NATIONAL LODGING CORP
10-K/A, 1996-05-28
MISCELLANEOUS AMUSEMENT & RECREATION
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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


   
                                   FORM 10-K/A
    

[X]               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
                   For the Fiscal Year Ended December 31, 1995
                         Commission File Number 0-24794

                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                 For the Transition Period from ______ to ______


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


                             NATIONAL LODGING CORP.
             (Exact name of Registrant as specified in its charter)

            DELAWARE                                             22-3326054
 (State or other jurisdiction of                                (IRS Employer
 incorporation or organization)                              Identification No.)

                                605 Third Avenue
                                   23rd Floor
                            New York, New York 10158
          (Address of principal executive offices, including zip code)

                                 (212) 692-1400
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                                 Title of Class
                     Common Stock, par value $.01 per share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes [x]       No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]

   
The aggregate market value of the voting stock held by non-affiliates of the
registrant on May 6, 1996, based on the closing price of these shares of $14.25
on that date, was $64,659,631.

As of May 6, 1996, there were 5,452,320 shares of the Registrant's Common Stock
issued and outstanding.
    

                      DOCUMENTS INCORPORATED BY REFERENCE:

   
None.
    


<PAGE>


<TABLE>

<CAPTION>
   
                                                 TABLE OF CONTENTS
<S>                                                                                                            <C>


PART I
         ITEM 1.    Business....................................................................................  1
         ITEM 2.    Properties.................................................................................. 13
         ITEM 3.    Legal Proceedings........................................................................... 13
         ITEM 4.    Submission of Matters to a Vote of Security Holders......................................... 14

PART II
         ITEM 5.    Market for Registrant's Common Equity and Related Stockholder Matters....................... 15
         ITEM 6.    Selected Financial Data..................................................................... 16
         ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations....... 17
         ITEM 8.    Financial Statements and Supplementary Data................................................. 23
         ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 23

PART III
         ITEM 10.   Directors and Executive Officers of the Company............................................. 24
         ITEM 11.   Executive Compensation...................................................................... 27
         ITEM 12.   Security Ownership of Certain Beneficial Owners and Management.............................. 30
         ITEM 13.   Certain Relationships and Related Transactions.............................................. 32

PART IV
         ITEM 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................ 37
    

</TABLE>

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



                SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
                  THE SECURITIES LITIGATION REFORM ACT OF 1995

         Except for historical information contained herein, this Annual Report
on Form 10-K contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 which involve certain risks and
uncertainties. The Company's actual results or outcomes may differ materially
from those anticipated. Important factors that the Company believes might cause
such differences are discussed in the cautionary statements accompanying the
forward-looking statements and under the caption "Business--Risk Factors" in
this Form 10-K. In assessing forward-looking statements contained herein,
readers are urged to carefully read those statements.
    

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<PAGE>




                                     PART I

ITEM 1.           Business

General Overview

                  National Lodging Corp., a Delaware corporation formerly known
as National Gaming Corp. (the "Company"), is a hotel and motel owner, operator
and developer. The Company concentrates on the limited-service segment of the
lodging industry.

                  The Company was formed in September 1994 as a wholly owned
subsidiary of HFS Incorporated, a Delaware corporation ("HFS"), for the purpose
of acquiring the assets of, and assuming the liabilities associated with, HFS's
casino development business. In November 1994, the Company became an independent
public company when HFS distributed all of the outstanding shares of the
Company's common stock, par value $.01 per share (the "Common Stock"), to the
stockholders of HFS (the "Distribution"). From November 1994 until the third
quarter of 1995, the Company engaged in the acquisition, development, operation
and ownership of casino gaming facilities.

                  During the third quarter of 1995, the Company's Board of
Directors decided to explore alternatives to enhance stockholder value such as
merger or acquisition transactions and/or investments either in the gaming or
non-gaming businesses. On November 9, 1995, the Company announced a decision by
its Board of Directors to curtail future gaming investments and focus on
investments and acquisitions in nongaming industries. In December 1995, the
Company's Board of Directors decided that the Company should pursue a new
strategic direction with a focus on becoming a hotel and motel owner and
operator.

                  In furtherance of the Company's new strategic direction, on
January 23, 1996, the Company acquired all of the outstanding shares of common
stock of Forte Hotels, Inc. ("Forte Hotels"), the principal assets of which
consisted of Travelodge hotels and motels in the United States, and appointed a
new management team with substantial experience in the lodging and hospitality
industry.

                  The Company owns, operates or has an interest in approximately
8,000 Travelodge hotel and motel rooms throughout the United States, which
represent ownership in 17 properties (approximately 2,700 rooms) and joint
venture interests in 97 additional properties (approximately 5,300 rooms).
Travelodge is a leading economy-segment lodging brand targeted at the
value-conscious leisure and business traveler.

   
                  Although the Company's properties extend across the United
States, a large number of its properties and rooms are located in the states of
California, Washington, Oregon, Nevada, Arizona and Florida. Travelodge
properties are generally located near major traffic arteries or destination
areas.

                  In connection with the Company's new strategic direction, the
Company has agreed to sell 4 million newly-issued shares of Common Stock (the
"Proposed Chartwell/FSNL Investment") for an aggregate purchase price of $57
million, or $14.25 per share, to Chartwell Leisure Associates L.P. II, a
partnership consisting primarily of members of the Fisher family and a trust for
the benefit of Gordon Getty and members of his family ("Chartwell"), and FSNL
LLC, a limited liability company owned principally by a trust for the benefit of
Charles deGunzburg ("FSNL"). Chartwell currently owns approximately 16.6% of the
outstanding Common Stock. If the Proposed Chartwell/FSNL Investment is
consummated, Chartwell and FSNL will own approximately 52% of the outstanding
Common Stock. Closing of the Proposed Chartwell/FSNL Investment is subject to
approval of the Company's stockholders, among other conditions.
    

                  Although the Company intends to focus primarily on pursuing
investments in the lodging industry, it continues to hold several investments in
the gaming industry (see "Business--Gaming Business Strategy"). The Company does
not intend to make any further investments in the gaming industry.

                  The Company maintains its executive offices at 605 Third
Avenue, 23rd Floor, New York, New York 10158, telephone (212) 692-1400.
References herein to the Company include both National Lodging Corp. and its
subsidiaries. References in this annual report to "hotels" include both hotels
and motels.

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                                        1

<PAGE>




Lodging Business

The Company's Strategy

   
                  The Company's strategy is to become a significant presence in
the limited-service segment of the lodging industry by offering convenient
locations and a superior lodging experience at attractive room rates.
Limited-service hotels generally do not provide management-intensive facilities
and services, such as in-house restaurants or cocktail lounges, banquet centers,
conference rooms, room service and recreational facilities. The Company believes
that the limited-service format of the economy segment of the lodging industry,
requiring limited on-site management expense, will allow the Company to offer
the greatest value to its customers. The Company also believes that
limited-service properties offer the potential for attractive growth rates and
are the segment of the lodging industry least vulnerable to economic downturns,
because room rates are at the low-end of the lodging scale.

                  The Company intends to initiate a corporate growth strategy
that consists of three parts: capital improvements, acquisitions and
development.

o                 Capital Improvements - The Company intends to launch a capital
                  improvement program to increase room and occupancy rates at
                  the Company's portfolio of hotels. The capital improvement
                  program will help ensure that all the Company's properties are
                  competitive in the marketplace. As part of this program, the
                  Company expects to upgrade the interior and exterior of all
                  properties that do not meet corporate standards. For 1996, the
                  Company has budgeted approximately $10 million for its capital
                  improvements program. If the Company's proposed Canadian
                  acquisition is consummated, the Company expects to increase
                  its budget for capital improvements to those properties, but
                  has not yet determined the amount of such increase or any
                  other amounts to be budgeted for capital improvements in
                  future years. See "Business--Lodging Business--Proposed
                  Canadian Acquisition."

o                 Acquisitions - The Company intends to acquire additional
                  limited-service properties domestically and internationally.
                  The Company will seek to acquire hotel properties that are
                  well located. Ability to generate cash flow will be the most
                  important criterion for evaluating potential acquisitions. The
                  Company will actively pursue opportunities in the hospitality
                  industry that meet these criteria, and would consider
                  acquiring properties operating under most limited-service
                  franchise brands.

                  In March 1996, the Company took a first step in implementing
                  this part of its corporate strategy when it reached an
                  agreement in principle to acquire 20 Travelodge hotels and a
                  one-half interest in an additional Travelodge hotel, all of
                  which are located in Canada. This acquisition is intended to
                  give the Company a toehold in Canada and to position the
                  Company to take advantage of future development opportunities
                  in the Canadian marketplace. After closing, the Company will
                  own or operate approximately 11,400 rooms and 135 properties
                  throughout the United States and Canada. See
                  "Business--Lodging Business--Proposed Canadian Acquisition."
    

o                 Development - The Company intends to develop new hotel
                  properties in appropriate markets. The Company will seek
                  development opportunities throughout North America in healthy
                  hotel markets with high overall occupancy rates. These
                  locations may be in city centers, near airports or major
                  traffic arteries.

The Company's ability to implement its strategy is subject to a number of 
uncertainties.  See "Business--Risk Factors."

Travelodge Acquisition

   
                  On January 23, 1996, the Company completed the acquisition
(the "Travelodge Acquisition") of all of the outstanding shares of Common Stock
of Forte Hotels from Forte USA, Inc. for approximately $98 million, net of
working capital adjustments and including expenses. The principal assets of
Forte Hotels
    

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<PAGE>



   
consisted of fee and leasehold interests in 18 hotel properties (one of which
was subsequently disposed of) and joint venture interests in 97 additional hotel
properties (the "Acquired Forte Properties"). Substantially all of the Acquired
Forte Properties operate under the names "Travelodge" and "Thriftlodge" pursuant
to franchise agreements acquired by HFS or entered into with HFS in connection
with the Travelodge Acquisition. See "Business--Lodging Business--Franchise
Agreements." In connection with the Travelodge Acquisition, the Company also
acquired a 20,000 square foot retail arcade that adjoins the Company's
Travelodge Hotel located at Fisherman's Wharf, San Francisco, Forte Hotels'
corporate headquarters in El Cajon, California, and a 50% profits interest in
the hotel management operations of Royco Hotels and Resorts, Ltd., a hotel
management company based in Calgary, Canada which manages Canadian hotel
properties. In a related transaction prior to consummation of the Travelodge
Acquisition, HFS and Motels of America, Inc. acquired directly from Forte Hotels
the Travelodge franchise system and 19 hotel properties, respectively, for an
aggregate purchase price of $71.6 million.
    

Hotel Properties

   
                  The Company owns fee and leasehold interests in 17 hotel
properties (totalling approximately 2,700 rooms) and joint venture interests in
97 additional hotel properties (totalling approximately 5,300 rooms). Where the
properties are operated as a joint venture or partnership, the Company is, in
most instances, the 50% general partner. The Company's hotels operate in the
economy segment of the lodging industry and are located in 26 states and two
Canadian provinces, with a particular concentration in the states of California,
Washington, Oregon, Nevada, Arizona and Florida. The states in which those
hotels are located, nature of the Company's ownership interest in those hotels
and the number of rooms in each state are set forth in the following table:
    



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<PAGE>





<TABLE>
<CAPTION>

                                                 THE COMPANY'S HOTEL PROPERTIES
 
                             Number of              Number                                    Number of                Number
Location                     Properties             of Rooms      Location                    Properties               of Rooms
- --------                     ----------             --------      ---------                   ----------               --------
<S>                          <C>                    <C>           <C>                         <C>                      <C>

United States
Alabama                                                           Montana
   Wholly Owned                 -0-                         -        Wholly Owned                 -0-                         -
   Joint Venture                 1                         60        Joint Venture                 2                         98
Arizona                                                           Nebraska
   Wholly Owned                 -0-                         -        Wholly Owned                 -0-                         -
   Joint Venture                 4                        177        Joint Venture                 1                         61
California                                                        Nevada
   Wholly Owned                  7                        661        Wholly Owned                  1                        128
   Joint Venture                 43                     2,122        Joint Venture                 4                        315
Colorado                                                          New Jersey
   Wholly Owned                 -0-                         -        Wholly Owned                  1                        229
   Joint Venture                 1                         39        Joint Venture                -0-                         -
Florida                                                           New Mexico
   Wholly Owned                  2                        383        Wholly Owned                 -0-                         -
   Joint Venture                 4                        174        Joint Venture                 1                         48
Georgia                                                           New York
   Wholly Owned                 -0-                         -        Wholly Owned                  1                        476
   Joint Venture                 2                        151        Joint Venture                 1                         46
Idaho                                                             Ohio
   Wholly Owned                 -0-                         -        Wholly Owned                 -0-                         -
   Joint Venture                 1                         48        Joint Venture                 3                        173
Illinois                                                          Oregon
   Wholly Owned                 -0-                         -        Wholly Owned                  1                        207
   Joint Venture                 2                        163        Joint Venture                 2                        117
Indiana                                                           Pennsylvania
   Wholly Owned                 -0-                         -        Wholly Owned                 -0-                         -
   Joint Venture                 1                         37        Joint Venture                 2                        109
Iowa                                                              Texas
   Wholly Owned                 -0-                         -        Wholly Owned                  1                        228
   Joint Venture                 1                         47        Joint Venture                 2                        183
Kansas                                                            Utah
   Wholly Owned                 -0-                         -        Wholly Owned                 -0-                         -
   Joint Venture                 1                         68        Joint Venture                 3                        199
Kentucky                                                          Washington
   Wholly Owned                 -0-                         -        Wholly Owned                  1                         59
   Joint Venture                 1                         96        Joint Venture                 9                        478
Louisiana
   Wholly Owned                  1                         70     Canada
                                                                  ------
   Joint Venture                 1                         61     Ontario
Massachusetts                                                        Wholly Owned                  1                        236
   Wholly Owned                 -0-                         -        Joint Venture                -0-                         -
   Joint Venture                 2                        110     British Columbia
                                                                     Wholly Owned                 -0-                         -
                                                                     Joint Venture                 2                        110
</TABLE>


                  All but six of the Company's hotels operate under the
"Travelodge" or "Thriftlodge" brand names. The Company's hotels operated under
the Travelodge brand name are generally of higher quality and provide a higher
level of service than the Company's hotels operated under the Thriftlodge brand
name. The Travelodge branded properties generally contain between 50 and 150
rooms and provide laundry services,

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<PAGE>



complimentary newspapers, cable television with a premium movie channel, and
in-room coffee service. The price per room for the Travelodge branded properties
generally ranges from $40 to $60 per night. The Thriftlodge branded properties
generally contain up to 75 rooms and provide fewer services than the Travelodge
branded properties. The price per room for the Thriftlodge branded properties
generally ranges from $25 to $45 per night. The six hotels which are not
operated as Travelodges or Thriftlodges are not operated as part of any lodging
chain. References in this annual report to "Travelodge" properties include both
Travelodge and Thriftlodge unless the context otherwise requires.

   
                  The Company's hotels are designed to attract the economy
conscious business and leisure traveler seeking room quality and hotel locations
that are generally comparable to those of mid-price hotels, but at lower average
room rates. The Travelodge and Thriftlodge branded properties generally do not
provide full service management-intensive facilities and services, such as
in-house restaurants or cocktail lounges, banquet centers, conference rooms,
room service, recreational facilities or other services and facilities that the
Company believes its targeted customers do not typically value. By omitting
these facilities and services, the Company believes that its Travelodge and
Thriftlodge properties are able to deliver a product that addresses both its
customers' needs and price expectations.

                  Approximately 86% of the Company's hotels are located on
property covered by ground leases with unaffiliated third parties. All of these
leases are net leases. Generally, the leases have fixed base rents of between
$300 and $1,000 per month. In addition, the Company or the joint venture, as the
case may be, is obligated to pay as rent a percentage, typically 7 1/2%, of its
gross receipts that are in excess of an annual threshold amount, typically
between $48,000 and $150,000. Gross receipts are typically defined as total
revenue received by the joint venture, excluding sales from vending machines,
newspapers, soda and telephone calls.

                  The ground leases have varying expiration dates, but most are
scheduled to expire between 1998 and 2015. Upon termination of a ground lease,
the hotel located on the leased property will become the property of the lessor.
The Company intends to attempt to negotiate renewals of the ground leases where
it considers it to be advantageous to do so, but there can be no assurance that
the Company will be able to do so.
    

Joint Venture Agreements

                  Ninety-seven of the Company's hotels are operated as joint
ventures. The Company's percentage interests in these joint ventures vary, but
in most the Company holds a 50% interest and shares in half of the profits and
losses of the joint venture.

   
                  Generally, the day-to-day business decisions of these joint
ventures are made by the Company's partner, while the significant business
decisions that fall outside the scope of day-to-day decisions are made by the
Company, either alone or with the consent of the Company's joint venture
partner. For approximately one-third of these hotel properties, the Company acts
as the day-to-day business manager of the property. In addition to profits and
losses under the joint venture, the day-to-day managerial partner typically
receives a distribution of partnership profits consisting of 10% of the gross
room revenues received from the operation of the hotel. The Company receives the
additional 10% of the gross room revenues for the properties for which it serves
as the managerial partner.
    

Franchise Agreements

                  The Company's Travelodge and Thriftlodge properties operate
under franchise agreements with HFS as the owner of the Travelodge and
Thriftlodge franchise systems. HFS acquired those franchise systems in
connection with the Travelodge Acquisition.

                  The franchise agreements covering the Travelodge and
Thriftlodge properties which are wholly-owned by the Company require monthly
payment by the Company of a royalty fee of 4% of the property's gross room
revenues plus a marketing fee also currently set at 4% of gross room revenues.
The marketing fee may be changed from time to time by the franchisor. These
franchise agreements have scheduled terms of twenty years but may be terminated
by the Company prior to their scheduled expiration upon the payment of
liquidated damages by the Company.

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                  In connection with the Travelodge Acquisition, the Company
entered into a franchise agreement (the "Omnibus Franchise Agreement") with an
affiliate of HFS as franchisor covering the Company's Travelodge and Thriftlodge
properties which are owned by joint ventures. Under the Omnibus Franchise
Agreement, the Company is required to pay to HFS annual franchise fees equal to
4% of gross room revenues for the hotel properties acquired by the Company plus
4% of gross room revenues for national marketing and reservation services
provided by HFS. In addition, the Company is required to pay HFS a license fee
equal to 4% of gross room revenues multiplied by the Company's percentage
interest in each of the hotel properties owned by joint ventures in which the
Company acquired an interest, plus an additional amount, generally equal to 4.5%
of gross room revenues, for national marketing and reservation services provided
by HFS. The Omnibus Franchise Agreement has a term of twenty years but may be
terminated by the Company with respect to any particular joint venture prior to
the scheduled expiration. Also, if any particular joint venture is terminated,
then the franchisor may terminate the Omnibus Franchise Agreement with respect
to that particular property. In either case, the Company is required to pay
liquidated damages upon the early termination of the Omnibus Franchise Agreement
with respect to any individual joint venture.

                  The amount of liquidated damages payable by the Company upon
termination of the franchise agreements covering any property equals five times
the amount of the royalty fees payable in respect of that property during the
twelve months most recently preceding the termination if the termination occurs
before the end of the fourth year of the franchise agreement. If the termination
occurs thereafter, the amount of liquidated damages scales down annually,
reaching two times the amount of the royalty fees payable in respect of that
property during the twelve months most recently preceding the termination if the
termination occurs after the sixth year of the franchise agreement.
    

                  The Company's franchise agreements authorize the operation of
a hotel under the "Travelodge" or "Thriftlodge" name at the specific location
where the hotel is located and require that the hotel be operated in accordance
with standards specified by the franchisor. The franchise agreements grant the
franchisor a right of first refusal, exercisable for thirty days, if the Company
proposes to sell, lease or sublease the franchised hotel and require the
franchisor's consent to the transfer of the franchised hotel or of any interest
in the subsidiary or joint venture which is a direct party to the franchise
agreement.

                  The franchise agreements are subject to cancellation in the
event of a default, including the failure to operate the hotel in accordance
with the quality standards of the franchisor.

                  The loss of a license for a hotel would, in most instances,
result in the renaming of the hotel, which might cause a loss of established
customer good will and reduced revenues. The Company believes that the loss of a
license for any individual hotel would not have a material adverse effect on the
Company's financial condition and results of operations. The Company believes it
will be able to renew its current licenses or obtain replacements of a
comparable quality.

   
                  The Company's franchise agreements do not contain any
territorial protection and, therefore, do not prohibit the franchisor from
franchising competing properties in close proximity to the Company's property.

Fisherman's Wharf Retail Arcade

                  In connection with the Travelodge Acquisition, the Company
also acquired a retail arcade that adjoins its 250 room Travelodge hotel located
at Fisherman's Wharf, San Francisco. The retail arcade overlooks the San
Francisco Bay and consists of approximately 20,000 square feet of ground floor
frontage located on San Francisco's Jefferson Street. Currently, the arcade is
fully-leased to 17 shops and restaurants. The Company occupies the premises
under a 74-year master land lease expiring in February 2035 with an annual rent
fixed until termination at $80,000. In 1995, the arcade generated approximately
$2.0 million in net operating income.
    

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<PAGE>



Management Staff

                  Each of the Company's hotels has its own on-site management
and staff. On-site employees are supervised by regional managers and the
Company's senior management. The Company also has centralized corporate
departments which support the on-site management in the following areas:
accounting and finance, payroll, data processing and management information
services, interior design, purchasing, hotel operations, human resources,
recruiting and training, legal, advertising, insurance and telecommunications.

Marketing

                  The Company does not market its hotel properties on a
company-wide level. Instead, it relies on HFS as the franchisor of the
Travelodge chain to market the Travelodge and Thriftlodge names. The Company's
hotels generally advertise in their local markets and some of the Company's
hotels employ small marketing staffs to carry on their local advertising and
marketing programs.

Competition

                  The Company's hotels compete with numerous other hotels,
motels and other lodging establishments in their market areas. Chains such as
Days Inn and Howard Johnson, both of which are franchised by HFS, Comfort Inns,
Fairfield Inns, Hampton Inns, La Quinta and Red Roof Inns are direct competitors
of the Company's hotels. There is no single competitor or group of competitors
of the Company's hotels that is dominant in the lodging industry. Competitive
factors in the industry include reasonableness of room rates, quality of
accommodations, degree of service and convenience of locations.

   
                  Demographic, economic and geographic changes in any of the
Company's markets could impact the convenience or desirability of the sites of
certain hotels in that market, which would adversely affect the operations of
the Company's hotels in that market. There can be no assurance that new or
existing competitors will not significantly lower rates or offer greater
convenience, services or amenities or significantly expand or improve facilities
in a market in which the Company's hotels compete, thereby adversely affecting
the Company's operations. Competition may generally reduce the number of
suitable hotel acquisition opportunities offered to the Company and increase the
bargaining power of property owners seeking to sell, which could adversely
affect the Company's financial performance.
    

Seasonality

                  Room occupancy rates at the Company's hotels are affected by
normally recurring seasonal patterns and, in most locations, are higher in the
late spring through early fall months than during the balance of the year, with
the lowest occupancy rates occurring in the first quarter of the year.

Regulation

   
                  Some of the Company's hotels are subject to state and local
regulations with respect to the sale of alcoholic beverages, and the Company
must maintain various alcoholic beverage licenses and permits. All of those
licenses and permits must be periodically renewed and may be revoked or
suspended for cause at any time. Loss of some of those licenses could have a
material adverse effect on the Company's financial condition and results of
operations. The Company is not aware of any reason why it should not be in a
position to maintain these licenses and permits. The Company is also subject to
dramshop statutes or equivalent common law in some jurisdictions which give an
injured person the right to recover damages from any establishment which
wrongfully served alcoholic beverages to an intoxicated person who causes the
injury. The Company believes that its insurance coverage with respect to any
such liquor liability is adequate. The Company has hotels that are subject to
alcohol sales regulations and/or dramshop statutes in Canada and the following
states:
California, Florida, New Jersey, New York, Pennsylvania and Texas.
    

Environmental Matters

                  The Company's hotels are subject to environmental regulations
under Federal, state and local laws. Certain of these laws may require a current
or previous owner or operator of real estate to clean up

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<PAGE>



   
designated hazardous or toxic substances affecting the property. In addition,
the owner or operator may be held liable to a government entity or to third
parties for damages or costs incurred by such parties in connection with such
contamination. Based upon a review of the environmental assessments of the
Acquired Forte Properties that were prepared in connection with the Travelodge
Acquisition, the Company does not believe that it is subject to any material
environmental liability with respect to its lodging business.
    

Proposed Canadian Acquisition

   
                  On March 12, 1996, the Company reached an agreement in
principle with Capital Properties Limited Partnership ("CPLP") to acquire from
CPLP 20 hotels and a one-half interest in an additional hotel, all of which are
located throughout Canada. These hotels operate under the Travelodge brand. The
Company intends to accomplish this acquisition by paying approximately C$92
million in order to purchase substantially all of CPLP's existing bank debt and
to pay certain specified closing costs (including real estate taxes) and by
assuming the liability for identified trade payables and property specific bank
debt, aggregating approximately another C$12 million. In addition, the Company
will be obligated to make certain contingent payments to CPLP's constituent
partners following a preferred return to the Company. Of the C$104 million
payment, approximately half is expected to be financed with proceeds from the
proposed stock sale to Chartwell and FSNL and half by bank borrowings. The
closing of the transaction is subject to financing, formal approval by the
Company's Board of Directors and approval by the limited partners of CPLP.
    

Gaming Business Strategy

                  The Company intends to focus primarily on pursuing investments
in the lodging industry. However, because the Company was previously engaged in
the business of acquiring investments in the gaming industry, the Company
continues to hold several investments in various casino gaming facilities. The
Company does not intend to make any further investments in the gaming industry.

Summary of Casino Development Ventures

   
                  Boomtown Biloxi. In 1994, the Company acquired a barge and
certain improvements comprising a casino building located in Biloxi, Mississippi
for approximately $8.5 million, and leased the barge and improvements back to
Boomtown, Inc. ("Boomtown"), a Reno, Nevada-based operator of four casinos, for
a term of 25 years. Lease payments are approximately 20% of the Biloxi
facility's EBITDA (defined generally as earnings from the operations after all
expenses, other than income taxes, interest expense, lease costs, other than
rent payable under that lease, or depreciation and amortization) net of
marketing fees paid to HFS approximating four percent of the Biloxi facility's
net gaming revenue.

                  On November 6, 1995, the Company and HFS entered into
agreements with Boomtown to reduce the Company's profit participation in the
Biloxi facility by 25% and to reduce the marketing fee payable to HFS for
services provided to the facility by 25%. In return, the Company and HFS
received $1.8 million and $0.6 million, respectively, reducing the Company's
investment by $1.8 million. Furthermore, the Company recorded a $2.4 million
expense in the third quarter of 1995, representing a write-down of its Boomtown
investment to its estimated net realizable value. The Company's remaining
investment approximates $4.8 million at December 31, 1995.
    

                  The Boomtown Biloxi casino is located on a site on the back
bay of Biloxi. The site is four- tenths of a mile from Interstate I-110, which
connects the Biloxi resort area to Interstate I-10, and one mile from the Gulf
beach area. The casino floats on a 400 foot barge which extends into the back
bay. The casino commenced operations on July 18, 1994 and has approximately
1,000 slot machines and 50 table games.

   
                  Terminated Boomtown Merger. In April 1995, the Company and
Boomtown terminated a proposed agreement and plan of merger and reorganization
pursuant to which the Company would have been merged into Boomtown, with
stockholders of the Company receiving shares of Boomtown common stock. For the
six months ended June 30, 1995, the Company expensed approximately $1.4 million
of professional fees and other expenses incurred, primarily in the first quarter
of 1995, in connection with the proposed merger.
    


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<PAGE>



                  Rainbow. In 1993, the Company entered into an agreement with
Rainbow Casino Corporation ("Rainbow") to finance a dockside casino located in
Vicksburg, Mississippi. Pursuant to that agreement, the Company has loaned
approximately $10 million to Rainbow for the licensing, construction and
start-up costs associated with the casino, which commenced operation in July,
1994. The loan bears interest at the stated annual interest rate of 7.5% and is
to be repaid in monthly installments of approximately $153,000 including
interest through August 2001. The loan is secured by a first mortgage on
existing real and tangible personal property excluding certain equipment. At the
inception of the loan, the Company imputed a 10% interest rate on the loan and
recorded a $0.8 million loan discount.

                  In March 1995, the Company agreed to loan up to an additional
$2.0 million to the partnership that owns the Rainbow Casino in Vicksburg,
Mississippi. The proceeds of that loan, together with additional capital to be
contributed by the general partner of such partnership, are being used to
finance certain improvements to the casino project, the completion of related
facilities and to provide additional working capital. The loan is unsecured,
bears interest at 10% per annum and will be repaid in equal monthly installments
of principal and interest over its seven year term. The outstanding balance for
this additional loan at December 31, 1995 was approximately $1.2 million.

   
                  The Rainbow casino contains approximately 574 slot machines
and 28 gaming tables. On an 80 acre tract along the Mississippi River adjacent
to the casino, a Days Inn hotel is operated by Amerihost Properties, Inc. and a
family entertainment center, developed and operated by a wholly owned subsidiary
of Six Flags Theme Parks, Inc., opened for business on May 1, 1995.

                  As an inducement to Chartwell Leisure Associates L.P.
("Chartwell Leisure"), an affiliate of Chartwell, to provide the financing for
the family entertainment center, the Company has agreed to pay Chartwell Leisure
a percentage of the principal and interest payments collected on the initial $10
million loan to Rainbow, with Chartwell Leisure's share ranging from 14% to 27%
of such payouts adjusted annually in accordance with a schedule to the
agreement. HFS has agreed to share marketing fees from Rainbow with Chartwell
Leisure based on the same scheduled percentages. Chartwell Leisure has agreed to
share with HFS 50% of the net cash flow payable to Chartwell Leisure in respect
of the family entertainment center, and HFS has agreed to share such amounts pro
rata with the Company based on the relative amounts paid by HFS and the Company,
respectively, to Chartwell Leisure each year.

                  Pittsburgh and Erie, Pennsylvania/URA Loan. The Company has
agreed in principle with its partners to dissolve its joint ventures which were
established to develop casino gaming facilities in Pittsburgh and Erie,
Pennsylvania. Upon dissolution, the Company's contingent obligation to acquire
land and to develop and finance the construction of the respective gaming
facilities will be terminated. In connection with the joint venture to develop a
gaming facility in Pittsburgh, the Company loaned the Urban Redevelopment
Authority of Pittsburgh, Pennsylvania ("URA") approximately $9.5 million in
September 1994. In September 1995, the URA exercised its option to extend the
maturity of its loan due the Company to September 30, 1996. As a result of the
Pennsylvania legislature's failure to propose a voter referendum to approve
casino gaming facilities in that state, the Company notified the URA that it
will not exercise its option to purchase a portion of the site which is the
collateral for that loan, thus requiring the URA to pay interest currently at 4%
per annum on a monthly basis. Accordingly, the Company expects to seek
collection of the loan in September 1996. The outstanding balance of the URA
loan at December 31, 1995 was approximately $9.5 million. In January 1996, the
Company received $3.8 million of principal and accrued interest on the loan.

                  Prescott, Arizona and St. Joseph, Missouri. In December 1994,
the Company acquired a 19.9% limited partnership interest in Prescott Convention
Center Limited Partnership ("Prescott") for $4.5 million (subject to increase to
a maximum of $7.5 million if the net cash flow from Prescott's first year of
full gaming operations, which began on October 1, 1995, exceeds certain levels
and an affiliate of the general partner of Prescott grants the Company an option
to purchase a 13.5% equity interest in a riverboat casino located in St. Joseph,
Missouri for approximately $6 million). Prescott owns and operates a hotel and
convention center in Prescott, Arizona, which includes a casino facility that is
leased to and operated by a Native American tribe in exchange for 20% of the
casino's operating profit. The Prescott casino contains approximately 300 slot
machines. The St. Joseph riverboat casino contains approximately 350 video poker
machines and 24 gaming tables. If the St. Joseph option is not granted to the
Company before any increase in the purchase price of its limited partnership
interest in Prescott becomes due, then the potential increase in the
    

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<PAGE>



   
purchase price for such interest would no longer be effective, regardless of the
first year's net cash flow. With respect to Prescott, an affiliate of HFS was
paid a pre-opening marketing services fee of $500,000 and will be paid an annual
marketing services fee of $500,000. Distributions in respect of the Company's
19.9% limited partnership interest in Prescott will be reduced by the $500,000
in annual marketing services fees paid to the affiliate of HFS.

                  Odyssey. Pursuant to agreements entered into in 1993, the
Company acquired non-voting preferred stock convertible into common stock
representing a 20% equity interest in Odyssey Gaming Corporation ("Odyssey") for
approximately $3.8 million plus an additional $1.5 million contingent upon the
occurrence of certain events which have not yet occurred and are, in the opinion
of management of the Company, unlikely to occur. The Company has also committed,
under certain circumstances, to make secured project financing loans of up to an
aggregate of $10 million to be used in connection with the development of Native
American casino gaming facilities to be managed by Odyssey. Such circumstances
are, in the opinion of management of the Company, unlikely to occur and include,
among others, execution of agreements between Odyssey and certain Native
American tribes relating to the development and management of certain gaming
facilities and the approval of such agreements by the Chairman of the National
Indian Gaming Commission, entering into a fixed price and bonded contract for
the construction of such gaming facilities, receipt of all other applicable
regulatory approvals and receipt of an opinion of counsel that Class II gaming
(e.g., bingo, pulltabs, punchboards and card games that are not played against
the house) can lawfully be conducted at such gaming facilities under the
management of Odyssey. Pursuant to a marketing services agreement retained by
HFS as part of its casino marketing business, HFS is entitled to receive a
marketing fee equal to 50% of any management fees to be paid to Odyssey under
its casino management contracts for projects financed by the Company. Presently,
Odyssey's principal assets are a five percent profits interest in a proposed
casino to be developed by the Wampanoag Tribe of Gay Head in New Bedford,
Massachusetts and a loan receivable from the Swinomish Indian Tribal Community
of La Conner, Washington.

                  Termination of Other Gaming Projects in 1995. In June 1995,
the State of Indiana determined not to award a gaming license to Century
Casinos, Inc. ("Century") for its proposed casino gaming operation in
Switzerland County, Indiana. Based on this decision, the Company determined that
its investment in Century common stock and a proposed joint venture with Century
were permanently impaired and recorded a $1.0 million loss in the second quarter
of 1995.
    

                  On July 18, 1995, the Illinois Gaming Board determined not to
approve the Company's proposed acquisition of Par-A-Dice Gaming Corporation
("Par-A-Dice"), an operator of a riverboat casino in East Peoria, Illinois. The
Company expensed $1.9 million of costs associated with the proposed Par-A-Dice
acquisition, including professional fees and deferred loan costs, primarily in
the second quarter of 1995.

Competition

                  The casino gaming industry is highly competitive and includes
traditional Las Vegas and Atlantic City style land-based casinos, riverboat and
dockside casinos, Native American casinos, state sponsored video lottery
terminals, parimutuel betting (horse racing, harness racing, dog racing and
jai-alai), sports bookmaking and card rooms. Although the Company's gaming
investments include primarily riverboat, dockside and Native American gaming,
the Company's gaming ventures must compete with all forms of gaming (including
any new forms of gaming that may be legalized in the future) and with all other
forms of non-gaming related entertainment.

Gaming Regulation

   
                  The Company is subject to regulation by each state in which it
holds investments which conduct activities in the gaming business, and to a
certain extent under Federal law. In jurisdictions where gaming has recently
been legalized, gaming cannot begin until a licensing and regulatory framework
is promulgated and regulatory commissions are appointed, staffed and funded. The
regulatory framework adopted by any jurisdiction may impose restrictions or
costs that would materially impact the profitability of gaming operations in
that jurisdiction. Generally, the Company is required to obtain a gaming license
for each location where it will conduct gaming operations, and each of the
Company's officers, directors, managers and principal
    

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<PAGE>



shareholders are subject to strict scrutiny and approval by the gaming
commission or other regulatory body of each state or jurisdiction in which the
Company may conduct gaming operations.

                  Certain gaming authorities may investigate and make findings
with respect to the suitability or qualifications of securityholders of the
Company to continue to hold interests in the Company in light of such
authorities' policies with respect to the regulation of gaming businesses.
Because of the imposition of such qualifications by the various regulatory
authorities, the Company's Certificate of Incorporation contains provisions that
(i) make the right of securityholders who are required to be qualified by
relevant gaming authorities to vote capital stock held by them dependent upon
their prompt qualification by the relevant gaming authorities (or the prompt
receipt of a waiver of such qualification), (ii) prevent securityholders found
to be disqualified under applicable gaming laws and regulations from voting any
shares of capital stock beneficially owned by them, (iii) provide for the
divestiture, at the Company's option, of any publicly traded securities held by
any person required to be qualified who has not been qualified (or obtained a
waiver of such qualification) or any person found to be disqualified and (iv)
provide for the redemption, at the Company's option, of any securities of the
Company held by any person found to be disqualified. The purpose of these
provisions is to provide a procedure permitting the Company to either (x)
require any person required to be qualified who has not been qualified (or
obtained a waiver of such qualification) or any person found unsuitable or
disqualified to hold securities of the Company to dispose of such securities or
(y) to redeem securities of the Company held by any such person.

                  Because the Company now holds only a limited number of gaming
related assets, and the Company has decided to pursue investments in the lodging
industry rather than the gaming industry, the Company believes that the
imposition of gaming regulations by the various regulatory authorities will have
less impact on the Company's operations than such regulations did in the past
when the Company invested primarily in the gaming industry.

Environmental Matters

                  The properties owned in connection with the Company's gaming
business are subject to environmental regulations under Federal, state and local
laws. Certain of these laws may require a current or previous owner or operator
of real estate to clean up designated hazardous or toxic substances affecting
the property. In addition, the owner or operator may be held liable to a
government entity or to third parties for damages or costs incurred by such
third parties in connection with such contamination. The Company does not
believe that it is subject to any material environmental liability.

Employees

   
                  The Company employed approximately 1,075 persons on April 1,
1996. Management considers its employee relations to be satisfactory.
    

Proposed Issuance to Chartwell and FSNL

   
                  In connection with the Company's new strategic direction, in
December 1995, the Company sold 904,930 newly issued shares of Common Stock to
Chartwell, resulting in Chartwell owning approximately 16.6% of the Company's
outstanding Common Stock. In February 1996, the Company agreed to sell to
Chartwell and FSNL an additional 4 million newly-issued shares of Common Stock
for an aggregate purchase price of $57 million, or of $14.25 per share (the
"Proposed Chartwell/FSNL Investment").
    

                  The partners in Chartwell are primarily members of the Fisher
family and a trust for the benefit of Gordon P. Getty and members of his family.
Richard Fisher, the Company's chief executive officer and a director of the
Company, Martin L. Edelman, the Company's president and a director of the
Company, and Marc E. Leland, a director of the Company, are each beneficial
owners in Chartwell. The majority beneficial owner of FSNL is a trust for the
benefit of Charles deGunzburg and members of his family.

   
                  If the sale of the Proposed Chartwell/FSNL Investment is
consummated, Chartwell and FSNL will own approximately 52% of the outstanding
Common Stock. Consummation of the Proposed
    

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<PAGE>



   
Chartwell/FSNL Investment is subject, among other conditions, to stockholder
approval at the Company's annual meeting of stockholders scheduled for the
middle of 1996.
    

Risk Factors

Expansion Risks

                  The Company's strategy includes increasing the number of its
hotels through the acquisition of existing hotels and development of new hotels.

                  The Company's ability to expand depends on a number of
factors, including the selection and availability of suitable locations at
acceptable prices, the hiring and training of sufficiently skilled management
and personnel and the availability of financing. There can be no assurance that
financing, or desirable locations for acquisitions or new development, will be
available, or, if available, will be on terms acceptable to the Company.

                  Expansion by acquisition of hotels entails risks that
investments will fail to perform in accordance with expectations and that the
anticipated costs of renovation or conversion will prove inaccurate, as well as
general investment risks associated with any new real estate investment. In
connection with acquired properties, the Company will incur additional costs
relating to renovation and pre-opening activities and operating expenses, which
could adversely affect the Company's financial performance. Newly opened hotels
generally begin with lower occupancy and room rates and improve over time.

                  Expansion by development of hotels is subject to a number of
risks including site acquisition cost and availability, risks of construction
delay or cost overruns, risks that properties will not achieve anticipated
occupancy levels or sustain expected room rate levels and commencement risks
such as receipt of zoning, occupancy and other required governmental permits and
authorizations, which in each case could adversely affect the Company's
financial performance.

                  There can be no assurance that the Company's expansion plans
will be completed successfully. The Company's inability to successfully
implement its expansion plans would limit the Company's ability to grow its
revenue base.

Lodging Industry Risks

                  The lodging industry, in general, may be adversely affected by
such factors as changes in national and regional economic conditions
(particularly in geographic areas in which the Company has a high concentration
of hotels), changes in local market conditions, oversupply of hotel space or a
reduction in local demand for rooms and related services, competition in the
hotel industry, changes in interest rates, the availability of financing and
other factors relating to the operation of economy hotels.

                  Operating factors affecting the Company and the lodging
industry generally include (i) competition from other hotels, motels and
recreational properties, (ii) demographic changes, (iii) the recurring need for
renovations, refurbishment and improvements of hotels and increased expenses
related to inn security, (iv) restrictive changes in zoning and similar land use
laws and regulations, or in health, safety, disability and environmental laws,
rules and regulations, (v) changes in government regulations that influence or
determine wages, prices or construction costs, (vi) changes in the
characteristics of hotel locations, (vii) the inability to secure property and
liability insurance to fully protect against all losses or to obtain such
insurance at reasonable costs, (viii) changes in real estate tax rates and other
operating costs, (ix) changes or cancellations in local tourist, athletic or
cultural events, (x) changes in travel patterns which may be affected by
increases in transportation costs or gasoline prices, changes in airline
schedules and fares, strikes, weather patterns or relocation or construction of
highways, (xi) increases in operating expenses and litigation as a result of on-
premise assaults of guests by third parties, and (xii) changes in brand identity
and reputation. Unexpected or adverse changes in any of the foregoing factors
could have a material adverse effect on the Company's business, assets,
financial condition or results of operations.


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<PAGE>



                  Substantially all of the Company's hotels are operated under
the Travelodge or Thriftlodge brand names pursuant to franchise agreements with
HFS. The Company expects that substantially all of the hotels that it acquires
or develops in the future will be operated under hotel brands franchised by HFS
or other third parties. While the Company believes that franchise arrangements
offer the Company competitive advantages over non-franchised lodging properties,
the value of a brand name under which the Company's hotels operate and, as a
result, the Company's business as a whole, could be adversely affected by a
number of factors relating to the franchisor of that brand over which the
Company has no control. These risks include the general reputation of the brand
and the success of the franchisor's marketing efforts.

Cyclicality

                  The hotel industry is subject to periods of cyclical growth
and downturn. In the past, the hotel industry has experienced cyclical downturns
resulting from, among other things, over-building in the industry and sluggish
general economic conditions in the United States. There can be no assurance that
downturns or prolonged adverse conditions in the hotel industry, in real estate
or capital markets or in national or local economics will not have a material
adverse impact on the Company. In addition, the Company's ownership of real
property is substantial. Real estate values are sensitive to changes in local
market and economic conditions and to fluctuations in the economy as a whole. A
decrease in the value of the Company's real estate could have an adverse effect
on the Company's financial position.

Relationship with HFS

   
                  In addition to the Company's relationship with HFS as the
franchisor of the Travelodge and Thriftlodge brand names under which
substantially all of the Company's hotels operate, the Company's principal
credit facility is guaranteed by HFS. The amount and availability of that credit
facility could be adversely affected by adverse changes in the financial
condition of HFS. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Credit Facilities."
    

ITEM 2.           Properties

   
                  The executive offices of the Company are located at 605 Third
Avenue, New York, New York and are occupied pursuant to a lease (the "New York
Lease") entered into in March 1996 with an affiliate of Chartwell and an
unaffiliated third party, as landlords. Under the New York Lease, the Company
has leased approximately 18,700 square feet of space for a period of ten years.
The Company is obligated to pay approximately $542,000 per year for each of the
first five years, and approximately $600,000 per year for each of the last five
years, of the term of the New York Lease for the use of the office space.

                  The Company also leases office space located at 1973
Friendship Drive, El Cajon, California, a suburb of San Diego, pursuant to a
lease (the "El Cajon Lease") entered into in November 1991 with an unaffiliated
third party, as landlord. Prior to January 1996, the office space served as the
headquarters of Forte Hotels and as its reservation center. Under the El Cajon
Lease, the Company is obligated to pay approximately $327,000 per year over a
term of ten years for the use of the office space. In the seventh year of the
term of the El Cajon Lease, the Company has an option to purchase at fair market
value its landlord's interest, which is that of a sublessor. The Company
subleases approximately half of the office space to HFS, which continues to
operate the Travelodge reservation system from that space. Rental costs charged
to HFS for the space used by it are allocated based upon the percentage of space
occupied and the related overhead expenses associated with that percentage.

                  See Item 1 under the caption "Business--Lodging Business" for
a description of the Company's ownership in various hotel properties and retail
space.
    


ITEM 3.           Legal Proceedings

                  The Company is not party to any litigation which it believes
will have a material impact on the financial condition of the Company.


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<PAGE>




ITEM 4.           Submission of Matters to a Vote of Security Holders

                  No matters were submitted to a vote of security holders during
the fourth quarter of 1995.

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<PAGE>



                                     PART II

ITEM 5.           Market for Registrant's Common Equity and Related Stockholder
                  Matters

                  The Company's common stock, par value $.01 per share ("Common
Stock"), commenced trading on the Nasdaq National Market on November 14, 1994
under the symbol "NAGC" and, since January 1996, has traded under the symbol
"NALC". The following table sets forth the range of high and low sale prices per
share of Common Stock, as reported on the Nasdaq National Market for the period
November 14, 1994 through December 31, 1995.



Year 1994                                            High            Low

    Fourth Quarter (commencing November 14, 1994)....$191/8         $9 1/2

Year 1995

    First Quarter....................................$14 1/4        $8 1/4
    Second Quarter...................................$11            $8
    Third Quarter....................................$10 1/2        $71/8
    Fourth Quarter...................................$12 1/2        $8 1/2


   
                  On May 6, 1996, the last reported sale price per share of
Common Stock was $14.25. As of May 6, 1996, there were approximately 135 holders
of record of Common Stock.
    

                  The Company has never paid any dividends on the Common Stock.
The Company expects to retain its earnings for the development and expansion of
its business and the repayment of indebtedness and does not anticipate paying
dividends on the Common Stock in the foreseeable future. Any future dividend
policy will be determined by the Company's Board of Directors, and the payment
of any dividend in the future will be based upon conditions then existing,
including the Company's earnings, financial condition and capital requirements,
as well as such economic and other factors as the Board may deem relevant at the
time. The Company's credit facility with Chemical Bank and Bankers Trust Company
prohibits the payment of dividends on the Common Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Credit
Facilities".


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<PAGE>



ITEM 6.           Selected Financial Data

         The following is a summary of selected historical financial data for
the Company and its subsidiaries. The data for the years ended December 31, 1995
and 1994 and the period August 1, 1993 (inception) to December 31, 1993, have
been derived from, and should be read in conjunction with, the audited
consolidated financial statements of the Company included in Item 8 of this
Report. All amounts are in thousands, except per share amounts.

<TABLE>
<CAPTION>

                                                                                                         Period from
                                                                                                        August 1, 1993
                                                                                                         (Inception)
                                                            Year Ended            Year Ended                  to
                                                           December 31,          December 31,            December 31,
                                                               1995                  1994                    1993
<S>                                                        <C>                   <C>                    <C>                

OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------

Total revenue                                                     $4,012               $ 2,391                   $  128

Total expenses                                                    21,485                 5,495                      581

Loss before income tax provision (benefit)                       (17,473)               (3,104)                    (453)

Net loss                                                         (18,182)               (1,831)                    (267)

Net loss per share                                                 (3.57)                (0.37)                   (0.05)


BALANCE SHEET DATA
- ----------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents                                        $51,470              $ 44,233                     $ --

Investments                                                       16,700                20,092                    5,360

Loans receivable                                                   7,166                15,375                    6,518

Total assets                                                      87,074                98,895                   12,238

Stockholders' equity                                              86,522                96,979                   12,041
</TABLE>


There were no dividends declared during the periods presented above.

On November 22, 1994, HFS distributed to its stockholders one share of Common
Stock for every ten shares of HFS common stock held of record on November 14,
1994 (the record date for the Distribution). Prior to November 22, 1994, the
Company's operations were conducted by HFS and its subsidiaries.

The following presents the unaudited pro forma consolidated results of
operations for the year ended December 31, 1995 as if the Travelodge Acquisition
and related financing occurred on January 1, 1995:



                                                     (In Thousands Except
                                                      per Share Amounts)
                                                           (Unaudited)

   
         Revenues                                             $ 69,141
         Net Loss                                              (21,023)
         Net Loss per share                                      (4.12)
    


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The pro forma results are not necessarily indicative of the actual results of
operations that would have occurred had the transactions been consummated as
indicated nor are they intended to indicate results that may occur in the
future. See "Business--Lodging Business--Proposed Canadian Acquisition" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Lodging Acquisition."


ITEM 7.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operations


GENERAL OVERVIEW

                  The Company became an independent public entity on November
22, 1994, when HFS distributed all of its wholly-owned common stock of the
Company to HFS stockholders. The Company engaged in the development of
prospective casino gaming facilities until the third quarter of 1995, when the
Company announced a decision by its Board of Directors to curtail future gaming
investments and focus on investments and acquisitions in non-gaming industries.
In December 1995, the Company's Board of Directors decided that the Company
should pursue a new strategic direction with a focus on becoming a hotel and
motel owner and operator.

   
                  On January 23, 1996, the Company entered the lodging industry
with its acquisition of Forte Hotels, which owned or had significant joint
venture interests in 115 hotels, for approximately $98 million, net of work
capital adjustments and including expenses. The Company has agreed to sell to
Chartwell Leisure Associates L.P. II ("Chartwell") and FSNL LLC ("FSNL") a
majority interest in the Company.
    

RESULTS OF OPERATION - FINANCIAL DATA

Pro Forma

                  The pro forma financial data includes the operations of Forte
Hotels, Inc. ("Forte Hotels") as if the acquisition occurred on January 1, 1995,
giving effect to depreciation and amortization associated with acquired hotel
properties, financing costs associated with the acquisition and related income
tax effects. Pro forma results of operations also include revenues and expenses
associated with the Company's gaming business which do not reflect net savings
which may be achieved as a result of the curtailment of future gaming
operations. Further, the pro forma financial data does not include potential
additional cost savings or revenue enhancements that management believes may be
realized following the acquisition of Forte Hotels.

1995 Versus 1994

                  The Company's operations from August 1, 1993 (date of
inception) through November 1995 consisted of the pursuit of gaming development
opportunities. Accordingly, the Company's operating results for 1995 and 1994
consist of modest investment revenue. In 1995, the Company's total revenue of
$4.0 million consisted entirely of interest income compared to $2.4 million of
total revenue in 1994, which consisted of $1.4 million of interest income and a
$1.0 million gain on the sale of Capital Gaming International, Inc. ("Capital")
common stock.

   
                  Development expenses for the year ended December 31, 1995
totaling $15.5 million primarily consist of expenses associated with terminated
investments and transactions, compared to $2.4 million of development expenses
associated with the pursuit of equity and development investments in
unsuccessful gaming opportunities in 1994. In 1995, due to the failure of the
Pennsylvania legislature to adopt legislation contemplating a referendum on
authorization of gaming in the state, the Company agreed in principle with its
partners to dissolve its joint ventures to develop casino gaming facilities in
Pittsburgh and Erie, Pennsylvania. As a result, the Company recorded $6.7
million of losses in 1995, primarily in the third quarter, representing a
write-off of its Pittsburgh and Erie joint venture interests. In 1995, the
Company also recognized approximately $2.4 million of write-downs of its
investment in Boomtown, Inc.'s ("Boomtown") Biloxi, Mississippi casino to the
investment's estimated net realizable value. In the second quarter of 1995, the
Company recognized a $1.9 million expense for professional and loan commitment
fees associated with the termination of its proposed acquisition of all of the
outstanding common stock of Par-A-Dice Gaming Corporation ("Par-A-Dice")
following
    

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<PAGE>



   
the Illinois Gaming Board's determination not to approve the Company's
acquisition of Par-A-Dice. The Company also recorded a $1.0 million loss for the
permanent impairment of its investment in Century Casinos, Inc. ("Century")
common stock and investment in a proposed joint venture with Century following
the unfavorable decision of the State of Indiana in June 1995 towards Century's
proposed casino in Switzerland County, Indiana. The Company recognized
approximately $1.4 million of professional fee expenses, primarily in the first
quarter of 1995, incurred in connection with the Company's proposed merger with
Boomtown which was terminated in April 1995. Management believes, based upon
available evidence, that gaming related assets at December 31, 1995 are stated
at the lower of cost or estimated net realizable value; however, the continued
uncertainty surrounding the ability of these assets to generate positive cash
flow necessarily results in the potential for future write-downs to present
these assets at their estimated net realizable value in subsequent periods.
    

                  Included in general and administrative expenses-related party
("Related Party G&A) 1995 are approximately $3.2 million of fees paid to HFS in
consideration for providing both corporate services and up to $75 million of
available credit and/or guarantees on behalf of the Company (see "Liquidity and
Capital Resources"). Related Party G&A totaling $339,000 in 1994 consisted of
similar charges for only a 1 1/2 month period following the Distribution.
General and administrative expenses (G&A) for 1995 of $2.8 million approximated
1994 expenses. The Company also expensed the net deferred tax assets previously
recorded at December 31, 1994 which were expected to be realized from income
generated from Par-A-Dice operations, following the Illinois Gaming Board's
determination not to approve the Company's acquisition of Par-A-Dice.

1994 Versus 1993

                  The Company commenced operations in August 1993 and recognized
$128,000 of interest income, $581,000 of total expenses allocated to the Company
by HFS for corporate services and $186,000 of tax benefits contributed to the
HFS consolidated income tax return during 1993. Company gaming development
activities expanded in 1994 and total revenue, expenses and tax benefits
contributed to HFS consolidated income tax return increased accordingly. The
Company generated a $1.8 million net loss on $2.4 million of investment revenue
and $5.5 million of total expenses.

LIQUIDITY AND CAPITAL RESOURCES

Lodging Acquisition

   
                  On January 23, 1996, the Company acquired the outstanding
common stock of Forte Hotels for approximately $98 million, net of working
capital adjustments and including expenses (the "Travelodge Acquisition"). In a
related transaction prior to consummation of the Travelodge Acquisition, HFS and
Motels of America, Inc. acquired from Forte Hotels the Travelodge franchise
system and 19 motel properties, respectively, for an aggregate purchase price of
$71.6 million. The principal assets of Forte Hotels acquired by the Company
consisted of fee and leasehold interests in 18 wholly owned hotels (of which one
was subsequently disposed) and joint venture interests in 97 additional hotel
properties. The Company financed $60 million of the purchase price of the
Travelodge Acquisition with proceeds from the Company's credit facility with
Chemical Bank and Bankers Trust Company and $38 million with existing cash. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Credit Facilities." HFS provided advisory services in connection
with the acquisition for which the Company paid a $1,968,000 fee. The Company
had approximately $50 million available for borrowing under that credit facility
immediately following the acquisition of Forte Hotels.
    

                  Concurrently with the acquisition of Forte Hotels, the Company
and HFS terminated or modified certain agreements entered into in connection
with the 1994 distribution of the shares of the Company's Common Stock to HFS
stockholders. These agreements provided for HFS to provide casino marketing,
corporate and advisory services to the Company in consideration for fees. The
Company and HFS terminated the marketing and advisory services agreement
concurrently with the Forte Hotels acquisition.

   
                  The financing agreement was modified such that HFS is to
provide up to $75 million of credit enhancements to the Company's non-gaming
industry financings for a fee of 2% per annum. The corporate services agreement
was modified such that in exchange for payment of a fee of $1.5 million per year
HFS is to
    

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provide advisory services through January 2019 in connection with business
acquisitions, financings and other transactions by the Company and, through
September 30, 1996, certain corporate and accounting services.
    

                  On January 23, 1996, the Company issued a $15.0 million
standby letter of credit in favor of Bank of America National Trust and Savings
Association to secure borrowings under Forte Hotel's loan agreement with that
bank.

                  The Company is also obligated under note obligations
principally to banks and other lenders approximating $3.1 million at December
31, 1995. Interest rates on such indebtedness range from 6% to 12% and require
future aggregate principal payments approximating $3.1 million for the five
years following 1995, including $891,000 in 1996.

                  On January 24, 1996, the Company entered into an agreement in
principle with Chartwell and FSNL to sell approximately 4 million newly issued
shares of unregistered Company stock for $57 million. Upon shareholder approval
and completion of such sale, Chartwell and FSNL will own approximately 52% of
the outstanding stock of the Company. See "Business--Proposed Issuance to
Chartwell and FSNL".

   
                  The Company intends to accomplish its proposed Canadian
acquisition (see "Business--Lodging Business--Proposed Canadian Acquisition") by
paying approximately C$92 million in order to purchase substantially all of
CPLP's existing bank debt and to pay certain specified closing costs (including
real estate taxes) and by assuming the liability for identified trade payables
and property specific bank debt, aggregating approximately another C$12 million.
In addition, the Company will be obligated to make certain contingent payments
to CPLP's constituent partners following a preferred return to the Company. Of
the C$92 million payment, approximately half is expected to be financed with
proceeds from the proposed stock sale to Chartwell and FSNL and half by bank
borrowings.

                  The Company intends to launch a capital improvement program to
increase room and occupancy rates at the Company's hotels. As part of this
program, the Company expects to upgrade the interior and exterior of all
properties that do not meet corporate standards. For 1996, the Company has
budgeted approximately $10 million for its capital improvements program. If the
Company's proposed Canadian acquisition is consummated, the Company expects to
increase its budget for capital improvements to those properties, but has not
yet determined the amount of such increase or any other amounts to be budgeted
for capital improvements in future years. The Company intends to finance this
capital expenditure program with borrowings under the Credit Facility.
    

Gaming Business

   
                  The Company has agreed in principle with its partners to
dissolve its joint ventures which were established to develop casino gaming
facilities in Pittsburgh and Erie, Pennsylvania. Upon dissolution, the Company's
contingent obligation to acquire land and to develop and finance the
construction of the respective gaming facilities will be terminated. In
connection with the joint venture to develop a gaming facility in Pittsburgh,
the Company loaned the Urban Redevelopment Authority of Pittsburgh, Pennsylvania
("URA") approximately $9.5 million in September 1994. In September 1995, the URA
exercised its option to extend the maturity of the loan by one year to September
30, 1996. As a result of the Pennsylvania legislature's failure to propose a
voter referendum to approve casino gaming facilities in that state, the Company
notified the URA that it will not exercise its option to purchase a portion of
the site which is the collateral for that loan, thus requiring the URA to pay
interest currently at 4% per annum on a monthly basis. The URA made a $3.8
million payment of principal and interest in January 1996. The Company will seek
collection of the remaining $5.7 million balance of the URA loan in September
1996. In December 1995, the Company sold for $0.9 million two parcels of land in
Erie, upon which a proposed casino was to be constructed.

                  In March 1995, the Company agreed to loan up to an additional
$2.0 million to the partnership that owns the Rainbow Casino in Vicksburg,
Mississippi. The proceeds of such loan, together with additional capital to be
contributed by the general partner of such partnership, are being used to
finance certain improvements to the casino project, the completion of related
facilities and to provide additional working capital. The loan is unsecured,
bears interest at 10% per annum and will be repaid in equal monthly installments
of principal and interest over its seven year term. Cumulative advances were
$1.2 million at
    

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December 31, 1995. In 1994, the Company loaned Rainbow Casino Corporation
("Rainbow") $10 million to finance the licensing, construction and start-up
costs associated with the Rainbow Casino, a dockside casino located in
Vicksburg, Mississippi, which commenced operations on July 12, 1994. In 1994,
the Company entered into an agreement with Chartwell Leisure Associates L.P., an
affiliate of Chartwell ("Chartwell Leisure"), to induce Chartwell Leisure to
finance a family entertainment center, which opened in May 1995. In connection
with the agreement, the Company agreed to pay Chartwell Leisure, upon opening of
the entertainment center, a percentage of principal and interest payments
collected on the $10 million loan to Rainbow, ranging from 14% to 27% of such
payouts adjusted annually in accordance with a schedule to the agreement. The
Company commenced payments to Chartwell Leisure in July 1995 and made
approximately $0.2 million of payments in 1995. HFS will also share marketing
fees from the Rainbow Casino with Chartwell Leisure based on the same scheduled
percentages. Chartwell Leisure has agreed to share 50% of the net cash flow
payable to Chartwell Leisure with respect to the family entertainment center
with HFS and HFS has agreed to share such amounts pro rata with the Company
based on relative amounts paid by HFS and the Company, respectively, to
Chartwell Leisure each year.
    

Credit Facilities

                  General. The Company is a party to a credit facility (the
"Credit Facility"), dated as of January 23, 1996, among the Company, Chemical
Bank, as Documentation Agent, Bankers Trust Company, as Administrative Agent,
and the Banks from time to time parties thereto. The Credit Facility provides
that the Company may borrow up to $125,000,000 under a revolving credit
commitment, which may be utilized for the incurrence of revolving credit loans
or the issuance of letters of credit. Revolving Loans under the Credit Facility
may be borrowed as Base Rate Loans or Eurodollar Loans. HFS has guaranteed
$75,000,000 of the Company's obligations under the Credit Facility.

                  Capitalized terms used in this section but not defined in
herein are defined in the relevant agreement. Forms of each of the agreements
described below have been filed with the Commission and are available as
described under "Available Information."

   
                  Revolving Loans may be used by the Company to finance the
Travelodge Acquisition, Permitted Hotel Acquisitions and for general corporate
purposes, including to finance working capital needs. As of March 31, 1996,
approximately $85,561,000 aggregate principal amount was outstanding under the
Credit Facility, of which approximately $70,000,000 constituted Revolving Loans
and approximately $15,561,000 constituted borrowings for letters of credit. On
May 21, 1996, the Company repaid approximately $10,600,000 of the Revolving
Loans, thereby reducing the aggregate principal amount outstanding under the
Credit Facility as of that date to approximately $74,961,000. All outstanding
borrowings under the Credit Facility mature on January 23, 2002.

                  Interest on the outstanding principal amount of each Base Rate
Loan is payable at an annual rate equal to the highest of (A) the rate which is
1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (B) 1/2 of 1%
in excess of the Federal Funds Rate or (C) the Prime Lending Rate of Bankers
Trust Company. Interest on the outstanding principal amount of each Eurodollar
Loan is payable at an annual rate equal to the sum of the Applicable Margin
(which is within a range of 0.40% to 0.75% based on the principal amount of
Revolving Loans and letters of credit outstanding) plus the Eurodollar Rate. The
Company is obligated to pay a commitment fee at an annual rate equal to 0.2% of
the amount of the Unutilized Revolving Loan Commitment and an annual
administration fee of $150,000. The Company is also obligated to pay a fee in
respect of each outstanding letter of credit equal to the Applicable Margin on
the stated amount of the letter of credit, plus an additional fee equal to the
higher of $500 per year or an amount of 0.5% of the stated amount of the letter
of credit.

                  The total revolving credit commitment amount will be reduced
and, to the extent outstanding borrowings would exceed the resulting commitment
amount, principal will be repaid, semi-annually on March 31 and December 31 each
year, commencing March 31, 1997. The commitment reductions will be in the amount
of $7,500,000 per year, except that the commitment will reduce by $50,000,000 to
zero in 2002. The revolving credit commitment amount also will be reduced in the
amounts specified in the Credit Facility and, to the extent outstanding
borrowings would exceed the resulting commitment amount, principal will be
repaid in such amounts, (i) in the event that the long-term senior unsecured
debt credit rating of HFS shall have been reduced to a level equal to or below
BBB- by S&P and/or is unrated by S&P (ii) from the proceeds of any
    

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capital contribution or sale of equities by the Company or its Subsidiaries or
Joint Ventures, (iii) from the proceeds of any incurrence of Indebtedness for
Borrowed Money by the Company or its Subsidiaries or Joint Ventures, (iv) from
the proceeds of any Asset Sale by the Company or its Subsidiaries or Joint
Ventures or (v) in an amount equal to 50% of all Residual Excess Cash Flow in
any fiscal year.
    

                  Covenants. The Credit Facility contains covenants restricting
the Company and its Subsidiaries and Joint Ventures from: (i) creating,
incurring or assuming any Liens; (ii) merging or consolidating or disposing of
its assets, or acquiring assets from any other person; (iii) changing the nature
of their respective businesses; (iv) incurring indebtedness other than existing
indebtedness and indebtedness not to exceed $15,000,000 under the Company's
credit facility with Bank of America; (v) paying dividends or making Restricted
Payments; and (vi) modifying the agreements relating to the Company's
indebtedness and preferred stock or its corporate charter documents. The Credit
Facility prohibits the Company from paying dividends on its Common Stock.

   
                  In addition, the Credit Facility requires that the Company, in
certain cases on a stand alone basis and in other cases on a consolidated basis
with its subsidiaries and joint ventures, satisfy certain financial ratio
coverage tests, including maintenance of net worth, minimum interest coverage,
and minimum fixed charge and maximum leverage coverages. The Company's required
minimum Adjusted Consolidated Borrower EBITDA (generally defined as net income
of the Company and its subsidiaries before interest expense, taxes, depreciation
and amortization to the extent each reduces net income) is $1,527,000 for the
Company's fiscal quarter ended March 31, 1996 and increases each fiscal quarter
thereafter until the fiscal quarter ended December 31, 2001 in which the
Company's required minimum Adjusted Consolidated Borrower EBITDA is $13,943,000.
The minimum required Consolidated Interest Coverage Ratio (generally defined as
the ratio of Adjusted Consolidated Borrower EBITDA to the interest expense of
the Company and its subsidiaries) at the quarterly fiscal periods ending on or
prior to December 31, 1996 is 1.75:1.00, which ratio increases each year until
it reaches 3.00:1.00 for quarterly fiscal periods ending after March 31, 2000.
The maximum allowable Total Leverage Ratio (generally defined as the ratio of
all indebtedness of the Company and its subsidiaries to Adjusted Consolidated
Borrower EBITDA) for determination dates occurring on or prior to March 30, 1997
is 6.75:1.00, which ratio decreases each year until it reaches 4.00:1.00 for
determination dates occurring after March 30, 2001.

                  The Credit Facility also requires that the Company and its
subsidiaries, on a consolidated basis, satisfy a Consolidated Fixed Charge
Coverage Ratio (generally defined as the ratio of Adjusted Consolidated Borrower
EBITDA to the sum of all interest expense, taxes paid and capital expenditures
of the Company and its subsidiaries) at the end of each fiscal quarter. The
minimum required Consolidated Fixed Charge Coverage Ratio for all test periods
to and including December 31, 1996 is 1.75:1.00, which ratio increases until it
reaches 1.25:1.00 for the quarterly fiscal periods ending after September 30,
1997.

                  The Company is currently not in compliance with various
covenants contained in the Credit Facility. The Company has requested a waiver
of compliance with such covenants, and has been informed that the waiver has
been approved by the Banks which are parties to the Credit Facility and that the
Company will receive written confirmation shortly. The waiver requested by the
Company will become effective as of March 31, 1996 for the financial covenants
determined as of, or for the period ending on, that date. Pursuant to the Credit
Facility, those covenants will be determined again as of, and for the period
ending on, June 30, 1996. The Company intends to refinance its indebtedness
under the Credit Facility, although no commitment has been received by the
Company in respect of such a refinancing. There can be no assurance that the
Company will be able to accomplish such a refinancing. If the Company is unable
to refinance its indebtedness under the Credit Facility, the Company expects
that it will continue to require waivers of the financial covenants in the
Credit Facility in the future or will attempt to renegotiate those covenants.
    

                  Forte Hotels Loan Agreement. Forte Hotels has a loan agreement
with Bank of America National Trust and Savings Association ("B of A") which was
amended and restated in connection with the Travelodge Acquisition (the "Forte
Loan Agreement"). The Forte Loan Agreement permits Forte Hotels and certain of
the joint ventures through which it owns hotels to make revolving credit
borrowings in an aggregate amount of up to $10 million and provides for an
uncommitted credit facility, which is available at the sole discretion of B of
A, in an aggregate amount of up to $5 million. Borrowings under the Forte Loan
Agreement may be made until December 31, 1996. Revolving credit borrowings under
the Forte Loan Agreement may be

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made, at the option of the Company, as short term borrowings, which have a
maximum maturity of six months, or medium term borrowings, which have a maximum
maturity of five years. Short term borrowings bear interest, at the option of
the Company, at the B of A prime rate, 1/2 of 1% in excess of the B of A
offshore rate or 3/4 of 1% in excess of the B of A CD rate. Medium term
borrowings bear interest at 1% in excess of the B of A prime rate. The
borrowings under the Forte Loan Agreement are secured by a $15.0 million standby
letter of credit issued under the Credit Facility. Forte Hotels is obligated to
pay a commitment fee at an annual rate of 0.1875% on the unutilized portion of
the Forte Loan Agreement. Borrowings under the Forte Loan Agreement were
approximately $7.8 million at January 23, 1996.

CASH FLOWS

                  Cash used in operating activities was $6.5 million in 1995
compared to $4.7 million in 1994. The increase in cash used relates primarily to
the increased development expense incurred by the Company in connection with its
casino development business.

   
                  Cash provided by investing activities totaled $5.5 million in
1995 compared to cash used in investing activities of $38 million in 1994.
Investing activities in both years are related to the Company's gaming
development activities. The net cash provided in 1995 is a result of the
Company's liquidation of certain gaming investments.
    

                  Capital contributions by HFS totaled $87.3 million in 1994,
which comprised amounts contributed to fund the Company's gaming investments and
to capitalize the Company in connection with the spin-off of the Company to HFS'
shareholders in November 1994. In December 1995 the Company sold, in a private
placement, 904,930 shares of its unregistered common stock to Chartwell,
resulting in cash generated from financing activities of $8.3 million in 1995.

WORKING CAPITAL

   
                  The Company had $62.2 million of available working capital
including $51.5 million of cash at December 31, 1995 of which $38 million was
used to finance the Travelodge Acquisition.
    

IMPACT ON INFLATION

                  The primary source of revenue of the Company will be on
lodging facilities' gross room revenue. As a result, the Company's revenue
(excluding those changes attributable to new property acquisition or disposals)
is expected to change consistent with the trend of the consumer price index. The
Company does not believe that inflation would have an unfavorable impact on its
operations.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENT

                  In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation", which became effective for the Company beginning
January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply APB
Opinion No. 25, which recognizes compensation cost based on the intrinsic value
of the equity instrument awarded. The Company will continue to apply APB Opinion
No. 25 to its stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share.

SEASONALITY

                  Room occupancy rates at its hotels are affected by normally
recurring seasonal patterns and, in most locations in the United States and
Canada, are higher in the late spring through early fall months than during the
balance of the year, with the lowest occupancy rates occurring in the first
quarter of the year. As a result, as a company which will be primarily engaged
in the lodging business in the future, the Company

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expects to experience seasonal lodging revenue patterns similar to the hotel
industry with the summer months, due to the increase in leisure travel,
producing a higher revenue than other periods during the year.

ITEM 8.           Financial Statements and Supplementary Data

                  See page F-1 of this Report, which includes an index to the
Company's consolidated financial statements. Financial statement schedules and
supplementary data are omitted for the reason that they are not applicable or
the required information is included in the consolidated financial statements or
notes thereto.


ITEM 9.           Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure

                  None.



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                                    PART III

ITEM 10.          Directors and Executive Officers of the Company

   
         The Board of Directors of the Company is presently comprised of nine
members, divided into three classes with terms expiring at the Company's annual
meeting of stockholders for the years 1996, 1997 and 1998, as indicated below
after each director's name. Also set forth below is certain information
regarding the directors and executive officers of the Company, including each
individual's age and principal occupation, a brief account of business
experience during at least the last five years and other directorships currently
held.

         The following table sets forth certain information regarding the
executive officers and directors of the Company currently in office:



 Name                                      Office or Positions Held

 Richard L. Fisher                 Chairman of the Board and Chief Executive
                                   Officer

 Martin L. Edelman                 Director, President and Vice Chairman of the
                                   Board

 Kenneth J. Weber                  Chief Financial Officer

 Carl Winston                      Executive Vice President -- Operations

 Douglas H. Verner                 Executive Vice President, General Counsel and
                                   Secretary

 James E. Buckman                  Director

 Stephen P. Holmes                 Director

 Michael J. Kennedy                Director

 Henry R. Silverman                Director

 Marc E. Leland                    Director

 Robert F. Smith                   Director

 Roger J. Stone, Jr.               Director


         On January 24, 1996: (i) Henry R. Silverman resigned as Chairman and
Chief Executive Officer of the Company, (ii) Robert S. Kingsley resigned as
President and Chief Operating Officer of the Company, (iii) Richard L. Fisher
was elected Chairman of the Board and Chief Executive Officer of the Company and
(iv) Martin L. Edelman was elected President of the Company. John D. Snodgrass
resigned as Vice Chairman of the Company's Board in December 1995, and resigned
as a director on January 23, 1996. Mr. Buckman resigned as Executive Vice
President, General Counsel and Secretary as of January 24, 1996, and Mr. Holmes
resigned as Executive Vice President, Chief Financial Officer and Treasurer as
of March 1, 1996. Mr. Edelman resigned as Vice Chairman of the Board as of March
12, 1996, and continues to serve as President and a Director of the Company.

         James E. Buckman, term expiring in 1996, age 51, has been a Director of
the Company since November 22, 1994. Mr. Buckman has been Executive Vice
President, General Counsel and Assistant Secretary of HFS since February 1992, a
director of HFS since June 1994 and was Executive Vice President, General
Counsel and Secretary of the Company from November 1994 until March 1996. Mr.
Buckman was a partner with
    

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Troutman, Sanders, Lockersman & Ashmore, an Atlanta, Georgia law firm, from
January 1990 to February 1992. He was Executive Vice President and General
Counsel of Buckhead America Corporation ("Buckhead"), the former owner of the
Days Inns hotel franchise system, from April 1985 to November 1989. Mr. Buckman
was an officer of Buckhead within two years of the time Buckhead filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. Buckhead, which was
formerly known as Days Inns of America, Inc., is not affiliated with or
otherwise related to the Company.

         Stephen P. Holmes, term expiring in 1996, age 39, has been a Director
of the Company since September 1994. Mr. Holmes has been Executive Vice
President and Chief Financial Officer of HFS since July 1990, a Director of HFS
since June 1994 and was Executive Vice President, Chief Financial Officer and
Treasurer of the Company from November 1994 until February 1996. Mr. Holmes is
also currently a director of AMRE, Inc., a home remodeling and improvement
company ("AMRE"). He was employed by The Blackstone Group ("Blackstone"), a New
York investment banking firm, from February 1990 through September 1991 as a
Vice President and a Managing Director.

         Michael J. Kennedy, term expiring in 1996, age 59, has been a Director
of the Company since November 22, 1994. Mr. Kennedy has been an attorney with
his own law firm in New York City since 1976.

         Henry R. Silverman, term expiring in 1997, age 55, has been a Director
of the Company since September 1994. He has been Chairman of the Board and Chief
Executive Officer of HFS since May 1990 and was the Chairman of the Board and
Chief Executive Officer of the Company from November 1994 until January 24,
1996. Mr. Silverman is a former General Partner of Blackstone, having held such
position from February 1990 to December 1991. He was Senior Vice President,
Business Development of Reliance Group Holdings, Inc., an insurance, consulting
and information services company, from 1982 to 1990 and President and Chief
Executive Officer of Reliance Capital Group, Inc. from November 1983 until
February 1990. Mr. Silverman served as President and Chief Executive Officer of
Telemundo Group, Inc., a Spanish language television network, from 1986 to 1990.
Mr. Silverman was Chairman and Chief Executive Officer of Buckhead from
September 1984 until November 1989. Mr. Silverman was an officer of Buckhead
within two years of the time Buckhead filed for reorganization under Chapter 11
of the U.S. Bankruptcy Code.

         Martin L. Edelman, term expiring in 1997, age 54, has been a Director
of the Company since November 22, 1994 and President of the Company since
January 24, 1996. Mr. Edelman was the Vice Chairman of the Board of Directors of
the Company from December 1995 until March 1996. He has also been a director of
HFS since November 1993. Mr. Edelman has been of counsel to Battle Fowler LLP, a
New York City law firm, since January 1994 and was a partner with that firm from
1972 through 1993. Mr. Edelman also serves as a director of Presidio Capital
Corp. Mr. Edelman is a limited partner in Chartwell and a stockholder in
Chartwell Corp.

         Marc E. Leland, term expiring in 1997, age 58, has been a Director of
the Company since December 20, 1995. Mr. Leland has been President of Marc E.
Leland & Associates, engaged in financial consulting and private investment
activities, since 1984. Mr. Leland is a Vice President and director of Chartwell
Corp. and a general partner in FGT, L.P., which is a limited partner of
Chartwell. Mr. Leland was appointed a Director as a nominee of Chartwell
pursuant to the agreement governing the Initial Chartwell Investment. Mr. Leland
is a director of Noble Drilling Corporation, a company that provides contract
drilling services for the oil and gas industry
worldwide.

         Robert F. Smith, term expiring in 1998, age 63, has been a Director of
the Company since November 22, 1994. Mr. Smith is expected to resign at the time
of the Closing. He has been a Director of HFS since February 1993. Mr. Smith is
the retired Chairman and Chief Executive Officer of American Express Bank, Ltd.
("AEBL"). He joined AEBL's parent, the American Express Company, in 1981 as
Corporate Treasurer, before moving to AEBL and serving as Vice Chairman and
Co-Chief Operating Officer and then President prior to becoming CEO. Mr. Smith
is currently a partner in Car Component Technologies, Inc., an automobile parts
remanufacturer located in Bedford, New Hampshire.

         Robert J. Stone, Jr., term expiring in 1998, age 43, has been a
Director of the Company since November 22, 1994. He has been a Director of HFS
since June 1994. Mr. Stone is currently a partner at Davis, Manafort and Stone,
a Washington, D.C. public affairs firm formed in 1995. From 1981 through 1995,
Mr. Stone was a partner at Black, Manafort, Stone & Kelly, a Washington, D.C.
based public affairs firm. Mr. Stone has served
    

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<PAGE>



   
on the Executive Committee of the Republican National Committee and was
appointed to the Amtrak Commuter Services Board by President Ronald Reagan. Mr.
Stone is a Director of the Pietro Food Corporation of Buena, New Jersey.

         Richard L. Fisher, term expiring in 1998, age 55, has been the Chairman
of the Board and Chief Executive Officer of the Company since January 24, 1996,
and a Director of the Company since December 20, 1995. Mr. Fisher has been
self-employed, engaged in private investment activities, financial management
and real estate ownership and development, among other businesses, since prior
to 1990. Mr. Fisher is a limited partner in Chartwell and is the President, a
director and a stockholder in Chartwell Corp. Mr. Fisher is also a partner in
various affiliates of Chartwell. Mr. Fisher was appointed a Director as a
nominee of Chartwell pursuant to the agreement governing the Initial Chartwell
Investment. Mr. Fisher is also a member of the Board of Trustees of the
University of Pennsylvania and the Horace Mann School located in Riverdale, New
York.

         Kenneth J. Weber, age 50, is currently the Chief Financial Officer of
the Company and has held such office since March 4, 1996. From September 1992
until February 1996, Mr. Weber was the Senior Vice President and Chief Financial
Officer of Omni Hotels, a company engaged in the ownership and management of
hotels. He was also the Senior Vice President and Chief Accounting Officer of
Red Lion Hotels, a company engaged in the ownership and management of hotels,
from January 1987 until September 1992. Mr. Weber currently serves on the
Advisory Board of the Protection Mutual Insurance Company and on the Financial
Officer Board of the American Hotel and Motel Association.

         Carl Winston, age 39, is currently the Executive Vice
President-Operations of the Company and has held such office since January 23,
1996. Mr. Winston was a Vice President of Forte Hotels from December 1990 until
January 1996.

         Douglas H. Verner, age 42, is currently the Executive Vice President,
General Counsel and Secretary of the Company and has held such office since
January 23, 1996. Mr. Verner was the Senior Vice President, General Counsel and
Secretary of Forte Hotels from November 1984 until January 1996. He is also
Chairman of the Copyright Committee of the American Hotel and Motel Association.

Compensation of the Board of Directors

         Currently, non-employee directors receive an annual retainer of
$20,000, plus $1,000 for chairing a committee and $500 for serving as a member
of a committee other than as chair. Non-employee directors are also paid $1,000
for each Board of Directors meeting attended and $500 for each committee meeting
attended. During 1995, non-employee directors received an annual retainer of
$30,000, plus $4,000 for chairing a committee and $2,000 for serving as a member
of a committee other than as chair. During that period, non-employee directors
were also paid $1,000 for each Board of Directors meeting attended and $500
($1,000 for committee chair) for each committee meeting if held on the same day
as a Board meeting and $1,000 ($2,000 for committee chair) for each committee
meeting attended on a day on which there was no Board of Directors meeting.
During 1995 and until March 12, 1996, non-employee directors who were also
non-employee directors of HFS were paid half of the amounts specified for that
period. All non-employee directors have been in the past, and continue to be,
reimbursed for expenses incurred in attending meetings of the Board of Directors
and committees.

         Members of the Board of Directors who are officers or employees of the
Company or any of its subsidiaries do not receive compensation or reimbursement
of expenses for serving in their capacity as directors. Because Messrs. Buckman,
Holmes and Silverman are no longer employees of the Company, they are considered
non-employee directors. However, Messrs. Buckman, Holmes and Silverman have
agreed to waive any compensation for their services as directors of the Company
for 1996.

         During 1995, the Company (i) provided $100,000 of term life insurance
coverage for each non-employee director to the beneficiary designated by such
non-employee director and (ii) purchased joint life insurance contracts in the
amount of $1,000,000 for each director, and upon the death of such director, the
Company agreed to donate an aggregate of $1,000,000 to one or more charitable
organizations designated by such director from the proceeds of such insurance
policy. With the exception of such joint life insurance contracts, members of
the Board of Directors who were officers or employees of the Company or any of
its subsidiaries during 1995 did not receive compensation or reimbursement of
expenses for serving in such capacity.
    

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         Pursuant to the Company's 1994 Stock Option Plan, each non-employee
director is automatically granted certain stock options as follows: options
granted to directors who are not employees of the Company or a subsidiary of the
Company are subject to pre-determined rules and procedures such that neither the
Board of Directors nor the Compensation Committee has any discretion in
connection with the granting of such options. Options are granted to
non-employee directors based on a formula whereby current non-employee directors
have received an option to purchase 15,000 shares of Common Stock; other
non-employee directors, upon initial appointment or election to the Board or
Directors, will be granted an option to purchase 15,000 shares of Common Stock;
and each non-employee director will receive an additional option grant for
15,000 shares of Common Stock on the first anniversary of the date of their
initial grant of options. Such options have an exercise price of not less than
100% of the fair market value on the date of grant and vest over a three year
period from the date of grant at the rate of 33-1/3% per year, and otherwise
have the same terms as all other options granted under the 1994 Stock Option
Plan.

Compliance With Section 16(a) of the Exchange Act

         Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities ("10% stockholders"), to file reports of ownership
and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission and Nasdaq National Market. Officers, directors and 10% stockholders
are required to furnish the Company with copies of all Forms 3, 4 and 5 they
file.

         Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for a specified fiscal year, the Company
believes that all of its officers, directors and 10% Stockholders complied with
all filing requirements applicable to them with respect to transactions during
1995.

ITEM 11.     Executive Compensation

Summary Compensation Table

         The following table sets forth for 1995 the cash and noncash
compensation awarded to or earned by the Chief Executive Officer of the Company
and the other most highly compensated executive officers (together, the "Named
Executive Officers") of the Company for 1995:
<TABLE>
<CAPTION>

                                         SUMMARY COMPENSATION TABLE (1)(2)
                                                                                        ---------------------------------
                                                                                                    Long-Term
                                                                                                  Compensation

                                                    Annual Compensation
                                                                                        ---------------------------------
                                                                                        ---------------------------------
                                                                                                     Awards
                                  ------------------------------------------------------------------------------------------------

Name and Principal                                                     Other
Position                                                               Annual                      Securities     All Other
                                                                      Compen-      Restricted      Underlying    Compensation
                                             Salary       Bonus        sation         Stock         Options/         ($)
                                      Year    ($)          ($)          ($)          Awards          SARs(#)
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>           <C>           <C>          <C>            <C>           <C>

Henry R. Silverman (3)              1995        500,000          0            0               0
 Chairman of the Board,             1994      41,667(4)          0            0               0      300,000(5)          299 (6)
 Chief Executive Officer



Robert S. Kingsley (3)              1995        260,430    125,000            0               0                       172,072(7)
 President, Chief                   1994      27,083(4)          0            0               0      100,000(5)            80(6)
 Operating Officer
</TABLE>

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

(1)      Because the Company first became subject to reporting requirements of
         the Exchange Act in 1994, the Company is not subject to the Summary
         Compensation Table disclosure requirements for 1993.
    
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(2)      Messrs. Silverman and Kingsley were the only executive officers of the
         Company who received salary or bonus from the Company in 1995. John D.
         Snodgrass, Stephen P. Holmes and James E. Buckman served as (i) Vice
         Chairman of the Board, (ii) Executive Vice President, Chief Financial
         Officer and Treasurer, and (iii) Executive Vice President, General
         Counsel and Secretary, respectively, of the Company during 1995. Mr.
         Snodgrass resigned in December 1995, Mr. Buckman resigned in January
         1996, and Mr. Holmes resigned in March 1996. Although Messrs.
         Snodgrass, Holmes and Buckman received their entire compensation as
         officers of HFS, a portion of the Corporate Services Fee paid by the
         Company to HFS represented the Company's payment to HFS for the
         executive services to be performed by such persons as officers of the
         Company pursuant to the Corporate Services Agreement. No set
         allocations were established with respect to the amount of time that
         such persons were expected to devote to the affairs of the Company and
         HFS, respectively, nor were set allocations established with respect to
         the portion of such persons' overall compensation from HFS that was
         expected to be paid in respect of services performed for the Company
         pursuant to the Corporate Services Agreement. It is not expected that
         any such allocation would have resulted in annual compensation to any
         of the above individuals in excess of $100,000 per year.

(3)      On January 24, 1996, Mr. Silverman resigned as Chairman and Chief
         Executive Officer of the Company and Mr. Kingsley resigned as President
         and Chief Operating Officer of the Company.

(4)      Represents salary paid to the named executive officer for the period
         commencing on the Distribution Date (defined below) and ending on
         December 31, 1995. Annualized salaries for Mr. Silverman and Mr.
         Kingsley for 1994 were $500,000 and $250,000, respectively.

(5)      On November 22, 1994, Messrs. Silverman and Kingsley were granted
         options to purchase 300,000 and 100,000 shares, respectively, under the
         Company's 1994 Stock Option Plan. Such options were cancelled as of
         February 1, 1996.

(6)      This compensation consists of life insurance premiums paid by the
         Company.

(7)      This compensation consists of (i) relocation expenses incurred by Mr.
         Kingsley and paid by the Company in the amount of $164,940, (ii)
         insurance premiums paid by the Company for life insurance coverage in
         the amount of $6,692, and (iii) Company contributions to the Company's
         defined contribution salary reduction 401(K) plan qualified under
         Section 401(a) of the Code.

         There are presently no pension or retirement plans of the Company that
will cover any of the Named Executive Officers.

         None of the Named Executive Officers were granted options during the
Company's 1995 fiscal year. The Company's option plans do not provide for stock
appreciation rights.
    


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<PAGE>


   
Option Exercises and Year-End Option Value Table

         The following table summarizes the exercise of options by the named
executive officers during the last fiscal year and the value of options held by
such named executives as of the end of such fiscal year. The Company's option
plans do not provide for stock appreciation rights.
<TABLE>
<CAPTION>

                                      AGGREGATED OPTION/SAR EXERCISES IN LAST
                                     FISCAL YEAR AND FY-END OPTION/SAR VALUES


                                                                   Number of Securities           Value of Unexercised
                                                                   Underlying Unexercised         In-the-Money Options/SARs
                                                                   Options/SARs at FY-End (#)     at FY-End ($)(2)
                        Shares Acquired
        Name            on Exercise (#)      Value Realized        Exercisable/Unexercisable (1)  Exercisable/Unexercisable
                                             ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>                  <C>                   <C>                             <C> 

Henry R. Silverman                      0                    0                100,000/200,000                          $0/$0

Robert S. Kingsley                      0                    0                  33,333/66,667                          $0/$0

</TABLE>

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

(1)      Messrs. Silverman and Kingsley were granted options to purchase 300,000
         and 100,000 shares, respectively, under the Company's 1994 Stock Option
         Plan. Such options were cancelled as of February 1, 1996.

(2)      Based upon the Common Stock's closing price in NASDAQ of $11.875 on 
         December 29, 1995 and the applicable exercise price.

Compensation Committee Interlocks and Insider Participation

         During 1995, the Compensation Committee of the Board of Directors
consisted of Mr. Robert F. Smith and Mr. Michael J. Kennedy. Neither Mr. Smith
nor Mr. Kennedy is or has ever been an officer or employee of the Company or any
of its subsidiaries.

Employment Contracts and Termination, Severance and Change of Control
Arrangements

         Each Named Executive Officer was employed by the Company pursuant to a
written employment agreement during 1995.

         Mr. Silverman served as Chairman of the Board and Chief Executive
Officer of the Company until January 24, 1996 pursuant to a five-year employment
agreement which was terminated by mutual agreement as of January 24, 1996. The
agreement provided for an annual base salary of at least $500,000 (subject to
annual increase based on the consumer price index). Mr. Silverman has agreed to
waive any and all payments to which he would otherwise have been entitled in
connection with that termination.

         Mr. Kingsley served as President and Chief Operating Officer of the
Company pursuant to an employment agreement between Mr. Kingsley and HFS, which
HFS transferred to the Company and the Company assumed pursuant to the
Distribution Agreement. The agreement was terminated as of January 24, 1996. The
agreement provided for an annual base salary of $250,000. Pursuant to the
agreement, Mr. Kingsley was paid a bonus of $125,000, for the initial year of
his employment. Upon termination of Mr. Kingsley's employment by the Company
during the term of his employment agreement other than for death, disability or
"cause", the employment agreement entitled Mr. Kingsley to receive a severance
payment in an amount equal to 100% of the annual base salary to which Mr.
Kingsley would be entitled under the agreement during the one year period
following the date of such termination. Generally, "cause" was defined in the
agreement as, among other things, (i) the willful failure by Mr. Kingsley
substantially to perform his duties under the agreement, (ii) any act of fraud,
misappropriation or similar conduct against the Company, (iii) conviction of a
felony, (iv) gross negligence by Mr. Kingsley in the performance of his duties,
(v) the determination by the Board that the employment of Mr. Kingsley would
preclude the granting of a gaming license or (vi) the willful breach by Mr.
Kingsley of a material provision of the agreement. In
    
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<PAGE>


   
connection with Mr. Kingsley's resignation from the Company, the Company has 
agreed to pay Mr. Kingsley his base salary through December 31, 1996.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

         The information set forth in the following table is furnished as of
April 30, 1996 with respect to any person (including any "group," as that term
is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) who is known to the Company to be the beneficial owner of
more than 5% of any class of the Company's voting securities, and as to those
shares of the Company's equity securities beneficially owned by each of its
directors and nominees for director, certain of its executive officers, and all
of its executive officers and directors as a group. Such information (other than
with respect to directors and officers of the Company) is based on a review of
statements filed with the Securities and Exchange Commission (the "Commission")
pursuant to Sections 13(d), 13(f), and 13(g) of the Exchange Act with respect to
the Company's Common Stock. As of April 30, 1996, there were 5,452,320 shares of
Common Stock outstanding.
<TABLE>
<CAPTION>

                                                         Amount and
                                                          Nature of
                                                         Beneficial                           Percent of
                                                          Ownership                           Class
Principal Stockholders
<S>                                                     <C>                                 <C>   

Chartwell Leisure Associates L.P. II                       904,930                            16.60%
P.O. Box
Rye, New York

Fir Tree Inc. d/b/a Fir Tree Partners (1)                  397,100                             7.28%
1211 Avenue of the Americas, 29th Floor
New York, New York 10036

The Kaufmann Fund, Inc.(2)                                 602,500                            11.05%
140 East 45th Street, 43rd Floor
New York, New York 10017

Directors, Nominees and Executive Officers

Richard L. Fisher (3)                                      906,930                            16.63%
Henry R. Silverman (4)                                     227,732                             4.01%

Robert S. Kingsley (5)                                           0                             *
Stephen P. Holmes (6)                                       19,400                             *
Martin L. Edelman (7)                                       48,437                             *

Michael J. Kennedy (8)                                       5,000                             *
Robert F. Smith (9)                                          6,000                             *
Roger J. Stone (10)                                          5,000                             *
Marc E. Leland (11)                                        904,930                            16.60%
James E. Buckman (12)                                       10,740                             *

Executive Officers and Directors                         1,180,802                            20.63%
  as a Group (13 persons) (13)
- ---------------
*less than 1%
</TABLE>

(1)      Based upon information contained in a Schedule 13D dated November 22,
         1995, filed by Fir Tree Inc., doing business as Fir Tree Partners, on
         behalf of itself and the other reporting persons named therein, such
         persons beneficially own 397,100 shares of Common Stock. According to
         the Schedule 13D, such persons have sole voting power and dispositive
         power over such shares.
    
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<PAGE>



   
(2)      Based upon information contained in a Schedule 13G dated February 15,
         1996, filed by The Kaufmann Fund, Inc., a registered investment
         company, such entity beneficially owns 602,500 shares of Common Stock.
         The Kaufmann Fund, Inc. has sole voting and dispositive power over such
         shares.

(3)      Includes all shares owned by Chartwell, and 2,000 shares owned by
         Fisher Brothers Financial and Development Company ("FBFDC"). Mr. Fisher
         is the President and one of the two directors of Chartwell Leisure
         Corp. II ("Chartwell Corp."), the general partner of Chartwell, and,
         accordingly, may be deemed to own beneficially all shares owned
         beneficially by Chartwell. Mr. Fisher is also a limited partner of
         Chartwell. FBFDC is a New York limited partnership of which Mr. Fisher
         is both a general and limited partner. Mr. Fisher disclaims beneficial
         ownership of the shares of Common Stock owned by Chartwell and FBFDC
         other than 88,098 shares representing 9.70% of the shares owned of
         record by Chartwell and 16% of the shares owned by FBFDC. Mr. Fisher
         owns, in the aggregate, a 9.70% beneficial interest in Chartwell and a
         16% interest in FBFDC.

(4)      Includes 222,560 shares of Common Stock issuable upon the exercise of
         options granted under the 1992 Stock Option Plan of HFS, the former
         parent of the Company, which options are currently exercisable, and
         5,172 shares of Common Stock in two retirement plans whose sole
         beneficiary is Mr. Silverman. Mr. Silverman was granted options to
         purchase 300,000 shares of Common Stock on November 22, 1994 under the
         Company's 1994 Stock Option Plan. Such options were cancelled as of
         February 1, 1996.

(5)      Mr. Kingsley was granted options to purchase 100,000 shares of Common
         Stock on November 22, 1994, under the Company's 1994 Stock Option Plan.
         Such options were cancelled as of February 1, 1996.

(6)      Includes 19,200 shares issuable upon the exercise of options granted
         under HFS's 1992 Stock Option Plan, which options are currently
         exercisable or exercisable within 60 days. Mr. Holmes was granted
         options to purchase 60,000 shares on November 22, 1994 under the
         Company's 1994 Stock Option Plan. Such options were cancelled as of
         February 1, 1996.

(7)      Includes 5,000 shares issuable upon the exercise of options granted
         under the Company's 1994 Stock Option Plan, which options are currently
         exercisable, or exercisable within 60 days. Amounts shown include
         43,437 shares representing 4.8% of the shares owned of record by
         Chartwell. Mr. Edelman owns, in the aggregate, a 4.8% beneficial
         interest in Chartwell.

(8)      Includes 5,000 shares issuable upon the exercise of options granted
         under the Company's 1994 Stock Option Plan, which options are currently
         exercisable or exercisable within 60 days.

(9)      Includes (a) 5,000 shares issuable upon the exercise of options granted
         under the Company's 1994 Stock Option Plan, which options are currently
         exercisable or exercisable within 60 days, and (b) 500 shares held in
         the name of the Smith Family Foundation, of which Mr. Smith is
         President. Mr. Smith disclaims beneficial ownership of the 500 shares
         held in the name of the Smith Family Foundation.

(10)     Represents 5,000 shares issuable upon the exercise of options granted
         under the Company's 1994 Stock Option Plan, which options are currently
         exercisable or exercisable within 60 days.

(11)     Represents the shares of Common Stock beneficially owned by Chartwell.
         Mr. Leland is the Vice President and one of the two directors of
         Chartwell Corp. and, accordingly, may be deemed to own beneficially all
         shares owned beneficially by Chartwell. Mr. Leland is also a beneficial
         owner of Chartwell. Mr. Leland disclaims beneficial ownership of the
         shares of Common Stock owned by Chartwell other than 28,668 shares,
         representing approximately 3.17% of the shares owned of record by
         Chartwell. Mr. Leland owns an 8% general partnership interest in FGT
         L.P. which, in turn, owns a 39.6% limited partnership interest in
         Chartwell.

(12)     Includes 9,240 shares issuable upon the exercise of options granted
         under HFS's 1992 Stock Option Plan, which options are currently
         exercisable or exercisable within 60 days. Mr. Buckman was granted
         options to purchase 60,000 shares on November 22, 1994 under the
         Company's 1994 Stock Option Plan. Such options were cancelled as of
         February 1, 1996.
    

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<PAGE>


   
(13)     Includes 271,000 shares, in the aggregate, of Common Stock purchasable
         by officers and directors pursuant to options granted under HFS's 1992
         Stock Option Plan or the Company's 1994 Stock Option Plan, which
         options are currently exercisable or exercisable within 60 days.

ITEM 13. Certain Relationships and Related Transactions

Relationships with HFS

         In connection with the Distribution, and for purposes of (i) governing
certain of the ongoing relationships between HFS and the Company after the
Distribution, (ii) providing mechanisms for an orderly transition and (iii)
providing HFS with a means of participating in the economic benefits of future
gaming projects, HFS and the Company entered into each of the agreements briefly
described below. The following descriptions are qualified in their entirety by
reference to the copies of such agreements filed with the Commission as exhibits
to the Company's Current Report on Form 8-K dated December 2, 1994. As indicated
herein under the caption "Directors and Executive Officers of the Company,"
certain of the persons who were executive officers and directors of the Company
since January 1, 1995 and certain of its current directors also serve as
directors and/or executive officers of HFS. Each of these directors and
executive officers also owns certain options to purchase shares of the common
stock of HFS.

         Distribution Agreement. The Company and HFS entered into a Transfer and
Distribution Agreement dated as of November 22, 1994 (the "Distribution
Agreement") to provide for, among other things, the principal corporate
transactions required to effect the Distribution, the transfer to the Company of
the Casino Development Business, the allocation between HFS and the Company of
certain liabilities, the capital contributions made by HFS to the Company and
certain other agreements governing the relationship between HFS and the Company.

         The Distribution Agreement also contains certain provisions relating to
employee compensation, benefits and labor matters and the treatment of options
to purchase HFS common stock held by employees of HFS that were outstanding at
the time of the Distribution. Among such provisions is an agreement by the
Company to reserve for future issuance and to issue up to 433,290 shares of
Common Stock to certain persons (including certain current and former directors
and executive officers of the Company) in connection with the exercise of
then-outstanding options to purchase shares of HFS common stock that were
granted pursuant to HFS's 1992 Stock Option Plan (which options were adjusted in
connection with the Distribution so that the holders of such options are
entitled, upon exercise thereof, to receive one share of Common Stock for every
20 shares of HFS common stock purchased upon such exercise, subject to further
adjustment in certain circumstances). As of March 1, 1996, the Company had
issued 18,280 of these shares of Common Stock in connection with the exercise of
HFS options. At the request of HFS, the Company will be obligated to register
the shares of Common Stock issuable in connection with HFS's 1992 Stock Option
Plan under the Securities Act of 1933. Similarly, the Distribution Agreement
provided for the Company to reserve for future issuance and to issue up to
153,600 shares of Common Stock to Bryanston Group Inc. ("Bryanston") in
connection with the exercise of certain rights to purchase shares of HFS common
stock under an Earnout Agreement between HFS and Bryanston (the "Earnout
Agreement"). As of September 22, 1995 all of the shares of Common Stock to be
issued in connection with the Earnout Agreement were issued and repurchased by
the Company.

         Financing Agreement. Pursuant to an Interim Financing Agreement dated
as of November 22, 1994 (the "Financing Agreement"), HFS agreed to extend up to
$75 million in credit enhancements (e.g., guarantees) on behalf of the Company
as security for future bank credit facilities. Pursuant to the Financing
Agreement, HFS guaranteed $75 million of the Company's $125 million revolving
credit obligation to certain banks, which the Company entered into in connection
with the Travelodge Acquisition (the "Travelodge Guarantee") and the Financing
Agreement was amended as of January 23, 1996 to provide for the issuance of that
guarantee. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Lodging
Acquisition." The Financing Agreement currently requires the Company to pay HFS
an annual fee equal to 2% of the obligations guaranteed pursuant to the
Travelodge Guarantee. Prior to the January 1996 amendment, the Company was
obligated to pay HFS a fee equal to 2% of the $75 million commitment from HFS
under the Financing Agreement. In 1995 the Company paid HFS a fee of $1.5
million pursuant to the Financing Agreement.

         Corporate Services Agreement.  Pursuant to a Corporate Services 
Agreement dated as of November 22, 1994 (the "Corporate Services Agreement"), 
HFS provided to the Company certain general corporate support services,
    
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<PAGE>


   
including executive services (such as the services of Messrs. Holmes and
Buckman; see "Directors and Executive Officers of the Company"), accounting
services, legal services, treasury services, financial reporting and internal
audit services, insurance and risk management services, management information
systems ("MIS") services and employee benefits administration, which HFS had
historically provided to its casino development business. During 1995, the
Company paid HFS a fee of $1.5 million under the Corporate Services Agreement.
The Corporate Services Agreement has a term ending 25 years after the date of
the Distribution (the "Distribution Date") and is terminable by HFS without
penalty upon 90 days' written notice to the Company or immediately upon a Change
in Control of the Company (as defined in the agreement). The Company generally
may not terminate the Corporate Services Agreement without HFS's consent. The
Corporate Services Agreement was amended as of January 24, 1996, to provide that
the services to be performed by HFS under the Corporate Services Agreement will
only include the following: (i) advisory services in connection with business
acquisitions, financings, and other transactions by the Company, and (ii)
through September 30, 1996, certain corporate and accounting services that the
Company requests HFS to perform and HFS agrees to perform. As amended, under the
Corporate Services Agreement the Company is required to pay HFS a fixed annual
fee of $1.5 million payable quarterly in advance.

         Tax Sharing Agreement. The Tax Sharing and Indemnification Agreement
dated as of November 22, 1994 (the "Tax Sharing Agreement"), provides for the
respective obligations of HFS and the Company concerning various tax
liabilities. The Tax Sharing Agreement provides that (i) HFS shall pay, and
indemnify the Company if necessary for, all federal, state, local and foreign
income taxes relating to the Casino Development Business for any taxable period
ending on or before the Distribution Date and (ii) the Company shall pay, and
indemnify HFS if necessary for, all federal, state and local income taxes
attributable to the Casino Development Business for any taxable period ending
after the Distribution Date or that arise as a result of or in connection with
the Distribution. Pursuant to the Tax Sharing Agreement, HFS is also required to
pay all other taxes attributable to periods prior to the Distribution Date. The
Tax Sharing Agreement further provides for cooperation with respect to certain
tax matters, the exchange of certain tax-related information and the retention
of records which may affect the income tax liability of either party.

         Marketing Services Agreement. Pursuant to a Gaming Related Marketing
Services Agreement dated as of November 22, 1994 and terminated on January 24,
1996 (the "Marketing Services Agreement"), an affiliate of HFS was obligated to
provide certain marketing services to gaming facilities in which the Company had
an interest through HFS's network of hotel franchises, reservation centers,
frequent traveller programs and other marketing resources. During 1995, this
affiliate did not provide the Company with any such services and the Company did
not make any payments to this affiliate under the Marketing Services Agreement
in 1995.

         Advisory Agreement. Pursuant to a Gaming Related Advisory Services
Agreement dated as of November 22, 1994 and terminated on January 22, 1996 (the
"Advisory Agreement"), the Company retained HFS as its advisor in connection
with all gaming related acquisition, financing or development projects or
transactions (including corporate or other acquisitions, mergers,
consolidations, joint ventures and similar transactions) considered by the
Company. During 1995, the Company paid HFS $337,000 for advisory services
rendered to the Company pursuant to the Advisory Services Agreement. In
connection with the termination of the Advisory Agreement, the Company has
agreed to pay HFS $1.14 million if the Closing occurs. Effective as of January
24, 1996, HFS has agreed to provide advisory services pursuant to the Corporate
Services Agreement.

         Facility Sublease. Pursuant to a sublease which commenced on the
Distribution Date and was terminated on March 1, 1996, the Company subleased
approximately 7,500 square feet of office space located at 339 Jefferson Road,
Parsippany, New Jersey 07054 from HFS at an annual rental of $130,000. During
1995, the Company paid HFS $130,000 pursuant to the Facility Sublease.

         Travelodge Acquisition. On January 23, 1996 the Company completed the
Travelodge Acquisition. In connection with the Travelodge Acquisition, the
Company paid approximately $2 million as an advisory fee to HFS for advisory
services rendered to the Company by HFS in connection with that transaction.
Such advisory fee was not paid in connection with the Advisory Agreement.
Concurrently with the purchase, HFS acquired from Forte Hotels, Inc. and Forte
Plc, the indirect parent of Forte USA, Inc., for $39.3 million, the "Travelodge"
and "Thriftlodge" franchise systems and the related trademarks and tradenames in
North America, which HFS has licensed to the Company under a separately
negotiated franchise agreement. Under this franchise agreement, the Company is
required to pay to HFS annual franchise fees equal to 4% of gross room revenues
for the hotel properties acquired by the Company plus 4% of gross room revenues
for national marketing and reservation services provided

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                                       33
    
<PAGE>


   
by HFS. In addition, the Company is required to pay HFS a license fee equal to
4% of gross room revenues multiplied by the Company's percentage interest in
each of the hotel properties owned by joint ventures in which the Company
acquired an interest, plus an additional amount, generally equal to 4.5% of
gross room revenues, for national marketing and reservation services provided by
HFS. The franchise agreement has a scheduled terms of 20 years but may be
terminated by the Company prior to its scheduled expiration upon the payment of
liquidated damages by the Company.

         Management Overlap and Conflicts of Interest. Messrs. Buckman, Edelman,
Holmes, Silverman, Smith and Stone are directors of HFS. As a result, there is
substantial overlap in the boards of directors of the Company and HFS. Due to
such commonality of management, certain conflicts of interest may arise with
respect to the administration of the ongoing relationships between HFS and the
Company. In particular, such conflicts may arise with respect to the Financing
Agreement, as amended, and the various franchise agreements between the Company
and HFS. It is anticipated that these conflicts of interest, to the extent that
they arise, will be resolved by consultation with independent financial and
legal advisors and determinations made by disinterested directors. The
resolution of such disagreements and/or conflicts of interests will, however, be
more difficult than would otherwise be the case due to the level of commonality
between the Company's and HFS's management. Moreover, such disagreements and/or
conflicts of interest may be resolved in a manner that may appear to be more
favorable to HFS or the Company, as the case may be.

Relationships with Chartwell and FSNL

         In addition to the Initial Chartwell Investment and the Proposed
Chartwell/FSNL Investment, the Company, Chartwell, FSNL and certain of their
affiliates have engaged in the transactions and have the relationships described
below.

         Initial Stock Purchase Agreement. In connection with the Initial
Chartwell Investment, Chartwell and the Company entered into a stock purchase
agreement dated as of December 20, 1995 (the "Initial Stock Purchase
Agreement"), pursuant to which Chartwell acquired 904,930, or approximately
16.6%, of the outstanding shares of Common Stock of the Company (the "16.6%
Block"). The Initial Stock Purchase Agreement provides that so long as Chartwell
remains a holder of 15% or more of the Company's shares of Common Stock (a "15%
Holder"), the Company will nominate as Directors two nominees selected by
Chartwell, and so long as Chartwell remains a holder of more than 10%, but less
than 15%, of the Company's shares of Common Stock (a "10% Holder"), the Company
will nominate as Director one nominee selected by Chartwell. If Chartwell ceases
to be either a 15% Holder or a 10% Holder, then the Company will no longer be
required to nominate as Director any nominees selected by Chartwell.

         The Initial Stock Purchase Agreement also provides for certain
restrictions on the transfer of Chartwell's 16.6% Block, including prohibitions
on sales made other than pursuant to an effective registration statement under
the Securities Act or in "brokers' transactions" pursuant to Rule 144 of the
Securities Act. Chartwell is required to obtain the Company's consent prior to
the consummation of any proposed sale of its 16.6% Block, other than a sale made
pursuant to a registration statement or in a broker's transaction.

         Initial Registration Rights Agreement. Concurrently with entering into
the Initial Stock Purchase Agreement, Chartwell and the Company entered into a
registration rights agreement (the "Initial Registration Rights Agreement").
Pursuant to that agreement, if the Company has withheld its consent to a
proposed sale of Chartwell's 16% Block as contemplated in the Initial Stock
Purchase Agreement, Chartwell (or its assignee) will have the right to make a
written request for a demand registration under the Securities Act in order to
register all, but not less than all, of its 16% Block. In addition, under the
Initial Registration Rights Agreement, Chartwell has an incidental registration
right to have its securities included in registrations of securities made by the
Company for its own account or for the account of a stockholder. The Initial
Registration Rights Agreement will terminate upon the closing of the Proposed
Chartwell/FSNL Investment.

         Vicksburg Facility. In addition to the Initial Chartwell Investment and
the Proposed Chartwell/FSNL Investment, Chartwell Leisure Associates L.P., an
affiliate of Chartwell and Messrs. Fisher, Edelman and Leland ("Chartwell
Leisure"), has entered into an agreement with Funtricity Vicksburg Family
Entertainment Park, Inc., a wholly-owned subsidiary of Six Flags Theme Parks,
Inc., to develop a family entertainment center in Vicksburg, Mississippi (the
"Vicksburg Facility") on land which is ground leased by Chartwell Leisure from
affiliates of

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                                       34
    
<PAGE>


   
Rainbow Casino Corporation (collectively, "Rainbow"). As an inducement to
Chartwell Leisure to provide financing for the Vicksburg Facility, commencing
May 1, 1995, the opening date of the Vicksburg Facility, the Company and
Chartwell Leisure share principal and interest payments on a loan to Rainbow,
with Chartwell Leisure's share ranging from 14% to 27%, of such payments,
adjusted annually. Similarly, HFS and Chartwell Leisure share marketing fees
from Rainbow with Chartwell Leisure's share ranging from 20% to 27% of such
payments, adjusted annually. Chartwell Leisure has agreed to share with HFS 50%
of the net cash flow payable to Chartwell Leisure in respect of the Vicksburg
Facility and HFS has agreed to share such amounts pro rata with the Company
based on the relative amounts paid by HFS and the Company, respectively, to
Chartwell Leisure each year.

         Chartwell Hotels. Chartwell Hotels Associates, a Delaware general
partnership, and Chartwell Hotels II Associates, a Delaware general partnership,
which are both affiliates of Chartwell and Messrs. Edelman, Fisher and Leland
(collectively, "Chartwell Hotels"), and their affiliate Chequers Investment
Associates, have acquired certain hotels and mortgages secured by hotels from
the Resolution Trust Corporation. In two transactions with Chartwell Hotels,
entered into in November 1992 and May 1993, and each amended in December 1994,
which have resulted in and will result in the addition of hotels to HFS's
franchise systems, HFS has advanced approximately $10 million, and has agreed to
advance up to an additional $4 million if certain additional property
conversions and other requirements are met, in return for Chartwell Hotels'
agreement to franchise the properties with one of HFS's brands. Subject to the
exceptions described below, all hotels owned by Chartwell Hotels will pay
royalties once they become part of HFS's franchise systems, and a portion of
these royalties will be credited toward the recovery of HFS's $10 million
advance. With the consent of HFS, Chartwell Hotels may elect not to operate a
hotel as a franchised hotel, provided that it pays HFS a percentage of gross
room sales in lieu of royalties (the "Non-Franchised Property Fee"). In
addition, in the event that the improvement costs required to upgrade any
Chartwell Hotels property so that such property meets HFS's franchise
requirements exceed a threshold amount, the property will not be required to be
operated under an HFS brand but Chartwell Hotels will be required to pay HFS a
certain fee in connection with such property (the "Unimproved Property Fee").
The entire amount of any Unimproved Property Fees and Non- Franchised Property
Fees will be credited toward the recovery of HFS's $10 million advance. Each
advance is required to be fully recovered over a maximum five-year period
following the advance. In addition, as individual properties convert to HFS
brands, HFS will make additional advances to the franchisee of such properties
to fund costs incurred in connection with the conversion. Those advances are
required to be repaid with interest by the franchisee over a three year period
and that repayment has been guaranteed by Chartwell Hotels.

         Chartwell Hotels Associates and HFS are also parties to a letter
agreement dated January 1, 1994 terminating an agreement dated November 17, 1992
whereby HFS had agreed to provide certain consulting services to Chartwell
Hotels Associates. Under the termination letter dated January 1, 1994, Chartwell
Hotels Associates agreed to pay HFS a fee of $2 million, payable over five
years, in full consideration of the termination of those consulting
arrangements.

         Stockholders' Agreement. In connection with the Proposed Chartwell/FSNL
Investment, Chartwell and FSNL have entered into a stockholders' agreement which
will become effective only upon the closing of the Proposed Chartwell/FSNL
Investment (the "Stockholders' Agreement"). The Stockholders' Agreement provides
that Chartwell and FSNL will vote their shares of Common Stock to elect as a
Director of the Company one nominee selected by FSNL and any number of nominees
selected by Chartwell, and that FSNL will vote its shares of Common Stock at all
meetings of stockholders of the Company and in any written consent in the manner
directed by Chartwell. The Stockholders' Agreement also provides for certain
restrictions on the transfer of their shares of Common Stock and on future
acquisitions of shares of Common Stock by Chartwell and FSNL. Upon the
Stockholders' Agreement becoming effective, for a period of six years, FSNL will
be prohibited from transferring its shares to persons other than Chartwell and
certain other permitted transferees identified in the Stockholders' Agreement.
Additionally, under the Stockholders' Agreement, FSNL is afforded certain
"tag-along" rights exercisable by it upon a sale of shares by Chartwell or upon
a request by Chartwell of a Demand Registration Statement pursuant to the
Registration Rights Agreement. Chartwell may sell its shares to FSNL and certain
other permitted transferees identified in the Stockholders' Agreement and to
third parties, provided that Chartwell allows for FSNL to "tag-along" in the
event of sale to any third party. Chartwell may also require FSNL to sell its
shares to a third party offering to purchase all of Chartwell's and FSNL's
shares of Common Stock.

         Third Avenue Lease. In March 1996, the Company entered into a lease
with an affiliate of Chartwell and an unaffiliated third party, as landlords,
pursuant to which the Company has leased approximately 18,700 square feet of
office space located at 605 Third Avenue, New York, New York for a period of ten
years. Under this lease, the
    

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                                       35

<PAGE>


   
Company is obligated to pay approximately $542,000 per year for each of the
first five years, and approximately $600,000 per year for each of the last five
years, of the term of the lease for the use of such office space. The terms of
this lease are, in the opinion of the Company, substantially similar to the
market terms that would be available from a third party for a similar property.

Relationships with Mr. Edelman

         Mr. Edelman is of counsel to Battle Fowler LLP, a New York City law
firm that is representing the Company in various matters relating to the
Proposed Chrartwell/FSNL Investment and has represented the Company, HFS and
certain Chartwell Parties in the past with respect to various legal matters.
That firm has represented the Company in connection with two of its open and
operating casino gaming ventures. The Company expects to continue to utilize
that firm after the closing of the Proposed Chartwell/FSNL Investment. In
addition, Mr. Edelman was retained as a consultant to the Company in connection
with the development of the Company's proposed casino projects in Pittsburgh and
Erie, Pennsylvania, for the period from March 1994 through June 1995. During
such period, Mr. Edelman was paid a fee of approximately $5,000 per month for
providing such consulting services. That consulting agreement was terminated in
January 1996.

Relationships with Mr. Stone

         Mr. Stone is currently a director of the Company. In December 1993, Mr.
Stone was a partner in the Washington, D.C. public-affairs firm of Black,
Manafort, Stone & Kelly. At that time, HFS engaged that firm to pursue gaming
opportunities at the direction of the Company. The engagement letter was
assigned by HFS to the Company in connection with the Distribution. The
engagement agreement provided for payment by the Company of a monthly fee of
$20,000 plus reasonable and necessary expenses. That agreement was amended to
provide for a monthly fee of $10,000 plus expenses, commencing in February 1995.
The agreement expired by its terms in June 1995.

         HFS also entered into an agreement dated March 22, 1994 with Mr. Stone
for consulting services relating to the identification and development of
opportunities for the Company to participate in gaming facilities. The
consulting agreement was assigned by HFS to the Company in connection with the
Distribution. Pursuant to the consulting agreement, Mr. Stone is to receive a
consulting fee of 0.5% of the total cost of development of a gaming facility in
respect of which Mr. Stone has rendered material services to the Company and was
instrumental in causing the completion of the facility, plus one percent to five
percent (to be mutually determined by the Company and Mr. Stone through
negotiations on a transaction-by-transaction basis) of the proceeds to the
Company from such facility after the Company receives a return of its
investment. This agreement with Mr. Stone does not have a stated duration and is
terminable by the Company upon notice to Mr. Stone. The Company did not pay Mr.
Stone any fees under this agreement during 1995. Because the Company has decided
to pursue investments in the lodging industry, the Company does not expect to
have any future payment obligations to Mr. Stone under this agreement.

    
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                                       36

<PAGE>



                                     PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         (a)      1.       Financial Statements:

                           See Index to Financial Statements on page F-1 hereof.

                  2.       Financial Statement Schedule:

                           Financial statement schedules and supplementary data
                           are omitted for the reason that they are not
                           applicable or the required information is included in
                           the consolidated financial statements or notes
                           thereto.

                  3.       Exhibits:

                           See Exhibit Index commencing on page E-1 hereof.

         (b)      Reports on Form 8-K

                  None.

         (c)      See response to Item 14(a)(3) above.

         (d)      None.

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<PAGE>



                                   SIGNATURES
   
         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report on Form 10-K/A
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                                NATIONAL LODGING CORP.



                                                By:   /s/ Martin L. Edelman
                                                      ---------------------
                                                      Martin L. Edelman
                                                      President
                                                      Date: May 24, 1996


Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report on Form 10-K/A has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

<TABLE>
<S>                                        <C>                                      <C>

Signature                                   Title                                   Date

         *                                  Chairman of the Board, Chief            May 24, 1996
- --------------------------------
Richard L. Fisher                           Executive Officer

/s/ Martin L. Edelman                       Director and President                  May 24, 1996
- --------------------------------
Martin L. Edelman

         *                      
- --------------------------------            Chief Financial Officer                 May 24, 1996
Kenneth J. Weber                            (principal financial and
                                            accounting officer)

         *                                  Director                                May 24, 1996
- --------------------------------
Henry R. Silverman

         *                                  Director                                May 24, 1996
- --------------------------------
Stephen P. Holmes

         *                                  Director                                May 24, 1996
- --------------------------------
James E. Buckman

         *                                  Director                                May 24, 1996
- --------------------------------
Marc E. Leland

         *                                  Director                                May 24, 1996
- --------------------------------
Michael J. Kennedy

         *                                  Director                                May 24, 1996
- --------------------------------
Robert F. Smith

         *                                  Director                                May 24, 1996
- --------------------------------
Roger J. Stone

                                                                                    May 24, 1996
*By:/s/ Martin L. Edelman
    ----------------------------
      Martin L. Edelman
      Attorney-in-Fact
</TABLE>
    


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                                       38

<PAGE>



                                                   EXHIBIT INDEX

<TABLE>
<CAPTION>

EXHIBIT NO.                DESCRIPTION                                                                  PAGE
<S>                        <C>                                                                          <C>

2.1                        Transfer and Distribution
                           Agreement, dated as of November 22, 1994, between the
                           Company and HFS. (Incorporated by reference to the
                           Company's Current Report on Form 8-K, dated December
                           2, 1994, Exhibit 2.1).

2.2                        Agreement and Plan of Merger and Reorganization, dated as of
                           January 17, 1995, by and among Boomtown, Tweety Sub, Inc. and the
                           Company.  (Incorporated by reference to the Company's Current
                           Report on Form 8-K, dated February 1, 1995, Exhibit 2.1).

2.3                        Agreement and Plan of Merger by and among National Gaming Corp.,
                           NGC Acquisition Corp. and Par-A-Dice Gaming Corporation, dated
                           December 28, 1994.  (Incorporated by reference to the Company's
                           Annual Report on Form 10-K, dated December 31, 1994, Exhibit 2.3).

2.4                        Stock Purchase Agreement, dated as of December 19, 1995, between
                           Forte USA and the Company.  (Incorporated by reference to the
                           Company's Current Report on Form 8-K, dated January 23, 1996,
                           Exhibit 2.1).

2.5                        Amendment No. 1 to Stock Purchase Agreement, dated as of January
                           1996, between Forte USA, Inc. and the Company.  (Incorporated by
                           reference to the Company's Current Report on Form 8-K, dated
                           January 23, 1996, Exhibit 2.2).

2.6                        Stock Purchase Agreement, dated as of December 20, 1995, by and
                           between Chartwell Leisure Associates L.P. II and the Company.**

2.7                        Stock Purchase Agreement, dated as of February 14, 1996, by and
                           between Chartwell Leisure Associates L.P. II, FSNL LLC and the
                           Company.**

2.8                        Form of Amended and Restated
                           Stock Purchase Agreement, dated as of March 14, 1996,
                           by and among Chartwell Leisure Associates L.P.
                           II, FSNL LLC and the Company.**

3.1                        Restated Certificate of Incorporation of the Company.  (Incorporated
                           by reference to the Company's Current Report on Form 8-K, dated
                           December 2, 1994, Exhibit 3.1).

3.2                        Amended and Restated Bylaws of the Company.  (Incorporated by
                           reference to the Company's Current Report on Form 8-K, dated
                           December 2, 1994, Exhibit 3.2).

4.1                        Form of Common Stock Certificate.  (Incorporated by reference to
                           Amendment No. 2 to the Company's Registration Statement on Form
                           10/A (File No. 0-024794), dated November 2, 1994, Exhibit 4.1).

10.1                       Interim Financing Agreement, dated as of November 22, 1994,
                           between the Company and HFS.  (Incorporated by reference to the
                           Company's Current Report on Form 8-K, dated December 2, 1994,
                           Exhibit 10.1).
</TABLE>




*        Filed herewith.
**       Previously filed.
1        Management contract or compensatory plan or arrangement.


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                                       E-1

<PAGE>


<TABLE>
<CAPTION>

EXHIBIT NO.                DESCRIPTION                                                                  PAGE
<S>                        <C>                                                                          <C>

10.2                       Gaming Related Marketing Services Agreement, dated as
                           of November 22, 1994, between the Company and HFS.
                           (Incorporated by reference to the Company's Current
                           Report on Form 8-K, dated December 2, 1994, Exhibit
                           10.2).

10.3                       Gaming Related Advisory Services Agreement, dated as
                           of November 22, 1994, between the Company and HFS.
                           (Incorporated by reference to the Company's Current
                           Report on Form 8-K, dated December 2, 1994, Exhibit
                           10.3).

10.4                       Corporate Services Agreement, dated as of November
                           22, 1994, between the Company and HFS. (Incorporated
                           by reference to the Company's Current Report on Form
                           8-K, dated December 2, 1994, Exhibit 10.4).

10.5                       Facility Lease, dated as of November 22, 1994,
                           between the Company and HFS. (Incorporated by
                           reference to the Company's Current Report on Form
                           8-K, dated December 2, 1994, Exhibit 10.5).

10.6                       Tax Sharing and Indemnification Agreement, dated as
                           of November 22, 1994, between the Company and HFS.
                           (Incorporated by reference to the Company's Current
                           Report on Form 8-K, dated December 2, 1994, Exhibit
                           10.6).

10.7                       Employment Agreement, dated as of November 22, 1994, between the
                           Company and Henry R. Silverman.  (Incorporated by reference to the
                           Company's Current Report on Form 8-K, dated December 2, 1994,
                           Exhibit 10.7).1

10.8                       Employment Agreement, dated as of June 6, 1994, between Robert S.
                           Kingsley and HFS (Incorporated by reference to Amendment No. 1 to
                           the Company's Registration Statement on Form 10/A (File No. 0-
                           024794), dated October 21, 1994, Exhibit 10.8).1

10.9                       1994 Stock Option Plan of the Company.  (Incorporated by reference
                           to the Company's Current Report on Form 8-K, dated December 2,
                           1994, Exhibit 10.8).1

10.10                      Lease Agreement between HFS Gaming Corp. as Landlord and
                           Mississippi-I Gaming, L.P. as Tenant, dated as of April 27, 1994.
                           (Incorporated by reference to HFS' Form 10-Q for the quarter ended
                           March 31, 1994, Exhibit 10.2).

10.11                      Marketing Services Agreement, dated as of April 27, 1994, by and
                           among Boomtown, Inc. and HFS Gaming Corp.  (Incorporated by
                           reference to HFS' Form 10-Q for the quarter ended March 31, 1994,
                           Exhibit 10.3).

10.12                      Asset Purchase and Sale Agreement, dated as of April
                           27, 1994, by and between HFS Gaming Corp. and
                           Mississippi-I Gaming, L.P. (Incorporated by reference
                           to HFS' Form 10-Q for the quarter ended March 31,
                           1994, Exhibit 10.1).

10.13                      Casino Financing Agreement, dated as of August 3, 1993, between
                           HFS and Rainbow Casino Corporation.  (Incorporated by reference to
                           HFS' Form 10-K for the year ended December 31, 1993, Exhibit
                           10.31).
</TABLE>



*        Filed herewith.
**       Previously filed.
1        Management contract or compensatory plan or arrangement.


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                                       E-2

<PAGE>


<TABLE>
<CAPTION>

EXHIBIT NO.                DESCRIPTION                                                                  PAGE
<S>                        <C>                                                                          <C>

10.13(a)                   Amendment of Casino Financing Agreement, dated as of February 25,
                           1994, between HFS and Rainbow Casino Corporation.  (Incorporated
                           by reference to HFS' Form 10-K for the year ended December 31,
                           1993, Exhibit 10.31(a)).

10.13(b)                   Second Amendment of Casino Financing Agreement, dated
                           as of August 11, 1994, among HFS, Rainbow Casino
                           Corporation, Rainbow Development Corporation and
                           Rainbow Casino - Vicksburg Partnership, L.P.
                           (Incorporated by reference to the Company's Annual
                           Report on Form 10-K, dated December 31, 1994, Exhibit
                           10.13(b)).

10.14                      Marketing Services Agreement, dated as of March 15,
                           1994, between Rainbow Casino Corporation and HFS
                           Gaming Corp. (Incorporated by reference to HFS' Form
                           10-K for the year ended December 31, 1993, Exhibit
                           10.32).

10.15                      Consolidation Agreement, dated as of March 29, 1995,
                           among Rainbow Casino Corporation, National Gaming
                           Mississippi Inc., HFS Gaming Corp., Alliance Gaming
                           Corp., United Gaming Corp., Rainbow Casino -
                           Vicksburg Partnership, L.P., Mr. John A. Barlett,
                           Jr., Mr. Leigh Seipel, Rainbow Development
                           Corporation and the Company. (Incorporated by
                           reference to the Company's Annual Report on Form
                           10-K, dated December 31, 1994, Exhibit 10.15).

10.16                      Agreement, dated as of March 29, 1995, between the
                           Rainbow Casino Corporation and National Gaming
                           Mississippi, Inc. (Incorporated by reference to the
                           Company's Annual Report on Form 10-K, dated December
                           31, 1994, Exhibit 10.16).

10.17                      Loan Agreement, dated as of October 26, 1993, among Alpha
                           Hospitality Corporation, Alpha Gulf Coast, Inc., as Borrower, and
                           HFS Gaming Corp., as Lender.  (Incorporated by reference to HFS'
                           Registration Statement on Form S-1 (Registration No. 33-70706,
                           Exhibit 10.40).

10.18                      Marketing Services Agreement, dated as of October 26, 1993, among
                           Alpha Gulf Coast, Inc., HFS Gaming Corp. and HFS.  (Incorporated
                           by reference to Amendment No. 1 to the Company's Registration
                           Statement on Form 10/A (File No. 0-024794), dated October 21, 1994,
                           Exhibit 10.17).

10.19                      Subscription Agreement, dated March 4, 1994, between Century
                           Casinos Management, Inc. and HFS.  (Incorporated by reference to
                           HFS' Form 10-K for the year ended December 31, 1993, Exhibit
                           10.36).

10.20                      Marketing Services Agreement, dated as of March 4, 1994, between
                           Century Casinos Management, Inc. and HFS Gaming Corp.
                           (Incorporated by reference to Amendment No. 1 to the Company's
                           Registration Statement on Form 10/A (File No. 0-024794), dated
                           October 21, 1994, Exhibit 10.19).
</TABLE>



*        Filed herewith.
**       Previously filed.
1        Management contract or compensatory plan or arrangement.


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                                       E-3

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.                DESCRIPTION                                                                  PAGE
<S>                        <C>                                                                          <C>

10.21                      Assignment Agreement, dated as of April 14, 1994, by and among
                           Bennett Funding, Inc. and Gamma International, Ltd., as Assignors,
                           HFS as Assignee, and Alfred J. Luciani D/B/A Luciani & Associates
                           LLC.  (Incorporated by reference to Amendment No. 1 to the
                           Company's Registration Statement on Form 10/A (File No.
                           0-024794), dated October 21, 1994, Exhibit 10.20).

10.22                      Preliminary Development Agreement, dated February 28, 1994,
                           between HFS and the Urban Redevelopment Authority of the City of
                           Pittsburgh.  (Incorporated by reference to HFS' Form 10-K for the
                           year ended December 31, 1993, Exhibit 10.35).

10.23                      Letter of Intent, dated March 1, 1994, between the Urban
                           Redevelopment Authority of the City of Pittsburgh and HFS.
                           (Incorporated by reference to Amendment No. 1 to the Company's
                           Registration Statement on Form 10/A (File No. 0-024794), dated
                           October 21, 1994, Exhibit 10.22).

10.24                      Memorandum of Understanding, dated April 14, 1994, between HFS
                           and The Erie Professional Associates.  (Incorporated by reference to
                           Amendment No. 1 to the Company's Registration Statement on Form
                           10/A (File No. 0-024794), dated October 21, 1994, Exhibit 10.23).

10.25                      Joint Venture Agreement of Erie Casino Associates, dated as of May
                           18, 1994, between The Erie Professional Associates and Keystone Erie
                           Gaming, Inc.  (Incorporated by reference to Amendment No. 1 to the
                           Company's Registration Statement on Form 10/A (File No.
                           0-024794), dated October 21, 1994, Exhibit 10.24).

10.26                      Letter of Intent, dated February 24, 1994, between Jumers of
                           St. Charles, Inc. and HFS.  (Incorporated by reference to Amendment
                           No. 1 to the Company's Registration Statement on Form 10/A (File
                           No. 0-024794), dated October 21, 1994, Exhibit 10.25).

10.27                      Joint Venture Agreement, dated as of October 1, 1994, between
                           Keystone Pittsburgh Gaming, Inc. and The Pittsburgh Professional
                           Associates.  (Incorporated by reference to Amendment No. 1 to the
                           Company's Registration Statement on Form 10/A (File No. 0-024794),
                           dated October 21, 1994, Exhibit 10.26).

10.28                      Amended and Restated Preferred Stock Purchase Agreement, dated as
                           of October 6, 1993, between HFS Gaming Corp. and Odyssey Gaming
                           Corporation.  (Incorporated by reference to HFS' Registration
                           Statement on Form S-1 (Registration No. 33-70706, Exhibit 10.39).

10.29                      Earnout Agreement, dated as of September 30, 1991, and amended
                           and restated as of December 20, 1991 among HFS and Messrs. Stanley
                           S. Tollman and Monty D. Hundley.  (Incorporated by reference to
                           HFS' Registration Statement on Form S-1 (Registration No. 33-
                           51422), Exhibit 10.17).

10.29(a)                   Letter Agreement, dated as of May 26, 1993, among HFS and
                           Bryanston Group, Inc. relating to the modification of the Earnout
                           Agreement.  (Incorporated by reference to HFS' Registration
                           Statement on Form S-1 (Registration No. 33-63398), Exhibit
                           10.18(a)).
</TABLE>



*        Filed herewith.
**       Previously filed.
1        Management contract or compensatory plan or arrangement.


C/M:  11752.0003 347035.13 05/24/96 3:21PM
                                       E-4

<PAGE>


<TABLE>
<CAPTION>

EXHIBIT NO.                DESCRIPTION                                                                  PAGE
<S>                        <C>                                                                          <C>

10.29(b)                   Amendment to Agreement, dated December 1993, between HFS and
                           Bryanston Group, Inc. (Incorporated by reference to HFS' Form 10-K
                           for the year ended December 31, 1993, Exhibit 10.9(b)).

10.30                      Option Agreement, dated as of September 30, 1994, between HFS and
                           the Urban Redevelopment Authority of the City of Pittsburgh.
                           (Incorporated by reference to Amendment No. 1 to the Company's
                           Registration Statement on Form 10/A (File No. 0-024794), dated
                           October 21, 1994, Exhibit 10.29).

10.31                      Memorandum of Understanding, dated October 1, 1994, between HFS
                           and The Pittsburgh Professional Associates.  (Incorporated by
                           reference to Amendment No. 1 to the Company's Registration
                           Statement on Form 10/A (File No. 0-024794), dated October 21, 1994,
                           Exhibit 10.31).

10.32                      Option Agreement, dated as of October 26, 1993, between HFS
                           Gaming Corp. and Alpha Hospitality Corporation.  (Incorporated by
                           reference to Amendment No. 1 to the Company's Registration
                           Statement on Form 10/A (File No. 0-024794), dated October 21, 1994,
                           Exhibit 10.32).

10.33                      Agreement, dated as of June 30, 1994, between HFS and Chartwell
                           Leisure Associates, L.P. (Incorporated by reference to Amendment No.
                           1 to the Company's Registration Statement on Form 10/A (File No. 0-
                           024794), dated October 21, 1994, Exhibit 10.33).

10.33(a)                   Sharing Agreement, dated November 22, 1994, among
                           HFS, Chartwell Leisure Associates, L.P. and the
                           Company. (Incorporated by reference to the Company's
                           Annual Report on Form 10-K, dated December 31, 1994,
                           Exhibit 10.33(a)).

10.34                      Letter Agreement, dated September 11, 1994, between HFS and
                           Century Casinos, Inc.  (Incorporated by reference to Amendment No.
                           1 to the Company's Registration Statement on Form 10/A (File No. 0-
                           024794), dated October 21, 1994, Exhibit 10.34).

10.35                      Letter Agreement, dated March 4, 1994, between HFS and Century
                           Casinos Management, Inc.  (Incorporated by reference to Amendment
                           No. 1 to the Company's Registration Statement on Form 10/A (File
                           No. 0-024794), dated October 21, 1994, Exhibit 10.35).

10.36                      Guarantee Letter, dated January 17, 1995, by and among HFS, the
                           Company and Boomtown.  (Incorporated by reference to the
                           Company's Current Report on Form 8-K dated February 1, 1995,
                           Exhibit 10.1).

10.37                      Form of Option Agreement, dated as of November 6,
                           1995, between National Gaming Mississippi, Inc. and
                           Mississippi - I Gaming, L.P. (Incorporated by
                           reference to the Company's Quarterly Report on Form
                           10-Q for the quarter ended September 30, 1995,
                           Exhibit 10.1).

10.38                      Form of Lease Amendment, dated as of November 6,
                           1995, between National Gaming Mississippi, Inc. and
                           Mississippi - I Gaming, L.P. (Incorporated by
                           reference to the Company's Quarterly Report on Form
                           10-Q for the quarter ended September 30, 1995,
                           Exhibit 10.2).

</TABLE>


*        Filed herewith.
**       Previously filed.
1        Management contract or compensatory plan or arrangement.


C/M:  11752.0003 347035.13 05/24/96 3:21PM
                                       E-5

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.                DESCRIPTION                                                                  PAGE
<S>                        <C>                                                                          <C>

10.39                      Letter Agreement, dated August 18, 1995, among the Company, HFS
                           Incorporated and Bryanston Group, Inc.  (Incorporated by reference to
                           the Company's Quarterly Report on Form 10-Q for the quarter ended
                           September 30, 1995, Exhibit 10.3).

10.40                      Registration Rights Agreement, dated as of December 20, 1995,
                           between Chartwell Leisure Associates L.P. II and the Company.**

10.41                      Agreement Among Purchasers, dated as of January 22,
                           1996, among HFS Incorporated, Motels of America, Inc.
                           and the Company. (Incorporated by reference to the
                           Company's Current Report on Form 8-K, dated January
                           23, 1996, Exhibit 10.1).

10.42                      Credit Agreement, dated as of January 23, 1996, among Chemical
                           Bank, Bankers Trust Company, various banks named therein and the
                           Company.  (Incorporated by reference to the Company's Current
                           Report on Form 8-K, dated January 23, 1996, Exhibit 10.2).

10.43                      Pledge Agreement, dated as of January 23, 1996, among
                           the Company, Forte Hotels, Inc. and the other parties
                           named therein, as Pledgors, and Bankers Trust
                           Company, as Pledgee and Collateral Agent.
                           (Incorporated by reference to the Company's Current
                           Report on Form 8-K, dated January 23, 1996, Exhibit
                           10.3).

10.44                      Form of Agreement of Lease between Fisher 40th & 3rd Company
                           and Hawaiian Realty, Inc., as landlord, and the Company, as tenant.**

10.45                      Employment and Noncompetition Agreement, dated as of March 1,
                           1996, by and between Kenneth J. Weber and the Company.** 1

10.46                      Employment Letter Agreement, dated as of January 23, 1996, between
                           Douglas H. Verner and the Company.** 1

10.47                      Letter Loan Agreement, dated January 22, 1996, between Bank of
                           America National Trust and Savings Association and Forte Hotels,
                           Inc.**

   
10.48                      Employment Letter Agreement,
                           dated as of January 23, 1996, by and between Carl
                           Winston and the Company. (Incorporated by reference
                           to the Company's Quarterly Report on Form 10-Q for
                           the quarter ended March 31, 1996, Exhibit 10.1).1

10.49                      License Agreement, dated as of January 23, 1996, between Bear
                           Acquisition Corp., as Licensor, and Forte Hotels, Inc., as Licensee.*

21.1                       Subsidiaries of the Company.**
    

</TABLE>



*        Filed herewith.
**       Previously filed.
1        Management contract or compensatory plan or arrangement.


C/M:  11752.0003 347035.13 05/24/96 3:21PM
                                       E-6

<PAGE>
NATIONAL LODGING CORP. AND
SUBSIDIARIES

Consolidated Financial Statements for the
Years Ended December 31, 1995 and 1994, and
Independent Auditors' Report


C/M:  11752.0003 368431.2  

<PAGE>



NATIONAL LODGING CORP. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




                                                                          Page
CONSOLIDATED FINANCIAL STATEMENTS

  Independent Auditors' Report                                            F-2

  Consolidated Balance Sheets at December 31, 1995 and 1994               F-3

  Consolidated Statements of Operations for the Years
    Ended December 31, 1995 and 1994 and the Period
    August 1, 1993 (date of inception) to December 31, 1993               F-4

  Consolidated Statements of Stockholders' Equity for the
    Years Ended December 31, 1995 and 1994 and the Period
    August 1, 1993 (date of inception) to December 31, 1993               F-5

  Consolidated Statements of Cash Flows for the Years
    Ended December 31, 1995 and 1994 and the Period
    August 1, 1993 (date of inception) to December 31, 1993               F-6

  Notes to Consolidated Financial Statements                       F-7 to F-17

C/M:  11752.0003 368431.2  
                                        F-1

<PAGE>



INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
National Lodging Corp.

We have audited the accompanying consolidated balance sheets of National Lodging
Corp. (previously known as National Gaming Corp.) and its subsidiaries as of
December 31, 1995 and 1994 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1995 and 1994 and the period August 1, 1993 (date of inception) to December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of National Lodging Corp.
and its subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years ended December 31, 1995 and 1994
and the period August 1, 1993 (date of inception) to December 31, 1993, in
conformity with generally accepted accounting principles.


Deloitte & Touche LLP                      /s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey

March 11, 1996

C/M:  11752.0003 368431.2  
                                       F-2

<PAGE>



NATIONAL LODGING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(In Thousands, Except Share Amounts)




ASSETS                                                   1995         1994

CURRENT ASSETS:                                     $    51,470  $   44,233
  Cash and cash equivalents                              10,481       10,706
  Loans receivable                                          837          901
                                                     
  Prepaid and other current assets

        Total current assets                             62,788       55,840

INVESTMENTS                                              16,700       20,092

LOANS RECEIVABLE                                         7,166        15,375

JOINT VENTURE INTERESTS                                  -             5,441

OTHER ASSETS                                             420             511

DEFERRED TAXES                                            -            1,636
                                                        - -

TOTAL ASSETS                                        $    87,074   $   98,895
                                                     ===========    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                  $        66 $        384
  Accrued expenses                                          486          943
  Deferred taxes                                              -          589
                                                       - -

        Total current liabilities                           552        1,916

COMMITMENTS AND CONTINGENCIES (Notes 2, 4, 6, 7, 10)

STOCKHOLDERS' EQUITY:
  Preferred stock $1.00 par value - 10,000,000 authorized;
    none issued and outstanding                             -            -
  Common stock, $.01 par value - 100,000,000 authorized;
    5,452,320 and 4,630,020 issued and 
     outstanding, respectively                               55           46
  Paid-in capital                                       106,697       99,611
  Accumulated deficit                                   (20,280)      (2,098)
  Unrealized gain (loss) on securities 
     available for sale                                      50         (580)

          Total stockholders' equity                     86,522       96,979
                                                        -  -

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $    87,074  $    98,895
                                                       ===========  ===========



 See accompanying notes to consolidated financial statements.

C/M:  11752.0003 368431.2  
                                     F-3

<PAGE>



NATIONAL LODGING CORP. AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 AND THE PERIOD
AUGUST 1, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1993
(In Thousands, Except Share Amounts)


<TABLE>
<CAPTION>


                                                         1995          1994       1993

<S>                                                  <C>            <C>         <C>
REVENUE:
  Interest                                            $ 4,012       $ 1,347      $    128
  Gain on sale of securities                              -           1,044            -
                                                               -

Total revenue                                           4,012         2,391          128

EXPENSES:
  Development                                          15,482         2,414          -
  General and administrative                            2,756         2,742          -
  General and administrative - related party            3,247           339           581
                                                            -      -

Total expenses                                         21,485         5,495            581
                                                            -      -


Loss before income tax provision (benefit)           (17,473)       (3,104)          (453)
Income tax provision (benefit)                            709       (1,273)          (186)
                                                           -       -


Net loss                                            $(18,182)      $(1,831)      $   (267)
                                                    ========       =======       =========


PER SHARE INFORMATION:
  Net loss                                            $   (3.57)   $  (0.37)     $  (0.05)
                                                      =========    ========      =========

Weighted average common
  shares outstanding                                    5,099         5,003         5,001



See accompanying notes to consolidated financial statements.


</TABLE>

C/M:  11752.0003 368431.2  
                                        F-4

<PAGE>



NATIONAL LODGING CORP. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 AND THE PERIOD
AUGUST 1, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1993
(In Thousands, Except Share Amounts)




<TABLE>
<CAPTION>

                                                                                  Unrealized
                                                                                 Gain (Loss) On
                                                                                  Securities
                                        Common Stock       Paid-in   Accumulated   Available
                                       Shares      Amount  Capital    Deficit      For Sale        Total

<S>                                   <C>         <C>      <C>        <C>         <C>           <C>
ISSUANCE OF CAPITAL STOCK,
  AUGUST 1, 1993                         100      $  -     $    -       $   -        $     -     $    -

Capital contribution from HFS             -          -        12,308        -              -     12,308
Net loss                                  -          -         -         (267)             -        (267)
                                   -    -       -  

BALANCE, DECEMBER 31, 1993              100         -     12,308         (267)              -     12,041

Capital contribution from HFS            -         -     87,349             -               -     87,349
Issuance of shares in connection
  with the Distribution (Note 2)  4,529,520        45       (45)             -              -          -
Issuance of common stock -
  reserved for issuance             100,400         1        (1)             -              -          -
Net loss                              -             -          -       (1,831)              -      (1,831)
Unrealized loss on securities
  available for sale                  -             -         -            -              (580)      (580)
                                 -                -   -

BALANCE, DECEMBER 31, 1994        4,630,020        46     99,611       (2,098)            (580)    96,979

Issuance of shares (Note 9(C))      904,930         9      8,302             -              -       8,311
Issuance of common stock -
  reserved for issuance              71,480         1        (1)             -              -          -
Acquisition and cancellation
  of treasury stock (Note 6(c)     (154,110)       (1)    (1,215)             -             -      (1,216)
Net loss                              -             -          -      (18,182)              -      (18,182)
Reversal of unrealized loss
  related to securities sold          -             -          -             -             580        580
Unrealized gain on securities
  available for sale                  -             -         -              -              50         50
                               -    - -         

BALANCE, DECEMBER 31, 1995        5,452,320     $  55   $106,697     $(20,280)       $     50    $  86,522
                                 ==========     =====   ========     ========        ========    =========


</TABLE>

See accompanying notes to consolidated financial statements.




C/M  11752.0003 368431.1  
                                           F-5

<PAGE>



NATIONAL LODGING CORP. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 AND THE PERIOD
AUGUST 1, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1993
(In Thousands)
- -------------------------------------------------------------------------------


<TABLE>
<CAPTION>


                                                  1995         1994         1993

<S>                                             <C>           <C>           <C>
OPERATING ACTIVITIES:
  Net loss                                      $ (18,182)    $ (1,831)     $  (267)
  Adjustments to reconcile net loss 
   to net cash used in operating 
    activities:
  Amortization of investment loan discounts and
    deferred loan costs                              (45)        (201)         (42)
  Write-off of joint venture interests 
    and investments                                10,485        -            -
  Deferred income taxes                               644        (714)           70
  Deferred financing costs                           (62)        (863)        (129)
  Gain on sale of securities                                   (1,004)
  Loss on sale of land                                520        -            -
  Increase (decrease) from changes in:
    Other current assets                            (139)        (895)          (6)
    Other assets                                    1,006        (395)        (137)
    Accounts payable and other accrued expenses     (775)        1,200          127
                                                   -------     --------      -------
      Net cash used in operating activities       (6,548)      (4,743)        (384)
                                                  --------     --------      -------
INVESTING ACTIVITIES:
  Loans to casino projects                        (1,189)     (18,728)     (10,580)
  Investment in joint ventures and casino 
     projects                                     (4,322)     (24,809)      (5,360)
  Proceeds from investments                         2,360        -            -
  Proceeds from sale of securities                    559       4,697         -
  Proceeds from sale of land                          846        -            -
  Principal payments received on loans              7,220        467         4,016
                                                  ---------    ------      --------
      Net cash provided by (used in) investing
        activities                                  5,474     (38,373)     (11,924)
                                                  ---------   --------     --------
FINANCING ACTIVITIES:
  Issuance of stock                                 8,311        -            -
  Capital contribution from HFS                      -          87,349      12,308
                                                  ---------   --------     --------

      Net cash provided by financing activities     8,311       87,349      12,308
                                                  ---------   --------     --------


NET INCREASE IN CASH AND
  CASH EQUIVALENTS                                  7,237       44,233        -

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                              44,233         -           -
                                                  ---------   --------     --------

CASH AND CASH EQUIVALENTS,
  END OF PERIOD                                  $ 51,470     $ 44,233   $    -
                                                 ========     ========   ========


</TABLE>

See Note 6(a) for noncash investing activity. See accompanying notes to
consolidated financial statements.

C/M  11752.0003 368431.1  
                                        F-6

<PAGE>



NATIONAL LODGING CORP. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 AND
THE PERIOD AUGUST 1, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1993




1. BUSINESS

   National Lodging Corp. (formerly known as National Gaming Corp.) and
   subsidiaries (the "Company") became an independent publicly held entity
   following the distribution of all of the outstanding capital stock of the
   Company by HFS Incorporated ("HFS") to HFS stockholders on November 22, 1994.
   At the distribution date, the Company was engaged in the business of
   developing and owning casino gaming facilities.

   Due to a confluence of negative factors impacting the Company's gaming
   investments and the gaming industry, on November 9, 1995, the Company
   announced a decision by its Board of Directors to curtail future gaming
   investments and focus on investments and acquisitions in nongaming
   industries. On January 23, 1996, the Company acquired the outstanding common
   stock of Forte Hotels, Inc. ("FHI") for approximately $98.4 million subject
   to certain working capital adjustments and commenced engaging in the business
   of hotel ownership, management and development (see Note 4).

2. DISTRIBUTION

   On November 22, 1994 (the "Distribution Date"), HFS distributed to its
   stockholders, one share of the Company Common Stock for every 10 shares owned
   of HFS as of the November 14, 1994 record date. Subsequent to the
   Distribution Date, HFS no longer has an equity interest in the Company.

   The net assets contributed by HFS to the Company in connection with the
   distribution were comprised of the following ($000's):

     Cash                                                              $50,000
     Loans receivable                                                   25,999
     Investments                                                        16,861
     Joint venture interests                                             5,203
     Other - net                                                           157
                                                                       -

     Total net assets contributed                                      $98,220

   At the Distribution Date, the Company and HFS entered into agreements for
   marketing, financing, advisory and corporate services and a facility lease.
   The Company and HFS modified or terminated certain of these arrangements upon
   the acquisition of FHI. The marketing services agreement, which was canceled
   on January 24, 1996, allowed HFS the right to provide marketing services to
   any gaming facility that the Company affiliated with through November 2019.
   Pursuant to the financing agreement, HFS committed to provide up to $75
   million in guarantees or loans at an interest rate of LIBOR plus 250 basis
   points to the Company, for a fee equal to 2% of its annual commitment. The
   agreement was modified on January 23, 1996 to extend the term to coincide
   with the term of the revolving credit facility which was used to finance the
   acquisition of FHI. Included in General and Administrative - Related Party
   expense is $1.5 million and $162,500 for the years ended December 31, 1995
   and 1994, respectively, related to the

C/M  11752.0003 368431.1  
                                        F-7

<PAGE>



   financing agreement. HFS provided investment advisory services to the Company
   under a 25-year arrangement for a fee equal to 2% of the total development or
   acquisition costs associated with completed transactions. In December 1994,
   the Company incurred costs of approximately $90,000 relating to the Company's
   investment in Prescott (see Note 7(b)) pursuant to the advisory agreement.
   The Company and HFS agreed to terminate the advisory agreement on January 22,
   1996. Accordingly, except for advisory services provided by HFS in connection
   with the proposed sale of 4 million shares to Chartwell Leisure Associates
   L.P. II ("Chartwell") and FSNL LLC ("FSNL") (see Note 4(B)) and the
   acquisition of FHI, the Company will no longer be obligated to pay fees to
   HFS under the advisory agreement. Under the corporate services agreement, HFS
   provides the Company with general corporate support services through November
   2019 for consideration equal to the greater of $1.5 million or 2% of the
   Company's revenue up to a maximum fee of $10 million annually. On January 24,
   1996, the Company and HFS modified the agreement to fix the annual fee at
   $1.5 million annually and add advisory services in connection with business
   acquisitions, financings and other transactions by the Company and to limit
   corporate support services to certain corporate accounting services through
   September 30, 1996. The Company subleases 7,500 square feet of office space
   from HFS at $130,000 per year through March 1, 1996.

   The Company's cash requirements prior to the Distribution Date were supported
   by HFS. Significant requirements include the payment of salaries, related
   benefits and development expenditures. Prior to the Distribution Date,
   General and Administrative - Related Party expenses include the allocation of
   certain HFS costs associated with corporate administration and other overhead
   costs based upon actual expenses incurred and an estimate of time spent by
   HFS employees for the benefit of the Company. Management believes that the
   costs allocated to the Company are reasonable. Expenditures made by HFS on
   behalf of the Company represented permanent capital and, accordingly, are
   included in Paid-in Capital through the Distribution Date.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   A. Principles of Consolidation - The consolidated financial statements
      include the accounts and transactions of the Company, together with its
      wholly-owned subsidiaries. All material intercompany balances and
      transactions have been eliminated in consolidation.

   B. Investments and Joint Venture Interests - Costs directly associated with
      the development and acquisition of investments and joint venture interests
      in casino gaming ventures are included with the related investment. Costs
      associated with unsuccessful efforts, lobbying expenses and development
      costs not directly associated with an investment or joint venture interest
      are expensed as incurred.

         Investments in marketable equity securities are considered available
         for sale and are reported at fair value. Unrealized gains and losses
         are excluded from earnings and reported in a separate component of
         stockholder's equity. Management periodically evaluates each investment
         to determine whether a decline in fair value below the amortized cost
         is other than temporary.

         Investments which are nonmarketable equity securities and joint venture
         interests are recorded at the lower of cost or net realizable value.
         Management periodically evaluates such investments based upon the
         present value of anticipated future cash flows, the likelihood of
         favorable casino gaming legislation, evaluation of available financial
         statements and management's judgment about the ability to recover such
         costs over future operations. With respect to investments in which the
         Company has less than a 20 per cent interest, those investments are
         accounted for at cost.


C/M  11752.0003 368431.1  
                                        F-8

<PAGE>



   C. Loan Origination Costs - Included in loans receivable are costs directly
      associated with the issuance of loans to casino gaming entities. These
      costs are amortized over the life of related loans receivable using the
      interest method.

   D. Allowance for Loan Losses - The Company evaluates the collectability of
      loans receivable on a quarterly basis. The major factors considered in
      evaluating potential losses are the current financial position of the
      borrower, general economic considerations and the net realizable value of
      any collateral received. As of December 31, 1995, the Company has not
      provided for any loan losses.

   E. Income Taxes - The Company uses the liability method of recording deferred
      income taxes. Differences in financial and tax reporting result from
      differences in the recognition of income and expenses for financial and
      income tax purposes. Subsequent to the Distribution the Company and its
      subsidiaries file a consolidated federal income tax return.

   F.    Cash Flow Information - The Company considers highly liquid debt
         instruments purchased with an original maturity of three months or less
         to be cash equivalents.

   G. Loss Per Share - Loss per share is computed based upon the number of
      shares outstanding plus the shares issuable in connection with the
      Distribution. Common stock equivalents are not included as they would be
      antidilutive.

   H. Significant Estimates, Risks and Uncertainties - The preparation of
      financial statements in conformity with generally accepted accounting
      principles requires management to make estimates and assumptions that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements
      and the reported amounts of revenues and expenses during the reporting
      period. Actual results could differ from those estimates.

         The Company was engaged in the business of developing and owning casino
         gaming facilities. As such, all of the Company's loans and investments
         are with casino operators, developers or investors. The success of
         casino gaming investments is dependent on a difficult and unpredictable
         regulatory environment, availability of third-party financing,
         successful licensing efforts and the ability to withstand competition
         in existing jurisdictions. During 1995, the Company announced a
         decision by its Board of Directors to curtail future gaming investments
         and focus on investments and acquisitions in nongaming industries. As a
         result, during the third quarter of 1995, the Company began to
         liquidate certain gaming investments and wrote down other investments
         and joint ventures to their estimated net realizable value.

         Management believes, based upon available evidence, that gaming related
         assets at December 31, 1995 are stated at the lower of cost or
         estimated net realizable value, however, the continued uncertainty
         surrounding the ability of these assets to generate positive cash flow
         necessarily results in the potential for future write-downs to present
         these assets at their estimated net realizable value in subsequent
         periods.

4. SUBSEQUENT EVENTS

   A. On January 23, 1996, the Company acquired the outstanding common stock of
      FHI for approximately $98.4 million subject to certain working capital
      adjustments. In related transactions on January 23, 1996 prior to
      consummation of the FHI Acquisition, HFS and Motels of America, Inc.
      acquired from FHI the Travelodge franchise system and 19 motel properties,
      respectively for

C/M  11752.0003 368431.1  
                                        F-9

<PAGE>



      an aggregate purchase price of $71.6 million. The principal assets of FHI
      acquired by the Company include 15 wholly-owned hotels and motels and a
      joint venture interest, ranging from 47% to 77% in 97 other lodging
      facilities. The Company financed $60 million of the purchase price with
      proceeds from a bank revolving credit facility ("Credit Facility") and
      $38.4 million with existing cash. HFS provided advisory services in
      connection with the acquisition for which the Company paid a $1,968,000
      fee.

         The Credit Facility provides up to $125 million of unsecured borrowings
         through December 31, 2001. Revolving loans under the Credit Facility
         may be borrowed, at the Company's option, as Base Rate Loans or
         Eurodollar Loans. Interest on the outstanding principal amount of each
         Base Rate Loan is payable at an annual rate equal to the highest of i)
         the administrative agent's Prime Lending Rate, ii) the Adjusted
         Certificate of Deposit Rate plus 0.50%, or iii) the Federal Funds Rate
         plus 0.50%. The interest on the outstanding principal amount of each
         Eurodollar Loan is payable at an annual rate of the Eurodollar Rate
         plus a margin not to exceed 0.75%. The Company incurred $1.1 million of
         costs related to execution of the Credit Facility and is required to
         pay an annual administration fee of $150,000. The revolving credit
         facility also contains covenants including restrictions on
         indebtedness, maintenance of net worth, minimum interest coverage,
         minimum fixed charge, maximum leverage coverages and others.

         The acquisition described above will be accounted for by the purchase
         method. The operating results of the acquired company will be included
         in the consolidated statements of operations from its acquisition date,
         January 23, 1996. The excess of cost over book value of the net assets
         acquired will be allocated to the acquired hotel properties and joint
         venture interests and will be amortized on a straight-line basis over
         25 years, which reflects the estimated useful lives of the acquired
         properties.

         The following presents the unaudited pro forma consolidated results of
         operations for the year ended December 31, 1995 as if the transactions
         described above occurred on January 1, 1995:


                                          (In Thousands Except
                                             per Share Amounts)
                                                   (Unaudited)

               Revenues                            $69,141
               Net loss                            (21,023)
               Net loss per share                    (4.12)


         The pro forma results are not necessarily indicative of the actual
         results of operations that would have occurred had the transactions
         been consummated as indicated nor are they intended to indicate results
         that may occur in the future.


   B. On February 14, 1996, the Company entered into an agreement with Chartwell
      and FSNL to sell approximately 4 million newly issued shares of
      unregistered Company stock for $57 million. Upon shareholder approval and
      completion of such sale, Chartwell and FSNL will own approximately 52% of
      the outstanding common stock of the Company. The Company chairman and
      chief executive officer, who holds similar positions at HFS, resigned
      effective February 1, 1996 and was replaced by a principal of Chartwell.
      HFS provided advisory services in connection with the transaction for
      which the Company will pay a $1,140,000 fee.

C/M  11752.0003 368431.1  
                                        F-10

<PAGE>




   C. In March 1996, the Company entered into a letter of intent with Capital
      Properties Limited Partnership ("CPLP") to acquire a majority interest in
      CPLP, which owns 20 hotels and a one-half interest in an additional hotel,
      which are limited service hotels, located throughout Canada and franchised
      under the "Travelodge" brand name. The acquisition is expected to be
      accomplished by the Company providing debt/equity financing sufficient to
      retire CPLP's existing bank debt of approximately 132.4 million Canadian
      dollars. The letter of intent provides the Company with future rights to
      acquire the remaining interest in CPLP.

   D. During March 1996, the Company entered into a lease with an affiliate of
      Chartwell and an unaffiliated third party, as landlords, pursuant to which
      the Company has leased approximately 18,700 square feet of office space
      for a period of 10 years. Under this lease, the Company is obligated to
      pay approximately $542,000 per year for each of the first five years, and
      approximately $600,000 per year for each of the last five years of the
      term of the lease for the use of such office space. The terms of this
      lease are, in the opinion of the Company, substantially similar to the
      market terms that would be available from a third party for similar
      property.

5. INCOME TAXES

   As of December 31, 1995, the Company had net tax operating loss carryforwards
   of approximately $13,700,000 available for federal income tax purposes,
   expiring through 2010. The net operating loss carryforward available to
   offset future taxable income will be restricted over several years as a
   result of future changes in ownership, pursuant to section 382 of the
   Internal Revenue Code of 1986 (see Note 4(B)). Prior to the Distribution, the
   Company's taxable losses were included in the consolidated tax return of HFS.
   Income taxes for the Company were calculated based on an allocation of the
   consolidated income tax provision of HFS, considering the Company's results
   of operations in relation to HFS consolidated results of operations. Prior to
   the Distribution, the benefit attributable to the losses also benefited HFS.
   Accordingly, through November 22, 1994 a portion of income tax benefits
   ($813,000 in 1994 and $256,000 in 1993) represent benefits which contributed
   to HFS' consolidated income tax return. These amounts were netted with the
   distribution from HFS, recorded as paid-in-capital.

   The components of the income tax provision (benefit) for the years ended
   December 31, 1995 and 1994 and the period August 1, 1993 (date of inception)
   to December 31, 1993 are as follows ($000's):

                                                   1995     1994    1993
      Current:
        Federal                                  $  -    $(1,551)   $(219)
        State                                      65       (436)     (37)
                                                 ------   -------- -------- 

                                                    -     (1,987)  (256)
                                                
      Deferred:
        Federal                                     472      558      60
        State                                       172      156      10
                                                 ------   -------- -------- 

                                                    644      714      70
                                                 ------   -------- -------- 

      Total income tax provision (benefit)       $  709  $(1,273)$ (186)
                                                 ======  ======= ======



C/M  11752.0003 368431.1  
                                        F-11

<PAGE>



   The components of the deferred income tax assets and liabilities are as
follows ($000's):

                                                                  December 31,
                                                                  1995    1994

      Deferred tax assets:
        Imputed interest on loans                            $     -    $   774
        Unrealized loss on securities available for sale           -        403
        Losses not currently deductible                        1,994         -
        Net tax operating loss carryforward                    5,629        459

                                                               7,623      1,636
        Less: valuation allowance                             (7,623)-

        Net deferred tax asset                                $    -     $1,636

      Deferred tax liabilities: common stock - warrants       $    -     $   589


   The Company's effective income tax rate of 41% for the year ended December
   31, 1994 and the period August 1, 1993 (date of inception) to December 31,
   1993 differs from the statutory federal rate of 35% due to the impact of
   state income taxes. At December 31, 1995, the Company has provided a 100%
   valuation allowance on its deferred tax assets. Management believes the
   valuation allowance is required based upon the Company's history of losses,
   thereby concluding that it is more likely than not that the Company will not
   realize deferred tax assets. As such, the income tax provision consists
   primarily of the write-off of prior year deferred tax assets.

6. LOANS RECEIVABLE

Loans receivable consists of ($000's):

   (a)Consists of a mortgage loan receivable from the Urban Redevelopment
      Authority of the City of Pittsburgh ("URA") in connection with the URA's
      purchase of a 100-acre tract on the Monongahela River in Pittsburgh,
      Pennsylvania. The loan bears interest at 4% which is not payable until
      maturity, and is secured by the entire tract of land. On September 30,
      1995 the URA exercised its option to extend the maturity of its loan due
      the Company from September 30, 1995 to September 30, 1996. The option
      requires that interest payments be remitted during the extension period.
      Such land was expected to be utilized by the Company in connection with
      the development of a riverboat casino facility; however, as a result of
      the URA's decision not to permit gaming on the site, the Company has
      notified the URA that it will not exercise its option to purchase a
      portion of such site and expects to seek collection of the loan in
      September 1996. In January 1996, the Company received $3.8 million of
      principal and accrued interest on the loan.

   (b)Consists of a loan to Rainbow Casino Corporation ("Rainbow") to finance
      the licensing, construction and start-up costs for a dockside casino
      located in Vicksburg, Mississippi which commenced operations in July 1994.
      Under the terms of the promissory note, Rainbow pays $153,383 in monthly
      installments of principal and interest at 7-1/2% through maturity in
      August 2001, before the allocation of loan payments to Chartwell Leisure
      Associates L.P. ("Chartwell Leisure"), an affiliate of Chartwell, in
      connection with the Company's interest in a family entertainment center
      located on the Rainbow site (see Note 7(e)). The loan is secured by a
      first mortgage on existing real and tangible personal property excluding
      certain equipment.

C/M  11752.0003 368431.1  
                                        F-12

<PAGE>




         At the inception of the loan, the Company recorded the loan receivable
         based upon an imputed interest rate of 10% which was determined to be a
         fair market rate based upon comparable loans with similar risk.
         Accordingly, a loan receivable discount approximating $0.8 million was
         recorded and a corresponding amount was assigned to HFS' marketing
         agreements prior to the Distribution. The loan receivable discount is
         being amortized in accordance with the interest method over the life of
         the loan. Accumulated amortization of the loan receivable discount at
         December 31, 1995 was $222,652.

         During 1995, the Company agreed to loan up to an additional $2.0
         million to the partnership that owns the Rainbow casino. The proceeds
         of such loan, together with additional capital to be contributed by the
         general partner of such partnership, will be used to finance certain
         improvements to the casino project, the completion of related
         facilities and provide additional working capital. The loan is
         unsecured and bears interest at 10% per annum and is to repaid in equal
         monthly installments of principal and interest over a seven-year term.
         The Company paid approximately $1.2 million in 1995 in connection with
         the loan.

      (c)During 1995, Bryanston Group, Inc. ("Bryanston"), an affiliate of Alpha
         Hospitality, Inc. ("Alpha"), purchased various Company investments in
         Alpha. The Company received $6.5 million cash and 153,600 shares of the
         Company's common stock in payment of a $7.1 million loan (net of
         discount and deferred loan costs) and approximately $0.6 million of the
         Company's investment in Alpha common stock. The Company reduced
         stockholders' equity by $1.2 million as a result of the repurchase of
         its common stock which was subsequently retired.

7. INVESTMENTS

Investments consists of the following ($000's):
                                                            December 31,
                                                            1995    1994

      Investment in Boomtown Biloxi (a)                  $ 4,840  $ 9,058
      Investment in Prescott (b)                           4,767    4,760
      Investment in common stock (c)                         425      959
      Investment in preferred stock (d)                    3,752    3,845
      Investment in Funtricity (e)                         1,836     -
      Warrants (f)                                         1,080    1,470
                                                            -        -

      Total                                              $16,700  $20,092
                                                         =======  =======

   (a)During 1994, the Company acquired for approximately $8.5 million, plus
      expenses, and leased back to Boomtown, a casino building and barge located
      in Biloxi, Mississippi for a term of 25 years. Lease payments are based
      upon a percentage of the casino's net income (as defined) net of marketing
      fees paid to HFS and are not required to the extent of cumulative net
      losses (as defined). Since the Company receives consideration which has
      characteristics of an equity investment, the Company has classified the
      purchase as an investment and records related income based on the equity
      method of accounting. As of December 31, 1995, the Company has a
      cumulative net loss, thus, the Company has not recognized income related
      to its investment.

         On November 6, 1995 the Company and HFS entered into agreements with
         Boomtown Inc.("Boomtown") to reduce the Company's profit participation
         in Boomtown's Biloxi, Mississippi casino by 25% and to reduce the
         marketing fee payable to HFS for services provided to the casino by
         25%. In return, the Company and HFS received $1.8 million and $0.6
         million, respectively,

C/M  11752.0003 368431.1  
                                        F-13

<PAGE>



         reducing their corresponding investments. Furthermore, the company
         recorded a $2.4 million charge in the third quarter of 1995 to reduce
         its investment in Boomtown's Biloxi casino to its estimated net
         realizable value, based on the present value of the anticipated fair
         market buyout at the end of the lease.

   (b)The Company acquired a 19.9% limited partnership interest in Prescott on
      November 30, 1994 for $4.5 million plus expenses. Prescott owns and
      operates a hotel and convention center in Prescott, Arizona which includes
      an operating casino facility.

   (c)The Company acquired 200,000 shares of the common stock of Century
      Casinos, Inc. ("Century") in 1994 for $1.3 million. During 1995, the State
      of Indiana determined not to award a gaming license to Century for its
      proposed casino gaming operation in Switzerland County, Indiana. Based on
      this decision, the Company determined that its investment in Century
      common stock was permanently impaired and recorded a $1.0 million loss
      which is included in development expenses. The Company also holds options,
      and may be required by Century to purchase up to 230,000 shares of Century
      common stock at $3 per share if the closing price of Century's common
      stock exceeds certain specified levels ($10 to $13 per share) for 10
      consecutive days prior to March 4, 1999. Based on the current trading
      price of Century common stock and Century's historical results of
      operations, the Company believes the options will not become exercisable
      and, therefore, have no value.

         The Company received 96,429 shares of Alpha common stock in settlement
         of certain outstanding obligations amounting to $559,000 in November
         1994. During 1995, the Company sold its investment in Alpha common
         stock to Bryanston (see Note 6(c)).

   (d)Includes nonvoting preferred stock convertible into common stock
      representing a 20% interest in Odyssey Gaming Corporation ("Odyssey")
      acquired for approximately $3.8 million plus approximately $1.5 million
      contingent upon the occurrence of certain events which have not occurred
      and are, in the opinion of management, unlikely to occur. The Company has
      also committed, under certain circumstances which are, in the opinion of
      management, unlikely to occur (including the execution of agreements
      between Odyssey and certain Native American tribes for the development and
      management of Class II (bingo, pulltabs and nonbanking card games) or
      Class III (casino style) gaming facilities) to make secured project
      financing loans of up to an aggregate of $10 million to be used in
      connection with the development of Native American casino gaming
      facilities to be managed by Odyssey.

   (e)Consists of the Company's allocation of Rainbow loan payments (see Note
      6(b)) to Chartwell Leisure as an inducement to Chartwell Leisure to
      provide financing for a family entertainment center ("Funtricity") located
      on the Rainbow site. The Company agreed to pay a percentage of principal
      and interest payments on the $10 million loan with Rainbow to Chartwell
      Leisure ranging from 14% to 27% adjusted annually in accordance with a
      schedule to the agreement. Additionally, HFS agreed to share marketing
      fees from Rainbow with Chartwell Leisure based on the same scheduled
      percentages. Chartwell Leisure agreed to share with HFS 50% of the net
      cash flow payable to Chartwell Leisure in respect to the family
      entertainment center and HFS agreed to share such amounts pro rata with
      the Company based on relative amounts paid by HFS and the Company,
      respectively, to Chartwell Leisure each year. The entertainment center
      commenced operations on May 1, 1995. The Company paid approximately
      $215,000 in 1995 in connection with the agreement.

   (f)The Company holds warrants to acquire 600,000 shares of Alpha common stock
      at $14 per share which expire in October 1998. The fair value of the
      underlying common stock approximated $4

C/M  11752.0003 368431.1  
                                        F-14

<PAGE>



      per share at December 31, 1995. The warrants were recorded at cost on date
      of receipt of approximately $1.5 million. These options were written down
      to fair value utilizing the Black-Scholes option valuation model at
      December 31, 1995.

8. JOINT VENTURE INTERESTS

   The Company is a participant in two joint ventures established to develop
   casino gaming facilities in Pittsburgh and Erie, Pennsylvania. The Company
   and its joint venture partners agreed in principle to dissolve both joint
   ventures due to increasing uncertainty that the Pennsylvania legislature
   would adopt legislation contemplating a referendum on authorization of gaming
   in the state. As a result, the Company recorded a $6.8 million loss
   representing a write-off of its joint venture interests. Upon dissolution,
   the Company's contingent obligation to acquire land and to develop and
   finance the construction of the respective gaming facilities will be
   terminated (see Note 6(a)). Consequently, the Company has notified the URA
   that it will not exercise its option to a acquire parcel of land from the URA
   in Pittsburgh upon which the construction of a casino was planned.
   Additionally, in November 1995, the Company sold for approximately $0.9
   million two parcels of land in Erie, upon which a proposed casino was to be
   constructed.

9. STOCKHOLDERS' EQUITY

   A. Shares Reserved for Issuance - The Company reserved for issuance up to
      433,290 shares of common stock to certain persons including directors and
      officers of HFS and the Company, in accordance with a distribution
      agreement signed in connection with the Distribution ("Distribution
      Agreement"). The shares correspond with options to acquire HFS common
      stock granted pursuant to HFS's incentive stock option plan which were
      unexercised at the Distribution Date. The shares are stapled to the HFS
      options and have no exercise price. As such, the Company will not receive
      any proceeds from exercised options. As of December 31, 1995, options to
      acquire 294,830 shares were exercisable.

         The Company also reserved for issuance up to 153,600 shares of common
         stock to Bryanston in accordance with the Distribution Agreement. The
         shares correspond with Bryanston's rights to purchase HFS common stock
         at the distribution date. Following the Distribution, the Company
         issued 153,600 shares pursuant to such rights, which were subsequently
         reacquired.

   B. Stock Options - Pursuant to the Company's 1994 Stock Option Plan, options
      to purchase up to two million shares of common stock may be granted to
      employees of the Company and certain other persons over the 10-year term
      of the plan. Options granted became exercisable at the rate of 33- 1/3%
      per year beginning one year after the date of grant and generally expire
      10 years from the date of grant. Options for 675,000 shares of common
      stock were granted on November 22, 1994 at an exercise price of $16.75
      representing fair market value on the date of grant. Additional options
      for 90,000 shares of common stock were granted during November and
      December 1995 at an exercise price of $9.88, representing fair market
      value on the dates of grant. As of December 31, 1995, there were 765,000
      options outstanding of which 224,999 were exercisable.
      615,000 of such options were canceled as of February 1, 1996.

   C. Sale of Common Stock - The Company sold 904,930 shares of its unregistered
      common stock to Chartwell in December 1995, representing approximately 17%
      ownership interest in the Company, for approximately $8,484,000
      ($8,311,000 net of expenses). Chartwell also designated two directors to
      the Board in December 1995.


C/M  11752.0003 368431.1  
                                        F-15

<PAGE>



10. COMMITMENTS AND CONTINGENCIES

    A.Employment Agreements - At December 31, 1995, the Company had an
      employment agreement with an employee who was subsequently terminated in
      January 1996. Pursuant to such agreement, the Company is required to
      provide severance payments to the employee of approximately $256,000 over
      the term of one year.

    B.Litigation - In the normal course of business, certain litigation is
      initiated against the Company. Generally those claims are insured and in
      the opinion of management, disposition of litigation will not have a
      material adverse effect on the Company's liquidity, consolidated financial
      position or consolidated results of operation.

11. OTHER RELATED PARTY TRANSACTIONS

    Mr. Roger J. Stone, a director of the Company, was a partner in the
    Washington, D.C. public-affairs firm of Black, Manafort, Stone & Kelly in
    1993. At that time, HFS engaged that firm to pursue gaming opportunities at
    the direction of the Company. The engagement letter was assigned by HFS to
    the Company in connection with the Distribution. The engagement agreement
    provided for payment by the Company of a monthly fee of $20,000, plus
    reasonable expenses. Such agreement was amended to provide for a monthly fee
    of $10,000, plus expenses, commencing in February 1995. This agreement
    expired by its terms in June 1995.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following disclosure of the estimated fair value of financial
    instruments is made in accordance with the requirement of Statement of
    Financial Accounting Standards No. 107, "Disclosures About Fair Value of
    Financial Instruments." The estimated fair value amounts have been
    determined by the Company, using available market information and
    appropriate valuation methodologies. However, considerable judgment is
    required in interpreting market data to develop the estimates of fair value.
    Accordingly, the estimates presented herein are not necessarily indicative
    of the amounts that the Company could realize in a current market exchange.
    The use of different market assumptions and/or estimation methodologies may
    have a material effect on estimated fair value.


                                                                1995
                                                               ($000's)
                                                         Carrying   Fair
                                                           Value   Value

      Cash and cash equivalents                          $ 51,470 $51,470

      Loans                                                17,647  18,017

      Investments in warrants, common stock
        and Boomtown Casino                                 6,345   6,345

      Investments in casino development enterprises,
        casinos and entertainment facility                 10,355 (See Below)



C/M  11752.0003 368431.1  
                                        F-16

<PAGE>


   Cash and Cash Equivalents - The carrying value of cash and cash equivalents
   approximates fair value because of their short-term maturities.

   Loans - The fair value is estimated by discounting the future cash flows
   using the current rates at which similar loans would be made to borrowers
   with similar credit ratings.

   Investments in Warrants, Common Stock and Boomtown Casino - Investment in
   warrants and common stock are valued using the Black-Scholes Option Pricing
   Model and the closing price of the common stock at December 31, 1995,
   respectively. The fair value of the investment in the Boomtown Casino Lease
   is estimated based on the present value of the anticipated market buyout at
   the end of the term.

   Investments in Casino Development Enterprises, Casinos and Entertainment
   Facility - The Company's investments in these projects generate no current or
   determinable cash flow. As a result, management believes that a fair value
   assessment is not practicable. The value of these investments are impacted by
   the status of gaming legislation and the potential timing and uncertainty of
   future cash flows.
                                       ******

C/M  11752.0003 368431.1  
                                        F-17



                                 EXHIBIT 10.49
<PAGE>
- -------------------------------------------------------------------------------


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

                               LICENSE AGREEMENT

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


                                    Between

                             BEAR ACQUISITION CORP.

                                      and

                               FORTE HOTELS, INC.




                         Dated as of January [23], 1996



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



365002.1

<PAGE>



                               TABLE OF CONTENTS

                                                                       Page No.


                                   ARTICLE I

                                  DEFINITIONS

SECTION 1.1.  Certain Defined Terms.......................................  1

                                   ARTICLE II

                                LICENSE GRANTED

SECTION 2.1.  Grant.......................................................  2
SECTION 2.2.  License Fees................................................  3
SECTION 2.3.  Compliance with Obligations.................................  3
SECTION 2.4.  Documents...................................................  3
SECTION 2.5.  Reservations and Promotion..................................  3
SECTION 2.6.  Third Party Infringement; Protection........................  4
SECTION 2.7.  Usage.......................................................  4
SECTION 2.8.  No Use upon Termination.....................................  4

                                  ARTICLE III

                                  TERMINATION

SECTION 3.1.  Term........................................................  5
SECTION 3.2.  Other Termination...........................................  5
SECTION 3.3.  Effect of Termination.......................................  5

                                   ARTICLE IV

                                 OTHER MATTERS

SECTION 4.1.  Rights Reserved, etc........................................  6
SECTION 4.2.  Limited Representations by Licensor.........................  6
SECTION 4.3.  Indemnification.............................................  6
SECTION 4.4.  Confidential Information....................................  8
SECTION 4.5.  Liquidated Damages..........................................  8
SECTION 4.6.  Continued Use of Trademarks.................................  9

                                   ARTICLE V

                                 MISCELLANEOUS

SECTION 5.1.  Expenses....................................................  9
SECTION 5.2.  Notices.....................................................  9
SECTION 5.3.  Public Announcements........................................ 10
SECTION 5.4.  Headings.................................................... 11
SECTION 5.5.  Severability................................................ 11

                                      -i-

365002.1

<PAGE>



SECTION 5.6.  No Third Party Beneficiaries................................ 11
SECTION 5.7.  Amendment and Waiver........................................ 11
SECTION 5.8.  Governing Law............................................... 11
SECTION 5.9.  Counterparts................................................ 12
SECTION 5.10. No Transfer, etc............................................ 12
SECTION 5.11. No Agency/Partnership....................................... 12



SCHEDULES

Schedule 1.01(q) The Trademarks
Schedule 2.01    Joint Ventures


                                      -ii-

365002.1

<PAGE>



                  LICENSE AGREEMENT (this "Agreement"), dated as of January
[  ], 1996, between FORTE HOTELS, INC., a Delaware corporation, as Licensee
("Licensee") and BEAR ACQUISITION CORP., a Delaware corporation, as Licensor
("Licensor").

                                  WITNESSETH:

               WHEREAS, pursuant to the Agreement Among Purchasers, dated as of
January [ ], 1996, among National Lodging Corp. ("NALC"), Motels of America,
Inc. and Licensor (the "Agreement Among Purchasers"), NALC has agreed to cause
Licensee to enter into this Agreement;

               NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein and other good and valuable consideration, the
parties hereto agree as follows:


                                   ARTICLE I

                                  DEFINITIONS

                  SECTION 1.1. Certain Defined Terms. As used in this
Agreement, the following terms shall have the respective meanings set forth
below. Unless the context otherwise requires, other terms used but not
otherwise defined shall have the meanings ascribed to them in the Agreement
Among Purchasers.

         (a)      "Agreement" has the meaning provided in the preamble to
this Agreement.

         (b)      "Agreement Among Purchasers" has the meaning provided
in the recitals to this Agreement.

         (c)      "Co-owner" has the meaning provided in Section 3.02.

         (d)      "Factor" has the meaning provided in Section 4.05.

         (e)      "Forte SPV Agreement" has the meaning provided in
Section 2.03:

         (f) "Gross Room Revenues" means all receipts derived from the renting,
use or occupancy of guest rooms and meeting rooms in the hotel or motel,
excluding sales taxes or other taxes which may be required by law, to be
collected from guests.

         (g)      "HFS" has the meaning provided in Section 4.05.

         (h)      "Indemnified Party" has the meaning provided in
Section 4.03.


                                      -1-
365002.1

<PAGE>



         (i)      "Joint Venture" has the meaning provided in
Section 2.01.

         (j)      "Joint Venture Properties" has the meaning provided in
Section 2.01.

         (k)      "Licensee" has the meaning provided in the preamble to
this Agreement.

         (l)      "Licensor" has the meaning provided in the preamble to
this Agreement.

         (m)      "Loss" has the meaning provided in Section 4.03.

         (n)      "NALC" has the meaning provided in the recitals to this
Agreement.

         (o)      "Territory" means Canada, Mexico, the Commonwealth of
Puerto Rico and the United States of America.

         (p)      "Third Party Claims" has the meaning provided in
Section 4.03.

         (q) "Trademarks" means the trademarks, service marks and logos listed
in Schedule 1.01(q), attached hereto and made a part hereof, including, without
limitation, the registrations and applications for registration listed in
Schedule 1.01(q).

         (r)      "Travelodge License Agreement" has the meaning provided
in Section 2.05.


                                   ARTICLE II

                                LICENSE GRANTED

                  SECTION 2.1. Grant. (a) Subject to the terms and conditions
hereof, Licensor hereby grants to Licensee a non-exclusive, non-transferable
right and license to continue to use the Trademarks within the Territory in
connection with hotel and motel services and related goods and services for the
hotels and motels listed on Schedule 2.01 (the "Joint Venture Properties"),
each individually a "Joint Venture Property", and the hotel or motel business
operated at each such Joint Venture Property being a "Joint Venture"), to the
extent of Licensor's rights in the Trademarks, subject always to compliance
with the terms of this Agreement.

                  (b)      Licensor further grants to Licensee a
non-exclusive, non-transferable right and license to continue to
use the Trademarks outside the Territory, to the extent of

                                      -2-
365002.1

<PAGE>



Licensor's rights in the Trademarks, solely to advertise, promote and make
reservations for the Joint Venture Properties.

                  (c) The right and license to use the Trademarks granted in
this Section 2.01 shall apply only to the Joint Venture Properties and for the
current term, or as extended pursuant to Section 3.04(a) of the Agreement Among
Purchasers, of the Joint Venture agreement in respect of such property. There
shall be no expansion or revision of the list of Joint Venture Properties
contained in Schedule 2.01 except that hotels and motels may be deleted from
the list upon termination of this Agreement with respect to such Joint Venture
Property.

                  SECTION 2.2. License Fees. (a) For each Joint Venture,
Licensee shall, within five (5) days after the end of each calendar month
during the term of this Agreement, pay to Licensor a royalty fee equal to four
percent (4%) of Licensee's percentage ownership interest in the Joint Venture
Property multiplied by the Gross Room Revenues of the Joint Venture. This
royalty fee is in consideration of Licensee's use of the Trademarks and is
fully earned each day such Trademarks are used by Licensee, and is not subject
to any counter-claims or setoffs of any nature.

                  (b) In addition, in consideration of the use and benefit of
the marketing and reservation system owned and operated by Licensor, Licensee
shall pay, or cause each Joint Venture to pay, to Licensor a fee equal to the
lesser of (i) the percentage of Gross Room Revenues currently being paid by
such Joint Venture to Licensee for such services, subject to the right of
Licensor to increase such fee under the same circumstances as Licensee may
currently raise such fee pursuant to the respective joint venture agreement and
(ii) four and one half percent (4.5%) of Gross Room Revenues of such Joint
Venture, within five (5) days after the end of each calendar month.

                  SECTION 2.3. Compliance with Obligations. Licensee hereby
agrees to abide by all obligations of Licensor in the Territory pursuant to the
trademark assignment agreement dated the date hereof between Licensor and Forte
USA, Inc., a Delaware corporation, relating to the Trademarks and all
attachments thereto.

                  SECTION 2.4. Documents. The parties agree to cooperate in
recording the licenses granted herein where appropriate and will enter into
such further agreements and execute such documents as either of them may
reasonably request as necessary for the purposes of recordation and enforcement
of the rights granted herein.

                  SECTION 2.5. Reservations and Promotion. The parties shall
cooperate in advertising and promoting their hotels and

                                      -3-
365002.1

<PAGE>



motels, and in taking reservations for each other's hotels and motels, on terms
substantially similar to those contained in the form of Travelodge License
Agreement ("Travelodge License Agreement"), a copy of which has been supplied
to Licensee, or on such other terms as may be mutually agreed from time to
time.

                  SECTION 2.6. Third Party Infringement; Protection. Licensee
shall immediately notify Licensor of any possible infringement of any of the
Trademarks which may come to Licensee's attention and Licensee agrees to
cooperate fully with Licensor at its own expense in the prosecution of any
infringers. Licensee further agrees to do any and all things (including, but
not limited to, executing any relevant documents or instruments) which are
deemed necessary or appropriate by Licensor in order to secure, protect and/or
preserve Licensor's rights to the Trademarks. Without limiting the generality
of the foregoing, Licensee agrees to take any actions required to be taken by
the franchisee under the terms of the Travelodge License Agreement.

                  SECTION 2.7. Usage. Licensee shall not, in any manner,
represent that it has any ownership in the Trademarks or in any registrations
thereof, but may, during the term hereof, represent that it is a "licensee" or
"official licensee" hereunder. Licensee shall not register or attempt to
register any of the Trademarks in its own name or that of any other person or
entity unless specifically authorized in writing by Licensor to do so. Licensee
shall not use, and shall use its best efforts to keep others from using, the
Trademarks in any manner likely to cause confusion or doubt in the mind of the
public. Any and all uses of the Trademarks by Licensee shall inure to the
benefit of Licensor, which shall be entitled to and own all rights, interests
and benefits created by such uses, including, but not limited to, Trademark
goodwill. Licensee shall use the Trademarks in compliance with the standards
and rules for franchisees contained in the Travelodge License Agreement or as
otherwise promulgated from time to time by Licensor in respect of Travelodge or
Thriftlodge properties.

                  SECTION 2.8. No Use upon Termination. Upon expiration or
termination of this Agreement for any reason, none of Licensee, any Joint
Venture or any co-owner of any Joint Venture shall use at any time, on any
products or otherwise, any word or term, or any symbol or any label having any
resemblance to the Trademarks.



                                      -4-
365002.1

<PAGE>



                                  ARTICLE III

                                  TERMINATION

                  SECTION 3.1. Term. With respect to any and all Trademarks,
this Agreement shall continue in force until the earliest of:

         (a) its expiration or earlier termination pursuant to the terms
         hereof, including, but not limited to, breach of this Agreement,
         including, with respect to any Joint Venture, any breach of the
         standards and rules for franchisees contained in the Travelodge
         License Agreement or as otherwise promulgated from time to time by
         Licensor in respect of Travelodge or Thriftlodge properties;

         (b) twenty (20) years from the date of this Agreement; or

         (c) in respect of any Joint Venture, upon the later of (i) ten
         business days following (A) delivery of written notice by Licensee to
         Licensor of termination in respect of such Joint Venture or (B) the
         dissolution of such Joint Venture and (ii) payment by Licensee to
         Licensor of liquidated damages in accordance with Section 4.05(a) in
         respect of such Joint Venture.

                  SECTION 3.2. Other Termination. Notwithstanding anything to
the contrary herein, Licensor may terminate this Agreement forthwith, or at any
time thereafter, by notice to Licensee in the event that (i) Licensee shall go
into liquidation, (ii) a receiver or trustee shall be appointed for all or a
portion of the property or estate of Licensee, (iii) Licensee shall be adjudged
bankrupt or insolvent, (iv) Licensor shall file a voluntary petition in
bankruptcy or insolvency, (v) a petition in bankruptcy or insolvency shall be
filed against Licensee and not dismissed within ninety (90) days, or (vi)
Licensee makes an assignment for the benefit of its creditors (and whether any
of the aforesaid events be the outcome of the voluntary act of Licensee or
otherwise). Licensee shall give Licensor prompt written notice of the
occurrence of any of the event(s) described in the preceding sentence.

                  SECTION 3.3. Effect of Termination. (a) Upon any termination
of this Agreement in respect of any Joint Venture Property, this instrument
forthwith constitutes an assignment to Licensor of all of Licensee's rights in
and to the Trademarks, together with the goodwill of the business then
symbolized thereby insofar as Licensee and said Joint Venture Property or Joint
Venture Properties are concerned, and Licensee will, and will cause the Joint
Venture to, immediately discontinue all use of the Trademarks and shall
immediately obliterate the words "Travelodge", "Thriftlodge", "Sleepy Bear" and
the design of

                                      -5-
365002.1

<PAGE>



"Sleepy Bear" from Licensee's signs and from any and all places
and materials whatsoever.

                  (b) If Licensee or the Joint Venture shall fail to obliterate
any such words within fifteen (15) days after written demand, then Licensor by
its duly authorized agents may enter upon the premises of Licensee to
accomplish said results without being guilty of trespass or any other tort, and
may make or cause to be made such changes at the expense of Licensee, which
Licensee agrees to pay on demand. Licensor and Licensee further agree that it
would be impractical or extremely difficult to fix the actual damage sustained
by Licensor for Licensee's use of the Trademarks, and Licensee agrees,
therefore, to pay to Licensor as liquidated damages Five Hundred Dollars ($500)
a day for each day's unauthorized use thereof. Licensee also agrees that
Licensor will suffer great and irreparable injury from any use by Licensee
after the termination of this Agreement of the Trademarks and that injunctive
relief will be the only fair, adequate and complete remedy available to
Licensor. Accordingly, Licensee hereby consents to the entry of an injunction
in favor of Licensor, permanently enjoining further use of the Trademarks
subsequent to any such termination of this Agreement.


                                   ARTICLE IV

                                 OTHER MATTERS

                  SECTION 4.1. Rights Reserved, etc. All rights in the
Trademarks other than those specifically granted herein are reserved by
Licensor for its own use and benefit. Upon expiration or termination of this
Agreement or upon expiration or termination of this Agreement in respect of a
Joint Venture Property for any reason whatsoever, all rights in the Trademarks
licensed hereunder shall automatically revert to Licensor. Licensor shall, at
any time or from time to time (whether during or after the term of this
Agreement), execute any documents reasonably required by Licensor in such
connection.

                  SECTION 4.2. Limited Representations by Licensor. Licensor
makes no representations or warranties to Licensor with regard to the
Trademarks (or any matter related thereto) other than as specifically expressed
herein.

                  SECTION 4.3. Indemnification. (a) Licensee hereby agrees to
indemnity and hold harmless on an after-tax basis Licensor and its affiliates,
officers, directors, employees, agents, successors and assigns (an "Indemnified
Party") for any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) actually suffered or
incurred by an Indemnified Party (including,

                                      -6-
365002.1

<PAGE>



without limitation, any action brought or otherwise initiated by an Indemnified
Party), net of any resulting tax benefit and net of any refund or reimbursement
of any portion of such amount including, without limitation, reimbursement by
way of insurance or third party indemnification (a "Loss"), arising out of or
resulting from:

                   (i)     Licensee's use of the Trademarks;

                  (ii)     the breach of any covenant or agreement by
         Licensee contained in this Agreement; or

                 (iii)     the ownership or operation of any Joint Venture or
         Joint Venture Property.

                  (b) An Indemnified Party seeking indemnification under this
Section 4.03 shall give Licensee notice of any matter that such Indemnified
Party has determined has given or could give rise to a right of indemnification
under this Agreement, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and liabilities of Licensee under this Section 4.03
with respect to Losses arising from claims of any third party which are subject
to the indemnification provided for in this Section 4.03 ("Third Party Claims")
shall be governed by the following additional terms and conditions: if an
Indemnified Party shall receive notice of any Third Party Claim, the
Indemnified Party shall give Licensee notice of such Third Party Claim within
30 days of the receipt by the Indemnified Party of such notice; provided,
however, that the failure to provide such notice shall not release Licensee
from any of its obligations under this Section 4.03 except to the extent
Licensee is materially prejudiced by such failure and shall not relieve
Licensee from any other obligation or liability that it may have to any
Indemnified Party otherwise than under this Section 4.03. If Licensee
acknowledges in writing its obligation to indemnify the Indemnified Party
hereunder against any Losses that may result from such Third Party Claim, then
Licensee shall be entitled to assume and control the defense of such Third
Party Claim at its expense and through counsel of its choice if it gives notice
of its intention to do so to the Indemnified Party within five days of the
receipt of such notice from the Indemnified Party; provided, however, that if
there exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the judgment of the Indemnified Party for the same
counsel to represent both the Indemnified Party and Licensee, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of Licensee. In the event Licensee exercises the right to undertake
any such defense against any such Third Party

                                      -7-
365002.1

<PAGE>



Claim as provided above, the Indemnified Party shall cooperate with Licensee in
such defense and make available to Licensee, at Licensee's expense, all
witnesses, pertinent records, materials and information in the Indemnified
Party's possession or under the Indemnified Party's control relating thereto as
is reasonably required by Licensee. Similarly, in the event the Indemnified
Party is, directly or indirectly, conducting the defense against any such Third
Party Claim, Licensee shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Licensee's expense,
all such witnesses, records, materials and information in the Licensee's
possession or under the Licensee's control relating thereto as is reasonably
required by the Indemnified Party. No such Third Party Claim may be settled by
Licensee without the prior written consent of the Indemnified Party.

                  SECTION 4.4. Confidential Information. Any information
disclosed to Licensee under this Agreement shall be held as confidential by
Licensee and shall be used only as allowed under this Agreement, except for
information which is or becomes publicly known through no fault of Licensee or
becomes published in a patent or other written publication.

                  SECTION 4.5. Liquidated Damages. (a) The parties establish
the following schedule of liquidated damages payable by Licensee to Licensor
within fifteen (15) days after termination of this Agreement in respect of any
Joint Venture Property prior to the end of the twentieth year following the
date of this Agreement with or without cause by either party, insofar as actual
damages are difficult to predict and this formula is a reasonable pre-estimate
of the actual damages to be suffered by Licensor as a result of premature
termination of this Agreement. Licensee shall pay to Licensor the product of
the aggregate payments due from Licensee pursuant to Section 2.02(a) (whether
or not paid by Licensee) during the last twelve (12) months multiplied by the
Factor (as hereinafter defined). If this Agreement has not been in effect for
at least twelve (12) months, the parties agree that liquidated damages shall be
calculated by taking the average of monthly payments due from Licensee pursuant
to Section 2.02(a) (whether or not paid by Licensee) under this Agreement times
twelve (12), then multiplying by the Factor. If the termination occurs before
the end of the fourth year following the date of this Agreement, then the
Factor will be five (5). If the termination occurs during the fifth year
following the date of this Agreement, the Factor will be four (4). If the
termination occurs during the sixth year following the date of this Agreement,
the Factor will be three (3). If the termination occurs after the sixth year
following the date of this Agreement, but before the end of the twentieth year
following the date of this Agreement, the Factor will be two (2).


                                      -8-
365002.1

<PAGE>



                  (b) Licensee may terminate this Agreement at any time in
respect of any Joint Venture without incurring the damages provided in
paragraph (a), provided, however, that Licensee shall have entered into a
license or franchise agreement with another subsidiary of HFS Incorporated
("HFS") providing for the operation of the relevant Joint Venture Property as
part of the franchise system owned by said subsidiary, which agreement shall be
in the then current standard form of license or franchise agreement being
offered to prospective licensees or franchisees by said subsidiary in its then
current Uniform Franchise Offering Circular for the state in which the relevant
Joint Venture Property is located. Such agreement shall be modified to include
liquidated damages and assignment provisions substantially the same as
paragraph (a) hereof, after giving effect to the expiration of the period prior
to such termination of this Agreement in respect of such Joint Venture, and a
term at least equal to the unexpired portion of the original term of this
Agreement in respect of such Joint Venture. Licensee acknowledges that neither
HFS nor any subsidiary of HFS shall be obligated to enter into any license or
franchise agreement with Licensee with respect to the relevant Joint Venture
Property.

                  SECTION 4.6. Continued Use of Trademarks. During the term of
this Agreement, Licensee will not discontinue the operation of any Joint
Venture Property under the Trademarks, without the prior written consent of
Licensor, unless such Joint Venture Property has dissolved or terminated its
joint venture agreement.


                                   ARTICLE V

                                 MISCELLANEOUS

                  SECTION 5.1. Expenses. Except as otherwise provided in
Section 4.03, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses.

                  SECTION 5.2. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by telecopy or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 6.02):


                                      -9-
365002.1

<PAGE>



         (a)      if to Licensee:

                  Forte Hotels, Inc.
                  c/o National Lodging Corp.
                  339 Jefferson Road
                  Parsippany, NJ 07054-0278
                  Telephone: (201) 952-8472
                  Telecopy: (201) 428-3260
                  Attention: James Buckman

                  with copies to:

                  Battle Fowler LLP
                  75 East 55th Street
                  New York, NY 10022
                  Telephone: (212) 856-7100
                  Telecopy: (212) 856-7808
                  Attention: Martin Edelman

                  and

                  Shearman & Sterling
                  599 Lexington Avenue
                  New York,  NY 10022
                  Telephone: (212) 848-4000
                  Telecopy: (212) 948-7179
                  Attention: Alfred Ross

         (b)      if to Licensor:

                  Bear Acquisition Corp.
                  c/o HFS Incorporated
                  339 Jefferson Road
                  Parsippany, NJ 07054-0278
                  Telephone: (201) 952-8472
                  Telecopy: (201) 428-3260
                  Attention: James Buckman

                  with a copy to:

                  Shearman & Sterling
                  599 Lexington Avenue
                  New York, NY 10022
                  Telephone: (212) 848-4000
                  Telecopy: (212) 848-7179
                  Attention: Alfred Ross

                  SECTION 5.3. Public Announcements. Except as may be required
by the federal securities laws or the rules of any listing agreement with a
national securities exchange, no party to this Agreement shall make, or cause
to be made, any press release or public announcement or make any other
disclosure in

                                      -10-
365002.1

<PAGE>



respect of this Agreement or the transactions contemplated hereby without the
prior written consent of the other parties hereto, and the parties shall
cooperate as to the timing and contents of any such press release, public
announcement or other disclosure.

                  SECTION 5.4. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.

                  SECTION 5.5. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.

                  SECTION 5.6. No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their Affiliates, and nothing herein, express or implied, is intended to or
shall confer upon any other person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.

                  SECTION 5.7. Amendment and Waiver. This Agreement may not be
amended or modified except by an instrument in writing signed by, or on behalf
of, the parties hereto. Any party hereto may (i) extend the time for the
performance of any obligation or other act of any other party hereto, (ii)
waive any inaccuracy in the representations and warranties of any other party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any agreement of any other party or any condition contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or each of the parties to be bound
thereby.

                  SECTION 5.8. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in the
Borough of Manhattan in the City of New York. To the extent permitted by law,
the parties hereto expressly consent to the jurisdiction of such courts, agree
to venue in such courts and hereby waive any

                                      -11-
365002.1

<PAGE>


defense or claim of forum non conveniens they may have with respect to any such
action or proceeding brought.

                  SECTION 5.9. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.

                  SECTION 5.10. No Transfer, etc. This Agreement and the rights
hereunder shall not be assignable or transferable in whole or in part by
Licensee, either voluntarily or by operation of law or otherwise, without the
prior written consent of Licensor, and Licensee shall not attempt to assign,
transfer, sub-license, pledge or otherwise dispose of this Agreement or of any
of its rights or obligations hereunder without the prior written consent of
Licensor. Any attempt by License to make any such disposition without the prior
written consent of Licensor shall be void and may be treated by Licensor as
grounds for termination of this Agreement. In the event of assignment of this
Agreement by Licensee, Licensee will remain liable for all obligations of the
assignee until the seventh anniversary of the Closing.

                  SECTION 5.11. No Agency/Partnership. Nothing in this
Agreement shall be construed so as to constitute either Party hereto the agent
or partner of the other. On no account may a Party hereto create (or hold
itself out to third parties as being able to create) any binding obligation on
behalf of the other without the prior written consent of the other.

                  IN WITNESS WHEREOF, Licensor and Licensee have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.


                                       BEAR ACQUISITION CORP.,
                                       as Licensor


                                       By: /S/James E. Buckman
                                           Name: James E. Buckman
                                           Title:Executive Vice-President


                                       FORTE HOTELS, INC.,
                                       as Licensee


                                       By: /S/Stephen P. Holmes
                                           Name: Stephen P. Holmes
                                           Title: Chief Financial Officer

                                      -12-
365002.1

<PAGE>

                          SCHEDULE 1.01(q): TRADEMARKS


<TABLE>
                             TRADEMARK "SLEEPY BEAR"
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------
                                      Reg.
         Trademark           Reg. No.                    Date                             Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
In Canada
- -----------------------------------------------------------------------------------------------------------------------------
<S>                               <C>                  <C>              <C>
SLEEPY                            270,706              07/02/82         Pens, pencils, postcards, placemats,
                                                                        drinking glasses made of glass or plastic, ashtrays, shower
                                                                        caps, ice buckets, shoe cloths and match books. Hotel and 
                                                                        motel services, namely services rendered in providing room
                                                                        and meals by hotels and motels, accommodation services;
                                                                        restaurant services; consulting services in connection
                                                                        with the operation of hotels and motels of others; charge
                                                                        account services, namely extending credit to customers;
                                                                        and services in training personnel.


BEAR                               270,705             07/02/82         Pens, pencils, postcards, placemats,
SILHOUETTE                                                              drinking glasses made of glass or
Design                                                                  plastic, ashtrays, shower caps, ice buckets, shoe clothes
                                                                        and match books. Hotel and motel services, namely services
                                                                        rendered in providing room and meals by hotels and motels;
                                                                        accommodation services; restaurant services; consulting
                                                                        services in connection with the operation of hotels and
                                                                        motels of others; charge account services, namely
                                                                        extending credit to customers; and services in training
                                                                        personnel.


NYL3/145199.1    

<PAGE>
</TABLE>


                                                                 2
<TABLE>
                                                      TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                      Reg.
         Trademark           Reg. No.                    Date                             Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                  <C>              <C>
- -----------------------------------------------------------------------------------------------------------------------------
In Mexico
- -----------------------------------------------------------------------------------------------------------------------------
SLEEPY BEAR                       357,297              12/23/88         Lodging, inns and food through hotels,
                                                                        inns and tourist camps, tourist homes,
                                                                        inn-farms (farming houses for tourists),
                                                                        and rest and convalescence houses.
                                                                        Restaurants, self-service restaurants,
                                                                        canteens, night clubs and bars.
- -----------------------------------------------------------------------------------------------------------------------------
BEAR                            Application          Filing Date        Hotel, motel, resort hotel, restaurant,
SILHOUETTE                        180,065              10/07/93         bar, catering and hotel/motel
Design                                                                  reservation services.
- -----------------------------------------------------------------------------------------------------------------------------
BEAR                            Application          Filing Date        Hotel directories, maps, brochures,
SILHOUETTE                        180,066              10/07/93         posters, newsletters, magazines,
Design                                                                  newspapers, note pads, message pads,
                                                                        door hangers, pens, pencils, drinking glass covers, 
                                                                        and toilet bowl covers.

- -----------------------------------------------------------------------------------------------------------------------------
In United States
- -----------------------------------------------------------------------------------------------------------------------------
SLEEPY with                       848,208              04/30/68         Motor hotel directories, motor hotel
SLEEPY BEAR                                                             services and performing a charge
Design                                                                  account service, namely extending
                                                                        credit to customers of applicant.
- -----------------------------------------------------------------------------------------------------------------------------
SLEEPY BEAR                      1,868,761             12/20/94         Hotel and Motel services.
- -----------------------------------------------------------------------------------------------------------------------------
SLEEPY BEAR                      1,895,437             05/23/95         Providing a children's club in
CLUB                                                                    connection with hotel and motel
                                                                        services.
- -----------------------------------------------------------------------------------------------------------------------------
BEAR                             1,001,682             01/14/75         Hotel, motel and restaurant services.
SILHOUETTE
- -----------------------------------------------------------------------------------------------------------------------------
BEAR                             1,006,905             03/18/75         Paper products, namely stationery,
SILHOUETTE                                                              postcards, placemats, and advertising
Design                                                                  brochures and leaflets.

</TABLE>

NYL3/145199.1    

<PAGE>

                                                                 3
<TABLE>
                                                      TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                      Reg.
         Trademark           Reg. No.                    Date                             Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                  <C>              <C>
- -----------------------------------------------------------------------------------------------------------------------------

BEAR                            Application          Filing Date        Men's, women's and children's
SILHOUETTE                      74/439,019             09/23/93         clothing, namely bandanas, head
                                                                        bands, neck bands, sweat bands, wrist bands, blazers, 
                                                                        blouses, bottoms, boxer shorts, cloth diapers for infants,
                                                                        raincoats, coveralls, dresses, footwear, golf shirts,
                                                                        nightgowns, halloween costumes, hats, head wear, infant
                                                                        wear, wind resistant jackets, knit shirts, loungewear,
                                                                        mittens, mufflers, neckerchiefs, neckties, night shirts,
                                                                        pajamas, sweat pants, polo shirts, robes, scarves, sport
                                                                        shirts, undershirts, bermuda shorts, boxer shorts, gym
                                                                        shorts, sweat shirts, sweat shorts, shower caps,
                                                                        sleepwear, slippers, sneakers, socks, bathing suits, gym
                                                                        suits, jogging suits, play suits, sweat suits, bathing
                                                                        trunks, swim trunks, uniforms, athletic uniforms, sun
                                                                        visors and warm-up suits.
</TABLE>


NYL3/145199.1    

<PAGE>


                                                                 4
<TABLE>
                                                      TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                      Reg.
         Trademark           Reg. No.                    Date                             Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                  <C>              <C>
- -----------------------------------------------------------------------------------------------------------------------------

"KEEP ON                        Application          Application        Soaps and cosmetics, including
TRUCKING"                       74-647,856           Dt. 03/17/95       shampoos, lotions and creams; clocks
POSE BEAR                                                               and watches, watch straps, jewelry,
Design                                                                  pins, key-chains; paper goods and
(SLEEPY BEAR                                                            printed matter, including stationery;
Character Design)                                                       accommodation and services
                                                                        directories, advertising brochures and leaflets, paper and
                                                                        plastic bags, paper bands for toilet seats, pens, pencils,
                                                                        drinking mugs, drinking glasses, ice buckets, fabrics,
                                                                        including bed linen and bed covers, table linens, wall
                                                                        hangings made of fabric, towels, clothing, headwear, and
                                                                        footwear for infants, children and adults, including
                                                                        bandanas, headbands, neckbands, sweatbands, wristbands,
                                                                        blazers, blouses, bottoms, boxer shorts, cloth diapers,
                                                                        raincoats and rainwear, coveralls, dresses, footwear, golf
                                                                        shirts, nightgowns, pajamas, halloween costumes, hats,
                                                                        headwear, infantwear, jackets (wind resistant), knit
                                                                        shirts, loungewear, mittens, mufflers, neckerchiefs,
                                                                        neckties, sweatpants, robes, scarves, knitshirts,
                                                                        nightshirts, poloshirts, sweatshirts, undershirts, bermuda
                                                                        shorts, gym shorts, sweat shorts, shower caps, sleepwear,
                                                                        sleepers, slippers, sneakers, socks, bathing suits, gym
                                                                        suits, jogging suits, play suits, sweatsuits, warm-up
                                                                        suits, bathing trunks, swimtrunks, uniforms, athletic
                                                                        uniforms, visors and sun visors; posters and wall hangings
                                                                        made of paper materials; games, playthings and sporting
                                                                        articles, including toys, dolls, inflatable dolls and golf
                                                                        balls; ashtrays and matches; hotel and motel

</TABLE>

NYL3/145199.1    

<PAGE>


                                                                 5


<TABLE>
                                                      TRADEMARK "SLEEPY BEAR"
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                      Reg.
         Trademark           Reg. No.                    Date                             Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                  <C>              <C>
- -----------------------------------------------------------------------------------------------------------------------------


                                                                        management services, convention services, business
                                                                        consultation services, business management services, and
                                                                        travel and convention organizing services.
                                                                        =======================================

</TABLE>

NYL3/145199.1    

<PAGE>


                                                                 6
<TABLE>
                                                      TRADEMARK "TRAVELODGE"

<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                      Reg.
         Trademark           Reg. No.                    Date                             Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                  <C>              <C>
- -----------------------------------------------------------------------------------------------------------------------------
In Canada
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                        117,776              04/29/60         Lodging services.
Logo
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                        352,092              02/24/89         Hotel, motel, lodging, restaurant,
                                                                        catering services, and related
                                                                        management services.
- -----------------------------------------------------------------------------------------------------------------------------
VISCOUNT                          291,703              06/8/84          Hotel, motel and restaurant services.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                      166/42384-             03/17/95         Lodging supplies, namely towels,
                                  206543                                blankets and soap.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                        294,589              08/31/84         Hotel, motel and restaurant services.
VISCOUNT
- -----------------------------------------------------------------------------------------------------------------------------
In Mexico
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                        405,526              02/11/92         Beer, mineral and aerated waters and
                                                                        other non-alcoholic drinks, fruit drinks
                                                                        and fruit juices, syrups and other
                                                                        preparations for making beverages.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                        405,717              02/12/92         Paper, cardboard and goods made from
                                                                        these materials not included in other
                                                                        classes; printed matter; book binding
                                                                        material; photographs; stationery;
                                                                        adhesives for stationery or household
                                                                        purposes; artists' materials; paint
                                                                        brushes; typewriters and office
                                                                        requisites (except furniture);
                                                                        instructional and teaching material
                                                                        (except apparatus); plastic materials for
                                                                        packaging (not included in other
                                                                        classes); playing cards; printers' type;
                                                                        and printing blocks.
</TABLE>


NYL3/145199.1    

<PAGE>


                                                                 7

<TABLE>
                                                      TRADEMARK "TRAVELODGE"

<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                      Reg.
         Trademark           Reg. No.                    Date                             Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                  <C>              <C>
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                        405,167              02/07/92         Coffee, tea, cocoa, sugar, rice,
                                                                        tapioca, sago, artificial coffee, flour
                                                                        and preparations made from cereals,
                                                                        bread, pastry and confectionery, ices,
                                                                        honey, treacle, yeast, baking powder,
                                                                        salt, mustard, vinegar, sauces (except
                                                                        salad dressings), spices and ice.
- -----------------------------------------------------------------------------------------------------------------------------
In United States
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                       1,474,602             01/26/88         Motor hotel services.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                       1,869,185             12/27/94         Hotel, motel, resort hotel, restaurant,
                                                                        catering and hotel/motel reservation
                                                                        services.  Toilet soap, hair shampoo,
                                                                        hand lotion, and hair conditioner.
                                                                        Pens, stationery, envelopes, bags for
                                                                        the disposal of feminine hygiene
                                                                        products, paper drinking-glass caps,
                                                                        note pads, paper placemats, hotel
                                                                        directories, comment cards,
                                                                        guestbooks, stationery portfolios,
                                                                        printed paper signs hung from
                                                                        doorknobs, tent cards, paper name
                                                                        tags, brochures regarding personal
                                                                        security, business cards, paper toilet-
                                                                        seat bands, and trash bags.  Drinking
                                                                        glasses, ashtrays not of precious metal,
                                                                        and matches.
</TABLE>

NYL3/145199.1    

<PAGE>


                                                                 8
<TABLE>
                                                      TRADEMARK "TRAVELODGE"

<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                      Reg.
         Trademark           Reg. No.                    Date                             Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                  <C>              <C>
- -----------------------------------------------------------------------------------------------------------------------------



- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                       1,879,457             02/21/95         Toilet soap, hair shampoo, hand lotion
and Design                                                              and hair conditioner.  Pens, stationery, envelopes, bags
                                                                        for the disposal of feminine hygiene products, paper
                                                                        drinking-glass caps, note pads, paper placemats, hotel
                                                                        directories, comment cards, guestbooks, stationery
                                                                        portfolios, printed paper signs hung from doorknobs, tent
                                                                        cards, paper name tags, brochures regarding personal
                                                                        security, business cards, paper toilet-seat bands, and
                                                                        trash bags. Drinking glasses, ashtrays not of precious
                                                                        metal, and matches.


- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                       1,868,724             12/20/94         Hotel, motel, resort hotel
                                                                        restaurant, and Design catering and hotel/motel
                                                                        reservation services.
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                       1,210,114             09/21/82         Hotel and motel services.
BARGAIN BREAK WEEKEND
- -----------------------------------------------------------------------------------------------------------------------------
TRAVELODGE                       1,213,615             10/19/82         Hotel and motel services featuring 
PREFERRED                                                               special rates and benefits 
TRAVELLER
=============================================================================================================================


</TABLE>

NYL3/145199.1    

<PAGE>


                                                                 9
<TABLE>

<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------
                                                      TRADEMARK "THRIFTLODGE"
- -----------------------------------------------------------------------------------------------------------------------------
         Trademark               Reg. No.             Reg. Date                           Services/Goods
- -----------------------------------------------------------------------------------------------------------------------------
In Mexico
- -----------------------------------------------------------------------------------------------------------------------------
<S>                               <C>                  <C>              <C>                                             
THRIFTLODGE                       363,997              02/27/89         Hotel, motel and restaurant services.
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
In United States
- -----------------------------------------------------------------------------------------------------------------------------
THRIFTLODGE                      1,539,812             05/16/89         Motel services.
- -----------------------------------------------------------------------------------------------------------------------------

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

</TABLE>

NYL3/145199.1    

<PAGE>
                                          SCHEDULE 2.01:   JOINT VENTURES

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------


<CAPTION>
             Date                         Joint Venture Partner                                 Property
- ------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                  <C>                                                    <C>
1.          1/24/86              Charlotte L. Mattinson Trustee, Mattinson              San Antonio Alamo
                                 Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
2.          3/14/83              Leroy G. Clark                                         Atlanta Central
- ------------------------------------------------------------------------------------------------------------------------------
3.          6/12/90              Antoni Trzaska; Teresa Trzaska; Harry                  Ashtabula
                                 Krieger; Lillian F. Epstein; Judith A.
                                 Epstein Brown; Norman D. Epstein; and
                                 Burnett and Bertha Hendryx, Co-Trustees,
                                 the Hendryx Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
4.          8/2/66               Bertil Hanson; Gregory Lawrence Johnson,               Chicago O'Hare
                                 Trustee of the Gregory Lawrence Johnson
                                 Trust and The John William Johnson Trust;
                                 and Gary L. Laughton and Evelyn M.
                                 Laughton, as Trustees for The Laughton
                                 Family Revocable Living Trust dated
                                 6/29/90
- ------------------------------------------------------------------------------------------------------------------------------
5.          10/30/67             RST, Inc.                                              Lancaster
- ------------------------------------------------------------------------------------------------------------------------------
6.          12/19/90             S. Ahluwalia                                           Athens, Alabama Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
7.          2/6/63               HAD Inc.                                               Natick
- ------------------------------------------------------------------------------------------------------------------------------
8.          4/15/80              Grow Mountain Corp.                                    Ocala
- ------------------------------------------------------------------------------------------------------------------------------
9.          11/1/82              The Maximuke Co.; William Howard and                   Cincinnati
                                 Diane L. Waite; and Virginia N. Webb
- ------------------------------------------------------------------------------------------------------------------------------
10.         7/24/84              Mark Pitre; Harold P. Chastnat and Evelyn              Lafayette Center
                                 Chastnat
- ------------------------------------------------------------------------------------------------------------------------------
11.         1/28/72              Marco, a Pennsylvania general partnership              Chambersburg
- ------------------------------------------------------------------------------------------------------------------------------
12.         1/30/91              Harrisburg, Inc.                                       Lake Park
- ------------------------------------------------------------------------------------------------------------------------------
13.         7/27/72              Lortola, Inc.                                          Quincy
- ------------------------------------------------------------------------------------------------------------------------------
14.         6/11/70              Alfred J. LeCocq and Sandra S. LeCocq;                 Zanesville Thriftlodge
                                 Frederick J. Grant III, as Trustee under
                                 Declaration of Trust by Ethel Weller
                                 Curphey; John M. Curphey; and William
                                 M. Curphey, Jr.
- ------------------------------------------------------------------------------------------------------------------------------
15.         2/5/75               Evelyn Ringquist                                       Alexandria
</TABLE>


NYL3/145204.1    

<PAGE>


                 2

<TABLE>
<CAPTION>
             Date                         Joint Venture Partner                                 Property
- ------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                  <C>                                                    <C>

- ------------------------------------------------------------------------------------------------------------------------------
16.         6/16/94              Roger A. Davis; Virginia Davis                         Mason City Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
17.         3/27/62              Montgomery Motel, Inc.                                 Louisville
- ------------------------------------------------------------------------------------------------------------------------------
18.         10/1/93              Nancy S. Juneby                                        Lawrence*
- ------------------------------------------------------------------------------------------------------------------------------
19.         7/18/77              Richard E. Pruehs                                      South Sioux City
- ------------------------------------------------------------------------------------------------------------------------------
20.         6/29/93              Harshad Patel                                          Bedford
- ------------------------------------------------------------------------------------------------------------------------------
21.         12/15/78             Arthur T. Bach; Cecilia B. Bach;                       Gainesville (Gainesville
                                 Willoughby Cox, Jr. and Barbara D. Cox;                Lodge)
                                 Kathleen Gale McBroom; Betty Jane Orton
- ------------------------------------------------------------------------------------------------------------------------------
22.         12/19/83             Ronald J. Grace; Artex Development Co.                 Sarasota Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
23.         3/16/87              Sara-Myers, Inc.                                       Fort Myers
- ------------------------------------------------------------------------------------------------------------------------------
24.         12/15/69             Angeline Kapelak; Gundlach's Florida                   Clearwater
                                 Properties, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
25.         12/23/84             Lucille M. Bonewitz; V. Michael Bonewitz;              Terre Haute Thriftlodge
                                 Josette M. Bonewitz
- ------------------------------------------------------------------------------------------------------------------------------
26.         1/12/68              William R. Webb; Virginia E. Webb; The                 Utica
                                 Stille & Duhlmeier Company
- ------------------------------------------------------------------------------------------------------------------------------
27.         12/13/77             Margaret M. Hurley Trust                               Seattle Downtown
- ------------------------------------------------------------------------------------------------------------------------------
28.         9/10/57              Sandra A. Brown, Trustee of the Brown                   Las Vegas Strip
                                 Family Living Trust; Deborah D. Brown;
                                 Jeanette Z. Foushee; James Zurcher, Jr.;
                                 LaFond Family Trust; Robert E. LaFond;
                                 Laura Belle Kelch, Trustee of the Kelch
                                 Family Trust; Marilyn Gubler, Trustee of
                                 the Marilyn Gubler Trust; Robert M. Kelch

- --------
*        The joint venture agreement was not executed by the parties.  The parties are currently acting
         in accordance with the terms thereof.
</TABLE>

NYL3/145204.1     

<PAGE>


                 3

<TABLE>
<CAPTION>
             Date                         Joint Venture Partner                                 Property
- ------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                  <C>                                                    <C>
- ------------------------------------------------------------------------------------------------------------------------------
29.         10/23/93             David and Thelma Schiller Living Trust;                San Francisco Central
                                 Estate of Frances M. Rose; Estate of
                                 Marguerite A. Loyton, Margene A. Lorton,
                                 Executor; Kenneth Gordon Rose; Lesley
                                 Rubinstein; Gregory Rubinstein; George S.
                                 & Barbara A. Ritzau, Co-Trustees of the
                                 Ritzau Family Trust; Kenneth Gordon
                                 Rose, Trustee of the June Rubinstein Trust;
                                 Joan L. Van de Sande, Trustee of Joan L.
                                 Van de Sande Trust; Brett William Van de
                                 Sande; Carole M. Phillips; Kurt Steven Van
                                 de Sande; Benjamin Byung-Sik Yuh &
                                 Barbara B. Yuh
- ------------------------------------------------------------------------------------------------------------------------------
30.         6/28/83              Edward A. Tudor; Rachel S. Knopp Trust,                Space Needle
                                 under Declaration of  Trust dated 9/4/87,
                                 Henry Straub, Jr., Trustee; Jeanette Z.
                                 Foushee; Rosalie M. Tudor; Safter, Inc.;
                                 James E. Zurcher, Jr.; La Fond Family
                                 Trust, Eugene La Fond, Trustee; Robert E.
                                 La Fond
- ------------------------------------------------------------------------------------------------------------------------------
31.         9/1/61               Nancy Bowker; Elizabeth M. Smith, as                   Monterey
                                 Sole Trustee of the Elizabeth Moies Smith
                                 Trust dated 9/11/87; Craig Smith
- ------------------------------------------------------------------------------------------------------------------------------
32.         4/9/87               Benjamin Byung-Sik Yuh and Barbara B.                  San Francisco Downtown
                                 Yuh; Borel Bank and Trust Company,
                                 Successor Trustee of the Frances G. Rose
                                 Trust; Kenneth Gordon Rose; Estate of
                                 Marguerite A. Lorton, Margene A. Lorton,
                                 Executor; Barbara Lorton; June Rubinstein
                                 Trust, Kenneth Rose, Trustee; Lesley
                                 Rubinstein; Gregory Rubinstein; Joan L.
                                 Van de Sande, Trustee of Joan L. Van de
                                 Sande Trust; Brett W. Van de Sande;
                                 Carole Phillips; Kurt S. Van de Sande;
                                 George S. and Barbara A. Ritzau, Co-
                                 Trustees of the Ritzau Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
33.         9/2/77               Carl J. Pendleton; Majorie E. Pendleton;               Tahoe City
                                 Nellys F. Webber

</TABLE>

NYL3/145204.1    

<PAGE>


                 4

<TABLE>
<CAPTION>
             Date                         Joint Venture Partner                                 Property
- ------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                  <C>                                                    <C>

- ------------------------------------------------------------------------------------------------------------------------------
34.         5/4/61               Pearson Radco, Inc.                                    Salt Lake City Center
                                                                                        (formerly Salt Lake-
                                                                                        Downtown)
- ------------------------------------------------------------------------------------------------------------------------------
35.         11/9/89              Harold Edwin Ross Nesbitt, Jr., Trustee                La Jolla Beach
                                 under declaration of trust dated 10/12/89;
                                 Cecil A. Smith and Caroline Smith,
                                 Trustees of the Caroline and Cecil A. Smith
                                 Family Trust dated 5/15/87
- ------------------------------------------------------------------------------------------------------------------------------
36.         1/2/62               Harold Edwin Ross Nesbitt, Jr.; Ronald                 La Jolla Cove
                                 Fearing; Gladys Fearing; Mary McDonnell
- ------------------------------------------------------------------------------------------------------------------------------
37.         5/25/88              Frances G. Rose Trust, Wells Fargo Bank,               San Francisco Ghiradelli
                                 Successor Trustee; Kenneth Gordon Rose;                Square
                                 Estate of June Rubinstein; Lesley
                                 Rubinstein; Gregory Rubinstein
- ------------------------------------------------------------------------------------------------------------------------------
38.         5/26/71              Barry W. Ongerth; Daniel P. Hagmaier and               San Francisco Airport South
                                 Elsie G. Hagmaier, as Trustees of the
                                 Revocable Trust of Daniel P. Hagmaier and
                                 Elsie G. Hagmaier, dated 8/1/91; Dale
                                 Wallace Bennett and Grant B. Johnson;
                                 Fred Bennett, Jr.
- ------------------------------------------------------------------------------------------------------------------------------
39.         10/15/84             Madene Beddo, Co-Trustee of the M&M                    Santa Fe
                                 Family Trust dated 3/27/95; Jeanette Z.
                                 Foushee; James E. Zurcher, Jr.; Robert E.
                                 La Fond; La Fond Family Trust, Eugene
                                 La Fond, Trustee
- ------------------------------------------------------------------------------------------------------------------------------
40.         4/3/62               Trustee of the Eli E. Dorsey Credit Trust              University (Seattle)
- ------------------------------------------------------------------------------------------------------------------------------
41.         3/10/75              Rellim, Inc.                                           Durango
- ------------------------------------------------------------------------------------------------------------------------------
42.         12/19/89             Russell C. Christensen; Romaine J.                     Salt Lake City
                                 Christensen; Highway Realty Co.
- ------------------------------------------------------------------------------------------------------------------------------
43.         1/10/79              Atlantic Partnership; TL Grove, Inc.; Helen            Long Beach Downtown
                                 P. Anderson; Robert O. Anderson
- ------------------------------------------------------------------------------------------------------------------------------
44.         11/14/86             Bentitou Partnership                                   Berkeley
- ------------------------------------------------------------------------------------------------------------------------------
45.         10/18/79             Kam-Rink Holdings Ltd.                                 Kamloops
</TABLE>


NYL3/145204.1    

<PAGE>


                 5

<TABLE>
<CAPTION>
             Date                         Joint Venture Partner                                 Property
- ------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                  <C>                                                    <C>
- ------------------------------------------------------------------------------------------------------------------------------
46.         4/4/72               Frederic J. Bentitou; Kyla L. Bentitou;                Presidio
                                 Hella R. Fluss, Trustee of the Fluss Family
                                 Trust
- ------------------------------------------------------------------------------------------------------------------------------
47.         3/1/66               W.G. Enterprises; Jeanne Gage Ahlgren                  Santa Monica
                                 and Myron Ahlgren, Trustees of the
                                 Ahlgren Family Trust Agreement
- ------------------------------------------------------------------------------------------------------------------------------
48.         3/17/72              KML Corporation                                        South Tahoe
- ------------------------------------------------------------------------------------------------------------------------------
49.         7/1/74               The Estate of George Karasek; Helga                    Santa Cruz
                                 Karasek; Nancy L. Bowker and Irving A.
                                 Bowker; Carolyn Bowker; Marilyn
                                 Dorman; Keith Bowker; June Cornell
- ------------------------------------------------------------------------------------------------------------------------------
50.         5/16/77              Bruce E. Depew                                         Missoula
- ------------------------------------------------------------------------------------------------------------------------------
51.         8/19/86              Robert Lee Delaney Enterprises, Inc.;                  Mission Valley
                                 Wulfing Land Investment Co.; Mission
                                 Four Inc.; Tey-Delaney Investments, Inc.;
                                 Ticoulat Family Trust, B. Odette Ticoulat,
                                 Trustee; Anita A. Tey, M.D.
- ------------------------------------------------------------------------------------------------------------------------------
52.         9/21/73              10-E, Inc.; Estate of Theresa G.                       Bellevue
                                 McNamara, M. Hudzikiewicz, Executrix
- ------------------------------------------------------------------------------------------------------------------------------
53.         12/7/90              Wilbur C. Huffstutler and Shirley J.                   Milpitas
                                 Huffstutler; Donald Dilsaver and Beverly
                                 Dilsaver
- ------------------------------------------------------------------------------------------------------------------------------
54.         6/23/94              Rajendra & Anita Shastri                               Mesa
- ------------------------------------------------------------------------------------------------------------------------------
55.         1/20/82              Shan J. Karia                                          Portland Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
56.         10/21/76             Govind R. Vaghashia                                    Burbank
- ------------------------------------------------------------------------------------------------------------------------------
57.         4/12/76              Sallie Sebree Gregg; Vijay Desai                       Williams
- ------------------------------------------------------------------------------------------------------------------------------
58.         7/16/79              Barney J. Huseby; Catherine J. Huseby;                 Mercer Island
                                 Elizabeth C. Ratcliff; Beverly B. Goucher
- ------------------------------------------------------------------------------------------------------------------------------
59.         6/22/93              Benjamin Byung-Sik Yuh; Barbara Bok-                   Golden Gate
                                 Soon Yuh; Linda Benamati Bower, Trustee
                                 of the Linda Benamati Bower Revocable
                                 Trust dated 6/8/89; Vivian Irwin; Betsy H.
                                 Keller, Trustee
- ------------------------------------------------------------------------------------------------------------------------------
60.         11/29/92             Edward A. Tudor; Rosalie M. Tudor                      Moses Lake

</TABLE>

NYL3/145204.1    

<PAGE>


                 6

<TABLE>
<CAPTION>
             Date                         Joint Venture Partner                                 Property
- ------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                  <C>                                                    <C>

- ------------------------------------------------------------------------------------------------------------------------------
61.         10/19/82             Mar-Te, Inc.                                           Boise
- ------------------------------------------------------------------------------------------------------------------------------
62.         6/23/75              Wayne Thompson; Sara D. Thompson;                      San Luis Obispo
                                 Lawrence Eastman, Trustee
- ------------------------------------------------------------------------------------------------------------------------------
63.         4/1/63               Robert E. La Fond; Irja S. Sturm; Jeanette             Las Vegas Downtown
                                 Z. Foushee; James E. Zurcher, Jr.; La
                                 Fond Family Trust, Eugene La Fond,
                                 Trustee
- ------------------------------------------------------------------------------------------------------------------------------
64.         10/22/87             Gary L. Hines, Maxine L. Hines                         Paso Robles
- ------------------------------------------------------------------------------------------------------------------------------
65.         3/6/63               Moberly Holdings, Ltd.                                 Revelstoke Lodge (Canada)
- ------------------------------------------------------------------------------------------------------------------------------
66.         8/28/69              Janet M. Perry                                         Flagstaff
- ------------------------------------------------------------------------------------------------------------------------------
67.         12/13/83             Brewer Family Trust - Descendants' Trust,              Palm Springs
                                 Frederick Brewer, Trustee; Brewer Family
                                 Trust - Marital Trust, Frederick Brewer,
                                 Trustee; Glenn A. Davis & Marguerite L.
                                 Davis; Erich H. & Elizabeth Langmann
- ------------------------------------------------------------------------------------------------------------------------------
68.         5/18/94              Alpha 100, Tae H. Chon                                 Ogden
- ------------------------------------------------------------------------------------------------------------------------------
69.         3/30/81              Visalia Lodging Associates                             Visalia Thriftlodge
- ------------------------------------------------------------------------------------------------------------------------------
70.         5/28/80              Diane H. Lundstrom & The Estate of Kim                 Walla Walla
                                 Lundstrom; Jeanne Gage Ahlgren and
                                 Myron Ahlgren, Trustees of the Ahlgren
                                 Family Trust, under agreement dated
                                 6/15/89
- ------------------------------------------------------------------------------------------------------------------------------
71.         4/30/92              Jayendra D. Bhakta; Parimala J. Bhakta                 Palo Alto
- ------------------------------------------------------------------------------------------------------------------------------
72.         2/12/92              WMT Inc.; Grimes Corp.; Denzell May                    Roseburg
                                 Gage; Jeanne Gage Ahlgren & Myron
                                 Ahlgren, Trustees Ahlgren Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
73.         5/25/76              Georgia Sherwood; Yutaka Gofuku; Keiko                 Santa Barbara City Center
                                 Gofuku; Yoshiyasu Nakanishi
- ------------------------------------------------------------------------------------------------------------------------------
74.         1/20/88              Erich H. Langmann; Elizabeth Langmann                  Yuma
- ------------------------------------------------------------------------------------------------------------------------------
75.         6/7/54               Gene Grief                                             Hollywood (Travel Inn)
- ------------------------------------------------------------------------------------------------------------------------------
76.         7/27/92              Alfred W. Van de Vanter and Lorayne B.                 Ephrata
                                 Van de Vanter; Cathy Vaughn
- ------------------------------------------------------------------------------------------------------------------------------
77.         3/7/85               Shah and Patel, a Partnership                          Oceanside

</TABLE>

NYL3/145204.1    

<PAGE>


                 7

<TABLE>
<CAPTION>
             Date                         Joint Venture Partner                                 Property
- ------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                  <C>                                                    <C>

- ------------------------------------------------------------------------------------------------------------------------------
78.         9/21/94              Dalip Sharma; Willis H. Miller, Trustee                Yakima
                                 under the Willis H. Miller Revocable Inter
                                 Vivos Trust dated 4/26/84
- ------------------------------------------------------------------------------------------------------------------------------
79.         5/1/91               Robert A. Mathison; Nanci B. Mathison;                 Eureka
                                 Ann Norwood; Myron Ahlgren and Jeanne
                                 Gage Ahlgren, Co-Trustees of the Ahlgren
                                 Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
80.         7/25/77              Lawrence A. Raffo and Victoria Raffo, as               Reno
                                 Co-Trustees of the Albert J. Raffo Family
                                 Trust; Gloria Mary Raffo; Richard H. &
                                 Geraldine Owens; Angelina Raggi; Nathan
                                 Scardigli; Anthony L. & Sylvia B. Flores;
                                 Dominic & Lorraine Giusti; Victoria Raffo
- ------------------------------------------------------------------------------------------------------------------------------
81.         2/9/81               Williard E. Hempel, Trustee, Williard E.               San Diego Airport
                                 Hempel Trust; Aubrey & Virginia Potter,
                                 Co-Trustees
- ------------------------------------------------------------------------------------------------------------------------------
82.         9/16/85              Jean Belleau                                           Santa Rosa Downtown
- ------------------------------------------------------------------------------------------------------------------------------
83.         11/14/88             D.J. Schock, Inc.                                      Billings
- ------------------------------------------------------------------------------------------------------------------------------
84.         6/15/82              April Blossom, Inc.; Arnold Schwartz and               Rancho Bernardo
                                 June Schwartz; Lester & Marion Schwartz;
                                 M. Louis Norman, Successor Trustee
                                 Herteen Family Trust
- ------------------------------------------------------------------------------------------------------------------------------
85.         3/14/94              Jean Belleau and Marianne Belleau                      Santa Rosa
- ------------------------------------------------------------------------------------------------------------------------------
86.         5/24/73              San-Ern, Inc.                                          Embarcadero-Harbor
- ------------------------------------------------------------------------------------------------------------------------------
87.         4/12/90              Alex Palermo and Jimmie Jane Palermo;                  San Diego Airport/Pt. Loma
                                 William A. Lake and Kleo M. Lake; Estate
                                 of Bettye Lutes, Eugene A. Horton, Esq.,
                                 Executor; Alfrieda Anderson; Nancy Jo
                                 Splitstoser; Molly C. Abreu; Madelyn
                                 McDonald; James P. McDonald
- ------------------------------------------------------------------------------------------------------------------------------
88.         6/22/89              Barob Group, Ltd.; Genevieve Simons                    Bayview Thriftlodge
                                 Family Trust, N. Joseph and G. Simons,
                                 Co-Trustees; Sadie Moss; Edward Moss;
                                 Elaine Levenson; Laurence Gerson; Estate
                                 of Rita Moss; Helen Moss

</TABLE>

NYL3/145204.1    

<PAGE>


                                                         8
<TABLE>
<CAPTION>
             Date                         Joint Venture Partner                                 Property
- ------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                  <C>                                                    <C>

- ------------------------------------------------------------------------------------------------------------------------------
89.         5/10/83              Michael M. Murata; June O. Murata;                     Bellingham
                                 Glenna M. Enquist
- ------------------------------------------------------------------------------------------------------------------------------
90.         2/12/81              Man-Kyung Hong; Myung-Joo Hung; Mary                   Cabrillo Central
                                 Jane Guerin
- ------------------------------------------------------------------------------------------------------------------------------
91.         5/31/83              Estate of Bettye Lutes, Eugene A. Horton,              Balboa Park
                                 Esq., Executor; Mary Jane Guerin; Helen
                                 McCormick Thomson; Leonard and Denise
                                 Marien
- ------------------------------------------------------------------------------------------------------------------------------
92.         9/2/64               Estate of Thelma Olson, Nancy Underlee,                Eagle Rock (Eagle Rock
                                 Executor; Michael Bonaparte, Executor of               Inn)*
                                 the Estate of Joseph Graham
- ------------------------------------------------------------------------------------------------------------------------------
93.         4/27/78              Arthur R. Boag                                         Ontario
- ------------------------------------------------------------------------------------------------------------------------------
94.         11/27/72             Twin Pines Apartments                                  Santa Barbara Beach
- ------------------------------------------------------------------------------------------------------------------------------
95.         7/19/90              James C. Rector and Yvonne A. Rector;                  San Diego Uptown Welcome
                                 Shrikant and Sunita Sawant                             Inn
- ------------------------------------------------------------------------------------------------------------------------------
96.         12/5/77              Estate of Bettye Lutes; Jessie I. Pruett;              San Diego Downtown
                                 Mary Jane Guerin
- ------------------------------------------------------------------------------------------------------------------------------
97.         1/2/80               Emmett D. White                                        El Paso
- ------------------------------------------------------------------------------------------------------------------------------
98.         5/2/82               The Elizabeth Moies Smith Trust                        Monterey Fairgrounds
- ------------------------------------------------------------------------------------------------------------------------------
99.         7/23/62              Co-owners of the Company                               Travelodge at Fisherman's
                                                                                        Wharf
- ------------------------------------------------------------------------------------------------------------------------------

- --------
*        The joint venture agreement was not executed by the parties.  The parties are currently acting
         in accordance with the terms thereof.
</TABLE>

NYL3/145204.1    



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