
constitute a material default thereunder. Seller has received no notice that
any party to any Assumed Contract intends to cancel or terminate its Assumed
Contract. Anything in this Contract to the contrary notwithstanding, Seller
shall not assign any Assumed contract or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a third party thereto, would constitute a breach or
other contravention thereof or in any way adversely affect the rights of Buyer
or Seller thereunder. Seller and Buyer will use reasonable best efforts (but
without any payment of money by Seller or Buyer) to obtain the consent of the
other parties to any such Assumed Contract or any claim or right or any benefit
arising thereunder for the assignment thereof to Buyer as Buyer may reasonably
request. If such consent is not obtained, or if an attempted assignment
thereof would be ineffective or that Buyer would not in fact receive all such
rights, Seller and Buyer will cooperate in a mutually agreeable arrangement
under which Buyer would obtain the benefits and assume the obligations
thereunder in accordance with this Agreement, including sub-
<PAGE> 22
16

contracting, sub-licensing, or sub-leasing to buyer, or under which Seller
would enforce for the benefit of Buyer, with Buyer assuming Seller's
obligations, any and all rights of Seller against a third party thereto.

(f) Financial Statements. The financial statements for each
Hotel delivered to Buyer, for the current year and each of the three years
prior to the date of this Contract, were prepared in accordance with generally
accepted accounting principles consistently applied in all material respects or
the Uniform System of Account for Hotels. To Seller's knowledge, no work of a
material nature has been performed at a Hotel which could give rise to the
filing of a mechanic's lien which is not reflected as a liability on such
financial statements.

(g) Notices. Seller has received no written notice from any
Governmental Authority, any insurer, or any other party (A) that either the
Property or the use or operation thereof is currently in violation of any
zoning or other land use regulations, (B) that Seller is currently in
violation, or with the passage of time will be in violation of the requirements
of any ordinance, law, regulation or order of any Governmental Authority
affecting the Property or that any investigation has commenced or is
contemplated regarding any such possible violation, or (C) asserting that
Seller is required to perform work at the Property or obtain any permit,
license, certificate or authority to cure or avoid any such violation; provided
that Seller shall not be deemed to have breached the representations in clauses
(A) or (B) above unless the applicable violation is material in relation to any
Hotel.

(h) Parties in Possession. Other than (i) Hotel guests and
(ii) as described in the Delivered Records, there are no parties other than
Seller in possession of any portion of the Land or Improvements as lessees,
tenants at sufferance or trespassers.

(i) Commitments to Governmental Authorities. Except as set
forth in the Delivered Records (i) no commitments relating to the Property that
are material in relation to any Hotel have been made to any Governmental
Authority, utility company, school board, church or other religious body or any
homeowner or homeowners association, merchant's association or any other
organization, group or individual which would impose an obligation upon Buyer
or its successors or assigns to make any contribution or dedication of money or
land or to construct, install or maintain any improvements of a public or
private nature on
<PAGE> 23
17

or off the Land and (ii) no Governmental Authority has imposed any requirement
that is material in relation to any Hotel that any owner of the Land pay
directly or indirectly any special fees or contributions or incur any expenses
or obligations in connection with the Land.

(j) Ownership and Condition of Property. Seller owns good
and insurable title to the Property, subject only to Permitted Liens and
Permitted Exceptions. To Seller's knowledge, except for those matters set
forth in the 1997 Capital Budget or 1997 Operating Budget, each of the Hotels
is in materially good operating condition, and there is no material defect in
the condition of any Hotel, or any portion thereof, which has not been
corrected or which reasonably could be expected to materially impair the
operation of such Hotel. To Seller's knowledge, except for those matters set
forth in the 1997 Capital Budget or 1997 Operating Budget, the Personal
Property at Hotels is in materially good operating condition and of sufficient
quantity and quality for the use on the Closing Date in the usual course of
business of each Hotel.

SECTION 5.02. Survival of Representations and Covenants. All
of the representations and warranties of the Seller set forth in this Contract
shall be true and correct in all material respects as of the Effective Date, in
the case of 5.01(a), 5.01(c) and 5.01(j) only, shall be deemed to be repeated
at and as of the Closing Date, and shall be true and correct in all material
respects as of the Closing Date, except as disclosed to Buyer prior to such
date and (iii) shall expressly survive the Closing for a period of six months
from and after the Closing Date and shall specifically not merge into the
Closing and delivery of the Deeds and Assignment. Except as expressly provided
herein, all of the covenants and agreements of the Buyer and Seller set forth
in this Contract shall expressly survive for an indefinite period after the
Closing and shall specifically not merge into the Closing and the delivery of
the Deeds and Assignment.

SECTION 5.03. No Other Representations and Warranties by
Seller. Buyer acknowledges that except as specifically stated in this
Contract: (a) Seller has not made any warranties or representations concerning
the Property, the Assumed Liabilities or any component thereof, including
without limitation (i) the operation, the existence, location, quantity or
condition of the Personal Property, (ii) the completion, status of completion
or soundness of the Improvements, (iii) the zoning or other land use
restrictions affecting the Property, (iv) the
<PAGE> 24
18

enforceability of any contract or other agreement or right (including the
Assumed Contracts) assigned hereunder, (v) the compliance of the Property or
any part thereof with any Governmental Requirement or (vi) the use or existence
or prior use or existence of Hazardous Material on the Property, (b) Buyer has
conducted (or has had the opportunity to make) its own inspection and
examination of the Property and all components thereof, and (c) Buyer
acknowledges that it will accept, subject to the terms hereof, the Property and
the Assumed Liabilities in an "AS IS" condition as of the Effective Date
(normal wear and tear excepted). EXCEPT AS SPECIFICALLY PROVIDED FOR HEREIN,
THERE ARE NO EXPRESSED OR IMPLIED WARRANTIES GIVEN TO BUYER IN CONNECTION WITH
THE SALE OF THE PROPERTY OR THE ASSUMPTION OF THE ASSUMED LIABILITIES. EXCEPT
AS SPECIFICALLY PROVIDED FOR HEREIN, SELLER DOES HEREBY DISCLAIM ANY AND ALL
WARRANTIES OF MERCHANTABILITY, HABITABILITY AND FITNESS THAT MAY BE DUE FROM
SELLER TO BUYER, WHETHER IN REGARD TO THE IMPROVEMENTS OR THE PERSONAL
PROPERTY. THIS SECTION 5.03 SHALL SURVIVE THE CLOSING.

SECTION 5.04. Obligation To Update. From the period
following the Effective Date to and including the Closing Date, Seller agrees
promptly to notify Buyer upon Seller becoming aware (i) that any representation
or warranty of Seller made herein was not true when made or (ii) of the
occurrence of any event that would make any of Seller's representations or
warranties contained herein untrue if made as of such later date and, in either
case, shall provide Buyer with reasonable detail with respect thereto.

ARTICLE VI

Covenants and Affirmative Obligations

SECTION 6.01. Maintenance of Property. From and after the
Effective Date, Seller shall not perform any construction or removal of any
Improvements, or make any other change or improvement on or about the Property,
except in accordance with the 1997 Capital Budget or the 1997 Operating Budget,
without the prior written consent of Buyer. Between the Effective Date and the
Closing Date, Seller shall maintain and operate the Property in substantially
the same condition and manner as the Property is now maintained and operated by
the Seller. All building supplies, maintenance materials, food and beverage in
process, linens and equipment, if any, located at the Property on the Closing
Date will be delivered and
<PAGE> 25
19

transferred to the Buyer. The Seller agrees to provide or maintain normal
inventories of such items up to the Closing Date, including at least a 3-par
inventory of linens and towels.

SECTION 6.02. Assumed Contracts. After the Effective Date,
other than agreements terminable without penalty on no more than 30 days'
notice, Seller shall not enter into any new Assumed Contract or extend,
replace, renew or terminate any Assumed Contract without the prior written
consent of Buyer, such consent of Buyer not to be unreasonably withheld.

SECTION 6.03. No Further Encumbrances. After the Effective
Date, Seller shall not create or incur any mortgage, lien, pledge or other
encumbrance affecting the Property other than the exceptions set forth on the
title policies comprising part of the Delivered Records and Permitted Liens.

SECTION 6.04. Compliance with Obligations. Seller will
perform all of its material obligations under the Assumed Contracts and will
comply in all material respects with all Governmental Requirements affecting
the Property and its use until the Closing Date.

SECTION 6.05. Notice of Change in Governmental Requirements.
Seller shall, upon notice, or upon becoming aware of any such changes, notify
Buyer promptly of any change in any applicable Governmental Requirements which
might affect the value or use of the Property to Buyer in a manner that is
material in relation to any Hotel.

SECTION 6.06. Insurance. Seller shall maintain in full force
and effect all of its existing insurance (or renew such insurance on
substantially similar terms) until the Closing Date.

SECTION 6.07. Liquor License. The Buyer shall make and
prosecute (and Seller will cooperate in connection therewith) applications for
approval of the transfer of all liquor licenses and alcoholic beverage licenses
necessary to operate the restaurants, bars and lounges presently located within
the Property, from the Seller to the Buyer (or for the issuance of new licenses
in favor of the Buyer or its designee). The parties agree that they will
promptly execute all transfer forms, applications and other documents required
by the liquor authorities in order to effect such transfer in accordance with
all applicable laws at the earliest possible time after the Closing Date.
Seller will
<PAGE> 26
20

reasonably cooperate with the Buyer in keeping open the bars and lounges and
liquor facilities of the Hotel between the Closing Date and the time when such
liquor license transfers actually become effective, by exercising management
and supervision of such facilities under the existing liquor license; provided,
however, that (i) Buyer shall indemnify and hold Seller harmless from any
liability, damages or claims encountered in connection with such operations
during such period, and Buyer shall procure and pay for dram shop liability
insurance naming Buyer and Seller as insured thereunder, and (ii) the
obligation of Seller to cooperate and keep open the liquor facilities of any
particular Hotel shall terminate on the earlier to occur of (A) 180 days after
the Closing and (B) Buyer having obtained liquor licenses to operate at such
Hotel.

SECTION 6.08. Capital Expenditures; Dallas Hotel. (a) Seller
shall commence and use reasonable efforts to complete the capital expenditures
set forth in the 1997 Capital Budget in accordance with the development
timetable set forth therein; provided that Buyer hereby agrees that all amounts
in excess of $3,000,000 paid or incurred by Seller in 1997 for capital
expenditures in respect of the Hotels shall constitute Assumed Liabilities
hereunder and, to the extent such amounts are paid by Seller prior to the
Closing Date, such amounts shall be included in the Closing Date Adjustment
pursuant to Section 11.01 hereof.

(b) In the event that the Hotel located on the Dallas Land
shall fail to generate Net Operating Income for the portion of fiscal year 1997
following the Closing Date in excess of 98% of the amount projected therefor in
the 1997 Capital Budget and 1997 Operating Budget (the amounts in such 1997
Capital Budget and 1997 Operating Budget being adjusted in a pro rata basis for
each day after June 30, 1997 that the Closing Date shall not have occurred),
then Seller shall agree to pay to Buyer an amount equal to all capital
expenditures to be made with respect to such Hotel in accordance with the 1997
Capital Budget (as so adjusted); provided, however, that in no event shall
Seller's aggregate liability pursuant to this Section 6.08(b) exceed
$1,500,000.

SECTION 6.09. Seller's Indemnity. Subject to the terms of
Section 5.03, Seller agrees to indemnify and hold Buyer and its Affiliates
harmless of and from all liabilities, losses, damages, costs, expenses
(including reasonable attorney's fees) which the Buyer or any of its Affiliates
may suffer or incur by reason of any action or claim arising from acts or
omissions of Seller (or any of
<PAGE> 27
21

its Affiliates) prior to the Closing Date in connection with the Property or
the use or operation of the Hotels and all liabilities in respect of the
Property or the operation of the Hotels that are not Assumed Liabilities or
Seller's failure to fulfill any of its obligations set forth in this Contract.

SECTION 6.10. Buyer's Indemnity. Buyer agrees to indemnify
and hold Seller and its Affiliates harmless of and from all liabilities,
losses, damages, costs, expenses (including reasonable attorney's fees) which
Seller or any of its Affiliates may suffer or incur by reason of any action or
claim arising on or after the Closing Date from acts or omissions of Buyer or
otherwise arising out of the Property or the use or operation of the Hotels on
or after the Closing Date, including Buyer's failure to discharge any of the
Assumed Liabilities or Buyer's failure to fulfill any of its obligations set
forth in this Contract.

SECTION 6.11. Indemnity Procedures Relating to Third Party
Claims; Exclusivity. (a) The party seeking indemnification under this Section
6.11 (the "Indemnified Party") agrees to give prompt notice to the party
against whom indemnity is sought (the "Indemnifying Party") of the assertion of
any claim, or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought under this Section. The Indemnifying Party may,
and at the request of the Indemnified Party shall, participate in and control
the defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under this Section 6.11 for any
settlement effected without its consent of any claim, litigation or proceeding
in respect of which indemnity may be sought hereunder.

(b) After the Closing, Section 6.11 will provide the exclusive
procedures for indemnification for any liabilities, losses, damages, costs,
losses or expenses to third parties arising out of this Contract, the Property,
the business conducted at the Hotel or the transactions contemplated hereby.

SECTION 6.12. Additional Buyer Obligations. (a) Buyer agrees
that for a period of three years from the date hereof, neither it nor any of
its Affiliates shall, directly or indirectly, alone or with others, without
Seller's prior written consent, (i) in any manner acquire, agree to acquire or
make any proposal to acquire, directly or indirectly, any securities or assets
(other than assets transferred in the ordinary course of business) of ITT
<PAGE> 28
22

Corporation ("ITT") or any of its subsidiaries, (ii) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934) with respect to any voting securities of ITT
or any of its subsidiaries, (iii) make or participate in any solicitation of
proxies to vote, or seek to advise or influence any person with respect to the
voting of any voting securities of ITT or any of its subsidiaries (iv) initiate
or propose any shareholder proposal or execute any written consent with respect
to ITT or any of its subsidiaries, (v) submit, propose or publicly announce or
refer to any such takeover proposal with respect to ITT or any of its
subsidiaries or take any other action which might require ITT or any of its
subsidiaries to make a public announcement regarding the possibility of such
takeover proposal or related transaction, (vi) deposit any securities of ITT or
any of its subsidiaries into a voting trust or subject any such securities to
any arrangement or agreement regarding the voting thereof, (vii) seek election
to, or seek the removal of any member of, the board of directors of ITT or any
of its subsidiaries or otherwise act or seek to control or influence the Board
of directors, management or policies of ITT or any of its subsidiaries, (viii)
disclose any intention, plan or arrangement inconsistent with the foregoing,
(ix) knowingly or intentionally advise, assist or encourage any other persons
in connection with any of the foregoing or (x) request either ITT or any of its
subsidiaries (or their respective directors, officers, employees, agents or
representatives) to amend or waive any provision of this paragraph or their
charter or by-laws or, in the case of ITT, the Rights Agreement dated November
1, 1995, between ITT and The Bank of New York, as Rights Agent.

(b) In addition, Buyer agrees for a period ending earlier to
occur of five years after the Closing Date or termination of the Management
Agreement applicable to the Hotel or Hotels proposed to be transferred as
described below, that it shall not sell, lease, transfer or otherwise dispose
of all or any portion of the Property except as expressly permitted pursuant to
the terms of the Management Agreement applicable to such Hotel or Hotels.

SECTION 6.13. Seller Approval Rights. Seller and Buyer agree
that from and after the Effective Date, Buyer shall not, without the prior
written consent of Seller, cause or permit Lessee to take or commit to take,
any of the following actions:

(a) agree to incur any debt contrary to the terms of the Loan
Agreement;
<PAGE> 29
23

(b) terminate, amend or modify any of the Lease Agreements or
grant any consent to a transfer of any such agreement;

(d) hypothecate or encumber all or a material part of the
assets or interests of the Lessee contrary to the terms of the Loan
Agreement;

(f) make, execute or deliver for or on behalf of the Lessee
any assignment for the benefit of creditors or any confession of
judgment;

(g) bind the Lessee as surety, guarantor or accommodation
party to any obligation contrary to the terms of the Loan Agreement
(other than of checks in the ordinary course of collection);

(h) engage the Lessee in any business activity other than the
Hotel operations contemplated by the Lease Agreements;

(i) execute or amend, supplement or modify, any agreement
between the Lessee or an Affiliate of the Lessee except as
specifically contemplated by this Agreement, the Lease Agreements, the
Loan Agreement or the Management Agreements;

(j) take any other action which impairs or would be reasonably
likely to impair the ability of the Lessee to comply with its
obligations under the Loan Agreement or the Management Agreements.

On the Closing Date, Buyer shall cause Lessee to agree to the
covenants contained in this Section 6.13.

ARTICLE VII

Conditions

SECTION 7.01. Conditions to Buyer's Obligation To Close.
Buyer shall not be obligated to consummate the Closing unless and until each of
the following conditions are either fulfilled or waived in writing by Buyer:

(a) Delivery of Documents. Seller shall be prepared to
deliver all instruments and documents to be
<PAGE> 30
24

delivered at the Closing pursuant to Sections 9.01 and 10.02 of this
Contract.

(b) Representations and Warranties. Seller's representations
and warranties contained in Sections 5.01(a), 5.01(c) and 5.01(j)
shall be true and correct in all material respects as of the Closing
Date without any supplementation after the Effective Date.

(c) Other Agreements. The Lease Agreements, the Loan
Agreement, the Management Agreements and the Nondisturbance Agreement
shall have been executed by all parties thereto and shall be in full
force and effect.

(d) Public Offering. FelCor Suite Hotels, Inc. shall have
consummated a public offering of its equity securities and shall have
received at least $250,000,000 in net proceeds therefrom.

SECTION 7.02. Failure of Buyer's Conditions. If any of the
conditions to Buyer's obligations have not been satisfied (or deemed satisfied)
on or before the Closing Date other than solely as a result of Seller's failure
to comply with its obligations hereunder for a period in excess of 30 days
after receipt of notice from Buyer of such failure (in which case, the
provisions of Section 14.02 shall be applicable), and Buyer is otherwise in
material compliance with the terms hereof, Buyer may exercise the remedy
granted pursuant to Section 14.02(i) hereof.

SECTION 7.03. Conditions to Seller's Obligation to Close.
Seller shall not be obligated to consummate the Closing unless and until each
of the following conditions are either fulfilled or waived by Seller:

(a) Compliance With Covenants. Buyer shall have performed in
all material respects all covenants, agreements and obligations and
complied in all material respects with all conditions required by this
Contract to be performed or complied with by Buyer prior to the
Closing Date.

(b) Delivery of Documents and Cash to Close. Buyer shall be
prepared to deliver all Cash to Close and all instruments and
documents to be delivered by Buyer at the Closing pursuant to Sections
10.01, 10.02, 11.01 and 11.03 of this Contract.
<PAGE> 31
25

SECTION 7.04. Failure of Seller's Conditions. If any of the
conditions to Seller's obligations have not been satisfied on or before the
Closing Date as a result of Buyer's failure to comply with its obligations
hereunder for a period of 30 days after receipt of Notice from Seller of such
failure, and Seller is otherwise in material compliance with the terms hereof,
Seller may terminate this Contract and receive the Deposit as liquidated
damages pursuant to Section 14.01 hereof.

ARTICLE VIII

Closing

Subject to all of the provisions of this Contract, Buyer and
Seller shall close the transactions contemplated hereby as soon as practicable
following the satisfaction or waiver of the conditions to Closing set forth
herein, provided that in no event shall the Closing occur after August 1, 1997.
The Closing shall take place on the Closing Date at 10:00 a.m. in Dallas, Texas
at the offices of Bracewell and Patterson, L.L.P., or at such other location
mutually agreed upon by the parties. Buyer and Seller will each use reasonable
best efforts to cause the Closing to occur on June 30, 1997.

ARTICLE IX

Closing Documents

SECTION 9.01. Seller's Closing Documents. At Closing, Seller
shall execute and deliver the following documents ("Seller's Closing
Documents") in accordance with Section 11.02:

(a) Deeds and Assignment. The Deeds and the Assignment,
which shall be duly executed and acknowledged by Seller so as to
convey to Buyer (or its designee) good and marketable title to the
Property described therein free and clear of all liens, encumbrances
and other conditions of title other than the Permitted Exceptions and
Permitted Liens.
<PAGE> 32
26

(b) Closing Date Documents. The Loan Agreement, the
Management Agreements and the Nondisturbance Agreement.

(c) Seller's Affidavits. Affidavits from Seller in form and
content reasonably satisfactory to Buyer and the Title Company to
facilitate the deletion of those standard exceptions on the Title
Company's title insurance commitments which may be deleted solely by
delivery of an affidavit.

(d) Closing Statement. A closing statement setting forth the
Purchase Price and all credits, adjustments and prorations between
Buyer and Seller, and the net Cash to Close due from Buyer.

(e) Authorizing Resolutions. Certificates of such
resolutions in form and content as the Title Company may reasonably
request evidencing Seller's existence, power and authority to
consummate the transaction herein contemplated, including copies of
all corporate organizational documents or other reasonable evidence of
corporate authority.

(f) FIRPTA. A FIRPTA Non-Foreign Transferor Certificate in
accordance with Section 1445 of the Internal Revenue Code from
Sheraton and each other Seller.

(g) Property Records. The originals, if available, otherwise
copies, of each of the Property Records to the extent not otherwise
covered in this Section.

(h) Vehicle Titles. The necessary certificates of title duly
endorsed for transfer together with any required affidavits and other
documentation necessary for the transfer of title from Seller to Buyer
of any motor vehicles owned by Seller and used in connection with the
Hotels' operations.

SECTION 9.02. Buyer's Closing Documents. At Closing, Buyer
shall execute and deliver the following documents ("Buyer's Closing Documents")
in accordance with Section 11.02:

(a) Assumption Documents. The Lease Agreements and all
documents under this Article IX to be executed by Buyer (or Buyer's
Affiliates).
<PAGE> 33
27

(b) Resolutions. Certificate of Resolution of Buyer in form
and content as the Title Company may reasonably request evidencing
authorizing the entering into and execution of this Contract and the
consummation of the transactions contemplated hereby.

ARTICLE X

Closing Procedure

The Closing shall proceed in the following manner:

SECTION 10.01. Transfer of Funds. Buyer shall pay the Cash
to Close to the Escrow Agent by wire transfer to a depository designated by the
Escrow Agent.

SECTION 10.02. Delivery of Documents. Seller shall deliver
Seller's Closing Documents and Buyer shall deliver Buyer's Closing Documents to
the Escrow Agent.

SECTION 10.03. Disbursement of Funds and Documents. When
Seller and Buyer have delivered all documents and funds to Escrow Agent as
provided in Sections 10.01 and 10.02, then the Escrow Agent shall disburse (a)
the Cash to Close and Deposit, less any interest earned thereon, to Seller, (b)
such interest and the Seller's Closing Documents to Buyer and (c) and the
Buyer's Closing Documents to Seller.

ARTICLE XI

Prorations and Closing Costs

SECTION 11.01. Prorations. Except as otherwise specified in
clause (a) below, the following items shall be prorated at the Closing as of
midnight preceding the Closing Date, without duplication:

(a) Certain costs and expenses relating to the Property shall
be adjusted as of the Closing Date between Seller and Buyer (the "Closing Date
Adjustment"). The Closing Date Adjustment shall constitute a composite
accounting of the different items described below in this Section. The intent
is to credit or charge, as the case may be, Seller with all revenues and
expenses respecting the Property which are attributable to
<PAGE> 34
28

operations before the Closing Date and to credit or charge as the case may be,
Buyer with all such revenues and expenses attributable to operations on and
after the Closing Date. Unless otherwise provided for herein, all revenues and
expenses shall be separately accounted for as between Seller and Buyer as of
12:01 a.m. on the Closing Date. No later than 90 days after the Closing Date,
Seller and Buyer shall review all the amounts and calculations made in respect
of the Closing Date Adjustment and any final corrections shall be made to the
Closing Date Adjustment, and Seller and Buyer at that time shall settle any
funds owed to each other. The following items shall be accounted for in
calculating the Closing Date Adjustment:

(i) Prepaid charges and fees for licenses and permits
transferred by Seller to Buyer shall be prorated as between Seller and
Buyer.

(ii) Prepaid rents and all room and other deposits and
advance payments under booking arrangements and trade-out agreements
for use of the Property facilities after the Closing Date shall be
credited to Buyer.

(iii) With regard to food (other than food in process
including mini-bars and gift shops) and non- alcoholic and alcoholic
beverages (other than opened containers and unopened containers
outside of storage areas), Buyer shall be charged with the costs of
all food and non-alcoholic and alcoholic beverages at the Property at
Seller's cost based upon an inventory of such items performed jointly
by Buyer and Seller as of 12:01 a.m. on the Closing Date.

(iv) All charges and prepayments relating to the Assumed
Contracts which are assumed by Buyer shall be separately accounted for
as between Seller and Buyer as of 12:01 on the Closing Date.

(v) All cash in the operating accounts for the Hotel (it
being understood that such accounts refer to "house banks" and not
bank accounts) shall be paid over to Buyer at Closing and Seller shall
receive a credit therefor in the Closing Date Adjustment.

(vi) With regard to the booking of guest rooms and the
provision of other services at the Property, the parties agree that
Seller shall be entitled to all of the revenue generated by such
operations through and including the night before the Closing Date;
provided that Buyer shall be entitled to one-half of such revenue
(including applicable sales Tax) for the night before the Closing
Date. Seller shall receive a
<PAGE> 35
29

credit, without duplication, for all accounts receivable (other than
for the guests' stay that includes the night prior to Closing) with
respect to hotel guests then in occupancy, net of any travel agent
commissions, credit card commissions, or other similar costs to
collect such revenue. Except as expressly provided for in this
subsection (vi), Seller shall own and be entitled to all collections
with respect to accounts receivable for the period prior to the
Closing Date. Buyer agrees, on a prompt, but no less frequent than a
monthly basis, to deliver to Seller any payments and back-up received
or generated with respect to such accounts receivable. The parties
acknowledge that if Buyer receives a payment which does not specify
the invoice being paid, then all payments shall be applied first to
the current sums due Buyer, if applicable. Buyer has no obligation,
nor responsibility to collect said accounts receivable, however, Buyer
will cooperate with Seller in such collection and shall give Seller
rights to inspect Buyer's books and records at reasonable times with
respect to such accounts receivable.

(vii) The parties shall arrange for Hotel guests to sign new
deposit box or other appropriate receipts on the day before the
Closing with respect to baggage, personal property, laundry, valet
packages and other property of Hotel guests checked or left in the
care of Seller by transient hotel guests or tenants and, to the extent
such receipts are not obtained, such property shall be sealed, listed
in an inventory prepared and signed jointly by the parties as of the
Closing Date, and Buyer shall be responsible from and after the
Closing Date for all such property listed in said inventory.
Notwithstanding the foregoing, to the extent a hotel guest has not
signed a new safe deposit box receipt, Seller shall continue to be
responsible for the contents thereof and shall indemnify and hold
Buyer harmless for any and all losses, misappropriations, thefts, or
otherwise improper removals from said safe deposit boxes. The
provisions of this Paragraph shall expressly survive the Closing.

(viii) All accrued and unpaid obligations of Seller under its
salary and employee benefits arrangements in place as of midnight
before the Closing for Hotel employees at the Property as of the
Closing Date, including without limitation, unemployment compensation
benefits, pension benefits, salaries, bonuses, sick leave, vacation
and other similar forms of compensation
<PAGE> 36
30

up to the date of the Closing, including all employer Taxes associated
with vacation and sick pay, shall be assumed by Buyer and credited to
Buyer, or at Seller's option, Seller may pay in full such benefits
direct to its manager and employees. Buyer acknowledges and agrees
that: (A) all employees employed at the Hotel are the employees of
Manager, and (B) no employee who elects to continue employment at the
Hotel will be terminated in violation of, and accordingly no notices
will be given pursuant to, the Worker Adjustment Retraining
Notification Act, 29 U.S.C.A. Section 2101, et seq. ("WARN Act").
Further, Buyer agrees to indemnify, defend and hold Seller harmless
from and against any claim or expense (including but not limited to
court costs and attorney fees) which may be asserted against or
incurred by Seller due to or as a result of any alleged failure to
comply with any provisions of the WARN Act which may be applicable to
Seller. Buyer's agreements in the preceding two sentences shall
survive the Closing.

(ix) All capital expenditures incurred by Seller prior to
Closing that are to be paid by Buyer pursuant to Section 6.08(a) shall
be credited to Seller.

(x) Any excess of $3,000,000 over the aggregate capital
expenditures made by Seller in 1997 in respect of the Hotels shall be
credited to Buyer.

(b) Seller shall pay or credit against the Purchase Price any
of the following that are a lien on the Land or Improvements: all (A) special
assessments relating to the Land and Improvements (to the extent allocable to
periods on or after the Closing) for work completed or substantially completed
as of the Effective Date, and (B) subject to Section 2.02(a)(iv), all unpaid
sales, occupancy, personal property or real estate Taxes for years prior to
Closing, together with any interest and penalties relating to any of the
foregoing.

(c) Seller shall notify the utility companies servicing the
Property prior to Closing that billing to Seller for such utilities shall be
discontinued at the end of the day preceding the Closing Date, and Buyer shall
arrange with such utilities to have such billings for utility services charged
to Buyer from and after the Closing Date and Seller shall be entitled to the
refunds of all deposits therefor. Seller shall pay all charges with respect to
such utilities for the period prior to the Closing Date and utility charges
since the date of the last
<PAGE> 37
31

billing will be adjusted at Closing as of the Closing Date on the basis of the
last bill so rendered, with subsequent adjustment, if any, when final bills are
rendered.

(d) If there is a water meter on the Property, the Seller
shall furnish, at the Closing or as soon thereafter as practicable, a reading
to a date not more than 30 days prior to the Closing Date, and the unfixed
meter charge, the unfixed sewer rent and/or unfixed water charges, if any,
based thereon for the intervening time shall be apportioned on the basis of
such last reading, subject to adjustment upon receipt of the actual meter
charge and sewer rent.

(e) Other costs, expenses and charges which are a lien or may
become a lien against the Property and are of such a type as are usually
involved in and adjusted with regard to property similar to and located in the
locale of the Property, including Taxes in accordance with Section 2.02(a)(iv).
Prorations hereunder shall, where applicable, be made on the basis of a 365-day
year and, for any month, on the basis of the number of days elapsed. If any of
the foregoing cannot be apportioned at the Closing because of the
unavailability of the amounts which are to be prorated, unless otherwise
provided for herein, a reasonable estimation of the amount of such items shall
be placed in escrow with the Title Company, and such items shall be prorated as
soon as practicable after the Closing Date. The provisions of this Section
11.01 shall survive the Closing.

(f) To the fullest extent permitted by applicable law, any
controversy, claim or dispute arising out of or relating to the prorations set
forth in this Section 11.01, including any dispute concerning the scope of this
clause (f), shall be resolved exclusively by the final and binding decision of
the Accountants as set forth herein. In the case of a dispute with respect to
such matters, either party may submit such matter to arbitration which shall be
conducted by the Accountants. The "Accountants" shall be one of three (3)
firms of certified public accountants of recognized international standing in
the hotel industry. Until otherwise agreed to by the parties, the three (3)
firms shall be Arthur Andersen LLP, Coopers and Lybrand, and Pannell Kerr
Forster, notwithstanding any existing relationships which may exist between
Seller and such accounting firms or Buyer and such accounting firms.
<PAGE> 38
32

The party desiring to submit any matter to arbitration hereunder shall do so by
written notice to the other party, which notice shall set forth the items to be
arbitrated and such party's choice of one of the three (3) accounting firms.
The party receiving such notice shall within fifteen (15) days after receipt of
such notice either approve such choice, or designate one of the remaining two
(2) firms by written notice back to the first party, and the first party shall
within fifteen (15) days after receipt of such notice either approve such
choice or disapprove the same. If both parties shall have approved one of the
three (3) firms under the preceding sentence, then such firm shall be the
"Accountants" for the purposes of arbitrating the dispute; if the parties are
unable to agree on an accounting firm, then the third firm, which was not
designated by either party, shall be the "Accountants" for such purpose. The
Accountants shall be required to render a decision in accordance with the
procedures described below within fifteen (15) days after being notified of
their selection. The fees and expenses of the Accountants will be paid by the
non-prevailing party. In all arbitration proceedings submitted to the
Accountants, the Accountants shall be required to agree upon and approve the
substantive position advocated by Buyer or Seller with respect to each disputed
item. Any decision rendered by the Accountants that does not reflect the
position advocated by Buyer or Seller shall be beyond the scope of authority
granted to the Accountants and, consequently, may be overturned by either
party. All proceedings by the Accountants shall be conducted in accordance
with the Uniform Arbitration Act, except to the extent the provisions of such
act are modified by this Agreement or the mutual agreement of the parties.
Unless otherwise agreed, all arbitration proceedings shall be conducted at the
Hotel with respect to which the dispute arose.

SECTION 11.02. Seller's Closing Costs. Seller shall pay for
the following items prior to or at the time of Closing:

(a) 50% of all transfer Taxes, conveyance fees, recording
costs and other documentary stamp Tax related to the transfer of the Property;

(b) 50% of the premium and other costs and fees payable in
connection with an Owner's Title Insurance Policy obtained by Buyer covering
the Land and the Improvements related thereto, plus the cost of all
endorsements thereto;

(d) Seller's attorneys' fees.
<PAGE> 39
33

SECTION 11.03. Buyer's Closing Costs. Buyer shall pay for
the following items prior to or at the time of Closing:

(a) 50% of the transfer taxes, conveyance fees, recording
costs and documentary stamp Tax related to the transfer of the
Property;

(b) 50% of the premium and other costs and fees payable in
connection with an Owner's Title Insurance Policy obtained by Buyer
covering the Land and the Improvements related thereto, plus the cost
of all endorsements thereto;

(d) One-half of all escrow fees and costs; and

(e) Buyer's attorneys' fees.

SECTION 11.04. Accounts Payable. Seller shall retain and be
responsible for the payment of all accounts payable relating to the Property
(including the Hotels) accrued prior to and as of the Closing and payable after
the Closing. Buyer shall be responsible for the particular accounts payable
relating to the Property (including the Hotels) accruing on or after the
Closing.

ARTICLE XII

Possession; Risk of Loss

Buyer shall be granted full possession of the Property at
Closing subject to (i) Manager's rights under the Management Agreements, (ii)
tenant's rights under any space leases of the Property assumed by Buyer and
(iii) guests in occupancy. All risk of loss with respect to the Property shall
pass to Buyer on and as of the Closing Date.
<PAGE> 40
34

ARTICLE XIII

Condemnation and Damage by Casualty

SECTION 13.01. Condemnation. Excluding the pending
condemnation action disclosed in the definition of "Permitted Exceptions", in
the event of the institution of any proceedings by any Governmental Authority
which shall relate to the proposed taking of any Material Portion of the
Property by eminent domain prior to Closing, or in the event of the taking of
any portion of the Property by eminent domain prior to Closing, Seller shall
promptly notify Buyer and Buyer shall thereafter have the right and option to
terminate this Contract by giving Seller and the Escrow Agent written notice of
Buyer's election to terminate within 30 days after receipt by Buyer of the
notice from Seller. Seller hereby agrees to furnish Buyer with written notice
of a proposed condemnation within two business days after Seller's receipt of
such notification. Should Buyer terminate this Contract pursuant to this
Section 13.01, the Escrow Agent shall return to Buyer its Deposit and, except
as otherwise provided for herein, the parties hereto shall be released from
their respective obligations and liabilities hereunder. Should Buyer elect not
to terminate, the parties hereto shall proceed to Closing and Seller shall
assign all of its right, title and interest in all awards in connection with
such taking to Buyer.

SECTION 13.02. Damage by Casualty. (a) If, after the
Effective Date but prior to the Closing Date, any damage other than Material
Damage occurs from fire, windstorm or other casualty to the Property, Buyer
shall be required to close this transaction in accordance with the Contract,
Seller shall assign unto Buyer any and all insurance proceeds paid or payable
with respect to such damage (other than business interruption insurance for
periods prior to the Closing Date), and Buyer shall receive at Closing a credit
in the amount of any deductible or co-payment amount under such policy. In
such event, Seller shall have no additional obligation if such insurance
proceeds are insufficient or unavailable to repair such damage.

(b) If, prior to Closing, there is any Material Damage to the
Hotels, Buyer shall have the option to terminate this Contract provided it
delivers written notice to Seller and the Escrow Agent of its election so to
terminate this Contract within 30 days after the date Seller has delivered
Buyer written notice of any such loss or damage, and in such event the Deposit
shall be delivered to
<PAGE> 41
35

Buyer and thereafter no party shall have any further obligation or liability to
the other under this Contract.

ARTICLE XIV

Default

SECTION 14.01. Buyer's Default; Liquidated Damages. In the
event that this transaction fails to close solely due to Buyer's failure to
comply with its obligations hereunder (after giving effect to the cure period
in Section 7.04), the Deposit shall be immediately paid to Seller by the Escrow
Agent and Buyer shall have no further rights with respect thereto. Buyer
recognizes that the Property will be removed from the market during the
existence of this Contract and, if Buyer fails to perform its obligations
hereunder, Seller shall be entitled to compensation for the detriment caused
thereby. However, both parties agree that it is extremely difficult and
impractical to ascertain the extent of the detriment and, to avoid such
difficulties, the parties agree that Seller shall be entitled to retain the
Deposit as liquidated damages (and not as a penalty) in accordance with this
Section 14.01. Both parties agree that such amount stated as liquidated
damages shall be in lieu of any other relief to which Seller might otherwise be
entitled by virtue of this Contract or by operation of law.

SECTION 14.02. Seller's Default. In the event that this
transaction fails to close solely due to Seller's failure to comply with its
obligations hereunder (after giving effect to the cure period in Section 7.02),
Buyer shall have the right to either (i) terminate this Contract and receive a
refund of the Deposit or (ii) elect to effect the Closing notwithstanding
Seller's default hereunder. If Buyer elects the option set forth in clause
(ii), consummation of the Closing shall not be deemed a waiver by Buyer of
Seller's default hereunder and Buyer may recover damages from Seller for such
breach in accordance with Sections 6.09 hereof. Further, if Buyer elects to
effect the Closing hereunder and Seller fails to close, Buyer may pursue any
and all remedies against Seller available at law or in equity, including
without limitation, specific performance of Seller's obligations hereunder, in
which event the Escrow Agent shall return the Deposit to Buyer upon notice.
<PAGE> 42
36

ARTICLE XV

Real Estate and Other Commissions and Fees

Seller and Buyer each represent and warrant to the other that
there are no brokers, salespersons, advisors or finders involved in this
transaction by reason of agreement with such representing party. The
provisions of this Article shall survive the Closing or termination of this
Contract.

Seller agrees to, and hereby does, indemnify and save harmless
Buyer and its Affiliates and their respective successors and assigns against
and from any loss, liability or expense, including reasonable attorneys' fees,
arising out of any claim or claims for commissions or other compensation for
bringing about this Contract or the transactions contemplated hereby, or advice
in connection herewith, made by any broker, finder, consultant or like agent if
such claim or claims made by any such broker, finder, consultant or like agent
are based in whole or in part on any agreements entered into with such Seller
or its representatives for a commission or other compensation. Buyer agrees
to, and hereby does, indemnify and save harmless Seller, its Affiliates and its
successors and assigns against and from any loss, liability or expense,
including reasonable attorneys' fees, arising out of any claim or claims for
commissions or other compensation for bringing about this Contract or the
transactions contemplated hereby, or advice in connection herewith, made by any
broker, finder, consultant or like agent if such claim or claims by any such
broker, finder, consultant or like agent are based on any agreements entered
into with Buyer or its representatives for a commission or other compensation.

ARTICLE XVI

Notices

Any notice, request, demand, instruction or other
communication to be given to either party hereunder, except where required to
be delivered at the Closing, shall be in writing and shall be hand-delivered or
sent by Federal Express or a comparable overnight mail service, or mailed by
U.S. registered or certified mail, return receipt requested, postage prepaid,
to Buyer, Seller, Buyer's Attorney, Seller's Attorney, and Escrow Agent at
their respective addresses set forth in Article I of this Contract. Notice
<PAGE> 43
37

shall be deemed to have been given upon receipt or refusal of delivery of said
notice. Notices may be given by confirmed telecopy provided a hard copy of
such notice is sent by another means in accordance with this Section on the
next business day following such telecopy delivery. The addressees and
addresses for the purpose of this paragraph may be changed by giving notice.
Unless and until such written notice is received, the last addressee and
address stated herein shall be deemed to continue in effect for all purposes
hereunder.

ARTICLE XVII

Assignment

This Contract may not be assigned by Buyer (except to an
Affiliate of Buyer in accordance with the provisions of this Article) without
the prior written consent of Seller. Any Affiliate of Buyer that receives an
assignment hereof without the consent of Seller shall assume the applicable
Assumed Liabilities on the terms and conditions contained herein and shall
otherwise acquire all of the right, title and interest to the Property that
Buyer would have acquired, under the conditions and subject to the obligations
that Buyer would have undertaken hereunder with respect to the Property
purchased by such Affiliate; provided, however, that Buyer shall remain fully
liable to Seller hereunder as if such transfer and assumption were made
directly to and by Buyer.

ARTICLE XVIII

Escrow Agent

SECTION 18.01. Duties and Authorization. The payment of the
Deposit, Cash to Close and all other funds provided hereunder to the Escrow
Agent is for the accommodation of the parties to this Contract. The duties of
the Escrow Agent shall be determined solely by the express provisions of this
Contract. In the event the Escrow Agent receives a written demand from either
Seller or Buyer for the Deposit (which demand shall include an explanation
setting forth the factual basis for such party's request for the Deposit),
Escrow Agent shall give 10 days written notice to the other party of such
demand and of Escrow Agent's intention to remit the Deposit to the party making
the demand on the stated date. If Escrow Agent does not receive a written
objection within 10 days after such
<PAGE> 44
38

notice, the Escrow Agent is hereby authorized to so remit the Deposit. If,
however, the Escrow Agent receives written objection from the other party
within 10 days after such notice, the Escrow Agent shall continue to hold the
Deposit until otherwise directed by joint written instructions from Seller and
Buyer, or until a final judgment of an appropriate court is issued. Buyer and
Seller authorize the Escrow Agent, without creating any obligation on the part
of the Escrow Agent, in the event this Contract or the Deposit becomes involved
in litigation, to deposit the Deposit with the clerk of the court in which the
litigation is pending and thereupon the Escrow Agent shall be fully relieved
and discharged of any further responsibility under this Contract. Buyer and
Seller also authorize the Escrow Agent, if it is threatened with litigation, to
interplead all interested parties in any court of competent jurisdiction and to
deposit the Deposit with the clerk of the court and thereupon the Escrow Agent
shall be fully relieved and discharged of any further responsibility hereunder.
Notwithstanding anything to the contrary contained herein, in the event there
is any controversy as to which party is entitled to the Deposit and all or any
portion of the Deposit is comprised of a letter of credit then, prior to the
expiration of any such letter of credit, the Escrow Agent shall (i) instruct
Seller to submit a drawing under such letter of credit and deposit the proceeds
of such drawing into the escrow or (ii) accept from Buyer a substituted letter
of credit which is in the same form and as the previously deposited letter of
credit with an expiration date no less than six months after the date of
replacement.

SECTION 18.02. Liability. The Escrow Agent shall not be
liable for any mistake of fact or error of judgment or any acts or omissions of
any kind unless caused by its own wilful misconduct or negligence. The Escrow
Agent shall be entitled to rely on any instrument or signature believed by it
to be genuine and may assume that any person purporting to give any writing,
notice or instruction in connection with this Contract is duly authorized to do
so by the party on whose behalf such writing, notice, or instruction is given.

SECTION 18.03. Hold Harmless. Buyer and Seller will, and
hereby agree to, jointly and severally, indemnify the Escrow Agent for and hold
it harmless against any loss, liability, or expense, including Attorneys' Fees,
incurred on the part of the Escrow Agent arising out of or in connection with
the acceptance of, or the performance of, its duties under this Contract, as
well as the costs and
<PAGE> 45
39

expenses of defending against any claim or liability arising under this
Contract other than as a result of its own wilful misconduct or negligence.
This provision shall survive the Closing or earlier termination of this
Contract.

SECTION 18.04. FDIC Coverage. The parties are informed that
the Federal Deposit Insurance Corporation (FDIC) coverage applies only to a
maximum amount of One hundred thousand Dollars ($100,000) for each individual
depositor, and that the Escrow Agent assumes no responsibility for any loss
occurring which arises from the fact that the amount held by the Escrow Agent
in any account may cause the aggregate amount of any individual depositor's
accounts to exceed One hundred thousand Dollars ($100,000) and that the excess
amount is not insured by the Federal Deposit Insurance Corporation.

ARTICLE XIX

Miscellaneous

SECTION 19.01. Counterparts. This Contract may be executed
in any number of counterparts, any one and all of which shall constitute the
contract of the parties and each of which shall be deemed an original.

SECTION 19.02. Section and Paragraph Headings. The section
and paragraph headings herein contained are for the purposes of identification
only and shall not be considered in construing this Contract.

SECTION 19.03. Amendment. No modification or amendment of
this Contract shall be of any force or effect unless in writing executed by
both Seller and Buyer.

SECTION 19.04. Attorneys' Fees. If any party obtains a
judgment against any other party by reason of breach of this Contract,
Attorneys' Fees and costs shall be included in such judgment.

SECTION 19.05. Governing Law. This Contract shall be
interpreted in accordance with the internal laws of the State of New York both
substantive and remedial, excluding laws governing conflicts of laws.

SECTION 19.06. Entire Contract. This Contract, including all
Exhibits which are incorporated by reference, sets forth the entire agreement
between Seller and Buyer relating to the Property and all subject matter herein
and
<PAGE> 46
40

supersedes all prior and contemporaneous negotiations, understandings and
agreements, written or oral, between the parties.

SECTION 19.07. Time of the Essence. Time is of the essence
in the performance of all obligations by Buyer and Seller under this Contract.

SECTION 19.08. Computation of Time. Any reference herein to
time periods of less than six (6) days shall exclude Saturdays, Sundays and
legal holidays in the computation thereof. Any time period provided for in
this Contract which ends on a Saturday, Sunday or legal holiday shall extend to
5:00 p.m. on the next full business day.

SECTION 19.09. Successors and Assigns. This Contract shall
inure to the benefit of and be binding upon the permitted successors and
assigns of the parties hereto.

SECTION 19.10. No Party Draftsman. This Agreement has been
drafted jointly by Buyer and Seller and, accordingly, shall not be construed or
interpreted against either Buyer or Seller.

SECTION 19.11. No Third Party Benefitted. This Contract is
solely for the benefit of the parties hereto and there shall be no third party
beneficiaries of the terms hereof.

ITT SHERATON CORPORATION,

by /s/ Mark Thomas
-------------------------
Name: Mark Thomas
Title: Senior Vice President

SHERATON SAVANNAH CORP.,
SHERATON PEACHTREE CORP.,
SHERATON CRESCENT CORP.,
SHERATON DALLAS CORP.,

by /s/ Mark Thomas
-------------------------
Name: Mark Thomas
Title: Senior Vice President
<PAGE> 47
41

SHERATON GATEWAY SUITES O'HARE
INVESTMENT PARTNERSHIP,

by SHERATON O'HARE CORP.,
as General Partner,

by /s/ Mark Thomas
-----------------------------
Name: Mark Thomas
Title: Senior Vice President

FELCOR SUITES LIMITED PARTNERSHIP,

by FELCOR SUITE HOTELS, INC.,
a Maryland corporation,
general partner, as Buyer,

by /s/ Thomas J. Corcoran, Jr.
-----------------------------
Name: Thomas J. Corcoran, Jr.
Title: President

COMMONWEALTH LAND TITLE INSURANCE
COMPANY (as to only those sections of
the Contract pertaining to the Escrow
Agent's rights and responsibilities),
as Escrow Agent,

by /s/ Le Ann Turrentine
--------------------------------
Name: Le Ann Turrentine
Title: Assistant Vice President

<PAGE> 48

EXHIBIT A

Title Descriptions

**INTENTIONALLY OMITTED**
<PAGE> 49

EXHIBIT B

Liens and Exceptions

**INTENTIONALLY OMITTED**
<PAGE> 50

EXHIBIT C

Assumed Contracts

**INTENTIONALLY OMITTED**
<PAGE> 51

EXHIBIT D

Options on Property

**INTENTIONALLY OMITTED**
<PAGE> 52

EXHIBIT E

Delivered Records

**INTENTIONALLY OMITTED**
<PAGE> 53

EXHIBIT F

Form of Estoppel Certificate

**INTENTIONALLY OMITTED**
<PAGE> 54

EXHIBIT G

Litigation

**INTENTIONALLY OMITTED**
<PAGE> 55

EXHIBIT H

1997 Capital Budget

**INTENTIONALLY OMITTED**
<PAGE> 56

EXHIBIT I

1997 Operating Budget

**INTENTIONALLY OMITTED**
<PAGE> 57

EXHIBIT J

**INTENTIONALLY OMITTED**
<PAGE> 58
Exhibit K

MANAGEMENT AGREEMENT

for

SHERATON ___________ HOTEL

June __, 1997
<PAGE> 59
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. TERM SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

II. APPOINTMENT OF THE OPERATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

III. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Extensions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

IV. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Operator's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Payment of Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Subordination of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Adjustment of Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

V. OBLIGATIONS OF OPERATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Operator's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
a. Standard of Operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
b. System Support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
c. Consultation with Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
d. Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
e. Centralized Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
f. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
g. Remittance of Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

VI. OBLIGATIONS OF THE OWNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Owner's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
a. Maintenance of the Hotel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
b. Consultation with Operator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
c. Expenses and Liabilities; Operating

Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
d. Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
e. Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
f. Title; Maintenance of Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>

ii
<PAGE> 60
<TABLE>
<S> <C> <C>
VII. OPERATION OF THE HOTEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Operator as Agent of Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2 Employment Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2.2 Union Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2.3 Stays by Operator Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2.4 Employees of Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2.5 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.3 Operating Plan; Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3.1 Operating Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3.2 Failure to Approve Operating Plan. . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3.3 Budget Variances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3.4 Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4.1 Leases, Licenses, Concessions. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4.2 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 Marketing and Advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5.1 Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5.2 Advertising Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Centralized Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.7 Purchasing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Repairs, Maintenance and Capital
Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.8.1 Repairs and Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.8.2 Structural Repairs, Changes,
Extraordinary Repairs and Replacements. . . . . . . . . . . . . . . . . . 15
7.8.3 Capital Improvements by Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8.4 Capital Improvements by Operator. . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8.5 Operator Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.9 Books and Records; Financial Statements;
Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.9.1 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.9.2 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9.3 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10 Funding Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10.1 Funding of Reserve Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10.2 Use and Disbursal of Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.11 Technical Assistance by Operator and its
Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.12 Liquor Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.13 Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

VIII. EVENTS OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.2 Notice and Right to Cure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3 Additional Owner Termination Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.4 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>

iii
<PAGE> 61
<TABLE>
<S> <C>
IX. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Obligations Upon Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 Use of Sheraton Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

X. DAMAGE AND DESTRUCTION; CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Damage or Destruction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

XI. ASSIGNMENT AND TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.1 Sale, Lease or Assignment by Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.1.1 Owner's Right to Assign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.1.2 Owner's Right to Sell. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.1.3 Notice of Sale or Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.2 Assignment by Operator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.3 Liability After Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

XII. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1 Owner Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.2 Operator Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.3 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.4 Separate Operator Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

XIII. INTELLECTUAL PROPERTY; TRADE NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.1 Use of Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.2 Hotel Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.3 Hotel Logo Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

XIV. CLAIMS AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.1 Claims and Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.2 Indemnification in favor of Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.3 Indemnification in favor of Operator. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
14.4 Limitation with respect to good faith acts. . . . . . . . . . . . . . . . . . . . . . . . 30
14.5 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

XV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.1 Casino. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.2 Financings and Offerings of Owner or its
Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.4 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.5 Performance During Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.6 Events of Force Majeure; Emergencies;
Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>

iv
<PAGE> 62
<TABLE>
<S> <C> <C>
15.7 Gaming Licensure Issues and Compliance with
Any Laws or Regulations Applicable to Operator. . . . . . . . . . . . . . . . . . . 34
15.8 Employment Solicitation Restriction
Upon Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.9 Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.10 Press Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.11 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.12 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.13 Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.14 Paragraph Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.15 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.16 Entire Agreement; Owner has not relied
on representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.17 Benefits of Agreement; No Third-Party
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.18 Cooperation with FelCor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>

Exhibits and Schedules

Exhibit A- Legal Description of the Premises
Exhibit B- Definitions
Exhibit C- Insurance Requirements
Exhibit D- Centralized Services and Programs

v
<PAGE> 63
This MANAGEMENT AGREEMENT (this "Agreement") is made as of the
Effective Date, by and between FCH/[ ] LEASING, L.L.C., a Delaware limited
liability company ("Owner"), and SHERATON OPERATING CORPORATION, a Delaware
corporation ("Operator").

Recitals

WHEREAS Owner owns a leasehold interest in a first-class hotel on the
land described as set forth in Exhibit A;

WHEREAS Operator is a wholly owned subsidiary of ITT Sheraton
Corporation ("Sheraton"), which is in the business of and experienced in the
ownership, management and operation, by itself and through subsidiaries, of
hotels and resorts throughout the world; and

WHEREAS Owner desires to obtain the benefits of Sheraton expertise by
authorizing Operator to operate, direct, manage and supervise the Hotel,
subject to the rights and obligations of Owner as hereinafter set forth, and
Operator, for a fee, wishes to assume said responsibility.

NOW, THEREFORE, in consideration of the foregoing and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Owner and Operator agree as follows:
<PAGE> 64
2

ARTICLE I

Term Sheet

Definitions: All capitalized terms used herein shall have the
meanings set forth in Exhibit B.

Effective Date: As of June ___, 1997.

Owner's notice address: FCH Leasing/ITT, L.L.C.
Attention: General Counsel
545 East John Carpenter Freeway Suite 1300
Irving, Texas 75062
Telephone: (972) 444-4900
Telecopy: (972) 444-4949

Operator's notice
address: Sheraton Operating Corporation
Attention: General Counsel
60 State Street
Boston, MA 02109
Telephone: (617) 367-3600
Telecopy: (617) 367-5626

Name of Hotel: Sheraton _______ Hotel

Term: Commencing on the Effective Date and expiring at
11:59 p.m. on the twentieth anniversary of the last
day of the month preceding the Effective Date.

Basic Fee: Two percent (2%) of Total Revenue for each
Accounting Period of the Operating Term.

Incentive Fee: See definition on Exhibit B.

Initial Working Capital: $25,000.00

Annual Reserve
Fund Contribution: Four (4%) percent of Room Revenues (as defined in
the Lease Agreement in effect as of the Effective
Date.)
<PAGE> 65
3

ARTICLE II

Appointment of the Operator

2.1 Appointment. Owner hereby appoints Operator as its agent and the
exclusive operator of the Hotel, and Operator hereby accepts its appointment as
Owner's agent and as the exclusive operator of the Hotel, and each party
undertakes and agrees to perform all of its obligations set forth herein and to
comply with all the provisions of this Agreement. Subject to all of the terms
and conditions of this Agreement, Operator shall be responsible for and shall
direct the day-to-day operations and activities of the Hotel, establishing all
policies and procedures relating to the management and operation of the Hotel,
including, without limitation, the determination of salaries, benefits and
labor policies (including the hiring, transfer and discharge of all Hotel
employees), credit policies (including entering into agreements with credit
card organizations), entertainment and amusements, purchasing, ordinary repairs
and maintenance, legal proceedings, terms of admittance, charges for rooms,
food and beverage policies, and all phases of sales, marketing, advertising,
promotion and publicity related to the Hotel. If the revenues or lease payments
made in connection with any restaurant space operated or leased by Operator are
less than the sum of the direct expenses and overhead allocable to such space
for the period of any Fiscal Year (all as reasonably determined in good faith
by the mutual agreement of Owner and Operator), Owner shall have the right to
remove the Operator from operating or leasing such space.

ARTICLE III

Term

3.1 Term. The Term of this Agreement shall be a period commencing on
the Effective Date continuing for a term of years as set forth in the Term
Sheet.

3.2 Extensions. The Term may be extended beyond the initial Term only
upon the mutual agreement in writing of Operator and Owner.
<PAGE> 66
4

ARTICLE IV

Fees

4.1 Operator's Fees. During each Fiscal Year of the Operating Term
(and proportionately for any partial Fiscal Year), Operator shall pay itself
from the Bank Account for services rendered under this Agreement, the Basic Fee
and the Incentive Fee.

4.2 Payment of Fees. On or before the fifth day of each Accounting
Period during the Operating Term, Operator (1) shall pay itself the Basic Fee
for the preceding Accounting Period, and (2) shall either (a) pay itself the
Incentive Fee based on the Net Income of Owner for that portion of the current
Fiscal Year which ended on the last day of the preceding Accounting Period to
the extent such fee is reasonably expected to be earned, or (b) return to the
Bank Account any excess Incentive Fee which Operator has already received in
respect of such period, all as reasonably determined by Operator from the Books
and Records. To the extent that there may be insufficient funds in the Bank
Account for such payments, Owner shall pay to Operator forthwith on demand any
insufficiency in the Basic Fee and Incentive Fee.

4.3 Subordination of Fees. For the period from the Effective Date
through December 31, 1998, Operator's right to payment of the Basic Fee shall
be subordinated to the payment of all rent and other amounts payable by Owner
under the Lease Agreements. Any such Basic Fees that are paid during the period
from the Effective Date through December 31, 1998, in violation of such
subordination shall not be deemed to be earned by Operator and shall be
returned to Owner. Any such Basic Fees that are not paid by Owner during the
period from the Effective Date through December 31, 1998 as a result of such
subordination shall not be deemed to be earned by Operator. For the period from
January 1, 1999 through the balance of the Operating Term, the Basic Fee shall
have a first priority of payment over all rent and other amounts payable by
Owner under the Lease Agreements.

4.4 Adjustment of Fees. At the end of each Fiscal Year during the
Operating Term and following receipt by Owner of the annual audit, an
adjustment will be made based on such audit, if necessary, so that Operator
shall have received its proper Basic Fee and Incentive Fee as hereinabove
specified for the said Fiscal Year. Within thirty (30) days of receipt by Owner
of such audit, Operator
<PAGE> 67
5

shall either (a) place in the Bank Account or remit to Owner, as appropriate,
any excess amounts it may have received as fees during such Fiscal Year, or (b)
be paid out of the Bank Account or by Owner, as appropriate, any deficiency in
the amounts it shall have received as such fees, whichever the case may be.

ARTICLE V

Obligations of Operator

5.1 Operator's Obligations. Operator, in addition to the other
obligations set forth in this Agreement, shall have the following obligations,
subject to Owner making available adequate funds (if not produced by Hotel
operations) for such purposes:

a. Standard of Operation. Operator shall manage and operate
the Hotel, subject to the terms and conditions of this Agreement, as a
first-class hotel consistent with the operation of similar hotels managed by
Operator in the same geographical area and subject to the facilities and
condition of the Hotel from time to time.

b. System Support. In accordance with the terms of this
Agreement, Operator from time to time or upon reasonable request from Owner
shall arrange for the Hotel to receive the benefits of Sheraton division or
regional headquarters operating reviews which will monitor and analyze Hotel
operating activities, or particular elements thereof and, when appropriate
offer advice, guidance and specific recommendations. Such reviews may take
place at Owner's request as often as quarterly in each Fiscal Year.

c. Consultation with Owner. Operator shall routinely consult
with Owner as to its activities hereunder and shall keep Owner generally
apprised of the state of operations at the Hotel. Operator shall be available
to consult with and advise Owner, at Owner's reasonable request, concerning all
policies and procedures affecting all phases of the conduct of business at the
Hotel.

d. Marketing. Operator shall arrange and contract for all
advertising and other marketing activities which Operator reasonably believes
to be appropriate for the operation of the Hotel, in accordance with Section
7.5.
<PAGE> 68
6

e. Centralized Services. Operator shall enroll the Hotel in
the available Centralized Services in accordance with Section 7.6.

f. Insurance. Operator shall obtain the Operator Insurance, as
required by Section 12.2.

g. Remittance of Funds. On or before the last day of each
Accounting Period during the Operating Term, after payment of Operator's Basic
Fee and Incentive Fee for the preceding Accounting Period, payment into the
Reserve Account, and retention of working capital sufficient to assure the
uninterrupted and efficient operation of the Hotel for the foreseeable future,
which retention shall be generally consistent in amount with the level of
working capital reserves previously maintained by the Hotel prior to the
Effective Date (including, if available and requested by Owner, payment of
premiums for Owner Insurance, Property Taxes, and Owner's debt service),
Operator shall transfer all remaining funds into the Bank Account or another
account designated by Owner.

ARTICLE VI

Obligations of the Owner

6.1 Owner's Obligations. Owner, in addition to the other obligations
set forth in this Agreement, shall have the following obligations:

a. Maintenance of the Hotel. Owner shall at all times take
such actions as shall be necessary to maintain the Hotel as a first-class hotel
and in compliance with all applicable laws and regulations.

b. Consultation with Operator. Owner shall be available to
consult with and advise Operator, at Operator's reasonable request, concerning
all policies and procedures affecting all phases of the conduct of business at
the Hotel. Owner shall not intercede in the day-to-day operations of the Hotel
and shall direct all contacts and communications (other than required notices,
statements and demands, which shall be given pursuant to Section 15.3 hereof)
concerning operation of the Hotel only to the General Manager of the Hotel
and/or the Sheraton area or regional manager responsible for the Hotel.
<PAGE> 69
7

c. Expenses and Liabilities; Operating Losses. Owner shall
have exclusive financial responsibility for all expenses, debts and
liabilities, including employment related expenses and liabilities, incurred by
Operator in performing its duties hereunder, and, except as set forth in
Section 14.2 hereof, Operator shall not be liable for any such obligations by
reason of its management, supervision, direction and operation of the Hotel for
Owner. Operator may so inform third parties with whom it deals and may take any
other reasonable steps to carry out the intent of this paragraph. Owner
acknowledges that, upon termination of this Agreement for any reason, all such
debts and liabilities, and any which may specifically arise by virtue of such
termination, are expressly the debts and liabilities of Owner alone.

d. Payment of Taxes. Owner shall pay, not less than ten (10)
days prior to the dates the same become delinquent (with the right to pay the
same in installments to the extent permitted by law) all Property Taxes. Owner
shall furnish Operator, not less than ten (10) days prior to the respective
dates such taxes will become delinquent, proof of payment thereof in form
satisfactory to Operator, in default whereof Operator: (a) may pay any such
taxes on Owner's behalf, (b) shall be reimbursed forthwith by Owner for all
sums so expended, and (c) may withdraw such sums for reimbursement from the
Bank Account.

e. Working Capital. Owner will provide Operator with the
Initial Working Capital on the Effective Date; and thereafter from time to time
throughout the Operating Term, if and as requested by Operator, Owner shall
promptly furnish to Operator funds which shall be generally consistent in
amount with the level of working capital reserves previously maintained at the
Hotel prior to the Effective Date and which shall be sufficient in amount to
constitute normal working capital for the uninterrupted and efficient operation
of the Hotel, including payment of all Operating Expenses and current funding
of Operator's Basic Fee and of the Reserve Fund (and, if requested by Owner,
payment of premiums for Owner's Insurance, Property Taxes, and Owner's debt
service). If Operator deems such action necessary, it may use the funds in the
Reserve Fund to defray Operating Expenses of the Hotel, and Owner shall replace
all such funds promptly on demand. Operator shall in no event be required to
advance any of its own funds for the operation of the Hotel, nor to incur any
liability in connection therewith. However, if Operator shall at any time elect
to advance any funds in payment of Operating Expenses, which Operator shall
have the right but not the obligation to do, Owner shall repay Operator on
demand all of such funds, with interest at a rate of ten percent (10%) per
annum.
<PAGE> 70
8

f. Title; Maintenance of Ownership. Owner covenants and agrees
that it has, and that throughout the Operating Term it will maintain full
ownership of the Hotel and every component part hereof (or if Owner's right and
interest in the Premises or the Building and Appurtenances is derived through a
lease or other agreement, Owner agrees to keep and maintain said lease or other
agreement in full force and effect throughout the Operating Term), free and
clear of all liens and encumbrances except those approved in writing by
Operator or which do not materially affect the operation of the Hotel. Owner
covenants that Operator, upon fulfilling its obligations hereunder, shall and
may peaceably and quietly possess, manage and operate the Hotel during the
Operating Term, and Owner will at its own expense undertake and prosecute any
appropriate action, judicial or otherwise, to assure such peaceful and quiet
possession by Operator. Owner further agrees that throughout the Operating Term
it will pay, keep, observe and perform all payments, terms, covenants,
conditions and obligations required under any lease, mortgage, or other
agreement creating a lien on the Hotel or any component part thereof. Owner
shall provide or cause to be provided to Operator evidence of the ownership
interest and title of Owner and its Affiliates with respect to the Premises as
Operator may reasonably require from time to time.

ARTICLE VII

Operation of the Hotel

Subject to the applicable Approved Operating Plan and provided funds
are made available therefor, Operator shall, as agent of Owner and in the name
of Owner, perform the following services, or cause the same to be performed for
the Hotel:

7.1 Operator as Agent of Owner. In the performance of its duties as
Operator of the Hotel, Operator shall act solely as agent of Owner, and
Operator may so inform third parties with whom it deals on behalf of Owner.
Nothing herein shall constitute or be construed to be or create a partnership
or joint venture between Owner and Operator. Owner acknowledges that this
Agreement is a management service contract which is irrevocable and
non-terminable by Owner except as expressly set forth herein. Owner and
Operator each acknowledge that it has significant and substantial duties,
powers and obligations under the terms hereof relating to the ultimate success
of the Hotel.

<PAGE> 71

7.2 Employment Matters.

7.2.1 General. Operator shall hire, discharge, promote and
supervise the Hotel's general manager and other senior staff, and shall
supervise through such staff the hiring, discharging, promotion and work of all
other employees of the Hotel. Operator shall consult with Owner prior to
appointing any new or substitute general manager at the Hotel and Owner shall
have the right to approve any such appointment, such approval not to be
unreasonably withheld or delayed, provided, however, that Owner may not reject
more than three candidates for such position. Costs associated with the
recruitment and relocation to the Hotel (but not outgoing relocations) of any
Hotel employee (i) shall be an Operating Expense if such employee is employed
by Operator at the Hotel for a period of at least 24 months and (ii) shall be
prorated as an Operating Expense based on the number of months such employee
has been employed at the Hotel divided by 24 if such employee has been employed
at the Hotel for a period less than 24 months. In connection with any
termination of any of the Hotel personnel who are on Sheraton's payroll and who
are entitled to termination benefits, the Hotel shall be responsible for the
payment of severance payments to the extent of Sheraton's written severance
policy, but only for that portion of such severance payment equal to a
fraction, the numerator of which is the number of months the individual was
employed at the Hotel during Owner's ownership thereof and the denominator of
which is the total number of months the individual was employed by Sheraton
and/or its Affiliates. Such payment shall be an Operating Expense.

7.2.2 Union Relations. Operator, with the participation,
advice, assistance and cooperation of Owner, and using counsel mutually
designated by and representing Owner and Operator, shall negotiate with any
labor unions representing employees of the Hotel including, without limitation,
negotiations with any labor union as to the terms of any applicable collective
bargaining agreement or labor contract. The cost and expenses of such counsel
shall be an Operating Expense. When Hotel employees are included in or covered
by any pension and/or retirement, disability, health, welfare or other benefit
plans pursuant to a collective bargaining agreement or labor contract, Owner
shall be solely responsible for any plan contributions and/or other obligations
or liabilities arising thereunder,
<PAGE> 72
10

and Operator shall pay such items out of the Bank Account on behalf of Owner as
an Operating Expense. In addition, if there is negotiation of a labor contract
with a union or unions representing Hotel employees and such negotiation is
conducted in the city or local area of the Hotel on an association basis, and
Operator believes being a member of such association is desirable, then the
Operator may seek to enroll the Hotel as a member of the association and any
costs associated with such membership shall be an Operating Expense.

7.2.3 Stays by Other Operator Employees. Employees of Operator
or its Affiliates who travel to the Hotel to perform technical assistance or
other services shall be permitted, without charge, to stay at the Hotel and use
its facilities (including food and beverage consumption). Other employees of
Operator or its Affiliates shall be permitted to stay at the Hotel for
non-business purposes at reduced rates in accordance with Sheraton's policies
with respect to such stays in effect from time to time.

7.2.4 Employees of Owner. Each Hotel employee shall be an
employee of Operator. Every person performing services in connection with this
Agreement, including any agent or employee of Operator, Sheraton or their
Affiliates or any agent or employee of Owner hired by Operator, shall be acting
as the agent of Owner.

7.2.5 Employee Benefits. Operator, in its discretion, may
enroll the Hotel employees in (and remove them from) pension, medical and
health, life insurance and similar employee benefit plans, including
multi-employer plans. Such plans may be joint plans for the benefit of
employees at more than one hotel owned, leased or managed by Sheraton or any of
its Affiliates. Employer contributions to such plans, reasonable administrative
fees which Operator may expend in connection therewith, and any liabilities
relating to multi-employer pension or welfare plans will be Operating Expenses
hereunder. The contributions, administrative expenses and liabilities of any
joint plans will be equitably apportioned by Sheraton among covered properties.

7.3 Operating Plan; Rates.

7.3.1 Operating Plan. Not later than sixty (60) days prior to
the commencement of each Fiscal Year (commencing with the Fiscal Year beginning
January 1, 1998), Operator shall submit to Owner a detailed annual budget for
<PAGE> 73
11

the operation of the Hotel in the form generally used by Sheraton from time to
time in accordance with Sheraton policy relating to all managed hotels in the
Sheraton system, together with the assumptions on the basis of which such
budget and schedules were prepared in narrative form (collectively, the
"Operating Plan"). The Operating Plan shall also include a proposed budget for
capital improvements during such succeeding Fiscal Year as set forth in Section
7.8.4. During the preparation of the Operating Plan, Operator will solicit
comments and suggestions from Owner regarding the Operating Plan, which
Operator shall reasonably consider in preparation of the Plan. Owner shall have
the right to request such additional information and detail with respect to the
Operating Plan as may be reasonable, and Operator shall promptly provide such
additional information and detail. Operator will review the Operating Plan with
Owner, and subject to the Owner's written approval, which approval shall be
subject to the terms and conditions of this Agreement and shall not be
unreasonably withheld or delayed for more than thirty (30) days, Operator shall
implement the same for the forthcoming Fiscal Year (during which period the
same shall be referred to as the "Approved Operating Plan").

7.3.2 Failure to Approve Operating Plan. If the Owner does not
approve or disapprove the Operating Plan in writing within such thirty (30) day
period, Owner shall be deemed to have approved the Operating Plan for the
relevant Fiscal Year, and such plan shall be the Approved Operating Plan. In
the event Owner disapproves the Operating Plan, or any component thereof, Owner
shall provide Operator with written notice thereof within such thirty (30) day
period in reasonable detail specifying those items of the Operating Plan which
Owner disapproves and the reasons for such disapproval. In such event, the
disputed budget item(s) shall be replaced for the Fiscal Year by an amount
equal to such budget item for the prior Fiscal Year, subject to escalation
thereof by a percentage equal to the percentage increase during the immediately
preceding Fiscal Year in the Consumer Price Index, and Operator or Owner may
request that the parties' disagreement be submitted to arbitration pursuant to
Section 15.4. As so modified, such plan shall be deemed to be the Approved
Operating Plan. Although the Operating Plan will represent Operator's
reasonable estimates relating to the matters contained therein, it will contain
estimates only and Operator makes no representations, assurances or guarantees
that the actual performance of the Hotel shall correspond to such estimates.
<PAGE> 74
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7.3.3 Budget Variances. After an Operating Plan has been
approved by Owner or has otherwise become the Approved Operating Plan pursuant
to the terms of the preceding paragraph, during the Fiscal Year in which an
Approved Operating Plan is applicable, Operator shall operate and manage the
Hotel in accordance with the Approved Operating Plan and, except as set forth
below, Operator will not make expenditures, without Owner's prior written
approval, which exceed a total of 110% of the aggregate budgeted amount in the
Approved Operating Plan (excluding amounts budgeted for Capital Expenditures).
Notwithstanding the foregoing, in the event actual Total Revenue for any Fiscal
Year exceeds (or is reasonably projected to exceed) the Total Revenue for such
Fiscal Year contemplated in the Approved Operating Plan, the aggregate budgeted
amount with respect to expenditures which are reasonably anticipated to
increase in connection with increases in Total Revenue will automatically be
increased by a percentage which is determined by dividing the actual or
reforecasted Total Revenue by the Total Revenue which was contemplated in the
Approved Operating Plan. In such event, Operator shall promptly give Owner
written notice of such automatic increase, and the basis for such revenue
projections. Owner and Operator on a quarterly basis during the Fiscal Year in
which the Operating Plan is applicable will meet to review the operating
performance of the Hotel as compared to the Approved Operating Plan and will
make such modifications thereto as shall be reasonable in the circumstances. In
addition to the foregoing, Operator shall have the right to depart from the
Approved Operating Plan in the event such departure is necessary in view of
reasonably unforeseen circumstances such as, but not limited to, the costs of
labor, material, services, utilities and supplies, casualties, force majeure,
operation of law or economic market conditions, provided that Operator shall
notify Owner in writing of any such departure as soon as is practicable.

7.3.4 Rates. As part of the Operating Plan, Operator will
submit to Owner the rates to be published and charged to members of the general
public for normal transient occupancy of the various categories of rooms and
suites in the Hotel during such Fiscal Year. It is understood that such rates
will not apply to group business or other categories of business to which
Operator may afford a lower rate and that in its discretion Operator may from
time to time permit individuals to occupy rooms or suites at the Hotel at
complimentary rates or at rates lower than such published rates.
<PAGE> 75
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7.4 Agreements.

7.4.1 Leases, Licenses, Concessions. Operator as agent for
Owner shall enter into, terminate, amend and modify leases with respect to the
commercial, retail and office space in the Hotel and concessions or other
arrangements with respect to other non-guestroom space and facilities at the
Hotel, subject to Owner's prior approval with respect to the entering into,
termination or any material amendment or modification of any such lease which
has a term greater than one year. Operator shall also enter into, terminate,
amend and modify equipment leases with respect to the FF&E, as shall be
reasonably necessary for the proper operation of the Hotel, provided that
Owner's approval shall be required prior to entering into any equipment lease
requiring aggregate rent payments in excess of $25,000 and any termination or
material modification of any equipment lease requiring aggregate rent payments
in excess of $25,000; provided, that the foregoing amounts may be redetermined
by agreement from time to time to reflect increases in the cost of living, and
shall in any event be increased automatically in each Fiscal Year by the same
percentage as the increase from the Effective Date in the Consumer Price Index;

7.4.2 Contracts. Operator as agent for Owner shall enter into,
terminate, amend and modify contracts for the furnishing of utilities,
maintenance, supplies, consumables and other services to the Hotel (including,
without limitation, telephone, television, satellite, cable, and pay-per-view
services), as shall be reasonably necessary for the proper operation and
maintenance thereof, provided that Owner's prior approval shall be required (x)
prior to entering into any contract requiring aggregate payments in excess of
$25,000 or which is for a term of longer than one (1) year and (y) prior to any
termination or material modification of any contract requiring aggregate
payments in excess of $25,000 or which is for a term longer than one (1) year,
other than (i) Centralized Services, (ii) utilities and (iii) expenses related
to employee benefits provided for hereunder; provided, that the foregoing
amounts may be redetermined by agreement from time to time to reflect increases
in the cost of living, and shall in any event be increased automatically in
each Fiscal Year by the same percentage as the increase from the Effective Date
in the Consumer Price Index.
<PAGE> 76
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7.5 Marketing and Advertising.

7.5.1 Marketing. The Sheraton system of hotels is comprised of
several separate and distinct brands. The marketing and advertising of the
Hotel will be consistent with other hotels in the Sheraton system utilizing the
same brand and the Hotel in its marketing and advertising will use the graphics
standards consistent with its brand identity as such graphics standards are
determined from time to time by Sheraton. Operator as agent for Owner shall
arrange and contract for all advertising and marketing for the Hotel,
including, without limitation, media, internal hotel collateral, yellow pages
and Internet. The Hotel shall participate in Sheraton marketing programs
(including, without limitation, Sheraton Club International and airline
frequent traveler programs in which Sheraton participates), and in Sheraton's
Cooperative Marketing Program, pursuant to which the Hotel shall contribute at
the current rate of one percent (1%) of Room Revenues (as such term is defined
in the Lease Agreement in effect on the Effective Date) for each Operating Year
to be used in local, regional and/or national advertising of the Hotel as part
of the Sheraton hotel system in advertisements relating to multiple Sheraton
hotels. The aforesaid rate may be subject to change from time to time, provided
such rate change is generally consistent throughout the affected division,
brand or product segment. The Hotel will also participate in any new marketing
programs instituted from time to time, provided that such programs are
instituted generally on a system-wide basis or to distinct sub-groups of
properties in the Sheraton system in the country, state or area in which the
Hotel is located.

7.5.2 Advertising Costs. As part of the Operating Plan,
Operator shall deliver to Owner a budget of the estimated advertising costs of
the Hotel for the succeeding Fiscal Year (commencing with the Fiscal Year
beginning January 1, 1998). Such advertising costs shall require Owner's
approval to the extent they exceed, in the aggregate, a sum equal to 3% of the
Total Revenue of the Hotel (inclusive of contributions to the Cooperative
Marketing Program, as described above) for the previous Fiscal Year (or, for
the first full Fiscal Year, and any initial partial Fiscal Year, a sum equal to
3% of the projected Total Revenue for such periods), which approval shall not
be unreasonably withheld.

7.6 Centralized Services. Operator shall cause Sheraton and/or its
Affiliates to furnish to the Hotel the benefits of the "Centralized Services",
which phrase shall
<PAGE> 77
15

mean (a) those services, programs and group benefits as are described in
Exhibit D (for so long as such services are offered generally within the
Sheraton system), and (b) such additional services, programs or group benefits
as are, from time to time, provided generally to all or distinct sub-groups of
properties in the Sheraton system in the country, state or area in which the
Hotel is located, and Owner hereby agrees that Operator may in its discretion
cause the Hotel to participate in any or all such Centralized Services.
Operator and its Affiliates shall be entitled to be paid for the existing
Centralized Services based on the charges set forth on Exhibit D (as such
charges may be increased to reflect increases in the Consumer Price Index from
the Effective Date and to reflect specific increases in the costs of operating,
maintaining and upgrading such services) and for any new Centralized Services
based on Sheraton's reasonable estimate of the costs and expenses which will be
incurred in providing such services on a system-wide basis to Sheraton hotels,
which estimate of costs may include, without limitation, salaries (including
payroll taxes and employee benefits) of employees of Sheraton and its
Affiliates, overhead, recovery of development costs, promotion, costs of
operating, upgrading and maintaining such services, and costs of all equipment
employed in the rendition of such services. The Hotel's costs for participating
in such Centralized Services shall be determined in an equitable manner and on
the same basis as allocated or charged to other Sheraton hotels. In addition,
if equipment is installed and maintained at the Hotel in connection with the
rendition of any Centralized Services, all costs thereof will be paid by Owner
and charged to the operation of the Hotel either as an Operating Expense (and
Operator may pay for same from the Bank Account) or over a period of years, as
determined by Sheraton's independent public accountant.

7.7 Purchasing. In its management of the Hotel hereunder, Operator may
purchase goods, supplies and services (i) from or through Sheraton or any of
its Affiliates, or (ii) by contracting directly with suppliers through regional
or national purchasing contracts negotiated by Sheraton or its Affiliates, so
long as the prices and terms thereof (inclusive of the fees described
hereafter) are competitive with the prices and terms of goods and services of
equal quality available from others (including Owner or its suppliers);
provided, however, if such goods or supplies are Capital Expenditures, the
approval of Owner will be required in connection with any purchases made
pursuant to clauses (i) or (ii) where such purchase exceeds the amount budgeted
for such Capital Expenditure in an
<PAGE> 78
16

Approved Operating Plan. Sheraton and its Affiliates may receive (i) fees from
the Hotel for the negotiation of the purchasing contracts described above,
and/or (ii) rebates or other payments from suppliers in connection with direct
purchases from such independent suppliers of goods, supplies and services, so
long as the prices and terms thereof after taking into account such fees and
rebates are competitive with the prices and terms of goods and services of
equal quality available from others (including Owner or its suppliers). Any
fees charged to the Hotel shall be on the same basis as is applicable to other
hotels owned, leased or managed by Sheraton or its Affiliates.

7.8 Repairs, Maintenance and Capital Improvements.

7.8.1 Repairs and Maintenance. Operator shall from time to
time cause to be undertaken such repairs and maintenance as it reasonably
determines to be necessary to keep the Hotel in a first-class condition
(excluding structural or otherwise extraordinary repairs and changes to the
Hotel, and extraordinary repairs to or replacement of equipment included in the
definition of Building and Appurtenances all of which shall be paid for by the
Owner and shall not be an Operating Expense), subject to the Owner providing
the necessary working capital therefor, as required under this Agreement. If
any such repairs or maintenance shall be made necessary by any condition
against the occurrence of which Owner has received the guaranty or warranty of
the builder of the Hotel or of any supplier of labor or materials for the
construction of the Hotel, then Owner shall invoke said guarantees or
warranties in Owner's name and at its own expense. Operator will cooperate
fully with Owner in the enforcement thereof.

7.8.2 Structural Repairs, Changes, Extraordinary Repairs and
Replacements. If structural repairs or other extraordinary repairs and changes
to the Hotel, or extraordinary repairs to or replacements of any equipment
included in the definition of Building and Appurtenances shall be required at
any time during the Operating Term to maintain the Hotel as a first-class hotel
or by reason of any laws, ordinances, rules or regulations now or hereafter in
force, or by order of any governmental or municipal power, department, agency,
authority or officer, or otherwise, or because Operator and Owner jointly agree
upon the desirability thereof, then in such event all such repairs, changes or
replacements shall be made by Owner and at Owner's sole expense, and shall be
made with as little hindrance to the operation of the Hotel as possible.
<PAGE> 79
17

Notwithstanding the foregoing, Owner shall have the right to contest the need
for any such repairs, changes or replacements required by any law, ordinance,
regulation or order of governmental authority and may postpone compliance
therewith, if so permitted by law, but in each such event Owner shall protect
Operator from any loss, cost, damage or expense which may result therefrom,
such protection to be in a form satisfactory to Operator.

7.8.3 Capital Improvements by Owner. Owner may from time to
time at its sole expense make such further alterations, additions or
improvements in or to the Hotel as Owner shall determine, provided that
Operator shall have the right to approve (which approval shall not be
unreasonably withheld or delayed) any such alterations, additions or
improvements which Operator reasonably believes could have an impact on the
operation of the Hotel. Owner shall seriously consider any alterations,
additions or improvements recommended by Operator.

7.8.4 Capital Improvements by Operator. Operator, at Owner's
sole expense, may also make expenditures for capital improvements to the Hotel
which are (i) included in the capital budget approved by the Owner as part of
the Operating Plan and (ii) otherwise expressly approved in writing by Owner.

7.8.5 Operator Rights. The provisions of this Section 7.8 are
without prejudice to any of Operator's rights or remedies arising out of any
breach by Owner of its obligation under Section 6.1.a. to maintain a
first-class hotel.

7.9 Books and Records; Financial Statements; Bank Accounts.

7.9.1 Books and Records. Operator shall, for the account of
Owner, keep full and adequate books of accounts and other records ("Books and
Records") reflecting the results of operation of the Hotel on an accrual basis,
all in accordance with the Uniform System and, if required, in accordance with
any applicable laws and regulations; provided, that Operator may make such
modifications in the Books and Records as are consistent with Sheraton's
standard practice in accounting for its operations under management contracts
generally, so long as such modifications do not affect the determination of Net
Operating Income. Except for those of the Books and Records which may be kept
in Sheraton's home office or other suitable location pursuant to the adoption
of a central billing or accounting system,
<PAGE> 80
18

the Books and Records shall be kept at the Hotel. All Books and Records shall
be available to Owner and its representatives at all reasonable times, upon
reasonable notice, for examination, audit, inspection, copying and
transcription. Upon any termination of this Agreement, the Books and Records
shall be turned over to Owner so as to insure the orderly continuance of the
operation of the Hotel, but shall thereafter be available to Operator at all
reasonable times for examination, audit, inspection, copying and transcription
for a period of ten (10) years.

7.9.2 Financial Statements. Operator shall deliver to Owner a
profit and loss statement showing the results of the operation of the Hotel for
the immediately preceding Accounting Period and for the Fiscal Year to date
within fifteen (15) days from the end of such preceding Accounting Period. Such
statement (a) shall be in the form customarily prepared by Operator or its
Affiliates for other hotels managed by Sheraton, (b) shall be taken from the
Books and Records, and (c) shall follow the general form set forth in the
Uniform System. Operator shall instruct the Independent Public Accountant to
deliver to Owner a certified profit and loss statement, within fifteen (15)
days after the end of each Fiscal Year, showing the results of operations of
the Hotel during such Fiscal Year. Owner shall be deemed to have waived any
objections to said certified statement not specified to Operator in writing
within one hundred and five (105) days of receipt thereof.

7.9.3 Bank Accounts. Except as expressly provided for in this
Agreement, (i) all funds received by Operator in connection with the operation
of the Hotel, including working capital furnished by Owner, shall be deposited
in the Bank Account and (ii) all funds set aside for the Reserve Fund shall be
deposited in the Reserve Account. Such funds shall not be commingled or
otherwise mingled with Operator's other funds. The Bank Account will be
established in Owner's name at a bank of Owner's selection with Owner's and
Operator's designees being authorized signatories on said account. Operator
shall be entitled to withdraw funds from the Bank Account, however, Operator's
sole right to the funds in such accounts shall be to receive amounts the
Operator is entitled to receive as expressly provided for in this Agreement.
The Reserve Account will be established in Owner's name at a bank of Owner's
selection with Operator's designees being the only authorized signatories on
said account. Operator shall be entitled to withdraw funds from the Reserve
Account as provided for in this Agreement.
<PAGE> 81
19

7.10 Funding Requirements.

7.10.1 Funding of Reserve Fund. During each Fiscal Year (and
proportionately for any fraction thereof) there shall be deducted in monthly
installments from Total Revenue, the amounts set forth in the Term Sheet for
the Reserve Fund. The amounts so deducted shall be deposited in the Reserve
Account and shall be recorded on the Books and Records as the Reserve Fund for
Replacements, Substitutions and Additions to Furniture and Equipment. Interest
on such account shall be credited to the Reserve Fund, but shall not reduce the
required contributions thereto under this Agreement.

7.10.2 Use and Disbursal of Fund. Except as otherwise
specified in this Agreement, the Reserve Fund shall be used solely for the
purposes of replacing worn, damaged or obsolete furniture, furnishings and
equipment utilized in the operation of the Hotel, or for the substitution of,
or addition to, such items. Any expenditures for replacement or substitution of
or additions to Furniture and Equipment made in any Fiscal Year up to the
greater of either an amount equal to the total amount required to be placed in
the Reserve Fund during each Fiscal Year, or the amount then accrued in the
Books and Records for the Reserve Fund, in each case if in accordance with an
Approved Operating Plan, shall be deemed to be made in the ordinary course and
may be made by Operator without Owner's approval. Such expenditures shall be
paid from the Reserve Account including any unused accumulation from prior
years. Any proposed expenditures in any Fiscal Year from the Reserve Fund in
excess of said amount shall be subject to Owner's approval. All proceeds from
the sale of Furniture and Equipment no longer needed for the operation of the
Hotel shall be credited to the Reserve Fund. All amounts remaining in the
Reserve Fund at the close of each Fiscal Year shall be carried forward and
retained until fully used as herein provided.

7.11 Technical Assistance by Operator and its Affiliates. During the
Term, Operator shall provide, or shall cause Sheraton or its Affiliates to
provide, advisory, supervisory and control services and cost-benefit analyses
with respect to the Hotel's operating departments and systems, including,
without limitation, front office, food and beverage, management information
systems, communications systems, purchasing, design and construction services
and personnel, and general life safety and security consultation and advice.
Such services shall be provided without additional charge to Owner, except that
(i) Owner shall be
<PAGE> 82
20

charged for any services requested to be performed by Sheraton's design and
construction technical assistance services personnel, including life safety and
security consultation at Sheraton's rates then generally prevailing, (ii) with
respect to stays by any other technical services personnel at the Hotel of more
than a total of three (3) days in any one-year period, Owner shall reimburse
Sheraton for the salary and benefits of such personnel for the period actually
spent at the Hotel, and (iii) Owner shall reimburse Sheraton for out-of-pocket
expenses (including, without limitation, travel expenses) with respect to such
services, including the cost of any third-party consultants engaged for such
purposes, and Owner shall pay for those items which are Centralized Services,
in accordance with the terms of this Agreement. There shall be no charge to
Owner for the operating reviews provided by supervisory operations personnel
from regional and divisional headquarters, as set forth in Section 5.1b.

7.12 Liquor Licenses. Operator shall assist Owner in making and
prosecuting any applications required for approval of the transfer of all
liquor licenses and alcoholic beverage licenses necessary to operate the
restaurants, bars and lounges presently located within the Hotel.

7.13 Standards. Owner acknowledges that Sheraton and Operator have and
will from time to time establish and maintain operational policies and
standards of quality, appearance and service, which shall be adhered to in the
operation of the Hotel. Such policies and standards may be altered, modified,
deleted or added to from time to time by Sheraton or Operator in order to
maintain or improve the public image and reputation of the brand, and to
anticipate or respond to changes in technology, the lodging industry,
competition and guests, needs and expectations. As absolute uniformity of such
policies and standards under many varying conditions may not be possible or
practical in a particular case, Sheraton and Operator reserve the right, in
their sole discretion, to vary standards for hotels within the system based on
conditions which Sheraton determines to be important to the successful
operation of the relevant hotel, provided, however, that the same varying
standard will be uniformly applied to all Sheraton hotels.
<PAGE> 83
21

ARTICLE VIII

Events of Default; Remedies

8.1 Events of Default. The following shall constitute events of
default:

a. The failure of Operator to pay any amount to Owner provided
for herein when the same is payable, or the failure of Owner to pay or furnish
to Operator any amount Owner is required to pay or furnish to Operator in
accordance with the terms hereof (including, without limitation, fees and
working capital) when the same is payable or required to be furnished, or the
failure of Owner to pay any amount payable to Sheraton or any of its Affiliates
when such amount is payable.

b. The filing of a voluntary petition under 11 U.S.C. Section
101 et seq. (the "Bankruptcy Code") or any successor thereto or under any other
federal or state insolvency law for liquidation or reorganization by either
Owner or Operator.

c. The consent to an involuntary petition under the Bankruptcy
Code or the failure to vacate within sixty (60) days from the date of entry of
an order for relief thereunder or any other order approving an involuntary
petition by either Owner or Operator.

d. The entry of an order for relief, judgment, or decree by
any court of competent jurisdiction, on the application of a creditor, under
the Bankruptcy Code against either Owner or Operator as a bankrupt or insolvent
or approving a petition seeking reorganization, liquidation or appointment of a
custodian, receiver, trustee or liquidator of all or a substantial part of such
party's assets, and such order, judgment or decree shall continue without being
stayed and in effect for a period of one hundred twenty (120) consecutive days.

e. The failure of either Owner or Operator to perform, keep or
fulfill any of the other material covenants, undertakings, obligations or
conditions set forth in this Agreement.

f. The failure of either Owner or Operator to pay its
respective debts as they become due.

g. The failure of Owner to obtain new or reinstated liquor
licenses. If the licenses for the sale of alcoholic beverages in the Hotel are
at any time, without
<PAGE> 84
22

the fault of Operator, suspended, terminated or revoked and such suspension,
termination or revocation shall continue in effect for a period of thirty (30)
consecutive days, then, unless during such period Owner and Operator are able
to negotiate a new fee structure and Operating Plan taking into account the
loss of liquor revenues, such suspension, termination or revocation shall be a
default hereunder.

h. The failure of Owner or any its Affiliates to comply with
all of the provisions of Section 15.2 hereof.

8.2 Notice and Right to Cure. In any of such events of
default specified in Section 8.1, the non-defaulting party may give to the
defaulting party notice of its intention to terminate this Agreement after the
expiration of a period of (i) ten (10) days from the effective date of such
notice in the case of a default pursuant to the provisions of Section 8.1(a)
above and (ii) thirty (30) days in the case of any other default pursuant to
Section 8.1 and, upon the expiration of such period without such default being
cured, the Operating Term shall expire; provided, however, in case of a default
pursuant to the provisions of Section 8.1(h) above, Operator may elect, without
limiting any other rights of Operator hereunder, to immediately terminate this
Agreement without further notice or an opportunity to cure, if Operator
determines in its sole discretion that any further delays would have a material
adverse effect on Operator or Sheraton's reputation or name or would create a
financial exposure to either, or to seek injunctive relief, the parties hereby
agreeing that such a default would irreparably harm Operator and could not be
adequately compensated through monetary damages. With respect to any default
referred to in Section 8.1(e) above, if such default is not susceptible of
being cured within such thirty (30) day period, the defaulting party shall
undertake and continue action to cure such default with all due diligence until
the same is cured, provided, however, such additional period of cure shall not
in any event exceed ninety (90) days from the giving of such notice. Once cure
has been effected as aforesaid such notice shall be of no further force and
effect.

8.3 Additional Owner Termination Rights. In addition to the rights
contained in Sections 8.1 and 8.2, Owner shall have the right to terminate this
Agreement: (i) on the tenth anniversary of the Effective Date if the rental
payments payable by Owner to FelCor pursuant to the Lease Agreements during the
two then most recently completed
<PAGE> 85
23

Fiscal Years provide FelCor with less than a 12% Cash-on-Cash Return; (ii) on
the fifteenth anniversary of the Effective Date if the rental payments payable
by Owner to FelCor pursuant to the Lease Agreements during the two then most
recently completed Fiscal Years provide FelCor with less than a 12%
Cash-on-Cash Return; (iii) if after the 1997 Fiscal Year the Initial Hotels
fail to achieve for any two consecutive Fiscal Years either (a) 90% of their
aggregate budgeted Net Operating Income (which budgets shall be mutually agreed
to between Owner and Operator) or (b) 90% of the Star Report yield index
calculated on an aggregate basis for the Initial Hotels based on the
competitive set of the Hotels (which competitive set shall be mutually agreed
to between Owner and Operator within 30 days from the Effective Date); or (iv)
at the option of Owner, upon the occurrence of a Change of Control; provided,
however, that Owner shall not have any termination rights pursuant to this
Section 8.3 if the conditions of clauses (i), (ii) or (iii) which gave rise to
such termination rights would not have occurred but for the existence of a
Force Majeure. If Owner elects to exercise any termination right set forth in
this Section 8.3, Owner must give written notice of such election to Operator
within thirty (30) business days of the date that Owner has received from
Operator the certified profit and loss statement for the relevant Fiscal Year
for each of the Initial Hotels (or, in the case of clause (iv), within 30 days
of Owner's receipt of written notice of the applicable Change of Control). Upon
receipt of such notice of election from Owner (other than with respect to
clause
<PAGE> 86
24

(iii)(b) or (iv) above), Operator and its Affiliates shall have the right
within fifteen (15) business days following such notice to eliminate Owner's
termination right with respect to such notice by paying to Owner the amount
necessary to cure any shortfall in the rental payments or aggregate budgeted
Net Operating Income of the Initial Hotels which gave rise to such termination
right.

8.4 Remedies. Owner's and Operator's rights of termination set
forth above shall be in addition to, and not in lieu of, any and all other
rights and remedies which such party shall have at law or in equity, including,
without limitation, injunctive relief.

ARTICLE IX

Termination

9.1 Obligations Upon Termination. Upon termination of this
Agreement, Owner acknowledges and agrees as follows:

a. Owner is and will be responsible for and assumes (i)
all obligations and liabilities under any and all contracts (including, but not
limited to, collective bargaining agreements and pension plans, leases,
licenses or concession agreements, maintenance and service contracts) in
existence as of the date of the termination, (ii) all obligations and
liabilities with respect to employees at the Hotel (including, but not limited
to, applicable on-going health benefits, termination claims or benefits,
workers' compensation claims and any retroactive premiums, and any obligations
under any self-insurance program) and any and all other obligations or
liabilities with respect to the operation of the Hotel, and (iii) all
obligations and liabilities with respect to reservations or bookings for rooms,
lodging, banquets, or other functions reserved in advance and made by Operator
during the Operating Term even though the same may be for a period which occurs
after the termination of this Agreement.

b. The termination of this Agreement shall not
extinguish Owner's and Operator's obligations relating to (i) the payment of
all sums due or to become due pursuant to this Agreement or any agreements
entered into as a result of this Agreement, (ii) the provisions of Article XIV
of this Agreement, or (iii) those provisions of this Agreement which, by their
very terms (either expressly or implicitly), survive the termination of this
Agreement.
<PAGE> 87
25

c. Operator shall have the right to maintain a
representative at the Hotel for a period of sixty (60) days after the date of
termination for the purpose of finalizing the termination of this Agreement.
During such sixty (60) day period, Owner will provide Operator's representative
with a guest room and private office space at the Hotel at no charge unless
such termination is the result of an event of default by Operator, in which
case Operator shall bear the cost of such room and space. Operator's
representative shall have access to the Hotel's books and records for the
period up to the date of termination and shall also have the right to use the
telephone, computer, copying and other office equipment of the Hotel during
normal business hours and will pay the actual out-of-pocket costs associated
with the use of such equipment.

9.2 Use of Sheraton Name. Upon the termination of this Agreement,
neither Owner nor any other owner or operator of the Hotel shall have the right
to use the word "Sheraton" or any Sheraton trademarks, emblems, insignia,
slogans or distinguishing characteristics in connection with the operation of
the Hotel, except that Owner shall have the right to use all of the then
existing Operating Equipment and Operating Supplies even though marked with the
name "Sheraton," or with other Sheraton characteristics, until fully consumed,
but in no event for a period in excess of sixty (60) days whereupon it shall
destroy said identity items. Owner shall, at its own expense within five (5)
days of the effective date of any termination or expiration of this Agreement,
remove from the Hotel any signs or other indicia of any connection with the
Sheraton hotel system. In the event Owner fails to remove such signs and other
indicia within such five (5) day period, Operator shall have the right and
Owner hereby grants Operator a license to enter upon the Premises and at
Owner's expense to remove, or cause to be removed, such signs and indicia.
Notwithstanding the foregoing, if within fifteen (15) days after termination
Operator offers to buy any or all of said Operating Equipment and Operating
Supplies bearing the name Sheraton or Sheraton trademarks, emblems, insignia or
distinguishing characteristics, at the lesser of actual cost or fair market
value, Owner shall cease to use same and shall sell same to Operator. In the
event of any dispute as to fair market value, the Independent Public Accountant
shall determine such value. Operator shall have the right to seek injunctive or
other relief in a court of competent jurisdiction, to enforce the foregoing
provisions, notwithstanding any arbitration provisions contained in this
Agreement, the parties hereby agreeing that the failure of Owner to comply with
this provision shall cause Operator
<PAGE> 88
26

irreparable harm which can not be fully compensated by monetary damages. Owner
shall bear all of Operator's costs, including reasonable attorneys' fees, in
connection with the enforcement of Operator's rights under this Article IX. The
provisions of this Article IX shall survive termination of this Agreement.

ARTICLE X

Damage and Destruction; Condemnation

10.1 Damage or Destruction. If the Hotel or any portion thereof shall
be damaged or destroyed at any time or times during the Operating Term by fire,
casualty or any other cause, Owner will, at its own cost and expense and with
due diligence, repair, rebuild or replace the same so that after such
repairing, rebuilding, or replacing, the Hotel shall be substantially the same
as prior to such damage or destruction. If Owner fails to undertake such work
within ninety (90) days after the fire or other casualty, or shall fail to
complete the same diligently, Operator may, at its option, terminate this
Agreement by written notice to Owner, effective as of the date sent.
Notwithstanding the foregoing, if the Hotel is damaged or destroyed to such an
extent that the cost of repairs or restoration, as reasonably estimated by
Operator, exceeds one-third of the original cost of the Hotel, Operator may
terminate this Agreement by written notice to Owner, or Owner may, if it
determines not to repair, rebuild or replace the Hotel, as aforesaid, terminate
this Agreement by such notice to Operator. In the event Owner is not required
to repair, rebuild or replace the Hotel under the terms hereof, but
nevertheless determines at any time within three (3) years after the date of
such casualty to so repair, rebuild or replace the Hotel, then Operator may
reinstate this Agreement by written notice to Owner within sixty (60) days
after the later of: (a) the commencement of such repairing, rebuilding or
restoring, (b) receipt of written notice from Owner of the commencement
thereof, or (c) receipt of written notice from Owner of its intention to
repair, rebuild or replace the Hotel.

10.2 Condemnation.

a. If the whole of the Hotel shall be taken or condemned in
any eminent domain, condemnation, compulsory acquisition or like proceeding by
any competent authority or if such a portion thereof shall be taken or
condemned as to make it imprudent or unreasonable to use the remaining
<PAGE> 89
27

portion as a first-class hotel of the type immediately preceding such taking or
condemnation, then the Operating Term shall terminate as of the date of such
taking or condemnation. If only a part of the Hotel shall be taken or condemned
and the taking or condemnation of such part does not make it unreasonable or
imprudent to operate the remainder as a first-class hotel of the type
immediately preceding such taking or condemnation, this Agreement shall not
terminate, and Owner shall undertake such alterations or modifications to the
Hotel, or any part thereof, as shall be reasonably necessary to make the Hotel
a satisfactory architectural unit as a first-class hotel of the type
immediately preceding such taking or condemnation.

b. Operator shall have the right, in the case of either total
or partial taking or condemnation, either to institute or to intervene in any
available administrative proceeding or judicial action, intended to determine
just compensation for such taking, for the purpose of representing Operator's
compensable interest in any award thereof, arising from this Agreement and more
specifically from Operator's right of quiet enjoyment. Any award that does not
recognize the separate compensable interests of Owner and Operator shall be
apportioned between the parties hereto in consideration, without limitation, of
such factors as: (i) recoupment by Owner of its investment, (ii) return on
investment to date, (iii) actual loss of income (including Operator's fee
income hereunder), (iv) loss of reasonably anticipated future income (including
Operator's fee income hereunder), (v) length of the unexpired term of this
Agreement, and/or (vi) the proportion that Operator's Basic and Incentive Fees
have historically borne to the return to Owner after payment of such fees. Any
award which does not recognize such separate and compensable interest in
Operator shall be the subject of arbitration between the parties hereto
pursuant to Section 15.4.

ARTICLE XI

Assignment and Transfer

11.1 Sale, Lease or Assignment by Owner.

11.1.1 Owner's Right to Assign. Subject to the provisions of
this Article XI, Owner shall have the right at any time during the Term to
assign its entire interest in this Agreement in connection with a Change of
Ownership, in which event such purchaser shall accept the assignment of this
Agreement and assume in writing all of
<PAGE> 90
28

Owner's obligations hereunder as of the date of the Change of Ownership. The
execution by the purchaser and Owner of an agreement of such assignment and
assumption in form reasonably satisfactory to Operator's counsel shall be a
condition of the sale or disposition to such proposed purchaser and Operator
shall have the right to enjoin such sale or disposition in the event that such
an agreement has not been delivered to Operator at least three (3) business
days prior to such sale or disposition. Notwithstanding the foregoing, Owner
shall not have the right to assign its interest hereunder as aforesaid, and if
Owner does so this Agreement shall be deemed to have been terminated by Owner,
if Operator determines, in its reasonable judgment, that (a) the proposed
purchaser or its beneficial owners do not have the ability to fulfill Owner's
financial obligations hereunder; (b) the consummation of the proposed
transaction would materially jeopardize any gaming or other license of
Operator, Sheraton, ITT or any of their respective Affiliates or it shall be
contrary to any United States law or regulation for Operator to manage the
Hotel for the proposed Owner; (c) the business reputation of the proposed
purchaser or its beneficial owners is unacceptable; or (d) the proposed
purchaser or its beneficial owners are (or are controlled by) a hotel
management or franchising company which competes with Operator or its
Affiliates. Any deemed termination resulting from a failure of any of the
conditions set forth in this Section 11.1.1 shall be deemed a termination by
Owner. Owner shall not otherwise have the right to assign its interest in this
Agreement during the Term, without Operator's prior written consent, such
consent not to be unreasonably withheld.

11.1.2 Owner's Right to Sell. The partners or other
constituent members of Owner may, upon written notice to Operator pursuant to
Section 11.1.3 below, assign, transfer, or dispose of all or any part of their
interest(s) in Owner from time to time without the consent of the Operator,
provided that such assignment, transfer or disposition does not constitute a
Change of Ownership, subject, however, to Operator's right to terminate this
Agreement in certain circumstances pursuant to Section 15.7.

11.1.3 Notice of Sale or Assignment. Owner and/or any partner
or other constituent member of Owner desiring to sell or otherwise dispose of
all or any part of its interest in the Hotel or Owner, as the case may be,
shall give Operator not less than forty-five (45) days' advance written notice
of its intention, which notice shall identify in reasonable detail the owners
of the proposed purchaser and shall be accompanied by the latest available
<PAGE> 91
29

audited and unaudited financial statements of the proposed purchaser. The
effective date of such notice to Operator shall be the date on which Operator
receives from Owner a detailed description of the proposed purchaser and all
beneficial owners of the proposed purchaser, including, without limitation, the
latest available audited and unaudited financial statements of the proposed
purchaser and such beneficial owners.

11.2 Assignment by Operator. Operator shall have the right to assign
all its right, title and interest under this Agreement to (a) any Affiliate of
it or of Sheraton, provided that (i) Operator shall remain liable for all
obligations and liabilities of Operator hereunder, and (ii) such assignee
enjoys the benefits of the Sheraton organization to the same degree as
Operator, or (b) any successor or assignee of Operator or Sheraton which may
result from any merger, consolidation or reorganization, or any other entity
which acquires all or substantially all of the business and assets of Sheraton,
other than any such transaction constituting a Change of Control. Operator
shall have no right to assign its right, title and interest under this
Agreement except as set forth in this Section 11.2.

11.3 Liability After Assignment. Except as expressly provided for
herein, upon any assignment permitted by this Article and upon assumption of
this Agreement by the assignee, the assignor shall be relieved of any
obligation or liability under this Agreement incurred or arising subsequent to
the date of such assignment.

ARTICLE XII

Insurance

12.1 Owner Insurance. Throughout the Term, Owner shall obtain, pay for
and maintain the insurance identified as "Owner Insurance" in Exhibit C and
shall comply with all of the requirements of such Exhibit.

12.2 Operator Insurance. Throughout the Term, Operator shall obtain
and maintain the insurance identified as "Operator Insurance" in Exhibit C, the
cost of which shall be an Operating Expense, and shall comply with all of the
requirements of such Exhibit.

12.3 Waiver of Subrogation. Owner hereby waives its right of
subrogation and shall have all policies of
<PAGE> 92
30

insurance provide that the insurance company will have no right of subrogation
against Operator, Sheraton, ITT or any of their respective Affiliates or the
agents or employees thereof. Owner assumes all risks in connection with the
adequacy of any insurance or self-insurance program required or permitted under
this Agreement, and waives any claim against Operator, Sheraton, ITT and all of
their respective Affiliates for any liability, cost or expense arising out of
any uninsured claim, in part or in full, of any nature whatsoever.

12.4 Separate Operator Insurance. Owner acknowledges that Operator,
Sheraton, ITT or any of their respective Affiliates may at their sole expense,
carry insurance coverages separate and distinct from those required under this
Agreement, including any excess coverage protecting only their separate
interests.

ARTICLE XIII

Intellectual Property; Trade Names

13.1 Use of Intellectual Property. Operator shall utilize the
Intellectual Property in connection with the operation of the Hotel as
appropriate for the purpose of carrying out its agreements and obligations
hereunder, but such use shall be strictly on a non-exclusive basis, and neither
such use nor anything contained in this Agreement shall confer any proprietary
rights in the Intellectual Property upon Owner or any third parties. All
advertising, marketing promotional pieces, public relations and sales materials
shall only use the Sheraton trademark and service marks in an approved manner
as to graphics, formatting, positioning and the like.

13.2 Hotel Name. During the Operating Term, the Hotel shall at all
times be known and designated as indicated in the Term Sheet, or by such other
name as from time to time may be agreed upon by Owner and Operator. All rights
to any such name, exclusive of the name "Sheraton" or any other term utilized
in the name of the Hotel which is a trade name or trade mark of Sheraton,
Operator or any of their respective Affiliates, or which is commonly used by
Sheraton, Operator or any of their respective Affiliates in connection with a
group of their hotels, or which identifies the general or specific location of
the Hotel, shall belong solely to Owner.
<PAGE> 93
31

13.3 Hotel Logo Goods. The parties agree that clothing and other goods
bearing the name or logo of the Hotel, or any other right, trade name, logo or
mark used only at the Hotel or specifically making reference to the Hotel, may
be sold at the Hotel and at any other hotel or facility owned, operated or
licensed by Operator, Sheraton, ITT or any of their respective Affiliates.
There shall be no royalty, license fee or other charge by Operator or Owner in
connection with the use of such rights.

ARTICLE XIV

Claims and Indemnification

14.1 Claims and Liability. Owner and Operator mutually agree for the
benefit of each other to look only to the appropriate insurance coverages in
effect pursuant to this Agreement in the event any demand, claim, action,
damage, loss, liability or expense occurs as a result of injury to person or
damage to property (collectively, a "Claim"), regardless whether any such Claim
is caused or contributed to, by or results from the negligence of Owner or
Operator or their respective Affiliates, employees, directors, officers, agents
or independent contractors and regardless whether the injury to person or
damage to property occurs in and about the Hotel or elsewhere as a result of
the performance of this Agreement.

14.2 Indemnification in favor of Owner. In the event the insurance
proceeds are insufficient or there is no insurance coverage to satisfy such
Claims, and provided Operator is made a party to such proceedings and is given
an adequate opportunity to defend itself with respect to such Claims, Operator
shall indemnify and hold Owner and its Affiliates, officers, directors,
employees, agents and independent contractors harmless, to the extent of the
excess liability (including any deductible amount under any policy of
insurance), from and against any and all Claims which such party may suffer,
sustain or incur, if, and only to the extent, such Claims are determined by the
final, unappealable judgment of a court of competent jurisdiction to result
from the fraud, gross negligence or willful misconduct of Operator's employees,
while such person is acting within the scope of his or her employment.

14.3 Indemnification in favor of Operator. In the event the insurance
proceeds are insufficient or there is no insurance coverage to satisfy such
Claims, Owner shall indemnify and hold Operator, Sheraton, ITT, their
respective
<PAGE> 94
32

Affiliates, and any officers, directors, employees, agents or independent
contractors of any of them, harmless from and against any and all Claims,
including reasonable attorneys' fees, except to the extent such Claims are the
responsibility of Operator pursuant to Section 14.2. Owner will, at Operator's
request, assume the defense (with counsel satisfactory to Operator) of any
proceeding brought by any third party to establish any such liability, the
costs of any such defense being an Operating Expense hereunder. Operator shall
also have the right to engage separate counsel, at its expense, to monitor the
proceedings, and Owner and Owner's counsel shall fully cooperate with such
counsel. Any liability resulting from, or settlement amount relating to, any
Claim which is not covered by insurance will be an Operating Expense so long as
this Agreement remains in effect. In addition, without limiting any
indemnifications set forth in this Agreement, Owner agrees to indemnify and
hold Operator, Sheraton, ITT, their respective Affiliates, and any officers,
directors, employees, agents or independent contractors harmless from any and
all liability, loss, damages, costs or expenses (including all reasonable
attorneys' fees) of any kind or nature by reason of any claim which may arise
as a result of a default or other breach by Owner of any of the obligations and
liabilities set forth in Section 9.1.

14.4 Limitation with respect to good faith acts. Notwithstanding any
other provisions of this Agreement, but without limiting the remainder of this
Article XIV, in no event shall Owner make any claim against Operator, Sheraton,
ITT or any of their respective Affiliates, or any officer, agent or employee of
any of them, nor shall they be liable to Owner or to any other person or
entity, on account of: (i) any act, omission, error of judgment or allegation
thereof in connection with the operation of the Hotel hereunder by Operator,
Sheraton, ITT or any of their respective Affiliates, or any officer, agent or
employee of any of them, which act, omission, error of judgment or allegation
thereof was made in good faith, or (ii) any negligent, tortious or other act,
error or omission of any officer, employee or agent of Owner (except with
respect to Operator, as set forth herein).

14.5 Survival. The provisions of this Article XIV shall survive
termination of this Agreement.
<PAGE> 95
33

ARTICLE XV

Miscellaneous

15.1 Casino. No casino shall be operated at the Hotel without the
consent of Owner and Operator. In the event the parties shall approve a casino
for operation at the Hotel, Operator shall have the exclusive right to operate
such casino as a part of the Hotel, and the excess of the gross amount wagered
therein over the total amount of money won by wagerers will be included in the
Total Revenue of the Hotel and the expenses of operation relating to the casino
will be an Operating Expense.

15.2 Financings and Offerings of Owner or its Affiliates. Neither
Owner nor any Affiliate of Owner shall represent to any lender or other
participant in any financing or in any public or private offering of securities
by Owner or any Affiliate of Owner that Operator, Sheraton or any Affiliate of
either is in any way responsible for any of the obligations of Owner or any
Affiliate of Owner in such financing or is in any way participating in any such
offering. Except with respect to public disclosure required by law, neither
Owner nor any Affiliate of Owner shall make use of the name "Sheraton" or the
name of Operator, Sheraton or any Affiliate of either in connection with any
financing or offering other than to state that the Hotel: (i) will bear the
name "Sheraton", (ii) will be managed by Operator under this Agreement, and
(iii) will be part of the "Sheraton Hotel System". The use of the name
"Sheraton" or the name of Operator, Sheraton or any Affiliate of either in any
other fashion, or the use of any written or oral materials or information
provided by Operator, Sheraton or any Affiliate of either to Owner, including,
but not limited to, financial or any other information concerning Operator,
Sheraton or any Affiliate of either, shall be subject to the prior written
approval of Operator and Sheraton, which approval may be withheld in such
party's sole discretion. Upon request, Operator and Sheraton will provide Owner
with written requirements which must be complied with as a prerequisite to any
other such use of any such name or the use of any such materials or
information.

15.3 Notices. Any notice, statement or demand required to be given
under this Agreement shall be in writing, sent by hand delivery, or by
certified mail (postage prepaid, return receipt requested), or by Federal
Express or other overnight delivery service, or by facsimile machine (with an
executed original sent the same day by overnight delivery service), addressed,
in the case of
<PAGE> 96
34

Owner, to the address set forth in the Term Sheet, and in the case of Operator,
to Sixty State Street, Boston, Massachusetts 02109, Attention: General Counsel,
with a copy to the General Manager of the Hotel, sent to the address of the
Hotel, or to such other addresses as Operator or Owner shall designate in the
manner herein provided. Notices shall be deemed delivered on the first business
day following (1) the date that is three (3) calendar days after the notice is
deposited in the U.S. mail (exclusive of the mailing date) if sent by certified
mail, or, (2) if hand delivered, the date the hand delivery is made, or (3) if
delivered by facsimile machine, the date the transmission is made (provided the
confirmatory original is received the next business day following), or, (4) if
given by an overnight delivery service, the day after the date that the notice
is deposited with the overnight delivery service.

15.4 Arbitration. The factual issues referred to in Sections 7.4 and
10.2b. of this Agreement shall be settled by the final and binding decision of
the Accountants as set forth herein. In the case of a dispute with respect to
such matters, either party may submit such matter to arbitration which shall be
conducted by the Accountants. The "Accountants" shall be one of three (3) firms
of certified public accountants of recognized international standing in the
hotel industry. Until otherwise agreed to by the parties, the three (3) firms
shall be Arthur Andersen LLP, Coopers and Lybrand, and Pannell Kerr Forster,
notwithstanding any existing relationships which may exist between Owner and
such accounting firms or Operator and such accounting firms. The party desiring
to submit any matter to arbitration hereunder shall do so by written notice to
the other party, which notice shall set forth the items to be arbitrated and
such party's choice of one of the three (3) accounting firms. The party
receiving such notice shall within fifteen (15) days after receipt of such
notice either approve such choice, or designate one of the remaining two (2)
firms by written notice back to the first party, and the first party shall
within fifteen (15) days after receipt of such notice either approve such
choice or disapprove the same. If both parties shall have approved one of the
three (3) firms under the preceding sentence, then such firm shall be the
"Accountants" for the purposes of arbitrating the dispute; if the parties are
unable to agree on an accounting firm, then the third firm, which was not
designated by either party, shall be the "Accountants" for such purpose. The
Accountants shall be required to render a decision in accordance with the
procedures described below within fifteen (15) days after being notified of
their selection. The fees and expenses of the Accountants will be paid by the
<PAGE> 97
35

non-prevailing party. In all arbitration proceedings submitted to the
Accountants, the Accountants shall be required to agree upon and approve the
substantive position advocated by Owner or Operator with respect to each
disputed item. Any decision rendered by the Accountants that does not reflect
the position advocated by Owner or Operator shall be beyond the scope of
authority granted to the Accountants and, consequently, may be overturned by
either party. All proceedings by the Accountants shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the
provisions of such act are modified by this Agreement or the mutual agreement
of the parties. Unless otherwise agreed, all arbitration proceedings shall be
conducted at the Hotel.

15.5 Performance During Disputes. It is mutually agreed that during
any kind of controversy, claim, disagreement or dispute, including a dispute as
to the validity of this Agreement, Operator shall remain in possession of the
Hotel as Operator and shall be entitled to receipt of Basic Fees and Incentive
Fees in accordance with the terms of this Agreement; and Owner and Operator
shall continue their performance of the provisions of this Agreement. Operator
shall be entitled to injunctive relief from a civil court or other competent
authority to maintain possession in the event of a threatened eviction during
any dispute, controversy, claim or disagreement arising out of this Agreement.

15.6 Events of Force Majeure; Emergencies; Compliance with Laws. If at
any time during the Term Operator is unable to perform pursuant to the terms of
this Agreement or it becomes necessary, in Operator's opinion, to cease
operation of the Hotel in order to protect the Hotel and/or the health, safety
and welfare of the guests and/or employees of the Hotel for reasons beyond the
reasonable control of Operator, such as, but not limited to, acts of war,
insurrection, civil strife and commotion, labor unrest, governmental
regulations and orders, shortage or lack of adequate supplies or lack of
skilled or unskilled employees, contagious illness, catastrophic events or acts
of God ("Force Majeure"), then in any such event or similar events Operator may
close and cease or partially cease operation of all or any part of the Hotel,
reopening and commencing operation when Operator deems that such may be done
pursuant to laws or regulations applicable to Sheraton and Operator, and
without jeopardy to the Hotel, its guests and employees. Operator and Owner
agree, except as otherwise provided herein, that the time within which a party
is required to perform an obligation and the Term shall be extended for a
<PAGE> 98
36

period of time equivalent to the period of delay caused by an event of Force
Majeure. If an emergency condition should exist which requires that immediate
repairs be made for the preservation and protection of the Hotel, its guests or
employees, or to assure the continued operation of the Hotel, Operator is
authorized to take all actions and to make all expenditures necessary to repair
and correct such condition, regardless whether provisions have been made in the
applicable budget for such emergency expenditures. Expenditures made by
Operator in connection with an emergency shall be paid, in Operator's sole
discretion, out of the Bank Account to the extent funds are available; and if
not, from the Reserve Account. Owner shall, to the extent required to meet
current obligations, immediately replenish such funds.

15.7 Gaming Licensure Issues and Compliance with Any Laws or
Regulations Applicable to Operator. Operator and Affiliates of Operator own and
operate or will own and operate casino gaming facilities in the states of
Nevada and New Jersey, and other U.S. and foreign jurisdictions, which are
subject to extensive regulation. If, in the sole judgment and discretion of
Operator, the association with Operator of Owner or any Affiliate of Owner or
any employee, officer or director of Owner or any transferee of Owner may
result in a disciplinary action or the loss of or inability to reinstate any
registration, application or license or any rights or entitlements held by
Operator or any Affiliate of Operator under any state, local, United States or
foreign gaming laws, or if Owner or any Affiliate or transferee of Owner is
required to qualify or be found suitable under any gaming laws under which
Operator or any Affiliate of Operator is licensed, registered, qualified or
found suitable, and Owner or any Affiliate or transferee of Owner does not so
qualify (at its own expense) or any of the foregoing shall be unsuitable or
unacceptable for Operator to do business with under any law or regulation
applicable to Operator or any Affiliate of Operator, then Operator may deliver
written notice of the foregoing to Owner, and then Operator may elect to
terminate this Agreement. Owner agrees to provide Operator with such
information and details concerning Owner and officers, directors and
shareholders of Owner as Operator or any regulatory agency may require in order
to establish suitability.

15.8 Employment Solicitation Restriction Upon Termination. Owner and
its Affiliates and their successors hereby agree not to solicit the employment
of the Hotel's general manager, director of sales or controller or any
personnel employed by Operator or an Affiliate of Operator
<PAGE> 99
37

at any time during the Term without Operator's prior written approval.
Furthermore, Owner and its Affiliates agree not to solicit or employ the
Hotel's general manager, director of sales or controller or any executive
personnel employed by Operator or an Affiliate of Operator for a period of
twelve (12) months after the termination or expiration of this Agreement,
without Operator's prior written approval.

15.9 Set-off. Without prejudice to Operator's right to terminate this
Agreement pursuant to the provisions of this Agreement, Operator may at any
time during the continuance of an event of default (as such term is defined in
Article VIII) and without notice to Owner set-off or transfer any sum or sums
held by Operator, Sheraton or their Affiliates to the order of, or on behalf
of, Owner, in or towards satisfaction of any of Owner's liabilities to Operator
in respect of all sums due to Operator under the terms of this Agreement.

15.10 Press Releases. Except with respect to public disclosure
required by law, no press releases or other written matter in which the names
"Sheraton" or "ITT" are used shall be released or otherwise used by Owner
without Operator's prior written approval of the timing and content of such
release in each and every case, which approval may be withheld in Operator's
sole discretion.

15.11 Consents. Except as herein otherwise provided, whenever in this
Agreement the consent or approval of Operator or Owner is required, Owner and
Operator each agree to act reasonably and without undue delay with respect to
requests for such consent or approval. Such consent or approval shall be in
writing only and shall be duly executed by an authorized officer or agent of
the party granting such consent or approval.

15.12 Partial Invalidity. In the event that any one or more of the
phrases, sentences, clauses or paragraphs contained in this Agreement shall be
declared invalid by the final and unappealable order, decree or judgment of any
court, this Agreement shall be construed as if such phrases, sentences, clauses
or paragraphs had not been inserted; provided that if any portion of Article IV
or Sections 6.1c., 7.1, or 14.3 shall be so declared invalid, Operator shall
have the option to terminate this Agreement within thirty (30) days thereafter
on written notice to Owner.
<PAGE> 100
38

15.13 Further Actions. Owner and Operator shall execute and deliver
all other appropriate supplemental agreements and other instruments, and take
any other action necessary to make this Agreement fully and legally effective,
binding, and enforceable as between them and as against third parties,
including Owner's filing in appropriate governmental offices pursuant to any
statute, ordinance, rule or regulation requiring such filing by persons or
entities doing business in a name other than their own, of a certificate or
similar document indicating that Owner is engaging in the hotel business at the
Hotel under the name of the Hotel. Any fees or expenses incurred in connection
therewith shall be borne by Owner.

15.14 Paragraph Headings. The headings of the titles to the several
articles of this Agreement are inserted for convenience only and are not
intended to affect the meaning of any of the provisions hereof.

15.15 Governing Law. This Agreement shall be construed, both as to its
validity and as to the performance of the parties, in accordance with the laws
of the place where the Hotel is located. This Agreement shall be binding upon
and inure to the benefit of Owner and Operator, and their respective successors
and permitted assigns. The waiver of any of the terms and conditions of this
Agreement on any occasion or occasions shall not be deemed a waiver of such
terms and conditions on any future occasion.

15.16 Entire Agreement; Owner has not relied on representations. This
Agreement, including all exhibits and schedules hereto which are hereby
incorporated by reference, constitutes the entire agreement between the parties
relating to the subject matter hereof, superseding all prior agreements or
undertakings, oral or written. Owner has not relied on any projection of
earnings, statements as to the possibility of future success or other similar
matter which may have been prepared by Operator, Sheraton, or any of their
respective Affiliates, and understands that no guaranty is made or implied by
Operator, Sheraton or any of their Affiliates as to the cost or the future
financial success of the Hotel.

15.17 Benefits of Agreement; No Third-Party Rights. None of the
provisions of this Agreement shall be for the benefit of or enforceable by any
party other than Owner, Operator or any of either of their respective
Affiliates. Except as expressly provided for herein, nothing in this Agreement
shall be deemed to create any right by any party other than Owner, Operator and
any of either of their respective Affiliates and this instrument shall not be
construed in any respect to be a contract in
<PAGE> 101
39

whole or in part for the benefit of any third party nor is this instrument
intended to create an interest in, or lien upon, the Premises.

15.18. Cooperation with FelCor. Operator shall reasonably cooperate
with Owner and FelCor in connection with any financing or refinancing of any
one or more of the Initial Hotels, and shall, upon not less than ten (10) days
prior written request, execute and deliver to any lender or prospective lender,
or purchaser or prospective purchaser of an interest in FelCor, estoppel
certificates regarding the effectiveness of the Management Agreements and
performance by Owner thereunder and cold comfort letters based upon terms
reasonably acceptable to Operator, to the effect that such lender or purchaser
will receive (i) concurrent notice and opportunity to cure defaults by Owner
under the Management Agreements and (ii) the right to substitute a new owner
reasonably acceptable to Operator if and when such lender or purchaser obtains
title to or possession of the Hotel(s).

IN WITNESS WHEREOF, Operator and Owner have duly executed this
Agreement the day and year first written above in the Term Sheet.

FCH/[ ] Leasing, L.L.C. SHERATON OPERATING
CORPORATION

By By
--------------------------- ---------------------------------
Name: Name:
Title: Title:
<PAGE> 102

EXHIBIT B

DEFINITIONS

For the purposes of this Agreement, the following terms shall have the
following respective meanings:

"Accounting Period" shall mean a period of time not less than three
nor more than six full weeks, as shall be used by Operator in accounting for
the operations of the Hotel.

"Affiliate(s)" shall mean, with respect to any entity, any natural
person or firm, corporation, partnership, limited liability company,
association, trust or other entity which, directly or indirectly, controls, is
controlled by, or is under common control with, the subject entity; a natural
person or entity which has an entity as an Affiliate under the foregoing shall
also be deemed to be an Affiliate of such entity. For purposes hereof, the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of any such
entity, or the power to veto major policy decisions of any such entity, whether
through the ownership of voting securities, by contract, or otherwise.

"Approved Operating Plan" shall mean an Operating Plan which has been
approved or deemed approved by the Owner pursuant to Section 7.3.

"Bank Account" shall mean a bank account designated by Owner from time
to time.

"Basic Fee" shall have the meaning set forth in the Term Sheet.

"Books and Records" shall have the meaning set forth in Section 7.9.1.

"Building and Appurtenances" shall mean the building(s) and
appurtenances thereto located on the Premises (including, without limitation,
heating, lighting, air conditioning equipment, and elevators).

"Capital Expenditure" shall mean all expenditures incurred with
respect to the Hotel during such period that, in accordance with GAAP, are or
should be capitalized rather than expensed, including items included in
"additions to property, plant or equipment" or similar items reflected in the
statement of cash flows.
<PAGE> 103
2

"Cash-on-Cash Return" shall mean an amount computed over the
applicable two-year period, reflected as a percentage, equal to (a) the sum of
(i) the aggregate amount of all rental payments under the Lease Agreements
during such period (after payment by FelCor of all personal and real property
taxes and insurance premiums related to any Initial Hotel for such period),
(ii) the aggregate amount of distributions made (or if not made, cash available
for distribution) by Owner to its members in respect of their ownership
interests in Owner during such period (which, for purposes of clarity, excludes
any payments made to Operator on account of the Incentive Fee) and (iii) the
aggregate Net Operating Income of any of the Initial Hotels for any portion of
the two-year period in which any Lease Agreement is not then in effect, divided
by (b) the sum of (i) the aggregate cost basis of FelCor in the Initial Hotels
(which, for purposes of clarity, includes the cost basis of any Initial Hotel
where the Lease Agreement relating to such Hotel becomes no longer in effect
during the two-year period) plus (ii) the aggregate amount of all Capital
Expenditures made by FelCor pursuant to Approved Operating Plans under the
Management Agreements.

"Centralized Services" shall mean the services and group benefits from
time to time made available for a fee to all or certain distinct groups of
Sheraton properties, as described in Section 7.6.

"Change of Control" shall mean, at the relevant time, (i) any event
resulting in any "person" or "group" (within the meaning of Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becoming the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of more than 35% of
the total voting power of all classes of capital stock of the ultimate parent,
at the relevant time, of Sheraton then outstanding and entitled to vote
generally in elections of directors ("Voting Stock") and such beneficial
ownership was acquired within a period of two years following a tender offer by
such person (or any of its Affiliates) for shares of Voting Stock of such
parent of Sheraton or a solicitation of proxies with respect to Voting Stock of
such parent of Sheraton by such person, if, in either case, such tender offer
or solicitation of proxies was not approved by a majority of the Board of
Directors of such parent of Sheraton in office at the time such tender offer or
proxy solicitation was commenced, or (ii) a majority of the Board of Directors
of the ultimate parent, at the relevant time, of Sheraton being constituted of
individuals who were elected pursuant to a solicitation of proxies with respect
to Voting Stock of such parent of Sheraton, if such solicitation of proxies was
not approved by a majority of the Board of Directors of such parent of Sheraton
in office at the time such solicitation of proxies was commenced.
<PAGE> 104
3

"Change of Ownership" shall mean (1) any sale or disposition of all or
any part of the Hotel, and/or (2) any sale or disposition of any interests in
the Owner or in the partners or other constituent members of the Owner which
would result in a change of the controlling interest in the Owner or in the
general partner of the Owner (if the Owner is a limited partnership), or in any
general partner(s) or venturer(s) of the Owner if the Owner is a general
partnership or a joint venture. For purposes of this definition, "controlling
interest" shall mean, as applicable, (a) management control and/or ownership of
more than forty-nine and nine-tenths percent (49.9%) of all classes of the
voting stock of a corporation, (b) management control and/or ownership of more
than forty-nine and nine-tenths percent (49.9%) of all outstanding partnership
interests of a limited partnership (which management control shall include,
without limitation, management control and/or ownership of more than forty-nine
and nine-tenths percent (49.9%) of the general partner thereof) and (c)
management control and/or ownership of more than forty-nine and nine-tenths
percent (49.9%) of all outstanding partnership interests of a general
partnership or joint venture.

"Claim" shall have the meaning set forth in Section 14.1.

"Compensation" shall mean the direct salaries and wages paid to, or
accrued for the benefit of, any of the executive level Hotel personnel or any
other Hotel employee to be paid in accordance with the terms of this Agreement,
together with all fringe benefits payable to, or accrued for the benefit of,
such executive level Hotel personnel or other Hotel employee, including
employer's contributions required pursuant to any legal requirement, or other
employment taxes, retirement, pension plans or pension fund contributions,
group life, accident, disability and health insurance premiums, savings plans,
executive compensation and bonus programs and other similar benefits to be paid
in accordance with the terms of this Agreement and any expenses not otherwise
specifically referred to in this definition which are referred to as
"Administrative and General Expenses" in the Uniform System; provided, that
with respect to the certain senior hotel personnel who, in accordance with
Sheraton policy remain on Sheraton's payroll, such benefits shall be charged to
the Hotel as a percentage of direct salary, such percentage to be equal to the
percentage of direct salary charged generally at other Sheraton-managed hotels
in the United States from time to time, which percentage in 1996 is 28% but
which percentage may be changed from time to time by Sheraton.
<PAGE> 105
4

"Consumer Price Index" shall mean the Consumer Price Index
(1982-1984=100) for Urban Wage Earners and Clerical Workers, as compiled and
published by the Bureau of Labor Statistics of the United States Department of
Labor for the city or the smallest area including the city or town in which the
Hotel is located for which such an index is published. In the event that such
Consumer Price Index shall be discontinued or abandoned, the term Consumer
Price Index shall refer to the closest comparable index as may be substituted
by the Bureau of Labor Statistics. If no such index shall be substituted, then
another index generally recognized as authoritative shall be substituted by
agreement of the parties, and if the parties cannot agree, such index shall be
determined by the Independent Public Accountant.

"Effective Date" shall have the meaning set forth in the Term Sheet.

"FelCor" shall mean FelCor Suites Limited Partnership.

"Fiscal Year" shall mean the calendar year, except that the first
Fiscal Year shall be that period commencing on the first day of the Operating
Term and ending on December 31 of the same year.

"Force Majeure" shall have the meaning set forth in Section 15.6.

"Full Fiscal Year" shall mean a Fiscal Year containing not less than
365 days.

"Furniture and Equipment" shall mean all furniture, furnishings,
equipment (including but not limited to audio-visual, kitchen, bar, office,
laundry and dry cleaning equipment), fixtures (excluding fixtures which, when
attached thereto, became a part of the Building and Appurtenances pursuant to
applicable law), wall coverings, vehicles, engineering and cleaning equipment
and other personal property used in, or held in storage for use in connection
with the operation, maintenance and cleaning of the Hotel, but excluding
Operating Equipment and Operating Supplies.

"GAAP" shall mean generally accepted accounting principles in the
United States in effect from time to time.

"Gross Operating Profit" shall mean, for any Accounting Period, the
excess of Total Revenue over all Operating Expenses for such period.
<PAGE> 106
5

"Hotel" shall mean collectively the Premises, Building and
Appurtenances, Furniture and Equipment, Operating Equipment and Operating
Supplies.

"Incentive Fee" shall mean an amount per Fiscal Year equal to (i) one
divided by the number of Initial Hotels managed by the Operator pursuant to the
Management Agreements multiplied by (ii) the sum of (x) 100% of the Net Income
of Owner, if any, with respect to all the Initial Hotels up to an aggregate of
2% of Total Revenue attributable to all the Initial Hotels plus (y) 50% of any
remaining Net Income of Owner, if any, with respect to all the Initial Hotels,
after giving effect to the payment provided in clause (i) of this definition.

"Independent Public Accountant" shall mean Arthur Andersen LLP, or any
successor firm thereto, or any other reputable national firm of certified
public accountants having substantial hotel experience as shall be mutually
agreed to by the parties.

"Initial Hotels" shall mean collectively, the existing (i) 395-room
hotel located College Park, Clayton County, Georgia, (ii) 277-room hotel
located in Atlanta, Cobb County, (iii) 297-room hotel located in Rosemont, Cook
County, Illinois, (iv) 342-room hotel located in Phoenix, Maricopa County,
Arizona and (v) 545-room hotel located in Dallas, Dallas County, Texas,
together, in each case, with all land, improvements and personal property
related thereto.

"Initial Working Capital" shall have the meaning set forth in the Term
Sheet.

"Intellectual Property" shall mean (i) proprietary software in use at
one or more of the hotels owned, operated, leased or managed by Operator,
Sheraton or any of their respective Affiliates and utilized in connection with
the operation of such hotels, and all related documentation, manuals and any
enhancements, modifications or substitutions therefor, (ii) trade secrets,
know-how and other proprietary information relating to the operating methods,
procedures and policies distinctive to such hotels, and (iii) all service
marks, trademarks, trade names, insignias and logos owned and used by Operator,
Sheraton or their respective Affiliates in connection with the operation of
such hotels.

"ITT" shall mean ITT Corporation, a Nevada corporation having its
principal office at 1330 Avenue of the Americas, New York, New York.
<PAGE> 107
6

"Lease Agreement" shall mean the lease agreement dated as of even date
herewith between FelCor and FCH/ITT Leasing, L.L.C.

"Management Agreements" shall mean collectively the five management
agreements dated as of the date this Agreement between Owner and Operator
regarding the management of the Initial Hotels.

"Net Income" shall mean net income as construed in accordance with GAAP
consistently applied.

"Net Operating Income" shall mean Total Revenues less the sum of
Operating Expenses and Specified Fixed Charges. For purposes of this
definition, there shall be excluded from Operating Expenses, without
duplication, (i) expenses for gratuities, service charges, sales and gross
receipts taxes and other similar taxes and assessments, to the extent that
receipts in respect thereof are excluded from Total Revenues, (ii) any overhead
or other costs of Owner incurred as a result of being the lessee under the
Lease Agreements (iii) any rental payments made by Owner as a result of being
the lessee under the Lease Agreement.

"Operating Equipment" shall mean all necessary chinaware, glassware,
linens, flatware, uniforms, utensils and other items of a similar nature.

"Operating Expenses" shall mean all costs and expenses of maintaining,
conducting and supervising the operation of the Hotel incurred by Operator
directly or at its request or as otherwise provided herein which are
attributable to the period under consideration under Operator's system of
accounting and are normally charged as an operating expense under GAAP, which
costs and expenses include without limitation:

(i) the cost of all food and beverages sold or consumed and of all
Operating Equipment (with the exception of the Operating Equipment
initially supplied by Owner at its sole expense pursuant to this
Agreement) and all Operating Supplies;

(ii) Compensation of Hotel personnel;

(iii) the cost of all other goods and services obtained by Operator in
connection with its operation of the Hotel to the extent equitably
allocable to the Hotel;
<PAGE> 108
7

(iv) the cost of ordinary repairs to and routine maintenance of the
Hotel;

(v) insurance premiums for insurance required pursuant to Section 12.2
of this Agreement and losses incurred on any self-insured risks
(including deductibles) in lieu thereof, provided that (a) Owner
and Operator have approved in advance such self-insurance to the
extent such consent is required herein, or (b) insurance is
unavailable to cover such risks. Premiums on policies for more
than one year will be pro-rated over the period of insurance and
premiums under blanket policies will be allocated among properties
covered;

(vi) taxes, assessments and other charges (other than income taxes and
business taxes and the like which are not collected from the
guest) payable by or assessed against Operator with respect to the
operation of the Hotel, and all water and sewer charges; provided,
that Operating Expenses shall not include any Property Taxes, all
of which shall be paid by Owner;

(vii) legal fees and fees of the Independent Public Accountant for
services (including in the latter case, fees for the Hotel annual
audit) directly related to the operation of the Hotel;

(viii) expenses for advertising, marketing, sales, promotion and public
relations activities;

(ix) the cost of Centralized Services as provided in Section 7.6;

(x) costs and expenses of employees of the Hotel and of Operator,
Sheraton and any of their Affiliates to attend meetings away from
Operator's principal executive offices (including meetings with
Owner) related to the administration or management of the Hotel,
and costs and expenses of Hotel employees with respect to training
sessions and similar meetings and conferences of Operator,
Sheraton or any of their Affiliates; and

(xi) all other expenses and disbursements determined by the Independent
Public Accountant to have been reasonably, properly and
specifically incurred by Operator, Sheraton or any of their
Affiliates pursuant to, in the course of and directly related
<PAGE> 109
8

to, the management and operation of the Hotel under this
Agreement, but specifically excluding any and all costs relating
to the headquarters offices maintained by Operator, Sheraton or
any of their Affiliates (other than offices maintained by them at
the Hotel for the management of the Hotel and offices utilized in
connection with the provision of Centralized Services, the costs
of which are reflected in the fees for such Centralized Services),

but the term "Operating Expenses" does not include (1) any depreciation and
amortization; (2) interest on any Owner indebtedness and any lease payment or
other rent payable with respect to the Hotel or any part or component thereof;
(3) Property Taxes and premiums and deductibles paid with respect to Owner
Insurance; (4) the cost of any repairs, replacements or capital improvements
required to be paid by Owner under Section 6.1 or Section 7.8; (5) structural
additions or modifications, extraordinary repairs, non-routine maintenance and
capital improvements and any other thing specified to be done or provided at
Owner's sole expense; or (6) any costs reimbursed to Owner or Operator by
commercial tenants of the Hotel.

"Operating Plan" shall have the meaning set forth in Section 7.3.1.

"Operating Supplies" shall mean the inventories of paper supplies,
cleaning materials and other consumable items used in connection with the
operation of the Hotel.

"Operating Term" shall mean the Term and any extension thereof, as set
forth in Article III.

"Operator Insurance" shall have the meaning set forth in Article XII.

"Owner Insurance" shall have the meaning set forth in Article XII.

"Premises" shall mean the lands described in Exhibit A attached
hereto.

"Property Taxes" shall mean all real and personal property taxes, all
betterments and public improvement assessments, and all other taxes or charges
of a similar nature, assessed on the Hotel or any of its component parts.
<PAGE> 110
9

"Reserve Account" shall mean the bank account designated by Operator
for the purpose of holding the funds constituting the Reserve Fund.

"Reserve Fund" shall mean the cash fund created for the purpose of
establishing a reserve for replacements and additions to Furniture and
Equipment in accordance with Section 7.10.

"Sheraton" shall mean ITT Sheraton Corporation, a Delaware corporation
having its principal place of business at 60 State Street, Boston,
Massachusetts 02109.

"Specified Fixed Charges" shall mean the following cash expenditures
made in connection with the operation of the Hotel:

(1) payments pursuant to any equipment leases or installment sales
contracts approved by Owner;

(2) real estate taxes applicable to the Hotel;

(3) premiums for insurance required to be obtained or maintained
by Owner pursuant to the Lease Agreement; and

(4) any amounts paid into the Reserve Fund.

"Star Report" shall mean the "Star Report" published by Smith Travel
Research.

"Term" shall mean the period described in Section 3.1.

"Term Sheet" shall mean the list of terms which are specific to this
Agreement as set forth in Article I above.

"Total Revenue" shall mean (1) all income and proceeds of sales of
every kind (whether in cash or on credit) resulting from the operation of the
Hotel and all of the facilities therein including, without limitation, all
amounts received from tenants (other than costs reimbursed to Owner or Operator
by commercial tenants of the Hotel), transient guests, patrons of Hotel
facilities, lessees, licensees and concessionaires and other persons occupying
space at the Hotel and/or rendering services to the Hotel guests, (2) all
income from catering operations (whether conducted inside or outside of the
Hotel), and (3) the proceeds of use and occupancy (and/or business
interruption) insurance actually received by Operator or Owner with respect to
the operation of the Hotel (after deduction from
<PAGE> 111
10

said proceeds of all necessary expenses incurred in the adjustment or
collection thereof). The term Total Revenue shall not include (a) gross
receipts of any lessee, licensee, concessionaire or other person occupying
space in the Hotel, (b) payments received at the Hotel for hotel
accommodations, goods or services to be provided at other hotels, although
arranged by, for or on behalf of Operator, (c) gratuities paid over to Hotel
employees, (d) state and municipal excise, sales and use taxes collected from
patrons or guests of the Hotel as a part of or based upon the sales price of
any goods or services but does include any business tax or similar imposition
of tax which is based on revenues and not collected from the guest, (e)
condemnation awards (other than awards for temporary use), (f) any credits or
refunds made to customers, guests or patrons, (g) any sums and credits received
by Owner for lost or damaged merchandise, (h) proceeds from the sale or other
disposition of the Hotel, (i) any interest paid with respect to any Hotel bank
accounts, (j) any fire and extended coverage insurance proceeds, and (k) any
proceeds of financing or refinancing of the Hotel.

"Uniform System" shall mean the "Uniform System of Accounts" (9th
Revised Edition, 1996) as adopted by the American Hotel and Motel Association,
with such exceptions as may be required by the provisions of this Agreement, as
such Uniform System shall be modified from time to time.
<PAGE> 112
Exhibit C

INSURANCE REQUIREMENTS

Owner Insurance.

a. "All Risk" insurance (including without limitation, flood and
earthquake to the extent available) for not less than one hundred
percent (100%) of the full replacement value of the Hotel. Such
insurance shall include business interruption insurance covering loss
of income to both Owner and Operator (including Basic and Incentive
Fees) for a minimum period of one (1) year resulting from interruption
of business caused by the occurrence of any of the risks insured
against under the "All Risk" policy.

b. Boiler and Machinery insurance (including use and occupancy/loss of
income) for all direct loss or damage to property caused by an
accident as defined under a standard Boiler and Machinery policy
including boilers, pressure vessels and mechanical or electrical
equipment. Said coverage shall be in limits of not less than ten
million dollars.

c. Such other additional insurance in such amounts and against such risks
as Operator shall reasonably require with respect to the buildings,
facilities and contents of the Hotel, it being reasonable for Operator
to require insurance of the types and in the amounts generally carried
on hotels owned or operated by Sheraton or its Affiliates.

Operator Insurance.

a. General liability insurance of not less than $100,000,000 (if
available) against all claims for personal injury (including bodily
injury), death or damage to property of third persons. Such coverage
shall not exclude liability for punitive or exemplary damages unless
such coverage is otherwise unavailable or such exclusion is required
by law. Such insurance shall include coverage against liability
arising out of the ownership or operation of motor vehicles, and must
include, at a minimum, those coverages contained under the standard
broad form Comprehensive General Liability endorsement which includes
contractual liability, employees as an insured, personal injury
liability (including false arrest, libel, slander, and defamation or
violation of the right of privacy), incidental medical malpractice,
extended bodily injury coverage,
<PAGE> 113
2

and liquor law (so-called "dram shop") liability coverages. Such
coverage shall also be applicable worldwide, and shall include costs
of legal defense. Operator may, from time to time, increase the amount
of coverage as additional coverage becomes available.

b. Crime insurance, including bonds covering Hotel employees for a
minimum of $1,000,000 per loss.

c. Statutory worker's compensation benefits and employers liability
insurance in such amounts as may be required by law.

Additional Coverage. Operator may increase the above limits of insurance
coverage and may require Owner to carry other or additional insurance, it being
reasonable for Operator to require insurance of the types and in the amounts
generally carried on hotels owned or operated by Sheraton or its affiliates.

Insurers and Named Insureds. All insurance shall be in such form and with such
companies as shall be reasonably satisfactory to Operator. Such All Risk
property damage policies shall provide that all coverages thereunder shall be
primary, and that the loss, if any, payable thereunder shall be adjusted with
and payable to Owner (or in the case of Business Interruption coverage, to
Owner and Operator). All insurance shall be in the name of Owner, Operator,
Sheraton, ITT and their respective Affiliates as the insureds, as their
interests may appear.

Certificates of Insurance. Certificates of all policies placed by each party
shall be delivered to the other: (a) on the Effective Date; and (b) not less
than thirty (30) days prior to the expiration date of all policies of insurance
that must be maintained subsequent to such expiration dates under the terms of
this Agreement. All such certificates shall specify that the policies to which
they relate cannot be canceled on less than thirty (30) days prior written
notice to each of the named insureds. Should Owner fail to supply Operator with
such certificates within the foregoing time limits, Operator may provide any
such insurance as to which such certificates are not supplied at Owner's
expense. Any advances for such insurance made by Operator shall be reimbursed
by Owner on demand or Operator may deduct such funds from the Agency Account
and/or the Reserve Account.
<PAGE> 114
Exhibit D

CENTRALIZED SERVICES AND PROGRAMS

RESERVATION

Current reservation fees are equal to the sum of the following:

$8.65 per available room per month (i.e., if the hotel has 500 rooms,
the monthly charge for this element would be $4,325), plus

0.8% of Total Rooms Revenue, plus

$2.00 per domestic reservation transaction ($4.00 for international),
plus

$4.75 per airline system transaction (i.e., Sabre and Apollo).

SHERATON CLUB INTERNATIONAL: FREQUENCY STAY PROGRAM

The Hotel shall remit to the SCI program an amount equal to 5% of the
room, food, beverages, telephone, in-room movies and valet revenues
generated at the Hotel by each paying Hotel guest who is a member in
the SCI program.

PURCHASING RESOURCE: NEGOTIATES NATIONAL CONTRACTS

Funded through vendor, self-liquidating rebates (generally in the
range of 2% per annum). Hotel may elect to utilize national contract
or other Sheraton-related purchase programs on a case-by-case basis.

SALES OFFICE FUNDING

5-1/2% of group rooms revenue booked through sales center. Commission
based program and Hotel can elect not to accept business.

ADVERTISING CO-OP

1% of total rooms revenue is contributed to a cooperative advertising
fund.

PARTNER MARKETING PROGRAMS

ITT Sheraton hotels award mileage to members of airline frequent flier
programs paying qualifying rates, upon guest request, including
American, United, Continental and Delta frequent flyer programs.
Expenses generally range from $8.00 to $10.00/transaction.
<PAGE> 115

CENTRALIZED TRAVEL AGENT COMMISSION PROGRAM

Property pays $.42/reservation transaction. This fee funds the
administration and distribution of travel agent commission checks.

ITT SHERATON TRAINING

If appropriate for the Hotel, ITT Sheraton courses shall be provided
for certain selected Hotel employees in new positions. The Hotel is
responsible for travel and lodging costs, and course fee which relates
to cost of training materials with respect to such courses. Attendance
at selected regional and corporate meetings is mandatory and results
in travel, lodging and registration expense.

GUEST SATISFACTION INDEX

Properties are assessed $8.00/room/year to fund the distribution of
guest questionnaires and the compilation of results on a quarterly
basis.

EMPLOYEE SATISFACTION INDEX

Properties are assessed $8.00/employee/year to administer the annual
distribution and collection of surveys. Reports are produced for each
department with metrics for 50 employee satisfaction attributes.

HOTEL AUDITS: LASHNER RUSH & ASSOCIATES

Lashner Rush & Associates' bi-annual property inspections are
estimated at $1,500.
<PAGE> 116
Exhibit L

FORM OF LEASE AGREEMENT

LEASE AGREEMENT

DATED AS OF __________, 1997

BETWEEN

FELCOR SUITES LIMITED PARTNERSHIP,
A DELAWARE LIMITED PARTNERSHIP,

AS LESSOR

AND

FCH/ITT LEASING, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY,

AS LESSEE

<PAGE> 117

(SHERATON [SUITES] HOTEL - _______________, _______________
TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE I ................................................................. 1
1.1 Leased Property ............................................... 1
1.2 Term .......................................................... 2
1.3 Management Agreement .......................................... 2

ARTICLE II ................................................................ 2
2.1 Definitions ................................................... 2

ARTICLE III ............................................................... 13
3.1 Rent .......................................................... 13
3.2 Confirmation of Percentage Rent ............................... 16
3.3 Additional Charges ............................................ 16
3.4 Net Lease Provision ........................................... 17
3.5 Annual Budget ................................................. 17
3.6 Books and Records ............................................. 18

ARTICLE IV ................................................................ 18
4.1 Payment of Impositions ........................................ 18
4.2 Notice of Impositions ......................................... 19
4.3 Adjustment of Impositions ..................................... 19
4.4 Utility Charges ............................................... 19
4.5 Insurance Premiums ............................................ 19

ARTICLE V ................................................................. 19
5.1 No Termination, Abatement, Etc ................................ 19
5.2 Abatement Procedures .......................................... 20

ARTICLE VI ................................................................ 20
6.1 Ownership of the Leased Property .............................. 20
6.2 Lessee's Personal Property .................................... 20
6.3 Lessor's Lien ................................................. 21

ARTICLE VII ............................................................... 21
7.1 Condition of the Leased Property .............................. 21
7.2 Use of the Leased Property .................................... 22
7.3 Lessor to Grant Easements, Etc ................................ 22

ARTICLE VIII .............................................................. 23
8.1 Compliance with Legal and Insurance Requirements, Etc ......... 23
8.2 Legal Requirement Covenants ................................... 23
8.3 Environmental Covenants ....................................... 24

ARTICLE IX ................................................................ 26
9.1 Maintenance and Repair ........................................ 26
9.2 Encroachments, Restrictions, Etc .............................. 27

ARTICLE X ................................................................. 28
10.1 Alterations ................................................... 28
10.2 Salvage ....................................................... 28
</TABLE>

-ii-

<PAGE> 118

<TABLE>
<S> <C>
10.3 Joint Use Agreements .......................................... 28
10.4 Initial Upgrade of Leased Improvements ........................ 28

ARTICLE XI ................................................................ 28
11.1 Liens ......................................................... 28

ARTICLE XII ............................................................... 29
12.1 Permitted Contests ............................................ 29

ARTICLE XIII .............................................................. 30
13.1 General Insurance Requirements ................................ 30
13.2 Replacement Cost .............................................. 31
13.3 Worker's Compensation ......................................... 31
13.4 Waiver of Subrogation ......................................... 31
13.5 Form Satisfactory, Etc ........................................ 31
13.6 Increase in Limits ............................................ 32
13.7 Blanket Policy ................................................ 32
13.8 Reports On Insurance Claims ................................... 32

ARTICLE XIV ............................................................... 33
14.1 Insurance Proceeds ............................................ 33
14.2 Reconstruction in the Event of Damage or Destruction
Covered by Insurance .......................................... 33
14.3 Reconstruction in the Event of Damage or Destruction
Not Covered by Insurance ...................................... 34
14.4 Lessee's Property ............................................. 34
14.5 Abatement of Rent ............................................. 34
14.6 Damage Near End of Term ....................................... 35
14.7 Waiver ........................................................ 35

ARTICLE XV ................................................................ 35
15.1 Definitions ................................................... 35
15.2 Parties' Rights and Obligations ............................... 35
15.3 Total Taking .................................................. 35
15.4 Allocation of Award ........................................... 36
15.5 Partial Taking ................................................ 36
15.6 Temporary Taking .............................................. 36

ARTICLE XVI ............................................................... 37
16.1 Events of Default ............................................. 37
16.2 Surrender ..................................................... 38
16.3 Damages ....................................................... 38
16.4 Waiver ........................................................ 39
16.5 Application of Funds .......................................... 39
16.5 Lessee's Right to Assign Lease ................................ 39

ARTICLE XVII .............................................................. 40
17.1 Lessor's Right to Cure Lessee's Default ....................... 40

ARTICLE XVIII ............................................................. 40
18.1 Provisions Relating to Purchase of the Leased Property ........ 40

ARTICLE XIX ............................................................... 40
19.1 Personal Property Limitation .................................. 40
19.2 Sublease Rent Limitation ...................................... 41
</TABLE>

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<TABLE>
<S> <C>
19.3 Sublease Tenant Limitation .................................... 41
19.4 Lessee Ownership Limitations .................................. 41
19.5 Lessee Officer and Employee Limitation ........................ 41
19.6 Payments to Affiliates of Lessee .............................. 42

ARTICLE XX ................................................................ 42
20.1 Holding Over .................................................. 42

ARTICLE XXI ............................................................... 42
21.1 Risk of Loss .................................................. 42

ARTICLE XXII .............................................................. 42
22.1 Indemnification ............................................... 42

ARTICLE XXIII ............................................................. 43
23.1 Subletting and Assignment ..................................... 43
23.2 Attornment .................................................... 44

ARTICLE XXIV .............................................................. 44
24.1 Officer's Certificates; Financial Statements;
Lessor's Estoppel Certificates and Covenants .................. 44

ARTICLE XXV ............................................................... 45
25.1 Lessor's Right to Inspect ..................................... 45

ARTICLE XXVI .............................................................. 45
26.1 No Waiver ..................................................... 45

ARTICLE XXVII ............................................................. 45
27.1 Remedies Cumulative ........................................... 45

ARTICLE XXVIII ............................................................ 45
28.1 Acceptance of Surrender ....................................... 45

ARTICLE XXIX .............................................................. 46
29.1 No Merger of Title ............................................ 46

ARTICLE XXX ............................................................... 46
30.1 Conveyance by Lessor .......................................... 46
30.2 Other Interests ............................................... 46
30.3 Lessor's Mortgage Default ..................................... 49

ARTICLE XXXI .............................................................. 46
31.1 Quiet Enjoyment ............................................... 46

ARTICLE XXXII ............................................................. 47
32.1 Notices ....................................................... 47

ARTICLE XXXIII ............................................................ 47
33.1 Appraisers .................................................... 47

ARTICLE XXXIV ............................................................. 48
34.1 Lessor May Grant Liens ........................................ 48
34.2 Lessee's Right to Cure ........................................ 48
34.3 Breach by Lessor .............................................. 49
</TABLE>

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<TABLE>
<S> <C>
ARTICLE XXXV .............................................................. 49
35.1 Miscellaneous ................................................. 49
35.2 Transition Procedures ......................................... 49
35.3 Waiver of Presentment, Etc .................................... 50

ARTICLE XXXVI ............................................................. 50
36.1 Memorandum of Lease ........................................... 50

ARTICLE XXXVII ............................................................ 50
37.1 Lessor's Option to Purchase Assets of Lessee .................. 50

ARTICLE XXXVIII ........................................................... 51
38.1 Lessor's Option to Terminate Lease ............................ 51

ARTICLE XXXIX ............................................................. 51
39.1 Compliance with Management Agreement .......................... 51

ARTICLE XL ................................................................ 52
40.1 Furniture, Fixture and Equipment Allowance .................... 52

ARTICLE XLI ............................................................... 52
41.1 The Ground Lease .............................................. 52
</TABLE>

Exhibit A - Legal Description
Exhibit B - Work Letter

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LEASE AGREEMENT

THIS LEASE AGREEMENT (hereinafter called "LEASE"), made as of the _____
day of ____________, 1997, by and between FelCor Suites Limited Partnership, a
Delaware limited partnership (hereinafter called "LESSOR"), and FCH/ITT
Leasing, L.L.C., a Delaware limited liability company (hereinafter called
"LESSEE"), provides as follows:

AGREEMENT:

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

ARTICLE I

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

(a) the land located in the City of ____________, County of
_______________, ____________ and described in EXHIBIT A attached hereto and by
reference incorporated herein (the "LAND");

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

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

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

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

THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL

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REQUIREMENTS AND OTHER MATTERS WHICH WOULD BE DISCLOSED BY AN INSPECTION OF THE
LEASED PROPERTY OR BY AN ACCURATE SURVEY THEREOF.

1.2 Term. The term of this Lease (the "TERM") shall commence on the date
hereof (the "COMMENCEMENT DATE"), and shall end on the fifteenth (15th)
anniversary of the last day of the month preceding the month in which the
Commencement Date occurs, unless sooner terminated in accordance with the
provisions hereof; provided, however, that Lessor shall have the option,
exercisable by Notice to Lessee not later than ninety (90) days prior to the
scheduled termination of this Lease, to extend the Term for an additional
period of five (5) years, on the same terms and conditions as set forth herein.

1.3 Management Agreement. Lessor acknowledges that Lessee has entered into
the Management Agreement, which provides for a term of twenty (20) years. In
the event that Lessor does not exercise its option to extend the Term for an
additional five (5) years, as permitted under Section 1.2, upon termination of
this Lease, Lessor shall (or shall enter into a new lease with a new lessee,
reasonably acceptable to Manager, who will) accept possession of the Hotel
subject to the Management Agreement, and shall execute such documentation as
may be reasonably requested by Manager to evidence such assumption. In
connection with such assumption by Lessor (or its substitute lessee), Lessee
shall be released from further liability under the Management Agreement.

ARTICLE II

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

Additional Charges: As defined in Section 3.3.

Affiliate: As used in this Lease the term "Affiliate" of a Person shall
mean (a) any Person that, directly or indirectly, controls or is controlled by
or is under common control with such Person, (b) any other Person that owns,
beneficially, directly or indirectly, five percent (5%) or more of the
outstanding capital stock, shares or equity interests of such Person, or (c)
any officer, director, employee, partner or trustee of such Person or any
Person controlling, controlled by or under common control with such Person
(excluding trustees and Persons serving in similar capacities who are not
otherwise an Affiliate of such Person). For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.

Annual Budget: As used in this Lease, the term "Annual Budget" shall mean
an operating and capital budget prepared by Lessee and delivered to Lessor in
accordance with Section 3.5.

Award: As defined in Section 15.1(a).

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

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Base Rent: As defined in Section 3.1(a).

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

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

Claims: As defined in Section 12.1.

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

Commencement Date: As defined in Section 1.2.

Condemnation, Condemnor: As defined in Section 15.1

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

Consolidated Net Worth: At any time, the sum of the following for Lessee
and any consolidated subsidiaries, on a consolidated basis determined in
accordance with generally accepted accounting principles:

(a) the amount of capital or stated capital (after deducting the cost
of any shares held in its treasury), plus

(b) the amount of capital surplus and retained earnings (or, in the
case of a capital or retained earnings deficit, minus the amount of such
deficit), minus

(c) the sum of the following (without duplication of deductions with
respect to items already deducted in arriving at surplus and retained
earnings): (1) unamortized debt discount and expense; and (2) any write-up in
the book value of assets resulting from a revaluation thereof subsequent to the
most recent Consolidated Financials prior to the date thereof, except any net
write-up in value of foreign currency in accordance with generally accepted
accounting principles.

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

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

Encumbrance: As defined in Article XXXIV.

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Environmental Audit: As defined in Section 8.3(b).

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

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

Environmental Laws: All applicable federal, state, local and foreign laws
and regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including without limitation laws and regulations relating
to emissions, discharges, Releases or threatened Releases of Hazardous
Materials or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials. Environmental Laws include but are not limited to CERCLA, FIFRA,
RCRA, SARA and TSCA.

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

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

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

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

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

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

Event of Default: As defined in Section 16.1.

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

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Fair Market Value: The fair market value of the Leased Property means an
amount equal to the price that a willing buyer not compelled to buy would pay a
willing seller not compelled to sell for such Leased Property, (a) assuming the
same is unencumbered by this Lease, (b) determined in accordance with the
appraisal procedures set forth in Article XXXIII or in such other manner as
shall be mutually acceptable to Lessor and Lessee, (c) assuming that such
seller must pay customary closing costs and title premiums, and (d) taking into
account the positive or negative effect on the value of the Leased Property
attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any encumbrance that is
assumed by the transferee. In addition, in determining the Fair Market Value
with respect to damaged or destroyed Leased Property such value shall be
determined as if such Leased Property had not been so damaged or destroyed.

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

Fiscal Year: The twelve (12) month period from January 1 to December 31.

Fixtures: As defined in Section 1.1.

Food and Beverage Revenues: All revenues, receipts, and income of any kind
derived directly or indirectly by Lessee from or in connection with the sale of
food, alcoholic and non-alcoholic beverages, and entertainment from or in a
Restaurant or otherwise in the Hotel (other than any Restaurant Sublease Rent),
whether on a cash basis or credit, paid or collected, determined in accordance
with generally accepted accounting principles, excluding, however: (i) federal,
state and municipal excise, sales, and use taxes collected directly from
patrons and guests or as a part of the sales price of any goods, services or
displays, such as gross receipts, admissions, cabaret or similar or equivalent
taxes and paid over to federal, state or municipal governments, (ii) the amount
of all credits, rebates or refunds to customers, guests or patrons, and all
service charges, finance charges, interest and discounts attributable to charge
accounts and credit cards, to the extent the same are paid to Lessee by its
customers, guests or patrons, or to the extent the same are paid for by Lessee
to, or charged to Lessee by, credit card companies, (iii) gratuities or service
charges actually paid to employees, (iv) sales other than sales in the ordinary
course of business, (v) the cost of meals to Lessee's employees, and the cost
of charitable, promotional or other complimentary meals given by Lessee in the
ordinary course of business and in accordance with its normal policies for
giving such meals, as is customary for similar operations, (vi) revenues
derived from vending machines operated by Lessee for the convenience of its
employees, (vii) receipts for returns to shippers, manufacturers or suppliers,
(viii) proceeds of business interruption or other insurance, and (ix) items
constituting "allowances" under the Uniform System.

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

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

Gross Operating Expenses: All salaries and employee expense and payroll
taxes (including salaries, wages, bonuses and other compensation of all
employees of the Hotel, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Lease, governmental fees and assessments, food, beverages,
laundry service expense, the cost

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

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

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

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

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

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

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

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

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

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

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

Indemnifying Party: Any party obligated to indemnify an Indemnified Party
pursuant to Sections 8.3 or 22.1.

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

Inventory: All "Inventories of Merchandise" and "Inventories of Supplies"
as defined in the Uniform System.

Land: As defined in Section 1.1.

Lease: This Lease.

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

Legal Requirements: All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the
maintenance, construction, use or alteration thereof (whether by Lessee or
otherwise), whether now in force or hereafter enacted and in force, including
(a) all laws, rules or regulations pertaining to the environment, occupational
health and safety and public health, safety or welfare, and (b) any laws, rules
or regulations that may (1) require repairs, modifications or alterations in or
to the Leased Property or (2) in any way adversely affect the use and enjoyment
thereof; and all permits, licenses and authorizations and regulations relating
thereto and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record

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or known to Lessee (other than encumbrances created by Lessor without the
consent of Lessee), at any time in force affecting the Leased Property.

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

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

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

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

[Lessee's Work: As defined in Section 10.4.]

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

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

Licenses: As defined in Section 35.2.

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

Manager: Sheraton Operating Corporation, a Delaware corporation, or any
successor manager that is retained by Lessee to operate the Hotel pursuant to
this Lease and the Management Agreement.

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

Mortgage: As defined in Section 30.2.

Notice: As defined in Article XXXII.

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

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

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

Percentage Rent: As defined in Section 3.1(b).

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

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

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

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

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

Purchase and Sale Agreement: The Contract for Purchase and Sale of Hotels
dated as of June 5, 1997 by and among ITT Sheraton Corporation and certain of
its affiliates, as Seller, and Lessor, as Purchaser.

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

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

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

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

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

Restaurant: Any restaurant or cocktail lounge, together with a kitchen for
those facilities, which may be located in the Hotel at any time and from time
to time.

Restaurant Sublease Rent: The entire net amount of rentals (including base
rent and percentage rent) and other amounts, if any, received by Lessee under
any sublease (or similar

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agreement) of a Restaurant which may be entered into from time to time between
Lessee and any unaffiliated third party, net of any management fees payable to
Manager under the Management Agreement with respect to such rentals.

Revenues Computation: As defined in Section 3.1(b).

Room Revenue Breakpoint: As defined in Section 3.1(b).

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

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

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

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

(e) Food and Beverage Revenues or Sundry Revenues.

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

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

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

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

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

Term: As defined in Section 1.2.

TSCA: The Toxic Substances Control Act, as amended.

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

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Uneconomic for its Primary Intended Use: A state or condition of the Hotel
such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body
of Lessee, the Hotel cannot be operated on a commercially practicable basis for
its Primary Intended Use, taking into account, among other relevant factors,
the number of usable rooms and projected revenues, such that Lessee intends to,
and shall, complete the cessation of operations from the Hotel.

Uniform System: The Uniform System of Accounts for Hotels (9th Revised
Edition, 1996) as published by the Hotel Association of New York City, Inc., as
the same may hereafter be revised.

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

Work Letter: As defined in Section 10.4.

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

ARTICLE III

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

(a) Base Rent: The annual sum of $_________ (or, in the case of the
fiscal year ending on December 31, 1997, $_____ (pro rated for any period of
less than six months in such fiscal year that this Lease is in effect)), in
both cases as adjusted pursuant to Section 3.1(d) hereof, payable in advance in
equal, consecutive monthly installments, on or before the tenth day of each
calendar month of the Term ("BASE RENT"); provided, however, that the first
monthly payment of Base Rent shall be payable during the second calendar month
of the Term, and that the first and last monthly payments of Base Rent shall be
pro rated as to any partial month (subject to adjustment as provided in
Sections 5.2, 14.5 and 15.3);(1) and

(b) Percentage Rent: For each Fiscal Year during the Term commencing
with the Fiscal Year ending December 31, 1997, Lessee shall pay percentage rent
("PERCENTAGE RENT") quarterly in an amount calculated by the following formula:

The amount equal to the Revenues Computation

less

an amount equal to the Base Rent paid year to date for the
applicable Fiscal Year

- --------
(1) Insert in blanks the amounts set forth for each Hotel on attached
Rent Schedule.

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less

an amount equal to Percentage Rent paid year to date for the
applicable Fiscal Year

equals

Percentage Rent for the applicable quarter.

For the purposes of this formula:

The Revenues Computation is equal to the amount obtained by
adding, for the applicable Fiscal Year, an amount equal to the sum of
(i) seventeen percent (17.0%) of the first $_______ (or, in the case
of the fiscal year ending on December 31, 1997, $_______ (pro rated
for any period of less than six months in such fiscal year that this
Lease is in effect)) in year to date Room Revenues ("Room Revenue
Breakpoint") and sixty-five percent (65.0%) of all year to date Room
Revenues in excess of the Room Revenue Breakpoint, plus (ii) five
percent (5.0%) of year to date Food and Beverage Revenues, plus (iii)
ninety-eight percent (98.0%) of any Restaurant Sublease Rent received
by Lessee year to date; each year the threshold Room Revenues shall
be adjusted by the same percentage that the Base Rent is adjusted
pursuant to Section 3.1(d). No Percentage Rent shall be payable by
Lessee with respect to Sundry Revenues.(2)

(c) Officer's Certificates. Additionally, an Officer's Certificate
shall be delivered to Lessor quarterly, together with such quarterly Percentage
Rent payment, setting forth the calculation of such rent payment for such
quarter, within forty-five (45) days after each of the first three quarters of
each Fiscal Year (or part thereof) in the Term. Such quarterly payments shall
be based on the formula set forth in Section 3.1(b). There shall be no
reduction in the Base Rent regardless of the result of the Revenues
Computations.

In addition, on or before March 31 of each year, commencing with March 31,
1998, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor setting forth the computation of the actual Percentage
Rent that accrued for each quarter of the Fiscal Year that ended on the
immediately preceding December 31 and shall pay to Lessor Percentage Rent, if
due and payable, for the last quarter of the applicable Fiscal Year.
Additionally, if the annual Percentage Rent due and payable for any Fiscal Year
(as shown in the applicable Officer's Certificate) exceeds the amount actually
paid as Percentage Rent by Lessee for such year, Lessee also shall pay such
excess to Lessor at the time such certificate is delivered. If the Percentage
Rent actually due and payable for such Fiscal Year is shown by such certificate
to be less than the amount actually paid as Percentage Rent for the applicable
Fiscal Year, Lessor, at its option, shall reimburse such amount to Lessee or
credit such amount against subsequent months' Base Rent and, to the extent
necessary, subsequent quarters' Percentage Rent payments. Any such credit to
Base Rent shall not be applied for purposes of calculating Percentage Rent
payable for any subsequent quarter.

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

- --------
(2) Insert in blanks the amounts set forth for each Hotel on attached
Rent Schedule.

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

(d) Annual Adjustments to Base Rent and Percentage Rent. For each
year of the Term beginning on or after January 1, 1998, the Base Rent shall be
adjusted annually to increase (but not decrease) the Base Rent by one and
one-half percent (1.5%) over the Base Rent for the preceding year. Adjustments
in the Base Rent shall be effective on the first day of the first calendar
month of the Fiscal Year to which such adjusted Base Rent applies. The Room
Revenues Breakpoint then included in the Revenues Computation pursuant to
Section 3.1(b) shall be similarly adjusted, effective with each such adjustment
in the Base Rent.

(e) Manager Fund-up Cure Payments. If and to the extent that Manager
pays amounts to Lessee pursuant to Section 8.3 of the Management Agreement in
order to avoid termination of the Management Agreement by Lessee for Manager's
failure to meet the requirements of (i) 12% cash-on-cash return to Lessor, or
(ii) 90% of Star report yield index, as described therein, Lessee shall pay
such amounts to Lessor as additional Percentage Rent hereunder.

3.2 Confirmation of Percentage Rent. Lessee shall utilize, or cause to be
utilized, an accounting system for the Leased Property in accordance with its
usual and customary practices, and in accordance with generally accepted
accounting principles, that will accurately record all data necessary to
compute Percentage Rent, and Lessee shall retain, for at least four (4) years
after the expiration of each Fiscal Year (and in any event until the
reconciliation described in Section 3.1(c) for such Fiscal Year has been made),
reasonably adequate records conforming to such accounting system showing all
data necessary to compute Percentage Rent for the applicable Fiscal Years.
Lessor, at its expense (except as provided hereinbelow), shall have the right
from time to time, upon prior written notice to Lessee and Manager, by its
accountants or representatives to audit the information that formed the basis
for the data set forth in any Officer's Certificate provided under Section
3.1(c) and, in connection with such audits, to examine all Lessee's records
(including supporting data and sales and excise tax returns) reasonably
required to verify Percentage Rent, subject to any prohibitions or limitations
on disclosure of any such data under Legal Requirements; provided, however that
Lessor may only inspect or audit records in Manager's possession subject to the
terms of Lessee's access thereto under the Management Agreement. If any such
audit discloses a deficiency in the payment of Percentage Rent, and either
Lessee agrees with the result of such audit or the matter is otherwise
determined or compromised, Lessee shall forthwith pay to Lessor the amount of
the deficiency, as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the date
of payment thereof; provided, however, that as to any audit that is commenced
more than two (2) years after the date Percentage Rent for any Fiscal Year is
reported by Lessee to Lessor, the deficiency, if any, with respect to such
Percentage Rent shall bear interest at the Overdue Rate only from the date such
determination of deficiency is made unless such deficiency is the result of
gross negligence or willful misconduct on the part of Lessee, in which case
interest at the Overdue Rate will accrue from the date such payment should have
been made to the date of payment thereof. If any such audit discloses that the
Percentage Rent actually due from Lessee for any Fiscal Year exceed those
reported by Lessee by more than three percent (3%), Lessee shall pay the cost
of such audit and examination. Any proprietary information obtained by Lessor
pursuant to the provisions of this Section shall be treated as confidential,
except that such information may be used, subject to appropriate
confidentiality safeguards, in any litigation between the parties and except
further that Lessor may disclose such information to prospective lenders. The
obligations of Lessee contained in this Section shall survive the expiration or
earlier termination of this Lease.

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

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

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

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

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

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

(d) A cash flow projection.

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

3.6 Books and Records. Lessee shall keep full and adequate books of
account and other records reflecting the results of operation of the Hotel on
an accrual basis, all in accordance with generally accepted accounting
principles and the obligations of Lessee under this Lease Agreement. The books
of account and all other records relating to or reflecting the operation of the
Hotel shall be kept either at the Hotel or at Lessee's offices in Irving, Texas
or at Manager's central offices, and

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shall be available to Lessor and its representatives and its auditors or
accountants, at all reasonable times, upon prior written notice to Lessee and
Manager, for examination, audit, inspection, and transcription; provided,
however that Lessor may only inspect or audit records in Manager's possession
subject to the terms of Lessee's access thereto under the Management Agreement.
All of such books and records pertaining to the Hotel including, without
limitation, books of account, guest records and front office records, at all
times shall be the property of Lessor and shall not be removed from the Hotel
or Lessee's offices or Manager's central offices (but may be moved among any of
the foregoing) by Lessee without Lessor approval.

ARTICLE IV

4.1 Payment of Impositions. Subject to Article XII (relating to permitted
contests), Lessee will pay, or cause to be paid, all Impositions (other than
Real Estate Taxes and Personal Property Taxes, which shall be paid by Lessor)
before any fine, penalty, interest or cost may be added for non-payment, such
payments to be made directly to the taxing or other authorities where feasible,
and will promptly furnish to Lessor copies of official receipts or other
satisfactory proof evidencing such payments. Lessee's obligation to pay such
Impositions shall be deemed absolutely fixed upon the date such Impositions
become a lien upon the Leased Property or any part thereof. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance of such
Imposition), Lessee may exercise the option to pay the same (and any accrued
interest on the unpaid balance of such Imposition) in installments and in such
event, shall pay such installments during the Term hereof (subject to Lessee's
right of contest pursuant to the provisions of Article XII) as the same
respectively become due and before any fine, penalty, premium, further interest
or cost may be added thereto. Lessor, at its expense, shall, to the extent
required or permitted by applicable law, prepare and file all tax returns in
respect of Lessor's net income, gross receipts, sales and use, single business,
transaction privilege, rent, ad valorem, franchise taxes, Real Estate Taxes,
Personal Property Taxes and taxes on its capital stock, and Lessee, at its
expense, shall, to the extent required or permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any Imposition as may be required by governmental authorities. If any refund
shall be due from any taxing authority in respect of any Imposition paid by
Lessee, the same shall be paid over to or retained by Lessee if no Event of
Default shall have occurred hereunder and be continuing. If an Event of Default
shall have occurred and be continuing, any such refund shall be paid over to or
retained by Lessor. Any such funds retained by Lessor due to an Event of
Default shall be applied as provided in Article XVI. Lessor and Lessee shall,
upon request of the other, provide such data as is maintained by the party to
whom the request is made with respect to the Leased Property as may be
necessary to prepare any required returns and reports. Lessee shall file all
Personal Property Tax returns in such jurisdictions where it is legally
required so to file. Lessor, to the extent it possesses the same, and Lessee,
to the extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for
any property classified as personal property. Where Lessor is legally required
to file Personal Property Tax returns, Lessee shall provide Lessor with copies
of assessment notices in sufficient time for Lessor to file a protest. Lessor
may, upon Notice to Lessee, at Lessor's option and at Lessor's sole expense,
protest, appeal, or institute such other proceedings (in its or Lessee's name)
as Lessor may deem appropriate to effect a reduction of real estate or personal
property assessments for those Impositions to be paid by Lessor, and Lessee, at
Lessor's expense as aforesaid, shall fully cooperate with Lessor in such
protest, appeal, or other action. Lessor hereby agrees to indemnify, defend,
and hold harmless Lessee from and against any claims, obligations, and
liabilities against or incurred by Lessee in connection with such cooperation.
Billings for reimbursement of Personal Property Taxes by Lessee to Lessor shall
be accompanied by copies of a bill therefor and payments thereof which identify
the personal property with respect to which such payments are made. Lessor,
however, reserves the right to effect any such protest, appeal or other action
and, upon Notice to Lessee, shall control any such activity, which shall then
go forward at Lessor's sole expense. Upon such Notice, Lessee, at Lessor's
expense, shall cooperate fully with such activities.

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

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

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

4.5 Insurance Premiums. Lessee will pay or cause to be paid all premiums
for the insurance coverages required to be maintained by it under Article XIII.

ARTICLE V

5.1 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, and except for loss of the Management Agreement solely
by reason of any action or inaction by Lessor, Lessee, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the written consent of Lessor (which shall not
be unreasonably withheld or delayed) to modify, surrender or terminate the
same, nor seek nor be entitled to any abatement, deduction, deferment or
reduction of the Rent, or setoff against the Rent, nor shall the obligations of
Lessee be otherwise affected by reason of (a) any damage to, or destruction of,
any Leased Property or any portion thereof from whatever cause or any Taking of
the Leased Property or any portion thereof, (b) the lawful or unlawful
prohibition of, or restriction upon, Lessee's use of the Leased Property, or
any portion thereof, or the interference with such use by any Person other than
Lessor, (c) any claim which Lessee has or might have against Lessor by reason
of any default or breach of any warranty by Lessor under this Lease or any
other agreement between Lessor and Lessee, or to which Lessor and Lessee are
parties, (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Lessor or any assignee or transferee of Lessor, or (e) for any other
cause whether similar or dissimilar to any of the foregoing other than a
discharge of Lessee from any such obligations as a matter of law. Lessee hereby
specifically waives all rights, arising from any occurrence whatsoever, which
may now or hereafter be conferred upon it by law to (1) modify, surrender or
terminate this Lease or quit or surrender the Leased Property or any portion
thereof, or (2) entitle Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically provided in this Lease. The obligations of Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be
terminated pursuant to the express provisions of this Lease or by termination
of this Lease other than by reason of an Event of Default.

5.2 Abatement Procedures. In the event of a partial Taking as described in
Section 15.5, the Lease shall not terminate, but the Base Rent shall be abated
in the manner and to the extent that is fair, just and equitable to both Lessee
and Lessor, taking into consideration, among other relevant factors, the number
of usable rooms, the amount of square footage, or the revenues affected by such
partial Taking. If Lessor and Lessee are unable to agree upon the amount of
such abatement within thirty (30) days after such partial Taking, the matter
may be submitted by either party to a court of competent jurisdiction for
resolution.

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ARTICLE VI

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

6.2 Lessee's Personal Property. Lessee will acquire and maintain
throughout the Term such Inventory as is required to operate the Leased
Property in the manner contemplated by this Lease. Lessee may (and shall as
provided hereinbelow), at its expense, install, affix or assemble or place on
any parcels of the Land or in any of the Leased Improvements, any items of
personal property (including Inventory) owned by Lessee. Lessee, at the
commencement of the Term, and from time to time thereafter, shall provide
Lessor with an accurate list of all such items of Lessee's personal property
(collectively, the "LESSEE'S PERSONAL PROPERTY"). Lessee may, subject to the
first sentence of this Section 6.2 and the conditions set forth below, remove
any of Lessee's Personal Property set forth on such list at any time during the
Term or upon the expiration or any prior termination of the Term. All of
Lessee's Personal Property, other than Inventory, not removed by Lessee within
ten (10) days following the expiration or earlier termination of the Term shall
be considered abandoned by Lessee and may be appropriated, sold, destroyed or
otherwise disposed of by Lessor without first giving Notice thereof to Lessee,
without any payment to Lessee and without any obligation to account therefor.
Lessee will, at its expense, restore the Leased Property to the condition
required by Section 9.1(d), including repair of all damage to the Leased
Property caused by the removal of Lessee's Personal Property, whether effected
by Lessee or Lessor. Upon the expiration or earlier termination of the Term,
Lessor or its designee shall have the option to purchase all Inventory on hand
at the Leased Property at the time of such expiration or termination (other
than Inventory with to respect to which the Manager has exercised any purchase
option under the Management Agreement) for a sale price equal to the fair
market value of such Inventory. Lessee may make such financing arrangements,
title retention agreements, leases or other agreements with respect to Lessee's
Personal Property as it sees fit provided that Lessee first advises Lessor of
any such arrangement and such arrangement expressly provides that in the event
of Lessee's default thereunder, Lessor (or its designee) may assume Lessee's
obligations and rights under such arrangement.

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

ARTICLE VII

7.1 Condition of the Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property. Lessee has examined and
otherwise has knowledge of the condition of the Leased Property and has found
the same to be satisfactory for its purposes hereunder. Lessee is leasing the
Leased Property "as is" in its present condition. Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property.
LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS

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TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT
BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES
THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO
IT. Provided, however, to the extent permitted by law, Lessor hereby assigns to
Lessee all of Lessor's rights to proceed against any predecessor in title
(other than any Affiliate of Lessee which conveyed the Property to Lessor) for
breaches of warranties or representations or for latent defects in the Leased
Property. Lessor shall fully cooperate with Lessee in the prosecution of any
such claim, in Lessor's or Lessee's name, all at Lessee's sole cost and
expense. Lessee hereby agrees to indemnify, defend and hold harmless Lessor
from and against any claims, obligations and liabilities against or incurred by
Lessor in connection with such cooperation.

7.2 Use of the Leased Property.

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

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

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

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

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

7.3 Lessor to Grant Easements, Etc. Lessor will, from time to time, so
long as no Event of Default has occurred and is continuing, at the request of
Lessee and at Lessee's cost and expense (but subject to the approval of Lessor,
which approval shall not be unreasonably withheld or delayed), (a) grant
easements and other rights in the nature of easements with respect to the
Leased

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Property to third parties, (b) release existing easements or other rights in
the nature of easements which are for the benefit of the Leased Property, (c)
dedicate or transfer unimproved portions of the Leased Property for road,
highway or other public purposes, (d) execute petitions to have the Leased
Property annexed to any municipal corporation or utility district, (e) execute
amendments to any covenants and restrictions affecting the Leased Property and
(f) execute and deliver to any Person any instrument appropriate to confirm or
effect such grants, releases, dedications, transfers, petitions and amendments
(to the extent of its interests in the Leased Property), but only upon delivery
to Lessor of an Officer's Certificate stating that such grant, release,
dedication, transfer, petition or amendment does not interfere with the proper
conduct of the business of Lessee on the Leased Property and does not
materially reduce the value of the Leased Property.

ARTICLE VIII

8.1 Compliance with Legal and Insurance Requirements, Etc. Subject to
Section 8.3(b) below and Article XII (relating to permitted contests), Lessee,
at its expense, will promptly (a) comply with all applicable Legal Requirements
and Insurance Requirements in respect of the use, operation, maintenance,
repair and restoration of the Leased Property, and (b) procure, maintain and
comply with all appropriate licenses and other authorizations required for any
use of the Leased Property and Lessee's Personal Property then being made, and
for the proper erection, installation, operation and maintenance of the Leased
Property or any part thereof.

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

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

(a) At all times hereafter until the later of (i) such time as all
liabilities, duties or obligations of Lessee to Lessor under the Lease have
been satisfied in full and (ii) such time as Lessee completely vacates the
Leased Property and surrenders possession of the same to Lessor, Lessee shall
fully comply with all Environmental Laws applicable to the Leased Property and
the

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operations thereon. Lessee agrees to give Lessor prompt Notice of (1) all
Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating to
any Environmental Liability or relating to the issuance, revocation or change
in any Environmental Authorization required for operation of the Leased
Property; (3) all Releases at, on, in, under or in any way affecting the Leased
Property, or any Release known by Lessee at, on, in or under any property
adjacent to the Leased Property; and (4) all facts, events or conditions that
could reasonably lead to the occurrence of any of the above-referenced matters.

(b) Lessor hereby agrees to defend, indemnify and save harmless any
and all Lessee Indemnified Parties from and against any and all Environmental
Liabilities other than (i) Environmental Liabilities resulting from conditions
disclosed in any environmental audit obtained by Lessor and provided to Lessee
prior to the execution of this Lease (the "ENVIRONMENTAL AUDIT"), and (ii)
Environmental Liabilities which were caused by the acts or negligent failures
to act of Lessee.

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

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

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

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

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

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

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

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

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

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

ARTICLE IX

9.1 Maintenance and Repair.

(a) Lessee, at its sole expense, will keep the Leased Property, and
all private roadways, sidewalks and curbs appurtenant thereto that are under
Lessee's control, including windows and plate glass, mechanical, electrical and
plumbing systems and equipment (including conduit and ductware), and non-load
bearing interior walls, and parking lot surfaces, in good order and repair,
except for ordinary wear and tear (whether or not the need for such repairs
occurred as a result of Lessee's use, any prior use, the elements or the age of
the Leased Property, or any portion thereof), and, except as otherwise provided
in Section 9.1(b), Article XIV or Article XV, with reasonable promptness, make
all necessary and appropriate repairs replacements, and improvements thereto of
every kind and nature, whether interior or exterior ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition existing prior to
the commencement of the Term of this Lease (concealed or otherwise), or
required by any governmental agency having jurisdiction over the Leased
Property, except as to the structural elements of the Leased Improvements. All
repairs shall, to the extent reasonably achievable, be at least equivalent in
quality to the original work. Lessee will not take or omit to take any action,
the taking or omission of which might materially impair the value or the
usefulness of the Leased Property or any part thereof for its Primary Intended
Use.

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

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

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

9.2 Encroachments, Restrictions, Etc. Lessor represents and warrants that
the Leased Improvements do not materially encroach upon any property, street or
right-of-way adjacent to the Leased Property, or violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting the Leased Property, or any part thereof, or impair the rights of
others under any easement or right-of-way to which the Leased Property is
subject. Except to the extent that such representation and warranty is breached
by Lessor, if any of the Leased Improvements, at any time hereafter, materially
encroach upon any property, street or right-of-way adjacent to the Leased
Property, or violate the agreements or conditions contained in any lawful
restrictive covenant or other agreement affecting the Leased Property, or any
part thereof, or impair the rights of others under any easement or right-of-way
to which the Leased Property is subject, then promptly upon the request of
Lessor or at the behest of any Person affected by any such encroachment,
violation or impairment, Lessee shall, at its expense, subject to its right to
contest the existence of any encroachment, violation or impairment and in such
case, in the event of an adverse final determination, either (a) obtain valid
and effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the
same shall affect Lessor or Lessee or (b) make such changes in the Leased
Improvements, and take such other actions, as Lessee in the good faith exercise
of its judgment deems reasonably practicable to remove

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such encroachment, and to end such violation or impairment, including, if
necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use substantially
in the manner and to the extent the Leased Improvements were operated prior to
the assertion of such violation, impairment or encroachment. Any such
alteration shall be made in conformity with the applicable requirements of
Article X. Lessee's obligations under this Section 9.2 shall be in addition to
and shall in no way discharge or diminish any obligation of any insurer under
any policy of title or other insurance held by Lessor.

ARTICLE X

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

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

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

[10.4 Initial Upgrade of Leased Improvements. Lessee desires to install,
construct and complete the improvements, alterations, upgrades and
refurbishments in the Leased Improvements (collectively, "LESSEE'S WORK")
necessary to qualify the Leased Improvements to operate under the Management
Agreement as a "Sheraton [Suites]" hotel. Pursuant to the terms of the Work
Letter (the "WORK LETTER") attached hereto as EXHIBIT B, Lessee agrees to
perform Lessee's Work; provided, however, Lessor shall pay the costs actually
incurred by Lessee to perform Lessee's Work, subject to and in accordance with
the terms and conditions of the Work Letter. Lessee shall pay all increased
taxes and insurance on Lessee's Work or attributable thereto.]

ARTICLE XI

11.1 Liens. Subject to the provisions of Article XII relating to permitted
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, not including, however, (a) this
Lease, (b) the matters included as exceptions in the title policy insuring
Lessor's interest in the Leased Property, (c) restrictions, liens and other
encumbrances which are consented to in writing by Lessor or any easements
granted pursuant to the provisions of Section 7.3 of this Lease, (d) liens for
those taxes upon Lessor or the Leased Property which Lessee is not required to
pay hereunder, (e) subleases permitted by Article XXV hereof, (f) liens for
Impositions or for sums resulting from

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noncompliance with Legal Requirements so long as (1) the same are not yet
payable or are payable without the addition of any fine or penalty or (2) such
liens are in the process of being contested as permitted by Article XII, (g)
liens of mechanics, laborers, materialmen, suppliers or vendors for sums either
disputed or not yet due provided that (1) the payment of such sums shall not be
postponed under any related contract for more than sixty (60) days after the
completion of the action giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor or (2) any such liens are
in the process of being contested as permitted by Article XII hereof, and (h)
any liens which are the responsibility of Lessor pursuant to the provisions of
Article XXXIV of this Lease.

ARTICLE XII

12.1 Permitted Contests. Lessee shall have the right to contest the amount
or validity of any Imposition to be paid by Lessee or any Legal Requirement or
Insurance Requirement or any lien, attachment, levy, encumbrance, charge or
claim ("CLAIMS") not otherwise permitted by Article XI, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon will be paid, or (b)
deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security
for the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all Claims
which may be assessed against or become a Claim on the Leased Property, or any
part thereof, in said legal proceedings. Lessee shall furnish Lessor and any
lender of Lessor with reasonable evidence of such deposit within five (5) days
of the same. Lessor agrees to join in any such proceedings if the same be
required legally to prosecute such contest of the validity of such Claims;
provided, however, that Lessor shall not thereby be subjected to any liability
for the payment of any costs or expenses in connection with any proceedings
brought by Lessee; and Lessee covenants to indemnify and save harmless Lessor
from any such costs or expenses. Lessee shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Lessee or paid by Lessor and for which Lessor has been fully reimbursed. In
the event that Lessee fails to pay any Claims when due or to provide the
security therefor as provided in this Article and diligently to prosecute any
contest of the same, Lessor may, upon ten (10) days' advance Notice to Lessee,
and Lessee's failure to correct the matter within such ten (10) day period, pay
such charges together with any interest and penalties and the same shall be
repayable by Lessee to Lessor as Additional Charges at the next Payment Date
provided for in this Lease; provided, however, that should Lessor reasonably
determine that the giving of such Notice would risk loss to the Leased Property
or cause damage to Lessor, then Lessor shall give such Notice as is practical
under the circumstances. Lessor reserves the right to contest any of the Claims
at its expense not pursued by Lessee. Lessor and Lessee agree to cooperate in
coordinating the contest of any Claims.

ARTICLE XIII

13.1 General Insurance Requirements. During the Term of this Lease, Lessor
and Lessee shall at all times keep the Leased Property insured with the kinds
and amounts of insurance described below, or such other insurance coverage(s)
as may be required by the Management Agreement. This insurance shall be written
by companies authorized to issue insurance in the State. The policies must name
Lessor and/or Lessee, as applicable, as the insured or as an additional named
insured, as the case may be. Losses shall be payable to Lessor or Lessee as
provided in this Lease.

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Any loss adjustment shall require the written consent of Lessor and Lessee,
each acting reasonably and in good faith. Evidence of insurance shall be
deposited with Lessor. The policies on the Leased Property, including the
Leased Improvements, Fixtures and Lessee's Personal Property, shall include the
following:

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

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

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

(iii) Loss of income insurance on the "Special Form", in the
amount of one year of Base Rent for the benefit of Lessor.

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

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

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

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

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

(v) Worker's compensation insurance to the extent necessary to
protect Lessor and the Leased Property against Lessee's worker's compensation
claims;

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

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

13.2 Replacement Cost. The term "full replacement cost" as used herein
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
exclusions)

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has increased or decreased at any time during the Lease Term, it shall have the
right to have such full replacement cost re-determined.

13.3 Worker's Compensation. Lessee, at its sole cost, shall at all times
maintain adequate worker's compensation insurance coverage for all persons, if
any, employed by Lessee on the Leased Property. Such worker's compensation
insurance shall be in accordance with the requirements of applicable local,
state and federal law.

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

13.5 Form Satisfactory, Etc.

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

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

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

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

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

ARTICLE XIV

14.1 Insurance Proceeds. Subject to the provisions of Section 14.6, all
proceeds payable by reason of any loss or damage to the Leased Property, or any
portion thereof, and insured under any policy of insurance required by Article
XIII of this Lease shall be paid to Lessor and held in trust by Lessor in an
interest-bearing account, shall be made available, if applicable, for
reconstruction or repair, as the case may be, of any damage to or destruction
of the Leased Property, or any portion thereof, and, if applicable, shall be
paid out by Lessor from time to time for the reasonable costs of such
reconstruction or repair upon satisfaction of reasonable terms and conditions
specified by Lessor. Any excess proceeds of insurance (and accrued interest)
remaining after the completion of the restoration or reconstruction of the
Leased Property, as hereinafter set forth, shall be paid to Lessee. If neither
Lessor nor Lessee is required or elects to repair and restore, and the Lease is
terminated without purchase by Lessee as described in Section 14.2, all such
insurance proceeds shall be retained by Lessor. All salvage resulting from any
risk covered by insurance shall belong to Lessor.

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

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

(b) Except as provided in Section 14.6, if during the Term the Leased
Property is partially destroyed by a risk covered by the insurance described in
Article XIII, but the Hotel is not thereby rendered Unsuitable for its Primary
Intended Use, Lessee shall restore the Hotel to substantially the same
condition as existed immediately before the damage or destruction and

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

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

(d) If Lessor accepts Lessee's offer to purchase the Leased Property

under this Article, this Lease shall terminate as to the Leased Property upon
payment of the purchase price, and Lessor shall remit to Lessee all insurance
proceeds pertaining to the Leased Property being held in trust by Lessor.

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

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

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

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

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

ARTICLE XV

15.1 Definitions.

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

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

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

(d) "DATE OF TAKING" means the date the Condemnor has the right to
possession of the property being condemned.

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

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

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

15.5 Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is not Unsuitable for its
Primary Intended Use, and not Uneconomic for its

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Primary Intended Use, or if Lessee or Lessor is entitled but neither elects to
terminate this Lease as provided in Section 15.3, Lessee at its cost shall with
all reasonable dispatch restore the untaken portion of any Leased Improvements
so that such Leased Improvements constitute a complete architectural unit of
the same general character and condition (as nearly as may be possible under
the circumstances) as the Leased Improvements existing immediately prior to the
Condemnation. Lessor shall contribute to the cost of restoration that part of
its Award specifically allocated to such restoration, if any, together with
severance and other damages awarded for the taken Leased Improvements;
provided, however, that the amount of such contribution shall not exceed such
cost.

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

ARTICLE XVI

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

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

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

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

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

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

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

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

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

(i) if an event of default has been declared by the Manager under the
Management Agreement with respect to the Hotel as a result of any action or
failure to act by Lessee or any Person with whom Lessee contracts for
management services at the Hotel, and such default is not cured by the earlier
of (A) ten (10) days following notice from Lessor or (B) such earlier date as
is required for Lessee to avoid termination of the Management Agreement by
Manager;

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

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

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

16.2 Surrender. If an Event of Default occurs (and the event giving
rise to such Event of Default has not been cured within the curative period
relating thereto as set forth in Section 16.1) and is continuing, whether or
not this Lease has been terminated pursuant to Section 16.1, Lessee shall, if
requested by Lessor so to do, immediately surrender to Lessor the Leased
Property including, without limitation, any and all books, records, files,
licenses, permits and keys relating thereto, and quit the same and Lessor may
enter upon and repossess the Leased Property by summary proceedings, ejectment
or otherwise, and may remove Lessee and all other persons and any and all
personal property from the Leased Property, subject to rights of any hotel
guests and to any requirement of law. Lessee hereby waives any and all
requirements of applicable laws for service

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of notice to re-enter the Leased Property. Lessor shall be under no obligation
to, but may if it so chooses, relet the Leased Property or otherwise mitigate
Lessor's damages.

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

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

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

(2) the sum of:

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

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

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

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

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

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

16.6 Lessee's Right to Assign Lease to Manager's Designee. In the event
that Lessor shall give Lessee Notice of Lessor's election to terminate this
Lease pursuant to Section 16.1, Lessee shall notify Manager of such termination
and Manager, provided that it is not in default of any of its obligations under
the Management Agreement, shall have the right, within thirty (30) days after
receipt by Lessee of the Notice of termination, to designate another lessee to
assume the obligations of Lessee under this Lease. If in the reasonable
judgment of Lessor (exercised in good faith), such proposed lessee is
substantially comparable to the Lessee in creditworthiness and financial
ability (measured as of the date hereof), Lessor shall consent to such
assignment. Such designee of Manager shall assume the obligations of Lessee
under the Lease from the date of assumption for the unexpired Term hereof only
and Lessee shall have no further liability hereunder.

ARTICLE XVII

17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails to make any
payment or to perform any act required to be made or performed under this
Lease, including, without limitation, Lessee's failure to comply with the terms
of any Management Agreement, and fails to cure the same within the relevant
time periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for
such purpose and, subject to Section 16.4, take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case to the extent permitted by law) so incurred, together
with a late charge thereon (to the extent permitted by law) at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessors,
shall be paid by Lessee to Lessor on demand. The obligations of Lessee and
rights of Lessor contained in this Article shall survive the expiration or
earlier termination of this Lease.

ARTICLE XVIII

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

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ARTICLE XIX

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

19.2 Sublease Rent Limitation. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublet the Leased Property on any
basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of the sublessee, or (b) any other formula such that any
portion of the Rent would fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or any similar or successor
provision thereto.

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

19.4 Lessee Ownership Limitations.

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

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

19.5 Lessee Officer and Employee Limitation. If a Person serves as both
(a) a director of Lessee (or any Person who furnishes or renders services to
the tenants of the Leased Property, or manages or operates the Leased Property)
and (b) a director and officer (or employee) of FelCor Suite Hotels, Inc., that
Person shall not receive any compensation for serving as a director of Lessee
(or any Person who furnishes or renders services to the tenants of the Leased
Property, or manages or operates the Leased Property). Furthermore, if a Person
serves as both (a) a director of FelCor Suite Hotels, Inc. and (b) a director
and officer (or employee) of Lessee (or any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property), that Person shall not receive any compensation for serving as
a director of Lessee (or any Person who furnishes or renders services to the
tenants of the Leased Property, or manages or operates the Leased Property).

19.6 Payments to Affiliates of Lessee. During the Term, Lessee shall not
pay any fees to any Affiliate of Lessee in connection with the Hotel, other
than payments required to be made to Manager pursuant to the Management
Agreement.

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ARTICLE XX

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

ARTICLE XXI

21.1 Risk of Loss. During the Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Property in consequence of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than those caused by Lessor and those claiming from, through
or under Lessor) is assumed by Lessee, and, in the absence of gross negligence,
willful misconduct or breach of this Lease by Lessor pursuant to Section 34.3,
Lessor shall in no event be answerable or accountable therefor, nor shall any
of the events mentioned in this Section entitle Lessee to any abatement of Rent
except as specifically provided in this Lease.

ARTICLE XXII

22.1 Indemnification. Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance,
but subject to Section 16.4 and Article VIII, Lessee will protect, indemnify,
hold harmless and defend Lessor from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses), to the extent
permitted by law, imposed upon or incurred by or asserted against Lessor
Indemnified Parties by reason of: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Leased
Property or adjoining sidewalks, including without limitation any claims under
liquor liability, "dram shop" or similar laws, (b) any use, misuse, non-use,
condition, management, maintenance or repair by Lessee or any of its agents,
employees or invitees of the Leased Property or Lessee's Personal Property
during the Term, or any litigation, proceeding or claim by governmental
entities or other third parties to which a Lessor Indemnified Party is made a
party or participant related to such use, misuse, non-use, condition,
management, maintenance, or repair thereof by Lessee or any of its agents,
employees or invitees, including any failure of lessee or any of its agents,
employees or invitees to perform any obligations under this Lease or imposed by
applicable law (other than arising out of Condemnation proceedings), (c) any
Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the part of Lessee to perform or
comply with any of the terms of this Lease, and (e) the non-performance of any
of the terms and provisions of any and all existing and future subleases of the
Leased Property to be performed by the landlord thereunder.

Lessor shall indemnify, save harmless and defend Lessee Indemnified
Parties from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses imposed upon or incurred by or
asserted against Lessee Indemnified Parties as a result of (a) the gross
negligence or willful misconduct of Lessor arising in connection with this
Lease or (b) any failure on the part of Lessor to perform or comply with any of
the terms of this Lease. Any amounts that become payable by an Indemnifying
Party under this Section shall be paid within ten (10) days after liability
therefor on the part of the Indemnifying Party is determined by litigation or
otherwise,

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and if not timely paid, shall bear a late charge (to the extent permitted by
law) at the Overdue Rate from the date of such determination to the date of
payment. An Indemnifying Party, at its expense, shall contest, resist and
defend any such claim, action or proceeding asserted or instituted against the
Indemnified Party. The Indemnified Party, at its expense, shall be entitled to
participate in any such claim, action, or proceeding, and the Indemnifying
Party may not compromise or otherwise dispose of the same without the consent
of the Indemnified Party, which may not be unreasonably withheld or delayed.
Nothing herein shall be construed as indemnifying a Lessor Indemnified Party
against its own (or Lessor's) grossly negligent acts or omissions or willful
misconduct.

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

ARTICLE XXIII

23.1 Subletting and Assignment. Subject to the provisions of Article XIX
and Section 23.2 and any other express conditions or limitations set forth
herein, Lessee may, but only with the consent of Lessor (which shall not be
unreasonably withheld or delayed), (a) assign this Lease or sublet all or any
part of the Leased Property to an Affiliate of Lessee, or (b) sublet any retail
or restaurant portion of the Leased Improvements in the normal course of the
Primary Intended Use; provided that any subletting to any party other than an
Affiliate of Lessee shall not individually as to any one such subletting, or in
the aggregate, materially diminish the actual or potential Percentage Rent
payable under this Lease. In the case of a subletting, the sublessee shall
comply with the provisions of Section 23.2, and in the case of an assignment,
the assignee shall assume in writing and agree to keep and perform all of the
terms of this Lease on the part of Lessee to be kept and performed and shall
be, and become, jointly and severally liable with Lessee for the performance
thereof. Notwithstanding the above, Lessee may assign the Lease to an Affiliate
without the consent of Lessor; provided that any such assignee assumes in
writing and agrees to keep and perform all of the terms of the Lease on the
part of Lessee to be kept and performed and shall be and become jointly and
severally liable with Lessee for the performance thereof. In case of either an
assignment or subletting made during the Term, Lessee shall remain primarily
liable, as principal rather than as surety, for the prompt payment of the Rent
and for the performance and observance of all of the covenants and conditions
to be performed by Lessee hereunder. An original counterpart of each such
sublease and assignment and assumption, duly executed by Lessee and such
sublessee or assignee, as the case may be, in form and substance satisfactory
to Lessor, shall be delivered promptly to Lessor.

23.2 Attornment. Lessee shall insert in each sublease permitted under
Section 23.1 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) if this Lease terminates before the expiration of such
sublease, the sublessee thereunder will, at Lessor's option, attorn to Lessor
and waive any right the sublessee may have to terminate the sublease or to
surrender possession thereunder as a result of the termination of this Lease,
and (c) if the sublessee receives a Notice from Lessor or Lessor's assignees,
if any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if
any, as the case may be, shall be credited against the amounts owing by Lessee
under this Lease.

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ARTICLE XXIV

24.1 Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants.

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

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

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

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

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

(c) At any time and from time to time upon not less than ten (10)
days Notice by Lessee, Lessor will furnish to Lessee or to any Person
designated by Lessee an estoppel certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force
and effect as modified and setting forth the modifications), the date to which
Rent has been paid, whether to the knowledge of Lessor there is any existing
default or Event of Default on Lessee's part hereunder, and such other
information as may be reasonably requested by Lessee.

(d) Lessee covenants that during the Term it will maintain a ratio of
debt (which shall mean indebtedness for borrowed money, but excluding
indebtedness of Lessee to Manager or its Affiliates that is expressly
subordinated to the payment of Rent on terms and conditions acceptable to
Lessor) to Consolidated Net Worth of fifty percent (50%) or less, exclusive of
capitalized leases.

ARTICLE XXV

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

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ARTICLE XXVI

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

ARTICLE XXVII

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

ARTICLE XXVIII

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

ARTICLE XXIX

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

ARTICLE XXX

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

30.2 Other Interests. This Lease and Lessee's interest hereunder shall at
all times be subject and subordinate to the lien and security title of any
deeds to secure debt, deeds of trust, mortgages, or other interests heretofore
or hereafter granted by Lessor or which otherwise encumber or affect the Leased
Property and to any and all advances to be made thereunder and to all renewals,
modifications, consolidations, replacements, substitutions, and extensions
thereof (all of which are herein called the "MORTGAGE"); provided, however,
that with respect to any Mortgage hereinafter granted, such subordination is
conditioned upon delivery to Lessee of a non-disturbance agreement which
provides that Lessee shall not be disturbed in its possession of the Leased
Property hereunder following a foreclosure of such Mortgage (or delivery of a
deed-in-lieu-of-foreclosure) and that the holder of such Mortgage or the
purchaser at a foreclosure sale (or grantee under such
deed-in-lieu-of-foreclosure) shall perform all obligations of Lessor under this
Lease. In confirmation of such

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subordination, however, Lessee shall, at Lessor's request, promptly execute,
acknowledge and deliver any instrument which may be required to evidence
subordination to any Mortgage and to the holder thereof. In the event of
Lessee's failure to deliver such subordination and if the Mortgage does not
change any term of the Lease, Lessor may, in addition to any other remedies for
breach of covenant hereunder, execute, acknowledge, and deliver the instrument
as the agent or attorney-in-fact of Lessee, and Lessee hereby irrevocably
constitutes Lessor its attorney-in-fact for such purpose, Lessee acknowledging
that the appointment is coupled with an interest and is irrevocable.

30.3 Lessor's Mortgage Default. In the event of a default by Lessor under
the Mortgage, which default continues for a period of ten (10) days following
written notice from Lessee to Lessor, Lessee shall have the right and option,
exercisable immediately upon notice to Lessor, either (i) to terminate this
Lease without further obligation hereunder, except with respect to payment of
accrued but unpaid Rent and other obligations that, by their terms, expressly
survive the expiration or sooner termination of this Lease, or (ii) to cure
such default pursuant to Section 34.2.

ARTICLE XXXI

31.1 Quiet Enjoyment. So long as Lessee pays all Rent as the same becomes
due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if
any, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Property for the Term hereof, free of any claim or other action by Lessor or
anyone claiming by, through or under Lessor, but subject to all liens and
encumbrances subject to which the Leased Property was conveyed to Lessor, to
the extent not released in connection with the transactions contemplated by
this Lease, or hereafter consented to by Lessee or provided for herein.
Notwithstanding the foregoing, Lessee shall have the right by separate and
independent action to pursue any claim it may have against Lessor as a result
of a breach by Lessor of the covenant of quiet enjoyment contained in this
Section.

ARTICLE XXXII

32.1 Notices. All notices, demands, requests, consents approvals and other
communications ("NOTICE" or "NOTICES") hereunder shall be in writing and
hand-delivered, sent by FedEx or other nationally recognized overnight courier
service, or mailed (by registered or certified mail, return receipt requested
and postage prepaid), if to Lessor at 545 East John Carpenter Freeway, Suite
1300, Irving, Texas 75062-3933, Attn: Thomas J. Corcoran, Jr., and if to Lessee
at 545 East John Carpenter Freeway, Suite 1300, Irving, Texas 75062-3933, Attn:
Thomas J. Corcoran, Jr., or to such other address or addresses as either party
may hereafter designate. Personally delivered Notice shall be effective upon
receipt, and Notice given by overnight courier service or by mail shall be
complete at the time of deposit with the courier service or in the U.S. Mail
system, respectively, but any prescribed period of Notice and any right or duty
to do any act or make any response within any prescribed period or on a date
certain after the service of such Notice given by overnight courier service
shall be extended one (1) day and by mail shall be extended five (5) days.

ARTICLE XXXIII

33.1 Appraisers. If it becomes necessary to determine the Fair Market
Value or Fair Market Rental of the Leased Property for any purpose of this
Lease, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a Person selected to act
as appraiser on its behalf. Within ten (10) days after Notice, Lessor (or
Lessee, as the case may be) shall by Notice to Lessee (or Lessor, as the case
may be) appoint a second Person as appraiser on its behalf. The appraisers thus
appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) with at least five
(5) years' experience in the State appraising property similar to the Leased
Property, shall, within forty-five (45) days after the date of the Notice
appointing the first appraiser, proceed to appraise the Leased Property to
determine the Fair Market Value or Fair Market Rental thereof as of the
relevant

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date (giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
shall have been so appointed, then the determination of such appraiser shall be
final and binding upon the parties. To the extent consistent with sound
appraisal practice as then existing at the time of any such appraisal, such
appraisal shall be made on a basis consistent with the basis on which the
Leased Property was appraised for purposes of determining its Fair Market Value
at the time the Leased Property was acquired by Lessor. If two (2) appraisers
are appointed and if the difference between the amounts so determined does not
exceed five percent (5%) of the lesser of such amounts, then the Fair Market
Value or Fair Market Rental shall be an amount equal to fifty percent (50%) of
the sum of the amounts so determined. If the difference between the amounts so
determined exceeds five percent (5%) of the lesser of such amounts, then such
two appraisers shall have twenty (20) days to appoint a third appraiser. If no
such appraiser shall have been appointed within such twenty (20) days or within
ninety (90) days of the original request for a determination of Fair Market
Value or Fair Market Rental, whichever is earlier, either Lessor or Lessee may
apply to any court having jurisdiction to have such appointment made by such
court. Any appraiser appointed by the original appraisers or by such court
shall be instructed to determine the Fair Market Value or Fair Market Rental
within forty-five (45) days after appointment of such appraiser. The
determination of the appraiser which differs most in the terms of dollar amount
from the determinations of the other two appraisers shall be excluded, and
fifty percent (50%) of the sum of the remaining two determinations shall be
final and binding upon Lessor and Lessee as the Fair Market Value or Fair
Market Rental of the Leased Property, as the case may be. This provision for
determining by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by
applicable law. Lessor and Lessee shall each pay the fees and expenses of the
appraiser appointed by it and each shall pay one-half of the fees and expenses
of the third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.

ARTICLE XXXIV

34.1 Lessor May Grant Liens. Without the consent of Lessee, Lessor may,
subject to the terms and conditions set forth below in this Section XXXIV, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("ENCUMBRANCE") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Any such Encumbrance
shall (a) contain the right to prepay (whether or not subject to a prepayment
penalty); (b) provide that it is subject to the rights of Lessee under this
Lease, (c) contain the Agreement by the holder of the Encumbrance that it will
(1) give Lessee the same notice, if any, given to Lessor of any default or
acceleration of any obligation underlying any such Encumbrance or any sale in
foreclosure under such Encumbrance, (2) permit Lessee to cure any such default
on Lessor's behalf within any applicable cure period, and Lessee shall be
reimbursed by Lessor for any and all costs incurred in effecting such cure,
including without limitation out-of-pocket costs incurred to effect any such
cure (including reasonable attorneys' fees) and (3) permit Lessee to appear by
its representative and to bid at any sale in foreclosure made with respect to
any such Encumbrance or to match any offer of the holder of the Encumbrance for
a deed-in-lieu-of-foreclosure from Lessor. Upon the request of Lessor, Lessee
shall subordinate this Lease to the lien of a new mortgage on the Leased
Property, on the condition that the proposed mortgagee executes a
non-disturbance agreement recognizing this Lease in accordance with the
provisions of Section 30.2, and agreeing, for itself and its successors and
assigns, to comply with the provisions of this Article XXXIV.

34.2 Lessee's Right to Cure. Subject to the provisions of Section 34.3, if
Lessor breaches any covenant to be performed by it under this Lease, Lessee,
after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to all other remedies available to
Lessee, may (but shall be under no obligation at any time thereafter to) make
such payment or perform such act for the account and at the expense of Lessor.
All sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys' fees) so

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incurred, together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid or incurred by Lessee, shall be paid by
Lessor to Lessee on demand or, following entry of a final, nonappealable
judgment against Lessor for such sums, may be offset by Lessee against the Base
Rent and/or Percentage Rent payments next accruing or coming due. The rights of
Lessee hereunder to cure and to secure payment from Lessor in accordance with
this Section 34.2 shall survive the termination of this Lease with respect to
the Leased Property.

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

ARTICLE XXXV

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

35.2 Transition Procedures. Upon the expiration or termination of the Term
of this Lease, for whatever reason (other than a purchase of the Leased
Property by Lessee), Lessor and Lessee shall do the following (and the
provisions of this Section 35.2 shall survive the expiration or termination of
this Lease until they have been fully performed) and, in general, shall
cooperate in good faith to effect an orderly transition of the management
and/or lease of the Hotel:

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

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<PAGE> 162

provided, in either case, that the costs and expenses of any such transfer or
the processing of any such application shall be paid by Lessor or Lessor's
nominee.

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

(c) Books and Records. All books and records for the Hotel kept by
Lessee pursuant to Section 3.6 shall be delivered promptly to Lessor or
Lessor's nominee, simultaneously with the termination of this Lease, but such
books and records shall thereafter be available to Lessee at all reasonable
times for inspection, audit, examination, and transcription for a period of one
(1) year and Lessee may retain (on a confidential basis) copies or computer
records thereof.

(d) Remittance. Lessee shall remit to Lessor or Lessor's nominee,
simultaneously with the termination of this Lease, all funds remaining, if any,
after payment of all accrued Gross Operating Expenses, and other amounts due
Lessee and after deducting the costs of any scheduled repair, replacement, or
refurbishment of Furniture and Equipment with respect to which deposits have
been made.

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

ARTICLE XXXVI

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

ARTICLE XXXVII

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

ARTICLE XXXVIII

38.1 Lessor's Option to Terminate Lease. In the event Lessor enters into a
bona fide contract to sell the Leased Property to a non-Affiliate, Lessor may
terminate the Lease by giving not less than thirty (30) days' prior Notice to
Lessee of Lessor's election to terminate the Lease effective upon the closing
under such contract. Effective upon such closing, this Lease shall terminate
and be of no further force and effect except as to any obligations of the
parties existing as of such date that survive termination of this Lease. As
compensation for the early termination of its leasehold

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<PAGE> 163

estate under this Article XXXVIII, Lessor shall at or before such closing
either (a) pay to Lessee the fair market value of Lessee's leasehold estate
hereunder as of the closing of the sale of the Leased Property or (b) offer to
lease to Lessee one or more substitute hotel facilities pursuant to one or more
leases that would create for Lessee leasehold estates that have an aggregate
fair market value of no less than the fair market value of the original
leasehold estate, both such values as determined as of the closing of the sale
of the Leased Property. Lessor also shall pay to Lessee, or reimburse Lessee
for, (i) any assignment fees, termination fees or other liabilities arising
under the Management Agreement solely as a result of the assignment or
termination of such Management Agreement in connection with the Lessor's sale
of the Hotel and termination of this Lease and (ii) any termination fees
payable by Lessee under any Restaurant sublease solely as a result of the
termination thereof in connection with the Lessor's sale of the Hotel and
termination of this Lease. If Lessor elects and complies with the option
described in (b) above, regardless of whether Lessee enters into the lease(s)
described therein, Lessor shall have no further obligations to Lessee with
respect to compensation for the early termination of this Lease. In the event
Lessor and Lessee are unable to agree upon the fair market value of an original
or replacement leasehold estate, it shall be determined by appraisal using the
appraisal procedure set forth in Article XXXIII.

For the purposes of this Article, fair market value of the leasehold
estate means, as applicable, an amount equal to the price that a willing buyer
not compelled to buy would pay a willing seller not compelled to sell for
Lessee's leasehold estate under this Lease or an offered replacement leasehold
estate.

The rights and obligations of the parties hereto are expressly subject to
their respective obligations under the Management Agreement and the Purchase
and Sale Agreement.

ARTICLE XXXIX

39.1 Compliance with Management Agreement. To the extent any of the
provisions of the Management Agreement impose a greater obligation on Lessee
than the corresponding provisions of the Lease, then Lessee shall be obligated
to comply with, and to take all reasonable actions necessary to prevent
breaches or defaults under, the provisions of the Management Agreement. It is
the intent of the parties hereto that Lessee shall comply in every respect with
the provisions of the Management Agreement so as to avoid any material default
thereunder during the term of this Lease. Lessor and Lessee agree to cooperate
fully with each other in the event it becomes necessary to obtain a franchise
extension or modification or a new franchise for the Leased Property.

ARTICLE XL

40.1 Furniture, Fixture and Equipment Allowance. Lessor shall be obligated
to pay Lessee, when and as required to meet the requirements of the Management
Agreement for a reserve for periodic repair, replacement or refurbishing of
furniture, fixtures and equipment that constitute Leased Property, an amount
equal to four percent (4%) of Room Revenues monthly. Upon written request by
Lessee to Lessor stating the specific use to be made and the reasonable
approval thereof by Lessor (or as otherwise required by Manager under the
Management Agreement), such reserve funds (and additional funds of Lessor, if
necessary) shall be made available by Lessor for use by Lessee for replacement
or refurbishing of furniture, fixtures and equipment that constitute Leased
Property in connection with the Primary Intended Use; provided, however, that
no amounts made available under this Article shall be used to purchase property
(other than "real property" within the meaning of Treasury Regulations Section
1.8563(d)), to the extent that doing so would cause Lessor to recognize income
other than "rents from real property" as defined in Section 856(d) of the Code.
Lessor's obligation shall be cumulative, but not compounded, and any amounts
that have accrued hereunder shall be payable in future periods for such uses
and in accordance with the procedure set forth herein. Lessee shall have no
interest in any accrued obligation of Lessor hereunder after the termination of
this Lease.

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<PAGE> 164

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

"LESSOR"

FELCOR SUITES LIMITED PARTNERSHIP,
a Delaware limited partnership

By: FelCor Suite Hotels, Inc., a Maryland
corporation, its General Partner

By:
------------------------------

"LESSEE"

FCH/ITT LEASING, L.L.C., a Delaware limited
liability company

By:
----------------------------------

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<PAGE> 165

EXHIBIT A

LEGAL DESCRIPTION

<PAGE> 166

EXHIBIT B

WORK LETTER

This Work Letter describes and specifies the rights and obligations of
FelCor Suites Limited Partnership, a Delaware limited partnership ("LESSOR"),
and FCH/_____ Leasing, L.L.C., a Delaware limited liability company ("LESSEE"),
with respect to the design, construction, installation and payment for the
completion of Lessee's Work (as defined in Section 10.4 of the Lease).

1. Definitions. Terms which are defined in that certain Lease Agreement
(the "LEASE") executed contemporaneously herewith, by and between Lessor and
Lessee, shall have the same meaning in this Work Letter. Additionally, as used
in this Work Letter, the following terms (when delineated with initial capital
letters) shall have the respective meaning indicated for each as follows:

(a) "Plans and Specifications" shall mean, collectively, the plans,
specifications and other information prepared or to be prepared by
Lessee's architect and, where necessary, by Lessee's electrical,
mechanical and structural engineers, which shall detail Lessee's Work and
which shall be approved in writing by both Lessee and Lessor prior to the
commencement of such work. The Plans and Specifications shall comply with
the minimum requirements established by Lessor.

(b) "Cost of the Work" shall mean the actual contract costs of all
materials and labor for the design, construction and installation to
completion of the Lessee's Work in accordance with the Plans and
Specifications.

(c) "Change Cost" shall mean any increase in the Cost of the Work
attributable to any change in the Plans and Specifications.

2. Procedure for the Completion of Plans and Specifications. The Plans and
Specifications shall be completed in accordance with the following procedure:

(a) Design Drawings. Lessee shall submit to Lessor design drawings
specifying the intended design, character and finishing of Lessee's Work.
The design drawings shall set forth the requirements of Lessee with
respect to the installation of Lessee's Work.

(i) After receipt of design drawings, Lessor shall return to
Lessee Lessor's required modifications and/or approval.

(ii) If Lessor requires modifications, the design drawings shall
be revised by Lessee and resubmitted to Lessor for approval. Unless
such action is taken, Lessee will be deemed to have accepted and
approved all of Lessor's comments on the design drawings. This
process will continue until approval of Lessor is obtained.

(b) Completion of Plans and Specifications. All Plans and
Specifications shall be prepared in strict compliance with applicable
standards and requirements as set forth in the Lease, this Work Letter and
otherwise, and shall also adhere to the design drawings approved by
Lessor. Lessee shall deliver to Lessor, as soon as practicable after the
date of Lessor's approval of design drawings, the proposed Plans and
Specifications. If the Plans and Specifications are returned to Lessee
with comments, but not bearing approval of Lessor, the Plans and
Specifications shall be revised by Lessee and resubmitted to Lessor for
approval. This process will continue until approval of Lessor is obtained.

(c) Compliance with Laws. Lessee shall have the sole responsibility
for compliance of the Plans and Specifications with all applicable
statutes, codes, ordinances and

<PAGE> 167

other regulations. The approval of the Plans and Specifications or
calculations included therein by Lessor shall not constitute an
indication, representation or certification by Lessor that such Plans and
Specifications or calculations are in compliance with said statutes,
codes, ordinances and other regulations. In instances where several sets
of requirements must be met, the requirements of Lessor's insurance
underwriter or the strictest applicable requirements shall apply where not
prohibited by applicable codes.

3. Pricing. As soon as practicable after finalization of the Plans and
Specifications, as evidenced by Lessor's written approval thereof, Lessee shall
notify Lessor in writing of the Cost of the Work. Lessor shall either approve
the Cost of the Work in writing or request that the Plans and Specifications
and the Cost of the Work be revised and resubmitted to Lessor for approval.
Lessee shall revise the Plans and Specifications and the Cost of the Work and
resubmit them to Lessor for approval. This procedure shall continue until
Lessor approves the Cost of the Work.

4. Performance of Work and Delays. Lessee shall select one or more
contractors ("CONTRACTORS") to furnish labor and/or materials for the Lessee's
Work in substantial accordance with the Plans and Specifications. Each
Contractor and the contract between Lessee and such Contractor must be approved
in advance by Lessor. After Lessor's approval of the Plans and Specifications,
the Cost of the Work, Contractors and contracts, Lessee agrees to cause the
Contractors to commence the construction and installation of the Lessee's Work
as promptly as reasonably practicable and to proceed with due diligence to
perform Lessee's Work in a good and workmanlike manner. Lessee warrants to
Lessor that all materials and equipment furnished in constructing and
installing the Lessee's Work will be new, unless otherwise specified to Lessor,
and that such work shall be of good quality, free from faults and defects;
provided, however, Lessor's sole remedy for breach of the above warranty shall
be that Lessee, for a period of twelve (12) months after substantial completion
of the Lessee's Work, at its sole cost and expense, will make all necessary
repairs, replacements and corrections of any nature or description as may
become necessary by reason of faulty construction, labor or materials in the
Lessee's Work. Any delays in the completion of Lessee's Work shall not justify
any abatement or reduction of the rent payable under the Lease.

5. Payments for Cost of Work. Lessor shall be liable for payment of the
Cost of the Work. Within ten (10) days after Lessor's receipt of an invoice
from Lessee, together with supporting billing statements, architect
certificates and other detailed information required by the construction
contracts with the Contractors, Lessor shall pay to Lessee the amount of the
invoice. Lessee shall pay over to its Contractors any payments by Lessor to
Lessee for the Cost of the Work. Lessor may, at its option, elect to make its
payments for the Cost of the Work directly to the Contractors rather than to
Lessee. Lessor shall not be obligated to pay for, and Lessee shall not pay for,
any work performed by any of the Contractors or their mechanics, workmen or
subcontractors until Lessor has received a lien waiver from any said party.

6. Change Orders. All changes and modifications in Lessee's Work from that
contemplated in the Plans and Specifications, whether or not such change or
modification gives rise to a Change Cost, must be evidenced by a written change
order executed by both Lessor and Lessee. In that regard, Lessee shall submit
to Lessor such information as Lessor shall require with respect to any change
order requested by Lessee. After receipt of any requested change order,
together with such information as Lessor shall require with respect thereto,
Lessor shall return to Lessee either the executed change order, which will
evidence Lessor's approval thereof, or the Plans and Specifications with
respect thereto with Lessor's suggested modifications. Lessee shall revise the
change order and resubmit it to Lessor. This process will continue until
Lessor's approval is obtained.

7. Punch List. Within ten (10) days after Lessor receives notice from
Lessee of the substantial completion of Lessee's Work, Lessor shall give Lessee
written notice specifying any details of construction, decoration, installation
or mechanical adjustment which remain to be

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<PAGE> 168

performed with respect to Lessee's Work; and except for the details contained
in such written notice from Lessor, all obligations of Lessee in regard to
Lessee's Work shall be deemed to have been satisfied. Lessor or its agents,
servants, employees or contractors shall have the right to enter the Leased
Improvements during the progress and after the completion of the Lessee's Work
to inspect any details of the Lessee's Work, and entry by Lessor, its agents,
servants, employees or contractors for such purpose shall not relieve Lessee of
any of its obligations under the Lease or impose any liability on Lessor or its
agents, servants, employees or contractors.

8. Insurance; Liability. Lessee shall procure and maintain adequate
Workmen's Compensation and public liability insurance for bodily injury and
property damage, all in amounts, with companies and in forms satisfactory to
Lessor. Lessee shall also cause each of the Contractors to provide and maintain
certificates of such insurance and furnish copies of same to Lessor prior to
proceeding with the Lessee's Work. Lessor shall not be liable in any way for
any injury, loss or damage which may occur in connection with or as a result of
the Lessee's Work, the same being solely at Lessee's risk. Lessee shall hold
Lessor harmless from any claim, demand or action arising from the construction
or installation activities in connection with Lessee's Work, the Contractors or
any workmen, mechanics or subcontractors working on the Lessee's Work.

9. Whole Agreement; No Oral Modification. This Work Letter and the Lease
embody all representations, warranties and agreements of Lessor and Lessee with
respect to the matter described herein, and this Work Letter may not be altered
or modified except by an agreement in writing signed by the parties.

10. Paragraph Headings. The paragraph headings contained in this Work
Letter are for convenient reference only and shall not in any way affect the
meaning or interpretation of such paragraphs.

11. Notices. All notices required or contemplated hereunder shall be given
to the parties in the manner specified for giving notices under the Lease.

12. Binding Effect. This Work Letter shall be construed under the laws of
the State of Texas and shall be binding upon and shall inure to the benefit of
the parties hereto and their respective permitted successors and assigns.

13. Conflict. In the event of conflict between this Work Letter and any
other exhibits or addenda to the Lease, this Work Letter shall prevail.

DATED as of the _______ day of ________________, 19____.

FCH/ITT LEASING, L.L.C., a Delaware limited
liability company

By:
----------------------------------

FELCOR SUITES LIMITED PARTNERSHIP,
a Delaware limited partnership

By: FelCor Suite Hotels, Inc., a Maryland
corporation, its General Partner

By:
------------------------------

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<PAGE> 169
EXHIBIT M

REVOLVING CREDIT AGREEMENT

Dated as of June __, 1997

between

[ ]

as Borrower

and

ITT SHERATON CORPORATION

as Lender
<PAGE> 170
REVOLVING CREDIT AGREEMENT, dated as of June __, 1997, between
FCH/_______ Leasing, L.L.C., a Delaware limited liability company ("Borrower"),
and ITT SHERATON CORPORATION, a Delaware corporation ("Lender").

WITNESSETH:

WHEREAS, Lender has agreed to make to Borrower revolving
credit loans in an aggregate principal amount outstanding at any one time of up
to $3,270,000, or such lesser amount as is then required by the terms hereof,
for the purposes and upon the terms and subject to the conditions set forth
herein.

NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, the parties hereto do hereby agree
as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

1.1. Defined Terms. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

"Agreement" means this Revolving Credit Agreement, together
with all Exhibits hereto, as amended, supplemented or otherwise modified from
time to time.

"Borrowing" means a borrowing consisting of a Loan made by
Lender according to its Commitment.

"Business Day" means a day of the year on which commercial
banks are not required or authorized to close in New York, New York, Boston,
Massachusetts, or Dallas, Texas.

"Commitment" means the commitment of Lender to make Loans to
Borrower pursuant to Section 2.1 hereof in an aggregate principal amount
outstanding not to exceed, from time to time, the amount determined in
accordance with Section 2.3 hereof.

"Final Maturity Date" means June 30, 2012.

"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by
such other entity as may be in general use by significant segments of the
accounting professions, which are applicable to the circumstances as of the
date of determination.
<PAGE> 171
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity duly exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

"Hotels" means any and all of the hotels listed on Exhibit A
attached hereto and incorporated herein by reference.

"Leases" means, with the respect to Borrower, any one or more
of the leases identified on Exhibit A hereto covering the Hotels, as the same
may be amended, supplemented or otherwise modified from time to time.

"Loan" or "Loans" means the revolving credit loan or loans
made or to be made by Lender to Borrower pursuant to Article II hereof.

"Loan Documents" means, collectively, this Agreement, the Note
and each other certificate, agreement or document executed by Borrower and
delivered to Lender in connection with or pursuant to any of the foregoing.

"Net Income (Loss)" means, for any Person for any period, the
aggregate of net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in conformity with GAAP.

"Note" means a subordinated promissory note of Borrower
payable to the order of Lender in a stated principal amount equal to the amount
of the Commitment, in substantially the form of Exhibit B.

"Notice of Borrowing" has the meaning specified in Section 2.2
hereof.

"Obligations" means the Loans and all other advances, debts,
liabilities, obligations, covenants and duties owing by Borrower to Lender, of
every type and description, present or future, arising under this Agreement or
under any other Loan Document, whether direct or indirect (including, without
limitation, those acquired by assignment), absolute or contingent, due to
become due, now existing or hereafter arising and however acquired. The term
"Obligations" includes, without limitation, all interest, charges, expenses,
fees, attorneys' fees and disbursements and any other sum then payable by
Borrower under this Agreement.

"Overhead" has the meaning specified in Section 2.5 hereof.

"Person" means an individual, partnership, corporation
(including, without limitation, a business trust), limited liability company,
joint stock company, trust, unincorporated association, joint venture or other
entity, or a Governmental Authority.

"Requirements of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing documents of
such Person, and all federal, state and local laws, rules and regulations,
including, without limitation, all orders, judgments, decrees or other
determinations of any Governmental Authority or arbitrator, applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.

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<PAGE> 172
"Stock" means shares of capital stock, limited liability
company or partnership interests, participations or other equivalents
(regardless of how designated) of or in a corporation or similar entity,
whether voting or non-voting, and includes, without limitation, common stock
and preferred stock.

"Subsidiary" means, with respect to any Person, at any date,
any corporation, partnership, limited liability company or other business
entity the accounts of which would be consolidated with those of such Person in
its consolidated financial statements in accordance with GAAP, if such
statements were prepared as of such date.

1.2. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including".

1.3. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.

1.4. Certain Terms. (a) The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, and not to any particular Article, Section, subsection or clause in this
Agreement. References herein to an Exhibit, Article, Section, subsection or
clause refer to the appropriate Exhibit, Article, Section, subsection or clause
in this Agreement.

(b) The term "Lender" includes its successors and each
assignee of such Lender who becomes a party hereto.

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS

2.1. The Loans. On the terms and subject to the conditions
contained in this Agreement, Lender agrees to make Loans to Borrower, from time
to time, on any Business Day during the period from the date hereof until the
Final Maturity Date, with each such Loan to be in a principal amount not in
excess of the then unfunded balance of the Commitment. In no event shall
Lender be obligated to make any Loan in a principal amount which, if advanced,
would result in the aggregate principal amount of the then outstanding Loans
being in excess of the then unfunded Commitment, as determined in accordance
with Section 2.3 hereof. Each such Loan shall be requested in an amount not to
exceed the amount which will be necessary, within fifteen (15) Business Days
following such request, to enable Borrower to pay when due and payable its
obligations for the payment of rent owing under the Leases. Within the then
limits of the Commitment, amounts repaid pursuant to Section 2.5 or 2.6 may be
re-borrowed under this Section 2.1. The Loans shall be evidenced by the Note,
made payable to the order of Lender, which Note has been duly executed and
delivered by Borrower to Lender concurrently with Lender's execution and
delivery of this Agreement.

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<PAGE> 173
2.2. Making the Loans. Borrowing shall be made on written
notice, given by Borrower to Lender not later than 11:00 A.M. (Dallas, Texas
time) on the tenth (10th) Business Day prior to the date of the proposed
Borrowing. Each such notice (a "Notice of Borrowing") shall be in
substantially the form of Exhibit C, specifying therein (i) the date of such
proposed Borrowing, (ii) the aggregate amount of such proposed Borrowing and
(iii) that such Loan will be necessary to enable Borrower to pay when due rent
which is, or within fifteen (15) Business Days following such request will be,
due and payable under the Leases and any such borrowing shall be subject to
Borrower's continued compliance with the covenants contained herein and there
not being any breach of a representation or warranty hereunder.

2.3. Amount of the Commitment. The Commitment of Lender
shall be re-computed on the date of each Notice of Borrowing and on the last
day of each calendar month, and shall be equal to $3,270,000, reduced by an
amount equal to 12.5% of the Initial Rent (as set forth opposite the name of
the Hotel to which it relates on Exhibit A attached hereto) applicable to any
Lease (i) upon the termination or expiration of such Lease or upon Borrower
ceasing to be liable for the payment of rent thereunder and (ii) covering any
Hotel as to which the management agreement between Sheraton Operating
Corporation and Borrower has been terminated by or as a result of action of
Borrower.

2.4. Termination of the Commitment. The Commitment of Lender
hereunder shall terminate upon the earlier of (i) the Final Maturity Date and
(ii) the date upon which Borrower's Net Income, determined in accordance with
GAAP (but before the payment of rent and other obligations under the Leases),
for the preceding 12 calendar months is equal to or in excess of 1.25 times the
amount of Borrower's rental and other obligations under the Leases for the same
period.

2.5. Repayment. On or before the fifteenth day of each
January, April, July and October, Borrower shall pay, to the extent of its then
available funds, if any, after paying or making adequate provision for the
payment when due of (i) all rent and other obligations due or to become due
under the Leases in respect of such prior fiscal quarter, (ii) all management
fees and other obligations due or to become due under Borrower's management
agreements with Sheraton Operating Corporation in respect of such prior fiscal
quarter, (iii) all overhead expenses of Borrower ("Overhead"), whether incurred
directly by it or allocated to it by any parent or affiliate in respect of such
prior fiscal quarter; provided, that in no event shall aggregate Overhead in
any fiscal year exceed an amount equal to $20,000 per year for each Hotel,
increased annually (beginning on December 31, 1998) in direct proportion to any
increase in the Consumer Price Index over that published for December 31, 1997
(or, if the Consumer Price Index ceases to be published, such other
substantially comparable published index as may be reasonably designated by
Lender), (A) all accrued but unpaid interest on the then outstanding Loans at
the date of such payment and, to the extent of any excess, (B) the principal
amount of the Loans then outstanding.

2.6. Prepayments; Revolving Credit. Borrower shall have the
right to repay the principal amount of any Loan, in whole or in part, at any
time or times, without premium or penalty; provided, however, that such
payments shall not reduce Lender's Commitment hereunder and Borrower may
reborrow such amounts repaid, subject to the terms of this Agreement.

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2.7. Interest. Simple interest shall accrue on the unpaid
principal amount of each Loan outstanding from the date thereof until the
principal amount thereof shall be paid in full, at the rate of ten percent
(10%) per annum. Simple interest at the rate of fifteen percent (15%) per
annum shall accrue on the unpaid principal amount of Loans outstanding during
any period of time during which Borrower shall be in default of its obligations
to make any payment to Lender as, and to the extent, required in Sections 2.5
and 5.1 hereof.

2.8. Payments and Computations. (a) Borrower shall make
each payment hereunder and under the Notes on the day when due, in United
States Dollars, to Lender at its address referred to in Section 7.2.

(b) All computations of interest shall be made by Lender on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest is payable.

(c) Whenever any payment hereunder or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in each
such case be included in the computation of interest.

ARTICLE III

BORROWER'S REPRESENTATIONS AND WARRANTIES

To induce Lender to enter into this Agreement, Borrower
represents and warrants to Lender that:

3.1. Existence; Compliance with Law; Other. Borrower (i) is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware; (ii) is duly qualified as a
limited liability company and in good standing under the laws of each
jurisdiction where such qualification is necessary; (iii) has all requisite
power and authority and the legal right to own, pledge and mortgage its
properties, to lease (as lessee) the properties that it leases as lessee, to
lease or sublease (as lessor) the properties it owns and/or leases (as lessee)
and to conduct its business as now or currently proposed to be conducted; (iv)
is in compliance with its certificate of formation and regulations; (v) is in
compliance with all other applicable Requirements of Law; (vi) has all
necessary licenses, permits, consents or approvals from or by, has made all
necessary filings with, and has given all necessary notices to, each
Governmental Authority having jurisdiction, to the extent required for such
ownership, leasing and conduct, except for licenses, permits, consents or
approvals which can be obtained by the taking of ministerial action to secure
the grant or transfer thereof or failures which in the aggregate have no
material adverse effect upon Borrower; (vii) is not an Investment Company, as
that term is defined in the Investment Company Act of 1940, as amended, (viii)
has no Subsidiaries, (ix) is not engaged in any trade or business other than
that relating to the leasing and operation of the Hotels, (x) has incurred no
indebtedness for borrowed money other than under this Agreement and has
incurred no other indebtedness except in the ordinary and normal course of
business of the operation of the Hotels, and

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<PAGE> 175
(xi) has granted no liens on any of its property or assets to secure
indebtedness for borrowed money.

3.2. Power; Authorization; Enforceable Obligations. (a) The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party and the consummation of the transactions related to the financing
contemplated hereby;

(i) are within Borrower's limited liability company
powers;

(ii) have been duly authorized by all necessary
action, including, without limitation, the consent of members where
required;

(iii) does not and will not contravene Borrower's
certificate of formulation or regulations; and

(iv) does not require the consent of, authorization
by, approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person, other than those which
have been obtained or made and copies of which have been delivered to
Lender.

(b) This Agreement and each of the other Loan Documents has
been duly executed and delivered by Borrower. This Agreement and the other
Loan Documents are the legal, valid and binding obligation of Borrower,
enforceable against it in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights and remedies generally.

ARTICLE IV

LENDER'S REPRESENTATIONS AND WARRANTIES

Lender represents and warrants to Borrower that:

4.1. Existence; Compliance with Law. Lender (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (ii) is duly qualified as a corporation and in
good standing under the laws of each jurisdiction where such qualification is
necessary; (iii) has all requisite corporate power and authority and the legal
right to own, dispose of, pledge and mortgage its properties, and to conduct
its business as now or currently proposed to be conducted; (iv) is in
compliance with its certificate of incorporation and by-laws; (v) is in
material compliance with all other applicable Requirements of Law; and (vi)
has all necessary licenses, permits, consents or approvals from or by, has made
all necessary filings with, and has given all necessary notices to, each
Governmental Authority having jurisdiction, to the extent required for such
ownership, leasing and conduct, except for licenses, permits, consents or
approvals which can be obtained by the taking of ministerial action to secure
the grant or transfer thereof or failures which in the aggregate have no
material adverse effect upon Lender.

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<PAGE> 176
4.2. Power; Authorization; Enforceable Obligations. (a) The
execution, delivery and performance by Lender of the Loan Documents to which it
is a party and the consummation of the transactions related to the financing
contemplated hereby;

(i) are within Lender's corporate powers;

(ii) have been duly authorized by all necessary
action, including, without limitation, the consent of its stockholder,
if required;

(iii) does not and will not contravene Lender's
certificate of incorporation or by-laws; and

(b) This Agreement and each of the other Loan Documents has
been duly executed and delivered by Lender. This Agreement and the other Loan
Documents are the legal, valid and binding obligation of Lender, enforceable
against it in accordance with its terms except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights and remedies generally.

ARTICLE V

BORROWER'S COVENANTS

As long as any of the Obligations or Commitments remain
outstanding, Borrower agrees with Lender that, unless otherwise agreed to in
writing by Lender:

5.1. Distributions. Within thirty (30) days following the
end of each fiscal year, Borrower shall distribute all of its then available
funds, if any, solely in accordance with the following priorities, subject to
the terms of the Leases and the Borrower's management agreements with Sheraton
Operating Corporation covering the Hotels: (i) FIRST, to the payment of (A) all
rent and other obligations due or to become due under the Leases in respect of
such prior fiscal year, (B) the Basic Fee and other obligations (other than the
Incentive Fee) due or to become due under Borrower's management agreements with
Sheraton Operating Corporation covering the Hotels in respect of such prior
fiscal year, (C) all Overhead expenses of Borrower covering the Hotels, (D) the
Incentive Fee due or to become due under Borrower's management agreements with
Sheraton Operating Corporation covering the Hotels in respect of such prior
fiscal year, (ii) SECOND, to the payment of all principal and interest then
outstanding in respect of the Loans, and (iii) THIRD, to the holders of the
Stock of the Borrower; provided that upon any default by Borrower in respect of
any of its covenants in this Article V (other than Section 5.6) or breach by
Borrower of any of its representations or warranties hereunder, then all
amounts then outstanding in respect of principal and interest on the Loans
shall be payable prior to the payment of any amount payable in accordance with
this Section 5.1 (other than rent in respect of the Leases) until such default
or breach shall have been cured.

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<PAGE> 177
5.2. Mergers, Asset Sales, Etc. Borrower shall not sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
assets or properties, and shall not, (i) merge with any Person, or (ii)
consolidate with any Person.

5.3. Indebtedness and Liens. Borrower shall incur no
indebtedness for borrowed money other than under this Agreement and shall incur
no other indebtedness except in the ordinary and normal course of business of
the operation of the Hotels. Borrower shall grant no liens on any of its
property or assets to secure indebtedness for borrowed money.

5.4. Distributions. Borrower shall not make any
distributions on or in respect of, or repurchase or acquire for value any of,
its Stock, except for the distributions contemplated by Section 5.1 hereof.

5.5. Related Party Transactions. Except as expressly
permitted by the management agreements between Borrower and Sheraton Operating
Corporation with respect of the Hotels, or as required by the Leases, Borrower
shall not make any investment in or any loan to, or assume, guaranty or
otherwise become liable for the payment of any obligation of, any Person
controlling, controlled by or under common control with Borrower.

5.6. Inspection of Books and Records. Borrower shall provide
Lender with access, during normal business hours, to its books and records for
the purpose of inspection thereof and shall provide to Lender, within
forty-five (45) days following the end of each fiscal quarter, an unaudited
balance as at the end of, and an operating statement for such fiscal quarter
and for the fiscal year to date. Within ninety (90) days following the end of
each fiscal year, a balance sheet and operating statement certified by
Borrower's chief accounting officer.

ARTICLE VI

THIRD PARTY BENEFICIARY

6.1. Third Party Beneficiary. Both Borrower and Lender
hereby acknowledge and agree that FelCor Suite Hotels, Inc. or one of its
Subsidiaries is the owner of the Hotels and the lessor thereof pursuant to the
Leases, and shall be deemed to be a third party beneficiary of the rights of
Borrower under this Agreement and shall have the full right, power and
authority, in its own name or in the name of the Borrower, to enforce each and
all of the obligations of Lender hereunder, including, without limitation, the
obligation of Lender to make Loans.

ARTICLE VII

MISCELLANEOUS

7.1. Amendments, Etc. (a) No amendment or waiver of any
obligation of Borrower under this Agreement nor consent to any departure by
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by Lender, and

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<PAGE> 178
then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

(b) Notwithstanding anything set forth herein to the
contrary, no amendment or waiver of any obligation of Lender under this
Agreement nor consent to any departure by Lender therefrom shall in any event
be effective unless the same shall be in writing and signed by Borrower and by
FelCor Suite Hotels, Inc., and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

7.2. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including, without limitation,
telecopy) and mailed, telecopied or delivered by hand, if to Borrower, at its
office at 545 East John Carpenter Freeway, Suite 1300, Irving, Texas 75062
(telecopy number: 972-444-4949) (telephone number: 972-444-4900), Attention:
President, with a copy to Attention: General Counsel; if to Lender, at its
office at 60 State Street, Boston, Massachusetts 02109 (telecopy number:
617-367-5637) (telephone number: 617-367-3600), Attention: General Counsel; and
with respect to each such notice or communication hereunder, a copy thereof
shall be sent to Hunton & Williams, 951 East Byrd Street, Richmond, Virginia
(telecopy number 804-788-8218) (telephone number 804-788-8793) Attention:
George C. Howell, III, or at such other address as shall be designated by such
party in a written notice to the other parties. All such notices and
communications shall, when mailed, telecopied or delivered, be effective three
(3) Business Days after being deposited in the mails, telecopied with
confirmation of receipt or delivered by hand to the addressee.

7.3. No Waiver; Remedies. No failure on the part of any
party hereto to exercise, and no delay in exercising, any right hereunder or
under the Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

7.4. Binding Effect. This Agreement is and hereafter shall
be binding upon and inure to the benefit of Borrower, Lender and their
respective permitted successors and assigns. Borrower may not assign its
rights hereunder without the prior written consent of Lender and any purported
assignment without such consent shall be null and void.

7.5 Governing Law; Severability. This Agreement and the Note
and the rights and obligations of the parties hereto and thereto shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

7.6. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

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<PAGE> 179
7.7. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

7.8. Entire Agreement. This Agreement, together with the
other Loan Documents, embody the entire agreement of the parties and supersedes
all prior agreements and understandings relating to the subject matter hereof.

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<PAGE> 180
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

[ ]

By:
-----------------------------------
Name:
Title:

ITT SHERATON CORPORATION

By:
-----------------------------------
Name: Mark Thomas
Title: Senior Vice President

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<PAGE> 181
EXHIBITS

Exhibit A List of Hotels and Initial Rent

Exhibit B Form of Note

Exhibit C Form of Notice of Borrowing

<PAGE> 182
EXHIBIT A

<TABLE>
<CAPTION>
Hotel Initial Rent
----- ------------
<S> <C>
Sheraton Gateway Hotel (Atlanta Airport) College Park, GA $___ million
Sheraton Suites (Cumberland) Atlanta, GA ___ million
Sheraton Gateway Suites (O'Hare Airport) Rosemont, IL ___ million
Sheraton Crescent Hotel Phoenix, AZ ___ million
Sheraton Park Central Hotel in Dallas, TX ___ million
</TABLE>

<PAGE> 183
EXHIBIT B

SUBORDINATED PROMISSORY NOTE

$3,270,000.00 Dallas, Texas June __, 1997

FOR VALUE RECEIVED, the undersigned, [ ] ("Borrower"),
promises to pay to the order of ITT Sheraton Corporation ("Lender"), at
Lender's principal executive office in Boston, Massachusetts, or at such other
place as hereafter directed by Lender, the principal sum of Three Million Two
Hundred Seventy Thousand and NO/100 Dollars ($3,270,000.00), or such lesser sum
as has been advanced hereunder and remains outstanding and unpaid, together
with interest on the unpaid balance, from time to time, at the rate of ten
percent (10%) per annum. This Note is issued under and pursuant to the terms of
that certain Revolving Credit Agreement, dated as of June __, 1997
("Agreement"), between Borrower and Lender and all payments of principal and
interest hereunder shall be made, in United States currency, in such amounts
and at such times as are set forth in the Agreement. All sums payable hereunder
are expressly subordinate in right of payment to the prior payment in full of
all of the obligations of Borrower for the payment of rent due and owing under
the Leases.

This Note may be prepaid in whole or in part at any time at the option
of Borrower without penalty or premium. All payments or prepayments made on
this Note shall be applied first to the payment of accrued and unpaid interest,
and then to the payment of principal.

This Note and the rights and obligations of the parties hereunder
shall be governed by the laws of the State of New York.

This Note shall be binding upon Borrower, its legal representatives,
successors and assigns, and shall inure to the benefit of Lender and its legal
representatives, successors and assigns.

This Note may not be changed, amended or modified orally. If any
provision of this Note is held to be invalid or unenforceable by a court of
competent jurisdiction, the other provisions of this Note shall remain in full
force and effect and shall be liberally construed in favor of Lender. Time is
of the essence with respect to all of Borrower's obligations and agreements
under this Note.

[ ]

By:
-----------------------------------
Name:
Title:

<PAGE> 184
EXHIBIT C

NOTICE OF BORROWING

TO: ITT Sheraton Corporation

FROM: [ ]

DATE: ________________________

RE: Notice of Borrowing under Revolving Credit Agreement between Lender
and Borrower

Notice is hereby given under and in accordance with Section 2.2 of that certain
Revolving Credit Agreement, dated as of June __, 1997 (the "Agreement"),
between ITT Sheraton Corporation ("Lender") and [ ] ("Borrower"),
the Borrower desires to borrow from Lender, on and as of ____________________,
being not less than ten (10) Business Days following the date hereof, the
principal sum of $___________ under and pursuant to the Agreement.

Borrower hereby represents and warrants to Lender that the above-requested
borrowing will be necessary to enable Borrower to pay rent that is, or within
fifteen Business Days following the date hereof will be, due and owing under
the Leases listed in Exhibit A to the Agreement and reaffirms, as of the date
hereof, the representations and warranties set forth in the Agreement and that
it is in compliance with the covenants contained in Article V hereof.
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Agreement.

[ ]

By:
-----------------------------------
Name:
Title:
<PAGE> 185

EXHIBIT N

Nondisturbance Agreement

**INTENTIONALLY OMITTED**