Document:

EXHIBIT 10.104

PREPARED BY AND UPON RECORDATION RETURN TO:        Tax Parcel No(s):  __________

Kennedy Covington Lobdell & Hickman, L.L.P.
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 28202-4006
Attention:  John Nicholas Suhr, Jr., Esq.

LOAN NO.: 26-5330848                                        SALT LAKE CITY, UTAH
                                                                 HOMEWOOD SUITES

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                            APPLE SUITES SPE I, INC.,
                              as Grantor (Trustor)

                                       to

                          METRO NATIONAL TITLE COMPANY,
                                   as Trustee

                               For the benefit of

                           FIRST UNION NATIONAL BANK,
                                 as Beneficiary

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

                        DEED OF TRUST, SECURITY AGREEMENT

                             AND UCC FIXTURE FILING

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

                             Date: September 8, 2000

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                                TABLE OF CONTENTS
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ARTICLE I. COVENANTS OF GRANTOR...................................................................................6

         1.1      Warranties of Grantor...........................................................................6
         1.2      Defense of Title...............................................................................10
         1.3      Performance of Obligations.....................................................................10
         1.4      Insurance......................................................................................10
         1.5      Payment of Taxes...............................................................................13
         1.6      Tax and Insurance Impound Account..............................................................14
         1.7      Intentionally Deleted..........................................................................15
         1.8      Replacement Reserve............................................................................15
         1.9      Casualty and Condemnation......................................................................18
         1.10     Construction Liens.............................................................................21
         1.11     Rents and Profits..............................................................................21
         1.12     Percentage Lease...............................................................................22
         1.13     Alienation and Further Encumbrances............................................................24
         1.14     Payment of Utilities, Assessments, Charges, Etc................................................28
         1.15     Access Privileges and Inspections..............................................................28
         1.16     Waste; Alteration of Improvements..............................................................29
         1.17     Zoning.........................................................................................29
         1.18     Financial Statements and Books and Records.....................................................29
         1.19     Further Documentation..........................................................................31
         1.20     Payment of Costs; Reimbursement to Beneficiary.................................................31
         1.21     Security Interest..............................................................................33
         1.22     Security Agreement.............................................................................33
         1.23     Easements and Rights-of-Way....................................................................35
         1.24     Compliance with Laws...........................................................................35
         1.25     Additional Taxes...............................................................................36
         1.26     Secured Indebtedness...........................................................................36
         1.27     Grantor's Waivers..............................................................................37
         1.28     SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL...............................................38
         1.29     Attorney-in-Fact Provisions....................................................................38
         1.30     Management.....................................................................................38
         1.31     Hazardous Waste and Other Substances...........................................................40
         1.32     Indemnification; Subrogation...................................................................44
         1.33     Covenants with Respect to Indebtedness, Operations, Fundamental Changes of Grantor.............45
         1.34     Intentionally Deleted..........................................................................49
         1.35     Year 2000 Compatibility........................................................................49
         1.36     ERISA..........................................................................................49

ARTICLE II. EVENTS OF DEFAULT....................................................................................50

         2.1      Events of Default..............................................................................50

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ARTICLE III. REMEDIES............................................................................................52

         3.1      Remedies Available.............................................................................52
         3.2      Application of Proceeds........................................................................56
         3.3      Right and Authority of Receiver or Beneficiary in the Event of Default; Power of Attorney......57
         3.4      Occupancy After Foreclosure....................................................................58
         3.5      Notice to Account Debtors......................................................................58
         3.6      Cumulative Remedies............................................................................58
         3.7      Payment of Expenses............................................................................59

ARTICLE IV. MISCELLANEOUS TERMS AND CONDITIONS...................................................................59

         4.1      Time of Essence................................................................................59
         4.2      Release of Deed of Trust.......................................................................59
         4.3      Certain Rights of Beneficiary..................................................................59
         4.4      Waiver of Certain Defenses.....................................................................59
         4.5      Notices........................................................................................59
         4.6      Statutory Notices..............................................................................60
         4.7      Successors and Assigns; Joint and Several Liability............................................60
         4.8      Severability...................................................................................60
         4.9      Gender.........................................................................................60
         4.10     Waiver; Discontinuance of Proceedings..........................................................61
         4.11     Section Headings...............................................................................61
         4.12     GOVERNING LAW..................................................................................61
         4.13     Counting of Days...............................................................................61
         4.14     Relationship of the Parties....................................................................62
         4.15     Application of the Proceeds of the Note........................................................62
         4.16     Unsecured Portion of Indebtedness..............................................................62
         4.17     Cross-Default; Cross-Collateralization.........................................................62
         4.18     Interest After Sale............................................................................62
         4.19     Inconsistency with Other Loan Documents........................................................62
         4.20     Construction of this Document..................................................................63
         4.21     No Merger......................................................................................63
         4.22     Rights With Respect to Junior Encumbrances.....................................................63
         4.23     Beneficiary May File Proofs of Claim...........................................................63
         4.24     Fixture Filing.................................................................................63
         4.25     After-Acquired Trust Property..................................................................63
         4.26     No Representation..............................................................................64
         4.27     Counterparts...................................................................................64
         4.28     Personal Liability.............................................................................64
         4.29     Recording and Filing...........................................................................64
         4.30     Entire Agreement and Modifications.............................................................64
         4.31     Maximum Interest...............................................................................65
         4.32     Interest Payable by Beneficiary................................................................65
         4.33     Secondary Market...............................................................................65
         4.34     Dissemination of Information...................................................................65

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         4.35     Contemporaneous Notes, Contemporaneous Mortgages and Contemporaneous
                  Assignments of Leases and Rents................................................................66

ARTICLE V. CONCERNING THE TRUSTEE................................................................................66

         5.1      Certain Rights.................................................................................66
         5.2      Retention of Money.............................................................................67
         5.3      Successor Trustees.............................................................................67
         5.4      Perfection of Appointment......................................................................67
         5.5      No Representation by Trustee or Beneficiary....................................................67
         5.6      Acceptance of Trust............................................................................67
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                        DEED OF TRUST, SECURITY AGREEMENT
                             AND UCC FIXTURE FILING

         THIS DEED OF TRUST,  SECURITY  AGREEMENT AND FIXTURE FILING (this "Deed
of  Trust") is made as of  September  8, 2000 by APPLE  SUITES  SPE I,  INC.,  a
Virginia  corporation,  as Trustor  ("Grantor"),  whose address is 9 North Third
Street,  Richmond,  Virginia 23219, to METRO NATIONAL TITLE COMPANY,  as Trustee
("Trustee")  with an address at 111 East  Broadway,  Suite 111,  Salt Lake City,
Utah 84111, Attention: Rod Newman, for the benefit of FIRST UNION NATIONAL BANK,
a national banking association, as Beneficiary ("Beneficiary"), whose address is
One First Union Center DC-6  (NC0166),  Charlotte,  North  Carolina  28288-0166,
Attention: William J. Cohane, Real Estate Capital Markets Contract Finance.

                              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,  GRANTOR HEREBY IRREVOCABLY GRANTS,  BARGAINS,  SELLS,
CONVEYS,  WARRANTS,  TRANSFERS,  PLEDGES,  SETS OVER AND ASSIGNS,  WITH POWER OF
SALE,  all of Grantor's  estate,  right,  title and interest (if any) in, to and
under any and all of the  following  described  property,  whether  now owned or
hereafter acquired by Grantor (exclusive of any of the following owned or leased
by tenants leasing all or part of the  Improvements  (as  hereinafter  defined),
including,  without  limitation,  the  tenant  under  the  Percentage  Lease (as
hereinafter  defined)) (Grantor's estate,  right, title and interest in all such
property being referred to, collectively, as the "Trust Property"):

         (A) All that certain real property situated in the County of Salt Lake,
State of Utah,  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  Grantor  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", the Premises and the Improvements being referred to as the "Real
Property");

         (C) All furniture,  furnishings,  fixtures, goods, equipment, inventory
or personal  property owned by Grantor 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 Grantor and as are now or hereafter  used or furnished in

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operating the  Improvements,  or the activities  conducted  therein  (including,
without limitation beds, bureaus,  chiffoniers,  chests,  chairs,  desks, lamps,
mirrors,  bookcases,  tables,  rugs,  carpeting,  drapes,  draperies,  curtains,
shades,  venetian  blinds,  screens,  paintings,   hangings,  pictures,  divans,
couches,  luggage  carts,  luggage  racks,  stools,  sofas,  chinaware,  linens,
pillows,  blankets,  glassware,  foodcarts,  cookware,  dry cleaning facilities,
dining room wagons, keys or other entry systems, bars, bar fixtures,  liquor and
other drink dispensers,  icemakers, radios, television sets, intercom and paging
equipment,  electric and  electronic  equipment,  dictating  equipment,  private
telephone  systems,  facsimile  machines,  medical  equipment,   potted  plants,
heating,  lighting and plumbing  fixtures,  fire  prevention  and  extinguishing
apparatus, cooling an air-conditioning systems, elevators, escalators, fittings,
plants,  apparatus,  stoves,  ranges,  refrigerators,  laundry machines,  tools,
machinery,  engines,  dynamos,  motors,  boilers,  incinerators,   switchboards,
conduits,  compressors,  vacuum cleaning  systems,  floor  cleaning,  waxing and
polishing equipment, call systems, brackets, electrical signs, bulbs, bells, ash
and  fuel,  conveyors,  cabinets,  lockers,  shelving,  spotlighting  equipment,
dishwashers,  garbage  disposals,  washers and dryers),  other  customary  hotel
equipment  and all building  materials and  equipment  hereafter  situated on or
about  the  Premises  or  Improvements,  and,  to  the  extent  assignable,  all
warranties  and  guaranties  relating  thereto,  and all  additions  thereto and
substitutions and replacements therefor;

         (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  Real  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 Grantor;

         (E) To the extent assignable, 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,  together  (i)  with all
utilities,  utility  lines,  utility  commitments,   utility  capacity,  capital
recovery charges,  impact fees and other fees paid in connection with same, (ii)
reimbursements  or other  rights  pertaining  to  utility  or  utility  services
provided to the Premises and/or Improvements and (iii) the present or future use
or  availability  of waste water  capacity,  or other utility  facilities to the
extent same pertain to or benefit the Premises and/or  Improvements,  including,
without limitation,  all reservations of or commitments covering any such use in
the future 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 funds now or hereafter  on deposit in the Impound  Account and
the Replacement Reserve (each as hereinafter defined);

          (H) (i) All leases, licenses,  concessions and occupancy agreements of
all or any part of the Premises or the  Improvements and any and all guarantees,
extensions,  renewals,

                                       2
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replacements and modifications thereof (collectively,  the "Leases"), including,
without  limitation,  that certain  Amended and Restated  Hotel Lease  Agreement
dated  November  24,  1999,  between  Grantor,   as  lessor,  and  Apple  Suites
Management,  Inc., as lessee,  with any guaranty of the  performance and payment
thereunder (the  "Percentage  Lease"),  and (ii) all rents,  royalties,  issues,
profits,  revenue,  income, all revenues and credit card receipts collected from
guest rooms,  restaurants,  bars, meeting rooms,  banquet rooms and recreational
facilities,  parking charges, and other benefits  (collectively,  the "Rents" or
"Rents and  Profits")  of the  Premises,  the  Improvements  or the  fixtures or
equipment,  now or  hereafter  arising  from the use or  enjoyment of all or any
portion  thereof or  rendering of services by Grantor or any operator or manager
of the hotel or the  commercial  space located in the  Improvements  (including,
without  limitation,  from the rental of any office space,  retail space,  guest
rooms or other space, halls, stores and offices),  and (iii) all concession fees
and rentals, health club membership fees, food and beverage wholesale and retail
sales,  service  charges,  vending  machine  sale or from  any  lease,  license,
tenancy,  concession,  occupancy agreement or other agreement pertaining thereto
or arising  from any of the  Contracts  (as  hereinafter  defined) or any of the
General  Intangibles  (as  hereinafter  defined) and any other items of revenue,
receipts or other  income as  identified  in the Uniform  System of Accounts for
Hotels, 9th Edition as published by the Hotel Association of New York City, Inc.
(1996) and (iv) all cash or securities  (the "Security  Deposits")  deposited in
any  security  deposit  account  (the  "Security  Deposit  Account")  to  secure
performance  by the  tenants,  lessees or  licensees,  as  applicable,  of their
obligations   under  any  such  leases,   licenses,   concessions  or  occupancy
agreements,  whether said cash or securities are to be held until the expiration
of the terms of said leases,  licenses,  concessions or occupancy  agreements or
applied (exclusive of any of the foregoing owed to tenants or any third parties)
to one or more of the installments of rent coming due prior to the expiration of
said terms,  subject to,  however,  the provisions  contained in Section 1.11 of
this Deed of Trust;

          (I) To the extent assignable:  (i) all contracts and agreements now or
hereafter  entered  into by Grantor  or binding  upon  Grantor  relating  to the
management,  maintenance  or  operation  of  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, maintenance contracts, equipment leases, personal property leases and
(ii) 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);

          (J) To the extent  assignable,  all present and future real estate tax
refunds  and  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) To the extent assignable,  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 Grantor has or may
have as developer or declarant under any covenants, restrictions or declarations
now or hereafter  relating to the

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Premises or the  Improvements)  and all notes or chattel  paper  relating to the
ownership,  operation or maintenance  of the Real Property  (exclusive of any of
the foregoing  owed to tenants or any other third  parties)  (collectively,  the
"General Intangibles");

          (L) To the extent assignable, 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, to the extent assignable, all
architectural renderings,  models, drawings, plans, specifications,  studies and
data now or hereafter relating to the Premises or the Improvements;

          (N) To the extent assignable, all right, title and interest of Grantor
in any  insurance  policies  or binders now or  hereafter  relating to the Trust
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

          (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 Grantor.

          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  Grantor  payable to the order of
Beneficiary  in the principal  face amount of Two Million Five Hundred  Thousand
and No/100 Dollars ($2,500,000.00), together with interest as therein provided;

          (2)  The  full  and  prompt  payment  and  performance  of  all of the
provisions, agreements, covenants and obligations herein contained and contained
in agreements, documents or instruments now or hereafter evidencing, securing or
otherwise relating to the Debt (as hereinafter defined) and described on Exhibit
C attached  hereto,  the  Contemporaneous  Notes (as hereinafter  defined),  the
Contemporaneous   Mortgages  (as  hereinafter   defined),   the  Contemporaneous
Assignments  (as  hereinafter  defined),  (together  with any and all  renewals,
amendments, extensions,  modifications and restatements thereof, are hereinafter
collectively  referred to as the "Loan  Documents") and the payment of all other
sums herein or therein

                                       4
<PAGE>

covenanted to be paid,  PROVIDED,  HOWEVER,  THIS DEED OF TRUST SHALL NOT SECURE
THE  OBLIGATIONS  PROVIDED UNDER EITHER THE INDEMNITY AND GUARANTY  AGREEMENT OF
EVEN  DATE  HEREWITH  EXECUTED  IN  CONNECTION  WITH  THE NOTE  (THE  "INDEMNITY
AGREEMENT");  OR THE  ENVIRONMENTAL  INDEMNITY  AGREEMENT OF EVEN DATE  HEREWITH
EXECUTED IN CONNECTION WITH THE NOTE (THE "ENVIRONMENTAL INDEMNITY AGREEMENT");

          (3) Any and all additional  advances made by Beneficiary to protect or
preserve the Trust Property or the lien or security  interest  created hereby on
the  Trust  Property,  or  for  taxes,  assessments  or  insurance  premiums  as
hereinafter  provided  or  for  performance  of  any  of  Grantor's  obligations
hereunder or under the other Loan  Documents or for any other  purpose  provided
herein or in the other Loan Documents; and

          (4) Any and all other indebtedness now owing or which may hereafter be
owing by Grantor to Beneficiary  under the Loan  Documents,  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.

(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 Trust  Property unto Trustee,  its  successors
and assigns forever, for the benefit of Beneficiary, its successors and assigns,
and Grantor does hereby bind itself, its successors and assigns,  to WARRANT AND
FOREVER  DEFEND the title to the Real  Property  (and such other  portion of the
Trust Property as may constitute real property under applicable law), 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,  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 Trust
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 cause this Deed of
Trust to be released and reconveyed of record by proper instrument.

                                       5
<PAGE>

                                   ARTICLE I.
                              COVENANTS OF GRANTOR

          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, Grantor covenants and agrees as follows:

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

              (a) Grantor has good, marketable and indefeasible fee simple title
to the Real  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 (the "Title Insurance
Policy"),  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 Trust  Property in the manner and form hereby done
or  intended.  Grantor  will  preserve  its  interest  in and  title to the Real
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 or ownership of the Trust Property pursuant to any
foreclosure;

              (b)  No  bankruptcy  or  insolvency  proceedings  are  pending  or
contemplated by Grantor or, to the best knowledge of Grantor, against Grantor or
by or against  any  endorser  or  cosigner  of the Note or of any portion of the
Debt,  or any  guarantor or  indemnitor  under the  Indemnity  Agreement and the
Environmental  Indemnity  Agreement  or the loan  evidenced  thereby and secured
hereby (the "Indemnitor");

              (c) All  written  certificates,  written  affidavits  and  written
statements  made by Grantor to Beneficiary 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 materially misleading;

              (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  Grantor in
accordance with the respective  terms thereof and do not in any material respect
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,  articles of incorporation,  operating  agreement or
other organizational  documents of Grantor or any material contract or agreement
to which  Grantor is a party or by which  Grantor or any of its  property may be
bound and do not violate or contravene in any material  respect any law,  order,
decree, rule or regulation to which Grantor is subject;

                                       6
<PAGE>

              (e)  Grantor is not  required to obtain any  consent,  approval or
authorization   from  or  to  file  any   declaration  or  statement  with,  any
governmental  authority  or agency in  connection  with or as a condition to the
execution,  delivery or performance of this Deed of Trust, the Note or the other
Loan Documents which has not been so obtained or filed;

              (f)  Grantor  has  obtained or made all  necessary  (i)  consents,
approvals  and  authorizations  and  registrations  and  filings  of or with all
governmental authorities or agencies and (ii) consents,  approvals,  waivers and
notifications of partners,  stockholders,  members, creditors, lessors and other
non-governmental persons and/or entities, in each case, which are required to be
obtained or made by Grantor in  connection  with the  execution and delivery of,
and the performance by Grantor of its obligations under, the Loan Documents;

              (g)  Grantor  is  not  an  "investment   company",  or  a  company
"controlled"  by an  "investment  company",  as such  terms are  defined  in the
Investment Company Act of 1940, as amended;

              (h) No part of the  proceeds of the  indebtedness  secured  hereby
will be used for the purpose of  purchasing  or  acquiring  any  "margin  stock"
within the  meaning of  Regulation  T, U or X of the Board of  Governors  of the
Federal Reserve System or for any other purpose which would be inconsistent with
such  Regulation T, U or X or any other  Regulations of such Board of Governors,
or for  any  purpose  prohibited  by  legal  requirements  or by the  terms  and
conditions of the Loan Documents;

              (i) Grantor and, if Grantor is a partnership,  any general partner
of Grantor,  has filed all federal,  state and local tax returns  required to be
filed as of the date  hereof  and has paid or made  adequate  provision  for the
payment of all federal,  state and local taxes,  charges and assessments payable
by Grantor and its general  partner,  if any as of the date hereof.  Grantor and
its general partners, if any, believe that their respective tax returns properly
reflect the income and taxes of Grantor and said general  partners,  if any, for
the periods covered thereby,  subject only to reasonable adjustments required by
the Internal Revenue Service or other applicable tax authority upon audit;

              (j)  Grantor  is not an  "employee  benefit  plan",  as defined in
section 3(3) of the Employee  Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title I of ERISA and the assets of Grantor do not
constitute  "plan  assets"  of one or more such plans  within the  meaning of 29
C.F.R. Section 2510.3-101;

              (k) The Premises and the Improvements and the current intended use
thereof  by  Grantor  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
ordinances,  orders or  requirements  issued by any state,  federal or municipal
authorities  having  or  claiming  jurisdiction  over the  Trust  Property.  The
Premises  and  Improvements  constitute  one or more  separate  tax  parcels for
purposes  of  ad  valorem  taxation.   To  the  best  of  Borrower's  knowledge,
information and belief,  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;

                                       7
<PAGE>

              (l) All utility  services  necessary and  sufficient  for the use,
occupancy and operation of the Premises and the  Improvements  for their current
intended  purposes are available to the Real Property,  including  water,  storm
sewer, sanitary sewer, gas, electric, cable and telephone facilities;

              (m) All streets,  roads, highways and bridges necessary for access
for  the  current  use,   occupancy  and  operation  of  the  Premises  and  the
Improvements  have  been  completed,   to  the  best  of  Grantor's   knowledge,
information  and belief,  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 Grantor;

              (n) All curb cuts, driveways and traffic signals (if any) shown on
the survey delivered to Beneficiary  prior to the execution and delivery of this
Deed of  Trust  (the  "Survey")  are  existing  and,  to the  best of  Grantor's
knowledge,  information and belief,  have been fully approved by the appropriate
governmental authority;

              (o)  There  are  no   judicial,   administrative,   mediation   or
arbitration  actions,  suits or  proceedings  pending or  threatened  against or
affecting  Grantor  (or,  if Grantor  is a  partnership  or a limited  liability
company, any of its general partners or members) or the Trust Property which, if
adversely  determined,  would  have a material  adverse  effect on (a) the Trust
Property,  (b)  the  business,   prospects,  profits,  operations  or  condition
(financial  or  otherwise)  of  Grantor,   (c)  the  enforceability,   validity,
perfection or priority of the lien of any Loan  Document,  or (d) the ability of
Grantor to perform any  obligations  under any Loan  Document  (collectively,  a
"Material Adverse Effect");

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

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

              (r) 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 Grantor's  knowledge and
belief, threatened;

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

              (t) Except as may otherwise be disclosed in the Engineering Report
of the Real Property  entitled  Property  Condition  Assessment,  dated July 14,
2000, and prepared by Jones,  Hill,  McFarland & Ellis, (i) the Improvements are
in  good  repair  and  (ii)  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;

                                       8
<PAGE>

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

              (v)  Each  Contract  constitutes  the  legal,  valid  and  binding
obligation  of Grantor and, to the best of Grantor's  knowledge  and belief,  is
enforceable  against any other party  thereto.  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;

              (w)  Grantor  and the  Trust  Property  are free from any past due
obligations for sales and payroll taxes;

              (x) There  are no  security  agreements  or  financing  statements
affecting all or any portion of the Trust  Property of Grantor other than (i) as
disclosed in writing by Grantor to Beneficiary prior to the date hereof and (ii)
the Loan Documents;

              (y) Grantor  has  delivered  to  Beneficiary  a true,  correct and
complete copy of the Percentage Lease;

              (z) The Percentage Lease constitutes the legal,  valid and binding
obligation  of Grantor and, to the best of Grantor's  knowledge  and belief,  is
enforceable  against the tenant thereof.  No default exists, or with the passing
of time or the giving of notice or both would exist,  under the Percentage Lease
which would, in the aggregate, have a Material Adverse Effect;

              (aa) The rents under the  Percentage  Lease have not been  waived,
released, or otherwise discharged or compromised;

              (bb) All work to be  performed  by  Grantor  under the  Percentage
Lease has been substantially  performed, all contributions to be made by Grantor
to the tenant  thereunder have been made and all other  conditions  precedent to
each such tenant's obligations thereunder have been satisfied;

              (cc) To the best of  Grantor's  knowledge  and belief,  the tenant
under  the  Percentage  Lease  is  free  from  bankruptcy,   reorganization   or
arrangement proceedings or a general assignment for the benefit of creditors;

              (dd) There are no outstanding  options or rights of first offer or
refusal to  purchase  all or any  portion  of the Trust  Property  or  Grantor's
interest therein or ownership thereof;

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

              (ff) As of the date  hereof,  the sole  shareholder  of Grantor is
Apple Suites,  Inc., a Virginia corporation (the "REIT"). The REIT's interest in
Grantor  is owned by the REIT  free
                                       9
<PAGE>

and clear of all mortgages, assignments, pledges and security interests and free
and clear of all warrants,  options and rights to purchase,  except as otherwise
consented  to in writing by  Beneficiary,  which such  consent may be granted or
withheld in Beneficiary's sole discretion.

         1.2  Defense of Title.  If,  while this Deed of Trust is in force,  the
title to the Real Property or the interest of  Beneficiary in the Trust Property
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  except for the  Permitted  Encumbrances,  Grantor,  at
Grantor's expense,  shall take all necessary and proper steps for the defense of
said title or interest,  including the employment of counsel reasonably approved
by Beneficiary,  the prosecution or defense of litigation, and the compromise or
discharge of claims made against  said title or  interest.  Notwithstanding  the
foregoing,  if an Event of Default has  occurred  and is  continuing  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 any and all costs and expenses
incurred by Beneficiary in connection therewith,  together with interest thereon
at the Default  Interest Rate (as defined in the Note) from the date incurred by
Beneficiary until actually paid by Grantor, shall be immediately paid by Grantor
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.  Grantor  shall  pay  when  due the
principal  of and the interest on the Debt in  accordance  with the terms of the
Note.  Grantor  shall also pay all charges,  fees and other sums  required to be
paid by Grantor 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 Grantor set
forth in the Loan  Documents in accordance  with their terms.  Further,  Grantor
shall promptly  perform and comply in all material  respects with all covenants,
conditions,  obligations and prohibitions required of Grantor in connection with
any  other  document  or  instrument  affecting  title to the Real  Property  or
Grantor's  interest in the Trust  Property,  or any part thereof,  regardless of
whether such document or instrument is superior or  subordinate  to this Deed of
Trust.

          1.4 Insurance.  Grantor shall, at Grantor's expense, maintain in force
and effect on the Trust Property at all times while this Deed of Trust continues
in effect the following insurance:

              (a)  Insurance  against  loss or damage to the Trust  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"  or  "special  form"  type 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

                                       10
<PAGE>

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.
Grantor  shall also  maintain  insurance  against  loss or damage to  furniture,
furnishings,   fixtures,  equipment  and  other  items  (whether  personalty  or
fixtures)  owned by Grantor  and  included  in the Trust  Property  and owned by
Grantor 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 $10,000.00.

              (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
Grantor  and to require an increase  in the amount of said  liability  insurance
should Beneficiary deem an increase to be reasonably prudent under then existing
circumstances.

              (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: (i) 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  Debt if  replacement  cost  coverage  is not  available  for the type of
building insured), or (ii) 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
original 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  reasonably  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 reasonably 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
Trust Property is located.

                                       11
<PAGE>

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

              (h)  Such  other  insurance  on  the  Trust  Property  or  on  any
replacements or substitutions  thereof or additions  thereto as may from time to
time be required by Beneficiary  against other  insurable  hazards or casualties
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 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  (provided  such  approval  as to a  particular  company  shall not be
withheld if the foregoing  minimum rating  requirement  is satisfied),  amounts,
content,  forms of policies,  method by which  premiums are paid and  expiration
dates,  and (v) include a standard,  non-contributory,  mortgagee  clause naming
EXACTLY:

         First Union National Bank,
         its Successors and Assigns ATIMA
         Attn.:  Structured Products Servicing
         8739 Research Drive, URP-4
         Charlotte, NC  28262-1075

(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.

          Grantor 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.  Grantor 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.  Grantor 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 Grantor  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

                                       12
<PAGE>

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,  Grantor hereby  acknowledges and agrees that failure to pay any
portion of the premium  therefor which is not allocable to the Trust Property or
by any other action not  relating to the Trust  Property  which would  otherwise
permit the issuer  thereof to cancel the  coverage  thereof,  would  require the
Trust Property to be insured by a separate,  single-property policy. The blanket
policy must  properly  identify  and fully  protect  the Trust  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. To the extent  permitted by applicable law, in the event of
foreclosure  of this  Deed of  Trust,  or other  transfer  of title to the Trust
Property in extinguishment in whole or in part of the Debt, all right, title and
interest of Grantor in and to all proceeds  payable  under such policies then in
force  concerning the Trust  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 Grantor 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 Grantor 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 Grantor, 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 Grantor to furnish such  insurance.  Grantor shall not
obtain  insurance  for the  Trust  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. Grantor shall pay or cause to be paid, except to
the extent  Beneficiary  is to pay the same  pursuant to Section  1.6(a) of this
Deed of Trust,  all taxes and assessments  which are or may become a lien on the
Trust Property or which are assessed against or imposed upon the Trust Property.
If paid by Grantor,  Grantor  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 at least fifteen (15) days prior
to the  applicable  delinquency  date therefor.  Notwithstanding  the foregoing,
Grantor  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

                                       13
<PAGE>

reasonable  subjective 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 Trust 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,  Grantor deposits in the Impound Account (as hereinafter defined) an
amount determined by Beneficiary to be reasonably  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 Grantor 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 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
Trust Property may be sold, lost or forfeited.

          1.6 Tax and Insurance Impound Account. (a) Grantor 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  insurance on the Trust  Property and as  additional
security for the Debt.  Simultaneously with the execution hereof,  Grantor 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 Trust Property at least one (1) month prior
to the earlier of (a) the due date thereof or (b) any such date by which Grantor
or Beneficiary is required by law to pay same and the next due annual  insurance
premiums with respect to the Trust  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,  Grantor
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
Trust  Property,  plus  one-twelfth  (1/12) of the amount of the annual premiums
that will next become due and payable on  insurance  policies  which  Grantor 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.  Grantor
shall be responsible  for ensuring the receipt by  Beneficiary,  at least thirty
(30) days prior to the  respective due date for payment  thereof,  of all bills,
invoices and statements for all taxes,  assessments and insurance premiums to be
paid from the Impound Account,  and so long as no Event of Default has occurred,
Beneficiary shall pay the governmental authority or other party entitled thereto
directly  to the extent  funds are  available  for such  purpose in the  Impound
Account.  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

                                       14
<PAGE>

or contestability of any tax, assessment,  valuation, sale, forfeiture, tax lien
or title or claim  thereof.  No  interest  on  funds  contained  in the  Impound
Account, if any, shall be paid by Beneficiary to Grantor.

              (b) Notwithstanding  anything herein or in any other Loan Document
to the  contrary,  at any time  prior to the  Maturity  Date (as  defined in the
Note),  unless  and  until  an Event  of  Default  shall  have  occurred  and be
continuing,  Grantor  shall not be  required  to make  deposits  to the  Impound
Account  as  required  by Section  1.6(a) of this Deed of Trust with  respect to
insurance  premiums  (the  "Insurance  Obligations")  provided  that each of the
following conditions is satisfied at all times:

              (i)  Simultaneously  with  the  execution  hereof,  Grantor  shall
deposit in the Impound  Account the  equivalent  of six (6) months of  insurance
premiums; and

              (ii) Grantor timely delivers  satisfactory evidence of payment for
and renewal of the insurance policy or policies as required hereunder.

              (c) If an Event of Default shall have occurred and be  continuing,
including,  without  limitation,  with  respect to Grantor's  obligations  under
Section 1.4 and Section  1.6(a) (as  modified by Section  1.6(b))  hereof,  upon
Beneficiary's  request,  Grantor shall promptly commence making full payments to
the Impound Account pursuant to Section 1.6(a) above.

              (d) Notwithstanding  anything to the contrary herein,  Beneficiary
shall not require  Grantor to commence making payments to the Impound Account if
a default  occurs with regard to the payment and  performance  of the  Insurance
Obligations  so long as such default shall not have resulted in the  expiration,
termination  or lapse of insurance as required  under  Section 1.4 hereof and so
long as Grantor  shall have cured such  default by the  earlier of (1) seven (7)
days after written  notice  thereof from  Beneficiary to Grantor or (2) prior to
the date on which  nonpayment of premiums would result in the lapse,  expiration
or termination of insurance as required by Section 1.4 hereof.

          1.7 Intentionally Deleted.

          1.8 Replacement Reserve.

              (a) The Trust Property is currently managed by Promus Hotels, Inc.
("Promus"),  pursuant to that  Management  Agreement  dated  November  29, 1999,
between  Promus  and Apple  Suites  Management,  Inc.  (the  "Promus  Management
Agreement").  If  the  Promus  Management  Agreement  is  terminated,  then,  as
additional  security for the Debt, Grantor shall establish and maintain a repair
and replacement reserve (the "Replacement Reserve") with Beneficiary for payment
of costs and  expenses  incurred  by  Grantor  in  connection  with the  repair,
replacement  and  maintenance  of the  furniture,  fixtures and equipment at the
Trust  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,  carpets,  appliances,
fixtures,   furnishings,   elevators   and   mechanical   and   HVAC   equipment
(collectively,  the "Repairs").  The Replacement Reserve shall be maintained for
so long as this

                                       15
<PAGE>

Deed of Trust continues in effect after the termination of the Promus Management
Agreement;  provided,  however,  no monthly  deposits  will be  required  to the
Replacement Reserve if and for so long as the Trust Property is managed pursuant
to a Management Agreement (as hereinafter defined)  subsequently entered into in
accordance  with the  provisions  of Section  1.30  hereof.  If  deposits to the
Replacement  Reserve  are  required  hereunder,  deposits  shall be made on each
monthly  Payment Date under the Note,  concurrently  with and in addition to the
monthly payments due under the Note. Deposits to the Replacement  Reserve,  when
required,  shall be in an  amount  equal to five  percent  (5.0%)  of the  gross
revenues of the Trust  Property based upon the most recent annual balance sheets
and  statement  of  operations  for  the  Trust  Property.  Notwithstanding  the
foregoing,  if a Management  Agreement  reserves  funds for Repairs in an amount
less than five  percent  (5%) of the gross  revenues  of the Trust  Property  as
calculated  above,  then a Replacement  Reserve  deposit shall be required in an
amount  equal  to the  difference  between  such  Management  Agreement  reserve
percentage  and five  percent  (5%) of the gross  revenues  of the  Property  as
calculated  above. So long as no Default or Event of Default has occurred and is
continuing,  Beneficiary  shall,  to the  extent  funds are  available  for such
purpose in the  Replacement  Reserve,  disburse  to Grantor  the amount  paid or
incurred by Grantor in performing  such Repairs within ten (10) days  following:
(a)  the  receipt  by  Beneficiary  of  a  written   request  from  Grantor  for
disbursement  from the Replacement  Reserve and a certification  by Grantor in a
form reasonably  approved in writing by Beneficiary  that the applicable item of
Repair has been completed; (b) the delivery to Beneficiary of invoices, receipts
or other evidence reasonably satisfactory to Beneficiary,  verifying the cost of
performing the Repairs;  (c) for disbursement  requests in excess of $25,000.00,
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
Trust Property have been paid all amounts due for labor and materials  furnished
to the Trust Property;  (d) for  disbursement  requests in excess of $25,000.00,
delivery to Beneficiary of a certification from an inspecting architect or other
third party  acceptable to  Beneficiary  describing  the  completed  Repairs and
verifying the completion of the Repairs and the value of the completed  Repairs;
and  (e)  for  disbursement  requests  in  excess  of  $25,000.00,  delivery  to
Beneficiary  of a new  certificate  of  occupancy  or local  equivalent  for the
portion of the Improvements  covered by such Repairs, if said new certificate of
occupancy  is  required  by  law,  or a  certification  by  Grantor  that no new
certificate of occupancy is required.  Beneficiary shall not be required to make
advances from the  Replacement  Reserve more  frequently than once in any ninety
(90) day period. In making any payment from the Replacement Reserve, Beneficiary
shall be entitled to rely on such request from Grantor  without any inquiry into
the accuracy, validity or contestability of any such amount. Beneficiary may, at
Grantor's  expense,  make or cause to be made  during  the term of this  Deed of
Trust an annual  inspection  of the Trust  Property to  determine  the need,  as
determined by Beneficiary in its reasonable judgment, for further Repairs of the
Trust Property.  In the event that such inspection  reveals that further Repairs
of the Trust  Property are required,  Beneficiary  shall provide  Grantor with a
written  description  of the required  Repairs and Grantor  shall  complete such
Repairs to the reasonable  satisfaction  of Beneficiary  within ninety (90) days
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 to Grantor as
provided in Section 4.32 hereof.

                                       16
<PAGE>

              (b) As  additional  security  for the payment and  performance  by
Grantor of all duties,  responsibilities  and obligations under the Note and the
other Loan Documents,  Grantor 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  Grantor's  right,  title and  interest  in, (i) the Impound  Account and the
Replacement  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.  Grantor 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.  Grantor hereby assumes all risk
of loss with  respect to amounts on  deposit  in the  Reserves,  unless  finally
determined by a court of competent jurisdiction to have been caused by the gross
negligence  or willful  misconduct of  Beneficiary.  Grantor  hereby  knowingly,
voluntarily  and  intentionally  stipulates,  acknowledges  and agrees  that the
advancement  of the funds from the  Reserves as set forth herein is at Grantor'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. If an Event of Default shall
occur  hereunder  or  under  any  other  of the  Loan  Documents  and  shall  be
continuing, Beneficiary may, without notice or demand on Grantor, 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  Grantor  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 Grantor, (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.

              (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 and assumption by assignee of

                                       17
<PAGE>

Beneficiary's  obligations hereunder,  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 may be credited
by Beneficiary on subsequent  payments to be made hereunder or, at the option of
Beneficiary,  refunded to Grantor. 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, Grantor shall, within thirty
(30) days after receipt of written notice thereof,  deposit with Beneficiary the
full  amount of any such  deficiency.  If Grantor  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  Grantor,  shall be  immediately  paid by Grantor 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 that shall have occurred and be continuing, 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
Grantor and no other party shall have any right or claim thereto.

          1.9 Casualty and Condemnation.  Grantor shall give Beneficiary  prompt
written notice of the occurrence of any casualty  affecting,  or the institution
of any  proceedings  for eminent  domain or for the  condemnation  of, the Trust
Property  or any  portion  thereof.  Subject  to  the  following  sentence,  all
insurance  proceeds  on the Trust  Property,  and all causes of action,  claims,
compensation,  awards and recoveries for any damage,  condemnation  or taking of
all or any part of the Trust  Property or for any damage or injury to it for any
loss or diminution in value of the Trust Property, 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  Grantor'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  Grantor  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 the receipt
of any sums  hereunder  which is not in excess of the lesser of (i) five percent
(5%) of the then  outstanding  principal  balance of the Note and (ii) $200,000,
and Grantor may receive such funds from any loss not in excess of the  foregoing
directly  to be  used  for  repair  or  restoration  of the  Trust  Property  in
accordance with the terms hereof.  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:

                                       18
<PAGE>

              (a) In the  event  that  less than  seventy  percent  (70%) of the
Improvements  located on the Premises have been taken or destroyed,  then if and
so long as:

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

                  (2)  the  Trust  Property  can,  in  Beneficiary's  reasonable
              judgment,  with diligent restoration or repair, be returned in all
              material  respects  to a condition  substantially  the same as the
              condition  thereof that  existed  prior to the casualty or partial
              taking  causing the loss or damage  within the earlier to occur of
              (i) nine (9) months  after the  receipt of  insurance  proceeds or
              condemnation  awards by either  Grantor 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 Trust  Property as
              described in Section (a)(2) above, and

                  (4) there are  sufficient  sums available  (through  insurance
              proceeds or condemnation  awards and  contributions  by Grantor or
              otherwise,  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 reasonable costs
              and expenses of Beneficiary to be incurred in  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 Trust  Property and debt service on the
              Debt  in  full  with  the  same  coverage   ratio   considered  by
              Beneficiary in its  determination to make the loan secured hereby,
              and

                  (6) in the event that the insurance  proceeds or  condemnation
              awards  received as a result of such  casualty  or partial  taking
              exceed the lesser of (i) five percent (5%) of the then outstanding
              principal  balance of the Note and (ii)  $200,000,  Grantor  shall
              have delivered to Beneficiary, at Grantor's sole cost and expense,
              an appraisal report in form and substance reasonably  satisfactory
              to  Beneficiary  appraising  the  value of the Trust  Property  as
              proposed  to be  restored  or  repaired  to be not  less  than the
              appraised value of the Trust Property considered by Beneficiary in
              its determination to make the loan secured hereby, and

                  (7)  Grantor  so  elects  by  written   notice   delivered  to
              Beneficiary  within  fifteen  (15) days  after  settlement  of the
              aforesaid  insurance  or  condemnation  claim,  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
              for such restoration or repair, and any funds deposited by Grantor
              therefor,  to  Grantor  in the  manner  and upon  such  terms  and
              conditions as would be required by a prudent interim  construction
              lender, including, but

                                       19
<PAGE>

              not limited to, the  reasonable  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 reasonably satisfactory
              to Beneficiary in its 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 seventy percent
(70%) or more of the  Improvements  located on the  Premises  have been taken or
destroyed  or Grantor  does not elect to  restore  or repair the Trust  Property
pursuant  to clause (a) above or  otherwise  fails to meet the  requirements  of
clause (a) above,  then,  in any of such events,  Beneficiary  shall  elect,  in
Beneficiary's  absolute  discretion  and  without  regard  to  the  adequacy  of
Beneficiary's  security, to do either of the following:  (1) 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 (and, if required
under  applicable  law so to do, to accelerate the maturity date of the Note and
declare any and all of the Debt to be  immediately  due and  payable),  with any
remainder being paid to Grantor,  or (2)  notwithstanding  that Grantor may have
elected not to restore or repair the Trust  Property  pursuant to the provisions
of  Section  1.9(a)(7)  above,  require  Grantor  to restore or repair the Trust
Property 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
deposit  by Grantor  with  Beneficiary,  within  thirty  (30) days after  demand
therefor, of any deficiency reasonably determined by Beneficiary to be necessary
in  order  to  assure  the  availability  of  sufficient  funds  to pay for such
restoration or repair, including Beneficiary's costs and expenses to be incurred
in connection  therewith,  the reasonable 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
reasonably  satisfactory  to  Beneficiary  in  its  discretion,  and  apply  the
remainder  of such sums toward  such  restoration  and repair,  with any balance
thereafter  remaining  being applied by  Beneficiary  for payment of the Debt in
whatever order Beneficiary directs in its absolute  discretion.  Notwithstanding
Section 1.9(b)(2) hereof,  Beneficiary shall not accelerate the maturity date of
the Note  pursuant to Section  1.9(b)(2) if the Trust  Property is released from
the lien of this Deed of Trust in  connection  with a Defeasance  (as defined in
the Note) in accordance with Section 1.5(d) of the Note.

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 force and effect and Grantor
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.  If  Grantor  elects  or
Beneficiary  directs  Grantor to restore or repair the Trust  Property after the
occurrence  of a casualty  or partial  taking of the Trust  Property as provided
above, Grantor shall promptly and diligently, at Grantor'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 Trust Property as nearly as practicable to its value,  condition and
character  immediately  prior to such  casualty or partial  taking in accordance

                                       20
<PAGE>

with the foregoing provisions and Grantor shall pay to Beneficiary all 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.  Grantor  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 Grantor (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 Grantor and
shall not be  affected  by any  disability  or  incapacity  suffered  by Grantor
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.  Grantor  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,  Grantor  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 Trust  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 Grantor shall contest any such claim
or demand,  Grantor  shall  promptly  notify  Beneficiary  of such  contest  and
thereafter shall, upon Beneficiary's  reasonable request, if an Event of Default
shall have occurred and is continuing,  promptly provide a bond, cash deposit or
other  security   sufficient  to  pay  such  claim  to  Beneficiary  to  protect
Beneficiary's  interest  and  security  should the contest be  unsuccessful.  If
Grantor 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 Grantor, shall
be  immediately  paid by  Grantor 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,  Grantor hereby  absolutely  and presently  assigns to Beneficiary
Grantor's  right,  title and  interest (if any) in all existing and future Rents
and Profits.  Grantor  hereby  grants to  Beneficiary  the sole,  exclusive  and
immediate  right,  without taking  possession of the Trust Property,  to demand,
collect (by suit or otherwise),  receive and give valid and sufficient  receipts
for any and all of said Rents and Profits, for which purpose Grantor 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 Grantor and shall not be affected by any
disability  or  incapacity  suffered by Grantor  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  and  continuance of an Event of Default under this Deed of
Trust or under any other of the Loan Documents,  Grantor shall have a license to
collect, receive, use

                                       21
<PAGE>

and enjoy the Rents and Profits  when due and  prepayments  thereof for not more
than one (1)  month  prior to due  date  thereof,  except  as  otherwise  may be
expressly permitted or provided in the Percentage Lease. Upon the occurrence and
continuance  of an Event  of  Default,  Grantor's  license  shall  automatically
terminate  without notice to Grantor and  Beneficiary  may  thereafter,  without
taking possession of the Trust Property, collect the Rents and Profits itself or
by an agent or receiver. From and after the termination of such license, Grantor
shall be the agent of  Beneficiary  in collection of the Rents and Profits,  and
all of the Rents and Profits so collected  by Grantor  shall be held in trust by
Grantor for the sole and exclusive  benefit of  Beneficiary,  and Grantor shall,
within three (3) business days 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.   Grantor
irrevocably  agrees and  consents  that the  respective  payors of the Rents and
Profits  shall,  upon demand and notice from  Beneficiary  of the occurrence and
continuance  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.  Grantor hereby waives any right,  claim or demand which
Grantor  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 Grantor.  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 Trust 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 Trust  Property.  Grantor  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 Grantor,
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 Percentage Lease .

              (a) Grantor represents that the Percentage Lease is the only Lease
affecting the Trust Property and that as of the date hereof the Percentage Lease
has at least eight (8) years remaining on its term and is unmodified and in full
force and  effect,  and to  Grantor's  best  knowledge,  no event of default has
occurred and is continuing  under the Percentage  Lease. The Percentage Lease is
and shall remain  subordinate  to the Deed of Trust  (either by the terms of the
Percentage Lease or pursuant to a subordination agreement).  Either party to the
Percentage  Lease may  terminate the  Percentage  Lease upon an Event of Default
under the Loan  Documents.  Grantor shall cause the lessee under the  Percentage
Lease to comply with the terms and conditions of the Percentage Lease.

                                       22
<PAGE>

              (b) Grantor  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 the Percentage  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 any such  Rents and  Profits.  Grantor,  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 the
Percentage  Lease and Grantor shall not anticipate,  discount,  release,  waive,
compromise  or otherwise  discharge  any rent  payable  under any of the Leases.
Grantor shall not, without the prior written consent of Beneficiary,  modify the
Percentage  Lease,  terminate or accept the surrender of the  Percentage  Lease,
waive or release  any other  party from the  performance  or  observance  of any
obligation or condition  under the Percentage  Lease except 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 Trust
Property is located. Beneficiary acknowledges that Grantor shall be permitted to
terminate  or  modify  the  Percentage   Lease  in  connection   with  the  REIT
Modernization  Act in order for  Grantor to avail  itself of certain  beneficial
provisions  therein  following  such act's  effective  date of December 31, 2000
and/or as contemplated  by Section 3.5 and Section 3.6 of the Percentage  Lease.
Grantor shall not permit the prepayment of any rents under the Percentage  Lease
for more  than one (1)  month  prior to the due date  thereof,  except as may be
expressly permitted or provided therein.

              (c) Upon the  occurrence  and  continuance  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,  Grantor  shall  surrender  to  Beneficiary,  and
Beneficiary  shall be entitled to take actual  possession of, the Trust Property
or any part  thereof  personally,  or by its agent or  attorneys.  The power and
authority hereby given and granted by Grantor to Beneficiary  shall be deemed to
be coupled  with an  interest,  shall not be revocable by Grantor so long as any
portion of the Debt is  outstanding,  shall survive the voluntary or involuntary
dissolution of Grantor and shall not be affected by any disability or incapacity
suffered by Grantor 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  Grantor  resulting  from  any act or  omission  of
Beneficiary in managing the Trust Property,  nor shall  Beneficiary be obligated
to perform or discharge any  obligation,  duty or liability under the Percentage
Lease covering the Trust Property (if not terminated by Beneficiary) or any part
thereof or under or by reason of this  instrument  or the  exercise of rights or
remedies hereunder.  Grantor 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
the Percentage 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 discharge any of the terms,  covenants or
agreements contained in the Percentage Lease other than those finally determined
by a court of  competent  jurisdiction  to have  resulted  solely 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 Grantor, shall

                                       23
<PAGE>

be immediately  due and payable to Beneficiary by Grantor 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
Trust  Property,  or for the carrying out of any of the terms and  conditions of
the Percentage  Lease, nor shall it operate to make  Beneficiary  responsible or
liable for any waste committed on the Trust Property by the tenant thereunder or
by any other  parties or for any  dangerous or defective  condition of the Trust
Property, or for any negligence in the management,  upkeep, repair or control of
the Trust Property. Grantor hereby assents to, ratifies and confirms any and all
actions of  Beneficiary  with  respect to the Trust  Property  taken  under this
Section.

          1.13 Alienation and Further Encumbrances.

              (a)  Grantor  acknowledges  that  Beneficiary  has relied upon the
principals  of Grantor and their  experience  in owning and  operating the Trust
Property and  properties  similar to the Trust  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 Trust  Property or any
part  thereof  or  interest  therein  shall  be  sold,  conveyed,  disposed  of,
alienated,  hypothecated,  leased (except  pursuant to the Percentage  Lease and
except for condemnation),  assigned, pledged,  mortgaged,  further encumbered or
otherwise  transferred  or Grantor  shall be  divested of its title to the Trust
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,  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. For the purposes of this Section: (i) in the event either Grantor or any
of its  general  partners  or  members  is a  corporation  or  trust,  the sale,
conveyance,  transfer  or  disposition  of  more  than  50%  of the  issued  and
outstanding  capital stock of Grantor or any of its general  partners or members
or of the  beneficial  interest of such trust (or the  issuance of new shares of
capital stock in Grantor or any of its general  partners or managing  members so
that immediately  after such issuance (in one or a series of  transactions)  the
total capital stock then issued and  outstanding  is more than 150% of the total
immediately  prior to such  issuance)  shall be  deemed to be a  transfer  of an
interest  in the Trust  Property;  and (ii) in the event  Grantor or any general
partner or  managing  member of Grantor is a limited or general  partnership,  a
joint venture or a limited liability  company,  a change of more than 50% in the
ownership  interests in any general partner,  any joint venturer or any managing
member, either voluntarily, involuntarily or otherwise, or the sale, conveyance,
transfer, disposition or alienation of more than 50% of, or the hypothecation or
encumbering  of all or any portion of the interest of any such general  partner,
joint venturer or managing member in Grantor or such general partner or managing
member  (whether in the form of a beneficial or  partnership  interest or in the
form of a power of direction,  control or management,  or  otherwise),  shall be
deemed to be a transfer of an interest  in the Trust  Property.  Notwithstanding
the foregoing,  however, (i) limited partnership  interests in Grantor or in any
general  partner or member of Grantor shall be freely  transferable  without the
consent of  Beneficiary,  (ii) any  involuntary  transfer caused by the death of
Grantor or any general partner, shareholder, joint

                                       24
<PAGE>

venturer, member or beneficial owner of a trust shall not be an Event of Default
under  this Deed of Trust so long as  Grantor  is  reconstituted,  if  required,
following such death and so long as those persons primarily  responsible for the
management  of the Trust  Property and Grantor  remain  unchanged as a result of
such death or any  replacement  management  is  approved by  Beneficiary,  (iii)
shares in the REIT may be offered and sold to investors in a public  offering of
such  shares  which  has  been  registered  with  the  Securities  and  Exchange
Commission  without  regard to the limits  referred  to above and (iv) gifts for
estate planning  purposes of any individual's  interests in Grantor or in any of
Grantor'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 Grantor is  reconstituted,
if  required,  following  such  gift  and so long  as  those  persons  primarily
responsible  for  the  management  of the  Trust  Property  and  Grantor  remain
unchanged  following  such gift or any  replacement  management  is  approved by
Beneficiary.

              (b)  Notwithstanding  the  foregoing  provisions  of this Section,
Beneficiary  shall  consent  to an  unlimited  number of sales,  conveyances  or
transfers  of the  Trust  Property  in its  entirety,  together  with all  Other
Mortgaged  Properties (as defined in Section 4.35 hereof)  (hereinafter,  each a
"Sale") to any person or entity  provided that each of the  following  terms and
conditions are satisfied as to each Sale:

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

                  (2) Grantor,  or its successor  pursuant to a prior Sale under
              the terms and conditions hereof,  gives Beneficiary written notice
              of the terms of such  prospective  Sale not less than  sixty  (60)
              days before the date on which such Sale is scheduled to close and,
              concurrently  therewith,  gives  Beneficiary all such  information
              concerning   the  proposed   transferee  of  the  Trust   Property
              (hereinafter,  "Buyer") as Beneficiary would require in evaluating
              an  initial  extension  of  credit  to a  borrower  under  a  loan
              comparable to the Loan and pays to  Beneficiary  a  non-refundable
              application  fee in the amount of $5,000.  Beneficiary  shall have
              the  right  to  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
              Trust  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
              reasonably   determines   to   be   commercially   reasonable   in
              Beneficiary's  sole discretion and, if given, may be given subject
              to such reasonable conditions as Beneficiary may deem appropriate;

                  (3) Grantor,  or its successor  pursuant to a prior Sale under
              the terms and conditions  hereof,  pays Beneficiary,  concurrently
              with the closing of such Sale, a non-refundable  assumption fee in
              an amount equal to all out-of-pocket costs

                                       25
<PAGE>

              and expenses, including, without limitation, reasonable attorneys'
              fees, incurred by Beneficiary in connection with the Sale, plus an
              amount equal to three quarters of one percent  (0.75%) of the then
              outstanding principal balance of the Note;

                  (4) The Buyer  assumes  and agrees to pay the Debt  subject to
              the   provisions   of  Section  4.28  hereof  and,   prior  to  or
              concurrently  with the closing of such Sale,  the Buyer  executes,
              without  any  cost or  expense  to  Beneficiary,  such  assumption
              documents and agreements as Beneficiary  shall reasonably  require
              to evidence and effectuate said assumption and delivers such legal
              opinions as Beneficiary may reasonably require;

                  (5) A party  associated with the Buyer approved by Beneficiary
              in its sole  discretion  assumes  the  obligations  of the current
              Indemnitor  under its  guaranty or  indemnity  agreement  and such
              party  associated  with the Buyer  executes,  without  any cost or
              expense to Beneficiary,  a new guaranty or indemnity  agreement in
              form and substance  reasonably  satisfactory  to  Beneficiary  and
              delivers  such  legal  opinions  as  Beneficiary   may  reasonably
              require;

                  (6) Grantor,  or its successor  pursuant to a prior Sale under
              the terms and conditions  hereof,  and the Buyer execute,  without
              any cost or expense to  Beneficiary,  new financing  statements or
              financing  statement   amendments  and  any  additional  documents
              reasonably requested by Beneficiary;

                  (7) Grantor,  or its successor  pursuant to a prior Sale under
              the terms and conditions hereof, delivers to Beneficiary,  without
              any  cost  or  expense  to  Beneficiary,   such   endorsements  to
              Beneficiary's  title insurance  policy,  hazard  insurance  policy
              endorsements  or  certificates  as Beneficiary may deem reasonably
              necessary  at the  time of the  Sale,  all in form  and  substance
              reasonably   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 except
              those approved by Beneficiary in its discretion, and insuring that
              fee simple title to the Real Property is vested in the Buyer;

                  (8) Grantor,  or its successor  pursuant to a prior Sale under
              the  terms  and  conditions  hereof,   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;

                  (9) Subject to the  provisions  of Section 4.28  hereof,  such
              Sale is not construed so as to relieve  Grantor,  or its successor
              pursuant to a prior Sale under the terms and conditions hereof, of
              any personal liability under the Note or any of the other

                                       26
<PAGE>

              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 Grantor,  or its successor pursuant to a
              prior  Sale  under  the  terms and  conditions  hereof,  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.  Grantor
              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;

                  (10) Such Sale is not  construed  so as to relieve any current
              Indemnitor  of its  obligations  under any  guaranty or  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
              each such  guaranty  and  indemnity  agreement.  Each such current
              Indemnitor  shall  be  released  from and  relieved  of any of its
              obligations under any guaranty or indemnity  agreement executed in
              connection  with the loan  secured  hereby  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) The Buyer shall  furnish,  if the Buyer is a corporation,
              partnership or other entity, all documents  evidencing the Buyer's
              capacity and good standing,  and the  qualification of the signers
              to execute the  assumption  of the  indebtedness  secured  hereby,
              which documents  shall include,  but not in any way be limited to,
              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.  The Buyer and such  constituent  partners,
              members  or  shareholders  of  Buyer  (as the  case  may  be),  as
              Beneficiary  may require,  shall be  single-purpose,  single-asset
              "bankruptcy  remote" entities,  whose formation documents shall be
              approved by counsel to Beneficiary.  An individual  recommended by
              the  Buyer  and  approved  by   Beneficiary   shall  serve  as  an
              Independent  Director (as defined in Section  1.33(z) of this Deed
              of Trust) of the  Buyer  (if the  Buyer is a  corporation)  or the
              Buyer's corporate general partner or an independent  member or, in
              Beneficiary's  discretion,  manager  of  Buyer  if the  Buyer is a
              limited  liability  company.  Unanimous  consent  of the  board of
              directors  (including the Independent  Director) shall be required
              for, among other things, any merger,  consolidation,  dissolution,
              bankruptcy or insolvency of any such constituent  partner,  member
              or shareholder of the Buyer (as the case may be) or of the Buyer;

                  (12) The Buyer, if required by Beneficiary and, in the case of
              clauses  (i) and (ii)  herein  only if the  outstanding  principal
              balance of the Loan is in excess of  $7,500,000,  shall furnish an
              opinion of counsel satisfactory to Beneficiary and its counsel (i)
              that the  Buyer's  formation  documents  provide  for the  matters
              described in subparagraph (11) of this Section 1.13(b),  (ii) that
              the assets of the Buyer will not be

                                       27
<PAGE>

              consolidated  with the assets of any other entity  (including  the
              Buyer's general partner or members, if any), as applicable, having
              an interest in, or affiliation  with,  the Buyer,  in the event of
              bankruptcy  or  insolvency  of any  such  entity  or such  general
              partner or members,  (iii) that the assumption of the indebtedness
              evidenced hereby has been duly authorized, executed and delivered,
              and that the Loan  Documents  are valid,  binding and  enforceable
              against the Buyer in  accordance  with their terms,  (iv) that the
              Buyer and any entity which is a controlling  stockholder,  general
              partner or member of Buyer,  have been duly organized,  and are in
              existence  and good  standing,  and (v) with respect to such other
              matters, as Beneficiary may request; and

                  (13) If required under the operative documents with respect to
              a  Secondary   Market   Transaction  (as   hereinafter   defined),
              Beneficiary  shall have  received  evidence  in  writing  from the
              Rating  Agency to the effect that the proposed  transfer  will not
              result in a re-qualification,  reduction,  downgrade or withdrawal
              of any rating initially  assigned or to be assigned in a Secondary
              Market  Transaction  or, if no such  rating  has been  issued,  in
              Beneficiary's good faith judgment, such transfer shall not have an
              adverse  effect on the level of rating  obtainable  in  connection
              with the loan secured hereby.

          1.14 Payment of Utilities,  Assessments,  Charges,  Etc. Grantor shall
pay when due all  utility  charges  which are  incurred  by Grantor or which may
become a charge or lien  against  any  portion  of the Trust  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 (excluding
taxes and assessments  escrowed in the Impound Account),  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.  Notwithstanding  the
foregoing,  Grantor  may, in good faith,  by  appropriate  proceedings  and upon
notice to  Beneficiary,  contest the  validity,  applicability  or amount of any
asserted  utilities,  assessments  or other  charges that may become a charge or
lien  against any portion of the Trust  Property as long as (a) such  contest is
diligently pursued,  (b) Beneficiary  determines,  in its reasonable  subjective
opinion,  that such contest  suspends the obligation to pay such utility charges
or assessments  and that  non-payment  of such charges or  assessments  will not
result in the sale, loss,  forfeiture or diminution of the Trust Property or any
part  thereof  or any  interest  of  Beneficiary  therein,  and (c) prior to the
earlier of commencement of such contest or the delinquency  date of the asserted
charge or assessment,  Grantor deposits the Impound Account an amount determined
by  Beneficiary  to be  reasonably  adequate to cover  payment of such charge or
assessment and a reasonable additional sum to cover possible interest, costs and
penalties;  provided,  however, that Grantor shall promptly cause to be paid any
amount adjudged by a court of competent  jurisdiction be due, with all interest,
costs and penalties  thereon,  promptly after such judgment becomes final beyond
any appeal period; and provided,  further,  that in any event such contest shall
be concluded and the charges or assessments  shall be paid prior to the date any
writ or order is issued  under  which the Trust  Property  may be sold,  lost or
forfeited.

          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

                                       28
<PAGE>

the Trust Property are kept at all reasonable  times and, except in the event of
an  emergency,  upon not less than three (3) days prior notice (which notice may
be  telephonic)  for the  purposes  of  inspecting  the  Trust  Property  and of
examining,  copying  and making  extracts  from the books and records of Grantor
relating  to the Trust  Property.  Grantor  shall  lend  assistance  to all such
agents, representatives and employees of Beneficiary.

          1.16 Waste;  Alteration  of  Improvements.  Grantor  shall not commit,
suffer or permit any waste on the Trust Property nor take any actions that might
invalidate any insurance  carried on the Trust Property.  Grantor shall maintain
the Trust 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  except as provided herein.  Without the prior written consent of
Beneficiary,  Grantor shall not commence construction of any improvements on the
Premises other than  improvements  required for the maintenance or repair of the
Trust Property or as otherwise provided herein.

          1.17 Zoning. Without the prior written consent of Beneficiary,  not to
be  unreasonably  withheld or delayed,  Grantor  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.  Grantor  shall  have the same  right to contest
zoning, conditions on use and other land use matters and/or any proposed changes
in the same in a manner  similar to the  provisions  relating to the contests of
Environmental Laws as provided for in Section 1.31 hereof.  Grantor shall comply
with and make all  payments  required  under the  provisions  of any  covenants,
conditions or restrictions  affecting the Premises or the Improvements.  Grantor
shall  comply with all  existing  and future  requirements  of all  governmental
authorities having  jurisdiction over the Real Property.  Grantor shall keep all
licenses, permits, franchises and other approvals necessary for the operation of
the Trust  Property in full force and  effect.  Grantor  shall  operate the Real
Property as a an upscale, extended stay suite hotel or other lawful use approved
by  Beneficiary  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,  Grantor  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,
Grantor  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.  Grantor shall keep
accurate  books  and  records  of  account  of the  Trust  Property  and its own
financial affairs  sufficient to permit the preparation of financial  statements
therefrom  in  accordance  with  generally   accepted   accounting   principles.
Beneficiary  and its duly  authorized  representatives  shall  have the right to
examine, copy and audit Grantor's records and books of account at all reasonable
times. Prior to the first Sale hereunder,  and for so long as this Deed of Trust
continues in effect,  Grantor 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 the chief  financial
officer  of the  REIT,  and,  with  respect  to  the  financial  statements  and
information  set forth in  subsection  (e)  hereof,  audited  by an  independent
certified public  accountant,  be prepared in accordance with generally accepted

                                       29
<PAGE>

accounting  principles  consistently  applied  and  be  in  form  and  substance
acceptable to Beneficiary:

          (a) monthly  balance  sheets and statement of operations for the Trust
Property,  within  thirty  (30) days  after  the end of each of the first  (1st)
twelve (12) calendar months following the date hereof; and

          (b) quarterly balance sheets and statement of operations for the Trust
Property,  within thirty (30) 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;

          (c) copy of the REIT's 10-Q as filed with the  Securities and Exchange
Commission,  within  forty-five (45) days after the end of each calendar quarter
following the date hereof;

          (d) annual  balance  sheets and statement of operations  for the Trust
Property;

          (e) the REIT's annual  financial  statements,  within ninety (90) days
after the end of each calendar year;

          (f) annual  occupancy  summary for the Real Property setting forth the
occupancy  rates,  average  daily room rates and room revenues for each month of
the preceding  calendar  year, as well as annual  averages of the same, and such
other  information  as  may  customarily  be  reflected  thereon  or  reasonably
requested by Beneficiary.

      Following the first Sale hereunder,  and for so long as this Deed of Trust
continues in effect,  Grantor 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 Grantor or the person
or entity to which  they  pertain,  as  applicable,  and,  with  respect  to the
financial statements and information set forth in subsection (d) hereof, audited
by an independent  certified public  accountant,  be prepared in accordance with
generally accepted accounting principles consistently applied and be in form and
substance acceptable to Beneficiary:

          (a) copies of all tax  returns  filed by Grantor,  within  thirty (30)
days after the date of filing;

          (b)  monthly  operating  statements  for the  Trust  Property,  within
fifteen (15) days after the end of each of the first (1st) twelve (12)  calendar
months following the date hereof; and

          (c) quarterly  operating  statements  for the Trust  Property,  within
thirty  (30) 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;

                                       30
<PAGE>

          (d) annual balance sheets for the Trust Property and annual  financial
statements for Grantor,  each principal or general partner in Grantor,  and each
Indemnitor, within ninety (90) days after the end of each calendar year;

          (e) annual occupancy  summary for the Trust Property setting forth the
occupancy  rates,  average  daily room rates and room revenues for each month of
the preceding  calendar  year, as well as annual  averages of the same, and such
other  information  as  may  customarily  be  reflected  thereon  or  reasonably
requested by Beneficiary; and

          (f)  such  other  information  with  respect  to the  Trust  Property,
Grantor,  the principals or general  partners in Grantor,  and each  Indemnitor,
which may be reasonably  requested  from time to time by  Beneficiary,  within a
reasonable time after the applicable request.

      If any of the  aforementioned  materials are not furnished to  Beneficiary
within the  applicable  time periods or  Beneficiary  is  dissatisfied  with the
contents   of  any  of  the   foregoing   and  has   notified   Grantor  of  its
dissatisfaction,  in addition to any other  rights and  remedies of  Beneficiary
contained  herein,  Beneficiary  shall have the right,  but not the  obligation,
after Grantor's  failure to cure such  satisfaction  within thirty (30) business
days following  Grantor's receipt of such notice, to obtain the same by means of
an audit by an independent  certified public accountant selected by Beneficiary,
in which event  Grantor  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.   Grantor  shall,   on  the  request  of
Beneficiary  and at the expense of  Grantor:  (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 Trust Property; (c) promptly execute, acknowledge, deliver,
procure and record or file any document or instrument  (including  specifically,
without  limitation,  any financing  statement)  reasonably  deemed advisable by
Beneficiary to protect,  continue or 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 Event of
Default has  occurred  hereunder  and is  continuing,  and  stating  whether any
offsets or defenses exist against the Debt.

         1.20 Payment of Costs; Reimbursement to Beneficiary.  Grantor shall pay
all  reasonable  costs and expenses of every  character  reasonably  incurred in
connection with the closing of the loan evidenced by the Note and secured hereby
or otherwise  attributable

                                       31
<PAGE>

or chargeable to Grantor as the owner of the Trust 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 Grantor  defaults in any such
payment,  which default is not cured within any applicable grace or cure period,
Beneficiary may, after reasonable prior written notice to Grantor,  pay the same
and  Grantor  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 Grantor.  Any such sums  disbursed  by
Beneficiary,   together  with  such  interest   thereon,   shall  be  additional
indebtedness  of  Grantor  secured by this Deed of Trust and by all of the other
Loan  Documents  securing all or any part of the Debt.  Further,  Grantor  shall
promptly  notify   Beneficiary  in  writing  of  any  litigation  or  threatened
litigation affecting the Trust Property,  or any other demand or claim which, if
enforced,  could impair or threaten to impair Beneficiary's  security hereunder.
Without  limiting  or waiving  any other  rights  and  remedies  of  Beneficiary
hereunder,  if  Grantor  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  adversely  affect  Beneficiary's  interest in the Trust
Property or Beneficiary's  right to enforce its security,  then Beneficiary may,
at its option, with or without notice to Grantor, 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 Grantor
to perform its covenants and agreements (without,  however,  waiving any default
of  Grantor).  Grantor  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 Grantor.  Any such
expenses so incurred by Beneficiary,  together with interest thereon as provided
above, shall be additional indebtedness of Grantor 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 Trust Property or any part thereof for the
purpose  of  performing  or  observing  any such  defaulted  term,  covenant  or
condition without thereby becoming liable to Grantor or any person in possession
holding under Grantor.  Grantor 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  Grantor  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  Grantor  of a
voluntary case or the filing against Grantor 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 hereafter in effect,  which may be or become  applicable  to
Grantor,  Beneficiary,  any  Indemnitor,  the Debt or any of the Loan Documents.
Grantor hereby  indemnifies and holds Beneficiary  harmless from and against all

                                       32
<PAGE>

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 Trust 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  Grantor  hereby  grants to
Beneficiary a security interest in, Grantor's right, title and interest (if any)
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  Grantor's  right,  title and interest (if any) in all
fixtures, chattels,  accounts,  equipment,  inventory,  contract rights, general
intangibles and other personal property included within the Trust 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 Collateral consisting of furniture, fixtures and equipment ("FF&E") 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  Grantor's
leasehold  interest in any of the foregoing property which is leased by Grantor.
Grantor  shall,  from  time to time  upon the  request  of  Beneficiary,  supply
Beneficiary with a current inventory of all of the Collateral consisting of FF&E
in which Beneficiary is granted a security interest hereunder, in such detail as
Beneficiary may reasonably  require.  Subject to the same being taken care of by
the tenant under the Percentage Lease, Grantor 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 similar suitability and value as above provided, owned
by Grantor 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.  Grantor  shall not use any of the  Collateral  in
violation of any applicable statute, ordinance or insurance policy.

         1.22  Security  Agreement.  This Deed of Trust  constitutes  a security
agreement  between  Grantor 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.  Grantor  hereby  agrees to execute  and deliver on demand and
hereby irrevocably  constitutes and appoints Beneficiary the attorney-in-fact of
Grantor to

                                       33
<PAGE>

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 and subject to the
rights  of  tenant  under the  Percentage  Lease  and the  terms and  provisions
thereof, 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 Trust Property,  and Grantor
shall promptly deliver the same to Beneficiary, endorsed to Beneficiary, without
further  notice from  Beneficiary.  Grantor 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 Grantor  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  following the  occurrence and  continuance of an
Event of Default may be  conducted by an employee or agent of  Beneficiary.  Any
person,  including both Grantor 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 Grantor,  shall be paid by Grantor 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 Grantor,  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
Grantor.  If notice is required by law,  Beneficiary shall give Grantor 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  Grantor,  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 Grantor.  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  Trust  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:

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

                                       34
<PAGE>

              (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  Grantor  (as  Debtor  under  any  applicable  Uniform
Commercial Code) are:

                           APPLE SUITES SPE I, INC.
                           9 North Third Street
                           Richmond, Virginia  23219

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

                           FIRST UNION NATIONAL BANK
                           Commercial Real Estate Finance Group
                           One First Union Center
                           301 South College Street
                           Mailcode NC 0166
                           Loan Number:  26-5330848
                           Charlotte, North Carolina  28288
                           Attention:     Contract Finance

          1.23 Easements and Rights-of-Way. Grantor 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 shall not
be  unreasonably  withheld or delayed.  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 Trust 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 Grantor other than reasonable expenses, including, without limitation,
reasonable  attorneys' fees,  incurred by Beneficiary in the review of Grantor's
request and in the preparation of documents effecting the subordination.

          1.24  Compliance with Laws. (a) Grantor 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  Trust  Property,
including,  but not limited to, those concerning  employment and compensation of
persons  engaged in  operation  and  maintenance  of the Trust  Property and any
environmental or ecological requirements,  even if such compliance shall require
structural changes to the Trust Property;  provided, however, that, Grantor may,
upon providing  Beneficiary with security

                                       35
<PAGE>

satisfactory to Beneficiary, proceed diligently and in good faith to contest the
validity  or  applicability  of  any  such  statute,  ordinance,  regulation  or
requirement  so long as during  such  contest  the Trust  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.  Grantor shall not use or occupy,  or allow
the use or occupancy  of, the Trust  Property in any manner  which  violates any
Lease  of or any  other  agreement  applicable  to  the  Trust  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.

              (b)  Grantor  agrees  that the Trust  Property  shall at all times
comply to the extent  applicable  with the  requirements  of the Americans  with
Disabilities Act of 1990, the Fair Housing  Amendments Act of 1988 and all other
state and local laws and ordinances related to handicapped access and all rules,
regulations,  and orders issued pursuant thereto including,  without limitation,
the Americans with Disabilities Act  Accessibility  Guidelines for Buildings and
Facilities  (collectively,  the "Access  Laws").  Grantor  agrees to give prompt
notice to  Beneficiary  of the receipt by Grantor of any  complaints  related to
violations  of any Access Laws and of the  commencement  of any  proceedings  or
investigations which relate to compliance with applicable Access Laws.

          1.25  Additional  Taxes.  In the event of the enactment after the date
hereof of any law of the state in which the Trust  Property is located or of any
other governmental entity deducting from the value of the Trust 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 Grantor,  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, Grantor, 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
Grantor 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
Grantor,  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
is 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,  excluding the Indemnity Agreement and
the  Environmental  Indemnity  Agreement,  all of which  indebtedness is equally

                                       36
<PAGE>

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 Grantor  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 Grantor's  Waivers.  To the full extent  permitted by law, Grantor
agrees that Grantor 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 Trust Property to be made pursuant to any provisions  contained herein or
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
Trust  Property  so sold.  Grantor,  for Grantor and  Grantor's  successors  and
assigns,  and for any and all persons  ever  claiming  any interest in the Trust
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 Grantor,  including
the Trust Property,  to a sale in the inverse order of alienation,  or to direct
the  order in which  any of the  Trust  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  Trust  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,  Grantor 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 Trust 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 Trust  Property in  preference to every other
claimant  whatever.  Furthermore,  Grantor 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.  Grantor
covenants and agrees that upon the  commencement  of a voluntary or  involuntary
bankruptcy  proceeding  by  or  against  Grantor,   Grantor  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.

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<PAGE>

         1.28     SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

              (a)  GRANTOR,   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 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,  (iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND (iv)
TO THE  FULLEST  EXTENT  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).

              (b)  GRANTOR,   TO  THE  FULL  EXTENT  PERMITTED  BY  LAW,  HEREBY
KNOWINGLY,  INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL,  WAIVES,  RELINQUISHES AND FOREVER FORGOES 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 GRANTOR, OR ANY OF
THEIR RESPECTIVE DIRECTORS,  OFFICERS,  PARTNERS,  MEMBERS, EMPLOYEES, AGENTS OR
ATTORNEYS,  OR ANY OTHER PERSONS AFFILIATED WITH BENEFICIARY OR GRANTOR, IN EACH
OF 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  Grantor  grants  to
Beneficiary a power-of-attorney, provided no Event of Default has occurred under
this Deed of Trust, Beneficiary shall first give Grantor written notice at least
five (5) days prior to acting  under such power,  which notice shall demand that
Grantor first take the proposed  action within such period and advising  Grantor
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,
or if  necessary  to prevent  imminent  death,  serious  injury,  damage,  loss,
forfeiture  or  diminution  in value to the Trust  Property  or any  surrounding
property or to prevent any adverse affect on Beneficiary's interest in the Trust
Property,  Beneficiary may act immediately and without first giving such notice.
In such  event,  Beneficiary  will give  Grantor  notice of such  action as soon
thereafter as reasonably practical.

          1.30 Management.  (a) Grantor shall cause the operation and management
of the Trust  Property to be by either:  (i) the lessee under and in  accordance
with the terms of the Percentage Lease; (ii) Promus Hotels, Inc., its successors
or assigns, and/or Apple Suites Management,  Inc., its successors or assigns, or
(iii) such other professional property management company reasonably approved by
Beneficiary.  Such management by an affiliated entity or a professional property
management company shall be pursuant to a written agreement  reasonably

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<PAGE>

approved  by  Beneficiary  (any such  person or entity  which  manages the Trust
Property,  including  the lessee  under the  Percentage  Lease,  is  hereinafter
referred  to as the  "Manager",  and any  such  written  agreement  approved  by
Beneficiary is hereinafter  referred to as the  "Management  Agreement").  In no
event shall any  Manager be removed or  replaced or the terms of the  Percentage
Lease or any Management  Agreement modified or amended without the prior written
consent of Beneficiary, except as otherwise provided herein. In the event (x) an
Event of Default has  occurred  and is  continuing  hereunder or under any other
Loan Document or under any Management  Agreement or the Percentage Lease then in
effect,  which default is not cured within any applicable  grace or cure period,
Beneficiary  shall have the right,  solely to the extent provided  therein or in
any separate subordination agreement by the lessee under the Percentage Lease or
by consent agreement by Promus, to terminate, or to direct Grantor to terminate,
solely to the extent provided therein or in any separate subordination agreement
by the lessee under the Percentage Lease or by consent agreement by Promus,  the
Percentage  Lease or such Management  Agreement upon thirty (30) days' notice or
(y) (1) of a change in  control  (fifty  percent  or more) of the  ownership  of
Manager or (2) in the event Manager provides cause for  termination,  including,
without limitation,  gross negligence,  willful misconduct or fraud, Beneficiary
shall have the right,  solely to the extent provided  therein or in any separate
subordination  agreement  by the lessee  under the  Percentage  Lease or consent
agreement by Promus, to terminate, or direct Grantor to terminate, solely to the
extent provided therein or in any separate subordination agreement by the lessee
under the Percentage Lease or consent agreement by Promus,  the Percentage Lease
or  such  Management  Agreement  at any  time  and,  in any  such  event  of the
termination of the Percentage Lease or Management  Agreement,  to retain,  or to
direct Grantor to retain, a new lessee or management  agent reasonably  approved
by  Beneficiary.  Any such  successor  manager  shall be a reputable  management
company having a senior  executive with at least seven (7) years'  experience in
the  management of similar  extended stay suite hotels in the state in which the
Trust  Property is located,  shall be the manager of at least five (5)  projects
comparable  to  the  Trust  Property  and  shall  be  reasonably  acceptable  to
Beneficiary.

              (b) Grantor  shall,  or shall cause the Manager to (i) operate the
hotel  located  on the  Trust  Property  in  accordance  with  the  terms of the
Franchise Agreement; (ii) promptly perform and observe (or cause to be performed
or observed)  all of the  covenants  required to be performed and observed by it
under the  Franchise  Agreement  and do all things  necessary to preserve and to
keep   unimpaired  its  material  rights   thereunder;   (iii)  promptly  notify
Beneficiary of any Event of Default under the Franchise Agreement of which it is
aware; (iv) promptly deliver to Beneficiary a copy of each financial  statement,
business plan, capital  expenditures plan, notice,  report and estimate received
by it under the Franchise  Agreement;  and (v) promptly  enforce the performance
and observance of all of the covenants  required to be performed and observed by
the  franchisor  under the  Franchise  Agreement.  Without  Beneficiary's  prior
consent,  Grantor shall not and shall not permit the Lessee under the Percentage
Lease or any  Manager  to: (i)  surrender,  terminate  or cancel  the  Franchise
Agreement;  (ii) reduce or consent to the reduction of the term of the Franchise
Agreement;  (iii)  increase  or  consent  to the  increase  of the amount of any
charges  under  the  Franchise   Agreement;   (iv)  otherwise  modify,   change,
supplement,  alter or amend,  or waive or release any of its rights and remedies
under,  the  Franchise  Agreement  or (v)  suffer or permit  the  occurrence  of
continuance  a default  beyond any  applicable  cure period under the  Franchise
Agreement  (or any successor  franchise  agreement

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<PAGE>

with a national hotel chain approved by the Beneficiary) if such default permits
the franchiser to terminate or cancel the Franchise  Agreement (or any successor
franchise agreement with a national hotel chain approved by Beneficiary);

          1.31 Hazardous Waste and Other Substances.

              (a) Grantor hereby represents and warrants to Beneficiary that, as
of the date hereof:  (i) to the best of  Grantor's  knowledge,  information  and
belief,  none of Grantor nor the Trust  Property  nor any Tenant at the Premises
nor the operations  conducted  thereon is in direct or indirect  violation of or
otherwise  exposed to any liability under any local,  state or federal law, rule
or regulation  or common law duty  pertaining to human health as affected by the
environment,   natural   resources  or  the  environment,   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.),  including any regulations  promulgated pursuant
to said laws, all as amended from time -- --- to time ("Environmental  Laws") or
otherwise  exposed to any liability under any  Environmental  Law relating to or
affecting  the Trust  -------------------  Property,  whether  or not used by or
within  the  control  of  Grantor;  (ii)  to the  best of  Grantor's  knowledge,
information  and belief,  no  hazardous,  toxic or harmful  substances,  wastes,
materials, pollutants or contaminants (including, without limitation,  materials
containing more than 1% asbestos, lead based paint,  polychlorinated  biphenyls,
petroleum or petroleum products or byproducts, flammable explosives, radioactive
materials,  infectious  substances  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 Trust
Property (including underground contamination), except for those substances used
by Grantor or any Tenant in the ordinary course of their  respective  businesses
and in  compliance  with  all  Environmental  Laws  and  where  such  would  not
reasonably be expected to give rise to liability under Environmental Laws; (iii)
to the best of Grantor's knowledge, information and belief, radon is not present
at the Trust 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 Trust  Property or to any  governmental
agency  or  the  general  public;  (iv)  to the  best  of  Grantor's  knowledge,
information  and  belief,  the Trust  Property  is not subject to any private or
governmental lien or judicial or  administrative  notice or action arising under
Environmental  Laws;  (v) there is no  pending,  nor,  to  Grantor's  knowledge,
information or belief,  threatened  litigation arising under  Environmental Laws
affecting  Grantor  or the  Trust  Property;  (vi)  to  the  best  of  Grantor's
knowledge,  information  and  belief,  there are no and have been no existing or
closed underground  storage tanks or other underground  storage  receptacles for
Hazardous Substances or landfills or dumps on the Trust Property;  (vii) Grantor
has  received no notice of, and to the best of Grantor's  knowledge  and belief,
there  exists  no  investigation,  action,  proceeding  or claim by any  agency,
authority or unit of  government or by any third party which

                                       40
<PAGE>

could  result  in  any  liability,  penalty,  sanction  or  judgment  under  any
Environmental Laws with respect to any condition,  use or operation of the Trust
Property, nor does Grantor know of any basis for such an investigation,  action,
proceeding or claim;  (viii)  Grantor has received no notice of and, to the best
of Grantor's knowledge and belief, there has been no claim by any party that any
use, operation or condition of the Trust Property has caused any nuisance or any
other  liability or adverse  condition on any other  property,  nor does Grantor
know of any basis for such an investigation, action, proceeding or claim.

              (b)  Grantor  has  not  received  nor to  the  best  of  Grantor'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.

              (c) To the best of Grantor's  knowledge,  information  and belief,
the  Trust  Property  is not  listed  or,  to the best of  Grantor'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) Grantor shall comply with all applicable  Environmental  Laws.
Grantor  shall keep or cause the Trust  Property to be kept free from  Hazardous
Substances  (except  those  substances  used by  Grantor  or any  Tenant  in the
ordinary course of their respective businesses and except in compliance with all
Environmental  Laws and where such would not reasonably be expected to give rise
to liability under  Environmental Laws) and in compliance with all Environmental
Laws,  Grantor 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,  Grantor
shall  not  install  in  the  Improvements  or  permit  to be  installed  in the
Improvements any asbestos or asbestos-containing materials.

              (e) Grantor shall  promptly  notify  Beneficiary  if Grantor shall
become  aware  of (i)  the  actual  or  potential  existence  of  any  Hazardous
Substances  on the Trust  Property  other than those  occurring  in the ordinary
course of Grantor's  business and which do not violate,  or would not  otherwise
give rise to liability  under  Environmental  Laws,  (ii) any direct or indirect
violation of, or other  exposure to liability  under,  any  Environmental  Laws,
(iii)  any lien,  action or notice  affecting  the  Trust  Property  or  Grantor
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  Grantor or the Trust 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,  Grantor,  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

                                       41
<PAGE>

potential  violation  or  liability  of  any  nature  whatsoever  arising  under
Environmental  Laws and  relating to the Trust  Property or to Grantor.  Grantor
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,  Grantor shall, at its own
expense, take all actions as required by applicable  Environmental Laws, for the
clean-up  of any and all  portions  of the  Trust  Property  or  other  affected
property, including, without limitation, all investigative, monitoring, removal,
containment and remedial actions in accordance with all applicable Environmental
Laws (and in all events in a manner reasonably  satisfactory to Beneficiary) and
shall  further  pay or cause to be  paid,  at no  expense  to  Beneficiary,  all
clean-up,  administrative  and  enforcement  costs  of  applicable  governmental
agencies which may be asserted against the Trust Property.  Notwithstanding  the
foregoing,  Grantor  may, in good faith,  by  appropriate  proceedings  and upon
notice  to  Beneficiary,  contest  the  validity  or  applicability  of any such
Environmental  Laws to any  portion  of the Trust  Property  as long as (a) such
contest is diligently  pursued,  (b) Beneficiary  determines,  in its reasonable
subjective  opinion,  that such contest  suspends the requirement for Grantor to
comply with such Environmental  Laws. Prior to the earlier  commencement of such
contest or the delinquency date of any asserted costs related  thereto,  Grantor
shall deposit into the Impound  Account an amount  determined by  Beneficiary to
the  reasonably  adequate  covered  payment  of  such  costs  and  a  reasonable
additional  sum to cover  possible  interest,  costs  and  penalties;  provided,
however,  that Grantor shall promptly cause to be paid any amount  adjudged by a
court of competent  jurisdiction be due, with all interest,  costs and penalties
thereon, promptly after such judgment becomes final; and provided, further, that
in any event such  contest  shall be  concluded  and the charges or  assessments
shall be paid  prior to the date any writ or order is  issued  under  which  the
Trust Property may be sold, lost or forfeited.  In the event Grantor fails to do
so,  Beneficiary  may, if required by  Environmental  Laws (and after reasonable
prior written notice to Grantor), but shall not be obligated to, cause the Trust
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 Grantor, shall be immediately paid by Grantor
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.  Grantor hereby grants to
Beneficiary  and its agents and  employees  access to the Trust  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 Trust Property
into conformance with Environmental Laws.

                  (f) Grantor  covenants and agrees,  at Grantor's sole cost and
expense,  to  indemnify,  defend  (at  trial  and  appellate  levels,  and  with
attorneys,  consultants and experts reasonably  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 as required by  applicable  Environmental
Laws 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)  which may

                                       42
<PAGE>

at any  time be  imposed  upon,  incurred  by or  asserted  or  awarded  against
Beneficiary or the Trust Property, and arising 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 Trust  Property  or any  surrounding  areas,  regardless  of
whether or not caused by or within the control of Grantor;  (iii) any transport,
treatment,  recycling,  storage,  disposal or arrangement  therefor of Hazardous
Substances  whether on the Trust Property,  originating from the Trust Property,
or otherwise  associated  with Grantor or any operations  conducted on the Trust
Property at any time; (iv) the failure by Grantor 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 in any  material  respect;  (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 Trust  Property or any
surrounding areas as required by applicable  Environmental Laws, 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 Trust
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 Trust 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 Trust Property or any future reduction in the sales price of the
Trust  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 Trust
Property  after  foreclosure  or other taking of title to the Trust  Property by
Beneficiary or its successor 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 during the continuance
of an Event of  Default  or at such other  time as  Beneficiary  has  reasonable
grounds to believe,  and so notifies Grantor,  that Hazardous  Substances are or
have been released,  stored or disposed of on the Trust Property, or on property
contiguous  with the  Trust  Property,  or that  the  Trust  Property  may be in
violation  of the  Environmental  Laws,  Grantor  shall  perform  or cause to be
performed,  at Grantor's sole cost and expense and in scope,  form and substance
reasonably  satisfactory  to  Beneficiary,  an  inspection or audit of the Trust
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 Trust  Property,  the  compliance  or
non-compliance status of the Trust Property and the operations conducted thereon
with  applicable  Environmental  Laws,  or an  inspection  or audit of the Trust
Property  prepared by an engineering or consulting firm  reasonably  approved by
Beneficiary indicating the presence or absence of friable asbestos or substances
containing  asbestos in excess of 1% or lead or  substances  containing  lead or
lead based paint ("Lead Based Paint") on the Trust Property. If Grantor fails to
provide  reports of such  inspection or audit within thirty (30) days after such
request,   Beneficiary  may  order  the  same,  and  Grantor  hereby  grants  to
Beneficiary  and its employees  and agents  access to the Trust  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

                                       43
<PAGE>

Rate from the date incurred by Beneficiary until actually paid by Grantor, shall
be  immediately  paid by  Grantor 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) If, prior to the date hereof, it was determined that the Trust
Property  contains Lead Based Paint,  Grantor 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  Trust  Property,  Grantor  agrees,  at its sole cost and
expense and within  sixty (60) 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.

              (i)  Grantor  agrees  that  if it  has  been,  or if at  any  time
hereafter it is,  determined that the Trust 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,  Grantor shall, at its sole
cost  and  expenses,  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 Trust  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,  Grantor  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.

          1.32 Indemnification; Subrogation.

              (a) Grantor 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 Trust  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 Trust 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  Grantor 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 or in connection  with  Beneficiary  effecting a
Secondary Market Transaction.

              (b) If Beneficiary is made a party  defendant to any litigation or
any claim is threatened or brought against Beneficiary  concerning the making or
enforcement of the Debt,  this Deed of Trust,  the Trust  Property,  or any part
thereof, or any interest therein, or the construction, maintenance, operation or
occupancy  or use  thereof,  then  Grantor  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

                                       44
<PAGE>

litigation or claim,  whether or not any such  litigation or claim is prosecuted
to judgment.  If Beneficiary  commences an action against Grantor to enforce any
of the terms  hereof or to  prosecute  any breach by Grantor of any of the terms
hereof or to recover any sum secured  hereby,  Grantor 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 Grantor  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 Grantor,  Grantor  shall pay
Beneficiary  reasonable  attorneys'  fees and expenses  incurred by Beneficiary,
whether or not an action is actually commenced against Grantor 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, and any allocation charges and allocation
costs of Beneficiary's in-house counsel.

              (c) A waiver of subrogation  shall be obtained by Grantor from its
insurance carrier and,  consequently,  Grantor waives any and all right to claim
or  recover   against   Beneficiary,   its  officers,   employees,   agents  and
representatives, for loss of or damage to Grantor, the Trust Property, Grantor's
property  or the  property  of others  under  Grantor'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 Grantor. Grantor hereby represents,  warrants and covenants as of the
date  hereof and until such time as the Debt is paid in full,  that  Grantor has
been, is, and shall remain a  Single-Purpose  Entity (as  hereinafter  defined).
Grantor has  complied and will at all times  comply,  or if Grantor is a limited
partnership  or a limited  liability  company,  each general  partner or the SPE
Member (as hereinafter  defined) of Grantor (each,  an "SPE Equity Owner"),  has
complied,  will at all times comply, and will cause Grantor to comply, with each
of the representations,  warranties and covenants contained in this Section 1.33
as if such representation,  warranty or covenant was made directly by Grantor or
such SPE Equity Owner,  as the case may be. A  "Single-Purpose  Entity" or "SPE"
means a corporation, limited partnership, or limited liability company that:

              (a) if a corporation,  must have at least one Independent Director
(as hereinafter  defined), or if requested by Beneficiary (which request Grantor
shall comply with within five (5) business days) in connection  with a Secondary
Market  Transaction,  two  Independent  Directors,  and must not take any action
that, under the terms of any certificate or articles of incorporation,  by-laws,
or any voting  trust  agreement  with  respect to such  entity's  common  stock,
requires the unanimous  affirmative  vote of 100% of the members of the board of
directors  unless  all of the  directors,  including,  without  limitation,  all
Independent Directors, shall have participated in such vote ("SPE Corporation");

              (b) if a limited partnership, must have each general partner be an
SPE Corporation;

                                       45
<PAGE>

              (c) if a limited liability company,  must have one managing member
(the "SPE Member") and such managing member must be an SPE Corporation. Only the
SPE  Member  may be  designated  as a  manager  under  the  Grantor's  operating
agreement and pursuant to the law where the Grantor is organized. Grantor may be
a single member Delaware  limited  liability  company without an SPE Corporation
managing member so long as Grantor has two "special  members" who shall serve as
Independent Directors of Grantor;

              (d) was and will be organized solely for the purpose of (i) owning
an interest  in the Trust  Property  and the Other  Mortgaged  Properties,  (ii)
acting as a general  partner of a limited  partnership  that owns an interest in
the Trust Property and the Other  Mortgaged  Properties,  or (iii) acting as the
member  of a  limited  liability  company  that  owns an  interest  in the Trust
Property and the Other Mortgaged Properties;

              (e) 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  Grantor's  existence as a single purpose entity,
bankruptcy-remote entity;

              (f) 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;

              (g) 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;

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

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

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

              (k) has not  incurred  and will not  incur any  debt,  secured  or
unsecured,  direct or contingent (including guaranteeing any obligation),  other
than (i) the Debt, (ii) affiliate advances or trade payables or accrued expenses
incurred in the ordinary  course of business of operating the Trust Property and
the Other Mortgaged Properties  customarily satisfied within

                                       46
<PAGE>

thirty (30) days in an  aggregate  amount,  as to the Trust  Property or each of
Other  Mortgaged  Properties,  not to exceed one percent (1%) of the outstanding
principal  balance  of the  Note  or the  respective  Contemporaneous  Note,  as
applicable,  and no other  debt will be  secured  (senior,  subordinate  or pari
passu) by the Trust Property;

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

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

              (n) 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;

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

              (p) 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;

              (q) 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 Grantor, as applicable);

              (r) will file its own tax  returns;  provided  that for so long as
the Grantor is a qualified REIT subsidiary or includible on a consolidated basis
in the tax return of the REIT,  Grantor  shall only be  required to have its own
employer identification number;

              (s) 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;

              (t) 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;

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

              (v) 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;

                                       47
<PAGE>

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

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

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

              (z) As used in this Section  1.33,  "Independent  Director"  shall
mean a duly appointed  member of the board of directors of an SPE Corporation or
single member Delaware  limited  liability  company who has not been at any time
during the five (5) years  preceding his or her initial  appointment,  and shall
not be at any time while serving as  Independent  Director any of the following:
(a) a stockholder, director (other than in his or her capacity as an Independent
Director),  officer,  employee,  partner,  or member of Grantor,  any SPE Equity
Owner,  any  partner,  shareholder  or member of any SPE  Equity  Owner,  or any
affiliate  of  any of  the  foregoing;  (b) a  stockholder,  director,  officer,
employee,  partner,  or member of any customer of, supplier or service  provider
(including  professionals)  to, or other person who derives more than 10% of its
purchases,  revenues,  compensation,  or other financial  remuneration  from its
activities  with Grantor,  any SPE Equity  Owner,  any partner,  shareholder  or
member of any SPE Equity Owner,  any affiliate of any of the  foregoing,  or any
person or  entity  who  otherwise  is  financially  dependent  upon an  officer,
director, or employee of Grantor, any SPE Equity Owner, any partner or member of
any SPE Equity  Owner,  or any family  member (by blood or marriage) of any such
officer,  director, or employee, or a business entity owned or controlled by any
of the  foregoing;  (c) a person or other  entity  controlling  or under  common
control with any such stockholder, director, officer, employee, partner, member,
customer,  supplier or other person;  or (d) a member of the immediate family of
any  individual  described  in clause  (a),  (b) or (c)  above.  Notwithstanding
anything to the contrary contained herein, the Independent Director of a general
partner  or  managing  member  of  Grantor  shall  be  permitted  to serve as an
Independent  Director of other Special Purpose Entities which are now, or may in
the future be, established by any affiliate of Grantor, or any partner or member
of Grantor. As used in this subsection, 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.  As  used  herein,  the  term
"affiliate" shall mean:

              (aa)  any  person  or  entity   directly  or  indirectly   owning,
controlling  or  holding  with  power to vote ten  percent  (10%) or more of the
outstanding voting securities or interests of such other person or entity;

              (bb) any  person  or  entity  ten  percent  (10%) or more of whose
outstanding  voting securities are directly or indirectly  owned,  controlled or
held with power to vote by such other person or entity;

              (cc) any  person or entity  directly  or  indirectly  controlling,
controlled by or under common control with such other person or entity;

              (dd) any  officer,  director  or partner  of such other  person or
entity;

                                       48
<PAGE>

              (ee) if such other  person or entity is an  officer,  director  or
partner,  any company for which such person or entity acts in any such capacity;
and

              (ff) any close relative or spouse of the specified person.

          1.34 Intentionally Deleted.

          1.35 Year 2000 Compatibility.  Grantor shall take all action necessary
to  assure  that  Grantor's  computer-based  systems  are  able to  operate  and
effectively  process data  including  dates on and after January 1, 2000. At the
request  of  Beneficiary,  Grantor  shall  provide  Beneficiary  with  assurance
acceptable to Beneficiary of Grantor's Year 2000 compatibility.

          1.36 ERISA.

              (a) Grantor shall not engage in any transaction  which would cause
any  obligation,  or action taken or to be taken,  hereunder (or the exercise by
Beneficiary  of any of its rights  under the Note,  this Deed of Trust or any of
the  other  Loan   Documents)   to  be  a  non-exempt   (under  a  statutory  or
administrative class exemption) prohibited transaction under ERISA.

              (b) Grantor further covenants and agrees to deliver to Beneficiary
such  certifications  or other evidence from time to time throughout the term of
this Deed of Trust, as requested by Beneficiary in its sole discretion, that (i)
Grantor is not an "employee  benefit plan" as defined in Section 3(32) of ERISA,
which is  subject  to Title I of ERISA,  or a  "governmental  plan"  within  the
meaning of Section 3(3) of ERISA;  (ii) Grantor is not subject to state statutes
regulating  investments and fiduciary  obligations  with respect to governmental
plans; and (iii) one or more of the following circumstances is true:

                  (1)  Equity   interests  in  Grantor  are   publicly   offered
              securities    within   the   meaning   of   29   C.F.R.    Section
              2510.3-101(b)(2);

                  (2) Less than 25 percent of each  outstanding  class of equity
              interests in Grantor are held by "benefit plan  investors"  within
              the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or

                  (3) Grantor  qualifies as an  "operating  company"  within the
              meaning of 29 C.F.R.  Section  2510.3-101 or an investment company
              registered under the Investment Company Act of 1940.

                  (c) Grantor shall  indemnify  Beneficiary  and defend and hold
Beneficiary  harmless from and against all civil  penalties,  excise  taxes,  or
other loss, cost damage and expense (including,  without limitation,  reasonable
attorneys'  fees and  disbursements  and costs  incurred  in the  investigation,
defense  and  settlement  of  claims  and  losses  incurred  in  correcting  any
prohibited transaction or in the sale of a prohibited loan, and in obtaining any
individual prohibited transaction exemption under ERISA that may be required, in
Beneficiary's   sole

                                       49
<PAGE>

discretion) that Beneficiary may incur, directly or indirectly, as a result of a
default  under this  Section.  This  indemnity  shall  survive any  termination,
satisfaction or foreclosure of this Deed of Trust.

                                   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)  Grantor  fails  to pay  any  money  to  Beneficiary  required
hereunder at the time or within any applicable  grace period set forth herein or
in any  other  Loan  Document,  or if no grace  period  is set  forth  herein or
therein,  then  within  seven (7) days after the date of  Beneficiary's  written
notice to Grantor that 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) Grantor fails to provide  insurance as required by Section 1.4
hereof or fails to perform any material covenant, agreement, obligation, term or
condition set forth in Section 1.31 or Section 1.33 hereof  (provided,  however,
so long as Grantor shall be undertaking any  obligations  required under Section
1.31 in accordance with  Environmental  Laws,  Grantor shall be entitled to such
time as may reasonably  required to fulfill such obligations so long as the same
are  completed  within  any  timeframe   established  under  applicable  law  or
governmental authority).

              (c)  Grantor  fails to  perform  any  other  covenant,  agreement,
obligation,  term or condition  set forth herein or in any other Loan  Document,
other than those  otherwise  described in this  Section 2.1,  and, to the extent
such failure or default is susceptible of being cured,  the  continuance of such
failure  or default  for thirty  (30) days after  written  notice  thereof  from
Beneficiary to Grantor;  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 Grantor  commences  to cure such  default  promptly
after  receipt  of written  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, or in any of the other Loan Documents to  Beneficiary  by Grantor,  by
any general  partner,  manager or member in  Grantor,  or by any  Indemnitor  is
determined  by  Beneficiary  to have been false or  misleading  in any  material
respect  at the time made and any such  false or  misleading  representation  or
warranty has resulted in a Material Adverse Effect.

              (e) There shall be a sale,  conveyance,  disposition,  alienation,
hypothecation,  leasing,  assignment,  pledge, mortgage,  granting of a security
interest in or other transfer

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<PAGE>

or further encumbrancing of the Trust Property,  Grantor or its general partners
or  managing  members,  or any  portion  thereof  or any  interest  therein,  in
violation of Section 1.13 hereof.

              (f) Grantor,  general partner or managing member in Grantor 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  Grantor,  for any such
general  partner or managing  member of Grantor or for any  Indemnitor  or for a
substantial  part of the  assets of  Grantor,  of any such  general  partner  or
managing  member  of  Grantor  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.

              (g) A petition is filed or any case, proceeding or other action is
commenced  against Grantor,  against any general partner or managing member,  as
the case may be, of Grantor 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  Grantor,  against any general
partner or  managing  member,  as the case may be, of  Grantor  or  against  any
Indemnitor,  as debtor, or an order,  judgment or decree is entered  appointing,
with or without the consent of Grantor,  of any such general partner or managing
member,  as the  case may be,  of  Grantor  or of any  Indemnitor,  a  receiver,
trustee,  custodian or similar officer for Grantor, for any such general partner
or managing member, as the case may be, of Grantor or for any Indemnitor, or for
any  substantial  part of any of the properties of Grantor,  of any such general
partner or managing member, as the case may be, of Grantor 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.

              (h) The Trust  Property or any part  thereof is taken on execution
or other  process  of law in any  final  and  non-appealable  legal  proceeding,
without the right of  redemption  against  Grantor,  other than in  connection a
condemnation or the exercise of the power of eminent domain or police power.

              (i)  Grantor  abandons  all or a  material  portion  of the  Trust
Property for a period in excess of thirty (30)  consecutive days other than as a
result of a force majeure.

              (j) The  holder  of any lien or  security  interest  on the  Trust
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.

                                       51
<PAGE>

              (k) The Trust Property, or any part thereof, is subjected to waste
or to removal,  demolition or material alteration so that the value of the Trust
Property is materially diminished thereby and Beneficiary  determines that it is
not adequately protected from any loss, damage or risk associated therewith.

              (l) Any dissolution, termination, partial or complete liquidation,
merger or consolidation of Grantor,  any general partner or any managing member,
or any Indemnitor.

              (m) The  occurrence  and  continuance of an Event of Default under
any  of  the  Contemporaneous  Notes,  the  Contemporaneous   Mortgages  or  the
Contemporaneous Assignments.

              (n) Except as otherwise provided herein, if without  Beneficiary's
prior consent,  (a) the Percentage  Lease is amended,  modified or terminated or
(b) the ownership, management or control of the lessee thereunder is transferred
to a person other than Grantor or an affiliate of Grantor.

              (o)  If,  so long as  lessee  under  the  Percentage  Lease  is an
affiliate of any Grantor, an Event of Default as defined in the Percentage Lease
occurs thereunder.

              (p) If lessee  under the  Percentage  Lease  shall  default in the
performance or observance of any of the obligations  under the subordination and
attornment  agreement  delivered to Beneficiary  beyond any applicable period of
notice and grace thereunder.

              (q) If, without Beneficiary's prior consent, there is any material
adverse  change  in the  Franchise  Agreement  or  Management  Agreement  or the
Franchise Agreement or Management  Agreement is terminated,  except as otherwise
provided herein.

              (r) If a  default  has  occurred  and for so long as it  continues
beyond  any  applicable  cure  period  under  the  Franchise  Agreement  or  the
Management  Agreement  if such  default  permits  the  franchisor  or Manager to
terminate or cancel such Franchise Agreement or Management Agreement.

                                  ARTICLE III.
                                    REMEDIES

          3.1  Remedies  Available.  If there shall occur and be  continuing  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,

                                       52
<PAGE>

notice or action of any kind whatever (each of which is hereby  expressly waived
by Grantor),  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  Trust  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 Trust  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 Grantor  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 rentability of the Trust
Property,  to  increase  the income  therefrom,  to manage and operate the Trust
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 Grantor 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 Trust
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  Trust  Property,  as a matter  of  strict  right and
without  notice to  Grantor  and  without  regard to the  adequacy  of the Trust
Property for the  repayment of the Debt or the solvency of Grantor or any person
or  persons  liable  for the  payment  of the  Debt,  and  Grantor  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
Trust  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  Trust
Property subject to foreclosure shall have passed by foreclosure sale under this
Deed of Trust or deed in lieu of foreclosure.

                                       53
<PAGE>

              (e) Foreclosure.  Immediately commence an action to foreclose this
Deed of Trust or to  specifically  enforce its provisions with respect to any of
the Debt,  pursuant to applicable  law, and sell the Trust Property or cause the
Trust Property  subject to foreclosure  hereunder 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.  In the event  foreclosure
proceedings  are  instituted  by  Beneficiary,  all  expenses  incident  to such
proceedings,  including,  but not limited  to,  reasonable  attorneys'  fees and
costs,  shall be paid by Grantor 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, 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' 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.  In the event of a
judicial sale pursuant to a foreclosure decree, it is understood and agreed that
Beneficiary  or its assigns may become the  purchaser of such Trust  Property or
any part thereof.

              (f)  Judicial  Remedies.  Proceed  by suit or suits,  at law or in
equity,  instituted  by or on behalf of  Beneficiary,  upon  written  request of
Beneficiary,  to enforce  the  payment of the Debt or the other  obligations  of
Grantor 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 Trust
Property,  and to have all or any part of the  Trust  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  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 Beneficiary.  If this Deed
of Trust is foreclosed judicially, as a mortgage,  Beneficiary shall be entitled
to  possession  of the Trust  Property  sold  during any  period of  redemption.
Grantor hereby waives any right it or its successors in interest may have in the
event of acceleration  or entry of a decree of foreclosure;  to obtain a partial
release of the Trust Property from the lien of this Deed of Trust by paying less
than the entire  amount then secured  hereby;  or to partially  redeem the Trust
Property by paying less than the amount necessary to effect redemption in full.

              (g) Sale of Property.  (i) Trustee, at the request of Beneficiary,
shall have the power to sell the Trust Property subject to foreclosure hereunder
or any part thereof at public auction,  in such manner, at such time, and place,
upon such terms and conditions, and upon such notice as is required or permitted
by applicable law. The proceeds or avails of any sale made under or by virtue of
this  paragraph,  together  with  any  other  sums  which  then  may be  held by
Beneficiary  under  this Deed of Trust,  whether  under the  provisions  of this
paragraph  or  otherwise,  shall be applied as  provided  in Section 3.2 hereof.
Beneficiary,  Trustee and any receiver or custodian of the Trust Property or any
part thereof shall be liable to account for only those rents,  issues,  proceeds
and profits actually received by it.

              (ii)  Trustee may  adjourn  from time to time any sale by it to be
made  under or by virtue of this Deed of Trust by  announcement  at the time and
place appointed for such sale or for such adjourned sale or sales and, except as
otherwise  provided by any applicable  law,

                                       54
<PAGE>

Trustee,  without further notice or publication,  may make such sale at the time
and place to which the same shall be so adjourned.

              (iii)  Upon  the  completion  of any  sale  or  sales  ordered  by
Beneficiary  and made by Trustee under or by virtue of this  paragraph,  Trustee
shall  execute and deliver to the accepted  purchaser  or  purchasers a good and
sufficient  deed or  other  instrument,  or good  and  sufficient  deed or other
instruments,  granting, conveying, assigning and transferring all estate, right,
title and interest in and to the  property  and rights  sold.  Each such deed or
other  instrument  from  Trustee may contain  recitals  of  compliance  with any
requirements  of applicable  law relating to exercise of the Power of Sale or to
the sale. Such recitals shall constitute  conclusive evidence of such compliance
in favor of bona fide  purchasers  and  encumbrancers  for value and prima facie
evidence  thereof  in  favor  of all  other  persons.  Each  such  deed or other
instrument  from Trustee shall  operate to convey to the grantee or  transferee,
not subject to any right of redemption,  Trustee's  title and all right,  title,
interest,  and claim of  Grantor,  of its  successors  in  interest,  and of all
persons  claiming by,  through,  or under them, in and to that part of the Trust
Property sold, including any and all right, title,  interest, or claim in and to
such part which may have been acquired by Grantor or its  successors in interest
subsequent to the  execution of this Deed of Trust.  Any such sale or sales made
under or by  virtue  or this  paragraph,  whether  made  under the power of sale
herein  granted or under or by virtue of judicial  proceedings  or a judgment or
decree of foreclosure and sale,  shall operate to divest all the estate,  right,
title,  interest,  claim and demand whatsoever,  whether at law or in equity, of
Grantor in and to the  property  and rights so sold,  and shall,  to the fullest
extent permitted under law, be a perpetual bar both at law and in equity against
Grantor and against any and all persons  claiming or who may claim the same,  or
any part thereof, from, through or under Grantor.

              (iv) In the event of any sale made under or by virtue of this Deed
of Trust  (whether  made under the power of sale  herein  granted or under or by
virtue of judicial proceedings or a judgment or decree of foreclosure and sale),
the entire Debt relative to the Trust  Property,  immediately  thereupon  shall,
anything in the Note,  this Deed of Trust or any other of the Loan  Documents to
the contrary notwithstanding, become due and payable.

              (v)  Upon  any  sale  under  or by  virtue  of this  Deed of Trust
(whether  made under the power of sale  herein  granted or under or by virtue of
judicial  proceedings  or  a  judgment  or  decree  of  foreclosure  and  sale),
Beneficiary  may bid for and acquire the Trust  Property or any part thereof and
in lieu of paying cash therefor may make  settlement  for the purchase  price by
crediting the Debt to and against the net sales price after deducting  therefrom
the expenses of the sale and the costs of the action.

              (vi) No recovery of any judgment by Beneficiary  and no levy of an
execution under any judgment upon the Trust Property or any part thereof or upon
any other  property of Grantor shall release the lien of this Deed of Trust upon
the Trust Property or any part thereof, or any liens, rights, powers or remedies
of  Beneficiary  hereunder,  but such  liens,  rights,  powers and  remedies  of
Beneficiary shall continue unimpaired until the entire Debt is paid in full.

              (vii) All procedural matters relating to exercise of the Trustee's
Power of Sale  available  under this Deed of Trust (such as the manner of giving
notice of default and notice of

                                       55
<PAGE>

sale, the forms employed for such purpose,  the persons to receive  notice,  the
time which must elapse between various stages of the proceeding,  and the manner
in which the sale is conducted)  shall be governed by the statutory law which is
in effect at the time said power is exercised.  In the event some or all of such
procedural  matters are not covered by then-effective  legislation,  the matters
not  covered  shall be  governed  by the law which is in effect at the time this
Deed of Trust is executed.

              (viii) Grantor hereby authorizes Trustee, upon its being presented
with an affidavit signed by Beneficiary  setting forth facts showing an Event of
Default under this Deed of Trust, to accept as true and conclusive all facts and
statements contained therein and to rely and act thereon.

              (ix) Upon  foreclosure of this Deed of Trust (whether  pursuant to
the Power of Sale which is  available  under this Deed of Trust or  pursuant  to
foreclosure of this Deed of Trust as a mortgage), no lease,  including,  without
limitation,  the  Percentage  Lease,  then affecting the Trust Property shall be
terminated by application  of the doctrine of merger,  or as a matter of law, or
as a result of such  foreclosure,  unless  Beneficiary  or the  purchaser at the
foreclosure  sale  shall  so  elect  in  writing.  No  act  by or on  behalf  of
Beneficiary,  Trustee,  or any such  purchaser  shall  constitute  or  result in
termination of any such lease unless  Beneficiary  or such purchaser  shall give
written notice of such termination to the tenant or lessee thereunder.

              (h) Other.  Beneficiary  may  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  following the  occurrence and
continuance of an Event of Default 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 Trust 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,  subject to applicable law, in any order that Beneficiary  chooses in
its sole discretion.

                                       56
<PAGE>

              (d) The  remainder,  if any, of such funds shall be  disbursed  to
Grantor or to the person or persons legally  entitled thereto or, in the case of
funds realized by reason of a sale by Trustee, the remainder may be deposited by
Trustee with the Clerk of the  District  Court for county in which the same took
place.

          3.3 Right and  Authority  of Receiver or  Beneficiary  in the Event of
Default;  Power of Attorney.  Upon the occurrence and continuance of an Event of
Default,  and entry upon the Trust Property 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 Grantor'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 Trust Property;  (b) take and maintain  possession
of all  documents,  books,  records,  papers and accounts  relating to the Trust
Property; (c) exclude Grantor and its agents, servants and employees wholly from
the Trust Property;  (d) manage and operate the Trust Property; (e) preserve and
maintain  the Trust  Property;  (f) make  repairs and  alterations  to the Trust
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 Trust  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 Trust Property,  or employ a marketing or leasing agent or agents
to do so, directed to the leasing or sale of the Trust 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 Grantor or in its own name as Beneficiary, such
documents  and  instruments  as  are  necessary  or  appropriate  to  consummate
transactions  authorized  hereunder;  (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 Trust  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 Grantor 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 Grantor or
Beneficiary,  at  the  request  of  Beneficiary  following  the  occurrence  and
continuance  of an  Event  of  Default  or as  otherwise  provided  in the  Loan
Documents,  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 Grantor 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,

                                       57
<PAGE>

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 Deed of Trust or under any of the other Loan  Documents  has
actually occurred or is then existing.  Grantor hereby  constitutes and appoints
Beneficiary, its assignees,  successors,  transferees and nominees, as Grantor's
true and lawful  attorney-in-fact  and agent, with full power of substitution in
the Trust Property,  in Grantor'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  Grantor,  shall be a demand  obligation  owing by  Grantor 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  resulting  from the  occurrence  and  continuance of an Event of
Default,  and at the time of such sale,  Grantor or  Grantor's  representatives,
successors or assigns,  or any other persons  claiming any interest in the Trust
Property by, through or under Grantor (except to the tenant under the Percentage
Lease if not  terminated  by  Beneficiary),  are  occupying  or using  the Trust
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 Trust 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 Trust Property upon the termination
of such tenancy,  the  purchaser  shall be entitled to institute and maintain an
action for unlawful  detainer of the Trust 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 the
occurrence and  continuance of an Event of Default,  notify the account  debtors
and obligors of any accounts,  chattel  paper,  negotiable  instruments or other
evidences  of  indebtedness  to Grantor  included  in the Trust  Property to pay
Beneficiary  directly.  Grantor  shall at any time or from time to time upon the
request of Beneficiary  following the occurrence and  continuance of an Event of
Default,  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

                                       58
<PAGE>

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.

         3.7  Payment  of  Expenses.   Grantor   shall  pay  on  demand  all  of
Beneficiary's or Trustee'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 Grantor 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 Trust
Property shall become wholly clear of the liens, security interests, conveyances
and  assignments  evidenced  hereby,  which  shall be  promptly  reconveyed  and
released  of record  by  Trustee,  at the  written  request  of  Beneficiary  at
Grantor's cost.

          4.3  Certain  Rights  of  Beneficiary.   Without  affecting  Grantor's
liability for the payment of any of the Debt,  Beneficiary may from time to time
and without notice to Grantor:  (a) release any person liable for the payment of
the Debt;  (b) extend or modify  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 Trust 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.  Except for Notices of Default,  Notice of Sale,  and any
other  notices or  materials  sent or given  pursuant to the Utah Trust Deed Act
(which  shall be given as required by said Act and which are  referred to herein
as  the  "Statutory  Notices"),   all  notices,   demands,

                                       59
<PAGE>

requests or other  communications to be sent by one party to the other hereunder
or  required by law (other than the Utah Trust Deed Act) 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 at its address set forth on the first page of this Deed of Trust or at
such other address as may be designated  by such party as herein  provided.  All
such  notices,  demands  and  requests  shall be  effective  upon such  personal
delivery, or one (1) business day after being deposited with the 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 Statutory Notices.  Notwithstanding the provisions of the foregoing
Section 4.5 or any other provision of this Deed of Trust,  any notice of default
required  by law or notice of sale  required  by law,  in either  case  given in
anticipation of or preparation for Trustee's exercise of the Power of Sale under
this  Deed of  Trust,  shall be given in the  manner,  at the  time,  and to the
persons required by the Utah Trust Deed Act. Grantor hereby requests that a copy
of any such notice of default and a copy of any such notice of sale be mailed to
Grantor at the  address  for Grantor set forth on the first page of this Deed of
Trust.

         4.7 Successors  and Assigns;  Joint and Several  Liability.  The terms,
provisions,  indemnities,  covenants and conditions hereof shall be binding upon
Grantor and the successors  and assigns of Grantor,  including all successors in
interest of Grantor in and to all or any part of the Trust  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  Grantor  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.

         4.8  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.

         4.9  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.

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<PAGE>

         4.10 Waiver;  Discontinuance of Proceedings.  Beneficiary may waive any
single Event of Default by Grantor  hereunder without waiving any other prior or
subsequent  Event of  Default.  Beneficiary  may  remedy any Event of Default by
Grantor  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 Grantor 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 Grantor  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  Grantor in any case shall of itself  entitle
Grantor  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  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,  Grantor and Beneficiary shall
be  restored  to their  former  positions  with  respect  to the Debt,  the Loan
Documents, the Trust Property and otherwise, and the rights, remedies, recourses
and powers of Beneficiary shall continue as if the same had never been invoked.

          4.11 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.

          4.12  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, ENCUMBRANCES AND SECURITY INTERESTS IN THE TRUST PROPERTY LOCATED IN SUCH
STATE.

          4.13  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.

                                       61
<PAGE>

         4.14 Relationship of the Parties.  The relationship between Grantor 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.

          4.15  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 Trust Property,
such  proceeds  have been  advanced  by  Beneficiary  at  Grantor'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.

          4.16 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 Trust  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.

          4.17 Cross-Default; Cross-Collateralization. Grantor acknowledges that
Beneficiary has made the loan evidenced by the Note to Grantor upon the security
of its collective interest in the Trust Property and Other Mortgaged  Properties
and in reliance  upon the  aggregate of the Trust  Property and Other  Mortgaged
Properties taken together being of greater value as collateral security than the
sum of the Trust  Property  and Other  Mortgaged  Properties  taken  separately.
Grantor agrees that this Deed of Trust and the other  Contemporaneous  Mortgages
are and will be cross-collateralized and cross-defaulted with each other so that
(i)  an  Event  of  Default  under  either  this  Deed  of  Trust  or any of the
Contemporaneous  Mortgages shall  constitute an Event of Default under both this
Deed of Trust and the  Contemporaneous  Mortgages  which secure the Note and the
Contemporaneous  Notes; (ii) an Event of Default under the Note shall constitute
an Event of Default under each of this Deed of Trust, the Contemporaneous Notes,
the  Contemporaneous  Mortgages and the Contemporaneous  Assignments;  and (iii)
each of this Deed of Trust, the  Contemporaneous  Notes and the  Contemporaneous
Mortgages and the Contemporaneous  Assignments shall constitute security for the
Note and the  Contemporaneous  Notes as if a single  blanket lien were placed on
the Trust Property and Other  Mortgaged  Properties as security for the Note and
the Contemporaneous Notes.

          4.18 Interest  After Sale. In the event the Trust 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.

          4.19  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 the other Loan Documents.

                                       62
<PAGE>

          4.20 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.

          4.21 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 Trust Property.  It is hereby understood and agreed that should  Beneficiary
acquire any  additional  or other  interests in or to the Trust  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 Trust Property,  toward the end that this Deed of Trust may be foreclosed as
if owned by a stranger to said other or additional interests.

          4.22 Rights With Respect to Junior Encumbrances.  Any person or entity
purporting  to have or to take a junior  mortgage  or other  lien upon the Trust
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.

          4.23  Beneficiary  May  File  Proofs  of  Claim.  In the  case  of any
receivership, insolvency, bankruptcy,  reorganization,  arrangement, adjustment,
composition or other proceedings  affecting  Grantor or the principals,  general
partners  or managing  members in  Grantor,  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 Grantor  hereunder  after
such date.

          4.24 Fixture  Filing.  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 Trust 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  oil and gas) and is to be
filed for record in the real estate  records of the county where the Premises is
situated.  The mailing  address of Grantor and the address of  Beneficiary  from
which  information  concerning  the security  interests  may be obtained are set
forth in Section 1.22 above. The record owner of the Premises (which is the land
to  which  the  fixtures   are  or  will  be  attached)  is  Grantor.   The  Tax
Identification number for Grantor is: [PENDING].

          4.25 After-Acquired  Trust Property.  All property acquired by Grantor
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

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<PAGE>

security interest created hereby, shall immediately upon the acquisition thereof
by Grantor and without further mortgage, conveyance or assignment become subject
to the lien and security  interest created by this Deed of Trust.  Nevertheless,
Grantor 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.

         4.26 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.

         4.27 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 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.  Any signature page of this Deed of Trust may be detached
from any counterpart of this Deed of Trust without impairing the legal effect of
any signatures  thereon and may be attached to another  counterpart of this Deed
of  Trust  identical  in  form  hereto  but  having  attached  to it one or more
additional signature pages.

         4.28  Personal  Liability.  Notwithstanding  anything  to the  contrary
contained  in this Deed of Trust,  the  liability  of Grantor 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.

         4.29  Recording and Filing.  Grantor 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. Grantor 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 Trust Property.

         4.30 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,

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<PAGE>

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.

         4.31 Maximum Interest.  The provisions of this Deed of Trust and of all
agreements  between Grantor 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  Grantor 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) or, at the  option  of  Beneficiary,  be paid over to
Grantor, 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  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 Grantor and Beneficiary.

         4.32 Interest Payable by Beneficiary.  Beneficiary shall cause funds in
the Replacement  Reserve 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 Replacement Reserve. Such interest
shall be calculated on a simple,  non-compounded  interest basis based solely on
contributions made to the Replacement Reserve by Grantor. All interest earned on
amounts  contributed to the Replacement Reserve shall be retained by Beneficiary
and  accumulated  for the  benefit  of Grantor  and added to the  balance in the
Replacement  Reserve and shall be  disbursed  for payment of the items for which
other funds in the Replacement Reserve are to be disbursed.

         4.33  Secondary  Market.  Beneficiary  may sell,  assign,  participate,
transfer or deliver  the Note and the Loan  Documents  to one or more  investors
(directly  or through a trust of other  entity  which may sell  certificates  or
other  instruments to investor) in the secondary  mortgage  market (a "Secondary
Market Transaction").  In connection with such sale, assignment,  participation,
transfer  or  delivery,  Beneficiary  may  retain or assign  responsibility  for
servicing  the loan  evidenced by the 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.

         4.34  Dissemination  of Information.  If Beneficiary  determines at any
time to sell,  transfer  or assign  the Note,  this Deed of Trust and other Loan
Documents,  and any or all

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<PAGE>

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,  Beneficiary,  servicer, participant,  investor, or
their   respective   successors  in  such   Participations   and/or   Securities
(collectively,  the  "Investors")  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, to Beneficiary,  any guarantor,  any  indemnitor,  and the
Trust  Property,  which  shall  have  been  furnished  by  Beneficiary  and  any
Indemnitor,  as Beneficiary  determines  necessary or desirable.  If at any time
during which the Loan is an asset of a  securitization  or is otherwise an asset
of any rated  transaction,  "Rating Agency" or "Rating  Agencies" shall mean the
rating  agency or rating  agencies  that from time to time rate the  securities,
certificates or other instruments issued in connection with such  securitization
or other transaction.

         4.35    Contemporaneous    Notes,    Contemporaneous    Mortgages   and
Contemporaneous  Assignments  of Leases  and  Rents.  This Deed of Trust is made
contemporaneously  with two (2) other  promissory notes of Grantor and three (3)
promissory  notes of Apple  Suites REIT Limited  Partnership,  each of even date
herewith (the "Contemporaneous Notes"), two (2) other deeds of trust or deeds to
secure debt of Grantor  and three (3) other deeds of trust of Apple  Suites REIT
Limited   Partnership,   each  of  even  date  herewith  (the   "Contemporaneous
Mortgages") and two (2) other Assignment of Leases, Rents and Profits of Grantor
and three (3) other Assignment of Leases, Rents and Profits of Apple Suites REIT
Limited   Partnership,   each  of  even  date  herewith  (the   "Contemporaneous
Assignments"),  given by Grantor or Apple Suites REIT Limited  Partnership to or
for the benefit of  Beneficiary  covering  properties  listed  together with the
Trust  Property,  on Exhibit B attached hereto and  incorporated  herein by this
reference (the "Other Mortgaged Properties").

                                   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

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<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.
Grantor will,  from time to time,  pay  reasonable  compensation  due to Trustee
hereunder and reimburse Trustee for, and save and hold Trustee harmless against,
any and all liability and  reasonable  expenses which may be incurred by Trustee
in the performance of Trustee's duties.

         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. Beneficiary may at any time appoint a successor
Trustee to act  hereunder.  All matters  relating  to the method of  effecting a
substitution  of Trustee  shall be  governed  by the  statutory  law which is in
effect  at the  time  substitution  takes  place.  In the  event  then-effective
legislation  does not cover some or all of the matters relating to the method of
accomplishing  a  substitution  of Trustee,  the  matters  not covered  shall be
governed  by the law  which  is in  effect  at the  time  this  Deed of Trust is
executed.  From the time a  substitution  of  Trustee is  accomplished,  the new
Trustee shall succeed to all the power,  duties,  authority and title of Trustee
named herein and of any successor Trustee.

         5.4  Perfection  of  Appointment.   Should  any  deed,  conveyance,  or
instrument  of any nature be required  from Grantor 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 Grantor.

         5.5 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.

         5.6 Acceptance of Trust.  Trustee  accepts this trust when this Deed of
Trust,  duly executed and  acknowledged,  is made a public record as provided by
law.  Trustee  is not  obligated  to  notify  any party to this Deed of Trust of
pending  sale under any other deed of trust or of any  action or  proceeding  in
which Grantor, Beneficiary, or Trustee is a party, unless brought by Trustee.

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<PAGE>

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

                                                     GRANTOR:

                                                     APPLE SUITES SPE I, INC.,
                                                     a Virginia corporation

                                                     By:/s/ Glade M. Knight
                                                     ---------------------------
                                                     Name:  Glade M. Knight
                                                     Title: President

<PAGE>

STATE/COMMONWEALTH OF VIRGINIA          )
                                        )  SS.
CITY/COUNTY OF RICHMOND                 )

         On the 6th day of September 2000,  personally  appeared before me Glade
M. Knight,  who being by me duly sworn did say that he is the President of Apple
Suites SPE I, Inc., a Virginia corporation and that the foregoing instrument was
signed on behalf of said  corporation  by authority of a resolution of its Board
of Directors,  and said Glade M. Knight acknowledged to me that said corporation
executed the same.

/s/ Robin S. Broughton
-----------------------
Notary Public

My Commission Expires:  7/31/02

Residing at Richmond, VA

<PAGE>

                                    EXHIBIT A

                                Legal Description

                                                    Tax Serial No(s): __________

                                    [OMITTED]

<PAGE>

                                    EXHIBIT B

                               Mortgaged Property

1.      Homewood  Suites,  Salt Lake City,  Utah - 844 East North Union  Avenue,
        Midvale, Utah 84047.

                           Other Mortgaged Properties

2.      Homewood  Suites,  Addison,  Texas - 4451 Beltline  Road,  Addison Texas
        75001.

3.      Homewood  Suites,  Atlanta,  Georgia  - 3200  Cobb  Parkway,  Southwest,
        Atlanta, Georgia 30339.

4.      Homewood  Suites,  Irving,  Texas - 4300 Wingren  Drive,  Irving,  Texas
        75001.

5.      Homewood Suites, Ridgeland,  Mississippi - 853 Centre Street, Ridgeland,
        Mississippi 39157.

6.      Homewood Suites,  Plano,  Texas - 4705 Old Shepard Place,  Plano,  Texas
        75093.

                              Contemporaneous Notes

1.      Promissory  Note from Apple Suites SPE I, Inc., a Virginia  corporation,
        to First Union National Bank, a national banking association, secured by
        Homewood Suites, Atlanta, Georgia (Loan No.: 26-5330841).

2.      Promissory Note from Apple Suites REIT Limited  Partnership,  a Virginia
        limited  partnership,  to First Union National Bank, a national  banking
        association,  secured  by  Homewood  Suites,  Irving,  Texas  (Loan No.:
        26-5330846).

3.      Promissory  Note from Apple Suites SPE I, Inc., a Virginia  corporation,
        to First Union National Bank, a national banking association, secured by
        Homewood Suites, Ridgeland, Mississippi (Loan No.: 26-5330844).

4.      Promissory Note from Apple Suites REIT Limited  Partnership,  a Virginia
        limited  partnership,  to First Union National Bank, a national  banking
        association,  secured  by  Homewood  Suites,  Plano,  Texas  (Loan  No.:
        26-5330847).

5.      Promissory  Note from Apple Suites SPE I, Inc., a Virginia  corporation,
        to First Union National Bank, a national banking association, secured by
        Homewood Suites, Addison, Texas (Loan No.: 26-5330845).

<PAGE>

                            Contemporaneous Mortgages

1.      Deed to Secure  Debt and  Security  Agreement  from Apple  Suites SPE I,
        Inc., a Virginia  corporation,  to First Union National Bank, a national
        banking association,  secured by Homewood Suites, Atlanta, Georgia (Loan
        No.: 26-5330841).

2.      Deed of Trust and  Security  Agreement  from Apple  Suites REIT  Limited
        Partnership, a Virginia limited partnership,  to TRSTE, Inc., a Virginia
        corporation,  as Trustee for the benefit of First Union National Bank, a
        national banking association,  secured by Homewood Suites, Irving, Texas
        (Loan No.: 26-5330846).

3.      Deed of Trust and  Security  Agreement  from Apple Suites SPE I, Inc., a
        Virginia corporation, to TRSTE, Inc., a Virginia corporation, as Trustee
        for the  benefit  of First  Union  National  Bank,  a  national  banking
        association,  secured by Homewood Suites,  Ridgeland,  Mississippi (Loan
        No.: 26-5330844).

4.      Deed of Trust and  Security  Agreement  from Apple  Suites REIT  Limited
        Partnership, a Virginia limited partnership,  to TRSTE, Inc., a Virginia
        corporation,  as Trustee for the benefit of First Union National Bank, a
        national banking association,  secured by Homewood Suites,  Plano, Texas
        (Loan No.: 26-5330847).

5.      Deed of Trust and  Security  Agreement  from Apple  Suites REIT  Limited
        Partnership, a Virginia limited partnership,  to TRSTE, Inc., a Virginia
        corporation,  as Trustee for the benefit of First Union National Bank, a
        national banking association, secured by Homewood Suites, Addison, Texas
        (Loan No.: 26-5330845).

                           Contemporaneous Assignments

1.      Assignment of Leases, Rents and Profits from Apple Suites SPE I, Inc., a
        Virginia corporation,  in favor of First Union National Bank, a national
        banking association,  secured by Homewood Suites, Atlanta, Georgia (Loan
        No.: 26-5330841).

2.      Assignment  of Leases,  Rents and Profits from Apple Suites REIT Limited
        Partnership,  a Virginia  limited  partnership,  in favor of First Union
        National  Bank,  a national  banking  association,  secured by  Homewood
        Suites, Irving, Texas (Loan No.: 26-5330846).

3.      Assignment of Leases, Rents and Profits from Apple Suites SPE I, Inc., a
        Virginia corporation,  in favor of First Union National Bank, a national
        banking association,  secured by Homewood Suites, Ridgeland, Mississippi
        (Loan No.: 26-5330844).

4.      Assignment  of Leases,  Rents and Profits from Apple Suites REIT Limited
        Partnership,  a Virginia  limited  partnership,  in favor of First Union
        National  Bank,  a national  banking  association,  secured by  Homewood
        Suites, Plano, Texas (Loan No.: 26-5330847).

<PAGE>

5.      Assignment  of Leases,  Rents and Profits from Apple Suites REIT Limited
        Partnership,  a Virginia  limited  partnership,  in favor of First Union
        National  Bank,  a national  banking  association,  secured by  Homewood
        Suites, Addison, Texas (Loan No.: 26-5330845).

<PAGE>

                                    EXHIBIT C

                                 Loan Documents

1.      Promissory  Note from Apple  Suites SPE I, Inc. to First Union  National
        Bank

2.      Deed of Trust,  Security  Agreement  and UCC  Fixture  Filing from Apple
        Suites SPE I, Inc. to First Union National Bank

3.      Security Agreement from Apple Suites SPE I, Inc. to First Union National
        Bank

4.      Indemnity and Guaranty Agreement from Apple Suites,  Inc. to First Union
        National Bank

5.      Environmental  Indemnity  Agreement  from Apple  Suites SPE I, Inc.  and
        Apple Suites, Inc. to First Union National Bank

6.      Assignment of Leases, Rents and Profits from Apple Suites SPE I, Inc. to
        First Union National Bank

7.      Assignment  of  Contracts  and Permits  from Apple Suites SPE I, Inc. to
        First Union National Bank

8.      Consent and Agreement of Manager by Promus Hotels, Inc.

9.      Disbursement Authorization by Apple Suites SPE I, Inc.

10.     Receipt and Closing  Certificate  by Apple  Suites SPE I, Inc. and Apple
        Suites, Inc.

11.     Form W-9 by Apple Suites SPE I, Inc.

12.     Certificate  Regarding  Organizational  Documents by Apple Suites SPE I,
        Inc.

13.     UCC-1  Fixture  filings by Apple Suites SPE I, Inc.  (Utah  Secretary of
        State and Salt Lake County)

14.     UCC-1  Financing  Statement by Apple Suites SPE I, Inc.  (Virginia State
        Corporation Commission)EXHIBIT 10.105
LOAN NO.: 26-5330848                                        SALT LAKE CITY, UTAH
                                                                 HOMEWOOD SUITES

                                  ASSIGNMENT OF
                              CONTRACTS AND PERMITS

     THIS ASSIGNMENT OF CONTRACTS AND PERMITS (this "Assignment"), is made as of
September  8, 2000,  from  APPLE  SUITES  SPE I,  INC.,  a Virginia  corporation
("Assignor"),  having an  office at 9 North  Third  Street,  Richmond,  Virginia
23219,   to  First  Union   National  Bank,  a  national   banking   association
("Assignee"),  having  an  office  at One First  Union  Center,  DC-6  (NC0166),
Charlotte,  NC  28288-0166,  Attention:  William J. Cohane,  Real Estate Capital
Markets Contract Finance.

                              W I T N E S S E T H:

     WHEREAS,  Assignor  owns in fee  simple  that  certain  parcel of land more
particularly  described  in Exhibit A annexed  hereto and  incorporated  herein,
including without  limitation,  the easements,  rights,  privileges,  tenements,
hereditaments  and  appurtenances  (including  air rights) in anyway  pertaining
thereto (the "Premises") and all buildings and other  improvements and additions
thereto  (whether  now  erected  or  hereafter  constructed  or placed  upon the
Premises  or any  part  thereof,  the  "Improvements"  and,  together  with  the
Premises, collectively, the "Property");

     WHEREAS,  in connection  with a loan (the "Loan")  being made  concurrently
herewith by Assignee to  Assignor in the  principal  amount of Two Million  Five
Hundred Thousand and No/100 Dollars  ($2,500,000.00),  Assignor has executed and
delivered to Assignee its Promissory  Note of even date herewith in the original
principal amount of the Loan (the "Note");

     WHEREAS, concurrently herewith, Assignor is delivering that certain Deed of
Trust,  Security Agreement and UCC Fixture Filing,  dated of even date herewith,
to Assignee  (the "Deed of Trust"),  encumbering  the  Property and securing the
Loan;

     WHEREAS,  Assignee  requires that this Assignment be executed and delivered
as a condition to making the Loan,

     NOW,  THEREFORE,  in  consideration  of the sum of Ten Dollars ($10.00) and
other good and  valuable  consideration,  the receipt and legal  sufficiency  of
which are hereby acknowledged and intending to be legally bound hereby, in order
to secure the  payment  of the Loan,  together  with all  interest  thereon,  as
evidenced by the Note, any other payments due to Assignee under this Assignment,
the Note,  the Deed of Trust or any other Loan  Document (as defined in the Deed
of Trust),  all costs of collection in connection  with the Loan,  and all other
sums,  charges,  obligations and liabilities of Assignor due or to become due at
any time to  Assignee  under  this  Assignment,  the  Note,  or any  other  Loan
Document;  and to secure the  performance  and  observance of all the provisions
hereof,  of the Note,  of the Deed of Trust,  and of the other  Loan  Documents,
including, without limitation, the payment to Assignee of the Loan

<PAGE>

and any other  sums  advanced  by  Assignee  hereunder  or under any other  Loan
Document,   Assignor  hereby  presently,   absolutely  and  irrevocably  grants,
transfers,  bargains,  sells, assigns, conveys, and sets over unto Assignee, its
successors  and  assigns,  all right,  title and interest of Assignor in, to and
under all of the following, to the extent assignable:

         (i) all contract rights and benefits,  documents,  insurance  policies,
contracts and other instruments relating to the Property or any part thereof and
all other contractual  arrangements  creating a right in Assignor as a result of
its ownership, operation, maintenance, repair, replacement, or improvement of or
to all or any part of the Property,  whether written or verbal, now or hereafter
in existence or arising,  including,  without  limitation,  all union contracts,
employment agreements, service contracts,  management agreement, leasing, rental
and brokerage agreements,  operating  agreements,  equipment leasing agreements,
warranties and guaranties covering any equipment,  appliances or fixtures now or
hereafter   located  on  or  placed  upon  the   Property   (collectively,   the
"Contracts"); and

         (ii)  all   building   permits,   surveys,   architectural   plans  and
specifications,  governmental  approvals,  certificates of occupancy,  licenses,
authorizations,  including,  without limitation,  hotel/motel  licenses,  health
permits,  restaurant  licenses,  liquor  licenses,  agreements  with any utility
companies, all deposits associated with the foregoing and any other consents and
approvals  which  Assignor  may now or  hereafter  own and now or  hereafter  in
existence  or  arising,  with  respect  to or in  connection  with the  Property
(collectively, the "Permits").

     1. This  Assignment  is intended by Assignor  and  Assignee to create,  and
shall be construed to create, an absolute  assignment to Assignee,  subject only
to the terms and provisions  hereof.  This Assignment is effective  immediately.
Notwithstanding  the  foregoing,  Assignee  hereby  grants to  Assignor  and its
successors and any lessee or other person operating and/or managing the Property
for  Assignor,  a revocable  license to perform under the Contracts and Permits,
and  to  retain,  use  and  enjoy  the  same.  Such  license  shall  be  revoked
automatically  upon the  occurrence  and during the  continuance of any Event of
Default as set forth in the Loan Documents.

     2. Subject to the license granted  pursuant to paragraph 1 above and to the
extent of Assignor's  rights in the Contracts and Permits,  Assignor does hereby
authorize  and empower  Assignee,  its  successors  and  assigns,  to collect or
enforce the  Contracts  and  Permits and does hereby  direct each and all of the
contractual  obligors of Assignor to pay any income  directly to  Assignee,  its
successors  and  assigns,  or as it or they shall  direct,  and to  perform  any
obligations  on its or their part to be  performed,  upon  demand for payment or
performance  thereof by  Assignee,  its  successors  and  assigns,  and upon the
occurrence and during the  continuance of an Event of Default (as defined in the
Deed of  Trust)  beyond  any  applicable  grace  period as set forth in the Loan
Documents  such  purchasers  and obligors of Assignor  shall pay the sums due or
perform the  obligations  owing to Assignee  upon such  demand  without  further
inquiry.  No such  obligor  shall be  obligated  to account to Assignor  for any
amounts paid to Assignee by reason of any payment  made to Assignee  pursuant to
such demand or to inquire as to the existence of any

                                       2
<PAGE>

default or whether Assignee is otherwise entitled to such amounts,  and Assignor
agrees to look  exclusively  to Assignee for such amounts in the event  Assignor
shall claim that such demand was not properly made.  Until the revocation of the
license  described in paragraph 1 above,  Assignor is  authorized  to collect or
enforce or continue collecting or enforcing the Contracts and Permits;  but such
privilege  shall not operate to permit the collection or demand for  performance
by Assignor,  its  successors or assigns,  of any  obligation  more than one (1)
month in advance of the date prescribed in the instrument providing therefor.

     The sole  signature of Assignee shall be sufficient for the exercise of any
rights  under this  Assignment.  Assignor  hereby  irrevocably  constitutes  and
appoints Assignee the attorney-in-fact and agent of Assignor,  which appointment
shall be coupled with an interest,  for the purpose of executing and  delivering
any notice in connection with this Assignment.

     3.  Assignor  hereby  covenants and warrants  that,  other than the Deed of
Trust, it has not executed any prior assignment or pledge of its interest in any
of the  Contracts  or  Permits,  nor  performed  any act or  executed  any other
instrument  which might prevent  Assignee from operating  under any of the terms
and  conditions  of this  Assignment,  or which  would  limit  Assignee  in such
operation.

     4. Assignor  hereby agrees that so long as the Debt (as defined in the Deed
of Trust), or any part thereof,  shall remain unpaid,  without the prior written
consent and  approval of Assignee in each  instance,  Assignor  will not further
assign,  pledge,  hypothecate or otherwise  encumber any of its rights under the
Contracts or the Permits.

     5. Assignor agrees that at its sole expense it (i) will duly and punctually
perform  and comply  with any and all  representations,  warranties,  covenants,
terms  and  provisions  to be  performed  or  complied  with by it in any of the
Contracts and Permits; (ii) will not terminate, accept a voluntary surrender of,
cancel,  abridge or otherwise modify in any materially  adverse respect or waive
its rights or the obligations of any other party under any of the Permits in any
materially  adverse  respect,  without the express  written consent of Assignee;
(iii)  will  maintain  the  Permits  in full  force and  effect in all  material
respects;  (iv) will  enforce  its  rights  under the  Permits  in all  material
respects  in  accordance  with their  terms;  (v) will not  terminate,  accept a
voluntary  surrender of,  cancel,  abridge in any  materially  adverse  respect,
otherwise modify or waive its rights or the obligations of any other party under
any of the Contracts in any materially  adverse respect,  except in the ordinary
course of Assignor's  business;  provided,  however,  in no event shall Assignor
fail to perform such covenant with respect to any Major  Contracts  (hereinafter
defined),  without Assignee's prior express written consent;  (vi) will maintain
the Contracts in full force and effect in all material  respects,  except in the
ordinary course of Assignor's  business;  provided,  however,  in no event shall
Assignor fail to perform such  covenant  with respect to any Major  Contracts to
which Assignor is a party,  without  Assignee's  prior express written  consent;
(vii) will  enforce its rights under the  Contracts in all material  respects in
accordance  with  their  terms,  except in the  ordinary  course  of  Assignor's
business;  provided,  however,  in no event shall  Assignor fail to perform such
covenant  with  respect to any Major  Contracts  to which  Assignor  is a party,
without  Assignee's  prior express  written  consent;  (viii) will appear in and
defend any action or proceeding  arising under or in any manner  connected  with
any of the Contracts or Permits or the  representations,  warranties,  covenants
and

                                       3
<PAGE>

agreements of it or the other party or parties  thereto to the extent  necessary
to preserve  Assignor's  material  rights under the Contracts and Permits;  (ix)
will furnish Assignee,  upon demand, with original executed  counterparts of all
Major Contracts and material  Permits now or hereafter  created  relating to the
Property;  and (x) will take all additional action to these ends as from time to
time may be  reasonably  requested in writing by Assignee.  For purposes of this
paragraph,  a "Major  Contract"  shall mean a Contract the  remaining  aggregate
payments  under which  exceed  $10,000.00.  Any such action in violation of this
paragraph shall be voidable at the option of Assignee.

     6. Assignee  shall not be obligated to perform or discharge any  obligation
of Assignor as a result of the assignment  hereby effected,  and Assignor agrees
to indemnify,  defend and hold Assignee  harmless against any and all liability,
loss or damage  which it may incur by reason of any act of  Assignee  under this
Assignment,  except only for  liability  arising out of the gross  negligence or
willful misconduct of Assignee.  Should Assignee incur any such liability,  loss
or damage by reason of this Assignment, or in defense against any such claims or
demands, the amount thereof, including costs, expenses and reasonable attorney's
fees and  disbursements,  together with interest thereon at the Default Interest
Rate (as  defined in the Note)  shall be included in the Debt (as defined in the
Deed of Trust), and Assignor shall reimburse Assignee therefor  immediately upon
demand.

     7. Assignor  agrees from time to time to execute,  acknowledge  and deliver
all such  instruments  and to take all such  action  for the  purpose of further
effectuating  this Assignment and the carrying out of the terms hereof as may be
reasonably requested by Assignee.

     8. Nothing herein  contained  shall be construed as making  Assignee or its
successors  and  assigns a  mortgagee-in-possession;  nor shall  Assignee or its
successors and assigns be liable for laches or failure to collect or enforce the
Contracts or Permits.

     9. Neither the execution of this  Assignment  nor any action or inaction on
the part of Assignee under this  Assignment  shall release  Assignor from any of
its  obligations  under any or all of the  Contracts or Permits or constitute an
assumption of any such  obligations  on the part of the  Assignee.  No action or
failure to act on the part of Assignor shall  adversely  affect or limit, in any
way, the rights of Assignee under this  Assignment or, through this  Assignment,
under any and all of the  Contracts  or Permits.  Neither the  existence of this
Assignment  nor the exercise of its  privilege to collect or enforce  Assignor's
rights and interest in the Contracts and Permits hereunder shall be construed as
a waiver by  Assignee  or its  successors  and  assigns  of the right to enforce
payment of the Debt (as defined in the Deed of Trust) in strict  accordance with
the terms and provisions of the Note and other Loan Documents.

     10. This  Assignment  shall be released as, when and to the extent the Deed
of Trust is released without the need to execute any further instruments.

     11.  This  Assignment  shall be of no force or effect  with  respect to any
Contracts  or  Permits  with  respect  to  which  an  assignment  would  cause a
termination thereof without the consent of any party thereto other than Assignor
(but only to the extent such  consent has not been given),  and this  Assignment
shall be construed so as not to assign such Contracts or

                                       4
<PAGE>

Permits.  Upon  reasonable  request of Assignee,  Assignor  shall use reasonable
efforts to obtain  the  consent of such  other  party to a Major  Contract  or a
material  Permit to the  assignment  of such  Contract  or  Permit  to  Assignee
pursuant to this Assignment.

     12. The terms and provisions  hereof shall be binding upon and inure to the
benefit of Assignor and Assignee 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. 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  Assignment.  This
Assignment 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.

     13. This Assignment may be executed in any number of counterparts,  each of
which shall only be effective  upon delivery and  thereafter  shall be deemed an
original, and all of which shall be taken to be one and the same instrument. All
signature  pages of this Assignment may be detached from any counterpart of this
Agreement without  impairing the legal effect of any signatures  thereon and may
be attached to another  counterpart of this Assignment  identical in form hereto
but having attached to it one or more additional signature pages.

     14. Notwithstanding  anything to the contrary contained in this Assignment,
the  liability  of  Assignor  and its  officers,  directors,  general  partners,
managers, members and principals for the indebtedness secured hereby 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.

             [THE BALANCE OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

                                       5

<PAGE>

     IN WITNESS WHEREOF, Assignor has executed this Assignment as of the day and
year first above written.

                                    ASSIGNOR:

                                    APPLE SUITES SPE I, INC.,
                                    a Virginia corporation

                                    By:  /s/ Glade M. Knight
                                       -------------------------------
                                       Name:    Glade M. Knight
                                       Title:   President

<PAGE>

                                    EXHIBIT A

                                Legal Description

                                    [OMITTED]

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