EXHIBIT 10.35


                   CHANGE IN CONTROL AND TERMINATION AGREEMENT


                  THIS  CHANGE  IN  CONTROL  AND   TERMINATION   AGREEMENT  (the
"Agreement"),  to be effective as of the 9th day of November,  1998, is made and
entered  into by and between  EQUITY INNS  SERVICES,  INC.  (the  "Company"),  a
corporation  organized  and existing  under the laws of the State of  Tennessee,
EQUITY INNS, INC. (the "Parent"), a corporation organized and existing under the
laws of the State of Tennessee, and Donald H. Dempsey (the "Executive").

                                R E C I T A L S:

                  The  Company  provides   management  services  to  the  Parent
pursuant to a management services agreement dated as of December 30, 1994.

                  The  Company  and  the  Parent  acknowledge  that  Executive's
contributions  to the past and future  growth and success of the Company and the
Parent  have  been  and  will  continue  to be  substantial.  As a  wholly-owned
subsidiary of a publicly held  corporation,  the Company  recognizes  that there
exists a possibility  of a Change in Control (as defined  herein) of the Company
or its Parent. The Company and the Parent also recognize that the possibility of
such a Change in Control may  contribute  to  uncertainty  on the part of senior
management and may result in the departure or  distraction of senior  management
from their operating responsibilities.

                  Outstanding  management of the Company is always  essential to
advancing the best interests of the Company's and the Parent's shareholders.  In
the event of a threat or occurrence of a bid to acquire or change control of the
Parent or to effect a business  combination,  it is particularly  important that
the  Company's  and the  Parent's  businesses  be  continued  with a minimum  of
disruption.  The Company and the Parent  believe that the  objective of securing
and  retaining  outstanding  management  will be achieved if the  Company's  key
management  employees are given  assurances of employment  security so they will
not  be  distracted  by  personal   uncertainties  and  risks  created  by  such
circumstances.

                  NOW,  THEREFORE,  in consideration of the mutual covenants and
obligations herein and the compensation the Parent and the Company,  jointly and
severally,  agree herein to pay to the Executive, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parent, the Company and the Executive agree as follows:

                  ARTICLE 1.          TERM; CERTAIN DEFINITIONS.

                  1.1 Term.  This  Agreement is  effective  from the date of its
execution  by the  Company  ("Effective  Date")  for a term of three  years (the
"Initial Term"). This Agreement  automatically  continues in effect from year to
year after  expiration  of the  Initial  Term unless the  Company  notifies  the
Executive in writing  ninety (90) days before any  anniversary  of the Effective
Date  following  the Initial Term that the Agreement  will  terminate as of that
anniversary  date.  Notwithstanding  the foregoing,  no notice of termination of
this  Agreement  under  the  preceding  sentence  shall be  effective  during an
Employment Period as defined in section 2.1 below.

                  1.2      Certain Definitions.  As used in this Agreement:

                           (a) Acquiring Person means that a Person,  considered
                  alone or together with all Control  Affiliates  and Associates
                  of that Person, is or becomes directly or indirectly the





<PAGE>



                  beneficial  owner (as defined in Rule 13d-3 under the Exchange
                  Act) of securities  representing at least twenty percent (20%)
                  of (i) the Parent's then  outstanding  securities  entitled to
                  vote generally in the election of the Parent's  Board; or (ii)
                  the Company's  then  outstanding  securities  entitled to vote
                  generally in the election of the Company's Board.

                           (b) Annual Base Salary  means the  Executive's  gross
                  annual salary before any taxes, deductions,  exclusions or any
                  deferrals  or  contributions  under any plan or program of the
                  Company  or  the  Parent,  but  excluding  bonuses,  incentive
                  compensation,  employee  benefits  or any  non-salary  form of
                  compensation  (determined  without  regard to any reduction in
                  Annual  Base  Salary  that  results in  Executive's  voluntary
                  termination with Good Reason, under sections 1.2(n) and 2.3).

                           (c) Associate, with respect to any Person, is defined
                  in Rule 12b-2 under the Exchange Act; provided,  however, that
                  an Associate shall not include the Parent or a  majority-owned
                  subsidiary of the Parent.

                           (d)  Bonus  means  the  Executive's  bonus  or  other
                  similar  payment from the Company or the Parent,  whether paid
                  in cash or shares of the Parent's  common stock or  otherwise,
                  that is based on the  performance of the Company,  the Parent,
                  or the Executive  during a fiscal year or years,  even if paid
                  after the close of the fiscal  year.  The term  "Bonus"  shall
                  include, without limitation, for 1996, restricted stock awards
                  granted in 1996 in lieu of  amounts  paid under the bonus pool
                  (which awards shall be deemed to have a value, solely for this
                  purpose,  equal to the Fair Market  Value on the date of grant
                  of all shares subject to the award, whether or not such shares
                  were vested on the date of grant);  and for 1997, amounts paid
                  under the  Company's  annual bonus pool.  Notwithstanding  the
                  foregoing,  for  purposes of  calculating  Base Period  Income
                  under  section 2.5,  the figure used as a Bonus (or  projected
                  Bonus, for purposes of section 2.5(b)(ii)) for any fiscal year
                  shall  be the  greater  of  (i)  the  actual  Bonus  paid  (or
                  projected,  for purposes of section 2.5(b)(ii)) for that year,
                  or (ii) the Bonus that would have been paid if (A)  reductions
                  that  would  permit a  termination  with Good  Reason  had not
                  occurred,  and (B) the discretionary  portion of the Bonus was
                  paid at the higher of "target" or actual levels.

                           (e)  "Cause,"  means  (i)  willful,   deliberate  and
                  continued  failure by the Executive  (other than for reason of
                  mental or  physical  illness or  Disability)  to  perform  his
                  duties as  established  by the  Company's  Board,  or fraud or
                  dishonesty in connection with such duties,  in either case, if
                  such  conduct  has a  materially  detrimental  effect  on  the
                  business operations of the Company;  (ii) a material breach by
                  the  Executive of his  fiduciary  duties of loyalty or care to
                  the Company or the Parent;  (iii)  conviction of any crime (or
                  upon entering a plea of guilty or nolo  contendere to a charge
                  of any crime) constituting a felony; (iv)  misappropriation of
                  funds or property;  or (v) willful,  flagrant,  deliberate and
                  repeated   infractions  of  material  published  policies  and
                  regulations  of the Company of which the  Executive has actual
                  knowledge.

                           (f)  Change  in  Control  means  (i) a  Person  is or
                  becomes an Acquiring Person; (ii) holders of the securities of
                  the Parent entitled to vote thereon approve any agreement with
                  a Person (or, if such  approval is not required by  applicable
                  law and is not solicited by the Parent, the closing of such an
                  agreement)  that  involves  the  transfer  of at  least  fifty
                  percent  (50%) of the  Parent's  and its  subsidiaries'  total
                  assets on a consolidated basis, as reported in the Parent's





<PAGE>



                  consolidated  financial  statements  filed with the Securities
                  and Exchange  Commission;  (iii) holders of the  securities of
                  the Parent entitled to vote thereon approve a transaction (or,
                  if such approval is not required by applicable  law and is not
                  solicited  by the Parent,  the closing of such a  transaction)
                  pursuant   to  which  the  Parent   will   undergo  a  merger,
                  consolidation,  or  statutory  share  exchange  with a Person,
                  regardless  of  whether  the  Parent  is  intended  to be  the
                  surviving or resulting entity after the merger, consolidation,
                  or statutory  share  exchange,  other than a transaction  that
                  results in the voting  securities  of the Parent  carrying the
                  right to vote in elections  of persons to the  Parent's  Board
                  outstanding   immediately   prior  to  the   closing   of  the
                  transaction  continuing  to  represent  (either  by  remaining
                  outstanding or by being  converted  into voting  securities of
                  the  surviving   entity)  at  least  66  2/3%  (sixty-six  and
                  two-thirds percent) of the Parent's voting securities carrying
                  the right to vote in  elections  of  persons  to the  Parent's
                  Board,   or  such   securities  of  such   surviving   entity,
                  outstanding immediately after the closing of such transaction;
                  (iv)  the  Continuing   Directors  cease  for  any  reason  to
                  constitute  a majority of the Parent's  Board;  (v) holders of
                  the securities of the Parent  entitled to vote thereon approve
                  a plan of complete  liquidation  of the Parent or an agreement
                  for the sale or liquidation by the Parent or its  subsidiaries
                  of  substantially  all of the  assets  of the  Parent  and its
                  subsidiaries   (or,  if  such  approval  is  not  required  by
                  applicable  law  and  is not  solicited  by  the  Parent,  the
                  commencement  of  actions  constituting  such  a  plan  or the
                  closing  of such an  agreement);  or (vi) the  Parent's  Board
                  adopts a resolution to the effect that, in its judgment,  as a
                  consequence  of any  one or more  transactions  or  events  or
                  series of transactions  or events,  a Change in Control of the
                  Company or the Parent has effectively  occurred.  The Parent's
                  Board  shall be entitled  to  exercise  its sole and  absolute
                  discretion  in  adopting  any  such  resolution   pursuant  to
                  subparagraph (vi) above and in determining  whether or not any
                  such transaction(s) or event(s) might be deemed,  individually
                  or  collectively,  to  constitute  a Change in  Control of the
                  Company or the Parent.

                           (g)      Company's Board means the Board of Directors
                  of the Company.

                           (h)  Continuing  Director  means  any  member  of the
                  Parent's  Board,  while a member of the Parent's Board and (i)
                  who was a member of the  Parent's  Board on the date hereof or
                  (ii) whose  nomination  for or election to the Parent's  Board
                  was  recommended  or approved by a majority of the  Continuing
                  Directors.

                           (i) Control  Affiliate,  with  respect to any Person,
                  means an affiliate as defined in Rule 12b-2 under the Exchange
                  Act.

                           (j)  Control  Change  Date  means the date on which a
                  Change in Control  occurs.  If a Change in  Control  occurs on
                  account of a series of transactions, the "Control Change Date"
                  is the date of the last of such transactions.

                           (k)  Disability  means a complete  physical or mental
                  inability,  confirmed by an independent licensed physician, to
                  perform  substantially  all of  the  services  required  of an
                  employee in Executive's  position with the Company immediately
                  before   Executive   first  became  unable  to  perform  those
                  services,  that  continues  for a period of two hundred  forty
                  (240)  consecutive  days,  provided that the Company has given
                  advance written notice to Executive of





<PAGE>



                  its  determination of such  Disability,  and Executive has not
                  resumed  performance of such services  within thirty (30) days
                  of such notice.

                           (l)      Exchange Act means the Securities Exchange
                  Act of 1934, as amended.

                           (m) Fair Market Value has the same meaning given that
                  term in the Parent's 1994 Stock Incentive Plan, as amended and
                  in effect from time to time.

                           (n) Good  Reason  means the  Executive's  resignation
                  from the Company's employment on account of one or more of the
                  following events:

                                    (i) the failure by the Parent's Board or the
                  Company's  Board (as  applicable)  to reelect the Executive to
                  Executive's  current  position with the Company and the Parent
                  (as of the Control Change Date), provided the Executive elects
                  to leave the Company's or Parent's  employment  within six (6)
                  months  of  such  failure  to  so  reelect  or  reappoint  the
                  Executive;

                                    (ii) a material  diminution  by the Parent's
                  Board or the Company's  Board (as  applicable)  of the duties,
                  functions  and   responsibilities  of  the  Executive  as  the
                  Executive Vice President of Finance, Secretary,  Treasurer and
                  Chief  Financial   Officer  of  the   Company/Executive   Vice
                  President of Finance, Secretary, Treasurer and Chief Financial
                  Officer  of the  Parent  without  his  consent  within six (6)
                  months  of such  diminution  of  duties,  responsibilities  or
                  functions; or

                                    (iii)  the  failure  of the  Company  or the
                  Parent   to   permit   the    Executive   to   exercise   such
                  responsibilities   as  are  consistent  with  the  Executive's
                  position  and are of such a nature as are  usually  associated
                  with such offices of a  corporation  engaged in  substantially
                  the same business as the Company or the Parent;

                                    (iv) the  Company's or the Parent's  causing
                  the Executive to relocate his employment  more than fifty (50)
                  miles from  Memphis,  Tennessee,  without  the  consent of the
                  Executive;

                                    (v)    the Parent's or the Company's failure
                  to make (or the Parent's failure to cause the Company to make)
                  a payment when due to the Executive;

                                    (vi) the  Company's  reduction,  during  the
                  Employment  Period, of the Executive's (A) Annual Base Salary,
                  as such may be  increased  from time to time after the date of
                  this Agreement;  (B) Bonus, such that the aggregate threshold,
                  target,  or maximum Bonus projected for Executive for a fiscal
                  year  are  lower  than  the  greater  of  (1)  the   aggregate
                  threshold,  target, or maximum Bonus, respectively,  projected
                  for the Executive for the immediately preceding fiscal year or
                  (2)  the  aggregate  threshold,   target,  or  maximum  Bonus,
                  respectively,  projected most recently prior to the Employment
                  Period for the Executive;  or (C) employee welfare,  fringe or
                  pension  benefits,  other  than  reductions  determined  to be
                  necessary  to  comply  with  the  Employee  Retirement  Income
                  Security   Act  of  1974,   as  amended,   or  to  retain  the
                  tax-qualified  or tax-favored  status of the benefit under the
                  Code, which  determination shall be made by the Parent's Board
                  in good  faith.  For  purposes of section  1.2(vi)(C),  awards
                  under the 1994 Plan,  and other  compensatory  awards  granted
                  with  respect to the  Parent's  capital  stock under any other
                  plan or outside of a plan,  shall not be considered  "employee
                  benefits"  and shall be  subject  to  reduction  except to the
                  extent those awards are otherwise  subject to  restrictions on
                  reductions in Bonus levels under section 1.2(vi)(B); or

                                    (vii) the Company,  the Company's Board, the
                  Parent or the Parent's  Board  directs  Executive to engage in
                  unlawful  or  unethical  conduct  or conduct  contrary  to the
                  Company's or the Parent's good business practices.

                           (o)      Parent's Board means the Board of Directors
                  of the Parent.

                           (p) Person means any human being, firm,  corporation,
                  partnership, or other entity. "Person" also includes any human
                  being,  firm,  corporation,  partnership,  or other  entity as
                  defined in sections 13(d)(3) and 14(d)(2) of the Exchange Act.
                  The term "Person" does not include the Company,  the Parent or
                  any Related  Entity,  and the term Person does not include any
                  employee-benefit plan maintained by the Parent, the Company or
                  any  Related  Entity,  and any  person  or  entity  organized,
                  appointed,  or established  by the Parent,  the Company or any
                  Related  Entity  for or  pursuant  to the  terms  of any  such
                  employee-benefit  plan,  unless  the  Parent's  Board  or  the
                  Company's Board determines that such an employee-benefit  plan
                  or such person or entity is a "Person".

                           (q)  Potential  Change in Control  means that (i) the
                  Parent's   Board   approves   a   transaction   or  series  of
                  transactions that, if consummated, would result in a Change in
                  Control;  (ii) any Person, the Company,  or the Parent makes a
                  public  announcement  of its  intention  to take  or  consider
                  taking actions that would result in a Change in Control; (iii)
                  any Person  initiates a tender  offer which,  if  consummated,
                  would  result in a Change  in  Control;  or (iv) the  Parent's
                  Board adopts a resolution to the effect that, in its judgment,
                  as a consequence of any one or more  transactions or events or
                  series  of  transactions  or  events,  a  Potential  Change in
                  Control of the Company or the Parent has effectively occurred.
                  The Parent's  Board shall be entitled to exercise its sole and
                  absolute  discretion in adopting any such resolution  pursuant
                  to subparagraph  (iv) above and in determining  whether or not
                  any  such   transaction(s)   or  event(s)   might  be  deemed,
                  individually or collectively, to constitute a Potential Change
                  in Control of the Company or the Parent.

                           (r) Related Entity means any entity that is part of a
                  controlled  group of  corporations  or is under common control
                  with the Parent within the meaning of section 1563(a),  414(b)
                  or 414(c) of the  Internal  Revenue  Code of 1986,  as amended
                  (the "Code").

                  ARTICLE 2.  TERMINATION OF EMPLOYMENT.

                  2.1 General.  Executive  is entitled to receive a  Termination
Payment  according to the remaining  provisions of this Article 2 if Executive's
employment  with the Company  terminates  during the term of this  Agreement and
during an Employment  Period (as defined below) because of an event described in
either





<PAGE>



section  2.2 or 2.3.  An  Employment  Period  begins  on the  occurrence  of any
Potential Change in Control.  An Employment Period also begins on the occurrence
of a Control Change Date if, with respect to the Change in Control to which such
Control  Change Date  relates,  no  Potential  Change in Control  occurred (or a
Potential  Change in Control did occur,  but it was  determined  by the Parent's
Board to have been unwound,  reversed or concluded (as provided in the following
sentence)).  If an  Employment  Period  begins on the  occurrence of a Potential
Change in Control,  it will end on the earlier of (i) the date (if any) that the
events constituting the Potential Change in Control have been unwound,  reversed
or concluded  such that the events are no longer  expected to result in a Change
in Control,  as determined by the Parent's Board in good faith, or (ii) eighteen
(18) months  following the Control Change Date to which the Potential  Change of
Control  relates.  If an Employment  Period begins on a Control  Change Date, it
will end eighteen (18) months  following the Control Change Date. If Executive's
employment  terminates  during an  Employment  Period and an event  described in
section 2.2 or 2.3 has not occurred,  or Executive's  employment terminates as a
result of his death or Disability, this Agreement terminates.

                  2.2  Termination  by the  Company.  Executive  is  entitled to
receive a  Termination  Payment if  Executive's  employment is terminated by the
Company during an Employment  Period without  Cause.  If the Company  desires to
discharge the Executive for Cause (the "Cause Exception"),  it shall give notice
to the Executive as provided in section 2.7 and the Executive  shall have thirty
(30) days after notice has been given to him in which to cure the reason for the
Company's  exercise  of the Cause  Exception.  If the reason  for the  Company's
exercise of the Cause  Exception is timely cured by the Executive (as determined
by a majority of the members of the Company's  Board  following a hearing),  the
Company's notice of discharge shall become null and void.

                  2.3 Voluntary Termination.  Executive is entitled to receive a
Termination  Payment if Executive  voluntarily  terminates  employment during an
Employment Period with Good Reason.

                  2.4 Termination  Payment.  The Parent shall pay or shall cause
the Company to pay a Termination  Payment  equal to three (3) times  Executive's
Base Period  Income (as  determined  under section 2.5) in a single sum payment,
net of any  required  tax  withholding,  in cash.  The  Termination  Payment  to
Executive  shall be made not later than the thirtieth  (30th) business day after
Executive's  employment  termination in accordance  with section 2.2 or 2.3 (the
"Payment Date"). Notwithstanding the foregoing, if the amount of the Termination
Payment  cannot be finally  determined on or before the Payment Date, the Parent
shall pay or shall cause the Company to pay on the Payment Date an estimate,  as
determined  in  good  faith  by  the  Company,  of  the  minimum  amount  of the
Termination  Payment. Any portion of the Termination Payment that is not made on
the Payment Date shall bear interest at a rate equal to one-hundred twenty (120)
percent of the monthly  compounded  applicable  federal rate, as in effect under
section  1274(d) of the Code for the month in which the Payment Date occurs.  In
the  event  that  the  amount  of  the  estimated  payment  exceeds  the  amount
subsequently determined to have been due, such excess shall constitute a loan by
the payor,  payable on the fifth day after  demand by the Parent or the Company,
as applicable,  with interest at the rate provided under section  1274(d) of the
Code until paid.

                  2.5      Base Period Income.  Base Period Income for the
Executive equals the sum of (a) and (b), as determined below:



<PAGE>


                  (a)      Average Annual Base Salary, determined as follows:


                           (i) twelve times: (A) the monthly rate of Annual Base
                           Salary to which the  Executive is entitled on the day
                           prior to his  termination  (the  "Salary  Measurement
                           Date");  plus (B) the  monthly  rate of  Annual  Base
                           Salary to which the  Executive  was  entitled  twelve
                           months  prior  to the  Salary  Measurement  Date,  if
                           Executive  was  employed by the Company or the Parent
                           on that  date;  plus (C) the  monthly  rate of Annual
                           Base  Salary  to which  the  Executive  was  entitled
                           twenty-four  months  prior to the Salary  Measurement
                           Date, if Executive was employed by the Company or the
                           Parent  on  that  date  (with   Annual   Base  Salary
                           determined  in each case in  accordance  with section
                           1.2(b));

                           (ii)  divided  by:  (A)  one,  if  Executive  was not
                           employed by the Company or the Parent  twelve  months
                           prior to the Salary  Measurement  Date;  (B) two,  if
                           Executive  was  employed by the Company or the Parent
                           twelve months (but not  twenty-four  months) prior to
                           the  Salary   Measurement  Date;  or  (C)  three,  if
                           Executive  was  employed by the  Company  twenty-four
                           months prior to the Salary Measurement Date;

                  plus

                  (b)      Average Bonus, determined as either:

                           (i) the sum of the  Bonuses  paid to or earned by the
                           Executive  for the  three  fiscal  years  immediately
                           preceding   the   year  in  which   the   Executive's
                           employment  with the Company  terminates,  divided by
                           the number of such fiscal years for which a Bonus was
                           paid to or earned by the Executive;  provided that if
                           the  Executive  was paid or  earned  a Bonus  for any
                           fiscal  year  that was pro  rated  based  on  partial
                           year's employment, such Bonus shall be annualized for
                           purposes of calculating Base Period Income; or

                           (ii) if Executive earned no Bonus for any fiscal year
                           prior to the year in which  his  employment  with the
                           Company terminates, his "target" Bonus for the fiscal
                           year  in  which  his  employment   with  the  Company
                           terminates shall be his Average Bonus for purposes of
                           calculating Base Period Income.

                           All Bonuses shall be  determined  in accordance  with
                           section 1.2(d),  including provisions that specify an
                           amount to be used in lieu of the Bonus  actually paid
                           or projected  for a fiscal year.  The  provisions  of
                           this   section   2.5(b)   and   section   1.2(d)  are
                           illustrated by the following examples:

                           Example.  Assume a Potential Change in Control occurs
                           (and thus an Employment  Period  begins) in December,
                           1998,  and   Executive's   employment  is  terminated
                           without  Cause in  January,  1999.  For  purposes  of
                           calculating    Executive's    Base   Period   Income,
                           Executive's Bonuses for the years 1996, 1997 and 1998
                           would be  averaged.  Assume that  Executive  received
                           7,500 shares of restricted stock in December, 1996 in
                           lieu of a payment under the bonus pool,  and that the
                           Fair  Market  Value of the  shares on date the shares
                           were issued was $13.50. Further assume that Executive
                           received  a payment  under  the bonus  pool for 1997,
                           taken part in cash ($150,000) and part in shares of





<PAGE>



                           Common Stock (7,500 shares,  with a Fair Market Value
                           on the date the  shares  were  issued of  $14.00  per
                           share).  Finally,  assume that (i)  Executive's  1998
                           Bonus  performance  measures,  as  established by the
                           Compensation  Committee of the Parent's Board,  had a
                           "corporate"  and  an  "individual"  component,   (ii)
                           Executive's Bonus would be $275,000,  if the "target"
                           Bonus was paid for both the corporate and  individual
                           components  of the award,  and (iii) the target Bonus
                           was earned for both components of the award.

                                    Executive's average Bonus, for purposes of
                           calculating his Base Period Income would be
                           $210,416.67 ([$101,250 for 1996 + $255,000 ($150,000
                           + $105,000) for 1997 + $275,000 for 1998] / 3).

                           Example.  Assume the same  "target"  Bonus levels for
                           1998 as set forth  above.  Further  assume that (i) a
                           Potential  Change in Control  occurs (and,  thus, the
                           Employment Period begins) in January, 1999; (ii) each
                           of the Bonus projections  subsequently established by
                           the  Compensation  Committee for the 1999 fiscal year
                           are set at a level lower than the corresponding Bonus
                           level  projections  for 1998;  and (iii)  Executive's
                           employment  is  terminated  without Cause in January,
                           1999. Finally,  assume that (i) corporate performance
                           for fiscal 1999 met "target"  levels of  achievement;
                           and (ii) the Compensation  Committee  determined that
                           the individual  component of the Bonus for 1999 would
                           be  paid  at  "target"  levels.  Executive's  average
                           Bonus,  for purposes of  calculating  his Base Period
                           Income  would be  $268,333.34  ([$255,000  for 1997 +
                           $275,000  for 1998 + $275,000  for 1999]).  Note that
                           "target" levels for both the corporate and individual
                           component  as  established   for  1998  are  used  to
                           calculate  the average  Bonus,  because the  "target"
                           levels  established for 1999 were lower than "target"
                           levels   established   for  1998  -  and  would  have
                           permitted a termination for Good Reason.

                  2.6  Other  Severance  Benefits.  In the  event  Executive  is
entitled to a  Termination  Payment under section 2.4, he shall also be entitled
to the following benefits and other rights:

                           (a) Accrued but unpaid Annual Base Salary through the
                  date that Executive's employment terminates,  which the Parent
                  shall  pay or  cause  the  Company  to pay no  later  than the
                  Payment Date (as defined in section 2.4);

                           (b)  Payment of a Bonus for the fiscal  year in which
                  Executive's  employment  terminates,  pro  rated  based on the
                  number of days of such year  prior to the date of  Executive's
                  termination,  with such Bonus being  calculated as a pro rated
                  portion of the "target" Bonus projected for Executive for that
                  year (determined  without regard to any reduction that results
                  in Executive's termination with Good Reason), which the Parent
                  shall  pay or  cause  the  Company  to pay no  later  than the
                  Payment Date;

                           (c)  Payment of any unpaid  Bonus for any fiscal year
                  prior to the year in which Executive's  employment  terminates
                  with any  discretionary  portion  of the Bonus  being  paid at
                  "target"   levels   or   higher   for   such   year   and  any
                  non-discretionary portion of the Bonus being paid





<PAGE>



                  based  on  actual  levels  of  corporate   achievement   (each
                  determined  without  regard to any  reduction  that results in
                  Executive's  termination  with Good Reason),  which the Parent
                  shall  pay or  cause  the  Company  to pay no  later  than the
                  Payment Date;

                           (d) Forgiveness of all loans made to Executive by the
                  Company  or the  Parent  and  outstanding  as of the  date  of
                  Executive's  termination of employment with the Company (other
                  than the loan  deemed  made by the  Company  to  Executive  in
                  accordance  with the last  sentence  of section 2.4 or section
                  3.3);

                           (e)    Accelerated    vesting,     settlement,     or
                  exercisability  of (i) awards  outstanding  under the Parent's
                  1994 Stock Incentive Plan;  (ii)  compensatory  awards granted
                  with  respect to the  Parent's  capital  stock under any other
                  plan or  outside of a plan (in each  case,  including  without
                  limitation  restricted  stock awards,  performance  shares and
                  stock options);  (iii) Executive's  balance under the Parent's
                  Deferred  Compensation Plan; and (iv) benefits under any other
                  non-tax-qualified plan of the Company or the Parent in which a
                  portion  of  an  award  or  benefit   would  be  lost  through
                  termination of employment;  provided that, in each case,  such
                  acceleration  shall  occur  as  of  the  date  of  Executive's
                  termination  of  employment  (if  such  acceleration  has  not
                  previously occurred);

                           (f) A payment  equal to the  portion  of  Executive's
                  account balance under any defined  contribution  tax-qualified
                  pension  plan of the  Company  or the  Parent  forfeited  as a
                  result of  failure  to  satisfy  vesting  requirements  due to
                  Executive's termination of employment,  which the Parent shall
                  pay or cause  the  Company  to pay no later  than the  Payment
                  Date;

                           (g)  Continuation,  for the longer of  eighteen  (18)
                  months following the date of termination of employment, or the
                  period mandated, in the case of group health plan coverage, by
                  the Consolidated Omnibus Budget Reconciliation Act of 1985, as
                  amended,  of all of Executive's  insurance benefits (including
                  without  limitation  medical,  dental,  and  vision  insurance
                  benefits) and any other medical, dental or vision benefits (if
                  not insured) on the same terms as in effect  immediately prior
                  to Executive's  termination  (determined without regard to any
                  reduction  that results in Executive's  termination  with Good
                  Reason); provided that any such benefits in effect immediately
                  prior to  Executive's  termination  shall be made available to
                  the Executive for the period stated above even if they must be
                  secured by the  Company  or the Parent  outside of any plan or
                  group insurance policy; and

                           (h) Any other benefits accrued by the Executive as of
                  the date of his termination of employment,  including  without
                  limitation  accrued vacation,  in accordance with the terms of
                  the  plan,  agreement  or other  arrangement  under  which the
                  benefit was  established,  which the Parent shall pay or cause
                  the Company to pay no later than the Payment Date.

                  2.7 Notice of  Termination.  Any  termination  by the  Company
under  the  Cause  Exception  or by the  Executive  for  Good  Reason  shall  be
communicated by Notice of Termination to the other party hereto. For purposes of
sections  2.2,  2.3 and 2.4, a "Notice of  Termination"  means a written  notice
which (i) indicates the specific termination  provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and  circumstances  claimed
to  provide a basis for  termination  of the  Executive's  employment  under the
provision so indicated and (iii) if the termination date is other than the date
of receipt of such notice, specifies the effective date of termination.





<PAGE>



                  ARTICLE 3.  TAX MATTERS.

                  3.1  Indemnification.  If the excise tax on "excess  parachute
payments,"  as  defined  in  section  280G of the Code,  will be  imposed on the
Executive under Code section 4999 as a result of the Executive's  receipt of the
Termination  Payment  or any other  payment,  benefit or  compensation  (without
regard to the "Additional  Amount" described below) which the Executive receives
or has the  right to  receive  from the  Company  or the  Parent or any of their
affiliates (the "Change in Control Benefits"),  the Company and the Parent shall
indemnify  the  Executive  and hold him  harmless  against all  claims,  losses,
damages, penalties,  expenses, and excise taxes. To effect this indemnification,
the  Parent  shall  pay or  cause  the  Company  to pay  to  the  Executive  the
"Additional  Amount"  described in this section 3.1. The Additional Amount shall
be the amount that is sufficient  to indemnify  and hold the Executive  harmless
from the application of Code sections 280G and 4999, including the amount of (i)
the excise tax that will be imposed on the  Executive  under section 4999 of the
Code with respect to the Change in Control  Benefits;  (ii) the  additional  (A)
excise tax under  section  4999 of the Code,  (B) hospital  insurance  tax under
section  3111(b) of the Code and (C)  federal,  state and local income taxes for
which the Executive is or will be liable on account of the payment of the amount
described  in item (i); and (iii) the further  excise,  hospital  insurance  and
income  taxes for which the  Executive  is or will be liable on  account  of the
payment of the amount  described  in item (ii) and this item (iii) and any other
indemnification  payment under this section 3.1. The Additional  Amount shall be
calculated and paid to the Executive at the time that the Termination Payment is
paid to the  Executive.  In  calculating  the  Additional  Amount,  the  highest
marginal rates of federal and applicable state and local income taxes applicable
to individuals  and in effect for the year in which the Change in Control occurs
shall be used.  Nothing in this paragraph  shall give the Executive the right to
receive  indemnification  from the Company or the Parent for  federal,  state or
local income taxes or hospital insurance taxes payable solely as a result of the
Executive's  receipt  of (a) the  Termination  Payment,  or (b)  any  additional
payment,  benefit or compensation other than additional compensation in the form
of the excise tax payment  specified in item (i),  above.  As specified in items
(ii) and (iii),  above,  all income,  hospital  insurance and additional  excise
taxes  resulting  from  additional  compensation  in the form of the  excise tax
payment specified in item (i), above, shall be paid to the Executive.

                  3.2      Example. The provisions of section 3.1 are
illustrated by the following example:

                  Assume that the  Termination  Payment and all other  Change in
Control  Benefits  result in a total  federal,  state and local  income  tax and
hospital insurance tax liability of $180,000;  and an excise tax liability under
Code section 4999 of $70,000. Under such circumstances,  the Executive is solely
responsible  for the $180,000 income and hospital  insurance tax liability;  and
the Parent must pay or cause the Company to pay to the Executive  $70,000,  plus
an amount necessary to indemnify the Executive for all federal,  state and local
income taxes,  hospital  insurance taxes, and excise taxes that will result from
the $70,000 payment to the Executive and from all further indemnification to the
Executive of taxes attributable to the initial $70,000 payment.

                  3.3 Estimated Payment.  Notwithstanding the foregoing,  if the
Additional Amount cannot be finally determined on or before the Payment Date (as
defined in section 2.4), the Parent shall pay or cause the Company to pay on the
Payment Date an estimate,  as  determined  in good faith by the Company,  of the
minimum





<PAGE>



amount of the Additional  Amount.  Any portion of the Additional  Amount that is
not made on the Payment Date shall bear interest at a rate equal to  one-hundred
twenty (120) percent of the monthly  compounded  applicable  federal rate, as in
effect under section 1274(d) of the Code for the month in which the Payment Date
occurs. In the event that the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by
the payor,  payable on the fifth day after  demand by the Parent or the Company,
as applicable,  with interest at the rate provided under section  1274(d) of the
Code until paid.

                  ARTICLE 4. MITIGATION.  The Executive shall not be required to
mitigate  damages or the amount of any payment provided for under this Agreement
by seeking or accepting other employment or otherwise,  and compensation  earned
from such employment or otherwise shall not reduce the amounts otherwise payable
under this Agreement.

                  ARTICLE 5.          RESTRICTION ON CONDUCT OF EXECUTIVE.

                  5.1 General.  The  Executive  and the Company  understand  and
agree  that the  purpose  of the  provisions  of this  Article  5 is to  protect
legitimate business interests of the Company and Parent, as more fully described
below,  and is not intended to impair or infringe upon the Executive's  right to
work,  earn a living,  or acquire  and possess  property  from the fruits of his
labor. The Executive hereby acknowledges that the post- employment  restrictions
set forth in this Article 5 are  reasonable  and that they do not, and will not,
unduly  impair  his  ability  to earn a  living  after  the  termination  of his
employment  with  the  Company.   Therefore,   subject  to  the  limitations  of
reasonableness  imposed by law upon  restrictions  set forth  herein,  Executive
shall be subject to the restrictions set forth in this Article 5.

                  5.2 Definitions.  The following capitalized terms used in this
Article 5 shall have the  meanings  assigned  to them below,  which  definitions
shall apply to both the singular and the plural forms of such terms:

                           (a) Confidential  Information  means any confidential
                  or  proprietary  information  possessed  by the  Company,  the
                  Parent or a Related Entity, including without limitation,  any
                  confidential "know-how",  customer lists, details of client or
                  consultant   contracts,   current  and  anticipated   customer
                  requirements,  pricing policies,  price lists, market studies,
                  business  plans,  operational  methods,   marketing  plans  or
                  strategies,  product development techniques or plans, computer
                  software  programs  (including  object code and source  code),
                  data  and  documentation,  data  base  technologies,  systems,
                  structures  and  architectures,  inventions  and ideas,  past,
                  current  and planned  research  and  development,  acquisition
                  plans,   new  personnel   acquisition   plans  and  any  other
                  information  that would constitute a trade secret under common
                  law or the laws of the State of Tennessee.

                           (b) Determination  Date means the date of termination
                  of  Executive's  employment  with the  Company  for any reason
                  whatsoever or any earlier date (during the Restricted  Period)
                  of an  alleged  breach  of the  Restrictive  Covenants  by the
                  Executive.

                           (c)  Principal or  Representative  means a principal,
                  owner, partner, shareholder,  joint venturer, member, trustee,
                  director, officer, manager, employee, agent, representative or
                  consultant.





<PAGE>



                           (d)  Protected   Employees  means  employees  of  the
                  Company,  the Parent, or a Related Entity who were employed by
                  the Company, the Parent or a Related Entity at any time within
                  six (6) months prior to the Determination Date.

                           (e) Restricted Period means the period of Executive's
                  employment  with the Company plus a period  extending  two (2)
                  years from the date of termination of employment.

                           (f)  Restrictive   Covenants  means  the  restrictive
                  covenants contained in sections 5.3, 5.4, and 5.5 hereof.

                  5.3   Restriction  on  Disclosure  and  Use  of   Confidential
Information.  Executive understands and agrees that the Confidential Information
constitutes  a valuable  asset of the  Company  and the  Parent,  and may not be
converted to  Executive's  own use.  Accordingly,  Executive  hereby agrees that
Executive shall not,  directly or indirectly,  at any time during the Restricted
Period reveal, divulge or disclose to any Person not expressly authorized by the
Company or the Parent any  Confidential  Information,  and Executive  shall not,
directly or indirectly, at any time during the Restricted Period use or make use
of any Confidential  Information in connection with any business  activity other
than that of the Company,  the Parent or a Related  Entity and,  upon request by
the  Company  or the  Parent,  shall  return  all  copies  of  any  Confidential
Information then in the Executive's  possession as of the date of termination of
his  employment.  The parties  acknowledge  and agree that this Agreement is not
intended  to be,  and  does  not,  alter  either  the  Company's  rights  or the
Executive's  obligations  under any state or  federal  statutory  or common  law
regarding trade secrets and unfair trade practices.

                  5.4   Nonsolicitation   of  Protected   Employees.   Executive
understands and agrees that the relationship between the Company, the Parent, or
a Related  Entity and each of the  Protected  Employees  constitutes  a valuable
asset of the Company or the Parent and may not be converted for  Executive's own
use.  Accordingly,  Executive  hereby agrees that during the Restricted  Period,
Executive  shall not directly or  indirectly on  Executive's  own behalf or as a
Principal or  Representative  of any Person  solicit any  Protected  Employee to
terminate  his or her  employment  with the  Company,  the Parent,  or a Related
Entity.

                  5.5  Noninterference  with  Company and Parent  Opportunities.
Executive  understands and agrees that all hotel development  opportunities with
which he is involved during his employment with the Company constitute  valuable
assets of the Company and the Parent and may not be converted to Executive's own
use.  Accordingly,  Executive  hereby agrees that during the Restricted  Period,
Executive  shall not directly or  indirectly on  Executive's  own behalf or as a
Principal or Representative of any Person,  interfere with, solicit,  pursue, or
in any  way  make  use of  the  Company's  or  the  Parent's  hotel  development
opportunities.

                  5.6 Exceptions from Disclosure  Restrictions.  Anything herein
to  the  contrary  notwithstanding,  Executive  shall  not  be  restricted  from
disclosing or using  Confidential  Information that: (i) is or becomes generally
available to the public other than as a result of an unauthorized  disclosure by
Executive or his agent;  (ii) becomes  available to Executive other than through
his  employment  by the  Company  and the Parent and in a manner  that is not in
contravention  of  applicable  law from a source  (other than the  Company,  the
Parent,  or a Related  Entity  or one of their  officers,  employees,  agents or
representatives)  that is not  bound  by a  confidential  relationship  with the
Company,  the  Parent or a Related  Entity or by a  confidentiality  or  similar
agreement;  (iii) was known to the Executive on a non-confidential basis and not
in  contravention  of  applicable  law or a  confidentiality  or  other  similar
agreement before its disclosure to Executive by the Company, the Parent,





<PAGE>



or  a  Related  Entity  or  one  of  their   officers,   employees,   agents  or
representatives;  or (iv) is required  to be  disclosed  by law,  court order or
other legal process; provided, however, that in the event disclosure is required
by  law,  Executive  shall  provide  the  Company  with  prompt  notice  of such
requirement so that the Company or the Parent may seek an appropriate protective
order prior to such required disclosure by Executive.

                  5.7      Enforcement of Covenants.

                           (a) Rights and  Remedies  upon  Breach.  In the event
                  Executive breaches, or threatens to commit a breach of, any of
                  the provisions of the Restrictive  Covenants,  the Company and
                  the  Parent  shall  each have the right and  remedy to enjoin,
                  preliminarily  and  permanently,  Executive  from violating or
                  threatening to violate the  Restrictive  Covenants and to have
                  the Restrictive  Covenants  specifically enforced by any court
                  of competent jurisdiction,  it being agreed that any breach or
                  threatened  breach of the  Restrictive  Covenants  would cause
                  irreparable  injury to the  Company  and the  Parent  and that
                  money  damages  would not  provide an  adequate  remedy to the
                  Company or the Parent. The rights referred to in the preceding
                  sentence  shall be  independent  of any others  and  severally
                  enforceable,  and shall be in addition to, and not in lieu of,
                  any other rights and remedies  available to the Company or the
                  Parent at law or in equity.

                           (b)  Acknowledgment.  The Executive  acknowledges and
                  agrees that the Restrictive Covenants are reasonable and valid
                  in time and  space and in all  other  respects,  and that they
                  will be interpreted in accordance with Article 10.

                  ARTICLE 6.  ATTORNEYS'  FEES.  In the event that the Executive
incurs any  attorneys'  fees in  protecting  or enforcing  his rights under this
Agreement,  the Parent shall  reimburse  or cause the Company to  reimburse  the
Executive  for such  reasonable  attorneys'  fees and for any  other  reasonable
expenses related thereto.  Such  reimbursement  shall be made within thirty (30)
days following final resolution of the dispute or occurrence giving rise to such
fees and expenses.

                  ARTICLE  7.  DECISIONS  BY  COMPANY  OR  PARENT;  FACILITY  OF
PAYMENT.  Any powers  granted to the Company's  Board or the Parent's  Board (as
applicable) hereunder may be exercised by a committee,  appointed by either such
Board, and such committee,  if appointed,  shall have general responsibility for
the  administration  and  interpretation  of this  Agreement.  If such  Board or
committee  shall  find  that any  person to whom any  amount  is or was  payable
hereunder is unable to care for his affairs  because of illness or accident,  or
has died,  then such Board or  committee,  if it so elects,  may direct that any
payment due him or his estate (unless a prior claim therefore has been made by a
duly appointed legal  representative) or any part thereof be paid or applied for
the benefit of such  person or to or for the benefit of his spouse,  children or
other dependents,  an institution  maintaining or having custody of such person,
any other person  deemed by such Board or committee to be a proper  recipient on
behalf of such person  otherwise  entitled to payment,  or any of them,  in such
manner and  proportion  as such Board or  committee  may deem  proper.  Any such
payment  shall be in complete  discharge of the liability of the Company and the
Parent therefor.






<PAGE>



                  ARTICLE 8.  INDEMNIFICATION.  The Company shall  indemnify the
Executive  during his employment and thereafter to the maximum extent  permitted
by applicable law for any and all liability of the Executive  arising out of, or
in connection with, his employment by the Company or the Parent or membership on
the Company's Board or the Parent's Board (as applicable);  provided, that in no
event shall such indemnity of the Executive at any time during the period of his
employment  by the  Company be less than the maximum  indemnity  provided by the
Company or the Parent at any time  during  such  period to any other  officer or
director under an  indemnification  insurance policy or the bylaws or charter of
the Company or the Parent or by agreement.

                  ARTICLE 9. SOURCE OF PAYMENTS;  NO TRUST.  The  obligations of
the Parent and the Company to make payments  hereunder shall  constitute a joint
and  several  liability  of the Parent and the  Company to the  Executive.  Such
payments  shall be made from the  general  funds of the Parent or the Company or
both,  and neither the Parent nor the Company  shall be required to establish or
maintain any special or separate  fund,  or  otherwise  to  segregate  assets to
assure that such  payments  shall be made,  and neither  the  Executive  nor his
designated  beneficiary  shall have any interest in any particular  asset of the
Parent  or the  Company  by reason of  either  entity's  obligations  hereunder.
Nothing  contained in this Agreement  shall create or be construed as creating a
trust of any kind or any other fiduciary  relationship between the Parent or the
Company and the  Executive  or any other  person.  To the extent that any person
acquires a right to receive payments from the Parent and the Company  hereunder,
such right shall be no greater  than the right of an  unsecured  creditor of the
Parent and the Company.

                  ARTICLE 10.  SEVERABILITY.  All agreements and covenants
contained herein, including the Restrictive Covenants, as defined in Article V,
are severable, and in the event any of them (or any portion thereof) shall be
held to be invalid or unenforceable by any competent court, the remainder of
this Agreement (including the  remainder of the  Restrictive  Covenants if only
a portion  thereof is held invalid or  unenforceable)  shall not thereby be
affected,  shall be given full effect,  and shall be  interpreted  as if such
invalid  agreements,  Restrictive Covenants or other covenants (or portion or
portions thereof) were not contained herein.


                  ARTICLE 11.  ASSIGNMENT PROHIBITED.  This Agreement is
personal to each of the parties hereto, and none of the parties may assign nor
delegate any of his or its rights or obligations hereunder.

                  ARTICLE 12. NO  ATTACHMENT.  Except as  otherwise  provided in
this Agreement or required by applicable law, no right to receive payments under
this Agreement shall be subject to anticipation,  commutation, alienation, sale,
assignment,  encumbrance,  charge,  pledge  or  hypothecation  or to  execution,
attachment,  levy, or similar  process or assignment by operation of law and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.

                  ARTICLE 13.  HEADINGS.  The headings of articles, paragraphs
and sections herein are included solely for convenience of reference and shall
not control the meaning or interpretation of any of the provisions of this
Agreement.

                  ARTICLE  14.  GOVERNING  LAW.  The  parties  intend  that this
Agreement and the  performance  hereunder and all suits and special  proceedings
hereunder  shall be construed in  accordance  with and under and pursuant to the
laws of the State of Tennessee  and that in any action,  special  proceeding  or
other  proceeding that may be brought arising out of, in connection  with, or by
reason of this Agreement, the laws of the State of Tennessee shall be applicable
and shall govern to the exclusion of the law of any other forum, without regard
to the jurisdiction in which any action or special proceeding may be instituted.





<PAGE>



                  ARTICLE 15.  SUCCESSORS; BINDING AGREEMENT.

                  15.1  Successors.  The Company and the Parent will require any
successor of all or substantially all of the business and/or assets of either of
them  (whether  direct  or  indirect,  by  purchase,  merger,  consolidation  or
otherwise) to expressly  assume and agree to perform this  Agreement in the same
manner and to the same extent  that the  Company or Parent  would be required to
perform it if no such  succession  had taken  place.  Failure of the  Company or
Parent to obtain such assumption and agreement prior to the effectiveness of any
such  succession  shall be a breach  of this  Agreement  and shall  entitle  the
Executive to compensation  from the Company or the Parent in the same amount and
on the same  terms  as the  Executive  would  be  entitled  to  hereunder  if he
terminated his employment for Good Reason following a Change in Control,  except
that for  purposes of  implementing  the  foregoing,  the date on which any such
succession   becomes   effective   shall  be  deemed  the  date  of  Executive's
termination.  As used in this  Agreement,  "Company" and "Parent" shall mean the
Company  and the  Parent as  herein  before  defined  and any  successor  to the
respective entity's business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.

                  15.2  Binding  Agreement.  This  agreement  shall inure to the
benefit  of  and  be   enforceable   by  the   Executive's   personal  or  legal
representative,  executors,  administrators,  successors,  heirs,  distributees,
devisees and  legatees.  If the  Executive  should die while any amount  remains
payable to him hereunder,  all such amounts,  unless otherwise  provided herein,
shall be paid in accordance  with the terms of this Agreement to the Executive's
devisee,  legatee or other  designee  or, if there is none,  to the  Executive's
estate.

                  ARTICLE 16. NO  RESTRICTION ON EMPLOYMENT  RIGHTS.  Nothing in
this Agreement shall confer on the Executive any right to continue in the employ
of the Company or the Parent or shall  interfere with or restrict in any way the
rights of the Company or the Parent,  which are hereby  expressly  reserved,  to
discharge the Executive at any time for any reason  whatsoever,  with or without
Cause, subject to the requirements of this Agreement.  Nothing in this Agreement
shall restrict the right of the Executive to terminate his  employment  with the
Company  or the Parent at any time for any  reason  whatsoever,  with or without
Good Reason.

                  ARTICLE 17.  COUNTERPARTS.  This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.

                  ARTICLE 18. ENTIRE  AGREEMENT.  This  Agreement  expresses the
whole and entire agreement  between the parties with reference to the employment
of the Executive and, as of the effective  date hereof,  supersedes and replaces
any prior employment agreement, understanding or arrangement (whether written or
oral) between the Company or the Parent and the  Executive.  Each of the parties
hereto has relied on his or its own judgment in entering into this Agreement.

                  ARTICLE  19.   NOTICES.   All  notices,   requests  and  other
communications  to any party under this Agreement  shall be in writing and shall
be given to such party at its address  set forth below or such other  address as
such party may hereafter specify for the purpose by notice to the other party:





<PAGE>



                           (a)      If to the Executive:

                                    Donald H. Dempsey
                                    4735 Spottswood
                                    Suite 102
                                    Memphis, TN  38117


                           (b)      If to the Company

                                    Equity Inns Services, Inc.
                                    4735 Spottswood
                                    Suite 102
                                    Memphis, TN  38117

                           (c)      If to the Parent:

                                    Equity Inns, Inc.
                                    4735 Spottswood
                                    Suite 102
                                    Memphis, TN  38117


Each such notice, request or other communication shall be effective (i) if given
by mail, 72 hours after such  communication is deposited in the mails with first
class  postage  prepaid,  addressed  as  aforesaid or (ii) if given by any other
means, when delivered at the address specified in this Article 19.

                  ARTICLE 20.  MODIFICATION OF AGREEMENT.  No waiver or
modification of this Agreement or of any covenant, condition, or limitation
herein contained shall be valid unless in writing and duly executed by the party
to be charged  therewith. No  evidence  of any waiver or  modification  shall be
offered or received in evidence at any  proceeding, arbitration,  or  litigation
between the parties hereto arising out of or affecting this Agreement,  or the
rights or obligations of the parties hereunder, unless such waiver or
modification is in writing, duly executed as aforesaid.  The parties  further
agree that the  provisions of this Article 20 may not be waived except as
herein set forth.

                  ARTICLE 21. TAXES.  To the extent  required by applicable law,
the  Company or the  Parent  shall  deduct and  withhold  all  necessary  Social
Security  and  Hospital  Insurance  taxes and all  necessary  federal  and state
withholding taxes and any other similar sums required by law to be withheld from
any payments made pursuant to the terms of this Agreement.

                  ARTICLE 22.  RECITALS.  The Recitals to this Agreement are
incorporated herein and shall constitute an integral part of this Agreement.

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





<PAGE>


                                    EXECUTIVE:


                                    By:     /s/ Donald H. Dempsey
                                            ---------------------
                                            [Name of Executive]



                                    EQUITY INNS SERVICES, INC.:


                                    By:     /s/ Phillip H. McNeill, Sr.
                                            ---------------------------
                                    Title:  CEO
                                            ---------------------------



                                    EQUITY INNS, INC.:


                                    By:     /s/ Phillip H. McNeill, Sr.
                                            ---------------------------
                                    Title:  CEO
                                            ---------------------------