<PAGE>   1
                                                                   Exhibit 10.20



                                                                 Loan No.: 52920
                                                          Servicing No.: 3113776




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                              BANK OF AMERICA, N.A.
                                    as Lender





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


                                 LOAN AGREEMENT
                           dated as of August 9, 2000


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






                               RFS SPE2 2000 LLC,
                                   as Borrower




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                                TABLE OF CONTENTS

<TABLE>
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                                                                                                  Page
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<S>                 <C>                                                                           <C>
ARTICLE I
DEFINITIONS

   Section 1.1      Definitions.....................................................................1
   Section 1.2      Other Definitional Provisions..................................................23
   Section 1.3      Incorporation by Reference of Commitment.......................................23

ARTICLE II
THE LOAN
   Section 2.1      Loan Terms.....................................................................23
   Section 2.2      Interest.......................................................................24
   Section 2.3      Term...........................................................................24
   Section 2.4      Payments.......................................................................24
   Section 2.5      Release of Properties..........................................................24
   Section 2.6      Substitution of Properties.....................................................24

ARTICLE III
CONDITIONS PRECEDENT TO LOAN
   Section 3.1      Loan Documents.................................................................33
   Section 3.2      Brokerage Commissions..........................................................33
   Section 3.3      Title Evidence.................................................................33
   Section 3.4      Survey.........................................................................33
   Section 3.5      Insurance......................................................................33
   Section 3.6      Authority Documents............................................................33
   Section 3.7      Financial Statements and Operating Statements..................................34
   Section 3.8      Opinions.......................................................................34
   Section 3.9      Compliance with Laws...........................................................34
   Section 3.10     Agreements.....................................................................34
   Section 3.11     Taxes..........................................................................34
   Section 3.12     Utilities......................................................................35
   Section 3.13     Reserve Accounts...............................................................35
   Section 3.14     Engineering Report.............................................................35
   Section 3.15     Certificate of Occupancy and Other Permits.....................................35
   Section 3.16     Environmental Assessment and O&M Program.......................................35
   Section 3.17     Appraisal......................................................................35
   Section 3.18     Equity.........................................................................35
   Section 3.19     Debt Service...................................................................35
   Section 3.20     Loan to Value Ratio............................................................35
   Section 3.21     Special Purpose Entity.........................................................36
   Section 3.22     Miscellaneous..................................................................36
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<TABLE>
<S>                 <C>                                                                           <C>

ARTICLE IV
REPRESENTATIONS AND WARRANTIES
   Section 4.1      Existence; Compliance with Law.................................................36
   Section 4.2      Equity Interests...............................................................36
   Section 4.3      Power; Authorization; Enforceable Obligations..................................36
   Section 4.4      No Legal Bar...................................................................37
   Section 4.5      No Litigation..................................................................37
   Section 4.6      No Default.....................................................................37
   Section 4.7      Solvency; Fraudulent Conveyance................................................37
   Section 4.8      Special Purpose Entity.........................................................38
   Section 4.9      Taxes..........................................................................38
   Section 4.10     No Burdensome Restrictions.....................................................38
   Section 4.11     Investment Company Act; Other Regulations......................................38
   Section 4.12     Subsidiaries...................................................................39
   Section 4.13     Title to Premises..............................................................39
   Section 4.14     Ownership of Personalty........................................................39
   Section 4.15     Financial Statements...........................................................39
   Section 4.16     No Change......................................................................39
   Section 4.17     Management Agreement...........................................................40
   Section 4.18     Accuracy of Information........................................................40
   Section 4.19     Principal Place of Business....................................................40
   Section 4.20     Taxpayer Identification Number.................................................40
   Section 4.21     Insurance......................................................................40
   Section 4.22     Mechanic's Liens, etc..........................................................40
   Section 4.23     No Violation...................................................................41
   Section 4.24     ERISA..........................................................................41
   Section 4.25     O&M Program....................................................................41
   Section 4.26     No Organizational Document Amendment...........................................41
   Section 4.27     Permitted Encumbrances.........................................................41
   Section 4.28     Insolvency Opinion.............................................................41

ARTICLE V
COVENANTS AND AGREEMENTS
   Section 5.1      Affirmative Covenants of the Borrower..........................................42
   Section 5.2      Negative Covenants of the Borrower.............................................48
   Section 5.3      Environmental Covenants........................................................52
   Section 5.4      Recourse Covenants.............................................................54
   Section 5.5      Insurance......................................................................55
   Section 5.6      Lockbox........................................................................56

ARTICLE VI
RESERVE ACCOUNTS
   Section 6.1      Establishment of Reserve Accounts..............................................56
   Section 6.2      Initial Reserve Deposits.......................................................57
   Section 6.3      Monthly Reserve Deposits.......................................................57
   Section 6.4      Replacement Reserve Account....................................................57
   Section 6.5      Permitted Investments, Earnings, Charges and Annual Accounting.................57
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<TABLE>
<S>                 <C>                                                                           <C>

   Section 6.6      Assignment to the Lender of Reserve Accounts and Rights and Claims.............58
   Section 6.7      Application of Reserve Accounts Upon an Event of Default.......................59
   Section 6.8      Disbursements from Tax and Insurance Reserve Account...........................59
   Section 6.9      Disbursements from Repair Escrow Account and Replacement Reserve Account.......60
   Section 6.10     Intentionally Deleted..........................................................62
   Section 6.11     Indemnification................................................................62

ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
   Section 7.1      Events of Default..............................................................63
   Section 7.2      Remedies.......................................................................65

ARTICLE VIII
CASUALTY LOSSES; EMINENT DOMAIN
   Section 8.1      Repairs and Casualty Losses....................................................65
   Section 8.2      Eminent Domain.................................................................66
   Section 8.3      Application of Insurance Proceeds and Condemnation Awards......................67

ARTICLE IX
GENERAL PROVISIONS
   Section 9.1      Remedies Cumulative; Waivers...................................................68
   Section 9.2      Benefit........................................................................68
   Section 9.3      Assignment and Assumption......................................................69
   Section 9.4      Securitization Cooperation/Indemnification.....................................71
   Section 9.5      Information....................................................................75
   Section 9.6      Nonrecourse Loan; Exceptions...................................................75
   Section 9.7      Amendments.....................................................................75
   Section 9.8      Governing Law and Jurisdiction.................................................75
   Section 9.9      Savings Clause.................................................................75
   Section 9.10     Execution in Counterparts......................................................75
   Section 9.11     Notices........................................................................76
   Section 9.12     Right of Set-Off...............................................................76
   Section 9.13     Written Agreement..............................................................76
   Section 9.14     Waiver of Jury Trial...........................................................77
   Section 9.15     Cross Default, Cross-Collateralization, Waiver of Marshalling of Assets........77
   Section 9.16     Servicer.......................................................................79

ARTICLE X
SPECIAL PROVISIONS
   Section 10.1     Termination of Manager.........................................................80
   Section 10.2     Substitution of Operating Lessee...............................................81
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<TABLE>
<S>               <C>

SCHEDULES
---------

SCHEDULE 1        Allocated Loan Amounts
SCHEDULE 2        Franchise Agreements
SCHEDULE 3        Operating Leases
SCHEDULE 4        Borrower's Disclosure of Non-Compliance with Requirements of Law


EXHIBITS
--------

EXHIBIT A         Equity Interests
EXHIBIT B         Immediate Repairs, Replacements and Reserve Amounts
EXHIBIT C         Addresses for Notice
EXHIBIT D         Program Rider
EXHIBIT E         Form of Nondisturbance, Subordination and Attornment Agreement for Operating Leases
EXHIBIT F         Form of Tenant Estoppel Certificate
EXHIBIT G         Form of Nondisturbance, Subordination and Attornment Agreement for Property Specific Leases
EXHIBIT H         Form of Hazardous Material Indemnity Agreement
EXHIBIT I         Borrower's Non-Consolidation Opinion
</TABLE>


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<PAGE>   6

                                 LOAN AGREEMENT

                  LOAN AGREEMENT, dated as of August 9, 2000 (together with all
exhibits, schedules, riders and addenda hereto, which are hereby incorporated
herein, the "Loan Agreement" or "Agreement"), by and between RFS SPE2 2000 LLC,
a Virginia limited liability company, (the "Borrower"), with its principal
place of business at c/o RFS Hotel Investors, Inc., 850 Ridge Lake Boulevard,
Suite 220, Memphis, Tennessee 38120, RFS HOTEL INVESTORS, INC., a Tennessee
corporation (the "Borrower Principal", whether one or more); and BANK OF
AMERICA, N.A., a national banking association, with its principal offices in
Charlotte, North Carolina (together with its successors and assigns, the
"Lender").

                                   RECITALS:

                  The Borrower has applied to the Lender for a loan in the
original principal amount of $25,484,000 (the "Loan") to be made by the Lender
pursuant to the terms hereof.

                  The Loan will be secured by, among other things, a first
priority lien on the Land, Improvements, Personalty and Rents and Profits.

                  The Lender is willing to make the Loan based on the terms and
conditions set forth in this Loan Agreement and subject to the execution and
delivery of each of the Loan Documents.

                  NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Borrower Principals and the Lender hereby agree as follows:


                                   ARTICLE I
                                  DEFINITIONS

                  Section 1.1       Definitions.

                  As used in this Agreement, the other Loan Documents, or any
certificate or other document made or delivered pursuant hereto, the
capitalized terms used herein shall, unless otherwise defined herein or
therein, have the following meanings:

                  Additional Repair(s) or Replacement(s). Any repairs,
replacements or improvements (other than Immediate Repairs or Replacements) (i)
which are advisable to keep the Premises in good order and repair and in good
marketable condition, or to prevent material deterioration of the Premises, or
(ii) for an Immediate Repair or Replacement to the extent such Immediate Repair
or Replacement exceeds 125% of the estimated cost of such Immediate Repair or
Replacement as set forth in Exhibit B hereto.

                  Adjusted Release Amount. Shall mean, for any Individual
Property, 125% of the Allocated Loan Amount for such Individual Property.


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<PAGE>   7

                  Affiliate(s). As to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person, including without limitation (i) any person who has a familial
relationship, by blood, marriage or otherwise with any member or employee of
Borrower, or any affiliate thereof and (ii) any Person which receives
compensation for administrative, legal or accounting services from the Borrower
or any affiliate. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" or
"controlled" have meanings correlative to the foregoing. Notwithstanding
anything to the contrary contained in this Loan Agreement, any two Persons
whose shares are both publicly traded shall not be deemed Affiliates regardless
of any common shareholders or directors.

                  Allocated Loan Amount. Shall mean the portion of the Loan
Amount allocated, solely for purposes of performing certain calculations
hereunder, to each Individual Property, as set forth in Schedule 1 hereto.

                  Appraisal. An appraisal of the Premises prepared at the
Borrower's expense by a qualified appraiser designated by and satisfactory to
the Lender, in accordance with written instructions from the Lender, dated as
of a date acceptable to the Lender and otherwise satisfactory in form and
substance to the Lender.

                  Approved Insurer. An insurer previously approved by the
Lender with an Standard and Poor's rating of AA or better, and which is
authorized to issue insurance in each state where an Individual Property is
located.

                  Bank. Shall have the meaning set forth in the Cash Management
Agreement.

                  Bankruptcy Code. Title 11 of the United States Code entitled
"Bankruptcy," as amended from time to time, and any successor statute or
statutes and all rules and regulations from time to time promulgated
thereunder, and any comparable foreign laws relating to bankruptcy, insolvency
or creditor's rights.

                  Bankruptcy Event. As to any Person, the occurrence of any of
the following with respect to such Person: (i) a court or governmental agency
having jurisdiction over the Premises shall enter a decree or order for relief
in respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency, reorganization, moratorium, sequestration, liquidation,
consolidation or other similar law now or hereafter in effect, or appoint a
receiver, liquidator, assignee, custodian, conservator, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
property or order the winding up or liquidation of its affairs; (ii) an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect is commenced against a Person and such petition
remains unstayed and in effect for a period of sixty (60) consecutive days;
(iii) such Person shall commence a voluntary case under any applicable
bankruptcy, insolvency or similar law or make any general assignment for the
benefit of creditors; (iv) such Person shall admit in writing its inability to
pay its debts


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<PAGE>   8

generally as they become due (otherwise than on a purely temporary basis), or
(v) such Person shall take any action in furtherance of any of the aforesaid
purposes.

                  Basic Carrying Costs. Shall mean, with respect to an
Individual Property, the sum of the following costs associated with such
Individual Property for the relevant calendar year or payment period: (i) taxes
and (ii) insurance premiums.

                  Borrower Party. Shall mean the Borrower Principal, any
guarantor, any general partner of Borrower if Borrower is a partnership or
limited partnership, any general partner in any partnership or limited
partnership that is a general partner of Borrower, any managing member of
Borrower if Borrower is a limited liability company, and any managing member in
any limited liability company that is a managing member of Borrower, any at any
level.

                  Business Day. Any day other than a Saturday, a Sunday, a
legal holiday in Charlotte, North Carolina, or a day on which banking
institutions located in Charlotte, North Carolina are authorized by law or
other governmental action to close.

                  Cash Management Agreement. The Cash Management Agreement,
dated as of even date herewith, executed by the Borrower, the Lender and the
Agent.

                  Certification. As to any specified report, Financial
Statement, Operating Statement, Rent Roll or other document, a written
certification by a Responsible Officer of the Person providing such report,
Financial Statement, Operating Statement, Rent Roll or other document that such
report, Financial Statement, Operating Statement, Rent Roll or other document,
as at the date thereof, (i) contains all of the information and statements
required to be set forth therein, (ii) that such information and statements are
true and correct in all material respects, (iii) that there is no untrue
statement of a material fact required to be stated therein, (iv) that there is
no failure to state therein any information or fact that is necessary to make
the information or statements contained therein, in light of the circumstances
under which they are made, not misleading, and (v) that there is no fact known
to such Responsible Officer that materially adversely affects any of the
information or statements set forth therein.

                  Closing Date. The date set forth in the first paragraph of
this Loan Agreement.

                  Code. Shall have the meaning set forth in the Note.

                  Commitment. The Lender's commitment letter with respect to
the Loan as accepted by the Borrower and the Borrower Principals in accordance
with the terms thereof.

                  Debt Service. Shall mean the installments of principal and
interest due and payable in accordance with the Note, the Defeased Note or the
Undefeased Note, as the case may be during any applicable period.

                  Debt Service Reserve Account. Shall mean an Eligible Account
established and maintained pursuant to the terms of this Loan Agreement.


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<PAGE>   9


                  Debt Service Coverage Ratio Leases. Shall mean the ratio that
shall be applied by Lender, calculated as follows:

                  (a)   With respect to the Leases for the Premises, the ratio
of the (i) Net Operating Income Leases for the Premises for the immediately
preceding twelve (12) calendar month period to (ii) the projected Debt Service
that would be due on the Loan with respect to the Premises for the twelve (12)
calendar month period immediately following such calculation; and

                  (b)   With respect to any Leases for an Individual Property,
the ratio of (i) Net Operating Income Leases for the subject Individual
Property for the immediately preceding twelve (12) month period to (ii) the
projected Debt Service that would be due with respect to the Allocated Loan
Amount applicable to the subject Individual Property for the twelve (12) month
period immediately following such calculation.

                  Debt Service Coverage Ratio Premises. Shall mean the ratio
that shall be applied by Lender, calculated as follows:

                  (a)   With respect to revenues of the Premises, the ratio of
(i) Net Operating Income Premises of the Premises for the immediately preceding
twelve (12) calendar month period to (ii) the projected Debt Service that would
be due on the Loan with respect to the Premises for the twelve (12) month
period immediately following such calculation; and

                  (b)   with respect to the revenues of an Individual Property,
the ratio (i) Net Operating Income Premises for the subject Individual Property
for the immediately preceding twelve (12) month period to (ii) the projected
Debt Service that would be due with respect to the Allocated Loan Amount
applicable to the subject Individual Property for the twelve (12) month period
immediately following such calculation.

                  Default Condition. The occurrence or existence of an event or
condition which, upon the giving of notice or the passage of time, or both,
would constitute an Event of Default.

                  Defeased Note. Shall have the meaning set forth in Section
4(c) of the Note.

                  Eligible Account. An account that is either (i) maintained
with a federal or state-chartered depository institution or trust company whose
commercial or finance paper or other similar obligations are rated A-1 or
better by Standard & Poor's Rating Group, a division of McGraw Hill, Inc.,
("Standard & Poors"), P-1 or better by Moody's, Investors Services, Inc.,
("Moody's"), D-1 or better by Duff & Phelps Credit Rating Co. ("Duff") and F-1
+ or better by Fitch IBCA, Inc. ("Fitch") (ii) an account or accounts
maintained with a depository institution with a minimum long-term unsecured
debt rating of AA or better by Standard & Poor's or Fitch and Duff, or Aaa or
better by Moody's provided that the deposits in such account or accounts are
fully insured by the Federal Deposit Insurance Corporation, (iii) a segregated
trust account maintained with the corporate trust department of an institution
with capital and surplus of not less than $50,000,000 and with a minimum
long-term unsecured debt rating of AA or better by Standard & Poor's or Fitch
and Duff, or Aaa or better by Moody's, or (iv) an account otherwise acceptable
to the Lender.


                                      -4-

<PAGE>   10

                  Engineering Report. An engineering report of the Premises
from an engineer approved by the Lender and dated as of a date acceptable to
the Lender, which report shall, among other things, (a) conform to all
requirements of the Lender and (b) certify that the Premises is in material
compliance with all applicable requirements of the Americans with Disabilities
Act of 1990.

                  Environmental Assessment. A report (including all drafts
thereof) of an environmental assessment of the Premises of such scope
(including but not limited to the taking of soil borings and air and
groundwater samples and other above and below ground testing) as the Lender may
request, by a consulting firm acceptable to the Lender, which shall, among
other things, be dated as of a date acceptable to the Lender and conform to (i)
the current minimum standards for the American Society of Testing and
Materials, and (ii) the Lender's then current requirements.

                  Environmental Covenant(s). Each of the covenants, agreements
and/or indemnities set forth in Section 5.3 of this Loan Agreement.

                  Equity Interests. Any and all shares, interests,
participations and other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person not a
corporation (including, without limitation, general and limited partnership
interests in a limited partnership), and any and all warrants and options to
purchase any of the foregoing.

                  ERISA. The Employee Retirement Income Security Act of 1974.

                  Event of Default. The occurrence of any event or condition
specified in Section 7.1 of this Loan Agreement.

                  Financial Statement. As to any indicated Person, for any
specified period, financial statements of such Person, including, at a minimum,
a current balance sheet, a current income and expense statement, a statement
showing contingent liabilities and any other supporting schedules or
documentation that the Lender may from time to time require, and, in the case
of the Borrower, a detailed cash flow statement for each property and/or entity
in which the Borrower has an interest, prepared in accordance with Required
Accounting Standards. The cash flow statements provided shall include, as
applicable, the property and entity name, location, size (including the number
of rooms with respect to hotels), and the percentage of ownership therein, its
leasing and occupancy status, its Operating Income Premises (including the
sources of Operating Income Premises), its Operating Expenses Premises, its Net
Operating Income Premises, any loan balance currently outstanding, the amount
and beneficiary of any cash distributions by such Person, the amount invested
in and/or received from such property or entity; and detailed cash flow
projections for the next twelve (12) month period therefor. Each Financial
Statement shall include a Certification thereto. All required financial
statements shall list only the assets of the indicated Person, and in no event
shall the assets of the indicated Person include the assets of any other
Person. Each annual financial statement shall be accompanied by (i) a
comparison of the budgeted income and expenses and the actual income and
expenses for the prior fiscal year, (ii) a certificate executed by the chief
financial officer of



                                      -5-
<PAGE>   11

the Person stating that each such annual financial statement presents fairly
the financial condition and the results of the operations of the Person and the
Property being reported upon and has been prepared in accordance with Required
Accounting Standards, (iii) an unqualified opinion of a "Big Five" accounting
firm or other independent certified public accountant reasonably acceptable to
Lender, (provided that an audit shall be required only for the Borrower and
Borrower Principal and, with respect to an Individual Property, there shall be
provided only a supplemental schedule of Operating Lease revenues on an
Individual Property by Individual Property basis) and (iv) a schedule audited
by such independent certified public accountant reconciling Operating Income
Leases to Net Operating Income Leases, which shall itemize all adjustments made
to Operating Income Leases to arrive at Net Operating Income Leases deemed
material by such independent certified public accountant.

                  Financing Statements. The UCC financing statements filed in
order to perfect the Lender's lien on certain personal property and fixtures as
more particularly described therein. The Financing Statements shall be on forms
approved for filing in the applicable state and local filing offices of the
applicable state in which any filings are necessary or, in the Lender's opinion
desirable, to be made to perfect the interests of the Lender granted under the
Loan Documents, together with the search results for such filing offices,
including copies of all reported financing statements.

                  Franchise Agreement. Means, with respect to any Individual
Property, that certain franchise agreement more specifically identified on
Schedule 2 attached hereto.

                  Fundamental Transaction. As defined in Section 5.2(e) hereof.

                  GAAP. Generally accepted accounting principles, as from
time-to-time in effect in the United States of America, consistently applied.

                  Governmental Action. The issuance or threatened issuance in
writing of any claim, citation, notice of any pending or threatened suit,
proceeding, order or governmental inquiry or opinion involving the Premises
that alleges the violation of any Requirement of Law or Hazardous Materials
Law.

                  Governmental Authorities. Any governmental (including health
and environmental) agency, office, officer or official whose consent or
approval is required as applicable under the circumstances as a prerequisite to
the commencement of the construction, renovation or expansion of the
Improvements or to the operation and occupancy of the Improvements or the
Premises or to the performance of any act or obligation or the observance of
any agreement, provision or condition of whatsoever nature herein contained.

                  Ground Lease. Each ground lease, if any, pursuant to which
the Borrower acquires an interest as ground lessee of any portion of the
Premises.

                  Hazardous Materials. Includes petroleum and petroleum
products, flammable explosives, radioactive materials (excluding radioactive
materials in smoke detectors), polychlorinated biphenyls, lead, asbestos or
asbestos containing materials in any form that is or could become friable,
hazardous waste, toxic or hazardous substances or other related materials



                                      -6-
<PAGE>   12

whether in the form of a chemical, element, compound, solution, mixture or
otherwise including, but not limited to, those materials defined as "hazardous
substances," "extremely hazardous substances," "hazardous chemicals,"
"hazardous materials," "toxic substances," "solid waste," "toxic chemicals,"
"air pollutants," "toxic pollutants," "hazardous wastes," "extremely hazardous
waste," or "restricted hazardous waste" by Hazardous Materials Law or regulated
by Hazardous Materials Law in any manner whatsoever, and all other "Hazardous
Materials", if any, identified in the Program Rider.

                  Hazardous Materials Indemnity Agreement. Shall mean a
Hazardous Materials Indemnification Agreement substantially in the form
attached hereto as Exhibit H and to the extent a new agreement is specifically
required under this Loan Agreement, as such form may be amended by Lender
consistent with prudent underwriting standards.

                  Hazardous Materials Law. All federal, state, and local laws,
ordinances and regulations and standards, rules, policies and other
governmental requirements and any court judgments applicable to the Borrower or
to the Premises relating to industrial hygiene or to environmental or unsafe
conditions or to human health including, but not limited to, those relating to
the generation, manufacture, storage, handling, transportation, disposal,
release, emission or discharge of Hazardous Materials, those in connection with
the construction, fuel supply, power generation and transmission, waste
disposal or any other operations or processes relating to the Premises, and
those relating to the atmosphere, soil, surface and ground water, wetlands,
stream sediments and vegetation on, under, in or about the Premises. "Hazardous
Materials Law" also shall include, but not be limited to, the following laws,
as amended as set forth herein and as subsequently amended: (1) the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USCA
9601 et seq.; (2) the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984, 42 USCA 6901 et seq.; (3) the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 USCA 1251 et seq.;
(4) the Toxic Substances Control Act, 15 USCA 2601 et seq.; (5) the Emergency
Planning and Community Right-to-Know Act of 1986, 42 USCA 11001 et seq.; (6)
the Clean Air Act, as amended by the Clean Air Act Amendments, 42 USCA 7401 et
seq.; (7) the National Environmental Policy Act of 1969, 42 USCA 4321 et seq.;
(8) the River and Harbor Act of 1899, 33 USCA 401 et seq.; (9) the Endangered
Species Act of 1973, 16 USCA 1531 et seq.; (10) the Occupational Safety and
Health Act of 1970, 29 USCA 651 et seq.; (11) the Safe Drinking Water Act, 42
USCA 300(f) et seq.; and (12) the Hazardous Materials Transportation Act, 49
USCA 1801 et seq., and all regulations from time to time adopted in respect to
the foregoing laws.

                  Immediate Repair(s). Those repairs, replacements and
improvements listed as "Immediate Repairs" on Exhibit B hereto.

                  Improvements. As defined in the Security Instrument.

                  Indebtedness. For any Person, without duplication: (a) all
indebtedness of such Person for borrowed money, for amounts drawn under a
letter of credit, or for the deferred




                                      -7-
<PAGE>   13

purchase price of property for which such Person or its assets is liable, (b)
all unfunded amounts under a loan agreement, letter of credit, or other credit
facility for which such Person would be liable, if such amounts were advanced
under the credit facility, (c) all amounts required to be paid by such Person
as a guaranteed payment to partners or a preferred or special dividend,
including any mandatory redemption of shares or interests, (d) all indebtedness
guaranteed by such Person, directly or indirectly, (e) all obligations under
leases that constitute capital leases for which such Person is liable, and (f)
all obligations of such Person under interest rate caps, floors, collars and
other interest hedge agreements, in each case whether such Person is liable
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations such Person otherwise assures a creditor against loss.

                  Indemnitor. Shall mean the Borrower Principal.

                  Independent Appraiser: Shall mean an independent appraiser
which is a member of the American Institute of Real Estate Appraisers selected
by Borrower and having at least five (5) years of experience in the applicable
real estate market where the applicable Individual Property is located in the
valuation of properties of the type being appraised.

                  Individual Property. Shall mean each parcel of real property
and the Improvements thereon encumbered by a Security Instrument, together with
all rights pertaining to such property and improvements as more particularly
described in the granting clauses of the Security Instrument and referred to
therein as the Premises.

                  Initial Reserve Deposit(s). Any amount required to be
deposited into any Reserve Account on or before the Closing Date in accordance
with the terms of this Loan Agreement, including without limitation, any
initial deposit to any Reserve Account identified on Exhibit B hereto or in the
Program Rider.

                  Insurance. All of the following insurance coverages:

                  (i)   Property Insurance. Insurance with respect to the
         Improvements against any peril included within the classification "All
         Risks of Physical Loss" with extended coverage in amounts at all times
         sufficient to prevent it from becoming a co-insurer within the terms
         of the applicable policies, but in any event such insurance shall be
         maintained in an amount equal to the full insurable value of the
         Premises and with deductibles acceptable to the Lender. The term "full
         insurable value" as used herein shall mean the actual replacement cost
         of the Premises (without taking into account any depreciation, and
         exclusive of excavations, footings and foundations, landscaping and
         paving, but in no event less than one hundred twenty-five percent
         (125%) of the applicable Allocated Loan Amount) determined annually by
         an insurer, a recognized independent insurance broker or an
         Independent Appraiser selected and paid by Borrower and in no event
         less than the coverage required pursuant to the terms of any Lease;
         provided, however, if the terms of the applicable insurance policies
         expressly provide for insurance to be provided in the amount of the
         actual replacement cost of the Improvements and the Building Equipment
         or such policies contain a replacement cost endorsement, no such
         annual determination will be necessary.



                                      -8-
<PAGE>   14

                  (ii)     Liability Insurance. Comprehensive general liability
         insurance, including bodily injury, death and property damage
         liability, dram shop coverage and umbrella liability insurance against
         any and all claims, including all legal liability to the extent
         insurable imposed upon the Lender and all court costs and attorneys'
         fees and expenses, arising out of or connected with the possession,
         use, leasing, operation, maintenance or condition of the Premises in
         such amounts as are generally required by institutional lenders for
         properties comparable to the Premises in market areas comparable to
         the market areas in which the Premises are located written on a per
         occurrence limit of not less than $1,000,000.00 and with an aggregate
         limit of not less than $3,000,000.00 per Individual Property. In the
         event that any payment of proceeds is made under any umbrella
         liability insurance policy, the Borrower shall immediately purchase
         additional liability insurance coverage so that at all times there
         shall be no less than a $1,000,000.00 minimum of liability insurance
         coverage per occurrence with a $3,000,000.00 minimum general aggregate
         limit.

                  (iii)    Workers' Compensation Insurance. Statutory workers'
         compensation insurance (to the extent the risks to be covered thereby
         are not already covered by other policies of insurance maintained by
         it), with respect to any work on, about or regarding the Premises.

                  (iv)     Business Interruption. Business interruption
         insurance and/or insurance for loss of income in an amount sufficient
         to avoid any co-insurance penalty and to provide proceeds which will
         cover a period of at least eighteen (18) months following the date of
         casualty or such other period acceptable to the Lender and the Rating
         Agencies. The amount of such business interruption insurance shall be
         determined prior to the date hereof and at least once each year
         thereafter based on Borrower's reasonable estimate of the gross income
         from each Individual Property for the succeeding eighteen (18) month
         period.

                  (v)      Boiler and Machinery Insurance. Broad form boiler and
         machinery insurance covering all boilers and other pressure vessels,
         machinery and equipment located in, on or about the Premises and
         insurance against loss of occupancy or use arising from any such
         breakdown in an amount equal to one hundred percent (100%) of the
         actual replacement cost of such machinery (without taking into account
         any depreciation) and containing such deductibles as are acceptable to
         the Lender.

                  (vi)     Flood Insurance. If all or any portion of the
         Premises is located within a federally designated flood hazard zone,
         flood insurance as is generally available and in such amounts and with
         such deductibles as the Lender may reasonably require.

                  (vii)    Other Insurance. Such other insurance (including,
         without limitation, earthquake insurance, sinkhole insurance, law and
         ordinance insurance, environmental insurance and malpractice
         insurance) with respect to the Premises against loss or damage of the
         kinds from time to time reasonably required by the Lender in
         connection with loans secured by properties comparable to the
         Premises.



                                      -9-
<PAGE>   15

                  Intangible Personalty. As defined in the Security Instrument.

                  Land. As defined in the Security Instrument.

                  Leases. As defined in the Cash Management Agreement.

                  Lessee. As defined in the Cash Management Agreement.

                  Lien. Any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
financing lease having substantially the same economic effect as any of the
foregoing).

                  Loan. Shall have the meaning set forth in the recitals
hereto.

                  Loan Amount.  The original principal amount of the Note.

                  Loan Document(s). This Loan Agreement, the Commitment, the
Note, the Security Instrument, the Financing Statements, the Cash Management
Agreement and all other documents evidencing, securing or relating to the Loan.

                  Loan to Value Ratio. Shall mean the quotient of the then
outstanding principal amount of the Loan divided by the value of the Premises
remaining subject to the Lien of the Security Instrument, as determined by
Lender in its sole discretion pursuant to its review and approval of a new or
updated Appraisal obtained by Lender at Borrower's expense and taking into
account only approved Operating Leases in place with respect to the portion of
the Premises not being defeased, having remaining terms (not taking into
account extension rights or options) of not less than five (5) years from the
date of the applicable defeasance.

                  Lockbox Account. The account specified for deposits of Rents
and Profits and other receipts from the Premises.

                  Management Agreement. Shall mean, with respect to any
Individual Property, the written management agreement for the Premises, if any,
in form and substance satisfactory to the Lender, by and between the Borrower,
as owner, and a management company, as manager.

                  Manager. Shall mean the manager of the Premises, if any,
under the Management Agreement, and its successors and assigns.

                  Maturity Date. Shall have the meaning the forth in the Note.

                  Monthly Payment Amount. Shall have the meaning set forth in
the Note.

                  Monthly Reserve Deposits. Any monthly payment or deposit
required in connection with any Reserve Account, including without limitation,
any monthly payments or deposits to any Reserve Account identified in Exhibit B
hereto or in the Program Rider.



                                     -10-
<PAGE>   16

                  Net Operating Income Leases. With respect to any specified
period, (i) Operating Income Leases, minus (ii) (A) Operating Expenses Leases
and (B) replacement reserves, including any capital expenditures (to the extent
such capital expenditures exceed any amounts held in the Replacement Reserve
Account) required in connection with (i) any franchise agreement; (ii) any
capital improvements budget with Operating Lessee; or (iii) any deposits to the
Replacement Reserve Account, each as calculated for such period.

                  Net Operating Income Premises. With respect to any specified
period, (i) Operating Income Premises, minus (ii) (A) Operating Expenses
Premises, (B) management fees (assuming a 4% management fee); and (C)
replacement reserves, including any capital expenditures (to the extent such
capital expenditures exceed any amounts held in the Replacement Reserve
Account) required in connection with (i) any franchise agreement; (ii) any
capital improvements budget with Operating Lessee; or (iii) any deposits to the
Replacement Reserve Account, each as calculated for such period.

                  New Manager. Shall mean Flagstone Hospitality Management LLC.

                  Non-Consolidation Opinion. Shall have the meaning set forth
in Section 4.28 hereof.

                  Nondisturbance Agreement. Shall mean, for each Individual
Property, that certain Nondisturbance, Subordination and Attornment Agreement
among Lender, Borrower and Operating Lessee, substantially in the form attached
hereto as Exhibit E (as such Nondisturbance Agreement may be amended (i) to
include any revisions required by Lender in the event a different form of
Operating Lease than those currently in existence is entered into by Operating
Lessee; or (ii) by Lender consistent with prudent underwriting standards).

                  Note. The promissory note or notes of the Borrower in
connection with the Loan in favor of the Lender, as acknowledged and agreed to
by the Borrower Principals, together with all prior notes amended, modified,
renewed, extended, restated, supplemented, replaced or substituted thereby.

                  Note Payment Amount. For any Payment Date, the total amount
due and owing under the Note on such Payment Date.

                  O&M Program. An operations and maintenance program (in form
and substance satisfactory to the Lender) relating to the use, handling and/or
abatement of one or more Hazardous Materials and which is accepted in writing
by the Borrower.

                  Obligations. As to any stated Person, the unpaid principal of
and interest on any promissory note or other indebtedness of such Person
(including, without limitation, interest accruing after the maturity of any
such promissory note or indebtedness and interest accruing thereon after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to such Person, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
and all other obligations and liabilities of such Person, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, whether on account of principal, interest, reimbursement





                                     -11-
<PAGE>   17

obligations, fees, indemnities, costs, expenses (including, without limitation,
all reasonable fees and disbursements of counsel) or otherwise.

                  Officer's Certificate. Shall mean a certificate delivered to
Lender and signed by an officer of the managing member of the Borrower.

                  Operating Expenses Leases. Any expense paid or to be paid by
the Borrower (or any of its agents or by the Lender on account or on behalf of
the Borrower) under the Operating Lease determined on an accrual basis, in
accordance with GAAP, including, without limitation, (i) all payments required
to be made pursuant to any franchise or other agreement, (ii) undistributed
expenses, including without limitation, general and administrative, marketing,
utilities, operations and maintenance, (iii) legal, accounting, appraisal and
other professional fees, costs and disbursements, including annual fees and
other amounts (including indemnity payments) payable annually or otherwise,
(iv) taxes, insurance premiums and impositions of any type, (v) any amount paid
in connection with any interest rate contract or similar hedge, cap, collar,
floor or currency swap, (vi) all items, if any, defined as an Operating Expense
herein. Notwithstanding the foregoing, Operating Expenses Leases will not
include (a) depreciation or amortization, (a) any expenses that in accordance
with GAAP should be capitalized (other than current charges for any such
expenses included in the preceding sentence) (C) the principal of and interest
on the Note and (D) any item of expense that would otherwise be considered
within Operating Expenses Leases pursuant to the provisions above but which is
required to be paid directly by the Operating Lessee under the Operating Lease.

                  Operating Expenses Premises. Any expenses in connection with
the operation of the Premises, determined (as if there were no Operating Lease)
on an accrual basis, in accordance with GAAP, including, without limitation,
(i) all payments required to be made pursuant to any management, franchise or
other agreement, (ii) undistributed expenses, including without limitation,
general and administrative, marketing, utilities, operations and maintenance
and other expenses and deposits required to be made to the Reserve Accounts, as
appropriate, (iii) legal, accounting, appraisal and other professional fees,
costs and disbursements, including annual fees and other amounts (including
indemnity payments) payable annually or otherwise, (iv) taxes (real or
personal), insurance premiums and impositions of any type, (v) any amount paid
in connection with any interest rate contract or similar hedge, cap, collar,
floor or currency swap, (vi) all items, if any, defined as an Operating Expense
in the Program Rider, and (vii) the cost of goods sold. Notwithstanding the
foregoing, Operating Expenses Premises will not include (A) depreciation or
amortization, (B) any expenses that in accordance with GAAP should be
capitalized (other than current charges for any such expenses included in the
preceding sentence), (C) the principal of and interest on the Note and (D)
management fees.

                  Operating Income Leases. All rents (net of concessions),
charges, fees, expense recovery, revenues and other income (including interest
income) paid (other than security deposits from tenants or other Persons under
valid leases or other agreements and insurance, eminent domain or similar
proceeds and rewards paid directly to the Lender pursuant to the provisions of
this Loan Agreement and any disbursements to Borrower from any Reserve
Accounts) at any time to the Borrower (or to any of its agents other than the
Operating Lessee for the account of the Borrower) by any Person under the
Operating Lease or otherwise in




                                     -12-
<PAGE>   18

connection with the operation of the Premises or under the Operating Leases, as
applicable, determined on an accrual basis, and all items, if any, defined as
Operating Income in the Program Rider.

                  Operating Income Premises. Shall mean, as if there were no
Operating Lease, all rents (net of concessions), charges, fees, expense
recovery, revenues and other income (including interest income) paid (other
than security deposits from tenants or other Persons under valid leases or
other agreements and insurance, eminent domain or similar proceeds and rewards
paid directly to the Lender pursuant to the provisions of this Loan Agreement
and any disbursements to Borrower from any Reserve Accounts) as if there were
no Operating Lease at any time to the Borrower (or to any of its agents for the
account of the Borrower) by the Person in connection with the operation of the
Premises or under the Operating Leases, as applicable, determined on an accrual
basis, and all items, if any, defined as Operating Income in the Program Rider.

                  Operating Lease. Shall mean, with respect to any Individual
Property, the lease agreement in effect between Borrower and the Operating
Lessee for the use and operation of each Individual Property and all
amendments, modifications, renewals, substitutions or replacements of such
lease. The initial Operating Leases in effect as of the date hereof are
identified on Schedule 3 hereto.

                  Operating Lessee. Shall mean (i) RFS, Inc. a Tennessee
corporation, or (ii) any Qualified Operating Lessee approved by Lender in
accordance with the provisions of this Loan Agreement.

                  [Operating Partnership. Shall mean RFS Partnership, L.P. a
Tennessee limited partnership, and any successor thereto.]

                  Operating Statement. As to the Premises and for each
Individual Property, for any period indicated, a statement of the Borrower, as
reflecting, truly and accurately, the items set forth therein as at the date
thereof, showing the Operating Income Premises and Operating Expenses Premises
for the indicated period and including a statement as to the amounts and
sources of rent or other income collected and any other information reasonably
required by the Lender. Each Operating Statement shall include a Certification.

                  Partial Defeasance Date. Shall have the meaning given in
Section 4(c) of the Note.

                  Payment Date. Each date any payment of principal or interest
on the Note is due and payable thereunder.

                  Permitted Encumbrances. As defined in the Security
Instrument, together with any Liens which have been bonded over (i) within
thirty (30) days after the date of filing thereof, (ii) with a bonding company
satisfactory to the Lender, (iii) in an amount satisfactory to the Lender, and
(iv) otherwise in form and substance satisfactory to the Lender, in each case,
in the Lender's reasonable discretion.



                                     -13-
<PAGE>   19


                  Permitted Investments. Shall mean any one or more of the
following obligations or securities acquired at a purchase price of not greater
than par, including those issued by the servicer or the trustee under any
Securitization, as hereinafter defined, or any of their respective Affiliates,
payable on demand or having a maturity date not later than the Business Day
immediately prior to the first Monthly Payment Date following the date of
acquiring such investment and meeting one of the appropriate standards set
forth below:

                  (i)      obligations of, or obligations fully guaranteed as
         to payment of principal and interest by, the United States or any
         agency or instrumentality thereof provided such obligations are backed
         by the full faith and credit of the United States of America
         including, without limitation, obligations of: the U.S. Treasury (all
         direct or fully guaranteed obligations), the Farmers Home
         Administration (certificates of beneficial ownership), the General
         Services Administration (participation certificates), the U.S.
         Maritime Administration (guaranteed Title XI financing), the Small
         Business Administration (guaranteed participation certificates and
         guaranteed pool certificates), the U.S. Department of Housing and
         Urban Development (local authority bonds) and the Washington
         Metropolitan Area Transit Authority (guaranteed transit bonds);
         provided, however, that the investments described in this clause must
         (A) have a predetermined fixed dollar of principal due at maturity
         that cannot vary or change, (B) if rated by Standard and Poor's, must
         not have an "r" highlighter affixed to their rating, (C) if such
         investments have a variable rate of interest, such interest rate must
         be tied to a single interest rate index plus a fixed spread (if any)
         and must move proportionately with that index, and (D) such
         investments must not be subject to liquidation prior to their
         maturity;

                  (ii)     Federal Housing Administration debentures;

                  (iii)    obligations of the following United States
         government sponsored agencies: Federal Home Loan Mortgage Corp. (debt
         obligations), the Farm Credit System (consolidated systemwide bonds
         and notes), the Federal Home Loan Banks (consolidated debt
         obligations), the Federal National Mortgage Association (debt
         obligations), the Student Loan Marketing Association (debt
         obligations), the Financing Corp. (debt obligations), and the
         Resolution Funding Corp. (debt obligations); provided, however, that
         the investments described in this clause must (A) have a predetermined
         fixed dollar of principal due at maturity that cannot vary or change,
         (B) if rated by Standard and Poor's, must not have an "r" highlighter
         affixed to their rating, (C) if such investments have a variable rate
         of interest, such interest rate must be tied to a single interest rate
         index plus a fixed spread (if any) and must move proportionately with
         that index, and (D) such investments must not be subject to
         liquidation prior to their maturity;

                  (iv)     federal funds, unsecured certificates of deposit,
         time deposits, bankers' acceptances and repurchase agreements with
         maturities of not more than 365 days of any bank, the short term
         obligations of which at all times are rated in the highest short term
         rating category by each Rating Agency, as hereinafter defined, (or, if
         not rated by all Rating Agencies, rated by at least one Rating Agency
         in the highest short term rating category and otherwise acceptable to
         each other Rating Agency, as confirmed in writing that such investment
         would not, in and of itself, result in a downgrade, qualification or



                                     -14-
<PAGE>   20

         withdrawal of the initial, or, if higher, then current ratings
         assigned to the Securities); provided, however, that the investments
         described in this clause must (A) have a predetermined fixed dollar of
         principal due at maturity that cannot vary or change, (B) if rated by
         Standard and Poor's, must not have an "r" highlighter affixed to their
         rating, (C) if such investments have a variable rate of interest, such
         interest rate must be tied to a single interest rate index plus a
         fixed spread (if any) and must move proportionately with that index,
         and (D) such investments must not be subject to liquidation prior to
         their maturity;

                  (v)      fully Federal Deposit Insurance Corporation-insured
         demand and time deposits in, or certificates of deposit of, or
         bankers' acceptances issued by, any bank or trust company, savings and
         loan association or savings bank, the short term obligations of which
         at all times are rated in the highest short term rating category by
         each Rating Agency (or, if not rated by all Rating Agencies, rated by
         at least one Rating Agency in the highest short term rating category
         and otherwise acceptable to each other Rating Agency, as confirmed in
         writing that such investment would not, in and of itself, result in a
         downgrade, qualification or withdrawal of the initial, or, if higher,
         then current ratings assigned to the Securities); provided, however,
         that the investments described in this clause must (A) have a
         predetermined fixed dollar of principal due at maturity that cannot
         vary or change, (B) if rated by Standard and Poor's, must not have an
         "r" highlighter affixed to their rating, (C) if such investments have
         a variable rate of interest, such interest rate must be tied to a
         single interest rate index plus a fixed spread (if any) and must move
         proportionately with that index, and (D) such investments must not be
         subject to liquidation prior to their maturity;

                  (vi)     debt obligations with maturities of not more than
         365 days and at all times rated by each Rating Agency (or, if not
         rated by all Rating Agencies, rated by at least one Rating Agency and
         otherwise acceptable to each other Rating Agency, as confirmed in
         writing that such investment would not, in and of itself, result in a
         downgrade, qualification or withdrawal of the initial, or, if higher,
         then current ratings assigned to the Securities) in its highest
         long-term unsecured rating category; provided, however, that the
         investments described in this clause must (A) have a predetermined
         fixed dollar of principal due at maturity that cannot vary or change,
         (B) if rated by Standard and Poor's, must not have an "r" highlighter
         affixed to their rating, (C) if such investments have a variable rate
         of interest, such interest rate must be tied to a single interest rate
         index plus a fixed spread (if any) and must move proportionately with
         that index, and (D) such investments must not be subject to
         liquidation prior to their maturity;

                  (vii)    commercial paper (including both
         non-interest-bearing discount obligations and interest-bearing
         obligations payable on demand or on a specified date not more than one
         year after the date of issuance thereof) with maturities of not more
         than 365 days and that at all times is rated by each Rating Agency
         (or, if not rated by all Rating Agencies, rated by at least one Rating
         Agency and otherwise acceptable to each other Rating Agency, as
         confirmed in writing that such investment would not, in and of itself,
         result in a downgrade, qualification or withdrawal of the initial, or,
         if higher, then current ratings assigned to the Securities) in its
         highest short-term unsecured debt rating;




                                     -15-
<PAGE>   21

         provided, however, that the investments described in this clause must
         (A) have a predetermined fixed dollar of principal due at maturity
         that cannot vary or change, (B) if rated by Standard and Poor's, must
         not have an "r" highlighter affixed to their rating, (C) if such
         investments have a variable rate of interest, such interest rate must
         be tied to a single interest rate index plus a fixed spread (if any)
         and must move proportionately with that index, and (D) such
         investments must not be subject to liquidation prior to their
         maturity;

                  (viii)   units of taxable money market funds or mutual funds,
         which funds are regulated investment companies, seek to maintain a
         constant net asset value per share and invest solely in obligations
         backed by the full faith and credit of the United States, which funds
         have the highest rating available from each Rating Agency for taxable
         money market funds or mutual funds (or, if not rated by all Rating
         Agencies, rated by at least one Rating Agency and otherwise acceptable
         to each other Rating Agency, as confirmed in writing that such
         investment would not, in and of itself, result in a downgrade,
         qualification or withdrawal of the initial, or, if higher, then
         current ratings assigned to the Securities) for money market funds or
         mutual funds; and

                  (ix)     any other security, obligation or investment which
         has been approved as a Permitted Investment in writing by (a) Lender
         and (b) each Rating Agency, as evidenced by a written confirmation
         that the designation of such security, obligation or investment as a
         Permitted Investment will not, in and of itself, result in a
         downgrade, qualification or withdrawal of the initial, or, if higher,
         then current ratings assigned to the Securities by such Rating Agency;

provided, however, that no obligation or security shall be a Permitted
Investment if (A) such obligation or security evidences a right to receive only
interest payments or (B) the right to receive principal and interest payments
on such obligation or security are derived from an underlying investment that
provides a yield to maturity in excess of one hundred twenty percent (120%) of
the yield to maturity at par of such underlying investment.

                  Person. An individual, a general or limited partnership, a
limited liability company, a limited liability partnership, a corporation, a
business trust, a joint stock company, a trust, an unincorporated association,
a joint venture, a Governmental Authority or other entity of whatever nature.

                  Personalty. The Tangible Personalty and the Intangible
Personalty.

                  Premises. The collective reference to the Land, the
Improvements and the Tangible Personalty for each of the five (5) Individual
Properties more particularly described in the Security Instrument.

                  Program Rider. The Program Rider attached as Exhibit D to
this Loan Agreement.

                  Property Release. Shall have the meaning set forth in
Section 2.5.



                                     -16-
<PAGE>   22

                  Prohibited Activities or Conditions. Causing or permitting,
whether directly or indirectly, (i) the presence, use, generation, manufacture,
production, processing, installation, release, discharge, storage (including
storage in above ground and underground storage tanks for petroleum or
petroleum products), treatment, handling, or disposal of any Hazardous
Materials (excluding the safe and lawful use and storage of quantities of
Hazardous Materials or petroleum products, customarily used in the ordinary
operations of the Borrower or customarily used in the ordinary operations of
any tenant previously approved by the Lender) on or under the Premises, or in
any way affecting the Premises or its value or which may form the basis for any
present or future claim, demand or action seeking cleanup of the Premises, (ii)
the transportation of any Hazardous Materials to or from the Premises
(excluding the safe and lawful use and storage of quantities of Hazardous
Materials or petroleum products, customarily used in the ordinary operations of
the Borrower or customarily used in the ordinary operations of any tenant
previously approved by the Lender), or (iii) any occurrence or condition on the
Premises (or exacerbation of the same) that is or may be in violation of
Hazardous Materials Law.

                  Qualified Manager. Means a Manager that is (or is controlled
by, controlling or under common control with ) either (a) an entity owned or
controlled by the executive management or shareholders of the REIT immediately
prior to the applicable Fundamental Transaction, as hereinafter defined, or (b)
a professional management company which at the time of its engagement as
Manager shall be the property manager for at least ten (10) hotel properties
containing at least one thousand three hundred (1,300) rooms exclusive of the
Premises.

                  Qualified Operating Lessee. Means a Person that (a) is (or is
controlled by, controlling or under common control with) either (i) an entity
owned or controlled by the executive management or shareholders of the REIT
immediately prior to the applicable Fundamental Transaction, or (ii) a hotel
operating company which at the time of its engagement as Operating Lessee shall
be operating and controlling, as owner, manager or operating lessee, at least
twelve (12) hotel properties consisting of at least one thousand five hundred
(1,500) rooms exclusive of the Premises, (b) is a single purpose
bankruptcy-remote entity in accordance with the then-current standards of the
Rating Agencies, and (c) if the Qualified Operating Lessee is an Affiliate, it
must be a taxable REIT subsidiary as set forth in and in accordance with the
definition of Fundamental Transaction.

                  Qualified Resultant Owner. Means one or more Persons which,
individually or collectively, own at least fifty-one percent (51%) of the
beneficial interest in and control of the REIT or the Operating Partnership, as
applicable; and (1)(a) is or is controlled by either a pension fund, pension
fund advisor, and insurance company, a domestic bank (with total assets of at
least One Billion Dollars ($1,000,000,000)) or publicly or privately traded
real estate investment trust or other publicly traded or privately held
company, (b) has a then current net worth of at lease One Hundred Million
Dollars ($100,000,000) and total real estate assets of at least Two Hundred
Million Dollars ($200,000,000), in each case exclusive of the Premises (or in
the case of a pension fund advisor, controls at least Five Hundred Million
($500,000,000) in real estate assets), and (c) controls (exclusive of the
Premises) at least ten (10) hotel properties containing in the aggregate at
least one thousand three hundred (1,300) rooms and (2) if the Fundamental
Transaction occurs at any time that the Loan is not part of a Securitization,
(x) such




                                     -17-
<PAGE>   23

Person(s) are not and have not been, within the previous ten (10)
years, subject to any material, uncured event of default which resulted in
litigation or an acceleration of any indebtedness under any agreement with
Lender, (y) such Person(s) are not subject to any bankruptcy action and (z) the
principals or entities which control such Person(s) have never been convicted
of a felony.

                  Rating Agencies. Shall mean, as applicable, each of Standard
& Poor's Ratings Group, a division of McGraw-Hill, Inc., Moody's Investors
Services, Inc., Duff & Phelps Credit Rating Co. and Fitch IBCA, Inc., or any
other nationally-recognized statistical rating agency which has been approved
by Lender which rated the securities in connection with the Securitization (as
defined in ss.9.3 below).

                  Recourse Covenant(s). Each of those covenants and/or
agreements set forth in Section 5.4 of this Loan Agreement.

                  REIT. Shall mean RFS Hotel Investors, Inc., a Tennessee
corporation, and any successor thereto.

                  Release Parcel. Shall have the meaning set forth in Section
4(c) of the Note.

                  REMIC. Shall have the meaning set forth in the Note.

                  Rent Roll. As to the Premises, a rent schedule in a form
acceptable to the Lender, including a Certification thereof, showing the legal
and trade name of each tenant, and for each tenant, the gross and net square
feet occupied, the lease expiration date, the rent payable (both base rent and
additional rent), right of first refusal, options, rights to move tenants,
security deposits and any other information requested by the Lender and, as to
any annual Rent Roll, copies of paid tax receipts for the related fiscal year.

                  Rents and Profits. As defined in the Security Instrument.

                  Repair Escrow Account. An Eligible Account established and
maintained pursuant to the terms of this Loan Agreement.

                  Replacement Reserve Account. An Eligible Account established
and maintained pursuant to the terms of this Loan Agreement.

                  Replacements. Those repairs, replacements or improvements
listed as "Replacements" on Exhibit B hereto.

                  Required Accounting Standards. GAAP or such alternative
accounting standard as may be acceptable to the Lender, consistently applied.

                  Required DSCR. As defined in Section 7.1(m) of this
Agreement.

                  Requirement(s) of Law. As to any Person, the organizational
or governing documents of such Person, and any statute, law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority (including, without limitation, all




                                     -18-
<PAGE>   24

requirements relating to zoning, parking, ingress and egress, building
setbacks, or use of the Premises, all Hazardous Materials Laws, the
Architectural Barriers Act of 1968, the Rehabilitation Act of 1973, the
Americans with Disabilities Act of 1990, erosion control ordinances, storm
drainage control laws and doing business and/or licensing laws), in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.

                  Reserve Account(s). The Repair Escrow Account, the Tax and
Insurance Reserve Account, the Replacement Reserve Account, the Debt Service
Reserve Account, and all other reserve and/or escrow accounts established or
required pursuant to the provisions of the Loan Documents, including, without
limitation, pursuant to the Program Rider.

                  Responsible Officer. As to any Person, the general partner
(if the general partner is not an individual, then the chief executive officer,
the chief financial officer or the president or similar individual of the
general partner), the managing member, the chief executive officer, the chief
financial officer or the president or similar individual of such Person.

                  Securities. Any certificates, notes or other securities
issued in connection with a Securitization of the Loan.

                  Securitization. Shall have the meaning set forth in Section
9.3 herein.

                  Security Instrument. The deeds of trust, mortgages, or other
instrument, dated as of even date herewith, executed by the Borrower granting
to the Lender a first priority lien or title priority on the Premises, the
Intangible Personalty and the Rents and Profits to secure the obligations of
the Borrower under the Loan Documents, together with all prior instruments
amended, modified, renewed, extended, restated, supplemented, replaced or
substituted thereby.

                  Special Purpose Entity. An entity whose structure and
organizational and governing documents are in form and substance acceptable to
the Lender and which satisfies all of the following requirements:

                  (i)      Its purpose shall be limited solely to, as
         applicable, (a) entering into this Loan Agreement with the Lender, (b)
         owning, holding, selling, leasing, transferring, exchanging, operating
         and managing the Premises and (c) transacting any and all lawful
         business for which it may be organized under its constitutive law that
         is incident, necessary and appropriate to accomplish the foregoing.

                  (ii)     It does not own and will not own any asset or
         property other than (a) the Premises, and/or (b) incidental Personalty
         necessary for and used or to be used in connection with the ownership
         or operation of the Premises.

                  (iii)    It will not engage in any business other than the
         ownership, management and operation of the Premises.

                  (iv)     It will not enter into any contract or agreement
         with any Affiliate, any constituent party of itself, any of its
         owners, any guarantors of its obligations, or any




                                     -19-
<PAGE>   25

         Affiliate of any constituent party, owner or guarantor (collectively,
         the "Related Parties") of itself, except upon terms and conditions
         that are intrinsically fair, commercially reasonable and substantially
         similar to those that would be available on an arms-length basis with
         third parties not so affiliated with itself or such related parties.

                  (v)      It has not incurred and will not incur any
         indebtedness other than, as applicable, (a) the Loan, (b) trade and
         operational debt incurred in the ordinary course of business with
         trade creditors in amounts not to exceed One Hundred Thousand Dollars
         ($100,000.00), provided such debt is not evidenced by a note and is
         not in excess of sixty (60) days past due. No other indebtedness may
         be secured (senior, subordinate or pari passu) by the Premises.

                  (vi)     It has not made and will not make any loans or
         advances to any Person and shall not acquire obligations or securities
         of any Related Party other than the Additional Loan.

                  (vii)    It is and will remain solvent and it will pay its
         debts and liabilities (including, as applicable, shared personnel and
         overhead expenses) from its assets as the same shall become due.

                  (viii)   It has done or caused to be done and will do all
         things necessary to observe organizational formalities and preserve
         its existence, and it will not, nor will it permit any related party
         to, amend, modify or otherwise change the partnership certificate,
         partnership agreement, articles of incorporation and bylaws, operating
         agreement, trust or other organizational documents of Borrower or such
         related party without the prior written consent of Lender.

                  (ix)     It will maintain all of its books, records,
         financial statements and bank accounts separate from those of any
         other Person and its assets will not be listed as assets on the
         financial statement of any other Person. It will file its own tax
         returns and will not file a consolidated federal income tax return
         with any other Person. It shall maintain its books, records,
         resolutions and agreements as official records.

                  (x)      It will be, and at all times will hold itself out to
         the public as, a legal entity separate and distinct from any other
         Person (including any Affiliate or other related party), shall correct
         any known misunderstanding regarding its status as a separate entity,
         shall conduct business in its own name, shall not identify itself or
         any of its Affiliates as a division or part of the other and shall
         maintain and utilize a separate telephone number and separate
         stationery, invoices and checks.

                  (xi)     It will maintain from its own assets (and without
         contribution by other Persons) adequate capital for the normal
         obligations reasonably foreseeable in a business of its size and
         character and in light of its contemplated business operations.

                  (xii)    Neither it nor any related party will seek its own
         dissolution, winding up, liquidation, consolidation or merger in whole
         or in part, or the sale of its material assets.



                                     -20-
<PAGE>   26

                  (xiii)   It will not commingle its assets with those of any
         other Person and will hold all of its assets in its own name.

                  (xiv)    Except as provided in Section 9.15 hereof, it will
         not guarantee or become obligated for the debts of any other Person
         and does not and will not hold itself out as being responsible for the
         debts or obligations of any other Person.

                  (xv)     If it is a limited partnership or a limited
         liability company, at least one general partner or member, or if it is
         a general partnership at least two general partners (each, an "SPC
         Party") shall be a corporation whose sole asset is the interest in
         Special Purpose Entity and each such SPC Party will at all times
         comply, and will cause it to comply, with each of the representations,
         warranties, and covenants contained in this definition of Special
         Purpose Entity as if such representation, warranty or covenant was
         made directly by such SPC Party. Upon the withdrawal or the
         disassociation of the SPC Party from the Special Purpose Entity, the
         Special Purpose Entity shall immediately appoint a new member whose
         articles of incorporation are substantially similar to those of the
         SPC Party and deliver a new Insolvency Opinion to the Rating Agency or
         Rating Agencies, as applicable, with respect to the new SPC Party and
         its equity owners.

                  (xvi)    It shall at all times have (if a corporation) or
         cause there to be at least two duly appointed members of the board of
         directors (each an "Independent Director") of each SPC Party (if
         Borrower is a limited partnership or a limited liability company)
         reasonably satisfactory to Lender who is not at the time of initial
         appointment and has not been at any time during the preceding five (5)
         years: (i) a stockholder, director, officer, employee, partner,
         attorney or counsel of Borrower or such SPC Party or any Affiliate of
         either of them; (ii) a customer, supplier or other Person who derives
         any of its purchases or revenues (other than any payments made in
         connection with such service as Independent Director) from its
         activities with Borrower or such SPC Party or any Affiliate of either
         of them; (iii) a Person controlling or under common control with any
         such stockholder, partner, customer, supplier or other Person; or (iv)
         a member of the immediate family of any such stockholder, director,
         officer, employee, partner, customer, supplier or other Person. (As
         used herein, the term "control" means the possession, directly or
         indirectly, of the power to direct or cause the direction of
         management, policies or activities of a Person, whether through
         ownership of voting securities, by contract or otherwise).

                  (xvii)   It shall not cause or permit the board of directors
         of an SPC Party to take any action which, under the terms of any
         certificate of incorporation, by-laws or any voting trust agreement
         with respect to any common stock, requires the vote of any SPC Party
         unless at the time of such action there shall be at least one member
         who is an Independent Director.

                  (xviii)  It shall allocate fairly and reasonably any overhead
         expenses that are shared with an Affiliate, including paying for
         office space and services performed by any employee of an Affiliate or
         related party.



                                     -21-
<PAGE>   27

                  (xix)    It shall not pledge its assets for the benefit of
         any other Person other than with respect to the Loan.

                  (xx)     It shall maintain a sufficient number of employees
         in light of its contemplated business operations and pay the salaries
         of its own employees from its own funds.

                  (xxi)    It shall conduct its business so that the
         assumptions made with respect to Borrower in the Insolvency Opinion
         shall be true and correct in all respects.

                  Subordination Agreement. A subordination, non-disturbance and
attornment agreement by and among Lender, Borrower and any Lessee substantially
in the form attached hereto as Exhibit G and to the extent a new Subordination
Agreement is specifically required under the terms of this Loan Agreement, as
such form may be amended by Lender consistent with prudent underwriting
standards.

                  Substitute Property. Shall have the meaning set forth in
Section 2.6.

                  Substitute Release Amounts. Shall have the meaning set forth
in Section 2.6 (xiv).

                  Substituted Property. Shall have the meaning set forth in
Section 2.6.


                  Survey. A survey of the Land and Improvements (as-built) made
by a civil engineer or surveyor, duly licensed or registered in the State where
the applicable property is located, dated as of a date acceptable to the
Lender, containing a surveyor's certification acceptable to the Lender for the
benefit of the Borrower and the Lender (which certification shall, among other
things, indicate whether or not any of the Land or Improvements are located
within an area identified as having "special flood hazards" as such term is
used in the Flood Disaster Protection Act of 1973), together with its
successors and assigns, as their interests may appear, and otherwise in form
and substance reasonably acceptable to the Lender.

                  Tangible Personalty. As defined in the Security Instrument.

                  Tax and Insurance Reserve Account. An Eligible Account
established and maintained pursuant to the terms of this Loan Agreement.

                  Tenant Estoppel Certificate. A tenant estoppel certificate
substantially in the form attached hereto as Exhibit F, as such form may be
amended by Lender consistent with prudent underwriting standards.

                  Title  Insurance  Policy.  Shall  mean,  with  respect to each
Individual  Property, a title insurance policy in a form acceptable to Lender in
its sole discretion, including all amendments and endorsements thereto.

                  Undefeased Note. Shall have the meaning set forth in Section
4(c) of the Note.



                                     -22-
<PAGE>   28

                  U.S. Obligations. Any direct obligations of the United States
Government, including, without limitation, treasury bills, notes and bonds.

                  Section 1.2       Other Definitional Provisions.

                  (a)      The words "hereof," "herein" and "hereunder" and
         words of similar import when used in this Agreement shall refer to
         this Agreement as a whole and not to any particular provision of this
         Agreement. The word "including" when used in this Agreement is
         intended to be illustrative and not exclusive. Section, subsection,
         paragraph, clause, exhibit, schedule, addendum and rider references
         contained in this Agreement are references to sections, subsections,
         paragraphs, clauses, exhibits, schedules, addenda and riders in or to
         this Agreement unless otherwise specified. The captions herein are
         inserted only as a matter of convenience and for reference and in no
         way define, limit or describe the scope of this Loan Agreement nor the
         intent of any provision hereof. The terms set forth herein are
         applicable to the singular as well as the plural forms of such terms
         and to the masculine as well as the feminine and neuter genders of
         such terms.

                  (b)      All references in this Loan Agreement or any other
         Loan Document to any Loan Document, agreement, contract, license,
         document or instrument shall mean such Loan Document, agreement,
         contract, license, document or instrument as amended, modified,
         renewed, extended, restated, supplemented, reissued, and/or
         substituted from time to time.

                  (c)      All references or citations in this Loan Agreement
         or any other Loan Document to any statute, law, treaty, rule,
         regulation or other Requirement of Law shall mean such statute, law,
         treaty, rule, regulation or other Requirement of Law as amended,
         modified, supplemented, replaced or substituted from time to time.

                  Section 1.3       Incorporation by Reference of Commitment.

                  All of the terms and conditions of the Commitment are hereby
incorporated herein by reference, as if such terms and conditions were set
forth herein in their entirety, but in the event of any conflict or discrepancy
between the terms and/or conditions of this Loan Agreement and those of the
Commitment, the terms and conditions of this Loan Agreement shall control.

                                  ARTICLE II
                                   THE LOAN

                  Section 2.1       Loan Terms.

                  Subject to the terms and conditions of this Loan Agreement
and the other Loan Documents, the Lender agrees to make the Loan to the
Borrower in the principal sum of the Loan Amount, such borrowing to be
evidenced by the Note and the other Loan Documents.



                                     -23-
<PAGE>   29


                  Section 2.2       Interest.

                  The outstanding principal balance of the Loan shall bear
interest, and principal and interest shall be repayable, in accordance with the
terms of the Note.

                  Section 2.3       Term.

                  The Loan shall be due and payable in full, unless accelerated
sooner pursuant to the terms of this Loan Agreement, on the Maturity Date.

                  Section 2.4       Payments.

                  All payments by the Borrower under the Loan shall be made in
accordance with the terms of the Note.

                  Section 2.5       Release of Properties.

                  Except as set forth in this Section 2.5, no repayment or
prepayment of all or any portion of the Note shall cause, give rise to a right
to require, or otherwise result in, the release of the Lien of the Security
Instrument on the Premises or any portion thereof.

                  Release on Payment in Full. If Borrower  shall pay or cause to
be paid,  the  principal  of and  interest on the Note in full at maturity or as
permitted  in  accordance  with the terms  thereof  and all  other  Indebtedness
payable to Lender hereunder by Borrower or secured by the Security Instrument or
by the other Loan Documents and all of the payment  Obligations  shall have been
performed,  then the Security  Instrument and all the other Loan Documents shall
be  discharged  and satisfied or assigned (to Borrower or to any other Person at
Borrower's direction and without  representation or warranty by, or recourse to,
Lender),  at Borrower's  option,  without  warranty (except that Lender shall be
deemed to have represented that such release and termination or reassignment has
been duly  authorized  and that it has not assigned or  encumbered  the Security
Instrument  or the other Loan  Documents),  at the expense of Borrower  upon its
written request.  Concurrently  with such release and satisfaction or assignment
of any Security Instrument and all the other Loan Documents,  Lender will return
to Borrower (or in the case of an  assignment,  the  assignee)  the Note and all
insurance  policies  relating to the Premises  which may be held by Lender,  any
amounts  held  in  escrow  pursuant  to the  Security  Instrument  or  the  Cash
Management Agreement, if applicable,  or otherwise, and any part of the Premises
or other  Collateral  that may be in its possession  and, on the written request
and at the expense of Borrower,  will execute and deliver  such  instruments  of
conveyance,  assignment and release  (including  appropriate  UCC-3  termination
statements)  prepared by Borrower and as may reasonably be requested by Borrower
to evidence and to assure the effectiveness of such release and satisfaction, or
assignment,  and any such  instrument,  when duly  executed  by Lender  and,  if
appropriate,  duly  recorded  by  Borrower  in the  places  where  the  Security
Instrument and each other Loan Document is recorded, shall conclusively evidence
the release and  satisfaction  or assignment of the Security  Instrument and the
other Loan Documents.

                  Section 2.6       Substitution of Properties. Subject to the
terms and conditions set forth in this Section 2.6, Borrower may obtain a
release of the Lien of a Security Instrument (and




                                     -24-
<PAGE>   30

the related Loan Documents) encumbering an Individual Property (a "Substituted
Property") by substituting therefor its fee interest in one or more hotel
properties of like kind and quality acquired by Borrower (individually, a
"Substitute Property" and collectively, the "Substitute Properties"), provided
that no such substitution may occur after the Maturity Date. In addition, any
such substitution shall be subject, in each case, to the satisfaction of the
following conditions precedent:

                  (i)      The Substitute Property must be a property as to
         which Borrower will hold indefeasible fee or ground leasehold title
         free and clear of any lien or other encumbrance except for Permitted
         Encumbrances, Leases and easements, restrictive covenants and other
         title exceptions which do not have a material adverse effect on the
         utility or value of such property for its current use.

                  (ii)     Lender and Rating Agencies shall have received (A) a
         copy of a deed conveying all of Borrower's right, title and interest
         in and to the Substituted Property (x) to an entity other than
         Borrower or its general partner or managing member (as applicable) in
         an arms' length transaction or (y) to the REIT or the Operating
         Partnership and (B) a letter from Borrower countersigned by a title
         insurance company acknowledging receipt of such deed and agreeing to
         record such deed in the real estate records for the county in which
         the Substituted Property is located. In the event the Substituted
         Property is to be conveyed to the REIT or the Operating Partnership,
         Lender shall also have received (a) a copy of a fully executed
         contract of sale between the REIT or the Operating Partnership, as
         applicable, and an entity other than Borrower or a Borrower Party for
         the sale of the Substituted Property in an arms' length transaction,
         which contract of sale (i) at the time of substitution, is not subject
         to any contingencies, except for the payment of the purchase price by
         the purchaser and the delivery of title by the REIT or the Operating
         Partnership, as applicable and (ii) contains a closing date which is
         not more than thirty (30) days following the date of the proposed
         substitution and (b) evidence that any good-faith deposit required
         under such contract of sale has been deposited into escrow.

                  (iii)    Lender and the applicable Rating Agencies shall have
         received an MAI appraisal of the Substitute Property dated no more
         than forty-five (45) days prior to the substitution by an appraiser
         acceptable to such Rating Agencies, indicating an appraised value of
         the Substitute Property that is at least equal to the greater of the
         appraised value of the Substituted Property determined by Lender as of
         the date hereof or determined by an Independent Appraiser as of the
         date immediately preceding the encumbrance of the Substitute Property
         by the related Security Instrument.

                  (iv)     The Debt Service Coverage Ratio Premises for the
         Substitute Property shall be a minimum of 2.3x, as determined by
         Lender in its sole and absolute discretion.

                  (v)      The Net Operating Income Premises for the Substitute
         Property either (A) does not show a successive decrease over the three
         (3) years immediately prior to the date of substitution, or (B) if the
         Substitute Property has been substantially renovated




                                     -25-
<PAGE>   31

         within such three (3) year period, the Net Operating Income Premises
         shall not show a successive decrease for such lesser period of no less
         than twelve (12) months.

                  (vi)     The Net Operating Income Leases for the Substitute
         Property either (A) does not show a successive decrease over the three
         (3) years immediately prior to the date of substitution, or (B) if the
         Substitute Property has been substantially renovated within such three
         (3) year period, the Net Operating Income Leases shall not show a
         successive decrease for such lesser period of no less than twelve (12)
         months

                  (vii)    The Net Operating Income Premises for the twelve
         (12) month period immediately preceding the substitution for the
         Substitute Property is at least one hundred five percent (105%) the
         Net Operating Income Premises for the twelve (12) month period
         immediately preceding the substitution for the Substituted Property.

                  (viii)   The Net Operating Income Leases for the twelve (12)
         month period immediately preceding the substitution for the Substitute
         Property is at least one hundred five percent (105%) the Net Operating
         Income Leases for the twelve (12) month period immediately preceding
         the substitution for the Substituted Property.

                  (ix)     The Debt Service Coverage Ratio Premises after any
         proposed substitution, based on the remaining collateral properties,
         including the Substitute Property shall be at least equal to the
         greater of (i) the Debt Service Coverage Ratio Premises on the date
         hereof; or (ii) the Debt Service Coverage Ratio Premises immediately
         prior to such substitution.

                  (x)      The Debt Service Coverage Ratio Leases after any
         proposed substitution, based on the remaining collateral properties,
         including the Substitute property shall be at least equal to the
         greater of (i) the Debt Service Coverage Ratio Leases on the date
         hereof; or (ii) the Debt Service Coverage Ratio Leases immediately
         prior to such substitution.

                  (xi)     The Person transferring the Substitute Property is
         solvent and the Substitute Property was transferred to Borrower in an
         arm's length transaction.

                  (xii)    If the Loan is part of a Securitization, Lender
         shall have received evidence in writing from the Rating Agencies to
         the effect that such substitution will not result in a withdrawal,
         qualification or downgrade of the respective ratings in effect
         immediately prior to such substitution for the Securities issued in
         connection with the Securitization that are then outstanding.

                  (xiii)   No Event of Default shall have occurred and be
         continuing. Lender and the Rating Agencies shall have received a
         certificate from Borrower confirming the foregoing.

                  (xiv)    Borrower shall have executed, acknowledged and
         delivered to Lender (A) a Security Instrument, and two UCC Financing
         Statements with respect to the Substitute Property, together with a
         letter from Borrower countersigned by a title




                                     -26-
<PAGE>   32

         insurance company acknowledging receipt of such Security Instrument
         and UCC-1 Financing Statements and agreeing to record or file, as
         applicable, such Security Instrument and one of the UCC-1 Financing
         Statements in the real estate records for the county in which the
         Substitute Property is located and to file one of the UCC-1 Financing
         Statement in the office of the Secretary of State of the state in
         which the Substitute Property is located, so as to effectively create
         upon such recording and filing valid and enforceable liens upon the
         Substitute Property, of the requisite priority, in favor of Lender (or
         such other trustee as may be desired under local law), subject only to
         the Permitted Encumbrances and such other liens as are permitted
         pursuant to the Loan Documents, (B) an Hazardous Materials Indemnity
         Agreement with respect to the Substitute Property, (C) a
         Nondisturbance Agreement for the Substitute Property and (D) written
         confirmation from each Indemnitor and all Borrower Principals
         regarding such substitution. The Security Instrument, UCC-1 Financing
         Statements and Hazardous Materials Indemnity Agreement shall be the
         same in form and substance as the counterparts of such documents
         executed and delivered with respect to the related Substituted
         Property subject to modifications reflecting the Substitute Property
         as the Individual Property that is the subject of such documents and
         such modifications reflecting the laws of the state in which the
         Substitute Property is located as shall be recommended by the counsel
         admitted to practice in such state and delivering the opinion as to
         the enforceability of such documents required pursuant to clause (xiv)
         below. The Security Instrument encumbering the Substitute Property
         shall secure all amounts evidenced by the Note, provided that in the
         event that the jurisdiction in which the Substitute Property is
         located imposes a mortgage recording, intangibles or similar tax and
         does not permit the allocation of indebtedness for the purpose of
         determining the amount of such tax payable, the principal amount
         secured by such Security Instrument shall be equal to one hundred
         twenty-five percent (125%) of the amount of the Loan allocated to the
         Substitute Property. The amount of the Loan allocated to the
         Substitute Property (such amount being hereinafter referred to as the
         "Substitute Release Amount") shall equal the Adjusted Release Amount
         of the related Substituted Property.

                  (xv)     Lender shall have received (A) any "tie-in" or
         similar endorsement to each Title Insurance Policy insuring the lien
         of an existing Security Instrument as of the date of the substitution
         available with respect to the Title Insurance Policy insuring the lien
         of the Security Instrument with respect to the Substitute Property and
         (B) a Title Insurance Policy (or a marked, signed and redated
         commitment to issue such Title Insurance Policy) insuring the lien of
         the Security Instrument encumbering the Substitute Property, issued by
         the title company that issued the Title Insurance Policies insuring
         the lien of the existing Security Instrument and dated as of the date
         of the substitution, with reinsurance and direct access agreements
         that replace such agreements issued in connection with the Title
         Insurance Policy insuring the lien of the Security Instrument
         encumbering the Substituted Property, to the extent such agreements
         are available in the jurisdiction in which the Substitute Property is
         located. The Title Insurance Policy issued with respect to the
         Substitute Property shall (1) provide coverage in the amount of the
         Allocated Loan Amount if the "tie-in" or similar endorsement described
         above is available or, if such endorsement is not available, in an
         amount equal to one hundred twenty-five percent (125%) of the
         Allocated Loan Amount, (2) insure Lender that the relevant




                                     -27-
<PAGE>   33

         Security Instrument creates a valid first lien on the Substitute
         Property encumbered thereby, free and clear of all exceptions from
         coverage other than Permitted Encumbrances and standard exceptions and
         exclusions from coverage (as modified by the terms of any
         endorsements), (3) contain such endorsements and affirmative coverages
         as are contained in the Title Insurance Policies insuring the liens of
         the existing Security Instrument, to the extent available in the
         jurisdiction in which the Substitute Property is located and (4) name
         Lender as the insured. Lender also shall have received copies of paid
         receipts showing that all premiums in respect of such endorsements and
         Title Insurance Policies have been paid.

                  (xvi)    Lender shall have received a current title survey
         for each Substitute Property, certified to the title company and
         Lender and their successors and assigns, in the same form and having
         the same content as the certification of the Survey of the Substituted
         Property prepared by a professional land surveyor licensed in the
         state in which the Substitute Property is located and acceptable to
         the Rating Agencies in accordance with the 1997 Minimum Standard
         Detail Requirements for ALTA/ACSM Land Title Surveys, including items
         1, (if readily available) 2, 3, 4, 6, 7 (a) (b) (c) , 8, 9, 10, 11 and
         13 from Table A. Such survey shall reflect the same legal description
         contained in the Title Insurance Policy relating to such Substitute
         Property and shall include, among other things, a metes and bounds
         description of the real property comprising part of such Substitute
         Property. The surveyor's seal shall be affixed to each survey and each
         survey shall certify that the surveyed property is not located in a
         "one-hundred-year flood hazard area."

                  (xvii)   Lender shall have received valid certificates of
         insurance indicating that the requirements for the policies of
         insurance required for an Individual Property hereunder have been
         satisfied with respect to the Substitute Property and evidence of the
         payment of all premiums payable for the existing policy period.

                  (xviii)  Lender shall have received a Phase I environmental
         report and, if recommended under the Phase I environmental report, a
         Phase II environmental report from a nationally recognized
         environmental consultant approved by the Rating Agencies (if
         applicable), not less than forty-five (45) days prior to such release
         and substitution, which conclude that the Substitute Property does not
         contain any Hazardous Materials (except for cleaning and other
         products used in connection with the routine maintenance or repair of
         the Substitute Property or the operation thereof as a hotel, in full
         compliance with Hazardous Materials Laws) and is not subject to any
         risk of contamination from any off-site Hazardous Materials. If any
         such report discloses the presence of any Hazardous Materials (except
         for cleaning and other products used in connection with the routine
         maintenance or repair of the Substitute Property or the operation
         thereof as a hotel, in full compliance with Hazardous Materials Laws)
         or the risk of contamination from any off-site Hazardous Materials,
         such report shall include an estimate of the cost of any related
         remediation and Borrower shall deposit with Lender an amount equal to
         one hundred twenty-five percent (125%) of such estimated cost, which
         deposit shall constitute additional security for the Loan and shall be
         released to Borrower upon the delivery to Lender of (A) an update to
         such report indicating that there is no longer any




                                     -28-
<PAGE>   34

         Hazardous Materials (except for cleaning and other products used in
         connection with the routine maintenance or repair of the Substitute
         Property or the operation thereof as a hotel, in full compliance with
         Hazardous Materials Laws) on the Substitute Property or any danger of
         contamination from any off-site Hazardous Materials that has not been
         fully remediated in accordance with all applicable laws and (B) paid
         receipts indicating that the costs of all such remediation work have
         been paid. Such report shall also state the amount of time that will
         be necessary to complete such remediation, as may be required by law.
         Borrower covenants to undertake any repairs, cleanup or remediation
         indicated.

                  (xix)    Borrower shall deliver or cause to be delivered to
         Lender (A) updates certified by Borrower of all organizational
         documentation related to Borrower and/or the formation, structure,
         existence, good standing and/or qualification to do business delivered
         to Lender in connection with the Closing Date; (B) good standing
         certificates, certificates of qualification to do business in the
         jurisdiction in which the Substitute Property is located (if required
         in such jurisdiction) and (C) resolutions of the managing member of
         Borrower authorizing the substitution and any actions taken in
         connection with such substitution.

                  (xx)     Lender shall have received the following opinions of
         Borrower's counsel (which opinions, with respect to the opinions set
         forth in clauses (A), (B) and (C) below, shall be in form similar to
         the corresponding opinions delivered in connection with the closing of
         the Loan): (A) an opinion or opinions of counsel admitted to practice
         under the laws of the state in which the Substitute Property is
         located stating that the Loan Documents delivered with respect to the
         Substitute Property pursuant to clause (viii) above are valid and
         enforceable in accordance with their terms, subject to the laws
         applicable to creditors' rights and equitable principles, and that
         Borrower is qualified to do business and in good standing under the
         laws of the jurisdiction where the Substitute Property is located or
         that Borrower is not required by applicable law to qualify to do
         business in such jurisdiction; (B) an opinion of counsel stating that
         the Loan Documents delivered with respect to the Substitute Property
         pursuant to clause (viii) above were duly authorized, executed and
         delivered by Borrower and that, to the best of Borrower's counsel's
         knowledge, the execution and delivery of such Loan Documents and the
         performance by Borrower of its obligations thereunder will not cause a
         breach of, or a default under, any agreement, document or instrument
         to which Borrower is a party or to which it or its properties are
         bound; (C) an opinion of counsel stating that subjecting the
         Substitute Property to the lien of the related Security Instrument and
         the execution and delivery of the related Loan Documents does not and
         will not affect or impair the ability of Lender to enforce its
         remedies under all of the Loan Documents or to realize the benefits of
         the cross-collateralization provided for thereunder; (D) an update of
         the Non-Consolidation Opinion indicating that the substitution does
         not affect the opinions set forth therein; (E) an opinion of counsel
         acceptable to the applicable Rating Agencies stating that the
         substitution and the related transactions do not constitute a
         fraudulent conveyance under applicable bankruptcy and insolvency laws
         and (F) an opinion of counsel acceptable to the applicable Rating
         Agencies that the substitution does not constitute a "significant
         modification" of the Loan




                                     -29-
<PAGE>   35

         under Section 1001 of the Code or otherwise cause a tax to be imposed
         on a "prohibited transaction" by any REMIC.

                  (xxi)    Borrower shall have paid or caused to be paid all
         Basic Carrying Costs relating to each of the Individual Properties and
         the Substitute Property, including, without limitation, (i) accrued
         but unpaid insurance premiums relating to each of the Individual
         Properties and the Substitute Property, (ii) currently due taxes
         (including any in arrears) relating to each of the Individual
         Properties and the Substitute Property and (iii) any other charges
         relating to each of the Individual Properties and Substitute Property
         which are currently due.

                  (xxii)   Borrower shall have paid or reimbursed Lender for
         all third party out-of-pocket costs and expenses incurred by Lender
         (including, without limitation, reasonable attorneys fees and
         disbursements) in connection with the substitution and Borrower shall
         have paid all recording charges, filing fees, taxes or other expenses
         (including, without limitation, mortgage and intangibles taxes and
         documentary stamp taxes) payable in connection with the substitution.
         Borrower shall have paid all costs and expenses of the Rating Agencies
         incurred in connection with the substitution.

                  (xxiii)  Lender shall have received annual operating
         statements and occupancy statements for the Substitute Property for
         the three (3) most recently completed fiscal years and a current
         operating statement for the Substituted Property or, if information is
         not available for a three (3) year period or if the Substituted
         Property has been substantially renovated within such three (3) year
         period, such lesser period as is available, but in no event less than
         twelve (12) months. Each of the statements required under this clause
         (xvii) shall be certified to Lender as being true and correct and a
         certificate from Borrower certifying that there has been no adverse
         change in the financial condition of the Substitute Property since the
         date of such operating statements.

                  (xxiv)   Borrower shall have delivered to Lender estoppel
         certificates from any Operating Lessees and other tenants of the
         Substitute Property. All such estoppel certificates shall be in the
         form attached hereto as Exhibit F and shall indicate, among other
         things, that (1) the subject lease is a valid and binding ---------
         obligation of the tenant thereunder, (2) there are no defaults under
         such lease on the part of the landlord or tenant thereunder, (3) the
         tenant thereunder has no defense or offset to the payment of rent
         under such leases, (4) no rent under such lease has been paid more
         than one (1) month in advance, (5) the tenant thereunder has no option
         or right of first refusal under such lease to purchase all or any
         portion of the Substitute Property and (6) all tenant improvement work
         required under such lease has been completed and the tenant under such
         lease is in actual occupancy of its leased premises. If an estoppel
         certificate indicates that all tenant improvement work required under
         the subject lease has not yet been completed, Borrower shall, if
         required by the Rating Agencies, deliver to Lender financial
         statements indicating that Borrower has adequate funds to pay all
         costs related to such tenant improvement work as required under such
         lease.



                                     -30-
<PAGE>   36

                  (xxv)    Lender shall have received copies of all tenant
         leases affecting the Substitute Property certified by Borrower as
         being true and correct. Lender shall have received a current Rent Roll
         of the Substitute Property certified by Borrower as being true and
         correct.

                  (xxvi)   Lender shall have received a Nondisturbance
         Agreement with respect to all Operating Leases and Subordination
         Agreements with respect to any other leases which are not subordinate
         by their terms to the Security Instrument with respect to the
         Substitute Property.

                  (xxvii)  Lender shall have received (A) an endorsement to the
         Title Insurance Policy insuring the lien of the Security Instrument
         encumbering the Substitute Property insuring that the Substitute
         Property constitutes a separate tax lot or, if such an endorsement is
         not available in the state in which the Substitute Property is
         located, a letter from the title insurance company issuing such Title
         Insurance Policy stating that the Substitute Property constitutes a
         separate tax lot or (B) a letter from the appropriate taxing authority
         stating that the Substitute Property constitutes a separate tax lot.

                  (xxviii) Lender shall have received a physical conditions
         report with respect to the Substitute Property from a nationally
         recognized structural consultant approved by the Rating Agencies (if
         applicable) in a form recognized and approved by such Rating Agencies
         not less than forty-five (45) days prior to such release and
         substitution stating that the Substitute Property and its use comply
         in all material respects with all applicable Requirements of Law
         (including, without limitation, zoning, subdivision and building laws)
         and that the Substitute Property is in good condition and repair and
         free of damage or waste. If compliance with any Requirements of Law
         are not addressed by the physical conditions report, such compliance
         shall be confirmed by delivery to Lender of a certificate of an
         architect licensed in the state in which the Substitute Property is
         located, a letter from the municipality in which such Substitute
         Property is located, a certificate of a surveyor that is licensed in
         the state in which the Substitute Property is located (with respect to
         zoning and subdivision laws), an ALTA 3.1 zoning endorsement to the
         Title Insurance Policy delivered pursuant to clause (xii) above (with
         respect to zoning laws) or a subdivision endorsement to the Title
         Insurance Policy delivered pursuant to clause (xii) above (with
         respect to subdivision laws) to the extent such endorsements are
         available in the jurisdiction in which the Substitute Property is
         located. If the physical conditions report recommends that any repairs
         be made with respect to the Substitute Property, such physical
         conditions report shall either (A) include an estimate of the cost of
         such recommended repairs (in which case Borrower shall deposit into
         the Repair Escrow Account an amount equal to one hundred twenty-five
         percent (125%) of such estimated cost), or (B) state the specific
         amounts that need to be reserved over time in order to meet the
         requirements of such replacements, but in no event less than five
         percent (5%) of gross revenues (in which case Borrower shall deposit
         such reserves into the Replacement Reserve Account on a monthly
         basis). Any such deposits shall constitute additional security for the
         Loan pursuant to Section 6.6 and shall be released to Borrower
         pursuant to Section 6.9. Borrower covenants to undertake any repairs,
         cleanup




                                     -31-
<PAGE>   37

         or remediation indicated in the physical conditions report before the
         earlier of (i) the time required by applicable law or (ii) the time
         recommended in the physical conditions report.

                  (xxix)   Lender shall have received and approved each
         Operating Lease, Franchise Agreement and Management Agreement, if any,
         relating to the Substitute Property, and Borrower shall have
         demonstrated that such agreements are substantially similar to the
         agreements then in place at the Substituted Property.

                  (xxx)    Lender shall have received such other and further
         approvals, opinions, documents and information in connection with the
         substitution as the Rating Agencies may have requested.

                  (xxxi)   Lender shall have received copies of all contracts
         and agreements relating to the leasing and operation of the Substitute
         Property together with a certification of Borrower attached to each
         such contract or agreement certifying that the attached copy is a true
         and correct copy of such contract or agreement and all amendments
         thereto.

                  (xxxii)  Borrower shall submit to Lender, not less than
         thirty (30) days prior to the date of such substitution, a release of
         lien (and related Loan Documents) for the Substituted Property for
         execution by Lender. Such release shall be in a form appropriate for
         the jurisdiction in which the Substituted Property is located.
         Borrower shall deliver an Officer's Certificate certifying that the
         requirements set forth in this Section 2.6 have been satisfied.

                  (xxxiii) The total Allocated Loan Amount, in the aggregate,
         for all prior Substituted Properties (including the current
         Substituted Property) is less than twenty percent (20%) of the
         Original Principal Amount of the Loan.

                  (xxxiv)  The Substitute Property shall be subject to the lien
         of the related Security Instrument and subject to the
         cross-collateralization and cross-default provisions of this Loan
         Agreement and the Security Instrument.

                  (xxxv)   With respect to the Substitute Property, Borrower
         shall deliver to Lender (i) copies of all franchisor inspection
         reports and performance improvement programs with respect to the
         Substitute Property for the two (2) year period prior to the
         substitution or if such information is not available for such two (2)
         year period, such lesser period as is available and (ii) an Officer's
         Certificate certifying that the items delivered in (i) above indicate
         that Borrower is in compliance with the franchisor's requirements.

Upon the satisfaction of the foregoing conditions precedent, Lender will
release its lien from the Substituted Property to be released and the
Substitute Property shall be deemed to be an Individual Property for purposes
of this Loan Agreement and the Substitute Release Amount with respect to such
Substitute Property shall be deemed to be the Allocated Loan Amount with
respect to such Substitute Property for all purposes hereunder.



                                     -32-
<PAGE>   38

                                  ARTICLE III
                          CONDITIONS PRECEDENT TO LOAN

                  The obligation of the Lender to make the Loan is subject to
the Lender's waiver or satisfaction, by proper evidence, execution and/or
delivery to the Lender of each of the following items, each in form and
substance satisfactory to the Lender and the Lender's counsel:

                  Section 3.1       Loan Documents.

                  Each of the Loan Documents.

                  Section 3.2       Brokerage Commissions.

                  All brokerage commissions, finder's fees or similar
compensation in connection with the purchase of the Premises (if all or any
portion of the Premises is being purchased with Loan proceeds), the making of
the Loan, or the transactions contemplated by the Loan Documents have been paid
in full.

                  Section 3.3       Title Evidence.

                  An original signed title commitment in form and substance
satisfactory to the Lender, for a standard ALTA mortgagee policy as to the
Premises from a company or from companies approved by the Lender (including any
reinsurance agreements and endorsements required by the Lender), providing
coverage for the full principal amount of the Loan, containing such coverages
and endorsements as may be required by the Lender, together with copies of all
recorded documents creating exceptions to such policy.

                  Section 3.4       Survey.

                  Two (2) originals of the Survey.

                  Section 3.5       Insurance.

                  Each policy of insurance required by this Loan Agreement is
in full force and effect on the Closing Date.

                  Section 3.6       Authority Documents.

                  (a)      Organizational Documents. As applicable, a certified
copy of each limited partnership agreement, limited partnership certificate,
partnership agreement, articles of incorporation, bylaws, shareholder
agreements, articles of organization and operating agreement of the Borrower
and each Borrower Principal (when not an individual), and each general partner,
member or shareholder of the Borrower, with all amendments, modifications,
supplements and restatements thereto.

                  (b)      Assumed Name Certificate. A certified copy of each
assumed name certificate, if any, of the Borrower and each Borrower Principal
(when not an individual).



                                     -33-
<PAGE>   39

                  (c)      Good Standing Certificates. Good standing
certificates, or their equivalent, issued by the Secretary of State and all
other appropriate offices of the state of organization of the Borrower and each
Borrower Principal (when not an individual) and evidence satisfactory to the
Lender of the Borrower's and each such Borrower Principal's authorization to do
business in each state where an Individual Property is located if the state of
the Borrower's and each such Borrower Principal's organization is other than
the state where such Individual Property is located.

                  (d)      Resolutions and Consents. Certified resolutions
and/or consents authorizing the Borrower and each Borrower Principal (when not
an individual) to enter into the Loan Documents.

                  Section 3.7       Financial Statements and Operating
Statements.

                  Financial Statements of the Borrower and each Borrower
Principal as of the end of the most recent fiscal year, together with Operating
Statements for the period from the beginning of the current fiscal year and
ending on a date not more than sixty (60) days prior to the Closing Date.

                  Section 3.8       Opinions.

                  Opinions of independent counsel to the Borrower in form and
substance acceptable to the Lender, dated as of the Closing Date including,
without limitation, an opinion with respect to the due execution and
enforceability of the Loan Documents and an opinion that in the event of a
bankruptcy proceeding involving an Affiliate of Borrower the assets of Borrower
including the Premises shall not be substantively consolidated with the assets
of the Affiliate.

                  Section 3.9       Compliance with Laws.

                  The Premises and the Intangible Personalty, and the intended
uses thereof, comply in all material respect with all Requirements of Law.

                  Section 3.10      Agreements.

                  Copies of all operating agreements, service contracts, labor
contracts, license agreements and equipment leases, if any, relating to the
Borrower's ownership and operation of the Premises executed by or binding
against Borrower. Copies, of any and all franchise agreements, purchase
contracts, comfort letters, Subordination Agreements and Nondisturbance
Agreements, relating to the Premises.

                  Section 3.11      Taxes.

                  The Land and the Improvements are separately assessed for tax
purposes, together with tax parcel identification numbers, tax rates, estimated
tax values and the identities of the taxing authorities.




                                     -34-
<PAGE>   40

                  Section 3.12      Utilities.

                  The availability and suitability of the water, storm water,
electric, oil, natural gas, sewer and telephone utilities needed to properly
service the Premises in its intended use.

                  Section 3.13      Reserve Accounts.

                  The establishment of each Reserve Account with balances equal
to any Initial Reserve Deposit thereto required by this Loan Agreement
(including the Program Rider) or any of the other Loan Documents.

                  Section 3.14      Engineering Report.

                  An Engineering Report.

                  Section 3.15      Certificate of Occupancy and Other Permits.

                  Such certificates of occupancy, permits and licenses as the
Lender may require to evidence that the Premises is suitable for occupancy and
use.

                  Section 3.16      Environmental Assessment and O&M Program.

                  An Environmental Assessment of the Premises. The Borrower
shall furnish and adopt an O&M Program, to the extent recommended by an
Environmental Assessment with respect to all Hazardous Materials, if any,
identified in such Environmental Assessment or as otherwise reasonably required
by the Lender.

                  Section 3.17      Appraisal.

                  An Appraisal.

                  Section 3.18      Equity.

                  The Borrower's equity as of the Closing Date is acceptable to
the Lender.

                  Section 3.19      Debt Service.

                  As of the Closing Date, the Borrower's: (a) Debt Service
Coverage Ratio Premises shall be a minimum of 2.30x and; (b) Debt Service
Coverage Ratio Leases shall be a minimum of 2.05x.

                  Section 3.20      Loan to Value Ratio.

                  The loan to value ratio as calculated for the Premises by
Lender in its sole discretion is less than 50%.



                                     -35-
<PAGE>   41

                  Section 3.21      Special Purpose Entity.

                  The Borrower is a Special Purpose Entity.

                  Section 3.22      Miscellaneous.

                  All other documents or items set forth in the Commitment
(including all supplement and special conditions included in the Commitment) or
otherwise required by the Lender.


                                  ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

                  To induce the Lender to enter into this Agreement and to make
the Loan, the Borrower hereby represents and warrants and, where specifically
indicated, each Borrower Principal hereby represents and warrants (but only for
purposes of each Borrower Principal's obligations under the recourse provisions
of Section 8 of the Note), to the Lender (for itself, but not otherwise) on the
Closing Date as follows:

                  Section 4.1       Existence; Compliance with Law.

                  The Borrower and each Borrower Principal (when not an
individual) (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has the power and
authority, and the legal right, to own and operate its property, to lease the
property it operates as lessor and to conduct the business in which it is
currently engaged, (c) is duly qualified to do business in and is in good
standing under the laws of each jurisdiction where an Individual Property is
located and where its ownership, lease or operation of property or the conduct
of its business requires such qualification and (d) is in compliance with all
Requirements of Law.

                  Section 4.2       Equity Interests.

                  The owners (beneficial and otherwise) of all of the Equity
Interests in the Borrower are as set forth in Exhibit A and have been duly
authorized, are validly issued and outstanding, fully paid and non-assessable.
There are no outstanding options or other rights pertaining to the Equity
Interests in the Borrower, and no voting trust or similar agreement affecting
either ownership of or the right to vote such Equity Interests (except for
those items detailed in the Borrower's operating agreement or certificate of
incorporation).

                  Section 4.3       Power; Authorization; Enforceable
Obligations.

                  The Borrower and each Borrower Principal (when not an
individual) has all requisite legal power and authority, and the legal right,
to make, deliver and perform each Loan Document to which it is, or is to be, a
party and to borrow hereunder, and has taken all necessary corporate,
partnership or company action (as the case may be) to authorize the execution,
delivery and performance of each Loan Document to which it is, or is to be, a
party and to




                                     -36-
<PAGE>   42

authorize the borrowings on the terms and conditions of this Agreement and the
Note. No consent or authorization of, filing with, notice to or other act by or
in respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of any Loan Document, except to the
extent specified in any such Loan Document. Each Loan Document has been (or
will be) duly executed by, and delivered on behalf of the Borrower and the
Borrower Principals, as the case may be. Each Loan Document constitutes (or
when executed and delivered will constitute) the legal, valid and binding
obligation, enforceable against the Borrower and the Borrower Principals, as
the case may be, in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
sequestration, liquidation, consolidation or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).

                  Section 4.4       No Legal Bar.

                  The execution, delivery and performance of the Loan Documents
will not violate any Requirement of Law applicable to the Borrower and the
Borrower Principals or any contractual obligation, security, agreement,
instrument, license or other undertaking by which the Borrower or the Borrower
Principal is bound and will not result in, or require, the creation or
imposition of any Lien (other than under the Loan Documents) on any of their
properties or revenues pursuant to any such Requirement of Law or contractual
obligation, security, agreement, instrument, license or other undertaking.

                  Section 4.5       No Litigation.

                  No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Borrower and the Borrower Principals, threatened against any of them or any of
their properties or revenues, or with respect to any Loan Document or any of
the transactions contemplated thereby, which would have a material adverse
effect on Borrower or Borrower Principal, and the Borrower is not a surety on
any bond through which a Lien might be created superior to the Security
Instrument.

                  Section 4.6       No Default.

                  The Borrower is not in default under, or with respect to, any
contractual obligation, security, agreement, instrument, license or other
undertaking by which the Borrower is bound which is in excess of $100,000.00.
The Borrower Principal is not in default under, or with respect to, any
contractual obligation, security, agreement, instrument, license or undertaking
by which the Borrower Principal is bound which would materially affect the
Borrower Principal's obligations under the Note. No Default Condition or Event
of Default has occurred and is continuing.

                  Section 4.7       Solvency; Fraudulent Conveyance.

                  The Borrower and each Borrower Principal is solvent and will
not be rendered insolvent by the transactions contemplated hereby and, after
giving effect to such transactions,




                                     -37-
<PAGE>   43

will not be left with an unreasonably small amount of capital with which to
engage in its business. Neither the Borrower nor the Borrower Principal intends
to incur, or believes that it has incurred, debts beyond its ability to pay
such debts as they mature. Neither the Borrower nor the Borrower Principal has
commenced or filed nor contemplates the commencement or filing of any
bankruptcy, insolvency, reorganization, moratorium, sequestration, liquidation,
consolidation or similar proceedings or the appointment of a receiver,
liquidator, assignee, conservator, trustee, sequestrator or similar official in
respect of it or any of its assets. The amount of the Loan constitutes
reasonably equivalent value and fair consideration for the transfer to the
Lender of the interest in the Premises represented by the Security Instrument.
Neither the Borrower nor the Borrower Principal is transferring any interest in
the Premises with any intent to hinder, delay or defraud any of its creditors.

                  Section 4.8       Special Purpose Entity.

                  The Borrower is a Special Purpose Entity.

                  Section 4.9       Taxes.

                  The Borrower and each Borrower Principal, respectively, has
filed or caused to be filed all tax returns which are required to be filed and
has paid all taxes shown to be due and payable on said returns and on any
assessments made against it and any of its property and, to its knowledge, all
other taxes, fees and other charges imposed on it and any of its property by
any Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with Required Accounting Standards have
been provided on its books). No tax Lien has been filed with respect to any
such tax, fee or other charge. To its knowledge, no claim is being asserted
with respect to any such tax, fee or other charge which, in either case, could
reasonably be expected to have a material adverse change with respect to the
Borrower or the Premises.

                  Section 4.10      No Burdensome Restrictions.

                  Neither the Borrower nor the Borrower Principal is a party to
or subject to any contractual obligation, security, agreement, instrument,
license or other undertaking by which the Borrower or such Borrower Principal
is bound (other than the Loan Documents) which has had or could reasonably be
expected to have a material adverse effect on the business, properties, assets,
operations or condition, financial or otherwise, of it, or on the ability of it
to carry out its obligations hereunder or under the other Loan Documents.
Notwithstanding anything contained herein to the contrary, Lender has consented
to that certain Revolving Line of Credit entered into by Borrower Principal
under which Lender serves as Agent.

                  Section 4.11      Investment Company Act; Other Regulations.

                  Neither the Borrower nor the Borrower Principal is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. Neither
the Borrower nor the Borrower Principal is subject




                                     -38-
<PAGE>   44

to regulation under any Requirement of Law which limits its ability to incur
Obligations, other than as set forth herein or in the other Loan Documents.

                  Section 4.12      Subsidiaries.

                  The Borrower has no Subsidiaries.

                  Section 4.13      Title to Premises.

                  The Borrower is seized of the Land and Improvements (and any
fixtures) in fee, or is the owner of a leasehold interest in the Land and
Improvements (and any fixtures) pursuant to a Ground Lease, and has marketable
title to any appurtenant easements and has the right to convey the same, that
title to such property is free and clear of all encumbrances except for the
Permitted Encumbrances, and that it will warrant and defend the title to such
property (except for the Permitted Encumbrances) against the claims of all
Persons. As to the balance of the Premises, the Rents and Profits and the
Intangible Personalty, the Borrower represents and warrants that it has
marketable title to such property, that it has the right to convey such
property and that it will warrant and defend such property against the claims
of all persons or parties.

                  Section 4.14      Ownership of Personalty.

                  The Borrower owns, subject to no Lien other than the Lien of
the Security Instrument and the other Loan Documents, as appropriate, all of
the Personalty.

                  Section 4.15      Financial Statements.

                  As of the date of the most recent Financial Statement
furnished to the Lender, neither the Borrower nor the Borrower Principal had
any material (a) indebtedness for borrowed money or for the deferred purchase
price of property or services, as evidenced by bonds, notes or other similar
instruments or agreements, (b) obligations as a lessee under leases which shall
have been or should be, in accordance with Required Accounting Standards,
recorded as capital leases, (c) obligations under direct or indirect guaranties
in respect of, or any obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or any obligations of another of the kind referred to in
clause (a) or (b) above, (d) contingent liability or liability for taxes, or
(e) long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction, which is not, to the extent required by Required Accounting
Standards, reflected in the foregoing statements or in the notes thereto. No
sale, transfer or other disposition by the Borrower or the Borrower Principal
of any material part of its business or property has occurred since the date of
such party's most recent Financial Statement furnished to the Lender.

                  Section 4.16      No Change.

                  There has been no development or event which has had or could
reasonably be expected to have a material adverse change (a) with respect to
the Borrower or the Borrower Principal since the date of such party's most
recent Financial Statement furnished to the Lender,




                                     -39-
<PAGE>   45

or (b) with respect to the Premises or any portion of the Intangible Personalty
since the date of the most recent Operating Statements furnished to the Lender.

                  Section 4.17      Management Agreement.

                  As of the date hereof, there are no Management Agreements,
other than the Operating Lease, in place on any Individual Property.

                  Section 4.18      Accuracy of Information.

                  (a)      Each exhibit, Financial Statement, Operating
         Statement, Rent Roll, document, book, record, report and other item of
         written information furnished by the Borrower or the Borrower
         Principals, as the case may be, to the Lender in connection with the
         Loan Documents is accurate as of its date and as of the date so
         furnished and (b) all financial projections contained therein are
         based on reasonable and stated assumptions, and no such document
         contains any material misstatement of fact or omits to state a
         material fact.

                  Section 4.19      Principal Place of Business.

                  The Borrower's principal place of business and chief
executive office is at the location set forth in the first paragraph of this
Loan Agreement and it has not operated under any name other than its own name
at any time from the date of its formation.

                  Section 4.20      Taxpayer Identification Number.

                  The Borrower's taxpayer identification number is as set forth
in the Note.

                  Section 4.21      Insurance.

                  The Borrower does not know of and has not received any
written notice of any violation of any insurance policy term that remains
uncured and, to its best knowledge, it and the Premises and the use thereof
materially comply with all insurance policy terms.

                  Section 4.22      Mechanic's Liens, etc.

                  Except as have been paid for in full by the Borrower on or
before the Closing Date or as shall be paid prior to delinquency in the
ordinary course of the Borrower's business, no improvements or repairs have
been made to the Premises during the one hundred twenty (120) days preceding
the date hereof; there are no contracts not fully performed, and no outstanding
bills incurred, for labor or materials used in making improvements or repairs
on the Premises, or for services of architects, surveyors or engineers incurred
in connection therewith. The Borrower has made no contract or arrangement of
any kind whatsoever, the performance of which by the other party thereto could
give rise to a Lien on the Premises superior to that of the Security
Instrument.



                                     -40-
<PAGE>   46

                  Section 4.23      No Violation.

                  Except as disclosed to Lender, the Borrower has not received
any notice of, and, to the best of its knowledge is not in violation of any
Requirement of Law, any Hazardous Materials Law or any Governmental Action. To
the best of Borrower's knowledge, the Premises are in material compliance with
all Requirements of Law.

                  Section 4.24      ERISA.

                  (a)      The Borrower is not an "employee benefit plan" as
         defined in Section 3(3) of ERISA, which is subject to Title I of
         ERISA, (b) the assets of the Borrower do not constitute "plan assets"
         of one or more such plans within the meaning of 29 C.F.R.
         ss.2510.3-101, (c) neither the Borrower nor any of its general
         partners, members or shareholders, as the case may be, have any trust
         or custodial relationship with the Lender or any affiliate of the
         Lender with respect to any ERISA plan, and (d) neither the Borrower
         nor any general partner, member or shareholder of the Borrower is a
         participant in any governmental plan that has a trust or custodial
         relationship with the Lender or any affiliate of the Lender. The
         Borrower (i) is not a "governmental plan" within the meaning of
         Section 3(32) of ERISA and (ii) transactions by or with the Borrower
         are not subject to Requirements of Law regulating investments of and
         fiduciary obligations with respect to government plans.

                  Section 4.25      O&M Program.

                  The Borrower has adopted an O&M Program with respect to all
Hazardous Materials, if any, identified in the Environmental Assessment
furnished to the Lender prior to the Closing Date or as otherwise required by
the Lender.

                  Section 4.26      No Organizational Document Amendment.

                  At no time after the date hereof while the Loan is
outstanding shall the Borrower, nor any member or general partner of the
Borrower, amend or modify their respective organizational documents without the
prior written consent of Lender.

                  Section 4.27      Permitted Encumbrances.

                  The Permitted Encumbrances as set forth in the Security
Instrument do not materially or adversely affect the Lender's lien on the
Premises created by the Security Instrument, and do not materially or adversely
affect the use, operation or value of the Premises.

                  Section 4.28      Insolvency Opinion.

                  All of the assumptions made in that certain substantive
non-consolidation opinion letter dated the date hereof, delivered by Borrower's
counsel in connection with the Loan and any subsequent non-consolidation
opinion delivered in accordance with the terms and conditions of this Agreement
(the "Non-consolidation Opinion"), including, but not limited to, any exhibits
attached thereto, are true and correct in all respects.




                                     -41-
<PAGE>   47

                                   ARTICLE V
                            COVENANTS AND AGREEMENTS

                  Section 5.1       Affirmative Covenants of the Borrower.

                  During  any  period  in  which  the Loan is  outstanding,  the
Borrower agrees that it will:

                  (a)      Use of Loan Funds. Cause all Loan proceeds to be
         used for the purposes set forth in a loan closing statement approved
         by the Lender and use all excess Loan proceeds disbursed to the
         Borrower only for lawful business purposes permitted under the
         Borrower's organizational documents. No part of the proceeds of the
         Loan will be used for "purchasing" or "carrying" any "margin stock"
         within the respective meanings of each of the quoted terms under
         Regulation U of the Board of Governors of the Federal Reserve System
         as now and from time to time hereafter in effect or for any purpose
         which violates the provisions of the Regulations of such Board of
         Governors. If requested by the Lender, the Borrower will furnish to
         the Lender a statement to the foregoing effect in conformity with the
         requirements of FR Form U-1 referred to in said Regulation U. No part
         of the proceeds of the Loan has been used in any manner that could
         result in a violation of Regulations G, T, V or X of the Board of
         Governors of the Federal Reserve System.

                  (b)      Payment. Pay when due all sums owing to the Lender
         and others in accordance with the terms of the Loan Documents.

                  (c)      Fees, Costs and Expenses. Pay when due all fees,
         costs and expenses required to be paid by the Borrower pursuant to the
         terms of the Commitment or any of the other Loan Documents, including
         without limitation, reasonable attorneys fees and other fees, costs
         and expenses of the Lender in connection with the enforcement of the
         Lender's rights under the Loan Documents. Any such amounts payable by
         or reimbursable to the Lender shall be due and payable within ten (10)
         days after written demand.

                  (d)      Condition of Premises. Keep and maintain the
         Premises in good order, condition and repair and shall make, as and
         when the same shall become necessary, all repairs and maintenance
         necessary or appropriate in order to keep the Premises from
         deteriorating.

                  (e)      Compliance. Comply in all material respect with all
         (i) building, zoning, fire, health, environmental, disability and use
         laws (including, but not limited, to all state and local handicapped
         access laws, the Architectural Barriers Act of 1968, the Fair Housing
         Amendments Act of 1988, the Rehabilitation Act of 1973, the Americans
         with Disabilities Act of 1990 and similar laws and ordinances), codes,
         ordinances, rules and regulations, to the extent required by
         applicable Governmental Authorities, (ii) covenants and restrictions
         of record and (iii) easements which are in any way applicable to the
         Premises or any part thereof and the use or enjoyment thereof.

                  (f)      Inspection. Subject to the rights of any tenants of
         the Premises under their leases, permit the Lender and/or its
         authorized agents to enter upon the Premises during normal working
         hours and as often as the Lender desires, for the purpose of
         inspecting the




                                     -42-
<PAGE>   48

         Improvements specifically and the condition and operation of the
         Premises generally. In connection therewith, the Borrower shall permit
         the Lender and the Lender's representatives (including an independent
         Person such as an engineer, architect, or inspector) or third parties
         making Immediate Repairs, Replacements or Additional Repairs or
         Replacements to enter onto the Premises during normal business hours
         (subject to the rights of any tenants of the Premises under their
         leases) to inspect the progress of any Immediate Repairs, Replacements
         or Additional Repairs or Replacements and all materials being used in
         connection therewith, to examine all plans, specifications and shop
         drawings relating to such Immediate Repairs, Replacements or
         Additional Repairs or Replacements which are or may be kept at the
         Premises, and to complete any Immediate Repairs, Replacements or
         Additional Repairs or Replacements. The Borrower agrees to cause all
         contractors, subcontractors, agents, architects and inspectors
         reasonably to cooperate with the Lender and the Lender's
         representatives or such other Persons described above in connection
         with inspections or the completion of Immediate Repairs, Replacements
         or Additional Repairs or Replacements.

                  (g)      Reimbursement. The Borrower agrees that if it shall
         fail to pay when due any tax, assessment or charge levied or assessed
         against the Premises (other than the amount or validity of which are
         currently being contested in good faith by appropriate proceedings and
         with respect to which reserves in conformity with Required Accounting
         Standards have been provided on its books) or any utility charge,
         whether public or private, or any insurance premium or if it shall
         fail to procure the Insurance required hereunder and cause the
         delivery of the insurance certificates as required herein, or if it
         shall fail to pay any other charge or fee described herein, then the
         Lender, at its option, may pay, procure or cause the delivery of the
         same. The Borrower will reimburse the Lender upon demand for any sums
         of money paid by the Lender pursuant to this Section, together with
         interest on each such payment at the default rate set forth in the
         Note and all such sums and interest thereon shall be secured hereby.

                  (h)      Environmental Assessment. Provide to the Lender from
         time-to-time, at the Borrower's sole fee, cost and expense, if the
         Lender shall ever have reason to believe that any Hazardous Material
         adversely affects the Premises, or if any Governmental Action is made
         or threatened, or if an Event of Default shall have occurred, an
         Environmental Assessment, which Environmental Assessment shall have
         been ordered by the Borrower within ten (10) days after the Lender's
         request and which shall be delivered to the Lender promptly after the
         date of the Lender's request. At all other times, the Lender may
         request an Environmental Assessment to be provided by the Borrower at
         the Lender's expense. The Borrower will cooperate with each consulting
         firm making any Environmental Assessment and will promptly supply to
         the consulting firm, from time to time upon request, all information
         available to the Borrower to facilitate the completion of the
         Environmental Assessment. If the Borrower fails to furnish the Lender
         within ten (10) days after the Lender's request with a copy of an
         agreement with an acceptable environmental consulting firm to provide
         such Environmental Assessment, or if the Borrower fails to order such
         Environmental Assessment within ten (10) days after the Lender's
         request, the Lender may cause any such Environmental Assessment to be
         made at the Borrower's fee, cost, expense and risk. The Lender may
         disclose to interested parties any information the Lender ever has
         about the environmental condition or compliance of the Premises, but
         shall be under no duty to disclose any such information except as may
         be required by law. The Lender shall be under no duty to make any
         Environmental Assessment of the Premises, and in no event




                                     -43-
<PAGE>   49

         shall any such Environmental Assessment by the Lender be or give rise
         to a representation that any Hazardous Material is or is not present
         on the Premises, or that there has been or shall be compliance with
         any Hazardous Materials Law, nor shall the Borrower or any other
         Person be entitled to rely on any Environmental Assessment made by the
         Lender or at the Lender's request. The Lender owes no duty of care to
         protect the Borrower or any other Person against, or to inform them
         of, any Hazardous Material or other adverse condition affecting the
         Premises.

                  (i)      Appraisal. At all times during the term of the Loan,
         cooperate with the Lender and use its best efforts to assist the
         Lender in obtaining an Appraisal of the Premises, and will promptly
         supply to the Lender, from time to time upon request, all information
         available to the Borrower to facilitate the completion of the
         Appraisal. If any Event of Default occurs, or if a casualty loss or
         governmental taking occurs and results in insurance or eminent domain
         proceeds in excess of $50,000.00 for an Individual Property, the
         Lender may, in its reasonable discretion, choose the appraiser, but
         the Borrower shall be responsible for reasonable fees payable to said
         appraiser in connection with an Appraisal of the Premises. Under all
         other circumstances, the appraiser performing any such Appraisal shall
         be engaged by the Lender, and the Lender shall be responsible for any
         fees payable to said appraiser in connection with an Appraisal of the
         Premises.

                  (j)      Surveys. Following any material, structural change
         in the exterior configuration of the Premises or any rezoning
         affecting the Premises, provide the Lender with such additional
         Surveys as reasonably requested by the Lender.

                  (k)      Other Tests. Promptly submit to the Lender copies of
         reports of all physical tests at any time made on the Land, the
         Improvements or the materials to be incorporated into the Improvements
         and shall, at the Borrower's expense, cause to be made such additional
         tests from time to time as the Lender may reasonably require after any
         change in the Premises or receipt by the Lender of any such report.

                  (l)      Taxes and Fees. Except as otherwise provided herein,
         pay or cause to be paid as they become due all taxes, general and
         special assessments (other than the amount or validity of which are
         currently being contested in good faith by appropriate proceedings and
         with respect to which reserves in conformity with Required Accounting
         Standards have been provided on its books), permit fees, inspection
         fees, license fees, water and sewer charges, franchise fees and
         equipment rents against it or the Premises, and the Borrower, upon
         request of the Lender, will submit to the Lender receipts evidencing
         said payments.

                  (m)      Financial Statements and Operating Statements.
         Furnish, or cause to be furnished to the Lender, annual Financial
         Statements for Borrower and Borrower Principal. Monthly Operating
         Statements for the Premises shall be submitted to the Lender when
         requested by the Lender and for any period during which any Event of
         Default is continuing. Operating Statements for the Premises shall be
         delivered to the Lender within forty-five (45) days of the end of each
         of the Borrower's fiscal quarters, and an annual Financial Statements
         shall be submitted to the Lender within ninety (90) days (or one
         hundred twenty (120) days if such annual Financial Statements are
         audited) of the Borrower's fiscal year end in lieu of an Operating
         Statement for the Borrower's fourth fiscal quarter. Borrower Principal
         shall furnish




                                     -44-
<PAGE>   50

         Lender, on a quarterly basis, such financial information as Borrower
         Principal is required to file under any Requirements of Law. Without
         limiting any other rights available to the Lender under this Loan
         Agreement or any of the other Loan Documents, in the event the
         Borrower shall fail to timely furnish the Lender any Financial
         Statement in accordance with this subsection, the Borrower shall
         promptly pay to the Lender a penalty in the amount of $1,000.00 for
         each such failure. Notwithstanding anything to the contrary contained
         herein, Borrower shall cause to be provided to Lender copies of all
         financial information required to be provided to Borrower by the
         Operating Lessee pursuant to the Operating Lease.

                  (n)      Books and Records. Keep and maintain or cause to be
         kept and maintained at all times at the Premises, at the Borrower's
         address set forth herein, or at such other place as the Lender may
         approve in writing, complete and accurate books of accounts and
         records adequate to reflect correctly the results of the operation of
         the Premises and copies of all written contracts, leases and other
         instruments which affect the Premises (including, but not limited to,
         all bills, invoices and contracts for utilities, waste management
         service, telephone service and management services, rent registrations
         and all materials filed with any Governmental Authority where
         applicable). Such books, records, contracts, leases and other
         instruments shall be subject to examination and inspection at any time
         by the Lender upon reasonable prior notice.

                  (o)      Further Assurances. The Borrower shall furnish or
         cause to be furnished such further documentation or information
         (including without limitation, amendments, replacements, corrections,
         deletions or additions to the Loan Documents or any other materials
         furnished to the Lender in connection with the Loan) which is (i)
         reasonably required to enable the Lender to sell the Loan, or (ii)
         reasonably deemed necessary or appropriate by the Lender in the
         exercise of its rights under any of the Loan Documents or to perfect,
         protect, maintain, preserve, continue and/or extend any Lien granted
         to the Lender under the Security Instrument or any other Loan
         Document, provided, however, that the Borrower shall not be required
         to do anything that (A) has the effect of (I) changing the essential
         economic terms of the Loan set forth in the Loan Documents or (II)
         imposing greater liability under the Loan Documents, or (B) results in
         any substantial fee, cost or expense to the Borrower. In addition, the
         Borrower shall furnish or cause to be furnished such further
         documentation and information (including without limitation,
         amendments, replacements, corrections, deletions and additions to the
         Loan Documents and other materials furnished to the Lender in
         connection with the Loan) reasonably deemed necessary or appropriate
         by the Lender to correct patent mistakes in the Loan Documents,
         materials relating to title insurance policies and other insurance
         required hereunder, and the funding of the Loan, provided that any
         such further documentation or information shall be at the sole fee,
         cost and expense of the Lender.

                  (p)      Payment of Operating Expenses Premises and Operating
         Expenses Leases. Pay all Operating Expenses Premises and Operating
         Expenses Leases, except to the extent that: (i) the Lender is
         obligated to pay any Operating Expense on behalf of the Borrower from
         the Tax and Insurance Reserve Account, the Replacement Reserve
         Account, the Repair Escrow Account or other Reserve Accounts
         established pursuant to the Loan Documents or (ii) the Operating
         Lessee is obligated to pay any Operating Expense under the Operating
         Lease.



                                     -45-
<PAGE>   51

                  (q)      Payment of Recurring Capital Expenditures. Pay all
         expenditures with respect to the Premises, to the extent so required
         under the Operating Lease, Franchise Agreements or otherwise, related
         to capital repairs, replacements and improvements (other than
         Replacements) performed from time to time, except to the extent that
         Lender is required to pay such expenditures from any Reserve Account.

                  (r)      ERISA. Deliver to the Lender such certifications or
         other evidence from time to time throughout the term of the Loan, as
         requested by the Lender in its reasonable discretion, that (i) the
         Borrower is not an "employee benefit plan," a "governmental plan"
         and/or subject to state statutes regulating investments and fiduciary
         obligations with respect to governmental plans; and (ii) one or more
         of the following circumstances is true:

                           (A)      Less than twenty-five percent (25%) of all
                  Equity Interests in the Borrower are held by "benefit plan
                  investors" within the meaning of 29 C.F.R.
                  ss.2510.3-101(f)(2); and/or

                           (B)      The Borrower qualifies as an "operating
                  company" or a "real estate operating company" within the
                  meaning of 29 C.F.R. ss.2510.3-101(c) or (e).

                  (s)      Actions and Proceedings. Promptly notify the Lender
         in writing of any action or proceeding relating to any condemnation or
         other taking, whether direct or indirect, of the Premises or any
         portion thereof, or purporting to affect the Premises, any Loan
         Document or any right of the Lender hereunder or thereunder. In each
         such action or proceeding, the Borrower shall, unless otherwise
         directed by the Lender in writing, appear in and prosecute or defend
         any such action or proceeding. The Borrower hereby further authorizes
         the Lender to participate and appear in (at the Borrower's expense,
         including without limitation, the Lender's reasonable attorney's fees)
         any action or proceeding relating to any condemnation or other taking
         of the Premises, whether direct or indirect, and, following an Event
         of Default, to settle or compromise any claim in connection with such
         condemnation or other taking.

                  (t)      Completion of Immediate Repairs, Replacements and
         Additional Repairs or Replacements.

                           (i)      The Borrower shall commence the Immediate
                  Repairs immediately following the execution of this Agreement
                  (or as soon thereafter as weather reasonably shall permit)
                  and shall at all times thereafter diligently pursue the
                  completion of all Immediate Repairs. The Borrower shall
                  complete all Immediate Repairs no later than twelve (12)
                  months after the date of this Agreement. The Borrower
                  covenants and agrees that each of the Immediate Repairs,
                  Replacements and Additional Repairs or Replacements and all
                  materials, equipment, fixtures, and any other item comprising
                  a part of any Immediate Repair, Replacement or Additional
                  Repair or Replacement shall be constructed, installed or
                  completed, as applicable, free and clear of all mechanic's,
                  materialman's or other liens (except for those liens existing
                  on the date of this Agreement which have been approved in
                  writing by the Lender).



                                     -46-
<PAGE>   52

                           (ii)     If the Lender determines, in its reasonable
                  discretion, that Additional Repairs or Replacements are
                  advisable in order to keep the Premises in good order and
                  repair, the Lender may send the Borrower written notice of
                  the need for making such Additional Repairs or Replacements.
                  The Borrower shall promptly commence making such Additional
                  Repairs or Replacements. If the Borrower fails to commence
                  such Additional Repairs or Replacements within thirty (30)
                  days after such notice and diligently pursue completion of
                  such Additional Repairs or Replacements, such failure shall
                  be an Event of Default under this Loan Agreement, and, in
                  addition to all other rights the Lender may have under the
                  Loan Documents upon an Event of Default, the Lender may
                  contract with third parties to make such Additional Repairs
                  or Replacements and may in its sole discretion (A) apply the
                  funds in the Repair Escrow Account and/or Replacement Reserve
                  Account toward the labor and materials necessary to complete
                  such Additional Repairs or Replacements, and/or (B) demand
                  payment for such Additional Repairs or Replacements from the
                  Borrower.

                           (iii)    In the event the Lender determines in its
                  reasonable discretion that any Immediate Repair, Replacement
                  or Additional Repair or Replacement has not been completed in
                  a workmanlike and timely manner, the Lender shall have the
                  option to withhold disbursement from the Reserve Accounts for
                  such unsatisfactory Immediate Repair, Replacement or
                  Additional Repair or Replacement and to proceed under
                  existing contracts or to contract with third parties to
                  complete such Immediate Repair, Replacement or Additional
                  Repair or Replacement and to apply the Repair Escrow Account
                  or the Replacement Reserve Account toward the labor and
                  materials necessary to complete such Immediate Repair,
                  Replacement or Additional Repair or Replacement to the
                  reasonable satisfaction of the Lender, without providing any
                  prior notice to the Borrower.

                           (iv)     In order to facilitate the Lender's
                  completion or making of the Immediate Repairs, Replacements
                  or Additional Repairs or Replacements, the Lender is granted
                  the irrevocable right to enter onto the Premises and perform
                  any and all work and labor necessary to complete or make the
                  Immediate Repairs, Replacements or Additional Repairs or
                  Replacements and employ watchmen to protect the Premises from
                  damage, loss and/or theft. All sums so expended by the Lender
                  shall be deemed to have been advanced to the Borrower and
                  secured by the Security Instrument and the other Loan
                  Documents.

                           (v)      All Immediate Repairs, Replacements and
                  Additional Repairs or Replacements shall comply with all
                  Requirements of Law and applicable insurance requirements
                  including, without limitation, applicable building codes,
                  special use permits, environmental regulations, and
                  requirements of insurance underwriters.

                  (u)      Assumptions in Non-consolidation Opinion. Borrower
         has complied and will comply with all of the assumptions made with
         respect to it in the Non-consolidation Opinion including, without
         limitation those set forth in that certain Non-consolidation Opinion,
         dated the date hereof, given by Hunton & Williams, attached as Exhibit
         I hereto and made a part hereof.



                                     -47-
<PAGE>   53

         Each entity other than the Borrower with respect to which an
         assumption is made in the Non-consolidation Opinion has complied and
         will comply with all of the assumptions made with respect to it in the
         Non-consolidation Opinion, including without limitation those set
         forth in that certain Non-consolidation Opinion, dated the date
         hereof, given by Hunton & Williams, attached as Exhibit I hereto and
         made a part hereof.

                  (v)      Program Rider. Comply with all covenants and
         agreements set forth in the Program Rider.

                  (w)      Operating Lease. Comply with all covenants,
         obligations and agreements contained in the Operating Lease. Borrower
         will exercise any and all cure rights under the Operating Lease in
         order to cure any breach by Borrower or any Affiliate of Borrower as
         Lessor thereunder.

                  (x)      Franchise Agreements. Borrower shall, at all times
         during the term of the Loan maintain or cause to be maintained
         Franchise Agreements for each of the Individual Properties.

                  (y)      REIT Status. Borrower Principal shall, at all times
         during the term of the Loan maintain its status as a Real Estate
         Investment Trust, unless otherwise consented to by Lender.

                  Section  5.2      Negative Covenants of the Borrower.

                  During any period in which the Loan is outstanding, the
Borrower agrees that it will not:

                  (a)      Sale or Encumbrance of Personalty. Sell, encumber or
         otherwise dispose of any of the Personalty except (i) to incorporate
         Tangible Personalty into the Improvements or replace Tangible
         Personalty with goods of quality and value at least equal to that
         replaced, or (ii) for the sale, disposal or use of inventory, if any,
         in the ordinary course of the Borrower's business at the Premises;
         provided, however, in the event the Borrower sells or otherwise
         disposes of any of the Personalty, the Lender's security interest in
         the proceeds of the Personalty shall continue pursuant to the Security
         Instrument and the other Loan Documents, as appropriate.

                  (b)      Construction. Construct or permit the construction
         of any material, structural improvements on the Premises other than
         Immediate Repairs or Replacements or as otherwise required hereunder
         or previously consented to in writing by the Lender, which consent
         shall not be unreasonably withheld, conditioned or delayed.

                  (c)      Change in Ownership; Identity of the Borrower.
         Subject to Section 5.2(d) hereof, permit any sale, transfer,
         assignment or other disposition of, or grant or create any Lien on
         (each a "Transfer"), any of the following interests in the Borrower
         except that:

                           (1)      Holders of membership/partnership interests
                  in Borrower and beneficiaries of holders of interests of
                  Borrower as of the date of this




                                     -48-
<PAGE>   54

                  Agreement (the "Interest Holders") shall have the right to
                  Transfer their interest in Borrower (or any entity directly
                  or indirectly holding a membership interest in Borrower)
                  without Lender's consent; provided, however, that (i) after
                  taking into account any prior Transfers pursuant to this
                  section, whether to the proposed transferee or otherwise, no
                  such Transfer (or series of Transfers) shall result in (x)
                  the proposed transferee, or any affiliates thereof, owning in
                  the aggregate (directly, indirectly or beneficially) forty
                  nine percent (49%) or more of the interests in Borrower (or
                  any entity directly or indirectly holding a membership
                  interest in Borrower), or (y) a Transfer in the aggregate of
                  forty nine percent (49%) or more of the interests in Borrower
                  as of the date hereof, (ii) no such Transfer of interest
                  shall result in a change of control of Borrower or the day to
                  day operations of the secured Premises, (iii) Borrower shall
                  give Lender notice of such Transfer together with copies of
                  all instruments effecting such Transfer not less than fifteen
                  (15) business days prior to the date of such Transfer; (iv)
                  no Event of Default has occurred and remains uncured; and (v)
                  the legal and financial structure of Borrower after such
                  Transfer and its shareholders, partners or members, as
                  applicable, and the Special Purpose Entity nature of Borrower
                  satisfies Lender's and the Rating Agency's then current
                  applicable underwriting criteria and requirements including,
                  without limitation, the requirement at the request of Lender,
                  to deliver evidence reasonably satisfactory to Lender that
                  the Special Purpose Entity nature of Borrower following such
                  Transfer is in accordance with the standards of the Rating
                  Agencies or, if a Securitization has occurred, the Rating
                  Agencies rating the Securities in the Securitization
                  (including, in such event written confirmations from such
                  Rating Agencies that such Transfer or series of Transfers
                  will not result in a requalification, reduction or withdrawal
                  of the ratings then applicable to such Securities), and
                  Opinions of Counsel (including a Non-consolidation Opinion)
                  as may be reasonably requested by Lender and the Rating
                  Agencies. Notwithstanding anything to the contrary contained
                  herein, the managing member of Borrower shall not have the
                  right to Transfer any interest in Borrower without Lender's
                  consent.

                           (2)      Transfers by any of the Interest Holders of
                  their direct or indirect interests in Borrower (or any entity
                  that directly or indirectly holds a membership interest in
                  Borrower) which result in (x) the proposed transferee, or any
                  affiliates thereof, owning in the aggregate (directly,
                  indirectly or beneficially) forty nine percent (49%) or more
                  of the interests in Borrower (or any entity directly or
                  indirectly holding a membership interest in Borrower), or (y)
                  a Transfer in the aggregate of forty nine percent (49%) or
                  more of the interests in Borrower as of the date hereof, or
                  (z) which are Transfers by the managing member of Borrower
                  shall be permitted only with the Lender's prior written
                  consent, which shall not be unreasonably withheld; provided
                  that such Transfer must comply with the




                                     -49-
<PAGE>   55

                  provisions of clauses (iii), (iv) and (v) of subparagraph (1)
                  above, and clauses (A) through (D) below:

                                    (A)      The Interest Holder shall pay to
                           the Lender all reasonable and customary expenses
                           incurred by the Lender in connection with any such
                           Transfer and a processing fee in an amount equal to
                           the 1% of the outstanding principal amount of the
                           Loan as of the date the Borrower requests the Lender
                           to consent to such Transfer.

                                    (B)      With respect to any Transfer
                           requested or occurring prior to the sale of the Loan
                           by the Lender in the secondary market, the
                           consideration paid or to be paid by the assignee or
                           purchaser in connection with the Transfer shall not
                           be less than the appraised value of the Premises
                           used by the Lender in underwriting the Loan, as
                           determined by the Lender in its reasonable judgment,
                           multiplied by the percentage of interests (direct or
                           indirect) being transferred in the Borrower. The
                           Borrower shall furnish the Lender at the Borrower's
                           sole cost and expense such information as the Lender
                           shall request in connection with any Transfer,
                           including without limitation, an Appraisal or other
                           evidence satisfactory to the Lender in its
                           reasonable discretion of the value of the Premises
                           as of the date of the Transfer.

                                    (C)      The assignee or purchaser must
                           meet Lender's reasonable underwriting standards
                           concerning, including without limitation, its net
                           worth and operating history, as determined by Lender
                           in its sole reasonable discretion.

                                    (D)      No Transfer shall relieve the
                           Borrower of its Obligations under this Loan
                           Agreement or any of the other Loan Documents.

                  (d)      Notwithstanding anything to the contrary contained
         in this Loan Agreement, the Security Instrument or any other Loan
         Documents, Lender's consent shall not be required for any of the
         following sales, transfers, assignments, pledges, conveyances or
         encumbrances, provided that Lender has received payment in full of all
         its actual expenses incurred in connection therewith:

                           (i)      with respect to the REIT and any holders of
                  interests therein, directly or indirectly, (A) Transfer of
                  all or any portion of any shares of beneficial interests of
                  the REIT for so long as the shares of the REIT continue to be
                  publicly traded on a national stock exchange and (B) the
                  issuance of additional shares of the REIT;

                           (ii)     with respect to the Operating Partnership
                  and any holders of interests therein, (A) any Transfer
                  (direct or indirect) of limited partnership interests in the
                  Operating Partnership and (B) the issuance of additional
                  limited partnership units or other securities, even if such
                  issuance results in a reduction of the partnership interest
                  of the REIT in the Operating Partnership, provided that,
                  after giving effect to such transfer or




                                     -50-
<PAGE>   56

                  series of transfers described in (A) or (B), the REIT owns
                  more than fifty-one percent (51%) of the partnership
                  interests of the Operating Partnership or continues to be the
                  sole general partner of the Operating Partnership; or

                           (iii)    a Fundamental Transaction relating to the
                  REIT or the Operating Partnership.

                  (e)      As used herein , the term "Fundamental Transaction"
         shall mean any acquisition by, merger with or consolidation with or
         into, or sale of substantially all of its assets to, an entity (the
         "Successor") in which the following conditions have been satisfied as
         of the consummation of the transaction:

                            (i)     the Successor owns, directly or indirectly,
                  substantially all the assets which the Operating Partnership
                  owned immediately prior to the effective date of such merger,
                  consolidation or sale;

                            (ii)    the Successor agrees in writing to assume
                  all obligations of the Operating Partnership under the Loan
                  Documents to which the Operating Partnership is a party;


                            (iii)   upon the consummation of such transaction,
                  Successor shall either be owned by a Qualified Resultant
                  Owner or the Successor shall be owned by the executive
                  management of the REIT immediately prior to such transfer;

                            (iv)    Lender shall have confirmations in writing
                  from the Rating Agencies to the effect that such transfer
                  will not result in a re-qualification, reduction or
                  withdrawal of any rating then assigned to any Securities in a
                  Securitization;

                            (v)     with respect to any Individual Property
                  that is the subject of a Management Agreement, the Manager
                  shall be either the Manager immediately prior to such
                  transfer or a Qualified Manager, and any new Management
                  Agreement shall be reasonably satisfactory to Lender;

                            (vi)    with respect to any Individual Property
                  that is the subject of an Operating Lease, the Operating
                  Lessee shall be either the Operating Lessee immediately prior
                  to such transfer or a Qualified Operating Lessee, and any new
                  Operating Lease shall be reasonably satisfactory to Lender;

                            (vii)   the Premises will be owned by one or more
                  special purpose bankruptcy remote entities and a
                  non-consolidation opinion acceptable to Lender and the Rating
                  Agencies has been delivered with respect to any Successor;
                  and

                            (viii)  Lender has received no less than forty-five
                  (45) days' prior written notice of such transfer.

         The Borrower hereby acknowledges to the Lender that (i) the identity
         of the Borrower and the expertise available to the Borrower were and
         continue to be material circumstances upon which the Lender has relied
         in connection with, and which constitute valuable consideration to the



                                     -51-
<PAGE>   57

         Lender for, the extending to the Borrower of the indebtedness
         evidenced by the Note and (ii) any change in such identity or
         expertise could materially impair or jeopardize the security for the
         payment of the Note granted to the Lender by the Security Instrument
         and the other Loan Documents, as appropriate.

                  (f)      Prepayment of Rent. Accept any prepayment of rent or
         installments of rent for more than two (2) months in advance without
         the prior written consent of the Lender.

                  (g)      No Other Name. Change its name or operate under any
         name other than its name as set forth herein.

                  (h)      No Restricted Payments. Without Lender's prior
         written consent, make any payment or take any other action
         constituting (i) any direct or indirect purchase or other acquisition
         by the Borrower of Equity Interests of any other Person, or any direct
         or indirect loan, advance (other than advances to employees for moving
         and travel expenses, drawing accounts and expenditures in the ordinary
         course of business) or capital contribution by the Borrower to any
         other Person, including all debt and any Obligation of any sort,
         and/or (ii) a payment or prepayment on account of, or the setting
         apart of assets for a sinking or other analogous fund for, the
         purchase, redemption, defeasance, retirement or other acquisition of
         subordinated debt, either directly or indirectly, whether in cash or
         in property or in obligations of any Person.

                  (i)      No Waste or Abandonment. Suffer, permit or commit
         affirmative waste, permit impairment or deterioration of, or abandon,
         the Premises or any portion thereof. The Borrower will not itself, or
         permit any tenant or other Person to, remove, demolish or alter any
         improvement now existing or hereafter erected on the Premises or any
         fixture, equipment or machinery in or on the Premises except in
         connection with any Repair or Replacement.

                  (j)      Use of Premises. Except as required by applicable
         law, or as otherwise permitted in writing by the Lender, allow any
         change in the business use of all or any portion of Premises from the
         use thereof as of the Closing Date.

                  (k)      Franchise Agreements. Borrower shall not amend or
         terminate any Franchise Agreement or permit Operating Lessee to
         terminate any Franchise Agreement.

                  Section  5.3      Environmental Covenants.

                  The Borrower hereby consents to:

                  (a)      Not cause, permit or exacerbate any Prohibited
         Activities or Conditions. The Borrower represents and warrants that it
         has not at any time caused or permitted any Prohibited Activities or
         Conditions except as set forth in the Environmental Assessment and
         that to its knowledge, no Prohibited Activities or Conditions exist or
         have existed on or under the Premises. The Borrower shall take all
         appropriate steps to prevent its employees, agents, and contractors,
         and any tenants from causing, permitting, or exacerbating any
         Prohibited Activities or Conditions. The Borrower shall not lease or
         allow the sublease or use of all or any portion of the Premises to any
         tenant, subtenant or user that, in the ordinary course of its
         business, would




                                     -52-
<PAGE>   58

         cause, permit, or exacerbate any Prohibited Activities or Conditions,
         and all leases, subleases and use agreements relating to the Premises
         shall contain provisions sufficient to ensure that tenants, subtenants
         and users shall not cause, permit or exacerbate any Prohibited
         Activities or Conditions.

                  (b)      Comply in a timely manner with, and cause all
         employees, agents, and contractors of the Borrower and any other
         persons present on the Premises to so comply with, (i) any O&M Program
         now or hereafter in effect during the term of the Loan, and (ii)
         Hazardous Materials Law, so as to minimize any economic loss to the
         Premises and the Loan. The Borrower shall adopt an O&M Program with
         respect to any Hazardous Materials as required in any Environmental
         Assessment or any Governmental Action relating to the Premises, or as
         otherwise reasonably required by the Lender with respect to the
         Premises. Any O&M Program shall be performed by qualified contractors
         under the supervision of a consulting engineer hired by the Borrower
         with the prior written approval of the Lender which approval shall not
         be unreasonably withheld, conditioned or delayed. All costs and
         expenses of any O&M Program shall be paid by the Borrower, including
         without limitation the charges of such contractors and consulting
         engineer and the Lender's reasonable fees, costs and expenses incurred
         in connection with the monitoring and review of the O&M Program and
         the Borrower's performance thereunder.

                  (c)      Promptly notify the Lender in writing of: (i) any
         Governmental Action it becomes aware of, (ii) any claim made or known
         by Borrower to be threatened by any third party against the Borrower,
         the Lender, or the Premises relating to loss or injury resulting from
         any occurrence or condition on the Premises or any other real property
         that could require the removal from the Premises of any Hazardous
         Materials or cause any restrictions on the ownership, occupancy,
         transferability or use of the Premises under Hazardous Materials Law,
         or (iii) the occurrence of any Prohibited Activities or Conditions.
         The Borrower shall cooperate with any governmental inquiry, and shall
         comply with any governmental or judicial order, request or directive
         which arises from any alleged Prohibited Activities or Conditions;
         provided that with respect to governmental requests or directives
         only, the Borrower may contest or object to a good faith dispute
         regarding said request or directive if the Borrower notifies the
         Lender in advance of said contest or objection and as long as said
         contest or objection does not result in a violation of law or fines
         assessed against the Premises unless such fines are bonded by Borrower
         in a manner acceptable to Lender in its sole discretion.

                  (d)      Pay promptly all reasonable costs and expenses
         incurred by the Lender in connection with any Governmental Action,
         including but not limited to costs of any environmental audits,
         studies, investigations or remedial activities including but not
         limited to the removal of any Hazardous Materials from the Premises.
         The Borrower also shall pay promptly the costs of any environmental
         audits, studies, investigations or the removal of any Hazardous
         Materials from the Premises required by the Lender as a condition of
         its consent to any sale or transfer of all or any part of the Premises
         or any interest therein or required by the Lender following a
         reasonable determination by the Lender that there may be Prohibited
         Activities or Conditions on or under the Premises. Any such reasonable
         costs or expenses incurred by the Lender (including but not limited to
         reasonable fees and expenses of attorneys and consultants, whether
         incurred in connection with any judicial or administrative process or



                                     -53-
<PAGE>   59

         otherwise) which the Borrower fails to pay promptly shall become
         additional indebtedness secured by the Security Instrument.

                  (e)      EXCEPT TO THE EXTENT ANY OF THE FOLLOWING IS THE
         RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER, HOLD
         HARMLESS, DEFEND AND INDEMNIFY THE LENDER AND ITS OFFICERS, DIRECTORS,
         TRUSTEES, EMPLOYEES, AGENTS, AFFILIATES (INCLUDING ANY PARENT
         CORPORATION), SUCCESSORS AND ASSIGNS, FROM AND AGAINST ALL
         PROCEEDINGS, CLAIMS, DAMAGES, PENALTIES, FEES, COSTS AND EXPENSES
         (INCLUDING WITHOUT LIMITATION REASONABLE FEES AND EXPENSES OF
         ATTORNEYS AND EXPERT WITNESSES, INVESTIGATORY FEES, AND CLEANUP AND
         REMEDIATION EXPENSES, WHETHER INCURRED IN CONNECTION WITH ANY JUDICIAL
         OR ADMINISTRATIVE PROCESS OR OTHERWISE), ARISING DIRECTLY OR
         INDIRECTLY FROM (i) ANY BREACH OF ANY REPRESENTATION, WARRANTY, OR
         OBLIGATION OF THE BORROWER CONTAINED IN THIS SECTION 5.3 OR (ii) THE
         PRESENCE OF HAZARDOUS MATERIALS ON OR UNDER THE PREMISES OR ANY
         PROPERTY PROXIMATE TO THE PREMISES OR ANY GOVERNMENTAL ACTION ALLEGING
         ANY SUCH PRESENCE, EXCEPT TO THE EXTENT THAT THE BORROWER CAN
         CONCLUSIVELY PROVE BOTH THAT SUCH PRESENCE OR GOVERNMENTAL ACTION
         ALLEGING SUCH PRESENCE WAS CAUSED SOLELY BY ACTIONS, CONDITIONS, OR
         EVENTS THAT OCCURRED AFTER THE DATE THAT THE LENDER (OR ANY PURCHASER
         AT A FORECLOSURE SALE) ACTUALLY ACQUIRED TITLE OR TOOK POSSESSION TO
         THE PREMISES AND THAT SUCH PRESENCE OR GOVERNMENTAL ACTION ALLEGING
         SUCH PRESENCE WAS NOT CAUSED BY THE DIRECT OR INDIRECT ACTIONS OF THE
         BORROWER OR THE BORROWER PRINCIPAL, OR ANY PARTNER, MEMBER, PRINCIPAL,
         OFFICER, DIRECTOR, TRUSTEE OR MANAGER OF THE BORROWER OR ANY EMPLOYEE,
         AGENT, CONTRACTOR OR AFFILIATE OF THE BORROWER OR THE BORROWER
         PRINCIPAL. THE OBLIGATIONS AND LIABILITIES OF THE BORROWER UNDER THIS
         SECTION 5.3(e) SHALL SURVIVE ANY TERMINATION, SATISFACTION,
         ASSIGNMENT, ENTRY OF A JUDGMENT OF FORECLOSURE OR DELIVERY OF A DEED
         IN LIEU OF FORECLOSURE OF THE SECURITY INSTRUMENT.

                  Section  5.4      Recourse Covenants.

                  Except as otherwise expressly permitted by the Loan
Documents, during any period in which the Loan is outstanding, the Borrower
agrees that it will not, without the prior written consent of the Lender:

                  (a)      Sale, Transfer, Conveyance or Disposal. Permit any
         sale, transfer, conveyance or other disposal of the Premises, the
         Rents and Profits or the Intangible Personalty.

                  (b)      Other Financing and Liens. Engage in any other
         financing with respect to the Borrower (except payables incurred with
         trade creditors in amounts not to exceed $100,000.00, provided such
         debt is not evidenced by a note and is not in excess of sixty days
         past due in the ordinary course of business and paid prior to
         delinquency), the Premises, the




                                     -54-
<PAGE>   60

         Rents and Profits or the Intangible Personalty or grant any consensual
         Liens against the Premises, the Rents and Profits or the Intangible
         Personalty. Nor shall Borrower or any member or partner of Borrower
         pledge any interest in Borrower without the prior written consent of
         Lender and without written confirmation from applicable Rating
         Agencies that such pledge will not result in a downgrade,
         qualification or withdrawal of the initial, or, if higher, then
         current ratings assigned to the Securities by such Rating Agency.

                  (c)      Special Purpose Entity. Fail to be a Special Purpose
         Entity.

                  Section  5.5      Insurance.

                  (a)      Maintenance of Insurance. The Borrower shall, or
         shall cause, at no cost or expense to Lender, keep in full force and
         effect all Insurance. If the Borrower fails to maintain, or cause to
         be maintained, any Insurance required by this Agreement, the Lender
         may, at its option, procure such Insurance, and the Borrower shall
         reimburse the Lender for the amount of all premiums paid by the Lender
         thereon promptly upon demand by the Lender, with interest thereon at
         the rate then provided by the Note from the date paid by the Lender to
         the date of repayment, and such sum shall be a part of the
         indebtedness secured by the Security Instrument. The Lender shall not
         by the fact of approving, disapproving, accepting, preventing,
         obtaining or failing to obtain any Insurance, incur any liability for
         or with respect to the amount of Insurance carried, the form or legal
         sufficiency of insurance contracts, solvency of insurance companies,
         or payment or defense of lawsuits, and the Borrower, for itself,
         hereby expressly assumes full responsibility therefor and all
         liability, if any, with respect thereto.

                  (b)      Insurance with Respect to Immediate Repairs,
         Replacements and Additional Repairs or Replacements. In addition to
         and to the extent not covered by any Insurance required under the Loan
         Documents, the Borrower shall provide or cause to be provided worker's
         compensation insurance, builder's risk, and public liability insurance
         and other insurance to the extent required under applicable law in
         connection with a particular Immediate Repair, Replacement or
         Additional Repair or Replacement reasonably required by the Lender.

                  (c)      Approved Insurers. Each of the Borrower's insurers
         shall be an Approved Insurer. If any of the Borrower's insurers shall
         at any time cease to be an Approved Insurer, then within thirty (30)
         days after notice from the Lender to the Borrower, the Borrower will
         obtain replacement Insurance or additional Insurance issued by one or
         more other Approved Insurers.

                  (d)      Form of Insurance Policies; Endorsements. All
         policies for Insurance shall be in such form and with such
         endorsements as are comparable to the forms of and endorsements to the
         Borrower's, or if applicable, its tenant's, insurance policies in
         effect on the date hereof or otherwise in accordance with commercially
         reasonable standards applied by prudent owners of similar businesses
         in the general vicinity of the Premises and generally acceptable to
         institutional lenders for comparable properties and risks. All such
         policies shall name the Lender, and its successors and assigns, as
         additional insureds, mortgagees and/or loss payees, as deemed
         appropriate by the Lender, and shall provide that all proceeds are
         payable to the Lender (except for any "non-property" insurance
         policies maintained by the Operating




                                     -55-
<PAGE>   61

         Lessee) and shall contain: (i) a standard "non-contributory mortgagee"
         endorsement or its equivalent relating, inter alia, to recovery by the
         Lender notwithstanding the negligent or willful acts or omissions of
         the named Borrower; (ii) to the extent available at commercially
         reasonable rates, a waiver of subrogation endorsement as to the
         Lender; (iii) an endorsement providing that no policy shall be
         impaired or invalidated by virtue of any act, failure to act,
         negligence of, or violation of declarations, warranties or conditions
         contained in such policy by the Borrower, any tenant at the Premises,
         the Lender or any other named insured, additional insured, mortgagee
         or loss payee, except for the willful misconduct of the Lender
         knowingly in violation of the conditions of such policy; (iv) an
         endorsement providing for a deductible per loss of an amount not more
         than that which is customarily maintained by prudent owners of similar
         businesses in the general vicinity of the Premises; (v) a provision
         that such policies shall not be canceled or amended, including,
         without limitation, any amendment reducing the scope or limits of
         coverage, without at least thirty (30) days prior written notice to
         the Lender in each instance, and (vi) effective waivers by the insurer
         of all claims for insurance premiums against any loss payees,
         additional insureds, mortgagees and named insureds (other than the
         Borrower). Any insurance coverage relating to the Premises that is
         carried by the Borrower or, if applicable, its tenant's, in excess of
         the Insurance required hereunder shall name the Lender, and its
         successors and assigns, as additional insureds, mortgagees and/or loss
         payees, as appropriate, as provided herein. A certificate executed by
         the Borrower's insurance consultant and other evidence of Insurance
         required by the Lender shall be delivered to the Lender not less than
         ten (10) days prior to the expiration date of any of the policies for
         Insurance required to be maintained hereunder which certificate and
         other evidence shall certify payment of applicable premiums for
         renewal and replacement policies. The Borrower may effect any
         Insurance required hereunder through blanket insurance policies. The
         Borrower shall deliver to the Lender certified copies of all policies
         for Insurance which shall be taken out upon the Premises while any
         part of the Loan shall remain unpaid.

                  (e)      Compliance with Insurance Policy Terms. The Borrower
         shall comply with all terms of policies for Insurance and shall not
         bring or keep or permit to be brought or kept any article upon the
         Premises or cause or permit any condition to exist thereon which would
         be prohibited by or could invalidate any Insurance required hereunder.

                  Section 5.6       Lockbox.

                  The Borrower has established as of the date hereof the
Lockbox Account, which Lockbox Account shall, in all respects, be governed by
the Cash Management Agreement.


                                  ARTICLE VI
                               RESERVE ACCOUNTS

                  Section 6.1       Establishment of Reserve Accounts.

                  On or before the Closing Date, the Lender shall establish
each Reserve Account. Each Reserve Account shall be under the sole dominion and
control of the Lender.




                                     -56-
<PAGE>   62

                  Section 6.2       Initial Reserve Deposits.

                  On the Closing Date, the Borrower shall pay to the Lender for
deposit into each Reserve Account any Initial Reserve Deposit applicable to
such Reserve Account.

                  Section 6.3       Monthly Reserve Deposits.

                  On each Payment Date, the Borrower shall pay to the Lender
for deposit into each Reserve Account any Monthly Reserve Deposit applicable to
such Reserve Account. The Lender may, upon written request from the Borrower,
waive any requirement for the payment of a Monthly Reserve Deposit, provided
however, that any such waiver by the Lender of a requirement that the Borrower
pay such Monthly Reserve Deposit may be revoked by the Lender, in the Lender's
sole discretion, at any time upon notice in writing to the Borrower.

                  Section 6.4       Replacement Reserve Account.

                  The Lender may, in the Lender's reasonable discretion, adjust
the Monthly Reserve Deposit to the Replacement Reserve Account from time to
time to an amount sufficient, in the Lender's reasonable judgment, to maintain
adequate balances necessary for Replacements, including, without limitation,
Additional Repairs or Replacements made pursuant to the terms of the Loan
Agreement and consistent with the requirements of the applicable Franchise
Agreement and Operating Lease. Notwithstanding the foregoing, in the event the
Lender shall at any time increase the Monthly Reserve Deposit to the
Replacement Reserve Account over the Monthly Reserve Deposit to the Replacement
Reserve Account then required pursuant to Exhibit B hereto, the Borrower, may
at its election, request that the Lender obtain, at the sole cost, fee and
expense of the Borrower, an engineering report from an engineer to be selected
by the Lender in its reasonable discretion, in which case the Monthly Reserve
Deposit to the Replacement Reserve Account shall be adjusted by the Lender
based on such engineering report, provided that in no event shall the Monthly
Reserve Deposit to the Replacement Reserve Account be decreased below the
applicable amount set forth on Exhibit B hereto. Following any defeasance of
any permitted portion of the Premises, or substitution of properties pursuant
to Section 2.6 hereof, and upon written request from Borrower, Lender will, at
Borrower's expense, commission an updated engineering report (from an engineer
selected by Lender) of the remaining portion of the Premises and, subject to
Lender's review and approval, the amount of the Monthly Deposit to the
Replacement Reserve Account shall be adjusted to reflect that the defeased
portion of the Premises no longer serves as collateral for the Loan.

                  Section 6.5       Permitted Investments, Earnings, Charges and
Annual Accounting.

                  (a)      Permitted Investments. The Lender may invest and
         reinvest, or cause to be invested or reinvested, all or any portion of
         any funds on deposit in any Reserve Account in Permitted Investments.
         The maturities of the Permitted Investments on deposit in any Reserve
         Account shall be selected and coordinated to become due not later than
         the day before any disbursements from any Reserve Account must be
         made. All such Permitted Investments shall be held in the name and be
         under the sole dominion and control of the Lender, to the extent
         permitted by applicable laws, and no Permitted Investment shall be
         made unless the Lender shall




                                     -57-
<PAGE>   63

         perfect its first priority Lien in such Permitted Investment and, to
         the extent permitted by applicable laws, the Lender shall have sole
         possession and control over each such Permitted Investment and the
         income thereon, and any certificate or other instrument or document
         evidencing any such investment shall be delivered directly to the
         Lender, together with any document of transfer necessary to transfer
         title to such investment to the Lender. The Lender shall not have any
         liability (other than for the Lender's gross negligence or willful
         misconduct) for any loss in investments of funds in any Reserve
         Account that are invested in Permitted Investments and no such loss
         shall affect the Borrower's obligation to (i) make any payment
         hereunder, under the Security Instrument, the Note or any other Loan
         Document, or (ii) fund, or have liability for funding, any Reserve
         Account. The Borrower agrees that it shall include all interest,
         earnings or profits on Permitted Investments of funds on deposit in
         any Reserve Account as its income (and, if the Borrower is a
         partnership or other pass-through entity, the partners, members or
         beneficiaries of the Borrower, as the case may be), and shall be the
         owner of such accounts for federal and applicable state and local tax
         purposes, except to the extent the Lender retains such interest,
         earnings or profits for its own account in accordance with the
         provisions of Section 6.5(b) of this Loan Agreement. The Borrower
         shall have no right whatsoever to direct the investment of the
         proceeds in any Reserve Account.

                  (b)      Earnings. All interest, earnings or profits on the
         Permitted Investments of funds in any of the Reserve Accounts shall be
         deposited into the applicable Reserve Account, provided that the
         Lender may, at its election, retain for its own account any such
         interest, earnings or profits (i) on the Tax and Insurance Reserve
         Account, and (ii) on any or all of the Reserve Accounts during the
         occurrence and continuance of an Event of Default.

                  (c)      Charges. Except as prohibited by applicable laws,
         the Lender may charge the Borrower for holding, maintaining and
         applying funds in any of the Reserve Accounts to the extent funds on
         deposit in such Reserve Account are invested or reinvested in
         Permitted Investments and the Lender does not retain for its own
         account any interest, earnings or profits on such Reserve Account in
         accordance with the provisions of Section 6.5(b) of this Loan
         Agreement.

                  (d)      Annual Accounting. The Lender shall furnish or cause
         to be furnished to the Borrower, without charge, an annual accounting
         of each Reserve Account in the normal format of the Lender or its
         agent, showing credits and debits to such Reserve Account and the
         purpose for which each debit to such Reserve Account was made.

                  Section  6.6      Assignment to the Lender of Reserve
Accounts and Rights and Claims.

                  (a)      The Borrower hereby assigns to the Lender the
         Reserve Accounts as additional security for all of the Borrower's
         Obligations to the Lender, under the Note and under the other Loan
         Documents; provided, however, the Lender shall make disbursements from
         the Reserve Accounts in accordance with the terms of this Agreement,
         including without limitation, the Program Rider.



                                     -58-
<PAGE>   64

                  (b)      The Borrower assigns to the Lender all rights and
         claims the Borrower may have against (i) all persons or entities
         claiming amounts due for taxes, utilities, rent or insurance, or (ii)
         all persons or entities supplying labor or materials in connection
         with the Immediate Repairs, Replacements or Additional Repairs or
         Replacements; provided, however, that the Lender may not pursue any
         such right or claim unless an Event of Default exists under this
         Agreement or the Loan Documents.

                  Section  6.7      Application of Reserve Accounts Upon an
Event of Default.

                  If any Event of Default occurs, then the Borrower shall
immediately lose all of its rights to receive disbursements from the Reserve
Accounts unless and until the earlier to occur of or concurrently with (a) the
date on which such Event of Default is fully cured, and (b) the date on which
all amounts secured by the Security Instrument and the other Loan Documents
have been paid in full and the lien of the Security Instrument and the other
Loan Documents, as appropriate, have been released by the Lender. Upon any
Event of Default, the Lender may in its sole discretion, use the Reserve
Accounts (or any portion thereof) for any purpose, including but not limited to
(i) repayment of any indebtedness secured by the Security Instrument and the
other Loan Documents, including but not limited to principal prepayments and
the prepayment premium applicable to such full or partial prepayment (as
applicable); provided, however, that such application of funds shall not cure
or be deemed to cure any Event of Default, (ii) reimbursement of the Lender for
all losses, fees, costs and expenses (including, without limitation, reasonable
legal fees) suffered or incurred by the Lender as a result of such Event of
Default, (iii) payment of any amount expended in exercising all rights and
remedies available to the Lender at law or in equity or under this Agreement or
under any of the other Loan Documents, or (iv) to the payment of any item for
which payment is required or permitted from any of the Reserve Accounts
pursuant to the terms of this Loan Agreement. Nothing in this Loan Agreement
shall obligate the Lender to apply all or any portion of the Reserve Accounts
on account of any Event of Default by the Borrower or to pay the indebtedness
secured by the Security Instrument or any of the other Loan Documents or in any
specific order of priority.

                  Section 6.8       Disbursements from Tax and Insurance
Reserve Account.

                  (a)      The Lender shall disburse, to the extent of amounts
         on deposit in the Tax and Insurance Reserve Account, directly to each
         Person owed any portion of the water and sewer assessments and
         frontage charges, taxes, assessments and insurance premiums, the total
         sum owed to such Person. Such disbursements shall be made by the
         Lender (i) so as to coincide in frequency with the regular billing
         cycle of such Person, and (ii) on or before the date that each such
         payment is due.

                  (b)      The Lender may require the Borrower to pay to the
         Lender in advance, additional amounts for taxes, charges, premiums,
         assessments, and impositions in connection with the Borrower or the
         Premises which the Lender shall reasonably deem necessary. Unless
         otherwise provided by applicable law, the Lender may require payments
         for such other amounts to be paid by the Borrower in a lump sum or
         periodic installments, at the Lender's option.




                                     -59-
<PAGE>   65

                  (c)      If the amount held in the Tax and Insurance Reserve
         Account at the time of the annual accounting thereof shall exceed the
         amount deemed necessary by the Lender to provide for the payment of
         water and sewer assessments and frontage charges, taxes, assessments,
         impositions and insurance premiums, as they fall due, such excess
         shall be credited against future Monthly Reserve Deposits to the Tax
         and Insurance Reserve Account. If at any time the amount held in the
         Tax and Insurance Reserve Account shall be less than the amount deemed
         necessary by the Lender to pay water and sewer assessments and
         frontage charges, taxes, assessments, impositions and insurance
         premiums, the Borrower shall pay to the Lender any amount necessary to
         make up the deficiency within thirty (30) days after notice from the
         Lender to the Borrower requesting payment thereof.

                  (d)      Upon payment in full of all amounts owed by the
         Borrower under or otherwise secured by any of the Loan Documents, all
         remaining amounts on deposit, if any, in the Tax and Insurance Reserve
         Account shall be distributed to the Borrower.

                  Section 6.9       Disbursements from Repair Escrow Account and
Replacement Reserve Account.

                  (a)      Upon written request from the Borrower and
         satisfaction of the requirements set forth in this Loan Agreement, the
         Lender shall disburse to the Borrower amounts from the Repair Escrow
         Account necessary to reimburse the Borrower for the actual costs of
         Immediate Repairs and shall disburse amounts from the Replacement
         Reserve Account necessary to reimburse the Borrower for the actual
         costs of Replacements (but, as to any Immediate Repair or Replacement,
         such amount shall not exceed one hundred twenty-five percent (125%) of
         the original estimated cost of such Immediate Repair and/or
         Replacement set forth on Exhibit B to this Loan Agreement, unless the
         Lender agrees to such reimbursement).

                  (b)      Upon written request from the Borrower, the Lender
         may, in its discretion, disburse amounts from the Repair Escrow
         Account and/or Replacement Reserve Account to reimburse the Borrower
         for the actual cost of labor and materials associated with an
         Additional Repair or Replacement. Each such request from the Borrower
         shall include a statement regarding why such disbursement should be
         made. If the Lender determines that (i) such Additional Repair or
         Replacement is of the type intended to be covered by this Agreement,
         (ii) the costs for such Additional Repair or Replacement are
         reasonable, (iii) the amount of funds in the Repair Escrow Account
         and/or the Replacement Reserve Account, as applicable, is sufficient
         to pay the Additional Repair or Replacement and one hundred
         twenty-five percent (125%) of the then current estimated cost of
         completing all remaining Immediate Repairs and Replacements, as
         applicable, and (iv) all other conditions for disbursement under this
         Loan Agreement have been met, then the Lender shall disburse funds
         from the Repair Escrow Account and/or the Replacement Reserve Account,
         as applicable, for such Additional Repair or Replacement in accordance
         with the requirements of this Loan Agreement for Immediate Repairs
         and/or Replacements.

                  (c)      Each request for disbursement from the Repair Escrow
         Account or Replacement Reserve Account shall be in a form specified or
         approved by the Lender and shall set forth (i) the specific Immediate
         Repairs, Replacements or Additional Repair or Replacement,




                                     -60-
<PAGE>   66

         as the case may be, for which the disbursement is requested, (ii) the
         quantity and price of each item purchased, if the Immediate Repair,
         Replacement or Additional Repair or Replacement, as the case may be,
         includes the purchase or replacement of specific items, (iii) the
         price of all materials (grouped by type or category) used in any
         Immediate Repair, Replacement or Additional Repair or Replacement, as
         the case may be, other than the purchase or replacement of specific
         items, and (iv) the cost of all contracted labor or other services
         applicable to each Immediate Repair, Replacement or Additional Repair
         or Replacement, as the case may be, for which such request for
         disbursement is made. With each request the Borrower shall certify
         that all Immediate Repairs, Replacements or Additional Repairs or
         Replacements, as the case may be, have been made in accordance with
         the requirements of this Loan Agreement and all Requirements of Laws.
         Each request for disbursement shall include (A) copies of invoices for
         all items or materials purchased and all contracted labor or services
         provided, and (B) for disbursements in excess of $25,000, such
         acknowledgments of payment, lien waivers and/or releases with respect
         to the Immediate Repairs, Replacements and Additional Repairs or
         Replacements for which disbursement is requested as the Lender may
         require. In connection with each disbursement from the Repair Escrow
         Account or the Replacement Reserve Account, as the case may be, the
         Lender may require the Borrower to provide the Lender with an
         endorsement to the Lender's title insurance policy showing that no
         Liens have been placed against the Premises since the date of
         recordation of the Security Instrument (other than Permitted
         Encumbrances and any other Liens previously approved in writing by the
         Lender, if any).

                  (d)      Except as provided in the following sentence, each
         request for disbursement from the Repair Escrow Account or the
         Replacement Reserve Account shall be made only after completion (as
         reasonably determined by the Lender) of the Immediate Repair,
         Replacement or Additional Repair or Replacement for which disbursement
         is requested. If (i) the cost of the Immediate Repair, Replacement or
         Additional Repair or Replacement exceeds the lesser of (A) one percent
         (1%) of the original Loan Amount, or (B) $50,000.00 per Individual
         Property, (ii) the written contract with respect to such Immediate
         Repair, Replacement or Additional Repair or Replacement requires
         periodic payment for such work pursuant to the terms thereof, and
         (iii) the Lender has approved in writing in advance such periodic
         payments, then a request for reimbursement from the Repair Escrow
         Account and/or Replacement Reserve Account may be made after
         completion of a portion of the work under such contract, provided (1)
         the materials for which the request is made are on site at the
         Premises and are properly secured or have been installed in the
         Premises, (2) all other conditions in this Loan Agreement for
         disbursement have been satisfied, and (3) funds remaining in the
         Repair Escrow Account or the Replacement Reserve Account, as the case
         may be, are, in the Lender's reasonable judgment, sufficient to
         complete such Immediate Repair, Replacement or Additional Repair or
         Replacement and all the other Immediate Repairs and/or Replacements
         when required. The Lender, at its option, may issue joint checks,
         payable to the Borrower and the supplier, materialman, mechanic,
         contractor, subcontractor or other party to whom payment is due in
         connection with any such periodic payment for an Immediate Repair,
         Replacement or Additional Repair or Replacement to be paid from the
         Repair Escrow Account or Replacement Reserve Account, as the case may
         be.



                                     -61-
<PAGE>   67

                  (e)      The Lender shall have no obligation to make any
         disbursement from the Repair Escrow Account or the Replacement Reserve
         Account more frequently than once in any month and (except in
         connection with the final disbursement) in any amount less than the
         lesser of (i) one percent (1%) of the original Loan Amount, or (ii)
         $5,000.00.

                  (f)      Prior to any disbursement from the Repair Escrow
         Account or the Replacement Reserve Account, the Lender may, at the
         Borrower's expense, require an inspection by an appropriate
         independent qualified professional reasonably selected by the Lender
         and a copy of a certificate of completion by an independent qualified
         professional reasonably acceptable to the Lender prior to the
         disbursement of any amounts from the Repair Escrow Account or the
         Replacement Reserve Account exceeding $25,000.00. The Borrower shall
         pay the Lender a reasonable inspection fee not exceeding $1,000.00 for
         each such inspection.

                  (g)      The Lender shall not be obligated to make
         disbursements from the Repair Escrow Account or the Replacement
         Reserve Account to reimburse the Borrower for the costs of routine
         maintenance to the Premises, tenant improvements or leasing
         commissions.

                  (h)      Upon the earlier to occur of (i) the timely
         completion of all Immediate Repairs in accordance with the
         requirements of this Loan Agreement, as verified by the Lender in its
         reasonable discretion, or (ii) the payment in full of all amounts owed
         by the Borrower under or otherwise secured by any of the Loan
         Documents, all amounts remaining on deposit, if any, in the Repair
         Escrow Account shall be distributed to the Borrower.

                  (i)      Upon payment in full of all amounts owed by the
         Borrower under or otherwise secured by any of the Loan Documents, all
         amounts remaining on deposit, if any, in the Replacement Reserve
         Account shall be distributed to the Borrower.

                  Section 6.10      Intentionally Deleted.

                  Section 6.11      Indemnification.

                  The Borrower agrees to indemnify the Lender and to hold the
Lender harmless from and against any and all actions, suits, claims, demands,
counterclaims, cross-claims, liabilities, losses, damages, obligations, fees
and costs and expenses (including litigation costs, reasonable attorneys' fees
and expenses) arising from or in any way connected with (a) the performance of
the Immediate Repairs, Replacements or Additional Repairs or Replacements, (b)
unpaid taxes, utility bills, rent or insurance premiums owed by the Borrower,
and/or (c) the holding or investment of the Reserve Accounts, except to the
extent any of the foregoing is the direct result of the gross negligence or
willful misconduct of the Lender.



                                     -62-
<PAGE>   68


                                  ARTICLE VII
                          EVENTS OF DEFAULT; REMEDIES

                  Section 7.1       Events of Default.


                  An Event of Default shall occur if any of the following has
occurred and is continuing beyond any applicable cure or grace period:

                  (a)      Payments. The Borrower fails to make any payment
         hereunder, under the Note or under any other Loan Document, when due
         and payable, and such payment is not received prior to the tenth
         (10th) day after the same is due (or such greater period, if any,
         required by applicable law).

                  (b)      Bankruptcy, etc. The occurrence of any Bankruptcy
         Event with respect to the Borrower Principal, Borrower or any general
         partner or managing member of Borrower.

                  (c)      Judgments. One or more judgments or decrees
         exceeding, in the aggregate, $100,000.00 per Individual Property shall
         be entered against the Borrower (not paid or fully covered by
         insurance provided by a carrier who has acknowledged coverage) and any
         such judgments or decrees shall not have been paid, vacated,
         discharged, stayed or bonded (through appeal or otherwise) within
         thirty (30) calendar days from the entry thereof.

                  (d)      Recourse Covenants. The Borrower violates any of the
         Recourse Covenants.

                  (e)      Compliance with Sections 5.1(o) and (p). The
         Borrower fails to comply with any or all of the provisions of either
         Section 5.1(o), or 5.1(p) and such failure continues for a period of
         thirty (30) calendar days following (i) in the case of Section 5.1(o),
         the date demand by the Lender is made upon the Borrower for the
         execution of any agreement or document in accordance with the
         provisions of Section 5.1(o), or (ii) in the case of Section 5.1(p),
         the date on which any Operating Expense becomes due and payable in
         accordance with the terms thereof, without regard to any extension,
         modification or waiver relating thereto; provided that if any
         Operating Expense is the subject of a bona fide dispute and is less
         than one percent (1%) of the outstanding balance of the Loan as of the
         date on which the particular Operating Expense in dispute became due
         and payable, then the Borrower shall have ninety (90) days from the
         date the same becomes due and payable to pay such Operating Expense or
         to furnish the Lender a bond or other collateral acceptable to the
         Lender in the Lender's reasonable discretion.

                  (f)      Representations and Warranties. Any representation,
         warranty, acknowledgment or statement made by the Borrower or the
         Borrower Principal herein, in any other Loan Document or in any
         written statement or certificate delivered or required to be delivered
         pursuant hereto shall prove untrue in any material respect on the date
         as of which it was deemed to have been made or any representation,
         warranty acknowledgment or statement submitted to the Lender
         concerning the financial condition or credit standing of the Borrower,
         any general partner or member thereof or the Borrower Principal proves
         to be false or misleading in any material respect.



                                     -63-
<PAGE>   69


                  (g)      Compliance with Covenants and Agreements. The
         Borrower shall fail to comply with, observe or perform any covenant or
         agreement made by it herein, in the Program Rider, or in any other
         Loan Document, which failure continues for thirty (30) days following
         written notice thereof to the Borrower; provided that if such failure
         is of a type which can not feasibly be cured within such thirty (30)
         day period and the Borrower is diligently and in good faith pursuing
         such cure, then the Borrower shall have a reasonable period of time
         (but in no event more than ninety (90) days following such written
         notice) to cure such failure without the same becoming an Event of
         Default hereunder. Borrower shall have no right to cure a default
         under Section 7.1(l) hereof. Nothing in this Section 7.1(g) shall be
         deemed or construed to entitle the Borrower to any notice and
         opportunity to cure with respect to any failure to comply with,
         observe or perform any covenant or agreement which constitutes an
         Event of Default under any other subsection of this Section 7.1 or to
         extend any notice and/or opportunity to cure otherwise provided for in
         any other subsection of this Section 7.1.

                  (h)      No Encumbrances. The Borrower fails to keep the
         Premises free and clear of all encumbrances, liens, deeds of trust,
         security interests and subordinate financing, except for Permitted
         Encumbrances and as may be permitted by the Loan Documents or
         otherwise approved in writing by the Lender in its sole discretion.

                  (i)      No Transfer. Except as permitted in Section 5.2
         hereof, the Borrower permits any sale, transfer, conveyance or other
         disposition of engages in any subordinate financing with respect to,
         or grants any consensual liens against, the Premises, the Rents and
         Profits or the Intangible Personalty without the consent of Lender.

                  (j)      Special Purpose Entity. The Borrower fails to be a
         Special Purpose Entity at any time while the Loan is outstanding.

                  (k)      Events of Default under the Program Rider or other
         Loan Documents. The occurrence of any Event of Default or similar
         event under any of the Program Rider or the other Loan Documents,
         after giving effect to any period of time provided for the cure of any
         such event or occurrence in the Program Rider or any such Loan
         Document.

                  (l)      Non-Consolidation Assumptions. If any of the
         assumptions contained in the Non-consolidation Opinion, or in any
         other "non-consolidation" opinion delivered to Lender in connection
         with the Loan, or in any other "non-consolidation" opinion delivered
         subsequent to the Loan, is or shall become untrue in any material
         respect. Any cure period or right to cure granted to Borrower in this
         Loan Agreement or the other Loan Documents shall not apply to this
         Section 7.1(l).

                  (m)      Intentionally deleted.

                  (n)      Operating Lease. If Borrower, Operating Partnership
         or any Affiliate thereof fails to comply with, observe or perform any
         covenant or agreement made by Borrower, Operating Partnership or any
         Affiliate thereof under the Operating Lease, and such failure
         continues (i) beyond any applicable grace or cure period provided
         under the Operating Lease and (ii) for thirty (30) days following
         written notice thereof to the Borrower.



                                     -64-
<PAGE>   70


                  (o)      Franchise Agreement. If any Franchise Agreement is
         amended, modified or terminated without Lender's prior written
         consent.

                  Section 7.2       Remedies.

                  Upon the occurrence of an Event of Default, the Lender may,
at its option:

                  (a)      Acceleration. Accelerate the entire unpaid principal
         balance of the Loan and all accrued interest thereon without advance
         notice to the Borrower, the same becoming immediately due and payable.
         In addition, upon acceleration, any and all other Obligations of the
         Borrower to the Lender shall be immediately due and payable.

                  (b)      Replacement of Property Manager. Upon written notice
         to the Borrower, require the replacement of any property manager or
         managing agent for the Premises, if any, with a property manager or
         managing agent acceptable to the Lender.

                  (c)      Other Remedies. Invoke any other remedies set forth
         herein or in any of the other Loan Documents, including without
         limitation, foreclosure of the Lien granted in the Security Instrument
         and enforcement of the assignment to the Lender of the Rents and
         Profits in accordance with the terms of the Security Instrument.


                                 ARTICLE VIII
                        CASUALTY LOSSES; EMINENT DOMAIN

                  Section 8.1       Repairs and Casualty Losses.

                  (a)      Restoration of Premises. Except as otherwise
         provided in this Section 8.1, the Borrower shall, at its expense,
         promptly repair, restore, replace or rebuild any part of the Premises
         which is damaged or destroyed by any casualty or as the result of any
         taking under the power of eminent domain, provided the Lender has made
         available insurance proceeds or eminent domain proceeds or awards
         available to the Borrower for such repair, restoration, replacement or
         rebuilding. The Borrower shall (i) substitute a Substitute Property
         (pursuant to the terms of Section 2.6 hereof) for each damaged or
         destroyed Individual Property; or (ii) cause all repairs, rebuilding,
         replacements or restorations to be (in the reasonable opinion of the
         Lender) of substantially equivalent quality to the Premises as of the
         date hereof, ordinary wear and tear excepted.

                  (b)      Proof of Loss; Claims Settlement. In the event of
         loss, the Borrower shall give prompt written notice thereof to the
         insurance carrier and the Lender, and the Lender may make proof of
         loss if not made promptly by the Borrower. During the existence of any
         Event of Default, the Lender is hereby authorized, in its reasonable
         discretion, to adjust, compromise and collect the proceeds of any
         insurance claims.

                  (c)      Application of Insurance Proceeds. The Borrower
         hereby assigns the proceeds of any such insurance policies to the
         Lender and hereby directs and authorizes each insurance company to
         make payment for such loss directly to the Lender. The proceeds of any



                                     -65-
<PAGE>   71

         insurance or any part thereof shall be applied by the Lender in
         accordance with the provisions of Section 8.3 of this Loan Agreement.

                  Section 8.2       Eminent Domain.

                  (a)      Participation in Proceedings. The Borrower shall
         promptly notify the Lender of any actual or threatened initiation of
         any eminent domain proceeding or other taking for public use as to the
         whole or any part of the Premises and/or any rights incident or
         appurtenant thereto and shall deliver to the Lender copies of any and
         all papers served or received in connection with such proceedings, and
         the Lender shall have the right, at its option, to participate in such
         proceedings at the expense of the Borrower (including, without
         limitation, the Lender's reasonable attorneys' fees) and the Borrower
         will execute such documents and take such other steps as required to
         permit such participation.

                  (b)      Right to Settle Claims. During the existence of any
         Event of Default, the Lender is hereby authorized to adjust,
         compromise and collect the proceeds of any eminent domain or similar
         award or settle a claim for damages and to apply the same (or any part
         thereof) to the then outstanding balance of the Loan.

                  (c)      Use of Proceeds. The Borrower assigns to the Lender
         any proceeds or awards which may become due by reason of any
         condemnation or other taking for public use of the whole or any part
         of the Premises and any rights incident or appurtenant thereto. The
         proceeds of any such condemnation award or proceeds of any part
         thereof shall be applied by the Lender in accordance with the
         provisions of Section 8.3 of this Loan Agreement.

                  (d)      Further Assignments; Acceleration. The Borrower
         agrees to execute such further assignments and agreements as may be
         reasonably required by the Lender to assure the effectiveness of this
         Section 8.2. In the event any governmental agency or authority shall
         require or commence any proceedings for the seizing or demolishing of
         any part of the Premises, or shall commence any proceedings to condemn
         or otherwise take pursuant to the power of eminent domain (or other
         power) a material portion of the Premises and such portion of the
         Premises has not been substituted pursuant to the terms of Section 2.6
         hereof, the Lender may, at its option, declare the Loan to be
         immediately due and payable in full and apply all or any portion of
         the eminent domain (or similar) awards or proceeds to the then
         outstanding balance of the Loan.



                                     -66-
<PAGE>   72

                  Section 8.3       Application of Insurance Proceeds and
Condemnation Awards.

                  (a)      Unless a Substitute Property has been substituted
         pursuant to the terms of Section 2.6 hereof for each Individual
         Property affected, all proceeds of insurance assigned to the Lender
         pursuant to Section 8.1 of this Loan Agreement, and all proceeds or
         awards which may become due by reason of any condemnation or other
         taking for public use of the whole or any part of the Premises or any
         rights incident or appurtenant thereto and that have been assigned to
         the Lender pursuant to Section 8.2 of this Loan Agreement shall be
         eligible to be applied by the Lender in its sole discretion to the
         repayment of the Loan; provided, however, that subject to the
         provisions of this Section 8.3, such proceeds shall be held in an
         Eligible Account and applied to the repair or restoration of the
         Premises if all of the following conditions are met:

                           (i)      there exists no Default Condition or Event
                  of Default;

                           (ii)     the Borrower presents sufficient evidence

                  to the Lender that (A) with respect to any casualty loss,
                  there are sufficient funds from the insurance proceeds and
                  from equity funds, if needed, to completely restore or repair
                  the damaged Premises, or (B) with respect to any condemnation
                  award, there are sufficient funds from the condemnation award
                  or proceeds and from equity funds, if needed, to completely
                  restore the Premises to an architectural whole and to pay
                  Operating Expenses Premises or Operating Expenses Leases, as
                  applicable, and (C) the insurance proceeds or condemnation
                  award is less than twenty percent (20%) of the original Loan
                  Amount;

                           (iii)    the Operating Lessee agrees in a manner
                  reasonably satisfactory to the Lender that it will continue
                  or extend its interests and arrangements for the contract
                  terms then in effect following the repair, restoration,
                  replacement or rebuilding;

                           (iv)     all parties having material operating,
                  management and/or franchise interests in, and arrangements
                  concerning, the Premises agree that they will continue their
                  interests and arrangements for the contract terms then in
                  effect following the repair, restoration, replacement or
                  rebuilding;

                           (v)      the Borrower presents sufficient evidence
                  to the Lender that the Premises will be repaired or restored
                  to an architectural whole prior to the expiration of the
                  insurance coverage referenced in clause (iv) of the
                  definition of Insurance set forth above and, in any event,
                  two (2) years prior to the Maturity Date;

                           (vi)     the Lender will not incur any liability to
                  any other Person as a result of such use or release of
                  proceeds; and

                           (vii)    (a) as to any casualty loss, the insurance
                  proceeds shall be held by the Lender and disbursed as repair,
                  restoration, replacement or rebuilding progresses
                  substantially in accordance with the procedures set forth in
                  this Loan Agreement for disbursement from the Replacement
                  Reserve Account; provided, however that insurance proceeds of
                  $150,000 for any Individual Property or less will be
                  disbursed directly to the Borrower for repair, restoration,
                  replacement or rebuilding and (B) as to any condemnation
                  award, the condemnation award or proceeds shall be held by
                  the Lender




                                     -67-
<PAGE>   73

                  and disbursed as repair, restoration, replacement or
                  rebuilding progresses substantially in accordance with the
                  procedures set forth in this Loan Agreement for disbursement
                  from the Replacement Reserve Account.

                  (b)      If the above-stated conditions are not satisfied
         within ninety (90) days of loss, then the Lender may, at its option,
         apply any proceeds in repayment of the amount then outstanding under
         the Note.

                  (c)      Upon the completion of any repair, restoration,
         replacement or rebuilding any remaining proceeds shall be paid to the
         Lender in repayment of the amount then outstanding under the Note in
         accordance with the provisions of the Note.


                                  ARTICLE IX
                               GENERAL PROVISIONS

                  Section 9.1       Remedies Cumulative; Waivers.

                  All remedies of the Lender provided for herein and/or in the
other Loan Documents are cumulative and shall be in addition to any and all
other rights and remedies provided for or available under the other Loan
Documents, at law and/or in equity. The exercise of any right or remedy by the
Lender hereunder shall not in any way constitute a cure or waiver of any
Default Condition or Event of Default hereunder or under any other Loan
Document, or invalidate any act done pursuant to any notice of the occurrence
of any Default Condition or Event of Default, or prejudice the Lender in the
exercise of any of its rights hereunder or under or any other Loan Document,
unless, in the exercise of said rights, the Lender realizes all amounts owed to
it under the Loan Documents. No waiver of any Default Condition or Event of
Default hereunder shall be implied from any delay or omission by the Lender to
take action on account of such Default Condition or Event of Default, and no
express waiver shall affect any Default Condition or Event of Default other
than the Default Condition or Event of Default specified in the waiver and it
shall be operative only for the time and to the extent therein stated. Waivers
of any covenants, terms or conditions contained herein must be in writing and
shall not be construed as a waiver of any subsequent failure to observe or
comply with the same covenant, term or condition. The consent or approval by
the Lender to or of any act by the Borrower requiring further consent or
approval shall not be deemed to waive or render unnecessary the consent or
approval to or of any subsequent or similar act.

                  Section 9.2       Benefit.

                  This Loan Agreement is made and entered into for the sole
protection and benefit of the Lender and the Borrower, their successors and
permitted assigns, and no other Person or Persons shall have any right to
action hereon or rights to the Loan proceeds at any time, nor shall the Lender
owe any duty whatsoever to any claimant for labor performed or material
furnished in connection with the construction of the Improvements, or to apply
any undisbursed portion of the Loan to the payment of any such claim, or to
exercise any right or power of the Lender hereunder or arising from any Default
Condition or Event of Default by the Borrower.



                                     -68-
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                  Section 9.3       Assignment and Assumption.

                  (a)      The terms hereof shall be binding upon and inure to
         the benefit of the heirs, successors, assigns, and personal
         representatives of the parties hereto.

                  (b)      Subject to the provisions of Sections 2.5, 2.6, 5.2
         and 10.1(c) hereof, neither Borrower nor any other Person having
         beneficial or ownership interest in Borrower shall assign or permit
         any assumption of this Loan Agreement, any of the other Loan
         Documents, the Loan or any of its rights, interests, duties or
         obligations hereunder or thereunder or any Loan proceeds or other sums
         to be advanced hereunder in whole or in part without the prior written
         consent of the Lender. Lender shall consent, no more than once, to
         such assignment and/or assumption to a qualified borrower acceptable
         to Lender at its sole discretion upon the payment to the Lender of all
         reasonable and customary expenses incurred by the Lender in connection
         with any such assignment and/or assumption and of a processing fee in
         an amount equal to one percent (1%) of the outstanding principal
         amount of the Loan as of the date the Borrower requests the Lender to
         consent to such assignment or assumption. Any assignment or assumption
         (whether voluntary or by operation of law) without said consent shall
         be void. Without in any way limiting the foregoing, in no event shall
         the Lender consent to any assignment or assumption requested or
         occurring prior to the sale of the Loan by the Lender in the secondary
         market if the consideration paid or to be paid by the assignee or
         purchaser of the Premises in connection therewith, as determined by
         the Lender in its reasonable judgment, is less than the appraised
         value of the Premises used by the Lender in underwriting the Loan. The
         Borrower shall furnish the Lender at the Borrower's sole cost and
         expense such information as the Lender shall request in connection
         with any assignment or assumption, including without limitation: (i)
         an Appraisal or other evidence satisfactory to the Lender in its
         reasonable discretion of the value of the Premises as of the date of
         the assignment and/or assumption; (ii) confirmation from the Rating
         Agencies that the credit ratings of Securities immediately prior to
         assignment and/or assumption will not be qualified, downgraded or
         withdrawn as a result of such assignment and/or assumption, which
         affirmation may be granted or withheld in the Rating Agencies sole and
         absolute discretion; (iii) evidence that the assignee is a Special
         Purpose Entity satisfying Lender's and Rating Agency's then current
         applicable underwriting criteria and requirements; and (iv) delivery
         of a "non-consolidation" opinion in form and substance satisfactory to
         Lender that, in the event of a bankruptcy proceeding involving any
         Affiliate of Borrower, the assets of the Borrower, including the
         Premises, shall not be substantively consolidated with the assets of
         the Affiliate. Lender further reserves the right to condition the
         consent to any assignment or assumption upon (i) payment of all of
         Lender's reasonable expenses incurred in connection with such
         transfer; (ii) the confirmation in writing by the applicable Rating
         Agencies that the proposed transfer will not, in and of itself, result
         in a downgrade, qualification or withdrawal of the initial, or, if
         higher, then current respective ratings in effect immediately prior to
         such assignment or assumption for the Securities issued in connection
         with a securitization; (iii) the delivery of a non-consolidation
         opinion reflecting the proposed transfer satisfactory in form and
         substance satisfactory to Lender that, in the event of a bankruptcy
         proceeding involving any Affiliate of Borrower, the assets of the
         Borrower, including the Premises, shall not be substantively
         consolidated with the assets of the Affiliate to Lender in its sole
         discretion; and (iv) the delivery to Lender of such additional
         documents, certificates and legal opinions as it may reasonably
         request. In addition, the assignee or purchaser of the




                                     -69-
<PAGE>   75

         Premises shall be required to assume the Borrower's duties and
         obligations under this Loan Agreement and shall be required to execute
         and deliver to the Lender such documents, opinions, certificates and
         information as the Lender reasonably requires to effectuate such
         assumption of duties and obligations. No sale, assignment or
         assumption shall relieve the Borrower of its Obligations under this
         Loan Agreement or any of the other Loan Documents, unless the Borrower
         has obtained the prior written consent of the Lender, which consent
         shall not be unreasonably withheld or delayed.

                  (c)      Lender shall have the right to sell, assign or
         otherwise transfer the Loan or any portion thereof or interest therein
         held by Lender without the consent of Borrower or Owner or the
         satisfaction of any other requirement with respect to Borrower or
         Owner. At the request of the holder of the Note and, to the extent not
         already required to be provided by Borrower or Owner under this
         agreement or the Security Instrument, Borrower and Owner shall use
         reasonable efforts to satisfy the market standards to which the holder
         of the Note customarily adheres or which may be reasonably required in
         the marketplace or by the Rating Agencies of the Note or participation
         therein or the first successful public or private securitization (such
         sale and/or securitization, the "Securitization") of rated single or
         multi-class Securities secured by or evidencing ownership interests in
         the Note and the Security Instrument, including, without limitation,
         to:

                           1.       (i) provide such financial and other
                  information with respect to the Premises, the Borrower and
                  the Owner, (ii) provide budgets relating to the Premises and
                  (iii) to permit to be performed or permitted such site
                  inspection, appraisals, market studies, environmental reviews
                  and reports (Phase I reports and, if appropriate, Phase II
                  reports), engineering reports and other due diligence
                  investigations of the Premises, as may be reasonably
                  requested by the holder of the Note or the Rating Agencies or
                  as may be reasonably necessary or appropriate in connection
                  with the Securitization (the "Provided Information"),
                  together, if customary, with appropriate verification of
                  and/or consents to the use of the Provided Information
                  through letters of auditors or opinions of counsel of
                  independent attorneys reasonably acceptable to the Lender and
                  acceptable to the Rating Agencies; provided, however, that
                  Phase II reports and other invasive testing may not be
                  performed at the Premises until Borrower has received
                  reasonably appropriate and evidence of insurance from any
                  Person preparing such report or performing such testing;

                           2.       cause counsel to render opinions as to
                  non-consolidation, fraudulent conveyance, and true sale or
                  any other opinion customary in securitization transactions
                  with respect to the Premises, the Borrower, the Owner and
                  their Affiliates, which counsel and opinions shall be
                  reasonably satisfactory to the holder of the Note and the
                  Rating Agencies;

                           3.       make such representations and warranties as
                  of the closing date of the Securitization with respect to the
                  Premises, the Borrower, the Owner and the Loan Documents as
                  are customarily provided in securitization transactions and
                  as may be reasonably requested by the holder of the Note or
                  the Rating Agencies and consistent with the facts covered by
                  such representations and warranties as they exist on the date



                                     -70-
<PAGE>   76

                  thereof to the extent such representations and warranties are
                  true as of the closing date of the Securitization, including
                  the representations and warranties made in the Loan Documents
                  to the extent such representations and warranties are true as
                  of the closing date of the Securitization; and

                           4.       execute such agreements and amendments to
                  the Loan Documents and organizational documents and enter
                  into a lockbox or similar arrangement with respect to the
                  rents from the Premises as may be reasonably requested by the
                  holder of the Note or as may be requested by the Rating
                  Agencies or as may be otherwise necessary to effect the
                  Securitization; provided, however, that the Borrower shall
                  not be required to modify or amend any Loan Document if such
                  modification or amendment would (i) change the interest rate,
                  the stated maturity or the amortization of principal set
                  forth in the Note, or (ii) modify or amend any other material
                  economic term of the Loan or materially increase Borrower's
                  or Owner's obligations or liabilities under the Loan
                  Documents.

                  All third party costs and expenses incurred by Lender in
connection with the Securitization or other sale or transfer of the Loan and
all reasonable third party costs and expenses incurred by Borrower or Owner in
connection with the Securitization or other sale or transfer of the Loan shall
be paid by Lender.

                  Section 9.4       Securitization Cooperation/Indemnification.

                  (a)      Borrower understands that certain of the Provided
         Information and the books and records delivered to Lender pursuant to
         Section 5.1(n) hereof, (the "Required Records") may be included in
         disclosure documents in connection with the Securitization, including,
         without limitation, a prospectus or private placement memorandum
         (each, a "Disclosure Document") and may also be included in filings
         with the Securities and Exchange Commission pursuant to the Securities
         Act of 1933, as amended (the "Securities Act"), or the Securities and
         Exchange Act of 1934, as amended (the "Exchange Act"), or provided or
         made available to investors or prospective investors in the
         Securities, the Rating Agencies, and service providers relating to the
         Securitization. In the event that the Disclosure Document is required
         to be revised prior to the sale of all Securities, the Borrower will
         cooperate with the holder of the Note in updating the Disclosure
         Document by providing all current information necessary to keep the
         Disclosure Document accurate and complete in all material respects.

                  (b)      Borrower agrees to provide in connection with each
         of (i) a preliminary and a private placement memorandum or (ii) a
         preliminary and final prospectus, as applicable, an indemnification
         certificate (A) certifying that Borrower has carefully examined such
         memorandum or prospectus, as applicable but only as such memorandum or
         prospectus, relates to the Premises, the Borrower, the Borrower
         Principal or their Affiliates, including without limitation, the
         sections entitled "Special Considerations," "Description of the
         Security Instruments," "Description of the Loans and Properties," "The
         Manager," "The Borrower" and "Certain Legal Aspects of the Loan," and
         such sections (and any other sections reasonably requested) do not,
         and with respect to any portions of such sections prepared in reliance
         upon the reports of third parties, to Borrower's knowledge do not,
         contain any untrue statement of a material fact or omit to state a
         material fact necessary in order to make the statements made, in




                                     -71-
<PAGE>   77

         the light of the circumstances under which they were made, not
         misleading, (B) indemnifying Lender, subject to Section 9.5 (and for
         purposes of this Section 9.4, Lender hereunder shall include its
         officers, directors and employees), the Affiliate of such Lender
         entity (the "Lender Entity") that has filed the registration statement
         relating to the securitization (the "Registration Statement"), each of
         its directors, each of its officers who have signed the Registration
         Statement and each person or entity who controls the Affiliate within
         the meaning of Section 15 of the Securities Act or Section 20 of the
         Exchange Act (collectively, the "Lender Group"), and Lender Entity,
         each of its directors and each person who controls Lender Entity
         within the meaning of Section 15 of the Securities Act and Section 20
         of the Exchange Act (collectively, the "Underwriter Group") for any
         losses, claims, damages or liabilities (the "Liabilities") to which
         Lender, the Lender Group or the Underwriter Group may become subject
         insofar as the Liabilities arise out of any untrue statement or
         alleged untrue statement of any material fact contained in such
         sections (other than any such statement made in reliance upon the
         reports of third parties that do not, to Borrower's knowledge, contain
         any untrue statement of a material fact or omit to state a material
         fact necessary in order to make the statements made, in light of the
         circumstances under which they were made, not misleading) or arise out
         of the omission or alleged omission to state therein a material fact
         known to Borrower and required to be stated in such sections or
         necessary in order to make the statements in such sections or in light
         of the circumstances under which they were made, not misleading and
         (C) agreeing to reimburse Lender, the Lender Group and the Underwriter
         Group for any legal or other expenses reasonably incurred by Lender
         and Lender Group in connection with investigating or defending the
         Liabilities; provided, however, that Borrower will be liable in any
         such case under clauses (B) or (C) above only to the extent that any
         such loss claim, damage, liability or expense arises out of any such
         untrue statement or omission made therein in reliance upon and in
         conformity with written information furnished to Lender by or on
         behalf of Borrower expressly for use in the Disclosure Document; and
         provided further, that this indemnity agreement shall not apply to any
         loss, liability, claim, damage or expense to the extent arising out of
         any untrue statement or omission or alleged untrue statement or
         omission made in reliance upon and in conformity with written
         information furnished to the Borrower by Lender, any member of the
         Lender Group or any member of the Underwriter Group expressly for use
         in the Disclosure Document. The foregoing indemnity with respect to
         any untrue statement contained in or omission from a preliminary
         private placement memorandum or preliminary prospectus shall not inure
         to the benefit of any member of the Underwriting Group (or any person
         controlling such member of the Underwriting Group) from whom the
         Person asserting any such loss, liability, claim, damage or expense
         purchased any of the Securities which are the subject thereof if the
         Borrower shall sustain the burden of proving that any such loss,
         liability, claim, damage or expense resulted from the fact that such
         Person was not sent or given a copy of the final private placement
         memorandum or final prospectus at or prior to the written confirmation
         of the sale of such Security to such Person and the loss, liability,
         claim, damage or expense resulted from an untrue statement contained
         in or omission from such preliminary private placement memorandum or
         preliminary prospectus that was corrected in the final private
         placement memorandum or final prospectus.

                  (c)      In connection with filings under the Exchange Act,
         Borrower agrees to indemnify (i) Lender, the Lender Group and the
         Underwriter Group for Liabilities to which Lender, the Lender Group or
         the Underwriter Group may become subject insofar as the




                                     -72-
<PAGE>   78

         Liabilities arise out of or are based upon the omission or alleged
         omission to state in the Provided Information or Required Records a
         material fact required to be stated in the Provided Information or
         Required Records in order to make the statements in the Provided
         Information or Required Records, in light of the circumstances under
         which they were made not misleading and (ii) reimburse Lender, the
         Lender Group or the Underwriter Group for any legal or other expenses
         reasonably incurred by Lender, the Lender Group or the Underwriter
         Group in connection with defending or investigating the Liabilities
         provided, however, that Borrower will be liable in any such case under
         clauses (i) or (ii) above only to the extent that any such loss claim,
         damage, liability or expense arises out of any such untrue statement
         or omission made therein in reliance upon and in conformity with
         written information furnished to Lender by or on behalf of Borrower
         expressly for use in the Disclosure Document; and provided further,
         that this indemnity agreement shall not apply to any loss, liability,
         claim, damage or expense to the extent arising out of any untrue
         statement or omission or alleged untrue statement or omission made in
         reliance upon and in conformity with written information furnished to
         the Borrower by Lender, any member of the Lender Group or any member
         of the Underwriter Group expressly for use in the Disclosure Document.

                  (d)      Lender Entity agrees to indemnify and hold harmless
         Borrower, each of its directors and each person who controls Borrower
         within the meaning of Section 15 of the Securities Act or Section 20
         of the Exchange Act (the "Borrower Group") against any and all losses,
         claims, damages or liabilities, joint or several, to which such group
         may become subject, under the Securities Act or otherwise, and will
         reimburse such group for any legal or other expenses reasonably
         incurred by such group in connection with investigating or defending
         any such loss, claim, damage, liability or action, insofar as such
         losses, claims, damages or liabilities (or actions in respect thereof)
         arise out of or are based upon any untrue statement or alleged untrue
         statement of any material fact contained in a Disclosure Document or
         arise out of or are based upon the omission or the alleged omission to
         state therein a material fact required to be stated therein or
         necessary to make the statements therein, in light of the
         circumstances under which they were made, not misleading, but only to
         the extent that such untrue statement or alleged untrue statement or
         omission or alleged omission relates to information that does not
         accurately reflect Provided Information.

                  (e)      Promptly after receipt by an indemnified party under
         this Section 9.4 of notice of the commencement of any action, such
         indemnified party will, if a claim in respect thereof is to be made
         against the indemnifying party under this Section 9.4, notify the
         indemnifying party in writing of the commencement thereof, but the
         omission to so notify the indemnifying party will not relieve the
         indemnifying party from any liability which the indemnifying party may
         have to any indemnified party hereunder except to the extent that
         failure to notify causes prejudice to the indemnifying party. In the
         event that any action is brought against any indemnified party, and it
         notifies the indemnifying party of the commencement thereof, the
         indemnifying party will be entitled, jointly with any other
         indemnifying party, to participate therein and, to the extent that it
         (or they) may elect by written notice delivered to the indemnified
         party promptly after receiving the aforesaid notice from such
         indemnified party, to assume the defense thereof with counsel
         satisfactory to such indemnified party, provided that no compromise or
         settlement shall be entered without the consent of such indemnified
         party, which consent shall not be unreasonably withheld. After notice
         from the indemnifying party to such




                                     -73-
<PAGE>   79

         indemnified party under the immediately preceding sentence of this
         Section 9.4 and except as otherwise explicitly provided herein, the
         indemnifying party shall not be responsible for any legal or other
         expenses subsequently incurred by such indemnified party in connection
         with the defense thereof; provided, however, if the defendants in any
         such action include both the indemnified party and the indemnifying
         party and the indemnified party shall have reasonably concluded that
         there are any legal defenses available to it and/or other indemnified
         parties that are different from or additional to those available to
         the indemnifying party, the indemnified party or parties shall have
         the right to select separate counsel to assert such legal defenses and
         to otherwise participate in the defense of such action on behalf of
         such indemnified party or parties. The indemnifying party shall not be
         liable for the expenses of more than one separate counsel unless an
         indemnified party shall have reasonably concluded that there may be
         legal defenses available to it that are different from or additional
         to those available to another indemnified party. In no event shall an
         indemnifying party be liable to an indemnified party under this
         Section 9.4 for any losses, claims, damages or liabilities to which
         such indemnified party may become subject to the extent the same arise
         by reason of the gross negligence, illegal acts, fraud or willful
         misconduct of such indemnified party.

                  (f)      In order to provide for just and equitable
         contribution in circumstances in which the indemnity agreement
         provided for in this Section 9.4 is for any reason held to be
         unenforceable by an indemnified party in respect of any losses,
         claims, damages or liabilities (or action in respect thereof) referred
         to therein which would otherwise be indemnifiable under Section 9.4,
         the indemnifying party shall contribute to the amount paid or payable
         by the indemnified party as a result of such losses, claims, damages
         or liabilities (or action in respect thereof); provided, however, that
         no person guilty of fraudulent misrepresentation (within the meaning
         of Section 11(f) of the Securities Act) shall be entitled to
         contribution from any person who was not guilty of such fraudulent
         misrepresentation; and provided further, that Borrower will be liable
         under this Section 9.4 only to the extent that any such loss, claim,
         damage or liability (or action in respect thereof) arises out of any
         untrue statement or omission made therein in reliance upon and in
         conformity with written information furnished to Lender by Borrower
         expressly for use in the Disclosure Document or any failure to state
         any material fact known to Borrower and required to be stated in such
         written information in order to make such written information in light
         of the circumstances under which they were made not misleading. In
         determining the amount of contribution to which the respective parties
         are entitled, the following factors shall be considered: (i) Lender
         Entity and Borrower's relative knowledge and access to information
         concerning the matter with respect to which claim was asserted; (ii)
         the opportunity to correct and prevent any statement or omission; and
         (iii) any other equitable considerations appropriate in the
         circumstances. Lender Entity and Borrower hereby agree that it would
         not be equitable if the amount of such contribution were determined by
         pro rata or per capita allocation.

                  (g)      The liabilities and obligations of both Borrower and
         Lender under this Section 9.4 shall survive the termination of the
         Security Instrument and the satisfaction and discharge of the
         Indebtedness for such period of time under any applicable statute of
         limitations that (i) any third party may bring any claim against
         Lender or Borrower, or (ii) Lender or Borrower may bring may bring any
         claim against each other, whether based on indemnification for a third
         party claim or otherwise.



                                     -74-
<PAGE>   80

                  Section  9.5      Information.

                  The Borrower hereby gives permission to the Lender to release
publicity articles concerning the existence, structure and the terms of the
Loan and the Borrower and principals involved in the financing of the Premises.
It is also expressly recognized and agreed that the Lender may share any
information pertaining to the Loan Documents, the transactions contemplated
thereby and the records maintained by the Lender in connection therewith with
Bank of America Corporation or Bank of America, including its bank subsidiaries
and Banc of America Securities LLC and any of the other Affiliates of the
foregoing and any other Persons which require such information in connection
with the sale of the Loan in the secondary mortgage market.

                  Section 9.6       Nonrecourse Loan; Exceptions.

                  The Note provides that the Loan is nonrecourse to the
Borrower and each Borrower Principal, except for (a) the lien of the Security
Instrument and the other Loan Documents and (b) the exceptions provided for in
the Note.

                  Section 9.7       Amendments.

                  This Loan Agreement shall not be amended except by a written
instrument signed by all parties hereto.

                  Section 9.8       Governing Law and Jurisdiction.

                  This Loan Agreement and the other Loan Documents and all
matters relating thereto shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina except that the
Security Instruments shall be governed by and construed and interpreted in
accordance with the laws of the state in which the applicable Individual
Property is located. The Borrower and all of its general partners/members and
each Borrower Principal hereby submit to the jurisdiction of the state and
federal courts located in the State of North Carolina and agree that the Lender
may, at its option, enforce its rights under the Loan Documents in such courts.

                  Section 9.9       Savings Clause.

                  Invalidation of any one or more of the provisions of this
Loan Agreement shall in no way affect any of the other provisions hereof, which
shall remain in full force and effect.

                  Section 9.10      Execution in Counterparts.

                  This Loan Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument, and in making proof of this Loan
Agreement, it shall not be necessary to produce or account for more than one
such counterpart.



                                     -75-
<PAGE>   81


                  Section 9.11      Notices.

                  All notices and other communications shall have been duly
given and shall be effective (a) when delivered, (b) when transmitted via
telecopy (or other facsimile device) to the number set forth in Exhibit C
hereto, (c) the day following the day on which the same has been delivered
prepaid to a reputable national overnight air courier service, or (d) the third
Business Day following the day on which the same is sent by certified or
registered mail, postage prepaid, in each case to the respective party at the
address set forth in Exhibit C hereto, or at such other address as such party
may specify by written notice to the other party hereto. No notice of change of
address shall be effective except upon actual receipt. This Section 9.10 shall
not be construed in any way to affect or impair any waiver of notice or demand
provided in any Loan Document or to require giving of notice or demand to or
upon any Person in any situation or for any reason. In addition to the
foregoing, the Lender and Borrower may, from time to time, specify to the other
party additional notice parties by providing to the other party written notice
of the name, address, telephone number and telecopy number of any such
additional notice party. Each such additional notice party shall be entitled to
receive and/or give any notice required or permitted to be given under this
Loan Agreement or any other Loan Document.

                  Section 9.12      Right of Set-Off.

                  In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence of and during the continuance of any Event of Default, the
Lender is authorized at any time and from time to time, without presentment,
demand, protest or other notice of any kind (all of which rights being hereby
expressly waived), to set-off and to appropriate and apply any and all deposits
(general or special) and any other indebtedness at any time held by or owing to
the Lender (including, without limitation branches, agencies or Affiliates of
the Lender wherever located) to or for the credit or the account of the
Borrower against the obligations and liabilities of the Borrower to the Lender
hereunder, under the Note or otherwise, irrespective of whether the Lender
shall have made any demand hereunder and although such obligations, liabilities
or claims, or any of them, may be contingent or unmatured, and any such set-off
shall be deemed to have been made immediately upon the occurrence of an Event
of Default even though such charge is made or entered on the books of the
Lender subsequent thereto. The Lender agrees to notify the Borrower subsequent
to any such set-off or application.

                  Section 9.13      Written Agreement.

                  (a)      THE RIGHTS AND OBLIGATIONS OF THE BORROWER, EACH
         BORROWER PRINCIPAL AND THE LENDER, AS APPROPRIATE, SHALL BE DETERMINED
         SOLELY FROM THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS,
         AND ANY PRIOR OR CONTEMPORANEOUS ORAL OR WRITTEN AGREEMENTS BETWEEN
         THE LENDER, THE BORROWER AND EACH BORROWER PRINCIPAL CONCERNING THE
         SUBJECT MATTER HEREOF AND OF THE OTHER LOAN DOCUMENTS ARE SUPERSEDED
         BY AND MERGED INTO THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS.



                                     -76-
<PAGE>   82


                  (b)      THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY
         NOT BE VARIED BY ANY ORAL AGREEMENTS OR DISCUSSIONS THAT OCCUR BEFORE,
         CONTEMPORANEOUSLY WITH, OR SUBSEQUENT TO THE EXECUTION OF THIS LOAN
         AGREEMENT OR THE OTHER LOAN DOCUMENTS.

                  (c)      THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
         DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
         NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
         SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
         AGREEMENTS BETWEEN THE PARTIES.

                  Section  9.14     Waiver of Jury Trial.


                  THE LENDER, THE BORROWER AND EACH BORROWER PRINCIPAL HEREBY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT
MATTER OF THIS LOAN AGREEMENT. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY THE LENDER, THE BORROWER AND EACH BORROWER PRINCIPAL, AND
THE LENDER, THE BORROWER AND EACH BORROWER PRINCIPAL ACKNOWLEDGE THAT NO PERSON
ACTING ON BEHALF OF ANOTHER PARTY TO THIS LOAN AGREEMENT HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. THE LENDER, THE BORROWER AND EACH BORROWER
PRINCIPAL FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE
OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LOAN AGREEMENT AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE
WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.

                  Section 9.15      Cross Default, Cross-Collateralization,
Waiver of Marshalling of Assets.

                  (a)      Borrower acknowledges that Lender has made the Loan
         to Borrower upon the security of its collective interest in the
         Individual Properties and in reliance upon the aggregate of the
         Individual Properties taken together being of greater value as
         collateral security than the sum of the Individual Properties taken
         separately. Borrower agrees that the Security Instruments are and will
         be cross-collateralized and cross-defaulted with each other so that
         (i) an Event of Default under any of the Security Instrument shall
         constitute an Event of Default under each of the other Security
         Instrument which secure the Note; (ii) an Event of Default under the
         Note or this Loan Agreement shall constitute an Event of Default under
         each Security Instrument; and (iii) each Security Instrument shall
         constitute security for the Note as if a single blanket lien were
         placed on all of the Individual Properties as security for the Note.

                  (b)      In addition to the Loan, the Security Instrument
         shall also secure the following described additional loan (the
         "Additional Loan"), including without limitation, the indebtedness



                                     -77-
<PAGE>   83

         evidenced by such Promissory Notes (the "Additional Note") described
         below, and the payment and performance of all other indebtedness and
         obligations (including any additional advances) under the Additional
         Note and all agreements, instruments and other documents evidencing,
         securing or relating to the Additional Loan (each an "Additional Loan
         Document" and, collectively, the "Additional Loan Documents"),
         including without limitation, the loan agreement relating to the
         Additional Loan (the "Additional Loan Agreement", together with any
         and all amendments, renewals, replacements, extensions or other
         modifications to any of the foregoing:

                  Loan in the principal amount of $26,716,000 evidenced by a
                  Promissory Note executed by RFS SPE 2000 LLC and payable to
                  the Lender dated of even date herewith, in such principal
                  amount, secured by the following properties: Residence Inn,
                  Jacksonville, Florida; Residence Inn, Torrance, California;
                  Hampton Inn, Houston, Texas; and Hampton Inn, Jacksonville,
                  Florida.

                  The holder of any such Additional Note shall be entitled to
                  the benefits of the Security Instrument to the same extent as
                  the holder of the Note. Accordingly, all references in the
                  Security Instrument to the Loan, the Note, the Loan Agreement
                  or the Loan Documents shall be construed to include,
                  respectively, the Additional Loan, the Additional Note, the
                  Additional Loan Agreement and the Additional Loan Documents.

                  Notwithstanding anything to the contrary in the Loan
         Documents, the fact that the Security Instrument shall also secure the
         Additional Loan and the fact that the Borrower will enter into the
         Contribution Agreement shall not result in a default under any of the
         Loan Documents.

                  (c)      Any default or event of default under any Additional
         Loan Documents shall constitute an Event of Default under this Loan
         Agreement, the Security Instrument and the other Loan Documents,
         including without limitation, the Note. Any Event of Default hereunder
         or under any of the other Loan Documents shall constitute a default or
         event of default under the Additional Loan Documents, including
         without limitation, the Additional Note.

                  (d)      The Lender may, from time to time, at its election,
         release the Loan and/or the Additional Loan from the
         cross-collateralization and cross-default provisions set forth above.
         In the event the Loan is paid in full or the Loan is assumed in
         accordance with the provisions of this Agreement, the Lender may, in
         its sole and absolute discretion, at the request of the Borrower or
         any such assuming party, release the cross-collateralization and
         cross-default provisions set forth above, upon (i) Lender's approval,
         in its sole and absolute discretion, of the new Special Purpose Entity
         borrower, (ii) the affirmation of the Rating Agencies that such
         release will not result in a downgrade, qualification, or withdrawal
         in the ratings for any Securities, (iii) Borrower's providing of
         additional collateral in the form of Permitted Investments in an
         amount equal to twenty-five percent (25%) of the Allocated Loan Amount
         being released, (iv) the Debt Service Coverage Ratio Leases and Debt
         Service Coverage Ratio Premises on the remaining Individual Properties
         remaining equal to the greater of (A) such ratios at the Closing Date
         or (B) such ratios




                                     -78-
<PAGE>   84

         immediately prior to such release, and (iv) payment to the Lender of
         an amount equal to twenty-five percent (25%) of the outstanding
         principal balance of the Loan immediately preceding such payment of
         the Loan in full or on the date of such assumption (to be applied on a
         pro-rata basis against the Additional Loan in such manner as the
         Lender may elect in its sole and absolute discretion) and satisfaction
         of all other requirements of the Lender for such release. Any release
         of such cross-collateralization and cross-default provisions may be
         made by instruments executed solely by the Lender, without any need
         for joinder by the Borrower or any other Person. Upon the execution of
         any such release by the Lender, all other Loan Documents and
         Additional Loan Documents shall be deemed amended thereby so as to
         conform to such release. In no event shall any such release of the
         cross-collateralization and cross-default provisions be deemed or
         construed so as to release, satisfy or otherwise amend the Note, the
         Security Instrument or any of the other Loan Documents.

                  (e)      To the fullest extent permitted by law, Borrower,
         for itself and its successors and assigns, waives all rights to a
         marshalling of the assets of Borrower, Borrower's partners and others
         with interests in Borrower, and of the Individual Properties, or to a
         sale in inverse order of alienation in the event of foreclosure of all
         or any of the Security Instrument, and agrees not to assert any right
         under any laws pertaining to the marshalling of assets, the sale in
         inverse order of alienation, homestead exemption, the administration
         of estates of decedents, or any other matters whatsoever to defeat,
         reduce or affect the right of Lender under the Loan Documents to a
         sale of the Individual Properties for the collection of the Loan
         without any prior or different resort for collection or of the right
         of Lender to the payment of the Loan out of the net proceeds of the
         Individual Properties in preference to every other claimant
         whatsoever. In addition, Borrower, for itself and its successors and
         assigns, waives in the event of foreclosure of any or all of the
         Security Instrument, any equitable right otherwise available to
         Borrower which would require the separate sale of the Individual
         Properties or require Lender to exhaust its remedies against any
         Individual Property or any combination of the Individual Properties
         before proceeding against any other Individual Property or combination
         of Individual Properties; and further in the event of such foreclosure
         Borrower does hereby expressly consents to and authorizes, at the
         option of Lender, the foreclosure and sale either separately or
         together of any combination of the Individual Properties.

                  Section 9.16      Servicer.

                  At the option of Lender, the Loan may be serviced by a
servicer (the "Servicer") selected by Lender and Lender may delegate all or any
portion of its responsibilities under this Agreement and the other Loan
Documents to the Servicer pursuant to a servicing agreement (the "Servicing
Agreement") between Lender and Servicer. Until Lender may elect otherwise, the
Servicer shall be Bank of America.



                                     -79-
<PAGE>   85

                                   ARTICLE X
                              SPECIAL PROVISIONS

                  Section 10.1      Termination of Manager.

                  (a)      To the extent Borrower enters into any Management
         Agreement, such Management Agreement shall include provisions that if
         any of the following conditions occur during the term of the Loan: (a)
         at any time, the Debt Service Coverage Ratio Premises for the
         immediately preceding twelve (12) month period is less than 1.3x or
         (b) the amounts evidenced by the Note have been accelerated; or (c)
         the Manager shall become insolvent, the Borrower shall, at the request
         of Lender, terminate the Management Agreement and replace the Manager
         with a manager approved by Lender on terms and conditions satisfactory
         to Lender, it being understood and agreed that the management fee for
         such replacement manager shall not exceed then prevailing market
         rates. Notwithstanding the foregoing, if the reason for termination of
         the Manager is subsection (a) above, the Borrower may elect from time
         to time to provide additional collateral for a portion of the Loan
         such that, if the outstanding principal balance of the Loan were equal
         to such principal balance less the lower of (as determined by Lender)
         the face amount or fair market value of the additional collateral, the
         Debt Service Coverage Ratio Premises (after adjusting the Debt Service
         accordingly to reflect same) would equal or exceed 1.3x, in which case
         no termination would be effective. Any such additional collateral
         would not be released until Borrower has demonstrated a Debt Service
         Coverage Ratio Premises in excess of 1.3x without taking into account
         the additional collateral. All additional collateral must be U.S.
         Obligations and must be accompanied by such additional security
         agreements, financing statements and other documents or instruments,
         including opinions of Borrower's counsel, which in the reasonable
         opinion of Lender and its counsel would be necessary or advisable to
         create in Lender a first perfected security interest in the additional
         collateral. In addition and as a condition to the posting of such
         additional collateral, Lender shall have received written affirmation
         from the Rating Agencies that the credit ratings of the Securities
         immediately prior to such posting will not be qualified, downgraded or
         withdrawn as a result of such posting, which affirmation may be
         granted or withheld in the Rating Agencies' sole and absolute
         discretion.

                  (b)      If at any time during the term of the Loan, any
         Manager under any Management Agreement is an Affiliate of Borrower,
         Borrower shall have delivered a Non-Consolidation opinion, as
         acceptable to Lender in its sole discretion with respect to Manager
         and its equity owners.



                                     -80-
<PAGE>   86

                  Section 10.2      Substitution of Operating Lessee.

                  Notwithstanding anything to the contrary contained herein,
Lender may consent to the termination of the Operating Lease and substitution
of a new operating lease or if applicable a management agreement entered into
pursuant to the formation of the taxable REIT subsidiary (the "New Operating
Lease") in its sole discretion. Such consent shall not be required, provided
that Lender has received payment in full of any and all actual expenses
incurred in connection therewith and the following conditions have been
satisfied as of the consummation of the transaction:

                  (i)      the operating lessee under the New Operating Lease
         (x) is a Qualified Operating Lessee; or (y) is a public company whose
         shares were initially distributed to the shareholders and unitholders
         of the REIT and Operating Partnership at the time the new Operating
         lease is executed;

                  (ii)     the terms of the New Operating Lease, including
         without limitation, economic provisions, are substantially similar or
         more preferential to Lender than the Operating Lease;

                  (iii)    the New Operating Lease contains a provision that
         if, at any time, the Debt Service Coverage Ratio Leases for the
         immediately preceding twelve (12) month period is less than 1.30x, the
         Borrower shall, at the request of Lender, terminate the New Operating
         Lease and replace the Operating Lessee or if applicable the New
         Manager with a new operating lessee or a new manager approved by
         Lender, on terms and conditions satisfactory to Lender;

                  (iv)     Lender has received no less than forty-five (45)
         days' prior written notice of such transfer;

                  (v)      if Qualified Operating Lessee is an Affiliate of
         Borrower: (x) Qualified Operating Lessee has fully subordinated all of
         its rights under the New Operating Lease to the Lien of the Security
         Instrument including but not limited to all provisions regarding
         insurance, condemnation and any purchase option exercisable by
         Qualified Operating Lessee; and (y) Borrower shall have delivered a
         Non-Consolidation Opinion, as acceptable to Lender in its sole
         discretion with respect to Qualified Operating Lessee and its equity
         owners;

                  (vi)     Lender shall have confirmations from any franchisors
         under any Franchise Agreements that such Franchise Agreements shall
         remain in full force and effect after the consummation of such New
         Operating Lease; and

                  (vii)    Lender shall have confirmations in writing from any
         applicable Rating Agencies to the effect that such new Operating Lease
         will not result in a re-qualification, reduction or withdrawal of any
         rating then assigned to any securities in a securitization.


                            [Signature Page Follows]



                                     -81-
<PAGE>   87

                  IN WITNESS WHEREOF, the Borrower, each Borrower Principal and
the Lender have executed this Loan Agreement under Seal as of the above-written
date.


                                          BORROWER:

                                          RFS SPE2 2000 LLC, a Virginia limited
                                          liability company

                                          By: RFS MM2 2000 CORPORATION,
                                              a Virginia corporation,
                                              its managing member

                                          By:                             (SEAL)
                                              ----------------------------
                                              Name: Kevin Luebbers
                                              Title: Secretary


                                          BORROWER PRINCIPALS:

                                          RFS HOTEL INVESTORS, INC.,
                                          a Tennessee corporation

                                          By:                             (SEAL)
                                              ----------------------------
                                              Name: Kevin Luebbers
                                              Title: Executive Vice President


                                          LENDER:


                                          BANK OF AMERICA, N.A., a national
                                          banking association



                                          By:                             (SEAL)
                                              ----------------------------
                                              Name:
                                                    ----------------------------
                                              Title:
                                                    ----------------------------

<PAGE>   88

                                   SCHEDULE 1

                             Allocated Loan Amount


        Residence Inn, Atlanta, Georgia                  $ 4,189,000.00
        Holiday Inn Express, Downers Grove, Illinois     $ 4,938,000.00
        Holiday Inn, Flint,  Michigan                    $ 9,999,000.00
        Sheraton, Clayton, Missouri                      $ 6,358,000.00



<PAGE>   89


                                   SCHEDULE 2

                              Franchise Agreements

Residence Inn, Atlanta, Georgia- By and Between Marriott International, Inc. as
Franchisor and RFS, Inc. as Franchisee, dated October 2, 1995.

Holiday Inn, Downers Grove, Illinois - By and Between Holiday Inns Franchising,
Inc., as Licensor and RFS, Inc. as Licensee, dated February 27, 1996.

Holiday Inn, Flint, Michigan- By and Between Holiday Inns Franchising, Inc., as
Licensor and RFS, Inc. as Licensee, dated February 27, 1996.

Sheraton, Clayton, Missouri- By and Between ITT Sheraton, as Licensor and RFS,
Inc. as Licensee, dated June 18, 1999.


<PAGE>   90

                                   SCHEDULE 3

                                Operating Leases


Residence Inn, Atlanta, Georgia, Holiday Inn Express, Downers Grove, Illinois,
Holiday Inn, Flint, Michigan and Sheraton, Clayton, Missouri - By and between
RFS, Inc. and RFS Partnership, L.P. as amended and consolidated on November 21,
1996.


<PAGE>   91

                                                                      EXHIBIT A
                                                                      ---------

                                EQUITY INTERESTS

Borrower:
--------

RFS MM2 2000 Corporation                                                  1%

RFS Hotel Investors, Inc.                                                99%





Each Borrower Principal which is not an Individual:
---------------------------------------------------


N/A


<PAGE>   92

                                                                      EXHIBIT B
                                                                      ---------


           IMMEDIATE REPAIRS, REPLACEMENTS, INITIAL RESERVE DEPOSITS
                          AND MONTHLY RESERVE DEPOSITS


                                                                     IMMEDIATE
        IMMEDIATE REPAIRS DETAIL                                  REPAIRS ESCROW

        Clayton, MO

                 HVAC Units                                         $116,000.00

                 Food Service equipment                             $ 18,800.00

                 Swimming pool                                      $  4,900.00

                 Hallways:  carpet and wallcover                    $ 71,000.00

                 Other/Miscellaneous                                $  3,900.00
                 -------------------                                -----------

                 TOTAL:                                             $214,600.00



Replacements                                                      Estimated Cost
------------                                                      --------------

         All items required to be capitalized under GAAP, including, but not
limited to, all furniture, furnishings, fixtures, hotel equipment, hotel
systems, wall coverings, floor coverings and soft goods of Borrower.



Initial Reserve Deposits
------------------------
<TABLE>
<S>                                                                             <C>

         Initial Reserve Deposit to the Repair Escrow Account (125% of the
         aggregate estimated cost of Immediate Repairs, as calculated above):   $268,250.00

         Initial Reserve Deposit to the Replacement Reserve Account:            $0.00

         Initial Reserve Deposit to the Tax and Insurance Reserve Account:      $509,136.74

         Initial Reserve Deposit to the Debt Service Reserve Account:           $0.00

         Initial Deposit to the COR Account:                                    $0.00
</TABLE>



<PAGE>   93

Monthly Reserve Deposits
------------------------

         In the first year of the Loan, Monthly Reserve Deposits to the
         Replacement Reserve Account shall be in an amount equal to $89,890.92.
         Beginning at the end of the first year of the Loan Term, Borrower
         shall make monthly deposits in an amount equal to the greater of (i)
         5% of Operating Income based on the Operating Statements provided by
         the Borrower, or (ii) $92,138.17 per month, the greater of (i) 5% of
         Operating Income based on the Operating Statements provided by the
         Borrower, or (ii) $94,441.67 per month beginning at the end of the
         second year of the Loan Term, the greater of (i) 5% of Operating
         Income based on the Operating Statements provided by the Borrower, or
         (ii) $96,802.67 per month beginning at the end of the third year of
         the Loan Term, the greater of (i) 5% of Operating Income based on the
         Operating Statements provided by the Borrower, or (ii) $99,222.75 per
         month beginning at the end of the fourth year of the Loan Term, the
         greater of (i) 5% of Operating Income based on the Operating
         Statements provided by the Borrower, or (ii) $101,703.33 per month
         beginning at the end of the fifth year of the Loan Term, the greater
         of (i) 5% of Operating Income based on the Operating Statements
         provided by the Borrower, or (ii) $104,245.91 per month beginning at
         the end of the sixth year of the Loan Term, the greater of (i) 5% of
         Operating Income based on the Operating Statements provided by the
         Borrower, or (ii) $106,852.08 per month beginning at the end of the
         seventh year of the Loan Term, the greater of (i) 5% of Operating
         Income based on the Operating Statements provided by the Borrower, or
         (ii) $109,523.33 per month beginning at the end of the eighth year of
         the Loan Term, and the greater of (i) 5% of Operating Income based on
         the Operating Statements provided by the Borrower, or (ii) $112,261.41
         per month beginning at the end of the ninth year of the Loan Term (the
         "Monthly Deposit to the Replacement Reserve Account"). The Lender may,
         in its reasonable discretion, adjust such monthly amount from time to
         time to an amount sufficient, in the Lender's reasonable judgment, to
         maintain adequate balances necessary for repair and/or replacement
         costs as they may arise. Notwithstanding the foregoing, in the event
         the Lender shall at any time increase the Monthly Deposit to the
         Replacement Reserve Account over the monthly amount then required, the
         Borrower may, at its election, request that the Lender obtain, at the
         sole cost, fee and expense of the Borrower, an engineer's report from
         an engineer to be selected by the Lender in its reasonable discretion,
         in which case the Monthly Deposit to the Replacement Reserve Account
         shall be adjusted by the Lender based on such engineer's report,
         provided that in no event shall the Monthly Deposit to the Replacement
         Reserve Account be decreased below the amount then required.

         Monthly Reserve Deposits to the Tax and Insurance Reserve Account
         shall be in an amount equal to (a) the sum of (i) the aggregate
         anticipated annual premiums for all insurance policies required to be
         maintained pursuant to this Loan Agreement due in the coming year,
         (ii) the sum of the anticipated annual real property taxes, personal
         property taxes, intangibles taxes and assessment for the Premises due
         in the coming year, (iii) the sum of anticipated annual water and
         sewer assessments and frontage charges for the Premises due in the
         coming year, and (iv) the sum of all other anticipated assessments and
         charges against the Premises due in the coming year, divided by (b)
         twelve (12).


<PAGE>   94


                                                                      EXHIBIT C
                                                                      ---------

                              ADDRESSES FOR NOTICE

         if to the Borrower:                RFS SPE2 2000 LLC
                                            c/o RFS Hotel Investors Inc.
                                            850 Ridge Lake Blvd, Suite 220
                                            Memphis, Tennessee  38120
                                            Attn:    Kevin Luebbers
                                            Telephone: (901) 767-7005
                                            Telecopy: (901) 819-5260

         with a copy to:                    Hunton & Williams
                                            1900 K Street, N.W., Suite 1200
                                            Washington, DC  20006
                                            Attn:  Thomas F. Kaufman, Esq.
                                            Telephone:  (202) 955-1604
                                            Telecopy:  (202) 778-2201

         if to the Lender:                  Bank of America, N.A.
                                            c/o Capital Markets Servicing Group
                                            333 South Beaudry, 26th Floor
                                            CA9-703-26-10
                                            Los Angeles, CA 90017
                                            Telephone: (800) 462-0505
                                            Telecopy:   (213) 345-6587

         with a copy to:                    Cadwalader, Wickersham & Taft
                                            227 West Trade Street, Suite 2400
                                            Charlotte, North Carolina  28202
                                            Attn:  James P. Carroll, Esq.
                                            Telephone:  (704) 348-5100
                                            Telecopy:  (704) 348-5200




<PAGE>   95
                                                                      EXHIBIT D
                                                                      ---------

                                 PROGRAM RIDER

                                    (Hotel)

         1.       Definitions. The capitalized terms used in this Program Rider
and not defined below shall have the meanings set forth in the Loan Agreement.

                  Operating Expense. Shall mean any operating expense relating
to the Premises, whether it be an Operating Expense Premises or an Operating
Expense Leases.

                  Operating Income. Shall mean any operating income relating to
the Premises, whether it be from Operating Income Premises or Operating Income
Leases.

         2.       Conditions Precedent. The obligation of the Lender to make
the Loan provided for in this Loan Agreement is subject to the satisfaction, by
proper evidence, execution and/or delivery to the Lender of each of the
following items, each in form and substance satisfactory to the Lender and the
Lender's counsel:

                  (a)      Leases. Copies (including a Certification) of all
         leases, assignments of lease, subleases and any lease amendments and
         other agreements (hereinafter "Leases") affecting any part of the
         Premises. The leases shall be subordinate to the Security Instrument.

                  (b)      Tenant Estoppel Certificates. Current Tenant
         Estoppel Certificates from all tenants and other users (hereinafter
         "Tenants") of any portion of the Premises.

                  (c)      Subordination Agreements. Subordination Agreements
         with any Lessee.

                  (d)      Nondisturbance Agreement. Nondisturbance Agreement
         with Operating Lessee.

                  (e)      Franchise Agreement. A copy of the Franchise
         Agreement.

                  (f)      Comfort Letter from Franchisor. A comfort letter or
         other agreement from the franchisor under the Franchise Agreement,
         which letter shall, at the election of the Lender, (i) be addressed to
         the Lender, (ii) verify that the Franchise Agreement is in full force
         and effect, (iii) verify that there are no defaults, breaches or
         violations under the Franchise Agreement and that no conditions exist
         which with the passage of time or the giving of notice or both could
         constitute a default, breach or violation thereunder, (iv) provide
         that notice of any default, breach or violation under the Franchise
         Agreement and right to cure same be given to the Lender, (v) provide
         that the Lender shall have the right to assign the letter or other
         agreement, (vi) permit the Lender to preserve the Franchise Agreement
         and operate the franchise in accordance with the terms thereof in



<PAGE>   96

         the event the Borrower suffers a Bankruptcy Event or in the event the
         Lender or any Affiliate of the Lender acquires the Premises at any
         foreclosure sale or by deed in lieu of foreclosure, which right to
         preserve and operate shall continue until dismissal of such Bankruptcy
         Event or any subsequent sale of the Premises to a party which is not
         the Lender or any Affiliate of the Lender, as applicable, and (vii)
         consent to the Loan and the assignment of and grant of a security
         interest in the Franchise Agreement in favor of the Lender as security
         for the Loan and the obligations evidenced and secured by the Loan
         Documents.

                  (g)      Franchise Inspection Reports. Copies of such
         franchise inspection reports relating to the Premises as the Lender
         may request.

                  (h)      Licenses. Copies (including a Certification) of all
         material licenses, permits, certificates and/or privileges necessary
         or desirable for the ownership or operation of the Premises as
         currently constructed and operated.

         3.       Representations and Warranties of the Borrower. To induce the
Lender to enter into this Loan Agreement and to make the Loan, the Borrower
hereby represents and warrants to the Lender on the Closing Date as follows:

                  (a)      Franchise Agreement. The Franchise Agreement is in
         full force and effect and has not been terminated, rescinded,
         withdrawn or cancelled, or (except as disclosed in writing by the
         Borrower prior to the Closing Date) altered, amended or modified. To
         the best of Borrower's knowledge, there is no default under or breach
         or violation of the terms of the Franchise Agreement by any party
         thereto.

                  (b)      The Premises. All guest rooms, facilities and
         amenities relating to the operation of the hotel as presently
         constructed and operated are located on the Premises.

                  (c)      Licenses. To the best of Borrower's knowledge, all
         licenses, permits, certificates and/or privileges necessary or
         desirable for the ownership or operation of the Premises as presently
         constructed and operated have been obtained and are in good standing.

                  (d)      Operating Lease. The Operating Lease is in full
         force and effect and has not been terminated, rescinded, withdrawn or
         canceled, or (except as disclosed in writing by the Borrower prior to
         the Closing Date) altered, amended or modified. There is no default
         under or between or violation of the terms of the Operating Lease by
         any party thereto.

         4.       Affirmative Covenants of the Borrower. During any period in
which the Loan is outstanding, the Borrower agrees that it will:

                  (a)       Franchise Inspection Reports. Furnish the Lender
         with a copy of each franchise inspection report relating to the
         Premises within fifteen (15) days after the Borrower's receipt
         thereof.



                                       2
<PAGE>   97

                  (b)       Lessee Information. Submit to the Lender when
         requested by the Lender, all information on all tenant leases
         otherwise required to be included in a Rent Roll, which information
         shall include a Certification thereof.

                  (c)       Rent Rolls. Furnish, or cause to be furnished, Rent
         Rolls to the Lender when requested by the Lender.

                  (d)       Tenant Estoppel Certificates. Furnish to the Lender
         when requested by the Lender, Tenant Estoppel Certificates from such
         tenants of any portion of the Premises as the Lender may require.

                  (e)       Subordination Agreements. Furnish to the Lender
         when requested by the Lender, Subordination Agreements with such
         tenants of any portion of the Premises as the Lender may require.

                  (f)       Licenses. Maintain in full force and effect all
         material licenses, permits, certificates and/or privileges necessary
         or desirable for the ownership or operation of the Premises as
         currently or hereafter constructed and operated.

         5.       Negative Covenants of the Borrower. During any period in
which the Loan is outstanding, the Borrower agrees that it will not:

                  (a)       Franchise Agreement and Other Agreements, Licenses
         and Permits. Consent to any default under or a breach, withdrawal,
         cancellation, revocation, rescission, termination, alteration,
         amendment, extension or modification of the Franchise Agreement, or
         any lease, including without limitation property specific leases,
         rental agreement, sales contract, management contract, construction
         contract, technical service agreement or other contract or agreement,
         or any license, permit, certificate or privilege affecting the
         ownership or operation of the Premises.

                  (b)       Leases. The Borrower shall not enter into, default
         under, breach, withdraw, cancel, rescind, terminate, alter or modify
         any lease of, or other agreement regarding, any portion of the
         Premises without the Lender's prior written approval, unless such
         lease or other agreement (i) is on a form previously approved by the
         Lender, (ii) provides for terms in conformity with local conditions,
         (iii) together with the tenant's proposed use of the space leased,
         conforms with applicable laws and all recorded restrictive covenants
         affecting the Premises, if any, and with the covenants and agreements
         set forth in the Loan Documents, including but not limited to those
         relating to Hazardous Materials and specifically references such
         covenants relating to Hazardous Materials, and (iv) does not provide
         for any purchase option, right of first offer or refusal or similar
         right relating to all or any portion of the Premises.

         6.       Adjustments to Monthly Reserve Deposit to the Replacement
Reserve Account. The Monthly Reserve Deposit to the Replacement Reserve Account
shall be adjusted pursuant to the provisions of Exhibit B hereof.



                                       3
<PAGE>   98


         7.       Debt Service Reserve. Borrower shall establish on the date
hereof a debt service reserve account (the "Debt Service Reserve Account")
which shall be under the sole dominion and control of Lender. On a quarterly
basis, based on trailing twelve (12) months certified operating statements,
Lender will determine the aggregate Debt Service Coverage Ratio Premises for
the Premises (the "Aggregate DSCR"). In the event the Aggregate DCSR is below
1.70x, funds sufficient to pay three (3) months debt service for the Loan shall
be deposited directly into the Debt Service Reserve Account. The Debt Service
Reserve shall be interest bearing for the benefit of the Borrower and will
remain in place for the remainder of the Loan. If at any time after the Debt
Service Reserve Account is established, the balance of such account is less
than an amount sufficient to pay three (3) months debt service, Borrower shall,
within ten (10) days, replenish the Debt Service Reserve Account with
additional funds necessary to maintain such amount.

         8.       Event of Default. In addition to any Events of Default set
forth in the Loan Agreement or any of the other Loan Documents, any default
under, breach of or failure by the Borrower to perform its obligations under
the Franchise Agreement or any withdrawal, cancellation, revocation,
rescission, termination, alteration, amendment or modification of the Franchise
Agreement (except as set forth on Schedule 4 hereto or to the extent consented
to in writing by the Lender) shall be an Event of Default under the Loan
Agreement and the other Loan Documents.



                                       4
<PAGE>   99



                                                                      EXHIBIT E
                                                                      ---------


         Form of Nondisturbance, Subordination and Attornment Agreement for
Operating Leases

This instrument was prepared                  Cadwalader, Wickersham & Taft
by and after recording return to:             227 West Trade Street, Suite 2400
                                              Charlotte, North Carolina 28202
                                              Attention: James P. Carroll, Esq.


            NON-DISTURBANCE, SUBORDINATION AND ATTORNMENT AGREEMENT

                  THIS AGREEMENT, made as of this ____ day of ______________,
2000 between ___________________________, and _________________________, each a
________________________, (collectively, the "Borrower"), RFS, Inc., a
Tennessee corporation (the "Lessee") and BANK OF AMERICA, N.A., a national
banking association (the "Lender").


                                    RECITALS

                  1.       The Lender has extended [two loans] to the Borrower
in the aggregate amount of up to $___________________ (collectively, the
"Loan") pursuant to certain loan agreements dated the date hereof between the
Borrower and the Lender (collectively, the "Loan Agreement") and evidenced by
promissory notes executed by the Borrower and payable to the Lender (such
notes, together with any extensions, renewals, and amendments thereto, and
hereinafter referred to as the "Note") and secured by deeds of trust, and
mortgages, (individually, a "Security Instrument" collectively, the "Security
Instruments") on certain parcels of land and improvements thereon
(individually, a "Property", collectively, the "Properties") owned by Borrower
as set forth in Schedule 1 attached hereto and incorporated herein by
reference. The Note, the Loan Agreement, the Security Instruments and any and
all other loan documents now or hereafter either securing or evidencing the
Loan evidenced by the Loan Agreement and the Note and all modifications,
extensions, consolidations, replacements and renewals of such loan documents
are referred to collectively as the "Loan Documents."

                  2.       The Lessee is the tenant under the lease agreements
for the Properties between [RFS Partnership, L.P., a Tennessee limited
partnership, ("RFS, L.P.")], and the Lessee, being more particularly described
in Schedule 2 attached hereto and incorporated herein by reference
(hereinafter, together with any amendments or modifications consented to by the
Lender, are referred to as the "Leases"). The Leases have been amended by an
Amendment to Third Consolidated Lease Amendment and Lease Agreements dated as
of the date hereof (the "Amendment"), whereby RFS, L.P. and Lessee have set
forth their agreements regarding certain matters that have been addressed in
this Agreement. The interests of RFS, L.P. under the Leases, as amended, have
been assigned to Borrower pursuant to two Assignment of Leases Agreements, each
dated as of the date hereof (collectively the "Assignment of Leases") and the
Properties subject to the Leases have been conveyed to Borrower.




                                       1
<PAGE>   100

                  3.       In connection with the credit being extended
pursuant to the terms of the Loan Agreement, the Lender has requested the
Lessee and the Borrower to execute this Agreement, and in order to induce the
Lender to make the Loan, the Lessee and the Borrower have agreed to the terms
set out herein.


                                   AGREEMENT

                  NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

                  FIRST: Each Lease shall be subject and subordinate to the
Security Instruments and to all renewals, modifications or extensions thereof.

                  SECOND: With respect to each Lease, so long as Lessee is not
in default (beyond any period in such Lease given Lessee to cure such default)
in the payment of rent (specifically including but not limited to percentage
rent and base rent of every kind and character) or additional rent or in the
performance of any of the terms, covenants or conditions of the Lease on
Lessee's part to be performed, and except as expressly set forth herein,
Lessee's possession of the premises described in the Lease and Lessee's rights
and privileges under the Lease, or any extensions or renewals thereof which may
be effected in accordance with any option therefor in the Lease, shall not be
disturbed, diminished or interfered with by any suit, action or proceeding upon
any Security Instrument or the obligations secured thereby, or the foreclosure
of the Security Instruments or the enforcement of any rights thereunder or
under any other Loan Document or otherwise by Lender.

                  THIRD: If the interests of Borrower shall be transferred to
and owned by Lender by reason of foreclosure, deed in lieu of foreclosure, or
other proceedings brought by it or by any other manner, and Lender succeeds to
the interest of the Borrower under any Lease, Lessee shall be bound to Lender
under all of the terms, covenants and conditions of such Lease for the balance
of the term thereof remaining and any extensions or renewals thereof which may
be effected in accordance with any option thereof in such Lease, with the same
force and effect as if Lender were the lessor under the Lease, and Lessee does
hereby attorn to Lender as its lessor, said attornment to be effective and
self-operative without the execution of any further instruments on the part of
either of the parties hereto immediately upon Lender succeeding to the interest
of the lessor under such Lease. The respective rights and obligations of Lessee
and Lender upon said attornment, to the extent of the then remaining balance of
the term of such Lease and any such extensions and renewals, shall be and are
the same as now set forth therein, subject to the terms and provisions of this
Agreement; it being the intention of the parties hereto for this purpose to
incorporate the Leases in this Agreement by reference with the same force and
effect as if set forth at length herein, subject to the terms and provisions of
this Agreement.

                  FOURTH: Lessee certifies that: (a) each Lease is presently in
full force and effect; (b) no rent under any Lease has been paid more than
thirty (30) days in advance of its due date, other than any overpayments of
percentage rent that may be adjusted as provided in such Lease; (c) Lessee has
not filed any claim of offset and, to the best knowledge of Lessee, Lessee,




                                       2
<PAGE>   101

as of this date, has no charge, lien or claim of offset under any Lease, or
otherwise, against the rents or other amounts due or to become due thereunder;
(d) the Lessee is owner of the "Tenant's" or "Lessee's" interest in the Lease
and has not transferred or assigned any Lease or sublet the premises demised
thereby; and (e) to the best knowledge of the Lessee, neither the Lessee nor
the Lessor is in any way in default under any Lease and Lessee, to the best of
its knowledge, knows of no event which but for the passage of time or the
giving of notice or both would constitute an event of default or breach by
Lessee or Borrower under any Lease. Lessee shall up to twice a calendar year
(and at such additional times as Lender shall reasonably request), within ten
(10) days after request by Lender, execute, acknowledge and deliver a statement
by Lessee certifying the items listed in subsections (a)-(e) above with such
exceptions as shall be necessary to cause such statement to be factually
correct.

                  FIFTH:  If Lender  shall  succeed to the  interest of Borrower
under any Lease, Lender shall be bound to Lessee under all terms,  covenants and
conditions of such Lease, and Lessee shall,  from and after Lender's  succession
to the interest of Borrower  under such Lease,  have the same  remedies  against
Lender for the breach of an  agreement  contained in the Lease that Lessee might
have had under such Lease  against  Borrower if Lender had not  succeeded to the
interest of Borrower;  provided further,  however, that Lender shall not be:

                  (a)      liable for any act or omission of any prior landlord
         (including the Borrower) except that Lender shall be liable for such
         act or omission only from and after the date on which Lender so
         succeeds to the interest of Borrower under such Lease if such act or
         omission constitutes a default of Borrower under such Lease and
         continues to exist after such date; or

                  (b)      subject to any offsets or defenses which the Lessee
         might have against any prior landlord (including the Borrower) except
         for offsets expressly provided for in such Lease arising from Lessor
         defaults under such Lease with respect to which Lessee has notified
         Lender pursuant to clause SEVENTH hereof (such notice to set forth a
         quantification of the potential offset amount to the extent possible);
         or

                  (c)      liable for the return of any security deposits not
         delivered to Lender; or

                  (d)      bound by any rent or additional rent which Lessee
         might have paid for more than thirty (30) days in advance of its due
         date to any prior landlord (including Borrower), other than any
         overpayments of percentage rent that may be adjusted as provided in
         the Lease; or

                  (e)      bound by any amendment or modification of the Lease
         including, but not limited to, any reduction in rent, made without
         Lender's consent; or

                  (f)      obligated to construct or finish the construction or
         to renovate or finish the renovation of the premises described in any
         Lease, except as required under such Lease.

                  SIXTH: Each Lease now is, and shall at all times continue to
be, subject and subordinate in each and every respect, to the Security
Instruments and to any and all renewals, modifications and extensions thereof,
but any and all such renewals, modifications and extensions shall nevertheless
be subject to and entitled to the benefits of the terms of this




                                       3
<PAGE>   102

Agreement. Lessee acknowledges and agrees that in the event of any conflict
between the provisions of any Lease and the provisions of this Agreement, this
Agreement shall control.

                  SEVENTH: Lessee will notify Lender or its successors or
assigns, by reputable overnight courier delivery, of any default of Borrower
which would entitle Lessee to cancel any Lease or abate the rent payable
thereunder, and agrees that notwithstanding any provision of such Lease, no
notice of cancellation thereof, nor any abatement shall be effective unless
Lender has received the notice aforesaid and has failed within thirty (30) days
of the date thereof to cure such default or, if the default cannot be cured
within thirty (30) days, has failed to commence and to diligently prosecute the
cure of Borrower's default which gave rise to such right of cancellation or
abatement. The address of the Lender for notice is Bank of America, N.A., CMLS
#1777, P.O. Box 3609, Los Angeles, California 90051, Attn: Servicing Manager.
Lender will notify Lessee or its successors or assigns in writing of any
default of Borrower under the Loan Documents that would entitle Lender to
enforce its rights or remedies thereunder, and agrees that it will not enforce
its rights or remedies thereunder unless Lessee has received a written notice
for a time period equivalent to the time period afforded to Borrower under the
Loan Documents and Lessee has failed to cure such default within such
time-period. The address of the Lessee for notice is RFS, Inc., c/o Promus
Hotel Corporation, 755 Crossover Lane, Memphis, Tennessee 38117-4900, Attn:
Peter Kesser.

                  EIGHTH: No Lease may be assigned or sublet by the Lessee
without the Lender's prior written consent, except as the Lessee may be
permitted to do so without the consent of the Borrower under the terms of such
Lease. A franchisor of any hotel owned by the Borrower on the premises demised
under any Lease may not be replaced by the Lessee without the Lender's prior
written consent. Lessee hereby consents and agrees to the lien of the Security
Instruments and the other Loan Documents for each of the Properties, including
any subsequent transfers or assignments thereof made by the Lender and the
financing of a direct purchaser from Lender, provided that such financing is
substantially similar to the Loan in all material respects including, but not
limited to, its financial terms, loan to value ratio and its effect on Lessee.

                  NINTH: Lessee acknowledges that all of the interest of
Borrower in and to the Leases has been assigned to Lender pursuant to the
Security Instruments and that pursuant to the terms of that certain Cash
Management Agreement of even date herewith between Lender and Borrower (the
"Cash Management Agreement"), all rent and other payments due under the Lease
shall be deposited in an account (the "Account") established in accordance with
the provisions contained in the Cash Management Agreement. Lessee hereby
agrees, without further notice, to so pay all such rent and other payments
under the Lease directly to the Account as and when same are due and payable
under the Lease. Lessee further acknowledges and agrees that this Agreement
shall serve as notice required pursuant to Section 3.1 of the Lease. Borrower
hereby authorizes Lessee to pay all rent and other payments to Lender and
acknowledges that all rent and other payments so paid to Lender shall be deemed
paid under the Lease.

                  TENTH: This Agreement may not be modified except by an
agreement in writing signed by the parties hereto.



                                       4
<PAGE>   103


                  ELEVENTH: Lessee hereby agrees not to exercise its rights
under Section 34.3 of any Lease with respect to any Property against Borrower,
Lender or any direct successor of Lender prior to the earlier of (i) the
payment in full, prepayment or defeasance of the Loan as to the Property, or
(ii) transfer of the Property to Lender or a third-party through foreclosure,
deed-in-lieu of foreclosure or otherwise.

                  TWELFTH: In no event shall Lender or any direct successor or
assignee of Lender (collectively, the "Subsequent Landlord") have any personal
liability for the obligations of Borrower under any Lease and should the
Subsequent Landlord succeed to the interests of the Borrower under such Lease,
Lessee shall look only to the estate and property of any such Subsequent
Landlord in the related Property for the satisfaction of Lessee's remedies for
the collection of a judgment (or other judicial process) requiring the payment
of money in the event of any default by any Subsequent Landlord as landlord
under the Lease, and no other property or assets of any Subsequent Landlord
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Lessee's remedies under or with respect to the Lease; provided,
however, that the Lessee may exercise any other right or remedy provided
thereby or by law in the event of any failure by Subsequent Landlord to perform
any such obligation.

                  THIRTEENTH: [Sections 15.3, 15.4 and 15.5 of each of the
Leases shall be amended so that any Award with respect to the Property shall be
subject and subordinate to the Lender's prior claim to one hundred twenty-five
percent (125%) of the amount set forth on Schedule 3 for such Property, as
reduced by any amortization, prepayment or defeasance amount on the Loan
applicable to such Property. Lessee acknowledges that Lessee has no claim to
any insurance proceeds payable to Lender or Lessor with respect to any Property
in the event of any loss or damage to the Property, or any portion thereof,
insured under the policies of insurance required by Article XIII of the
Leases.]

                  FOURTEENTH: As to each Lease, the law of the state in which
the applicable Property subject to such Lease is located shall govern the
interpretation of this Agreement.

                  FIFTEENTH Borrower represents and warrants that the
Assignment of Leases was duly executed by Borrower and all consents,
resolutions or other approvals required for Borrower to execute the Assignment
of Leases were obtained. Lessee represents and warrants that the Leases were
duly executed by Lessee and all consents, resolutions or other approvals
required for Lessee to execute the Leases were obtained.

                  SIXTEENTH: Lessee represents and warrants that it has made no
assignment of Lessee's rights or interest pursuant to any portion of the Lease
including without limitation Section 4(b) of the Master Agreement dated as of
_______________________.

                  SEVENTEENTH: Lender hereby consents to the amendment of the
Lease terms as set forth in the Amendment. Lessee hereby consents to the
assignment of the interest of RFS, L.P. under the Lease to Borrower pursuant to
the Assignment of Leases.



                                       5
<PAGE>   104

                  EIGHTEENTH: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute and be construed as one and the same instrument.

                  NINETEENTH: All remedies which Lender may have against
Borrower provided herein, if any, are cumulative and shall be in addition to
any and all other rights and remedies provided by law and by other agreements
between Lender and Borrower or others. If any party consists of multiple
individuals or entities, each of same shall be jointly and severally liable for
the obligations of such party hereunder.

                  TWENTIETH: This Agreement is binding upon, and inures to the
benefit of the parties hereto and any successors and assigns to the parties
hereto. There are no other agreements, either written or oral, with respect to
the matters described herein.

                  TWENTY-FIRST: This Agreement shall apply to all properties
substituted for any Property under the terms of the Loan Documents, and such
substituted properties shall be thereafter known as a Property. Any Property,
and the Lease therefor, for which there has been a substitution under the terms
of the Loan Documents shall thereafter be released from the terms of this
Agreement.

                  TWENTY-SECOND: The terms of this Agreement shall expire and
be of no further effect, except to the extent of any then existing unsatisfied
obligations arising under this Agreement as to a Lease for a property upon the
earlier of: (i) a release by Lender of the property as security for the Loan,
or (ii) a foreclosure or conveyance by deed-in-lieu of foreclosure of such
property.


                            [SIGNATURE PAGE FOLLOWS]



                                       6
<PAGE>   105

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed under Seal in manner and form sufficient to bind
them, as of the day and year first above written.


                                       BORROWER:
                                       __________________, a __________________

                                       By: ________________ CORPORATION,
                                           a _____________ corporation,
                                           its _________________

                                           By:                            (SEAL)
                                               ---------------------------
                                               Kevin Luebbers
                                               Secretary


                                       ______________________, a ______________

                                       By: ________________ CORPORATION,
                                           a _____________ corporation,
                                           its _________________

                                           By:                            (SEAL)
                                               ---------------------------
                                               Kevin Luebbers
                                               Secretary

                                       LESSEE:

                                       RFS, Inc., a Tennessee corporation

                                       By:                                (SEAL)
                                           -------------------------------
                                               Peter Kesser
                                               Vice President


                                       LENDER:

                                       BANK OF AMERICA, N.A.

                                       By:                                (SEAL)
                                           -------------------------------
                                           Name:
                                                 ------------------------------
                                           Title:
                                                 ------------------------------

<PAGE>   106

                                   Schedule I



<PAGE>   107
                                  Schedule II


<PAGE>   108

                                                                      EXHIBIT F
                                                                      ---------


                      Form of Tenant Estoppel Certificate

TO:      BANK OF AMERICA, N.A.
         Bank of America Corporate Center, 11th Floor
         Charlotte, North Carolina  28255
         Attention:  Conduit Program Manager

RE:      ____________________________

                  The undersigned, as tenant under that certain lease (the
"Lease") dated ____________________, 20___, made with ________________________,
(the "Landlord"), covering approximately _________ square feet of space at
Landlord's property generally described as ____________________________________
in _____________ County, _______________, hereby certifies as follows:

                  (1)      That the tenant has entered into occupancy of the
premises described in the Lease.

                  (2)      That the Lease is in full force and effect and has
not been assigned, modified, supplemented or amended in any way, except as
follows:

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

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


                  (3)      That the Lease, as amended as indicated in paragraph
2 hereof, represents the entire agreement between the parties as to said
leasing.

                  (4)      That the commencement date of the term of the Lease
is _________________.

                  (5)      That the expiration date of the term of the Lease is
_______________________. The tenant has no rights to renew or extend the term
of the Lease except as follows:

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

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


                  (6)      That all conditions of the Lease to be performed by
the landlord and necessary to the enforceability of the Lease have been
satisfied.

                  (7)      That there are no defaults by either the tenant or
the landlord thereunder, and no event has occurred or situation exists which
would, with the passage of time, constitute a default under the Lease. All
improvements or work required under the Lease to be made by the landlord to
date, if any, have been completed to the satisfaction of the tenant. Charges
for all labor and materials used or furnished in connection with improvements
and/or alterations made for the account of the tenant at the premises and
common areas have been paid in full.



                                       1
<PAGE>   109

                  (8)      That monthly rent in the amount of
$_________________ is payable on the _____ day of each month during the Lease
term. That no rents have been prepaid more than two (2) months in advance and
full rental, including basic minimum rent, if any, has commenced to accrue.

                  (9)      That on this date there are no existing defenses,
offsets, claims or credits which the tenant has against the enforcement of the
Lease by the landlord except for prepaid rent through __________________ (not
to exceed two months).

                  (10)     The tenant has paid to the landlord a security
deposit in the amount of $________________.

                  (11)     The tenant has all governmental permits, licenses
and consents required for the activities and operations being conducted or to
be conducted by it in or around the premises.

                  (12)     That as of the date hereof, there are no actions,
whether voluntary or otherwise, pending against the tenant under the bankruptcy
or insolvency laws of the United States or any state thereof.

                  (13)     That it understands that Bank of America, N.A., (the
"Lender") will make a mortgage loan to ___________________ (or its successor
and/or assign) as holder of fee simple title in the premises encumbered by the
Lease) in reliance upon, among other things, this certificate.

                  (14)     That tenant will pay to Lender all payments due
under the Lease from and after the date Lender sends written notice to the
tenant requesting such payments to be made directly to Lender.

                  EXECUTED this _____ day of ____________________, 20__.


                                          TENANT:




                                          By:                             (SEAL)
                                              ----------------------------
                                              Name:
                                                    ---------------------------
                                              Title:
                                                    ---------------------------


ATTEST/WITNESS:

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



                                       2
<PAGE>   110



                                                                      EXHIBIT G

                             BANK OF AMERICA, N.A.
                                    (Lender)

                                    - and -


                           --------------------------
                                    (Tenant)


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

                         SUBORDINATION, NON-DISTURBANCE

                            AND ATTORNMENT AGREEMENT

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


                         Dated:

                         Location:

                         Section:
                         Block:
                         Lot:
                         County:

                              PREPARED BY AND UPON
                             RECORDATION RETURN TO:

                         Cadwalader, Wickersham & Taft
                         227 West Trade Street, Suite 2400
                         Charlotte, North Carolina 28202
                         Attention: Anderson D. Caperton, Esq.

                         File No.:

                         Title No.:



<PAGE>   111

            SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

                  THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
(the "Agreement") is made as of the ___ day of _____________, 2000 by and
between BANK OF AMERICA, N.A., a national banking association, having an
address at 100 North Tryon Street, Charlotte, North Carolina 28255 successors
and assigns ("Lender") and ___________________________________________________
having an address at
____________________________________________________________________("Tenant").


                                   RECITALS:

                  A.       Lender is the present owner and holder of a certain
deed of trust and security agreement (the "Security Instrument") dated
___________, 2000, given by Landlord (defined below) to Lender which encumbers
the fee estate of Landlord in certain premises described in Exhibit A attached
hereto known as the _____________________ (the "Property") and which secures
the payment of certain indebtedness owed by Landlord to Lender evidenced by a
certain promissory note dated ____________, 2000, given by Landlord to Lender
(the "Note);

                  B.       Tenant is the holder of a leasehold estate in a
portion of the Property under and pursuant to the provisions of a certain lease
dated ________________, ____ between ______________, as landlord ("Landlord")
and Tenant, as tenant (the "Lease"); and

                  C.       Tenant has agreed to subordinate the Lease to the
Security Instrument and the lien thereof and Lender has agreed to grant
non-disturbance to Tenant under the Lease on the terms and conditions
hereinafter set forth.


                                   AGREEMENT:

                  For good and valuable consideration, Tenant and Lender agree
as follows:

                  1.       Subordination. The Lease and all of the terms,
covenants and provisions thereof and all rights, remedies and options of Tenant
thereunder are and shall at all times continue to be subject and subordinate in
all respects to the terms, covenants and provisions of the Security Instrument
and to the lien thereof, including without limitation, all renewals, increases,
modifications, spreaders, consolidations, replacements and extensions thereof
and to all sums secured thereby and advances made thereunder with the same
force and effect as if the Security Instrument had been executed, delivered and
recorded prior to the execution and the delivery of the Lease.

                  2.       Non-Disturbance. If any action or proceeding is
commenced by Lender for the foreclosure of the Security Instrument or the sale
of the Property, Tenant shall not be named as a party therein unless such
joinder shall be required by law, provided, however, such joinder shall not
result in the termination of the Lease or disturb the Tenant's possession or
use of the premises thereunder, and the sale of the Property in any such action
or proceeding and the exercise by Lender of any of its other rights under the
Note or the Security Instrument shall be made subject to all rights of Tenant
under the Lease, provided that at the time of the




                                       1
<PAGE>   112

commencement of any such action or proceeding or at the time of any such sale
or exercise of any such other rights, Tenant shall not be in default beyond any
applicable cure period under any of the terms, covenants or conditions of the
Lease or of this Agreement on Tenant's part to be observed or performed.

                  3.       Attornment. If Lender or any other subsequent
purchaser of the Property shall become the owner of the Property by reason of
the foreclosure of the Security Instrument or the acceptance of a deed or
assignment in lieu of foreclosure or by reason of any other enforcement of the
Security Instrument (Lender or such other purchaser being hereinafter referred
as "Purchaser"), and the conditions set forth in Section 2 above have been met
at the time Purchaser becomes owner of the Property, the Lease shall not be
terminated or affected thereby but shall continue in full force and effect as a
direct Lease between Purchaser and Tenant upon all of the terms, covenants and
conditions set forth in the Lease and in that event, Tenant agrees to attorn to
Purchaser and Purchaser by virtue of such acquisition of the Property shall be
deemed to have agreed to accept such attornment, provided, however, that
Purchaser shall not be (a) liable for the failure of any prior landlord (any
such prior landlord, including Landlord and any successor landlord, being
hereinafter referred to as a "Prior Landlord") to perform any of its
obligations under the Lease except that Lender shall be liable for such failure
only from and after the date on which Lender so succeeds to the interest of
such Prior Landlord, provided that the foregoing shall not limit Purchaser's
obligations under the Lease to correct any conditions that (i) existed as of
the date Purchaser shall become the owner of the Property and (ii) violate
Purchaser's obligations as landlord under the Lease; provided further however,
that Purchaser shall have received written notice of such omissions, conditions
or violations and has had a reasonable opportunity to cure the same, all
pursuant to the terms and conditions of the Lease, (b) subject to any offsets,
defenses, abatements or counterclaims which shall have accrued in favor of
Tenant against any Prior Landlord prior to the date upon which Purchaser shall
become the owner of the Property except for offsets expressly provided for in
the Lease arising from Landlord defaults under the Lease with respect to which
Tenant has notified Purchaser (such notice to set forth a quantification of the
potential offset amount to the extent possible), (c) liable for the return of
rental security deposits, if any, paid by Tenant to any Prior Landlord in
accordance with the Lease unless such sums are actually received by Purchaser,
or (d) bound by any payment of rents, additional rents or other sums which
Tenant may have paid more than one (1) month in advance to any Prior Landlord
unless (i) such sums are actually received by Purchaser or (ii) such prepayment
shall have been expressly approved of by Purchaser. In the event that any
liability of Purchaser does arise pursuant to this Agreement, such liability
shall be limited and restricted to Purchaser's interest in the Property and
shall in no event exceed such interest.

                  4.       Notice to Tenant. After notice is given to Tenant by
Lender that the Landlord is in default under the Note and the Security
Instrument and that the rentals under the Lease should be paid to Lender
pursuant to the terms of the assignment of leases and rents executed and
delivered by Landlord to Lender in connection therewith, Tenant shall
thereafter pay to Lender or as directed by the Lender, all rentals and all
other monies due or to become due to Landlord under the Lease and Landlord
hereby expressly authorizes Tenant to make such payments to Lender and hereby
releases and discharges Tenant from any liability to Landlord on account of any
such payments.




                                       2
<PAGE>   113

                  5.       Notice to Lender and Right to Cure. Tenant shall
notify Lender of any default by Landlord under the Lease and agrees that,
notwithstanding any provisions of the Lease to the contrary, no notice of
cancellation thereof or of an abatement shall be effective unless Lender shall
have received notice of default giving rise to such cancellation or abatement
and shall have failed within sixty (60) days, or within thirty (30) days if
such default materially interferes with the operation of the Premises as a
restaurant, (or such longer period for cure as specified in the Lease) after
receipt of such notice to cure such default, or if such default cannot be cured
within sixty (60) days (or such longer period for cure as specified in the
Lease), shall have failed within sixty (60) days (or such longer period for
cure as specified in the Lease) after receipt of such notice to commence and
thereafter diligently pursue any action necessary to cure such default.
Notwithstanding the foregoing, Lender shall have no obligation to cure any such
default.

                  6.       Notices. All notices or other written communications
hereunder shall be deemed to have been properly given (i) upon delivery, if
delivered in person or by facsimile transmission with receipt acknowledged by
the recipient thereof and confirmed by telephone by sender, (ii) one (1)
Business Day (hereinafter defined) after having been deposited for overnight
delivery with any reputable overnight courier service, or (iii) three (3)
Business Days after having been deposited in any post office or mail depository
regularly maintained by the U.S. Postal Service and sent by registered or
certified mail, postage prepaid, return receipt required, addressed as follows:

If to Tenant:

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

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

                  -----------------------------
                  Attention:
                            -------------------
                  Facsimile No.
                               ----------------


If to Lender:

                  Bank of America, N.A.
                  Bank of America Corporate Center
                  100 North Tryon Street
                  Charlotte, North Carolina 28255
                  Attention:
                            -------------------
                  Facsimile No.
                               ----------------


or addressed as such party may from time to time designate by written notice to
the other parties. For purposes of this Section 6, the term "Business Day"
shall mean a day on which commercial banks are not authorized or required by
law to close in the state where the Property is located. Either party by notice
to the other may designate additional or different addresses for subsequent
notices or communications.

                  7.       Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of Lender, Tenant and Purchaser and their
respective successors and assigns.




                                       3
<PAGE>   114

                  8.       Governing Law. This Agreement shall be deemed to be
a contract entered into pursuant to the laws of the State where the Property is
located and shall in all respects be governed, construed, applied and enforced
in accordance with the laws of the State where the Property is located.

                  9.       Miscellaneous. This Agreement may not be modified in
any manner or terminated except by an instrument in writing executed by the
parties hereto. If any term, covenant or condition of this Agreement is held to
be invalid, illegal or unenforceable in any respect, this Agreement shall be
construed without such provision. This Agreement may be executed in any number
of duplicate originals and each duplicate original shall be deemed to be an
original. This Agreement may be executed in several counterparts, each of which
counterparts shall be deemed an original instrument and all of which together
shall constitute a single Agreement. The failure of any party hereto to execute
this Agreement, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.


                         [NO FURTHER TEXT ON THIS PAGE]



                                       4
<PAGE>   115

                  IN WITNESS WHEREOF, Lender and Tenant have duly executed this
Agreement as of the date first above written.


                                         LENDER:


                                         BANK OF AMERICA, N.A.,
                                         a national banking association



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



                                         TENANT:

                                         --------------------------------------,
                                         a
                                           ------------------------------------



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


The undersigned accepts and agrees to the provisions of Section 4 hereof:

LANDLORD:

----------------------------------,
a
  --------------------------------


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



                                       5
<PAGE>   116

                                ACKNOWLEDGMENTS

                                (To be attached)




<PAGE>   117

                                   EXHIBIT A

                           (Description of Property)


<PAGE>   118


                                                                      EXHIBIT H

                 Form of Hazardous Material Indemnity Agreement



                                                             Loan No.: ________
                                                        Servicing No.: ________


                 HAZARDOUS MATERIALS INDEMNIFICATION AGREEMENT

                  THIS HAZARDOUS MATERIALS INDEMNIFICATION AGREEMENT
("Agreement") is made as of the ______ day of _____________, 2000, by
_____________________ a ____________________________, having an office at c/o
RFS Hotel Investors Inc., 850 Ridge Lake Blvd., Suite 220, Memphis, Tennessee
38120 (the "Borrower"); rfs hotel investors, inc. (the "Principal"), the
Borrower and the Principal are hereinafter referred to, individually and
collectively, as the context requires as the Indemnitor (the "Indemnitor"), to
and for the benefit of BANK OF AMERICA, N.A., a national banking association,
having an office in Charlotte, North Carolina (the "Lender").


                              W I T N E S S E T H:

                  WHEREAS, the Borrower is the owner and holder of certain fee
and other interests, in respect of that certain real property located in the
Counties and States of:
_________________________________________________________________ and more
particularly described in Exhibit A attached hereto and the improvements
located thereon, as more particularly described in the Security Instrument (as
hereinafter defined) (such real property, together with all improvements now or
hereafter located thereon, are collectively, the "Premises");

                  WHEREAS, the Borrower has applied to the Lender for a loan
(the "Loan") of up to the maximum principal amount of
$___________________________, pursuant to and in accordance with that certain
Loan Agreement, dated as of the date hereof by and between the Borrower and the
Lender (as the same may hereafter be modified, supplemented, extended or
renewed and in effect from time to time, the "Loan Agreement"), and which Loan
shall be evidenced by a Promissory Note of even date herewith given by the
Borrower to, and in favor of, the Lender (the "Note") and shall be secured by,
among other things, a [Deed of Trust/Mortgage], Assignment of Leases and Rents,
and Security Agreement dated the date hereof given by the Borrower to, and in
favor of, the Lender (the "Security Instrument");

                  WHEREAS, as a condition to making the Loan, the Lender
requires the Borrower to make certain covenants, representations, warranties
and agreements with respect to the Premises; and

                  WHEREAS, as an inducement to the Lender to make the Loan to
the Borrower, the Indemnitor has agreed to enter into this Agreement. Borrower
has delivered to Lender




                                       1
<PAGE>   119

certain environmental assessment reports for cash Individual Property dated
November 13, 1998, prepared by EMG entitled Environmental Site Assessment (the
"Environmental Report").

                  NOW THEREFORE, in consideration of the Premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Indemnitor hereby agrees to and for the benefit of the
Lender as follows:


                                   ARTICLE I

                          REPRESENTATIONS, WARRANTIES,
                           COVENANTS AND INDEMNITIES

                  Section 1.1.      The Indemnitor hereby represents and
warrants to the Lender that, except as noted in the Environmental Report, to
the best of the Indemnitor's knowledge, after due inquiry and investigation:
(i) the Premises is not in direct or indirect violation of any federal, state,
or local laws, ordinances, regulations, standards, rules, policies or other
governmental requirements or any court judgments applicable to the Indemnitor
or to the Premises relating to industrial hygiene or to environmental or unsafe
conditions or to human health including, but not limited to, those relating to
the generation, manufacture, storage, handling, transportation, disposal,
release, emission or discharge of Hazardous Materials (as defined below), those
in connection with the construction, fuel supply, power generation and
transmission, waste disposal or any other operations or processes relating to
the Premises, and those relating to the atmosphere, soil, surface and ground
water, wetlands, stream sediments and vegetation on, under, in or about the
Premises, including but not limited to, the following laws, as amended as set
forth herein and as subsequently amended: (1) the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 USCA 9601 et seq.; (2) the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 USCA
6901 et seq.; (3) the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 USCA 1251 et seq.; (4) the Toxic Substances Control
Act, 15 USCA 2601 et seq.; (5) the Emergency Planning and Community
Right-to-Know Act of 1986, 42 USCA 11001 et seq.; (6) the Clean Air Act, as
amended by the Clean Air Act Amendments, 42 USCA 7401 et seq.; (7) the National
Environmental Policy Act of 1969, 42 USCA 4321 et seq.; (8) the River and
Harbor Act of 1899, 33 USCA 401 et seq.; (9) the Endangered Species Act of
1973, 16 USCA 1531 et seq.; (10) the Occupational Safety and Health Act of
1970, 29 USCA 651 et seq.; (11) the Safe Drinking Water Act, 42 USCA 300(f) et
seq.; and (12) the Hazardous Materials Transportation Act, 49 USCA 1801 et
seq., and all regulations from time to time adopted in respect to the foregoing
laws (collectively, "Hazardous Materials Laws"); (ii) the Premises are not
subject to any private or governmental lien or judicial or administrative
notice or action relating to petroleum and petroleum products, flammable
explosives, radioactive materials (excluding radioactive materials in smoke
detectors), polychlorinated biphenyls, lead, asbestos or asbestos containing
materials in any form that is or could become friable, hazardous waste, toxic
or hazardous substances or other related materials whether in the form of a
chemical, element, compound, solution, mixture or otherwise including, but not
limited to, those materials defined as "hazardous substances," "extremely
hazardous substances," "hazardous chemicals," "hazardous materials," "toxic



                                       2
<PAGE>   120

substances," "solid waste," "toxic chemicals," "air pollutants," "toxic
pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted
hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials
Law in any manner whatsoever (collectively, "Hazardous Materials"); (iii) no
Hazardous Materials are or have been, prior to the Indemnitor's acquisition of
the Premises, discharged, generated, treated, disposed of or stored on,
incorporated in, or removed or transported from the Premises otherwise than in
compliance with all Hazardous Material Laws; (iv) no property adjoining the
Premises are being used or has ever been used at any previous time, for the
disposal, storage, treatment, processing or other handling of Hazardous
Materials; (v) no underground storage tanks exist on any of the Premises except
as those disclosed in writing to the Lender and which comply with applicable
Hazardous Material Laws; and (vi) it has not received any notice or has any
knowledge of any claim with respect to Hazardous Materials on the Premises or
any completed, pending or threatened investigation or inquiry concerning the
presence or release of any Hazardous Materials on the Premises or any adjacent
property or concerning whether any condition, use or activity on the Premises
or any adjacent property is in violation of any Hazardous Material Laws.


                  Section  1.2. So long as the Indemnitor owns or is in
possession of the Premises, the Indemnitor shall:

                  (a)      Not cause, permit or exacerbate any Prohibited
         Activities or Conditions (as defined below). The Indemnitor represents
         and warrants that it has not at any time caused or permitted any
         Prohibited Activities or Conditions except as set forth in the
         Environmental Assessment (as defined below) and that, except as noted
         in the Environmental Report, no Prohibited Activities or Conditions
         exist or have existed on or under the Premises. The Indemnitor shall
         take all appropriate steps to prevent its employees, agents, and
         contractors, and any tenants from causing, permitting, or exacerbating
         any Prohibited Activities or Conditions. The Indemnitor shall not
         lease or allow the sublease or use of all or any portion of the
         Premises to any tenant, subtenant or user that, in the ordinary course
         of its business, would cause, permit, or exacerbate any Prohibited
         Activities or Conditions, and all leases, subleases and use agreements
         relating to the Premises shall contain provisions sufficient to ensure
         that tenants, subtenants and users shall not cause, permit or
         exacerbate any Prohibited Activities or Conditions.

                  (b)      Comply in a timely manner with, and cause all
         employees, agents, and contractors or the Indemnitor and any other
         persons present on the Premises to so comply with, (i) any O&M Program
         (as defined below) now or hereafter in effect during the term of the
         Loan, and (ii) Hazardous Materials Law, so as to minimize any economic
         loss to the Premises and the Loan. The Indemnitor shall adopt an O&M
         Program with respect to any Hazardous Materials identified in any
         Environmental Assessment or any Governmental Action (as defined below)
         relating to the Premises, or as otherwise required by the Lender with
         respect to the Premises. Any O&M Program shall be performed by
         qualified contractors under the supervision of a consulting engineer
         hired by the Indemnitor with the prior written approval of the Lender
         which approval shall not be unreasonably withheld, conditioned or
         delayed. All costs and expenses of any O&M Program shall be paid by
         the Indemnitor, including without limitation the charges of such
         contractors and consulting engineer and the Lender's fees, costs and
         expenses incurred in




                                       3
<PAGE>   121

         connection with the monitoring and review of the O&M Program and the
         Indemnitor's performance thereunder.

                  (c)      Promptly notify the Lender in writing of: (i) any
         Governmental Action it becomes aware of (ii) any claim made or
         threatened by any third party against the Indemnitor, the Lender, or
         the Premises relating to loss or injury resulting from any occurrence
         or condition on the Premises or any other real property that could
         require the removal from the Premises of any Hazardous Materials or
         cause any restrictions on the ownership, occupancy, transferability or
         use of the Premises under Hazardous Materials Law or (iii) the
         occurrence of any Prohibited Activities or Conditions. The Indemnitor
         shall cooperate with any governmental inquiry, and shall comply with
         any governmental or judicial order, request or directive which arises
         from any alleged Prohibited Activities or Conditions; provided that
         with respect to governmental requests or directives only, the
         Indemnitor may contest or object to a good faith dispute regarding
         said request or directive if the Indemnitor notifies the Lender in
         advance of said contest or objection and as long as said contest or
         objection does not result in a violation of law or fines assessed
         against the Premises.

                  (d)      Pay promptly or cause to be paid all costs and
         expenses incurred by the Lender in connection with any Governmental
         Action, including but not limited to costs of any environmental
         audits, studies, investigations or remedial activities including but
         not limited to the removal of any Hazardous Materials from the
         Premises. The Borrower also shall pay promptly or cause to be paid the
         costs of any environmental audits, studies, investigations or the
         removal of any Hazardous Materials from the Premises required by the
         Lender as a condition of its consent to any sale or transfer of all or
         any part of the Premises or any interest therein or required by the
         Lender following a reasonable determination by the Lender that there
         may be Prohibited Activities or Conditions on or under the Premises.
         Any such costs or expenses incurred by the Lender (including but not
         limited to reasonable fees and expenses of attorneys and consultants,
         whether incurred in connection with any judicial or administrative
         process or otherwise) which the Borrower fails to pay promptly shall
         become additional indebtedness secured by the Security Instrument.

                  Section  1.3.     Upon the Lender's reasonable request, at any
time after a prohibited activity occurs and from time to time while the
Security Instrument is in effect, the Indemnitor shall provide at the
Indemnitor's sole expense, an inspection or audit of the Premises prepared by a
licensed hydrogeologist or licensed environmental engineer approved by the
Lender indicating the presence or absence of Hazardous Materials on the
Premises. If the Indemnitor fails to provide such inspection or audit within
thirty (30) days after such request the Lender may order same, and the
Indemnitor hereby grants to the Lender and their employees and agents access to
the Premises and a license to undertake such inspection or audit. The cost of
such inspection or audit shall be added to the principal balance of the sums
due under the Note (as defined in the Security Instrument) and the Security
Instrument and shall bear interest thereafter until paid at the default rate
thereunder.

                  Section  1.4.     The Indemnitor represents and warrants that,
except as noted in the Environmental Report to the best of the Indemnitor's
knowledge, after due inquiry and investigation, no asbestos or any substance
containing asbestos ("Asbestos") is located on the




                                       4
<PAGE>   122

Premises except as may have been disclosed in an environmental report delivered
to the Lender prior to the date of this Agreement. The Indemnitor shall not
install in the Premises, nor permit to be installed in the Premises, Asbestos
and shall remove or cause to be removed any Asbestos promptly upon discovery to
the satisfaction of the Lender, or take all action necessary to ensure that
such Asbestos is abated or managed in a manner which complies with all
applicable federal, state and local laws, ordinances, rules and regulations
with respect to Asbestos. The Indemnitor shall in all instances comply with,
and ensure compliance by all occupants of the Premises with, all applicable
federal, state and local laws, ordinances, rules and regulations with respect
to Asbestos, and shall keep the Premises free and clear of any liens imposed
pursuant to such laws, ordinances, rules or regulations. In the event that the
Indemnitor receives any notice or advice from any governmental agency or any
source whatsoever with respect to Asbestos on, affecting or installed on the
Premises, the Indemnitor shall immediately notify the Lender. Upon the Lender's
reasonable request, at any time and from time to time while the Security
Instrument is in effect, the Indemnitor shall provide, at the Indemnitor's sole
expense, an inspection or audit of the Premises prepared by an engineering or
consulting firm approved by the Lender, indicating the presence or absence of
Asbestos on the Premises. If the Indemnitor fails to provide such inspection or
audit within thirty (30) days after such request, the Lender may order same,
and the Indemnitor hereby grants to the Lender and its employees and agents
access to the Premises and a license to undertake such inspection or audit. The
cost of such inspection or audit shall be added to the principal balance of the
sums due under the Note and the Security Instrument and shall bear interest
thereafter until paid at the default rate thereunder.

                  Section 1.5.          In the event that any investigation,
site monitoring, containment cleanup, removal, restoration or other work of any
kind is reasonably necessary or desirable under an applicable Hazardous
Material Law (the "Remedial Work"), the Indemnitor shall commence or cause to
be commenced and thereafter diligently prosecute to completion all such
Remedial Work within thirty (30) days after written demand by the Lender for
performance thereof (or such shorter period of time as may be required under
applicable law). All Remedial Work shall be performed by contractors approved
in advance by the Lender, and under the supervision of a consulting engineer
approved by the Lender. All costs and expenses of such Remedial Work shall be
paid by the Indemnitor including, without limitation, the Lender's reasonable
attorneys' fees and disbursements incurred in connection with monitoring or
review of such Remedial Work. In the event the Indemnitor shall fail to timely
commence, or cause to be commenced, or fail to diligently prosecute to
completion, or pay for, such Remedial Work, the Lender may, but shall not be
required to, cause such Remedial Work to be performed or paid for, and all
costs and expenses thereof, or incurred in connection therewith, may be added
to the sums due under the Note and the Security Instrument and shall bear
interest thereafter until paid at the default rate thereunder.

                  Section 1.6.      THE INDEMNITOR SHALL HOLD HARMLESS, DEFEND
AND INDEMNIFY THE LENDER AND ITS OFFICERS, DIRECTORS, TRUSTEES, EMPLOYEES,
AGENTS, AFFILIATES (INCLUDING ANY PARENT CORPORATION), SUCCESSORS AND ASSIGNS,
FROM AND AGAINST ALL PROCEEDINGS, CLAIMS, DAMAGES, PENALTIES, FEES, COSTS AND
EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE FEES AND EXPENSES OF
ATTORNEYS AND EXPERT WITNESSES, INVESTIGATORY FEES, AND CLEANUP AND REMEDIATION



                                       5
<PAGE>   123

EXPENSES, WHETHER INCURRED IN CONNECTION WITH ANY JUDICIAL OR ADMINISTRATIVE
PROCESS OR OTHERWISE), ARISING DIRECTLY OR INDIRECTLY FROM (i) ANY BREACH OF
ANY REPRESENTATION, WARRANTY, OR OBLIGATION OF THE BORROWER CONTAINED IN THIS
AGREEMENT OR (ii) THE PRESENCE OF HAZARDOUS MATERIALS ON OR UNDER THE PREMISES
OR ANY PROPERTY PROXIMATE TO THE PREMISES OR ANY GOVERNMENTAL ACTION ALLEGING
ANY SUCH PRESENCE, EXCEPT TO THE EXTENT THAT THE BORROWER CAN CONCLUSIVELY
PROVE BOTH THAT SUCH PRESENCE OR GOVERNMENTAL ACTION ALLEGING SUCH PRESENCE WAS
CAUSED SOLELY BY ACTIONS, CONDITIONS, OR EVENTS THAT OCCURRED AFTER THE DATE
THAT THE LENDER (OR ANY PURCHASER AT A FORECLOSURE SALE) ACTUALLY ACQUIRED
TITLE TO THE PREMISES AND THAT SUCH PRESENCE OR GOVERNMENTAL ACTION ALLEGING
SUCH PRESENCE WAS NOT CAUSED BY THE DIRECT OR INDIRECT ACTIONS OF THE BORROWER
OR THE BORROWER PRINCIPAL, OR ANY PARTNER, MEMBER, PRINCIPAL, OFFICER,
DIRECTOR, TRUSTEE OR MANAGER OF THE BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR
OR AFFILIATE OF THE BORROWER OR THE BORROWER PRINCIPAL. THE OBLIGATIONS AND
LIABILITIES OF THE BORROWER UNDER THIS AGREEMENT SHALL SURVIVE ANY TERMINATION,
SATISFACTION, ASSIGNMENT, ENTRY OF A JUDGMENT OF FORECLOSURE OR DELIVERY OF A
DEED IN LIEU OF FORECLOSURE OF THE SECURITY INSTRUMENT. THE INDEMNITY SET FORTH
HEREIN IS AN ABSOLUTE, UNCONDITIONAL, PRESENT INDEMNITY AND IS IN NO WAY
CONDITIONED OR CONTINGENT UPON ANY ATTEMPT TO ENFORCE THE LENDER'S RIGHTS
AGAINST THE INDEMNITOR UNDER THE SECURITY INSTRUMENT, THE NOTE OR ANY OF THE
OTHER LOAN DOCUMENTS (AS DEFINED IN THE LOAN AGREEMENT) OR AGAINST ANY OTHER
PARTY OR TO COLLECT FROM THE INDEMNITOR UNDER THE SECURITY INSTRUMENT, THE NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS OR FROM ANY OTHER PARTY OR UPON ANY OTHER
CONDITION OR CONTINGENCY; ACCORDINGLY, THE LENDER SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE UNDERSIGNED IMMEDIATELY UPON ANY DEFAULT HEREUNDER WITHOUT
TAKING ANY PRIOR ACTION TO ENFORCE THE OBLIGATIONS OF THE INDEMNITOR UNDER THE
SECURITY INSTRUMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS.

                  Section 1.7.      To the best of Indemnitor's knowledge, no
representation or warranty by the Indemnitor contained herein, nor any
schedule, certificate, or other document furnished by the Indemnitor to the
Lender in connection with this Agreement contains any misstatement of fact or
omits to state any fact necessary to make the statements contained therein not
misleading.

                  Section 1.8.      The obligations and liabilities of the
Indemnitor to the Lender under this Article I shall survive any termination,
satisfaction, or assignment of the Security Instrument, including, without
limitation, any sale of the Loan and the exercise by the Lender of any of its
rights or remedies hereunder, including but not limited to, the acquisition of
the Premises by foreclosure or a conveyance in lieu of foreclosure. This
Agreement is not intended




                                       6
<PAGE>   124

to be, nor shall it be, secured by the Security Instrument and it is not
intended to secure payment of the Note.

                  Section 1.9.      As used in this Agreement:

                  (a)      "Environmental Assessment" shall mean a report
         (including all drafts thereof) of an environmental assessment of the
         Premises of such scope (including but not limited to the taking of
         soil borings and air and groundwater samples and other above and below
         ground testing) as the Lender may request, by a consulting firm
         acceptable to the Lender, which shall, among other things, be dated as
         of a date acceptable to the Lender and conform to (i) the current
         minimum standards for the American Society of Testing and Materials,
         and (ii) the Lender's then current requirements.

                  (b)      "Governmental Action" shall mean the issuance or
         threatened issuance of any claim, citation, notice of any pending or
         threatened suit, proceeding, order or governmental inquiry or opinion
         involving the Premises that alleges the violation of any Hazardous
         Materials Law.

                  (c)      "O&M Program" shall mean an operations and
         maintenance program (in form and substance satisfactory to the Lender)
         relating to the use, handling and/or abatement of one or more
         Hazardous Materials and which is accepted in writing by the
         Indemnitor.

                  (d)      "Prohibited Activities or Conditions" shall mean
         causing or permitting, whether directly or indirectly, (i) the
         presence, use, generation, manufacture, production, processing,
         installation, release, discharge, storage (including storage in above
         ground and underground storage tanks for petroleum or petroleum
         products), treatment, handling, or disposal of any Hazardous Materials
         (excluding the safe and lawful use and storage of quantities of
         Hazardous Materials or petroleum products, customarily used in the
         ordinary operations of the Indemnitor or customarily used in the
         ordinary operations of any tenant previously approved by the Lender)
         on or under the Premises, or in any way affecting the Premises or its
         value or which may form the basis for any present or future claim,
         demand or action seeking cleanup of the Premises, (ii) the
         transportation of any Hazardous Materials to or from the Premises
         (excluding the safe and lawful use and storage of quantities of
         Hazardous Materials or petroleum products, customarily used in the
         ordinary operations of the Indemnitor or customarily used in the
         ordinary operations of any tenant previously approved by the Lender),
         or (iii) any occurrence or condition on the Premises (or exacerbation
         of the same) that is or may be in violation of Hazardous Materials
         Law.


                                   ARTICLE II

                                 MISCELLANEOUS

                  Section 2.1.      The Indemnitor's liability hereunder shall
not be affected (a) by (i) any amendment or modification of the Loan Documents;
(ii) any extensions of time for performance under the Loan Documents whether
prior to or after maturity; or (iii) the release of any collateral for the Loan
or the release of the Indemnitor from performance or observance of




                                       7
<PAGE>   125

any of the agreements, covenants, terms or conditions contained in any of the
Loan Documents by operation of law or otherwise (whether such amendments,
modifications, extensions or releases are made with or without notice to the
undersigned); (b) by the fact that the Indemnitor may or may not be personally
liable, in whole or in part, under the terms of the Loan Documents; (c) by the
failure to give the Indemnitor any notices of default under the Loan Documents
or otherwise; (d) by any other indemnity or guaranty now or hereafter executed
in connection with the Loan; (e) by any rights, powers or privileges the Lender
may now or hereafter have against any person, entity or collateral or (f) by
reason of any bankruptcy or similar proceeding instituted by or against the
Indemnitor. The Indemnitor will not take or fail to take action of any kind the
taking of which or the failure to take which might be the basis for a claim
that the Indemnitor has any defense to the Indemnitor's obligations hereunder.
The Indemnitor waives any right or claim of right to cause a marshaling of the
Indemnitor's assets or to cause the Lender to proceed against the Indemnitor
under the Security Instrument or under any other Loan Document, and/or any
collateral held by the Lender at any time or in any particular order and the
Indemnitor agrees that any payments required to be made by the Indemnitor
hereunder shall become due on demand in accordance with the terms hereof and
the Indemnitor expressly waives and relinquishes all rights and remedies
accorded by applicable law to the Indemnitors, including, without limitation,
any extension of time conferred by any law now or hereafter in effect and any
requirement of notice to which the Indemnitor may now or hereafter be entitled.
The Indemnitor waives (i) notice of acceptance of this Agreement by the Lender
and any and all notices and demands of every kind which may be required to be
given by any statute, rule or law, (ii) any defense, right of set-off or other
claim which the Indemnitor may have against the Lender or the holder of the
Security Instrument, (iii) any failure by the Lender to inform the Indemnitor
of any facts the Lender may now or hereafter know about the Indemnitor, the
Premises, the Loan or the transactions contemplated by the Loan Documents, it
being understood and agreed that the Lender has no duty so to inform, and (iv)
all rights of redemption, homestead, dower, and other rights or exemptions of
every kind, whether under common law or by statute.

                  Section 2.2.      No delay on the Lender's part in exercising
any right, power or privilege under any of the Loan Documents, this Agreement
or any other document executed by the Indemnitor in connection with the Loan
shall operate as a waiver of any such right, power or privilege.

                  Section 2.3.      The Lender shall have the right to join the
Indemnitor in any action or proceeding commenced by the Lender pursuant to the
rights, powers and privileges the Lender now or hereafter may possess under
this Agreement or, at the Lender's option, the Lender may commence any action
or proceeding based upon this Agreement directly against the Indemnitor without
making the Indemnitor under the Security Instrument or under any other Loan
Document or anyone else a party defendant in such action or proceeding. In the
event any action or proceeding arising on, under, out of or by reason of or
relating in any way to this Agreement or the interpretation, breach or
enforcement thereof is brought against the Indemnitor, service of process may
be made on the Indemnitor by certified mail, return receipt requested, at the
address set forth below or such other address as the Lender is notified of by
notice sent in accordance herewith.



                                       8
<PAGE>   126


                  Section 2.4.      If: (i) this Agreement is placed in the
hands of an attorney for collection of any payment due hereunder or is
collected through any legal proceeding; (ii) an attorney is retained to
represent the Lender in any bankruptcy, reorganization, receivership, or other
proceedings affecting creditors' rights and involving a claim under this
Agreement; or (iii) an attorney is retained to represent the Lender in any
other proceedings whatsoever in connection with this Agreement or to provide
advice or other representation with respect to this Agreement, then the
Indemnitor shall pay expenses, including, without limitation, court costs,
filing fees, recording costs, and all other costs and expenses reasonably
incurred in connection therewith, in addition to all other amounts due
hereunder, regardless of whether all or a portion of such enforcement costs are
in a single proceeding brought to enforce this Agreement as well as the other
Loan Documents.

                  Section 2.5.      This Agreement contains the sole and entire
understanding and agreement of the Lender and the Indemnitor with respect to
its entire subject matter, and all prior negotiations, discussions,
representations, agreements and understandings heretofore had between the
Lender and the Indemnitor with respect thereto are merged herein.

                  Section 2.6.      THE INDEMNITOR HEREBY WAIVES TRIAL BY JURY
AND THE RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING ON,
UNDER, OUT OF, BY REASON OF OR RELATING IN ANY WAY TO THIS AGREEMENT, OR THE
INTERPRETATION, BREACH OR ENFORCEMENT THEREOF.

                  Section 2.7.      All stipulations, obligations, liabilities
and undertakings hereunder shall be binding upon the Indemnitor and the
successors and permitted assigns of the Indemnitor and shall inure to the
Lender's benefit and to the benefit of the Lender's successors and assigns and
to the benefit of each and every holder of any of the Loan Documents and to the
benefit of anyone claiming title to the collateral sold by the Lender pursuant
to the Lender's rights, powers and privileges under the Loan Documents.

                  Section 2.8.      THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT
REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. THE INDEMNITOR HEREBY SUBMITS TO
PERSONAL JURISDICTION IN SAID STATE AND THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA (AND ANY APPELLATE COURTS TAKING APPEALS THEREFROM) LOCATED IN SAID
STATE FOR THE ENFORCEMENT OF THE INDEMNITOR'S OBLIGATIONS HEREUNDER AND WAIVES
ANY AND ALL PERSONAL RIGHTS UNDER THE LAW OF ANY OTHER STATE TO OBJECT TO
JURISDICTION WITHIN SUCH STATE FOR THE PURPOSES OF ANY ACTION, SUIT, PROCEEDING
OR LITIGATION TO ENFORCE SUCH OBLIGATIONS OF THE INDEMNITOR. THE INDEMNITOR
HEREBY WAIVES AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT,
PROCEEDING OR LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT, (A) THAT
IT IS NOT SUBJECT TO SUCH JURISDICTION OR THAT SUCH ACTION, SUIT, PROCEEDING OR
LITIGATION MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN THOSE COURTS OR THAT
THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY THOSE COURTS OR THAT THE INDEMNITOR
IS EXEMPT OR IMMUNE FROM




                                       9
<PAGE>   127

EXECUTION, (B) THAT THE ACTION, SUIT, PROCEEDING OR LITIGATION IS BROUGHT IN AN
INCONVENIENT FORUM, OR (C) THAT THE VENUE OF THE ACTION, SUIT, PROCEEDING OR
LITIGATION IS IMPROPER.

                  Section 2.9.      This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same instrument.

                  Section 2.10.      Any and all notices, elections, demands,
request and responses thereto permitted or required to be given under this
Agreement shall be in writing, signed by or on behalf of the party giving the
same, and shall be deemed to have been properly given or served and shall be
effective upon being personally delivered to three (3) Business Days (as
defined in the Loan Agreement) after being deposited in the United States mail,
postage prepaid, certified with return receipt requested, or one day after
delivery to a nationally recognized overnight courier, to the other party at
the address of such other party set forth below or at such other address as
such other party may designate by notice specifically designated as a notice of
change of address and given in accordance herewith; provided, however, that no
notice of change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to an officer, partner, agent or
employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of change of address of
which no notice has been received shall also constitute receipt. Any such
notice, election, demand, request or response given to the parties herein shall
be addressed as follows:

         if to the Indemnitor/Borrower:       RFS SPE2 2000, LLC
                                              c/o RFS Hotel Investors Inc.
                                              850 Ridge Lake Blvd, Suite 220
                                              Memphis, Tennessee  38120
                                              Attn:    Kevin Luebbers
                                              Telephone: (901) 767-7005
                                              Telecopy: (901) 819-5260

         if to the Indemnitor/Principal:      RFS Hotel Investors Inc.
                                              850 Ridge Lake Blvd., Suite 220
                                              Memphis, Tennessee  38120
                                              Attn: Kevin Luebbers
                                              Telephone:  (901) 767-7005
                                              Telecopy:  (901) 819-5260

         with a copy to:                      Hunton & Williams
                                              1900 K Street, N.W., Suite 1200
                                              Washington, DC  20006
                                              Attn:  Thomas F. Kaufman, Esq.
                                              Telephone:  (202) 955-1604
                                              Telecopy:  (202) 778-2201



                                      10
<PAGE>   128

         if to the Lender:                    Bank of America, N.A.
                                              CMLS #1777
                                              P.O. Box 3609
                                              Los Angeles, California  90051
                                              Attn:  Servicing Manager
                                              Telephone:  (800) 574-0169
                                              Telecopy:  (213) 345-6587

         with copies to:                      Cadwalader, Wickersham & Taft
                                              227 West Trade Street, Suite 2400
                                              Charlotte, North Carolina  28202
                                              Attn:  James P. Carroll
                                              Telephone:  (704) 348-5100
                                              Telecopy:  (704) 348-5200


                  Section 2.11.     The execution, delivery, and performance by
the Indemnitor of this Agreement do not and will not contravene or conflict
with (i) organizational documents of the Indemnitor, (ii) any law, order, rule,
regulation, writ, injunction, or decree now in effect of any government,
governmental instrumentality or court having jurisdiction over the Indemnitor,
or (iii) any contractual restriction binding on or affecting the Indemnitor or
any of the Indemnitor's property or assets which may adversely affect any of
the Indemnitor's ability to fulfill the Indemnitor's obligations under this
Agreement.

                  Section 2.12.     No termination, modification or waiver of
any provisions of this Agreement shall be binding upon the Lender except as
expressly set forth in a writing duly signed and delivered by the Lender.

                  Section 2.13.     If the Indemnitor consists of more than one
person or entity, the obligations and liabilities of each such person hereunder
are joint and several.


                      [signature page immediately follows]



                                      11
<PAGE>   129

                                         INDEMNITOR/BORROWER:


                                         _____________________________________,
                                         a ___________________________________


                                         By: _____________________ Corporation,
                                            a ____________________ corporation,
                                            its ______________________________

                                         By:
                                             ---------------------------------
                                             Kevin Luebbers
                                             Secretary


                                         INDEMNITOR/BORROWER PRINCIPAL:

                                         RFS HOTEL INVESTORS, INC.,
                                         a Tennessee corporation

                                         By:
                                             ---------------------------------
                                             Kevin Luebbers
                                             Executive Vice President



<PAGE>   130
                                   EXHIBIT A

                               Legal Description