Document:

EXHIBIT 10.20

                                                         FUNB Loan No. 265950357

                                 PROMISSORY NOTE
                                 ---------------

$50,000,000.00                                                 December __, 2000

         FOR VALUE RECEIVED, the undersigned, INNKEEPERS RESIDENCE SAN MATEO,
L.P., a Virginia limited partnership ("Borrower 1"), Innkeepers Residence
Shelton, L.P. d/b/a Innkeepers Shelton Limited Partnership, a Virginia limited
partnership ("Borrower 2"), Innkeepers Residence Atlanta-Downtown, L.P., a
Virginia limited partnership ("Borrower 3"), Innkeepers Residence Arlington
(TX), L.P., a Virginia limited partnership ("Borrower 4"), Innkeepers Residence
Addison (TX), L.P., a Virginia limited partnership ("Borrower 5"), and
Innkeepers RI Altamonte, L.P., a Virginia limited partnership ("Borrower 6";
Borrower 1, Borrower 2, Borrower 3, Borrower 4, Borrower 5 and Borrower 6, are
individually a "Borrower", and collectively, "Maker"), each having an address at
c/o Innkeepers USA Trust, 306 Royal Poinciana Way, Palm Beach, Florida 33480,
jointly and severally, promise to pay to the order of FIRST UNION NATIONAL BANK,
a national banking association ("Payee"), at the office of Payee at One First
Union Center, 301 South College Street, DC-6, Charlotte, North Carolina
28288-0166, or at such other place as Payee may designate to Maker in writing
from time to time, the principal sum of FIFTY MILLION AND NO/100 DOLLARS
($50,000,000.00), together with interest on so much thereof as is from time to
time outstanding and unpaid (the "Loan"), from the date of the advance of the
principal evidenced hereby, at the rate of Seven and seventy-five hundredths
percent (7.75%) per annum (the "Note Rate"), together with all other amounts due
hereunder or under the other Loan Documents (as defined herein), in lawful money
of the United States of America, which shall at the time of payment be legal
tender in payment of all debts and dues, public and private.

                        Article I - TERMS AND CONDITIONS
                        --------------------------------

         1.1.     Computation of Interest. Interest shall be computed hereunder
based on a 360-day year and based on the actual number of days elapsed for any
month in which interest is being calculated. Interest shall accrue from the date
on which funds are advanced hereunder (regardless of the time of day) through
and including the day on which funds are credited pursuant to Section 1.2
hereof.

         1.2.     Payment of Principal and Interest. Payments in federal funds
immediately available at the place designated for payment received by Payee
prior to 2:00 p.m. local time on a day on which Payee is open for business at
said place of payment shall be credited prior to close of business, while other
payments, at the option of Payee, may not be credited until immediately
available to Payee in federal funds at the place designated for payment prior to
2:00 p.m. local time on a day on which Payee is open for business. Payments of
interest only shall be due and payable beginning on the first day of the second
full calendar month following the date

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of this Note (or on the first day of the first full calendar month following the
date hereof, in the event the advance of the principal amount evidenced by this
Note is the first day of a calendar month) (the "First Payment Date"), and
continuing on the first day of each and every calendar month thereafter through
and including the forty-eighth (48th) Payment Date (as hereinafter defined) as
more particularly set forth in Schedule 1 annexed hereto and made a part hereof.
Commencing on the forty-ninth (49th) Payment Date and continuing on the first
day of each and every calendar month thereafter through and including December
1, 2010, payments of principal and interest shall be payable in equal
consecutive monthly installments of $377,664.38. The first day of each and every
calendar month during the term of this Note, commencing with the First Payment
Date, shall hereinafter be referred to as a "Payment Date." On January 1, 2011
(the "Maturity Date"), the entire outstanding principal balance hereof, together
with all accrued but unpaid interest thereon, shall be due and payable in full.

         1.3.     Application of Payments. So long as no Event of Default (as
hereinafter defined) exists hereunder or under any other Loan Document, each
such monthly installment shall be applied first, to any amounts hereafter
advanced by Payee hereunder or under any other Loan Document, second, to any
late fees and other amounts payable to Payee, third, to the payment of accrued
interest and last to reduction of principal.

         1.4.     Payment of "Short Interest". If the advance of the principal
amount evidenced by this Note is made on a date other than the first day of a
calendar month, Maker shall pay to Payee contemporaneously with the execution
hereof interest at the Note Rate for a period from the date hereof through and
including the last day of this calendar month.

         1.5.     Prepayment; Defeasance.

                  (a)      This Note may not be prepaid, in whole or in part
(except as otherwise specifically provided herein), at any time. In the event
that Maker wishes to have any of the Crossed Properties (as hereinafter defined)
comprising the Security Property (as hereinafter defined) released from the lien
of the Security Instrument (as hereinafter defined) encumbering such Crossed
Property (as hereinafter defined), Maker's sole options shall be: (x) a
Defeasance (as hereinafter defined) upon satisfaction of the terms and
conditions set forth in Section 1.5(d) hereof and (y) the substitution and
release of the particular Crossed Property in accordance with Section 4.33 of
the applicable Security Instrument. This Note may be prepaid in whole but not in
part without premium or penalty on any Payment Date occurring within three (3)
months prior to the Maturity Date provided (i) written notice of such prepayment
is received by Payee not more than ninety (90) days and not less than ten (10)
days prior to the date of such prepayment, and (ii) such prepayment is
accompanied by all interest accrued hereunder through and including the date of
such prepayment and all other sums due hereunder or under the other Loan
Documents. If, upon any such permitted prepayment on a Payment Date occurring
within three (3) months prior to the Maturity Date, the aforesaid prior written
notice has not been timely received by Payee, there shall be due a prepayment
fee equal to, an amount equal to the lesser of (i) thirty (30) days' interest
computed at the Note Rate on the outstanding principal balance of this Note so
prepaid and (ii) interest computed at the Note Rate on the outstanding principal
balance of this Note so prepaid that would have been payable for the period
from, and including, the date of prepayment through the Maturity Date of this
Note as though such prepayment had not occurred.

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                  (b)      If, prior to the earlier to occur of (x) the fourth
(4th) anniversary of the First Payment Date and (y) the date which is two years
after the "startup day", within the meaning of Section 860G(a)(9) of the
Internal Revenue Code of 1986, as amended from time to time or any successor
statute (the "Code") of a "real estate mortgage investment conduit" ("REMIC"),
within the meaning of Section 860D of the Code, that holds this Note (the
earlier of (x) and (y), the "Lockout Expiration Date"), the indebtedness
evidenced by this Note shall have been declared due and payable by Payee
pursuant to Article II hereof or the provisions of any other Loan Document due
to a default by Maker, then, in addition to the indebtedness evidenced by this
Note being immediately due and payable, there shall also then be immediately due
and payable a sum equal to the interest which would have accrued on the
principal balance of this Note at the Note Rate from the date of such
acceleration to the Lock-out Expiration Date (such amount being referred to as
the "Foregone Interest"), together with a prepayment fee in an amount equal to
the Yield Maintenance Premium (as hereinafter defined) based on the entire
indebtedness on the date of such acceleration. If such acceleration is on or
following the Lock-out Expiration Date, the Yield Maintenance Premium shall also
then be immediately due and payable as though Maker were prepaying the entire
indebtedness on the date of such acceleration. In addition to the amounts
described in the two preceding sentences, in the event of any such acceleration
or tender of payment of such indebtedness occurs or is made on or prior to the
first (1st) anniversary of the date of this Note, there shall also then be
immediately due and payable an additional prepayment fee of one and one-half
percent (1.5%) of the principal balance of this Note. The term "Yield
Maintenance Premium" shall mean an amount equal to the greater of (A) two
percent (2.0%) of the principal amount being prepaid, and (B) the present value
of a series of payments each equal to the Payment Differential (as hereinafter
defined) and payable on each Payment Date over the remaining original term of
this Note and on the Maturity Date, discounted at the Reinvestment Yield (as
hereinafter defined) for the number of months remaining as of the date of such
prepayment to each such Payment Date and the Maturity Date. The term "Payment
Differential" shall mean an amount equal to (i) the Note Rate less the
Reinvestment Yield, divided by (ii) twelve (12) and multiplied by (iii) the
principal sum outstanding under this Note after application of the constant
monthly payment due under this Note on the date of such prepayment, provided
that the Payment Differential shall in no event be less than zero. The term
"Reinvestment Yield" shall mean an amount equal to the lesser of (i) the yield
on the U.S. Treasury issue (primary issue) with a maturity date closest to the
Maturity Date, or (ii) the yield on the U.S. Treasury issue (primary issue) with
a term equal to the remaining average life of the indebtedness evidenced by this
Note, with each such yield being based on the bid price for such issue as
published in the Wall Street Journal on the date that is fourteen (14) days
prior to the date of such prepayment set forth in the notice of prepayment (or,
if such bid price is not published on that date, the next preceding date on
which such bid price is so published) and converted to a monthly compounded
nominal yield. In the event that any prepayment fee is due hereunder, Payee
shall deliver to Maker a statement setting forth the amount and determination of
the prepayment fee, and, provided that Payee shall have in good faith applied
the formula described above, Maker shall not have the right to challenge the
calculation or the method of calculation set forth in any such statement in the
absence of manifest error, which calculation may be made by Payee on any day
during the fifteen (15) day period preceding the date of such prepayment. Payee
shall not be obligated or required to have actually reinvested the prepaid
principal balance at the Reinvestment Yield or otherwise as a condition to
receiving the prepayment fee.

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                  (c)      Partial prepayments (or a total prepayment) of this
Note shall not be permitted, except for partial prepayments (or a total
prepayment) resulting from Payee's or Maker's (if applicable) election to apply
insurance or condemnation proceeds to reduce the outstanding principal balance
of this Note as provided in the Security Instrument, in which event no
prepayment fee or premium (including, without limitation, the Yield Maintenance
Premium) or the Foregone Interest shall be due unless, at the time of either
Payee's receipt of such proceeds or the application of such proceeds to the
outstanding principal balance of this Note, an Event of Default, or an event
which, with notice or the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, which default or Event of
Default is unrelated to the applicable casualty or condemnation, in which event
the applicable prepayment fee or premium shall be due and payable based upon the
amount of the prepayment. No notice of prepayment shall be required under the
circumstances specified in the preceding sentence. No principal amount repaid
may be reborrowed. Any partial prepayments of principal payable under this
Section 1.5(c) shall be applied to the unpaid principal balance evidenced hereby
but such application shall not reduce the amount of the fixed monthly
installments required to be paid pursuant to Section 1.2 above. Except as
otherwise expressly provided in Section 1.5(a) above or in this Section 1.5(c),
the prepayment fees provided above shall be due, to the extent permitted by
applicable law, under any and all circumstances where all or any portion of this
Note is paid prior to the Maturity Date, whether such prepayment is voluntary or
involuntary, including, without limitation, if such prepayment results from
Payee's exercise of its rights upon Maker's default and acceleration of the
Maturity Date of this Note (irrespective of whether foreclosure proceedings have
been commenced), and shall be in addition to any other sums due hereunder or
under any of the other Loan Documents. No tender of a prepayment of this Note
with respect to which a prepayment fee is due shall be effective unless such
prepayment is accompanied by the applicable prepayment fee.

                  (d)      (i) At any time after the Lockout Expiration Date,
and provided no Event of Default has occurred and is continuing hereunder or
under any of the other Loan Documents, at Maker's option, Payee shall cause the
release (the "Release") of the Security Property or any of the Crossed
Properties (each, a "Designated Parcel"), as applicable, from the lien of the
applicable Security Instrument encumbering such Designated Parcel and the other
Loan Documents (a "Defeasance") upon the satisfaction of the following
conditions:

                           (A) Maker shall give not more than ninety (90) days'
or less than thirty (30) days' prior written notice to Payee specifying the date
Maker intends for the Defeasance to be consummated (the "Release Date"), which
date shall be a Payment Date.

                           (B) All accrued and unpaid interest and all other
sums due under this Note and under the other Loan Documents up to and including
the Release Date shall be paid in full on or prior to the Release Date.

                           (C) Maker shall deliver to Payee on or prior to the
Release Date:

                               (1) a sum of money in immediately available funds
(the "Defeasance Deposit") equal to the outstanding principal balance of this
Note in the event of a Total Defeasance (as hereinafter defined) or the
outstanding Allocated Loan Amount for the

                                      -4-
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Designated Parcel(s) in the event of a Partial Defeasance (as hereinafter
defined) plus an amount, if any, which together with the outstanding principal
balance of this Note in the event of a Total Defeasance or the outstanding
Allocated Loan Amount for the Designated Parcel(s) in the event of a Partial
Defeasance, shall be sufficient to enable Payee to purchase, through means and
sources customarily employed and available to Payee, for the account of Maker,
direct, non-callable obligations of the United States of America (or other
collateral acceptable to the applicable rating agencies rating the securities
issued in the Secondary Market Transaction of which the Loan is a part thereof)
that provide for payments prior, but as close as possible, to all successive
monthly Payment Dates occurring after the Release Date and to the Maturity Date,
with each such payment being equal to or greater than the amount of the
corresponding installment of principal and/or interest required to be paid (x)
under this Note (including, but not limited to, all amounts due on the Maturity
Date) in the event that the entire Loan is subject to a defeasance (a "Total
Defeasance") and the Release is to be applicable for the entire Security
Property, or (y) on account of the Allocated Loan Amount for the Designated
Parcel(s) which is the subject of the Release (including, but not limited to,
all amounts due on account of the Allocated Loan Amount on the Maturity Date) in
the event that only a portion of the Loan is subject to a defeasance (a "Partial
Defeasance") and the Release is to be applicable to one or more (but not all) of
the Designated Parcels, for the balance of the term hereof (the "Defeasance
Collateral"), each of which shall be duly endorsed by the holder thereof as
directed by Payee or accompanied by a written instrument of transfer in form and
substance satisfactory to Payee in its sole discretion (including, without
limitation, such instruments as may be required by the depository institution
holding such securities or the issuer thereof, as the case may be, to effectuate
book-entry transfers and pledges through the book-entry facilities of such
institution) in order to perfect upon the delivery of the Defeasance Security
Agreement (as hereinafter defined) the first priority security interest in the
Defeasance Collateral in favor of Payee in conformity with all applicable state
and federal laws governing granting of such security interests.

                               (2) A pledge and security agreement, in form and
substance satisfactory to Payee in its sole discretion, creating a first
priority security interest in favor of Payee in the Defeasance Collateral (the
"Defeasance Security Agreement"), which shall provide, among other things, that
any excess received by Payee from the Defeasance Collateral over the amounts
payable by Maker hereunder, or under the Defeased Note (as hereinafter defined),
if applicable, shall be refunded to Maker promptly after each monthly Payment
Date.

                               (3) A certificate of Maker certifying that all of
the requirements set forth in this subsection 1.5(d)(i) have been satisfied.

                               (4) An opinion of counsel for Maker in form and
substance and delivered by counsel reasonably satisfactory to Payee stating,
among other things, that (w) Payee has a perfected first priority security
interest in the Defeasance Collateral, (x) the Defeasance Security Agreement is
enforceable against Maker in accordance with its terms, (y) the contemplated
defeasance in accordance with and subject to the terms and conditions of this
Note will not result in any deemed exchange of the Note pursuant to Section 1001
of the Code and will not adversely affect the Note's status as indebtedness for
Federal income tax purposes and (z) any trust formed as a REMIC in connection
with a Secondary Market Transaction (as defined in the Security Instrument) will
not fail to maintain its status as a REMIC as a result of

                                      -5-
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such defeasance in accordance with and subject to the terms and conditions of
this Note or be subject to a tax on a prohibited transaction under Section
860(f)(a) of the Code.

                               (5) Evidence in writing from the applicable
rating agencies to the effect that the collateral substitution will not by
itself result in a downgrading, withdrawal or qualification of the respective
ratings in effect immediately prior to such defeasance event for any securities
issued in connection with a Secondary Market Transaction of which the Loan is a
part thereof.

                               (6) A certificate from a firm of independent
public accountants (or a firm specializing in Defeasance procedures if such
firm's certificate in lieu of a certificate from independent public accountants
is acceptable to the applicable rating agencies) reasonably acceptable to Payee
certifying that the Defeasance Collateral is sufficient to satisfy the
provisions of paragraph (1) above.

                               (7) Maker and any guarantor or indemnitor of
Maker's obligations under the Loan Documents for which Maker has personal
liability executes and delivers to Payee such documents and agreements as Payee
shall reasonably require to evidence and effectuate the ratification of such
personal liability and guaranty or indemnity, respectively.

                               (8) Such other certificates, documents or
instruments as Payee may reasonably require.

                               (9) Payment of all fees, costs, expenses and
charges incurred by Payee in connection with the Defeasance of the Security
Property or the Designated Parcel, as applicable, and the purchase of the
Defeasance Collateral, including, without limitation, all reasonable legal fees
and costs and expenses incurred by Payee or its agents in connection with the
release of the Security Property or the Designated Parcel, as applicable, review
of the proposed Defeasance Collateral and preparation of the Defeasance Security
Agreement and related documentation, any revenue, documentary, stamp, intangible
or other taxes, charges or fees due in connection with transfer of the Note,
assumption of the Note, or substitution of collateral for the Security Property
or the Designated Parcel, as applicable, shall be paid on or before the Release
Date. Without limiting Maker's obligations with respect thereto, Payee shall be
entitled to deduct all such fees, costs, expenses and charges from the
Defeasance Deposit to the extent of any portion of the Defeasance Deposit which
exceeds the amount necessary to purchase the Defeasance Collateral.

                           (D) In addition to the other conditions precedent to
a Defeasance as contemplated herein, Maker may not obtain a release in
connection with a Partial Defeasance from the lien of any Security Instrument
unless:

                  In connection with such Partial Defeasance and in
consideration of, inter alia, Payee releasing the Designated Parcel(s), as
applicable, from the terms and provisions of the applicable Security Instrument,
Maker deposits with, and pledges to, Payee, in addition to any other sums
required to be deposited pursuant to the terms hereof, a cash deposit equal to
twenty-five percent (25%) of the portion of the outstanding principal balance of
this Note attributable to the Allocated Loan Amount of the Designated Parcel(s)
(such deposit, the

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"Additional Defeasance Deposit"); provided, however, that in no event shall
Maker be obligated to make an Additional Defeasance Deposit in excess of an
amount that would result in the total amounts of all Additional Defeasance
Deposits given in connection with any Partial Defeasance under this Note to be
greater than 15% of the outstanding principal balance of the Note which has not
been defeased. The Additional Defeasance Deposit shall be held by Payee pursuant
to a guaranty, pledge and security agreement between the remaining borrowers
under this Note and/or the Undefeased Note (as hereinafter defined) and Payee in
form and substance reasonably satisfactory to Payee, as additional collateral
and security for the Undefeased Note and the Additional Defeasance Deposit shall
be held by Payee in an interest bearing account (such account, the "Cash
Collateral Account") in accordance with the provisions of Section 4.31 of the
applicable Security Instrument. Upon payment in full or defeasance of the entire
Loan, the remaining portion of the Additional Defeasance Deposit, if any (with
any interest earned thereon), shall be released to Maker. Maker hereby
acknowledges and agrees that Payee may commingle any and all Additional
Defeasance Deposits.

                           (ii) (A) Upon a Total Defeasance in compliance with
the requirements of subsection 1.5(d)(i), the Security Property shall be
released from the lien of the Security Instruments and the other Loan Documents,
and the Defeasance Collateral shall constitute collateral which shall secure
this Note and all other obligations under the Loan Documents. Payee will, at
Maker's expense, execute and deliver any agreements reasonably requested by
Maker to release the lien of the Security Instrument from the Security Property.

                                (B) Upon a Partial Defeasance in compliance with
the requirements of this Section 1.5(d), the Designated Parcel(s) shall be
released from the lien of the applicable Security Instrument securing such
Designated Parcel(s) and the other Loan Documents, the Defeasance Collateral
shall constitute collateral which shall secure the Defeased Note (as hereinafter
defined) and Maker shall cause to be executed and delivered to Payee all
necessary documents to amend and restate this Note and issue substitute notes to
reflect a note evidencing the portion of the principal balance of this Note that
has not been defeased (the "Undefeased Note") and a substitute note with a
principal balance equal to the Defeasance Deposit evidencing the principal
balance that has been defeased (the "Defeased Note"). The Undefeased Note shall
have terms identical to the terms of this Note, except for the principal
balance, which shall be equal to the undefeased principal portion of this Note.
Each Defeased Note shall be in a principal amount equal to the applicable
Defeasance Deposit, be dated as of the date hereof, mature on the Maturity Date,
be secured by the Defeasance Collateral delivered in connection with the
defeasance and otherwise contain substantially the same terms as this Note. Each
Defeased Note shall evidence a portion of the existing indebtedness hereunder
and not any new or additional indebtedness of Maker. A Defeased Note may not be
the subject of any further defeasance. Payee will, at Maker's expense, execute
and deliver any agreements reasonably requested by Maker to release the lien of
the applicable Security Instrument from the Designated Parcel(s).

                           (iii) Upon the release of the Security Property or a
Designated Parcel in accordance with this Section 1.5(d), Maker or the
applicable Borrower, as the case may be, shall assign all its obligations and
rights under this Note in the case of a Total Defeasance or under the Defeased
Note in the case of a Partial Defeasance, as the case may be, together with the
pledged Defeasance Collateral, to a newly created successor entity which
complies with the

                                      -7-
<PAGE>

terms of Section 1.33 of the Security Instrument designated by Maker and
approved by Payee in its sole discretion. Such successor entity shall execute an
assumption agreement in form and substance satisfactory to Payee in its sole
discretion pursuant to which it shall assume Maker's obligations under this Note
in the case of a Total Defeasance or the applicable Borrower's obligations under
the Defeased Note in the case of a Partial Defeasance, as the case may be, and
Maker's, or the applicable Borrower's, obligations under the Defeasance Security
Agreement. As conditions to such assignment and assumption, Maker (or the
applicable Borrower in the event of a Partial Defeasance) shall (x) deliver to
Payee an opinion of counsel in form and substance and delivered by counsel
satisfactory to Payee in its sole discretion stating, among other things, that
such assumption agreement is enforceable against Maker (or the applicable
Borrower in the event of a Partial Defeasance) and such successor entity in
accordance with its terms and that this Note and the Defeasance Security
Agreement as so assumed, are enforceable against such successor entity in
accordance with their respective terms, and (y) pay all costs and expenses
(including, but not limited to, reasonable legal fees) incurred by Payee or its
agents in connection with such assignment and assumption (including, without
limitation, the review of the proposed transferee and the preparation of the
assumption agreement and related documentation). Upon such assumption, Maker (or
the applicable Borrower in the event of a Partial Defeasance) shall be relieved
of its obligations hereunder, under the other Loan Documents other than as
specified in Section 1.5(d)(i)(C)(7) above and under the Defeasance Security
Agreement.

                           (iv) Any references in this Section 1.5 to "Allocated
Loan Amount" shall be deemed to refer to the respective Allocated Loan Amount
for a Designated Parcel as set forth in Schedule 2 attached hereto and made a
part hereof, as same may have been proportionately reduced as a result of any
payments that may have been made under this Note and applied to the principal
indebtedness due under this Note.

                  (e)      Waiver of Statutory Rights for Prepayment Premium
Upon Acceleration. With respect to San Mateo (as hereinafter defined), Maker
hereby expressly (i) waives any rights it may have under California Civil Code
ss.2954.10 or any other statute or judicial precedent now or hereafter in effect
to prepay this Note, in whole or in part, without penalty, upon acceleration of
the maturity date of this Note, foreclosure or otherwise and (ii) agrees that if
for any reason, a prepayment or deemed prepayment of any or all of this Note is
made, whether voluntarily or upon or following any acceleration of the maturity
date of this Note by Payee on account of any default by Maker, or on account of
foreclosure or otherwise, including, but not limited to, any transfer or
disposition as prohibited or restricted by the Security Instrument, then Maker
shall be obligated to pay, concurrently therewith, as a prepayment charge on
acceleration, the applicable sums specified in this Section 1.5. By initialing
this provision in the space provided below, Maker hereby declares that Payee's
agreement to make the subject loan at the interest rate and for the term set
forth in this Note constitutes adequate consideration, given individual weight
by Maker, for this waiver and agreement and acknowledges that, in making the
loan on the terms set forth in this Note and the Security Instrument, Payee has
given individual weight to the consideration afforded to Payee by this waiver
and agreement. Nothing in this Section 1.5(e) shall waive or be deemed to waive
the restrictions on prepayment and defeasance set forth in this Note. The
foregoing California statutory references shall not be construed to mean that
this Note is governed by California law, but have been inserted solely as a
result of a portion of the Security Property being situated in the State of
California.

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                  Maker's Initials:__________

         1.6.     Security. The indebtedness evidenced by this Note and the
obligations created hereby are secured by, among other things, that certain (i)
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing ("San Mateo Deed of Trust") from Borrower 1 for the benefit of Payee,
dated of even date herewith, covering property located in San Mateo County,
California ("San Mateo"); (ii) Open-End Mortgage Deed and Security Agreement
("Shelton Mortgage") from Borrower 2 for the benefit of Payee, dated of even
date herewith, covering property located in Shelton, Connecticut ("Shelton");
(iii) Deed to Secure Debt and Security Agreement ("Atlanta-Downtown Security
Deed") from Borrower 3 for the benefit of Payee, dated of even date herewith,
covering property located in Atlanta, Georgia ("Atlanta-Downtown"); (iv) Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
("Arlington Deed of Trust") from Borrower 4 for the benefit of Payee, dated of
even date herewith, covering property located in Arlington, Texas ("Arlington"),
(v) Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing ("Addison Deed of Trust") from Borrower 5 for the benefit of
Payee, dated of even date herewith, covering property located in Addison, Texas
("Addison"); and (vi) Mortgage, Assignment of Leases and Rents and Security
Agreement ("Altamonte Mortgage"; the San Mateo Deed of Trust, Shelton Mortgage,
Atlanta-Downtown Security Deed, Arlington Deed of Trust, Addison Deed of Trust
and Altamonte Mortgage are, individually, a "Security Instrument" and
collectively, "Security Instruments") from Borrower 6 for the benefit of Payee,
dated of even date herewith, covering property located in Altamonte Springs,
Florida ("Altamonte"; San Mateo, Shelton, Atlanta-Downtown, Arlington, Addison
and Altamonte are, individually, a "Crossed Property", and collectively, the
"Crossed Properties"). The Security Instruments, together with this Note and all
other documents to or of which Payee is a party or beneficiary now or hereafter
evidencing, securing, guarantying, modifying or otherwise relating to the
indebtedness evidenced hereby, are herein referred to collectively as the "Loan
Documents". All of the terms and provisions of the Loan Documents are
incorporated herein by reference. Some of the Loan Documents are to be filed for
record on or about the date hereof in the appropriate public records.

         1.7.     Alienation and Further Encumbrances. Each Security Instrument
provides that the Security Property or any part thereof or interest therein
shall not be sold, conveyed, disposed of, alienated, hypothecated, leased
(except to tenants of space in the improvements in accordance with the
provisions of Section 1.12 of each of the Security Instruments), assigned,
pledged, mortgaged, further encumbered or otherwise transferred and Maker shall
not be divested of its title to the Security Property or any interest therein,
in any manner or way, whether voluntarily or involuntarily, except as otherwise
provided in Sections 1.13 or 4.33 in each of the Security Instruments.

                              Article II - DEFAULT
                              --------------------

         2.1.     Events of Default. It is hereby expressly agreed that should
any default occur in the payment of principal or interest as stipulated above
and such payment is not made within seven (7) days of the date such payment is
due (provided that no grace period is provided for the payment of principal and
interest due on the Maturity Date), or should any other default not cured within
any applicable grace or notice period occur under any other Loan Document, then
an Event of Default (an "Event of Default") shall exist hereunder, and in such
event the

                                      -9-
<PAGE>

indebtedness evidenced hereby, including all sums advanced or accrued hereunder
or under any other Loan Document, and all unpaid interest accrued thereon,
shall, at the option of Payee and without notice to Maker, at once become due
and payable and may be collected forthwith, whether or not there has been a
prior demand for payment and regardless of the stipulated date of maturity.

         2.2.     Late Charges. In the event that any payment is not received by
Payee within seven (7) days of the date when due, then, in addition to any
default interest payments due hereunder, Maker shall also pay to Payee a late
charge in an amount equal to five percent (5%) of the amount of such overdue
payment.

         2.3.     Default Interest Rate. So long as any Event of Default exists
hereunder, regardless of whether or not there has been an acceleration of the
indebtedness evidenced hereby, and at all times after maturity of the
indebtedness evidenced hereby (whether by acceleration or otherwise), interest
shall accrue on the outstanding principal balance of this Note, from the date
due until the date credited, at a rate per annum equal to four percent (4%) in
excess of the Note Rate, or, if such increased rate of interest may not be
collected under applicable law, then at the maximum rate of interest, if any,
which may be collected from Maker under applicable law (the "Default Interest
Rate"), and such default interest shall be immediately due and payable.

         2.4.     Maker's Agreements. Maker acknowledges that it would be
extremely difficult or impracticable to determine Payee's actual damages
resulting from any late payment or default, and such late charges and default
interest are reasonable estimates of those damages and do not constitute a
penalty. The remedies of Payee in this Note or in the Loan Documents, or at law
or in equity, shall be cumulative and concurrent, and may be pursued singly,
successively or together, in Payee's discretion.

         2.5.     Maker to Pay Costs. In the event that this Note, or any part
hereof, is collected by or through an attorney-at-law, Maker agrees to pay all
costs of collection, including, but not limited to, reasonable attorneys' fees.

         2.6.     Exculpation. Notwithstanding anything in this Note or the Loan
Documents to the contrary, but subject to the qualifications hereinbelow set
forth, Payee agrees that:

                  (a)      Maker shall be liable upon the indebtedness evidenced
hereby and for the other obligations arising under the Loan Documents to the
full extent (but only to the extent) of the security therefor, the same being
all properties (whether real or personal), rights, estates and interests now or
at any time hereafter securing the payment of this Note and/or the other
obligations of Maker under the Loan Documents (collectively, the "Security
Property"); none of Maker's officers or partners, nor any shareholder, director
or officer of any of Maker's affiliates, nor any of Maker's affiliates, shall be
liable for the indebtedness evidenced hereby or under any other Loan Documents
except with respect to any liability which such party may be subject to as a
result of Maker's obligations described in Section 2.6(c) hereof and/or as set
forth in the Environmental Indemnity Agreement;

                  (b)      if a default occurs in the timely and proper payment
of all or any part of such indebtedness evidenced hereby or in the timely and
proper performance of the other

                                      -10-
<PAGE>

obligations of Maker under the Loan Documents, any judicial proceedings brought
by Payee against Maker shall be limited to the preservation, enforcement and
foreclosure, or any thereof, of the liens, security titles, estates,
assignments, rights and security interests now or at any time hereafter securing
the payment of this Note and/or the other obligations of Maker under the Loan
Documents, and no attachment, execution or other writ of process shall be
sought, issued or levied upon any assets, properties or funds of Maker other
than the Security Property, except with respect to the liability described below
in this section; and

                  (c)      in the event of a foreclosure of such liens, security
titles, estates, assignments, rights or security interests securing the payment
of this Note and/or the other obligations of Maker under the Loan Documents, no
judgment for any deficiency upon the indebtedness evidenced hereby shall be
sought or obtained by Payee against Maker, except with respect to the liability
described below in this section; provided, however, that, notwithstanding the
foregoing provisions of this section, Maker shall be fully and personally liable
and subject to legal action (i) for proceeds paid under any insurance policies
(or paid as a result of any other claim or cause of action against any person or
entity) by reason of damage, loss or destruction to all or any portion of the
Security Property, to the full extent of such proceeds not previously delivered
to Payee, but which, under the terms of the Loan Documents, should have been
delivered to Payee, (ii) for proceeds or awards resulting from the condemnation
or other taking in lieu of condemnation of all or any portion of the Security
Property, to the full extent of such proceeds or awards not previously delivered
to Payee, but which, under the terms of the Loan Documents, should have been
delivered to Payee, (iii) for all tenant security deposits or other refundable
deposits paid to or held by Maker or any other person or entity in connection
with leases of all or any portion of the Security Property which are not applied
in accordance with the terms of the applicable lease or other agreement, (iv)
for rent and other payments received from tenants under leases of all or any
portion of the Security Property paid more than one (1) month in advance, (v)
for rents, issues, profits and revenues of all or any portion of the Security
Property received or applicable to a period after the occurrence of any Event of
Default or any event which, with notice or the passage of time, or both, would
constitute an Event of Default, hereunder or under the other Loan Documents
which are not either applied to the ordinary and necessary expenses of owning
and operating the Security Property or paid to Payee, (vi) for intentional waste
committed on the Security Property, damage to the Security Property as a result
of the intentional misconduct of Maker or any of its principals, officers,
general partners or members, any guarantor, any indemnitor, or any agent or
employee of any such person, or any removal of all or any portion of the
Security Property in violation of the terms of the Loan Documents, to the full
extent of the losses or damages incurred by Payee on account of such occurrence,
(vii) for failure to pay any valid taxes, assessments, mechanic's liens,
materialmen's liens or other liens which could create liens on any portion of
the Security Property which would be superior to the lien or security title of
the Security Instrument or the other Loan Documents, to the full extent of the
amount claimed by any such lien claimant except, with respect to any such taxes
or assessments, to the extent that funds have been deposited with Payee pursuant
to the terms of the Security Instrument (including, without limitation, the
provisions of Section 4.31 thereof) specifically for the applicable taxes or
assessments and not applied by Payee to pay such taxes and assessments, (viii)
for all obligations and indemnities of Maker under the Loan Documents relating
to hazardous or toxic substances or radon or compliance with environmental laws
and regulations to the full extent of any losses or damages (including, but not
limited to, those resulting from diminution in value of any Security Property)
incurred by Payee as a result

                                      -11-
<PAGE>

of the existence of such hazardous or toxic substances or radon or failure to
comply with environmental laws or regulations, except to the extent that such
losses or damages are recovered under insurance policies, and (ix) for fraud or
intentional misrepresentation by Maker or any of its principals, officers,
general partners or members, any guarantor, any indemnitor or any agent,
employee or other person authorized or apparently authorized to make statements,
representations or disclosures on behalf of Maker, to the full extent of any
losses, damages and expenses of Payee on account thereof. References herein to
particular sections of the Loan Documents shall be deemed references to such
sections as affected by other provisions of the Loan Documents relating thereto.
Nothing contained in this section shall (1) be deemed to be a release or
impairment of the indebtedness evidenced by this Note or the other obligations
of Maker under the Loan Documents or the lien of the Loan Documents upon the
Security Property, or (2) preclude Payee from foreclosing the Loan Documents in
case of any default or from enforcing any of the other rights of Payee except as
stated in this section, or (3) limit or impair in any way whatsoever the
Environmental Indemnity Agreement (the "Environmental Indemnity Agreement") of
even date herewith executed and delivered in connection with the indebtedness
evidenced by this Note or release, relieve, reduce, waive or impair in any way
whatsoever, any obligation of any party to the Environmental Indemnity
Agreement.

         Notwithstanding anything to the contrary in this Note, the Security
Instruments or any of the other Loan Documents, Payee shall not be deemed to
have waived any right which Payee may have under Section 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the indebtedness evidenced hereby or secured by the Security
Instrument or any of the other Loan Documents or to require that all collateral
shall continue to secure all of the indebtedness owing to Payee in accordance
with this Note, the Security Instruments and the other Loan Documents.

                        Article III - GENERAL CONDITIONS
                        --------------------------------

         3.1.     No Waiver; Amendment. No failure to accelerate the
indebtedness evidenced hereby by reason of default hereunder, acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (i) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby or as a waiver of such right of acceleration or of
the right of Payee thereafter to insist upon strict compliance with the terms of
this Note, or (ii) to prevent the exercise of such right of acceleration or any
other right granted hereunder or by any applicable laws; and Maker hereby
expressly waives the benefit of any statute or rule of law or equity now
provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing. No extension of the time for the
payment of this Note or any installment due hereunder made by agreement with any
person now or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change or affect the original liability of Maker
under this Note, either in whole or in part, unless Payee agrees otherwise in
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.

         3.2.     Waivers. Presentment for payment, demand, protest and notice
of demand, protest and nonpayment and all other notices are hereby waived by
Maker. Maker hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any

                                      -12-
<PAGE>

moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension,
redemption, appraisement, exemption and homestead now or hereafter provided by
the Constitution and laws of the United States of America and of each state
thereof, both as to itself and in and to all of its property, real and personal,
against the enforcement and collection of the obligations evidenced by this Note
or the other Loan Documents.

         3.3.     Limit of Validity. The provisions of this Note and of all
agreements between Maker and Payee, whether now existing or hereafter arising
and whether written or oral, including, but not limited to, the Loan Documents,
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of demand or acceleration of the maturity of this Note or
otherwise, shall the amount contracted for, charged, taken, reserved, paid or
agreed to be paid ("Interest") to Payee for the use, forbearance or detention of
the money loaned under this Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or fulfillment
of any provision hereof or of any agreement between Maker and Payee shall, at
the time performance or fulfillment of such provision shall be due, exceed the
limit for Interest prescribed by law or otherwise transcend the limit of
validity prescribed by applicable law, then, ipso facto, the obligation to be
performed or fulfilled shall be reduced to such limit, and if, from any
circumstance whatsoever, Payee shall ever receive anything of value deemed
Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under this Note in the inverse order of its maturity
(whether or not then due) or, at the option of Payee, be paid over to Maker, and
not to the payment of Interest. All Interest (including any amounts or payments
judicially or otherwise under the law deemed to be Interest) contracted for,
charged, taken, reserved, paid or agreed to be paid to Payee shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of this Note, including any extensions and renewals
hereof until payment in full of the principal balance of this Note so that the
Interest thereon for such full term will not exceed at any time the maximum
amount permitted by applicable law. To the extent United States federal law
permits a greater amount of interest than is permitted under the law of the
State in which the Security Property is located, Payee will rely on United
States federal law for the purpose of determining the maximum amount permitted
by applicable law. Additionally, to the extent permitted by applicable law now
or hereafter in effect, Payee may, at its option and from time to time,
implement any other method of computing the maximum lawful rate under the law of
the State in which the Security Property is located or under other applicable
law by giving notice, if required, to Maker as provided by applicable law now or
hereafter in effect. This Section 3.3 will control all agreements between Maker
and Payee.

         3.4.     Use of Funds. Maker hereby warrants, represents and covenants
that no funds disbursed hereunder shall be used for personal, family or
household purposes.

         3.5.     Unconditional Payment. Maker is and shall be obligated to pay
principal, interest and any and all other amounts which become payable hereunder
or under the other Loan Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any reduction for
counterclaim or setoff. In the event that at any time any payment received by
Payee hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any

                                      -13-
<PAGE>

cancellation or satisfaction of this Note or return thereof to Maker and shall
not be discharged or satisfied with any prior payment thereof or cancellation of
this Note, but shall remain a valid and binding obligation enforceable in
accordance with the terms and provisions hereof, and such payment shall be
immediately due and payable upon demand.

         3.6.     Governing Law. THIS NOTE SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED ACCORDING TO THE LAWS OF THE STATE OF NORTH CAROLINA.

         3.7.     Waiver of Jury Trial. MAKER AND PAYEE, TO THE FULL EXTENT
PERMITTED BY LAW, EACH HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND
UPON THE ADVICE OF COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO THE DEBT EVIDENCED BY THIS NOTE OR ANY CONDUCT, ACT OR
OMISSION OF PAYEE OR MAKER, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH PAYEE OR MAKER, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE.

         3.8.     Secondary Market. Payee may sell, transfer and deliver the
Loan Documents to one or more investors in the secondary mortgage market. In
connection with such sale, Payee may retain or assign responsibility for
servicing the loan evidenced by this Note or may delegate some or all of such
responsibility and/or obligations to a servicer, including, but not limited to,
any subservicer or master servicer, on behalf of the investors. All references
to Payee herein shall refer to and include, without limitation, any such
servicer, to the extent applicable.

         3.9.     Dissemination of Information. If Payee determines at any time
to sell, transfer or assign this Note, the Security Instruments and the other
Loan Documents, and any or all servicing rights with respect thereto, or to
grant participations therein (the "Participations") or issue mortgage
pass-through certificates or other securities evidencing a beneficial interest
in a rated or unrated public offering or private placement (the "Securities"),
Payee may forward to each purchaser, transferee, assignee, servicer,
participant, investor, or their respective successors in such Participations
and/or Securities (collectively, the "Investor") or any rating agency rating
such Securities, each prospective Investor and each of the foregoing's
respective counsel, all documents and information which Payee now has or may
hereafter acquire relating to the debt evidenced by this Note and to Maker, any
guarantor, any indemnitor and the Mortgaged Property, which shall have been
furnished by Maker, any guarantor or any indemnitor as Payee determines
necessary or desirable.

                                      -14-
<PAGE>

                     Article IV - MISCELLANEOUS PROVISIONS
                     -------------------------------------

         4.1.     The terms and provisions hereof shall be binding upon and
inure to the benefit of Maker and Payee and their respective heirs, executors,
legal representatives, successors, successors-in-title and assigns, whether by
voluntary action of the parties or by operation of law. As used herein, the
terms "Maker" and "Payee" shall be deemed to include their respective heirs,
executors, legal representatives, successors, successors-in-title and assigns,
whether by voluntary action of the parties or by operation of law. If Maker
consists of more than one person or entity, each shall be jointly and severally
liable to perform the obligations of Maker under this Note. All personal
pronouns used herein, whether used in the masculine, feminine or neuter gender,
shall include all other genders; the singular shall include the plural and vice
versa. Titles of articles and sections are for convenience only and in no way
define, limit, amplify or describe the scope or intent of any provisions hereof.
Time is of the essence with respect to all provisions of this Note. This Note
and the other Loan Documents contain the entire agreements between the parties
hereto relating to the subject matter hereof and thereof and all prior
agreements relative hereto and thereto which are not contained herein or therein
are terminated.

         4.2.     The Tax Identification Numbers for each Borrower comprising
Maker are:

                            Borrower 1:  65-0701067
                            Borrower 2:  65-0797654
                            Borrower 3:  65-0701072
                            Borrower 4:  65-0746245
                            Borrower 5:  65-0722052
                            Borrower 6:  65-0803243

         4.3.     Notwithstanding anything to the contrary contained in this
Note, in the event Maker has an obligation to pay attorneys' fees or legal fees
under this Note or any of the other Loan Documents, such obligation shall be in
an amount equal to reasonable attorneys' fees and expenses actually incurred.

         4.4.     PREJUDGMENT REMEDY WAIVER. WITH RESPECT TO SHELTON, MAKER
HEREBY REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS OF THE LOAN SHALL BE
USED FOR GENERAL COMMERCIAL PURPOSES AND THAT THE LOAN IS A "COMMERCIAL
TRANSACTION" AS DEFINED BY THE STATUTES OF THE STATE OF CONNECTICUT. MAKER
HEREBY WAIVES ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER
CONNECTICUT GENERAL STATUTES, SECTIONS 52-278A ET SEQ., AS AMENDED, OR UNDER ANY
OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES
PAYEE MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE
SPECIFICALLY, MAKER ACKNOWLEDGES THAT PAYEE'S ATTORNEY MAY, PURSUANT TO
CONNECTICUT GENERAL STATUTES, SECTION 52-278F, ISSUE A WRIT FOR A PREJUDGMENT
REMEDY WITHOUT SECURING A COURT ORDER. MAKER ACKNOWLEDGES AND RESERVES ITS RIGHT
TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT
REMEDY BY PAYEE'S ATTORNEY, AND PAYEE ACKNOWLEDGES MAKER'S

                                      -15-
<PAGE>

RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT. MAKER FURTHER
HEREBY WAIVES ANY REQUIREMENT OR OBLIGATION OF PAYEE TO POST A BOND OR OTHER
SECURITY IN CONNECTION WITH ANY PREJUDGMENT REMEDY OBTAINED BY PAYEE AND WAIVES
ANY OBJECTIONS TO ANY PREJUDGMENT REMEDY OBTAINED BY PAYEE BASED ON ANY OFFSETS,
CLAIMS, DEFENSES OR COUNTERCLAIMS OF MAKER OR ANY OTHER OBLIGATED PARTY TO ANY
ACTION BROUGHT BY PAYEE. MAKER ACKNOWLEDGES AND AGREES THAT ALL OF THE WAIVERS
CONTAINED IN THIS SECTION HAVE BEEN MADE KNOWINGLY, VOLUNTARILY, INTENTIONALLY
AND INTELLIGENTLY, AND WITH THE ADVICE OF ITS COUNSEL. THE FOREGOING CONNECTICUT
STATUTORY REFERENCES SHALL NOT BE CONSTRUED TO MEAN THAT THIS NOTE IS GOVERNED
BY CONNECTICUT LAW, BUT HAVE BEEN INSERTED SOLELY AS A RESULT OF A PORTION OF
THE SECURITY PROPERTY BEING SITUATED IN THE STATE OF CONNECTICUT.

         4.5.     With respect to Altamonte, the proper Florida Documentary
Stamp Taxes in the amount of $21,857.50 have been paid and the proper
documentary stamps have been affixed to the Altamonte Mortgage securing this
Promissory Note, dated of even date herewith, recorded in the public records of
Seminole County, Florida.

             [THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                      -16-
<PAGE>

IN WITNESS WHEREOF, Maker has executed this Note as of the date first written
above.

MAKER:

FIRST BORROWER:                             SECOND BORROWER:
--------------                              ---------------

INNKEEPERS RESIDENCE SAN MATEO,             INNKEEPERS RESIDENCE SHELTON,
L.P., a Virginia limited partnership        L.P. d/b/a Innkeepers Shelton
                                            Limited Partnership, a
                                            Virginia limited partnership

By: Innkeepers Residence San Mateo, Inc.,
    a Virginia corporation,                 By: Innkeepers Residence Shelton,
    its General Partner                         Inc., a Virginia corporation,
                                                its General Partner

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

THIRD BORROWER:                             FOURTH BORROWER:
--------------                              ---------------

INNKEEPERS RESIDENCE ATLANTA-               INNKEEPERS RESIDENCE ARLINGTON (TX),
DOWNTOWN, L.P., a Virginia                  L.P. a Virginia limited partnership
limited partnership

By: Innkeepers Residence Atlanta-           By: Innkeepers Residence Arlington,
    Downtown, Inc.,                             Inc., a Virginia corporation,
    a Virginia corporation,                     its General Partner
    its General Partner

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

FIFTH BORROWER:                             SIXTH BORROWER:
--------------                              --------------

INNKEEPERS RESIDENCE ADDISON (TX),          INNKEEPERS RI ALTAMONTE, L.P.,
L.P., a Virginia limited partnership        a Virginia limited partnership

By: Innkeepers Residence Addison, Inc.,     By: Innkeepers RI Altamonte, Inc.,
    a Virginia corporation,                     a Virginia corporation,
    its General Partner                         its General Partner

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

                                      -17-EXHIBIT 10.21

Requested by and when recorded return to:                SAN MATEO
                                                         FUNB Loan No. 265950357

Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention:  Ms. Oona Fitzpatrick

Assessor's Parcel No.:  035-610-030

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

                      INNKEEPERS RESIDENCE SAN MATEO, L.P.,

                                     TRUSTOR

                                       TO

                        COMMONWEALTH LAND TITLE COMPANY,

                                   AS TRUSTEE

                               FOR THE BENEFIT OF

                           FIRST UNION NATIONAL BANK,

                                   BENEFICIARY

                             Date: December __, 2000

                       Property Address: 2000 Windward Way
                       City: San Mateo
                       County: San Mateo
                       State: California

<PAGE>

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

         THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT
AND FIXTURE FILING (this "Deed of Trust") is made as of December __, 2000 by
INNKEEPERS RESIDENCE SAN MATEO, L.P., a Virginia limited partnership, as Trustor
("Trustor"), whose address is c/o Innkeepers USA Trust, 306 Royal Poinciana Way,
Palm Beach, Florida 33480, to COMMONWEALTH LAND TITLE COMPANY, a California
corporation, as Trustee ("Trustee"), whose address is 525 Market Street, Suite
2320, San Francisco, California 94105, for the benefit of FIRST UNION NATIONAL
BANK, a national banking association, as Beneficiary ("Beneficiary"), whose
address is One First Union Center DC-6, Charlotte, North Carolina 28288-0166.

                              W I T N E S S E T H:

         THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS
($10), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH
ARE HEREBY ACKNOWLEDGED, TRUSTOR HEREBY IRREVOCABLY MORTGAGES, GRANTS, BARGAINS,
SELLS, CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS UNTO TRUSTEE, IN
TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, all of Trustor's
estate, right, title and interest in, to and under any and all of the following
described property, whether now owned or hereafter acquired by Trustor
(collectively, the "Mortgaged Property"):

         (A) All that certain real property situated in the City of San Mateo,
County of San Mateo, State of California, more particularly described on Exhibit
A attached hereto and incorporated herein by this reference (the "Premises"),
together with all of the easements, rights, privileges, franchises, tenements,
hereditaments and appurtenances now or hereafter thereunto belonging or in any
way appertaining thereto, and all of the estate, right, title, interest, claim
and demand whatsoever of Trustor therein or thereto, either at law or in equity,
in possession or in expectancy, now or hereafter acquired;

         (B) All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Premises (the
"Improvements");

         (C) All furniture, furnishings, fixtures, goods, equipment, inventory
or personal property owned by Trustor and now or hereafter located on, attached
to or used in and about the Improvements, including, but not limited to, all
machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all
appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Trustor as are now or hereafter used or furnished in operating the
Improvements, or the activities conducted therein, and all building materials
and equipment hereafter situated on or about the Premises or Improvements, and
all warranties and guaranties relating thereto, and all additions thereto and
substitutions and replacements therefor (exclusive of any of the foregoing owned
or leased by tenants of space in the Improvements);

<PAGE>

         (D) All easements, rights-of-way, strips and gores of land, vaults,
streets, ways, alleys, passages, sewer rights, and other emblements now or
hereafter located on the Premises or under or above the same or any part or
parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions and remainders whatsoever, in any
way belonging, relating or appertaining to the Mortgaged Property or any part
thereof, or which hereafter shall in any way belong, relate or be appurtenant
thereto, whether now owned or hereafter acquired by Trustor;

         (E) All water, ditches, wells, reservoirs and drains and all water,
ditch, well, reservoir and drainage rights which are appurtenant to, located on,
under or above or used in connection with the Premises or the Improvements, or
any part thereof, whether now existing or hereafter created or acquired;

         (F) All minerals, crops, timber, trees, shrubs, flowers and landscaping
features now or hereafter located on, under or above the Premises;

         (G) All cash funds, deposit accounts and other rights and evidence of
rights to cash, now or hereafter created or held by Beneficiary pursuant to this
Deed of Trust or any other of the Loan Documents (as hereinafter defined),
including, without limitation, all funds now or hereafter on deposit in the
Impound Account, the Replacement Reserve and the Repair and Remediation Reserve
(each as hereinafter defined);

         (H) All leases (including, without limitation, operating leases, oil,
gas and mineral leases), licenses, concessions and occupancy agreements of all
or any part of the Premises or the Improvements to which Trustor is a party
(each, a "Lease" and collectively, "Leases"), whether written or oral, now or
hereafter entered into and all rents, royalties, issues, profits, bonus money,
revenue, income, rights and other benefits (collectively, the "Rents and
Profits") of the Premises or the Improvements, now or hereafter arising from the
use or enjoyment of all or any portion thereof or from any present or future
Lease or other agreement pertaining thereto or arising from any of the Leases or
any of the General Intangibles (as hereinafter defined) and all cash or
securities deposited to secure performance by the tenants, lessees or licensees
(each, a "Tenant" and collectively, "Tenants"), as applicable, of their
obligations under any such Leases, whether said cash or securities are to be
held until the expiration of the terms of said Leases or applied to one or more
of the installments of rent coming due prior to the expiration of said terms,
subject, however, to the provisions contained in Section 1.11 hereinbelow;

         (I) That certain management agreement dated as of November 1, 1996
between Residence Inn By Marriott, Inc., as manager ("Franchisor"), and
Innkeepers Hospitality III, Inc. (f/k/a JF Hotel III, Inc.), as lessee
(hereinafter, the "Franchise Agreement"), and all contracts and agreements to
which Trustor is a party now or hereafter entered into covering any part of the
Premises or the Improvements (collectively, the "Contracts") and all revenue,
income and other benefits thereof, including, without limitation, management
agreements, service contracts and maintenance contracts, if any, equipment
leases, personal property leases and any contracts or documents relating to
construction on any part of the Premises or the Improvements (including plans,
drawings, surveys, tests, reports, bonds and governmental approvals) or to the
management or operation of any part of the Premises or the Improvements;

                                       2
<PAGE>

         (J) All present and future monetary deposits given to any public or
private utility with respect to utility services furnished to any part of the
Premises or the Improvements;

         (K) All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles (including,
without limitation, trademarks, trade names, service marks and symbols now or
hereafter used in connection with any part of the Premises or the Improvements,
all names by which the Premises or the Improvements may be operated or known,
all rights to carry on business under such names, and all rights, interest and
privileges which Trustor has or may have as developer or declarant under any
covenants, restrictions or declarations now or hereafter relating to the
Premises or the Improvements) and all notes or chattel paper now or hereafter
arising from or by virtue of any transactions related to the Premises or the
Improvements (collectively, the "General Intangibles");

         (L) All water taps, sewer taps, certificates of occupancy, permits,
licenses, franchises, certificates, consents, approvals and other rights and
privileges now or hereafter obtained in connection with the Premises or the
Improvements and all present and future warranties and guaranties relating to
the Improvements or to any equipment, fixtures, furniture, furnishings, personal
property or components of any of the foregoing now or hereafter located or
installed on the Premises or the Improvements;

         (M) All building materials, supplies and equipment now or hereafter
placed on the Premises or in the Improvements and all architectural renderings,
models, drawings, plans, specifications, studies and data now or hereafter
relating to the Premises or the Improvements;

         (N) All right, title and interest of Trustor in any insurance policies
or binders now or hereafter relating to the Mortgaged Property, including any
unearned premiums thereon;

         (O) All proceeds, products, substitutions and accessions (including
claims and demands therefor) of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards and all refunds of taxes or
assessments levied against all or any portion of the Mortgaged Property; and

         (P) All other or greater rights and interests of every nature in the
Premises or the Improvements and in the possession or use thereof and income
therefrom, whether now owned or hereafter acquired by Trustor.

         (Q) All revenues, receipts, income, accounts, accounts receivable and
other receivables, including, without limitation, revenues receipts, income,
receivables and accounts relating to or arising from rentals, rent equivalent
income, income and profits from guest rooms, meeting rooms, food and beverage
facilities, vending machines, telephone and television systems, guest laundry,
the provision or sale of other goods and services, and any other items of
revenue, receipts or other income as identified in the Uniform System of
Accounts for Hotels, 8th Edition, International Association of Hospitality
Accountants (now known as Hospitality Financial and Technology Professionals)
(1986), as from time to time amended.

                                       3
<PAGE>

         FOR THE PURPOSE OF SECURING:

         (1) The debt evidenced by that certain Promissory Note (such Promissory
Note, together with any and all renewals, amendments, modifications,
consolidations and extensions thereof, is hereinafter referred to as the "Note")
of even date with this Deed of Trust, made by Trustor, Innkeepers Residence
Shelton, L.P., Innkeepers Residence Atlanta - Downtown, L.P., Innkeepers
Residence Arlington (TX), L.P., Innkeepers Residence Addison (TX), L.P. and
Innkeepers RI Altamonte, L.P., jointly and severally, collectively as the maker,
payable to the order of Beneficiary in the principal face amount of FIFTY
MILLION AND NO/100 DOLLARS ($50,000,000.00), together with interest as therein
provided (the "Loan");

         (2) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and contained
in (a) that certain Subordination, Non-Disturbance and Attornment Agreement
(hereinafter the "Assignment of Franchise Agreement") dated of even date
herewith, by Trustor, as owner, Innkeepers Hospitality III, Inc. (f/k/a JF Hotel
III, Inc.), as lessee, and Residence Inn By Marriott, Inc., as manager, in favor
of Beneficiary, and (b) any other agreements, documents or instruments now or
hereafter evidencing, securing or otherwise relating to the Debt (as hereinafter
defined) excluding only the Environmental Indemnity Agreement (as hereinafter
defined) of even date herewith (the Note, this Deed of Trust, and such other
agreements, documents and instruments securing or otherwise relating to the
Loan, together with any and all renewals, amendments, extensions and
modifications thereof, are hereafter collectively, referred to as the "Loan
Documents") and the payment of all other sums herein or therein covenanted to be
paid;

         (3) Any and all additional advances made by Beneficiary to protect or
preserve the Mortgaged Property or the lien or security interest created hereby
on the Mortgaged Property, or for taxes, assessments or insurance premiums as
hereinafter provided or for performance of any of Trustor's obligations
hereunder or under the other Loan Documents or for any other purpose provided
herein or in the other Loan Documents (whether or not the original Trustor
remains the owner of the Mortgaged Property at the time of such advances); and

         (4) Any and all other indebtedness now owing or which may hereafter be
owing by Trustor (or any of the entities referred to in clause (1) above) to
Beneficiary, including, without limitation, all prepayment fees, however and
whenever incurred or evidenced, whether express or implied, direct or indirect,
absolute or contingent, or due or to become due, and all renewals,
modifications, consolidations, replacements and extensions thereof, it being
contemplated by Trustor and Beneficiary that Trustor may hereafter become so
indebted to Beneficiary.

(All of the sums referred to in Paragraphs (1) through (4) above are herein
referred to as the "Debt").

         TO HAVE AND TO HOLD the Mortgaged Property unto Beneficiary and
Trustee, their respective successors and assigns forever, and Trustor does
hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND
the title to the Mortgaged Property, subject to the Permitted Encumbrances (as
hereinafter defined), to Beneficiary and Trustee against every person whomsoever
lawfully claiming or to claim the same or any part thereof;

         PROVIDED, HOWEVER, that if the principal and interest and all other
sums due or to become due under the Note or under the other Loan Documents,
including, without limitation,

                                       4
<PAGE>

any prepayment fees required pursuant to the terms of the Note, shall have been
paid at the time and in the manner stipulated therein and the Debt shall have
been paid and all other covenants contained in the Loan Documents shall have
been performed, then, in such case, the liens, security interests, estates and
rights granted by this Deed of Trust shall be satisfied and the estate, right,
title and interest of Beneficiary in the Mortgaged Property shall cease, and
upon payment to Beneficiary of all costs and expenses incurred for the
preparation of the release hereinafter referenced and all recording costs if
allowed by law, Beneficiary shall promptly satisfy and release this Deed of
Trust of record and the lien hereof by proper instrument.

                                   ARTICLE I.
                              COVENANTS OF TRUSTOR

         For the purpose of further securing the Debt and for the protection of
the security of this Deed of Trust, for so long as the Debt or any part thereof
remains unpaid, Trustor covenants and agrees as follows:

         1.1. Warranties of Trustor. Trustor, for itself and its successors and
assigns, does hereby represent, warrant and covenant to and with Beneficiary,
its successors and assigns, that:

                  (a) Trustor has good, marketable and indefeasible fee simple
title to the Mortgaged Property, subject only to those matters expressly set
forth as exceptions to or subordinate matters in the title insurance policy
insuring the lien of this Deed of Trust delivered as of the date hereof which
Beneficiary has agreed to accept, excepting therefrom all preprinted and/or
standard exceptions (such items being the "Permitted Encumbrances"), and has
full power and lawful authority to grant, bargain, sell, convey, assign,
transfer, encumber and mortgage its interest in the Mortgaged Property in the
manner and form hereby done or intended. Trustor will preserve its interest in
and title to the Mortgaged Property and will forever warrant and defend the same
to Beneficiary against any and all claims whatsoever and will forever warrant
and defend the validity and priority of the lien and security interest created
herein against the claims of all persons and parties whomsoever, subject to the
Permitted Encumbrances. The foregoing warranty of title shall survive the
foreclosure of this Deed of Trust and shall inure to the benefit of and be
enforceable by Beneficiary in the event Beneficiary acquires title to the
Mortgaged Property pursuant to any foreclosure;

                  (b) No bankruptcy or insolvency proceedings are pending or
contemplated by Trustor or, to the best knowledge of Trustor, against Trustor or
by or against any endorser or cosigner of the Note or of any portion of the
Debt, or any guarantor or indemnitor under any guaranty or indemnity agreement
executed in connection with the Note or the loan evidenced thereby and secured
hereby (an "Indemnitor");

                  (c) All written reports, certificates, financial statements,
affidavits, statements and other data furnished by Trustor to Beneficiary (and,
to the best knowledge of Trustor, those furnished on behalf of Trustor to
Beneficiary by third parties and reviewed by Trustor; provided, however, that
Trustor shall have no duty to review such items) in connection with the loan
evidenced by the Note are true and correct in all material respects and do not
omit to state any fact or circumstance necessary to make the statements
contained therein not misleading;

                                       5
<PAGE>

                  (d) The execution, delivery and performance of this Deed of
Trust, the Note and all of the other Loan Documents have been duly authorized by
all necessary action to be, and are, binding and enforceable against Trustor in
accordance with the respective terms thereof and do not contravene, result in a
breach of or constitute a default (nor upon the giving of notice or the passage
of time or both will same constitute a default) under the partnership agreement,
or other organizational documents of Trustor or any contract or agreement of any
nature to which Trustor is a party or by which Trustor or any of its property
may be bound and do not violate or contravene any law, order, decree, rule or
regulation to which Trustor is subject;

                  (e) The Premises and the Improvements and the current intended
use thereof by Trustor comply in all material respects with all applicable
restrictive covenants, zoning ordinances, subdivision and building codes, flood
disaster laws, health and environmental laws and regulations and all other
applicable ordinances, orders or requirements issued by any state, federal or
municipal authorities having or claiming jurisdiction over the Mortgaged
Property. The Premises and Improvements constitute one or more separate tax
parcels for purposes of ad valorem taxation. The Premises and Improvements do
not require any rights over, or restrictions against, other property in order to
comply with any of the aforesaid governmental ordinances, orders or
requirements, which have not been obtained;

                  (f) All utility services necessary and sufficient for the full
use, occupancy, operation and disposition of the Premises and the Improvements
for their intended purposes are available to the Mortgaged Property, including
water, storm sewer, sanitary sewer, gas, electric, cable and telephone
facilities, through public rights-of-way or perpetual private easements;

                  (g) All streets, roads, highways, bridges and waterways
necessary for access to and full use, occupancy, operation and disposition of
the Premises and the Improvements have been completed, have been dedicated to
and accepted by the appropriate municipal authority and are open and available
to the Premises and the Improvements without further condition or cost to
Trustor;

                  (h) All curb cuts, driveways and traffic signals shown on the
survey delivered to Beneficiary prior to the execution and delivery of this Deed
of Trust are existing and have been fully approved by the appropriate
governmental authority;

                  (i) There are no judicial, administrative, mediation or
arbitration actions, suits or proceedings pending or, to the knowledge of
Trustor, threatened, against or affecting Trustor (or any of its general
partners) or the Mortgaged Property which, if adversely determined, would
materially impair either the Mortgaged Property or Trustor's ability to perform
the covenants or obligations required to be performed under the Loan Documents;

                  (j) The Mortgaged Property is free from delinquent water
charges, sewer rents, taxes and assessments;

                  (k) As of the date of this Deed of Trust, the Mortgaged
Property is free from unrepaired damage caused by fire, flood or other casualty;

                                       6
<PAGE>

                  (l) As of the date of this Deed of Trust, no part of the
Premises or the Improvements has been taken in condemnation, eminent domain or
like proceeding nor is any such proceeding pending or, to Trustor's knowledge
and belief, threatened or contemplated;

                  (m) Trustor possesses all franchises, patents, copyrights,
trademarks, trade names, licenses and permits necessary for the conduct of its
business substantially as now conducted;

                  (n) Except as may otherwise be disclosed in the Engineering
Report (as hereinafter defined), to Trustor's knowledge, the Improvements are
structurally sound, in good repair and free of defects in materials and
workmanship and have been constructed and installed in substantial compliance
with the plans and specifications relating thereto. All major building systems
located within the Improvements, including, without limitation, the heating and
air conditioning systems and the electrical and plumbing systems, are in good
working order and condition;

                  (o) Trustor has delivered to Beneficiary true, correct and
complete copies of any and all Contracts and all amendments thereto or
modifications thereof;

                  (p) Each Contract constitutes the legal, valid and binding
obligation of Trustor and, to Trustor's knowledge, is enforceable against any
other party thereto. To Trustor's knowledge, no default exists, or with the
passing of time or the giving of notice or both would exist, under any Contract
which would, in the aggregate, have a material adverse effect on Trustor or the
Mortgaged Property;

                  (q) No Contract provides any party with the right to obtain a
lien or encumbrance upon the Mortgaged Property superior to the lien of this
Deed of Trust;

                  (r) Trustor and the Mortgaged Property are free from any past
due obligations for sales and payroll taxes;

                  (s) There are no security agreements or financing statements
affecting all or any portion of the Mortgaged Property other than (i) as
disclosed in writing by Trustor to Beneficiary prior to the date hereof and (ii)
the security agreements and financing statements created in favor of
Beneficiary;

                  (t) Each Lease, including, but not limited to, the Operating
Lease Agreement, between Trustor, as lessor, and Innkeepers Hospitality III,
Inc. (f/k/a JF Hotel III, Inc.), as lessee, dated as of December 30, 1997 (the
"Operating Lease"), constitutes the legal, valid and binding obligation of
Trustor and, to Trustor's knowledge, is enforceable against the Tenant thereof.
To Trustor's knowledge, no default exists, or with the passing of time or the
giving of notice or both would exist, under any Lease which would, in the
aggregate, have a material adverse effect on Trustor or the Mortgaged Property;

                  (u) No Tenant under any Lease or the Operating Lease has, as
of the date hereof, paid rent more than thirty (30) days in advance, and the
rents under such Leases have not been waived, released, or otherwise discharged
or compromised;

                                       7
<PAGE>

                  (v) Trustor has delivered to Beneficiary true, correct and
complete copies of all Leases and the Operating Lease;

                  (w) To Trustor's knowledge, the Tenant under the Operating
Lease is free from bankruptcy, reorganization or arrangement proceedings or a
general assignment for the benefit of creditors;

                  (x) No Lease, including, but not limited to, the Operating
Lease, provides any party with the right to obtain a lien or encumbrance upon
the Mortgaged Property superior to the lien of this Deed of Trust;

                  (y) Trustor is not a "foreign person" within the meaning of
ss.1445(f)(3) of the Internal Revenue Code of 1986, as amended (the "IRS Code"),
and the related Treasury Department regulations, including temporary
regulations;

                  (z) The Permitted Encumbrances do not and will not materially
and adversely affect (i) the ability of Trustor to pay in full the Debt in a
timely manner and (ii) the use of the Mortgaged Property for the use currently
being made thereof, the operation of the Mortgaged Property as currently being
operated or the value of the Mortgaged Property;

                  (aa) Any right of any affiliate of Trustor, or any affiliate
of any of Trustor's constituent members, partners, shareholders, employees or
principals to receive any compensation, reimbursement of costs and expenses or
other payments in consideration for its management services for the Mortgaged
Property or its asset management services for the Trustor shall be and remain
subordinate in all respects to the Beneficiary's rights under this Mortgage;

                  (bb) Trustor has not dealt with any financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with
the loan secured hereby; and

                  (cc) The Mortgaged Property forms no part of any property
owned, used or claimed by Trustor as a residence or business homestead and is
not exempt from forced sale under the laws of the state in which the Premises
are located. Trustor hereby disclaims and renounces each and every claim to all
or any portion of the Mortgaged Property as a homestead.

         1.2. Defense of Title. If, while this Deed of Trust is in force, the
title to the Mortgaged Property or the interest of Beneficiary therein shall be
the subject, directly or indirectly, of any action at law or in equity, or be
attached directly or indirectly, or endangered, clouded or adversely affected in
any manner, Trustor, at Trustor's expense, shall take all necessary and proper
steps for the defense of said title or interest, including the employment of
counsel reasonably satisfactory to Beneficiary, the prosecution or defense of
litigation, and the compromise or discharge of claims made against said title or
interest. Notwithstanding the foregoing, in the event that Beneficiary
determines that Trustor is not adequately performing its obligations under this
Section, Beneficiary may, without limiting or waiving any other rights or
remedies of Beneficiary hereunder, take such steps with respect thereto as
Beneficiary shall deem necessary or proper and all reasonable costs and expenses
incurred by Beneficiary in connection therewith, together with interest thereon
at the Note Rate (as defined in the Note) from the date incurred by Beneficiary
until actually paid

                                       8
<PAGE>

by Trustor, shall be immediately paid by Trustor on demand and shall be secured
by this Deed of Trust and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note.

         1.3. Performance of Obligations. Trustor shall pay when due the
principal of and the interest on the Debt in accordance with the terms of the
Note. Trustor shall also pay all charges, fees and other sums required to be
paid by Trustor as provided in the Loan Documents, in accordance with the terms
of the Loan Documents, and shall observe, perform and discharge all obligations,
covenants and agreements to be observed, performed or discharged by Trustor set
forth in the Loan Documents in accordance with their terms. Further, Trustor
shall promptly and strictly perform and comply with all covenants, conditions,
obligations and prohibitions required of Trustor in connection with any other
document or instrument affecting title to the Mortgaged Property, or any part
thereof, regardless of whether such document or instrument is superior or
subordinate to this Deed of Trust.

         1.4. Insurance. Trustor shall, at Trustor's expense (or, if applicable,
the expense of the tenant under the Operating Lease), maintain or cause to be
maintained in force and effect on the Mortgaged Property at all times while this
Deed of Trust continues in effect the following insurance:

                  (a) Insurance against loss or damage to the Mortgaged Property
by fire, windstorm, tornado and hail and against loss and damage by such other,
further and additional risks as may be now or hereafter embraced by an
"all-risk" form of insurance policy. The amount of such insurance shall be not
less than one hundred percent (100%) of the full replacement cost (insurable
value) of the Improvements (as established by an MAI appraisal), without
reduction for depreciation. The determination of the replacement cost amount
shall be adjusted annually to comply with the requirements of the insurer
issuing such coverage or, at Beneficiary's election, by reference to such
indices, appraisals or information as Beneficiary determines in its reasonable
discretion in order to reflect increased value due to inflation. Absent such
annual adjustment, each policy shall contain inflation guard coverage insuring
that the policy limit will be increased over time to reflect the effect of
inflation. Full replacement cost, as used herein, means, with respect to the
Improvements, the cost of replacing the Improvements without regard to deduction
for depreciation, exclusive of the cost of excavations, foundations and footings
below the lowest basement floor. Trustor shall maintain insurance against loss
or damage to furniture, furnishings, fixtures, equipment and other items
(whether personalty or fixtures) included in the Mortgaged Property and owned by
Trustor from time to time to the extent applicable. Each policy shall contain a
replacement cost endorsement and either an agreed amount endorsement (to avoid
the operation of any co-insurance provisions) or a waiver of any co-insurance
provisions, all subject to Beneficiary's approval. The maximum deductible shall
be $20,000.00.

                  (b) Commercial General Liability Insurance against claims for
personal injury, bodily injury, death and property damage occurring on, in or
about the Premises or the Improvements in amounts not less than $1,000,000.00
per occurrence and $2,000,000.00 in the aggregate plus umbrella coverage in an
amount not less than $2,000,000. Beneficiary hereby retains the right to
periodically review the amount of said liability insurance being maintained by
Trustor and to require a reasonable increase in the amount of said liability
insurance should Beneficiary deem an increase to be reasonably prudent under
then existing circumstances.

                                       9
<PAGE>

                  (c) Boiler and machinery insurance is required if steam
boilers or other pressure-fired vessels are in operation at the Premises.
Minimum liability coverage per accident must equal the greater of the
replacement cost (insurable value) of the Improvements housing such boiler or
pressure-fired machinery or $2,000,000.00. If one or more large HVAC units is in
operation at the Premises, "Systems Breakdowns" coverage shall be required, as
determined by Beneficiary. Minimum liability coverage per accident must equal
the value of such unit(s).

                  (d) If the Improvements or any part thereof is situated in an
area designated by the Federal Emergency Management Agency ("FEMA") as a special
flood hazard area (Zone A or Zone V), flood insurance in an amount equal to the
lesser of: (a) the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid balance
of the portion of the Debt equal to the Allocated Loan Amount for the Mortgaged
Property (as set forth in the Note) if replacement cost coverage is not
available for the type of building insured), or (b) the maximum insurance
available under the appropriate National Flood Insurance Administration program.
The maximum deductible shall be $3,000.00 per building or a higher minimum
amount as required by FEMA or other applicable law.

                  (e) During the period of any construction, renovation or
alteration of the existing Improvements which exceeds the lesser of 10% of the
principal amount of the Note or $500,000, at Beneficiary's request, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Beneficiary, may be
required. During the period of any construction of any addition to the existing
Improvements, a completed value, "All Risk" Builder's Risk form or "Course of
Construction" insurance policy in non-reporting form, in an amount approved by
Beneficiary, shall be required.

                  (f) When required by applicable law, ordinance or other
regulation, Worker's Compensation and Employer's Liability Insurance covering
all persons subject to the worker's compensation laws of the state in which the
Mortgaged Property is located.

                  (g) Business income (loss of rents) insurance in amounts
sufficient to compensate Trustor for all Rents or income during a period of not
less than eighteen (18) months. The amount of coverage shall be adjusted
annually to reflect the Rents or income payable during the succeeding twelve
(12) month period.

                  (h) If requested by Beneficiary, earthquake insurance in an
amount reasonably required by Beneficiary.

                  (i) Such other insurance on the Mortgaged Property or on any
replacements or substitutions thereof or additions thereto as may from time to
time be reasonably required by Beneficiary against other insurable hazards or
casualties and which at the time are commonly insured against in the case of
property similarly situated including, without limitation, Sinkhole, Mine
Subsidence, Earthquake and Environmental insurance, due regard being given to
the height and type of buildings, their construction, location, use and
occupancy.

         All such insurance shall (i) be with insurers fully licensed and
authorized to do business in the state within which the Premises is located and
who have and maintain a rating of at least A

                                       10
<PAGE>

from Standard & Poors, or equivalent, (ii) contain the complete address of the
Premises (or a complete legal description), (iii) be for terms of at least one
year, with premium prepaid, and (iv) be subject to the approval of Beneficiary
as to insurance companies, amounts, content, forms of policies, method by which
premiums are paid and expiration dates, and (vi) include a standard,
non-contributory, mortgagee clause naming EXACTLY:

                       FIRST UNION NATIONAL BANK,
                       its Successors and Assigns ATIMA
                       c/o First Union National Bank, as Servicer
                       P.O. Box 391690
                       Solon, Ohio  44139-1690

(a) as an additional insured under all liability insurance policies, (b) as the
first mortgagee on all property insurance policies and (c) as the loss payee on
all loss of rents or loss of business income insurance policies.

         Trustor shall, as of the date hereof, deliver to Beneficiary evidence
that said insurance policies have been prepaid as required above and certified
copies of such insurance policies and original certificates of insurance signed
by an authorized agent of the applicable insurance companies evidencing such
insurance satisfactory to Beneficiary. Trustor shall renew all such insurance
and deliver to Beneficiary certificates and policies evidencing such renewals at
least thirty (30) days before any such insurance shall expire. Trustor further
agrees that each such insurance policy: (i) shall provide for at least thirty
(30) days' prior written notice to Beneficiary prior to any policy reduction or
cancellation for any reason other than non-payment of premium and at least ten
(10) days' prior written notice to Beneficiary prior to any cancellation due to
non-payment of premium; (ii) shall contain an endorsement or agreement by the
insurer that any loss shall be payable to Beneficiary in accordance with the
terms of such policy notwithstanding any act or negligence of Trustor which
might otherwise result in forfeiture of such insurance; (iii) shall waive all
rights of subrogation against Beneficiary; (iv) in the event that the Premises
or the Improvements constitutes a legal non-conforming use under applicable
building, zoning or land use laws or ordinances, shall include an ordinance or
law coverage endorsement which will contain Coverage A: "Loss Due to Operation
of Law" (with a minimum liability limit equal to Replacement Cost With Agreed
Value Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased
Cost of Construction" coverages; and (v) may be in the form of a blanket policy
provided that, in the event that any such coverage is provided in the form of a
blanket policy, Trustor hereby acknowledges and agrees that failure to pay any
portion of the premium therefor which is not allocable to the Mortgaged Property
or by any other action not relating to the Mortgaged Property which would
otherwise permit the issuer thereof to cancel the coverage thereof, would
require the Mortgaged Property to be insured by a separate, single-property
policy. The blanket policy must properly identify and fully protect the
Mortgaged Property as if a separate policy were issued for 100% of Replacement
Cost at the time of loss and otherwise meet all of Beneficiary's applicable
insurance requirements set forth in this Section 1.4. The delivery to
Beneficiary of the insurance policies or the certificates of insurance as
provided above shall constitute an assignment of all proceeds payable under such
insurance policies relating to the Mortgaged Property by Trustor to Beneficiary
as further security for the Debt. In the event of foreclosure of this Deed of
Trust, or other transfer of title to the Mortgaged Property in extinguishment in
whole or in part of the Debt, all right, title and interest of Trustor

                                       11
<PAGE>

in and to all proceeds payable under such policies then in force concerning the
Mortgaged Property shall thereupon vest in the purchaser at such foreclosure, or
in Beneficiary or other transferee in the event of such other transfer of title.
Approval of any insurance by Beneficiary shall not be a representation of the
solvency of any insurer or the sufficiency of any amount of insurance. In the
event Trustor fails to provide, maintain, keep in force or deliver and furnish
to Beneficiary the policies of insurance required by this Deed of Trust or
evidence of their renewal as required herein, Beneficiary may, but shall not be
obligated to, procure such insurance and Trustor shall pay all amounts advanced
by Beneficiary therefor, together with interest thereon at the Default Interest
Rate from and after the date advanced by Beneficiary until actually repaid by
Trustor, promptly upon demand by Beneficiary. Any amounts so advanced by
Beneficiary, together with interest thereon, shall be secured by this Deed of
Trust and by all of the other Loan Documents securing all or any part of the
Debt. Beneficiary shall not be responsible for nor incur any liability for the
insolvency of the insurer or other failure of the insurer to perform, even
though Beneficiary has caused the insurance to be placed with the insurer after
failure of Trustor to furnish such insurance. Trustor shall not obtain insurance
for the Mortgaged Property in addition to that required by Beneficiary without
the prior written consent of Beneficiary, which consent will not be unreasonably
withheld provided that (i) Beneficiary is a named insured on such insurance,
(ii) Beneficiary receives complete copies of all policies evidencing such
insurance, and (iii) such insurance complies with all of the applicable
requirements set forth herein.

         1.5. Payment of Taxes. Trustor shall pay or cause to be paid, except to
the extent provision is actually made therefor pursuant to Section 1.6 of this
Deed of Trust, all taxes and assessments which are or may become a lien on the
Mortgaged Property or which are assessed against or imposed upon the Mortgaged
Property. Trustor shall furnish Beneficiary with receipts (or if receipts are
not immediately available, with copies of canceled checks evidencing payment
with receipts to follow promptly after they become available) showing payment of
such taxes and assessments prior to the applicable delinquency date therefor.
Notwithstanding the foregoing, Trustor may, in good faith, by appropriate
proceedings and upon notice to Beneficiary, contest the validity, applicability
or amount of any asserted tax or assessment so long as (a) such contest is
diligently pursued, (b) Beneficiary determines, in its reasonable opinion, that
such contest suspends the obligation to pay the tax and that nonpayment of such
tax or assessment will not result in the sale, loss, forfeiture or diminution of
the Mortgaged Property or any part thereof or any interest of Beneficiary
therein, and (c) prior to the earlier of the commencement of such contest or the
delinquency date of the asserted tax or assessment, Trustor shall deposit in the
Impound Account (as hereinafter defined) an amount determined by Beneficiary to
be adequate to cover the payment of such tax or assessment and a reasonable
additional sum to cover possible interest, costs and penalties; provided,
however, that Trustor shall promptly cause to be paid any amount adjudged by a
court of competent jurisdiction to be due, with all interest, costs and
penalties thereon, promptly after such judgment becomes final and any excess of
the amounts deposited pursuant to this clause (c) shall promptly be released
from the Impound Account and paid to Trustor; and provided further that in any
event each such contest shall be concluded and the taxes, assessments, interest,
costs and penalties shall be paid prior to the date any writ or order is issued
under which the Mortgaged Property may be sold, lost or forfeited.

                                       12
<PAGE>

         1.6. Tax and Insurance Impound Account. Trustor shall establish and
maintain at all times while this Deed of Trust continues in effect an impound
account (the "Impound Account") with Beneficiary for payment of real estate
taxes and assessments and property and casualty and earthquake insurance on the
Mortgaged Property and as additional security for the Debt. Simultaneously with
the execution hereof, Trustor shall deposit in the Impound Account an amount
determined by Beneficiary to be necessary to ensure that there will be on
deposit with Beneficiary an amount which, when added to the monthly payments
subsequently required to be deposited with Beneficiary hereunder on account of
real estate taxes, assessments and insurance premiums, will result in there
being on deposit with Beneficiary in the Impound Account an amount sufficient to
pay the next due installment of real estate taxes and assessments on the
Mortgaged Property at least one (1) month prior to the earlier of (a) the due
date thereof or (b) any such date by which Trustor or Beneficiary is required by
law to pay same and the next due annual insurance premiums with respect to the
Mortgaged Property at least one (1) month prior to the due date thereof.
Commencing on the first monthly payment date under the Note and continuing
thereafter on each monthly payment date under the Note, Trustor shall pay to
Beneficiary, concurrently with and in addition to the monthly payment due under
the Note and until the Debt is fully paid and performed, deposits in an amount
equal to one-twelfth (1/12) of the amount of the annual real estate taxes and
assessments that will next become due and payable on the Mortgaged Property,
plus one-twelfth (1/12) of the amount of the annual premiums that will next
become due and payable on the property and casualty and earthquake insurance
policies which Trustor is required to maintain hereunder, each as estimated and
determined by Beneficiary. So long as no Event of Default has occurred, and no
event has occurred or failed to occur which with the passage of time, the giving
of notice, or both would constitute an Event of Default (a "Default"), all sums
in the Impound Account shall be held by Beneficiary in the Impound Account to
pay said taxes, assessments and insurance premiums before the same become
delinquent. Trustor shall be responsible for ensuring that Beneficiary receives
bills directly from the proper party for real estate taxes, assessments and
insurance premiums at least thirty (30) days prior to the respective due date
for payment thereof. Beneficiary shall, to the extent that funds are available
in the Impound Account and bill or invoices have been received therefor at least
30 days in advance of their due date and so long as no Event of Default has
occurred, pay all real estate taxes, assessments and insurance prior to such due
date. In the event that the above conditions have been satisfied but the real
estate taxes, assessments and/or insurance premiums have not been timely paid by
the servicer of the Loan, Beneficiary shall either pay any resulting penalties
or late charges or cause any resulting penalties or late charges to be paid by
such servicer. In making any payment from the Impound Account, Beneficiary shall
be entitled to rely on any bill, statement or estimate procured from the
appropriate public office or insurance company or agent without any inquiry into
the accuracy of such bill, statement or estimate and without any inquiry into
the accuracy, validity, enforceability or contestability of any tax, assessment,
valuation, sale, forfeiture, tax lien or title or claim thereof. Interest on
funds contained in the Impound Account, if any, shall be credited and paid to
Trustor as provided in Section 4.31 hereof.

         1.7. Intentionally Deleted.

                                       13
<PAGE>

         1.8. Replacement Reserve; Reserves Generally.

                  (a) As additional security for the Debt, Trustor shall
establish and maintain at all times while this Deed of Trust continues in effect
a repair and replacement reserve (the "Replacement Reserve") with Beneficiary
for payment of costs and expenses incurred by Trustor in connection with the
repair, replacement and maintenance of the furniture, fixtures and equipment at
the Mortgaged Property and the performance of work to the roofs, chimneys,
gutters, downspouts, paving, curbs, ramps, driveways, balconies, porches,
patios, exterior walls, exterior doors and doorways, windows, elevators and
mechanical and HVAC equipment (collectively, the "Repairs"), provided such costs
and expenses are incurred for repairs categorized under generally accepted
accounting principles as a capital item and not as an operating expense.
Commencing on the first monthly Payment Date under the Note and continuing
thereafter on each monthly Payment Date under the Note, Trustor shall pay to
Beneficiary, concurrently with and in addition to the monthly payment due under
the Note and until the Debt is fully paid and performed, a deposit to the
Replacement Reserve in an amount equal to $21,345.27 per month. So long as no
Event of Default has occurred, all sums in the Replacement Reserve shall be held
by Beneficiary in the Replacement Reserve to pay the costs and expenses of
Repairs. So long as no Default or Event of Default has occurred, Beneficiary
shall, to the extent funds are available for such purpose in the Replacement
Reserve, disburse to Trustor the amount incurred and paid by Trustor in
performing such Repairs within ten (10) days following: (a) the receipt by
Beneficiary of a written request from Trustor for disbursement from the
Replacement Reserve and a certification by Trustor in the form attached hereto
as Exhibit B or another form approved in writing by Beneficiary that the
applicable item of Repair has been completed; (b) the delivery to Beneficiary of
paid invoices, receipts or other evidence satisfactory to Beneficiary, verifying
the cost and payment of performing the Repairs; (c) for disbursement requests in
excess of $50,000.00 for an individual project, the delivery to Beneficiary of
affidavits, lien waivers or other evidence reasonably satisfactory to
Beneficiary showing that all materialmen, laborers, subcontractors and any other
parties who might or could claim statutory or common law liens and are
furnishing or have furnished material or labor to the Mortgaged Property have
been paid all amounts due for labor and materials furnished to the Mortgaged
Property; (d) for disbursement requests in excess of $50,000.00 for an
individual project, if requested by Beneficiary, delivery to Beneficiary of a
certification from an inspecting architect or other third party reasonably
acceptable to Beneficiary (including a licensed independent general contractor
having no connection to such Repairs) describing the completed Repairs and
verifying the completion of the Repairs and the value of the completed Repairs;
(e) for disbursement requests in excess of $50,000.00 for an individual project,
if requested by Beneficiary, delivery to Beneficiary of a new certificate of
occupancy for the portion of the Improvements covered by such Repairs, if said
new certificate of occupancy is required by law, or a certification by Trustor
that no new certificate of occupancy is required; and (f) the receipt by
Beneficiary of the out-of-pocket cost of inspections which Beneficiary or
Beneficiary's loan servicer reasonably deems necessary in connection with such
disbursements (which costs of inspection shall not exceed $2,000.00 each).
Beneficiary shall not be required to make advances from the Replacement Reserve
more frequently than once in any thirty (30) day period. In making any payment
from the Replacement Reserve, Beneficiary shall be entitled to rely on such
request from Trustor without any inquiry into the accuracy, validity or
contestability of any such amount. Beneficiary may, at Trustor's expense, make
or cause to be made during the term of this Deed of Trust an annual inspection
of the Mortgaged Property to determine the need, as

                                       14
<PAGE>

determined by Beneficiary in its reasonable judgment, for further Repairs of the
Mortgaged Property. In the event that such inspection reveals that further
Repairs of the Mortgaged Property are required, Beneficiary shall provide
Trustor with a written description of the required Repairs and Trustor shall
complete such Repairs to the reasonable satisfaction of Beneficiary within six
(6) months after the receipt of such description from Beneficiary, or such later
date as may be approved by Beneficiary in its reasonable discretion. Interest on
the funds contained in the Replacement Reserve shall be credited and paid to
Trustor as provided in Section 4.31 hereof.

                  (b) As additional security for the payment and performance by
Trustor of all duties, responsibilities and obligations under the Note and the
other Loan Documents, Trustor hereby unconditionally and irrevocably assigns,
conveys, pledges, mortgages, transfers, delivers, deposits, sets over and
confirms unto Beneficiary, and hereby grants to Beneficiary a security interest
in, (i) the Impound Account, the Replacement Reserve, the Repair and Remediation
Reserve (as hereinafter defined) and any other reserve or escrow account
established pursuant to the terms hereof or of any other Loan Document
(collectively, the "Reserves"), (ii) the accounts into which the Reserves have
been deposited, (iii) all insurance on said accounts, (iv) all accounts,
contract rights and general intangibles or other rights and interests pertaining
thereto, (v) all sums now or hereafter therein or represented thereby, (vi) all
replacements, substitutions or proceeds thereof, (vii) all instruments and
documents now or hereafter evidencing the Reserves or such accounts, (viii) all
powers, options, rights, privileges and immunities pertaining to the Reserves
(including the right to make withdrawals therefrom), and (ix) all proceeds of
the foregoing. Trustor hereby authorizes and consents to the account into which
the Reserves have been deposited being held in Beneficiary's name or the name of
any entity servicing the Note for Beneficiary and hereby acknowledges and agrees
that Beneficiary, or at Beneficiary's election, such servicing agent, shall have
exclusive control over said account. Notice of the assignment and security
interest granted to Beneficiary herein may be delivered by Beneficiary at any
time to the financial institution wherein the Reserves have been established,
and Beneficiary, or such servicing entity, shall have possession of all
passbooks or other evidences of such accounts. Trustor hereby assumes all risk
of loss with respect to amounts on deposit in the Reserves. Trustor hereby
knowingly, voluntarily and intentionally stipulates, acknowledges and agrees
that the advancement of the funds from the Reserves as set forth herein is at
Trustor's direction and is not the exercise by Beneficiary of any right of
set-off or other remedy upon a Default or an Event of Default. Trustor hereby
waives all right to withdraw funds from the Reserves except as provided for in
this Deed of Trust. If an Event of Default shall occur hereunder or under any
other of the Loan Documents Beneficiary may, without notice or demand on
Trustor, at its option: (A) withdraw any or all of the funds (including, without
limitation, interest) then remaining in the Reserves and apply the same, after
deducting all costs and expenses of safekeeping, collection and delivery
(including, but not limited to, reasonable attorneys' fees, costs and expenses)
to the Debt or any other obligations of Trustor under the other Loan Documents
in such manner as Beneficiary shall deem appropriate in its sole discretion, and
the excess, if any, shall be paid to Trustor, (B) exercise any and all rights
and remedies of a secured party under any applicable Uniform Commercial Code, or
(C) exercise any other remedies available at law or in equity. No such use or
application of the funds contained in the Reserves shall be deemed to cure any
Default or Event of Default.

                                       15
<PAGE>

                  (c) The Reserves shall not, unless otherwise explicitly
required by applicable law, be or be deemed to be escrow or trust funds, but, at
Beneficiary's option and in Beneficiary's discretion, may either be held in a
separate account or be commingled by Beneficiary with the general funds of
Beneficiary. The Reserves are solely for the protection of Beneficiary and
entail no responsibility on Beneficiary's part beyond the payment of the
respective items for which they are held following receipt of bills, invoices or
statements therefor in accordance with the terms hereof and beyond the allowing
of due credit for the sums actually received. Upon assignment of this Deed of
Trust by Beneficiary, any funds in the Reserves shall be turned over to the
assignee and any responsibility of Beneficiary, as assignor, with respect
thereto shall terminate. If the funds in the applicable Reserve shall exceed the
amount of payments actually applied by Beneficiary for the purposes and items
for which the applicable Reserve is held, such excess shall, at the option of
Beneficiary, either be credited by Beneficiary on subsequent payments to be made
hereunder or refunded to Trustor. If, however, the applicable Reserve shall not
contain sufficient funds to pay the sums required by the dates on which such
sums are required to be on deposit in such account, Trustor shall, within ten
(10) days after receipt of written notice thereof, deposit with Beneficiary the
full amount of any such deficiency. If Trustor shall fail to deposit with
Beneficiary the full amount of such deficiency as provided above, Beneficiary
shall have the option, but not the obligation, to make such deposit, and all
amounts so deposited by Beneficiary, together with interest thereon at the
Default Interest Rate from the date so deposited by Beneficiary until actually
paid by Trustor, shall be immediately paid by Trustor on demand and shall be
secured by this Deed of Trust and by all of the other Loan Documents securing
all or any part of the Debt. If there is an Event of Default under this Deed of
Trust, Beneficiary may, but shall not be obligated to, apply at any time the
balance then remaining in any or all of the Reserves against the Debt in
whatever order Beneficiary shall subjectively determine. No such application of
any or all of the Reserves shall be deemed to cure any Event of Default. Upon
full payment of the Debt in accordance with its terms or at such earlier time as
Beneficiary may elect, the balance of any or all of the Reserves then in
Beneficiary's possession shall be paid over to Trustor and no other party shall
have any right or claim thereto.

                  (d) By exercising any of its rights or remedies under this
Section 1.8 (including, without limitation, taking possession of the Reserves),
Beneficiary shall not be deemed to have exercised any equitable right of setoff,
foreclosed any statutory banker's lien, initiated or prosecuted any "action" to
enforce the rights and obligations secured by this Deed of Trust, or the Loan
Documents, as the term "action" is used in California Code of Civil Procedure
Section 726 ("Section 726"), or to have violated the "security first" principle
of Section 726. Accordingly, the exercise of any or all of Beneficiary's rights
and remedies under this Section 1.8 shall not in any way prejudice or affect
Beneficiary's right to initiate and complete a judicial or non-judicial
foreclosure under this Deed of Trust. This Deed of Trust evidences the
consensual granting of a personal property security interest in the Reserves as
permitted by the California Commercial Code; the parties do not intend that the
exercise by Beneficiary of any of its rights or remedies hereunder shall have
any different consequences under Section 726 than the exercise of rights or
remedies under any other security agreement under which a secured party has been
granted a security interest in other types of personal property.

         1.9. Casualty and Condemnation. Trustor shall give Beneficiary prompt
written notice of the occurrence of any casualty affecting, or the institution
of any proceedings for eminent

                                       16
<PAGE>

domain or for the condemnation of, the Mortgaged Property or any portion
thereof. All insurance proceeds on the Mortgaged Property, and all causes of
action, claims, compensation, awards and recoveries for any damage, condemnation
or taking of all or any part of the Mortgaged Property or for any damage or
injury to it for any loss or diminution in value of the Mortgaged Property, are
hereby assigned to and shall be paid to Beneficiary. Beneficiary may participate
in any suits or proceedings relating to any such proceeds, causes of action,
claims, compensation, awards or recoveries, and Beneficiary is hereby
authorized, in its own name or in Trustor's name, to adjust any loss covered by
insurance or any condemnation claim or cause of action, and to settle or
compromise any claim or cause of action in connection therewith, and Trustor
shall from time to time deliver to Beneficiary any instruments required to
permit such participation; provided, however, that, so long as no Default or
Event of Default shall have occurred, Beneficiary shall not have the right to
participate in the adjustment of any loss or condemnation claim or cause of
action which is not in excess of $250,000. So long as no Default or Event of
Default shall have occurred and be continuing, condemnation awards and/or
insurance proceeds in the aggregate sum of $150,000.00 or less shall be paid
directly to Trustor to be held in trust by Trustor and applied for the
restoration or repair of the Mortgaged Property in accordance with the
provisions of this Section 1.9 and the balance thereof not used for such
restoration or repair shall be paid by Trustor to Beneficiary, to be applied by
Beneficiary for payment of the Debt in whatever order Beneficiary directs in its
absolute discretion. Beneficiary shall apply any sums received by it under this
Section first to the payment of all of its costs and expenses (including, but
not limited to, reasonable legal fees and disbursements) incurred in obtaining
those sums, and then, as follows:

                  (a) In the event that less than forty percent (40%) of the
Improvements located on the Premises have been destroyed or in the event that
less than fifteen percent (15%) of the Improvements located on the Premises have
been taken, and provided that the casualty or condemnation does not occur within
the last six (6) months of the term of the Loan, then if and so long as:

                           (1) no Default or Event of Default has occurred
hereunder or under any of the other Loan Documents, and

                           (2) the Mortgaged Property can, in Beneficiary's
reasonable judgment, with diligent restoration or repair, be returned to a
condition at least equal to the condition thereof that existed prior to the
casualty or partial taking causing the loss or damage within the earlier to
occur of (i) six (6) months after the receipt of insurance proceeds or
condemnation awards by either Trustor or Beneficiary, and (ii) sixty (60) days
prior to the stated maturity date of the Note, and

                           (3) all necessary governmental approvals can be
obtained to allow the rebuilding and reoccupancy of the Mortgaged Property as
described in Section (a)(2) above, and

                           (4) there are sufficient sums available (through
insurance proceeds or condemnation awards and contributions by Trustor, the full
amount of which shall, at Beneficiary's option, have been deposited with
Beneficiary) for such restoration or repair (including, without limitation, for
any costs and expenses of Beneficiary to be incurred in

                                       17
<PAGE>

administering said restoration or repair) and for payment of principal and
interest to become due and payable under the Note during such restoration or
repair, and

                           (5) the economic feasibility of the Improvements
after such restoration or repair will be such that income from their operation
is reasonably anticipated to be sufficient to pay operating expenses of the
Mortgaged Property and debt service on the portion of the Debt equal to the
Allocated Loan Amount of the Mortgaged Property (as set forth in the Note) in
full with the same coverage ratio considered by Beneficiary in its determination
to make the loan secured hereby, including an assessment of the impact of the
termination of any Leases, including, but not limited to, the Operating Lease,
due to such casualty or condemnation, and

                           (6) in the event that the insurance proceeds or
condemnation awards received as a result of such casualty or partial taking
exceed $500,000.00, Trustor shall have delivered to Beneficiary, at Trustor's
sole cost and expense, an appraisal report in form and substance satisfactory to
Beneficiary appraising the value of the Mortgaged Property as proposed to be
restored or repaired to be not less than the appraised value of the Mortgaged
Property considered by Beneficiary in its determination to make the loan secured
hereby, and

                           (7) Trustor so elects by written notice delivered to
Beneficiary within ten (10) days after settlement of the aforesaid insurance or
condemnation claim to restore, then, Beneficiary shall, solely for the purposes
of such restoration or repair, advance so much of the remainder of such sums as
may be required to pay the contractors and materialmen for such restoration or
repair, and any funds deposited by Trustor therefor, to Trustor in the manner
and upon such terms and conditions as would be required by a prudent interim
construction lender, including, but not limited to, the prior approval by
Beneficiary of plans and specifications, contractors and form of construction
contracts and the furnishing to Beneficiary of permits, bonds, lien waivers,
invoices, receipts and affidavits from contractors and subcontractors, in form
and substance satisfactory to Beneficiary in its reasonable discretion, with any
remainder being applied by Beneficiary for payment of the Debt in whatever order
Beneficiary directs in its absolute discretion.

                  (b) In all other cases, namely, in the event that forty
percent (40%) or more of the Improvements located on the Premises have been
destroyed or in the event that fifteen percent (15%) or more of the Improvements
located on the Premises have been taken or Trustor does not elect to restore or
repair the Mortgaged Property pursuant to clause (a) above or otherwise fails to
meet the requirements of clause (a) above, then, in any of such events,
Beneficiary may elect, in Beneficiary's absolute discretion and without regard
to the adequacy of Beneficiary's security, to cause Trustor to immediately
prepay the full Allocated Loan Amount attributable to the Mortgaged Property (as
set forth in the Note) that is then outstanding and declare such Allocated Loan
Amount to be immediately due and payable and apply the remainder of such sums
received pursuant to this Section to the payment of the Debt in whatever order
Beneficiary directs in its absolute discretion, with any remainder being paid to
Trustor.

         Any reduction in the Debt resulting from Beneficiary's application of
any sums received by it hereunder shall take effect only when Beneficiary
actually receives such sums and elects to apply such sums to the Debt and, in
any event, the unpaid portion of the Debt shall remain in full

                                       18
<PAGE>

force and effect and Trustor shall not be excused in the payment thereof.
Partial payments received by Beneficiary, as described in the preceding
sentence, shall be applied first to the final payment due under the Note and
thereafter to installments due under the Note in the inverse order of their due
date, in which event the amount of each payment shall remain the same, but the
portion of the amount of each payment to be applied to the principal
indebtedness due under the Note shall be recalculated based on the reduced
principal. If Trustor elects to restore or repair the Mortgaged Property after
the occurrence of a casualty or partial taking of the Mortgaged Property as
provided above, Trustor shall promptly and diligently, at Trustor's sole cost
and expense and regardless of whether the insurance proceeds or condemnation
award, as appropriate, shall be sufficient for the purpose, restore, repair,
replace and rebuild the Mortgaged Property as nearly as possible to its value,
condition and character immediately prior to such casualty or partial taking in
accordance with the foregoing provisions and Trustor shall pay to Beneficiary
all reasonable costs and expenses of Beneficiary incurred in administering said
rebuilding, restoration or repair, provided that Beneficiary makes such proceeds
or award available for such purpose. Trustor agrees to execute and deliver from
time to time such further instruments as may be requested by Beneficiary to
confirm the foregoing assignment to Beneficiary of any award, damage, insurance
proceeds, payment or other compensation. Beneficiary is hereby irrevocably
constituted and appointed the attorney-in-fact of Trustor (which power of
attorney shall be irrevocable so long as any portion of the Debt is outstanding,
shall be deemed coupled with an interest, shall survive the voluntary or
involuntary dissolution of Trustor and shall not be affected by any disability
or incapacity suffered by Trustor subsequent to the date hereof), with full
power of substitution, subject to the terms of this Section, to settle for,
collect and receive any such awards, damages, insurance proceeds, payments or
other compensation from the parties or authorities making the same, to appear in
and prosecute any proceedings therefor and to give receipts and acquittances
therefor.

         1.10. Construction Liens. Trustor shall pay when due all claims and
demands of mechanics, materialmen, laborers and others for any work performed or
materials delivered for the Premises or the Improvements; provided, however,
that, Trustor shall have the right to contest in good faith any such claim or
demand, so long as it does so diligently, by appropriate proceedings and without
prejudice to Beneficiary and provided that neither the Mortgaged Property nor
any interest therein would be in any danger of sale, loss or forfeiture as a
result of such proceeding or contest. In the event Trustor shall contest any
such claim or demand, Trustor shall promptly notify Beneficiary of such contest
and thereafter shall, upon Beneficiary's request, promptly provide a bond, cash
deposit or other security satisfactory to Beneficiary to protect Beneficiary's
interest and security should the contest be unsuccessful. If Trustor shall fail
to immediately discharge or provide security against any such claim or demand as
aforesaid, Beneficiary may do so and any and all expenses incurred by
Beneficiary, together with interest thereon at the Default Interest Rate from
the date incurred by Beneficiary until actually paid by Trustor, shall be
immediately paid by Trustor on demand and shall be secured by this Deed of Trust
and by all of the other Loan Documents securing all or any part of the Debt.

         1.11. Rents and Profits. As additional and collateral security for the
payment of the Debt and cumulative of any and all rights and remedies herein
provided for, Trustor hereby absolutely and presently assigns to Beneficiary all
existing and future Rents and Profits. Trustor hereby grants to Beneficiary the
sole, exclusive and immediate right, without taking possession of the Mortgaged
Property, to demand, collect (by suit or otherwise), receive and give valid and

                                       19
<PAGE>

sufficient receipts for any and all of said Rents and Profits, for which purpose
Trustor does hereby irrevocably make, constitute and appoint Beneficiary its
attorney-in-fact with full power to appoint substitutes or a trustee to
accomplish such purpose (which power of attorney shall be irrevocable so long as
any portion of the Debt is outstanding, shall be deemed to be coupled with an
interest, shall survive the voluntary or involuntary dissolution of Trustor and
shall not be affected by any disability or incapacity suffered by Trustor
subsequent to the date hereof). Beneficiary shall be without liability for any
loss which may arise from a failure or inability to collect Rents, proceeds or
other payments. However, until the occurrence of an Event of Default under this
Deed of Trust or under any other of the Loan Documents, Trustor shall have a
license to collect, receive, use and enjoy the Rents and Profits when due and
prepayments thereof for not more than one (1) month prior to due date thereof.
Upon the occurrence of an Event of Default, Trustor's license shall
automatically terminate without notice to Trustor and Beneficiary may
thereafter, without taking possession of the Mortgaged Property, collect the
Rents and Profits itself or by an agent or receiver. From and after the
termination of such license, Trustor shall be the agent of Beneficiary in
collection of the Rents and Profits, and all of the Rents and Profits so
collected by Trustor shall be held in trust by Trustor for the sole and
exclusive benefit of Beneficiary, and Trustor shall, within one (1) business day
after receipt of any Rents and Profits, pay the same to Beneficiary to be
applied by Beneficiary as hereinafter set forth. Neither the demand for or
collection of Rents and Profits by Beneficiary shall constitute any assumption
by Beneficiary of any obligations under any agreement relating thereto.
Beneficiary is obligated to account only for such Rents and Profits as are
actually collected or received by Beneficiary. Trustor irrevocably agrees and
consents that the respective payors of the Rents and Profits shall, upon demand
and notice from Beneficiary of an Event of Default, pay said Rents and Profits
to Beneficiary without liability to determine the actual existence of any Event
of Default claimed by Beneficiary. Trustor hereby waives any right, claim or
demand which Trustor may now or hereafter have against any such payor by reason
of such payment of Rents and Profits to Beneficiary, and any such payment shall
discharge such payor's obligation to make such payment to Trustor. All Rents
collected or received by Beneficiary may be applied against all expenses of
collection, including, without limitation, reasonable attorneys' fees, against
costs of operation and management of the Mortgaged Property and against the
Debt, in whatever order or priority as to any of the items so mentioned as
Beneficiary directs in its sole subjective discretion and without regard to the
adequacy of its security. Neither the exercise by Beneficiary of any rights
under this Section nor the application of any Rents to the Debt shall cure or be
deemed a waiver of any Event of Default. The assignment of Rents and Profits
hereinabove granted shall continue in full force and effect during any period of
foreclosure or redemption with respect to the Mortgaged Property. Trustor has
executed an Assignment of Leases and Rents dated of even date herewith (the
"Assignment") in favor of Beneficiary covering all of the right, title and
interest of Trustor, as landlord, lessor or licensor, in and to any Leases. All
rights and remedies granted to Beneficiary under the Assignment shall be in
addition to and cumulative of all rights and remedies granted to Beneficiary
hereunder.

         1.12. Leases.

                  (a) Trustor covenants and agrees that it shall not enter into
any Lease affecting the lesser of (x) five percent (5%) of the gross leaseable
area of the Improvements and (y) 2,500 square feet or more of the Mortgaged
Property or having a term of three (3) years or more without the prior written
approval of Beneficiary, which approval shall not be unreasonably

                                       20
<PAGE>

withheld, conditioned or delayed. The request for approval of each such proposed
new Lease shall be made to Beneficiary in writing and shall state that, pursuant
to the terms of this Deed of Trust, failure to approve or disapprove such
proposed Lease within fifteen (15) business days is deemed approval and Trustor
shall furnish to Beneficiary (and any loan servicer specified from time to time
by Beneficiary): (i) such biographical and financial information about the
proposed Tenant as Beneficiary may require in conjunction with its review, (ii)
a copy of the proposed form of Lease, and (iii) a summary of the material terms
of such proposed Lease (including, without limitation, rental terms and the term
of the proposed lease and any options). It is acknowledged that Beneficiary
intends to include among its criteria for approval of any such proposed Lease
the following: (i) such Lease shall be with a bona-fide arm's-length Tenant;
(ii) such Lease shall not contain any rental or other concessions which are not
then customary and reasonable for similar properties and Leases in the market
area of the Premises; (iii) such Lease shall provide that the Tenant pays for
its expenses; (iv) the rental shall be approximately at the market rate then
prevailing for similar properties and leases in the market areas of the
Premises; and (v) such Lease shall contain subordination and attornment
provisions in form and content reasonably acceptable to Beneficiary. Failure of
Beneficiary to approve or disapprove any such proposed Lease within fifteen (15)
business days after receipt of such written request and all the documents and
information required to be furnished to Beneficiary with such request shall be
deemed approval, provided that the written request for approval specifically
mentioned the same.

                  (b) Prior to execution by Trustor of any Leases of space in
the Improvements or otherwise at the Mortgaged Property after the date hereof,
Trustor shall submit to Beneficiary, for Beneficiary's prior approval, which
approval shall not be unreasonably withheld, conditioned or delayed, a copy of
such Lease. Trustor shall not do or suffer to be done any act, or omit to take
any action, that might result in a default by the landlord, lessor or licensor
under any such Lease or the Operating Lease or allow the Tenant thereunder to
withhold payment of rent or cancel or terminate same and shall not further
assign any such Lease or the Operating Lease or any such Rents and Profits.
Trustor, at no cost or expense to Beneficiary, shall enforce, short of
termination, the performance and observance of each and every condition and
covenant of each of the parties under such Leases and the Operating Lease and
Trustor shall not anticipate, discount, release, waive, compromise or otherwise
discharge any rent payable under any of the Leases or the Operating Lease.
Trustor shall not, without the prior written consent of Beneficiary, modify any
of the Leases or the Operating Lease (subject to the provisions of any of the
other Loan Documents), terminate or accept the surrender of any Leases or the
Operating Lease, waive or release any other party from the performance or
observance of any obligation or condition under such Leases or the Operating
Lease except, with respect only to Leases (including, without limitation,
modifying, terminating or releasing any party, guaranty, letter of credit or
other credit support thereof) affecting less than the lesser of (x) five percent
(5%) of the gross leaseable area of the Improvements and (y) 2,500 square feet
and having a term of three (3) years or less, in the normal course of business
in a manner which is consistent with sound and customary leasing and management
practices for similar properties in the community in which the Mortgaged
Property is located. Trustor shall not permit the prepayment of any rents under
any of the Leases or the Operating Lease for more than one (1) month prior to
the due date thereof.

                  (c) Each Lease executed after the date hereof affecting any of
the Premises or the Improvements must provide, in a manner approved by
Beneficiary, that the Tenant will

                                       21
<PAGE>

recognize as its landlord, lessor or licensor, as applicable, and attorn to any
person succeeding to the interest of Trustor upon any foreclosure of this Deed
of Trust or deed in lieu of foreclosure. Each such Lease shall also provide
that, upon request of said successor-in-interest, the Tenant shall execute and
deliver an instrument or instruments confirming its attornment as provided for
in this Section; provided, however, that neither Beneficiary nor any
successor-in-interest shall be bound by any payment of rent for more than one
(1) month in advance, or any amendment or modification of said Lease made
without the express written consent of Beneficiary or said
successor-in-interest. Beneficiary may at any time and from time to time by
specific written instrument intended for such purpose, unilaterally subordinate
the lien of this Deed of Trust to any Lease without joinder or consent of, or
notice to, Trustor, any Tenant or any other person. Notice is hereby given to
each Tenant under a Lease of such right to subordinate. No subordination
referred to in this Section shall constitute a subordination to any lien or
other encumbrance, whenever arising, or improve the right of any junior
lienholder. Nothing herein shall be construed as subordinating this Deed of
Trust to any Lease.

                  (d) Upon the occurrence of an Event of Default under this Deed
of Trust, whether before or after the whole principal sum secured hereby is
declared to be immediately due or whether before or after the institution of
legal proceedings to foreclose this Deed of Trust, forthwith, upon demand of
Beneficiary, Trustor shall surrender to Beneficiary, and Beneficiary shall be
entitled to take actual possession of, the Mortgaged Property or any part
thereof personally, or by its agent or attorneys. In such event, Beneficiary
shall have, and Trustor hereby gives and grants to Beneficiary, the right, power
and authority to make and enter into Leases with respect to the Mortgaged
Property or portions thereof for such rents and for such periods of occupancy
and upon conditions and provisions as Beneficiary may deem desirable in its sole
discretion, and Trustor expressly acknowledges and agrees that the term of any
such Lease may extend beyond the date of any foreclosure sale of the Mortgaged
Property, it being the intention of Trustor that in such event Beneficiary shall
be deemed to be and shall be the attorney-in-fact of Trustor for the purpose of
making and entering into Leases of parts or portions of the Mortgaged Property
for the rents and upon the terms, conditions and provisions deemed desirable to
Beneficiary in its sole discretion and with like effect as if such Leases had
been made by Trustor as the owner in fee simple of the Mortgaged Property free
and clear of any conditions or limitations established by this Deed of Trust.
The power and authority hereby given and granted by Trustor to Beneficiary shall
be deemed to be coupled with an interest, shall not be revocable by Trustor so
long as any portion of the Debt is outstanding, shall survive the voluntary or
involuntary dissolution of Trustor and shall not be affected by any disability
or incapacity suffered by Trustor subsequent to the date hereof. In connection
with any action taken by Beneficiary pursuant to this Section, Beneficiary shall
not be liable for any loss sustained by Trustor resulting from any failure to
let the Mortgaged Property, or any part thereof, or from any other act or
omission of Beneficiary in managing the Mortgaged Property, nor shall
Beneficiary be obligated to perform or discharge any obligation, duty or
liability under any Lease covering the Mortgaged Property or any part thereof or
under or by reason of this instrument or the exercise of rights or remedies
hereunder. Trustor shall, and does hereby, indemnify Beneficiary for, and hold
Beneficiary harmless from, any and all claims, actions, demands, liabilities,
loss or damage which may or might be incurred by Beneficiary under any such
Lease or the Operating Lease or under this Deed of Trust or by the exercise of
rights or remedies hereunder and from any and all claims and demands whatsoever
which may be asserted against Beneficiary by reason of any alleged obligations
or undertakings on its part to perform or

                                       22
<PAGE>

discharge any of the terms, covenants or agreements contained in any such Lease
or the Operating Lease other than those arising from the gross negligence or
willful misconduct of Beneficiary. Should Beneficiary incur any such liability,
the amount thereof, including, without limitation, costs, expenses and
reasonable attorneys' fees, together with interest thereon at the Default
Interest Rate from the date incurred by Beneficiary until actually paid by
Trustor, shall be immediately due and payable to Beneficiary by Trustor on
demand and shall be secured hereby and by all of the other Loan Documents
securing all or any part of the Debt. Nothing in this Section shall impose on
Beneficiary any duty, obligation or responsibility for the control, care,
management or repair of the Mortgaged Property, or for the carrying out of any
of the terms and conditions of any such Lease or the Operating Lease, nor shall
it operate to make Beneficiary responsible or liable for any waste committed on
the Mortgaged Property by the Tenants or by any other parties or for any
dangerous or defective condition of the Mortgaged Property, or for any
negligence in the management, upkeep, repair or control of the Mortgaged
Property. Trustor hereby assents to, ratifies and confirms any and all actions
of Beneficiary with respect to the Mortgaged Property taken under this Section.

                  (e)      (1) Notwithstanding any other terms of the Loan
Documents, Beneficiary shall permit the tenant's interest in the Operating Lease
to be transferred to a taxable real estate investment trust subsidiary of
Indemnitor or any entity controlled by Jeffrey H. Fisher (directly or
indirectly) without the imposition of any assumption fee, provided that
Beneficiary reasonably approves the ownership/leasing structure of the Mortgaged
Property and the transferee of the Operating Lease, and provided that
Beneficiary receives a written statement from the applicable rating agencies to
the effect that such transfer will not by itself result in a downgrading,
withdrawal or qualification of the respective securities rating in effect
immediately prior to such transfer.

                           (2) Beneficiary shall permit the Trustor to terminate
the Operating Lease if the IRS Code permits direct operation by Trustor and
Beneficiary receives a written statement from the applicable rating agencies to
the effect that such change in structure will not by itself result in a
downgrading, withdrawal or qualification of the respective securities rating in
effect immediately prior to such change in structure and Beneficiary receives
other documentation, if any, reasonably required by Beneficiary in connection
with such change in structure.

         1.13. Alienation and Further Encumbrances.

                  (a) Trustor acknowledges that Beneficiary has relied upon the
principals of, Trustor, Indemnitor and/or their affiliates and their experience
in owning and operating the Mortgaged Property and properties similar to the
Mortgaged Property in connection with the closing of the loan evidenced by the
Note. Accordingly, except as specifically allowed hereinbelow in this Section
and notwithstanding anything to the contrary contained in Section 4.6 hereof, in
the event that the Mortgaged Property or any part thereof or interest therein
shall be sold, conveyed, disposed of, alienated, hypothecated, leased (except to
Tenants of space in the Improvements in accordance with the provisions of
Section 1.12 hereof), assigned, pledged, mortgaged, further encumbered or
otherwise transferred or Trustor shall be divested of its title to the Mortgaged
Property or any interest therein, in any manner or way, whether voluntarily or
involuntarily, without the prior written consent of Beneficiary being first
obtained, which consent may be withheld in Beneficiary's sole discretion, then
the same shall constitute an Event of Default and Beneficiary shall have the
right, at its option, to declare any or all of the Debt,

                                       23
<PAGE>

irrespective of the maturity date specified in the Note, immediately due and
payable and to otherwise exercise any of its other rights and remedies contained
in Article III hereof. A prohibited sale, conveyance, disposition,
hypothecation, alienation, mortgage, encumbrance, assignment, lease, pledge or
transfer within the meaning of this Section 1.13(a) shall be deemed to include,
among other things: (i) an installment sales agreement wherein Trustor agrees to
sell the Mortgaged Property or any part thereof for a price to be paid in
installments; (ii) an agreement by Trustor leasing all or a substantial part of
the Mortgaged Property for other than actual occupancy by a space tenant
thereunder (except for the Operating Lease) or a sale, assignment or other
transfer of, or the grant of a security interest in, Trustor's right, title and
interest in and to any Leases or the Operating Lease (other than as expressly
permitted in Section 1.12(e) hereof) or any Rents and Profits; (iii) if Trustor,
any guarantor or indemnitor or any partner or member of Trustor is a corporation
or trust, the voluntary or involuntary sale, conveyance or transfer of such
corporation's stock or securities (or the stock or securities of any corporation
or trust directly or indirectly controlling such corporation or trust by
operation of law or otherwise) or the creation or issuance of new stock or
securities, in all instances in one or a series of transactions by which an
aggregate of more than 49% of such corporation's or trust's stock or securities
shall be vested in a party or parties who are not stockholders or
securityholders as of the date hereof or any change in the control of such
corporation or trust; (iv) if Trustor, any guarantor or indemnitor or any
general partner or managing member of Trustor is a limited or general
partnership, joint venture or limited liability company, the change, removal,
resignation or addition of a general partner, managing member, joint venturer or
the transfer, assignment or pledge of any ownership interest of any general
partner, managing member, or joint venturer in Trustor or the transfer,
assignment or pledge of any ownership interest in any general partner, managing
member, or joint venturer (whether in the form of a beneficial or partnership
interest or in the form of a power of direction control or management, or
otherwise); or (v) if Trustor or any guarantor or indemnitor or any general
partner or managing member of Trustor or guarantor or indemnitor is a limited
partnership or limited liability company, the voluntary or involuntary sale,
conveyance, transfer or pledge of any limited partnership interests or
membership interests (whether directly or indirectly) or the creation or
issuance of new limited partnership interests or membership interests (whether
in one or a series of transactions), by which an aggregate of more than 49% of
such limited partnership interests or membership interests are held by, or
pledged to, parties who are not currently limited partners or members or
affiliated with Indemnitor. Notwithstanding the foregoing, however, (i) limited
partnership interests and/or non-managing member interests in Trustor or in any
general partner or member of Trustor shall be freely transferable without the
consent of Beneficiary so long as following such transfer, no more than 49% of
the beneficial economic interest in the Trustor (whether directly or indirectly)
has been transferred in the aggregate and substantially all of the persons
responsible for the management and control of the Mortgaged Property and Trustor
as of the date hereof remain in legal, beneficial and actual control and
management of the Mortgaged Property and Trustor, (ii) any involuntary transfer
caused by the death of Trustor or any general partner, shareholder, joint
venturer, member or beneficial owner of a trust shall not be an Event of Default
under this Deed of Trust so long as Trustor is reconstituted, if required,
following such death and so long as substantially all of those persons
responsible for the control and management of the Mortgaged Property and Trustor
remain unchanged as a result of such death or any replacement management or
controlling parties are approved by Beneficiary, (iii) gifts for estate planning
purposes of any individual's interests in Trustor or in

                                       24
<PAGE>

any of Trustor's general partners, managing members or joint venturers to the
spouse or any lineal descendant of such individual, or to a trust for the
benefit of any one or more of such individual, spouse or lineal descendant,
shall not be an Event of Default under this Deed of Trust so long as Trustor is
reconstituted, if required, following such gift and so long as those persons
responsible for the control and management of the Mortgaged Property and Trustor
remain unchanged following such gift or any replacement management or
controlling parties are approved by Beneficiary, and (iv) sales, conveyances or
transfers of properties (or interests in properties) owned by affiliates of
Trustor (whether directly or indirectly), other than the properties (or
interests in the properties unless otherwise expressly permitted herein) that
are given as security for the Note as of the date hereof (each, individually, a
"Crossed Property" and collectively, the "Crossed Properties"), shall not be
prohibited under this Section 1.13. Notwithstanding any provision of this Deed
of Trust to the contrary, no person or entity may become an owner of a direct or
indirect interest in Trustor, which interest exceeds forty-nine (49%) percent,
without Beneficiary's written consent in each instance and a written statement
from the applicable rating agency to the effect that the transfer of interest
will not by itself result in a downgrading, withdrawal or qualification of the
respective ratings in effect immediately prior to such transfer for any
securities issued in connection with a Secondary Market Transaction (as
hereinafter defined).

                  Notwithstanding the provisions of this Section 1.13(a), equity
holders in Trustor and their beneficiaries may transfer their direct or indirect
interests in Trustor without Beneficiary's consent, provided that Beneficiary
receives payment of its reasonable out-of-pocket expenses actually incurred with
respect thereto and each of the following items are satisfied, as reasonably
determined by Beneficiary: (i) taking prior transfers into account, the transfer
will not result in (x) the proposed transferee or its affiliates becoming the
owner of 49% or more of the interests in Trustor (whether directly or
indirectly) or (y) the transfer of 49% or more of the interests in Trustor
(whether directly or indirectly), (ii) the transfer does not result in a change
of control of Trustor (whether directly or indirectly), (iii) Trustor gives
Beneficiary a minimum of 15 days prior written notice of such transfer, (iv) no
Default or Event of Default exists under the Loan Documents, (v) the structure
of Trustor after the transfer satisfies the applicable rating agencies'
then-current criteria and (vi) the applicable rating agencies confirm that the
transfer will not by itself result in an Adverse Rating Impact (as hereinafter
defined). Transfers of more than 49% of the interests in Trustor (whether
directly or indirectly) shall require Beneficiary's consent, not to be
unreasonably withheld, and satisfaction of each of the assumption provisions
specified in Section 1.13(b) hereof (such transfers shall be deemed a "Sale" (as
such term is defined in Section 1.13(b) hereof and the transferee shall be
deemed a "Buyer" (as such term is defined in Section 1.13(b) hereof). To the
extent of any inconsistency between the terms of this paragraph and the terms of
the immediately preceding paragraph, the terms of this paragraph shall govern.

                  (b) Notwithstanding the foregoing provisions of this Section,
Beneficiary shall consent to one or more sales, conveyances or transfers of the
Mortgaged Property or the Trustor in its entirety (hereinafter, a "Sale") to any
person or entity provided that, for each Sale, each of the following terms and
conditions are satisfied:

                           (1) No Default and no Event of Default is then
continuing hereunder or under any of the other Loan Documents;

                                       25
<PAGE>

                           (2) Trustor gives Beneficiary written notice of the
terms of such prospective Sale not less than forty-five (45) days before the
date on which such Sale is scheduled to close and, concurrently therewith, gives
Beneficiary all such information concerning the proposed transferee
(hereinafter, "Buyer") as Beneficiary would require in evaluating an initial
extension of credit to a borrower and pays to Beneficiary a non-refundable
application fee in the amount of $5,000.00 (provided, however, if one or more of
the Crossed Properties are simultaneously being requested to be transferred to
the same Buyer, the application fee shall be $5,000.00 in the aggregate for all
such transfers). Beneficiary shall have the right to reasonably approve or
disapprove the proposed Buyer. In determining whether to give or withhold its
approval of the proposed Buyer, Beneficiary shall consider the Buyer's
experience and track record in owning and operating facilities similar to the
Mortgaged Property, the Buyer's financial strength, the Buyer's general business
standing and the Buyer's relationships and experience with contractors, vendors,
tenants, lenders and other business entities; provided, however, that,
notwithstanding Beneficiary's agreement to consider the foregoing factors in
determining whether to give or withhold such approval, such approval shall be
given or withheld based on what Beneficiary determines to be commercially
reasonable in Beneficiary's sole discretion and, if given, may be given subject
to such conditions as Beneficiary may deem appropriate;

                           (3) Trustor pays Beneficiary, concurrently with the
closing of such Sale, a non-refundable assumption fee in an amount equal to all
out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred by Beneficiary in connection with the Sale, plus an
amount equal to one percent (1.0%) of the then outstanding principal balance of
the Note;

                           (4) In the event of a Sale of the Mortgaged Property
(as opposed to a Sale of the Trustor), the Buyer assumes and agrees to pay the
portion of the Debt equal to the Allocated Loan Amount for the Mortgaged
Property (as set forth in the Note) subject to the provisions of Section 4.27
hereof and, prior to or concurrently with the closing of such Sale, the Buyer
executes, without any cost or expense to Beneficiary, a new promissory note (the
"New Note") in the principal amount of the Allocated Loan Amount for the
Mortgaged Property and such documents and agreements as Beneficiary shall
reasonably require to evidence and effectuate said assumption. The parties to
this Deed of Trust acknowledge and agree that the New Note shall be secured by
the Mortgaged Property (and not by any of the other Crossed Properties) and the
Note (as reduced by the principal amount of the New Note) shall continue to be
secured by the remaining Crossed Properties (excluding the Mortgaged Property);

                           (5) The Buyer delivers such legal opinions as
Beneficiary may reasonably require;

                           (6) A party approved by Beneficiary in its sole
discretion assumes the obligations of the current Indemnitor under the
Environmental Indemnity Agreement (as hereinafter defined) covering the
Mortgaged Property and such party executes, without any cost or expense to
Beneficiary, a new Environmental Indemnity Agreement in form and substance
reasonably satisfactory to Beneficiary covering the Mortgaged Property, a
guaranty and indemnity agreement in form and substance reasonably satisfactory
to Beneficiary covering

                                       26
<PAGE>

those acts and circumstances set forth in Section 2.6(c) of the Note, and
delivers such legal opinions as Beneficiary may reasonably require;

                           (7) Trustor and the Buyer, as applicable, execute,
without any cost or expense to Beneficiary, new financing statements or
financing statement amendments and any additional documents reasonably requested
by Beneficiary;

                           (8) In the event of a Sale of the Mortgaged Property
(as opposed to a Sale of the Trustor), Trustor delivers to Beneficiary, without
any cost or expense to Beneficiary, such endorsements to Beneficiary's title
insurance policy, hazard insurance policy endorsements or certificates and other
similar materials as Beneficiary may deem necessary at the time of the Sale, all
in form and substance satisfactory to Beneficiary, including, without
limitation, an endorsement or endorsements to Beneficiary's title insurance
policy insuring the lien of this Deed of Trust, extending the effective date of
such policy to the date of execution and delivery (or, if later, of recording)
of the assumption agreement referenced above in subparagraph (4) of this
Section, with no additional exceptions added to such policy, and insuring that
fee simple title to the Mortgaged Property subject to the Permitted Encumbrances
is vested in the Buyer;

                           (9) Trustor and/or the transferor in connection with
a Sale executes and delivers to Beneficiary, without any cost or expense to
Beneficiary, a release of Beneficiary, its officers, directors, employees and
agents, from all claims and liability relating to the transactions evidenced by
the Loan Documents, through and including the date of the closing of the Sale,
which agreement shall be in form and substance reasonably satisfactory to
Beneficiary and shall be binding upon the Buyer;

                           (10) Subject to the provisions of Section 4.27
hereof, such Sale is not construed so as to relieve Trustor of any personal
liability under the Note or any of the other Loan Documents for any acts or
events occurring or obligations arising prior to or simultaneously with the
closing of such Sale, whether or not same is discovered prior or subsequent to
the closing of such Sale, and Trustor executes, without any cost or expense to
Beneficiary, such documents and agreements as Beneficiary shall reasonably
require to evidence and effectuate the ratification of said personal liability.
In the event of a Sale of the Mortgaged Property (as opposed to a Sale of the
Trustor), Trustor shall be released from and relieved of any personal liability
under the Note or any of the other Loan Documents for any acts or events
occurring or obligations arising after the closing of such Sale which are not
caused by or arising out of any acts or events occurring or obligations arising
prior to or simultaneously with the closing of such Sale;

                           (11) Such Sale is not construed so as to relieve any
current Indemnitor of its obligations under the Environmental Indemnity
Agreement for any acts or events occurring or obligations arising prior to or
simultaneously with the closing of such Sale, and each such current Indemnitor
executes, without any cost or expense to Beneficiary, such documents and
agreements as Beneficiary shall reasonably require to evidence and effectuate
the ratification of the Environmental Indemnity Agreement for any acts or events
occurring or obligations arising prior to or simultaneously with the closing of
such Sale. Each such current Indemnitor shall be released from and relieved of
any of its obligations under the Environmental Indemnity Agreement executed in
connection with the loan secured hereby for any acts or events occurring

                                       27
<PAGE>

or obligations arising after the closing of such Sale which are not caused by or
arising out of any acts or events occurring or obligations arising prior to or
simultaneously with the closing of such Sale;

                           (12) The Buyer shall furnish, if the Buyer is a
corporation, partnership or other entity, all appropriate papers evidencing the
Buyer's capacity and good standing, and the qualification of the signers to
execute the assumption of the portion of the Debt equal to the Allocated Loan
Amount for the Mortgaged Property (as set forth in the Note), which papers shall
include certified copies of all documents relating to the organization and
formation of the Buyer and of the entities, if any, which are partners of the
Buyer. In the event of a Sale of the Mortgaged Property or a Sale of the general
partner of the Trustor (as opposed to a Sale of other interests in the Trustor):
(i) the Buyer and such constituent partners, members or shareholders of Buyer
(as the case may be), as Beneficiary shall reasonably require, shall be single
purpose, "bankruptcy remote" entities, whose formation documents shall be
approved by counsel to Beneficiary; (ii) one individual recommended by the
Trustor and approved by Beneficiary shall serve as the independent director of
the Buyer (if the Buyer is a corporation) or the Buyer's corporate general
partner or as independent members or, in Beneficiary's discretion, as managers,
of Buyer if the Buyer is a limited liability company; and (iii) the consent of
such independent parties shall be required for, among other things, any merger,
consolidation, dissolution, bankruptcy or insolvency of such independent party
or of the Buyer;

                           (13) Trustor delivers to Beneficiary a written
statement from the applicable rating agency to the effect that the Sale
(including, without limitation, the release of the Mortgaged Property as
security for the Note and the subsequent use of the Mortgaged Property as
security for the New Note, if applicable) will not by itself result in a
downgrading, withdrawal or qualification of the respective ratings (an "Adverse
Rating Impact") in effect immediately prior to such Sale for any securities
issued in connection with a Secondary Market Transaction (as hereinafter
defined). In the event the Secondary Market Transaction has not yet occurred,
Beneficiary shall, in its reasonable discretion, have determined that the Sale
would not by itself have resulted in an Adverse Rating Impact had the Secondary
Market Transaction theretofore occurred;

                           (14) The applicable transfer will not result in an
increase in the real property taxes for the Premises and Improvements that would
cause the Debt Service Coverage Ratio (as defined in Schedule 2 attached hereto)
for the Mortgaged Property to be less than 1.60:1.0 on a trailing twelve
calendar month basis;

                           (15) After such Sale, the Debt Service Coverage Ratio
(as defined on Schedule 1 attached hereto) for the Crossed Properties remaining
as security for the Note shall be no less than 1.60:1.0;

                           (16) The Debt Service Coverage Ratio (as defined on
Schedule 2 attached hereto) for the Mortgaged Property shall be no less than
1.60:1.0;

                           (17) Trustor shall make a cash deposit with
Beneficiary in like amount (the "Release Deposit Amount") as the face value of
the Additional Defeasance Deposit (as defined in the Note) which would be
required if the Allocated Loan Amount for the Mortgaged

                                       28
<PAGE>

Property (as set forth in the Note) were being defeased (without taking into
account the 15% aggregate limitation set forth in the Note), which cash deposit
shall be held by Beneficiary as additional collateral and security for the New
Note being executed by the Buyer, shall be subject to a pledge and security
agreement acceptable to Beneficiary and executed and delivered by Buyer to
Beneficiary and shall be held in an interest bearing account in a manner similar
to the sums held in the Cash Collateral Account as referred to in Section 4.31
hereof;

                           (18) Trustor shall, at Trustor's expense, provide
such documents, certificates, requests and agreements as reasonably requested by
Beneficiary; and

                           (19) Trustor shall, at Trustor's expense, provide an
opinion of counsel for Trustor in form and substance and delivered by counsel
reasonably satisfactory to Beneficiary stating, among other things, that any
trust formed as a REMIC (as defined in the Note) in connection with a Secondary
Market Transaction (as defined herein) will not fail to maintain its status as a
REMIC or be subject to a tax on a prohibited transaction under the IRS Code as a
result of the transaction contemplated under this Section 1.13(b).

                  All references to the Allocated Loan Amount for the Mortgaged
Property as set forth in this Section 1.13(b) shall be deemed to be the then
unpaid Allocated Loan Amount for the Mortgaged Property (as set forth in the
Note), which will reflect any monthly payments made under the Note and which are
applied to the principal indebtedness due under the Note and allocated
proportionately to all of the Allocated Loan Amounts set forth in the Note.

                  (c) Notwithstanding any other terms of the Loan Documents, the
securities of Innkeepers USA Trust or its successors (collectively, the "REIT")
or Innkeepers USA Limited Partnership or its successors (collectively, the
"Partnership") (the Partnership and the REIT being referred to individually as a
"Principal" and collectively as the "Principals") may be transferred or issued
without limitation except (A) if such transfer or issue would result in 49% or
more of either Principal's securities being vested in a single party and/or such
party's affiliates and such single party and/or such party's affiliates is on
any "bad borrower" list or similar list maintained by Standard and Poor's or any
other rating agency (whether or not such list is then published or in writing)
or is otherwise viewed as a "bad borrower" by any such rating agency (each, a
"Bad Borrower") or (B) if such transfer or issue would result in a change in the
control or management of either Principal to a Bad Borrower or to an affiliate
of a Bad Borrower, each of which transactions in (A) or (B) shall be prohibited.
Notwithstanding any other terms of the Loan Documents to the contrary, the
following transactions shall be permitted without Beneficiary's consent,
provided that Beneficiary receives a minimum of 15 days prior written notice and
payment of its reasonable out-of-pocket expenses actually incurred with respect
thereto (including, but not limited to, reasonable legal fees and
disbursements), but no additional fees shall be payable to Beneficiary with
respect thereto: (A) either Principal participating in a merger or consolidation
in which such Principal is the survivor of any such merger or consolidation or
(B) either Principal participating in a merger, consolidation or sale of
substantially all of its assets and the surviving entity ("Successor") (a) owns
substantially all of the assets of such Principal after the transaction, (b) is
owned (i) at least 15% in equity by executive management of REIT and the
remainder by nationally recognized investors (or affiliates thereof) with
substantial leveraged buyout experience or (ii) at least 51% in equity by one or
more pension funds, pension fund advisors, insurance companies, banks, or real
estate investment trusts, with an aggregate net worth of at least
$100,000,000.00 and control of at least ten hotels with

                                       29
<PAGE>

at least 1,300 rooms, and (c) delivers to Beneficiary confirmation that there
will be no Adverse Rating Impact.

         1.14. Payment of Utilities, Assessments, Charges, Etc. Trustor shall
pay when due all utility charges which are incurred by Trustor or which may
become a charge or lien against any portion of the Mortgaged Property for gas,
electricity, water and sewer services furnished to the Premises and/or the
Improvements and all other assessments or charges of a similar nature, or
assessments payable pursuant to any restrictive covenants, whether public or
private, affecting the Premises and/or the Improvements or any portion thereof,
whether or not such assessments or charges are or may become liens thereon.

         1.15. Access Privileges and Inspections. Beneficiary and the agents,
representatives and employees of Beneficiary shall, subject to the rights of
Tenants, have full and free access to the Premises and the Improvements and any
other location where books and records concerning the Mortgaged Property are
kept at all reasonable times and, except in the event of an emergency, upon not
less than 72 hours prior notice (which notice may be telephonic) for the
purposes of inspecting the Mortgaged Property and of examining, copying and
making extracts from the books and records of Trustor relating to the Mortgaged
Property. Trustor shall lend assistance to all such agents, representatives and
employees of Beneficiary.

         1.16. Waste; Alteration of Improvements. Trustor shall not commit,
suffer or permit any waste on the Mortgaged Property nor take any actions that
might invalidate any insurance carried on the Mortgaged Property. Trustor shall
maintain the Mortgaged Property in good condition and repair. No part of the
Improvements may be removed, demolished or materially altered, without the prior
written consent of Beneficiary. Without the prior written consent of
Beneficiary, Trustor shall not commence construction of any improvements on the
Premises other than improvements required for the maintenance or repair of the
Mortgaged Property.

         1.17. Zoning. Without the prior written consent of Beneficiary, Trustor
shall not seek, make, suffer, consent to or acquiesce in any change in the
zoning or conditions of use of the Premises or the Improvements. Trustor shall
comply with and make all payments required under the provisions of any
covenants, conditions or restrictions affecting the Premises or the
Improvements. Trustor shall comply with all existing and future requirements of
all governmental authorities having jurisdiction over the Mortgaged Property.
Trustor shall keep all licenses, permits, franchises and other approvals
necessary for the operation of the Mortgaged Property in full force and effect.
Trustor shall operate the Mortgaged Property as a hotel for so long as the Debt
is outstanding. If, under applicable zoning provisions, the use of all or any
part of the Premises or the Improvements is or becomes a nonconforming use,
Trustor shall not cause or permit such use to be discontinued or abandoned
without the prior written consent of Beneficiary. Further, without Beneficiary's
prior written consent, Trustor shall not file or subject any part of the
Premises or the Improvements to any declaration of condominium or co-operative
or convert any part of the Premises or the Improvements to a condominium,
co-operative or other form of multiple ownership and governance.

         1.18. Financial Statements and Books and Records. Trustor shall keep or
cause to be kept accurate books and records of account of the Mortgaged Property
and its own financial affairs sufficient to permit the preparation of financial
statements therefrom in accordance with

                                       30
<PAGE>

generally accepted accounting principles. Beneficiary and its duly authorized
representatives shall have the right to examine, copy and audit Trustor's
records and books of account at all reasonable times. So long as this Deed of
Trust continues in effect, Trustor shall provide to Beneficiary, in addition to
any other financial statements required hereunder or under any of the other Loan
Documents, the following financial statements and information, all of which must
be certified to Beneficiary as being true and correct by Trustor or the person
or entity to which they pertain, as applicable, and be prepared in accordance
with generally accepted accounting principles consistently applied (provided,
that if Trustor after the date hereof shall at any time have the Trustor's
financial statements audited by an independent certified public accountant,
Trustor shall deliver such audited statements to Beneficiary):

                  (a) quarterly operating statements for the Mortgaged Property,
on a year-to-date and a quarterly basis, together with average daily room rates,
occupancy rates and room revenues for each quarter within forty-five (45) days
after the end of each March, June, September and December commencing with the
first (1st) of such months to occur following the first (1st) anniversary of the
date hereof;

                  (b) annual financial statements for the Indemnitor, within
ninety (90) days after the end of each calendar year; and

                  (c) such other information with respect to the Mortgaged
Property and each Indemnitor, which may be reasonably requested from time to
time by Beneficiary and which may be provided without additional material
expense, within a reasonable time after the applicable request.

If any of the aforementioned materials are not furnished to Beneficiary within
the applicable time periods, in addition to any other rights and remedies of
Beneficiary contained herein, Beneficiary shall have the right, but not the
obligation, to obtain the same by means of an audit by an independent certified
public accountant selected by Beneficiary, in which event Trustor agrees to pay,
or to reimburse Beneficiary for, any expense of such audit and further agrees to
provide all necessary information to said accountant and to otherwise cooperate
in the making of such audit.

         1.19. Further Documentation.

                  (a) Trustor shall, on the request of Beneficiary and at the
expense of Trustor: (a) promptly correct any defect, error or omission which may
be discovered in the contents of this Deed of Trust or in the contents of any of
the other Loan Documents; (b) promptly execute, acknowledge, deliver and record
or file such further instruments (including, without limitation, further
mortgages, deeds of trust, security deeds, security agreements, financing
statements, continuation statements and assignments of rents or leases) and
promptly do such further acts as may be necessary, desirable or proper to carry
out more effectively the purposes of this Deed of Trust and the other Loan
Documents and to subject to the liens and security interests hereof and thereof
any property intended by the terms hereof and thereof to be covered hereby and
thereby, including specifically, but without limitation, any renewals,
additions, substitutions, replacements or appurtenances to the Mortgaged
Property; (c) promptly execute, acknowledge, deliver, procure and record or file
any document or instrument (including specifically, without limitation, any
financing statement) deemed advisable by Beneficiary to protect, continue or

                                       31
<PAGE>

perfect the liens or the security interests hereunder against the rights or
interests of third persons; and (d) promptly furnish to Beneficiary, upon
Beneficiary's request, a duly acknowledged written statement and estoppel
certificate addressed to such party or parties as directed by Beneficiary and in
form and substance supplied by Beneficiary, setting forth all amounts due under
the Note, stating whether any Default or Event of Default has occurred
hereunder, stating whether any offsets or defenses exist against the Debt and
containing such other matters as Beneficiary may reasonably require.

                  (b) Trustor acknowledges that Beneficiary and its successors
and assigns may effectuate a Secondary Market Transaction (as hereinafter
defined). Trustor shall cooperate in good faith with Beneficiary in effecting
any such Secondary Market Transaction and shall cooperate in good faith to
implement all requirements imposed by any rating agency involved in any
Secondary Market Transaction including, without limitation, all structural or
other changes to the Debt, and modifications to any documents evidencing or
securing the loan; provided, however, that the Trustor shall not be required to
incur material additional cost or modify any documents evidencing or securing
the Debt which would modify (A) the interest rate payable under the Note, (B)
the stated maturity of the Note, (C) the amortization of principal of the Note,
(D) the interest only payments due under the Note, (E) terms relating to
assumption, substitution, defeasance and prepayment, (F) provisions relating to
substitute managers, lessees or franchisees, or (G) any other material economic
term of the Debt. Trustor shall provide such information and documents relating
to Trustor, any guarantor or indemnitor, the Mortgaged Property and any tenants
of the Improvements as Beneficiary may reasonably request in connection with
such Secondary Market Transaction. Trustor shall make available to Beneficiary
all information concerning its business and operations that Beneficiary may
reasonably request. Beneficiary shall be permitted to share all such information
with the investment banking firms, rating agencies, accounting firms, law firms
and other third-party advisory firms involved with the Loan Documents or the
applicable Secondary Market Transaction. It is understood that the information
provided by Trustor to Beneficiary may ultimately be incorporated into the
offering documents for the Secondary Market Transaction and thus various
investors may also see some or all of the information. Beneficiary and all of
the aforesaid third-party advisors and professional firms shall be entitled to
rely on the information supplied by, or on behalf of, Trustor and Trustor
indemnifies Beneficiary as to any losses, claims, damages or liabilities that
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any information supplied by Trustor or
Indemnitor to Beneficiary or any third-party advisors or professional firms in
writing to be incorporated in the offering materials, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated in any information or necessary in order to make the
statements in such information not misleading. Beneficiary may publicize the
existence of the Debt in connection with its marketing for a Secondary Market
Transaction. For purposes hereof, a "Secondary Market Transaction" shall be (a)
any sale of the Deed of Trust, Note and other Loan Documents to one or more
investors as a whole loan; (b) a participation of the Debt to one or more
investors, (c) any deposit of the Deed of Trust, Note and other Loan Documents
with a trust or other entity which may sell certificates or other instruments to
investors evidencing an ownership interest in the assets of such trust or other
entity, or (d) any other sale or transfer of the Debt or any interest therein to
one or more investors.

                                       32
<PAGE>

         1.20. Payment of Costs; Reimbursement to Beneficiary. Trustor shall pay
all costs and expenses reasonably incurred in connection with the closing of the
loan evidenced by the Note and secured hereby or otherwise attributable or
chargeable to Trustor as the owner of the Mortgaged Property, including, without
limitation, appraisal fees, recording fees, documentary, stamp, mortgage or
intangible taxes, brokerage fees and commissions, title policy premiums and
title search fees, uniform commercial code/tax lien/litigation search fees,
escrow fees and reasonable attorneys' fees. If Trustor defaults in any such
payment, which default is not cured within any applicable grace or cure period,
Beneficiary may pay the same and Trustor shall reimburse Beneficiary on demand
for all such costs and expenses incurred or paid by Beneficiary, together with
such interest thereon at the Default Interest Rate from and after the date of
Beneficiary's making such payment until reimbursement thereof by Trustor. Any
such sums disbursed by Beneficiary, together with such interest thereon, shall
be additional indebtedness of Trustor secured by this Deed of Trust and by all
of the other Loan Documents securing all or any part of the Debt. Further,
Trustor shall promptly notify Beneficiary in writing of any litigation or
threatened litigation materially affecting the Mortgaged Property, or any other
demand or claim which, if enforced, could materially impair or threaten to
materially impair Beneficiary's security hereunder. Without limiting or waiving
any other rights and remedies of Beneficiary hereunder, if Trustor fails to
perform any of its covenants or agreements contained in this Deed of Trust or in
any of the other Loan Documents and such failure is not cured within any
applicable grace or cure period, or if any action or proceeding of any kind
(including, but not limited to, any bankruptcy, insolvency, arrangement,
reorganization or other debtor relief proceeding) is commenced which might
affect Beneficiary's interest in the Mortgaged Property or Beneficiary's right
to enforce its security, then Beneficiary may, at its option, with or without
notice to Trustor, make any appearances, disburse any sums and take any actions
as may be necessary or desirable to protect or enforce the security of this Deed
of Trust or to remedy the failure of Trustor to perform its covenants and
agreements (without, however, waiving any default of Trustor). Trustor agrees to
pay on demand all expenses of Beneficiary or Trustee incurred with respect to
the foregoing (including, but not limited to, reasonable fees and disbursements
of counsel), together with interest thereon at the Default Interest Rate from
and after the date on which Beneficiary or Trustee incurs such expenses until
reimbursement thereof by Trustor. Any such expenses so incurred by Beneficiary,
together with interest thereon as provided above, shall be additional
indebtedness of Trustor secured by this Deed of Trust and by all of the other
Loan Documents securing all or any part of the Debt. The necessity for any such
actions and of the amounts to be paid shall be determined by Beneficiary in its
discretion. Beneficiary is hereby empowered to enter and to authorize others to
enter upon the Mortgaged Property or any part thereof for the purpose of
performing or observing any such defaulted term, covenant or condition without
thereby becoming liable to Trustor or any person in possession holding under
Trustor. Trustor hereby acknowledges and agrees that the remedies set forth in
this Section 1.20 shall be exercisable by Beneficiary, and any and all payments
made or costs or expenses incurred by Beneficiary in connection therewith shall
be secured hereby and shall be, without demand, immediately repaid by Trustor
with interest thereon at the Default Interest Rate, notwithstanding the fact
that such remedies were exercised and such payments made and costs incurred by
Beneficiary after the filing by Trustor of a voluntary case or the filing
against Trustor of an involuntary case pursuant to or within the meaning of the
Bankruptcy Reform Act of 1978, as amended, Title 11 U.S.C., or after any similar
action pursuant to any other debtor relief law (whether statutory, common law,
case law or otherwise) of any jurisdiction whatsoever, now or

                                       33
<PAGE>

hereafter in effect, which may be or become applicable to Trustor, Beneficiary,
any Indemnitor, the Debt or any of the Loan Documents. Trustor hereby
indemnifies and holds Beneficiary harmless from and against all loss, cost and
expenses with respect to any Event of Default hereof, any liens (i.e.,
judgments, mechanics' and materialmen's liens, or otherwise), charges and
encumbrances filed against the Mortgaged Property, and from any claims and
demands for damages or injury, including claims for property damage, personal
injury or wrongful death, arising out of or in connection with any accident or
fire or other casualty on the Premises or the Improvements or any nuisance made
or suffered thereon, except those that are due to Beneficiary's gross negligence
or willful misconduct as finally determined by a court of competent
jurisdiction, including, without limitation, in any case, reasonable attorneys'
fees, costs and expenses as aforesaid, whether at pretrial, trial or appellate
level, and such indemnity shall survive payment in full of the Debt. This
Section shall not be construed to require Beneficiary to incur any expenses,
make any appearances or take any actions.

         1.21. Security Interest. This Deed of Trust is also intended to
encumber and create a security interest in, and Trustor hereby grants to
Beneficiary a security interest in, all sums on deposit with Beneficiary
pursuant to the provisions of Section 1.6, Section 1.8 and Section 1.34 hereof
or any other Section hereof or of any other Loan Document and all fixtures,
chattels, accounts, equipment, inventory, contract rights, general intangibles
and other personal property included within the Mortgaged Property, all
renewals, replacements of any of the aforementioned items, or articles in
substitution therefor or in addition thereto or the proceeds thereof (said
property is hereinafter referred to collectively as the "Collateral"), whether
or not the same shall be attached to the Premises or the Improvements in any
manner. It is hereby agreed that to the extent permitted by law, all of the
foregoing property is to be deemed and held to be a part of and affixed to the
Premises and the Improvements. The foregoing security interest shall also cover
Trustor's leasehold interest in any of the foregoing property which is leased by
Trustor. Notwithstanding the foregoing, all of the foregoing property shall be
owned by Trustor and no leasing or installment sales or other financing or title
retention agreement in connection therewith shall be permitted without the prior
written approval of Beneficiary; provided, however, that Trustor may lease or
finance photocopiers, vans, telecommunication equipment, satellite television
equipment and other equipment customarily leased by similarly situated hotels.
Trustor shall, from time to time upon the reasonable request of Beneficiary,
supply Beneficiary with a current inventory of all of the property in which
Beneficiary is granted a security interest hereunder, in such detail as Trustor
maintains for the Mortgaged Property (in accordance with the requirements of the
Franchise Agreement, if applicable) or as maintained by the affiliates of
Indemnitor for other hotels. Trustor shall promptly replace all of the
Collateral subject to the lien or security interest of this Deed of Trust when
worn or obsolete with Collateral comparable to the worn out or obsolete
Collateral when new and will not, without the prior written consent of
Beneficiary, remove from the Premises or the Improvements any of the Collateral
subject to the lien or security interest of this Deed of Trust except such as is
replaced by an article of equal suitability and value as above provided, owned
by Trustor free and clear of any lien or security interest except that created
by this Deed of Trust and the other Loan Documents. All of the Collateral shall
be kept at the location of the Premises except as otherwise required by the
terms of the Loan Documents. Trustor shall not use any of the Collateral in
violation of any applicable statute, ordinance or insurance policy.

                                       34
<PAGE>

         1.22. Security Agreement. This Deed of Trust constitutes a security
agreement between Trustor and Beneficiary with respect to the Collateral in
which Beneficiary is granted a security interest hereunder, and, cumulative of
all other rights and remedies of Beneficiary hereunder, Beneficiary shall have
all of the rights and remedies of a secured party under any applicable Uniform
Commercial Code. Trustor hereby agrees to execute and deliver on demand and
hereby irrevocably constitutes and appoints Beneficiary the attorney-in-fact of
Trustor to execute and deliver and, if appropriate, to file with the appropriate
filing officer or office, such security agreements, financing statements,
continuation statements or other instruments as Beneficiary may request or
require in order to impose, perfect or continue the perfection of the lien or
security interest created hereby. To the extent specifically provided herein,
Beneficiary shall have the right of possession of all cash, securities,
instruments, negotiable instruments, documents, certificates and any other
evidences of cash or other property or evidences of rights to cash rather than
property, which are now or hereafter a part of the Mortgaged Property, and
Trustor shall promptly deliver the same to Beneficiary, endorsed to Beneficiary,
without further notice from Beneficiary. Trustor agrees to furnish Beneficiary
with notice of any change in the name, identity, organizational structure,
residence, or principal place of business or mailing address of Trustor within
ten (10) days of the effective date of any such change. Upon the occurrence of
any Event of Default, Beneficiary shall have the rights and remedies as
prescribed in this Deed of Trust, or as prescribed by general law, or as
prescribed by any applicable Uniform Commercial Code, all at Beneficiary's
election. Any disposition of the Collateral may be conducted by an employee or
agent of Beneficiary. Any person, including both Trustor and Beneficiary, shall
be eligible to purchase any part or all of the Collateral at any such
disposition. Expenses of retaking, holding, preparing for sale, selling or the
like (including, without limitation, Beneficiary's reasonable attorneys' fees
and legal expenses), together with interest thereon at the Default Interest Rate
from the date incurred by Beneficiary until actually paid by Trustor, shall be
paid by Trustor on demand and shall be secured by this Deed of Trust and by all
of the other Loan Documents securing all or any part of the Debt. Beneficiary
shall have the right to enter upon the Premises and the Improvements or any real
property where any of the property which is the subject of the security interest
granted herein is located to take possession of, assemble and collect the same
or to render it unusable, or Trustor, upon demand of Beneficiary, shall assemble
such property and make it available to Beneficiary at the Premises, or at a
place which is mutually agreed upon or, if no such place is agreed upon, at a
place reasonably designated by Beneficiary to be reasonably convenient to
Beneficiary and Trustor. If notice is required by law, Beneficiary shall give
Trustor at least ten (10) days' prior written notice of the time and place of
any public sale of such property, or adjournments thereof, or of the time of or
after which any private sale or any other intended disposition thereof is to be
made, and if such notice is sent to Trustor, as the same is provided for the
mailing of notices herein, it is hereby deemed that such notice shall be and is
reasonable notice to Trustor. No such notice is necessary for any such property
which is perishable, threatens to decline speedily in value or is of a type
customarily sold on a recognized market. Any sale made pursuant to the
provisions of this Section shall be deemed to have been a public sale conducted
in a commercially reasonable manner if held contemporaneously with a foreclosure
sale as provided in Section 3.1(e) hereof upon giving the same notice with
respect to the sale of the Mortgaged Property hereunder as is required under
said Section 3.1(e). Furthermore, to the extent permitted by law, in conjunction
with, in addition to or in substitution for the rights and remedies available to
Beneficiary pursuant to any applicable Uniform Commercial Code:

                                       35
<PAGE>

                  (a) In the event of a foreclosure sale, the Mortgaged Property
may, at the option of Beneficiary, be sold as a whole; and

                  (b) It shall not be necessary that Beneficiary take possession
of the aforementioned Collateral, or any part thereof, prior to the time that
any sale pursuant to the provisions of this Section is conducted and it shall
not be necessary that said Collateral, or any part thereof, be present at the
location of such sale; and

                  (c) Beneficiary may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any sale
held by Beneficiary, including the sending of notices and the conduct of the
sale, but in the name and on behalf of Beneficiary.

The name and address of Trustor (as Debtor under any applicable Uniform
Commercial Code) are:

                       INNKEEPERS RESIDENCE SAN MATEO, L.P.
                       c/o Innkeepers USA Trust
                       306 Royal Poinciana Way
                       Palm Beach, Florida  33480

The name and address of Beneficiary (as Secured Party under any applicable
Uniform Commercial Code) are:

                       FIRST UNION NATIONAL BANK
                       One First Union Center DC-6
                       Charlotte, North Carolina 28288-0166

         1.23. Easements and Rights-of-Way. Trustor shall not grant any easement
or right-of-way with respect to all or any portion of the Premises or the
Improvements without the prior written consent of Beneficiary, which consent
shall not be unreasonably withheld, delayed or conditioned. The purchaser at any
foreclosure sale hereunder may, at its discretion, disaffirm any easement or
right-of-way granted in violation of any of the provisions of this Deed of Trust
and may take immediate possession of the Mortgaged Property free from, and
despite the terms of, such grant of easement or right-of-way. If Beneficiary
consents to the grant of an easement or right-of-way, Beneficiary agrees to
grant such consent without charge to Trustor other than expenses, including,
without limitation, reasonable attorneys' fees, incurred by Beneficiary in the
review of Trustor's request and in the preparation of documents effecting the
subordination.

         1.24. Compliance with Laws. Trustor shall at all times comply with all
statutes, ordinances, regulations and other governmental or quasi-governmental
requirements and private covenants now or hereafter relating to the ownership,
construction, use or operation of the Mortgaged Property, including, but not
limited to, those concerning employment and compensation of persons engaged in
operation and maintenance of the Mortgaged Property and any environmental or
ecological requirements, even if such compliance shall require structural
changes to the Mortgaged Property, except to the extent non-compliance would not
have a material adverse effect on the Mortgaged Property or the Trustor or the
Trustor's ability to satisfy its obligations under the Loan Documents; provided,
however, that, Trustor may, upon providing Beneficiary with security
satisfactory to Beneficiary, proceed diligently and in good faith to contest the
validity or applicability of any such statute, ordinance, regulation or

                                       36
<PAGE>

requirement so long as during such contest the Mortgaged Property shall not be
subject to any lien, charge, fine or other liability and shall not be in danger
of being forfeited, lost or closed. Trustor shall not use or occupy, or allow
the use or occupancy of, the Mortgaged Property in any manner which violates any
Lease of or any other agreement applicable to the Mortgaged Property or any
applicable law, rule, regulation or order or which constitutes a public or
private nuisance or which makes void, voidable or cancelable, or increases the
premium of, any insurance then in force with respect thereto.

         1.25. Additional Taxes. In the event of the enactment after the date
hereof of any law of the state in which the Mortgaged Property is located or of
any other governmental entity deducting from the value of the Mortgaged Property
for the purpose of taxing any lien or security interest thereon, or imposing
upon Beneficiary the payment of the whole or any part of the taxes or
assessments or charges or liens herein required to be paid by Trustor, or
changing in any way the laws relating to the taxation of deeds of trust,
mortgages or security agreements or debts secured by deeds of trust, mortgages
or security agreements or the interest of the beneficiary, Beneficiary or
secured party in the property covered thereby, or the manner of collection of
such taxes, so as to adversely affect this Deed of Trust or the Debt or
Beneficiary, then, and in any such event, Trustor, upon demand by Beneficiary,
shall pay such taxes, assessments, charges or liens, or reimburse Beneficiary
therefor; provided, however, that if in the opinion of counsel for Beneficiary
(a) it might be unlawful to require Trustor to make such payment, or (b) the
making of such payment might result in the imposition of interest beyond the
maximum amount permitted by law, then and in either such event, Beneficiary may
elect, by notice in writing given to Trustor, to declare all of the Debt to be
and become due and payable in full thirty (30) days from the giving of such
notice, and, in connection with the payment of such Debt, no prepayment premium
or fee shall be due unless, at the time of such payment, an Event of Default or
a Default shall have occurred and be continuing, which Default or Event of
Default is unrelated to the provisions of this Section 1.25, in which event any
applicable prepayment premium or fee in accordance with the terms of the Note
shall be due and payable.

         1.26. Secured Indebtedness. It is understood and agreed that this Deed
of Trust shall secure payment of not only the indebtedness evidenced by the Note
but also any and all substitutions, replacements, renewals and extensions of the
Note, any and all indebtedness and obligations arising pursuant to the terms
hereof and any and all indebtedness and obligations arising pursuant to the
terms of any of the other Loan Documents, all of which indebtedness is equally
secured with and has the same priority as any amounts advanced as of the date
hereof. It is agreed that any future advances made by Beneficiary to or for the
benefit of Trustor from time to time under this Deed of Trust or the other Loan
Documents and whether or not such advances are obligatory or are made at the
option of Beneficiary, or otherwise, made for any purpose, within twenty (20)
years from the date hereof, and all interest accruing thereon, shall be equally
secured by this Deed of Trust and shall have the same priority as all amounts,
if any, advanced as of the date hereof and shall be subject to all of the terms
and provisions of this Deed of Trust.

         1.27. Trustor's Waivers. To the full extent permitted by law, Trustor
agrees that Trustor shall not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the Debt prior to any
sale of the Mortgaged Property to be made pursuant to any provisions contained
herein or

                                       37
<PAGE>

prior to the entering of any decree, judgment or order of any court of competent
jurisdiction, or any right under any statute to redeem all or any part of the
Mortgaged Property so sold. Trustor, for Trustor and Trustor's successors and
assigns, and for any and all persons ever claiming any interest in the Mortgaged
Property, to the full extent permitted by law, hereby knowingly, intentionally
and voluntarily, with and upon the advice of competent counsel: (a) waives,
releases, relinquishes and forever forgoes all rights of valuation,
appraisement, stay of execution, reinstatement and notice of election or
intention to mature or declare due the Debt (except such notices as are
specifically provided for herein); (b) waives, releases, relinquishes and
forever forgoes all right to a marshaling of the assets of Trustor, including
the Mortgaged Property, to a sale in the inverse order of alienation, or to
direct the order in which any of the Mortgaged Property shall be sold in the
event of foreclosure of the liens and security interests hereby created and
agrees that any court having jurisdiction to foreclose such liens and security
interests may order the Mortgaged Property sold as an entirety; and (c) waives,
releases, relinquishes and forever forgoes all rights and periods of redemption
provided under applicable law. To the full extent permitted by law, Trustor
shall not have or assert any right under any statute or rule of law pertaining
to the exemption of homestead or other exemption under any federal, state or
local law now or hereafter in effect, the administration of estates of decedents
or other matters whatever to defeat, reduce or affect the right of Beneficiary
under the terms of this Deed of Trust to a sale of the Mortgaged Property, for
the collection of the Debt without any prior or different resort for collection,
or the right of Beneficiary under the terms of this Deed of Trust to the payment
of the Debt out of the proceeds of sale of the Mortgaged Property in preference
to every other claimant whatever. Furthermore, Trustor hereby knowingly,
intentionally and voluntarily, with and upon the advice of competent counsel,
waives, releases, relinquishes and forever forgoes all present and future
statutes of limitations as a defense to any action to enforce the provisions of
this Deed of Trust or to collect any of the Debt to the fullest extent permitted
by law. Trustor covenants and agrees that upon the commencement of a voluntary
or involuntary bankruptcy proceeding by or against Trustor, Trustor shall not
seek a supplemental stay or otherwise shall not seek pursuant to 11 U.S.C.
ss.105 or any other provision of the Bankruptcy Reform Act of 1978, as amended,
or any other debtor relief law (whether statutory, common law, case law, or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may
be or become applicable, to stay, interdict, condition, reduce or inhibit the
ability of Beneficiary to enforce any rights of Beneficiary against any
guarantor or indemnitor of the secured obligations or any other party liable
with respect thereto by virtue of any indemnity, guaranty or otherwise.

         1.28. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

                  (a) TRUSTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PREMISES
IS LOCATED AND THE STATE WHOSE LAW IS GOVERNING THE NOTE OVER ANY SUIT, ACTION
OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS DEED OF
TRUST OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT ANY SUCH ACTION, SUIT
OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN THE COUNTY IN WHICH THE PREMISES IS LOCATED OR IN THE
STATE WHOSE LAW IS GOVERNING THE NOTE, (iii) SUBMITS TO THE JURISDICTION OF SUCH
COURTS, AND (iv) TO THE FULLEST EXTENT

                                       38
<PAGE>

PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING
IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF BENEFICIARY TO
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM WHERE CROSSED PROPERTIES
ARE LOCATED OR THE FORUM WHOSE LAW IS GOVERNING THE TERMS OF THE NOTE). TRUSTOR
FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S.
MAIL, POSTAGE PREPAID, TO THE TRUSTOR AT THE ADDRESS FOR NOTICES DESCRIBED IN
SECTION 4.5 HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT
THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW).

                  (b) TRUSTOR AND BENEFICIARY, TO THE FULL EXTENT PERMITTED BY
LAW, EACH HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVICE OF COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY
WAY RELATING TO THE DEBT OR ANY CONDUCT, ACT OR OMISSION OF BENEFICIARY OR
TRUSTOR, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS, MEMBERS,
EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH BENEFICIARY
OR TRUSTOR, IN EACH OR THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE.

         1.29. Attorney-in-Fact Provisions. With respect to any provision of
this Deed of Trust or any other Loan Document whereby Trustor grants to
Beneficiary a power-of-attorney, provided no Default or Event of Default has
occurred and is continuing under this Deed of Trust, Beneficiary shall first
give Trustor written notice at least five (5) business days prior to acting
under such power, which notice shall demand that Trustor first take the proposed
action within such period and advising Trustor that if it fails to do so,
Beneficiary will so act under the power; provided, however, that, in the event
that a Default or an Event of Default has occurred and is continuing, or if
necessary to prevent imminent death, serious injury, damage, loss, forfeiture or
diminution in value to the Mortgaged Property or any surrounding property or to
prevent any adverse affect on Beneficiary's interest in the Mortgaged Property,
Beneficiary may act immediately and without first giving such notice. In such
event, Beneficiary will give Trustor notice of such action as soon thereafter as
reasonably practical.

         1.30. Management.

                  (a) The management of the Mortgaged Property shall be by
either: (x) Trustor or an entity affiliated with Trustor reasonably approved by
Beneficiary; or (y) a professional property management company reasonably
approved by Beneficiary; provided, however, that any management company
controlled by Marriott International, Inc., Hyatt Hotels Corporation, Hilton
Hotels Corporation, Bass PLC, Starwood Hotels and Resorts Worldwide, Inc.,
Meristar International Hotels and Resorts, Inc. or Jeffrey H. Fisher (provided
that Jeffrey H. Fisher shall at no time have been indicted for any felony, filed
for bankruptcy or become

                                       39
<PAGE>

insolvent) is hereby approved. Such management by an affiliated entity or a
professional property management company shall be pursuant to a written
agreement approved by Beneficiary, which approval shall not be unreasonably
withheld, conditioned or delayed. In no event shall any manager be removed or
replaced or the terms of any management agreement materially modified or amended
without the prior written consent of Beneficiary. Beneficiary shall not
unreasonably withhold or delay its consent to Trustor's request to replace the
manager, operator or lessee with respect to the Mortgaged Property, provided
that any such substitute manager, operator or lessee is a hotel operating
company which (together with its affiliates) is then managing not less than
twelve (12) hotel properties consisting of at least one thousand five hundred
(1500) rooms (not including the Mortgaged Property). After an Event of Default
or a default under any management contract then in effect, which default is not
cured within any applicable grace or cure period, Beneficiary shall have the
right to terminate, or to direct Trustor to terminate, such management contract
upon thirty (30) days' notice and to retain, or to direct Trustor to retain, a
new management agent approved by Beneficiary. All Rents and Profits generated by
or derived from the Mortgaged Property shall first be utilized solely for
current expenses directly attributable to the ownership and operation of the
Mortgaged Property, including, without limitation, current expenses relating to
Trustor's liabilities and obligations with respect to this Deed of Trust and the
other Loan Documents, and none of the Rents and Profits generated by or derived
from the Mortgaged Property shall be diverted by Trustor and utilized for any
other purposes unless all such current expenses attributable to the ownership
and operation of the Mortgaged Property have been fully paid and satisfied. Any
right of payment of Trustor (or any affiliated manager) arising out of or in any
way connected with the management and/or ownership of the Mortgaged Property
shall be fully and completely subordinated to the lien of this Deed of Trust and
the other Loan Documents, and to Beneficiary's right to payment under the Note
and the other Loan Documents.

                  (b) Trustor shall be permitted to operate the Mortgaged
Property under brands owned or controlled by Bass, Marriott, Hyatt, Hilton,
Starwood or Meristar or, subject to Beneficiary's prior consent, any other
brands.

         1.31. Hazardous Waste and Other Substances.

                  (a) Trustor hereby represents and warrants to Beneficiary
that, as of the date hereof, and except as may be expressly set forth in the
environmental reports delivered to Beneficiary in connection with the making of
the Loan: (i) to the best of Trustor's knowledge, information and belief, none
of Trustor nor the Mortgaged Property nor any Tenant at the Premises nor the
operations conducted thereon is in violation of or could reasonably be expected
to be subject or give rise to any liability under any local, state or federal
law, rule or regulation or common law duty pertaining to human health, natural
resources or the environment (collectively, "Environmental Laws"), including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C.ss.9601 et seq.), the Resource Conservation and
Recovery Act of 1976 (42 U.S.C.ss.6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C.ss.1251 et seq.), the Clean Air Act (42 U.S.C.ss.7401 et
seq.), the Emergency Planning and Community-Right-to-Know Act (42 U.S.C.ss.11001
et seq.), the Endangered Species Act (16 U.S.C.ss.1531 et seq.), the Toxic
Substances Control Act (15 U.S.C.ss.2601 et seq.), the Occupational Safety and
Health Act (29 U.S.C.ss.651 et seq.) and the Hazardous Materials Transportation
Act (49 U.S.C.ss.1801 et seq.), and regulations promulgated

                                       40
<PAGE>

pursuant to said laws, all as amended from time to time; (ii) no hazardous,
toxic or harmful substances, wastes, materials, pollutants or contaminants
(including, without limitation, asbestos or asbestos-containing materials, lead
based paint, polychlorinated biphenyls, petroleum or petroleum products or
byproducts, flammable explosives, radioactive materials, infectious substances,
radon gas or raw materials which include hazardous constituents) or any other
substances or materials which are included under or regulated by Environmental
Laws (collectively, "Hazardous Substances") are located on, in or under or have
been handled, generated, stored, processed or disposed of on or released or
discharged from the Mortgaged Property (including underground contamination),
except for those substances used by Trustor or any Tenant in the ordinary course
of their respective businesses and material compliance with all Environmental
Laws and where such could not reasonably be expected to give rise to liability
under Environmental Laws; (iii) the Mortgaged Property is not subject to any
private or governmental lien or judicial or administrative notice or action
arising under Environmental Laws; (iv) there is no pending, nor, to Trustor's
knowledge, information or belief, threatened litigation arising under
Environmental Laws affecting Trustor or the Mortgaged Property; there are no
and, to Trustor's knowledge, have been no existing or closed underground storage
tanks or other underground storage receptacles for Hazardous Substances or
landfills or dumps on the Mortgaged Property; (v) Trustor has received no notice
of, and to Trustor's knowledge, there exists no investigation, action,
proceeding or claim by any agency, authority or unit of government or by any
third party which could result in any liability, penalty, sanction or judgment
under any Environmental Laws with respect to any condition, use or operation of
the Mortgaged Property, nor does Trustor know of any basis for such an
investigation, action, proceeding or claim; (vi) Trustor has received no notice
of and, to the best of Trustor's knowledge and belief, there has been no claim
by any party that any use, operation or condition of the Mortgaged Property has
caused any nuisance or any other liability or adverse condition on any other
property, nor does Trustor know of any basis for such an investigation, action,
proceeding or claim; and (vii) to Trustor's knowledge, radon is not present at
the Mortgaged Property in excess or in violation of any applicable thresholds or
standards or in amounts that require under applicable law disclosure to any
tenant or occupant of or invitee to the Mortgaged Property or to any
governmental agency or the general public.

                  (b) Trustor has not received nor to the best of Trustor's
knowledge, information and belief has there been issued, any notice,
notification, demand, request for information, citation, summons, or order in
any way relating to any actual, alleged or potential violation or liability
arising under Environmental Laws; and

                  (c) Neither the Mortgaged Property, nor to Trustor's
knowledge, any property to which Trustor has, in connection with the maintenance
or operation of the Mortgaged Property, directly or indirectly transported or
arranged for the transportation of any Hazardous Substances is listed or, to the
best of Trustor's knowledge, information and belief, proposed for listing on the
National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined
in CERCLA) or on any similar federal or state list of sites requiring
environmental investigation or clean-up.

                  (d) Trustor shall comply in all material respects with all
applicable Environmental Laws. Trustor shall keep or cause the Mortgaged
Property to be kept free from Hazardous Substances (except those substances used
by Trustor or any Tenant in the ordinary

                                       41
<PAGE>

course of their respective businesses and except in material compliance with all
Environmental Laws and where such could not reasonably be expected to give rise
to liability under Environmental Laws) and in compliance with all Environmental
Laws, Trustor shall not install or use any underground storage tanks, shall
expressly prohibit the use, generation, handling, storage, production,
processing and disposal of Hazardous Substances by all Tenants in quantities or
conditions that would violate or give rise to any obligation to take remedial or
other action under any applicable Environmental Laws. Without limiting the
generality of the foregoing, during the term of this Deed of Trust, Trustor
shall not install in the Improvements or permit to be installed in the
Improvements any asbestos or asbestos-containing materials.

                  (e) Trustor shall promptly notify Beneficiary if Trustor shall
become aware of (i) the actual or potential existence of any Hazardous
Substances on the Mortgaged Property other than those occurring in the ordinary
course of Trustor's business and which do not violate, or would not otherwise
reasonably be expected to give rise to liability under Environmental Laws, (ii)
any violation of, or other occurrence that could reasonably be expected to give
rise to liability under, any Environmental Laws, (iii) any lien, action or
notice affecting the Mortgaged Property or Trustor resulting from any violation
or alleged violation of or liability or alleged liability under any
Environmental Laws, (iv) the institution of any investigation, inquiry or
proceeding concerning Trustor or the Mortgaged Property pursuant to any
Environmental Laws or otherwise relating to Hazardous Substances, or (v) the
discovery of any occurrence, condition or state of facts which would render any
representation or warranty contained in this Deed of Trust incorrect in any
material respect if made at the time of such discovery. Immediately upon receipt
of same, Trustor shall deliver to Beneficiary copies of any and all requests for
information, complaints, citations, summonses, orders, notices, reports or other
communications, documents or instruments in any way relating to any actual,
alleged or potential violation or liability of any nature whatsoever arising
under Environmental Laws and relating to the Mortgaged Property or to Trustor.
Trustor shall remedy or cause to be remedied in a timely manner (and in any
event within the time period permitted by applicable Environmental Laws) any
violation of Environmental Laws or any condition that could give rise to
liability under Environmental Laws. Without limiting the foregoing, Trustor
shall, promptly and regardless of the source of the contamination or threat to
the environment or human health, at its own expense, take all actions as shall
be required, for the clean-up of any and all portions of the Mortgaged Property
or other affected property, including, without limitation, all investigative,
monitoring, removal, containment and remedial actions in accordance with all
applicable Environmental Laws and shall further pay or cause to be paid, at no
expense to Beneficiary, all clean-up, administrative and enforcement costs
required to be paid to applicable governmental agencies which may be asserted
against the Mortgaged Property; provided, however, that in the event that
Trustor contests such expenses and the contest thereof results in an extension
of the period for the payment of such expenses (and does not in any way
adversely affect Trustor, Beneficiary, the Mortgaged Property or Beneficiary's
security interest in the Mortgaged Property), then Trustor may delay payment of
such expenses until the end of any such extended period. In the event Trustor
fails to do so: (a) Beneficiary may, but shall not be obligated to, cause the
Mortgaged Property or other affected property to be freed from any Hazardous
Substances or otherwise brought into conformance with Environmental Laws and any
and all costs and expenses incurred by Beneficiary in connection therewith,
together with interest thereon at the Default Interest Rate from the date
incurred by Beneficiary until actually paid by Trustor, shall be immediately
paid by Trustor on demand and shall be secured by this Deed of Trust and by all
of the other Loan

                                       42
<PAGE>

Documents securing all or any part of the Debt and (b) Trustor hereby grants to
Beneficiary and its agents and employees access to the Mortgaged Property and a
license to remove any items deemed by Beneficiary to be Hazardous Substances and
to do all things Beneficiary shall deem necessary to bring the Mortgaged
Property into conformance with Environmental Laws.

                  (f) Trustor covenants and agrees, at Trustor's sole cost and
expense, to indemnify, defend (at trial and appellate levels, and with
attorneys, consultants and experts acceptable to Beneficiary), and hold
Beneficiary harmless from and against any and all liens, damages (including
without limitation, punitive or exemplary damages), losses, liabilities
(including, without limitation, strict liability), obligations, settlement
payments, penalties, fines, assessments, citations, directives, claims,
litigation, demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses of any kind or of any nature whatsoever (including,
without limitation, reasonable attorneys', consultants' and experts' fees and
disbursements actually incurred in investigating, defending, settling or
prosecuting any claim, litigation or proceeding (collectively, "Costs")) which
may at any time be imposed upon, incurred by or asserted or awarded against
Beneficiary or the Mortgaged Property, and arising directly or indirectly from
or out of: (i) any violation or alleged violation of, or liability or alleged
liability under, any Environmental Law; (ii) the presence, release or threat of
release of or exposure to any Hazardous Substances or radon on, in, under or
affecting all or any portion of the Mortgaged Property or any surrounding areas,
regardless of whether or not caused by or within the control of Trustor; (iii)
any transport, treatment, recycling, storage, disposal or arrangement therefor
of Hazardous Substances whether on the Mortgaged Property, originating from the
Mortgaged Property, or otherwise associated with Trustor or any operations
conducted on the Mortgaged Property at any time; (iv) the failure by Trustor to
comply fully with the terms and conditions of this Section 1.31; (v) the breach
of any representation or warranty contained in this Section 1.31; (vi) the
enforcement of this Section 1.31, including, without limitation, the cost of
assessment, investigation, containment, removal and/or remediation of any and
all Hazardous Substances from all or any portion of the Mortgaged Property or
any surrounding areas, the cost of any actions taken in response to the
presence, release or threat of release of any Hazardous Substances on, in, under
or affecting any portion of the Mortgaged Property or any surrounding areas to
prevent or minimize such release or threat of release so that it does not
migrate or otherwise cause or threaten danger to present or future public
health, safety, welfare or the environment, and costs incurred to comply with
Environmental Laws in connection with all or any portion of the Mortgaged
Property or any surrounding areas. The indemnity set forth in this Section 1.31
shall also include any diminution in the value of the security afforded by the
Mortgaged Property or any future reduction in the sales price of the Mortgaged
Property by reason of any matter set forth in this Section 1.31. The foregoing
indemnity shall specifically not include any such Costs relating to Hazardous
Substances which are initially placed on, in or under the Mortgaged Property
after foreclosure or other taking of title to the Mortgaged Property by
Beneficiary or its successors or assigns. Beneficiary's rights under this
Section shall survive payment in full of the Debt and shall be in addition to
all other rights of Beneficiary under this Deed of Trust, the Note and the other
Loan Documents.

                  (g) Upon Beneficiary's request, at any time after the
occurrence of an Event of Default or at such other time as Beneficiary has
reasonable grounds to believe that Hazardous Substances are or have been
released, stored or disposed of on the Mortgaged Property, or on property
contiguous with the Mortgaged Property, or that the Mortgaged Property may be in

                                       43
<PAGE>

violation of the Environmental Laws, Trustor shall perform or cause to be
performed, at Trustor's sole cost and expense and in scope, form and substance
satisfactory to Beneficiary, an inspection or audit of the Mortgaged Property
prepared by a hydrogeologist or environmental engineer or other appropriate
consultant approved by Beneficiary indicating the presence or absence of
Hazardous Substances on the Mortgaged Property, the compliance or non-compliance
status of the Mortgaged Property and the operations conducted thereon with
applicable Environmental Laws, or an inspection or audit of the Mortgaged
Property prepared by an engineering or consulting firm approved by Beneficiary
indicating the presence or absence of friable asbestos or substances containing
asbestos or lead or substances containing lead or lead based paint ("Lead Based
Paint") on the Mortgaged Property. If Trustor fails to provide reports of such
inspection or audit within forty-five (45) days after such request, Beneficiary
may order the same, and Trustor hereby grants to Beneficiary and its employees
and agents access to the Mortgaged Property and an irrevocable license to
undertake such inspection or audit. The cost of such inspection or audit,
together with interest thereon at the Default Interest Rate from the date
incurred by Beneficiary until actually paid by Trustor, shall be immediately
paid by Trustor on demand and shall be secured by this Deed of Trust and by all
of the other Loan Documents securing all or any part of the Debt.

                  (h) Reference is made to that certain Environmental Indemnity
Agreement of even date herewith by and among Trustor, Innkeepers USA Trust and
Beneficiary (the "Environmental Indemnity Agreement"). The provisions of this
Deed of Trust and the Environmental Indemnity Agreement shall be read together
to maximize the coverage with respect to the subject matter thereof.

                  (i) Intentionally Deleted.

                  (j) If, prior to the date hereof, it was determined that the
Mortgaged Property contains Lead Based Paint, Trustor had prepared an assessment
report describing the location and condition of the Lead Based Paint (a "Lead
Based Paint Report"). If, at any time hereafter, Lead Based Paint is suspected
of being present on the Mortgaged Property, Trustor agrees, at its sole cost and
expense and within thirty (30) days thereafter, to cause to be prepared a Lead
Based Paint Report prepared by an expert, and in form, scope and substance,
acceptable to Beneficiary.

                  (k) Trustor agrees that if it has been, or if at any time
hereafter it is, determined that the Mortgaged Property contains Lead Based
Paint, on or before thirty (30) days following (i) the date hereof, if such
determination was made prior to the date hereof or (ii) such determination, if
such determination is hereafter made, as applicable, Trustor shall, at its sole
cost and expense, develop and implement, and thereafter diligently and
continuously carry out (or cause to be developed and implemented and thereafter
diligently and continually to be carried out), an operations, abatement and
maintenance plan for the Lead Based Paint on the Mortgaged Property, which plan
shall be prepared by an expert, and be in form, scope and substance, acceptable
to Beneficiary (together with any Lead Based Paint Report, the "O&M Plan"). (If
an O&M Plan has been prepared prior to the date hereof, Trustor agrees to
diligently and continually carry out (or cause to be carried out) the provisions
thereof.) Compliance with the O&M Plan shall require or be deemed to require,
without limitation, the proper preparation and maintenance of all records,
papers and forms required under the Environmental Laws.

                                       44
<PAGE>

                  (l) Trustor and Beneficiary agree that: (i) this Section 1.31
is intended as Beneficiary's written request for information (and Trustor's
response) concerning the environmental condition of the real property security
as required by California Code of Civil Procedure Section 726.5; and (ii) each
representation and warranty and covenant in this Section (together with any
indemnity applicable to a breach of any such representation and warranty) with
respect to the environmental condition of the Property is intended by
Beneficiary and Trustor to be an "environmental provision" for purposes of
California Code of Civil Procedure Section 736.

         1.32. Indemnification; Subrogation.

                  (a) Trustor shall indemnify, defend and hold Beneficiary
harmless against: (i) any and all claims for brokerage, leasing, finders or
similar fees which may be made relating to the Mortgaged Property or the Debt,
and (ii) any and all liability, obligations, losses, damages, penalties, claims,
actions, suits, costs and expenses (including Beneficiary's reasonable
attorneys' fees) of whatever kind or nature which may be asserted against,
imposed on or incurred by Beneficiary in connection with the Debt, this Deed of
Trust, the Mortgaged Property, or any part thereof, or the exercise by
Beneficiary of any rights or remedies granted to it under this Deed of Trust;
provided, however, that nothing herein shall be construed to obligate Trustor to
indemnify, defend and hold harmless Beneficiary from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions, suits,
costs and expenses enacted against, imposed on or incurred by Beneficiary by
reason of Beneficiary's willful misconduct or gross negligence.

                  (b) If Beneficiary is made a party defendant to any litigation
or any claim is threatened or brought against Beneficiary concerning the Debt,
this Deed of Trust, the Mortgaged Property, or any part thereof, or any interest
therein, or the construction, maintenance, operation or occupancy or use
thereof, then Trustor shall indemnify, defend and hold Beneficiary harmless from
and against all liability by reason of said litigation or claims, including
reasonable attorneys' fees and expenses incurred by Beneficiary in any such
litigation or claim, whether or not any such litigation or claim is prosecuted
to judgment. If Beneficiary commences an action against Trustor to enforce any
of the terms hereof or to prosecute any breach by Trustor of any of the terms
hereof or to recover any sum secured hereby, Trustor shall pay to Beneficiary
its reasonable attorneys' fees and expenses. The right to such attorneys' fees
and expenses shall be deemed to have accrued on the commencement of such action,
and shall be enforceable whether or not such action is prosecuted to judgment.
If Trustor breaches any term of this Deed of Trust, Beneficiary may engage the
services of an attorney or attorneys to protect its rights hereunder, and in the
event of such engagement following any breach by Trustor, Trustor shall pay
Beneficiary reasonable attorneys' fees and expenses incurred by Beneficiary,
whether or not an action is actually commenced against Trustor by reason of such
breach. All references to "attorneys" in this Subsection and elsewhere in this
Deed of Trust shall include, without limitation, any attorney or law firm
engaged by Beneficiary and Beneficiary's in-house counsel, and all references to
"fees and expenses" in this Subsection and elsewhere in this Deed of Trust shall
include, without limitation, any fees of such attorney or law firm, any
appellate counsel fees, if applicable.

                                       45
<PAGE>

                  (c) A waiver of subrogation shall be obtained by Trustor from
its insurance carrier and, consequently, Trustor waives any and all right to
claim or recover against Beneficiary, its officers, employees, agents and
representatives, for loss of or damage to Trustor, the Mortgaged Property,
Trustor's property or the property of others under Trustor's control from any
cause insured against or required to be insured against by the provisions of
this Deed of Trust.

         1.33. Covenants with Respect to Indebtedness, Operations, Fundamental
Changes of Trustor. (A) Trustor hereby represents, warrants and covenants as of
the date hereof and until such time as the Debt is paid in full, that Trustor:

                  (a) will not, nor will any partner, limited or general, member
or shareholder thereof, as applicable, amend, modify or otherwise change its
partnership certificate, partnership agreement, articles of incorporation,
by-laws, operating agreement, articles of organization, or other formation
agreement or document, as applicable, in any material term or manner, or in a
manner which adversely affects Trustor's existence as a single purpose entity;

                  (b) will not liquidate or dissolve (or suffer any liquidation
or dissolution), or enter into any transaction of merger or consolidation, or
acquire by purchase or otherwise all or substantially all the business or assets
of, or any stock or other evidence of beneficial ownership of any entity;

                  (c) has not and will not guarantee, pledge its assets for the
benefit of, or otherwise become liable on or in connection with, any obligation
of any other person or entity, except as contemplated in the Note with respect
to the other Crossed Properties;

                  (d) does not own and will not own any asset other than (i) the
Mortgaged Property, and (ii) incidental personal property necessary for the
operation of the Mortgaged Property;

                  (e) is not engaged and will not engage, either directly or
indirectly, in any business other than the ownership, management and operation
of the Mortgaged Property;

                  (f) will not enter into any contract or agreement with any
general partner, principal, affiliate or member of Trustor, as applicable, or
any affiliate of any general partner, principal or member of Trustor, except
upon terms and conditions that are fair and substantially similar to those that
would be available on an arms-length basis with third parties other than an
affiliate;

                  (g) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the Debt, and (ii) affiliate advances or trade payables or accrued
expenses (not exceeding five (5%) percent in the aggregate of the Allocated Loan
Amount for the Mortgaged Property set forth in the Note) incurred in the
ordinary course of business of operating the Mortgaged Property (provided,
however, that all such sums shall be paid in full promptly by Trustor, but in no
event later than sixty (60) days of the date incurred), and no other debt will
be secured (senior, subordinate or pari passu) by the Mortgaged Property;

                                       46
<PAGE>

                  (h) has not made and will not make any loans or advances to
any third party (including any affiliate);

                  (i) is and will be solvent and pay its debts from its assets
as the same shall become due;

                  (j) has done or caused to be done and will do all things
necessary to preserve its existence, and will observe all formalities applicable
to it;

                  (k) will conduct and operate its business in its own name and
as presently conducted and operated;

                  (l) will maintain financial statements, books and records and
bank accounts separate from those of its affiliates, including, without
limitation, its general partners or members, as applicable;

                  (m) will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity
(including, without limitation, any affiliate, general partner, or member, as
applicable, or any affiliate of any general partner or member of Trustor, as
applicable);

                  (n) will file its own tax returns;

                  (o) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;

                  (p) will establish and maintain an office through which its
business will be conducted separate and apart from those of its affiliates and
shall allocate fairly and reasonably any overhead and expense for shared office
space;

                  (q) will not commingle the funds and other assets of Trustor
with those of any general partner, member, affiliate, principal or any other
person;

                  (r) has and will maintain its assets in such a manner that it
is not costly or difficult to segregate, ascertain or identify its individual
assets from those of any affiliate or any other person;

                  (s) does not and will not hold itself out to be responsible
for the debts or obligations of any other person;

                  (t) will pay any liabilities out of its own funds, including
salaries of its employees, not funds of any affiliate;

                  (u) will use stationery, invoices, and checks separate from
its affiliates;

                  (v) will not do any act which would make it impossible to
carry on the ordinary business of Trustor;

                                       47
<PAGE>

                  (w) will not possess or assign the Mortgaged Property or
incidental personal property necessary for the operation of the Mortgaged
Property for other than a business or company purpose;

                  (x) will not sell, encumber or otherwise dispose of all or
substantially all of the Mortgaged Property or incidental personal property
necessary for the operation of the Mortgaged Property except as otherwise
permitted in the Loan Documents;

                  (y) will not hold title to Trustor's assets other than in
Trustor's name; and

                  (z) will not, without the affirmative vote of 100 percent of
the partners, members or board of directors, as applicable, institute
proceedings to be adjudicated bankrupt or insolvent; or consent to the
institution of bankruptcy or insolvency proceedings against it; or file a
petition seeking, or consent to, reorganization or relief under any applicable
federal or state law relating to bankruptcy; or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Trustor or a substantial part of Trustor's property; or make
any assignment for the benefit of creditors; or admit in writing its inability
to pay its debts generally as they become due; or take any action in furtherance
of any such action.

                  (B) If Trustor is a limited partnership or a limited liability
company, its general partner or managing member (together with its successors
and assigns the "SPC Entity") shall be a corporation whose sole asset is its
interest in Trustor and the SPC Entity will at all times comply with the
representations, warranties and covenants contained in this Section 1.33(B) and
will cause Trustor to comply with each of the representations, warranties, and
covenants contained in Section 1.33(A). By execution hereof, the SPC Entity
agrees that it:

                  (a) shall at all times act as the general partner of Trustor
with all of the rights, powers, obligations and liabilities of general partner
under the limited partnership agreement of Trustor and shall take any and all
actions and do any and all things necessary or appropriate to the accomplishment
of same and will engage in no other business;

                  (b) shall not, without the affirmative vote of 100 percent of
the partners, members or board of directors, as applicable, institute
proceedings to be adjudicated bankrupt or insolvent; or to have the Trustor
adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy
or insolvency proceedings against it or the Trustor; or file a petition seeking,
or consent to, reorganization or relief under any applicable federal or state
law relating to bankruptcy for itself or the Trustor; or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the SPC Entity or of the Trustor or a substantial part of
its or the Trustor's property; or make any assignment for the benefit of
creditors for itself or the Trustor; or admit in writing its inability to pay
its debts generally as they become due; or take any corporate action in
furtherance of any such action;

                  (c) shall not except as otherwise permitted in the Loan
Documents (a) liquidate or dissolve the SPC Entity or Trustor in whole or in
part and (b) consolidate, merge or enter into any form of consolidation or cause
the Trustor to consolidate, merge or enter into any form of consolidation with
or into any other entity, nor convey, transfer or lease its assets or cause the
Trustor to convey, transfer or lease its assets substantially as an entirety to
any person

                                       48
<PAGE>

or entity nor permit any entity to consolidate, merge or enter into any form of
consolidation with or into the SPC Entity or Trustor, nor convey, transfer or
lease its assets or cause the Trustor to convey, transfer or lease its assets
substantially as an entirety to any person or entity;

                  (d) shall either (i) maintain its principal executive office
and telephone and facsimile numbers separate from that of any affiliate of the
SPC Entity and shall conspicuously identify such office and numbers as its own
and shall use its own stationery, invoices and checks which reflect its address,
telephone number and facsimile number, as appropriate, or (ii) if sharing office
space, allocate fairly and reasonably any overhead for shared office space and
shall use separate stationery, invoices and checks;

                  (e) shall maintain its corporate records and books and
accounts separate from those of any affiliate of the SPC Entity or any other
entity;

                  (f) shall maintain its own separate bank accounts, if any, and
correct, complete and separate books of account;

                  (g) shall hold itself out to the public (including any
creditors of any affiliate of the SPC Entity) under the SPC Entity's own name
and as a separate and distinct corporate entity and not as a department,
division or otherwise of any affiliate of the SPC Entity;

                  (h) shall observe all customary formalities regarding the
corporate existence of the SPC Entity, including holding meetings of or
obtaining the consent of its board of directors, as appropriate, and its
stockholders and maintaining current accurate minute books separate from those
of any affiliate of the SPC Entity;

                  (i) shall act solely in its own corporate name and through its
own duly authorized officers and agents and no affiliate of the SPC Entity shall
be appointed or act as agent for the SPC Entity in its capacity as general
partner of Trustor;

                  (j) shall make investments in the name of the SPC Entity
directly by the SPC Entity or on its behalf by brokers engaged and paid by the
SPC Entity or its agents;

                  (k) except as required by Beneficiary or any successor to
Beneficiary in connection with any extension of credit by Beneficiary or any
successor to Beneficiary to Trustor (or any refinancing, increase, modification,
consolidation or extension of any such extension of credit), shall not guaranty
or assume or hold itself out or permit itself to be held out as having
guaranteed or assumed any liabilities of any partner of Trustor or any affiliate
of the SPC Entity other than Trustor, nor shall the SPC Entity make any loan;

                  (l) represents and warrants that the SPC Entity is and expects
to remain solvent and shall pay its own liabilities, indebtedness and
obligations of any kind, including all administrative expenses, from its own
separate assets;

                  (m) represents and warrants that assets of the SPC Entity
shall be separately identified, maintained and segregated and the SPC Entity's
assets shall at all times be held by or on behalf of the SPC Entity and if held
on behalf of the SPC

                                       49
<PAGE>

Entity by another entity, shall at all times be kept identifiable (in accordance
with customary usages) as assets owned by the SPC Entity (this restriction
requires, among other things, that corporate funds shall not be commingled with
those of any affiliate of the SPC Entity and it shall maintain all accounts, if
any, in its own name and with its own tax identification number, separate from
those of any affiliates of the SPC Entity);

                  (n) shall not intentionally take any action if, as a result of
such action, the SPC Entity would be required to register as an investment
company under the Investment Company Act of 1940, as amended;

                  (o) shall at all times be adequately capitalized to engage in
the transactions contemplated at its formation;

                  (p)      Intentionally Deleted;

                  (q) represents and warrants that none of the SPC Entity's
funds shall be invested in securities issued by any affiliate of the SPC Entity;

                  (r) will not amend, modify or otherwise change its partnership
certificate, partnership agreement, articles of incorporation, by-laws,
operating agreement, articles of organization or other formation agreement or
document, as applicable, in any material term or manner or in any manner which
may adversely affect Trustor's existence as a single purpose entity;

                  (s) shall maintain at all times one (1) duly appointed members
of the board of directors (an "Independent Director") of the SPC Entity
reasonably satisfactory to Beneficiary who shall not have been at the time of
such individual's appointment, and may not have been at any time during the
preceding five years (i) a shareholder of, or an officer, director, attorney,
counsel, partner or employee of, Trustor or any of its shareholders or
subsidiaries, (ii) a customer of, or supplier to, Trustor or any of its
shareholders, subsidiaries or affiliates, (iii) a person or other entity
controlling or under common control with any such shareholder, partner, supplier
or customer, or (iv) a member of the immediate family of any such shareholder,
officer, director, partner, employee, supplier or customer of any other director
of Trustor. As used herein, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person or entity, whether through ownership of voting securities,
by contract or otherwise;

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

                  (u) shall conduct its business so that the assumptions made
with respect to Trustor and the SPC Entity in that certain opinion letter dated
the date hereof delivered by Hunton & Williams in connection with the loan
secured hereby shall be true and correct in all respects.

         1.34. Repair and Remediation Reserve. Prior to the execution of this
Deed of Trust, Beneficiary has caused the Mortgaged Property to be inspected and
such inspection has revealed

                                       50
<PAGE>

that the Mortgaged Property is in need of certain maintenance, repairs and/or
remedial or corrective work. Contemporaneously with the execution hereof,
Trustor has established with the Beneficiary a reserve in the amount of $0.00
(the "Repair and Remediation Reserve") by depositing such amount with
Beneficiary. Trustor shall cause each of the items described in that certain
Engineering Report (the "Engineering Report") entitled Property Condition
Report, dated November 9, 2000 and prepared by IVI (the "Deferred Maintenance")
to be completed, performed, remediated and corrected to the satisfaction of
Beneficiary and as necessary to bring the Mortgaged Property into compliance
with all applicable laws, ordinances, rules and regulations on or before the
expiration of six (6) months after the effective date hereof, as such time
period may be extended by Beneficiary in its sole discretion. So long as no
Event of Default has occurred, all sums in the Repair and Remediation Reserve
shall be held by Beneficiary in the Repair and Remediation Reserve to pay the
costs and expenses of completing the Deferred Maintenance. So long as no Event
of Default has occurred, Beneficiary shall, to the extent funds are available
for such purpose in the Repair and Remediation Reserve, disburse to Trustor the
amount paid and incurred by Trustor in completing, performing, remediating or
correcting the Deferred Maintenance upon (a) the receipt by Beneficiary of a
written request from Trustor for disbursement from the Repair and Remediation
Reserve and a certification by Trustor in the form annexed hereto as Exhibit B
or any other form as may be required by Beneficiary that the applicable item of
Deferred Maintenance has been completed in accordance with the terms of this
Deed of Trust, (b) delivery to Beneficiary of paid invoices, receipts or other
evidence satisfactory to Beneficiary verifying the costs of the Deferred
Maintenance to be reimbursed, (c) if the aggregate cost of such Deferred
Maintenance for an individual project is greater than $50,000.00, delivery to
Beneficiary of a certification from an inspecting architect, engineer or other
consultant reasonably acceptable to Beneficiary (including a licensed
independent general contractor having no connection to such Deferred
Maintenance) describing the completed work, verifying the completion of the work
and the value of the completed work and, if applicable, certifying that the
Mortgaged Property is, as a result of such work, in compliance with all
applicable laws, ordinances, rules and regulations relating to the Deferred
Maintenance so performed, (d) if the aggregate cost of such Deferred Maintenance
for an individual project is greater than $50,000.00, delivery to Beneficiary of
affidavits, lien waivers or other evidence reasonably satisfactory to
Beneficiary showing that all materialmen, laborers, subcontractors and any other
parties who might or could claim statutory or common law liens and are
furnishing or have furnished materials or labor to the Mortgaged Property have
been paid all amounts due for such labor and materials furnished to the
Mortgaged Property, and (e) the receipt by Beneficiary of the out-of-pocket cost
of inspections which Beneficiary or Beneficiary's loan servicer reasonably deems
necessary in connection with such disbursements (which costs of inspection shall
not exceed $2,000.00 each). Beneficiary shall not be required to make advances
from the Repair and Remediation Reserve more frequently than once in any thirty
(30) day period. In making any payment from the Repair and Remediation Reserve,
Beneficiary shall be entitled to rely on such request from Trustor without any
inquiry into the accuracy, validity or contestability of any such amount.
Interest on the funds contained in the Repair and Remediation Reserve shall be
credited and paid to Trustor as provided in Section 4.31 hereof. Trustor hereby
grants to Beneficiary a power-of-attorney, coupled with an interest, to cause
the Deferred Maintenance to be completed, performed, remediated and corrected to
the satisfaction of Beneficiary upon Trustor's failure to do so in accordance
with the terms and conditions of this Section 1.34, and Trustor shall reimburse
Beneficiary for all costs associated

                                       51
<PAGE>

therewith, all as Beneficiary may determine in its sole and absolute discretion
but without obligation to do so.

                                  ARTICLE II.
                                EVENTS OF DEFAULT

         2.1. Events of Default. The occurrence of any of the following events
shall be an Event of Default hereunder:

                  (a) Trustor fails to pay any money to Beneficiary required
hereunder at the time or within any applicable grace period set forth herein, or
if no grace period is set forth herein, then within seven (7) days of the date
such payment is due (except those regarding payments to be made under the Note,
which failure is subject to any grace periods set forth in the Note).

                  (b) Trustor fails to provide insurance as required by Section
1.4 hereof or fails to perform any covenant, agreement, obligation, term or
condition set forth in Sections 1.5 (only in the event that Beneficiary is no
longer requiring a Tax and Insurance Impound Account), 1.15 (after the
expiration of three (3) days' notice to cure), or 1.31 hereof.

                  (c) Trustor fails to perform any other covenant, agreement,
obligation, term or condition set forth herein, other than those otherwise
described in this Section 2.1, and, to the extent such failure or default is
susceptible of being cured, such failure or default continues for thirty (30)
days after written notice thereof from Beneficiary to Trustor; provided,
however, that if such default is susceptible of cure but such cure cannot be
accomplished with reasonable diligence within said period of time, and if
Trustor commences to cure such default promptly after receipt of notice thereof
from Beneficiary, and thereafter prosecutes the curing of such default with
reasonable diligence, such period of time shall be extended for such period of
time as may be necessary to cure such default with reasonable diligence, but not
to exceed an additional ninety (90) days.

                  (d) Any representation or warranty made herein, in or in
connection with any application or commitment relating to the loan evidenced by
the Note (but only if such representation or warranty made in connection with
the application or commitment was material to Beneficiary's decision to make the
Loan), or in any of the other Loan Documents to Beneficiary by Trustor, by any
principal, general partner, manager or member in Trustor, or by any Indemnitor
is determined by Beneficiary to have been false or misleading in any material
respect at the time made.

                  (e) There shall be a sale, conveyance, disposition,
alienation, hypothecation, leasing, assignment, pledge, mortgage, granting of a
security interest in or other transfer or further encumbrancing of the Mortgaged
Property, Trustor or its general partners or managing members, or any portion
thereof or any interest therein, in violation of Section 1.13 hereof.

                  (f) A default occurs under any of the other Loan Documents
which has not been cured within any applicable grace or cure period therein
provided.

                                       52
<PAGE>

                  (g) Trustor, any general partner or managing member in Trustor
or any Indemnitor becomes insolvent, or makes a transfer in fraud of creditors,
or makes an assignment for the benefit of creditors, or files a petition in
bankruptcy, or is voluntarily adjudicated insolvent or bankrupt or admits in
writing the inability to pay its debts as they mature, or petitions or applies
to any tribunal for or consents to or fails to contest the appointment of a
receiver, trustee, custodian or similar officer for Trustor, for any such
principal, general partner or managing member of Trustor or for any Indemnitor
or for a substantial part of the assets of Trustor, of any such general partner
or managing member of Trustor or of any Indemnitor, or commences any case,
proceeding or other action under any bankruptcy, reorganization, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect.

                  (h) A petition is filed or any case, proceeding or other
action is commenced against Trustor, against any Principal, general partner or
managing member of Trustor or against any Indemnitor seeking to have an order
for relief entered against it as debtor or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts or other
relief under any law relating to bankruptcy, insolvency, arrangement,
reorganization, receivership or other debtor relief under any law or statute of
any jurisdiction, whether now or hereafter in effect, or a court of competent
jurisdiction enters an order for relief against Trustor, against any Principal,
general partner or managing member of Trustor or against any Indemnitor, as
debtor, or an order, judgment or decree is entered appointing, with or without
the consent of Trustor, of any such Principal, general partner or managing
member of Trustor or of any Indemnitor, a receiver, trustee, custodian or
similar officer for Trustor, for any such general partner or managing member of
Trustor or for any Indemnitor, or for any substantial part of any of the
properties of Trustor, of any such Principal, general partner or managing member
of Trustor or of any Indemnitor, and if any such event shall occur, such
petition, case, proceeding, action, order, judgment or decree is not dismissed
within sixty (60) days after being commenced.

                  (i) The Mortgaged Property or any material part thereof is
taken on execution or other process of law in any action against Trustor.

                  (j) Trustor abandons all or a portion of the Mortgaged
Property.

                  (k) The holder of any lien or security interest on the
Mortgaged Property (without implying the consent of Beneficiary to the existence
or creation of any such lien or security interest), whether superior or
subordinate to this Deed of Trust or any of the other Loan Documents, declares a
default and such default is not cured within any applicable grace or cure period
set forth in the applicable document or such holder institutes foreclosure or
other proceedings for the enforcement of its remedies thereunder.

                  (l) The Mortgaged Property, or any part thereof, is subjected
to intentional waste committed on the Mortgaged Property or damage to the
Mortgaged Property results from intentional misconduct of Trustor and/or
Indemnitor or the Mortgaged Property, or any part thereof, is subjected to
removal, demolition or material alteration so that the value of the Mortgaged
Property is materially diminished thereby and Beneficiary reasonably determines
that it is not adequately protected from any loss, damage or risk associated
therewith.

                                       53
<PAGE>

                  (m) Any dissolution, termination, partial or complete
liquidation, merger or consolidation of Trustor, any of its principals, any
general partner or any managing member, or any Indemnitor, except as otherwise
expressly permitted under the Loan Documents.

                  (n) Trustor or SPC Entity fail to perform in any material
respect any covenant, agreement, obligation, term or condition of Section 1.33
which could reasonably be expected to have a material adverse effect on Trustor
or the single purpose entity status of Trustor; provided, however, if
Beneficiary or Beneficiary's attorneys determine that such violation is
reasonably susceptible of being cured without adversely impacting the single
purpose entity status of Trustor, Trustor shall have seven (7) days grace period
to so cure following written notice from Beneficiary of such violation.

                  (o) If a default occurs under the Franchise Agreement or the
Assignment of Franchise Agreement which remains uncured after the giving of any
required notice to Trustor and the expiration of any applicable cure period, or
if the Franchise Agreement expires or terminates and is not immediately replaced
with another franchise agreement with any permitted brand specified in Section
1.30 hereof.

                  (p) If a default occurs under any of the provisions of the
security instruments or other Loan Documents given to Beneficiary with respect
to any of the other Crossed Properties which remains uncured after the
expiration of any applicable grace or notice period.

                                  ARTICLE III.
                                    REMEDIES

         3.1. Remedies Available. If there shall occur an Event of Default under
this Deed of Trust, then this Deed of Trust is subject to foreclosure as
provided by law and Beneficiary may, at its option and by or through a trustee,
nominee, assignee or otherwise (including, without limitation, the Trustee), to
the fullest extent permitted by law, exercise any or all of the following
rights, remedies and recourses, either successively or concurrently:

                  (a) Acceleration. Accelerate the maturity date of the Note and
declare any or all of the Debt to be immediately due and payable without any
presentment, demand, protest, notice or action of any kind whatever (each of
which is hereby expressly waived by Trustor), whereupon the same shall become
immediately due and payable. Upon any such acceleration, payment of such
accelerated amount shall constitute a prepayment of the principal balance of the
Note and any applicable prepayment fee provided for in the Note shall then be
immediately due and payable.

                  (b) Entry on the Mortgaged Property. Either in person or by
agent, with or without bringing any action or proceeding, or by a receiver
appointed by a court and without regard to the adequacy of its security, enter
upon and take possession of the Mortgaged Property, or any part thereof, without
force or with such force as is permitted by law and without notice or process or
with such notice or process as is required by law, unless such notice and
process is waivable, in which case Trustor hereby waives such notice and
process, and do any and all acts and perform any and all work which may be
desirable or necessary in Beneficiary's judgment to complete any unfinished
construction on the Premises, to preserve the value, marketability or

                                       54
<PAGE>

rentability of the Mortgaged Property, to increase the income therefrom, to
manage and operate the Mortgaged Property or to protect the security hereof, and
all sums expended by Beneficiary therefor, together with interest thereon at the
Default Interest Rate, shall be immediately due and payable to Beneficiary by
Trustor on demand and shall be secured hereby and by all of the other Loan
Documents securing all or any part of the Debt.

                  (c) Collect Rents. With or without taking possession of the
Mortgaged Property, sue or otherwise collect the Rents, including those past due
and unpaid.

                  (d) Appointment of Receiver. Upon, or at any time prior or
after, initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, make
application to a court of competent jurisdiction for appointment of a receiver
for all or any part of the Mortgaged Property, as a matter of strict right and
without notice to Trustor and without regard to the adequacy of the Mortgaged
Property for the repayment of the Debt or the solvency of Trustor or any person
or persons liable for the payment of the Debt, and Trustor does hereby
irrevocably consent to such appointment, waive any and all notices of and
defenses to such appointment and agree not to oppose any application therefor by
Beneficiary, but nothing herein is to be construed to deprive Beneficiary of any
other right, remedy or privilege Beneficiary may now have under the law to have
a receiver appointed, provided, however, that the appointment of such receiver,
trustee or other appointee by virtue of any court order, statute or regulation
shall not impair or in any manner prejudice the rights of Beneficiary to receive
payment of the Rents pursuant to other terms and provisions hereof. Any such
receiver shall have all of the usual powers and duties of receivers in similar
cases, including, without limitation, the full power to hold, develop, rent,
lease, manage, maintain, operate and otherwise use or permit the use of the
Mortgaged Property upon such terms and conditions as said receiver may deem to
be prudent and reasonable under the circumstances as more fully set forth in
Section 3.3 below. Such receivership shall, at the option of Beneficiary,
continue until full payment of all of the Debt or until title to the Mortgaged
Property shall have passed by foreclosure sale under this Deed of Trust or deed
in lieu of foreclosure.

                  (e) Foreclosure. Immediately commence an action to foreclose
this Deed of Trust or to specifically enforce its provisions with respect to all
or any portion of the Debt pursuant to the statutes in such case made and
provided, and sell the Mortgaged Property or cause the Mortgaged Property to be
sold in accordance with the requirements and procedures provided by said
statutes in a single parcel or in several parcels at the option of Beneficiary.

                           (1) Should Beneficiary have elected to accelerate the
indebtedness secured hereby, Beneficiary may initiate foreclosure of the
Mortgaged Property by requesting the Trustee to effectuate a non-judicial
foreclosure sale. Trustee shall give and record such notice as the law then
requires as a condition precedent to a trustee's sale. When the minimum period
of time required by law after such notice has elapsed, Trustee, without notice
to or demand upon Trustor except as required by law, shall sell the Mortgaged
Property at the time and place of sale fixed by it in the notice of sale, at one
or several sales, either as a whole or in separate parcels and in such manner
and order, all as Beneficiary in its sole discretion may determine, at public
auction to the highest bidder for cash, in lawful money of the United States,
payable at time of sale. Neither Trustor nor any other person or entity other
than Beneficiary shall have the right to

                                       55
<PAGE>

direct the order in which the Mortgaged Property is sold. Subject to
requirements and limits imposed by law, Trustee may, from time to time postpone
the sale of all or any portion of the Mortgaged Property by public announcement
at such time and place of sale, and from time to time may post-pone the sale by
public announcement at the time and place fixed by the preceding postponement. A
sale of less than the whole of the Mortgaged Property on any defective or
irregular sale made hereunder shall not exhaust the power of sale provided for
herein. Trustee shall deliver to the purchaser at such sale a deed conveying the
Mortgaged Property or portion thereof so sold, but without any covenant or
warranty, express or implied. The recitals in the deed of any matters or facts
shall be conclusive proof of the truthfulness thereof. Beneficiary shall have
the right to become the purchaser at any sale held by any Trustee or substitute
or successor Trustee, or by any receiver or public officer. Any Beneficiary
purchasing at any such sale shall have the right to credit the secured
indebtedness owing to such Beneficiary upon the amount of its bid entered at
such sale to the extent necessary to satisfy such bid. Said Trustee may appoint
an attorney-in-fact to act in its stead as Trustee to conduct sale as
hereinbefore provided. Trustor authorizes and empowers the Trustee to sell the
Mortgaged Property, in lots or parcels or as a whole, and to execute and deliver
to the purchaser or purchasers thereof good and sufficient deeds of conveyance
thereto of the estate of title then existing on the Mortgaged Property and bills
of sale with covenants of general warranty. Trustor binds himself to warrant and
forever defend the title of such purchaser or purchasers when so made by the
Trustee, and agrees to accept proceeds of said sale, if any, which are payable
to Trustor as provided herein. In addition to the posting and filing of notices
hereinabove provided, and for so long as required by law, no foreclosure under
the power of sale herein contained shall be held unless Beneficiary, at least
twenty-one (21) days preceding the date of sale and in the manner prescribed by
law, shall have served written notice of the proposed sale which designates the
county where the Mortgaged Property will be sold and designates the date, time
period, the place and the terms of sale by certified mail on Trustor. Service of
such a notice by certified mail shall be completed upon deposit of such notice,
postage prepaid and properly addressed to each such person or entity at the
address for Trustor indicated on the first page of this Deed of Trust, in a Post
Office of the United States Postal Service or in an official depository under
the care and custody of the United States Postal Service. The affidavit of a
person knowledgeable of the facts to the effect that such service was completed
shall be prima facie evidence of the fact of service.

                           (2) Should Beneficiary have not elected to accelerate
the indebtedness secured hereby, Beneficiary may nonetheless proceed with
foreclosure in satisfaction of such default, either through the courts or by
directing the Trustee to proceed as if under a full foreclosure, conducting sale
as hereinbefore provided, but without declaring the entire indebtedness secured
by this Deed of Trust due, and provided that if said sale is made because of
such default, such sale may be made subject to the unmatured part of the secured
indebtedness. Such sale, if so made, shall not in any manner affect the
unmatured part of the debt secured by this Deed of Trust, but as to such
unmatured part, this Deed of Trust shall remain in full force as though no sale
had been made. Several sales may be made without exhausting the right of sale
with respect to any unmatured part of the secured indebtedness, it being the
purpose and intent hereof to provide for a foreclosure and the sale of the
Mortgaged Property for any matured portion of said secured indebtedness without
exhausting the power of foreclosure.

                                       56
<PAGE>

                           (3) In the event foreclosure proceedings are
instituted by Beneficiary, all expenses incident to such proceedings, including,
but not limited to, attorneys' and trustee's fees and costs, shall be paid by
Trustor and secured by this Deed of Trust and by all of the other Loan Documents
securing all or any part of the Debt. The Debt and all other obligations secured
by this Deed of Trust, including, without limitation, interest at the Default
Interest Rate (as defined in the Note), any prepayment charge, fee or premium
required to be paid under the Note in order to prepay principal (to the extent
permitted by applicable law), reasonable attorneys' and trustee's fees and any
other amounts due and unpaid to Beneficiary under the Loan Documents, may be bid
by Beneficiary in the event of a foreclosure sale hereunder.

                  (f) Judicial Remedies. Proceed by suit or suits, at law or in
equity, instituted by Beneficiary, or Trustee, upon written request of
Beneficiary, to enforce the payment of the Debt or the other obligations of
Trustor hereunder or pursuant to the Loan Documents, to foreclose the liens and
security interests of this Deed of Trust as against all or any part of the
Mortgaged Property, and to have all or any part of the Mortgaged Property sold
under the judgment or decree of a court of competent jurisdiction. This remedy
shall be cumulative of any other non-judicial remedies available to the
Beneficiary with respect to the Loan Documents. Proceeding with the request or
receiving a judgment for legal relief shall not be or be deemed to be an
election of remedies or bar any available non-judicial remedy of the
Beneficiary.

                  (g) Other. Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or at law or in equity.

         3.2. Application of Proceeds. To the fullest extent permitted by law,
the proceeds of any sale under this Deed of Trust shall be applied, to the
extent funds are so available, to the following items in such order as
Beneficiary in its discretion may determine:

                  (a) To payment of the reasonable costs, expenses and fees of
taking possession of the Mortgaged Property, and of holding, operating,
maintaining, using, leasing, repairing, improving, marketing and selling the
same and of otherwise enforcing Beneficiary's rights and remedies hereunder and
under the other Loan Documents, including, but not limited to, receivers' fees,
court costs, attorneys', accountants', appraisers', managers' and other
professional fees, title charges and transfer taxes.

                  (b) To payment of all sums expended by Beneficiary under the
terms of any of the Loan Documents and not yet repaid, together with interest on
such sums at the Default Interest Rate.

                  (c) To payment of the Debt and all other obligations secured
by this Deed of Trust, including, without limitation, interest at the Default
Interest Rate and, to the extent permitted by applicable law, any prepayment
fee, charge or premium required to be paid under the Note in order to prepay
principal, in any order that Beneficiary chooses in its sole discretion.

                  (d) The remainder, if any, of such funds shall be disbursed to
Trustor or to the person or persons legally entitled thereto.

         3.3. Right and Authority of Receiver or Beneficiary in the Event of
Default; Power of Attorney. Upon the occurrence of an Event of Default, and
entry upon the Mortgaged Property

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<PAGE>

pursuant to Section 3.1(b) hereof or appointment of a receiver pursuant to
Section 3.1(d) hereof, and under such terms and conditions as may be prudent and
reasonable under the circumstances in Beneficiary's or the receiver's sole
discretion, all at Trustor's expense, Beneficiary or said receiver, or such
other persons or entities as they shall hire, direct or engage, as the case may
be, may do or permit one or more of the following, successively or concurrently:
(a) enter upon and take possession and control of any and all of the Mortgaged
Property; (b) take and maintain possession of all documents, books, records,
papers and accounts relating to the Mortgaged Property; (c) exclude Trustor and
its agents, servants and employees wholly from the Mortgaged Property; (d)
manage and operate the Mortgaged Property subject to any existing agreements
that have not been terminated by Beneficiary; (e) preserve and maintain the
Mortgaged Property; (f) make repairs and alterations to the Mortgaged Property;
(g) complete any construction or repair of the Improvements, with such changes,
additions or modifications of the plans and specifications or intended
disposition and use of the Improvements as Beneficiary may in its sole
discretion deem appropriate or desirable to place the Mortgaged Property in such
condition as will, in Beneficiary's sole discretion, make it or any part thereof
readily marketable or rentable; (h) conduct a marketing or leasing program with
respect to the Mortgaged Property, or employ a marketing or leasing agent or
agents to do so, directed to the leasing or sale of the Mortgaged Property under
such terms and conditions as Beneficiary may in its sole discretion deem
appropriate or desirable; (i) employ such contractors, subcontractors,
materialmen, architects, engineers, consultants, managers, brokers, marketing
agents, or other employees, agents, independent contractors or professionals, as
Beneficiary may in its sole discretion deem appropriate or desirable to
implement and effectuate the rights and powers herein granted; (j) execute and
deliver, in the name of Beneficiary as attorney-in-fact and agent of Trustor or
in its own name as Beneficiary, such documents and instruments as are necessary
or appropriate to consummate authorized transactions; (k) enter such leases,
whether of real or personal property, or tenancy agreements, under such terms
and conditions as Beneficiary may in its sole discretion deem appropriate or
desirable; (1) collect and receive the Rents from the Mortgaged Property; (m)
eject tenants or repossess personal property, as provided by law, for breaches
of the conditions of their leases or other agreements; (n) sue for unpaid Rents,
payments, income or proceeds in the name of Trustor or Beneficiary; (o) maintain
actions in forcible entry and detainer, ejectment for possession and actions in
distress for rent; (p) compromise or give acquittance for Rents, payments,
income or proceeds that may become due; (q) delegate or assign any and all
rights and powers given to Beneficiary by this Deed of Trust; and (r) do any
acts which Beneficiary in its sole discretion deems appropriate or desirable to
protect the security hereof and use such measures, legal or equitable, as
Beneficiary may in its sole discretion deem appropriate or desirable to
implement and effectuate the provisions of this Deed of Trust. This Deed of
Trust shall constitute a direction to and full authority to any lessee, or other
third party who has heretofore dealt or contracted or may hereafter deal or
contract with Trustor or Beneficiary, at the request of Beneficiary, to pay all
amounts owing under any lease, contract, concession, license or other agreement
to Beneficiary without proof of the Event of Default relied upon. Any such
lessee or third party is hereby irrevocably authorized to rely upon and comply
with (and shall be fully protected by Trustor in so doing) any request, notice
or demand by Beneficiary for the payment to Beneficiary of any Rents or other
sums which may be or thereafter become due under its lease, contract,
concession, license or other agreement, or for the performance of any
undertakings under any such lease, contract, concession, license or other
agreement, and shall have no right or duty to inquire whether any Event of
Default under this

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Deed of Trust or under any of the other Loan Documents has actually occurred or
is then existing. Trustor hereby constitutes and appoints Beneficiary, its
assignees, successors, transferees and nominees, as Trustor's true and lawful
attorney-in-fact and agent, with full power of substitution in the Mortgaged
Property, in Trustor's name, place and stead, to do or permit any one or more of
the foregoing described rights, remedies, powers and authorities, successively
or concurrently, and said power of attorney shall be deemed a power coupled with
an interest and irrevocable so long as any portion of the Debt is outstanding.
Any money advanced by Beneficiary in connection with any action taken under this
Section 3.3, together with interest thereon at the Default Interest Rate from
the date of making such advancement by Beneficiary until actually paid by
Trustor, shall be a demand obligation owing by Trustor to Beneficiary and shall
be secured by this Deed of Trust and by every other instrument securing all or
any portion of the Debt.

         3.4. Occupancy After Foreclosure. In the event there is a foreclosure
sale hereunder and at the time of such sale, Trustor or Trustor's
representatives, successors or assigns, or any other persons claiming any
interest in the Mortgaged Property by, through or under Trustor (except tenants
of space in the Improvements subject to leases entered into prior to the date
hereof), are occupying or using the Mortgaged Property, or any part thereof,
then, to the extent not prohibited by applicable law, each and all shall, at the
option of Beneficiary or the purchaser at such sale, as the case may be,
immediately become the tenant of the purchaser at such sale, which tenancy shall
be a tenancy from day-to-day, terminable at the will of either landlord or
tenant, at a reasonable rental per day based upon the value of the Mortgaged
Property occupied or used, such rental to be due daily to the purchaser.
Further, to the extent permitted by applicable law, in the event the tenant
fails to surrender possession of the Mortgaged Property upon the termination of
such tenancy, the purchaser shall be entitled to institute and maintain an
action for unlawful detainer of the Mortgaged Property in the appropriate court
of the county in which the Premises is located.

         3.5. Notice to Account Debtors. Beneficiary may, at any time after an
Event of Default, notify the account debtors and obligors of any accounts,
chattel paper, negotiable instruments or other evidences of indebtedness to
Trustor included in the Mortgaged Property to pay Beneficiary directly. Trustor
shall at any time or from time to time upon the request of Beneficiary provide
to Beneficiary a current list of all such account debtors and obligors and their
addresses.

         3.6. Cumulative Remedies. All remedies contained in this Deed of Trust
are cumulative and Beneficiary shall also have all other remedies provided at
law and in equity or in any other Loan Documents. Such remedies may be pursued
separately, successively or concurrently at the sole subjective direction of
Beneficiary and may be exercised in any order and as often as occasion therefor
shall arise. No act of Beneficiary shall be construed as an election to proceed
under any particular provisions of this Deed of Trust to the exclusion of any
other provision of this Deed of Trust or as an election of remedies to the
exclusion of any other remedy which may then or thereafter be available to
Beneficiary. No delay or failure by Beneficiary to exercise any right or remedy
under this Deed of Trust shall be construed to be a waiver of that right or
remedy or of any Event of Default. Beneficiary may exercise any one or more of
its rights and remedies at its option without regard to the adequacy of its
security.

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<PAGE>

         3.7. Payment of Expenses. Trustor shall pay on demand all of
Beneficiary's expenses incurred in any efforts to enforce any terms of this Deed
of Trust, whether or not any lawsuit is filed and whether or not foreclosure is
commenced but not completed, including, but not limited to, reasonable legal
fees and disbursements, foreclosure costs and title charges, together with
interest thereon from and after the date incurred by Beneficiary until actually
paid by Trustor at the Default Interest Rate, and the same shall be secured by
this Deed of Trust and by all of the other Loan Documents securing all or any
part of the Debt.

                                  ARTICLE IV.
                       MISCELLANEOUS TERMS AND CONDITIONS

         4.1. Time of Essence. Time is of the essence with respect to all
provisions of this Deed of Trust.

         4.2. Release of Deed of Trust. If all of the Debt be paid, then and in
that event only, all rights under this Deed of Trust, except for those
provisions hereof which by their terms survive, shall terminate and the
Mortgaged Property shall become wholly clear of the liens, security interests,
conveyances and assignments evidenced hereby, which shall be promptly released
of record by Beneficiary in due form at Trustor's cost. No release of this Deed
of Trust or the lien hereof shall be valid unless executed by Beneficiary.

         4.3. Certain Rights of Beneficiary. Without affecting Trustor's
liability for the payment of any of the Debt, Beneficiary may from time to time
and without notice to Trustor: (a) release any person liable for the payment of
the Debt; (b) extend the terms of payment of the Debt; (c) accept additional
real or personal property of any kind as security or alter, substitute or
release any property securing the Debt; (d) recover any part of the Mortgaged
Property; (e) consent in writing to the making of any subdivision map or plat
thereof; (f) join in granting any easement therein; or (g) join in any extension
agreement of this Deed of Trust or any agreement subordinating the lien hereof.

         4.4. Waiver of Certain Defenses. No action for the enforcement of the
lien hereof or of any provision hereof shall be subject to any defense which
would not be good and available to the party interposing the same in an action
at law upon the Note or any of the other Loan Documents.

         4.5. Notices. All notices, demands, requests or other communications to
be sent by one party to the other hereunder or required by law shall be in
writing and shall be deemed to have been validly given or served by delivery of
the same in person to the intended addressee, or by depositing the same with
Federal Express or another reputable private courier service for next business
day delivery, or by depositing the same in the United States mail, postage
prepaid, registered or certified mail, return receipt requested, in any event
addressed to the intended addressee: to Trustor or Trustee at its address set
forth on the first page of this Deed of Trust, to Beneficiary at First Union
National Bank, Commercial Real Estate Finance Group, One First Union Center, 301
South College Street, Mailcode NC 0166, Loan Number 265950357, Charlotte, North
Carolina 28288-0166, Attn: Contract Finance, or at such other address as may be
designated by such party as herein provided. All notices, demands and requests
shall be effective upon such personal delivery, or one (1) business day after
being deposited with the

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<PAGE>

private courier service, or two (2) business days after being deposited in the
United States mail as required above. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand or
request sent. By giving to the other party hereto at least fifteen (15) days'
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.

         4.6. Successors and Assigns; Joint and Several Liability. The terms,
provisions, indemnities, covenants and conditions hereof shall be binding upon
Trustor and the successors and assigns of Trustor, including all successors in
interest of Trustor in and to all or any part of the Mortgaged Property, and
shall inure to the benefit of Beneficiary, its directors, officers,
shareholders, employees and agents and their respective successors and assigns
and shall constitute covenants running with the land. All references in this
Deed of Trust to Trustor or Beneficiary shall be deemed to include all such
parties' successors and assigns, and the term "Beneficiary" as used herein shall
also mean and refer to any lawful holder or owner, including pledgees and
participants, of any of the Debt. If Trustor consists of more than one person or
entity, each is jointly and severally liable to perform the obligations of
Trustor hereunder and all representations, warranties, covenants and agreements
made by Trustor hereunder are joint and several.

         4.7. Severability. A determination that any provision of this Deed of
Trust is unenforceable or invalid shall not affect the enforceability or
validity of any other provision, and any determination that the application of
any provision of this Deed of Trust to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.

         4.8. Gender. Within this Deed of Trust, words of any gender shall be
held and construed to include any other gender, and words in the singular shall
be held and construed to include the plural, and vice versa, unless the context
otherwise requires.

         4.9. Waiver; Discontinuance of Proceedings. Beneficiary may waive any
single Event of Default by Trustor hereunder without waiving any other prior or
subsequent Event of Default. Beneficiary may remedy any Event of Default by
Trustor hereunder without waiving the Event of Default remedied. Neither the
failure by Beneficiary to exercise, nor the delay by Beneficiary in exercising,
any right, power or remedy upon any Event of Default by Trustor hereunder shall
be construed as a waiver of such Event of Default or as a waiver of the right to
exercise any such right, power or remedy at a later date. No single or partial
exercise by Beneficiary of any right, power or remedy hereunder shall exhaust
the same or shall preclude any other or further exercise thereof, and every such
right, power or remedy hereunder may be exercised at any time and from time to
time. No modification or waiver of any provision hereof nor consent to any
departure by Trustor therefrom shall in any event be effective unless the same
shall be in writing and signed by Beneficiary, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
given. No notice to nor demand on Trustor in any case shall of itself entitle
Trustor to any other or further notice or demand in similar or other
circumstances. Acceptance by Beneficiary of any payment in an amount less than
the amount then due on any of the Debt shall be deemed an acceptance on account
only and shall not in any way affect the

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<PAGE>

existence of an Event of Default. In case Beneficiary shall have proceeded to
invoke any right, remedy or recourse permitted hereunder or under the other Loan
Documents and shall thereafter elect to discontinue or abandon the same for any
reason, Beneficiary shall have the unqualified right to do so and, in such an
event, Trustor and Beneficiary shall be restored to their former positions with
respect to the Debt, the Loan Documents, the Mortgaged Property and otherwise,
and the rights, remedies, recourses and powers of Beneficiary shall continue as
if the same had never been invoked.

         4.10. Section Headings. The headings of the sections and paragraphs of
this Deed of Trust are for convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.

         4.11. GOVERNING LAW. THIS DEED OF TRUST WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS
LOCATED, PROVIDED THAT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER
BE PREEMPTED BY FEDERAL LAW, SUCH FEDERAL LAW SHALL SO GOVERN AND BE
CONTROLLING, AND PROVIDED FURTHER THAT THE LAWS OF THE STATE IN WHICH THE
PREMISES IS LOCATED SHALL GOVERN AS TO THE CREATION, PRIORITY AND ENFORCEMENT OF
LIENS AND SECURITY INTERESTS IN THE MORTGAGED PROPERTY LOCATED IN SUCH STATE.

         4.12. Counting of Days. The term "days" when used herein shall mean
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the Premises is located, the
period shall be deemed to end on the next succeeding business day. The term
"business day" when used herein shall mean a weekday, Monday through Friday,
except a legal holiday or a day on which banking institutions in New York, New
York are authorized by law to be closed.

         4.13. Relationship of the Parties. The relationship between Trustor and
Beneficiary is that of a borrower and a lender only and neither of those parties
is, nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.

         4.14. Application of the Proceeds of the Note. To the extent that
proceeds of the Note are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against the Mortgaged
Property, such proceeds have been advanced by Beneficiary at Trustor's request
and Beneficiary shall be subrogated to any and all rights, security interests
and liens owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens, security
interests, charges or encumbrances are released.

         4.15. Unsecured Portion of Indebtedness. If any part of the Debt cannot
be lawfully secured by this Deed of Trust or if any part of the Mortgaged
Property cannot be lawfully subject to the lien and security interest hereof to
the full extent of such indebtedness, then all payments made shall be applied on
said indebtedness first in discharge of that portion thereof which is unsecured
by this Deed of Trust.

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<PAGE>

         4.16. Cross Default. An Event of Default hereunder which has not been
cured within any applicable grace or cure period shall be a default under each
of the other Loan Documents.

         4.17. Interest After Sale. In the event the Mortgaged Property or any
part thereof shall be sold upon foreclosure as provided hereunder, to the extent
permitted by law, the sum for which the same shall have been sold shall, for
purposes of redemption (pursuant to the laws of the State in which the Premises
is located), bear interest at the Default Interest Rate.

         4.18. Inconsistency with Other Loan Documents. In the event of any
inconsistency between the provisions hereof and the provisions in any of the
other Loan Documents, it is intended that the provisions of the Note shall
control over the provisions of this Deed of Trust, and that the provisions of
this Deed of Trust shall control over the provisions of the Assignment of Leases
and Rents, the Environmental Indemnity Agreement, and the other Loan Documents.

         4.19. Construction of this Document. This document may be construed as
a mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, in order to fully effectuate the
liens and security interests created hereby and the purposes and agreements
herein set forth.

         4.20. No Merger. It is the desire and intention of the parties hereto
that this Deed of Trust and the lien hereof do not merge in fee simple title to
the Mortgaged Property. It is hereby understood and agreed that should
Beneficiary acquire any additional or other interests in or to the Mortgaged
Property or the ownership thereof, then, unless a contrary intent is manifested
by Beneficiary as evidenced by an appropriate document duly recorded, this Deed
of Trust and the lien hereof shall not merge in such other or additional
interests in or to the Mortgaged Property, toward the end that this Deed of
Trust may be foreclosed as if owned by a stranger to said other or additional
interests.

         4.21. Rights With Respect to Junior Encumbrances. Any person or entity
purporting to have or to take a junior mortgage or other lien upon the Mortgaged
Property or any interest therein shall be subject to the rights of Beneficiary
to amend, modify, increase, vary, alter or supplement this Deed of Trust, the
Note or any of the other Loan Documents, and to extend the maturity date of the
Debt, and to increase the amount of the Debt, and to waive or forebear the
exercise of any of its rights and remedies hereunder or under any of the other
Loan Documents and to release any collateral or security for the Debt, in each
and every case without obtaining the consent of the holder of such junior lien
and without the lien or security interest of this Deed of Trust losing its
priority over the rights of any such junior lien.

         4.22. Beneficiary May File Proofs of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Trustor or the principals, general
partners or managing members in Trustor, or their respective creditors or
property, Beneficiary, to the extent permitted by law, shall be entitled to file
such proofs of claim and other documents as may be necessary or advisable in
order to have the claims of Beneficiary allowed in such proceedings for the
entire Debt at the date of the institution of such proceedings and for any
additional amount which may become due and payable by Trustor hereunder after
such date.

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<PAGE>

         4.23. Fixture Filing. Pursuant to California Uniform Commercial Code
Sections 9313 and 9402, as amended and recodified from time to time, this Deed
of Trust shall be effective from the date of its recording as a financing
statement filed as a fixture filing with respect to all goods constituting part
of the Mortgaged Property which are or are to become fixtures. This Deed of
Trust shall also be effective as a financing statement covering minerals or the
like (including, but not limited to, oil and gas) and is to be filed of record
in the real estate records of the county where the Premises is situated. The
mailing address of Trustor and the address of Beneficiary from which information
concerning the security interest may be obtained are set forth in Section 1.22
hereof. Some or all of the Mortgaged Property may be or become a fixture in
which Beneficiary has a security interest under the security agreement set forth
in Section 1.22 above (the "Security Agreement"), and the purpose of this
Section 4.23 is to create a fixture filing under Sections 9313 and 9402 of the
California Uniform Commercial Code, as amended or recodified from time to time.
The rights, remedies and interests of Beneficiary under the Security Agreement
and under other provisions of this Deed of Trust are independent and cumulative,
and there shall be no merger of any security interest created by the Security
Agreement with any lien created under the other provisions of this Deed of
Trust. Beneficiary may elect to exercise or enforce any of its rights, remedies,
or interests under the Security Agreement and the other provisions of this Deed
of Trust as Beneficiary may from time to time deem appropriate. In connection
with any sale or sales hereunder, Beneficiary may elect to treat any of the
Mortgaged Property which consists of a right in action or which is property that
can be severed from the real property covered hereby or any improvements thereon
without causing structural damage thereto as if the same were personal property
or a fixture, as the case may be, and dispose of the same in accordance with
applicable law, separate and apart from the sale of real property. Any sale of
any personal property or fixtures hereunder shall be conducted in any manner
permitted by the UCC.

         4.24. After-Acquired Mortgaged Property. All property acquired by
Trustor after the date of this Deed of Trust which by the terms of this Deed of
Trust shall be subject to the lien and the security interest created hereby,
shall immediately upon the acquisition thereof by Trustor and without further
mortgage, conveyance or assignment become subject to the lien and security
interest created by this Deed of Trust. Nevertheless, Trustor shall execute,
acknowledge, deliver and record or file, as appropriate, all and every such
further mortgages, security agreements, financing statements, assignments and
assurances as Beneficiary shall require for accomplishing the purposes of this
Deed of Trust.

         4.25. No Representation. By accepting delivery of any item required to
be observed, performed or fulfilled or to be given to Beneficiary pursuant to
the Loan Documents, including, but not limited to, any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Beneficiary shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness or
legal effect of the same, or of any term, provision or condition thereof, and
such acceptance of delivery thereof shall not be or constitute any warranty,
consent or affirmation with respect thereto by Beneficiary.

         4.26. Counterparts. This Deed of Trust may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed

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<PAGE>

an original, and all of which shall be taken to be one and the same instrument,
for the same effect as if all parties hereto had signed the same signature page.

         4.27. Personal Liability. Notwithstanding anything to the contrary
contained in this Deed of Trust, the liability of Trustor and its officers,
directors, general partners, managers, members and principals for the Debt and
for the performance of the other agreements, covenants and obligations contained
herein and in the Loan Documents shall be limited as set forth in Section 2.6 of
the Note.

         4.28. Recording and Filing. Trustor will cause the Loan Documents and
all amendments and supplements thereto and substitutions therefor to be
recorded, filed, re-recorded and re-filed in such manner and in such places as
Beneficiary shall reasonably request, and will pay on demand all such recording,
filing, re-recording and re-filing taxes, fees and other charges. Trustor shall
reimburse Beneficiary, or its servicing agent, for the costs incurred in
obtaining a tax service company to verify the status of payment of taxes and
assessments on the Mortgaged Property.

         4.29. Entire Agreement and Modifications. This Deed of Trust and the
other Loan Documents contain the entire agreements between the parties relating
to the subject matter hereof and thereof and all prior agreements relative
hereto and thereto which are not contained herein or therein are terminated.
This Deed of Trust and the other Loan Documents may not be amended, revised,
waived, discharged, released or terminated orally but only by a written
instrument or instruments executed by the party against which enforcement of the
amendment, revision, waiver, discharge, release or termination is asserted. Any
alleged amendment, revision, waiver, discharge, release or termination which is
not so documented shall not be effective as to any party.

         4.30. Maximum Interest. The provisions of this Deed of Trust and of all
agreements between Trustor and Beneficiary, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest") to Beneficiary for the use, forbearance or retention of the
money loaned under the Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or fulfillment
of any provision hereof or of any agreement between Trustor and Beneficiary
shall, at the time performance or fulfillment of such provision shall be due,
exceed the limit for Interest prescribed by law or otherwise transcend the limit
of validity prescribed by applicable law, then, ipso facto, the obligation to be
performed or fulfilled shall be reduced to such limit, and if, from any
circumstance whatsoever, Beneficiary shall ever receive anything of value deemed
Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under the Note in the inverse order of its maturity
(whether or not then due), in which event the amount of each payment shall
remain the same, but the portion of the amount of each payment to be applied to
the principal indebtedness due under the Note shall be recalculated based on the
reduced principal or, at the option of Beneficiary, be paid over to Trustor, and
not to the payment of Interest. All Interest (including any amounts or payments
deemed to be Interest) paid or agreed to be paid to Beneficiary shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full period until

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<PAGE>

payment in full of the principal balance of the Note so that the Interest
thereon for such full period will not exceed the maximum amount permitted by
applicable law. This Section will control all agreements between Trustor and
Beneficiary.

         4.31. Interest Payable by Trustor. Beneficiary shall cause funds in the
Impound Account, the Replacement Reserve, the Repair and Remediation Reserve and
the Cash Collateral Account (as defined in the Note) to be deposited into
interest bearing accounts of the type customarily maintained by Beneficiary or
its servicing agent for the investment of similar reserves, which accounts may
not yield the highest interest rate then available. Interest payable on such
amounts shall be computed based on the daily outstanding balance in the Impound
Account, Replacement Reserve, the Repair and Remediation Reserve and the Cash
Collateral Account. Interest earned on such accounts shall be based solely on
amounts in the Impound Account, Replacement Reserve, the Repair and Remediation
Reserve or the Cash Collateral Account. All interest earned on amounts
contributed to the Impound Account, Replacement Reserve or the Repair and
Remediation Reserve shall be retained by Beneficiary and accumulated for the
benefit of Trustor and added to the balance in the Impound Account, Replacement
Reserve or the Repair and Remediation Reserve and, provided no Event of Default
has occurred and is then continuing, shall be disbursed to Trustor annually. All
interest earned on amounts contributed to the Cash Collateral Account shall
remain in such account as additional security for Beneficiary. Beneficiary shall
provide Trustor with monthly statements for the Impound Account, the Replacement
Reserve, the Repair and Remediation Reserve and the Cash Collateral Account.

         4.32. Dissemination of Information. (a) If Beneficiary determines at
any time to sell, transfer or assign the Note, this Deed of Trust and the other
Loan Documents, and any or all servicing rights with respect thereto, or to
grant participations therein (the "Participations") or issue mortgage
pass-through certificates or other securities evidencing a beneficial interest
in a rated or unrated public offering or private placement (the "Securities"),
Beneficiary may forward to each purchaser, transferee, assignee, servicer,
participant, investor, or their respective successors in such Participations
and/or Securities (collectively, the "Investor") or any rating agency rating
such Securities, each prospective Investor and each of the foregoing's
respective counsel, all documents and information which Beneficiary now has or
may hereafter acquire relating to the Debt and to Trustor, any guarantor, any
Indemnitor and the Mortgaged Property, which shall have been furnished by
Trustor, any guarantor or any Indemnitor as Beneficiary determines necessary or
desirable.

                  (b) Secondary Market. Beneficiary may sell, transfer and
deliver the Loan Documents to one or more Investors in the secondary mortgage
market. In connection with such sale, Beneficiary may retain or assign
responsibility for servicing the loan or may delegate some or all of such
responsibility and/or obligations to a servicer, including, but not limited to,
any subservicer or master servicer, on behalf of the Investors. All references
to Beneficiary herein shall refer to and include, without limitation, any such
servicer, to the extent applicable.

         4.33. Substitution and Release of Collateral.

         Trustor may obtain a release of the lien encumbering the Mortgaged
Property by substituting therefor its fee interest in one or more hotel
properties of like kind and quality

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<PAGE>

acquired by Trustor (individually, a "Substitute Property" and collectively, the
"Substitute Properties"), provided that (x) no such substitution may occur after
the Maturity Date (as defined in the Note), (y) no such substitution may occur
during the first year of the term of the Loan and (z) Trustor may not request
such a substitution more than once in any four (4) year period, unless the
substitution is made in connection with the sale of the Mortgaged Property. In
addition, any such substitution shall be subjected, in each case, to the
satisfaction of the following conditions precedent:

                  (i) The Substitute Property must be a property as to which
         Trustor (or a single purpose entity affiliate of Trustor reasonably
         satisfactory to Beneficiary) will hold fee title free and clear of any
         lien or other encumbrance, except for permitted encumbrances, leases
         and easements, restrictive covenants and other title exceptions which
         do not have a material adverse effect on the utility or value of such
         property (or its current use).

                  (ii) If a substitution is made in connection with a sale of
         the Mortgaged Property, Beneficiary and the applicable rating agencies
         shall have received (A) a copy of the deed conveying all of Trustor's
         right, title and interest in and to the Mortgaged Property to an entity
         other than Trustor or its general partner in an arms' length
         transaction and (B) a letter from Trustor countersigned by a title
         insurance company acknowledging receipt of such deed and agreeing to
         record such deed in the real estate records for the county in which the
         Mortgaged Property is located. A sale of the Mortgaged Property shall
         not be a condition precedent to the substitution contemplated in this
         Section 4.33.

                  (iii) Beneficiary and the applicable rating agencies shall
         have received an MAI appraisal of the Substitute Property dated no more
         that forty-five (45) days prior to the substitution by an appraiser
         acceptable to Beneficiary and such rating agencies, indicating an
         appraised value of the Substitute Property that is at least equal to or
         greater than the appraised value of the Mortgaged Property determined
         by the same appraiser, or another appraiser acceptable to Beneficiary,
         as of (A) the date hereof or (B) the date immediately preceding the
         encumbrance of the Substitute Property. If the Loan is not part of a
         Secondary Market Transaction as of the date of the substitution, the
         fair market value of the Substitute Property as determined by
         Beneficiary must be at least equal to or greater than the fair market
         value of the Mortgaged Property as of (A) the date hereof or (B) the
         date immediately preceding the encumbrance of the Substitute Property
         by the related Loan Documents, such determination to be made by
         Beneficiary in its sole reasonable discretion consistent with the
         methodology used by Beneficiary in determining property values in
         connection with the origination of the Loan (which determination may
         include an appraisal satisfactory to Beneficiary in all respects).

                  (iv) The debt service coverage ratio (calculated in a manner
         consistent with Schedule 2 attached hereto) of the Substitute
         Properties is not less than the greater of the debt service coverage
         ratio of the Mortgaged Property as of (A) the date hereof or (B) the
         date immediately preceding the substitution.

                  (v) The net operating income for the Substitute Property
         either (A) does not show a successive decrease in any material amount
         over the three (3) years immediately

                                       67
<PAGE>

         prior to the date of substitution, or (B) with respect to a Substitute
         Property for which information regarding the net operating income of
         such Substitute Property for the three (3) years immediately prior to
         the date of substitution cannot be obtained by Trustor after Trustor's
         exercise of diligent efforts, the net operating income shall not show a
         successive decrease for such lesser period of no less than twelve (12)
         months, or (C) if the Substitute Property has been substantially
         renovated within such three (3) year period, the net operating income
         shall not show a successive decrease in any material amount for such
         lesser period no less than twelve (12) months.

                  (vi) The net operating income for the Substitute Property for
         the twelve (12) month period immediately preceding the substitution is
         at least one hundred (100%) of the net operating income for the
         Mortgaged Property for the twelve (12) month period immediately
         preceding the substitution.

                  (vii) The entity transferring the Substitute Property is
         solvent.

                  (viii) If the Loan is part of a Secondary Market Transaction,
         Beneficiary shall have received evidence in writing from the applicable
         rating agencies to the effect that such substitution will not by itself
         result in a withdrawal, qualification or downgrade of the respective
         ratings in effect immediately prior to such substitution for the
         securities issued in connection with the Secondary Market Transaction
         that are then outstanding.

                  (ix) No Event of Default shall have occurred and be
         continuing. Beneficiary and the applicable rating agencies shall have
         received a certificate from Trustor confirming the foregoing.

                  (x) Trustor shall have executed, acknowledged and delivered to
         Beneficiary (A) a security instrument, and two UCC financing statements
         with respect to the Substitute Property, together with a letter from
         Trustor countersigned by a title insurance company acknowledging
         receipt of such security instruments and UCC-1 financing statements and
         agreeing to record or file, as applicable, such security instruments
         and one of the UCC-1 financing statements in the real estate records
         for the county in which the Substitute Property is located and to file
         one of the UCC-1 financing statements in the office of the Secretary of
         State of the state in which the Substitute Property is located, so as
         to effectively create upon such recording and filing valid and
         enforceable liens upon the Substitute Property in favor of Beneficiary
         (or such other trustee as may be desired under local law), subject only
         to the permitted encumbrances and such other liens as are permitted
         pursuant to the Loan Documents, and (B) an Environmental Indemnity
         Agreement with respect to the Substitute Property. The security
         instruments, UCC-1 financing statements and Environmental Indemnity
         Agreement shall be substantially the same in form and substance as the
         counterparts of such documents executed and delivered with respect to
         the related Mortgaged Property, subject to such modifications
         reflecting the laws of the state in which the Substitute Property is
         located as shall be recommended by the counsel admitted to practice in
         such state and delivering the opinion as to the enforceability of such
         documents required pursuant to clause (xvi) below. The security
         instruments encumbering the Substitute Property shall secure the entire
         Debt, including, without limitation, all amounts evidenced by the Note.

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<PAGE>

                  (xi) Beneficiary shall have received a title insurance policy
         (or a marked, signed and redated commitment to issue such title
         insurance policy) insuring the lien of the security instruments
         encumbering the Substitute Property, together with all endorsements
         requested by Beneficiary, issued by the title company that issued the
         title insurance policies insuring the lien of the existing security
         instruments and dated as of the date of the substitution. Beneficiary
         also shall have received copies of paid receipts showing that all
         premiums in respect of such endorsements and title insurance policies
         have been paid.

                  (xii) Beneficiary shall have received a current title survey
         for each Substitute Property, certified to the title company and
         Beneficiary and their successors and assigns, in the same form and
         having substantially the same content as the certification of the
         survey of the Mortgaged Property prepared by a professional land
         surveyor licensed in the state in which the Substitute Property is
         located.

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

                  (xiv) Beneficiary shall have received a Phase I environmental
         report and, if recommended under the Phase I environmental report, a
         Phase II environmental report from a nationally recognized
         environmental consultant approved by Beneficiary and, if a substitution
         occurs after a Secondary Market Transaction, approved by the applicable
         rating agencies, not less than forty-five (45) days prior to such
         release and substitution, which conclude that the Substitute Property
         does not contain any hazardous materials (except for cleaning and other
         products used in connection with the routine maintenance or repair of
         the Substitute Property or the operation thereof as a hotel, in full
         compliance with hazardous materials laws) and is not subject to any
         risk of contamination from any off-site hazardous materials (except for
         cleaning and other products used in connection with the routine
         maintenance or repair of the Substitute Property or the operation
         thereof as a hotel, in full compliance with hazardous materials laws)
         or the risk of contamination from any off site hazardous materials, any
         such report shall include an estimate of the cost of any related
         remediation and Trustor shall deposit with Beneficiary an amount equal
         to one hundred twenty-five percent (125%) of such estimated cost, which
         deposit shall constitute additional security for the Loan and shall be
         held and released to Trustor in accordance with the provisions of
         Section 1.34 hereof (together with any interest earned thereon) upon
         the delivery to Beneficiary of (A) an update to such report indicating
         that there is no longer any hazardous materials (except for cleaning
         and other products used in connection with the routine maintenance or
         repair of the Substitute Property or the operation thereof as a hotel,
         in full compliance with hazardous materials laws) on the Substitute
         Property or any danger of contamination from any off-site hazardous
         materials that has not been fully remediated in accordance with all
         applicable laws and (B) paid receipts indicating that the costs of all
         such remediation work have been paid. Such report shall also state the
         amount of time that will be necessary to complete such remediation, as
         may be required by law. Trustor covenants to undertake

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<PAGE>

         any repairs, cleanup or remediation indicated for hazardous materials
         on the Substitute Property.

                  (xv) Trustor shall deliver or cause to be delivered to
         Beneficiary (A) updates certified by Trustor of all organizational
         documentation related to Trustor and/or the formation, structure,
         existence, good standing and/or qualification to do business
         certificate delivered to Beneficiary in connection with the closing of
         the Loan; (B) good standing certificates, certificates of qualification
         to do business in the jurisdiction in which the Substitute Property is
         located (if required in such jurisdiction) and (C) resolutions of the
         general partner of Trustor authorizing the substitution and any actions
         taken in connection with such substitution.

                  (xvi) Beneficiary shall have received an opinion of Trustor's
         counsel substantially similar to the opinions received in connection
         with the closing of the Loan; in addition, if the Loan is part of a
         Secondary Market Transaction, Beneficiary shall have received an
         opinion from Trustor's counsel that the substitution does not
         constitute a "significant modification" of the Loan under Section 1001
         of the IRS Code or otherwise cause a tax to be imposed on a "prohibited
         transaction" by any REMIC.

                  (xvii) Trustor shall have paid or caused to be paid all (A)
         accrued but unpaid insurance premiums relating to the Substitute
         Property, (B) currently due taxes (including any in arrears) relating
         to the Substitute Property and (C) any other charges relating to the
         Substitute Property which are currently due.

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

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

                  (xx) Trustor shall have delivered to Beneficiary estoppel
         certificates from any lessees and other tenants of Trustor in the
         Substitute Property. All such estoppel certificates shall indicate that
         (1) the subject lease is a valid and binding obligation of the tenant
         thereunder, (2) there are no defaults under such lease on the part of
         the landlord or tenant thereunder, (3) the tenant thereunder has no
         defense or offset to the payment of

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<PAGE>

         rent under such leases, (4) no rent under such lease has been paid more
         than one (1) month in advance, and (5) all tenant improvement work
         required under such lease has been completed and the tenant under such
         lease is in actual occupancy of its leased premises. If an estoppel
         certificate indicated that all tenant improvement work required under
         the subject lease has not yet been completed, Trustor shall, if
         required by the applicable rating agencies, deliver to Beneficiary
         financial statements indicating that Trustor has adequate funds to pay
         all costs related to such tenant improvement work as required under
         such lease.

                  (xxi) Beneficiary shall have received a physical conditions
         report with respect to the Substitute Property from a nationally
         recognized structural consultant approved by the applicable rating
         agencies in a form recognized and approved by such rating agencies not
         less than forty-five (45) days prior to such release and substitution
         stating that the Substitute Property and its use comply in all material
         respects with all applicable requirements of law and that the
         Substitute Property is in good condition and repair and free of damage
         or waste. If the physical conditions report recommends that any repair
         be made with respect to the Substitute Property, such physical
         conditions report shall either (A) include an estimate of the cost of
         such recommended repairs (in which case Trustor shall deposit into an
         interest-bearing escrow an amount equal to one hundred twenty-five
         (125%) of such estimated cost, which sums shall be disbursed to Trustor
         in accordance with the provisions of Section 1.34 hereof), or (B) state
         the specific amounts that need to be reserved over time in order to
         meet the requirements of such replacements, which sums shall be
         deposited in the Replacement Reserve and disbursed to Trustor in
         accordance with the provisions of Section 1.8 hereof.

                  (xxii) Beneficiary shall have received such other and further
         approvals, opinions, documents and information in connection with the
         substitution as the applicable rating agencies may request.

                  (xxiii) Trustor shall submit to Beneficiary, not less than
         thirty (30) days prior to the date of such substitution, a release of
         lien (and related Loan Documents) for the Mortgaged Property for
         execution by Beneficiary. Such release shall be in a form acceptable to
         Beneficiary and appropriate for the jurisdiction in which the Mortgaged
         Property is located. Trustor shall deliver to Beneficiary an officer's
         certificate certifying that the requirements set forth in this section
         have been satisfied.

                  (xxiv) Beneficiary shall have received evidence that the
         Substitute Property and the use thereof complies with all laws,
         ordinances, rules and regulations of all governmental authorities
         having jurisdiction over the Substitute Property and/or the use thereof
         and that there is no action or proceeding pending before any court,
         quasi-judicial body or administrative agency relating to the proposed
         or actual use of the Substitute Property, or that all rights to appeal
         any decision rendered in any such action or proceeding have expired.
         Trustor shall furnish evidence of zoning classification and zoning
         compliance for the Substitute Property, which evidence shall be (i) a
         zoning letter from the local municipality, (ii) a 3.1 zoning
         endorsement (with parking) to the title insurance policy or (iii) a
         legal opinion in form and substance reasonably satisfactory to
         Beneficiary.

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<PAGE>

                  (xxv) Beneficiary shall have received unqualified, final
         Certificate(s) of Occupancy and other permits or licenses required for
         the operation and use of the Substitute Property, issued by the
         appropriate governmental authority.

                  (xxvi) Beneficiary shall have received evidence reasonably
         satisfactory to Beneficiary that the Substitute Property constitutes
         one or more tax lots separate from any other real property and that the
         Substitute Property is assessed with respect to ad valorem taxes
         separately from all other property.

                  (xxvii) Beneficiary shall have received a copy of the
         management agreement, if any, for the Substitute Property (certified by
         Trustor to be complete and correct), and such management agreement and
         manager are reasonably acceptable to Beneficiary. Trustor shall cause
         the manager of the Substitute Property to execute a consent to the
         assignment of the management agreement to Beneficiary and, in the event
         that the manager is an affiliate of Trustor, a subordination of its
         management fee to the Loan, as additional collateral for the Loan.
         Trustor shall also provide copies to Beneficiary of all other material
         contracts relating to the Substitute Property (certified by Trustor to
         be complete and correct).

                  (xxviii) Beneficiary shall have received a copy of the
         franchise agreement for the Substitute Property (certified by Trustor
         to be complete and correct). Trustor shall cause the respective
         franchisor to deliver a comfort letter and a Franchisor's Consent and
         Subordination of Franchise Agreement in favor of Beneficiary.

         Upon the satisfaction of the foregoing conditions precedent,
Beneficiary will release its lien from the Mortgaged Property to be released. At
the request of Trustor, an executed deed of release for the Mortgaged Property
shall be deposited in escrow to be released from escrow upon satisfaction of the
foregoing conditions.

                                   ARTICLE V.
                             CONCERNING THE TRUSTEE

         5.1. Certain Rights. With the approval of Beneficiary, Trustee shall
have the right to take any and all of the following actions: (i) to select,
employ and consult with counsel (who may be, but need not be, counsel for
Beneficiary) upon any matters arising hereunder, including the preparation,
execution and interpretation of the Loan Documents, and shall be fully protected
in relying as to legal matters on the advice of counsel, (ii) to execute any of
the trusts and powers hereof and to perform any duty hereunder either directly
or through his or her agents or attorneys, (iii) to select and employ, in and
about the execution of his or her duties hereunder, suitable accountants,
engineers and other experts, agents and attorneys-in-fact, either corporate or
individual, not regularly in the employ of Trustee (and Trustee shall not be
answerable for any act, default, negligence, or misconduct of any such
accountant, engineer or other expert, agent or attorney-in-fact, if selected
with reasonable care, or for any error of judgment or act done by Trustee in
good faith, or be otherwise responsible or accountable under any circumstances
whatsoever, except for Trustee's gross negligence or bad faith), and (iv) any
and all other lawful action that Beneficiary may instruct Trustee to take to
protect or enforce Beneficiary's rights hereunder. Trustee shall not be
personally liable in case of entry by Trustee, or anyone entering

                                       72
<PAGE>

by virtue of the powers herein granted to Trustee, upon the Trust Property for
debts contracted for or liability or damages incurred in the management or
operation of the Trust Property. Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting any action taken or
proposed to be taken by Trustee hereunder, believed by Trustee in good faith to
be genuine. Trustee shall be entitled to reimbursement for expenses incurred by
Trustee in the performance of Trustee's duties hereunder and to reasonable
compensation for such of Trustee's services hereunder as shall be rendered.
Trustor will, from time to time, pay the compensation due to Trustee hereunder
and reimburse Trustee for, and save and hold Trustee harmless against, any and
all liability and expenses which may be incurred by Trustee in the performance
of Trustee's duties (other than liabilities and expenses arising directly from
the gross negligence or willful misconduct of Trustee).

         5.2. Retention of Money. All moneys received by Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received, and shall be segregated from any other moneys of Trustee.

         5.3. Successor Trustees. Trustee may resign by the giving of notice of
such resignation in writing to Beneficiary. If Trustee shall die, resign or
become disqualified from acting in the execution of this trust, or if, for any
reason, Beneficiary, in Beneficiary's sole discretion and with or without cause,
shall prefer to appoint a substitute trustee or multiple substitute trustees, or
successive substitute trustees or successive multiple substitute trustees, to
act instead of the aforenamed Trustee, Beneficiary shall have full power to
appoint a substitute trustee (or, if preferred, multiple substitute trustees) in
succession who shall succeed (and if multiple substitute trustees are appointed,
each of such multiple substitute trustees shall succeed) to all the estates,
rights, powers and duties of the aforenamed Trustee. Such appointment may be
executed by any authorized agent of Beneficiary, and if such Beneficiary be a
corporation and such appointment be executed on its behalf by any officer of
such corporation, such appointment shall be conclusively presumed to be executed
with authority and shall be valid and sufficient without proof of any action by
the board of directors or any superior officer of the corporation. Trustor
hereby ratifies and confirms any and all acts which the aforenamed Trustee, or
his or her successor or successors in this trust, shall do lawfully by virtue
hereof. If multiple substitute trustees are appointed, each of such multiple
substitute trustees shall be empowered and authorized to act alone without the
necessity of the joinder of the other multiple substitute trustees, whenever any
action or undertaking of such substitute trustees is requested or required under
or pursuant to this Deed of Trust or applicable law. Any prior election to act
jointly or severally shall not prevent either or both of such multiple
substitute Trustees from subsequently executing, jointly or severally, any or
all of the provisions hereof.

         5.4. Perfection of Appointment. Should any deed, conveyance, or
instrument of any nature be required from Trustor by any Trustee or substitute
Trustee to more fully and certainly vest in and confirm to Trustee or substitute
Trustee such estates, rights, powers, and duties, then, upon request by Trustee
or substitute trustee, any and all such deeds, conveyances and instruments shall
be made, executed, acknowledged, and delivered and shall be caused to be
recorded and/or filed by Trustor.

         5.5. Succession Instruments. Any substitute trustee appointed pursuant
to any of the provisions hereof shall, without any further act, deed or
conveyance, become vested with all the

                                       73
<PAGE>

estates, properties, rights, powers, and trusts of its, his or her predecessor
in the rights hereunder with like effect as if originally named as Trustee
herein; but nevertheless, upon the written request of Beneficiary or of the
substitute trustee, the Trustee ceasing to act shall execute and deliver any
instrument transferring to such substitute trustee, upon the trusts herein
expressed, all the estates, properties, rights, powers, and trusts of the
Trustee so ceasing to act, and shall duly assign, transfer and deliver any of
the property and moneys held by such Trustee to the substitute trustee so
appointed in such Trustee's place.

         5.6. No Representation by Trustee or Beneficiary. By accepting or
approving anything required to be observed, performed, or fulfilled or to be
given to Trustee or Beneficiary pursuant to the Loan Documents, including,
without limitation, any officer's certificate, balance sheet, statement of
profit and loss or other financial statement, survey, appraisal or insurance
policy, neither Trustee nor Beneficiary shall be deemed to have warranted,
consented to, or affirmed the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision, or condition thereof, and such
acceptance or approval thereof shall not be or constitute any warranty or
affirmation with respect thereto by Trustee or Beneficiary.

             [THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       74
<PAGE>

         IN WITNESS WHEREOF, Trustor has executed this Deed of Trust on the day
and year first written above.

                                       TRUSTOR:

                                       INNKEEPERS RESIDENCE SAN MATEO, L.P.,
                                       a Virginia limited partnership

                                       By: Innkeepers Residence San Mateo, Inc.,
                                           a Virginia corporation,
                                           its General Partner

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

CONSENTED AND AGREED TO AS TO
THE PROVISIONS OF SECTION 1.33 (B):

INNKEEPERS RESIDENCE SAN MATEO, INC.,
a Virginia corporation

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

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