EXHIBIT 4.2

                                                                      [Colorado]

        THE INFORMATION ON THIS COVER PAGE IS PART OF THIS DEED OF TRUST

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

                                                             Date: June 30, 2000

              FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES
               AND RENTS AND SECURITY AGREEMENT AND FIXTURE FILING

                                  ("this Deed")

                                      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

           THE PUBLIC TRUSTEE IN AND FOR BOULDER COUNTY, COLORADO AND
         ANY SUCCESSOR TRUSTEE APPOINTED PURSUANT TO THE PROVISIONS OF
                    SECTION 3.03 HEREOF OR OF APPLICABLE LAW

                                   ("Trustee")

   Address of Trustee:   As fixed pursuant to the Colorado statutes creating and
                         governing the office of "Public Trustee"


                               FOR THE BENEFIT OF

                              PROMUS HOTELS, INC.,
                             a Delaware corporation

                                 ("Beneficiary")

         Address of Beneficiary:        755 Crossover Lane
                                        Memphis, Tennessee 38117

                            Note Amount: $91,350,000

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

       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.............................2

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

     ARTICLE I          COVENANTS OF GRANTOR...................................5
         Section 1.01.  (a)   Warranty of Title; Power and Authority...........5
                        (b)   Hazardous Materials..............................6
                        (c)   Flood Hazard Area................................6
         Section 1.02.  (a)   Further Assurances...............................6
                        (b)   Information Reporting and Back-up Withholding....7
         Section 1.03.  (a)   Filing and Recording of Documents................7
                        (b)   Filing and Recording Fees and Other Charges......7
         Section 1.04.  Payment and Performance of Loan Documents..............7
         Section 1.05.  Maintenance of Existence; Compliance with Laws.........7
         Section 1.06.  After-Acquired Property................................8
         Section 1.07.  (a)   Payment of Taxes and Other Charges...............8
                        (b)   Payment of Mechanics and Materialmen.............9
                        (c)   Good Faith Contests..............................9
         Section 1.08.  Taxes on Trustee or Beneficiary........................9
         Section 1.09.  Insurance..............................................9
         Section 1.10.  Protective Advances by Beneficiary....................13
         Section 1.11.  (a)   Visitation and Inspection.......................13
                        (b)   Financial and Other Information.................13
                        (c)   Estoppel Certificates...........................13
         Section 1.12.  Maintenance of Premises and Improvements..............13
         Section 1.13.  Condemnation..........................................14
         Section 1.14.  Leases................................................14
         Section 1.15.  Premises Documents....................................15
         Section 1.16.  Trust Fund; Lien Laws.................................15
         Section 1.17.  Expenses of Trustee...................................16

     ARTICLE II         EVENTS OF DEFAULT AND REMEDIES........................16
         Section 2.01.  Events of Default and Certain Remedies................16
         Section 2.02.  Other Matters Concerning Sales........................20
         Section 2.03.  Payment of Amounts Due................................23
         Section 2.04.  Actions; Receivers....................................24
         Section 2.05.  Beneficiary's Right to Possession.....................24
         Section 2.06.  Remedies Cumulative...................................25

                                      (i)

<PAGE>

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         Section 2.07.  Moratorium Laws; Right of Redemption..................25
         Section 2.08.  Intentionally Omitted.................................25
         Section 2.09.  Beneficiary's Rights Concerning Application of Amounts
                        Collected.............................................25
         Section 2.10.  Additional Advances...................................25

    ARTICLE III         CONCERNING TRUSTEE....................................26
         Section 3.01.  Trustee's Performance.................................26
         Section 3.02.  Resignation by Trustee................................26
         Section 3.03.  Removal of Trustee; Successors........................26
         Section 3.04.  Limitations Imposed by Law............................26

     ARTICLE IV         MISCELLANEOUS.........................................27
         Section 4.01.  Assignment of Rents...................................27
         Section 4.02.  Security Agreement and Fixture Filing.................27
         Section 4.03.  Application of Certain Payments.......................28
         Section 4.04.  Severability..........................................28
         Section 4.05.  Modifications and Waivers in Writing..................28
         Section 4.06.  Notices...............................................29
         Section 4.07.  Successors and Assigns................................29
         Section 4.08.  Limitation on Interest................................29
         Section 4.09.  Counterparts..........................................29
         Section 4.10.  Substitute Deeds......................................29
         Section 4.11.  Beneficiary's Sale of Interests in Loan...............29
         Section 4.12.  No Merger of Interests................................29
         Section 4.13.  CERTAIN WAIVERS.......................................30
         Section 4.14.  GOVERNING LAW.........................................30



                                      (ii)

<PAGE>



                                     RECITAL

         Beneficiary,  Hampton Inns, Inc. ("Hampton") and Promus Hotels Florida,
Inc. ("Promus  Florida"),  as sellers,  and Fee Owner, as buyer, have heretofore
entered into an  Agreement  of Sale dated as of August 6, 1999 (as amended,  the
"First   Agreement  of  Sale")  for  the  purchase  of  certain   premises  more
particularly described therein (the "Initial Premises"). Hampton, as seller, and
Fee Owner, as buyer,  have entered into an Agreement of Sale dated as of October
5, 1999 (as amended, the "Second Agreement of Sale") for the purchase of certain
premises  more  particularly   described  therein  (the  "Additional  Premises";
together with the Initial  Premises,  collectively,  the  "Existing  Premises").
Beneficiary,  Hampton and Promus Florida,  as sellers,  and Fee Owner, as buyer,
have  entered  into an  Agreement  of Sale  dated as of  November  22,  1999 (as
amended,  the "Third  Agreement of Sale";  together with the First  Agreement of
Sale and the Second  Agreement of Sale,  collectively,  the "Agreement of Sale")
for the purchase of, among other premises,  the premises described in SCHEDULE A
attached hereto and made a part hereof.  Fee Owner has acquired and is the owner
of the  premises  described in SCHEDULE A and Lessee is the owner of a leasehold
interest therein.  Lessee  acknowledges that it will derive substantial  benefit
from the making of the loans  contemplated  in the Agreement of Sale and further
acknowledges   that  the  obligation  of  Beneficiary  to  make  such  loans  is
conditioned  upon,  among other things,  the execution and delivery by Lessee of
this Deed. In connection with the purchase of the Existing Premises by Fee Owner
(or its indirect  wholly-owned  subsidiary) from Beneficiary (or its affiliates)
pursuant to the First  Agreement of Sale and the Second  Agreement of Sale,  Fee
Owner has borrowed (i) the sum of $26,625,000  and has executed and delivered to
Beneficiary its note, dated September 20, 1999,  obligating it to pay the sum of
$26,625,000,  with interest  thereon as therein  provided (the "First Note") and
(ii) the sum of  $7,350,000  and has executed and delivered to  Beneficiary  its
note,  dated October 5, 1999,  obligating it to pay the sum of $7,350,000,  with
interest  thereon as therein  provided  (the "Second  Note").  Prior to the date
hereof,  in connection  with the purchase of certain  premises  described in the
Third  Agreement  of Sale by Fee Owner (or its direct or  indirect  wholly-owned
subsidiary),  Fee Owner has borrowed the sum of $46,211,250 and has executed and
delivered to Beneficiary its note, dated November 29, 1999, obligating it to pay
the sum of  $30,210,000,  with  interest as therein  provided,  its note,  dated
December 22, 1999, obligating it to pay the sum of $4,384,500,  with interest as
therein provided,  and its note, dated May 8, 2000, obligating it to pay the sum
of $11,616,750,  with interest as therein provided  (collectively,  the "Interim
Notes"). In connection with the purchase on the date hereof of the Premises, Fee
Owner will borrow $11,163,750 from Beneficiary and has executed and delivered to
Beneficiary  its note,  dated the date hereof,  obligating  it to pay the sum of
$11,163,750,  with  interest  thereon as therein  provided  (the "Fourth  Note";
together  with the First Note,  the Second  Note,  the Interim  Notes and as any
thereof  may  hereafter  be  amended,  modified,  extended,  severed,  assigned,
renewed,  replaced or restated,  hereinafter,  the "Note"). The notes comprising
the Note have  different  maturities  with the latest to mature  being April 28,
2001.  In order to secure the  payment  of the Note,  Fee Owner and  Lessee,  as
grantors,  have duly  authorized  the execution  and delivery of this Deed.  For
purposes of this Deed, "Grantor" 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.

<PAGE>

                  CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION

         Grantor,  Trustee  and  Beneficiary  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
properties,  the  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 Beneficiary to Fee Owner evidenced by the
Note and secured hereby.

                                       2

<PAGE>

         "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 Grantor 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 Deed  which are not  defined  above  shall  have the
meaning set forth elsewhere in this Deed.

         Except as  expressly  indicated  otherwise,  when used in this Deed (i)
"or" is not exclusive, (ii) "hereunder",  "herein",  "hereof" and the like refer
to this Deed as a whole,  (iii)  "Article",  "Section" and  "Schedule"  refer to
Articles,  Sections  and  Schedules  of this  Deed,  (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 with
its  terms  and as  permitted  hereby  and by the other  documents  executed  or
delivered to  Beneficiary  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,  Grantor, 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 Deed 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 Trustee,
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;

                                       3

<PAGE>

                (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 Grantor 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 4.01;

                (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 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 Grantor to refunds of real estate  taxes and
         assessments;

                (viii)   all revenue  and  income  received  by or on  behalf of
         Grantor  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

                                       4

<PAGE>


                (x) any deposit, operating or other account including the entire
         balance  therein  (now or  hereafter  existing)  of Grantor  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 Grantor  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 Trustee, its successors and assigns forever.

         IN TRUST,  to secure the payment to Beneficiary of the principal of and
interest on the Note at the maturity thereof and all other sums due hereunder or
under the Note and the performance of all covenants and agreements herein and in
the Note, whereupon this Deed shall cease and be void and the Mortgaged Property
shall be released at the cost of Grantor.

                                   ARTICLE I

                              COVENANTS OF GRANTOR

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

         Section  1.01.  (a)  Warranty of Title;  Power and  Authority.  Grantor
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,
Grantor  further  warrants that,  with respect to the 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  Grantor  warrants  that this  Deed is and will  remain a valid and
enforceable  lien on the  Mortgaged  Property  subject  only  to the  exceptions
referred to above.  Grantor has full power and lawful  authority  to subject the
Mortgaged  Property  to the lien  hereof in the manner and form  herein  done or
intended  hereafter to be done.  Grantor will preserve such title, will preserve
such leasehold  estate created by the Ground Lease and will forever  warrant and
defend the same to Trustee and  Beneficiary  and will forever warrant and defend
the validity  and priority of the lien hereof  against the claims of all persons
and parties whomsoever. Grantor 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

                                       5

<PAGE>

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 Deed or the 0rights of  Beneficiary
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 Grantor
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
Beneficiary.

         (b) Hazardous Materials.  To the best of Grantor's  knowledge,  Grantor
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) Grantor 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. Grantor 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. Grantor 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,  Grantor has obtained the
insurance required by Section 1.09.

         Section 1.02.  (a) Further  Assurances.  Grantor 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  Trustee or  Beneficiary  shall from time to time
reasonably require, for the better assuring, conveying, assigning,  transferring
and confirming  unto Trustee the property and rights hereby conveyed or assigned
or intended now or hereafter so to be, or which  Grantor may be or may hereafter
become bound to convey or assign to Trustee,  or for carrying out the  intention
or facilitating the performance of the terms hereof, or for filing,  registering
or recording  this Deed and, on demand,  will  execute and  deliver,  and hereby
authorizes  Trustee or Beneficiary to execute and file in Grantor's name, to the
extent  they may  lawfully  do so,  one or more  financing  statements,  chattel
mortgages  or  comparable  security  instruments,  to evidence  or perfect  more
effectively  Beneficiary's  security  interest  in and the lien  hereof upon the
Chattels and other personal property encumbered hereby.

                                       6

<PAGE>

         (b) Information Reporting and Back-up Withholding. Grantor 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  Beneficiary  with  satisfactory
evidence of such compliance and notify  Beneficiary of the information  reported
in connection with such compliance.

         Section 1.03. (a) Filing and Recording of Documents.  Grantor forthwith
upon the execution and delivery  hereof,  and thereafter from time to time, will
cause this Deed 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 title of  Trustee  to,  the  Mortgaged
Property.

         (b) Filing and Recording Fees and Other  Charges.  Grantor will pay all
filing,  registration  or  recording  fees,  and all  expenses  incident  to the
execution and acknowledgment  hereof, any deed of trust 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 Beneficiary 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 Deed,  any deed of trust  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.  Grantor 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 America  which at the time of such payment  shall be legal
tender for the payment of public and private debts. Grantor 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 Grantor to  Beneficiary  in connection  with the Loan,  and will
permit no failures of performance thereunder.

         Section 1.05. Maintenance of Existence;  Compliance with Laws. Grantor,
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.  Grantor  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.

                                       7

<PAGE>

         Section 1.06. After-Acquired Property. All right, title and interest of
Grantor  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,  Grantor  or
constructed, assembled or placed by Grantor 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 deed of trust,  conveyance,  assignment  or
other act by  Grantor,  shall  become  subject  to the lien  hereof as fully and
completely,  and with the same  effect,  as  though  now  owned by  Grantor  and
specifically  described in the Granting Clause hereof,  but at any and all times
Grantor  will  execute  and deliver to Trustee or  Beneficiary  any and all such
further  assurances,  deeds of trust,  conveyances  or  assignments  thereof  as
Trustee or Beneficiary  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.  Grantor,  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.  Grantor  will,  upon  Beneficiary's  request,  deliver to  Beneficiary
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.

         Beneficiary  may, at its option following the occurrence of an Event of
Default,  to be exercised  by thirty (30) days'  notice to Grantor,  require the
deposit by Grantor, 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 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  Beneficiary,  so that the  aggregate of such
deposits shall be sufficient  for this purpose,  shall be made by Beneficiary in
its sole discretion.  Such amounts shall be held by Beneficiary without interest
and applied to the payment of the  obligations  in respect of which such amounts
were deposited or, at Beneficiary's  option,  to the payment of said obligations
in such order or  priority  as  Beneficiary  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,  Grantor within ten (10) days after demand shall deposit the
amount of the deficiency  with  Beneficiary.  Nothing herein  contained shall be
deemed to affect any right or remedy of Beneficiary  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.

                                       8

<PAGE>

         (b) Payment of Mechanics and  Materialmen.  Grantor 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 Grantor and without expense to
Trustee  or  Beneficiary,  other  than  those  liens  which  Beneficiary  or its
affiliates have indemnified  Grantor 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 Grantor by this Section so
long as Grantor  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 Grantor shall set aside reserves
sufficient to discharge  Grantor'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 Grantor 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 Grantor shall pay the same in sufficient  time to prevent the
delivery of such tax deed or other instrument.

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

         Section  1.09.  Insurance.  (a) Grantor will at all times  (directly or
indirectly) provide, maintain and keep in force:

                (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 Beneficiary  from time to time reasonably may designate in an amount
         sufficient to prevent Beneficiary or Grantor 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

                                       9

<PAGE>

         (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 Grantor and (C) the fair
         rental  value of any  portion of such  buildings  which is  occupied by
         Grantor.  Grantor  hereby  assigns the  proceeds of such  insurance  to
         Beneficiary,  to be applied by  Beneficiary  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 Grantor
         is not  then in  default  hereunder,  the  balance  of  such  insurance
         proceeds, if any, held by Beneficiary shall be paid over to Grantor;

                (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 Beneficiary 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 Beneficiary  may reasonably  request,  in
         form and substance acceptable to Beneficiary;

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

                (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 Beneficiary as additional
         insured  by an  endorsement,  and  shall  contain  cross-liability  and
         severability of interest clauses, all satisfactory to Beneficiary; 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 Beneficiary against the same or other insurable
         hazards.

                                       10

<PAGE>


         Notwithstanding  anything  herein to the contrary,  for so long as that
certain   Management   Agreement  of  even  date  herewith  between  Lessee  and
Beneficiary  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 Grantor'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  Beneficiary,  shall be subject  to the  reasonable  approval  of
Beneficiary 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 Beneficiary,  and shall provide
that the proceeds thereof shall be payable to Beneficiary.  Beneficiary 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 Beneficiary. At least thirty (30) days prior
to  expiration  of  any  policy  required   hereunder,   Grantor  shall  furnish
Beneficiary  appropriate  proof of issuance of a policy  continuing in force the
insurance  covered  by  the  policy  so  expiring.   Grantor  shall  furnish  to
Beneficiary,  promptly upon request,  receipts or other satisfactory evidence of
the  payment  of the  premiums  on such  insurance  policies.  In the event that
Grantor  does not  deposit  with  Beneficiary  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 Beneficiary may, but shall
not be obligated to, procure such insurance and pay the premiums  therefor,  and
Grantor agrees to repay to Beneficiary the premiums  thereon promptly on demand,
together with interest thereon at the Default Rate.

         (c) Grantor hereby assigns to Beneficiary all proceeds of any insurance
required to be  maintained by this Section 1.09 which Grantor may be entitled to
receive for loss or damage to the Premises,  Improvements or Chattels.  All such
insurance  proceeds  shall  be  payable  to  Beneficiary,   and  Grantor  hereby
authorizes and directs any affected  insurance  company to make payment  thereof
directly to Beneficiary  subject,  however,  to clause (f) below.  Grantor shall
give prompt  notice to  Beneficiary  of any  casualty,  whether or not of a kind
required  to be insured  against  under the  policies  to be provided by Grantor
hereunder,  such  notice to  generally  describe  the  nature  and cause of such
casualty and the extent of the damage or destruction. Grantor 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  Beneficiary's   prior  consent.   Notwithstanding   the  foregoing,
Beneficiary  shall have the right to join  Grantor  in  settling,  adjusting  or
compromising  any  loss of  $100,000  or more.  Grantor  hereby  authorizes  the
application or release by Beneficiary of any insurance proceeds under any policy
of insurance, subject to the other provisions hereof. The application or release
by Beneficiary 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.

                                       11

<PAGE>


         (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 Grantor 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) Grantor 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 Beneficiary is included thereon as a named insured with loss
payable to Beneficiary under standard mortgage endorsements of the character and
to the  extent  above  described.  Grantor  shall  promptly  notify  Beneficiary
whenever any such separate  insurance is taken out and shall promptly deliver to
Beneficiary the policy or policies of such insurance.

         (f) Any  and all  monies  received  as  payment  which  Grantor  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 Beneficiary and, at Beneficiary'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  Grantor in  reimbursement  of its costs and
expenses  incurred in the  restoration of the  Improvements  in accordance  with
Beneficiary's standard construction lending practices,  terms and conditions, in
either case,  less  Beneficiary'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,  Beneficiary agrees to
apply any such proceeds  received by it to the  reimbursement of Grantor's costs
of restoring the Improvements.  Advances of insurance  proceeds shall be made to
Grantor from time to time in accordance with Beneficiary's standard construction
lending practices, terms and conditions;  amounts not required for such purposes
shall be applied, at Beneficiary's  option, to the prepayment of the Note and to
interest accrued and unpaid thereon in such order and proportions as Beneficiary
may elect. In no event shall Beneficiary be required to advance such proceeds to
Grantor unless  Beneficiary 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
Beneficiary  to be  inadequate,  Beneficiary  shall have received from Grantor 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 Beneficiary's  receipt thereof or if the
actual restoration shall not have been

                                       12

<PAGE>

commenced  within  such  period,  Beneficiary  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 Beneficiary
may elect.

         Section 1.10. Protective Advances by Beneficiary. If Grantor shall fail
to perform any of the covenants  contained  herein,  Trustee or Beneficiary  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.  Grantor 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. Grantor will keep adequate
records and books of account in accordance  with generally  accepted  accounting
principles  and will permit each of Trustee and  Beneficiary,  by their  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 Grantor, at such reasonable times as
may be requested by Trustee or Beneficiary.

         (b)   Financial  and  Other   Information.   Grantor  will  deliver  to
Beneficiary with reasonable  promptness such financial  information with respect
to Grantor or the Premises as Beneficiary  may  reasonably  request from time to
time. All financial  statements of Grantor 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 Grantor,  dated  within five (5) days of the  delivery of
such  statements  to  Beneficiary,  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 period of  existence  thereof  and what  action  Grantor has taken or
proposes to take with  respect  thereto,  and,  except as  otherwise  specified,
stating  that  Grantor  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.  Grantor, 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 Deed and whether any offsets,  counterclaims  or defenses exist
against the indebtedness secured hereby.

         Section 1.12.  Maintenance of Premises and  Improvements.  Grantor 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.  Grantor  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

                                       13

<PAGE>

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 Beneficiary'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.   Grantor,   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  Trustee and
Beneficiary  thereof.  Trustee  and  Beneficiary  may  participate  in any  such
proceedings  and  may  be  represented   therein  by  counsel  of  Beneficiary's
selection. Grantor from time to time will deliver to Beneficiary 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 Beneficiary. Beneficiary 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  Beneficiary'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
Grantor from time to time for restoration of the Improvements in accordance with
Beneficiary's standard construction lending practices,  terms and conditions, in
either case,  less  Beneficiary'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,  Beneficiary  agrees to apply any such  condemnation  award  proceeds
received  by it to  the  reimbursement  of  Grantor's  costs  of  restoring  the
Improvements.  Advances of condemnation  award proceeds shall be made to Grantor
from time to time in accordance with Beneficiary's standard construction lending
practices, terms and conditions; amounts not required for such purposes shall be
applied, at Beneficiary's  option, to the prepayment of 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 Beneficiary may elect.

         Section 1.14. Leases. (a) Grantor will not (i) execute an assignment of
the rents or any part  thereof  from the Premises  without  Beneficiary'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 or surrender 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.

                                       14

<PAGE>

         (b) Grantor 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,  Grantor  shall
exercise  its right to request  such  certificates  within  five (5) days of any
demand  therefor by Beneficiary  and shall deliver copies thereof to Beneficiary
promptly upon receipt.

         (c) In the event of the  enforcement  by Trustee or  Beneficiary of the
remedies  provided  for hereby or by law, the lessee under each of the leases of
the Premise  will,  upon  request of any person  succeeding  to the  interest of
Grantor 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  Beneficiary  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.  Grantor  shall (a) do all  things
reasonably necessary to cause the due compliance and faithful performance by the
other  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  Beneficiary  or its
affiliate,  and (b) deliver promptly to Beneficiary  copies of any notices which
it gives or receives under any of the Premises Documents.

         Section 1.16. Trust Fund; Lien Laws.  Grantor 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.  Grantor will indemnify
and hold Trustee and Beneficiary 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 Grantor of any  applicable
lien law.

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<PAGE>


         Section 1.17.  Expenses of Trustee.  Grantor shall pay all costs,  fees
and  expenses  of  Trustee,  its  agents  and  counsel  in  connection  with the
performance of its duties hereunder.

                                   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
         Deed or in any other  document  executed or delivered to Beneficiary 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 Grantor  by  Beneficiary,  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 Grantor in Section
         1.01 shall be  incorrect,  or if any other  representation  or warranty
         made to Beneficiary in this Deed, or in any other document, certificate
         or statement  executed or delivered to Beneficiary  in connection  with
         the Loan  shall be  incorrect  in any  material  respect  when  made or
         remade; or

                (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 Grantor shall be appointed and such order shall not be discharged
         or dismissed within sixty (60) days after such appointment; or

                (e) if Grantor  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,  Grantor 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

                                       16

<PAGE>

                (f) if any of the  creditors of Grantor shall file a petition in
         bankruptcy against Grantor or for reorganization of Grantor 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 Grantor and Grantor 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)

                (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; it being further  agreed by Grantor 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 or for the
         benefit of Beneficiary; 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
         Beneficiary  or its affiliate;  or if any of the Premises  Documents is
         amended,  modified,  supplemented or terminated  without  Beneficiary's
         prior consent; or

                (k) if Grantor shall  transfer,  or agree to transfer (or suffer
         or permit the transfer or agreement to transfer), 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,  Beneficiary'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  Grantor  (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
         Grantor is a

                                       17

<PAGE>


         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 Grantor  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, Beneficiary'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.  (Beneficiary  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 Grantor'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,
         Beneficiary,  by notice to Grantor, 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 4.08 hereof,  the provisions thereof
         limiting interest payable thereunder to the maximum amount permitted by
         applicable law) to the contrary notwithstanding.

                II. During the continuance of any such Event of Default, Trustee
         or Beneficiary personally,  or by their agents or attorneys,  may enter
         into and upon all or any part of the Premises,  and each and every part
         thereof,  and are each hereby  given a right and license and  appointed
         Grantor's  attorney-in-fact  and  exclusive  agent  to do so,  and  may
         exclude Grantor,  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  their
         superintendents,  managers,  agents, servants,  attorneys or receivers;
         and upon every such entry,  Trustee or  Beneficiary,  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 they shall  become  possessed  as  aforesaid;  may complete the
         construction of the  Improvements  and

                                       18

<PAGE>


         in  the  course  of  such  completion  may  make  such  changes  in the
         contemplated  Improvements  as  Beneficiary  may deem desirable and may
         insure the same; and likewise, from time to time, at the expense of the
         Mortgaged  Property,  Trustee or Beneficiary  may make all necessary or
         proper repairs,  renewals and replacements and such useful alterations,
         additions,   betterments  and  improvements   thereto  and  thereon  as
         Beneficiary  may seem  advisable;  and in every  such case  Trustee  or
         Beneficiary  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  Grantor  with  respect  thereto  either in the name of
         Grantor or otherwise  as  Beneficiary  shall deem best;  and Trustee or
         Beneficiary  shall be  entitled  to collect  and  receive the Rents and
         every part  thereof,  all of which  shall for all  purposes  constitute
         property of Grantor;  and in furtherance of such right  Beneficiary 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  Beneficiary  of all rents due and to become
         due under its lease,  and Grantor FOR THE  BENEFIT OF  BENEFICIARY  AND
         EACH SUCH LESSEE  hereby  covenants and agrees that the lessee shall be
         under no duty to question  the accuracy of  Beneficiary's  statement of
         default  and shall  unequivocally  be  authorized  to pay said rents to
         Beneficiary  without regard to the truth of Beneficiary's  statement of
         default  and   notwithstanding   notices  from  Grantor  disputing  the
         existence  of an Event of Default  such that the payment of rent by the
         lessee  to  Beneficiary  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  Grantor;  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 Trustee and Beneficiary and for all attorneys, counsel,
         agents,  clerks,  servants  and other  employees  by them  engaged  and
         employed,  Trustee or Beneficiary,  as the case may be, 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  Beneficiary  shall elect
         and  second,  to the  payment of any other sums  required to be paid by
         Grantor hereunder.

                III. Trustee or Beneficiary, as the case may be, with or without
         entry,  personally  or  by  their  agents  or  attorneys,   insofar  as
         applicable, may:

                     (1) sell the  Mortgaged  Property  and all  estate,  right,
                title and interest,  claim and demand therein, at public auction
                at such time and place,  and upon such terms and  conditions  as
                Beneficiary  may  deem  expedient  or  as  may  be  required  or
                permitted  by  applicable  law,  having  first given such notice
                prior to the sale of such time,  place and terms by  publication
                in one (1) or more  newspapers  published  or  having a  general
                circulation  in the county or counties of the state in which the
                Mortgaged Property is located as may be required or permitted by
                law and by such

                                       19

<PAGE>

                other  methods,  if any,  as  Trustee  or  Beneficiary  may deem
                desirable or as may be required or permitted by applicable  law.
                In the  event  of any  sale  of all  or  part  of the  Mortgaged
                Property under the terms hereof,  Grantor shall pay (in addition
                to taxable  costs) a reasonable fee to Trustee which shall be in
                lieu of all other fees and  commission  permitted  by statute or
                custom to be paid,  reasonable  attorneys' fees and all expenses
                incurred in obtaining or  continuing  abstracts of title for the
                purpose of any such sale; or

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

                     (3) take such steps to protect  and  enforce  their  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 Trustee or Beneficiary shall elect.

                IV. Upon the  occurrence of such an Event of Default,  or at any
         time  thereafter,  Beneficiary  is authorized  and  empowered,  without
         further  notice,  to file with Trustee a written Notice of Election and
         Demand for Sale,  as provided by law,  whereupon it shall be and may be
         lawful for Trustee to foreclose, and Trustee shall foreclose, this Deed
         and sell and dispose of the Mortgaged  Property en masse or in separate
         parcels  (as  Beneficiary  may  elect)  and all the  right,  title  and
         interest  of  Grantor  therein,  at public  auction  at any place  then
         authorized  by law as may be specified in the notice of such sale,  for
         the highest and best price the same will bring,  four (4) weeks' public
         notice having  previously been given of the time and place of such sale
         by advertisement weekly in some newspaper of general circulation at the
         time published in Boulder County,  Colorado,  or upon such other notice
         as may then be required by law, and shall issue,  execute and deliver a
         Certificate  of Purchase,  Trustee's Deed (which may be in the ordinary
         form  of  conveyance),  or  Certificate  of  Redemption  in the  manner
         provided by law to the party entitled thereto.

         Section  2.02.   Other  Matters   Concerning   Sales.  (a)  Trustee  or
Beneficiary 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, Trustee or Beneficiary, as the case may be, 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  Trustee  or
Beneficiary, as the case may be, under or by virtue of this Article II, Trustee,
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.  Trustee is hereby

                                       20

<PAGE>

appointed the true and lawful attorney  irrevocable of Grantor,  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  Trustee may
execute all necessary  instruments of conveyance,  assignment and transfer,  and
may substitute one or more persons with like power, Grantor hereby ratifying and
confirming all that its said attorney or such  substitute or  substitutes  shall
lawfully do by virtue hereof. Nevertheless,  Grantor, if requested by Trustee or
Beneficiary,  shall ratify and confirm any such sale or sales by  executing  and
delivering to Trustee or to such purchaser or purchasers all such instruments as
may be advisable,  in the judgment of Trustee or  Beneficiary,  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 Grantor
in and to the  properties  and rights so sold, and shall be a perpetual bar both
at law and in equity against Grantor and against any and all persons claiming or
who may claim the same, or any part thereof from, through or under Grantor.

         (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 Grantor
pursuant hereto,  immediately thereupon shall, anything in any of said documents
(other than Section 4.08 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 Trustee or Beneficiary 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 Trustee and  Beneficiary,  their
         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 Trustee  hereunder,  together  with interest at the Default
         Rate on all advances made by Trustee, 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 Beneficiary may elect.

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

                                       21

<PAGE>

             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,
Beneficiary  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 Trustee or Beneficiary are authorized to deduct hereunder.

         (f)  It is  specifically  authorized  hereby  that  Beneficiary  or its
nominee  or both of them may bid at any  foreclosure  sale held by Trustee or by
act of a court,  and the fact of such bid  shall  not in any way  alter,  amend,
waiver or limit any  obligation  which  Grantor or any other obligor under or in
respect  of the Note or any of them  might  have by way of a  deficiency  in the
amount which might then be due under the terms of the Note or of this Deed or of
both of them. It is also  specifically  authorized that where Beneficiary or its
nominee enters a bid at such  foreclosure  sale,  whether such sale be conducted
through Trustee or through the courts, no bid made by such party shall be deemed
insufficient  in whole or in part  where the  amount of such bid is equal to the
excess of (i) the appraised value of the property then being  foreclosed,  which
appraisal  shall be  rendered  not more than six (6) weeks  prior to the date of
such  sale,  over (ii) the sum of (x) any  anticipated  taxes,  assessments  and
insurance premiums which may be due or become due within six (6) months from the
date of  such  sale,  (y) any  costs  which  might  reasonably  be  incurred  by
Beneficiary for rendering the condition of such property reasonably  appropriate
pursuant to said  appraisal for the purpose of resale and (z) the costs of sale,
which costs shall include  reasonable  attorneys' fees therefor,  the then going
real estate  agent's  commission as is customary in the area where such property
is located,  title  evidence  expense,  and any and all other title  expenses as
might be necessitated by the status of the title to render such title marketable
for the  purposes of  disposition.  (The effect of this  provision is to provide
Beneficiary  with a reasonable  cash return from said  property as a credit upon
the Note inasmuch as Beneficiary  advanced cash to Grantor.  Grantor agrees that
such cash for cash provision would  essentially  render back to Beneficiary that
which Beneficiary had originally advanced.)

         (g)  Beneficiary  shall be entitled,  as a matter of absolute right and
without  regard to the value of any security for the secured  obligations or the
solvency of any person liable therefor, to the appointment of a receiver for the
Premises and/or other parts of the Mortgaged  Property upon ex parte application
to any court of competent jurisdiction.  Grantor waives any right to any hearing
or notice of hearing prior to the  appointment of a receiver.  Such receiver and
his agents  shall be empowered  (i) to take  possession  of the Premises  and/or
other parts of the Mortgaged Property and any businesses conducted by

                                       22

<PAGE>

Grantor or any other  person  thereon and any  business or other  assets used in
connection therewith, (ii) to exclude Grantor and Grantor's agents, servants and
employees  from the Premises,  (iii) to collect the rents,  issues,  profits and
income  therefrom,  (iv) to complete any construction  which may be in progress,
(v) to do  such  maintenance  and  make  such  repairs  and  alterations  as the
receiver, with the consent of Beneficiary, deems necessary or desirable, (vi) to
use all stores of materials,  supplies and maintenance equipment on the Premises
and replace such items at the expense of the receivership  estate,  (vii) to pay
all taxes and  assessments  against the Premises and the Chattels,  all premiums
for insurance thereon,  all utility and other operating  expenses,  and all sums
due under any prior  encumbrance  and  (viii)  generally  to do  anything  which
Grantor could  legally do if Grantor were in  possession  of the  Premises.  All
expenses  incurred by the receiver and his agents shall constitute a part of the
indebtedness  secured  hereby.  Any revenues  collected by the receiver shall be
applied  first  to  the  expenses  of  the  receivership,  including  reasonable
attorneys'  fees  incurred by the receiver  and by  Beneficiary,  together  with
interest  thereon at the Default Rate from the date incurred  until repaid,  and
the balance shall be applied toward the Note.  Unless sooner terminated with the
express consent of Beneficiary,  any such  receivership  will continue until the
indebtedness  secured hereby has been  discharged in full, or until title of the
Premises  has  passed  after  foreclosure  sale and all  applicable  periods  of
redemption have expired.

         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  Beneficiary,  Grantor will pay to  Beneficiary  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 Beneficiary interest at the Default Rate on the then
unpaid  principal  of the  Note,  and the sums  required  to be paid by  Grantor
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 Trustee and Beneficiary, their agents and counsel and
any expenses incurred by Trustee or Beneficiary hereunder.  In the event Grantor
shall fail forthwith to pay all such amounts upon such demand, Beneficiary 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 Grantor
and collect, out of the property of Grantor wherever situated, as well as out of
the  Mortgaged  Property,  in any manner  provided  by law,  moneys  adjudged or
decreed to be payable.

         (b)  Beneficiary  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 Beneficiary 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, Beneficiary 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,

                                       23

<PAGE>

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  Grantor in
insolvency or bankruptcy or any proceedings for its  reorganization or involving
the liquidation of its assets,  then Beneficiary  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 Beneficiary receive, from the aggregate
amount  of  the  proceeds  of  the  sale  of  the  Mortgaged  Property  and  the
distribution  from the estate of Grantor,  a greater  amount than such principal
and interest and such other payments, charges and costs.

         (c) No  recovery  of any  judgment  by  Beneficiary  and no  levy of an
execution  under any  judgment  upon the  Mortgaged  Property  or upon any other
property of Grantor 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 Trustee or Beneficiary hereunder, but such liens, rights, powers and
remedies of Trustee or Beneficiary shall continue unimpaired as before.

         (d) Any moneys thus  collected by  Beneficiary  under this Section 2.03
shall be applied by Beneficiary 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 Trustee or  Beneficiary to obtain  judgment for the principal of,
or interest on, the Note and other sums required to be paid by Grantor  pursuant
to any provision hereof, or of any other nature in aid of the enforcement of the
Note or hereof,  Grantor  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  Beneficiary,  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 Deed
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 Trustee or
Beneficiary,  Trustee or Beneficiary shall be entitled, as a matter of right, if
they 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.

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

                                       24

<PAGE>

         Section 2.06. Remedies  Cumulative.  No remedy herein conferred upon or
reserved to Trustee or  Beneficiary  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 Trustee or
Beneficiary  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 Trustee or Beneficiary may be exercised from time to time
as often as may be deemed by them expedient. Nothing herein or in the Note shall
affect the obligation of Grantor 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. Grantor 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
the 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
Grantor  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 Trustee or Beneficiary,  but to suffer and permit
the  execution  of every  power as  though  no such law or laws had been made or
enacted.  Grantor,  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.

         Section 2.08. Intentionally Omitted.

         Section 2.09.  Beneficiary's  Rights Concerning  Application of Amounts
Collected.  Notwithstanding  anything to the contrary contained herein, upon the
occurrence  of an  Event  of  Default,  Beneficiary  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 Beneficiary shall elect in its sole and
absolute discretion.

         Section 2.10. Additional Advances.  This Deed shall secure, in addition
to the  original  indebtedness  and accrued  interest  thereon,  any  additional
advances and any  expenditures  made by  Beneficiary  as  determined in its sole
discretion  for  taxes,  special  assessments,   insurance  premiums,  costs  of
completing the construction of unfinished Improvements, if any, costs of repair,
maintenance and preservation of said Improvements,  utility charges,  delinquent
payment  fees,  attorneys'  fees and  other  charges,  all of which  shall  bear
interest  at the  Default  Rate.  It shall be lawful  for the  beneficiary  of a
Certificate of Purchase  covering the Premises to make  expenditures  for any of
the  following:  taxes,

                                       25

<PAGE>

special assessments, insurance premiums, costs of completing the construction of
unfinished Improvements,  if any, costs of repair,  maintenance and preservation
of said  Improvements and utility charges,  and upon filing receipts  evidencing
payment of the same with  Trustee or the Sheriff or other person  authorized  to
make and  making  said sale and  issuing  said  Certificate  of  Purchase,  such
payments  or  expenditures  shall bear  interest  at the  Default  Rate.  Before
redemption can be made from such foreclosure  sale, the party redeeming shall be
required to pay, in addition to the amounts  specified  in said  Certificate  of
Purchase,  the further  and  additional  amounts  represented  by the  foregoing
expenditures.   Upon  the  occurrence  of  an  Event  of  Default  hereunder  or
foreclosure and if, in the opinion of  Beneficiary,  it is necessary to complete
construction  of any  incomplete  Improvements  or make repairs,  alterations or
renovations to the Premises and Improvements, it shall have the right to proceed
as it deems  advisable,  and in that  connection,  Grantor  does hereby  appoint
Beneficiary  as its  attorney-in-fact  to do such things as are hereby  provided
herein  and such  power of  attorney  is coupled  with an  interest  in the said
property and is irrevocable.

                                  ARTICLE III

                               CONCERNING TRUSTEE

         Section 3.01. Trustee's Performance. Trustee, by its acceptance hereof,
covenants  faithfully to perform and fulfill the trusts herein created.  Trustee
shall not incur any  personal  liability  hereunder,  except for its own willful
neglect  or  misconduct,  and  Trustee  shall  have  the  right  to  rely on any
instrument,  document or signature authorizing or supporting any action taken or
proposed  to be  taken  by it  hereunder,  believed  by it in good  faith  to be
genuine. Trustee shall be entitled to reimbursement for all expenses incurred by
it in the  performance  of its  duties,  and  shall be  entitled  to  reasonable
compensation for such of its services as shall be rendered.

         Section 3.02.  Resignation  by Trustee.  Trustee may resign at any time
upon giving thirty (30) days' notice to Grantor and Beneficiary.

         Section 3.03.  Removal of Trustee;  Successors.  Beneficiary may remove
Trustee at any time or from time to time and select a successor trustee.  In the
event of the death,  removal,  resignation  or refusal  or  inability  to act of
Trustee,  or in its sole discretion for any reason whatsoever,  Beneficiary may,
without notice and without specifying any reason therefor, without any formality
other than  designation by  Beneficiary  in writing and without  applying to any
court, select and appoint a successor Trustee,  and all powers,  rights,  duties
and authority of Trustee,  as aforesaid,  shall thereupon  become vested in such
successor.  In such connection,  Beneficiary  may, on its and Grantor's  behalf,
execute, acknowledge and record an instrument or agreement of such substitution,
and Grantor hereby  irrevocably  appoints  Beneficiary as its  attorney-in-fact,
with full power of substitution,  to do so. Such substitute trustee shall not be
required to give bond for the faithful performance of its duties unless required
by Beneficiary.

         Section  3.04.  Limitations  Imposed by Law.  It is  understood  by the
parties hereto that the foregoing sections of this Article III may be limited by
the provisions of applicable law.

                                       26

<PAGE>

                                   ARTICLE IV

                                  MISCELLANEOUS

         Section 4.01.  Assignment of Rents. This Deed is intended to constitute
a  present,  absolute  and  irrevocable  assignment  of all of the  Rents now or
hereafter accruing, and Grantor, 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  Beneficiary.  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  Beneficiary  hereby grants to
Grantor  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  Beneficiary  a mortgagee  in  possession  unless and until  Beneficiary
actually takes possession of the Mortgaged Property, nor to obligate Beneficiary
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.

         Section  4.02.   Security  Agreement  and  Fixture  Filing.  This  Deed
constitutes a security  agreement,  with Grantor as the "debtor" and Beneficiary
as the  "secured  party",  under the  Uniform  Commercial  Code as  adopted  and
applicable in the State of Colorado (hereinafter, the "Uniform Commercial Code")
with respect to the Chattels and such other of the Mortgaged  Property  which is
personal  property or which are fixtures and not yet realty,  and Grantor hereby
grants a security  interest to  Beneficiary  in such  portions of the  Mortgaged
Property. In addition to the rights and remedies granted to Beneficiary by other
applicable law or hereby,  Beneficiary 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  Uniform  Commercial  Code,   including,   without
limitation,  taking  possession  of,  holding and selling the  Chattels and such
other personal  property.  Grantor will execute and deliver to  Beneficiary  all
financing  statements  that may from time to time be required by  Beneficiary to
establish  and maintain  the  validity and priority of the security  interest of
Beneficiary,  or any modification thereof, and pay all costs and expenses of any
searches reasonably required by Beneficiary. Upon Beneficiary's request after an
Event of  Default,  Grantor  shall  promptly  and at its  expense  assemble  the
Chattels  and such  other  personal  property  and make  the same  available  to
Beneficiary at a convenient place acceptable to Beneficiary.  Grantor,  after an
Event of  Default,  shall pay to  Beneficiary  on demand,  with  interest at the
Default  Rate,  any and all expenses,  including  attorneys'  fees,  incurred by
Beneficiary  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 Beneficiary with respect to the Chattels
and  such  other  personal  property  sent to  Grantor  in  accordance  with the
provisions  hereof at least five (5) days prior to such action shall  constitute
reasonable notice to Grantor.  Any requirement for reasonable notice of the time
and place of any public  sale,  or of the time after which any  private  sale or
other  disposition is to be made, will be satisfied by  Beneficiary's  giving of

                                       27

<PAGE>

such  notice to  Grantor  at least five (5) days prior to the time of any public
sale or the time after which any private sale or other  intended  disposition is
to be made. The proceeds of any such sale or  disposition,  or any part thereof,
may be applied by Beneficiary to the payment of the indebtedness  secured hereby
in such  order and  proportions  as  Beneficiary  in its  discretion  shall deem
appropriate.  Notwithstanding  the  foregoing,  Beneficiary  may, at its option,
dispose of such property in accordance  with  Beneficiary's  rights and remedies
with respect to the real  property  pursuant to the  provisions of this Deed, in
lieu of  proceeding  under the  Uniform  Commercial  Code.  Some of the items of
Mortgaged Property described herein are goods that are or are to become fixtures
related to the real estate  described  herein,  and it is intended  that,  as to
those goods,  this Deed shall be effective as a financing  statement  filed as a
fixture filing from the date of its filing for record in the real estate records
of the county in which the  Premises  is  situated.  To the extent  Grantor  may
lawfully do so and without limiting any rights and/or  privileges herein granted
to Beneficiary, Grantor agrees that Beneficiary and/or Trustee and any successor
Trustee may dispose of any or all of the Chattels at the same time and place and
after  giving  the same  notices  provided  in this  Deed in  connection  with a
non-judicial  foreclosure  sale  under  the terms  and  conditions  set forth in
Article II,  Section  2.01,  or III of this Deed.  In this  connection,  Grantor
agrees that the sale may be conducted by Trustee or successor Trustee;  that the
sale of the real estate and improvements described in this Deed and the Chattels
or any part thereof,  may be sold separately or together;  and that in the event
the Premises and the Chattels or any part thereof are sold together, Beneficiary
will not be  obligated  to allocate  the  consideration  received as between the
Premises and the Chattels.

         Section 4.03. Application of Certain Payments. In the event that all or
any part of the  Mortgaged  Property is encumbered by one or more deeds of trust
held by or for the benefit of Beneficiary, Grantor hereby irrevocably authorizes
and directs  Beneficiary to apply any payment received by Beneficiary in respect
of any note secured  hereby or by any other such deed of trust to the payment of
such of  said  notes  as  Beneficiary  shall  elect  in its  sole  and  absolute
discretion,  and  Beneficiary  shall have the right to apply any such payment in
reduction  of  principal  and/or  interest  and in such  order  and  amounts  as
Beneficiary  shall elect in its sole and absolute  discretion  without regard to
the  priority  of the deed of trust  securing  the note so repaid or to contrary
directions from Grantor or any other party.

         Section  4.04.  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 Deed
shall be construed as if such invalid,  illegal or  unenforceable  provision had
never been contained herein or therein.

         Section 4.05. 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 Grantor and Beneficiary  relating hereto shall be superior to the rights
of the holder of any intervening or subordinate lien or encumbrance.

                                       28

<PAGE>


         Section 4.06. 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
Grantor 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 Beneficiary 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 4.07.  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 successors and assigns of Grantor, the
successors in trust of Trustee and the  endorsees,  transferees,  successors and
assigns of Beneficiary.

         Section 4.08. Limitation on Interest. Anything herein or in the Note to
the contrary notwithstanding, the obligations of Grantor 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 Beneficiary  would be
contrary to provisions of law  applicable  to  Beneficiary  limiting the maximum
rate of interest that may be charged or collected by Beneficiary.

         Section 4.09. Counterparts.  This Deed 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 deed.

         Section 4.10.  Substitute  Deeds.  Grantor and Beneficiary  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  deeds of trust, so as to create two (2) or more liens on or security
titles in respect of 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 Note Amount;  in such event,  Grantor covenants and agrees to pay
the reasonable  fees and expenses of  Beneficiary  and its counsel in connection
with any such modification.

         Section  4.11.   Beneficiary's  Sale  of  Interests  in  Loan.  Grantor
recognizes that  Beneficiary 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 Grantor,
any  Guarantor  or the  Loan,  may be  exhibited  to and  retained  by any  such
participant or assignee or prospective participant or assignee.

         Section  4.12.  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 Deed  shall  not  merge in said  title but shall
continue to be and remain a valid and subsisting  lien and/or trust deed on said
estates in the Premises for the amount secured hereby.

                                       29

<PAGE>


         Section 4.13.  CERTAIN WAIVERS.  GRANTOR EXPRESSLY AND  UNCONDITIONALLY
WAIVES BY EXECUTION  HEREOF,  AND BENEFICIARY  WAIVES BY ACCEPTANCE  HEREOF,  IN
CONNECTION  WITH ANY  FORECLOSURE  OR  SIMILAR  ACTION OR  PROCEDURE  BROUGHT BY
BENEFICIARY  ASSERTING  AN EVENT OF DEFAULT  UNDER CLAUSE (A) OF SECTION 2.01 OF
THIS DEED, ANY AND EVERY RIGHT IT MAY HAVE TO A TRIAL BY JURY.

         Section  4.14.  GOVERNING  LAW. THE  PERFORMANCE  REQUIRED BY THIS DEED
SHALL,  INSOFAR AS IS POSSIBLE,  BE RENDERED TO THE BENEFICIARY AT ITS OFFICE IN
TENNESSEE.  GRANTOR AND BENEFICIARY INTEND THAT THE VALIDITY AND CONSTRUCTION OF
THE  OBLIGATIONS  SECURED BY THIS DEED 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 DEED 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 COLORADO 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 COLORADO SHALL APPLY TO ANY
AND ALL ACTS WITH  RESPECT TO THE  CREATION AND PRIORITY OF THE LIEN OF THE DEED
AND ASSIGNMENT OF LEASES AND RENTS ON THE MORTGAGED  PROPERTY  HEREBY  EVIDENCED
AND FORECLOSURE BY TRUSTEE ON THE MORTGAGED PROPERTY.  GRANTOR,  BENEFICIARY AND
TRUSTEE  COVENANT  AND AGREE TO TAKE ANY AND ALL ACTION  WHICH MAY BE  NECESSARY
UNDER  COLORADO LAW WITH RESPECT TO  FORECLOSURE  UNDER THE LAWS OF THE STATE OF
COLORADO.  SHOULD  ANY  OBLIGATION  OR  REMEDY  UNDER  THIS DEED BE  INVALID  OR
UNENFORCEABLE  UNDER THE LAWS  PROVIDED  HEREIN TO  GOVERN,  THE LAWS OF ANOTHER
STATE WHOSE LAWS CAN VALIDATE AND APPLY TO THIS DEED SHALL APPLY.

                                       30

<PAGE>



         IN WITNESS  WHEREOF,  this Deed has been duly executed and delivered by
Grantor.

                                         APPLE SUITES, INC.,
                                         a Virginia corporation

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

                                         APPLE SUITES MANAGEMENT, INC.,
                                         a Virginia corporation

                                         By  /s/  Glade M. Knight         [L.S.]
                                             -----------------------------------
                                             Name:  Glade M. Knight
                                             Title: President, CEO and Chairman



<PAGE>


STATE OF VIRGINIA

CITY OF RICHMOND

         On the 28th day of June, A.D. 2000 personally  appeared before me Glade
M.  Knight  who being by me duly  sworn  did say,  for  himself,  that he is the
President  and  Chairman  of Apple  Suites,  Inc.,  that he  executed  the above
instrument  on behalf of said  corporation  by authority of a resolution  of its
board of directors  and said Glade M. Knight duly  acknowledged  to me that said
corporation executed the same.

                                           /s/  Jacquelyn B. Owens
                                           -------------------------------------
                                           Notary Public

                                           Residing at:

                                           306 E. Main Street
                                           -------------------------------------
                                           Richmond, VA  23219
                                           -------------------------------------

My commission expires:

  6/30/03
------------------------

Notary Seal

STATE OF VIRGINIA

CITY OF RICHMOND

         On the 28th day of June, A.D. 2000 personally  appeared before me Glade
M.  Knight  who being by me duly  sworn  did say,  for  himself,  that he is the
President,  CEO and Chairman of Apple Suites Management,  Inc., that he executed
the above  instrument on behalf of said corporation by authority of a resolution
of its board of directors and said Glade M. Knight duly  acknowledged to me that
said corporation executed the same.

                                           /s/  Jacquelyn B. Owens
                                           -------------------------------------
                                           Notary Public

                                           Residing at:

                                           306 E. Main Street
                                           -------------------------------------
                                           Richmond, VA  23219
                                           -------------------------------------

My commission expires:

  6/30/03
------------------------

Notary Seal

<PAGE>

                                                                       [Boulder]


                                  SCHEDULE "A"


PARCEL I:

Lot 5,
THE MEADOWS ON THE PARKWAY
City of Boulder,  County of Boulder,  State of  Colorado
according  to the Plat which is recorded
in Plan File P-22, F-3, #26, 27 and 28.

PARCEL II:

A  non-exclusive  easement over and across that portion of Lot 3, The Meadows on
the  Parkway,  for  ingress  and  egress,  for Lots 4 and 5, The  Meadows on the
Parkway, to and from Baseline Road, described as follows:

A strip  of land  30.00  feet  in  width  located  in the  Northeast  1/4 of the
Northwest 1/4 of Section 4, Township 1 South, Range 70 West of the 6th P.M., THE
MEADOWS ON THE PARKWAY, a subdivision in the City of Boulder, County of Boulder,
State of  Colorado,  said strip of land  extending  from a line that bears North
00(degree) 02' 30" West and South 00(degree) 02' 30" East through the True Point
of Beginning,  Easterly to a line that bears North  00(degree)  02' 30" West and
South  00(degree) 02' 30" East through the Point of Termination  and being 15.00
feet on each side of the following described Centerline:

Commencing at the Northwest  Corner of the Northeast 1/4 of the Northwest 1/4 of
said  Section 4, from which the North 1/4 Corner of said  Section 4 bears  North
89(degree)  57' 30" East,  1330.76 feet,  thence North  89(degree) 57' 30" East,
30.00 feet along the North line of the  Northwest  1/4 of said  Section 4 to the
Northeast  Corner of Frasier  Meadows,  a Subdivision  in the County of Boulder,
State  of  Colorado,  according  to the  recorded  plat  thereof;  thence  South
00(degree) 26' 50" West,  75.46 feet along the East line of said Frasier Meadows
to the Southwest Corner of that tract of land conveyed to the City of Boulder as
described in Warranty  Deed  recorded on Film 775 as Reception No. 022428 of the
records of Boulder County, Colorado;  thence continuing South 00(degree) 26' 50"
West,  201.93 feet along the East line of said  Frasier  Meadows;  thence  north
89(degree)  57' 30" East,  170.00 feet;  thence South  00(degree)  26' 50" West,
50.38 feet;  thence North  89(degree)  57' 30" East,  218.20 feet;  thence North
89(degree) 57' 30" East, 73.00 feet; thence North 00(degree) 02' 30" West, 34.27
feet to the TRUE POINT OF BEGINNING;

Thence South 89(degree) 13 '50" East, 142.41 feet to the POINT OF TERMINATION.

<PAGE>

                            SCHEDULE "A" (CONTINUED)



PARCEL III:

A  non-exclusive  easement over and across that portion of Lot 4, The Meadows on
the Parkway,  for ingress and egress for Lot 5, The Meadows on the  Parkway,  to
and from Baseline Road, described as follows:

A strip  of land  30.00  feet  in  width  located  in the  Northeast  1/4 of the
Northwest 1/4 of Section 4, Township 1 South, Range 70 West of the 6th P.M., THE
MEADOWS ON THE PARKWAY, a subdivision in the City of Boulder, County of Boulder,
State of  Colorado,  said strip of land  extending  from a line that bears North
00(degree)02'30" West and South  00(degree)02'30" East through the True Point of
Beginning,   Easterly   and   Southeasterly   to  a  line   that   bears   North
41(degree)43'50"  West and  South  41(degree)43'50"  East  through  the Point of
Termination  and  being  15.00  feet on each  side  of the  following  described
Centerline:

Commencing at the Northwest  Corner of the Northeast 1/4 of the Northwest 1/4 of
said  Section 4, from which the North 1/4 Corner of said  Section 4 bears  North
89(degree)57'30"  East, 1330.76 feet, thence North  89(degree)57'30" East, 30.00
feet  along  the  North  line  of the  Northwest  1/4 of said  Section  4 to the
Northeast  Corner of Frasier  Meadows,  a Subdivision  in the County of Boulder,
State  of  Colorado,  according  to the  recorded  plat  thereof;  thence  South
00(degree)26'50" West, 75.46 feet along the East line of said Frasier Meadows to
the  Southwest  Corner of that tract of land  conveyed to the City of Boulder as
described in Warranty  Deed  recorded on Film 775 as Reception No. 022428 of the
records of Boulder County,  Colorado;  thence continuing South  00(degree)26'50"
West,  201.93 feet along the East line of said  Frasier  Meadows;  thence  North
89(degree)57'30"  East, 170.00 feet; thence South  00(degree)26'50"  West, 50.38
feet;   thence  North   89(degree)57'30"   East,   218.20  feet;   thence  North
89(degree)57'30"  East, 73.00 feet;  thence North  00(degree)02'30"  West, 34.27
feet;  thence  South  89(degree)13'50"  East,  142.41  feet to the TRUE POINT OF
BEGINNING;

Thence  South  89(degree)13'  50" East,  257.49  feet to a point of curve to the
right;

Thence  Southeasterly 53.89 feet along the arc of said curve to a point tangent,
said arc having a radius of 65.00 feet, a central  angle of  47(degree)  30' 00"
and being subtended by a chord that bears South  65(degree) 28' 50" East,  52.36
feet;  thence South 41(degree) 43' 50" East,  124.39 feet to a point of curve to
the right;

Thence Southeasterly, 76.74 feet along the arc of said curve to a point tangent,
said arc having a radius of 365.00 feet, a central angle of  12(degree)  02' 45"
and being subtended by a chord that bears South  35(degree) 42' 28" East,  76.60
feet;

Thence  South  29(degree)41'  05" East,  111.30  feet to a point of curve to the
right;


<PAGE>

                            SCHEDULE "A" (CONTINUED)


Thence Southeasterly, 72.92 feet along the arc of said curve to a point tangent,
said arc having a radius of 365.00 feet, a central angle of  11(degree)  26' 46"
and being subtended by a chord that bears South  23(degree) 57' 42" East,  72.80
feet;

Thence  South  18(degree)14'  19"  East,  62.01  feet to a point of curve to the
right;

Thence  Southwesterly,  110.28  feet  along  the  arc of said  curve  to a point
tangent,  said arc having a radius of 95.00 feet, a central  angle of 66(degree)
30' 33" and being subtended by a chord that bears South 15(degree) 00' 57" West,
104.19 feet;

Thence South 48(degree) 16' 13" West, 17.99 feet to the POINT OF TERMINATION.


PARCEL IV:

A  non-exclusive  easement over and across that portion of Lot 4, The Meadows on
the Parkway,  for ingress and egress, for Lot 5, The Meadows on the Parkway,  to
and from Baseline Road, described as follows:

A tract of land located in the  Northeast 1/4 of the Northwest 1/4 of Section 4,
Township 1 South,  Range 70 West of the 6th P.M., THE MEADOWS ON THE PARKWAY,  a
subdivision  in the City of  Boulder,  County  of  Boulder,  State of  Colorado,
described as follows:

Commencing at the Northwest  Corner of the Northeast 1/4 of the Northwest 1/4 of
said  Section 4, from which the North 1/4 Corner of said  Section 4 bears  North
89(degree)  57' 30" East,  1330.76 feet,  thence North  89(degree) 57' 30" East,
30.00 feet along the North line of the  Northwest  1/4 of said  Section 4 to the
Northeast  Corner of Frasier  Meadows,  a Subdivision  in the County of Boulder,
State  of  Colorado,  according  to the  recorded  plat  thereof;  thence  South
00(degree)  26' 50" West 75.46 feet along the East line of said Frasier  Meadows
to the Southwest Corner of that tract of land conveyed to the City of Boulder as
described in Warranty  Deed  recorded on Film 775 as Reception No. 022428 of the
records of Boulder County, Colorado;  thence continuing South 00(degree) 26' 50"
West,  201.93 feet along the East line of said  Frasier  Meadows;  thence  North
89(degree)  57' 30" East,  170.00 feet;  thence South  00(degree)  26' 50" West,
50.38 feet,  thence North 89(degree) 57' 30" East, 218.20 feet to the TRUE POINT
OF BEGINNING;

Thence North 89(degree)57' 30" East, 73.00 feet;

Thence North 00(degree)02' 30" West, 49.27 feet;

Thence North 89(degree)13' 50" West, 2.00 feet;


<PAGE>


                            SCHEDULE "A" (CONTINUED)


Thence  North  00(degree)  02' 30" West,  208.46  feet to the South line of that
tract of land  conveyed to the City of Boulder as  described  in  Warranty  Deed
recorded on Film 775 as Reception No.  022421 of the records of Boulder  County,
Colorado;

Thence  South  89(degree)57'  30" West,  69.00 feet along the South line of that
tract of land as described on said Film 775 as Reception No. 022421;

Thence South 00(degree)02' 30" East, 207.48 feet;

Thence North  89(degree) 13' 50" West,  2.00 feet to a point from which the True
Point of Beginning bears South 00(degree) 02' 30" East;

Thence South 00(degree) 02' 30" East, 50.30 feet to the TRUE POINT OF BEGINNING.