Exhibit 10-18




                             BUILDING LOAN AGREEMENT


     THIS BUILDING LOAN AGREEMENT  (this  "Agreement")  is made and entered into
this 31st day of December, 1997, by and between KEYBANK NATIONAL ASSOCIATION,  a
national  banking  association with an office for the transaction of business at
50  Fountain  Plaza,  Buffalo,  New  York  14202  (hereinafter  referred  to  as
"Lender"),  and Erie Hotel LLC, a New York  limited  liability  company  with an
office for the transaction of business at 100 Corporate  Woods,  Rochester,  New
York 14623 (hereinafter referred to as "Borrower").


                                   WITNESSETH:

     In  consideration  of the mutual  covenants and agreements  hereinafter set
forth,  Lender agrees to make and Borrower agrees to accept a loan in accordance
with and subject to the terms and conditions hereinafter set forth.


                                    ARTICLE I

                              TERMS AND DEFINITIONS

     In addition to the other terms  hereinafter  defined,  the following  terms
shall have the meanings set forth in this  Article.  References to documents and
other  materials  shall  include  those  documents  and materials as they may be
revised,  amended  and  modified,  from  time to time,  with the  prior  written
approval of Lender.

     1.1 ADVANCE.  "Advance" means any  disbursement of the proceeds of the Loan
by Lender pursuant to the terms of this Agreement.

     1.2 APPROVAL.  "Approval",  "Approved",  "approval" or "approved" means, as
the context so  determines,  an approval in writing  given to the party  seeking
approval  after full and fair  disclosure  to the party  giving  approval of all
material  facts  necessary  in order to  determine  whether  approval  should be
granted.

     1.3 ARCHITECT'S CONTRACT.  "Architects Contract" means the contract,  dated
September 5, 1996, between Borrower and Borrower's Architect.

     1.4  BORROWER'S  ARCHITECT.  "Borrower's  Architect"  means Braun & Steidel
Architects, Inc., whose address is 1041 West Market Street, Akron, Ohio 44313.

     1.5 COMPLETION DATE. "Completion Date" means December 31, 1998.

     1.6  COMMITMENT.  "Commitment"  means the  commitment  letter  for the Loan
issued by Lender to Borrower dated December 3, 1997, and accepted by Borrower on
December 12, 1997, as amended by amendment  letter from Borrower  dated December
12, 1997.



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     1.7 CONSTRUCTION BUDGET.  "Construction  Budget" means the budget for total
estimated  Property  Costs,  submitted  by  Borrower,  approved  by Lender,  and
attached  hereto as I i A, which  includes:  (a) a line item cost  breakdown for
construction of the Improvements by trades, jobs and subcontractors (the "Direct
Cost  Breakdown");  (b) a line item  cost  breakdown  for  Indirect  Costs  (the
"Indirect  Cost  Breakdown");  and (c) a schedule of the sources of funds to pay
Property  Costs,  indicating by item the portion of Property  Costs to be funded
through the Loan and Required Equity Funds (the "Source of Funds Schedule").

     1.8  CONSTRUCTION  CONTRACT.  "Construction  Contract"  means the contract,
dated December 11, 1997,  between  Borrower and Contractor and providing for the
construction of the Improvements on the Land.

     1.9 CONSTRUCTION  INSPECTOR.  "Construction  Inspector" means  Construction
Monitoring Consultants, Inc. or at Lender's option either an officer or employee
of Lender or consulting architects, engineers or inspectors appointed by Lender.

     1.10  CONSTRUCTION  SCHEDULE.  "Construction  Schedule" means the schedule,
broken down by trade, of the estimated  dates of commencement  and completion of
the Improvements,  submitted by Borrower, approved by Lender and attached hereto
as EXHIBIT B.

     1.11  CONTINGENCY  RESERVE.   "Contingency  Reserve"  means  the  amount(s)
allocated as contingency reserve(s) in the Construction Budget.

     1.12  CONTRACTOR.  "Contractor"  means DiMarco  Constructors  Corp.,  whose
address is 2595 Brighton Henrietta Townline Road, Rochester, New York 14623.

     1.13 [INTENTIONALLY OMITTED].

     1.14 DISBURSEMENT SCHEDULE.  "Disbursement  Schedule" means the schedule of
the amounts of Advances  anticipated to be  requisitioned by Borrower each month
during the term of construction of the Improvements (including an itemization of
direct  costs and  Indirect  Costs to be  included  in each  such  requisition),
approved by Lender and attached hereto as EXHIBIT C.

     1.15 DRAW  REQUEST.  "Draw  Request"  means,  with respect to each Advance,
Borrower's request for such Advance, and documents required by this Agreement to
be furnished to Lender as a condition to such Advance.

     1.16 EVENT OF DEFAULT.  "Event of  Default"  means any  condition  or event
described herein as such.

     1.17 GOVERNMENTAL APPROVALS.  "Governmental Approvals" means all approvals,
consents, waivers, orders, acknowledgments, authorizations, permits and licenses
required  under  applicable  Requirements  to be obtained from any  Governmental
Authority for the construction of


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the Improvements and the use, occupancy and operation of the Property following
completion of construction of the Improvements.

     1.18  GOVERNMENTAL  AUTHORITY.  "Governmental  Authority"  means the United
States of  America,  the states in which the Land is located  and  Borrower  and
Guarantor  are  located  or  organized,   any  political   subdivision  thereof,
municipalities  in  which  the  Land  is  located,  and any  agency,  authority,
department, commission, board, bureau, or instrumentality of any of them.

     1.19  GUARANTOR.  "Guarantor"  means Essex Partners  Inc.,  with a business
address of 100 Corporate Woods, Rochester, New York 14623.

     1.20  IMPROVEMENTS'  "Improvements"  means a 54,000 square foot,  101 room,
four story Hampton Inn to be constructed on the Land substantially in accordance
with the Plans and Specifications.

     1.21 INDIRECT  COSTS.  "Indirect  Costs" mean and include  title  insurance
premiums,  survey charges,  engineering  fees,  architectural  fees, real estate
taxes during the period of construction, commitment fees and interest payable to
Lender under the Loan,  premiums for insurance,  appraisal fees,  commitment and
other fees payable to Permanent Lender,  legal fees and all other expenses which
are,  in  accordance  with  sound  accounting  practices,  capital  expenditures
relating to the Property.

     1.22 LAND.  "Land" means the real property  described in Exhibit D attached
hereto.

     1.23 [INTENTIONALLY OMITTED].

     1.24 LOAN.  "Loan" means the construction loan which is the subject of this
Agreement.

     1.25 LOAN AMOUNT. "Loan Amount" means $4,700,000.00.

     1.26 LOAN DOCUMENTS.  "Loan Documents" means collectively,  this Agreement,
all  documents  referred  to in  Article  2 hereof,  and all  other  agreements,
documents and  instruments  now or hereafter  evidencing,  securing or otherwise
relating to the Loan.

     1.27 [INTENTIONALLY OMITTED].

     1.28  PERMANENT  COMMITMENT.  "Permanent  Commitment"  means the commitment
letter for the Permanent Loan issued by Permanent Lender to Borrower.

     1.29 PERMANENT LENDER.  "Permanent  Lender" means GMAC Commercial  Mortgage
Corporation,  whose address is 8814  Westwood  Center  Drive,  Vienna,  Virginia
22182.


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     1.30 PERMANENT LOAN.  "Permanent Loan" means the loan from Permanent Lender
to  Borrower  in the amount of  $4,700,000.00  to  finance  the  Property  after
completion of construction of the  Improvements in accordance with the Permanent
Commitment.

     1.31 PERSONAL PROPERTY.  "Personal Property" means materials,  furnishings,
fixtures, machinery, equipment and all items of tangible and intangible personal
property now or hereafter owned by Borrower, wherever located, and either (i) to
be  incorporated  into  the  Improvements,  (ii)  used in  connection  with  the
construction  of the  Improvements  or (iii) to be used in  connection  with the
operation of the Land or Improvements or both.

     1.32 PLANS AND SPECIFICATIONS.  "Plans and Specifications"  means the plans
and  specifications  for the Improvements  prepared by Borrower's  Architect and
more particularly identified on EXHIBIT E attached hereto.

     1.33  PROPERTY.  "Property"  means  the  Land,  Improvements  and  Personal
Property.

     1.34 PROPERTY COSTS. "Property Costs" shall mean and include all costs that
will be incurred by Borrower in connection with the acquisition of the Land, the
construction of the Improvements, the marketing and leasing of leasable space in
the  Improvements,  and the operation  and carrying of the Property  through the
maturity date of the Loan, including without limitation all Indirect Costs.

     1.35 REQUIRED EQUITY FUNDS. "Required Equity Funds" means the sums, if any,
required of Borrower by Lender,  to be available to pay the  difference  between
Property Costs and the amount of the Loan.

     1.36 REQUIRED  LEASES.  "Required  Leases" means the leases,  if any, which
Lender  has  specified  in  the  Commitment  must  be  in  effect  in  a  manner
satisfactory to Lender.

     1.37 REQUIREMENTS.  "Requirements" means any law, ordinance, order, rule or
regulation of any  Governmental  Authority  relating in any way to the Property,
Borrower or Guarantor.

     1.38 TAKING.  "Taking"  shall mean any  condemnation  for public use of, or
damage by reason of, the action of any Governmental  Authority,  or any transfer
by private sale in lieu thereof, either temporarily or permanently.

     1.39 TERMINATION DATE. "Termination Date" means the earlier of December 31,
1998, or such other date as may be set forth herein which fixes the  termination
of Lender's obligations to make Advances.



                                      - 4 -




<PAGE>



                                    ARTICLE 2

                                 LOAN DOCUMENTS

     The following  documents have been duly authorized,  executed and delivered
to Lender by the parties thereto:

     2.1 NOTE. The Promissory Note (hereinafter  referred to as the "Note") from
Borrower to Lender, dated as of even date herewith, in the Loan Amount.

     2.2 OPEN-END  MORTGAGE AND SECURITY  AGREEMENT.  The Open-End  Mortgage And
Security Agreement  (hereinafter referred to as the "Mortgage") from Borrower in
favor of  Lender,  dated of even date  herewith,  encumbering  the  Property  as
security  for the Note and any sums in addition  to the Loan Amount  advanced by
Lender under the other Loan Documents,  together with any assignment of revenues
and a  security  agreement  (whether  or not a  part  thereof)  encumbering  any
materials,  furnishings,  fixtures,  machinery,  equipment, or other articles of
personal property incorporated or to be incorporated in the Improvements or used
in the  operation of the Property  and all income,  profit and revenues  derived
from the Property;  which Mortgage is to be recorded in the  appropriate  public
records on or about the date hereof

     2.3  FINANCING  STATEMENTS.  Uniform  Commercial  Code,  Form  1  Financing
Statement(s) (hereinafter referred to as the "Financing Statements") in favor of
Lender giving notice of a security interest; which Financing Statement(s) are to
be filed in the appropriate public records on or about the date hereof

     2.4 ASSIGNMENT OF CONTRACT DOCUMENTS.  The Assignment of Contract Documents
(hereinafter  referred  to as  the  "Assignment  of  Contract  Documents")  from
Borrower in favor of Lender dated of even date herewith.

     2.5 ASSIGNMENT OF Leases.  The Assignment of Rents and Leases  (hereinafter
referred to as the "Assignment")  from Borrower in favor of Lender dated of even
date herewith  which is to be recorded in the  appropriate  public records on or
about the date hereof

     2.6  GUARANTY.  The  Guaranty of Payment and  Performance  and  Guaranty of
Completion  (hereinafter  collectively  referred  to  as  the  "Guaranty")  from
Guarantor in favor of Lender dated of even date herewith.

     INDEMNITY   AGREEMENT.   The  Hazardous   Substances   Indemnity  Agreement
(hereinafter  referred  to as  the  "Indemnity  Agreement")  from  Borrower  and
Guarantor in favor of Lender dated of even date herewith.



                                     - 5 -



<PAGE>



                                    ARTICLE 3

                   REPRESENTATIONS AND WARRANTIES OF BORROWER

     Borrower hereby represents and warrants to Lender as follows:

     3.1 VALIDITY OF LOAN DOCUMENTS. That the Loan Documents are in all respects
valid and legally  binding  obligations,  enforceable  in accordance  with their
respective  terms,  and grant to Lender a direct,  valid and  enforceable  first
mortgage lien on and security interest in and to the Property, including any and
all Personal Property acquired by Borrower after the date of this Agreement.

     3.2 TITLE TO PROPERTY.  That Borrower has good clear record and  marketable
fee simple absolute title to the Land, subject to no liens,  security interests,
charges or  encumbrances  in favor of any person other than Lender,  and that no
conditional  sale  contract,  chattel  mortgage,   security  agreement,   lease,
financing  statement  or other  title  retention  agreement  has been or will be
executed in favor of any person  other than  Lender  with  respect to any of the
Personal Property.

     3.3  ABSENCE OF  CONFLICTS.  That the  execution  and  delivery of the Loan
Documents  by  Borrower  and any  Guarantor  do not,  and  the  performance  and
observance by Borrower and any Guarantor of their  obligations  thereunder  will
not,  contravene  or  result  in a breach of (a) if  Borrower  or any  Guarantor
purports to be a limited  liability  company or a corporation,  any provision of
Borrower's or any Guarantor's  articles of organization,  operating agreement or
corporate  charter or by-laws,  or, if Borrower or any Guarantor  purports to be
partnership,   any  provision  of  Borrower's  or  any  Guarantor's  partnership
agreement or certificate, or (b) any Requirements, or (c) any decree or judgment
binding on Borrower or any Guarantor, or (d) any agreement or instrument binding
on Borrower or any Guarantor or any of their respective properties, nor will the
same  result in the  creation of any lien or  security  interest  under any such
agreement or instrument.

     3.4 PENDING LITIGATION. That there are no actions, suits, investigations or
proceedings  pending,  or, to the knowledge of Borrower,  threatened  against or
affecting  Borrower (or any general  partner of Borrower),  any Guarantor or the
Property,  or  involving  the  validity  or  enforceability  of any of the  Loan
Documents or the priority of the lien thereof,  or which will affect  Borrower's
ability to repay the Loan, at law or in equity or before or by any  Governmental
Authority.

     3.5  VIOLATIONS  OF  REQUIREMENTS.  That  Borrower  has no knowledge of any
violations or notices of violations of any Requirements.

     3.6 COMPLIANCE WITH  REQUIREMENTS.  That the Plans and  Specifications  and
construction of the  Improvements  pursuant  thereto and the use of the Property
contemplated thereby will comply with all Requirements.




                                      - 6 -




<PAGE>




     3.7 ORGANIZATION, STATUS AND AUTHORITY.


         (a)  If  Borrower  purports  to be a  limited  liability  company  or a
     corporation,  that (i) it is a limited  liability  company or a corporation
     duly organized, validly existing and in good standing under the laws of the
     state in which it is  organized  or  incorporated,  (ii) if required by the
     laws of the state in which the Land is located,  it is duly qualified to do
     business and is in good standing therein, (iii) it has the power, authority
     and legal right to own and operate its properties and assets,  carry on the
     business  now being  conducted  and  proposed to be conducted by it, and to
     engage in the transactions contemplated by the Loan Documents, and (iv) the
     execution and delivery of the Loan Documents to which it is a party and the
     performance  and  observance  of the  provisions  thereof  have  been  duly
     authorized by all necessary actions.

     3.8  AVAILABILITY  OF UTILITIES.  That all utility  services  necessary and
sufficient for the  construction,  Development and operation of the Property for
its intended  purposes are  presently  available to the  boundaries  of the Land
through dedicated public rights of way or through  perpetual private  easements,
approved by Lender, with respect to which the Mortgage creates a valid,  binding
and enforceable first lien, including,  but not limited to, water supply,  storm
and sanitary sewer, gas, electric and telephone facilities, and drainage.

     3.9  CONDITION  OF  PROPERTY.  That  neither the  Property  nor any portion
thereof is now  damaged or injured as result of any fire,  explosion,  accident,
flood  or other  casualty  or has been the  subject  of any  Taking,  and to the
knowledge of Borrower, no Taking is pending or contemplated.

     3.10  BROKERAGE   COMMISSIONS.   That  any  brokerage  commissions  due  in
connection with the transactions  contemplated hereby have been paid in full and
that any such  commissions  coming due in the future  will be  promptly  paid by
Borrower.  Borrower  agrees to and shall  indemnify  Lender from any  liability,
claims or losses  arising  by reason  of any such  brokerage  commissions.  This
provision  shall  survive the  repayment of the Loan and shall  continue in full
force and effect so long as the possibility of such liability,  claims or losses
exists.

     3.11 FINANCIAL  STATEMENTS.  That the financial  statements of Borrower and
any  Guarantor  previously  delivered  to  Lender  are true and  correct  in all
material  respects,  have been prepared in accordance  with  generally  accepted
accounting  principles  consistently  applied, and fairly present the respective
financial  conditions of Borrower and any Guarantor as of the  respective  dates
thereof and the results of their  operations  for the periods  covered  thereby;
that no material  adverse  change has  occurred in the assets,  liabilities,  or
financial conditions reflected therein since the respective dates thereof-,  and
that no additional  borrowings have been made by Borrower or any Guarantor since
the date thereof other than the borrowing contemplated hereby.

     3.12 TAXES.  That all federal,  state and other tax returns of Borrower and
any  Guarantor  required by law to be filed have been filed,  that all  federal,
state and other taxes,  assessments and other governmental charges upon Borrower
and any Guarantor or their respective  properties which are due and payable have
been paid, and that Borrower and any Guarantor have set aside on their



                                      - 7 -



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books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods for which such returns have been filed.

     3.13 OTHER CONTRACTS.  That Borrower has made no contract or arrangement of
any kind or type whatsoever (whether oral or written,  formal or informal),  the
performance  of which by the other  party  thereto could  give RISE to a lien or
encumbrance  on the  Property,  except  for  contracts  (all of which  have been
disclosed in writing to Lender).

     3.14 CONSTRUCTION  CONTRACT.  That (i) the Construction Contract is in full
force and effect;  (ii) both Borrower and Contractor are in full compliance with
their respective obligations under the Construction Contract;  (iii) the work to
be performed by Contractor  under the  Construction  Contract is the work called
for by the  Plans and  Specifications  and all work  required  to  complete  the
Improvements  in accordance  with the Plans and  Specifications  is provided for
under the Construction  Contract; and (iv) all work on the Improvements shall be
completed  substantially  in accordance with the Plans and  Specifications  in a
good and workmanlike manner and shall be free of any defects.

     3.15 ACCESS.  That the rights of way for all roads  necessary  for the full
utilization of the  Improvements  for their  intended  purposes have either been
acquired by the Borrower,  the appropriate  Governmental  Authority or have been
dedicated to public use and  accepted by such  Governmental  Authority,  and all
such roads shall have been  completed,  or all  necessary  steps shall have been
taken by  Borrower  and such  Governmental  Authority  to  assure  the  complete
construction and installation thereof prior to the date upon which access to the
Property via such roads will be necessary.  Allcurb cuts,  driveway  permits and
traffic signals shown on the Plans and Specifications or otherwise necessary for
access  to the  Property  are  existing  or  have  been  fully  approved  by the
appropriate Governmental Authority.

     3.16 NO DEFAULT. That no Event of Default exists and no event which but for
the passage of time,  the giving of notice or both would  constitute an Event of
Default has occurred.

     3.17  ARCHITECT'S  CONTRACT.  That (i) the Architect's  Contract is in full
force and effect;  and (ii) both Borrower and  Borrower's  Architect are in full
compliance with their  respective  obligations  under the Architect's  Contract.
Borrower  shall from time to time,  upon  request by  Lender,  cause  Borrower's
Architect to provide Lender with reports in regard to the status of construction
of the Improvements, in such form and detail as reasonably requested by Lender.

     3.18 PLANS AND SPECIFICATIONS.  That Borrower has furnished Lender true and
complete   sets  of  the  Plans  and   Specifications   which  comply  with  all
Requirements,  all Governmental Approvals,  and all restrictions,  covenants and
easements  affecting  the  Property,   and  which  have  been  approved  by  the
Contractor,  Borrower's  Architect,  Permanent  Lender,  and  such  Governmental
Authority as is required for construction of the Improvements.

     3.19  GOVERNMENTAL  APPROVALS.  That Borrower has obtained all Governmental
Approvals  from, and has given all such notices to, and has taken all such other
actions with respect to such



                                      - 8 -



<PAGE>




Governmental Authority as may be required under applicable Requirements for the
construction of the Improvements.

     3.20 CONSTRUCTION  BUDGET. That the Construction Budget accurately reflects
all Property Costs of Construction.

     3.21  FEASIBILITY.   That  each  of  the  Construction   Schedule  and  the
Disbursement Schedule is realistic and feasible, and is accurate to date.

     3.22 EFFECT OF DRAW REQUEST.  That each Draw Request submitted to Lender as
provided  in  Article  6  hereof  shall   constitute  an  affirmation  that  the
representations  and warranties  contained in Article 3 of this Agreement (other
than the  representations  made in the last clause of Section 3.11 as it relates
to the  indebtedness  of any guarantor)  and in the other Loan Documents  remain
true and correct as of the date  thereof,  and unless  Lender is notified to the
contrary, in writing,  prior to the disbursement of the requested Advance or any
portion  thereof,  shall constitute an affirmation that the same remain true and
correct on the date of such disbursement.


                                    ARTICLE 4

                              COVENANTS OF BORROWER

     Borrower hereby covenants and agrees with Lender as follows:

     4.1 COMMITMENTS. To permit no default under the terms of the Commitment.

     4.2 CONSTRUCTION  CONTRACT. (i) To permit no default under the terms of the
Construction  Contract,  (ii) to waive  none of the  obligations  of  Contractor
thereunder,  (iii)  to do  no  act  which  would  relieve  Contractor  from  its
obligations   to  construct  the   Improvements   according  to  the  Plans  and
Specifications,  and (iv) to make no  amendments  to or change  orders under the
Construction Contract without the prior approval of Lender;  provided,  however,
that the Borrower shall be permitted to make a proposed change order without the
prior approval of the Lender if (a) any such change order results in a reduction
in the cost of the Improvements, or (b) any such change order is for an increase
in the cost of the  Improvements  in an amount less than  $25,000.00  unless the
aggregate amount of all change orders that increase the cost of the Improvements
(inclusive of the proposed  change order) between the date of this Agreement and
the date of the proposed change order is greater than $100,000.00.

     4.3 ARCHITECT'S  CONTRACT.  (i) To permit no default under the terms of the
Architect's  Contract,  (fi) to  waive  none of the  obligations  of  Borrower's
Architect  thereunder,  (iii)  to do  no  act  which  would  relieve  Borrower's
Architect from its obligations under the Architect's Contract,  and (iv) to make
no amendments to the Architect's  Contract without the prior approval of Lender;
provided,  however,  that the  Borrower  shall be  permitted  to make a proposed
change  order  without  the prior  approval of the Lender if (a) any such change
order  results in a reduction in the cost of the  Improvements,  or (b) any such
change order is for an increase in the cost of the Improvements in




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an amount less than $25,000.00  unless the aggregate amount of all change orders
that increase the cost of the  Improvements  (inclusive  of the proposed  change
order)  between the date of this  Agreement and the date of the proposed  change
order is greater than $100,000.00.

     4.4 INSURANCE.  To obtain  insurance or evidence of insurance as Lender may
reasonably require, including, but not limited to, the following:

         (a) TITLE  INSURANCE.  A mortgagee title  insurance  policy (the "Title
     Insurance  Policy") in an amount,  and issued by a title insurance  company
     (the  "Title  Insurer")  and  through a title agent as shall be approved by
     Lender,  insuring a valid first lien upon and  security  interest in and to
     the  Property  by  virtue  of  the  Mortgage,   with  such  reinsurance  or
     co-insurance  agreements as may be required by Lender.  The Title Insurance
     Policy shall contain no exceptions other than those  specifically  approved
     in writing by Lender, contain a pending disbursements clause or endorsement
     and such other  endorsements  as Lender may  reasonably  require,  and such
     affirmative insurance as Lender may reasonably require. The Title Insurance
     Policy,  together  with evidence of payment of premiums  thereon,  shall be
     delivered to Lender on or before the date of this Agreement.

         (b) INSURANCE  REQUIRED BY MORTGAGE.  Such insurance as may be required
     by the  Mortgage.  If any hazard  insurance  required  by the  Mortgage  is
     obtained  as  to  all  or  part  of  the  Property  before   completion  of
     construction then such policy shall contain an endorsement recognizing that
     construction  is in progress  and  agreeing  that such shall not  adversely
     affect the  coverage  or be  asserted  as a defense on any claim under such
     policy.

         (c) PROFESSIONAL  LIABILITY  INSURANCE.  Evidence or certificates  from
     insurance companies  indicating that Borrower's  Architect,  the Contractor
     and  all  other  architects,   engineers,  contractors  and  subcontractors
     responsible for the design or construction of the  Improvements are covered
     by professional  liability  insurance to the  satisfaction of Lender;  such
     evidence or certificates to be delivered to Lender on or before the date of
     this Agreement.

     4.5  APPLICATION OF LOAN  PROCEEDS.  To use the proceeds of the Loan solely
for the purpose of paying for the cost of the  construction of the  Improvements
in accordance with the terms of this Agreement.

     4.6 PROPERTY COSTS AND EXPENSES.  To pay all Property Costs,  regardless of
the amount,  and to pay all costs and  expenses  of Lender  with  respect to the
financing,  acquisition  and  construction  of the  Property,  including but not
limited  to,   appraisal  fees,   inspection  fees,   surveying   costs,   legal
fees(including  legal fees  incurred by Lender  subsequent to the closing of the
Loan in connection with the disbursement, administration, collection or transfer
of the Loan), advances,  recording expenses, surveys, intangible taxes, expenses
of foreclosure (including attorney's fees) and similar items.



                                     - 10 -




<PAGE>



     4.7  COMMENCEMENT  AND  COMPLETION OF  CONSTRUCTION.  To diligently  pursue
construction  to  completion  prior  to the  Completion  Date  substantially  in
accordance  with the  Plans  and  Specifications,  in full  compliance  with all
restrictions,  covenants and easements affecting the Property, all Requirements,
and all  Governmental  Approvals,  and with all terms and conditions of the Loan
Documents  without deviation from the Plans and  Specifications  unless with the
prior approval of Lender or otherwise  permitted by this  Agreement;  to pay all
sums  and  to  perform  such  duties  as  may  be  necessary  to  complete  such
construction of the Improvements in accordance with the Plans and Specifications
and in full compliance with all restrictions,  covenants and easements affecting
the Property,  all  Requirements and all  Governmental  Approvals,  and with all
terms and conditions of the Loan  Documents,  all of which shall be accomplished
on or before the  Completion  Date,  free from any liens,  claims or assessments
(actual or contingent) asserted against the Property for any material,  labor or
other  items  furnished  in  connection  therewith.   Evidence  of  satisfactory
compliance  with the  foregoing  shall be  furnished by Borrower to Lender on or
before the Completion Date.

     4.8  RIGHT  OF  LENDER  TO  INSPECT  PROPERTY.  To  permit  Lender  and its
representatives  and  agents  to enter  upon the  Property  and to  inspect  the
Improvements  and all  materials  to be used in the  construction  thereof  upon
reasonable notice and to cooperate and cause Contractor to cooperate with Lender
and its  representatives  and agents during such inspections  (including  making
available to Lender working copies of the Plans and Specifications together with
all related  supplementary  materials);  provided,  however, that this provision
shall not be deemed to impose  upon  Lender any  obligation  to  undertake  such
inspections.

     4.9 CORRECTION OF DEFECTS. Unless Borrower demonstrates to Lender that such
corrective  work  is   inappropriate   or   inconsistent   with  the  Plans  and
Specifications,  to  promptly  correct all  defects in the  Improvements  or any
material departure from the Plans and Specifications not previously  approved by
Lender or otherwise  permitted  under this  Agreement.  Borrower agrees that the
advance of any  proceeds  of the Loan  whether  before or after such  defects or
departures  from the Plans and  Specifications  are discovered by, or brought to
the  attention,  of Lender,  shall not  constitute a waiver of Lender's right to
require compliance with this covenant.

     4.10 SIGN REGARDING  CONSTRUCTION  FINANCING.  At Lender's option, to erect
promptly  and  maintain on a suitable  site on the Land a sign  indicating  that
construction  financing is being provided by Lender,  all to the satisfaction of
Lender; and to prevent the destruction or removal of said sign without the prior
approval of Lender.

     4.11 APPROVAL OF CHANGE ORDERS.  To permit no deviations from the Plans and
Specifications  during  construction  without  the prior  approval of Lender and
Permanent  Lender,  except as permitted in Section 4.2 of this Agreement,  or in
the Permanent Commitment, or in the Tri-Party Agreement.

     4.12 [INTENTIONALLY OMITTED].



                                     - 11 -




<PAGE>



     4.13 BOOKS AND RECORDS.  To keep and maintain  complete proper and accurate
books,  records  and  accounts  reflecting  all items of income  and  expense of
Borrower  in  connection   with  the  Property  and  the   construction  of  the
Improvements and the results of the operation thereof,  and, upon the reasonable
request  of  Lender,  to make  such  books,  records  and  accounts  immediately
available to Lender for inspection or independent audit.

     4.14 FINANCIAL STATEMENTS AND OTHER INFORMATION.  To furnish to Lender such
financial statements and information as Borrower has agreed to provide elsewhere
in the Loan Documents.

     4.15  CONSTRUCTION  INSPECTOR.  To permit Lender to retain the Construction
Inspector at the cost of Borrower to perform the following services on behalf of
Lender:

         (a)  To  review  and  advise  Lender  whether,  in the  opinion  of the
     Construction Inspector, the Plans and Specifications are satisfactory;

         (b) To review Draw Requests and change orders;

         (c) To make  periodic  inspections  (approximately  at the date of each
     Draw  Request)  for  the  purpose  of  assuring  that  construction  of the
     Improvements  to date is  substantially  in  accordance  with the Plans and
     Specifications and to approve Borrower's then current Draw Request as being
     consistent with  Borrower's  obligations  under this  Agreement,  including
     INTER  ALIA,  an opinion as to  Borrower's  continued  compliance  with the
     provisions of Section 6.1 (g) (4) hereof.

     The fees of the Construction  Inspector shall be paid by Borrower forthwith
upon billing  therefor and expenses  incurred by Lender on account thereof shall
be reimbursed to Lender forthwith upon request therefor,  but neither Lender nor
the  Construction  Inspector  shall have any liability to Borrower on account of
(i) the services  performed by the Construction  Inspector,  (ii) any neglect or
failure  on the part of the  Construction  Inspector  to  properly  perform  its
services, or (iii) any approval by the Construction Inspector of construction of
the  Improvements.  Neither Lender nor the  Construction  Inspector  assumes any
obligation  to  Borrower  or  any  other  person   concerning   the  quality  of
construction of the Improvements or the absence therefrom of defects.

     4.16 SOIL TESTS. To provide  promptly to Lender at Borrower's  expense such
soil tests and environmental  assessments of the Land as Lender may require from
time to time.

     4.17 [INTENTIONALLY OMITTED].

     4.18  INSUFFICIENCY  OF LOAN  PROCEEDS.  To deposit  funds  with  Lender as
follows: If at any time or from time to time during the terms of this Agreement,
in Lender's judgment and opinion, the remaining undisbursed portion of the Loan,
together with the Required  Equity  Funds,  is or will be insufficient  to fully
complete  the  Improvements  substantially  in  accordance  with the  Plans  and
Specifications,  to  operate  and carry the  Property  after  completion  of the
Improvements  until  payment in full of the Loan by  Borrower,  to pay all other
Property Costs, to pay all interest accrued



                                     - 12 -



<PAGE>




or to  accrue  on the Loan  during  the term of the Loan from and after the date
hereof, and to pay all other sums due or to become due under the Loan Documents,
regardless of how such condition may be caused, Borrower shall, within seven (7)
days after written notice thereof from Lender,  deposit with Lender such sums of
money in cash as Lender may  require,  in an amount  sufficient  to remedy  such
condition, and sufficient to pay any liens for services and materials alleged to
be due and payable at that time in  connection  with the  Improvements,  and, at
Lender's  option;  no further Advances of the Loan shall be made by Lender until
the  provisions  of this  Paragraph  have  been  fully  complied  with. All such
deposited  sums shall stand as additional  security for  Borrower's  obligations
under this  Agreement  and shall be  disbursed  by Lender in the same  manner as
Advances under this Agreement  before any further  Advances of the Loan proceeds
shall be made. Lender shall have no obligation to pay Borrower any interest with
respect to such deposited funds.

     4.19 ADDITIONAL DOCUMENTS. To perform hereunder as follows:

         (a)  REGARDING  CONSTRUCTION.  To furnish  to Lender  all  instruments,
     documents,  boundary surveys, footing or foundation surveys,  certificates,
     plans and specifications,  appraisals,  title and other insurance,  reports
     and agreements and each and every other document and instrument required to
     be furnished by, the terms of the Commitment or this Agreement or the other
     Loan Documents, all at Borrower's expense.

         (b)  REGARDING  PRESERVATION  OF  SECURITY.  To execute  and deliver to
     Lender such documents,  instrument,  assignments and other writings, and to
     do such other acts  necessary  or  desirable,  to preserve  and protect the
     collateral  at any time  securing or intended to secure the Loan, as Lender
     may require.

         (c) REGARDING  THIS  AGREEMENT.  To do and execute all and such further
     lawful and reasonable  acts,  conveyances and assurances in the law for the
     better and more effective  carrying out of the intents and purposes of this
     Agreement as Lender shall require from time to time.

     4.20  FINANCING  PUBLICITY.   To  permit  Lender  to  obtain  publicity  in
connection with the construction of the Improvements  through press releases and
participation in such events as ground breaking and opening  ceremonies;  and to
give  Lender  ample  advance  notice of such  events and to give  Lender as much
assistance as possible in connection with obtaining such publicity as Lender may
request.

     4.21 EASEMENTS AND RESTRICTIONS.  To submit to Lender for Lender's approval
prior to the execution thereof by Borrower all proposed easements, restrictions,
covenants,  permits, licenses, and other instruments which would or might affect
the title to the Property,  accompanied  by a survey  showing the exact proposed
location thereof and such other information as Lender shall reasonably  require.
Borrower  shall not subject the  Property or any part  thereof to any  easement,
restriction or covenant (including any restriction or exclusive use provision in
any lease or other  occupancy  agreement)  without the prior approval of Lender,
which shall not be unreasonably withheld.



                                     - 13 -



<PAGE>




     4.22 COMPLIANCE WITH REQUIREMENTS. To comply promptly with all requirements
and governmental  approvals and to furnish Lender,  on demand,  with independent
evidence of such compliance.

     4.23 LEASES. To enter into no leases or occupancy  agreements affecting the
Property  without the prior  approval of Lender and Permanent  Lender.  Borrower
shall  deliver  to Lender  executed  counterparts  of all leases and  occupancy
agreements  affecting the Property  whether executed before or after the date of
this  Agreement,  and  shall  not  amend  any  provision  thereof  or waive  any
obligations  of tenants under any leases or occupancy  agreements  affecting the
Property without the prior approval of Lender.

     4.24 COMPLIANCE WITH RESTRICTIONS,  COVENANTS AND EASEMENTS. To comply with
all restrictions, covenants and easements affecting the Property.

     4.25 LABORERS,  SUBCONTRACTORS AND MATERIALMEN.  To furnish to Lender, upon
request at anytime,  and from time to time,  affidavits  listing  all  laborers,
subcontractors,  materialmen,  and any other  parties  who might or could  claim
statutory  or common law liens and are  furnishing  or have  furnished  labor or
material to the Property or any portion thereof,  together with  affidavits,  or
other evidence satisfactory to Lender,  showing that such parties have been paid
all amounts  then due for labor and  materials  furnished  to the  Property.  In
addition,  Borrower will notify Lender immediately,  and in writing, if Borrower
receives  any  notice,  written  or oral,  from any  laborer,  subcontractor  or
materialmen to the effect that said laborer,  subcontractor  or materialmen  has
not been paid when due for any labor or materials  furnished in connection  with
the construction of the  Improvements.  Borrower will also furnish to Lender, at
any time and from time to time upon  demand by Lender,  lien  waivers  bearing a
then current date from  Contractor  and such  subcontractors  or  materialmen as
Lender may designate.

     4.26 FURTHER ASSURANCE OF TITLE. To further assure title as follows:  If at
any time  Lender or Lender's  counsel has reason to believe  that any Advance is
not  secured or will or may not be secured  by the  Mortgage  as a first lien or
security  interest on the Property,  then Borrower  shall,  within ten (10) days
after written notice from Lender, do all things and matters necessary, to assure
to the satisfaction of Lender and Lender's  counsel that any Advance  previously
made  hereunder  or to be made  hereunder  is  secured or will be secured by the
Mortgage as a first lien or first security interest on the Property, and Lender,
at its option,  may decline to make further Advances  hereunder until lender has
received such assurance.

     4.27 [INTENTIONALLY OMITTED].

     4.28 COMPLIANCE WITH PERMANENT  COMMITMENT.  (i) To permit no default under
the terms of the Permanent Commitment,  (ii) to waive none of the obligations of
the  Permanent  Lender  thereunder,  (iii)  to do no  act  which  would  relieve
Permanent  Lender from its  obligations  to fund the  Permanent  Loan or entitle
Permanent Lender to cancel or terminate the Permanent  Commitment,  (iv) to take
all actions  necessary or  appropriate  in order to close on the Permanent  Loan
prior  to  the  expiration  of  the  Permanent   Commitment,   (v)  to  complete
construction of the Improvements, and



                                     - 14 -



<PAGE>




each and every part  thereof,  and to satisfy all  conditions  to closing of the
Permanent  Loan not later than sixty  (60) days prior to the  expiration  of the
Permanent  Commitment,  (vi) to make no amendments  to the Permanent  Commitment
without the prior approval of Lender,  (vii) to the maximum extent  permitted by
law and under the terms of the  Permanent  Commitment,  to assign to Lender,  in
such form as Lender may reasonably require, Borrower's right to receive proceeds
of the  Permanent  Loan (to the extent of  Borrower's  indebtedness  to Lender),
(viii) to direct Permanent Lender to disburse the proceeds of the Permanent Loan
(to the extent of Borrower's  indebtedness to Lender)  directly to Lender at the
time of closing of the Permanent Loan, and (ix) to provide Lender with copies of
any communications given to or received from Permanent Lender.

     4.29 NO TRANSFERS OR ENCUMBRANCES.  To cause or permit no sale, conveyance,
transfer,  assignment  or  encumbering  of the Property or any interest  therein
without the prior  approval of Lender;  provided,  however,  that  transfers  of
limited  partnership  interests in Essex  Hospitality  Associates IV L.P. may be
made without the prior approval of the Lender.


                                    ARTICLE 5

                                AGREEMENT TO LEND

     Subject to the terms and  conditions  set forth in this  Agreement,  Lender
agrees to make  Advances  of the Loan to  Borrower  from time to time during the
period from the date hereof to the  Termination  Date in an aggregate  principal
amount of up to and  including  the Loan Amount to pay Property  Costs  actually
incurred in connection with the acquisition of the Land and  construction of the
Improvements (including Indirect Costs) if and to the extent such Property Costs
are reflected in the Construction Budget as being funded by Lender.

     5.1 NOTE.  The  obligation of Borrower to pay the  principal  amount of all
Advances  made by Lender to Borrower  under this  Agreement,  plus all  interest
accrued  thereon at the rate or rates set forth in the Note,  shall be evidenced
by the Note.

     5.2 ADVANCES. The Construction Budget reflects, by category and line items,
the purposes and the amounts for which funds to be advanced by Lender under this
Agreement are to be used. Except to the extent that  reallocations are permitted
under,  or approved by the Lender  pursuant to Section 5.4,  Lender shall not be
required  to  disburse  for any  category  or line  item  more  than the  amount
specified therefor in the Construction Budget.

     5.3 COST  OVERRUNS.  If  Borrower  becomes  aware of any change in Property
Costs which will increase a category or line item of Property Costs reflected on
the Construction Budget (as the Construction Budget is revised from time to time
and approved by Lender), Borrower shall immediately notify Lender in writing and
promptly  submit to Lender for its approval a revised  Construction  Budget.  No
further   Advances  need  be  made  by  Lender  unless  and  until  the  revised
Construction  Budget so submitted by Borrower is approved by Lender,  and Lender
reserves  the right to approve or  disapprove  any revised  Construction  Budget
which approval will not be unreasonably withheld. If Lender approves the revised
Construction Budget, and such revised Construction



                                     - 15 -




<PAGE>



Budget  reflects  Project  Costs to be  funded  by  Lender in excess of the Loan
Amount,  the  amount  of such  excess  shall be added  to the Loan  Amount,  and
Borrower's  obligation to repay the same,  together with interest thereon at the
rate or rates provided in the Note,  shall be deemed to be evidenced by the Note
and secured by the Loan Documents.

     5.4 CONTINGENCY RESERVE. Any amount allocated as Contingency Reserve in the
Construction  Budget is not intended to be disbursed  and will only be disbursed
upon the prior approval of Lender, which approval can be withheld for any reason
or for no reason; provided, however, that the Borrower may request that funds be
reallocated  from the  Contingency  Reserve to a category or line item for which
funds are  insufficient,  and the Lender shall authorize such  reallocation  for
Property  Costs if it  determines  in its  reasonable  discretion  (taking  into
account  the  extent  of  completion  of  the  Improvements)  that,  after  such
reallocation,  the aggregate amount of undisbursed proceeds of the Building Loan
and the Borrower's  remaining Required Equity Funds will be sufficient to pay in
full all Property Costs required to complete  construction of the  Improvements.
The  disbursement  of a  portion  of the  Contingency  Reserve  shall  in no way
prejudice  Lender from  withholding  disbursement  of any further portion of the
Contingency Reserve.

     5.5  STORED  MATERIALS.  Lender  shall  disburse  funds for any  materials,
furnishings,  fixtures, machinery or equipment not yet incorporated into Land or
Improvements  (the  "Stored   Materials"),   contingent  upon  Lender  receiving
satisfactory evidence that:

         (a)  The  Stored   Materials  are   components  in  a  form  ready  for
     incorporation into the Improvements;

         (b) The Stored Materials are stored at the Land, in a bonded warehouse,
     at a site  controlled  by  Borrower,  or at such other site as Lender shall
     approve, and are protected against theft and damage;

         (c) The Stored Materials have been paid for in full or will be paid for
     with the  funds  to be  disbursed  and all lien  rights  or  claims  of the
     supplier have been released or will be released upon payment with disbursed
     funds;

         (d)  Lender  has or will  have  upon  payment  with  disbursed  funds a
     perfected, first priority security interest in the Stored Materials; and

         (e) The  Stored  Materials  are  insured  for an amount  equal to their
     replacement costs.

     5.6  AMOUNT OF  ADVANCES.  In no event  shall any  Advance  exceed the full
amount of Indirect Costs approved by Lender and  theretofore  paid or to be paid
with the proceeds of such  Advance  plus ninety  (90%)  percent of all costs for
construction of Improvements approved by Lender and incurred by Borrower through
the date of the Draw Request for such Advance less the  aggregate  amount of any
Advances  previously made by Lender. It is further understood that the retainage
described  above is intended to provide a  contingency  fund  protecting  Lender
against



                                     - 16 -




<PAGE>



failure of Borrower or any Guarantor to fulfill any  obligations  under the Loan
Documents,  and that Lender may charge  amounts  against  such  retainage in the
event  Lender is  required or elects to expend its own funds to cure any Default
or Event of Default.

     Anything herein to the contrary notwithstanding,  it is understood,  stated
and  agreed  that at such  time as the  Improvements  are  fifty  percent  (50%)
complete,  that all  Advance  amounts  shall be made  without any  retainage  by
Lender.

     5.7  QUALITY OF WORK.  No Advance  shall be due unless all work done at the
date the  Draw  Request  for such  Advance  is  submitted  is done in a good and
workmanlike  manner  and  without  defects,  as  confirmed  by the report of the
Construction  Inspector,  but Lender  may  disburse  all or part of any  Advance
before the sum shall  become due if Lender  believes it  advisable to do so, and
all such Advances or parts thereof shall be deemed to have been made pursuant to
this Agreement.

     5.8 REQUIRED EQUITY FUNDS.  Required Equity Funds shall be used by Borrower
for  Property  Costs  before  any  Advances  of the Loan  proceeds  in excess of
$100,000.00  shall be made.  Required Equity Funds will be disbursed by Borrower
and not deposited with or disbursed by Lender.


                                   ARTICLE 6

                            CONDITIONS PRECEDENT TO
                         DISBURSEMENT OF LOAN PROCEEDS

     6.1  CONDITIONS OF INITIAL  Advance.  The  obligation of Lender to make the
initial Advance, which shall be limited to $100,000.00 for soft cost items only,
shall be subject to the following conditions precedent:

         (a)  COMMITMENT.  All items  required  by the  Commitment  or letter of
     instructions  from  Lender to Borrower  regarding  the Loan shall have been
     delivered to the proper parties as required therein, and all conditions set
     forth in the  Commitment  or such  letter of  instructions  shall have been
     satisfied.

         (b)  LOAN  DOCUMENTS.   The  Loan  Documents,  in  form  and  substance
     satisfactory to Lender,  shall have been duly executed and delivered by the
     parties  thereto  and shall be in full force and effect,  and Lender  shall
     have received the original or a fully executed counterpart thereof All Loan
     Documents to be filed or recorded in the public  records shall have been so
     filed or recorded in the appropriate public records.

         (c) CONSTRUCTION  DOCUMENTS.  The Architect's Contract and Construction
     Contract,  in form and substance  satisfactory  to Lender,  shall have been
     duly executed and delivered by the parties thereto,  shall be in full force
     and effect,  and Lender shall have received a certified or a fully executed
     counterpart thereof borrower's Architect and the Contractor shall have duly
     executed and delivered to Lender a consent to the assignment of

 

                                    - 17 -




<PAGE>



     the Architect's Contract and Construction  Contract,  in form and substance
     satisfactory  to Lender,  and Lender shall have  received the original or a
     fully executed counterpart thereof.

         (d) SUBCONTRACTS.  Borrower shall have delivered to Lender,  and Lender
     shall have approved,  a list of all subcontractors and materialmen who have
     been or, to the extent  identified by Borrower,  will be supplying labor or
     materials for the Property, a copy of the standard form of  subcontract to
     be used by the  Contractor,  and correct and  complete  photocopies  of all
     executed subcontracts and contracts.

         (e) OTHER  CONTRACTS.  Borrower  shall have delivered to Lender correct
     and complete  photocopies of all other executed contracts with contractors,
     engineers  or  consultants  for  the  Property,  and  of  all  development,
     management, brokerage, sales or leasing agreements for the Property.

         (f) REQUIRED LEASES. The Required Leases, if any, in form and substance
     satisfactory  to  Lender,  shall  have been duly  executed  by the  parties
     thereto  and shall be in full  force and  effect,  and  Lender  shall  have
     received a certified or fully executed counterpart thereof Lender, Borrower
     and each tenant under a Required Lease shall have duly executed an Estoppel
     Certificate and Non-Disturbance, Attornment and Subordination Agreement, in
     form and substance  satisfactory to Lender,  and Lender shall have received
     the original or a fully executed counterpart thereof.

         (g)  DELIVERIES.  The  following  items or  documents  shall  have been
     delivered to Lender:

              (1) PLANS AND  SPECIFICATIONS.  One  complete set of the Plans and
         Specifications  and  approval  thereof  by any  necessary  Governmental
         Authority,  with a  certification  from  Borrower's  Architect that the
         Improvements  to  be  constructed  comply  with  all  Requirements  and
         Governmental    Approvals   and   that   the   Construction    Contract
         satisfactorily provides for the construction of the Improvements.

              (2) TITLE  INSURANCE  POLICY.  A paid  Title  Insurance  Policy or
         report in all respects satisfactory to Lender and its counsel.

              (3) OTHER INSURANCE.  Policies (or, if permitted,  certificates or
         other  evidence  of) all  insurance  required by this  Agreement or any
         other Loan Document.

              (4) EVIDENCE OF SUFFICIENCY  OF FUNDS.  Evidence  satisfactory  to
         Lender that the proceeds of the Loan,  together  with  Required  Equity
         Funds,  will be  sufficient  to cover  all  Property  Costs  reasonably
         anticipated to be incurred, to satisfy the requirements of the Required
         Leases and  Permanent  Commitment  and to satisfy  the  obligations  of
         Borrower to Lender under this Agreement.


                                     - 18 -




<PAGE>



              (5) EVIDENCE OF ACCESS,  AVAILABILITY  OF UTILITIES,  GOVERNMENTAL
         APPROVALS. Evidence satisfactory to Lender as to:

                   (A) the  methods of access to and egress  from the  Property,
              and  nearby or  adjoining  public  ways,  meeting  the  reasonable
              requirements of property of the type  contemplated to be completed
              under this  Agreement and the status of completion of any required
              improvements to such access;

                   (B) the  availability of storm and sanitary sewer  facilities
              meeting the reasonable requirements of the Property;

                   (C) the  availability  of all other  required  utilities,  in
              location and capacity  sufficient to meet the reasonable  needs of
              the Property; and

                   (D) the  securing  of all  Governmental  Approvals  from  the
              applicable   Governmental   Authority  which  are  required  under
              applicable  Requirements for the construction of the Improvements,
              together with copies of all such Governmental Approvals.

              (6) ENVIRONMENTAL  REPORT.  An environmental  assessment report or
         reports of one or more qualified  environmental  engineering or similar
         inspection  firms  approved  by  Lender in form,  scope  and  substance
         satisfactory  to  Lender,  which  report or  reports  shall  indicate a
         condition  of the Land in all  respects  satisfactory  to Lender in its
         sole  discretion  and upon which report or reports  Lender is expressly
         entitled to rely.

              (7) SOIL  REPORT.  A soil  report for the Land  prepared by a soil
         engineer  approved  by Lender  in form and  substance  satisfactory  to
         Lender, containing recommendations for the design of foundations, paved
         areas and underground utilities.

              (8) SURVEY.  A survey  prepared in accordance with Lender's survey
         requirements,  certified by a land  surveyor  registered as such in the
         state in which the Land is located,  which  survey shall be in form and
         substance satisfactory to Lender.

              (9) DRAW REQUEST.  A Draw Request complying with the provisions of
         this Agreement.

              (10) GMAC  DOCUMENTS.  Lender  shall  have  received  an  executed
         application  letter and a "comfort  letter" from the  Permanent  Lender
         evidencing the Permanent Commitment, or the Permanent Commitment.



                                     - 19 -



<PAGE>





         (h) LEGAL  OPINIONS.  Lender shall have  received  opinions in form and
     substance   satisfactory  to  Lender  and  Lender's  counsel  from  counsel
     satisfactory  to  Lender as to such  matters  as  Lender  shall  reasonably
     request.

         (i)  CERTIFICATION  REGARDING  CHATTELS.  Lender shall have  received a
     certification  from the Title  Insurer  or counsel  satisfactory  to Lender
     (which  shall be  updated  from  time to time at  Borrower's  expense  upon
     request  by  Lender)  that a search  of the  public  records  disclosed  no
     conditional  sales  contracts,  chattel  mortgages,  leases of personality,
     financing  statements  or  title  retention  agreements  which  affect  the
     Property.

         (j) NOTICES.  All notices required by any Governmental  Authority or by
     any  applicable   Requirement  to  be  filed  prior  to   commencement   of
     construction of the Improvements shall have been filed.

         (k) APPRAISAL.  Any appraisal  requirements set forth in the Commitment
     shall have been satisfied.

         (1) PERFORMANCE; NO DEFAULT. Borrower shall have performed and complied
     with all terms and conditions  herein  required to be performed or complied
     with by it at or prior to the date of the initial Advance,  and on the date
     of the initial Advance, there shall exist no Default or Event of Default.

         (m) REPRESENTATIONS AND WARRANTIES.  The representations and warranties
     made by Borrower and any Guarantor in the Loan  Documents or otherwise made
     by or on behalf of Borrower or any  Guarantor  in  connection  therewith or
     after the date  thereof  shall have been true and  correct in all  material
     respects  on the date on which made and shall  also be true and  correct in
     all material respects on the date of the initial Advance.

         (n) OTHER DOCUMENTS. Such other documents, opinions and certificates as
     Lender or its counsel may reasonably require.

         (o) PROCEEDINGS  AND DOCUMENTS.  All proceedings in connection with the
     transactions  contemplated  by this  Agreement and the other Loan Documents
     shall be satisfactory to Lender and Lender's counsel in form and substance,
     and  Lender  shall  have  received  all  information  and such  counterpart
     originals  on   certified   copies  of  such   documents   and  such  other
     certificates,  opinions or  documents  as Lender and  Lender's  counsel may
     reasonably require.

     6.2 CONDITIONS OF SUBSEQUENT ADVANCES. The obligation of Lender to make any
Advance after the initial  Advance shall be subject to the following  conditions
precedent:

         (a) PRIOR CONDITIONS SATISFIED. All conditions precedent to the initial
     Advance and any prior Advance shall continue to be satisfied as of the date
     of such subsequent Advance.



                                     - 20 -



<PAGE>





         (b) PERFORMANCE; NO DEFAULT. Borrower shall have performed and complied
     with all terms and conditions  herein  required to be performed or complied
     with by it at or prior to the date of such advance, and on the date of such
     Advance there shall exist no Default or Event of Default.

         (c) REPRESENTATIONS AND WARRANTIES.  The representations and warranties
     made by Borrower and any Guarantor in the Loan  Documents or otherwise made
     by or on behalf of Borrower or any Guarantor in connection  therewith after
     the date thereof shall have been true and correct in all material  respects
     on the  date on which  made  and  shall  also be true  and  correct  in all
     material respects on the date of such Advance.

         (d) NO DAMAGE.  The Improvements shall not have been injured or damaged
     by fire, explosion,  accident flood or other casualty,  unless Lender shall
     have received  insurance  proceeds  sufficient in the judgment of Lender to
     effect the  satisfactory  restoration of the Improvements and to permit the
     completion thereof prior to the Completion Date.

         (e) RECEIPT BY LENDER. Lender shall have received:

              (1) DRAW REQUEST.  A Draw Request  complying with the requirements
         hereof.

              (2)   ENDORSEMENT  TO  TITLE  INSURANCE   POLICY.   A  "run  down"
         endorsement  to the Title  Insurance  Policy or  report  indicating  no
         change in the state of title and  containing no survey  exceptions  not
         approved by Lender, which endorsement shall,  expressly or by virtue of
         a proper "pending  disbursements"  clause or endorsement in the policy,
         increase  the  coverage  of the policy to the  aggregate  amount of all
         proceeds of the Loan advanced on or before the  effective  date of such
         endorsement.

              (3) CERTIFICATES. Certificates from Borrower, Borrower's Architect
         and the  Construction  Inspector  to the effect that in their  opinion,
         based upon on-site observations and submissions by the Contractor,  the
         construction of the Improvements to the date thereof was performed in a
         good and workmanlike  manner and  substantially  in accordance with the
         Plans  and   Specifications,   stating  the  estimated  total  cost  of
         construction  of  the  Improvements,  stating  the  percentage  of  the
         in-place   construction  of  the  Improvements  and  stating  that  the
         remaining  non-disbursed portion of the Loan allocated for such purpose
         is adequate,  together with such Required  Equity Funds to complete the
         construction  of the  Improvements.

              Anything herein to the contrary notwithstanding,  the Certificates
         from the Borrower's  Architect will be required at the following times:
         (a) at the time of every other monthly Loan Advance; (b) at the time of
         all change orders in excess of $25,000.00;  and, (c) at the time of the
         final Loan Advance.

              (4) APPROVAL BY PERMANENT  LENDER. If Lender shall have reasonable
         cause  to  doubt  such   compliance  as  set  forth  in  the  foregoing
         certificates, then, at the option



                                     - 21 -



<PAGE>




         of  Lender,  Lender  shall  require  inspection  of work in  place  and
         approval of such work by Permanent  Lender as being in compliance  with
         the terms of the Permanent Commitment.

              (5)  CONTRACTS.  Evidence that one hundred  percent  (100%) of the
         cost of the remaining construction work is covered by firm contracts or
         subcontracts,   or  orders  for  the  supplying  of   materials,   with
         contractors,  subcontractors,  materialmen or suppliers satisfactory to
         Lender.

              (6) PERMANENT COMMITMENT. Delivery of a copy of the fully executed
         Permanent Commitment.

              (7)  FRANCHISE   AGREEMENT.   Delivery  of  an  amended  Franchise
         Agreement  between  Promus  Hotels,  Inc.  and  Essex  Partners,   Inc.
         reflecting a construction  completion date of no earlier than December,
         1998 and approval to build 101 guest rooms, which Franchise  Agreement
         shall be assigned to Lender.

              (8) PERMANENT LENDER  APPROVALS.  Evidence  satisfactory to Lender
         that Permanent Lender has approved and acknowledged  satisfaction  with
         the following:

                   (A) the survey  showing  the  Property,  subject to  required
              updating to show the as-built  location of the  Improvements  upon
              construction thereof,

                   (B) the Title  Insurance  Policy or report and all exceptions
              therein,  subject to required updating or issuance of a new policy
              as and when the Permanent Loan is closed;

              (9) TRI-PARTY  AGREEMENT.  Lender,  Borrower and Permanent  Lender
         shall have executed a tri-party agreement (the "Tri-Party  Agreement"),
         satisfactory  to Lender,  providing  for the  closing of the  Permanent
         Loan, substantially in the form of Exhibit G.

         (f) OTHER DOCUMENTS. Such other documents, opinions and certificates as
     Lender or its counsel may reasonably require.

     6.3 CONDITIONS OF FINAL ADVANCE. In addition to the conditions set forth in
Paragraph 6.2 above,  Lender's  obligation to advance sums retained  pursuant to
this Agreement shall be subject to receipt by Lender of the following:

         (a)  APPROVAL  OF  IMPROVEMENTS.   Evidence  of  the  approval  by  all
     appropriate  Governmental  Authority of the  Improvements in their entirety
     for  permanent  occupancy  to the extent any such  approval is or will be a
     condition of lawful use and occupancy of the Improvements,  and evidence of
     approval by all appropriate Governmental Authority of the contemplated uses
     thereof.


                                     - 22 -



<PAGE>



         (b)  APPROVAL  BY  CONSTRUCTION   INSPECTOR.   Notification   from  the
     Construction  Inspector  to the  effect  that the  Improvements  have  been
     completed in a good and workmanlike manner substantially in accordance with
     the Plans and Specifications.

         (c) FINAL  SURVEY.  A final  survey  acceptable  to Lender  showing the
     as-built location of the completed Improvements and evidence that Permanent
     Lender HAS approved such survey.

         (d) [INTENTIONALLY OMITTED].

         (e) INSPECTION BY PERMANENT UNDER. Evidence satisfactory to Lender that
     any and all final inspection  requirements of the Permanent Commitment have
     been satisfied.

         (f)  CERTIFICATE  OF BORROWER'S  ARCHITECT.  Certificate  of Borrower's
     Architect  that the  Improvements  have  been  completed  substantially  in
     accordance  with the Plans  and  Specifications  and that the  Improvements
     comply with all applicable  Requirements and Governmental Approvals and are
     in all  respects  (except for work to be  performed  by tenants)  ready for
     occupancy.

         (g) PAYMENT OF COSTS. Evidence satisfactory to Lender that all sums due
     in connection with the construction of the  Improvements  have been paid in
     full (or will be paid out of the funds  requested to be advanced)  and that
     no party  claims or has a right to claim any  statutory  or common law firm
     arising out of the  construction  of the  Improvements  or the supplying of
     labor, material, and/or services in connection therewith.


                                    ARTICLE 7

                     METHOD OF DISBURSEMENT OF LOAN PROCEEDS

     Lender agrees to make Advances in accordance with the  Construction  Budget
and subject to the following procedures.

     7.1 DRAW REQUEST TO BE SUBMITTED TO LENDER.  At such time as Borrower shall
desire to obtain an Advance,  Borrower  shall  complete,  execute and deliver to
Lender a  Borrower's  Requisition  in the form  attached  hereto  as  EXHIBIT  F
(hereinafter   referred  to  as  "Borrower's   Requisition").   Each  Borrower's
Requisition shall be accompanied by:

         (a) if  Borrower's  Requisition  includes  amounts  to be  paid  to the
     Contractor  under the Construction  Contract,  it shall be accompanied by a
     completed  and  itemized  Application  and  Certificate  for  payment  (AIA
     Document  No.  G702) or similar  form  approved by Lender,  containing  the
     certification  of  Contractor,  Borrower's  Architect and the  Construction
     Inspector as to the accuracy of same,  together with  invoices  relating to
     all items of direct cost covered thereby. All such applications for payment
     shall  show  the  sum  of all  subcontracts  by  trade,  the  total  amount
     theretofore paid to all subcontractors as of the date



                                     - 23 -



<PAGE>




     of such  application,  and the total amount to be paid from the proceeds of
     the Advance to all subcontractors;

         Anything herein to the contrary notwithstanding,  the Certificates from
     the Borrower's  Architect will be required at the following  times:  (a) at
     the time of every other monthly Loan Advance; (b) at the time of all change
     orders in  excess of  $25,000.00;  and,  (c) at the time of the final  Loan
     Advance.

         (b) if Borrower's  Requisition includes payments for Indirect Costs, it
     shall be  accompanied  by a completed and itemized  Indirect Cost statement
     executed by  Borrower,  together  with  invoices  for all items of Indirect
     Costs covered thereby;

         (c)  written  lien  waivers  from the  Contractor  and  such  laborers,
     subcontractors and materialmen for work done and materials supplied by them
     which were paid for pursuant to any prior Draw Request;

         (d) a written  request of  Borrower  for any  necessary  changes in the
     Plans and Specifications, the Construction Budget the Disbursement Schedule
     or the  Construction  Schedule for which the Lender's  approval is required
     under this Agreement;

         (e) copies of all change  orders and  subcontracts,  and, to the extent
     requested by Lender,  of all inspection or test reports and other documents
     relating to the construction of the Improvements,  not previously delivered
     to Lender; and

         (f) such other  information,  documentation and certification as Lender
     shall reasonably request.

     7.2 NOTICE AND FREQUENCY OF ADVANCES.  Each Draw Request shall be submitted
to Lender at least five (5)  business  days  prior to the date of the  requested
Advance,  and no more  frequently  than monthly and  submission  of all required
documentation.

     7.3  DEPOSIT  OF  FUNDS  ADVANCED.  Borrower  shall  open  and  maintain  a
non-interest  bearing loan checking  account with Lender into which Lender shall
deposit the proceeds of each Advance. Lender is hereby irrevocably authorized to
make an Advance to and/or charge any account of Borrower with Lender,  including
such loan checking  account,  without the further approval of Borrower,  for (i)
any  installment of interest due under the Note,  (ii) any expenses  incurred by
Lender (including  without limiting the generality of the foregoing,  reasonable
attorneys' fees and other fees incurred by Lender),  or (iii) any other sums due
to Lender under the Note, this Agreement or any of the other Loan Documents, all
to the extent that the same are not paid by the respective due dates thereof out
of Advances of the Loan proceeds.

     7.4  ADVANCES TO  CONTRACTOR.  At its option and upon  notice to  Borrower,
Lender  may make any or all  Advances  for  construction  expenses  directly  to
Contractor for deposit in an appropriately  designated special bank account, and
the execution of this Agreement by Borrower shall,  and hereby does,  constitute
an irrevocable authorization so to advance the proceeds of the



                                     - 24 -



<PAGE>



Loan. No further  authorization from Borrower shall be necessary to warrant such
direct  Advances to Contractor and all such Advances shall satisfy PRO TANTO the
obligations  of Lender  hereunder  and shall be secured by the  Mortgage and the
other Loan Documents as fully as if made directly to Borrower.

     7.5 ADVANCES TO TITLE  INSURER OR TO OTHERS.  At its option and upon notice
to Borrower,  Lender may make any or all Advances  through the Title Insurer and
any portion of the Loan so disbursed  by Lender shall be deemed  disbursed as of
the date on which such Title Insurer receives such disbursement.  At its option,
Lender may make  Advances of portions of the  proceeds of the Loan to any person
to whom  Lender in good faith  determines  payment is due and any portion of the
Loan so disbursed  by Lender  shall be deemed  disbursed as of the date on which
the person to whom  payment is made  receives  the same.  The  execution of this
Agreement  by  Borrower  shall,  and  hereby  does,  constitute  an  irrevocable
authorization to Advance the proceeds of the Loan. No further authorization from
Borrower  shall be  necessary  to  warrant  such  direct  Advances  and all such
Advances shall satisfy PRO TANTO the  obligations of Lender  hereunder and shall
be secured by the  Mortgage  and the other  Loan  Documents  as fully as if made
directly to Borrower.

     7.6 ADVANCES DO NOT  CONSTITUTE  A WAIVER.  No Advance  shall  constitute a
waiver of any of the conditions of Lender's  obligation to make further Advances
nor, in the event  Borrower is unable to satisfy any such  condition,  shall any
Advance have the effect of  precluding  Lender from  thereafter  declaring  such
inability to be an Event of Default hereunder.


                                    ARTICLE 8

                               EVENTS OF DEFAULTS

     The  occurrence  of any one or more of the  following  conditions or events
(each an "Event of Default") shall constitute a default under and breach of this
Agreement:

         (a) any  failure by  Borrower  to pay as and when due and  payable  any
     interest  on or  principal  of or other  sum  payable  under  the Note (and
     subject to any grace or cure periods that may be applicable); or

         (b) any failure by Borrower to deposit  with Lender any funds  required
     by this  Agreement to be deposited  with Lender  within ten (10) days after
     notice to the Borrower;

         (c) any  failure by  Borrower  to pay as and when due and  payable  any
     other  sums to be paid by  Borrower  to Lender  under  this  Agreement  and
     continuance  of such  failure  for a period of ten (10) days after  written
     notice thereof from Lender; or

         (d) title to the  Property  is or becomes  unsatisfactory  to Lender by
     reason of any lien,  charge,  encumbrance,  title  condition  or  exception
     (including  without  limitation,  any mechanic's,  materialman's or similar
     statutory or common law lien or notice thereof), and



                                     - 25 -





<PAGE>



     such matter  causing title to be or become  unsatisfactory  is not cured or
     removed (including by bonding) within twenty (20) days after notice thereof
     from Lender to Borrower; or

         (e) any  refusal by the Title  Insurer  to insure any  Advance as being
     secured  by  the  Mortgage  as a  valid  first  lien  on the  Property  and
     continuance  of such  refusal for a period of twenty (20) days after notice
     thereof by Lender to Borrower; or

         (f) the  Improvements  are not completed by the Completion  Date or, in
     the reasonable estimation of Lender,  construction of the Improvements will
     not be completed by the Completion Date; or

         (g) the Property or any portion thereof is injured by fire,  explosion,
     accident,  flood or other  casualty,  unless  Lender  shall  have  received
     insurance  proceeds  sufficient in the  reasonable  estimation of Lender to
     effect  the  satisfactory  restoration  of the  Property  and to permit the
     completion of the Improvements prior to the Completion Date; or

         (h) the  Property  is subject to any  Taking,  or the  Property  or any
     portion  thereof  is  subject to any  Taking  which  will  prevent,  in the
     reasonable  estimation of Lender,  the completion of the Improvements prior
     to the Completion Date; or

         (i) any  voucher  or invoice is  submitted  at any time which  Borrower
     knows  has not been  earned  by the payee  for  services  performed  or for
     materials used in or furnished for the Property; or

         (j) any cessation at any time in construction of the  Improvements  for
     more than twenty (20)  consecutive  days except for  strikes,  acts of God,
     fire or other casualty, or other causes entirely beyond Borrower's control;
     or

         (k) any  failure  by  Borrower  to duly  observe  or  perform  any term
     covenant,  condition or agreement  requiring Borrower to maintain insurance
     or to comply with the terms of a Permanent Commitment or not to encumber or
     transfer the Property; or

         (l) Borrower requests a termination of the Loan, or confesses inability
     to continue or complete construction of the Improvements in accordance with
     this Agreement; or

         (m) any  Guarantor  denies that said  Guarantor  has any  liability  or
     obligation under the Guaranty or any other agreement to which any Guarantor
     is a party, or shall notify Lender of the Guarantor's  intention to attempt
     to cancel or terminate  the  Guaranty or any other  agreement to which said
     Guarantor is a party; or

         (n) any  representation  or warranty made or deemed to be made by or on
     behalf of Borrower or any Guarantor in this  Agreement or in any other Loan
     Document, or in any report, certificate,  financial statement, Draw Request
     or other instrument furnished in



                                     - 26 -





<PAGE>



     connection  with this  Agreement,  any Advance or any other Loan  Document,
     shall prove to have been false or incorrect  in any material  respect as at
     the date of which made or deemed to be made; or

         (o) any  dissolution,  termination,  partial or  complete  liquidation,
     merger or  consolidation of Borrower,  any general partner of Borrower,  or
     any  Guarantor,  or any  sale,  transfer  or  other  disposition  of all or
     substantially  all of the  assets  of  Borrower,  any  general  partner  of
     Borrower,  or any Guarantor,  other than with the prior approval of Lender;
     or

         (p)  any  condition  occurs  which  would  allow  Permanent  Lender  to
     terminate  the  Permanent  Commitment,  or  Permanent  Lender shall fail to
     comply with any of the terms,  covenants,  conditions  or agreements of the
     Permanent  Commitment  or any  Buy-Sell  Agreement,  or, in the  reasonable
     estimation of Lender, the terms of the Permanent Commitment or any Buy-Sell
     Agreement cannot be satisfied; or

         (q) any  suit or  proceeding  shall  be  filed  against  Borrower,  any
     Guarantor or the Property  which,  if  adversely  determined,  would have a
     materially  adverse  affect on the ability of Borrower and any Guarantor to
     perform  each and every one of their  respective  obligations  under and by
     virtue of the Loan Documents; or

         (r) any failure by Borrower to obtain any  Governmental  Approvals,  or
     the  revocation  or  other  invalidation  of  any  Governmental   Approvals
     previously issued; or

         (s) the death or mental incapacity of Borrower,  any general partner of
     Borrower, or any Guarantor; or

         (t) any change in the legal or  beneficial  ownership of Borrower,  any
     general  partner of Borrower or any  Guarantor,  other than as permitted in
     Section 4.29 or with the prior approval of Lender; or

         (u) any one or more of the  obligations  of Borrower  or any  Guarantor
     under the Loan  Documents  shall at any time and for any reason cease to be
     in full force and effect; or

         (v) any default in the payment of money shall occur under or in respect
     of any loan agreement, credit agreement, promissory note, bond, trust deed,
     indenture,  mortgage, pledge, security agreement,  indemnity or guaranty to
     which  Borrower,  any general  partner of  Borrower is a party  (whether as
     principal or guarantor or other  surety),  or any other default shall occur
     thereunder  which would  entitle the holder  thereof to declare all amounts
     payable with respect thereto to be immediately due and payable; or

         (w) Borrower, any member of Borrower, any Guarantor or any tenant under
     a Required Lease shall be involved in financial  difficulties  as evidenced
     by: (1) its  commencement  of a voluntary case under Title 11 of the United
     States  Code  as  from  time to time  in  effect,  or its  authorizing,  by
     appropriate proceedings of partners, directors or other



                                     - 27 -





<PAGE>



     governing  body, the  commencement of such a voluntary case; (2) its filing
     an answer or other  pleading  admitting  or  failing  to deny the  material
     allegations of a petition  filed against it commencing an involuntary  case
     under said Title 11, or seeking, consenting to or acquiescing in the relief
     therein  provided,  or by its  failing to  controvert  timely the  material
     allegations of any such  petition;  (3) the entry of an order for relief in
     any involuntary  case commenced under said Title 11; (4) its seeking relief
     as a debtor  under any  applicable  law,  other than said Title II, of any
     jurisdiction relating to the liquidation or reorganization of debtors or to
     the  modification  or  alteration  of the  rights of  creditors,  or by its
     consenting to or acquiescing in such relief-,  (5) the entry of an order by
     a court of  competent  jurisdiction  which is not  withdrawn,  reversed  or
     rescinded  within  sixty  (60) days  after its entry (i)  finding  it to be
     bankrupt  or  insolvent,   (ii)  ordering  or  approving  its  liquidation,
     reorganization  or any  modification  or  alteration  of the  rights of its
     creditors,  or (ii) assuming  custody of, or appointing a receiver or other
     custodian for, all or a substantial part of its property; (6) by its making
     an assignment for the benefit of, or entering into a composition  with, its
     creditors,  or appointing or consenting to the appointment of a receiver or
     other  custodian  for all or a  substantial  part of its  property;  or (7)
     generally, its failure to pay its debts as such debts become due; or

         (x) any failure by Borrower to duly  observe or perform any other term,
     covenant,  condition or agreement  under this Agreement and  continuance of
     such failure for a period of thirty (30) days after written  notice thereof
     from Lender; PROVIDED,  HOWEVER, that if such failure is not susceptible of
     cure during such  thirty (30) day period (but is  susceptible  of cure) and
     Borrower  promptly  commences and  diligently  pursues cure of such failure
     during such thirty (30) day period,  then such thirty (30) day period shall
     be extended for an additional consecutive period of thirty (30) days; or

         (y) any  "default"  or "event of default"  shall occur under any of the
     other Loan Documents.


                                    ARTICLE 9

                          RIGHTS AND REMEDIES OF LENDER

     9.1 REMEDIES.  Upon the occurrence and continuance of any Event of Default,
Lender may at any time  thereafter,  at its option,  exercise  any or all of the
following rights and remedies:

         (a) Lender may declare its obligations to make Advances hereunder to be
     terminated,  whereupon the same shall terminate,  and/or declare all unpaid
     principal of and accrued interest on the Note, together with all other sums
     payable  under  the Loan  Documents,  to be  immediately  due and  payable,
     whereupon same shall become and be immediately due and payable, anything in
     the  Loan   Documents   to  the  contrary   notwithstanding,   and  without
     presentation, protest or further demand or notice of any kind, all of which
     are expressly hereby waived by Borrower; provided, however, that Lender may
     make Advances or parts of Advances  thereafter  without thereby waiving the
     right to demand



                                     - 28 -





<PAGE>



     payment of the Note,  without  becoming liable to make any other or further
     Advances,  and without  affecting the validity of or  enforceability of the
     Loan Documents.  Notwithstanding and without limiting the generality of the
     foregoing,  upon the occurrence of an Event of Default under  paragraph (w)
     of Article  8, or if any event has  occurred  which but for the  passage of
     time,  the giving of notice or both would  constitute  an Event of Default,
     Lender's  obligations  to make Advances  hereunder  automatically  shall so
     terminate  and, in  addition,  upon the  occurrence  of an Event of Default
     under  paragraph  (w) of  Article 8, all unpaid  principal  of and  accrued
     interest  on the  Note,  together  with all  sums  payable  under  the Loan
     Documents,  automatically  shall  become  and be  immediately  so  due  and
     payable, with any declaration or other act on the part of the Lender.

         (b) Following  acceleration of the Building Loan,  Lender may cause the
     Property to be completed and may enter upon the Land and  construct,  equip
     and complete the Property in accordance with the Plans and  Specifications,
     with such changes therein as Lender may, from time to time, and in its sole
     discretion,  deem  appropriate.  In connection with any construction of the
     Property   undertaken  by  Lender   pursuant  to  the  provisions  of  this
     subparagraph, Lender may:

              (1) use any funds of Borrower,  including any balance which may be
         held by Lender  as  security  or in  escrow,  and any  funds  remaining
         unadvanced under the Loan;

              (2)   employ   existing   contractors,   subcontractors,   agents,
         architects,  engineers,  and the like, or terminate the same and employ
         others;

              (3) employ security watchmen to protect the Property;

              (4) make such additions,  changes and corrections in the Plans and
         Specifications  as shall,  in the  judgment of Lender,  be necessary or
         desirable;

              (5) take over and use any and all Personal Property contracted for
         or  purchased by Borrower,  if  appropriate,  or dispose of the same as
         Lender sees fit;

              (6)  execute  all  applications  and  certificates  on  behalf  of
         Borrower  which  may be  required  by  any  Governmental  Authority  or
         Requirement or contract documents or agreements;

              (7) pay,  settle or  compromise  all  existing or future bills and
         claims  which  are or may be  liens  against  the  Property,  or may be
         necessary for the  completion of the  Improvements  or the clearance of
         title to the Property;

              (8) complete the  marketing  and leasing of leasable  space in the
         Improvements,  enter  into new  leases and  occupancy  agreements,  and
         modify or amend existing leases and occupancy agreements, all as Lender
         shall deem to be necessary or desirable;




                                     - 29 -




<PAGE>



              (9) prosecute and defend all actions and proceedings in connection
         with the construction of the Improvements or in any other way affecting
         the Land or the  Improvements  and take such  action and  require  such
         performance as Lender deems necessary under any Payment and Performance
         Bonds; and

              (10) take such action hereunder, or refrain from acting hereunder,
         as Lender may, in its sole and absolute  discretion,  from time to time
         determine,  and without  any  limitation  whatsoever,  to carry out the
         intent of this subparagraph. Borrower shall be liable to Lender for all
         costs paid or incurred for the  construction,  completion and equipping
         of the Property, whether the same shall be paid or incurred pursuant to
         the provisions of this subparagraph or otherwise, and all payments made
         or  liabilities  incurred by Lender  hereunder  of any kind  whatsoever
         shall be deemed  advances  made to Borrower  under this  Agreement  and
         shall be secured by the Mortgage and the other Loan Documents.

     To the extent that any costs so paid or incurred by Lender,  together  with
an other Advances made by Lender hereunder,  exceed the Loan Amount, such excess
costs shall be paid by Borrower to Lender on demand,  with  interest  thereon at
the Default  Rate, if any, set forth in the Note or, in the absence of a Default
Rate, at the Interest Rate, until paid; and Borrower shall execute such notes or
amendments  to the Note as may be  requested  by Lender to  evidence  Borrower's
obligation  to pay such excess costs and until such notes or  amendments  are so
executed by Borrower,  Borrower's  obligation  to pay such excess costs shall be
deemed to be evidenced by this Agreement.  In the event Lender takes  possession
of the Property and assumes control of such construction as aforesaid,  it shall
not be obligated to continue such construction  longer than it shall see fit and
may  thereafter,  at any time,  change any course of action  undertaken by it or
abandon such  construction  and decline to make further payments for the account
of  Borrower  whether or not the  Property  shall have been  completed.  For the
purpose of this subparagraph, the construction,  equipping and completion of the
Property  shall be deemed to include any action  necessary  to cure any Event of
Default by  Borrower  under any of the terms and  provisions  of any of the Loan
Documents.

         (c) Lender may to the extent  permitted by applicable  law, at any time
     and from time to time,  without  notice  (any such notice  being  expressly
     waived),  without  regard to the  adequacy of any  collateral,  set off and
     apply  any  and  all  deposits  (general  or  specific,   time  on  demand,
     provisional or final,  regardless of currency,  maturity,  or the branch of
     Lender where the deposits are held) at any time held or other sums credited
     by or due from Lender to Borrower against any and all  liabilities,  direct
     or indirect,  absolute or contingent, due or to become due, now existing or
     hereafter arising of Borrower to Lender.

         (d) Lender may exercise any or all of the rights and remedies set forth
     in the other Loan Documents.

     9.2 POWER OF ATTORNEY.  For the purposes of carrying out the provisions and
exercising the fights,  powers and privileges  granted by or referred to in this
Agreement, Borrower hereby

                                                       - 30 -



<PAGE>



irrevocably    constitutes   and   appoints   Lender   its   true   and   lawful
attorney-in-fact,  with full power of substitution,  to execute, acknowledge and
deliver any  instruments  and do and  perform any acts which are  referred to in
this Agreement,  in the name and on behalf of Borrower. The power vested in such
attorney-in-fact  is, and shall be deemed to be,  coupled  with an interest  and
irrevocable.

     9.3 REMEDIES  CUMULATIVE.  Upon the  occurrence of any Event of Default the
rights,  powers and privileges provided in this Article 9 and all other remedies
available  to  Lender  under  this  Agreement  or under  any of the  other  Loan
Documents or at law or in equity may be exercised by Lender at any time and from
time to time and shall not  constitute a waiver of any of Lender's  other rights
or remedies  thereunder,  whether or not the Loan shall be due and payable,  and
whether or not Lender shall have instituted any foreclosure proceedings or other
action for the enforcement of its rights under the Loan Documents.

     9.4 ANNULMENT OF Defaults. An Event of Default shall not be deemed to be in
existence for any purpose of this Agreement or any Loan Document if Lender shall
have  waived  such Event of Default in writing or stated  that the same has been
cured to its  reasonable  satisfaction,  but no such waiver  shall  extend to or
affect  any  subsequent  Event of  Default or impair any of the rights of Lender
upon the occurrence thereof.

     9.5  WAIVERS.  Borrower  hereby  waives to the  extent  not  prohibited  by
applicable law (a) all presentments, demands for payment or performance, notices
of nonperformance  (except to the extent required by the provisions hereof or of
any other Loan Documents), protests and notices of dishonor, (b) any requirement
of diligence or  promptness on Lender's  part in the  enforcement  of its rights
(but not fulfillment of its obligations)  under the provisions of this Agreement
or any  other  Loan  Document,  and (c) any and all  notices  of every  kind and
description  which may be required to be given by any statute or rule of law and
any defense of any kind which Borrower may now or hereafter have with respect to
its liability under this Agreement or under any other Loan Document.

     9.6 COURSE OF  DEALING,  ETC.  No course of dealing  between  Borrower  and
Lender shall operate as a waiver of any of Lender's  rights under this Agreement
or any Loan  Document.  No delay or omission on Lender's part in exercising  any
right under this  Agreement or any Loan  Document  shall  operate as a waiver of
such right or any other right hereunder.  A waiver on any one occasion shall not
be construed as a bar to or waiver of any right or remedy on any future occasion
No waiver or consent  shall be binding  upon Lender  unless it is in writing and
signed by Lender.  The making of an Advance hereunder during the existence of an
Event of Default shall not constitute a waiver thereof.


                                   ARTICLE 10

                                GENERAL CONDMONS

     The following  conditions  shall be applicable  throughout the term of this
Agreement:


                                     - 31 -



<PAGE>



     10.1 RIGHTS OF THIRD PARTIES.  All conditions of the  obligations of Lender
hereunder,  including the  obligation to make  Advances,  are imposed solely and
exclusively  for the  benefit of Lender and its  successors  and  assigns and no
other person shall have standing to require  satisfaction  of such conditions in
accordance  with their  terms or be  entitled  to assume  that  Lender will make
Advances  in the  absence of strict  compliance  with any or all  thereof and no
other person shall,  under any  circumstances,  be deemed to be a beneficiary of
such  conditions,  any and all of which may be freely waived in whole or in part
by Lender at any time if in its sole  discretion it deems it desirable to do so.
In particular,  Lender makes no representations and assumes no obligations as to
third  parties  concerning  the quality of the  construction  by Borrower of the
Improvements or the absence  therefrom of defects.  In this connection  Borrower
agrees  to and  shall  indemnify  Lender  from any  liability,  claims or losses
resulting  from the  disbursement  of the Loan proceeds or from the condition of
the Property  whether  related to the quality of  construction  or otherwise and
whether  arising during or after the term of the Loan made by Lender to Borrower
in connection  herewith.  This provision shall survive the repayment of the Loan
and shall  continue in full force and effect so long as the  possibility of such
liability, claims or losses exists.

     10.2 RELATIONSHIP.  The relationship  between Lender and Borrower is solely
that of a lender and  borrower,  and nothing  contained  herein or in any of the
other Loan  Documents  shall in any manner be  construed  as making the  parties
hereto partners, joint venturers or any other relationship other than lender and
borrower.

     EVIDENCE OF  SATISFACTION  OF  CONDITIONS.  Any condition of this Agreement
which requires the submission of evidence of the existence or non-existence of a
specified  fact or facts implies as a condition the existence or  non-existence,
as the case may be, of such fact or facts and Lender  shall,  at all  times,  be
free  independently  to  establish  to its  satisfaction  and  in  its  absolute
discretion such existence or non-existence.

     10.4 NOTICES. Any notices required or permitted to be given hereunder shall
be: (i)  personally  delivered or (ii) given by  registered  or certified  mail,
postage  prepaid,  return  receipt  requested,  or (iii)  forwarded by overnight
courier  service,  in each instance  addressed to the addresses set forth at the
head  of  this  Agreement,  or  such  other  addresses  as the  parties  may for
themselves  designate in writing as provided herein for the purpose of receiving
notices hereunder. All notices shall be in writing and shall be deemed given, in
the case of notice by personal delivery,  upon actual delivery,  and in the case
of  appropriate  mail or courier  service,  upon  deposit  with the U.S.  Postal
Service or delivery to the courier service.

     10.5  ASSIGNMENT.  Borrower  may not assign  this  Agreement  or any of its
rights or obligations hereunder without the prior approval of Lender.

     10.6 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in this Agreement
one  of  the  parties  hereto  is  named  or  referred  to,  the  heirs,   legal
representatives,  successors  and assigns of such parties  shall be included and
all  covenants  and  agreements  contained in this  Agreement by or on behalf of
Borrower  or by or on behalf of Lender  shall  bind and inure to the  benefit of
their respective heirs, legal representatives,  successors and assigns,  whether
so expressed or not.



                                     - 32 -



<PAGE>



     10.7 HEADINGS.  The headings of the Articles,  Paragraphs and subparagraphs
of this  Agreement  are for the  convenience  of reference  only,  are not to be
considered  a part  hereof  and shall not limit or  otherwise  affect any of the
terms hereof

     10.8  INVALID  PROVISIONS  TO  AFFECT  NO  OTHERS.  If  fulfillment  of any
provision  hereof or any transaction  related hereto at the time  performance of
such provisions  shall be due, shall involve  transcending the limit of validity
presently  prescribed by law, with regard to  obligations  of like character and
amount,  then IPSO FACTO, the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision herein contained operates
or would prospectively operate to invalidate this Agreement in whole or in part,
then such  clause or  provision  only  shall be held for  naught,  as though not
herein contained, and the remainder of this Agreement shall remain operative and
in full force and effect.

     10.9 NUMBER AND GENDER.  Whenever  the  singular or plural  number,  or the
masculine,  feminine or neuter gender is used herein,  it shall equally  include
the other.

     10.10  GOVERNING LAW. This Agreement  shall be governed by and construed in
accordance with laws of the State of New York.

     10.11   CONSENT  TO   JURISDICTION.   Borrower   hereby   irrevocably   and
unconditionally  (a) submits to personal  jurisdiction  in the State of New York
over  any  suit,  action  or  proceeding  arising  out of or  relating  to  this
Agreement,  and (b) waives  any and all  personal  rights  under the laws of any
state  (i) to the  right,  if any,  to  trial  by  jury,  or (ii) to  object  to
jurisdiction  within  the  State of New York or  venue in any  particular  forum
within the State of New York. Nothing contained herein,  however,  shall prevent
Lender from bringing any suit,  action or  proceeding  or exercising  any rights
against any security and against Borrower, and against any property of Borrower,
in any other state.  Initiating  such suit,  action or proceeding or taking such
action  in any state  shall in no event  constitute  a waiver  of the  agreement
contained  herein that the laws of the State of New York shall govern the rights
and  obligations of Borrower and Lender  hereunder or the  submission  herein by
Borrower to personal jurisdiction within the State of New York.

     10.12  AMENDMENTS.  Neither this Agreement nor any provision  hereof may be
changed,  waived,  discharged  or terminated  orally,  but only by instrument in
writing  signed by the party  against whom  enforcement  of the change,  waiver,
discharge or termination is sought.




                                     - 33 -





<PAGE>



         IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement
under seal on the date first above written.

                                     ERIE HOTEL LLC

                                     BY:  ESSEX HOTELS II LLC
                                          its Managing Member

                                     BY:  ESSEX HOSPITALITY ASSOCIATES IV L.P.,
                                          its Managing Member

                                     BY:  Essex Partners Inc.,
                                          its General Partner


                                     BY:  /s/ Barbara J. Purvis
                                          --------------------------
                                          Barbara J. Purvis
                                          Senior Vice President




                                     KEYBANK NATIONAL ASSOCIATION


                                     BY:  /s/ Karen M. Cummings
                                          --------------------------
                                          Karen M. Cummings
                                          Vice-President


STATE OF NEW YORK        )
COUNTY OF MONROE         ) ss.:

     On this 31st day of December,  1997,  before me personally  came Barbara J.
Purvis,  to me personally known, who, being by me duly sworn, did depose and say
that  she is a  Senior  Vice  President  of  Essex  Partners  Inc.,  a New  York
corporation and the general partner of Essex  Hospitality  Associates IV L.P., a
New York limited  partnership  and the managing  member of Essex Hotels H LLC, a
New York limited  liability  company and the managing  member of Erie Hotel LLC,
the limited  liability company described in and on whose behalf she executed the
within  Instrument;  and she duly  acknowledged  to me that she  signed her name
thereto as the act and deed of said limited liability company.

                                           /s/ Mark R. Foerster
                                           ------------------------------
                                                     Notary Public


MARK R. FOERSTER
Notary Public in the State of New York
MONROE COUNTY
Commission Expires May 31, 1999






                                     - 34 -




<PAGE>



STATE OF NEW YORK       )
COUNTY OF ERIE          ) ss.:

     On the 31st day of  December,  1997,  before me  personally  came  Karen M.
Cummings,  to me known who, being by me duly sworn,  did depose and say that she
resides in the Town of Amherst; that she is a Vice-President of KeyBank National
Association,  the  corporation  described in and which  executed  the  foregoing
instrument;  and  that she  signed  her name  thereto  by order of the  Board of
Directors of said corporation.


                                           /s/ Louis C. Fessard
                                           ------------------------------
                                                     Notary Public


LOUIS C. FESSARD
Notary Public State of New York
Qualified in Erie County
My Commission Expires Aug. 31, 1999













                                     - 35 -





<PAGE>



                                    EXHIBIT A

                               CONSTRUCTION BUDGET

                                                         Society National Bank
                                                             "A Key Corp Bank"

Essex - Hampton Inn Erie, PA

Enter amounts in the "Total Cost" column first. Then enter amounts in the
"Equity $" column.  The "Loan $" column will calculate automatically.


DEVELOPMENT BUDGET                                         Total rooms   98
<TABLE>
<CAPTION>

DESCRIPTION                                                                   TOTAL          COST     % OF TOTAL

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

                                                 LOAN $       EOUITY $        COST           PSF         COST

LAND                                                 $0       $793,600      $793,600      $8,097.96     10.4%
SITE IMPROVEMENTS                                    $0       $550,150       550,150       5,613.78      7.2%
-----------------                             ---------     ----------    ----------    -----------    ------
TOTAL LAND & SITE WORK                               $0     $1,343,750    $1,343,750     $13,711.73     17.6%

HARD COSTS                        SQ. FT.
Construction costs                     0      2,613,887      1,120,373     3,734,260     $38,104.69     48.9%
tech and develop services              0        250,000              0       250,000      $2,551.02      3.3%
Performance Bond                                      0              0             0
Furniture, Fixtures & Equipment        0        842,100              0       842,100      $8,592.86     11.0%
CONTINGENCY (HARD COSTS)                        186,713              0       186,713      $1,905.23      2.4%
------------------------                      ---------      ---------       -------     ----------    ------
TOTAL HARD COSTS                              3,892,700      1,120,373     5,013,073     $51,153.81     65.5%

SOFT COSTS
ARCHITECTURE/ENGINEERING                        108,400              0       108,400      $1,106.12      1.4%
CONSTRUCTION MANAGEMENT                               0              0             0          $0.00      0.0%
Note Securities - financing cost                      0        190,177       190,177      $1,940.58      2.5%
Permits                                         106,000              0       106,000      $1,081.63      1.4%
LEGAL FEES                                      245,000              0       245,000      $2,500.00      3.2%
Recording Fees                                   47,000              0        47,000        $479.59      0.6%
REAL ESTATE TAXES/Insurance                      15,000              0        15,000        $153.06      0.2%
Pre-opening costs                                 3,800         76,200        80,000        $816.33      1.0%
APPRAISALS                                            0         12,006        12,000        $122.45      0.2%
ENVIRONMENTAL                                         0         10,000        10,000        $102.04      0.1%
Franchise Fee                                         0         45,000        45,000        $459.18      0.6%
TITLE INSURANCE                                       0         16,000        16,000        $163.27      0.2%
Key BANK FEE                                     23,500              0        23,500        $239.80      0.3%
PERMANENT LOAN FEE                               47,000              0        47,000        $479.59      0.6%
Note Interest                                         0        112,000       112,000
Travel & other costs                                  0         24,500        24,500
CONSTRUCTION INTERST                            185,180              0       185,180      $1,889.59      2.4%
CONTINGENCY (WORKING CAPITAL)                    26,420              0        26,420        $269.59      0.3%
-----------------------------                 ---------      ---------    ----------     ----------    ------

TOTAL SOFT COST                                $807,300       $485,877    $1,293,177     $11,802.83     15.1%
                                              =========      =========    ==========     ==========    ======


TOTAL DEVELOPMENT COSTS                      $4,700,000     $2,950,000    $7,650,000     $78,061.22

PERCENT OF TOTAL COSTS                           61.44%         38.56%       100.00%

LOAN PER SQUARE FOOT                         $47,959.18

CONTINGENCY:
     HARD                                      $186,713
     SOFT                                       $26,420
                                               --------
     TOTAL                                     $213,133
</TABLE>


COMMENTS





<PAGE>



                                    EXHIBIT C

                              DISBURSEMENT SCHEDULE




<PAGE>



                                    EXHIBIT D

                               DESCRIPTION OF LAND


     ALL THAT  CERTAIN  piece or  parcel  of land  situate  in Tract  373 in the
Township of Summit, County of Erie and Commonwealth of Pennsylvania, being Lot I
as shown on a map entitled "Subdivision of Land of David A. Kellogg,  Richard E.
and Mary L. Hess and Pamela A. Giese", made by Henry T. Welks Associates,  dated
August 22, 1996,  revised  September  4, 1996 and May 19, 1997,  and recorded in
Erie County Map No. 1997-133,  and being more particularly bounded and described
as follows, to wit:

     BEGINNING at the most southerly comer of the piece herein  described,  at a
point in the centerline of Old Oliver Road (50 foot right-of-way);  thence North
27(degree)  25' 40" West,  a distance  of 408.58 feet to a point;  thence  North
69(degree) 0I' 12" East, a distance of 397.38 feet to an iron survey pin; thence
North 72(degree) 03' 09" East, a distance of 37.77 feet to a point; thence South
54(degree)  11' 20"  East,  a  distance  of  124.85  feet  to a PK.  nail in the
centerline of Old Oliver Road;  thence South  35(degree) 48' 40" West, along the
centerline  of Old  Oliver  Road,  a  distance  of  546.91  feet to the point of
beginning.  CONTAINING 2.819 acres of land to the centerline of Old Oliver Road;
CONTAINING 2.509 acres of land to the northerly  right-of-way line of Old Oliver
Road.

     EXCEPTING therefrom a 400 square foot parcel of land conveyed to the Summit
Township  Sewer  Authority in Erie County Record Book 70 page 635,  bearing Erie
County Index No. (40) 17-73-2.09.










<PAGE>



                                    EXHIBIT E

                    Descriptions of Plans and Specifications


     Drawings and  specifications  for the Erie Hampton Inn, Erie,  Pennsylvania
prepared by Braun & Steidl Architects (Project No. 96066) dated August 27, 1997,
as amended by Addendum No. 1 dated  September 9, 1997,  and Addendum No. 2 dated
September 16, 1997.














<PAGE>



                                    EXHIBIT F

                             BORROWER'S REQUISITION


BORROWER:              ERIE HOTEL LLC
REQUISITION NO.:
DATE:
PROJECT:               Erie Hampton Inn, Summit Township, Pennsylvania

     Pursuant to the Building Loan Agreement (the "Agreement")  between Borrower
and Lender, Borrower hereby authorizes and requests an Advance for the following
purpose(s) and in the following amounts:

Amount                Purpose(s)                     Attributable to


---------------------------
         $





Total: $


     IN  CONNECTION  WITH AND IN ORDER TO INDUCE  LENDER TO  ADVANCE  THE AMOUNT
REQUESTED  ABOVE,  THE BORROWER  HEREBY  REPRESENTS,  WARRANTS AND STIPULATES AS
FOLLOWS:

     1 . There is existing no Event of Default (as defined in the Agreement) and
no event which but for the  passage of time,  the giving of notice or both would
constitute  an Event of Default.  The  undersigned  has duly  complied  with and
observed all of the terms,  covenants and conditions of each of said instruments
required to be performed by the undersigned to the date of this Requisition, and
unless the Lender is notified to the contrary prior to the  disbursement  of the
Advance requested above, will be so on the date hereof.




<PAGE>



     2. The amounts  herein are true and  correct to the best of the  Borrower's
knowledge  and after the honoring of this  Requisition,  the Loan amount not yet
advanced,  less the retainage  held, if any,  shall be sufficient to pay for the
completion of the costs of construction of the Improvements not yet paid.

     3. All sums  previously  requisitioned  have been applied to the payment of
the  costs of  construction  of the  Improvements  heretofore  incurred  and the
proceeds of any Advance made in accordance with this Requisition will be applied
to, and solely to, payment of the foregoing items.

     4. All work has been  performed  fully in  accordance  with the  Plans  and
Specifications as defined in the Agreement.

                                              "BORROWER"


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











<PAGE>



                                    EXHIBIT G


                                                                    KM&Z Draft
                                                                      10/21/97

                               TRI-PARTY AGREEMENT


     THIS  TRI-PARTY  AGREEMENT  (the  "AGREEMENT")  is  being  executed  as  of
__________________,  199_____,    by    and    between _____________________,  a
_______________(together  with any  subsequent  holder  of the  Note as  defined
below,  the GMAC  COMMERCIAL  MORTGAGE  CORPORATION,  a California  corporation
(together with any subsequent  holder of the note  evidencing the Bridge Loan as
defined below, the "BRIDGE LENDER"),___________________________________________,
a _____________________ (the    "Borrower") and _____________________________, a
__________________________ ("Franchisor").


                                    RECITALS:

     A. The Borrower is (or will be upon funding of the Loan as defined  below)
the owner of  certain  real  property  (the  "PROPERTY")  located in the City of
_________,  _________County,  ____________,  and more particularly  described in
EXHIBIT A attached hereto and made a part of this Agreement The Borrower intends
to construct upon the Property certain improvements and appurtenances to consist
generally of a _____________ -story, approximately  ________________ square foot
hotel to be operated as a _____ -room _____________ Hotel (the "IMPROVEMENTS);

     B. The Bank has agreed to make a loan to the Borrower in the  principal sum
of $_________  (the "LOAN") to assist  Borrower in financing the  acquisition of
the  Property,  site  development  of the Property and the  construction  of the
Improvements.  The Loan will be  advanced to the  Borrower  under the terms of a
certain  Loan  Agreement  entered  or to be  entered  into by the  Bank  and the
Borrower  (the "LOAN  AGREEMENT"),  and is or will be  evidenced by a promissory
note in the maximum principal amount of $____________  (the,  "NOTE") that is or
will be secured by, among other things, a Construction  Deed of Trust,  Security
Agreement,  Assignment,  Assignment of Rents and Leases and Fixture  Filing (the
"MORTGAGE")  encumbering  the Property,  the  Improvements  and certain  related
personal property of the Borrower. The Loan Agreement the Note, the Mortgage and
all other  documents  evidencing  or securing the Loan are referred to herein as
the "LOAN DOCUMENTS".

     C.  The  Borrower  has  obtained  from  Bridge  Lender a  conditional  loan
commitment  (the  "COMMITMENT")  from the Bridge  Lender for a five-year  bridge
mortgage  loan on the Property and  Improvements  in the amount of $ ___________
(the "BRIDGE LOAN").  The Commitment is evidenced by a letter from Bridge Lender
to  the  Borrower  dated  __________________,  199______  and  agreed  to by the
Borrower on ________________,  199_________. The Bank and Franchisor acknowledge
that they have received and reviewed the Commitment, a copy of which is attached
hereto as EXHIBIT B.


                                      - 1 -






<PAGE>



     D. The Agreement is being executed to coordinate  the financing  agreements
between the Bank and the Bridge Lender.

     IN ORDER TO IMPLEMENT the above facts and understandings,  and for good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto, intending to be legally bound hereby, covenant
and agree as follows:

     1 . ASSIGNMENT.  In  consideration of the making of the Loan by the Bank to
the Borrower,  the Borrower hereby collaterally  assigns to the Bank as security
for the Loan,  all of Borrower's  rights and interests in and to the  Commitment
The Bridge Lender hereby consents to such assignment.  The Bank, in the event of
any Event of Default as defined in the Loan Agreement,  is hereby  authorized at
the Bank's  election  to take any and all actions  the Bank deems  necessary  or
appropriate  under the  Commitment  to close the Bridge  Loan in the name of the
Bank,  including without limitation,  the execution of the Bridge Loan Documents
(as  defined  herein)  as well as any and all other  documents  required  by the
Commitment or documents  which may be convenient or appropriate  for the closing
of the  Bridge  Loan for and on behalf of the Bank.  Notwithstanding  any of the
foregoing,  the Bank shall have no obligation  to close the Bridge Loan.  Bridge
Lender  consents to the Bank  closing the Bridge Loan in its own name and agrees
to  accept  the  Bridge  Loan  Documents  executed  and  delivered  by the Bank;
PROVIDED,  THAT , (i) the Bank  delivers a legal  opinion,  acceptable to Bridge
Lender,  regarding the enforceability of the Bridge Loan Documents, and (ii) all
conditions  set forth in the  Commitment  are satisfied in  accordance  with the
terms and provisions set forth therein.

     2. FUNDING OF BRIDGE LOAN.  Unless all amounts  owing  pursuant to the Loan
are otherwise  paid in full and the Bank released from all  obligations  to make
further advances thereunder, the Borrower shall timely comply with the terms and
conditions of the  Commitment  and timely close the Bridge Loan.  The Commitment
shall not be modified or amended  without the prior written  consent of the Bank
except  changes  that may be required by  applicable  law.  Upon timely and full
compliance  with the terms and  conditions  of the  Commitment,  the Bridge Loan
shall be closed by the execution and delivery of the Bridge Loan Documents.  The
proceeds of the Bridge Loan (but no amounts in excess thereof) shall be advanced
directly by the Bridge Lender to the Bank or through title company escrow to the
Bank, in an amount not exceeding the sum required to pay in full and satisfy the
Loan. The Borrower shall provide any additional  funds required to fully pay the
Loan and all sums then owing to the Bank and secured by the  Mortgage and to pay
all fees and expenses of closing the Bridge Loan.

     3. THE CLOSING DATE.

     (a) Unless all amounts  owing  pursuant to the Loan are  otherwise  paid in
full by Borrower, the Borrower shall satisfy all closing conditions set forth in
the  Commitment  and shall  cause the  funding of the  Bridge  Loan on or before
_____________,  199______ or on such earlier date as shall be mutually agreed to
by Borrower and Bridge Lender (the CLOSING DATE");  PROVIDED,  HOWEVER, if there
has occurred an Event of Default under any of the Loan Documents, then Bank



                                      - 2 -


<PAGE>



and Bridge Lender may mutually select the Closing Date so long as such closing
date is not later than the end of the term of the Commitment

     (b) The Closing Date may be extended by written agreement between the Bank,
Bridge Lender and Borrower,  PROVIDED,  HOWEVER, that if there has been an Event
of Default under any of the Loan Documents such written agreement may be between
the Bank and the Bridge Lender only, and any such agreement between the Bank and
the  Bridge  Lender  will  bind  the  Borrower  as if it  were a  party  to that
agreement. Bank and Borrower acknowledge that Bridge Lender has no obligation to
extend the Closing Date,  and that any such agreed  extension may be conditioned
upon  further  conditions  and  requirements  not  currently  set  forth  in the
Commitment.  Any agreed  extension  of the  Closing  Date beyond the term of the
Commitment  pursuant to the provisions of this paragraph 3(b) will automatically
extend the expiration  date of the Commitment and of this Agreement for an equal
period of time.  Any reference in this  Agreement to the "Closing  Date" will be
construed  to mean  the  Closing  Date  as it may be  extended  pursuant  to the
provisions of this Agreement.

     4.  EFFECTIVENESS  OF  COMMITMENT,  NO DEFAULT.  Bridge Lender and Borrower
hereby  warrant and represent to Bank that (i) the  Commitment has been accepted
by Borrower prior to the required  acceptance date set out in the Commitment and
all fees due for acceptance of the Commitment  have been paid in full;  (ii) the
Commitment  is in full  force and  effect  and has not been  amended,  except as
described herein;  (iii) to the best of Bridge Lender's  knowledge,  no default,
nor any  condition  or event  which with the giving of notice or the  passage of
time or both would  constitute a default  currently exists under the Commitment;
and (iv) the Commitment is a binding contract  currently  entitling  Borrower to
the benefits thereof (subject to equitable  principles,  bankruptcy,  insolvency
and other similar  creditor's rights laws) and, upon execution of this Agreement
and subject to the provisions of Section 1 of this  Agreement,  the Bank will be
entitled  to such  benefits,  in each case  subject to the  satisfaction  of all
conditions set forth in the Commitment.

     5. BRIDGE LOAN  DOCUMENTS.  Borrower  and Bridge  Lender shall agree on the
form of loan  documents  evidencing,  guaranteeing,  governing  and securing the
Bridge Loan  (collectively,  the "BRIDGE LOAN  DOCUMENTS")  prior to the Closing
Date.  The  Bridge  Loan  Documents  shall be in the same form in all  materials
respects as those form loan documents typically used in transactions  similar to
the Bridge Loan where Franchisor is providing  credit  enhancement to the Bridge
Lender,  which form documents have  previously been provided by Bridge Lender to
Borrower  and  Bank,  as  modified  to  reflect  (i)  changes  in such form loan
documents as are made after  today's date at the request of Franchisor or as are
otherwise  acceptable to Franchisor,  (ii) the business terms and conditions set
forth in the Commitment and (iii) the  requirements  of local law. Bridge Lender
warrants and represents to Bank that the Bridge Loan Documents are the only loan
documents  required as a condition  precedent to the rending of the Bridge Loan.
Borrower  agrees to execute and deliver  the Bridge Loan  Documents  in the form
agreed to as provided  above.  Upon  Borrower's  satisfaction  of all Commitment
requirements  and  conditions,  Bridge  Lender agrees to execute any Bridge Loan
Documents requiring Bridge Lender's



                                      - 3 -





<PAGE>



signature.  Bank  acknowledges  that Franchisor must also execute certain Bridge
Loan  Documents,  including,  a  certain  guaranty  agreement  providing  credit
enhancement  to  Bridge  Lender  and a  "comfort  letter"  or  other  instrument
providing  certain  information  to Bridge  Lender  regarding  the status of the
Management Agreement (as hereinafter defined).

     6. MANAGEMENT  AGREEMENT.  Borrower and Bridge Lender  acknowledge that the
Management Agreement (the "MANAGEMENT  AGREEMENT") dated . 1997 between Borrower
and  Franchisor  is  acceptable to Borrower and Bridge  Lender.  The  Management
Agreement shall not be modified or amended without the prior written approval of
Bank or Bridge Lender.

     7. COMPLETION OF  CONSTRUCTION.  Upon completion of the construction of the
Improvements in substantial accordance with the Plans, the Bank and the Borrower
agree to deliver to the Bridge Lender written notice of such completion and of a
proposed date for the closing of the Bridge Loan,  which  proposed date shall be
not later than ten (1 0) days prior to expiration of the Commitment. On the date
specified  in the  notice,  or on any  earlier  or later  date  agreed to by the
parties,  the Bridge Loan will be funded as  contemplated  by this  Agreement so
long as all  conditions  of such funding set forth in the  Commitment  have been
fulfilled.

     8. SUBSTITUTION OF GENERAL PARTNER.  Bridge Lender  acknowledges and agrees
that the limited partners of Borrower may remove the general partner of Borrower
and admit a new general partner of Borrower  pursuant to the terms of Borrower's
partnership  agreement  and that the same  shall not  affect  or  impair  Bridge
Lender's  obligations to fund the Bridge Loan in accordance  with the Commitment
and this  Agreement  so long as such new  general  partner  is an  affiliate  of
____________________   and  so  long  as  Borrower   continues  to  satisfy  the
"single-purpose, bankruptcy-remote" requirements set forth in the Commitment and
in such event  Bridge  Lender  agrees to a  substitution  of the  organizational
documents and  resolution  of such  substitute  general  partner in the place of
those of the current general partner.

     9. DEFAULT BY BORROWER,  The Bridge  Lender agrees to give the Bank and the
Borrower  prompt  written  notice of any  default  of the  Borrower  under  this
Agreement or the  Commitment  to the extent the Bridge  Lender  becomes aware of
such  default.  Failure of the Bridge Lender to become aware of any such default
or to provide such notice shall not be a default under this  Agreement or affect
Bridge  Lender's  rights under the  Commitment The Bank and/or the Borrower will
have  thirty  (30) days after  receipt of any such notice of default to cure all
defaults,  or if such  default is not  reasonably  capable of being cured within
such period of time,  the Bank and/or  Borrower shall have the right to commence
remedying  such default and shall proceed  diligently  to cure the same,  except
that no such period for notice or cure will extend the Closing  Date without the
prior written consent of the Bridge Lender, PROVIDED, HOWEVER, nothing contained
herein shall obligate Bank to cure any such default. Failure of the Borrower and
the  Bridge  Lender to agree on the terms of the  Bridge  Loan  Documents  shall
constitute  a default  on the part of  Borrower  which the Bank  shall  have the
right, but not the obligation, to attempt to cure. No notice and/or cure periods
set forth herein shall extend the term of the



                                      - 4 -





<PAGE>



Commitment  as set forth  therein.  If all  defaults  are not cured  within such
period,  then,  in addition to pursing its available  rights and remedies  under
applicable  law,  the Bridge  Lender may, at its option,  and by prompt  written
notice  to the  Bank  and  Borrower  either  terminate  the  Commitment  and its
obligations  under this  Agreement or waive the defaults  that have not yet been
cured and  extend  the time for cure of those  defaults.  'Me Bank and  Borrower
acknowledge  that upon any such  termination  of the  Commitment,  certain fees,
including without Stations the Deferred Financing Fee, will remain payable under
the  Commitment,  and  Borrower  and bank  hereby  agree that the Bank shall not
release the lien of its Mortgage  without first obtaining  written  confirmation
from  the  Bridge  Lender  that  payment  of any such  fees  arising  under  the
Commitment have been paid in full or waived.

     Without in any way limiting any rights or remedies  which the Bank may have
against Borrower,  in the event of any default by Borrower under any of the Loan
Documents,  the Bank (a) shall promptly notify the Bridge Lender of such default
by Borrower and (b) may elect in its discretion to terminate this Agreement,  or
to promptly  notify the Bridge  Lender in writing that Bank elects to assume the
obligations  of the Borrower to the Bridge Lender under the terms and conditions
of the  Commitment  and this  Agreement,  in which  event (i) the Bridge  Lender
agrees not to terminate the  Commitment  and to make the Bridge Loan directly to
the Bank upon completion of construction of the  Improvements in accordance with
the Commitment and  satisfaction  of all other  conditions of the Commitment and
this  Agreement,  and (ii) Bank shall assume  Borrower's  obligations  under the
Management Agreement and Franchisor hereby acknowledg6s that it shall consent to
such  assumption.  Nothing  in this  Section  1 0 shall  extend  the term of the
Commitment as set forth therein.

     10. ADDITIONAL BANK COVENANTS. Prior to expiration of the Commitment,  Bank
hereby  agrees (a) not to release any part of the  Property  required to secured
the Bridge Loan, (b) not to accept payment or prepayment of principal  under the
Note (except to the extent  required to reduce the unpaid balance of the Note to
au amount equal to the amount of the Bridge Loan), (c) not to assign or transfer
the Note and other Loan  Documents,  without  the prior  written  consent of the
Bridge Lender.  not to be unreasonably  withhold or delayed,  (d) not to release
the lien of the Mortgage without first obtaining  written  confirmation from the
Bridge Lender that it has received or waived  payment of the Deferred  Financing
Fee described in the  Commitment,  and (e) not to accelerate the maturity of the
Note unless an event of default has arisen under the Loan  Documents  and within
twenty (20) days after receipt of written  notice of such default from the Bank,
the Bridge  Lender does not either (i) cure or cause to be cured such default or
(ii) notify the Bank of Bridge  Lender's  willingness  to purchase the Loan from
the Bank by  payment  of any  outstanding  balance  of  principal  and  interest
thereunder  within ten (1O)  business days after  expiration of such  twenty-day
period and does so purchase the Loan within such period.

     11.  AMENDMENTS.  Except as  otherwise  provided  herein,  no  amendment or
modification of the Commitment  after the date of this Agreement will affect any
obligations  of the  parties  under this  Agreement,  unless that  amendment  or
modification is approved in writing by all parties to this Agreement.



                                      - 5 -



<PAGE>



     12.  NOTICES.  All notices and  requests  for visits and  confirmations  of
compliance  under this Agreement must be given in writing and will be considered
to have been duly and properly served upon personal  delivery to the party or an
officer of the party being served, or if mailed,  upon the first to occur of (i)
actual  receipt (ii) the  expiration  of four (4) business days after deposit in
United  States  registered  or  certified  mail  postage  prepaid,  or (iii) the
expiration of twenty-four  (24) hours after deposit for overnight  delivery with
Federal  Express or another  nationally  recognized  express  delivery  company,
addressed to the parties as follows:


          BANK:

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

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

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




          BORROWER:

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

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

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

          Attn:


          BRIDGE LENDER::

          GMAC Commercial Mortgage Corporation
          8614 Westwood Center Drive, Suite 630
          Vienna, Virginia 22182-2233
          Attn: Morgan G. Earnest, II
          Senior Vice President

          FRANCHISOR:

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

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

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

          Attn:



                                      - 6 -




<PAGE>



Such  addresses  may be changed by notice to the other parties given in the same
manner as provided  above,  such  changes in address to be  effective  only upon
receipt.

     14. TERMINATION. This Agreement will terminate upon:

         (a) Funding of the Bridge Loan by the Bridge Lender, or

         (b) Termination of this Agreement under Section 9 above.

     15.  COUNTERPARTS.  This  Agreement  may  be  executed  in  any  number  of
counterparts  by the parties.  Each of the  counterparts  will be  considered an
original and all counterparts will constitute but one and the same Instrument.

     16. CONSENTS.  Except as expressly provided otherwise herein,  whenever the
consent or  approval  of the Bank or the  Bridge  Lender is  required  under the
Commitment or under this  Agreement,  the Bank and the Bridge Lender agrees that
such  consent or approval  will not be  unreasonably  withhold,  conditioned  or
delayed.  The foregoing provisions of this Section  notwithstanding,  the Bridge
Lender  shall have no  obligation  to extend the term of the  Commitment,  or to
increase  the  Bridge  Loan  amount,  or  to  delete  or  limit  the  provisions
customarily included in the Bridge Loan Documents.

     17. WAIVER,  No waiver of any of the terms or conditions of this Agreement,
and no  waiver  of any  default  or  compliance,  shall be  effective  unless in
writing,  and no waiver  furnished in writing  shall be deemed to be a waiver of
any other term or provision or any future condition of this Agreement.

     18. MISCELLANEOUS, This Agreement will be governed by_____________ law. The
invalidity  or  unenforceability  of any  provision of this  Agreement  will not
affect any other provision. The captions of the Paragraphs of this Agreement are
for convenience only and do not limit any terms or provisions.

     19. SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and inure
to the  benefit  of the  parties  hereto  and their  respective  successors  and
assigns,  including  without  limitation,  any  person  or entity  obligated  by
operation of law upon the reorganization,  merger, consolidation or other change
in the  organizational  structure of any of the parties hereto.  Notwithstanding
the foregoing,  Banks right to assign the Loan and this Agreement are restricted
pursuant to Section 10 above, and Bank's right under Section 9 above to elect to
assume Borrower's obligations to Bridge Lender under the terms and conditions of
the  Commitment  and this  Agreement upon a default by Borrower under any of the
Loan  Documents is not  assignable  without the prior written  consent of Bridge
Lender.




                                      - 7 -




<PAGE>



     IN WITTNESS  WHEREOF,  the parties  hereto have executed this Agreement the
day and year first above written.

                           BORROWER:

                           _____________________, a __________________

                           By: _____________________, a _______________

                           _____________________, its __________________
               
                             By:_______________________________
                             Name:_____________________________
                             Its:______________________________


                             BRIDGE LENDER:

                             GMAC COMMERCIAL MORTGAGE
                             CORPORATION, a California corporation

                              By:____________________________________
                                 Morgan G. Earnest, II, Senior Vice President

                              FRANCHISOR:

                              _____________________, a __________________
                              _____________________

                              By:_______________________________
                              Name:_____________________________
                              Its:______________________________


                              BANK:

                              _____________________, a __________________

                              By:_______________________________
                              Name:_____________________________
                              Its:______________________________



                                      - 8 -