Exhibit 4.5

                                                                      [Michigan]

                                                                   [second lien]

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

                                                       Date:   December 22, 1999

                FEE AND LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES
                        AND RENTS AND SECURITY AGREEMENT
                                ("this Mortgage")

                                      FROM

                               APPLE SUITES, INC.,
                             a Virginia corporation

                                  ("Fee Owner")

                                       AND

                         APPLE SUITES MANAGEMENT, INC.,
                             a Virginia corporation

                                   ("Lessee")

         Address of Fee Owner and Lessee:           306 East Main Street
                                                    Richmond, Virginia 23219
                                                    Attention:   Glade M. Knight

                                       TO

                              PROMUS HOTELS, INC.,
                             a Delaware corporation

                                  ("Mortgagee")

         Address of Mortgagee:          755 Crossover Lane
                                        Memphis, Tennessee 38117

                           Mortgage Amount: $4,384,500

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

       This instrument prepared by, and after recording please return to:
                              Dewey Ballantine LLP
                           1301 Avenue of the Americas
                          New York, New York 10019-6092
                         Attention: Graham R. Hone, Esq.


<PAGE>


                                TABLE OF CONTENTS

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     RECITAL.............................................................................................1

     CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION.......................................................1

     GRANTING CLAUSE.....................................................................................3

     ARTICLE I                 COVENANTS OF MORTGAGOR....................................................4
         Section 1.01.         (a)   Warranty of Title; Power and Authority..............................4
                               (b)   Hazardous Materials.................................................5
                               (c)   Flood Hazard Area...................................................5
         Section 1.02.         (a)   Further Assurances..................................................6
                               (b)   Information Reporting and Back-up Withholding.......................6
         Section 1.03.         (a)   Filing and Recording of Documents...................................6
                               (b)   Filing and Recording Fees and Other Charges.........................6
         Section 1.04.         Payment and Performance of Loan Documents.................................6
         Section 1.05.         Maintenance of Existence; Compliance with Laws............................7
         Section 1.06.         After-Acquired Property...................................................7
         Section 1.07.         (a)   Payment of Taxes and Other Charges..................................7
                               (b)   Payment of Mechanics and Materialmen................................8
                               (c)   Good Faith Contests.................................................8
         Section 1.08.         Taxes on Mortgagee........................................................8
         Section 1.09.         Insurance.................................................................8
         Section 1.10.         Protective Advances by Mortgagee.........................................12
         Section 1.11.         (a)   Visitation and Inspection..........................................12
                               (b)   Financial and Other Information....................................12
                               (c)   Estoppel Certificates..............................................13
         Section 1.12.         Maintenance of Premises and Improvements.................................13
         Section 1.13.         Condemnation.............................................................13
         Section 1.14.         Leases...................................................................14
         Section 1.15.         Premises Documents.......................................................14
         Section 1.16.         Trust Fund; Lien Laws....................................................15

     ARTICLE II                EVENTS OF DEFAULT AND REMEDIES...........................................15
         Section 2.01.         Events of Default and Certain Remedies...................................15
         Section 2.02.         Other Matters Concerning Sales...........................................19
         Section 2.03.         Payment of Amounts Due...................................................21
         Section 2.04.         Actions; Receivers.......................................................22
         Section 2.05.         Mortgagee's Right to Possession..........................................23
         Section 2.06.         Remedies Cumulative......................................................23

</TABLE>

                                      (i)

<PAGE>

<TABLE>
<CAPTION>

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         Section 2.07.         Moratorium Laws; Right of Redemption.....................................23
         Section 2.08.         Regarding Defenses.......................................................24
         Section 2.09.         Expenses as Indebtedness.................................................24
         Section 2.10.         Mortgagee's Rights Concerning Application of Amounts Collected...........24

     ARTICLE III               MISCELLANEOUS............................................................24
         Section 3.01.         Assignment of Rents......................................................24
         Section 3.02.         Security Agreement.......................................................25
         Section 3.03.         Application of Certain Payments..........................................25
         Section 3.04.         Severability.............................................................25
         Section 3.05.         Modifications and Waivers in Writing.....................................25
         Section 3.06.         Notices..................................................................26
         Section 3.07.         Successors and Assigns...................................................26
         Section 3.08.         Limitation on Interest...................................................26
         Section 3.09.         Counterparts.............................................................26
         Section 3.10.         Substitute Mortgages.....................................................26
         Section 3.11.         Mortgagee's Sale of Interests in Loan....................................26
         Section 3.12.         No Merger of Interests...................................................26
         Section 3.13.         No Credit For Taxes......................................................27
         Section 3.14.         No Consent to Contracts..................................................27
         Section 3.15.         Business Loan............................................................27
         Section 3.16.         CERTAIN WAIVERS..........................................................27
         Section 3.17.         GOVERNING LAW............................................................27

</TABLE>

                                      (ii)

<PAGE>

                   THE AMOUNT OF THIS MORTGAGE IS $4,384,500.

                                     RECITAL

         Mortgagee,  Hampton  Inns,  Inc. and Promus  Hotels  Florida,  Inc., as
sellers,  and Fee Owner, as buyer, have heretofore  entered into an Agreement of
Sale dated as of November 22, 1999 (as amended, the "Agreement of Sale") for the
purchase by Fee Owner on the date hereof of certain premises  described  therein
(the "New  Premises").  Fee Owner has  acquired and is the owner of the premises
described in SCHEDULE A attached hereto and made a part hereof and Lessee is the
owner of a leasehold interest therein.  Lessee  acknowledges that it will derive
substantial  benefit from the making of the loan contemplated herein and further
acknowledges  that the  obligation of Mortgagee to make such loan is conditioned
upon, among other things, the execution and delivery by Lessee of this Mortgage.
In connection  with the purchase of the New Premises by Fee Owner from Mortgagee
(or its  affiliates)  pursuant to the  Agreement of Sale,  Fee Owner will borrow
$4,384,500  from Mortgagee and has executed and delivered to Mortgagee its note,
dated the date hereof, obligating it to pay the sum of $4,384,500, with interest
thereon as therein  provided  (said note,  as the same may hereafter be amended,
modified,   extended,   severed,   assigned,   renewed,  replaced  or  restated,
hereinafter,  the "Note"). In order to secure the payment of the Note, Fee Owner
and Lessee, as grantors, have duly authorized the execution and delivery of this
Mortgage.  For purposes of this Mortgage,  "Mortgagor"  shall mean Fee Owner and
Lessee but only to the extent of their  respective  interests  in the  Mortgaged
Property (as herein defined) and their respective obligations under the Note and
Ground Lease.

                  CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION

         Mortgagor  and  Mortgagee  agree  that,  unless the  context  otherwise
specifies  or  requires,  the  following  terms shall have the  meanings  herein
specified.

         "Chattels"  means  all  fixtures,  furnishings,  fittings,  appliances,
apparatus, equipment, building materials and components,  machinery and articles
of personal  property,  of whatever kind or nature,  including any replacements,
proceeds or products  thereof and additions  thereto,  other than those owned by
lessees,  now or at any time  hereafter  intended to be or actually  affixed to,
attached to, placed upon, or used in any way in connection with the complete and
comfortable use, enjoyment, development, occupancy or operation of the Premises,
and whether located on or off the Premises.

         "Default Rate" means the rate (or, if more than one, the highest of the
rates) of  interest  per annum  provided in the Note plus 5%, but in no event to
exceed the maximum rate allowed by law.

         "Events of Default"  means the events and  circumstances  described  as
such in Section 2.01.

         "Ground  Lease"  means the Master  Hotel  Lease  Agreement  dated as of
September 20, 1999 between Fee Owner and Lessee covering,  among other premises,
the

<PAGE>

premises  described in SCHEDULE A, as the same may be amended,  supplemented  or
modified from time to time.

         "Hazardous  Materials"  means  any  pollutant,   effluents,  emissions,
contaminants,  toxic or hazardous  wastes,  materials or  substances,  as any of
those terms are defined from time to time in or for the purposes of any relevant
environmental law, rule, regulation,  code, permit, order, notice, demand letter
or other binding  determination  (hereinafter,  "Environmental Laws") including,
without  limitation,  asbestos  fibers  and  friable  asbestos,  polychlorinated
biphenyls and any petroleum or  hydrocarbon-based  products or  derivatives,  in
each case in amounts in violation of applicable Environmental Laws.

         "Improvements"  means all  structures  or buildings,  and  replacements
thereof,  now or  hereafter  located  upon the  Premises,  including  all  plant
equipment, apparatus, machinery and fixtures of every kind and nature whatsoever
forming part of said structures or buildings.

         "lease" or "leases"  means any lease or leases of all or any portion of
the Premises, whether affecting the fee or leasehold portion thereof.

         "Loan" means the loan made by  Mortgagee to Mortgagor  evidenced by the
Note and secured hereby.

         "Premises"  means the premises  described in SCHEDULE A,  including the
leasehold interest therein created by the Ground Lease, and including all of the
easements,  rights,  privileges and appurtenances  (including air or development
rights) thereunto belonging or in anywise  appertaining,  and all of the estate,
right, title,  interest,  claim or demand whatsoever of Mortgagor therein and in
the streets and ways adjacent thereto, either in law or in equity, in possession
or expectancy,  now or hereafter acquired,  and as used herein shall, unless the
context otherwise requires, be deemed to include the Improvements.

         "Premises   Documents"  means  all  reciprocal  easement  or  operating
agreements, declarations of covenants, conditions or restrictions,  declarations
of condominium, developer's or utility agreements with any village, town, county
or other governmental authority, and any similar such agreements or declarations
now or hereafter affecting the Premises or any part thereof.

         All terms of this  Mortgage  which are not defined above shall have the
meaning set forth elsewhere in this Mortgage.

         Except as expressly indicated otherwise, when used in this Mortgage (i)
"or" is not exclusive, (ii) "hereunder",  "herein",  "hereof" and the like refer
to this Mortgage as a whole, (iii) "Article",  "Section" and "Schedule" refer to
Articles,  Sections and  Schedules of this  Mortgage,  (iv) terms defined in the
singular have a correlative  meaning when used in the plural and vice versa, (v)
a reference to a law or statute  includes any amendment or  modification  to, or
replacement  of,  such law or  statute  and (vi) a  reference  to an  agreement,
instrument or document means such agreement,  instrument or document as the same
may be amended,  modified or  supplemented  from time to time in accordance

                                       2

<PAGE>

with its terms and as permitted  hereby and by the other  documents  executed or
delivered  to  Mortgagee  in  connection  with the Loan.  The cover page and all
Schedules  hereto are incorporated  herein and made a part hereof.  Any table of
contents and the headings and captions herein are for convenience only and shall
not affect the interpretation or construction hereof.

                                 GRANTING CLAUSE

         NOW,  THEREFORE,  Mortgagor,  in  consideration  of the premises and in
order to secure the payment of both the  principal  of, and the interest and any
other sums payable  under,  the Note or this  Mortgage and the  performance  and
observance of all the provisions hereof and of the Note,  hereby gives,  grants,
bargains,  sells,  warrants,  aliens,  remises,   releases,   conveys,  assigns,
transfers,  mortgages,  hypothecates,  deposits, pledges, sets over and confirms
unto Mortgagee,  all its estate,  right, title and interest in, to and under any
and  all  of the  following  described  property  (hereinafter,  the  "Mortgaged
Property") whether now owned or held or hereafter acquired:

                    (i)   the Premises;

                    (ii)  the Improvements;

                    (iii) the Chattels;

                    (iv)  the Premises Documents;

                    (v)   all  rents,  royalties,  issues,  profits,    revenue,
         income, recoveries, reimbursements and other benefits of the  Mortgaged
         Property  (hereinafter,  the "Rents")  and all leases of the  Mortgaged
         Property or  portions  thereof now or  hereafter  entered  into and all
         right, title and interest of Mortgagor thereunder,  including,  without
         limitation,   cash  or  securities   deposited   thereunder  to  secure
         performance  by the lessees of their  obligations  thereunder,  whether
         such cash or  securities  are to be held  until the  expiration  of the
         terms of such leases or applied to one or more of the  installments  of
         rent coming due immediately  prior to the expiration of such terms, and
         including  any  guaranties  of such leases and any lease  cancellation,
         surrender or termination fees in respect thereof, all subject, however,
         to the provisions of Section 3.01;

                    (vi)  all  (a)   development  work   product   prepared   in
         connection   with  the  Premises,   including,   but  not  limited  to,
         engineering,  drainage,  traffic,  soil and other  studies  and  tests;
         water,  sewer,  gas,  electrical  and  telephone  approvals,  taps  and
         connections;   surveys,   drawings,   plans  and  specifications;   and
         subdivision,  zoning and  platting  materials;  (b)  building and other
         permits,  rights,  licenses and approvals relating to the Premises; and
         (c) contracts and agreements (including, without limitation,  contracts
         with architects and engineers, construction contracts and contracts for
         the maintenance or management of the Premises), contract rights, logos,
         trademarks,  trade names, copyrights and other general intangibles

                                       3

<PAGE>

         used or useful in connection with the ownership, operation or occupancy
         of the Premises or any part thereof;

                    (vii)  all  proceeds  of   the   conversion,   voluntary  or
         involuntary,  of any of the foregoing  into cash or liquidated  claims,
         including,  without limitation,  proceeds of insurance and condemnation
         awards, and all rights of Mortgagor to refunds of real estate taxes and
         assessments;

                    (viii) all revenue  and income  received  by or on behalf of
         Mortgagor  resulting  from the  operation  of the  Premises as a hotel,
         including  all sums (1) paid by  customers  for the use of hotel  rooms
         located  within  the  Premises,  (2)  derived  from  food and  beverage
         operations  located  within the Premises,  (3) generated by other hotel
         operations,  including any parking, convention, sports and recreational
         facilities and (4) business interruption insurance proceeds;

                   (ix)    all accounts and accounts receivable,  including  all
         present and future right to payment from any consumer  credit or charge
         card organization or entity (such as those  organizations which sponsor
         or administer  the American  Express,  Carte  Blanche,  Discover  Card,
         Diners  Club,  Visa and Master  Card)  arising  out of the  leasing and
         operation  of, or the  business  conducted at or in relation to, all or
         any part of the Premises; and

                   (x)     any  deposit,  operating  or other account  including
         the entire  balance  therein (now or  hereafter  existing) of Mortgagor
         containing  proceeds of the  operation of the Premises with any banking
         or  financial  institution  and  all  money,  instruments,  securities,
         documents,  chattel paper,  credits,  demands,  and any other property,
         rights,  or  interests of  Mortgagor  relating to the  operation of the
         Premises which at any time shall come into the  possession,  custody or
         control of any banking or financial institution.

         TO HAVE AND TO HOLD unto Mortgagee, its successors and assigns forever.

                                   ARTICLE I

                             COVENANTS OF MORTGAGOR

         Mortgagor represents, except as known by Mortgagee or its affiliates to
the  contrary,  or disclosed to  Mortgagee  in  connection  with the sale of the
Mortgaged Property to Mortgagor, and Mortgagor covenants and agrees as follows:

         Section 1.01.  (a) Warranty of Title;  Power and  Authority.  Mortgagor
warrants that,  with respect to the fee interest in the Premises,  it has a good
and marketable title to an indefeasible fee estate subject to no lien, charge or
encumbrance,  that the Ground Lease is subject to no lien, charge or encumbrance
of any kind and is prior to all liens,  charges and  encumbrances  whatsoever on
the fee interest of the landlord  thereunder,  except in either case such as are
listed as exceptions to title in the title policy insuring the lien hereof; and,
Mortgagor  further warrants that, with respect to the

                                       4

<PAGE>

leasehold  interest  in the  Premises,  that  it is the  owner  of a  valid  and
subsisting  interest as tenant under the Ground Lease,  that the Ground Lease is
in full force and  effect,  there are no  defaults  thereunder  and no event has
occurred  or is  occurring  which  after  notice or passage of time or both will
result in such a default; that it owns the Chattels, all leases and the Rents in
respect of the Mortgaged  Property and all other  personal  property  encumbered
hereby  free and clear of liens and claims;  and  Mortgagor  warrants  that this
Mortgage  is and  will  remain a valid  and  enforceable  lien on the  Mortgaged
Property  subject only to the exceptions  referred to above.  Mortgagor has full
power and lawful authority to mortgage the Mortgaged  Property in the manner and
form herein done or intended hereafter to be done.  Mortgagor will preserve such
title,  will preserve such leasehold estate created by the Ground Lease and will
forever  warrant and defend the same to Mortgagee  and will forever  warrant and
defend the validity  and  priority of the lien hereof  against the claims of all
persons and parties whomsoever.  Mortgagor will perform or cause to be performed
all of the  covenants  and  conditions  required to be performed by it under the
Ground Lease,  will do all things  necessary to preserve  unimpaired  its rights
thereunder,  and will not (i) enter into any agreement modifying or amending the
Ground Lease that would reduce the term of the Ground Lease, increase the amount
of rent payable  thereunder  (except as  contemplated  by the  provisions of the
Ground  Lease) or have a  material  adverse  effect on the lien  created by this
Mortgage or the rights of Mortgagee  hereunder or (ii) for so long as the Ground
Lease is in effect, release the landlord thereunder from any obligations imposed
upon it  thereby.  If  Mortgagor  receives a notice of default  under the Ground
Lease, it shall immediately cause a copy of such notice to be sent by registered
United States mail to Mortgagee.

         (b)  Hazardous  Materials.   To  the  best  of  Mortgagor's  knowledge,
Mortgagor  represents  and warrants  that (i) the Premises and the  improvements
thereon and the surrounding  areas are not currently and have never been subject
to Hazardous Materials or their effects, in each case in amounts in violation of
applicable  Environmental  Laws, (ii) neither it nor any portion of the Premises
or improvements thereon is in violation of, or subject to any existing,  pending
or threatened investigation or proceeding by any governmental authorities under,
any Environmental Law, (iii) there are no claims, litigation,  administrative or
other  proceedings,  whether  actual or  threatened,  or  judgments  or  orders,
concerning  Hazardous  Materials  relating  in any  way to the  Premises  or the
improvements thereon and (iv) Mortgagor is not required by any Environmental Law
to obtain any permits or licenses to construct or use any improvements, fixtures
or equipment  with respect to the Premises,  or if any such permit or license is
required it has been  obtained  and is capable of being  mortgaged  and assigned
hereby.  Mortgagor will comply with all applicable  Environmental Laws and will,
at its sole cost and expense,  promptly remove, or cause the removal of, any and
all Hazardous  Materials or the effects  thereof at any time identified as being
on, in, under or affecting the Premises.

         (c) Flood Hazard Area.  Mortgagor  represents that neither the Premises
nor any part thereof is located in an area  identified  by the  Secretary of the
United States  Department of Housing and Urban  Development or by any applicable
federal  agency as having  special  flood  hazards or, if it is,  Mortgagor  has
obtained the insurance required by Section 1.09.

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<PAGE>

         Section 1.02. (a) Further Assurances.  Mortgagor will, at its sole cost
and expense,  do,  execute,  acknowledge  and deliver all and every such further
acts,  deeds,  conveyances,   mortgages,  assignments,  notices  of  assignment,
transfers  and  assurances  as  Mortgagee  shall  from  time to time  reasonably
require,  for  the  better  assuring,  conveying,  assigning,  transferring  and
confirming unto Mortgagee the property and rights hereby conveyed or assigned or
intended now or hereafter so to be, or which  Mortgagor  may be or may hereafter
become bound to convey or assign to Mortgagee, or for carrying out the intention
or facilitating the performance of the terms hereof, or for filing,  registering
or recording this Mortgage and, on demand, will execute and deliver,  and hereby
authorizes  Mortgagee to execute and file in Mortgagor's  name, to the extent it
may  lawfully do so, one or more  financing  statements,  chattel  mortgages  or
comparable  security  instruments,  to  evidence  or  perfect  more  effectively
Mortgagee's security interest in and the lien hereof upon the Chattels and other
personal property encumbered hereby.

         (b) Information  Reporting and Back-up Withholding.  Mortgagor will, at
its sole cost and expense,  do,  execute,  acknowledge and deliver all and every
such acts,  information  reports,  returns and withholding of monies as shall be
necessary or appropriate to comply fully, or to cause full compliance,  with all
applicable  information  reporting and back-up  withholding  requirements of the
Internal  Revenue  Code of 1986  (including  all  regulations  now or  hereafter
promulgated  thereunder) in respect of the Premises and all transactions related
to the  Premises,  and will at all times  provide  Mortgagee  with  satisfactory
evidence of such compliance and notify Mortgagee of the information  reported in
connection with such compliance.

         Section  1.03.  (a)  Filing  and  Recording  of  Documents.   Mortgagor
forthwith upon the execution and delivery  hereof,  and thereafter  from time to
time,  will cause this Mortgage and any security  instrument  creating a lien or
evidencing  the lien hereof upon the  Chattels  and each  instrument  of further
assurance to be filed,  registered or recorded in such manner and in such places
as may be required  by any  present or future law in order to publish  notice of
and fully to protect the lien hereof upon, and the interest of Mortgagee in, the
Mortgaged Property.

         (b) Filing and Recording Fees and Other Charges. Mortgagor will pay all
filing,  registration  or  recording  fees,  and all  expenses  incident  to the
execution and  acknowledgment  hereof,  any mortgage  supplemental  hereto,  any
security instrument with respect to the Chattels,  and any instrument of further
assurance,   and  any  reasonable  expenses   (including   attorneys'  fees  and
disbursements)  incurred by Mortgagee in connection  with the Loan, and will pay
all federal,  state,  county and municipal stamp taxes and other taxes,  duties,
imposts,  assessments  and  charges  arising  out of or in  connection  with the
execution and delivery of the Note,  this  Mortgage,  any mortgage  supplemental
hereto,  any security  instrument with respect to the Chattels or any instrument
of further assurance.

         Section 1.04. Payment and Performance of Loan Documents. Mortgagor will
punctually  pay the  principal  and interest and all other sums to become due in
respect hereof and of the Note at the time and place and in the manner specified
therein,  according to the true intent and meaning  thereof,  all in currency of
the United  States of

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<PAGE>

America  which at the time of such payment shall be legal tender for the payment
of public and  private  debts.  Mortgagor  will duly and timely  comply with and
perform all of the terms, provisions, covenants and agreements contained in said
documents  and in all other  documents or  instruments  executed or delivered by
Mortgagor to Mortgagee in connection  with the Loan, and will permit no failures
of performance thereunder.

         Section  1.05.   Maintenance  of  Existence;   Compliance   with  Laws.
Mortgagor,  if other than a natural person,  will, so long as it is owner of all
or part of the Mortgaged Property,  do all things necessary to preserve and keep
in full force and effect its existence,  franchises,  rights and privileges as a
business or stock corporation,  partnership, limited liability company, trust or
other entity under the laws of the state of its  formation.  Mortgagor will duly
and  timely  comply  with all laws,  regulations,  rules,  statutes,  orders and
decrees  of any  governmental  authority  or  court  applicable  to it or to the
Mortgaged Property or any part thereof.

         Section 1.06. After-Acquired Property. All right, title and interest of
Mortgagor  in  and  to  all  extensions,  improvements,  betterments,  renewals,
substitutes and  replacements  of, and all additions and  appurtenances  to, the
Mortgaged  Property,  hereafter  acquired  by,  or  released  to,  Mortgagor  or
constructed,  assembled  or  placed  by  Mortgagor  on  the  Premises,  and  all
conversions  of  the  security  constituted   thereby,   immediately  upon  such
acquisition, release, construction,  assembling, placement or conversion, as the
case may be, and in each such case,  without any further  mortgage,  conveyance,
assignment or other act by Mortgagor, shall become subject to the lien hereof as
fully and completely, and with the same effect, as though now owned by Mortgagor
and  specifically  described in the Granting  Clause hereof,  but at any and all
times  Mortgagor  will execute and deliver to Mortgagee any and all such further
assurances,  mortgages,  conveyances  or  assignments  thereof as Mortgagee  may
reasonably require for the purpose of expressly and specifically  subjecting the
same to the lien hereof.

         Section 1.07. (a) Payment of Taxes and Other Charges.  Mortgagor,  from
time to time before the same shall become delinquent, will pay and discharge all
taxes of every kind and nature  (including real and personal  property taxes and
income, franchise,  withholding,  profits and gross receipts taxes), all general
and special assessments, levies, permits, inspection and license fees, all water
and sewer rents and charges,  and all other public charges  whether of a like or
different nature,  imposed upon or assessed against it or the Mortgaged Property
or any part thereof or upon the revenues,  rents, issues,  income and profits of
the Mortgaged Property or arising in respect of the occupancy, use or possession
thereof. Mortgagor will, upon Mortgagee's request, deliver to Mortgagee receipts
evidencing the payment of all such taxes,  assessments,  levies, fees, rents and
other  public  charges  imposed  upon or  assessed  against it or the  Mortgaged
Property or any portion thereof.

         Mortgagee  may, at its option  following the  occurrence of an Event of
Default,  to be exercised by thirty (30) days' notice to Mortgagor,  require the
deposit by Mortgagor,  at the time of each payment of an installment of interest
or principal  under the Note (but no less often than monthly),  of an additional
amount  sufficient to discharge the

                                       7

<PAGE>

obligations under this clause (a) when they become due. The determination of the
amount so  payable  and of the  fractional  part  thereof to be  deposited  with
Mortgagee,  so that the aggregate of such deposits  shall be sufficient for this
purpose,  shall be made by Mortgagee in its sole discretion.  Such amounts shall
be  held by  Mortgagee  without  interest  and  applied  to the  payment  of the
obligations  in respect of which such amounts were  deposited or, at Mortgagee's
option,  to the  payment  of said  obligations  in such  order  or  priority  as
Mortgagee shall  determine,  on or before the respective dates on which the same
or any of them would become  delinquent.  If one (1) month prior to the due date
of any of the  aforementioned  obligations the amounts then on deposit  therefor
shall be  insufficient  for the payment of such  obligation  in full,  Mortgagor
within ten (10) days after  demand  shall  deposit the amount of the  deficiency
with Mortgagee.  Nothing herein contained shall be deemed to affect any right or
remedy of Mortgagee under any provisions hereof or of any statute or rule of law
to pay any such amount and to add the amount so paid,  together with interest at
the Default Rate, to the indebtedness hereby secured.

         (b) Payment of Mechanics and Materialmen. Mortgagor will pay, from time
to time when the same  shall  become  due,  all  lawful  claims  and  demands of
mechanics, materialmen,  laborers, and others which, if unpaid, might result in,
or permit the creation of, a lien on the Mortgaged Property or any part thereof,
and in general will do or cause to be done everything necessary so that the lien
hereof shall be fully preserved, at the cost of Mortgagor and without expense to
Mortgagee,  other  than those  liens  which  Mortgagee  or its  affiliates  have
indemnified  Mortgagor  pursuant to the provisions set forth in the Agreement of
Sale.

         (c) Good Faith Contests. Nothing in this Section 1.07 shall require the
payment or discharge of any obligation imposed upon Mortgagor by this Section so
long as Mortgagor shall in good faith and at its own expense contest the same or
the validity  thereof by appropriate  legal  proceedings  which shall operate to
prevent  the  collection  thereof or other  realization  thereon and the sale or
forfeiture  of the  Mortgaged  Property or any part thereof to satisfy the same;
provided,  however,  that (i)  during  such  contest  Mortgagor  shall set aside
reserves  sufficient to discharge  Mortgagor's  obligation  hereunder and of any
additional  charge,  penalty or expense  arising from or incurred as a result of
such  contest and (ii) if at any time  payment of any  obligation  imposed  upon
Mortgagor by clause (a) above shall become  necessary to prevent the delivery of
a tax deed or other instrument  conveying the Mortgaged  Property or any portion
thereof because of non-payment,  then Mortgagor shall pay the same in sufficient
time to prevent the delivery of such tax deed or other instrument.

         Section 1.08. Taxes on Mortgagee.  Mortgagor will pay any taxes, except
income  taxes,  imposed on Mortgagee  by reason of its  ownership of the Note or
this Mortgage,  provided that Mortgagee can require  payment of the Note in full
within  ninety (90) days if it shall be illegal for  Mortgagor to pay any tax or
if the  payment  of such tax by  Mortgagor  would  result  in the  violation  of
applicable usury laws.

         Section  1.09.  Insurance.  (a)  Mortgagor  will at all times  provide,
maintain and keep in force:

                                       8

<PAGE>

               (i)   policies of insurance insuring the  Premises,  Improvements
         and Chattels against loss or damage by fire and lightning; against loss
         or damage by other risks  embraced by coverage of the type now known as
         All Risk  Replacement  Cost Insurance  with agreed amount  endorsement,
         including  but not  limited  to riot and  civil  commotion,  vandalism,
         malicious  mischief and theft;  and against such other risks or hazards
         as Mortgagee  from time to time  reasonably  may designate in an amount
         sufficient to prevent Mortgagee or Mortgagor from becoming a co-insurer
         under  the  terms of the  applicable  policies,  but in any event in an
         amount  not less  than 100% of the then  full  replacement  cost of the
         Improvements  (exclusive of the cost of  excavations,  foundations  and
         footings  below  the  lowest  basement  floor)  without  deduction  for
         physical depreciation;

               (ii) policies of insurance insuring the Premises against the loss
        of  "rental  value"  of the  buildings  which  constitute  a part of the
        Improvements  on a "rented or vacant  basis"  arising  out of the perils
        insured  against  pursuant to clause (i) above in an amount equal to not
        less than one (1)  year's  gross  "rental  value"  of the  Improvements.
        "Rental  value" as used  herein is  defined  as the sum of (A) the total
        anticipated  gross rental income from tenant occupancy of such buildings
        as furnished and  equipped,  (B) the amount of all charges which are the
        legal  obligation of tenants and which would otherwise be the obligation
        of  Mortgagor  and (C) the  fair  rental  value of any  portion  of such
        buildings which is occupied by Mortgagor.  Mortgagor  hereby assigns the
        proceeds of such  insurance to Mortgagee,  to be applied by Mortgagee in
        payment of the interest and principal on the Note,  insurance  premiums,
        taxes,  assessments  and  private  impositions  until  such  time as the
        Improvements  shall have been restored and placed in full operation,  at
        which time,  provided  Mortgagor is not then in default  hereunder,  the
        balance of such insurance  proceeds,  if any, held by Mortgagee shall be
        paid over to Mortgagor;

               (iii) if  all  or part  of  the  Premises  are located in an area
         identified by the Secretary of the United States  Department of Housing
         and Urban  Development or by any  applicable  federal agency as a flood
         hazard area, flood insurance in an amount at least equal to the maximum
         limit of coverage  available  under the National Flood Insurance Act of
         1968, provided,  however,  that Mortgagee reserves the right to require
         flood   insurance  in  excess  of  said  limit  if  such  insurance  is
         commercially available up to the amount provided in clause (i) above;

               (iv)  during any period of restoration  under  this  Section 1.09
         or  Section  1.13,  a  policy  or  policies  of  builder's  "all  risk"
         insurance,  written on a Standard  Builder's Risk Completed  Value Form
         (100%  non-reporting),  in an amount  not less than the full  insurable
         value  of  the  Premises   against  such  risks   (including,   without
         limitation,   fire  and  extended  coverage,  collapse  and  earthquake
         coverage to agreed limits) as Mortgagee may reasonably request, in form
         and substance acceptable to Mortgagee;

                                       9

<PAGE>

               (v)   a  policy or policies of workers' compensation insurance as
         required by workers' compensation  insurance laws (including employer's
         liability insurance,  if requested by Mortgagee) covering all employees
         of Mortgagor;

               (vi)  comprehensive  liability insurance on an "occurrence" basis
         against  claims for "personal  injury"  liability,  including,  without
         limitation,  bodily injury, death or property damage liability,  with a
         limit of not less than $15,000,000 in the event of "personal injury" to
         any  number of  persons  or of damage to  property  arising  out of one
         "occurrence".  Such policies shall name Mortgagee as additional insured
         by an endorsement,  and shall contain  cross-liability and severability
         of interest clauses, all satisfactory to Mortgagee; and

               (vii) such  other  insurance  (including,  but  not  limited  to,
         earthquake insurance), and in such amounts, as may from time to time be
         reasonably  required by Mortgagee  against the same or other  insurable
         hazards.

         Notwithstanding  anything  herein to the contrary,  for so long as that
certain Management  Agreement of even date herewith between Lessee and Mortgagee
with respect to the  Premises  remains in full force and effect (as the same may
be amended,  the  "Management  Agreement"),  the types and amounts of  insurance
required by the Management  Agreement to the extent  inconsistent with those set
forth above shall govern and control Mortgagor's obligations in respect thereof.

         (b) All policies of insurance required under this Section 1.09 shall be
issued  by  companies  having  Best's  ratings  and being  otherwise  reasonably
acceptable  to  Mortgagee,  shall  be  subject  to the  reasonable  approval  of
Mortgagee as to amount,  content,  form and expiration  date and, except for the
liability  policies  described in clauses (a)(v) and (vi) above, shall contain a
Non-Contributory   Standard   Mortgagee   Clause  and   Lender's   Loss  Payable
Endorsement, or their equivalents, in favor of Mortgagee, and shall provide that
the proceeds thereof shall be payable to Mortgagee. Mortgagee shall be furnished
with the  original of each  policy  required  hereunder,  which  policies  shall
provide that they shall not lapse, nor be modified or cancelled,  without thirty
(30) days'  written  notice to  Mortgagee.  At least  thirty  (30) days prior to
expiration of any policy required  hereunder,  Mortgagor shall furnish Mortgagee
appropriate  proof of issuance  of a policy  continuing  in force the  insurance
covered  by the  policy so  expiring.  Mortgagor  shall  furnish  to  Mortgagee,
promptly upon request, receipts or other satisfactory evidence of the payment of
the premiums on such  insurance  policies.  In the event that Mortgagor does not
deposit with Mortgagee a new certificate or policy of insurance with evidence of
payment of premiums thereon at least thirty (30) days prior to the expiration of
any expiring policy,  then Mortgagee may, but shall not be obligated to, procure
such insurance and pay the premiums  therefor,  and Mortgagor agrees to repay to
Mortgagee  the  premiums  thereon  promptly on demand,  together  with  interest
thereon at the Default Rate.

         (c) Mortgagor hereby assigns to Mortgagee all proceeds of any insurance
required to be maintained  by this Section 1.09 which  Mortgagor may be entitled
to receive for loss or damage to the  Premises,  Improvements  or Chattels.  All
such  insurance

                                       10

<PAGE>

proceeds  shall be payable to Mortgagee,  and Mortgagor  hereby  authorizes  and
directs any  affected  insurance  company to make  payment  thereof  directly to
Mortgagee  subject,  however,  to clause (f) below.  Mortgagor shall give prompt
notice to Mortgagee  of any  casualty,  whether or not of a kind  required to be
insured against under the policies to be provided by Mortgagor  hereunder,  such
notice to  generally  describe  the  nature and cause of such  casualty  and the
extent of the damage or destruction.  Mortgagor may settle, adjust or compromise
any claims for loss,  damage or destruction,  regardless of whether or not there
are  insurance  proceeds  available or whether any such  insurance  proceeds are
sufficient  in amount to fully  compensate  for such loss or damage,  subject to
Mortgagee's prior consent.  Notwithstanding the foregoing,  Mortgagee shall have
the right to join Mortgagor in settling,  adjusting or compromising  any loss of
$100,000 or more.  Mortgagor  hereby  authorizes  the  application or release by
Mortgagee of any insurance  proceeds  under any policy of insurance,  subject to
the other  provisions  hereof.  The  application  or release by Mortgagee of any
insurance  proceeds  shall not cure or waive any  default  or notice of  default
hereunder or invalidate any act done pursuant to such notice.

         (d) In the event of the  foreclosure  hereof or other  transfer  of the
title to the Mortgaged Property in  extinguishment,  in whole or in part, of the
indebtedness  secured hereby,  all right, title and interest of Mortgagor in and
to any insurance  policy,  or premiums or payments in  satisfaction of claims or
any other  rights  thereunder  then in force,  shall  pass to the  purchaser  or
grantee  notwithstanding the amount of any bid at such foreclosure sale. Nothing
contained  herein shall  prevent the accrual of interest as provided in the Note
on any  portion of the  principal  balance due under the Note until such time as
insurance  proceeds  are actually  received and applied to reduce the  principal
balance outstanding.

         (e) Mortgagor shall not take out separate insurance  concurrent in form
or contributing  in the event of loss with that required to be maintained  under
this Section 1.09 unless  Mortgagee is included  thereon as a named insured with
loss payable to Mortgagee under standard mortgage  endorsements of the character
and to the extent above  described.  Mortgagor shall promptly  notify  Mortgagee
whenever any such separate  insurance is taken out and shall promptly deliver to
Mortgagee the policy or policies of such insurance.

         (f) Any and all monies  received  as  payment  which  Mortgagor  may be
entitled to receive for loss or damage to the Premises, Improvements or Chattels
under any  insurance  maintained  pursuant  to this  Section  1.09  (other  than
proceeds under the policies required by clause (a)(ii) above) shall be paid over
to Mortgagee and, at Mortgagee's option, either applied to the prepayment of the
Note and all interest  and other sums  accrued and unpaid in respect  thereof or
disbursed  from  time to time to  Mortgagor  in  reimbursement  of its costs and
expenses  incurred in the  restoration of the  Improvements  in accordance  with
Mortgagee's standard  construction lending practices,  terms and conditions,  in
either  case,  less  Mortgagee's  reasonable  expenses  for  collecting  and, if
applicable,   disbursing  the  insurance  proceeds,  or  otherwise  incurred  in
connection   therewith.   Notwithstanding  the  provisions  of  the  immediately
preceding  sentence,  provided no default exists hereunder,  Mortgagee agrees to
apply any such proceeds

                                       11

<PAGE>

received  by it to the  reimbursement  of  Mortgagor's  costs of  restoring  the
Improvements.  Advances of insurance  proceeds  shall be made to Mortgagor  from
time  to time in  accordance  with  Mortgagee's  standard  construction  lending
practices, terms and conditions; amounts not required for such purposes shall be
applied,  at Mortgagee's  option,  to the prepayment of the Note and to interest
accrued and unpaid thereon in such order and proportions as Mortgagee may elect.
In no event shall  Mortgagee be required to advance  such  proceeds to Mortgagor
unless  Mortgagee  shall  have  (i)  received  satisfactory  evidence  that  the
funding/expiration dates of the commitment,  if any, for the permanent financing
of the Improvements  have been extended for such period of time as is reasonably
necessary to complete said  restoration and (ii) reasonably  determined that the
restoration  of the  Improvements  can be completed by the Maturity  Date of the
Note at a cost which does not exceed the amount of available  insurance proceeds
or, in the event that such proceeds are reasonably determined by Mortgagee to be
inadequate, Mortgagee shall have received from Mortgagor a cash deposit equal to
the  excess  of said  estimated  cost of  restoration  over the  amount  of said
available proceeds.  If the conditions for the advance of insurance proceeds for
restoration  set forth in clauses  (i) and (ii) above are not  satisfied  within
sixty (60) days of  Mortgagee's  receipt  thereof  or if the actual  restoration
shall not have been  commenced  within  such  period,  Mortgagee  shall have the
option at any time thereafter to apply such insurance proceeds to the payment of
the  Note  and to  interest  accrued  and  unpaid  thereon  in  such  order  and
proportions as Mortgagee may elect.

         Section 1.10. Protective Advances by Mortgagee. If Mortgagor shall fail
to perform any of the covenants contained herein, Mortgagee may make advances to
perform the same on its behalf and all sums so advanced shall be a lien upon the
Mortgaged  Property and shall be secured hereby.  Mortgagor will repay on demand
all sums so advanced on its behalf together with interest thereon at the Default
Rate.  The  provisions  of this  Section  shall not  prevent  any default in the
observance  of any  covenant  contained  herein  from  constituting  an Event of
Default.

         Section  1.11.  (a)  Visitation  and  Inspection.  Mortgagor  will keep
adequate  records and books of account in  accordance  with  generally  accepted
accounting principles and will permit Mortgagee, by its agents,  accountants and
attorneys,  to visit and inspect the Mortgaged  Property and examine its records
and books of account  and make  copies  thereof or  extracts  therefrom,  and to
discuss  its  affairs,  finances  and  accounts  with the  officers  or  general
partners,  as the case may be, of Mortgagor,  at such reasonable times as may be
requested by  Mortgagee.

         (b)  Financial  and  Other  Information.   Mortgagor  will  deliver  to
Mortgagee with reasonable  promptness such financial information with respect to
Mortgagor or the Premises as Mortgagee may reasonably request from time to time.
All  financial  statements  of Mortgagor  shall be prepared in  accordance  with
generally  accepted  accounting  principles  and  shall  be  accompanied  by the
certificate of a principal  financial or accounting  officer or general partner,
as the case may be, of Mortgagor,  dated within five (5) days of the delivery of
such  statements  to  Mortgagee,  stating  that he or she  knows  of no Event of
Default,  nor of any event  which  after  notice or lapse of time or both  would
constitute an Event of Default, which has occurred and is continuing, or, if any
such event or Event of Default has occurred and is  continuing,  specifying  the
nature and

                                       12

<PAGE>

period of existence  thereof and what action  Mortgagor has taken or proposes to
take with respect  thereto,  and,  except as otherwise  specified,  stating that
Mortgagor  has  fulfilled  all of its  obligations  hereunder  and  otherwise in
respect of the Loan which are  required to be  fulfilled on or prior to the date
of such certificate.

         (c)  Estoppel  Certificates.  Mortgagor,  within  three  (3) days  upon
request in person or within five (5) days upon  request by mail,  will furnish a
statement,  duly  acknowledged,  of the  amount due  whether  for  principal  or
interest on this  Mortgage  and whether any offsets,  counterclaims  or defenses
exist against the indebtedness secured hereby.

         Section 1.12. Maintenance of Premises and Improvements.  Mortgagor will
not  commit  any  waste on the  Premises  or make any  change  in the use of the
Premises  which  will in any way  increase  any  ordinary  fire or other  hazard
arising out of  construction  or operation.  Mortgagor  will, or shall cause its
Lessee  to,  at all  times,  maintain  the  Improvements  and  Chattels  in good
operating  order and condition and will promptly  make,  from time to time,  all
repairs,  renewals,  replacements,  additions  and  improvements  in  connection
therewith which are needful or desirable to such end. The Improvements shall not
be  demolished  or  substantially  altered,  nor shall any  Chattels  be removed
without Mortgagee's prior consent except where appropriate  replacements free of
superior title, liens and claims are immediately made of value at least equal to
the value of the removed Chattels.

         Section  1.13.  Condemnation.  Mortgagor,  immediately  upon  obtaining
knowledge of the  institution or pending  institution of any proceedings for the
condemnation  of the  Premises or any  portion  thereof,  will notify  Mortgagee
thereof.   Mortgagee  may  participate  in  any  such  proceedings  and  may  be
represented  therein by counsel of its  selection.  Mortgagor  from time to time
will  deliver  to  Mortgagee  all  instruments  requested  by  it to  permit  or
facilitate such  participation.  In the event of such condemnation  proceedings,
the award or  compensation  payable is hereby  assigned  to and shall be paid to
Mortgagee.  Mortgagee shall be under no obligation to question the amount of any
such  award or  compensation  and may accept the same in the amount in which the
same shall be paid. The proceeds of any award or compensation so received shall,
at Mortgagee's  option,  either be applied to the prepayment of the Note and all
interest  and other sums  accrued  and unpaid in respect  thereof at the rate of
interest  provided  therein  regardless  of the rate of interest  payable on the
award by the  condemning  authority,  or be disbursed to Mortgagor  from time to
time for restoration of the Improvements in accordance with Mortgagee's standard
construction  lending  practices,  terms and  conditions,  in either case,  less
Mortgagee's  reasonable  expenses for collecting and, if applicable,  disbursing
the award, or otherwise incurred in connection  therewith.  Notwithstanding  the
provisions  of the  immediately  preceding  sentence,  provided  no  monetary or
bankruptcy  related default or any Event of Default exists hereunder,  Mortgagee
agrees to apply  any such  condemnation  award  proceeds  received  by it to the
reimbursement of Mortgagor's  costs of restoring the  Improvements.  Advances of
condemnation  award  proceeds  shall be made to  Mortgagor  from time to time in
accordance with Mortgagee's standard  construction lending practices,  terms and
conditions;  amounts  not  required  for  such  purposes  shall be  applied,  at
Mortgagee's  option,  to the prepayment of

                                       13

<PAGE>

the  Note  and  to interest  accrued and unpaid thereon (at the rate of interest
provided therein  regardless of the rate of interest payable on the award by the
condemning  authority) in such order and proportions as Mortgagee may elect.

         Section 1.14.  Leases. (a) Mortgagor will not (i) execute an assignment
of the rents or any part  thereof from the Premises  without  Mortgagee's  prior
consent,  (ii) except  where the lessee is in default  thereunder,  terminate or
consent to the  cancellation or surrender of any lease of the Premises or of any
part thereof,  now existing or hereafter to be made, having an unexpired term of
one (1) year or more,  provided,  however,  that any lease may be  cancelled  if
promptly after the  cancellation  thereof a new lease is entered into with a new
lessee having a credit standing at least  equivalent to that of the lessee whose
lease was  cancelled,  on  substantially  the same  terms as the  terminated  or
cancelled lease, (iii) modify any such lease so as to shorten the unexpired term
thereof or so as to decrease,  waive or  compromise  in any manner the amount of
the rents payable  thereunder or materially expand the obligations of the lessor
thereunder,  (iv) accept  prepayments of more than one month of any installments
of rents to become due under such leases,  except  prepayments  in the nature of
security for the performance of the lessees thereunder,  (v) modify,  release or
terminate  any  guaranties  of any such lease or (vi) in any other manner impair
the value of the Mortgaged Property or the security hereof.

         (b)  Mortgagor  will not  execute  any  lease  of all or a  substantial
portion of the Premises except for actual occupancy by the lessee  thereunder or
its property manager,  and will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or portions thereof now or hereafter existing,  on
the part of the lessor thereunder to be kept and performed and will at all times
do all things  reasonably  necessary to compel  performance  by the lessee under
each lease of all  obligations,  covenants  and  agreements by such lessee to be
performed thereunder. If any of such leases provide for the giving by the lessee
of  certificates  with  respect to the status of such  leases,  Mortgagor  shall
exercise  its right to request  such  certificates  within  five (5) days of any
demand  therefor by  Mortgagee  and shall  deliver  copies  thereof to Mortgagee
promptly upon receipt.

         (c) In the  event  of the  enforcement  by  Mortgagee  of the  remedies
provided  for  hereby or by law,  the  lessee  under  each of the  leases of the
Premises  will,  upon  request  of any  person  succeeding  to the  interest  of
Mortgagor as a result of such  enforcement,  automatically  become the lessee of
said successor in interest,  without change in the terms or other  provisions of
such lease,  provided,  however,  that said  successor in interest  shall not be
bound by (i) any payment of rent or additional  rent for more than one (1) month
in advance,  except prepayments in the nature of security for the performance by
said  lessee  of its  obligations  under  said  lease or (ii) any  amendment  or
modification  of the  lease  made  without  the  consent  of  Mortgagee  or such
successor in interest.  Each lease shall also provide that, upon request by said
successor in interest,  such lessee shall  execute and deliver an  instrument or
instruments confirming such attornment.

         Section 1.15.  Premises  Documents.  Mortgagor  shall (a) do all things
reasonably necessary to cause the due compliance and faithful performance by the
other

                                       14

<PAGE>

parties to the Premises  Documents with and of all obligations and agreements by
such other parties to be complied with and performed thereunder,  except for any
continuing  failure of the Premises to comply with the Premises Documents of the
date of the acquisition hereof from Mortgagee or its affiliate,  and (b) deliver
promptly to Mortgagee copies of any notices which it gives or receives under any
of the Premises Documents.

         Section  1.16.  Trust  Fund;  Lien Laws.  Mortgagor  will  receive  the
advances  secured  hereby and will hold the right to receive such  advances as a
trust  fund  to be  applied  first  for the  purpose  of  paying  the  costs  of
improvements  on the  Premises  and will apply the same first to the  payment of
such costs before using any part of the total of the same for any other purpose.
Mortgagor  will  indemnify  and  hold  Mortgagee  harmless  against  any loss or
liability,  cost or  expense,  including,  without  limitation,  any  judgments,
attorney's  fees,  costs of appeal bonds and printing  costs,  arising out of or
relating to any  proceeding  instituted by any claimant  alleging a violation by
Mortgagor of any applicable lien law.

                                   ARTICLE II

                         EVENTS OF DEFAULT AND REMEDIES

         Section 2.01. Events of Default and Certain Remedies. If one or more of
the following Events of Default shall happen, that is to say:

               (a) if (i) default shall be made in the payment of any principal,
         interest, fees or other sums under the Note, in any such case, when and
         as the same shall  become due and  payable,  whether at  maturity or by
         acceleration  or as part of any payment or prepayment or otherwise,  in
         each case,  as herein or in the Note  provided,  and such default shall
         have  continued  for a period of ten (10) days or (ii) default shall be
         made in the payment of any tax or other charge required by Section 1.07
         to be paid and said default shall have continued for a period of twenty
         (20) days; or

               (b) if default shall be made in the due observance or performance
         of any covenant,  condition or agreement in the Note,  this Mortgage or
         in any other document  executed or delivered to Mortgagee in connection
         with the Loan,  and such default  shall have  continued for a period of
         thirty  (30)  days  after  notice  thereof  shall  have  been  given to
         Mortgagor by Mortgagee,  or, in the case of such other documents,  such
         shorter grace period, if any, as may be provided for therein; or

               (c) if any  representation  or  warranty  made  by  Mortgagor  in
         Section  1.01 shall be  incorrect,  or if any other  representation  or
         warranty made to Mortgagee in this Mortgage,  or in any other document,
         certificate  or  statement   executed  or  delivered  to  Mortgagee  in
         connection  with the Loan shall be incorrect  in any  material  respect
         when made or remade; or

                                       15

<PAGE>

               (d) if by order of a court of competent jurisdiction,  a trustee,
         receiver or liquidator  of the Mortgaged  Property or any part thereof,
         or of  Mortgagor  shall  be  appointed  and  such  order  shall  not be
         discharged or dismissed within sixty (60) days after such  appointment;
         or

               (e) if Mortgagor  shall file a petition in  bankruptcy  or for an
         arrangement or for  reorganization  pursuant to the Federal  Bankruptcy
         Act or any similar federal or state law, or if, by decree of a court of
         competent  jurisdiction,  Mortgagor shall be adjudicated a bankrupt, or
         be declared  insolvent,  or shall make an assignment for the benefit of
         creditors,  or shall  admit in writing its  inability  to pay its debts
         generally as they become due, or shall consent to the  appointment of a
         receiver or receivers of all or any part of its property; or

               (f) if any of the creditors of Mortgagor shall file a petition in
         bankruptcy   against  Mortgagor  or  for  reorganization  of  Mortgagor
         pursuant to the Federal  Bankruptcy Act or any similar federal or state
         law, and if such petition  shall not be discharged or dismissed  within
         sixty (60) days after the date on which such petition was filed; or

               (g) if final  judgment for the payment of money shall be rendered
         against  Mortgagor and Mortgagor  shall not discharge the same or cause
         it to be discharged  within sixty (60) days from the entry thereof,  or
         shall not appeal  therefrom  or from the order,  decree or process upon
         which or pursuant to which said judgment was granted, based or entered,
         and secure a stay of execution pending such appeal; or

               (h) [Intentionally Omitted]; or

               (i) if there shall occur a default  which is not cured within the
         applicable grace period,  if any, under any mortgage,  deed of trust or
         other  security  instrument  covering  all or  part  of  the  Mortgaged
         Property  regardless  of whether  any such  mortgage,  deed of trust or
         other security  instrument is prior or subordinate  hereto or under any
         mortgage,  deed of trust or other security  instrument now or hereafter
         securing the Note or any other note of Fee Owner to Mortgagee; it being
         further  agreed by Mortgagor that an Event of Default  hereunder  shall
         constitute an Event of Default under any such  mortgage,  deed of trust
         or other security instrument held by Mortgagee; or

               (j) if there shall occur a default  which is not cured within the
         applicable grace period,  if any, under any of the Premises  Documents,
         except for any  continuing  failure of the  Premises to comply with the
         Premises Documents of the date of the acquisition hereof from Mortgagee
         or its  affiliate;  or if any of the  Premises  Documents  is  amended,
         modified, supplemented or terminated without Mortgagee's prior consent;
         or

               (k) if Mortgagor shall transfer,  or agree to transfer (or suffer
         or permit the transfer or agreement to transfer), in any manner, either
         voluntarily or

                                       16

<PAGE>

         involuntarily,  by operation of law or otherwise, all or any portion of
         the Mortgaged  Property,  or any interest or rights therein  (including
         air or development rights) without, in any such case, Mortgagee's prior
         consent.  As used in this clause,  "transfer"  shall  include,  without
         limitation,  any sale,  assignment,  lease  (other  than to  Lessee) or
         conveyance  except leases for occupancy  subordinate  hereto and to all
         advances made and to be made hereunder or, in the event Mortgagor (or a
         general  partner  or  co-venturer  thereof)  is  a  partnership,  joint
         venture, limited liability company, trust or closely-held  corporation,
         the sale,  conveyance,  transfer or other disposition of more than 10%,
         in the aggregate,  of any class of the issued and  outstanding  capital
         stock of such closely-held corporation or of the beneficial interest of
         such  partnership,  venture,  limited  liability company or trust, or a
         change of any general partner,  joint venturer,  member or beneficiary,
         as the case may be. In the event  Mortgagor  is a limited  partnership,
         and so  long  as a  limited  partner  has  contributed  to (or  remains
         personally  liable  for) the  present  and future  partnership  capital
         contributions  required  of such  limited  partner  by the  partnership
         agreement,  such partner may sell, convey, devise,  transfer or dispose
         of all or a part of his  limited  partnership  interest  to his spouse,
         children, grandchildren or a family trust in which his spouse, children
         or grandchildren are sole beneficiaries; or

               (l) if Mortgagor  shall  encumber,  or agree to encumber,  in any
         manner,  either  voluntarily or  involuntarily,  by operation of law or
         otherwise,  all  or  any  portion  of the  Mortgaged  Property,  or any
         interest  or  rights  therein  (including  air or  development  rights)
         without,  in any such case,  Mortgagee's prior consent. As used in this
         clause,  "encumber" shall include,  without limitation,  the placing or
         permitting  the placing of any mortgage,  deed of trust,  assignment of
         rents  or  other  security  device.  (Mortgagee  may  grant or deny its
         consent under this clause and the immediately  preceding  clause in its
         sole discretion  and, if consent should be given,  any such transfer or
         encumbrance  shall be subject hereto and to any other  documents  which
         evidence or secure the Loan,  and, if a transfer,  any such  transferee
         shall assume all of  Mortgagor's  obligations  hereunder and thereunder
         and agree to be bound by all  provisions  and perform  all  obligations
         contained  herein  and  therein;   consent  to  one  such  transfer  or
         encumbrance  shall not be deemed to be a waiver of the right to require
         consent to future or successive transfers or encumbrances);

then and in every such case:

               I.  During  the   continuance  of  any  such  Event  of  Default,
         Mortgagee, by notice to Mortgagor,  may declare the entire principal of
         the  Note  then  outstanding  (if not then  due and  payable),  and all
         accrued and unpaid  interest and other sums in respect  thereof,  to be
         due  and  payable  immediately,  and  upon  any  such  declaration  the
         principal  of the Note and said  accrued and unpaid  interest and other
         sums shall become and be immediately  due and payable,  anything herein
         or in the Note (other than Section 3.08 hereof,  the provisions thereof
         limiting interest payable thereunder to the maximum amount permitted by
         applicable law) to the contrary notwithstanding.

                                       17

<PAGE>

               II.  During  the  continuance  of  any  such  Event  of  Default,
         Mortgagee personally, or by its agents or attorneys, may enter into and
         upon all or any part of the Premises,  and each and every part thereof,
         and is  hereby  given a right and  license  and  appointed  Mortgagor's
         attorney-in-fact  and  exclusive  agent  to  do  so,  and  may  exclude
         Mortgagor,  its agents and servants  wholly  therefrom;  and having and
         holding the same, may use, operate, manage and control the Premises and
         conduct   the   business   thereof,   either   personally   or  by  its
         superintendents,  managers,  agents, servants,  attorneys or receivers;
         and upon every such entry,  Mortgagee,  at the expense of the Mortgaged
         Property,   from  time  to  time,   either  by  purchase,   repairs  or
         construction,  may maintain and restore the Mortgaged Property, whereof
         it shall become  possessed as aforesaid;  may complete the construction
         of the  Improvements and in the course of such completion may make such
         changes  in  the  contemplated   Improvements  as  Mortgagee  may  deem
         desirable and may insure the same; and likewise,  from time to time, at
         the expense of the Mortgaged Property, Mortgagee may make all necessary
         or  proper  repairs,   renewals  and   replacements   and  such  useful
         alterations,   additions,  betterments  and  improvements  thereto  and
         thereon as to it may seem  advisable;  and in every such case Mortgagee
         shall have the right to manage and operate the  Mortgaged  Property and
         to carry on the business  thereof and exercise all rights and powers of
         Mortgagor  with  respect  thereto  either in the name of  Mortgagor  or
         otherwise  as it shall deem best;  and  Mortgagee  shall be entitled to
         collect  and  receive  the Rents and every part  thereof,  all of which
         shall  for  all  purposes  constitute  property  of  Mortgagor;  and in
         furtherance of such right Mortgagee may collect the rents payable under
         all leases of the Premises  directly from the lessees  thereunder  upon
         notice to each such  lessee that an Event of Default  exists  hereunder
         accompanied  by a demand on such lessee for the payment to Mortgagee of
         all rents due and to become due under its lease,  and Mortgagor FOR THE
         BENEFIT OF MORTGAGEE AND EACH SUCH LESSEE  hereby  covenants and agrees
         that the lessee  shall be under no duty to  question  the  accuracy  of
         Mortgagee's  statement of default and shall unequivocally be authorized
         to  pay  said  rents  to  Mortgagee  without  regard  to the  truth  of
         Mortgagee's  statement  of default  and  notwithstanding  notices  from
         Mortgagor  disputing the existence of an Event of Default such that the
         payment of rent by the lessee to  Mortgagee  pursuant  to such a demand
         shall constitute  performance in full of the lessee's  obligation under
         the lease for the  payment  of rents by the  lessee to  Mortgagor;  and
         after deducting the expenses of conducting the business  thereof and of
         all  maintenance,   repairs,   renewals,   replacements,   alterations,
         additions,  betterments and improvements  and amounts  necessary to pay
         for taxes,  assessments,  insurance  and prior or other proper  charges
         upon the Mortgaged  Property or any part  thereof,  as well as just and
         reasonable  compensation  for the  services  of  Mortgagee  and for all
         attorneys,  counsel, agents, clerks, servants and other employees by it
         engaged  and  employed,  Mortgagee  shall  apply the moneys  arising as
         aforesaid,  first,  to the payment of the principal of the Note and the
         interest thereon, when and as the same shall become payable and in such
         order and  proportions  as  Mortgagee  shall elect and  second,  to the
         payment of any other sums required to be paid by Mortgagor hereunder.

                                       18

<PAGE>

               III.  Mortgagee,  with or  without  entry,  personally  or by its
         agents or attorneys, insofar as applicable, may:

                     (1) sell the Mortgaged Property to the extent permitted and
               pursuant  to the  procedures  provided  by law,  and all  estate,
               right, title and interest, claim and demand therein, and right of
               redemption  thereof,  at one (1) or more sales as an entity or in
               parcels or parts,  and at such time and place upon such terms and
               after such notice thereof as may be required or permitted by law;
               or

                     (2)  institute  proceedings  for the  complete  or  partial
               foreclosure hereof; or

                     (3) take such  steps to  protect  and  enforce  its  rights
               whether by action, suit or proceeding in equity or at law for the
               specific  performance of any covenant,  condition or agreement in
               the  Note or  herein,  or in aid of the  execution  of any  power
               herein  granted,  or for any  foreclosure  hereunder,  or for the
               enforcement of any other appropriate legal or equitable remedy or
               otherwise as Mortgagee shall elect.

         Section 2.02. Other Matters Concerning Sales. (a) Mortgagee may adjourn
from time to time any sale by it to be made  hereunder  or by  virtue  hereof by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and, except as otherwise provided by any applicable  provision of
law, Mortgagee, without further notice or publication, may make such sale at the
time and place to which the same shall be so adjourned.

         (b) Upon the completion of any sale or sales made by Mortgagee under or
by virtue of this Article II, Mortgagee, or an officer of any court empowered to
do so, shall execute and deliver to the accepted  purchaser or purchasers a good
and sufficient instrument or instruments  conveying,  assigning and transferring
all estate,  right,  title and  interest in and to the property and rights sold.
Mortgagee  is hereby  appointed  the true and  lawful  attorney  irrevocable  of
Mortgagor,   in  its  name  and  stead,  to  make  all  necessary   conveyances,
assignments,  transfers and  deliveries of the Mortgaged  Property and rights so
sold and for that purpose  Mortgagee  may execute all necessary  instruments  of
conveyance, assignment and transfer, and may substitute one or more persons with
like power, Mortgagor hereby ratifying and confirming all that its said attorney
or  such  substitute  or  substitutes   shall  lawfully  do  by  virtue  hereof.
Nevertheless, Mortgagor, if requested by Mortgagee, shall ratify and confirm any
such sale or sales by executing and delivering to Mortgagee or to such purchaser
or  purchasers  all such  instruments  as may be  advisable,  in the judgment of
Mortgagee,  for the purpose,  and as may be designated in such request. Any such
sale or sales made under or by virtue of this Article II, whether made under the
power of sale herein granted or under or by virtue of judicial proceedings or of
a judgment or decree of  foreclosure  and sale,  shall operate to divest all the
estate, right, title, interest,  claim and demand whatsoever,  whether at law or
in equity,  of Mortgagor in and to the  properties and rights so sold, and shall
be a perpetual bar both at

                                       19

<PAGE>

law and in equity against  Mortgagor and against any and all persons claiming or
who may claim the same,  or any part thereof  from, through or under Mortgagor.

         (c) In the event of any sale or sales  made  under or by virtue of this
Article II (whether  made under the power of sale herein  granted or under or by
virtue of judicial  proceedings  or of a judgment or decree of  foreclosure  and
sale), the entire principal of, and interest and other sums on, the Note, if not
previously due and payable,  and all other sums required to be paid by Mortgagor
pursuant hereto,  immediately thereupon shall, anything in any of said documents
(other than Section 3.08 hereof) to the contrary notwithstanding, become due and
payable.

         (d) The  purchase  money,  proceeds or avails of any sale or sales made
under or by virtue of this Article II,  together  with any other sums which then
may be held by Mortgagee hereunder, whether under the provisions of this Article
II or otherwise, shall be applied as follows:

                  First:  To the payment of the costs and expenses of such sale,
         including reasonable compensation to Mortgagee, its agents and counsel,
         and of any judicial  proceedings  wherein the same may be made,  and of
         all  expenses,  liabilities  and advances made or incurred by Mortgagee
         hereunder,  together  with interest at the Default Rate on all advances
         made by  Mortgagee,  and of all taxes,  assessments  or other  charges,
         except any taxes,  assessments  or other  charges  subject to which the
         Mortgaged Property shall have been sold.

                  Second:  To the payment of the whole amount then due, owing or
         unpaid upon the Note for principal  and interest,  with interest on the
         unpaid  principal at the Default  Rate from and after the  happening of
         any Event of Default  described  in clause (a) of Section 2.01 from the
         due date of any such  payment of principal  until the same is paid,  in
         such order and amounts as Mortgagee may elect.

                  Third:   To the payment of any other sums required to be  paid
         by Mortgagor pursuant to any provision hereof or of the Note, including
         all  expenses,  liabilities  and advances made or incurred by Mortgagee
         hereunder or in connection with the enforcement  hereof,  together with
         interest at the Default Rate on all such advances.

                  Fourth:  To  the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.

         (e) Upon any sale or sales made under or by virtue of this  Article II,
whether  made  under the power of sale  herein  granted or under or by virtue of
judicial  proceedings  or of a  judgment  or  decree  of  foreclosure  and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make  settlement  for the purchase  price by
crediting  upon the  indebtedness  secured  hereby  the net  sales  price  after
deducting therefrom the expenses of the sale and the costs of the action and any
other sums which Mortgagee is authorized to deduct hereunder.


                                       20

<PAGE>

         Section  2.03.  Payment of Amounts Due. (a) In case an Event of Default
described in clause (a) of Section 2.01 shall have  happened and be  continuing,
then, upon demand of Mortgagee, Mortgagor will pay to Mortgagee the whole amount
which then  shall have  become due and  payable on the Note,  for  principal  or
interest or both,  as the case may be, and after the  happening of said Event of
Default  will also pay to  Mortgagee  interest at the  Default  Rate on the then
unpaid  principal  of the Note,  and the sums  required to be paid by  Mortgagor
pursuant to any provision hereof, and in addition thereto such further amount as
shall be  sufficient  to cover the costs and expenses of  collection,  including
reasonable  compensation  to Mortgagee,  its agents and counsel and any expenses
incurred by Mortgagee hereunder.  In the event Mortgagor shall fail forthwith to
pay all such amounts upon such demand, Mortgagee shall be entitled and empowered
to institute such action or proceedings at law or in equity as may be advised by
its counsel for the collection of the sums so due and unpaid,  and may prosecute
any such action or proceedings to judgment or final decree,  and may enforce any
such judgment or final decree against Mortgagor and collect, out of the property
of Mortgagor wherever situated, as well as out of the Mortgaged Property, in any
manner provided by law, moneys adjudged or decreed to be payable.

         (b) Mortgagee shall be entitled to recover judgment as aforesaid either
before,  after or during the pendency of any  proceedings for the enforcement of
the provisions hereof; and the right of Mortgagee to recover such judgment shall
not be affected by any entry or sale hereunder,  or by the exercise of any other
right,  power or remedy for the  enforcement  of the provisions  hereof,  or the
foreclosure  of the lien  hereof;  and in the  event of a sale of the  Mortgaged
Property, and of the application of the proceeds of sale, as herein provided, to
the payment of the debt hereby  secured,  Mortgagee shall be entitled to enforce
payment of, and to receive all amounts then  remaining due and unpaid upon,  the
Note,  and to  enforce  payment  of all other  charges,  payments  and costs due
hereunder or otherwise in respect of the Loan,  and shall be entitled to recover
judgment  for any portion of the debt  remaining  unpaid,  with  interest at the
Default  Rate.  In  case of  proceedings  against  Mortgagor  in  insolvency  or
bankruptcy  or  any  proceedings  for  its   reorganization   or  involving  the
liquidation of its assets,  then Mortgagee  shall be entitled to prove the whole
amount  of  principal,  interest  and  other  sums due upon the Note to the full
amount  thereof,  and all other  payments,  charges and costs due  hereunder  or
otherwise  in respect of the Loan,  without  deducting  therefrom  any  proceeds
obtained  from the sale of the  whole  or any  part of the  Mortgaged  Property,
provided,  however,  that in no case shall Mortgagee receive, from the aggregate
amount  of  the  proceeds  of  the  sale  of  the  Mortgaged  Property  and  the
distribution from the estate of Mortgagor,  a greater amount than such principal
and interest and such other payments, charges and costs.

         (c) No  recovery  of any  judgment  by  Mortgagee  and  no  levy  of an
execution  under any  judgment  upon the  Mortgaged  Property  or upon any other
property of  Mortgagor  shall  affect in any manner or to any  extent,  the lien
hereof upon the Mortgaged  Property or any part thereof,  or any liens,  rights,
powers or remedies of Mortgagee hereunder,  but such liens,  rights,  powers and
remedies of Mortgagee shall continue unimpaired as before.

                                       21

<PAGE>

         (d) Any moneys thus  collected  by  Mortgagee  under this  Section 2.03
shall be applied by Mortgagee in accordance with the provisions of clause (d) of
Section 2.02.

         Section 2.04. Actions;  Receivers.  After the happening of any Event of
Default and immediately upon the commencement of any action, suit or other legal
proceedings  by Mortgagee to obtain  judgment for the  principal of, or interest
on, the Note and other sums  required  to be paid by  Mortgagor  pursuant to any
provision  hereof,  or of any other nature in aid of the enforcement of the Note
or hereof,  Mortgagor  will (a) waive the  issuance  and  service of process and
enter its  voluntary  appearance in such action,  suit or proceeding  and (b) if
required by Mortgagee,  consent to the appointment of a receiver or receivers of
all or part of the Mortgaged  Property and of any or all of the Rents in respect
thereof. After the happening of any Event of Default and during its continuance,
or upon the  commencement  of any  proceedings  to foreclose this Mortgage or to
enforce  the  specific  performance  hereof  or  in  aid  thereof  or  upon  the
commencement of any other judicial proceeding to enforce any right of Mortgagee,
Mortgagee shall be entitled, as a matter of right, if it shall so elect, without
the giving of notice to any other  party and without  regard to the  adequacy or
inadequacy of any security for the indebtedness secured hereby, forthwith either
before  or  after  declaring  the  unpaid  principal  of the  Note to be due and
payable,  to the appointment of such a receiver or receivers.  Such  appointment
may be made either before or after any  foreclosure  sale without  regard to the
solvency or insolvency of Mortgagor at the time of application for such receiver
and without  regard to the then value of the  Premises or whether the same shall
be then  occupied as a homestead or not and  Mortgagee  may be appointed as such
receiver.  Such receiver  shall have (i) power to collect the rents,  issues and
profits of the Premises  and, in case of a  foreclosure  sale and a  deficiency,
during the full statutory  period of redemption,  whether there be redemption or
not,  as well as  during  any  further  times  when  Mortgagor,  except  for the
intervention of such receiver,  would be entitled to collect such rents,  issues
and profits, (ii) power to extend or modify any then existing leases and to make
new leases, which extensions,  modifications and new lease may provide for terms
to expire, or for options to lessees to extend or renew terms to expire,  beyond
the maturity date of the indebtedness  secured hereby and beyond the date of the
issuance of a deed or deeds to a purchaser or purchasers at a foreclosure  sale,
it being  understood  and agreed that any such leases,  and the options or other
such provisions to be contained therein, shall be binding upon Mortgagor and all
persons whose interest in the Mortgaged  Property are subject to the lien hereof
and upon the purchaser or purchasers at any  foreclosure  sale,  notwithstanding
any  redemption  from  sale,  discharge  of  the  indebtedness  secured  hereby,
satisfaction of any foreclosure  decree,  or issuance of any certificate of sale
or deed to any  purchaser  and (iii) all other  powers which may be necessary or
are usual in such cases for the protection,  possession, control, management and
operation of the Mortgaged  Property during the whole of said period.  The court
from time to time may  authorize  the  receiver  to apply the net  income in his
hands in payment in whole or in part of: (x) the indebtedness secured hereby, or
by any decree foreclosing this Mortgage, or any tax, special assessment or other
lien  which  may be or become  superior  to the lien  hereof or of such  decree,
provided  such  application  is  made  prior  to  foreclosure  sale  and (y) the
deficiency in case of a foreclosure sale and deficiency.

                                       22

<PAGE>

         In  connection  with the  foregoing  it is  understood  and agreed that
Mortgagor's failure to pay taxes and/or assessments against the Premises, or any
installment  thereof,  or any insurance  premiums upon the policies  required by
this Mortgage,  shall constitute waste as provided by Act 236 of the Public Acts
of 1961 of  Michigan  (Revised  Judicature  Act),  Section  600.2927,  as and if
amended from time to time, or any successor statute; and Mortgagor agrees to and
hereby  consents to the  appointment  of a receiver  under said  statute  should
Mortgagee elect to resort to its remedies thereunder.

         Section 2.05.  Mortgagee's  Right to  Possession.  Notwithstanding  the
appointment  of any receiver,  liquidator or trustee of Mortgagor,  or of any of
its property, or of the Mortgaged Property or any part thereof,  Mortgagee shall
be entitled to retain  possession  and control of all  property now or hereafter
held hereunder.

         Section 2.06. Remedies  Cumulative.  No remedy herein conferred upon or
reserved  to  Mortgagee  is  intended  to be  exclusive  of any other  remedy or
remedies,  and each and every such remedy shall be  cumulative,  and shall be in
addition to every other remedy given  hereunder or now or hereafter  existing at
law, in equity or by statute.  No delay or omission of Mortgagee to exercise any
right or power accruing upon any Event of Default shall impair any such right or
power,  or shall be construed to be a waiver of any such Event of Default or any
acquiescence  therein;  and every power and remedy given hereby to Mortgagee may
be exercised from time to time as often as may be deemed expedient by Mortgagee.
Nothing  herein or in the Note shall affect the  obligation  of Mortgagor to pay
the  principal of, and interest and other sums on, the Note in the manner and at
the time and place therein respectively expressed.

         Section 2.07. Moratorium Laws; Right of Redemption.  Mortgagor will not
at any time insist upon, or plead,  or in any manner  whatever claim or take any
benefit or advantage of any stay or extension or  moratorium  law, any exemption
from execution or sale of the Mortgaged  Property or any part thereof,  wherever
enacted,  now or at any time hereafter in force,  which may affect the covenants
and terms of performance  hereof,  nor claim, take or insist upon any benefit or
advantage of any law now or hereafter in force  providing  for the  valuation or
appraisal of the Mortgaged Property,  or any part thereof,  prior to any sale or
sales thereof which may be made pursuant to any provision herein, or pursuant to
any decree, judgment or order of any court of competent jurisdiction; nor, after
any such sale or sales, claim or exercise any right under any statute heretofore
or  hereafter  enacted to redeem the  property  so sold or any part  thereof and
Mortgagor  hereby  expressly  waives all benefit or advantage of any such law or
laws,  and covenants  not to hinder,  delay or impede the execution of any power
herein granted or delegated to Mortgagee, but to suffer and permit the execution
of  every  power  as  though  no such  law or laws  had  been  made or  enacted.
Mortgagor, for itself and all who may claim under it, waives, to the extent that
it lawfully may, all right to have the  Mortgaged  Property  marshaled  upon any
foreclosure  hereof.  Mortgagor  hereby  waives any and all rights of redemption
from sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor and all persons  beneficially  interested therein,  and each and every
person  except decree or judgment  creditors of Mortgagor in its  representative
capacity  acquiring  any interest in or title to the Premises  subsequent to the
date of this Mortgage.

                                       23

<PAGE>


         Section 2.08. Regarding Defenses.  No action for the enforcement of the
lien or any provision  hereof shall be subject to any defense which would not be
good and  available to the party  interposing  the same in an action at law upon
the Note.

         Section 2.09.  Expenses as  Indebtedness.  In any suit to foreclose the
lien hereof  (including any partial  foreclosure) or to enforce any other remedy
of  Mortgagee  under  this  Mortgage  or the Note or  other  Loan  documents  or
otherwise  in  respect  of the Loan,  there  shall be allowed  and  included  as
additional  indebtedness  in the decree for sale or other judgment or decree all
expenditures  and  expenses  which  may be paid or  incurred  by or on behalf of
Mortgagee for attorneys'  fees,  appraiser's  fees,  outlays for documentary and
expert evidence, stenographer's charges, publication costs, and costs (which may
be estimated as to items to be expended  after entry of the decree) of procuring
all such abstracts of title,  title searches and  examinations,  title insurance
policies, Torrens certificates,  and similar data and assurances with respect to
title and value as Mortgagee may deem reasonably  necessary  either to prosecute
such suit or to  evidence  to bidders at any sale which may be had  pursuant  to
such decree the true condition of the title to or the value of the Premises.

         Section 2.10.  Mortgagee's  Rights  Concerning  Application  of Amounts
Collected.  Notwithstanding  anything to the contrary contained herein, upon the
occurrence of an Event of Default,  Mortgagee may apply, to the extent permitted
by law, any amount collected  hereunder to principal,  interest or any other sum
due  under  the Note or  otherwise  in  respect  of the Loan in such  order  and
amounts,  and to such  obligations,  as  Mortgagee  shall  elect in its sole and
absolute discretion.

                                  ARTICLE III

                                  MISCELLANEOUS

         Section  3.01.  Assignment  of Rents.  This  Mortgage  is  intended  to
constitute a present,  absolute and  irrevocable  assignment of all of the Rents
now or hereafter accruing, and Mortgagor, without limiting the generality of the
Granting  Clause  hereof,   specifically   hereby   presently,   absolutely  and
irrevocably assigns all of the Rents now or hereafter accruing to Mortgagee. The
aforesaid  assignment  shall be effective  immediately upon the execution hereof
and is not conditioned upon the occurrence of any Event of Default  hereunder or
any other contingency or event, provided,  however, that Mortgagee hereby grants
to  Mortgagor  the right and  license to collect  and  receive the Rents as they
become due, and not in advance, so long as no Event of Default exists hereunder.
Immediately  upon the  occurrence  of any such Event of Default,  the  foregoing
right and license shall be  automatically  terminated and of no further force or
effect. Nothing contained in this Section or elsewhere herein shall be construed
to make Mortgagee a mortgagee in possession unless and until Mortgagee  actually
takes possession of the Mortgaged  Property,  nor to obligate  Mortgagee to take
any action or incur any expense or discharge  any duty or liability  under or in
respect of any leases or other agreements  relating to the Mortgaged Property or
any part  thereof.  The  foregoing  provisions  of this Section and  Mortgagee's
rights under this  Mortgage  generally,  including,  without  limitation,  under
clauses (v) or (viii) of the Granting Clause, are in

                                       24

<PAGE>

addition to and not in lieu of Mortgagee's  rights and benefits under Act 210 of
the Public Acts of Michigan of 1953, as amended, and under Act 228 of the Public
Acts of Michigan of 1925, as amended.

         Section 3.02. Security Agreement.  This Mortgage constitutes a security
agreement  under the  applicable  Uniform  Commercial  Code with  respect to the
Chattels and such other of the Mortgaged Property which is personal property. In
addition to the rights and remedies granted to Mortgagee by other applicable law
or hereby,  Mortgagee  shall have all of the rights and remedies with respect to
the Chattels and such other personal  property as are granted to a secured party
under the applicable Uniform Commercial Code. Upon Mortgagee's  request after an
Event of Default,  Mortgagor  shall  promptly  and at its expense  assemble  the
Chattels  and such  other  personal  property  and make  the same  available  to
Mortgagee at a convenient  place  acceptable to Mortgagee.  Mortgagor,  after an
Event of Default, shall pay to Mortgagee on demand, with interest at the Default
Rate, any and all expenses,  including attorneys' fees, incurred by Mortgagee in
protecting its interest in the Chattels and such other personal  property and in
enforcing its rights with respect  thereto.  Any notice of sale,  disposition or
other  intended  action by Mortgagee with respect to the Chattels and such other
personal  property sent to Mortgagor in accordance with the provisions hereof at
least five (5) days prior to such action shall constitute  reasonable  notice to
Mortgagor.  The proceeds of any such sale or  disposition,  or any part thereof,
may be applied by Mortgagee to the payment of the indebtedness secured hereby in
such  order  and   proportions  as  Mortgagee  in  its  discretion   shall  deem
appropriate.

         Section 3.03. Application of Certain Payments. In the event that all or
any part of the Mortgaged  Property is encumbered by one or more  mortgages held
by Mortgagee,  Mortgagor hereby irrevocably  authorizes and directs Mortgagee to
apply any payment received by Mortgagee in respect of any note secured hereby or
by any other such  mortgage  to the  payment of such of said notes as  Mortgagee
shall elect in its sole and absolute  discretion,  and Mortgagee  shall have the
right to apply any such payment in reduction of principal and/or interest and in
such  order  and  amounts  as  Mortgagee  shall  elect in its sole and  absolute
discretion  without regard to the priority of the mortgage  securing the note so
repaid or to contrary directions from Mortgagor or any other party.

         Section  3.04.  Severability.  In the  event  any  one or  more  of the
provisions  contained  herein or in the Note  shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability  shall not affect any other provision hereof, but this Mortgage
shall be construed as if such invalid,  illegal or  unenforceable  provision had
never been contained herein or therein.

         Section 3.05. Modifications and Waivers in Writing. No provision hereof
may be changed,  waived,  discharged or terminated  orally or by any other means
except an instrument in writing signed by the party against whom  enforcement of
the change, waiver,  discharge or termination is sought. Any agreement hereafter
made by Mortgagor and Mortgagee  relating hereto shall be superior to the rights
of the holder of any intervening or subordinate lien or encumbrance.

                                       25

<PAGE>

         Section 3.06. Notices. All notices,  demands,  consents,  approvals and
statements  required  or  permitted  hereunder  shall be in writing and shall be
deemed to have been sufficiently given or served for all purposes when presented
personally,  three (3) days  after  mailing by  registered  or  certified  mail,
postage  prepaid,  or one (1) day  after  delivery  to a  nationally  recognized
overnight  courier  service  providing  evidence of the date of delivery,  if to
Mortgagor at its address stated above,  , with a copy to Thomas E. Davis,  Esq.,
Jenkens & Gilchrist, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799, and
if to Mortgagee to its address stated above, or at such other address of which a
party shall have  notified the party giving such notice in  accordance  with the
provisions of this Section.

         Section 3.07.  Successors  and Assigns.  All of the grants,  covenants,
terms,  provisions and conditions herein shall run with the land and shall apply
to, bind and inure to the benefit of, the  respective  successors and assigns of
Mortgagor and Mortgagee.

         Section 3.08. Limitation on Interest. Anything herein or in the Note to
the contrary  notwithstanding,  the obligations of Mortgagor hereunder and under
the Note shall be subject to the limitation  that payments of interest shall not
be required to the extent that receipt of any such payment by Mortgagee would be
contrary to provisions of law applicable to Mortgagee  limiting the maximum rate
of interest that may be charged or collected by Mortgagee.

         Section 3.09. Counterparts. This Mortgage may be executed in any number
of counterparts and each of such  counterparts  shall for all purposes be deemed
to be an original;  and all such counterparts shall together  constitute but one
and the same mortgage.

         Section 3.10. Substitute Mortgages. Mortgagor and Mortgagee shall, upon
their mutual  agreement to do so,  execute such documents as may be necessary in
order  to  effectuate  the  modification  hereof,  including  the  execution  of
substitute  mortgages,  so as to create two (2) or more  liens on the  Mortgaged
Property  in such  amounts  as may be  mutually  agreed  upon but in no event to
exceed,  in the aggregate,  the unpaid principal portion of the Mortgage Amount;
in such event,  Mortgagor  covenants and agrees to pay the  reasonable  fees and
expenses of Mortgagee and its counsel in connection with any such modification.

         Section  3.11.   Mortgagee's  Sale  of  Interests  in  Loan.  Mortgagor
recognizes that Mortgagee may sell and transfer  interests in the Loan to one or
more participants or assignees and that all documentation, financial statements,
appraisals and other data, or copies thereof, relevant to Mortgagor or the Loan,
may be  exhibited  to and  retained  by any  such  participant  or  assignee  or
prospective participant or assignee.

         Section  3.12.  No  Merger  of  Interests.  Unless  expressly  provided
otherwise,  in the event  that  ownership  hereof  and  title to the fee  and/or
leasehold  estates in the Premises  encumbered hereby shall become vested in the
same  person or entity,  this  Mortgage  shall not merge in said title but shall
continue  to be and remain a valid and  subsisting  lien on said  estates in the
Premises for the amount secured hereby.

                                       26

<PAGE>

         Section 3.13. No Credit For Taxes.  Mortgagor shall not claim or demand
or be entitled to receive any credit or credits on the principal indebtedness to
be secured by this Mortgage, or on the interest payable thereon, for any part of
the taxes  assessed  against  the  Premises  and no  deduction  shall be made or
claimed from the taxable value of the Premises by reason of this Mortgage.

         Section 3.14. No Consent to  Contracts.  Mortgagee  does not consent to
any contract for labor or  materials,  and all  contracts for labor or materials
that will be let by Mortgagor  shall at all times be  subordinate to the lien of
this Mortgage.

         Section 3.15. Business Loan.  Mortgagor  represents and agrees that the
obligations  secured hereby: (a) constitute a business loan and (b) are exempted
transactions under the federal  Truth-in-Lending Act (15 U.S.C. Section 1601, et
seq.).  None of the  forgoing  is  intended,  however,  to vitiate or in any way
detract from the  intention of Mortgagor  and  Mortgagee to have the laws of the
State of Tennessee apply in all respects to the  construction and enforcement of
the Note, as said intention is expressly set forth therein.

         Section 3.16. CERTAIN WAIVERS.  MORTGAGOR EXPRESSLY AND UNCONDITIONALLY
WAIVES BY EXECUTION  HEREOF,  AND  MORTGAGEE  WAIVES BY  ACCEPTANCE  HEREOF,  IN
CONNECTION  WITH ANY  FORECLOSURE  OR  SIMILAR  ACTION OR  PROCEDURE  BROUGHT BY
MORTGAGEE ASSERTING AN EVENT OF DEFAULT UNDER CLAUSE (a) OF SECTION 2.01 OF THIS
MORTGAGE, ANY AND EVERY RIGHT IT MAY HAVE TO A TRIAL BY JURY.

         Section 3.17.  GOVERNING LAW. THE PERFORMANCE REQUIRED BY THIS MORTGAGE
SHALL,  INSOFAR AS IS  POSSIBLE,  BE RENDERED TO THE  MORTGAGEE AT ITS OFFICE IN
TENNESSEE.  MORTGAGOR AND MORTGAGEE INTEND THAT THE VALIDITY AND CONSTRUCTION OF
THE OBLIGATIONS SECURED BY THIS MORTGAGE BE GOVERNED BY THE LAWS OF THE STATE OF
TENNESSEE  INCLUDING ALL OBLIGATIONS  AND LIABILITIES  HEREUNDER WITH RESPECT TO
THE PAYMENT OF INTEREST OR ANY OTHER  COMPENSATION  FOR THE USE,  FORBEARANCE OR
DETENTION OF MONEY.  THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TENNESSEE,  WITHOUT  REFERENCE TO THE CONFLICTS OF
LAW  PRINCIPLES  OF THAT  STATE,  EXCEPT ONLY TO THE EXTENT  THAT  MICHIGAN  LAW
EXPRESSLY  PROVIDES THAT IT GOVERNS AND THAT A CONTRARY AGREEMENT BY THE PARTIES
IS  INEFFECTIVE  AND EXCEPT THAT THE LAW OF THE STATE OF MICHIGAN SHALL APPLY TO
ANY AND ALL ACTS WITH  RESPECT TO THE  CREATION AND PRIORITY OF THE LIEN OF THIS
MORTGAGE AND  ASSIGNMENT  OF LEASES AND RENTS ON THE MORTGAGED  PROPERTY  HEREBY
EVIDENCED AND ON THE MORTGAGED  PROPERTY.  MORTGAGOR AND MORTGAGEE  COVENANT AND
AGREE TO TAKE ANY AND ALL ACTION WHICH MAY BE NECESSARY  UNDER MICHIGAN LAW WITH
RESPECT TO FORECLOSURE UNDER THE LAWS OF

                                       27

<PAGE>

THE STATE OF MICHIGAN.  SHOULD ANY  OBLIGATION OR REMEDY  UNDER THIS MORTGAGE BE
INVALID OR  UNENFORCEABLE  UNDER THE LAWS PROVIDED HEREIN TO GOVERN, THE LAWS OF
ANOTHER STATE WHOSE LAWS CAN VALIDATE AND APPLY TO THIS MORTGAGE SHALL APPLY.

                                       28

<PAGE>



         IN WITNESS WHEREOF,  this Mortgage has been duly executed and delivered
by Mortgagor.

                                            APPLE SUITES, INC.,
Witness:                                    a Virginia corporation


/s/  Deanna Jost                            By  /s/  Glade M. Knight      [L.S.]
---------------------------                   ----------------------------
Name:                                         Name:   Glade M. Knight
                                              Title:  President

/s/  Tina R. Hansen
---------------------------
Name:

                                            APPLE SUITES MANAGEMENT, INC.,
Witness:                                    a Virginia corporation


/s/  Deanna Jost                            By  /s/  Glade M. Knight      [L.S.]
---------------------------                   ----------------------------
Name:                                         Name:   Glade M. Knight
                                              Title:  President

/s/  Tina R. Hansen
---------------------------
Name:


<PAGE>



STATE OF TEXAS

COUNTY OF DALLAS

                  THIS INSTRUMENT was acknowledged  before me on the 20th day of
December,  1999, by Glade M. Knight, President of Apple Suites, Inc., a Virginia
corporation, on behalf of said Apple Suites, Inc.


                            /s/  Deanna Jost
                            ---------------------------------------------------
                            Notary Public, State of Texas

                            Printed Name: Deanna Jost

                            Commission Expires: April 8, 2003

STATE OF TEXAS

COUNTY OF DALLAS

                  THIS INSTRUMENT was acknowledged  before me on the 20th day of
December, 1999, by Glade M. Knight, President of Apple Suites Management,  Inc.,
a Virginia corporation, on behalf of said Apple Suites Management, Inc.


                          /s/  Deanna Jost
                          ------------------------------------------------------
                          Notary Public, State of Texas

                          Printed Name: Deanna Jost

                          Commission Expires: April 8, 2003


<PAGE>


                                                                [Detroit/Warren]

                                   SCHEDULE A

                          LEGAL DESCRIPTION OF PREMISES


LAND IN THE CITY OF WARREN, MACOMB COUNTY,  MICHIGAN,  DESCRIBED AS: Part of the
Northwest 1/4 of Section 10, Town 1 North, Range 12 East, City of Warren, Macomb
County,  Michigan being more particularly  described as: Beginning at a point on
the east line of Civic  Center  Blvd.,  said point  located  north 89 degrees 39
minutes 10 seconds  east along the east and west 1/4 line of said  Section 10, a
distance  of 1024.74  feet and north 00 degrees 33 minutes  east along said east
line  280.14  feet and on a curve to the left  (radius = 281.49  feet long chord
bears  north 19 degrees 50 minutes 55 seconds  west  196.22  feet) a distance of
200.43 feet from the west 1/4 corner of said Section 10; thence  continuing on a
curve to the left  (radius = 281.49  FEET LONG CHORD  BEARS  NORTH 42 DEGREES 29
MINUTES 09 SECONDS  WEST 21.99  feet) a distance of 22.0 feet;  thence  north 45
degrees 16  minutes 30 seconds  east  118.52  feet;  thence  north 03 degrees 25
minutes 47 seconds  east  106.51 feet  thence  north 00 degrees 33 minutes  east
310.00 feet;  thence south 89 degrees 27 minutes east 176.39 feet;  thence south
23 degrees 33 minutes west 97.22 feet;  thence on a curve to the right (radius =
225.0 FEET,  LONG CHORD BEARS SOUTH 38 DEGREES 40 MINUTES 08 SECONDS EAST 285.13
feet) a distance of 308.80  feet;  thence South 00 degrees 38 minutes 58 seconds
west  144.40  feet;  thence  North 89 degrees 21 minutes 02 seconds  West 286.44
feet;  thence on a curve to the left (radius = 105.0 feet long chord bears South
67 degrees 57 minutes 44  seconds  West 80.99  feet) a distance  of 83.14  feet;
thence  south 45 degrees  16  minutes 30 seconds  west 44.0 feet to the point of
beginning.

Parcel Indent. # (Part of) 13-10-151-014