<PAGE>   1

                                                                   EXHIBIT 10.36

<TABLE>
<S>                                 <C>                                           <C>
This instrument was prepared by:    William C. Matthews, Jr.                          North Carolina
whose address is:                   Womble Carlyle Sandridge & Rice, PLLC               Moore County
                                    Post Office Box 831                                Onslow County
                                    Raleigh, North Carolina 27602                     Watauga County
                                                                                  New Hanover County
                                                                                       Durham County
                                                                                         Wake County
                                                                                      Forsyth County
</TABLE>

NORTH CAROLINA,

VARIOUS COUNTIES


               THIS DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and
FINANCING STATEMENT made and entered into as of the 15th day of January, 1999,
by and among WINN LIMITED PARTNERSHIP, a North Carolina limited partnership,
whose address is c/o Winston Hotels, Inc., 2209 Century Drive, Suite 300,
Raleigh, North Carolina 27612 (referred to hereinafter as the "Partnership" or
the "Grantor"), WINSTON HOTELS, INC., a North Carolina corporation (the
"Corporation"), having the same address as the Partnership, NEW SALEM, INC., a
North Carolina corporation, Trustee (hereinafter called "Trustee"), and WACHOVIA
BANK, N.A., a national banking association, as Agent (the "Agent") on behalf of
the banks referred to in that certain Syndicated Credit Agreement among the
Grantor, the Corporation (as hereinafter defined), the banks referred to therein
and being parties thereto (the "Banks"), and Wachovia Bank, N.A., as Agent (the
"Credit Agreement"), whose address is 191 Peachtree Street, N.E., Real Estate
Finance Group, Atlanta, Georgia, 30303, Attention: Syndicated Services (the
Agent is hereinafter referred to as the "Beneficiary");

                                    RECITALS:

                          COLLATERAL INCLUDES FIXTURES

               The Partnership and the Corporation (the Partnership and the
Corporation are collectively referred to herein as the "Borrower"), have
requested the Beneficiary make available to the Borrower credit, and the Banks
have agreed to extend to the Borrower, subject to the terms and provisions of
the Credit Agreement and any modifications, extensions or replacements thereof
executed by the Borrower, the Banks and the Beneficiary, credit of up to the sum
of ONE HUNDRED FORTY MILLION AND NO/100 DOLLARS ($140,000,000.00) (the "Facility
Limit"), as evidenced by the Borrower's promissory notes, each dated of even
date herewith, in the aggregate principal amount of ONE HUNDRED FORTY MILLION
AND NO/100 DOLLARS ($140,000,000.00) and each payable to a Bank (hereinafter
referred to as the "Bank Notes," which term shall include any and all renewals,
modifications, replacements, and extensions thereof), which sum, subject to the
terms and conditions of the Credit Agreement, may from time to time be borrowed
and repaid or reduced by partial payment and reborrowed, provided the unpaid
balance of the principal amount outstanding and secured hereby shall never
exceed such sum.



                                       -1-

<PAGE>   2

               A portion of the funds available under the Credit Agreement, and
evidenced by the Bank Notes, is also evidenced by Notes executed by the Borrower
and payable to the Agent for the benefit of the Banks (the "Term Notes," which
term shall include any and all renewals, modifications, replacements, and
extensions thereof) (the Bank Notes and any Term Notes are hereinafter
collectively referred to as the "Notes").

               Borrower is therefore indebted to the Banks in the sum of ONE
HUNDRED FORTY MILLION AND NO/100 DOLLARS ($140,000,000.00), or so much thereof
as shall be advanced from time to time and remain outstanding, as evidenced by
the Borrower's Notes.

               The Borrower may also become indebted and obligated to one or
more of the Banks with respect to an interest rate swap transaction, interest
rate cap transaction, interest rate floor transaction, interest rate collar
transaction or other similar transaction pursuant to an International Swap
Dealers Association, Inc. Master Agreement dated as of January 15, 1999, which
has been executed by and between the Borrower and Wachovia Bank, N.A. (the
"Existing Master Agreement") or any other International Swap Dealers
Association, Inc. Master Agreement hereafter executed by and between the
Borrower and one or more of the Banks (the Existing Master Agreement and any
such Agreement, together with all amendments and schedules thereto and
confirmations thereof from time to time, are hereinafter referred to
collectively as the "Master Agreement").

               This Deed of Trust is given to secure all present and future
obligations of Borrower to the Banks and to the Beneficiary which may be
incurred from time to time pursuant to the terms of the Credit Agreement,
including but not limited to the obligations evidenced by the Notes, and also to
secure any future obligations of the Borrower to the Banks and the Beneficiary
under any Master Agreement. As provided in the Credit Agreement, the Borrower
may pay such future obligations and then reborrow from time to time under the
line of credit thereby established up to the Facility Limit (as hereinabove
defined), in accordance with the provisions of the Credit Agreement. The period
in which future obligations may be incurred and secured by this Deed of Trust is
the period between the date hereof and that date which is the earlier of (i) the
stated maturity date of the Notes, subject to extensions from time to time as
provided in the Credit Agreement, or (ii) fifteen (15) years from the date
hereof. The amount of present obligations secured by this Deed of Trust is Zero
and No/100 Dollars ($0.00), and the maximum principal amount, including present
and future obligations, which may be secured by this Deed of Trust at any one
time is the sum of (a) One Hundred Forty Million and No/100 Dollars
($140,000,000.00) plus (b) the obligations of the Borrower under any Master
Agreement, the amount of which cannot be determined at the present time but
which, for purposes of this Deed of Trust, shall not exceed Two Hundred Eighty
Million and No/100 Dollars ($280,000,000.00). Any additional amounts advanced by
the Banks or the Beneficiary pursuant to the provisions of this Deed of Trust
shall be deemed necessary expenditures for the protection of the security.
Neither Borrower nor Grantor need sign any instrument or notation evidencing or
stipulating that future advances are secured by this Deed of Trust.

               Grantor desires to secure the following described obligations
(the "Obligations") by the collateral hereinafter described: (a) payment of the
Notes with interest and any renewals, modifications, replacements or extensions
thereof, in whole or in part, (b) all present and future obligations of the
Borrower to the Banks and to the Beneficiary which may be incurred from time to
time pursuant to the terms of the Credit Agreement, (c) the additional payments
hereinafter agreed


                                       -2-

<PAGE>   3

to be made, (d) performance of the covenants and agreements of the Grantor set
out herein, and (e) any and all indebtedness, liabilities and obligations of any
and every kind and nature heretofore, now or hereafter owing, due or payable
from the Borrower, arising under, in connection with or evidenced by the Master
Agreement and any renewals, modifications or extensions thereof, in whole or in
part. Notwithstanding anything to the contrary contained herein, the Premises by
reason of the terms of this Deed of Trust shall not secure such other
indebtedness, obligations and liabilities of the Grantor or the Borrower to the
Banks or the Beneficiary that are (a) consumer credit as defined in Federal
Reserve Board Regulation Z, or (b) non-consumer credit if under applicable state
law the maximum interest rate for such credit is reduced when secured (herein
collectively referred to as the "Restricted Debt").

               NOW, THEREFORE, in consideration of the premises, and the sum of
One Dollar ($1.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor has given, granted,
bargained, sold and conveyed, and by these presents does give, grant, bargain,
sell and convey unto Trustee the following property consisting of ten distinct
tracts located in various counties of North Carolina (the "Premises"):

               (a) Those real properties lying and being in Moore County, Onslow
County, Watauga County, New Hanover County, Durham County, Wake County and
Forsyth County, North Carolina and described in EXHIBIT A ATTACHED HERETO AND
INCORPORATED HEREIN BY REFERENCE (collectively, the "Land"); and

               (b) All buildings and other improvements now or hereafter located
in, on or about the Land, and all of Grantor's building materials intended for
incorporation but not incorporated into the improvements to the Land, and all
furnishings, furniture, fixtures, machinery, equipment, tools, and all other
personal property or chattels used in connection with the operation of such
improvements, specifically including, without limitation, appliances, gas and
electric fixtures and systems, radiators, heaters, engines and machinery,
boilers, ranges, elevators and motors, plumbing and heating fixtures and
systems, carpeting and other floor coverings, water heaters, air conditioning
apparatus and systems, window screens, awnings, storm sashes AND THE OTHER
PERSONAL PROPERTY COLLATERAL DESCRIBED IN THE SCHEDULE OF ADDITIONAL PERSONAL
PROPERTY COLLATERAL ATTACHED HERETO, whenever acquired by Grantor and now or
hereafter located in, upon or under the Land, together with all additions and
accessions thereto and replacements and proceeds thereof (the buildings and all
such tangible personal property being collectively referred to as the
"Improvements"); and

               (c) (i) All leases, rents, issues, profits, royalties, income and
other benefits derived from the Land and the Improvements (which, together with
the items listed in (j) are collectively referred to as the "Rents"), subject to
the right, power and authority hereinafter given to Grantor to collect and apply
such Rents, (ii) the proceeds from any present or future insurance award
relating to the Land and the Improvements and all rights in and to all present
and future fire and/or hazard insurance 

                                       -3-

<PAGE>   4

policies; and (iii) all awards now or hereafter made by any public body or
decreed by any court of competent jurisdiction for a taking or for a degradation
of value with respect to the Land or the Improvements in any eminent domain
proceeding; and

               (d) All easements, rights-of-way and rights used in connection
with the Land and the Improvements or as a means of access thereto, and all
tenements, hereditaments and appurtenances thereof and thereto; and

               (e) All the rights, interest and privileges which the Grantor as
lessor has or may have in the leases now existing or hereafter made and
affecting the Land or the Improvements or any part thereof, as said leases may
have been or may from time to time be hereafter modified, extended and renewed,
together with any and all guarantees of any leases affecting all or any part of
the Land or the Improvements (collectively, the "Leases"), all security deposits
now or hereafter received in respect of any Lease, and all capital expenditure
reserve funds now or hereafter required to be established by the Grantor
pursuant to any Leases (such security deposits and such capital expenditure
reserve funds are hereinafter referred to as the "Lease Reserves/Deposits"); and

               (f) All rights of the Grantor under any contracts in connection
with or relating to the construction, use, operation and/or management of the
Premises, including, without limitation, any construction contracts,
architectural contracts, management contracts, repair contracts, maintenance
contracts and service contracts; and

               (g) Any and all licenses, permits and approvals relative to the
use, operation, management, repair, maintenance and/or service of the Premises;
and

               (h) Any and all accounts, accounts receivable and contract rights
with respect to the Premises, and rights to money, fees, revenue, rents and
income pursuant thereto, and all records and books of account now or hereafter
maintained by the Grantor in connection with the use, operation, management,
maintenance, repair and service of the Premises; and

               (i) All general intangibles, including, without limitation,
trademarks and trade names used in connection with the Premises; and

               (j) All of Grantor's right, title and interests in all rents,
issues, profits, royalties, income, room revenues, bed revenues, service
revenues, food service revenues, health service revenues, hotel revenues,
government payments, rights to government payments, accounts, accounts
receivable, contract rights, general intangibles and other benefits now or
hereafter derived from the Premises and/or any operations now or hereafter
conducted thereon; and

               (k) All proceeds and products of every kind and description of
the property described in (a) through (j) above.


                                       -4-

<PAGE>   5

               The term "Loan Documents" shall mean this Deed of Trust, any and
all Deeds of Trust, Deeds to Secure Debt, and/or Mortgages executed in
connection herewith as security for the Notes, the Notes, the Credit Agreement,
the Master Agreement, any security agreement, any guaranty, and all such other
agreements or documents evidencing or securing the Notes.

               TO HAVE AND TO HOLD the Premises unto Trustee in fee simple
forever, upon the trusts and for the uses and purposes hereinafter set out;

               And Grantor covenants with Trustee that Grantor is seized of the
Premises in fee and has the right to convey the same in fee simple; that the
same are free and clear of all encumbrances, that Grantor has done no act to
encumber the Premises and that Grantor will warrant and defend the title to the
same against the lawful claims of all persons whomsoever, and that Grantor will
execute such further issuances of said lands as may be required.

               THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if either
Borrower or Grantor shall pay the Obligations in accordance with their terms and
all sums owing under the Credit Agreement and shall comply with all the
covenants, terms and conditions of this Deed of Trust, this conveyance shall be
released and cancelled of record. Grantor and Borrower, as applicable, hereby
further covenant and agree with Trustee and Beneficiary as follows:

               Section 1. CREDIT AGREEMENT. The terms and provisions of the
Credit Agreement are incorporated herein by reference. A default under the
Credit Agreement shall for all purposes constitute a default hereunder and under
the Obligations.

               Section 2. FINANCIAL STATEMENTS. The Grantor shall provide to the
Beneficiary such financial information and financial statements with respect to
the Premises as is required by the Credit Agreement, the terms of which are
incorporated herein by reference as if fully set forth herein.

               Section 3. PAYMENT OF OBLIGATIONS; IMPOSITIONS. Borrower will
pay, when due, the Obligations, and Grantor shall pay when due all real and
personal property taxes and assessments, general and special, and all other
taxes and assessments of any kind or nature whatsoever, including without
limitation non-governmental levies or assessments (hereinafter referred to as
Impositions) such as owner association dues or charges or fees and maintenance
charges which are assessed or imposed upon the Premises or the Loan Documents.
If at any time after the date hereof, there shall be assessed or imposed (the
following hereafter referred to as the "Additional Impositions") (a) a tax or
assessment on the Premises in lieu of or in addition to the Impositions payable
by Grantor or (b) a license fee, tax or assessment imposed on Beneficiary or the
Banks and measured by or based in whole or in part upon the amount of the
outstanding obligations secured hereby, Grantor shall pay and discharge all such
taxes, assessments or fees before they become delinquent. Beneficiary may, at
its option, pay any such Impositions or Additional Impositions of which payment,
amount and validity thereof the official receipt shall be conclusive evidence,
and any amounts so expended shall immediately become debts due by the Borrower,
shall bear interest at the rate specified in the Credit Agreement, and such
payment shall be secured by this Deed of Trust.


                                      -5-
<PAGE>   6

               Section 4. INSURANCE. Borrower or Grantor will cause the
Improvements to be insured against loss and damage by fire, flood, tornado and
windstorm, vandalism, malicious mischief and builder's risk (if applicable) and
against such other hazards as are customary in the locale for the Improvements
or as Beneficiary may otherwise require, including, if applicable, rent loss as
to base rent due under any Leases or business interruption for periods of no
less than twelve (12) months, in amounts at no time less than the total
replacement cost of such Improvements, plus an amount sufficient to prevent any
co-insurance liability on the part of the owner of the Premises. The Borrower
shall maintain general liability insurance in an amount satisfactory to the
Beneficiary. All insurance shall be with reputable companies with a Best
Insurance Report rating of A or better; and Borrower or Grantor will cause to be
paid all premiums for such insurance when due. Borrower shall cause such
insurance to name Beneficiary as mortgagee or loss payee and deliver such
policies or renewals or evidence of payment of premiums to Beneficiary, and
Grantor or Borrower shall make such adjustments in the coverage of such
insurance as Beneficiary may require. If Grantor fails or refuses to keep the
Premises so insured, Beneficiary may obtain such insurance without prejudice to
its right to foreclose hereunder by reason of such default. In the event of
loss, Grantor or Borrower will give immediate notice by mail to Beneficiary who,
if then named as mortgagee and additional insured, may make proof of loss if not
made promptly by Grantor, and, if the Beneficiary is then named as mortgagee and
additional insured, each insurance company concerned shall hereby be authorized
and directed to make payment for such loss directly to Beneficiary instead of to
Grantor , Borrower and Beneficiary jointly. If the Beneficiary is then named as
mortgagee and additional insured, the proceeds of any insurance, or any part
thereof, may be applied by Beneficiary, at its option, either to the reduction
of the Obligations or to the restoration or repair of the Improvements.
Beneficiary may, at its option, pay any such insurance premiums of which
payment, amount and validity thereof the official receipt shall be conclusive
evidence, and any amounts so expended shall immediately become debts due by
Borrower, shall bear interest at the rate specified in the Credit Agreement, and
such payment shall be secured by this Deed of Trust.

               If any portion of the Improvements is located in a special flood
hazard area according to the Federal Emergency Management Agency ("FEMA"), then
the Grantor or Borrower must maintain a flood insurance policy in an amount
equal to the lesser of (x) the Facility Limit plus the outstanding principal
balance of any senior liens on the Premises or (y) the replacement value of the
Improvements located in a special flood hazard area. If at any time during the
term of the Obligations, the Improvements are classified by FEMA as being
located in a special flood hazard area, flood insurance will be mandatory.
Should this occur federal law requires the Beneficiary to notify the Grantor or
Borrower of the reclassification. If, within forty-five (45) days of receipt of
notification from the Beneficiary that any portion of the Improvements has been
reclassified by the FEMA as being located in a special flood hazard area, the
Grantor or Borrower has not provided sufficient evidence of flood insurance, the
Beneficiary is mandated under federal law to purchase flood insurance on behalf
of the Grantor, and any amounts so expended shall immediately become debts of
the Borrower, shall bear interest at the rate specified in the Credit Agreement,
and payment thereof shall be secured by this Deed of Trust.



                                      -6-
<PAGE>   7

               Section 5. MAINTENANCE OF PREMISES; COMPLIANCE WITH LAWS. Grantor
will keep the Premises in good order, repair and condition, reasonable wear and
tear excepted and shall not commit or permit any waste. Grantor will also comply
with all applicable laws, statutes, ordinances, codes, and judicial and
administrative decisions (including without limitation and as applicable, all
such laws, statutes, judicial and administrative decisions relating to the
physical accessibility requirements of Title III of the Americans with
Disabilities Act of 1990 (as amended) and the implementing regulations
promulgated thereunder by the Department of Justice and the Americans with
Disabilities Act Accessibility Guidelines (ADAAG) associated therewith and the
applicable ANSI Standards under the Fair Housing Act (as amended) and all
applicable regulations) of all applicable state, federal or local governmental
entities (the "Requirements"). Grantor will not make material changes to the
Premises, change the use of the Premises, or consent to a change in zoning of
the Premises without the Beneficiary's prior written consent. Grantor shall
immediately provide notice of proposed zoning changes to the Beneficiary.

               Section 6. CONVEYANCE OF PREMISES. Grantor will not sell, convey,
transfer or encumber the Premises, or any part thereof or interest therein,
legal or equitable, without the prior written consent of Beneficiary; provided,
however, that Grantor may dispose of, free and clear of the security interest
granted herein and the lien hereof, any personal property or fixtures which, in
the reasonable judgment of Grantor, have become obsolete or unfit for use or
which are no longer useful in Grantor's operations, on the condition that
Grantor shall replace such personal property or fixtures by, or substitute for
the same, other personal property or fixtures (not necessarily of the same
character) owned by Grantor, which shall (a) be of at least equal value to the
personal property or fixtures disposed of and (b) perform a function or serve a
purpose the same as, similar to or related to that of the personal property or
fixtures disposed of. Any such replacement personal property or fixtures shall
forthwith, without further action, become subject to the security interest
granted in, and the lien created by, this Deed of Trust, and such security
interest is hereby granted by Grantor. Beneficiary's consent to any conveyance
or encumbrance may be conditioned upon an increase in the interest rate
specified in the Credit Agreement, an extension or curtailment of the maturity
of the Obligations, or other modification of the Notes, the Credit Agreement or
this Deed of Trust. For purposes of this Section 6, a change of ownership of
partnership interests in Grantor shall not be deemed a conveyance or transfer of
the Premises so long as the Corporation shall remain as the sole general partner
of the Grantor.

               Section 7. HAZARDOUS MATERIAL.

               7.01 REPRESENTATIONS AND WARRANTIES. Grantor and Borrower
represent, warrant and agree that (a) no Hazardous Material (as hereinafter
defined) has been used or placed on the Premises in violation of Environmental
Laws (as hereinafter defined); (b) there are no unregistered underground storage
tanks on the Premises that are subject to any underground storage tank
registration laws or regulations; (c) no notice has been received with regard to
any Hazardous Material on the Premises; (d) the Premises are presently in
compliance with Environmental Laws; (e) no action, investigation or proceeding
is pending or to Grantor's or Borrower's knowledge threatened which seeks to
enforce any right or remedy against Grantor or the Premises under any
Environmental Law; (f) Grantor shall permit no installation or placement of
Hazardous Material on 



                                      -7-
<PAGE>   8

the Premises in violation of Environmental Laws; (g) Grantor shall permit no
release of Hazardous Material onto or from the Premises; (h) Grantor shall cause
the Premises to comply with Environmental Laws and be free and clear of any
liens imposed pursuant to Environmental Laws; (i) all licenses, permits and
other governmental or regulatory actions necessary for the Premises to comply
with Environmental Laws (the "Permits") shall be obtained and maintained and
Grantor shall assure compliance therewith; and (j) Grantor shall give
Beneficiary prompt written notice if Grantor receives any notice with regard to
Hazardous Material on, from or affecting the Premises and shall conduct and
complete all investigations and all cleanup actions necessary to remove, in
accordance with Environmental Laws, such Hazardous Material from the Premises.

               7.02 INSPECTIONS AND AUDITS. Beneficiary shall have the right at
any time during the term of this Deed of Trust, whether before or after default,
to conduct or cause to be conducted an environmental inspection or audit of the
Premises by itself or by a qualified environmental consultant or engineer
selected by Beneficiary; and Grantor hereby grants to Beneficiary and its
employees, agents, and independent contractors (hereinafter collectively called
"Beneficiary and its Representatives"), the right to enter the Premises upon
reasonable notice for the purpose of conducting, whether before or after
default, any inspection, audit or tests, making soil borings, extracting
samples, installing monitoring wells, and conducting such other procedures as
Beneficiary and its Representatives deem necessary or desirable in connection
with such inspection or audit. At any time during the term of this Deed of
Trust, provided Beneficiary has a reasonable basis for doing so, Beneficiary may
require Grantor or Borrower to cause to be performed, at the expense of Grantor
or Borrower, for the benefit of Grantor, Borrower and Beneficiary, an inspection
or audit of the Premises by an environmental consultant or engineer approved by
Beneficiary, and Grantor shall furnish to Beneficiary, at no cost to
Beneficiary, the written inspection or audit report certifying as to the
presence or absence of Hazardous Material on, at, or under the Premises. All
inspection reports may be submitted to governmental entities or agencies as
requested or as may be required by law or regulations.

               7.03 INDEMNIFICATION. Grantor and Borrower, jointly and
severally, shall indemnify and hold harmless Beneficiary from and against all
losses, expenses (including, without limitation, attorneys' fees) and claims of
every kind suffered by or asserted against Beneficiary as a direct or indirect
result of (i) the presence on or release from the Premises of any Hazardous
Material, whether or not caused by Grantor or Borrower, (ii) the violation of
Environmental Laws applicable to the Premises, whether or not caused by Grantor
or Borrower, (iii) the requirement to conduct any remediation of Hazardous
Materials from the Premises, (iv) the failure by Grantor or Borrower to comply
fully with the terms and provisions of this section, or (v) any warranty or
representation made by Grantor or Borrower in this section being false or untrue
in any material respect.

               7.04 DEFINITIONS; SURVIVAL OF PROVISIONS. "Hazardous Material"
means polychlorinated biphenyls, petroleum, flammable explosives, radioactive
materials, asbestos, lead and any hazardous, toxic or dangerous waste, substance
or material defined as such in (or for purposes of) Environmental Laws or listed
as such by the Environmental Protection Agency. "Environmental Laws" means any
current or future federal, state or local law, regulation or ruling 



                                      -8-
<PAGE>   9

applicable to environmental conditions on, under or about the Premises
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Toxic Substances Control Act and the Clean Water Act. Grantor's and Borrower's
obligations under this section shall survive the repayment of the Notes and
other Obligations, a foreclosure of or exercise of power of sale under this Deed
of Trust, a delivery of a deed in lieu of foreclosure, a cancellation or
termination of record of this Deed of Trust and a transfer of the Premises.

               Section 8. MARSHALING; MULTIPLE-TRACT PROVISIONS. It is
specifically covenanted and agreed (i) that the Beneficiary may proceed, at the
same or at different times, to foreclose this Deed of Trust, or any other
mortgage, deed to secure debt or deed of trust with respect to other property
given to further secure the indebtedness also secured hereby (the "Other Deeds
of Trust"), by any proceedings appropriate in the state where any of the
properties now or hereafter encumbered as security for the Notes (the "Tracts")
lies , (ii) that no exercise of remedies granted in this Deed of Trust or the
Other Deeds of Trust taking place in any state [including, without limiting the
generality of the foregoing, any pending foreclosure, judgment or decree of
foreclosure, foreclosure sale, rents received, possession taken, deficiency
judgment or decree, or judgment taken on the indebtedness secured hereby], shall
in any manner stay, preclude or bar enforcement of this Deed of Trust or the
Other Deeds of Trust in any other proceeding, and (iii) that the Beneficiary may
pursue any or all its remedies to the maximum extent permitted by state law
until all the debt now or hereafter secured by any or all of the Loan Documents
has been paid and discharged in full.

               Neither the Grantor, nor any person claiming under the Grantor,
either has or enjoys any right to marshaling of assets, all such right being
hereby expressly waived as to the Grantor and all persons claiming under or
through the Grantor. No release of personal liability of any person whatever and
no release of any portion of the property now or hereafter subject to the lien
of any of the loan documents shall have any effect whatever by way of impairment
or disturbance of the lien or priority of this Deed of Trust or any of the Other
Deeds of Trust. Any foreclosure or other appropriate remedy brought with respect
to any Tract may be brought and prosecuted as to any part of the collateral
securing the indebtedness also secured by, wherever located, without regard to
the fact that foreclosure proceedings or other appropriate remedies have or have
not been instituted on any other tract subject to the lien of this Deed of Trust
or the Other Deeds of Trust.

               Section 9. ASSIGNMENT OF RENTS, LEASES, AND PROFITS.

               9.01 ASSIGNMENT. As further security for the payment of the
Obligations and for the faithful performance of all the covenants, agreements,
terms and provisions of this Deed of Trust, Grantor hereby sells, transfers and
assigns unto Beneficiary all the right, title and interest of Grantor in and to
the Rents, and to that end Grantor hereby assigns and sets over unto Beneficiary
all Leases of the Premises now made, executed or delivered, whether written or
verbal, or hereafter made, whether written or verbal, specifically including,
but not limited to, those certain lease agreements between the Grantor and
CapStar Winston Company, L.L.C., and Grantor does hereby authorize and empower
Beneficiary to collect the Rents when due, and does hereby direct each tenant of
the Premises to pay the Rents to Beneficiary, upon demand for payment thereof by
Beneficiary; it being



                                      -9-
<PAGE>   10

understood and agreed, however, that no such demand shall be made absent the
occurrence of an Event of Default hereunder; and until such demand is made,
Grantor is authorized to collect or continue collecting the Rents; such
privilege to collect or continue collecting the Rents by Grantor shall not
operate, however, to permit the collection of any Rents more than thirty (30)
days in advance of their due date.

               It is intended that the assignment set forth above be an
absolute, present assignment from Grantor to the Beneficiary and not merely the
passing of a security interest. The rents, issues, income and profits are hereby
assigned absolutely by Grantor to the Beneficiary contingent only upon the
occurrence of an Event of Default. Immediately upon the occurrence of an Event
of Default, the Grantor's right to collect the rents, income and profits from
the Leases and to retain, use and enjoy the same shall at the Beneficiary's
option immediately cease and terminate, and the Beneficiary's absolute, present
and continuing right to collect the rents, issues, income and profits shall
continue in full force and effect, and the Beneficiary shall be entitled at its
option to collect such rents, issues, income and profits without taking
possession of the Premises, without the appointment of a receiver and without
any further act whatsoever. Notwithstanding anything to the contrary set forth
in this Deed of Trust, or any other document executed in connection herewith,
there shall be no cure or grace period with respect to Grantor's default which
must expire prior to the Beneficiary's right to collect the rents, issues,
income and profits and there shall be no condition precedent other than
Grantor's default to the Beneficiary's right to collect such rents, issues,
income and profits. The Grantor may apply in writing to the Beneficiary for a
reinstatement of the Grantor's right to collect the rents, income and profits
from the Leases and to retain, use and enjoy the same; however, the Beneficiary
shall be under no obligation to do so.

               Anything to the contrary notwithstanding, Grantor hereby assigns
to the Beneficiary any award made hereafter to it in any court procedure
involving any of the Leases in any bankruptcy, insolvency, or reorganization
proceedings in any state or Federal court and any and all payments made by
lessees in lieu of rent. Grantor appoints the Beneficiary as its irrevocable
attorney in fact to appear in any action and/or to collect any such award or
payment. Grantor hereby assigns to the Beneficiary all Lease Reserves/Deposits
received by Grantor or any agent in respect of any Leases. Prior to an Event of
Default hereunder or under the Credit Agreement or under any other Obligations
and demand by the Beneficiary for delivery of the Lease Reserves/Deposits to it
or its designee, Grantor shall maintain the Lease Reserves/Deposits in a
separate, identifiable account in a bank acceptable to Beneficiary. After
default and upon demand by the Beneficiary, Grantor shall deliver the Lease
Reserves/Deposits to the Beneficiary or its designee. Upon delivery of the Lease
Reserves/Deposits to Beneficiary, the Beneficiary shall hold such deposits
pursuant to the terms of the Leases in respect of which such deposits were
obtained by Grantor. Provided, however, in no event shall Beneficiary be liable
under any Lease of any part of the Premises for the return of any Lease
Reserves/Deposits in any amount in excess of the amount delivered to the
Beneficiary by Grantor. Any Lease Reserves/Deposits delivered to and held by the
Beneficiary shall not bear interest. The Beneficiary shall be entitled to
exercise its rights under this Section 9, to the fullest extent permitted by
law, without the need for the commencement of foreclosure action hereunder or
the undertaking of any other remedy available at law or equity.



                                      -10-
<PAGE>   11

               9.02 LEASES AFFECTING PREMISES. Grantor shall promptly and fully
keep, perform and comply with and observe all the terms and covenants and
obligations imposed upon or assumed by Grantor as landlord under the Leases and
will not do, permit anything to be done, or omit or refrain from doing anything,
the doing or omission of which will entitle any tenant to terminate any of the
Leases. Grantor, if requested by Beneficiary, shall furnish promptly to
Beneficiary executed copies of all such Leases, renewals, or amendments now
existing or hereafter created, all of which shall be subject to the approval of
the Beneficiary.

               9.03 SEPARATE ASSIGNMENT OF LEASES. Grantor will, upon request of
the Beneficiary, execute a separate assignment of any Lease affecting any part
of the Land or Improvements. A default under any separate assignment of
Grantor's interest in leases given as additional security for the Notes and
other Obligations shall constitute an Event of Default hereunder.

               9.04 REPRESENTATIONS. The Grantor covenants and represents that:

                              (a) Grantor has full right and title to assign the
Leases and the rents, issues, income and profits due or to become due
thereunder;

                              (b) The terms of the Leases have not been changed
from the terms in the copies of the Leases submitted to the Banks for approval;

                              (c) No other assignment of any interest in the
Leases has been made;

                              (d) There are no existing defaults under the
provisions of any of the Leases on the part of the Grantor as landlord
thereunder and, to the best of Grantor's knowledge, there are no existing
defaults on the part of the tenants/lessees under the provisions of any of the
Leases;

                              (e) The Grantor will not without the prior written
consent of the Beneficiary cancel, surrender or terminate any of the Leases, or
exercise any option which might lead to such termination, or change, alter or
modify any of the Leases, or consent to the release of any party liable
thereunder, or consent to the assignment of any lessee's interest therein;

                              (f) No tenant has been granted a concession in the
form of a waiver, release, reduction, discount or other alteration of rental due
or to become due under any Lease;

                              (g) No rent for any period subsequent to the date
of this Deed of Trust has been collected more than one month in advance of the
time when the same is due under the terms of the Leases;

                              (h) To the best of Grantor's knowledge, no lessee
has any defense, setoff or counterclaim against Grantor under any Lease; and



                                      -11-
<PAGE>   12

                              (i) Grantor shall give prompt written notice to
Beneficiary of any notice of Grantor's default received from any tenant and will
furnish Beneficiary with a complete copy thereof.

               Section 10. RIGHT TO CURE; PROTECTION OF SECURITY. If Grantor or
Borrower, as applicable, shall fail in any of the covenants and provisions
contained in this Deed of Trust, Beneficiary may (but shall not be obligated to)
take any action Beneficiary deems necessary or desirable to prevent or cure any
such default or failure. Beneficiary shall have the right to enter upon the
Premises to such extent and as often as Beneficiary, in its sole discretion,
deems necessary or desirable in order to prevent or cure any such default or
failure by Grantor or Borrower, as applicable. In addition, if any legal
proceeding (such as bankruptcy, condemnation, forfeiture or other legal or
regulatory proceeding) that may affect Beneficiary's rights or interests in the
Premises (or any part thereof) is commenced, Beneficiary may act to protect or
preserve such rights or interests (including, without limitation, the employment
of an attorney or other professional(s)). Beneficiary may expend such sums of
money as Beneficiary, in its sole discretion, deems necessary for any such
purpose, and Grantor and Borrower, jointly and severally, hereby agree to pay to
Beneficiary, immediately upon demand, all sums so expended by Beneficiary,
together with interest thereon from the date of each such payment at the rate
provided for in the Credit Agreement. All sums so expended by Beneficiary, and
the interest thereon, shall be added to and secured by the lien of this Deed of
Trust.

               Section 11. CONDEMNATION. Upon condemnation of the Premises or
any part thereof, this Deed of Trust shall become a lien, charge and encumbrance
upon the proceeds or award realized as a result of any such proceeding or of any
settlement or payment made in lieu of any such proceeding ("Condemnation
Proceeds"). Grantor hereby grants to Beneficiary a security interest in any
Condemnation Proceeds and hereby agrees to execute such further assignments of
the Condemnation Proceeds as Beneficiary may require. Grantor further covenants
and agrees that Beneficiary may (and is hereby authorized and empowered but not
required to) collect and receive any Condemnation Proceeds and, if received by
Grantor, Grantor shall pay over and deliver immediately to Beneficiary all
Condemnation Proceeds to be held by Beneficiary and applied as follows:

               (a) In the event the entire Premises shall be taken by
condemnation or in settlement of any threat of condemnation, then any
Condemnation Proceeds shall be paid to Beneficiary and applied in payment in
whole or in part to the Obligations, whether or not then due and payable, and
any excess shall be delivered to the parties legally entitled thereto. In the
event of a partial taking of the Premises, the portion of the Condemnation
Proceeds necessary to prevent impairment of the security of this Deed of Trust,
as determined by the Beneficiary in the Beneficiary's sole discretion, shall be
set aside, withheld or paid over to the Beneficiary and applied to the
Obligations, whether or not then due and payable, and the excess of such award
or proceeds shall be delivered to Grantor or other parties legally entitled
thereto. Upon any partial taking of the Premises, this Deed of Trust shall
continue in full force as security for the unpaid portion of the Obligations.
Upon any partial taking of the Premises, Grantor covenants with Beneficiary to
restore 



                                      -12-
<PAGE>   13

the Premises as nearly as possible to the condition thereof immediately prior to
such taking and to apply Grantor's portion of any Condemnation Proceeds together
with any other necessary funds to complete and pay for the costs of restoration.

               (b) Notwithstanding any contrary provision of this Deed of Trust,
(i) upon condemnation of the entire Premises, or (ii) if it shall at any time be
determined that N.C. Gen. Stat. Sec. 40A-68 shall for any reason be
unenforceable or inapplicable to this Deed of Trust, upon partial condemnation
of the Premises, the entire unpaid balance of the Obligations shall, at the
option of Beneficiary, at once become due and payable, whereupon any
Condemnation Proceeds shall be paid over to Beneficiary and applied in
accordance with the first sentence of subparagraph (a) of this Section 11.

               Section 12. INSPECTION. Beneficiary may inspect the Premises at
all reasonable times, and access thereto shall be permitted for that purpose to
Beneficiary and its Representatives.

               Section 13. EVENTS OF DEFAULT. The following shall constitute
defaults or events of default hereunder ("Events of Default"):

               (a) Failure by Borrower to pay when due any payment of interest,
principal, principal and interest, commitment fees, deposits or other payments
which are due and payable under any of the Notes, the Credit Agreement, the
Master Agreement, this Deed of Trust, the other Obligations, any of the Loan
Documents or any documents executed in connection therewith or as security
therefor after the passage of any applicable cure period for such default
specifically set out in the Credit Agreement.

               (b) Failure by Grantor or Borrower to keep, perform or observe
any covenant, term or condition required to be kept, performed or observed by
Grantor or Borrower under this Deed of Trust, the Notes, the Credit Agreement,
the Master Agreement, any of the other Loan Documents or any documents executed
in connection therewith or as security therefor after the passage of any
applicable cure period for such default specifically set out in the Credit
Agreement.

               (c) The occurrence of any event or condition which would allow
Beneficiary to accelerate the Notes or other Obligations, or would constitute a
default or event of default after the passage of any applicable cure period for
such default specifically set out in the Credit Agreement under the terms of the
Notes, the other Obligations, this Deed of Trust, the Master Agreement, any of
the Loan Documents, any other loan agreement or any documents executed in
connection therewith or as security therefor.

               (d) The occurrence of an Event of Default under the Credit
Agreement.

               (e) If any representation, warranty or certificate given by
Grantor or Borrower, or at any time hereafter required to be given by Grantor or
Borrower in connection with the Credit Agreement shall be false or erroneous in
any material respect when made.



                                      -13-
<PAGE>   14

               (f) A breach of or a failure of performance by Grantor or
Borrower of any provision of or the occurrence of any default under the terms
and provisions of any documents, instruments, security agreements, mortgages or
deeds of trust granting security interests in or liens upon the Premises or any
part thereof, whether prior to or subordinate to the lien of this Deed of Trust
or the lien of any Deed of Trust, Deed to Secure Debt, or Mortgage executed in
connection with the Loan Documents.

               (g) Any attempted enforcement of or realization upon any security
interest, lien or judgment affecting the Premises or any part thereof, whether
prior to or subordinate to the lien of this Deed of Trust.

               (h) Any actual or threatened demolition or injury or waste to the
Premises which may impair the value of the Premises.

               (i) Grantor, Borrower, or any guarantor (if a corporation or a
limited liability company) commences the process of liquidation or dissolution
or its charter expires or is revoked, or Grantor, or Borrower, or any guarantor
(if a partnership or business association) commences the process of dissolution
or partition, or Grantor, Borrower, or any guarantor (if a trust) commences the
process of termination or expires.

               (j) The institution of any proceeding seeking the forfeiture of
the Premises or any portion thereof or any interest therein as a result of any
criminal or quasi-criminal activity by Grantor, Borrower (or any person so
related to Grantor, Borrower, or the Premises) that the Premises or any portion
thereof or any interest therein might be forfeited on account of the activity of
such person.

               Section 14. ACCELERATION. If an Event of Default shall have
occurred, the Obligations shall, at the option of Beneficiary, immediately
become due and payable without further notice or demand, time being of the
essence of this Deed of Trust; and no omission on the part of Beneficiary to
exercise such option when entitled to do so shall be construed as a waiver of
such right. Upon the occurrence of an Event of Default, the Beneficiary may, at
its option, defer application by it to the Trustee to sell the Premises and may
take action under and invoke such other rights and remedies as may be provided
in the Credit Agreement, this Deed of Trust, or any of the Loan Documents.

               Section 15. POWER OF SALE. Upon the occurrence of an Event of
Default, Beneficiary may notify Trustee to exercise the power of sale granted
hereunder and upon such notification it shall be lawful for and the duty of
Trustee, and Trustee is hereby authorized and empowered to expose to sale and to
sell the Premises or any part thereof at public sale to the highest bidder for
cash, in compliance with applicable requirements of North Carolina law governing
the exercise of powers of sale contained in deeds of trust and upon such sale,
Trustee shall collect the purchase proceeds and convey title to the portion of
the Premises so sold to the purchaser in fee simple. In the event of a sale of
the Premises or any part thereof, the proceeds of sale shall be applied in the
following order of priority: (i) to the payment of all costs and expenses for
and in connection with such sale, including a commission for Trustee's services
as hereinafter provided and reasonable attorneys' fees 



                                      -14-
<PAGE>   15

incurred by Trustee for legal services actually performed; (ii) to the
reimbursement of Beneficiary for all sums expended or incurred by Beneficiary
under the terms of this Deed of Trust or to establish, preserve or enforce this
Deed of Trust or to collect the Obligations (including, without limitation,
reasonable attorneys' fees); (iii) to the payment of the Obligations and
interest thereon and all other indebtedness hereby secured; and (iv) the
balance, if any, shall be paid to the parties lawfully entitled thereto. In the
event of a sale hereunder, Beneficiary shall have the right to bid at such sale
and shall have the right to credit all or any portion of the indebtedness
secured hereby against the purchase price. Trustee shall have the right to
designate the place of sale in compliance with applicable law and the sale shall
be held at the place designated by the notice of sale. Trustee may require the
successful bidder at any sale to deposit immediately with Trustee cash or
certified check or cashier's check in an amount up to five percent (5%) of the
bid provided notice of such deposit requirement is published as required by law.
The bid may be rejected if the deposit is not immediately made. Such deposit
shall be refunded in case of a sale to another purchaser pursuant to an upset
bid or if Trustee is unable to convey the portion of the Premises so sold to the
bidder because the power of sale has been terminated in accordance with
applicable law. If the purchaser fails to comply with its bid, the deposit may,
at the option of Trustee, be retained and applied to the expenses of the sale
and any resales and to any damages and expenses incurred by reason of such
default (including the amount that such bid exceeds the final sales price), or
may be deposited with the Clerk of Superior Court. In all other cases, the
deposit shall be applied to the purchase price. Pursuant to Section 25-9-501(4)
of the North Carolina General Statutes (or any amendment thereto), Trustee is
expressly authorized and empowered to expose to sale and sell, together with the
real estate, any portion of the Premises which constitutes personal property. If
personal property is sold hereunder, it need not be at the place of sale.

               The Premises may be sold in such parcels or lots without regard
to principles of marshalling and may be sold at one sale or in multiple sales,
all as determined by Trustee. A previous exercise of the power of sale hereunder
by Trustee shall not be deemed to extinguish the power of sale which power of
sale shall continue in full force and effect until all the Premises shall have
been finally sold and properly conveyed to the purchasers at the sale. The
Trustee shall be entitled to a reasonable commission for a completed or
uncompleted foreclosure.

               Section 16. APPOINTMENT OF RECEIVER. Beneficiary shall have the
right, after the occurrence of an Event of Default, to the appointment of a
receiver to collect the Rents from the Premises and to operate and manage the
Premises without notice to Grantor, Borrower or any other party (Grantor and
Borrower hereby waiving any right to such notice) and without consideration of
the value of the Premises or the solvency of any person liable for the payment
of the amounts then owing, and all amounts collected by the receiver shall,
after expenses of the receivership, be applied to the payment of the
Obligations. The Beneficiary, at its option, in lieu of an appointment of a
receiver, shall also have the right to take all actions set forth in the
previous sentence. If such receiver should be appointed, or if there should be a
sale of the Premises, as provided in Section 15, Grantor, or any person in
possession of the Premises thereunder, as tenant or otherwise, shall become a
tenant at will of the receiver or of the purchaser and may be removed by a writ
of ejectment, summary ejectment or other lawful remedy.



                                      -15-
<PAGE>   16

               Section 17. DELAY NOT TO OPERATE AS WAIVER; INDEMNIFICATION OF
TRUSTEE AND BENEFICIARY. No delay or forbearance by Beneficiary in exercising
any rights hereunder or otherwise afforded by law, shall operate as a waiver
thereof or preclude the exercise thereof during the continuance of any default
hereunder, and all such rights shall be cumulative. In case Beneficiary or
Trustee voluntarily or otherwise shall become a party to any suit or legal
proceeding to protect the Premises or the lien of this Deed of Trust, Trustee
and Beneficiary shall be saved harmless and reimbursed by Grantor and Borrower
for any amounts paid, including all reasonable costs, charges and attorneys'
fees incurred in any such suit or proceeding, which obligations shall be secured
by this Deed of Trust. No right, power or remedy conferred upon or reserved to
Beneficiary by this Deed of Trust, or the Notes, the Credit Agreement or any
separate assignment of rents and leases or the other Loan Documents is intended
to be exclusive of any other right, power or remedy, but each and every such
right, power and remedy shall be cumulative and concurrent and shall be in
addition to any other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or by statute. No act of the Beneficiary
shall be construed as a waiver or as an election to proceed under any provision
herein or the other documents evidencing the loan or securing same to the
exclusion of any other provisions, and Beneficiary shall be entitled to enforce
all remedies severally or concurrently as it shall see fit. No release or
subordination by Beneficiary of any part of the Premises or any other property,
collateral, or obligation securing the Notes or any other indebtedness secured
by this Deed of Trust shall release or impair the lien or title of unreleased
property.

               Section 18. BENEFICIARY'S POWERS. Without affecting the liability
of any other person liable for the payment of the Obligations, and without
affecting the lien or charge of this Deed of Trust upon any portion of the
Premises not then or theretofore released as security for the Obligations,
Beneficiary may, from time to time and without notice, (i) release any person so
liable, (ii) extend the maturity or alter any of the terms of the Obligations,
(iii) grant other indulgences, (iv) release or reconvey (or cause to be released
or reconveyed at any time at Beneficiary's option) any part or all of the
Premises, (v) take or release any other or additional security for any of the
Obligations, (vi) make compositions or other arrangements with debtors in
relation thereto, or (vii) advance additional funds to protect the security
hereof or pay or discharge the obligations of Grantor or Borrower hereunder, or
under the Obligations or any document executed in connection with or securing
the Obligations, and all amounts so advanced, with interest thereon at the
applicable rate set forth in the Credit Agreement, shall be secured hereby.

               Whenever in this Deed of Trust or any other Loan Document the
Grantor is obligated to reimburse the Beneficiary for sums advanced, with
interest at the "applicable rate set forth in the Credit Agreement" (or similar
provision), interest on such sums shall be calculated as a LIBOR Loan (as
defined in the Credit Agreement), unless an Event of Default has occurred. Upon
the occurrence of such an Event of Default, interest shall accrue at the Default
Rate (as defined in the Credit Agreement).

               Section 19. WAIVERS. Grantor and Borrower hereby waive any rights
or remedies on account of any extensions of time, releases granted or other
dealings between Beneficiary and any subsequent owner of the Premises as said
activities are contemplated or otherwise addressed in N.C. Gen. Stat. Sec.
45-45.1 or any similar or subsequent law. The foregoing waiver shall not be



                                      -16-
<PAGE>   17

construed as affecting or otherwise amending the covenants of Grantor contained
in Section 6 hereof. Grantor and Borrower waive the benefit of all laws now
existing or that hereafter may be enacted providing for (i) any appraisement
before sale of any portion of the Premises and (ii) in any way extending the
time for the enforcement of the collection of the Notes or the debt evidenced
thereby or any of the other Obligations. To the full extent Grantor and Borrower
may do so, Grantor and Borrower agree that Grantor and Borrower will not at any
time insist upon, plead, claim or seek to take the benefit or advantage of any
law now or hereafter in force providing for any exemption (including homestead
exemption), appraisement, valuation, stay, extension, redemption or extension,
and Grantor, Borrower, Grantor's and Borrower's heirs, devisees,
representatives, successors and assigns, and for any and all persons claiming
any interest in the Premises, to the extent permitted by law, hereby waive and
release all rights of valuation, appraisement, redemption, stay of execution,
notice of election to mature or declared due the whole of the secured
indebtedness and marshalling in the event of foreclosure of the liens hereby
created. Grantor and Borrower further waive any and all notices including,
without limitation, notice of intention to accelerate and of acceleration of the
Notes and other Obligations.

               Section 20. INTEREST NOT TO EXCEED MAXIMUM ALLOWED BY LAW. The
parties hereto shall in no event be deemed to have contracted for a greater rate
of interest than the maximum rate permitted by law. Should a greater amount be
collected, it shall be construed as a mutual mistake of the parties and the
excess shall be returned to the party paying same.

               Section 21. ESCROW OF TAXES, INSURANCE. The Grantor, in order to
more fully protect the security of this Deed of Trust, agrees that in addition
to the scheduled payments of principal and/or interest, as the case may be,
under the terms of the Credit Agreement or other Obligations, Grantor will, upon
request of Beneficiary, pay on the first day of each month, or on the due date
of scheduled payments of principal and/or interest, to Beneficiary a sum equal
to one-twelfth of the known or estimated (by Beneficiary) yearly taxes,
assessments and insurance premiums on or against the Premises. Beneficiary shall
hold such payments (and Grantor does hereby expressly agree that Beneficiary
shall be under no obligation to pay interest thereon and any interest earned
shall belong to the Beneficiary) and shall apply the same to the payment of
taxes, assessments and insurance premiums as and when due. If the total of such
monthly payments shall exceed the amount needed, the excess shall be held for
future needs; but, should such monthly payments at any time fail to provide
sufficient funds to pay taxes, assessments and insurance premiums when due, then
Grantor shall, upon demand, pay to Beneficiary the amount necessary to cover the
deficiency. When Grantor shall have paid the Obligations, Beneficiary shall
refund to Grantor or other person lawfully entitled thereto any excess funds
accumulated hereunder. In the event of a foreclosure sale of the Premises,
Beneficiary may apply any balance remaining of the funds accumulated for the
above purposes to the payment of the Obligations.

               Section 22. SUBSTITUTION OF TRUSTEE. Beneficiary shall at any
time have the irrevocable right to remove Trustee herein named without notice or
cause and to appoint its successor by an instrument in writing, duly
acknowledged and recorded.



                                      -17-
<PAGE>   18

               Section 23. RESTORATION TO FORMER POSITIONS. In case Beneficiary
shall have proceeded to enforce any right or remedy under this Deed of Trust by
suit, receiver, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to Beneficiary, then and in every such case, Grantor and Beneficiary shall be
restored to their former positions and rights hereunder, and all rights, powers
and remedies of Beneficiary shall continue as if no such proceeding had been
taken.

               Section 24. GREATER ESTATE. In the event that Grantor or Borrower
is the owner of a leasehold estate with respect to any portion of the Premises
and Grantor or Borrower obtains a fee estate in such portions of the Premises,
then, such fee estate shall automatically, and without further action of any
kind on the part of the Grantor or Borrower, be and become subject to the
security title and lien hereof.

               Section 25. SECURITY AGREEMENT.

               25.01 SECURITY AGREEMENT. This Deed of Trust shall constitute a
security agreement pursuant to the Uniform Commercial Code for any items
constituting a part of the Premises which, under applicable law, may be
subjected to a security interest pursuant to the Uniform Commercial Code, and
Grantor hereby grants Beneficiary a security interest in such items, including
but not limited to those items in granting clauses (b) through (k) of this Deed
of Trust, which constitute a portion of the Premises (the "Collateral"). Without
the prior written consent of Beneficiary, Grantor shall not create or suffer to
be created any other security interest in such items, including replacements and
additions thereto. In exercising such remedies, Beneficiary may proceed against
the real property and personal property described herein separately or together
and in any order whatsoever, without in any way affecting the availability of
Beneficiary's remedies under the Uniform Commercial Code or herein. This Deed of
Trust shall constitute a financing statement filed as a fixture filing in
accordance with N.C. Gen. Stat. ss.25-9-402 (or any amendment thereto). For
purposes of complying with the requirements of N.C. Gen. Stat. ss.25-9-402, the
name of Grantor, as Debtor, and Beneficiary, as Secured Party, and the
respective addresses of Grantor, as Debtor, and Beneficiary, as Secured Party,
are set forth on the first page of this Deed of Trust; the types or items of
Collateral are described in this Section and in the definition of the "Premises"
appearing in the granting clauses of this Deed of Trust; and the description of
the Land is set forth on Exhibit "A" attached hereto. The Collateral is or
includes fixtures.

               25.02 REMEDIES. In case any one or more Events of Default under
the Notes, the Credit Agreement, other Obligations and/or this Deed of Trust
shall have occurred and be continuing beyond any applicable cure period
therefor, the Beneficiary shall have, in addition to all other rights and
remedies given to it by this Deed of Trust, those allowed by law, and the rights
and remedies of a secured party under the Uniform Commercial Code as enacted and
in effect in the applicable jurisdiction, and, without limiting the generality
of the foregoing, the Beneficiary may immediately, without demand of performance
and without other notice (except as set forth in the Notes, the Credit
Agreement, the other Obligations, this Deed of Trust or other documents executed
and delivered pursuant thereto or in connection therewith) or demand whatsoever
to Grantor, all of which are hereby expressly waived, and without advertisement,
sell at public or private sale or otherwise 



                                      -18-
<PAGE>   19

realize upon in the county where the Premises are located, or elsewhere, the
whole or, from time to time, any part of the Collateral, or any interest which
Grantor may have therein, and, after deducting from the proceeds of sale or
other disposition of the Collateral all expenses (including all reasonable
expenses for legal services), shall apply the residue of such proceeds towards
the satisfaction of the Notes and any other sums secured by this Deed of Trust.
The remainder, if any, of the proceeds after satisfaction in full of the Notes
and any other sums secured by this Deed of Trust shall be paid to Grantor.
Notice of any sale or other disposition shall be given to Grantor at least ten
days before the time of any intended public sale or the time any intended
private sale or other disposition of the Collateral is to be made, which the
Grantor hereby agrees shall be reasonable notice of sale or other disposition.
Grantor agrees to assemble, or cause to be assembled, at its own expense, the
Collateral at such place or places as the Beneficiary shall designate by written
notice. At any such sale or disposition, the Beneficiary may, to the extent
permissible under applicable law, purchase the whole or any part of the
Collateral sold, free from any right of redemption on the part of Grantor, which
right is hereby waived and released. Without limiting the generality of any
rights and remedies conferred upon the Beneficiary under this Paragraph 25.02,
the Beneficiary may, to the full extent permitted by law: (a) Enter upon the
Premises, exclude therefrom Grantor or any affiliate thereof, and take immediate
possession of the Improvements, either personally or by means of a receiver
appointed by a court of competent jurisdiction, using all lawful, necessary
force to do so; (b) Use, operate, manage and control the Improvements in any
lawful manner; (c) Collect and receive all rents, income, revenue, earnings,
issues and profits therefrom; and (d) Maintain, repair, renovate, alter or
remove the Improvements as the Beneficiary may determine in its discretion, and
any monies so collected or received by the Beneficiary shall be applied to, or
may be accumulated for application upon, satisfaction of the Notes or any other
sums secured by this Deed of Trust.

               25.03. FILINGS; FURTHER ASSURANCES. Grantor agrees to execute and
deliver to the Beneficiary Uniform Commercial Code financing statements and such
other documents, instruments, supplemental security agreements and chattel
mortgages as the Beneficiary may deem necessary, proper or desirable to obtain
the benefits of this Deed of Trust, and Grantor authorizes the Beneficiary, upon
failure of the Grantor to do so at the request of the Beneficiary, to effect any
filing or recording of any such financing statement or statements relating to
the Improvements or amendments thereto without the signature of Grantor, where
lawful, and hereby appoints the Beneficiary as its attorney in fact (without
requiring the Beneficiary to act as such) to execute any such financing or other
statement or statements in the name of Grantor, and to perform all other acts
which the Beneficiary deems appropriate to perfect and continue the security
interest in, and to protect and preserve, the Improvements. The power herein
conferred upon the Beneficiary is coupled with an interest and is irrevocable.
Grantor further agrees to assign the Beneficiary its rights in or under any
financing statements relating to the Improvements filed in favor of Grantor.

               Section 26. NOTICES. All notices and other communications
required under this Deed of Trust shall be in writing and shall be deemed to
have been properly given, when given as provided in the Credit Agreement. Any
notice of the Trustee shall be delivered to New Salem, Inc., 100 North 



                                      -19-
<PAGE>   20

Main Street, Winston-Salem, North Carolina 27150, or such other address as the
Trustee may hereafter specify in writing by notice to the other parties hereto.
Any party may designate a change of address by written notice to the other,
given at least ten (10) business days before such change of address is to become
effective.

               Section 27. SUCCESSORS AND ASSIGNS. The covenants, terms and
conditions herein contained shall bind, and the benefits and powers shall inure
to the respective heirs, executors, administrators, successors and assigns of
the parties hereto. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the term "Beneficiary" shall include any
payee of the indebtedness hereby secured and any transferee or assignee thereof,
whether by operation of law or otherwise.

               Section 28. GOVERNING LAW. This Deed of Trust shall be governed
by and construed in accordance with the laws of the State of North Carolina
without regard to principles of conflict of laws.

               Section 29. EXPENSES. Grantor or Borrower shall pay or reimburse
Beneficiary for all costs, charges and expenses, including reasonable attorney's
fees and disbursements, incurred or paid by Beneficiary in documenting or
servicing the Notes or in any pending or threatened action or proceeding in
which Beneficiary is or may become a party and which affects or might affect the
Notes, the Credit Agreement, the other Obligations or the Premises or any part
thereof, or the interests of Grantor, Borrower or Beneficiary therein, including
but not limited to, the foreclosure of this Deed of Trust, condemnation
involving all or part of the Premises or any action to protect the security
hereof. The amounts so incurred or paid by Beneficiary, together with interest
thereon at the rate of interest set forth in the Credit Agreement from the date
incurred until paid by Grantor or Borrower, shall be added to the indebtedness
and secured by the lien of this Deed of Trust.

               Section 30. SEVERABILITY. If any provisions of this Deed of Trust
or the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent under applicable law, the remainder of this Deed of
Trust and the application of such provisions to other persons or circumstances
shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.

               Section 31. REPLACEMENT OF NOTES. In the event of loss, theft,
destruction, total or partial obliteration, mutilation or inappropriate
cancellation of one or more of the Notes, Borrower will execute and deliver, in
lieu thereof, a replacement for such Note, identical in form and substance to
such Note and dated as of the date of such Note.

               Section 32. INDEMNITY. Grantor and Borrower, jointly and
severally, shall protect, defend, indemnify and save harmless Beneficiary from
and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including attorneys'
fees and expenses) imposed upon or incurred by the Beneficiary by reason of (a)
any claim for brokerage fees or other such commissions relating to the Premises
or the Notes, the Credit Agreement, or any other Obligations, or (b) the
condition of the Premises, or (c) failure to pay recording, mortgage,

                                      -20-
<PAGE>   21

intangibles or similar taxes, roll back taxes, fees or charges relating to the
Notes, the Credit Agreement, or any one or more of the Loan Documents, or (d)
the Loan Documents or any claim or demand whatsoever which may be asserted
against the Beneficiary by reason of any alleged action, obligation or
undertaking of the Beneficiary relating in any way to the Notes, the Credit
Agreement, or any matter contemplated by the Loan Documents, or (e) any and all
liability arising from any of the Leases or any negligence in the management,
operation, upkeep, repair or control of the Premises resulting in loss or injury
or death to any tenant, occupant, licensee, employee or stranger. In the event
the Beneficiary incurs any liability, loss or damage arising out of or in any
way relating to the loan transaction contemplated by the Loan Documents
(including any of the matters referred to in this section), the amounts of such
liability, loss or damage shall be added to the Notes, shall bear interest at
the interest rate specified in the Credit Agreement from the date incurred until
paid and shall be payable on demand.

               Section 33. HEADINGS. The headings of the sections, paragraphs,
and subparagraphs of this Deed of Trust 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.

               Section 34. COUNTERPARTS. This Deed of Trust is executed in
multiple counterparts, one to be recorded in each county in which the Land is
located. These counterparts together constitute a single instrument as to the
various tracts described herein. The Beneficiary may, however, exercise its
rights hereunder with respect to one tract without being required to exercise
its rights as to the other tracts. Likewise, the Beneficiary may release one
tract described herein without releasing any other tract.




                  [Remainder of page left intentionally blank]



                                      -21-
<PAGE>   22

               IN WITNESS WHEREOF, Grantor and Borrower have caused this Deed of
Trust to be executed under seal the day and year first above written.

                             
                              
                              WINN LIMITED PARTNERSHIP, a North Carolina
                              limited partnership   (SEAL)

                              By: WINSTON HOTELS, INC., its sole general partner


                                            By: /s/ Joseph V. Green
                                               ----------------------------
                                                Senior Vice President
ATTEST:
/s/ Brenda G. Burns
------------------------------
Assistant Secretary

[CORPORATE SEAL]

                              WINSTON HOTELS, INC., a North Carolina corporation


                                              By: /s/ Joseph V. Green
                                                 -------------------------------
                                                  Senior Vice President
ATTEST:
/s/ Brenda G. Burns
------------------------------
Assistant Secretary

[CORPORATE SEAL]

                                      -22-
<PAGE>   23

STATE OF NORTH CAROLINA

COUNTY OF WAKE

               I, Sherian A. Liles, a Notary Public, certify that Brenda G.
Burns personally came before me this day and acknowledged that she is Assistant
Secretary of Winston Hotels, Inc., a North Carolina corporation, and that, by
authority duly given and as the act of the corporation, and as the act of WINN
Limited Partnership, a North Carolina limited partnership, in which the
corporation is a general partner, the foregoing instrument was signed in its
name by its Senior Vice President, sealed with its corporate seal, and attested
by herself as its Assistant Secretary.

               Witness my hand and notarial stamp or seal, this 6th day of
January, 1999.

My commission expires:                          /s/ Sherian A. Liles
                                                --------------------------
2-13-2002                                       Notary Public
---------------------

[NOTARY SEAL]




STATE OF NORTH CAROLINA

COUNTY OF WAKE

               I, Sherian A. Liles, a Notary Public, certify that Brenda G.
Burns personally came before me this day and acknowledged that she is Assistant
Secretary of Winston Hotels, Inc., a North Carolina corporation, and that, by
authority duly given and as the act of the corporation, the foregoing instrument
was signed in its name by its Senior Vice President, sealed with its corporate
seal, and attested by herself as its Assistant Secretary.

               Witness my hand and notarial stamp or seal, this 6th day of
January, 1999.

My commission expires:                          /s/ Sherian A. Liles
                                                --------------------------
2-13-2002                                       Notary Public
---------------------

[NOTARY SEAL]




                                      -23-
<PAGE>   24

                                    EXHIBIT A

                           [INSERT LEGAL DESCRIPTION]







                                       -1-

<PAGE>   25


                                   SCHEDULE 1

               SCHEDULE OF ADDITIONAL PERSONAL PROPERTY COLLATERAL

               All furniture, furnishings, machinery, apparatus, equipment,
fittings, fixtures and articles of every kind and nature including all stored
building materials, any interest in which is now owned or hereafter acquired by
Grantor, and is now or hereafter installed in, affixed to, placed upon or used
in connection with the Premises, or any portion thereof, and all additions
thereto and all replacements thereof, including but not limited to: (i) all
personal property relating to the operation of a hotel or motel (including, but
not limited to, all beds, credenzas, chairs, tables, chests of drawers,
nightstands, linens, towels, television sets, satellite dish equipment, cable
television equipment, telephones and telephone equipment, video equipment, door
locks, and computers); (ii) all personal property relating to any restaurant or
food operations now or hereinafter located on the Premises (including, but not
limited to, all silverware or flatware, all pots, pans and all other cooking
equipment, microwaves, stoves, ovens, linens, tables, chairs, and related
personal property) and (iii) all machinery, engines, furnaces, boilers, stokers,
pumps, heaters, incinerators, power equipment, laundry equipment, tanks,
dynamos, motors, generators, switchboards, conduits, electrical equipment,
heating, cooling, ventilating, air conditioning, lighting, incinerating and
plumbing apparatus, compressors, exhaust fans, elevators, escalators, venetian
blinds, shades, draperies, drapery and curtain rods, brackets, electric signs,
bulbs, fire prevention and extinguishing apparatus, plumbing fixtures, vacuum
cleaners, vacuum cleaning systems, floor cleaning, waxing and polishing
apparatus, call systems, pictures, mirrors, lamps, ornaments, carpeting, rugs,
linoleum and other floor covering, refrigerating and cooling apparatus and
equipment, typewriters, office and accounting equipment and software, safes,
cabinets, lockers, shelving, tools, spotlighting equipment, uniforms, screens,
screen doors, awnings, blinds, refrigerators, ranges, ovens, garbage disposals,
dishwashers, washing machines and clothes dryers, mantels and lobby furnishings,
lawn mowers, landscaping and swimming pool equipment, and any and all such
property which is at any time hereafter installed in, affixed to and to become
fixtures on, placed upon or used in connection with, the Premises, or any
portion thereof.





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