Document:

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                                                                   EXHIBIT 10.36

                                     FORM OF
                            CASH MANAGEMENT AGREEMENT

                           Dated: as of June __, 2004

                                      among

                                  THE BORROWERS
                      LISTED ON THE SIGNATURE PAGES HERETO,
                                  as Borrowers,

                      MERRILL LYNCH MORTGAGE LENDING, INC.

                                   as Lender,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,

                                    as Agent

                                       and

                LODGIAN MANAGEMENT CORP., a Delaware corporation,
                                   as Manager

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                                     FORM OF
                            CASH MANAGEMENT AGREEMENT

            CASH MANAGEMENT AGREEMENT (this "AGREEMENT"), dated as of June __,
2004, among the Borrowers listed on the signature pages hereto, each having an
address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia
30326 (each, a "BORROWER", and collectively, "BORROWERS"), WACHOVIA BANK,
NATIONAL ASSOCIATION, having an address at 8739 Research Drive, URP4, Charlotte,
North Carolina 28288-1075 ("AGENT"), MERRILL LYNCH MORTGAGE LENDING, INC., a
Delaware corporation having an office at Four World Financial Center, New York,
New York 10080 ("LENDER"), and LODGIAN MANAGEMENT CORP., a Delaware corporation,
having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30326 ("MANAGER").

                                   WITNESSETH:

            WHEREAS, pursuant to a certain Loan and Security Agreement, dated as
of the date hereof (together with all extensions, renewals, modifications,
substitutions and amendments thereof, the "LOAN Agreement"), between the
Borrowers and Lender, Lender has made a loan to the Borrowers in the principal
amount of _________________________________________ (the "LOAN"), which Loan is
evidenced by a Promissory Note, dated as of the date hereof (together with all
extensions, renewals, modifications, restatements, replacements, substitutions,
by means of multiple notes or otherwise, and amendments thereof, collectively,
the "NOTE"), made by the Borrowers, as makers, to Lender, as payee, and secured
by, among other things, (i) those certain Mortgages/Deeds of Trust/Deeds to
Secure Debt, Assignments of Leases and Rents, Security Agreements and Fixture
Filings, each dated as of the date hereof (together with all extensions,
renewals, modifications, restatements, substitutions and amendments thereof,
each a "SECURITY INSTRUMENT" and, collectively, the "SECURITY Instruments"),
each made by a Borrower for the benefit of Lender and covering the properties as
more particularly described therein (collectively, the "PROPERTIES"), (ii) those
certain Assignments of Leases and Rents, dated as of the date hereof (together
with all extensions, renewals, modifications, restatements, substitutions and
amendments thereof, collectively, the "ASSIGNMENT OF LEASES"), made by the
applicable Borrower, as assignor, to Lender, as assignee, and (iii) the other
Loan Documents (as defined in the Loan Agreement);

            WHEREAS, pursuant to the Security Instruments and the Assignment of
Leases, the Borrowers have each granted to Lender a security interest in all of
the Borrowers' right, title and interest in, to and under the Rents (as defined
in the Security Instruments) and other revenues derived from and otherwise
attributable or allocable to the Properties, and have assigned and conveyed to
Lender all of the Borrowers' right, title and interest in, to and under the
Operating Revenues due and to become due to each of the Borrowers or to which
any of the Borrowers are now or may hereafter become entitled, arising out of
the Property or any part or parts thereof;

            WHEREAS, the Borrowers and Manager have entered into Management
Agreements with respect to the Properties pursuant to which Manager has agreed
to manage the Properties; and

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            WHEREAS, Manager has agreed to subordinate any right, title and
interest that Manager may have in and to the Operating Revenues and any other
income and revenues from the Properties to the interests of Lender under the
Loan Agreement and the Loan Documents; and

            WHEREAS, in order to fulfill all of the Borrowers' obligations under
the Loan Agreement, the Borrowers and Manager have agreed that all Operating
Revenues and other revenues from the Properties will be deposited directly into
the Deposit Account or the Lock Box Account (as such terms are hereinafter
defined), transferred to a Lock Box Account (if not deposited directly therein)
established hereunder with Agent and allocated and/or disbursed in accordance
with the terms and conditions hereof.

            NOW, THEREFORE, in consideration of the covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

            I.    DEFINITIONS

            Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Loan Agreement. As used herein, the following terms
shall have the following definitions:

            "ACCOUNTS" shall mean, collectively, the Deposit Account, the Lock
Box Account, the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds
Account, and any other accounts pledged to Lender pursuant to this Agreement or
any of the other Loan Documents.

            "AGENT" shall mean Wachovia Bank, National Association, as agent
under this Agreement, together with its successors and assigns.

            "AGREEMENT" shall mean this Cash Management Agreement among the
Borrowers, Manager, Agent and Lender, as amended, supplemented, restated or
otherwise modified from time to time.

            "APPROVED OPERATING BUDGET" shall mean, for any period, each
Borrower's Operating Budget as approved or deemed approved by Lender from time
to time in accordance with Section 5.1(D) of the Loan Agreement, setting forth
such Borrower's reasonable estimate of Operating Revenues and Operating Expenses
for the applicable Property for such period.

            "BORROWERS" as defined in the Preamble, together with their
successors and permitted assigns.

            "BUSINESS INTERRUPTION INSURANCE" as defined in Section 2.1(d).

            "CAP" means the interest rate cap agreement to be provided by the
Borrowers pursuant to Section 2.3 of the Loan Agreement.

            "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" as defined in Section
2.1(c).

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            "CASH TRAP EVENT" as defined in Section 6.8 of the Loan Agreement.

            "CASH TRAP RESERVE SUB-ACCOUNT" as defined in Section 2.1(c).

            "COLLATERAL" as defined in Section 5.1.

            "CREDIT CARD COMPANIES" as defined in Section 2.2(a).

            "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" as defined in
Section 2.2(a).

            "DEBT SERVICE SUB-ACCOUNT" as defined in Section 2.1(c).

            "DEPOSIT ACCOUNT" as defined in Section 2.1(a).

            "DEPOSIT ACCOUNT AGREEMENT" as defined in Section 2.1(a).

            "DEPOSIT BANK" as defined in Section 2.1(a).

            "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account
from all other funds held by the holding institution, which account is either
(i) an account maintained with an Eligible Bank or (ii) a segregated trust
account maintained by a corporate trust department of a federal depository
institution or a state chartered depository institution subject to regulations
regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulation ss.9.10(b), which, in either case, has corporate trust powers and is
acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

            "ELIGIBLE BANK" shall mean a bank that satisfies the Rating
Criteria.

            "EXCESS CASH FLOW" means any and all amounts available for
distribution in any calendar month after allocations and/or distribution of all
amounts required to be allocated under Sections 3.3(a)(i) through (ix) hereof.

            "EXTRAORDINARY EXPENSES" shall mean any extraordinary Operating
Expense or Capital Expenditure not set forth in the Approved Operating Budget
then in effect for the Property.

            "EXTRAORDINARY RECEIPTS" shall mean any receipts of the Borrowers
not included within the definition of Operating Revenues under the Loan
Agreement, including, without limitation, receipts from litigation proceedings
and tax certiorari proceedings.

            "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" as defined in Section 2.1(e).

            "FF&E RESERVE ACCOUNT" as defined in Section 2.1(f).

            "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

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            "IMPOSITIONS AND INSURANCE RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

            "LENDER" shall mean Merrill Lynch Mortgage Lending, Inc., together
with its successors and assigns.

            "LOCK BOX ACCOUNT" as defined in Section 2.1(b).

            "LOSS PROCEEDS ACCOUNT" as defined in Section 2.1(d).

            "MANAGER" shall mean Lodgian Management Corp., together with its
successors and permitted assigns.

            "MEZZANINE BORROWER" as defined in the Loan Agreement.

            "MEZZANINE LENDER" as defined in the Loan Agreement.

            "MEZZANINE LENDER'S PERCENTAGE" as defined in the Loan Agreement.

            "MEZZANINE LOAN" as defined in the Loan Agreement.

            "MEZZANINE LOAN AGREEMENT" means that certain Mezzanine Loan
Agreement dated as of the date hereof, between Mezzanine Lender and Mezzanine
Borrower.

            "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" as defined in Section
2.1(c).

            "MEZZANINE SERVICER" means the Servicer as such term is defined in
the Mezzanine Loan Agreement.

            "MEZZANINE SERVICING FEE" shall mean the monthly Servicing Fee (as
defined in the Mezzanine Loan Agreement) for which the Mezzanine Borrower is
responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement.

            "MINIMUM BALANCE" as defined in Section 2.1(g).

            "MINIMUM BALANCE SUB-ACCOUNT" as defined in Section 2.1(c).

            "MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment
of principal and interest on the Loan required to be paid on each Monthly
Payment Date during the term of the Loan.

            "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required to be
made to the FF&E Reserve pursuant to Section 6.4 of the Loan Agreement for any
month provided that if at the time of determination thereof the actual Operating
Revenues utilized in calculating the Monthly FF&E Payment have not been
determined for the prior calendar month (the "Measurement Month"), such
calculation shall be based upon the Operating Revenues set forth for the
Measurement Month in the applicable Operating Budget (the "Estimated Monthly
FF&E Payment"), and, upon determination of the actual Operating Revenues for the
Measurement Month, funds from the Lock Box Account in an amount equal to any
deficit between the

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Estimated Monthly FF&E Payment and the Monthly FF&E Payment required to be
allocated to the FF&E Reserve based upon the actual Operating Revenues for the
Measurement Month, shall be allocated (or if funds available in the Lock Box
Account and not otherwise required to be deposited in any other Sub-Account for
the applicable month are not sufficient to cover such deficit, paid by the
Borrowers) to the FF&E Reserve within five (5) Business Days of such
determination. Any excess of the Estimated Monthly FF&E Payment allocated to the
FF&E Reserve for the applicable month over the Monthly FF&E Payment based upon
the actual Operating Revenues for the Measurement Month shall be made available
for allocation to the other Sub-Accounts or disbursed in accordance with Section
3.3(a) hereof.

            "MONTHLY IMPOSITIONS AND INSURANCE AMOUNT" shall mean the aggregate
monthly deposit for Impositions and Insurance Premiums required to be paid
pursuant to Section 6.3 of the Loan Agreement.

            "MONTHLY MEZZANINE DEBT SERVICE PAYMENT AMOUNT" shall mean the
monthly payment of principal and interest on the Mezzanine Loan required to be
paid on each Monthly Payment Date to Mezzanine Lender pursuant to the Mezzanine
Loan Agreement.

            "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with respect
to each month, an amount equal to the Operating Expenses plus estimated sales,
use, occupancy and similar taxes relating to the Properties (excluding therefrom
Impositions, Insurance Premiums, FF&E expenditures, and management fees payable
to any Manager that is an Affiliate of the Borrowers) set forth in the Approved
Operating Budget for the applicable month of determination.

            "MONTHLY PAYMENT DATE" means the date that is the last day of each
calendar month occurring during the term of the Loan (or if such last day of
such calendar month is not a Business Day, the immediately preceding day that is
a Business Day).

            "MORTGAGE LENDER'S PERCENTAGE" as defined in the Loan Agreement.

            "OPERATING EXPENSES" as defined in the Loan Agreement.

            "OPERATING EXPENSE SUB-ACCOUNT" as defined in Section 2.1(c).

            "OPERATING REVENUES" as defined in the Loan Agreement.

            "PERMITTED INVESTMENTS" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including those issued by any Servicer, the trustee under any Securitization or
any of their respective Affiliates, payable on demand or having a maturity date
not later than the Business Day immediately prior to the date on which the
invested sums are required for payment of an obligation for which the related
Sub-Account was created and meeting one of the appropriate standards set forth
below:

                  (i)   obligations of, or obligations fully guaranteed as to
      payment of principal and interest by, the United States or any agency or
      instrumentality thereof, provided such obligations are backed by the full
      faith and credit of the United States of America including, without
      limitation, obligations of: the U.S. Treasury (all direct or

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      fully guaranteed obligations), the Farmers Home Administration
      (certificates of beneficial ownership), the General Services
      Administration (participation certificates), the U.S. Maritime
      Administration (guaranteed Title XI financing), the Small Business
      Administration (guaranteed participation certificates and guaranteed pool
      certificates), the U.S. Department of Housing and Urban Development (local
      authority bonds) and the Washington Metropolitan Area Transit Authority
      (guaranteed transit bonds); provided, however, that the investments
      described in this clause (i) must (A) have a predetermined fixed dollar
      amount of principal due at maturity that cannot vary or change, (B) if
      rated by S&P, not have an "r" highlighter affixed to their rating, (C) if
      such investments have a variable rate of interest, have an interest rate
      tied to a single interest rate index plus a fixed spread (if any) and must
      move proportionately with that index, and (D) not be subject to
      liquidation prior to their maturity;

                  (ii)  Federal Housing Administration debentures;

                  (iii) obligations of the following United States government
      sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations),
      the Farm Credit System (consolidated systemwide bonds and notes), the
      Federal Home Loan Banks (consolidated debt obligations), the Federal
      National Mortgage Association (debt obligations), the Student Loan
      Marketing Association (debt obligations), the Financing Corp. (debt
      obligations), and the Resolution Funding Corp. (debt obligations);
      provided, however, that the investments described in this clause (iii)
      must (A) have a predetermined fixed dollar amount of principal due at
      maturity that cannot vary or change, (B) if rated by S&P, not have an "r"
      highlighter affixed to their rating, (C) if such investments have a
      variable rate of interest, have an interest rate tied to a single interest
      rate index plus a fixed spread (if any) and must move proportionately with
      that index, and (D) not be subject to liquidation prior to their maturity;

                  (iv)  federal funds, unsecured certificates of deposit, time
      deposits, bankers' acceptances and repurchase agreements with maturities
      of not more than 365 days of any bank, the short term obligations of which
      at all times are rated in the highest short term rating category by each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency in the highest short term rating category and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investment would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of certificates or other securities issued
      in connection with any Securitization backed in whole or in part by the
      Loan (collectively the "CERTIFICATES"); provided, however, that the
      investments described in this clause (iv) must (A) have a -------------
      predetermined fixed dollar amount of principal due at maturity that cannot
      vary or change, (B) if rated by S&P, not have an "r" highlighter affixed
      to their rating, (C) if such investments have a variable rate of interest,
      have an interest rate tied to a single interest rate index plus a fixed
      spread (if any) and must move proportionately with that index, and (D) not
      be subject to liquidation prior to their maturity;

                  (v)   fully Federal Deposit Insurance Corporation-insured
      demand and time deposits in, or certificates of deposit of, or bankers'
      acceptances issued by, any

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      bank or trust company, savings and loan association or savings bank, the
      short term obligations of which at all times are rated in the highest
      short term rating category by each Rating Agency (or, if not rated by all
      Rating Agencies, rated by at least one Rating Agency in the highest short
      term rating category and otherwise acceptable to each other Rating Agency,
      as confirmed in writing that such investment would not, in and of itself,
      result in a downgrade, qualification or withdrawal of the initial or, if
      higher, then current ratings assigned to any class of Certificates);
      provided, however, that the investments described in this clause (v) must
      (A) have a predetermined fixed dollar of principal due at maturity that
      cannot vary or change, (B) if rated by S&P, not have a "r" highlighter
      affixed to their rating, (C) if such investments have a variable rate of
      interest, have an interest rate tied to a single interest rate index plus
      a fixed spread (if any) and must move proportionately with that index, and
      (D) not be subject to liquidation prior to their maturity;

                  (vi)  debt obligations with maturities of not more than 365
      days and at all times rated by each Rating Agency (or, if not rated by all
      Rating Agencies, rated by at least one Rating Agency and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investments would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to the Certificates) in its highest long-term unsecured
      debt rating category; provided, however, that the investments described in
      this clause (vi) must (A) have a predetermined fixed dollar amount of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have an "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, (D) not be subject to liquidation prior
      to their maturity, and (E) if such investment has a maturity of (1) less
      than one month, have a long-term rating of at least "A2" by Moody's, (2)
      up to three months, have a long-term rating of at least "Aa" by Moody's,
      (3) up to six months, have a long-term rating of at least "Aa3" by
      Moody's, and (4) over six months, have a long-term rating of at least
      "Aaa" by Moody's;

                  (vii) commercial paper (including both non-interest-bearing
      discount obligations and interest-bearing obligations payable on demand or
      on a specified date not more than one year after the date of issuance
      thereof) with maturities of not more than 365 days and that at all times
      is rated by each Rating Agency (or, if not rated by all Rating Agencies,
      rated by at least one Rating Agency and otherwise acceptable to each other
      Rating Agency, as confirmed in writing that such investment would not, in
      and of itself, result in a downgrade, qualification or withdrawal of the
      initial or, if higher, then current ratings assigned to any class of
      Certificates) in its highest short-term unsecured debt rating; provided,
      however, that the investments described in this clause (vii) must (A) have
      a predetermined fixed dollar amount of principal due at maturity that
      cannot vary or change, (B) if rated by S&P, not have a "r" highlighter
      affixed to their rating, (C) if such investments have a variable rate of
      interest, have an interest rate tied to a single interest rate index plus
      a fixed spread (if any) and must move proportionately with that index, and
      (D) not be subject to liquidation prior to their maturity;

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                  (viii) units of taxable money market funds or mutual funds,
      which funds are regulated investment companies, seek to maintain a
      constant net asset value per share and have the highest rating from each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency and otherwise acceptable to each other Rating Agency, as
      confirmed in writing that such investment would not, in and of itself,
      result in a downgrade, qualification or withdrawal of the initial or, if
      higher, then current ratings assigned to any class of Certificates) for
      money market funds or mutual funds; and

                  (ix)  any other security, obligation or investment which has
      been approved as a Permitted Investment in writing by (a) Lender and (b)
      each Rating Agency, as evidenced by a written confirmation that the
      designation of such security, obligation or investment as a Permitted
      Investment will not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of Certificates by such Rating Agency;

provided, however, that such instrument continues to qualify as a "CASH FLOW
INVESTMENT" pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and no obligation or security shall be a Permitted Investment
if (A) such obligation or security evidences a right to receive only interest
payments or (B) the right to receive principal and interest payments on such
obligation or security are derived from an underlying investment that provides a
yield to maturity in excess of 120% of the yield to maturity at par of such
underlying investment; and provided, further, no obligation or security, other
than an obligation or security constituting real estate assets, cash, cash items
or Government securities pursuant to Code Section 856(c)(4)(A), shall be a
Permitted Investment if the value of such obligation or security exceeds ten
percent (10%) of the total value of the outstanding securities of any one
issuer.

            "RATING CRITERIA" with respect to any Person, shall mean that (i)
the short-term unsecured debt obligations of such Person are rated at least
"A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such
Person for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa3" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

            "SERVICING FEE" shall mean the monthly Servicing Fee (as defined in
the Loan Agreement) for which the Borrowers are responsible under Section 2.11
of the Loan Agreement.

            "SPECIAL PAYMENTS" shall mean (x) any Release Price paid pursuant to
the Loan Agreement, (y) any principal prepayments made pursuant to Sections
2.5(B)(iii), 5.5(C) or 6.8 of the Loan Agreement, and (z) any Prepayment
Consideration due on any of the foregoing principal prepayments received
pursuant to the terms of the Loan Agreement.

            "SUB-ACCOUNTS" shall mean, collectively, the Debt Service
Sub-Account, the Impositions and Insurance Reserve Sub-Account, the Mezzanine
Loan Debt Service Sub-Account, the Capital Improvement Reserve Sub-Account, the
Hazardous Materials Remediation Reserve Sub- Account, the Extraordinary Receipts
Sub-Account, the Cash Trap Reserve Sub-

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Account, the Operating Expense Sub-Account, the Minimum Balance Sub-Account and
any other sub-accounts of the Lock Box Account which may hereafter be
established by Lender hereunder.

            "UCC" as defined in Section 5.1(a)(iv).

            II.   THE ACCOUNTS

            SECTION 2.1 ESTABLISHMENT OF DEPOSIT ACCOUNT, LOCK BOX ACCOUNT AND
SUB-ACCOUNTS.

            (a)   DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts (collectively, the "DEPOSIT ACCOUNT") shall be established at
the Borrowers' sole cost and expense with financial institutions approved by
Lender (collectively, the "DEPOSIT BANK"), each pursuant to an agreement
(collectively, the "DEPOSIT ACCOUNT AGREEMENT") in form and substance reasonably
acceptable to Lender, executed and delivered by each Borrower and the applicable
Deposit Bank. Among other things, the Deposit Account Agreement shall provide
that the Borrowers shall have no access to or control over the Deposit Account,
and that all available funds on deposit in the Deposit Account shall be
deposited by wire transfer (or transfer via the ACH System) on each Business Day
by the Deposit Bank into the Lock Box Account.

            (b)   LOCK BOX ACCOUNT. On or before the Closing Date, an Eligible
Account shall be established with Agent for the purposes specified herein, which
shall be entitled "Lock Box Account for the benefit of Merrill Lynch Mortgage
Lending, Inc., its successors and assigns, as secured party" (said account, and
any account replacing the same in accordance with this Agreement, the "LOCK BOX
ACCOUNT"). The Lock Box Account shall be under the sole dominion and control of
Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as may be expressly provided herein.

            Any amounts that Lender may hold in reserve pursuant to the Loan
Agreement may be held by Lender in the Lock Box Account (including in a
Sub-Account thereof) or may be held in another account or manner as specified in
Articles VI or VII of the Loan Agreement.

            (c)   SUB-ACCOUNTS OF THE LOCK BOX ACCOUNT. The Lock Box Account
shall be deemed to contain, among others, the following Sub-Accounts (which may
be maintained as separate ledger accounts):

                  (i)   "DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account
      established for the purpose of depositing the amounts required for
      payments of principal and interest under the Loan and all other amounts
      then due under the Note and the Loan Agreement;

                  (ii)  "IMPOSITION AND INSURANCE RESERVE SUB-ACCOUNT" shall
      mean the Sub-Account established for the purpose of depositing the sums
      required to be deposited pursuant to Section 6.3 of the Loan Agreement;

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                  (iii) "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the sums required to
      be deposited pursuant to Section 6.5 of the Loan Agreement;

                  (iv)  "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT"
      shall mean the Sub-Account established for the purpose of depositing sums
      required to be deposited pursuant to Section 6.6 of the Loan Agreement;

                  (v)   "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the amounts required
      for payments of the Monthly Mezzanine Debt Service Payment Amount;

                  (vi)  "CASH TRAP RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing Excess Cash Flow
      when required to be deposited pursuant to Section 6.8 of the Loan
      Agreement;

                  (vii) "OPERATING EXPENSE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the Monthly
      Operating Expense Budget Amount, Extraordinary Expenses approved by
      Lender, if any, and fees due to the Manager; and

                  (viii) "MINIMUM BALANCE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing and maintaining the
      Minimum Balance as and to the extent required under Section 2.1(g) hereof.

            (d)   If the proceeds of any business interruption or rent loss
insurance maintained under Section 5.4 of the Loan Agreement (any such
insurance, "BUSINESS INTERRUPTION INSURANCE") paid upon the occurrence of any
fire or casualty to any Property shall be paid in a lump sum (rather than on a
monthly basis), the Borrowers and Lender shall establish a separate Eligible
Account with Agent hereunder entitled "Loss Proceeds Account for the benefit of
Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured
party" (said account, the "LOSS PROCEEDS ACCOUNT") for deposit of such Business
Interruption Insurance proceeds and such proceeds shall be held, allocated and
disbursed in accordance with the terms and conditions hereof and of the Loan
Agreement. The Loss Proceeds Account shall be under the sole dominion and
control of Lender and/or its designee, including any Servicer of the Loan, and
the Borrowers shall have no rights to control or direct the investment or
payment of funds therein except as expressly provided herein.

            (e)   If any Extraordinary Receipts are received by any Borrower,
such amounts shall be paid to the Lock Box Account to be retained in a
subaccount thereof (the "EXTRAORDINARY RECEIPTS SUB-ACCOUNT"). Amounts held in
the Extraordinary Receipts Sub-Account shall be disbursed to the Lock Box
Account and allocated and distributed in accordance with Section 3.3 upon
receipt by Lender of evidence reasonably satisfactory to Lender that (x) with
respect to Extraordinary Receipts received in connection with any pending
litigation, action, or similar matter, such action has been concluded in favor
of the Borrowers and no appeal has been timely filed within the applicable
appeal period, (y) with respect to Extraordinary Receipts received with respect
to work at, or other conditions with respect to, any of the Properties, the

                                       10
<PAGE>

item of work or other condition has been completed or corrected and paid for to
the reasonable satisfaction of Lender, and (z) with respect to Extraordinary
Receipts received in any other circumstance, the Borrowers are not liable
directly, or indirectly, to refund or repay any such amounts; provided however,
all Extraordinary Receipts with respect to lease termination payments, advance
booking terminations, and similar payments or fees, shall be retained in the
Extraordinary Receipts Sub-Account and disbursed in equal monthly installments
during the period of time for which such payments relate in accordance with
Section 3.3. The Extraordinary Receipts Sub-Account shall be under the sole
dominion and control of Lender and/or its designee, including any Servicer of
the Loan, and the Borrowers shall have no rights to control or direct the
investment or payment of funds therein except as expressly provided herein.

            (f)   On or before the Closing Date, the Borrowers shall establish a
separate Eligible Account hereunder entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as
secured party" (said account, the "FF&E RESERVE ACCOUNT") with Agent for the
purpose of depositing Monthly FF&E Reserve Payments pursuant to Section 6.4 of
the Loan Agreement, to be held, allocated and disbursed in accordance with the
terms and conditions hereof and of the Loan Agreement. The FF&E Reserve Account
shall be under the sole dominion and control of Lender and/or its designee,
including any Servicer of the Loan, and the Borrowers shall have no rights to
control or direct the investment or payment of funds therein except as expressly
provided herein and in the Loan Agreement. Notwithstanding the foregoing, the
Borrowers shall, in accordance with the terms of this Agreement and the Loan
Agreement, have access to and the right to withdraw funds held in the FF&E
Reserve Account on or prior to (x) the occurrence and during the continuance of
an Event of Default, or (y) the failure of the Borrowers or Manager to comply
with the reporting requirements set forth in Section 5.1(A)(v) of the Loan
Agreement, at which time Agent, upon receipt of notice from Lender, shall (i)
cease to honor checks drawn by Manager or any Borrower on the FF&E Reserve
Account, (ii) cease to disburse funds from the FF&E Reserve Account to either
the Manager or the Borrowers except in accordance with written instructions
received from Lender, and (iii) deposit the amounts in the FF&E Reserve Account,
together with any funds from time to time held or deposited or received into the
FF&E Reserve Account, in accordance with Lender's instructions from time to time
on the day such instructions are received, if such instructions are received
prior to 12:00 p.m. on such day, or, if received after 12:00 p.m., on the
following Business Day. The Borrowers shall not withdraw any funds from the FF&E
Reserve Account in violation of this Agreement or the Loan Agreement.

            (g)   Upon the occurrence and during the continuance of a Cash Trap
Event or an Event of Default, the Borrowers shall be required to deposit, from
and at the time of the allocations from the Lock Box Account pursuant to Section
3.3(a)(ix) hereof, and maintain in the Minimum Balance Sub-Account an amount
equal to $50,000 (the "MINIMUM BALANCE"). In the event that, during the
continuance of a Cash Trap Event, funds available in a Deposit Account are
insufficient to pay the amount of any checks deposited into such Deposit Account
which are returned for insufficient or uncollected funds (collectively
"CHARGEBACKS"), and such Chargebacks are required to be paid by the applicable
Borrower to the applicable Deposit Account Bank pursuant to the terms of the
applicable Deposit Account Agreement, provided that no Event of Default exists,
funds shall be made available from the Minimum Balance Sub-Account to the
applicable Borrower to pay the amount of such Chargebacks due to such Deposit
Account Bank (or to reimburse the applicable Borrower for any such amounts as
may have been

                                       11
<PAGE>

previously paid by or on behalf of such Borrower from other funds on account of
any Chargebacks at a time when insufficient amounts were available therefor in
the Minimum Balance Sub-Account) promptly after delivery to Lender of evidence
reasonably satisfactory to Lender that such amounts are due (or have been paid
by or on behalf of the applicable Borrower). In the event that during a Cash
Trap Event, as a result of any such disbursement or otherwise, the Minimum
Balance Sub-Account shall contain less than the Minimum Balance, the Borrowers
shall be required to deposit such deficiency from and at the time of allocations
from the Lock Box Account pursuant to Section 3.3(a)(ix) hereof.

            SECTION 2.2 DEPOSITS INTO ACCOUNTS. The Borrowers and Manager
represent, warrant and covenant that:

            (a)   Each Borrower and Manager shall cause all Operating Revenues
and other income and revenues received by such Borrower or Manager to be
deposited directly into the Deposit Account for each applicable Property. The
Borrowers shall obtain an agreement (each, a "CREDIT CARD RECEIVABLES PAYMENT
DIRECTION LETTER") from each of the Persons paying or disbursing credit card
receivables (each, a "CREDIT CARD COMPANY" and collectively, the "CREDIT CARD
COMPANIES"), in substantially the form of EXHIBIT A attached hereto or as
otherwise approved by Lender in its reasonable discretion, pursuant to which the
Credit Card Companies agree to pay all credit card receivables for the
Properties directly into the Lock Box Account, and acknowledge and agree that
Lender shall have a first priority perfected security interest in such credit
card receivables. Pursuant to the Deposit Account Agreement, all available funds
on deposit in the applicable Deposit Account shall be deposited directly by the
Deposit Bank into the Lock Box Account by wire transfer on each Business Day.

            (b)   If any Borrower or Manager receives any Operating Revenues or
other income or revenues from any Property, or any Extraordinary Receipts, then
such receipt shall not constitute a Default provided (i) such amounts shall be
deemed to be Collateral and shall be held in trust for the benefit, and as the
property, of Lender, and (ii) such Borrower or Manager shall deposit such
amounts into the applicable Deposit Account within two (2) Business Days of
receipt.

            (c)   Without the prior written consent of Lender, which shall not
be unreasonably withheld, delayed or conditioned, neither the Borrowers nor
Manager shall (i) terminate, amend, revoke or modify any Credit Card Receivables
Payment Direction Letter in any manner whatsoever, or (ii) direct or cause any
Credit Card Company to pay any amount in any manner other than as provided in
the related Credit Card Receivables Payment Direction Letter, unless a
replacement Credit Card Receivables Payment Direction Letter in form reasonably
acceptable to Lender is executed and delivered to Lender by any proposed
replacement Credit Card Company prior to termination of the then effective
Credit Card Receivables Payment Direction Letter.

            (d)   Each Borrower and Manager shall also cause the proceeds of any
Business Interruption Insurance to be deposited directly into the Lock Box
Account as same are paid (or, if any such proceeds are received by such Borrower
or Manager, same shall be deposited into the Lock Box Account within two (2)
Business Days after receipt thereof) and such proceeds shall be allocated and
disbursed in accordance with Section 3.3 hereof. If the proceeds of any such

                                       12
<PAGE>

Business Interruption Insurance are paid in a lump sum, such proceeds shall be
deposited into the Loss Proceeds Account. Agent shall cause monthly amounts to
be transferred from the Loss Proceeds Account to the Lock Box Account as
directed by Lender (based upon a ratable allocation of such proceeds over the
casualty restoration period as reasonably determined by Lender) on the first
(1st) Business Day of each calendar month during the period of restoration of
the Property, and after transfer of same to the Lock Box Account, such amounts
shall be allocated and disbursed in accordance with Section 3.3 hereof.

            (e)   The Borrowers and Manager shall also cause any payments and
proceeds payable to the Borrowers under any Cap entered into by or for the
benefit of the Borrowers and pledged to Lender in accordance with the terms of
the Loan Agreement to be deposited directly into the Lock Box Account by the
applicable Cap Provider (or, if any such proceeds are received by any Borrower
or Manager, same shall be deposited into the Lock Box Account within two (2)
Business Days after receipt thereof) and such proceeds shall be allocated,
disbursed and applied in accordance with Section 3.3 hereof.

            SECTION 2.3 ACCOUNT NAME. The Accounts shall each be in the names
set forth herein; provided, however, that if Lender transfers or assigns the
Loan, Agent, at Lender's request (with respect to the Accounts other than the
Deposit Account), and each Deposit Bank (with respect to its Deposit Account)
shall change the name of each Account to the name of the transferee or assignee.
If Lender retains a Servicer to service the Loan, Agent, at Lender's request,
shall change the name of each Account to the name of Servicer, as agent for
Lender.

            SECTION 2.4 ELIGIBLE ACCOUNTS/CHARACTERIZATION OF ACCOUNTS. The
Borrowers and Agent shall maintain each Account (other than the Deposit Account)
as an Eligible Account. Each Account (other than the Deposit Account) is and
shall be treated as a "SECURITIES ACCOUNT" as such term is defined in Section
8-501(a) of the UCC. Agent hereby agrees that each item of property (whether
investment property, financial asset, securities, securities entitlement,
instrument, cash or other property) credited to each Account shall be treated as
a "FINANCIAL ASSET" within the meaning of Section 8-102(a)(9) of the UCC. Agent
shall, subject to the terms of this Agreement, treat Lender as entitled to
exercise the rights that comprise any financial asset credited to each Account.
All securities or other property underlying any financial assets credited to
each Account (other than cash) shall be registered in the name of Agent,
indorsed to Agent or in blank or credited to another securities account
maintained in the name of Agent and in no case will any financial asset credited
to any Account be registered in the name of any Borrower, payable to the order
of any Borrower or specially indorsed to any Borrower.

            SECTION 2.5 PERMITTED INVESTMENTS. Sums on deposit in the Accounts
may, at the Borrowers' election, be invested in Permitted Investments, provided
that, notwithstanding the foregoing, in no event will funds in the Deposit
Account be subject to any investment. Except during the existence of any Event
of Default, the Borrowers shall have the right to direct Agent to invest sums on
deposit in the Accounts in Permitted Investments. After an Event of Default and
during the continuance thereof, Lender may direct Agent to invest sums on
deposit in the Accounts in Permitted Investments as Lender shall determine in
its sole discretion. The Borrowers hereby irrevocably authorize and direct Agent
to apply any income earned from Permitted Investments to the respective
Accounts. The amount of actual losses sustained on a

                                       13
<PAGE>

liquidation of a Permitted Investment shall be deposited into the Lock Box
Account by the Borrowers no later than three (3) Business Days following such
liquidation. The Borrowers shall be responsible for payment of any federal,
state or local income or other tax applicable to income earned from Permitted
Investments. The Accounts shall be assigned the federal tax identification
number of the applicable Borrowers, which numbers are set forth on the signature
page hereof. Any interest, dividends or other earnings which may accrue on the
Accounts shall be added to the balance in the applicable Account and allocated
and/or disbursed in accordance with the terms hereof.

            III.  DEPOSITS

            SECTION 3.1 INITIAL DEPOSITS.

            (a)   The Borrowers shall deposit in the Debt Service Sub-Account on
the date hereof the amount of **[$___________]**.

            (b)   The Borrowers shall deposit in the Impositions and Insurance
Reserve Sub-Account on the date hereof the amount of **[$_________________]**.

            (c)   The Borrowers shall deposit in the Hazardous Materials
Remediation Reserve Sub-Account on the date hereof the amount of
**[$________________]**.

            (d)   The Borrowers shall deposit in the FF&E Reserve Account on the
date hereof the amount of **[$___________________]**.

            (e)   The Borrowers shall deposit in the Capital Improvement Reserve
Sub-Account on the date hereof the amount of **[$______________]**.

            SECTION 3.2 ADDITIONAL DEPOSITS; SPECIAL PAYMENTS. The Borrowers
shall make such additional deposits into the Accounts as may be required by the
Loan Agreement. In addition, any Special Payments received by Lender under the
Loan Agreement, together with interest thereon through the immediately following
Payment Date pursuant to the Loan Agreement and the Mezzanine Loan Agreement,
shall be deposited by Lender in the Lock Box Account and shall, at any time
other than after the occurrence and during the continuance of an Event of
Default, be distributed by Agent on the immediately following Monthly Payment
Date, or on such earlier date as may be reasonably requested by Lender, as
follows: (i) to Lender, the Mortgage Lender's Percentage of such Special Payment
together with any interest due thereon pursuant to the terms of the Loan
Agreement, and (ii) to Mezzanine Lender, the Mezzanine Lender's Percentage of
such Special Payment together with any interest due thereon pursuant to the
terms of the Mezzanine Loan Agreement. Lender and Mezzanine Lender shall apply
such portions of the Special Payments as provided in the Loan Agreement and in
the Mezzanine Loan Agreement, as applicable.

            SECTION 3.3 ALLOCATION OF FUNDS FROM THE LOCK BOX ACCOUNT.

            (a)   At any time other than after the occurrence and during the
continuance of an Event of Default, Agent shall allocate and deposit, as
applicable, all available funds on

                                       14
<PAGE>

deposit in the Lock Box Account on each Business Day of each calendar month (or
such other period of time as set forth below) in the following amounts and order
of priority:

                  (i)   First, to the Impositions and Insurance Reserve
      Sub-Account, the Monthly Impositions and Insurance Amount for the next
      Monthly Payment Date;

                  (ii)  Second, (A) to the Agent, as Servicer, the monthly
      Servicing Fee on the Loan and then (B) to the Debt Service Sub-Account,
      the Monthly Debt Service Payment Amount due under the Loan Agreement for
      the next Monthly Payment Date;

                  (iii) Third, to the FF&E Reserve Account, the Monthly FF&E
      Payment for the next Monthly Payment Date;

                  (iv)  Fourth, to the Operating Expense Sub-Account, funds
      sufficient to pay the Monthly Operating Expense Budget Amount for the next
      calendar Month;

                  (v)   Fifth, to the Operating Expense Sub-Account, funds in an
      amount necessary to pay Extraordinary Expenses approved by Lender, if any;

                  (vi)  Sixth, to the Operating Expense Sub-Account, subject to
      the terms and conditions of the Assignment of Management Agreement, any
      management fees due and owing to Manager which have not previously been
      paid to Manager, together with any fees payable to Manager for the next
      calendar month pursuant to the Management Agreement not otherwise paid
      pursuant to (iv) above;

                  (vii) Seventh, to the Debt Service Sub-Account any late
      payment charges, default interest, and any other amounts (other than
      interest and principal paid pursuant to (ii) above) then due and owing
      under the Loan Agreement;

                  (viii) Eighth, for so long as the Mezzanine Loan is
      outstanding, (A) to the Mezzanine Servicer, the monthly Mezzanine
      Servicing Fee, and then (B) to the Mezzanine Loan Debt Service
      Sub-Account, an amount equal to the Monthly Mezzanine Debt Service Payment
      Amount due for the next Monthly Payment Date under the Mezzanine Loan
      Agreement;

                  (ix)  Ninth, if a Cash Trap Event shall have occurred and is
      continuing and the balance then held in the Minimum Balance SubAccount is
      less than the Minimum Balance, to the Minimum Balance Sub-Account until
      such Sub-Account contains the Minimum Balance;

                  (x)   Tenth, if a Cash Trap Event shall have occurred and is
      continuing, any amounts remaining in the Lock Box Account after deposits
      for items (i) through (ix) above shall be deposited into the Cash Trap
      Reserve Sub-Account; and

                  (xi)  Eleventh, if no Cash Trap Event shall have occurred and
      is continuing, any amounts remaining in the Lock Box Account after
      deposits for items (i) through (viii) above shall be paid to, or as
      directed by, the Borrowers.

                                       15
<PAGE>

            (b)   If there are insufficient funds in the Lock Box Account for
the deposits required by Sections 3.3(a)(i) through (iii) and (vii) above, the
Borrowers shall deposit such deficiency into the Lock Box Account on or before
the applicable Monthly Payment Date. Except as expressly provided in Section 6.8
of the Loan Agreement, under no circumstances shall Lender be required to
utilize the Cash Trap Reserve or funds in any other Sub-Account to cure any
deficiencies in any other Sub-Accounts. The deposit by the Borrowers of any such
deficiency pursuant to this Section 3.3(b) shall satisfy the obligation of the
Borrowers to make the related deposit under the Loan Agreement.

            (c)   The Borrowers shall use, or caused to be used, all
disbursements made to it under Sections 3.3(a)(iv) and (v) solely to pay
Operating Expenses in accordance with the Approved Operating Budget and to pay
Extraordinary Expenses for which Lender has approved disbursements under Section
3.3(a)(v) above.

            (d)   Notwithstanding anything to the contrary contained herein,
Lender shall not be obligated to make any disbursement from the Lock Box Account
(under Sections 3.3(a)(iv) and (v) or otherwise) to pay for any costs or
expenses (including legal fees) in connection with any dispute or defense of the
Borrowers under any of the Loan Documents.

            (e)   Upon the expiration of a Cash Trap Event in accordance with
Section 6.8 of the Loan Agreement, any funds remaining in the Cash Trap Reserve
Sub-Account and in the Minimum Balance Sub-Account will be disbursed pursuant to
Section 6.8 of the Loan Agreement.

            (f)   Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, all funds on
deposit in the Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, and
any Loss Proceeds Account shall be disbursed to or as directed by Lender, it
being agreed that application of any such amounts shall be in Lender's sole
discretion and shall not be subject to the terms of Section 3.3(a) hereof.

            (g)   Except as otherwise agreed to by Lender in writing, no funds
shall be withdrawn from the FF&E Reserve Account other than in accordance with
the CapEx/FF&E Budget.

            SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The
Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation
of any variances of ten percent (10%) or more between budgeted (as set forth in
the Approved Operating Budget) and actual Operating Expense amounts for any
month in the aggregate, and (b) with respect to any individual item with a cost
of $10,000 or more and not otherwise covered by the Approved Operating Budget,
all invoices or other backup requested by Lender to substantiate the amount
disbursed to the Borrowers pursuant to Section 3.3(a)(iv) and (v).

            IV.   PAYMENT OF FUNDS FROM SUB-ACCOUNTS

            SECTION 4.1 PAYMENTS FROM SUB-ACCOUNTS.

            (a)   Impositions and Insurance Reserve Sub-Account. Lender shall
have the right to withdraw amounts on deposit in the Impositions and Insurance
Reserve Sub-Account to

                                       16
<PAGE>

pay (or reimburse any Borrower for repayment of) Impositions and Insurance
Premiums in accordance with the Loan Agreement.

            (b)   Debt Service Sub-Account. Lender shall have the right to
withdraw amounts from the Debt Service Sub-Account to pay: (i) default interest
and late charges, if any, and any amounts then due and payable under the Note
and the Loan Agreement, and (ii) the Monthly Debt Service Payment Amount on each
Monthly Payment Date on which same are due and payable under the Loan Agreement.

            (c)   Operating Expense Sub-Account. Funds deposited into the
Operating Expense Sub-Account pursuant to Sections 3.3(a)(iv) through (vi) shall
be distributed to the Borrowers on each Business Day.

            (d)   Mezzanine Loan Debt Service Sub-Account. On each Monthly
Payment Date, all funds held in the Mezzanine Loan Debt Service Sub-Account
shall be distributed to Mezzanine Lender, and such distribution shall be deemed
to have been distributed by the Borrowers to the Mezzanine Borrowers and shall
be applied by Mezzanine Borrowers to the obligations under the Mezzanine Loan
Agreement.

            (e)   Distributions to the Borrowers. Following the date in each
month that Borrower has made all required deposits pursuant to Section 3.3(i)
through (viii), to the extent that Excess Cash Flow is to be distributed to the
Borrowers pursuant to Section 3.3(a)(xi) above, such funds shall be distributed
to the Borrowers on each Business Day.

            (f)   FF&E Reserve Account. Distributions from the FF&E Reserve
Account will be made in accordance with Section 2.1(f).

            (g)   Minimum Balance Sub-Account. Distributions from the Minimum
Balance Sub-Account will be made in accordance with Section 2.1(g).

            SECTION 4.2 REQUESTS FOR WITHDRAWALS FROM THE HAZARDOUS MATERIALS
REMEDIATION RESERVE SUB-ACCOUNT AND CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT.
Agent shall disburse funds on deposit in the Hazardous Materials Remediation
Reserve Sub-Account and the Capital Improvement Reserve Sub-Account within five
(5) Business Days after written request made from time to time (but not more
often than twice per calendar month) by the Borrowers in accordance with the
terms and conditions of Section 6.7 of the Loan Agreement.

            SECTION 4.3 SOLE DOMINION AND CONTROL. The Borrowers and Manager
acknowledge and agree that the Accounts are subject to the sole dominion,
control and discretion of Lender, its authorized agents or designees, including
Agent, subject to the terms hereof and the Loan Agreement. Neither the Borrowers
nor Manager shall have any right of withdrawal with respect to any Account
except, subject to the terms and conditions hereof and the Loan Agreement, the
FF&E Reserve Account. Agent shall have the right and agrees to comply with the
instructions of Lender with respect to the Accounts without the further consent
of the Borrowers or Manager. Agent shall comply with all "entitlement orders"
(as defined in Section 8-102(a)(8) of the UCC) and instructions originated by
Lender without further consent by the Borrowers or any other Person.

                                       17
<PAGE>

            V.    PLEDGE OF ACCOUNTS

            SECTION 5.1 SECURITY FOR OBLIGATIONS. (a) To secure the full and
punctual payment and performance of all Obligations of the Borrowers under the
Loan Agreement, the Note, the Security Instruments, this Agreement and all other
Loan Documents, the Borrowers hereby grant to Lender a first priority continuing
security interest in and to the following property of the Borrowers, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (all of the same, collectively, the "COLLATERAL"):

                  (i)   the Deposit Account, the Lock Box Account, each of the
      Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds Account and all
      cash, checks, drafts, certificates and instruments, if any, from time to
      time deposited or held in the Lock Box Account, each of the Sub-Accounts,
      any Loss Proceeds Account and the FF&E Reserve Account, including, without
      limitation, all deposits or wire transfers made to the Deposit Account,
      the Lock Box Account, each of the Sub-Accounts, the FF&E Reserve Account,
      and any Loss Proceeds Account;

                  (ii)  any and all amounts invested in Permitted Investments;

                  (iii) all interest, dividends, cash, instruments and other
      property from time to time received, receivable or otherwise payable in
      respect of, or in exchange for, any or all of the foregoing; and

                  (iv)  to the extent not covered by clauses (i), (ii) or (iii)
      above, all "proceeds" (as defined under the Uniform Commercial Code as in
      effect in the State of New York (the "UCC")) of any or all of the
      foregoing.

            (b)   Lender and Agent, as agent for Lender, shall have with respect
to the Collateral, in addition to the rights and remedies herein set forth, all
of the rights and remedies available to a secured party under the UCC, as if
such rights and remedies were fully set forth herein.

            SECTION 5.2 RIGHTS ON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Lender shall promptly notify Agent of such
Event of Default and, without notice from Lender, (a) the Borrowers shall have
no further right in respect of (including, without limitation, the right to
instruct Lender or Agent to transfer from) the Accounts, (b) Lender may direct
Agent to liquidate and transfer any amounts then invested in Permitted
Investments to the Accounts or reinvest such amounts in other Permitted
Investments as Lender may reasonably determine is necessary to perfect or
protect any security interest granted or purported to be granted hereby or to
enable Agent, as agent for Lender, or Lender to exercise and enforce Lender's
rights and remedies hereunder with respect to any Collateral, and (c) Lender may
apply any Collateral to any Obligations in such order of priority as Lender may
determine. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Lender to the payment of the Obligations in such
priority and proportions as Lender in its discretion shall deem proper.

            SECTION 5.3 FINANCING STATEMENT; FURTHER ASSURANCES. Simultaneously
herewith, the Borrowers shall deliver to Lender for filing a financing statement
or statements in

                                       18
<PAGE>

connection with the Collateral in the form reasonably required by Lender to
properly perfect Lender's security interest therein to the extent a security
interest in the Collateral may also be perfected by filing. The Borrowers agree
that at any time and from time to time, at the expense of the Borrowers, the
Borrowers will promptly execute and deliver all further instruments and
documents, and take all further actions, that may be reasonably necessary, or
that Agent or Lender may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby (including, without
limitation, any security interest in and to any Permitted Investments) or to
enable Agent or Lender to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. In the event of any change in name, identity or
structure of any Borrower, such Borrower shall notify Lender thereof and
promptly after Lender's reasonable request shall file and record, or deliver to
Lender, such UCC financing statements (if any) as are necessary to maintain the
priority of Lender's lien upon and security interest in the Collateral, and
shall pay all expenses and fees in connection with the filing and recording
thereof. If Lender shall require the filing or recording of additional UCC
financing or continuation statements, the Borrowers shall, promptly after
request, execute, if necessary, file and record such UCC financing or
continuation statements as Lender shall deem reasonably necessary, and shall pay
all reasonable expenses and fees in connection with the filing and recording
thereof.

            SECTION 5.4 TERMINATION OF AGREEMENT. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations. Upon payment and
performance in full of the Obligations, this Agreement shall terminate and the
Borrowers shall be entitled to the return, at their expense, of such of the
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof, and Agent and/or Lender shall execute such instruments and
documents as may be reasonably requested by the Borrowers to evidence such
termination and the release of the lien hereof including, without limitation,
letters to Credit Card Companies, as applicable, prepared by the Borrowers and
reasonably acceptable to Lender rescinding the instructions set forth in the
Credit Card Receivables Payment Direction Letter and UCC-3 termination
statements.

            VI.   RIGHTS AND DUTIES OF LENDER AND AGENT

            SECTION 6.1 REASONABLE CARE. Beyond the exercise of reasonable care
in the custody thereof or as otherwise expressly provided herein, neither Agent
nor Lender shall have any duty as to any Collateral in its possession or control
as agent therefor or bailee thereof or any income thereon or the preservation of
rights against any Person or otherwise with respect thereto. Agent and Lender
each shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Agent or Lender accords its own
property, it being understood that Agent and/or Lender shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in value thereof, by reason of the act or omission of Agent or
Lender, its Affiliates, agents, employees or bailees, except to the extent that
such loss or damage results from such Person's gross negligence or willful
misconduct, provided that nothing in this Article VI shall be deemed to relieve
Agent from the duties and standard of care which, as a commercial bank, it
generally owes to depositors. Neither Lender nor Agent shall have any liability
for any loss resulting from the investment of funds in Permitted Investments in
accordance with the terms and conditions of this Agreement.

                                       19
<PAGE>

            SECTION 6.2 INDEMNITY. Agent, in its capacity as agent hereunder,
shall be responsible for the performance only of such duties as are specifically
set forth herein, and no duty shall be implied from any provision hereof. Agent
shall not be under any obligation or duty to perform any act which would involve
it in expense or liability or to institute or defend any suit in respect hereof,
or to advance any of its own monies. The Borrowers shall indemnify and hold
Agent and Lender, their respective employees, officers, directors and agents
harmless from and against any loss, liability, cost or damage (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
Agent or Lender in connection with the transactions contemplated hereby, except
to the extent that such loss or damage results from such Person's gross
negligence or willful misconduct. The foregoing indemnity shall survive the
termination of this Agreement and the resignation and removal of Agent.

            SECTION 6.3 RELIANCE. Agent shall be protected in acting upon any
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other paper, document or signature believed by it to be genuine, and it may
be assumed that any person purporting to act on behalf of any Person giving any
of the foregoing in connection with the provisions hereof has been duly
authorized to do so. Agent may consult with legal counsel, and the advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken or suffered by it hereunder and in good faith in
accordance therewith. Agent shall not be liable for any act or omission done or
omitted to be done by Agent in reliance upon any instruction, direction or
certification received by Agent and without gross negligence or willful or
reckless misconduct. Agent shall be entitled to execute any of the powers
hereunder or perform any duties hereunder either directly or through agents or
attorneys; provided, however, that the execution of such powers by any such
agents or attorneys shall not diminish, or relieve Agent for, responsibility
therefor to the same degree as if Agent itself had executed such powers.

            SECTION 6.4 RESIGNATION OF AGENT.

            (a)   Agent shall have the right to resign as Agent hereunder upon
sixty (60) days' prior written notice to the Borrowers and Lender, and in the
event of such resignation, the Borrowers shall appoint a successor Agent which
must be an Eligible Bank. No such resignation by Agent shall become effective
until a successor Agent shall have accepted such appointment and executed an
instrument by which it shall have assumed all of the rights and obligations of
Agent hereunder. If no such successor Agent is appointed within sixty (60) days
after receipt of the resigning Agent's notice of resignation, the resigning
Agent may petition a court for the appointment of a successor Agent.

            (b)   In connection with any resignation by Agent, (i) the resigning
Agent shall, (A) duly assign, transfer and deliver to the successor Agent this
Agreement and all cash and Permitted Investments held by it hereunder, (B)
deliver such financing statements and execute and deliver such other instruments
prepared by the Borrowers and reasonably approved by Lender or prepared by
Lender as may be reasonably necessary to assign to the successor Agent, as agent
for Lender, any security interest in the Collateral existing in favor of the
retiring Agent hereunder and to otherwise give effect to such succession and (C)
take such other actions as may be reasonably required by Lender or the successor
Agent in connection with the foregoing and (ii) the successor Agent shall
establish in Lender's name, as secured party, cash collateral accounts, which
shall become the Accounts for purposes of this Agreement upon the succession

                                       20
<PAGE>

of such Agent, and which Accounts shall also be "securities accounts" within the
meaning of the UCC.

            (c)   Lender at its sole discretion shall have the right, upon
thirty (30) days notice to Agent, to substitute Agent with a successor Agent
that satisfies the requirements of an Eligible Bank or to have one or more of
the Accounts held by another Eligible Bank, provided that such successor Agent
shall perform the duties of Agent pursuant to the terms of this Agreement.

            SECTION 6.5 LENDER APPOINTED ATTORNEY-IN-FACT. The Borrowers hereby
irrevocably constitute and appoint Lender as the Borrowers' true and lawful
attorney-in-fact, coupled with an interest and with full power of substitution,
to exercise and enforce every right, power, remedy, option and privilege of the
Borrowers with respect to the Collateral, and do in the name, place and stead of
the Borrowers, all such acts, things and deeds for and on behalf of and in the
name of the Borrowers, which the Borrowers are required to do hereunder or under
the other Loan Documents or which Agent or Lender may reasonably deem necessary
to more fully vest in Lender the rights and remedies provided for herein and to
accomplish the purposes of this Agreement including, without limitation, the
filing of any UCC financing statements or continuation statements in appropriate
public filing offices on behalf of the Borrowers, in any of the foregoing cases,
upon the Borrowers' failure to take any of the foregoing actions within ten (10)
days after notice from Lender. The foregoing powers of attorney are irrevocable
and coupled with an interest. If any Borrower fails to perform any agreement
herein contained and such failure shall continue for ten (10) days after notice
of such failure is given to such Borrower, Lender may perform or cause
performance of any such agreement, and any reasonable expenses of Lender and
Agent in connection therewith shall be paid by the Borrowers.

            SECTION 6.6 ACKNOWLEDGMENT OF LIEN/OFFSET RIGHTS. Agent hereby
acknowledges and agrees with respect to the Accounts that (a) the Accounts shall
be held by Agent in the names set forth herein, (b) all funds held in the
Accounts shall be held for the benefit of Lender, (c) the Borrowers have granted
to Lender a first priority security interest in the Collateral, (d) Agent shall
not disburse any funds from the Accounts except as provided herein, and (e)
Agent shall invest and reinvest any balance of the Accounts in Permitted
Investments in accordance with Section 2.5 hereof. Agent hereby waives any right
of offset, banker's lien or similar rights against, or any assignment, security
interest or other interest in, the Collateral.

            SECTION 6.7 REPORTING PROCEDURES.

            Agent shall provide the Borrowers and Lender with a record of all
checks and any other items deposited to the Lock Box Account or processed for
collection. Agent shall send a daily credit advice to the Borrowers and Manager,
which credit advice shall specify the amount of each receipt deposited into each
Account on such date. Agent shall send a monthly report to the Borrowers,
Manager and Lender, which monthly report shall specify the credits and charges
to the Accounts for the previous calendar month. Agent shall, at the request of
Lender, establish Lender and its designated Servicer, and the Borrowers, as
users of Agent's electronic data transfer system in accordance with Agent's
standard procedures; provided that, the Borrowers' access shall be limited to
information services and shall under no circumstances provide the Borrowers with
transaction rights in any such account. Upon request of Lender or its designated

                                       21
<PAGE>

Servicer, (i) Agent shall send to Lender or its designated Servicer, as
applicable, either (x) copies of the daily credit advices and any other advices
or reports furnished by Agent to the Borrowers and/or Manager hereunder or (y)
information on Account balances, to the extent said balances in the Accounts
have changed from the previous report, the aggregate amount of withdrawals from
the Accounts and other similar information via the electronic data transfer
system or facsimile transmission on a daily basis, and (ii) Agent shall advise
Lender or its designated Servicer, as applicable, of the amount of available
funds in the Accounts and shall deliver to Lender or its designated Servicer
copies of all statements and other information concerning the Accounts, to the
extent that the balances in the Accounts have changed from the previous report,
as Lender or its designated Servicer shall reasonably request. In the event
Agent shall resign as Agent hereunder, Agent shall provide the Borrowers with a
final written accounting, including closing statements, with respect to the
Accounts within thirty (30) days of resignation.

            VII.  REMEDIES

            SECTION 7.1 REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, Lender or Agent at the direction of Lender, as agent for
Lender, may:

            (a)   without notice to the Borrowers, except as required by law,
and at any time or from time to time, charge, set-off and otherwise apply all or
any part of the Collateral against the Obligations or any part thereof,
including, without limitation, reasonable costs and expenses set forth in
Section 8.4 hereof;

            (b)   in its sole discretion, at any time and from time to time,
exercise any and all rights and remedies available to it under this Agreement,
and/or as a secured party under the UCC and/or under any other applicable law or
in equity; and

            (c)   demand, collect, take possession of, receive, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral (or any
portion thereof) as Lender may determine in its sole discretion.

            SECTION 7.2 WAIVER. The Borrowers hereby expressly waive, to the
fullest extent permitted by law, presentment, demand, protest or any notice of
any kind in connection with this Agreement or the Collateral. The Borrowers
acknowledge and agree that ten (10) days' prior written notice of the time and
place of any public sale of the Collateral or any other intended disposition
thereof shall be reasonable and sufficient notice to the Borrowers within the
meaning of the UCC.

            VIII. MISCELLANEOUS

            SECTION 8.1 TRANSFERS AND OTHER LIENS. Each Borrower agrees that it
will not (i) sell or otherwise dispose of any of the Collateral or (ii) create
or permit to exist any Lien upon or with respect to all or any of the
Collateral, except for the Lien granted under this Agreement.

            SECTION 8.2 LENDER'S RIGHT TO PERFORM BORROWER'S OBLIGATIONS; NO
LIABILITY OF LENDER. If any Borrower fails to perform any of the covenants or
obligations contained herein, and such failure shall continue for a period ten
(10) Business Days after such Borrower's receipt of written notice thereof from
Lender, Lender may itself perform, or cause

                                       22
<PAGE>

performance of, such covenants or obligations, and the reasonable expenses of
Lender incurred in connection therewith shall be payable by the Borrowers to
Lender. Notwithstanding Lender's right to perform certain obligations of the
Borrowers, it is acknowledged and agreed that the Borrowers retain control of
the Property and operation thereof and notwithstanding anything contained herein
or Agent's or Lender's exercise of any of its rights or remedies hereunder,
under the Loan Documents or otherwise at law or in equity, neither Agent nor
Lender shall be deemed to be a mortgagee-in-possession nor shall Lender be
subject to any liability with respect to the Property or otherwise based upon
any claim of lender liability except as a result of Lender's gross negligence or
willful misconduct.

            SECTION 8.3 NO WAIVER. The rights and remedies provided in this
Agreement and the other Loan Documents are cumulative and may be exercised
independently or concurrently, and are not exclusive of any other right or
remedy provided at law or in equity. No failure to exercise or delay by Agent or
Lender in exercising any right or remedy hereunder or under the Loan Documents
shall impair or prohibit the exercise of any such rights or remedies in the
future or be deemed to constitute a waiver or limitation of any such right or
remedy or acquiescence therein. Every right and remedy granted to Agent and/or
Lender hereunder or by law may be exercised by Agent and/or Lender at any time
and from time to time, and as often as Agent and/or Lender may deem it
expedient. Any and all of Agent's and/or Lender's rights with respect to the
lien and security interest granted hereunder shall continue unimpaired, and the
Borrowers shall be and remain obligated in accordance with the terms hereof,
notwithstanding (a) any proceeding of the Borrowers under the Federal Bankruptcy
Code or any bankruptcy, insolvency or reorganization laws or statutes of any
state, (b) the release or substitution of Collateral at any time, or of any
rights or interests therein or (c) any delay, extension of time, renewal,
compromise or other indulgence granted by the Agent and/or Lender in the event
of any default, with respect to the Collateral or otherwise hereunder. No delay
or extension of time by Agent and/or Lender in exercising any power of sale,
option or other right or remedy hereunder, and no notice or demand which may be
given to or made upon the Borrowers by Agent and/or Lender, shall constitute a
waiver thereof, or limit, impair or prejudice Agent's and/or Lender's right,
without notice or demand, to take any action against the Borrowers or to
exercise any other power of sale, option or any other right or remedy.

            SECTION 8.4 EXPENSES. Agent shall deduct from the Lock Box Account
for its own account the monthly Servicing Fee for which the Borrowers are
responsible pursuant to Section 2.11 of the Loan Agreement prior to making any
disbursements pursuant to Section 3.3(a)(ii) hereof, and, for so long as the
Mezzanine Loan is outstanding, Agent shall deduct from the Lock Box Account the
monthly Mezzanine Servicing Fee for which the Mezzanine Borrower is responsible
pursuant to Section 2.11 of the Mezzanine Loan Agreement to be remitted to the
Mezzanine Servicer prior to making any disbursements pursuant to Section
3.3(a)(viii) hereof. The Collateral shall secure, and the Borrowers shall pay to
Agent and Lender within five (5) Business Days of the written demand therefor,
from time to time, all reasonable costs and expenses (including, but not limited
to, reasonable attorneys' fees and disbursements, and transfer, recording and
filing fees, taxes and other charges) of, or incidental to, the creation or
perfection of any lien or security interest granted or intended to be granted
hereby, the custody, care, sale, transfer, administration, collection of or
realization on the Collateral, or in any way relating to the enforcement,
protection or preservation of the rights or remedies of Agent and/or Lender
under this Agreement, the Loan Agreement, the Note, the Security Instruments, or
the

                                       23
<PAGE>

other Loan Documents. Standard and customary fees and charges associated with
the Accounts shall be included on a monthly consolidated account analysis
statement which Agent shall submit to the Borrowers for the Borrowers' payment.
This statement shall set forth the fees and charges payable for such month,
including, but not limited to reasonable fees and reasonable expenses incurred
in connection with this Agreement and be accompanied by reasonably detailed
supporting documentation. Agent shall be entitled to charge the Accounts for
such reasonable fees and expenses as indicated by the analysis statement.

            SECTION 8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
and final agreement between the parties with respect to the subject matter
hereof and may not be changed, terminated or otherwise varied, except by a
writing duly executed by the parties.

            SECTION 8.6 NO WAIVER. No waiver of any term or condition of this
Agreement, whether by delay, omission or otherwise, shall be effective unless in
writing and signed by the party sought to be charged, and then such waiver shall
be effective only in the specific instance and for the purpose for which given.

            SECTION 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective successors
and permitted assigns.

            SECTION 8.8 NOTICES. All notices, demands, requests, consents,
approvals and other communications (any of the foregoing, a "NOTICE") required,
permitted, or desired to be given hereunder to the Borrowers, Lender or Manager
shall be in writing and delivered to such parties at the addresses and in the
manner provided in Section 14.5 of the Loan Agreement. Notices to the Agent
shall be addressed as follows:

                  Wachovia Bank, National Association
                  8739 Research Drive
                  URP4
                  Charlotte, North Carolina  28288-1075
                  Attention: David Tucker
                  Facsimile No.: (704) 593-7737

            SECTION 8.9 CAPTIONS. All captions in this Agreement are included
herein for convenience of reference only and shall not constitute part of this
Agreement for any other purpose.

            SECTION 8.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in all respects in accordance with the laws of the State
of New York without regard to conflicts of law principles of such State.

            SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts.

            SECTION 8.12 EXCULPATION. The provisions of Article XII of the Loan
Agreement are hereby incorporated by reference into this Agreement as to the
liability of the Borrowers hereunder to the same extent and with the same force
as if fully set forth herein, and shall apply equally to Manager to the same
extent and with the same force as if fully set forth

                                       24
<PAGE>

herein, provided, however, that notwithstanding the foregoing, there shall be
personal liability to the Borrowers and Manager for the payment to Lender of all
losses, damages, costs and expenses suffered or incurred by Lender and arising
from the failure of the Borrowers and/or Manager to comply with the provisions
of Section 2.2 of this Agreement.

            SECTION 8.13 LOAN AGREEMENT. If any inconsistency exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                                       25
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                          LENDER:

                                          MERRILL LYNCH MORTGAGE LENDING, INC.

                                          By: ________________________________
                                              Name:
                                              Title:

                                          AGENT:

                                          WACHOVIA BANK, NATIONAL ASSOCIATION

                                           By: _________________________________
                                               Name:
                                               Title:

                                          MANAGER:

                                          LODGIAN MANAGEMENT CORP.

                                          By: __________________________________
                                              Name:
                                              Title:

                   [SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

                                      A-26

<PAGE>

                                          BORROWERS:

                                          [LODGIAN ENTITIES]

                                          By: __________________________________
                                              Name: Daniel E. Ellis
                                              Title: Vice President and
                                                     Secretary, or Authorized
                                                     Signatory for each of the
                                                     entities listed above

                                      A-27<PAGE>

                                                                   EXHIBIT 10.37

                         FORM OF ENVIRONMENTAL INDEMNITY

            This ENVIRONMENTAL INDEMNITY, made as of June __, 2004 (this
"AGREEMENT"), by the Borrowers named on the signature pages hereto, each having
an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30326 (each, a "BORROWER" and collectively, "BORROWERS"), by LODGIAN,
INC., a Delaware corporation, having an address at 3445 Peachtree Road, NE,
Suite 700, Atlanta, Georgia 30326 ("OBLIGOR"), jointly and severally (Borrowers
and Obligor being referred to herein collectively as "INDEMNITORS" and
individually as an "INDEMNITOR"), in favor of MERRILL LYNCH MORTGAGE LENDING,
INC., a Delaware corporation, having an address at 4 World Financial Center, New
York, New York, 10080 (together with its successors, transferees and assigns,
"LENDER").

                                   WITNESSETH:

            WHEREAS:

            A.    Borrowers are the owners of fee simple or leasehold title, as
applicable, to those certain parcels of real property (collectively, the
"PREMISES") described in EXHIBIT A attached hereto, and the buildings,
structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and other improvements now or hereafter located thereon
(the "IMPROVEMENTS"; together with the Premises, collectively, the "PROPERTY").

            B.    Borrowers and Lender have entered into a certain Loan and
Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrowers as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

            C.    Pursuant to the Loan Agreement, Lender is making a Loan to
Borrower in the aggregate original principal amount of up to
______________________________________ (the "LOAN"). The Loan is evidenced by
those certain Promissory Notes, each dated as of the date hereof (as amended,
modified, restated or split from time to time, collectively, the "NOTE") and
secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds to Secure
Debt, Assignments of Leases and Rents and Security Agreements, dated as of the
date hereof (as amended, modified or restated from time to time, collectively,
the "SECURITY INSTRUMENT"), with respect to the Property.

            D.    As a condition to Lender's making the Loan, Lender is
requiring that Indemnitors indemnify the Indemnified Parties (as hereinafter
defined) with respect to environmental conditions or liabilities on, in, under
or affecting the Property as hereinafter set forth.

            E.    Obligor holds a direct and/or indirect ownership interest in
Borrower and will derive substantial economic benefit from Lender making the
Loan to Borrower.

<PAGE>

            NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and
in consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitors hereby covenant and agree for the benefit of the Indemnified Parties
as follows:

      1.    DEFINITIONS. The following terms shall have the following meanings
when used herein:

            "COSTS" shall mean, collectively, all liens, damages, losses, fines,
liabilities (including, without limitation, any strict liability), obligations,
settlements, penalties, assessments, citations, directives, claims, litigations,
demands, response costs (including, without limitation, investigation, removal,
remediation, mitigation, containment, post-closure and monitoring costs),
defenses, judgments, suits, proceedings, costs, laboratory fees, disbursements
and expenses of any kind or nature whatsoever (including, without limitation,
reasonable attorneys', consultants' and experts' fees and disbursements). Costs
shall also include any future reduction in sales price of, or unmarketability
and consequent inability of Lender to foreclose on or otherwise sell, the
Property and the lost opportunity costs resulting from the inability of Lender
to sell or dispose of its interest in the Property, all as a consequence of any
event described in paragraph 2 herein to the extent that such loss in value
results in Lender receiving in any foreclosure, or deed in lieu thereof, of the
Properties less than the full amount of the Obligations by reason of any matter
set forth in Section 2.

            "ENVIRONMENTAL LAWS" shall have the meaning given to such term in
the Loan Agreement.

            "HAZARDOUS MATERIAL" shall have the meaning given to such term in
the Loan Agreement.

            "INDEMNIFIED PARTY" shall mean Lender, any subsequent holder of the
Note and each of their officers, directors, shareholders, principals, partners,
representatives, employees, agents, successors and assigns.

            "TENANTS" shall mean all tenants, lessees, subtenants and other
occupants of the Property.

      2.    INDEMNITY.

            (a)   Except as provided in Section 2(b) below, Indemnitors hereby
assume liability for, and agree to pay, protect, defend, indemnify and save all
Indemnified Parties harmless from and against any and all Costs which may be
imposed upon, incurred by or asserted or awarded against any of the Indemnified
Parties or the Property, and arising directly or indirectly from: (i) the
violation or alleged violation of any Environmental Laws relating to or
affecting the Property, whether or not caused by or within the control of
Indemnitors; (ii) the actual or alleged presence, release or threat of release
of, or exposure to any Hazardous Material on, in, under or affecting all or any
portion of the Property or any surrounding areas, regardless of whether or not
caused by or within the control of Indemnitors; (iii) any actual or alleged
personal injury or property damage arising out of or related to Hazardous
Material on the Property; (iv) any acts or omissions that exacerbate an existing
condition at the Property and give

                                        2
<PAGE>

rise to liability under any Environmental Law; (v) the failure by Indemnitors to
comply fully with the terms and conditions of this Agreement in all material
respects; (vi) a material breach of any representation or warranty contained in
this Agreement; (vii) the enforcement of this Agreement; or (viii) assessment,
investigation, containment, monitoring, remediation and/or removal of any and
all Hazardous Material from the Property or any surrounding areas, and costs
incurred to comply with Environmental Laws in connection with the Property or
any surrounding areas.

            (b)   Notwithstanding any provision hereof to the contrary,
Indemnitors shall have no liability under this Agreement with respect to Costs
relating to Hazardous Material which is initially placed on, in or under the
Property after the earlier of (i) Lender or any receiver appointed at the
request of Lender taking actual possession and control of the Property following
an Event of Default, and (ii) Lender completing a foreclosure or other sale
pursuant to which Lender takes title to the Property. Indemnitors shall have no
liability under this Agreement to any Indemnified Party with respect to Costs
which result from such Indemnified Party's willful misconduct or gross
negligence. In addition to the foregoing, Obligor shall have no liability
pursuant to this Agreement with respect to costs relating to Hazardous Material
which is initially placed on, in or under the Property after the transfer of the
Mezzanine Borrowers' equity interest in the applicable Borrower to the Mezzanine
Lender or its designee by reason of, or in lieu of, enforcement of the Mezzanine
Lender's rights under the Mezzanine Loan Documents.

            (c)   Indemnitors' obligation to defend the Indemnified Parties
hereunder shall include defense at both the trial and appellate levels and shall
be with attorneys, consultants and experts selected by Indemnitor and subject to
the reasonable approval of the Indemnified Parties.

      3.    REPRESENTATIONS REGARDING HAZARDOUS MATERIAL. Indemnitors hereby
represent and warrant to agree with the Indemnified Parties as follows:

            (a)   Indemnitors, the Property and all businesses or operations
conducted thereon are in compliance with all applicable Environmental Laws in
all material respects;

            (b)   Except as previously disclosed to Lender in the Phase I
Reports, no Hazardous Material has been disposed of on or released (as used
herein, "RELEASE" shall have the meaning provided in 42 U.S.C. ss. 9601(22)) at,
onto oR under the Property by any Indemnitor or, to Indemnitors' knowledge, by
any other Person that has not been remediated in accordance with applicable
Environmental Laws or that is present at or under the Property at a level in
excess of that allowed by applicable Environmental Laws;

            (c)   Except as previously disclosed to Lender in the Phase I
Reports, no Hazardous Material is located in, on or under, or has been handled,
generated, stored, processed or discharged from the Property in violation of
applicable Environmental Laws by any Indemnitor or, to the Indemnitors'
knowledge, by any other Person, except for those materials used by Borrowers,
Manager or tenants of the Property ("TENANTS") in the ordinary course of their
business in material compliance with all applicable Environmental Laws and not
reasonably expected to give rise to liability under applicable Environmental
Laws;

                                        3
<PAGE>

            (d)   Indemnitors have received no written notice that the Property
is subject to any private or governmental lien or judicial or administrative
notice or action relating to or arising under applicable Environmental Laws;

            (e)   Except as previously disclosed to Lender in the Phase I
Reports, there are no underground storage receptacles or surface impoundments,
landfills or dumps for Hazardous Material on the Property;

            (f)   Indemnitors have received no notice of, and to Indemnitors'
knowledge there exists no investigation, action, proceeding or claim by any
agency, authority or unit of government or by any third party asserted or
threatened which could result in any liability, penalty, sanction or judgment
under any applicable Environmental Laws with respect to any condition, use or
operation of the Property, nor do Indemnitors know of any basis for any of the
foregoing;

            (g)   Except as previously disclosed to Lender in the Phase I
Reports or the Property Condition Reports, there is no asbestos-containing
material or lead-based paint at the Property nor are there any polychlorinated
biphenyls ("PCB'S"), endangered species' habitats or wetlands at the Property;

            (h)   Indemnitors have received no notice that, and to Indemnitors'
knowledge, there has been no claim by any party that, any use, operation or
condition of the Property has caused any nuisance or any other liability or
adverse condition on any other property nor do Indemnitors know of any basis for
such a claim relating to Hazardous Material;

            (i)   Except as previously disclosed in writing to Lender,
Indemnitor has not knowingly waived or released any Person's liability with
regard to Hazardous Material in, on, under or around the Property nor retained
or assumed, contractually or otherwise, any other Person's liability relative to
Hazardous Material or any claim, action or proceeding relating thereto; and

            (j)   Except as previously disclosed to Lender in the Phase I
Reports, neither the Property nor any other property owned by any Borrower (i)
is included or, to Indemnitor's knowledge, proposed for inclusion on the
National Priorities List issued pursuant to CERCLA (hereinafter defined) by the
United States Environmental Protection Agency (the "EPA") or on any of the
inventories of other potential "Problem" sites issued by the EPA or other
applicable Governmental Authority nor (ii) otherwise identified by the EPA as a
potential CERCLA site or included or, to Indemnitor's knowledge, proposed for
inclusion on any such list or inventory issued pursuant to any other applicable
Environmental Law or issued by any other Governmental Authority.

      4.    COVENANTS OF INDEMNITORS.

            (a)   So long as any Borrower or Affiliate thereof owns or is in
possession of the Property, Indemnitors shall, and shall use commercially
reasonable efforts to cause all property managers, agents, employees and Tenants
to: (i) comply with all Environmental Laws applicable to the Property, (ii) keep
or cause the Property to be kept free from Hazardous Material (except those
materials used by Borrower, Manager or Tenants in the ordinary course of

                                        4
<PAGE>

their business, in compliance with applicable Environmental Laws), (iii) not
install or use, or permit the installation or use of, any underground
receptacles containing Hazardous Material on the Property, (iv) expressly
prohibit the use, generation, handling, storage, production, release, processing
and disposal of Hazardous Material by all future Tenants and Managers (except
those substances used by such Tenants or Managers in the ordinary course of
their business in compliance with all applicable Environmental Laws) and use all
commercially reasonable efforts to prevent existing Tenants, Managers and other
permitted occupants of the Property from taking any such actions, (v) in any
event, not install on the Property or permit to be installed on the Property
PCB's, urea formaldehyde insulation, asbestos or any substance containing
asbestos or any material containing lead-based paint, (vi) prohibit the disposal
and/or release of any Hazardous Material in violation of applicable
Environmental Laws on, at or beneath, the Property, (vii) operate and maintain,
or cause to be operated and maintained, the HVAC systems at the Property in
accordance with standards for operation of similar systems located at properties
that are similar (including, without limitation, the manner, class of operation,
and/or Franchisor standards) to the Property, (viii) cause the Required Capital
Improvements which relate to mold to be completed in accordance with the
standards and time frames set forth in Section 6.5 of the Loan Agreement, and
(ix) not permit any Lien imposed pursuant to any applicable Environmental Law to
be imposed or, subject to Section 4(c) below, to remain on the Property.

            (b)   Indemnitors shall promptly notify Lender in writing should any
Indemnitor become aware of (i) any release, disposal or discharge of Hazardous
Material in violation of applicable Environmental Laws, or other material actual
environmental problem or liability, with respect to or affecting the Property,
(ii) any lien, action or notice of violation or potential liability affecting
the Property or Borrowers and arising under any applicable Environmental Law,
(iii) the institution of any investigation, inquiry or proceeding concerning
Borrowers or the Property pursuant to any applicable Environmental Law or
otherwise relating to Hazardous Material affecting the Property, (iv) the
discovery of any occurrence, condition or state of facts which would render any
representation or warranty contained in this Agreement incorrect or incomplete
in any material respect if made at the time of such discovery, (v) any remedial
action taken by Indemnitors or, if actually known by Indemnitor, any other
Person in response to any Hazardous Material on, under or at the Property, (vi)
the discovery by Indemnitors of any occurrence or condition on any real property
adjoining or in the vicinity of the Property that would reasonably be expected
to cause the Property or any part thereof to be subject to any restrictions on
the ownership, occupancy, transferability or use thereof under any applicable
Environmental Laws, and (vii) any request for information from any governmental
agency that indicates such agency is investigating whether Indemnitors may be
potentially responsible for a release, disposal or discharge of Hazardous
Material. Borrowers shall promptly notify Lender of any proposed action to be
taken pertaining in any way to the Property to commence any operations that
could reasonably be expected to subject any Borrower or the Property to
additional obligations or liabilities under applicable Environmental Laws,
including laws, rules and regulations requiring additional or amended
environmental permits or licenses which could reasonably be expected to subject
any Borrower to any material obligations or requirements under any applicable
Environmental Laws. Borrowers shall, at their own expense, provide copies of
such documents or information as Lender may reasonably request in relation to
any matters disclosed pursuant to this Section. Indemnitor shall promptly
transmit to Lender

                                        5
<PAGE>

copies of any and all material citations, orders, notices and all other
communications sent or received by any Borrower relating to any of the foregoing
provisions of this paragraph.

            (c)   Regardless of the source of contamination, Indemnitors shall,
at their own expense, promptly take or cause to be taken and diligently
prosecute all actions required by applicable Environmental Laws for the clean-up
of the Property and other property affected by contamination in, on, under or at
the Property, including, without limitation, all investigative, monitoring,
removal, containment and remedial actions in accordance with and required by all
applicable Environmental Laws (and in all events in a manner satisfactory to the
applicable Governmental Authority and reasonably satisfactory to Lender).
Indemnitor shall further pay or cause to be paid, at no expense to any
Indemnified Party, all clean-up, administrative and enforcement costs of
applicable governmental agencies which may be asserted against the Property. In
the event Indemnitors fail to do so, or following an Event of Default, Lender
may, at its sole election, cause the Property or other affected property to be
freed from any Hazardous Material located thereon at a level in excess of that
allowed by applicable Environmental Laws, or otherwise be brought into
compliance with applicable Environmental Laws, and any cost incurred in
connection therewith shall be included in Costs. Borrowers hereby grant to
Lender access to the Property and an irrevocable license to remove any Hazardous
Material and to do all things necessary to bring the Property into compliance in
all material respects with applicable Environmental Laws. However, Lender shall
have no obligation to inspect or clean up any Hazardous Material. Lender shall
not be deemed a generator of any Hazardous Material removed from the Property.

            (d)   Upon the request of Lender, at any time (i) after the
occurrence of an Event of Default or (ii) Lender has reasonable grounds to
believe that (A) Hazardous Material is or has been released, stored or disposed
of, or existing, on or around the Property at a level in excess of that allowed
by applicable Environmental Laws or (B) the Property may be in material
violation of applicable Environmental Laws, Indemnitors shall cause an
investigation or audit of the Property to be undertaken by a hydrogeologist or
environmental engineer or other appropriate consultant reasonably approved by
Lender to determine whether any Hazardous Material is located on, at, beneath,
or near the Property and/or whether the Property is in compliance in all
material respects with Environmental Laws. The scope of any investigation or
audit shall be approved by Lender in Lender's reasonable discretion. If
Indemnitors fail to provide reports of such investigation or audit within thirty
(30) days after such request, Lender may, but shall have no obligation to, order
the same. Borrowers hereby grant to Lender and Lender's contractors access to
the Property and an irrevocable license to undertake such investigation or audit
provided that such investigation is conducted in a manner so as not to
unreasonably affect Borrowers' operations at the Property. All reasonable costs
of any such investigation or audit shall be included in Costs and shall be paid
by Indemnitors in accordance with the terms of paragraph 5(c) hereof.

            (e)   In the event that a Lien is filed against the Property
pursuant to any applicable Environmental Law, Indemnitors shall, within ten (10)
Business Days from the date that any Borrower receives notice of such Lien (but
in any event ten (10) days prior to the date of any contemplated sale pursuant
to such Lien), either (i) pay the claim and remove the Lien from the Property,
or (ii) furnish, at Indemnitor's option, (A) a bond satisfactory to Lender in
the amount of the claim out of which the Lien arises, (B) a cash deposit in the
amount of the claim

                                        6
<PAGE>

out of which the Lien arises, (C) other security reasonably satisfactory to
Lender in an amount sufficient to discharge the claim out of which the Lien
arises, or (D) security in a form and amount satisfactory to the applicable
Governmental Authority pursuant to a valid consent or other order, and
Indemnitors shall promptly arrange for the removal of the Lien. Notwithstanding
the foregoing, Indemnitors shall prevent a sale pursuant to any Lien.

            (f)   The amount of Indemnitors' liability hereunder is unrelated to
the amount of the Loan and any failure of the Loan to be repaid in full. The
enforcement of this Agreement by the Indemnified Parties shall not be construed
by Indemnitors as an indirect attempt to recover any Loan deficiency or loss
relating to the failure of the Loan to be repaid in full. Indemnitors
acknowledge that they may have liability hereunder even if the Loan is repaid in
full by reason of a full credit bid at any foreclosure sale under the Security
Instrument, and that the amount of Indemnitor's liability hereunder could exceed
the entire amount paid by Borrower for the Property.

      5.    INDEMNIFICATION PROCEDURES.

            (a)   If any action, proceeding, litigation or claim shall be
brought or asserted against any Indemnified Party for any matter which the
Indemnified Parties are indemnified hereunder (each, a "CLAIM"), such
Indemnified Party shall notify Indemnitors in writing thereof and Indemnitors
shall promptly assume the defense thereof, including, without limitation, the
employment of counsel selected by the Indemnitor and approved by the Indemnified
Party, such approval not to be unreasonably withheld, conditioned or delayed,
and the negotiation of any settlement. Any failure of such Indemnified Party to
notify Indemnitors of such matter shall not impair or reduce the obligations of
Indemnitors hereunder. The Indemnified Parties shall have the right, at the
reasonable expense of Indemnitors (which expense shall be included in Costs), if
an Indemnified Party has reason to believe that its interests are not being
adequately represented or diverge from other interests being represented by such
counsel, to employ separate counsel in any such action and to participate in the
defense thereof at such Indemnitor's sole cost and expense. In the event
Indemnitors shall fail to discharge or undertake to defend any Indemnified Party
against any Claim, such failure shall constitute an Event of Default and the
Indemnified Party may, at its sole election, defend or settle such Claim. The
liability of Indemnitors to such Indemnified Party hereunder for any settlement
by such Indemnified Party shall be conclusively established by any settlement
entered into by the Indemnified Party in good faith. The amount of Indemnitors'
liability hereunder shall include the settlement consideration and all other
Costs, which shall be paid by the Indemnitors as hereinafter provided. Costs
incurred in connection with a Claim shall be reimbursed by Indemnitors without
the requirement of waiting for the ultimate outcome of such Claim.

            (b)   Indemnitors shall not, without the prior written consent of
the Indemnified Party, which consent will not be unreasonably withheld,
conditioned or delayed, settle or compromise any Claim in any manner or consent
to the entry of any judgment (i) in which the claimant or plaintiff does not
unconditionally release the Indemnified Party from all liability and obligations
in respect of such Claim and obtain a dismissal of such Claim with prejudice; or
(ii) that may adversely affect the Indemnified Party (as determined in the
reasonable discretion of such Indemnified Party) or obligate the Indemnified
Party to pay any sum or perform any obligation.

                                        7
<PAGE>

            (c)   Indemnitors shall pay to the applicable Indemnified Party any
and all Costs within fifteen (15) days after written notice from such
Indemnified Party. All Costs shall be immediately reimbursable to the
Indemnified Party or, upon request of the Indemnified Party, paid directly to
the party sending a bill or other statement to the Indemnified Party. Any Costs
not paid within the aforementioned fifteen (15) day period shall bear interest
at the Default Rate from the date incurred until the date paid in full.

      6.    REINSTATEMENT OF OBLIGATIONS. If at any time all or any part of any
payment received by an Indemnified Party pursuant to this Agreement shall be
rescinded or returned for any reason whatsoever, including, without limitation,
the insolvency, bankruptcy or reorganization of any Indemnitor, then the
obligations of Indemnitors hereunder shall, to the extent of such rescinded or
returned payment, be reinstated and shall continue as though such previous
payment received by the Indemnified Party had never occurred.

      7.    WAIVERS BY INDEMNITORS. To the extent permitted by law, Indemnitors
hereby waive and agree not to assert or take advantage of:

            (a)   Any right to require an Indemnified Party (i) to proceed
against Borrower or any other Person, (ii) to proceed against or exhaust any
security held by any Indemnified Party at any time or (iii) to pursue any other
remedy in such Indemnified Party's power or under any other agreement, in any
case, before proceeding against Indemnitors hereunder;

            (b)   Any defense that may arise by reason of the incapacity, lack
of authority, death or disability of any other Person or the failure of an
Indemnified Party to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of any other Person;

            (c)   Demand, presentment for payment, protest and notice of
protest, demand, dishonor and nonpayment and all other notices except as
expressly required in the Loan Documents, including, without limitation, notice
of new or additional indebtedness or obligations or of any action or non-action
on the part of Borrower, Lender, any endorser or creditor of Borrower or of
Indemnitor or of any other Person whomsoever under this Agreement or any other
Loan Document;

            (d)   Any defense based upon an election of remedies, splitting a
cause of action or merger of judgments by any Indemnified Party;

            (e)   Any right or claim of right to cause a marshaling of the
assets of Indemnitors;

            (f)   Any principle or provision of law, statutory or otherwise,
which is or might be in conflict with the terms and provisions of this
Agreement;

            (g)   Any duty on the part of any Indemnified Party to disclose to
Indemnitors any facts such Indemnified Party may now or hereafter know about
Borrower or the Property, regardless of whether such Indemnified Party (i) has
reason to believe that any such facts materially increase the risk beyond that
which Indemnitors intend to assume, (ii) has reason to believe that such facts
are unknown to Indemnitors or (iii) has a reasonable opportunity to

                                        8
<PAGE>

communicate such facts to Indemnitors, it being understood and agreed that
Indemnitors are fully responsible for being informed of the financial condition
of Borrower, the condition of the Property and of all other circumstances
bearing on the risk that liability may be incurred by Indemnitors hereunder;

            (h)   Any invalidity, irregularity or unenforceability, in whole or
in part, of any one or more of the Loan Documents;

            (i)   Any lack of commercial reasonableness in dealing with the
collateral for the Loan;

            (j)   Any deficiencies in the collateral for the Loan or any
deficiency in the ability of Lender to collect or to obtain performance from any
Persons now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;

            (k)   An assertion or claim that the automatic stay provided by 11
U.S.C. ss. 362 (arising upon the voluntary or involuntary bankruptcy proceeding
of Borrower) or any other stay provided under 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, shall
operate or be interpreted to stay, interdict, condition, reduce or inhibit the
ability of Lender to enforce any of its rights, whether now existing or
hereafter acquired, which Lender may have against any Indemnitor or the
collateral for the Loan;

            (l)   Any modifications of the Loan Documents or any obligation of
Borrower relating to the Loan by operation of law or by action of any court,
whether pursuant to 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, or otherwise;

            (m)   Any action, occurrence, event or matter consented to by
Indemnitors under Section 8(j) hereof, under any other provision hereof, or
otherwise; and

            (n)   the failure of any representation and/or warranties made by
Borrower, Indemnitor or any other party to be true, complete or correct when
given, or at any time thereafter.

Indemnitors covenant and agree that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against any Borrower, neither such
Indemnitor shall seek a supplemental stay or otherwise 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 Lender to enforce any rights of Lender against such Indemnitor by
virtue of this Agreement or otherwise.

                                        9
<PAGE>

      8.    GENERAL PROVISIONS.

            (a)   Fully Recourse. Notwithstanding any provision of any other
Loan Document to the contrary, all of the terms and provisions of this Agreement
are recourse obligations of Indemnitors and not restricted by any limitation on
personal liability.

            (b)   Right to Indemnification Not Affected by Knowledge. An
Indemnified Party's right to defense, indemnification, payment of Costs or other
rights and remedies pursuant to this Agreement shall not be diminished or
affected in any way by any investigation conducted by or on behalf of such
Indemnified Party or other knowledge acquired (or capable of being acquired) by
such Indemnified Party through any means at any time.

            (c)   Reliance. Indemnitors hereby acknowledge that Lender would not
make the Loan without being able to rely upon the covenants and obligations of
Indemnitors set forth herein. Accordingly, Indemnitors intentionally and
unconditionally enter into this Agreement.

            (d)   Obligations Unsecured. Indemnitors acknowledge that even
though the representations, warranties and covenants of Indemnitors contained
herein may be identical or substantially similar to those of Borrower set forth
in the Security Instrument, the obligations of Indemnitors hereunder are
independent obligations which are not secured by the Security Instrument or the
other Loan Documents. The Indemnitors further acknowledge that it is the intent
of Lender to create separate obligations of Indemnitors hereunder which can be
enforced against Indemnitors without regard to the existence of the Security
Instrument or the other Loan Documents or the liens or security interests
created therein.

            (e)   Survival. This Agreement shall be deemed to be continuing in
nature, remain in full force and effect and survive indefinitely,
notwithstanding the exercise of any remedy by Lender under the Security
Instrument or any of the other Loan Documents, including, without limitation,
any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the
Loan is paid or satisfied in full. Notwithstanding the foregoing to the
contrary, the obligations and liabilities of Indemnitors under this Agreement
shall survive following payment in full of the Obligations in accordance with
the terms of the Loan Documents for a period equal to the lesser of (x) five (5)
years, or (y) if Borrowers deliver Phase I environmental reports for each of the
Properties to Lender, acceptable to Lender in all respects, and which Lender
determines in its sole discretion demonstrates that no condition exists which
may cause any of the liabilities of Indemnitors to arise after delivery thereof,
two (2) years following the delivery of such Phase I environmental reports,
provided, however, in the event that (a) any obligations or liabilities of the
Indemnitors under this Agreement shall have arisen from any Hazardous Material
which existed on, in, under or affecting the Property prior to the expiration of
such period or (b) if, prior to payment in full of the Loan, Lender shall have
exercised any rights or remedies after an Event of Default or any of the Loan
Documents shall have been modified or amended or any provision thereof waived
pursuant to any workout or restructuring of the Loan (and if, as a consequence
thereof, at any time after the expiration of the survival period specified
above, Lender shall be unable to avail itself of any exemption from liability
available to lenders under any applicable Environmental Law or shall be required
to defend any claim or action relating to any Hazardous Material), then in any
such event the foregoing survival period shall not apply and the obligations and
liabilities of Indemnitors hereunder shall survive.

                                       10
<PAGE>

            (f)   Subordination; No Recourse Against Lender. Obligor hereby
subordinates any and all indebtedness of Borrower now or hereafter owed to
Obligor to all indebtedness of Borrower to Lender. Obligor shall not demand or
accept any payment of principal or interest from Borrower, shall not claim any
offset or other reduction of Obligor's obligations hereunder because of any such
indebtedness and shall not take any action to obtain any of the collateral for
the Loan. Further, Indemnitors shall not have any right of recourse against any
Indemnified Party by reason of any action such Indemnified Party may take or
omit to take under the provisions of this Agreement or any other Loan Documents.

            (g)   Reservation of Rights. Nothing contained in this Agreement
shall prevent or in any way diminish or interfere with any rights or remedies,
including, without limitation, the right to cost recovery or contribution, which
any Indemnified Party may have against either Indemnitor or any other party
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (codified at Title 42 U.S.C. ss. 9601 et seq.), as it may be amended
from time to time ("CERCLA"), or any other applicable Federal, state or local
laws, all such rights being hereby expressly reserved.

            (h)   Financial Statements. Each Indemnitor hereby agrees to furnish
Lender such financial statements and other information as is required to be
delivered pursuant to Section 5.1 of the Loan Agreement.

            (i)   Nature of Obligations. The obligations of Indemnitors
hereunder are independent of the obligations of Borrower under the other Loan
Documents. In the event of any default hereunder, a separate action or actions
may be brought and prosecuted against Indemnitors whether or not Indemnitors are
the alter ego of Borrower and whether or not Borrower is joined therein or a
separate action or actions are brought against Borrower. Lender's rights
hereunder shall not be exhausted until all of the obligations of Indemnitor
hereunder have been fully paid and performed.

            (j)   No Limitation on Liability. Indemnitors hereby consent and
agree that any of the following may occur from time to time, without notice or
consideration to, or consent of, Indemnitors, and the liability of Indemnitors
hereunder shall remain unconditional and absolute and shall in no way be
impaired or limited by reason thereof:

                  (i)   any extension of time for performance required by any of
the Loan Documents or otherwise granted by Lender or any extension or renewal of
the Note;

                  (ii)  any sale, assignment or foreclosure of the Note, the
Security Instrument or any of the other Loan Documents or any sale or transfer
of the Property, except as set forth in Section 2(b);

                  (iii) any change in the composition of Borrower, including,
without limitation, the voluntary or involuntary withdrawal or removal of
Indemnitors from any current or future position of ownership, management or
control of Borrower;

                  (iv)  the release of Borrower or of any other Person from
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the Loan Documents by operation of law, Lender's
voluntary act or otherwise;

                                       11
<PAGE>

                  (v)   the release or substitution in whole or in part of any
security for the Loan;

                  (vi)  Lender's failure to record the Security Instrument or to
file any financing statement (or Lender's improper recording or filing thereof)
or to otherwise perfect, protect, secure or insure any lien or security interest
given as security for the Loan;

                  (vii) the modification of the terms of any one or more of the
Loan Documents;

                  (viii) subject to Section 2(b) hereof, the exercise by
Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant to
the terms of the Mezzanine Loan Documents, including, without limitation,
foreclosure or similar remedies under any pledge agreement encumbering Mezzanine
Borrower's interest in General Partner, Member or any Borrower; or

                  (ix)  the taking or failure to take any action of any type
whatsoever. No such action which Lender shall take or fail to take in connection
with the Loan Documents or any collateral for the Loan, nor any course of
dealing with Borrower or any other Person, shall limit, impair or release
Indemnitor's obligations hereunder, affect this Agreement in any way or afford
Indemnitors any recourse against any Indemnified Party. Nothing contained in
this Section shall be construed to require any Indemnified Party to take or
refrain from taking any action referred to herein.

            (k)   Representations. Each Indemnitor represents and warrants that
there is no bankruptcy, reorganization or insolvency proceeding pending or, to
its knowledge, threatened against it.

            (l)   Professionals' Fees. In the event it is necessary for any
Indemnified Party to retain the services of an attorney or any other consultants
in order to enforce this Agreement, or any portion hereof, Indemnitors agree to
pay to such Indemnified Party any and all reasonable costs and expenses,
including, without limitation, reasonable attorneys' and consultants' fees and
disbursements, incurred by such Indemnified Party as a result thereof and all
such amounts shall be included in Costs.

            (m)   Successive Actions. A separate right of action hereunder shall
arise each time an Indemnified Party acquires knowledge of any matter
indemnified or guaranteed by Indemnitors hereunder. Separate and successive
actions may be brought hereunder to enforce any of the provisions hereof at any
time and from time to time and no action hereunder shall preclude any subsequent
action.

            (n)   No Waiver; Remedies Cumulative. No failure or delay on the
part of Lender in exercising any right, remedy, power or privilege hereunder or
under the other Loan Documents and no course of dealing between Borrower and
Lender shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder or under the other
Loan Documents preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege hereunder or thereunder. The rights
and remedies provided herein and in the other Loan Documents are cumulative and
not exclusive

                                       12
<PAGE>

of any rights or remedies provided by law. The giving of notice to or demand on
Borrower which notice or demand is not required hereunder or under the other
Loan Documents shall not entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights,
remedies, powers or privileges of Lender in any circumstances not requiring
notice or demand.

            (o)   Notices. All notices, requests and other communications to any
party hereunder or under the Note shall be given in the manner set forth in
Section 14.5 of the Loan Agreement, to Lender and Borrower at such party's
address set forth in Section 14.5 of the Loan Agreement and to each Obligor at
its address set forth above, or such other address as Indemnitors or Lender
shall hereafter specify by not less than ten (10) days prior written notice as
provided herein; provided, however, that notwithstanding any provision of this
Section to the contrary, such notice of change of address shall be deemed given
only upon actual receipt thereof. Rejection or other refusal to accept or the
inability to deliver because of changed addresses of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand,
statement, request or consent.

            (p)   Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York and the
applicable laws of the United States of America. Indemnitors hereby irrevocably
submit to the jurisdiction of any court of competent jurisdiction located in the
State of New York and in any state in which the Property is located in
connection with any proceeding out of or relating to this Agreement.

            (q)   Invalid Provisions. If any provision of this Agreement is held
to be invalid, illegal or unenforceable in any respect, this Agreement shall be
construed without such provision.

            (r)   Amendments. The terms of this Agreement, together with the
terms of the other Loan Documents, constitute the entire understanding and
agreement of the parties hereto and supersede all prior agreements,
understandings and negotiations between Indemnitors and Lender with respect to
the obligations contained herein. This Agreement, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act on the part of Borrower or Lender, but only by an agreement
in writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

            (s)   Parties Bound; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives; provided, however, that except as
provided in the Loan Agreement or herein, Indemnitors may not, without the prior
written consent of Lender, assign any of their rights, powers, duties or
obligations hereunder.

            (t)   Headings; Construction of Documents. The headings and captions
of various sections of this Agreement are for convenience of reference only and
are not to be construed as defining or limiting, in any way, the scope or intent
of the provisions hereof. Indemnitors acknowledge that they were represented by
competent counsel in connection with the negotiation and drafting of this
Agreement and the other Loan Documents and that neither

                                       13
<PAGE>

this Agreement nor the other Loan Documents shall be subject to the principle of
construing the meaning against the Person who drafted same.

            (u)   Recitals. The recital and introductory paragraphs hereof are a
part hereof, form a basis for this Agreement and shall be considered prima facie
evidence of the facts and documents referred to therein.

            (v)   Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be convenient or required. It shall not
be necessary that the signature or acknowledgment of, or on behalf of, each
party, or that the signature of all Persons required to bind any party, or the
acknowledgment of such party, appear on each counterpart. All counterparts shall
collectively constitute a single instrument. It shall not be necessary in making
proof of this Agreement to produce or account for more than a single counterpart
containing the respective signatures of, or on behalf of, and the respective
acknowledgments of, each of the parties hereto. Any signature or acknowledgment
page to any counterpart may be detached from such counterpart without impairing
the legal effect of the signatures or acknowledgments thereon and thereafter
attached to another counterpart identical thereto except having attached to it
additional signature or acknowledgment pages.

            (w)   Cumulative Rights. The rights of Lender under this Agreement
shall be separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Lender shall be construed as an election to
proceed under any one provision herein to the exclusion of any other provision.
Lender shall not be limited exclusively to the rights and remedies herein stated
but shall be entitled, subject to the terms of this Agreement, to every right
and remedy now or hereafter afforded by law.

            (x)   Waiver of Counterclaim and Right to Trial by Jury. Indemnitors
hereby waive the right to assert a counterclaim, other than a compulsory
counterclaim, in any action or proceeding brought against it by Lender or its
agents, and Lender and Indemnitors waive trial by jury in any action or
proceeding brought by either party hereto against the other or in any
counterclaim any other party may be permitted to assert hereunder or which may
be asserted by any party or its agents, against Indemnitors, or in any matters
whatsoever arising out of or in any way connected with this Agreement, the debt
or the obligations contained herein.

            (y)   Singular and Plural; Joint and Several Liability.

                  (i)   If there is more than one entity comprising Obligor, all
references to Obligor herein shall be to Obligor, or any one or more of them.
All references to Indemnitors herein shall be to Indemnitors or any one or more
of them. All obligations and liabilities of Indemnitors hereunder are in
addition to, not in lieu of and are independent of: (A) all obligations of
Borrower under any other Loan Document, including the Note and the Loan
Agreement; and (B) any obligation of Obligor under any other Loan Document to
which Obligor is a party.

                  (ii)  All obligations of Indemnitors hereunder shall be joint
and several.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       14
<PAGE>

            IN WITNESS WHEREOF, Indemnitors have executed this Agreement as of
the day and year first above written.

                                   BORROWERS:

                                   [LODGIAN ENTITIES]

                                   By: ____________________________________
                                       Name: Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory for each of
                                              the entities listed above

<PAGE>

                                   OBLIGOR:

                                   LODGIAN, INC., a Delaware
                                   corporation

                                   By: _________________________________
                                       Name:
                                       Title:

<PAGE>

                                   EXHIBITS A

                                   PROPERTIES

          CHAIN/NAME                 CITY                  ST

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