Document:

Form of Fixed Rate Note

    
      

      

    

     

    
 

    Exhibit
      10.2

    Loan
      No. ________

    

    

    FORM
      OF DEED OF TRUST NOTE

    

    $______________                                                                                        May
      ___,
      2007

    

    FOR
      VALUE RECEIVED EQI
      ________ PARTNERSHIP, L.P.,
      a
      Tennessee limited partnership having an address at c/o Equity Inns, Inc., 7700
      Wolf River Boulevard, Germantown, Tennessee 38138 ("Maker")
      promises to pay to the order of
      CAPMARK BANK,
      a Utah
      Industrial Bank (together with its successors or assigns or any servicers
      selected by the holder(s) of this Note from time to time in its sole discretion
      to service the Loan, "Payee"),
      at
      one of its principal places of business at 6955 Union Park Center, Suite 330,
      Midvale, Utah 84047, Attn: President, or at such place as the holder hereof
      may
      from time to time designate in writing, the principal sum of ___________ Dollars
      ($______) (the "Loan"),
      in
      lawful money of the United States of America, with interest thereon to be
      computed on the unpaid principal balance from time to time outstanding at the
      Interest Rate (as such term is defined in Section 1(a) hereof), and to be paid
      in installments on the first (1st) day of each calendar month (each, a
      "Monthly
      Payment Date")
      as
      follows:

    

    (a)
       commencing
      on July 1, 2007 and on each Monthly Payment Date thereafter through and
      including June 1, 2012, interest in arrears calculated at the Interest Rate
      on
      the basis of a three hundred sixty (360) day year and charged on the principal
      balance outstanding from time to time for the actual number of days
      elapsed;

    

    (b) commencing
      on July 1, 2012 and on each Monthly Payment Date thereafter through and
      including the Monthly Payment Date immediately prior to the Maturity Date (as
      defined below), a constant payment of principal and interest in the amount
      of
      __________ Dollars ($______) (the "Monthly
      Debt Service Payment Amount");
      each
      such constant payment (i) shall be computed based on a three hundred sixty
      (360) day year comprised of twelve (12) months of thirty (30) days each and
      an
      amortization schedule of three hundred sixty (360) months and (ii)(A) shall
      be applied to the payment of interest then due and payable; and (B) the balance
      applied toward the reduction of the principal sum, except as otherwise provided
      in the Loan Documents (as hereinafter defined); and 

    

    (c)  the
      balance of said principal sum together with all accrued and unpaid interest
      thereon shall be due and payable on the first (1st) day of June, 2017 (the
      "Maturity
      Date").
      Interest on the principal sum of this Note (whether under subsection (a), (b)
      or
      (c) hereof) shall be calculated on the basis of a three-hundred-sixty (360)
      day
      year and shall be charged on the principal balance outstanding from time to
      time
      for the actual number of days elapsed. All amounts due under this Note shall
      be
      payable without setoff, counterclaim or any other deduction
      whatsoever.

    

    Maker
      has
      the option, effective any time during the term of the Loan, to arrange for
      the
      automatic wire transfer on the Monthly Payment Date of the Monthly Debt Service
      Payment Amount 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    from
      Maker’s bank account to an account designated by Payee pursuant to the terms and
      conditions of an automatic payment authorization form.

    

    1. Calculation
      of Interest; Application of Payments.

    

    (a) The
      term
      "Interest
      Rate"
      as used
      in this Note shall mean from the date of this Note through and including the
      date this Note is paid in full, a rate of Five and Fifty-Three One Hundredths
      percent (5.53%).

    

    (b) Payments
      under this Note shall be applied first to the payment of interest and other
      costs and charges due in connection with this Note or the Debt (as such term
      is
      defined in Section 4 hereof), as Payee may determine in its sole discretion,
      and
      then to reduction of the outstanding principal balance. All amounts due under
      this Note shall be payable without setoff, counterclaim or any other deduction
      whatsoever.

    

    (c) From
      and
      after the date of this Note, interest shall accrue on the unpaid principal
      balance from time to time outstanding on this Note at the Interest Rate. All
      of
      the Debt shall be due and payable on the Maturity Date.

    

    (d) MAKER
      UNDERSTANDS AND ACKNOWLEDGES THAT THIS NOTE AND THE OTHER LOAN DOCUMENTS DO
      NOT
      PROVIDE FOR FULL AMORTIZATION OF THE PRINCIPAL SUM AND, THEREFORE, UPON THE
      MATURITY DATE OR EARLIER ACCELERATION, A BALLOON PAYMENT OF THE THEN OUTSTANDING
      BALANCE OF THE PRINCIPAL SUM WILL BE REQUIRED, ALONG WITH PAYMENT IN FULL OF
      OTHER SUMS DUE HEREUNDER.

    

    2. Security
      for the Loan.

    

    (a) This
      Note
      is secured by: (i) that certain Deed of Trust, Assignment of Leases and Rents,
      Security Agreement and Fixture Filing dated as of the date hereof from Maker
      to
      Payee (the "Deed
      of Trust")
      affecting the real property and improvements identified therein (the
      "Property");
      (ii)
      that certain Assignment of Assignment of Leases, Rents and Profits, affecting
      the Property and dated as of the date hereof from Maker to Payee (the
      "Assignment
      of Assignment");
      (iii)
      that certain Assignment of Leases, Rents and Profits from ENN ______ L.L.C.,
      a
      Delaware limited liability company ("ENN")
      to
      Maker (the "Assignment");
      (iv)
      an Environmental Indemnity Agreement dated as of the date hereof among Payee,
      Maker, Equity Inns, Inc., a Tennessee corporation (“Guarantor”)
      (the
      "Environmental
      Agreement");
      (v) a
      Guaranty of Recourse Obligations dated as of the date hereof from Guarantor
      for
      the benefit of Payee (the "Guaranty");
      (vi)
      that certain Assignment of Assignment of Contracts, Licenses, Permits,
      Agreements, Warranties and Approvals dated as of the date hereof from Maker
      to
      Payee (the "Assignment
      of Contract Assignment");
      (vii) that certain Assignment of Contracts, Licenses, Permits, Agreements,
      Warranties and Approvals dated as of the date hereof from ENN to Maker (the
      "Contract
      Assignment");
      (viii) a Replacement Reserve Agreement dated as of the date hereof from Maker
      for the benefit of Payee (the "Replacement
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Reserve
      Agreement");
      (ix)
      a Consent and Subordination Agreement dated as of the date hereof by and between
      Maker, Payee and [MANAGER] (the "Consent
      Subordination Agreement");
      (x) a
      Subordination Agreement dated as of the date hereof by and between Maker, Payee
      and ENN (the "Subordination
      Agreement");
      (xi)
      and such other documents now or hereafter executed by Maker and/or others and
      by
      or in favor of Payee, which wholly or partially secure or guarantee payment
      of
      this Note including, without limitation, any collateral assignments, reserve
      and/or escrow accounts and Uniform Commercial Code Financing Statements (such
      other documents, collectively, the "Other
      Security Documents").

    

    (b) As
      used
      herein, the term "Loan
      Documents"
      means,
      collectively, this Note, the Deed of Trust, the Assignment, the Assignment
      of
      Assignment, the Environmental Agreement, the Guaranty, the Consent Subordination
      Agreement, the Contract Assignment, the Assignment of Contract Assignment,
      the
      Replacement Reserve Agreement, the Subordination Agreement, the Other Security
      Documents and any and all other documents executed in connection with the
      Loan.

    

    3. Late
      Charge.
      If any
      sum payable under this Note is not paid prior to the tenth (10th)
      day
      after the date such payment is due (other than when the entire Debt is due
      on
      the Maturity Date or earlier accelerated maturity date), Maker shall pay to
      Payee on demand an amount equal to the lesser of: (i) five percent (5%) of
      such
      overdue and unpaid sum or (ii) the maximum lawful rate of interest permitted
      on
      the overdue obligation outstanding for the period for which such amount is
      overdue, to defray the expenses incurred by Payee in handling and processing
      such delinquent payment and to compensate Payee for the loss of the use of
      such
      delinquent payment, and such additional amount shall be secured by the Deed
      of
      Trust and the other Loan Documents. The additional payments required under
      this
      paragraph shall be in addition to and shall in no way limit any other rights
      and
      remedies provided for in this Note, the Deed of Trust or any of the Loan
      Documents, as well as all other remedies provided by law.

    

    4. Events
      of Default.
      The
      entire outstanding principal balance of this Note, together with all accrued
      and
      unpaid interest thereon and all other sums due under the Loan Documents (all
      such sums, collectively, the "Debt"),
      or
      any portion thereof, shall without notice become immediately due and payable
      at
      the option of Payee: (a) if any payment required in this Note is not paid prior
      to the fifth (5th) day after the date when due or on the Maturity Date; (b)
      upon
      the occurrence of any other default under this Note, which continues more than
      thirty (30) days following written notice thereof from Payee; provided, however,
      that if the cure of such default cannot reasonably be accomplished within such
      thirty (30) day period and Maker shall have promptly and diligently commenced
      to
      cure such default within such thirty (30) day period, then the period to cure
      shall be deemed extended for up to an additional sixty (60) days from Payee's
      notice of such default so long as Maker diligently and continuously proceeds
      to
      cure such default to Payee's satisfaction; or (c) upon the happening of any
      other Event of Default under and as defined in the Deed of Trust, not cured
      beyond the applicable cure period (each of the foregoing, an "Event
      of Default").
      In
      the event that Payee retains counsel to collect the Debt or to protect or
      foreclose the security provided in connection herewith, Maker also agrees to
      pay
      on demand all costs of collection incurred by Payee, 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    including
      attorneys' fees for the services of counsel whether or not suit is brought.
      In
      addition, the prevailing party shall be entitled to recover attorney fees in
      any
      suit or action on appeal.

    

    5. Default
      Rate Interest.
      Maker
      does hereby agree that upon the occurrence of an Event of Default, including
      Maker's failure to pay the Debt in full on the Maturity Date, Payee shall be
      entitled to receive, and Maker shall pay, interest on the entire outstanding
      principal balance and any other amounts due at the rate equal to the Interest
      Rate plus five percent (5%) (the "Default
      Rate"),
      but
      not to exceed the maximum nonusurious rate permitted by applicable law. Interest
      shall accrue and be payable at the Default Rate from the occurrence of the
      Event
      of Default until all such Events of Default have been fully cured. The Default
      Rate interest shall be deemed secured by the Deed of Trust. This provision,
      however, shall not be construed as an agreement or privilege to extend the
      date
      of the payment of the Debt, nor as a waiver of any other right or remedy
      accruing to Payee by reason of the occurrence of any Event of Default. The
      additional payments required under this paragraph shall be in addition to and
      shall in no way limit any other rights and remedies provided for in this Note,
      the Deed of Trust or any of the Loan Documents, as well as all other remedies
      provided by law.

    

    6. Prepayment

    

    (a) Other
      than as set forth in Section 7 hereof, and in accordance with Section 68 of
      the
      Deed of Trust, Maker shall have no right to prepay all or any portion of the
      Loan during the period commencing on the date hereof to but not including the
      Monthly Payment Date which is one (1) month prior to the Maturity Date. From
      and
      after one (1) month prior to the Maturity Date, the Loan may be prepaid in
      whole, but not in part, at any time, together with accrued interest to the
      date
      of such prepayment on the principal amount prepaid and together with all of
      Payee's fees and expenses related thereto, without penalty or premium,
provided that
      if a
      prepayment is made other than on a Monthly Payment Date, Maker shall pay
      interest on the amount prepaid through and including the last day of the
      calendar month in which the prepayment occurs. Any such prepayment shall be
      subject, in each case, to the satisfaction of the condition precedent that
      Maker
      shall provide not less than thirty (30) days' prior written notice to Payee
      specifying the Monthly Payment Date (or, if applicable, any other date) on
      which
      such prepayment is to occur and indicating the principal amount of this Note
      to
      be so prepaid. Except as set forth above, this Note may not be prepaid prior
      to
      the Maturity Date; provided,
      however,
      at any
      time after the date which is the earlier of three (3) years from the date hereof
      or two (2) years after the Loan is securitized and is at least one (1) month
      prior to the Maturity Date, Maker shall have the right and option to release
      the
      Property (as defined in the Deed of Trust) from the lien of the Deed of Trust
      in
      accordance with the terms and provisions set forth in Section 68 of the Deed
      of
      Trust.

    

    (b) Notwithstanding
      anything herein to the contrary, no prepayment consideration or the Prohibited
      Prepayment Fee (as defined below) shall be due in the event that Payee elects
      to
      apply the proceeds of a condemnation award or insurance settlement on a Property
      towards the reduction of the principal balance of this Note pursuant to the
      terms of the Deed of Trust. At Payee's option, (i) the monthly payments of
      principal and interest on the Loan shall be reduced to an amount which would
      amortize the reduced outstanding principal balance of the Loan over the
      remaining 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    amortization
      term, or (ii) the monthly payments of principal and interest shall not be
      modified and the partial prepayment shall be applied to the payments of
      principal otherwise due on the remaining monthly payment date(s) in inverse
      order of maturity, and the term of the Loan shall be reduced, if necessary,
      to
      reflect the actual Loan amortization schedule as modified by the application
      of
      this clause (ii).

    

    7. Repayment
      Upon Default

    

    If
      all or
      any part of the principal amount of this Note is prepaid upon acceleration
      of
      the Loan or otherwise following the occurrence of an Event of Default prior
      to
      the Monthly Payment Date which is one (1) month immediately preceding the
      Maturity Date, then, in addition to such principal payment, Maker shall be
      required to pay the Prohibited Prepayment Fee to Payee. As used herein, the
      "Prohibited
      Prepayment Fee"
      shall
      be a prepayment premium equal to the sum of three percent (3%) of the
      outstanding principal balance of the Note plus
      the
      Yield Maintenance Payments (as defined below). As used herein, "Yield
      Maintenance Payments"
      shall
      mean an amount equal to the greater of (i) one percent (1%) of the
      outstanding principal balance of the Note, and (ii) the excess, if any, of
      (a) the sum of (1) the aggregate respective present values of all scheduled
      interest payments payable on each Monthly Payment Date in respect of this Note
      (or the portion of all such interest payments corresponding to the portion
      of
      the principal of this Note to be prepaid upon acceleration) for the period
      from
      the date of such prepayment upon acceleration to the Monthly Payment Date which
      is one (1) month immediately preceding the Maturity Date, discounted monthly
      at
      a rate equal to the Treasury Constant Maturity Yield Index and based on a
      360-day year of twelve 30-day months and (2) the aggregate respective present
      values of all scheduled principal payments payable on each Monthly Payment
      Date
      in respect of this Note (or the then unpaid portion thereof to be prepaid upon
      acceleration) assuming the then outstanding principal balance of this Note
      is
      paid in full on the Monthly Payment Date which is one (1) month immediately
      preceding the Maturity Date, discounted monthly at a rate equal to the Treasury
      Constant Maturity Yield Index and based on a 360-day year of twelve 30-day
      months minus
      (b) the
      then current outstanding principal amount of this Note (or the then unpaid
      portion thereof to be prepaid upon acceleration). The Yield Maintenance Payments
      to be paid in connection with any prepayment under this Section 7 shall be
      determined in good faith by Payee and shall be conclusive and binding on Maker
      (absent mani-fest error). For purposes of this Section 7, the amount of
      this Note (or the portion of the principal of this Note to be prepaid upon
      acceleration) on the date of prepayment shall be determined after giving effect
      to any payment of scheduled amortization made on such date. For purposes hereof,
      "Treasury
      Constant Maturity Yield Index"
      shall
      mean the average yield for "This Week" as reported by the Federal Reserve Board
      in Federal Reserve Statistical Release H.15(519) ("FRB
      Release")
      published during the second full week preceding the prepayment date (caused
      by
      acceleration of the Loan following the occurrence of an Event of Default) for
      instruments having a maturity coterminous with the remaining term of this Note.
      In the event the FRB Release is no longer published, Payee shall select a
      comparable publication to determine the Treasury Constant Maturity Yield Index.
      If there is no Treasury Constant Maturity Yield Index for instruments having
      a
      maturity coterminous with the remaining term of this Note, then the weighted
      average yield to maturity of the Treasury Constant Maturity Yield Indices with
      maturities next longer and shorter than such remaining average life to maturity
      shall be used, calculated by averaging (and rounding upward to the nearest
      whole
      multiple 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    of
      1/100
      of 1% per annum, if the average is not such a multiple) the yields of the
      relevant Treasury Constant Maturity Yield Indices (rounded, if necessary, to
      the
      nearest 1/100 of 1% with any figure of 1/200 or above rounded
      upward).

    

    8. Limitations
      on Recourse.
      (a)
      Subject to the qualifications set forth in this Section, neither Maker nor
      Guarantor nor any partner, member, shareholder, officer or director of either
      of
      them (collectively, the "Maker
      Group")
      shall
      be personally liable either at law or in equity for the repayment of the Debt
      or
      the failure of performance of any other obligation evidenced by the Note or
      contained in the Deed of Trust or the Other Security Documents, and Payee will
      satisfy any judgments, orders or decrees on account of the failure to repay
      such
      Debt and/or the failure to perform any such obligation, from the Property and
      any other real or personal property, tangible or intangible, as Maker, Guarantor
      or any other entity shall have pledged or assigned to secure this Note by any
      of
      the Loan Documents, except that Payee may bring a foreclosure action, an action
      for specific performance or any other appropriate action or proceeding to enable
      Payee to enforce and realize upon this Note, the Deed of Trust, the Other
      Security Documents, and the interests in the Property and any other collateral
      given to Payee pursuant to the Deed of Trust and the Other Security Documents;
      provided,
      however,
      that,
      except as specifically provided in this Section, any judgment in any such action
      or proceeding shall be enforceable against Maker Group only to the extent of
      Maker Group's interest in the Property and in any other collateral given to
      Payee. Payee, by accepting this Note, the Deed of Trust and the Other Security
      Documents, agrees that it shall not sue for, seek or demand any deficiency
      judgment against Maker Group in any such action or proceeding, under, by reason
      of or in connection with the Deed of Trust, the Other Security Documents or
      this
      Note. The provisions of this Section shall not, however: (i) constitute a
      waiver, release or impairment of any obligation evidenced or secured by the
      Deed
      of Trust, the Environmental Agreement, the Guaranty or the Other Security
      Documents or this Note; (ii) impair the right of Payee to name Maker as a party
      defendant in any action or suit for foreclosure and sale under the Deed of
      Trust; (iii) affect the validity or enforceability of any guaranty or indemnity
      made in connection with the Deed of Trust, this Note or the Other Security
      Documents; (iv) impair the right of Payee to obtain the appointment of a
      receiver; (v) impair the right of Payee to bring suit with respect to fraud
      or
      misrepresentation by Maker or Maker Group in connection with the Deed of Trust,
      this Note, the Environmental Agreement, the Guaranty or the Other Security
      Documents; (vi) affect the validity or enforceability of the Environmental
      Agreement or limit the liability of Maker or Guarantor thereunder; or (vii)
      affect the validity or enforceability of the Guaranty or limit the liability
      of
      Guarantor thereunder.

    

    (b) Nothing
      herein shall be deemed to be a waiver of any right which Payee may have under
      Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy
      Code to file a claim for the full amount of the Debt secured by the Deed of
      Trust or to require that all collateral shall continue to secure all of the
      debt
      owing to Payee in accordance with this Note, the Deed of Trust, the
      Environmental Agreement, the Guaranty and the Other Security
      Documents.

    

    (c) NOTWITHSTANDING
      THE FOREGOING PROVISIONS OF THIS SECTION OR ANY OTHER PROVISION IN THE LOAN
      DOCUMENTS, MAKER AND GUARANTOR, JOINTLY AND SEVERALLY, SHALL BE FULLY LIABLE
      FOR
      AND SHALL INDEMNIFY 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    PAYEE
      FOR
      ANY OR ALL LOSS, COST, LIABILITY, JUDGMENT, CLAIM, DAMAGE OR EXPENSE SUSTAINED,
      SUFFERED OR INCURRED BY PAYEE (INCLUDING, WITHOUT LIMITATION, PAYEE'S ATTORNEYS'
      FEES) ARISING OUT OF OR ATTRIBUTABLE OR RELATING TO:

    

    (i) FRAUD
      OR
      MISREPRESENTATION BY MAKER GROUP OR GUARANTOR IN CONNECTION WITH THE
      LOAN;

    

    (ii)
       THE
      GROSS
      NEGLIGENCE OR WILLFUL MISCONDUCT OF MAKER GROUP OR GUARANTOR, THEIR RESPECTIVE
      AGENTS OR EMPLOYEES (NOT INCLUDING LESSEES OR PROPERTY MANAGERS), OR PHYSICAL
      WASTE OF THE PROPERTY BY MAKER OR GUARANTOR;

    

    (iii)
       THE
      BREACH OF PROVISIONS IN THE DEED OF TRUST OR THE ENVIRONMENTAL AGREEMENT
      CONCERNING ENVIRONMENTAL LAWS, HAZARDOUS SUBSTANCES AND ASBESTOS (AS EACH SUCH
      TERM IS DEFINED IN THE DEED OF TRUST), AND ANY INDEMNIFICATION OF PAYEE IN
      THE
      DEED OF TRUST OR ANY OTHER LOAN DOCUMENT WITH RESPECT TO SUCH ENVIRONMENTAL
      LAWS, HAZARDOUS SUBSTANCES AND ASBESTOS;

    

    (iv)
       THE
      REMOVAL OR DISPOSAL OF ANY PORTION OF THE PROPERTY AFTER DEFAULT UNDER THIS
      NOTE, THE DEED OF TRUST, THE ENVIRONMENTAL AGREEMENT, THE GUARANTY OR ANY OTHER
      LOAN DOCUMENT;

    

    (v)
       THE
      MISAPPLICATION OR CONVERSION BY MAKER OR GUARANTOR OF: (A) ANY INSURANCE
      PROCEEDS PAID BY REASON OF ANY LOSS, DAMAGE OR DESTRUCTION TO THE PROPERTY;
      (B)
      ANY AWARDS OR OTHER AMOUNTS RECEIVED IN CONNECTION WITH THE CONDEMNATION OF
      ALL
      OR A PORTION OF THE PROPERTY; OR (C) RENTS, ISSUES, PROFITS, PROCEEDS, ACCOUNTS
      OR OTHER AMOUNTS RECEIVED BY MAKER OR GUARANTOR (IN THE CASE OF CLAUSE (C)
      FOLLOWING AN EVENT OF DEFAULT UNDER THIS NOTE, THE DEED OF TRUST, THE
      ENVIRONMENTAL AGREEMENT, THE GUARANTY OR ANY OTHER LOAN DOCUMENT);

    

    (vi) Maker's
      failure to pay taxes, assessments, charges for labor or materials or other
      charges that may result in liens on any portion of the Property; provided,
      however, that Maker's and Guarantor's liability hereunder shall cease with
      respect to such amounts incurred from and after such time, if any, that Payee
      forecloses the Deed of Trust or accepts a deed in lieu of foreclosure of the
      Deed of Trust;

    

    (vii) MAKER'S
      FAILURE TO PAY INSURANCE DEDUCTIBLES OR PREMIUMS IN RESPECT OF ANY INSURANCE
      REQUIRED UNDER THE LOAN DOCUMENTS TO BE MAINTAINED IN RESPECT OF THE PROPERTY;
      PROVIDED, 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    HOWEVER,
      THAT MAKER'S AND GUARANTOR'S LIABILITY HEREUNDER SHALL CEASE WITH RESPECT TO
      SUCH AMOUNTS INCURRED FROM AND AFTER SUCH TIME, IF ANY, THAT PAYEE FORECLOSES
      THE DEED OF TRUST OR ACCEPTS A DEED IN LIEU OF FORECLOSURE OF THE DEED OF
      TRUST;

    

    (viii)
       THE
      DEDUCTIBLE AMOUNT OF ANY INSURANCE MAINTAINED IN RESPECT OF THE
      PROPERTY;

    

    (ix)
       THE
      COSTS
      INCURRED BY PAYEE (INCLUDING ATTORNEYS' FEES) IN CONNECTION WITH THE COLLECTION
      OR ENFORCEMENT OF THE DEBT;

    

    (x) MAKER'S
      FAILURE TO MAKE THE PROPERTY REPAIRS OR ALTERATIONS REQUIRED UNDER THE LOAN
      DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ALTERATIONS REQUIRED IN ORDER TO
      COMPLY WITH THE AMERICANS WITH DISABILITIES ACT;

    

    (xi) MAKER'S
      FAILURE TO PERMIT ON-SITE INSPECTIONS OF THE PROPERTY OR TO PROVIDE FINANCIAL
      REPORTS AND INFORMATION PERTAINING TO THE PROPERTY AS REQUIRED BY THE DEED
      OF
      TRUST, UNLESS, IN EITHER CASE, SUCH FAILURE IS THE RESULT OF A GOOD FAITH ERROR
      AND IS CURED WITHIN TEN (10) DAYS AFTER NOTICE;

    

    (xii)
       ANY
      SECURITY DEPOSITS OR ADVANCE DEPOSITS COLLECTED WITH RESPECT TO THE PROPERTY
      WHICH ARE NOT DELIVERED TO PAYEE UPON A FORECLOSURE OF THE PROPERTY OR ACTION
      IN
      LIEU THEREOF;

    

    (xiii) MAKER
      FAILS TO OBTAIN PAYEE'S WRITTEN CONSENT TO ANY SUBORDINATE FINANCING;

    

    (xiv) MAKER'S
      FAILURE TO OBTAIN PAYEE'S PRIOR WRITTEN CONSENT TO ANY TRANSFER OF THE PROPERTY
      OR OF ANY OWNERSHIP INTEREST IN MAKER; AND

    

    (xv) MAKER
      FAILS TO COMPLY WITH THE PROVISIONS OF SECTION 11 OF THE DEED OF TRUST
      PERTAINING TO ITS SINGLE-PURPOSE ENTITY STATUS.

    

    (d) Notwithstanding
      the foregoing, the agreement of Payee not to pursue recourse liability as set
      forth in subsection (a) above SHALL BE AND BECOME NULL AND VOID and shall be
      of
      no further force or effect if: (i) any financial information concerning Maker
      or
      Guarantor provided by Maker or Guarantor or any of their respective employees
      or
      agents is fraudulent in any respect, contains any fraudulent information or
      misrepresents in any material respect the financial condition of Maker or such
      Guarantor; (ii) a voluntary bankruptcy or insolvency proceeding is commenced
      by
      Maker or Maker’s managing member/general partner; or (iii) an involuntary

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    bankruptcy
      or insolvency proceeding is commenced by any party against Maker or Maker’s
      managing member/general partner and is not unconditionally dismissed within
      ninety (90) days of filing. Upon the occurrence of any of the foregoing events,
      Maker and Guarantor shall have full joint and several recourse liability for
      all
      sums due under the Loan Documents.

    

    (e) Nothing
      in this Section shall be interpreted or construed to impair, limit the liability
      of or otherwise affect the terms, conditions, requirements and obligations
      of
      Guarantor under the Guaranty or Maker or Guarantor under the Environmental
      Agreement.

    

    9. No
      Usury
      The
      provisions of this Note and of all agreements between Maker and Payee, whether
      now existing or hereafter arising and whether written or oral, including, but
      not limited to, the Loan Documents, are hereby expressly limited so that in
      no
      contingency or event whatsoever, whether by reason of demand or acceleration
      of
      the maturity of this Note or otherwise, shall the amount contracted for,
      charged, taken, reserved, paid or agreed to be paid (defined as "Interest” for
      purposes of this section) to Payee for the use, forbearance or detention of
      the
      money loaned under this Note exceed the maximum nonusurious amount permissible
      under applicable law. If, from any circumstance whatsoever (including, without
      limitation, the receipt of any late charge or similar amount), performance
      or
      fulfillment of any provision hereof or of any agreement between Maker and Payee
      shall, at the time performance or fulfillment of such provision shall be due,
      exceed the limit for Interest prescribed by law or otherwise transcend the
      limit
      of validity prescribed by applicable law, then ipso facto the obligation to
      be
      performed or fulfilled shall be reduced to such limit, and if, from any
      circumstance whatsoever, Payee shall ever receive anything of value deemed
      Interest by applicable law in excess of the maximum lawful amount, an amount
      equal to any excessive Interest shall be applied to the reduction of the
      principal balance owing under this Note in the inverse order of its maturity
      (whether or not then due) or at the option of Payee be paid over to Maker,
      and
      not to the payment of Interest. All Interest (including any amounts or payments
      judicially or otherwise under the law deemed to be Interest) contracted for,
      charged, taken, reserved, paid or agreed to be paid to Payee shall, to the
      extent permitted by applicable law, be amortized, prorated, allocated and spread
      throughout the full term of this Note including any extensions and renewals
      hereof until payment in full of the principal balance of this Note so that
      the
      Interest thereon for such full term will not exceed at any time the maximum
      nonusurious amount permitted by applicable law. Maker hereby agrees that as
      a
      condition precedent to any claim seeking usury penalties against Payee, Maker
      will provide written notice to Payee, advising Payee in reasonable detail of
      the
      nature and amount of the violation, and Payee shall have sixty (60) days after
      receipt of such notice in which to correct such usury violation, if any, by
      either refunding such excess interest to Maker or crediting such excess interest
      against this Note and/or any other indebtedness then owing by Maker to Payee.
      To
      the extent that Payee is relying on Chapter ___, as amended, of the [APPLICABLE
      STATE FINANCE CODE] to determine the maximum nonusurious amount of Interest
      permitted by applicable law on the principal of this Note, Payee will utilize
      the weekly rate ceiling from time to time in effect as provided in such Chapter
      ___, as amended. To the extent United States federal law permits a greater
      amount of interest than is permitted under [STATE] law, Payee will rely on
      United States federal law instead of such Chapter ___, as amended, for the
      purpose of determining the maximum nonusurious amount permitted by applicable
      law. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Additionally,
      to the extent permitted by applicable law now or hereafter in effect, Payee
      may,
      at its option and from time to time, implement any other method of computing
      the
      maximum lawful rate under such Chapter ___, as amended, or under other
      applicable law by giving notice, if required, to Maker as provided by applicable
      law now or hereafter in effect. In no event shall the provisions of Chapter
      ___
      of the [APPLICABLE STATE FINANCE CODE] (which regulates certain revolving credit
      loan accounts and revolving tri-party accounts) apply to the indebtedness
      evidenced hereby. This Section 2.3 will control all agreements between Maker
      and
      Payee.

    

    10. Transfers
      Not Permitted
      Without
      the prior written consent of Payee, Maker shall not sell, convey, alienate,
      mortgage, encumber, pledge or otherwise transfer, or permit the transfer of,
      directly or indirectly, the Property or ownership interests of Maker or Maker's
      general partner except for transfers otherwise permitted in the Deed of
      Trust.

    

    11. Authority
      Maker
      represents that Maker has full power, authority and legal right to execute,
      deliver and perform its obligations pursuant to this Note, the Deed of Trust
      and
      the other Loan Documents to which it is a party and that this Note, the Deed
      of
      Trust and the other Loan Documents constitute valid and binding obligations
      of
      Maker.

    

    12. Notices
      All
      notices or other communications required or permitted to be given pursuant
      hereto shall be given in the manner specified in the Deed of Trust directed
      to
      the parties at their respective addresses as provided therein.

    

    13. Loan
      Assumption The
      Loan
      may not be assumed by any third party prior to the date which is the earlier
      of
      (i) one (1) year from the date hereof, (ii) one (1) month after the Loan is
      securitized or (iii) such earlier date as Payee shall determine in its sole
      discretion. Thereafter, two (2) transfers of the Property or legal or beneficial
      interests in the Property or Maker will be allowed, subject to the prior written
      consent of Payee, by a third party approved by Payee in its reasonable
      discretion. Any approved assumption shall be subject to delivery to Payee of
      an
      (a) assumption agreement, and related certificates, agreements and opinions,
      in
      form and substance reasonably acceptable to Payee, delivery of appropriate
      ratification/assumption agreements and legal opinions; (b) an assumption fee
      equal to (i) with respect to the first assumption hereunder, one half of one
      percent (0.50%) of the then unpaid principal balance of the Loan and (ii) with
      respect to the second assumption hereunder, one percent (1.0%) of the then
      unpaid principal balance of the Loan; (c) payment of all costs and expenses
      incurred by Payee in connection with the assumption; and (d) written
      confirmation from all applicable rating agencies that such assumption will
      not
      cause such rating agency to withdraw, downgrade or qualify any then-current
      ratings for any securities backed by a pool of mortgage loans that includes
      the
      Loan. 

    

    14. Governing
      Law THE
      NOTE
      SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
      IN
      WHICH THE REAL PROPERTY ENCUMBERED BY THE DEED OF TRUST IS LOCATED, WITHOUT
      REGARD FOR CONFLICTS OF LAWS PRINCIPLES OR OTHERWISE, AND THE APPLICABLE LAWS
      OF
      THE UNITED STATES OF AMERICA.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    15. Time
      of Essence
      Time is
      of the essence of each liability and obligation of Maker hereunder.

    

    16. Certain
      Waivers
      To the
      fullest extent permitted by law, Maker and all guarantors, sureties and
      endorsers, severally waive all applicable exemption rights, whether under any
      state constitution, homestead laws or otherwise, and also severally waive
      diligence, valuation and appraisement, presentment for payment, protest and
      demand, notice of protest, notice of default, notice of intention to accelerate
      all sums under the Note or the Loan Documents, notice of acceleration of all
      sums under the Note or the Loan Documents, demand and dishonor and diligence
      in
      collection and nonpayment of this Note and all other notices in connection
      with
      the delivery, acceptance, performance, default, or enforcement of the payment
      of
      this Note (except notice of default and any other notice as specifically
      provided for in this Note, the Deed of Trust or the Loan Documents). To the
      fullest extent permitted by law, Maker further waives all benefit that might
      accrue to Maker by virtue of any present or future laws exempting any Property,
      or any other property, real or personal, or the proceeds arising from any sale
      of any such property, from attachment, levy, or sale under execution, or
      providing for any stay of execution to be issued on any judgment recovered
      on
      this Note or in any action to foreclose the Deed of Trust, injunction against
      sale pursuant to power of sale, exemption from civil process or extension of
      time for payment. Maker agrees that any real estate that may be levied upon
      pursuant to a judgment obtained by virtue of this Note, or any writ of execution
      issued thereon, may be sold upon any such writ in whole or in part in any order
      desired by Payee. In
      addition, to the extent permitted by applicable law, Maker hereby agrees that
      Payee may bring separate actions on this Note and on any of the Loan Documents
      and Maker waives any rights it may have under the law of the state in which
      any
      Property is located to object to or raise a defense in any such action regarding
      such splitting of causes of action. Notwithstanding anything to the contrary
      contained in this Note or the other Loan Documents, Sections ____ through ____
      of the [APPLICABLE STATE PROPERTY CODE] are not being waived.

    

    17. Effect
      of Waiver
      No
      failure to exercise, and no delay in exercising any right, power or remedy
      hereunder or under any other Loan Document shall impair any right, power or
      remedy which Payee may have, nor shall any such delay be construed to be a
      waiver of any of such rights, powers or remedies, or an acquiescence in any
      breach or default under this Note or any other Loan Document, nor shall any
      waiver of any breach or default of Maker hereunder or under any other Loan
      Document be deemed a waiver of any default or breach subsequently occurring.
      The
      rights and remedies herein specified are cumulative and not exclusive of any
      rights or remedies which Payee would otherwise have.

    

    18. Severability
      of Provisions
      In case
      any one or more of the provisions contained in this Note should be invalid,
      illegal or unenforceable in any respect, the validity, legality and
      enforceability of the remaining provisions contained herein shall not in any
      way
      be affected or impaired thereby.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    19. Successors
      and Assigns
      This
      Note shall be binding upon and inure to the benefit of Maker, Payee and their
      respective successors and assigns; provided,
      however,
      that,
      except as specifically provided herein or in the Deed of Trust, Maker may not
      directly or indirectly, sell, assign or otherwise transfer all or any part
      of
      the Property or any interest therein, or any of Maker's rights and obligations
      under this Note, or take or permit any other action prohibited by the Deed
      of
      Trust, without the prior written consent of Payee, which Payee may give or
      withhold in its absolute discretion. 

    

    20. Transfer
      of Loan
      (a)
      Payee may, at any time, sell, transfer or assign this Note, the Deed of Trust
      and the other Loan Documents, and any or all servicing rights with respect
      thereto, or grant participations therein or issue mortgage pass-through
      certificates or other securities evidencing a beneficial interest in a rated
      or
      unrated public offering or private placement. Payee may forward to each
      purchaser, transferee, assignee, servicer, participant or investor in such
      securities or any credit rating agency rating such securities (collectively,
      the
      "Investor")
      and
      each prospective Investor, all documents and information which Payee now has
      or
      may hereafter acquire relating to Maker, Guarantor and the Property, whether
      furnished by Maker, Guarantor or otherwise as Payee determines necessary or
      desirable consistent with full disclosure for purposes of marketing and
      underwriting the Loan; provided,
      however,
      that
      Payee shall use reasonable efforts not to unnecessarily disclose Maker's and
      Guarantor’s confidential information. Maker shall furnish and hereby consents to
      Payee furnishing to such Investors or such prospective Investors any and all
      information concerning Maker, Guarantor and the Property as may be reasonably
      requested by Payee, any Investor or any prospective Investor in connection
      with
      any sale, transfer or participation interest.

    

    (b) Upon
      any
      transfer or proposed transfer contemplated above and by the Loan Documents,
      at
      Payee's request, Maker and Guarantor shall provide an estoppel certificate,
      certifying as to the then true state of facts, to the Investor or any
      prospective Investor in such form, substance and detail as Payee, such Investor
      or prospective Investor may require.

    

    21. Securitization
      and Transfer.
      Payee
      may
      sell the Loan, interests in the Loan, issue securities backed by or evidencing
      ownership of the Loan in one or more public or private offerings and/or further
      tranche the Loan or divide the Loan into two or more component parts or notes
      (as described more fully in Section 22 below) and/or pledge the Loan (or any
      interest therein) at any time without Maker's or Guarantor’s consent. Maker
      shall cooperate with Payee in connection with the sale, participation, pledge
      or
      the securitization of all or a part of the Loan and obtaining ratings from
      one
      or more rating agencies, which cooperation shall include (i) providing
      additional information regarding the Property, Maker or any of its affiliates
      or
      Guarantor, including without limitation, additional appraisals, environmental
      reports, engineering reports and similar due diligence materials, and updates,
      verifications and consents with respect to such materials that were delivered
      on
      or prior to the Closing Date (as defined in the Deed of Trust), (ii) supplying
      such documentation, financial statements, and reports that may be required
      to
      comply with Regulation S-X of the federal securities law, (iii) making
      modifications to the Loan Documents or the organizational documents, revisions
      to existing opinions or supplying additional opinions, (iv) delivering
      additional Manager and Franchisor estoppel letters, subordination agreements
      or
      similar agreements and (v) participating 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (including
      senior management of Maker) in meetings and presentations to the rating agencies
      and prospective investors, provided that no such modification, revision,
      additional documents, or other action in connection with such cooperation shall
      materially increase the substantive obligations or materially decrease the
      substantive rights of Maker or Guarantor pursuant to the Loan Documents. The
      cost of providing such additional opinions, additional documents, revisions
      to
      existing opinions or modifications to the Loan Documents or other actions in
      connection with such cooperation shall be borne by Payee, except Maker will
      pay
      the cost of making reasonable amounts of photocopies and postage. At the request
      of Payee, Maker shall make such representations and warranties as of the date
      of
      the securitization as are customary for Makers to make in securitization
      transactions, review any factual information or disclosures with respect to
      the
      Property, Maker, and its affiliates contained in any private placement
      memorandum, prospectus, registration statement, or other offering materials
      relating to any sale or securitization of the Loan, and Maker and its sponsor
      or
      parent, as applicable, shall indemnify Payee against any loss or expense
      incurred as a result of any misstatements or omissions in any written offering
      material approved by Maker, its general partner or any of their
      affiliates.

    

    22. Note
      Structure.
      Payee
      shall have the right, in its sole discretion, between the Closing Date and
      a
      sale, participation or securitization of the Loan, to require that the Loan
      be
      divided into two or more separate (or component) notes, of which the aggregate
      weighted average coupon rate shall, as of the sale or securitization, equal
      the
      initial Interest Rate on the Loan on the Closing Date (adjusted to account
      for
      amortization), but each of which may have a different interest rate and a
      different amortization schedule, which notes may be included in separate
      transactions, and which notes may be secured by pari-passu or senior/subordinate
      deeds of trust and security agreements. In no event shall such bifurcation
      of
      this Note affect the overall loan economics expected by Maker or Guarantor
      or
      alter Maker's or Guarantor’s substantive rights or obligations under the Loan
      Documents.

    

    23. Remedies
      Available.
      The
      remedies of Payee, as provided herein or in any other Loan Document, shall
      be
      cumulative and concurrent, and may be pursued singularly, successively or
      together, at the sole discretion of Payee, and may be exercised as often as
      occasion therefor shall arise. No act of omission or commission of Payee,
      including specifically any failure to exercise any right, remedy or recourse,
      shall be deemed to be a waiver or release of the same, and any waiver or release
      with reference to any one event shall not be construed as continuing or as
      a bar
      to, or as a waiver or release of, any subsequent right, remedy or recourse
      as to
      a subsequent event.

    

    24. Maker's
      Covenants.
      Maker
      agrees that (a) the obligation evidenced by this Note is an exempted transaction
      under the Truth-in-Lending Act, 15 U.S.C. '
      1601,
et seq.
      (1982);
      (b) said obligation constitutes a business loan within the purview of the law
      of
      the state in which the Property is located, for the purpose of the application
      of any laws that distinguish between consumer loans and business loans and
      that
      have as their purpose the protection of consumers in the state in which the
      Property is located; and (c) it hereby waives any objections to
      venue.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    25. Extension
      of Time.
      Maker
      consents to any extension of time for the payment hereof, release of all or
      any
      part of the security for the payment hereof or release of any party liable
      for
      Maker's liabilities or obligations hereunder or under any of the other Loan
      Documents. Any such extension or release may be made without notice to Maker
      and
      without discharging Maker's liability.

    

    26. Payee.
      Reference in this Note to "Payee"
      shall
      mean the original Payee hereunder so long as such Payee shall be the holder
      of
      this Note and thereafter shall mean any subsequent holder of this
      Note.

    

    27. WAIVER
      OF JURY TRIAL.
      MAKER
      AND PAYEE EACH HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE
      OF
      RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
      ANY
      SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS NOTE, THE DEED
      OF
      TRUST, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION
      ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
      KNOWINGLY AND VOLUNTARILY BY MAKER AND PAYEE, AND IS INTENDED TO ENCOMPASS
      INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH RIGHT TO TRIAL BY JURY
      WOULD OTHERWISE ACCRUE. MAKER AND PAYEE EACH ARE HEREBY AUTHORIZED TO FILE
      A
      COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER
      BY
      EACH OTHER.

    

    28. Submission
      to Jurisdiction.
      MAKER
      AND PAYEE EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OF
      _____ COURT SITTING IN ______ COUNTY OR THE UNITED STATES OF AMERICA FEDERAL
      DISTRICT COURT HAVING JURISDICTION OVER _______ COUNTY IN ANY SUIT, ACTION
      OR
      PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE AND HEREBY AGREE NOT TO
      ASSERT THAT IT IS NOT SUBJECT TO THE JURISDICTION OF THE FOREGOING COURTS.
      EITHER MAKER OR PAYEE MAY, AT ITS SOLE DISCRETION, ELECT THE STATE OF ______,
      ______ COUNTY, OR THE UNITED STATES OF AMERICA FEDERAL DISTRICT COURT HAVING
      JURISDICTION OVER ______ COUNTY AS THE VENUE OF ANY SUCH SUIT, ACTION OR
      PROCEEDING. MAKER AND PAYEE EACH HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
      PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO SUCH VENUE
      AS
      BEING AN INCONVENIENT FORUM OR IMPROPER VENUE.

    

    29. Miscellaneous.

    

    (a) No
      release of any security for the Debt or any person liable for payment of the
      Debt, no extension of time for payment of this Note or any installment hereof,
      and no alteration, amendment or waiver of any provision of the Loan Documents
      made by agreement between Payee and any other person or party shall release,
      modify, amend, waive, extend, change, discharge, 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    terminate
      or affect the liability of Maker, and any other person or party who might be
      or
      become liable for the payment of all or any part of the Debt, under the Loan
      Documents.

    

    (b) This
      Note
      may not be modified, amended, waived, extended, changed, discharged or
      terminated orally or by any act or failure to act on the part of Maker or Payee,
      but only by an agreement or other document in writing signed by the party
      against whom enforcement of any modification, amendment, waiver, extension,
      change, discharge or termination is sought.

    

    (c) Whenever
      used, the singular number shall include the plural, the plural the singular,
      and
      the words "Payee"
      and
      "Maker"
      shall
      include their respective successors, assigns, heirs, executors and
      administrators.

    

    30. Service
      of Process.
      Process
      in any suit, action or proceeding of the nature referred to in Section 28 hereof
      may be served in any manner permitted by law and nothing herein shall limit
      Payee’s right to bring proceedings against Maker in the courts of any other
      jurisdiction.

    

    31. Tax
      Identification Number.
      Maker
      represents and warrants that its current tax identification number is
      ____________.

    

    32. SPECIFIC
      NOTICE.
      IT IS EXPRESSLY AGREED AND UNDERSTOOD THAT THIS NOTE INCLUDES INDEMNIFICATION
      PROVISIONS WHICH, IN CERTAIN CIRCUMSTANCES, COULD INCLUDE AN INDEMNIFICATION
      BY
      MAKER AND GUARANTOR OF PAYEE FROM CLAIMS OR LOSSES ARISING AS A RESULT OF
      PAYEE'S OWN NEGLIGENCE.

    

    THE
      WRITTEN LOAN DOCUMENTS TO WHICH MAKER IS A PARTY REPRESENT THE FINAL AGREEMENT
      BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
      CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
      PARTIES.

    

    THERE
      ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

    

    

    

    [SIGNATURE
      APPEARS ON FOLLOWING PAGE]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      Maker
      has duly executed and delivered this Deed of Trust Note under seal as of the
      day
      and year first above written.

    

    MAKER:

    

    EQI
      _________ PARTNERSHIP, L.P.,
      a

    Tennessee
      limited partnership

    

    By: EQI
      __________ Corporation, a

    Tennessee
      corporation, its general partner

    

                       By:__________________________(SEAL)

                       Name:________________________ 

                     Title:_________________________

    

    

    

    

    

    

    

    

    PAY
      TO
      THE ORDER OF 

     ________________________________,

    WITHOUT
      REPRESENTATION OR RECOURSE

     

    CAPMARK
      BANK

     

    By:    

    Name:
           

    Title:
           

    Date:EXHIBIT 10.1

                         EMPLOYMENT AGREEMENT LION, INC.
                     (David Stedman, President/ Interim CEO)

         This Employment  Agreement (this "Agreement") is made effective May 22,
2007  ("Effective  Date"),  by  LION,  Inc.  ("Employer"),  and  David  Stedman,
President/ Interim CEO of LION, Inc. ("Executive").

                                    RECITALS

         Employer desires  Executive's  employment with Employer,  and Executive
wishes to accept such  employment,  upon the terms and  conditions  set forth in
this Agreement.

                                    AGREEMENT

         The parties, intending to be legally bound, agree as follows:

                                 1. DEFINITIONS

         For the  purposes  of this  Agreement,  the  following  terms  have the
meanings specified or referred to in this Section 1.

         1.1 "Basic Compensation" is defined as Salary and Benefits (see Section
3.1.1 and 3.1.2).

         1.2  "Bonus Compensation" is defined in Section 3.2.

         1.3  "Cause" is defined in Section 6.2

         1.4 "Confidential  Information" is defined as the following information
and materials in written,  oral, magnetic,  photographic,  optical or other form
and  whether  now  existing  or  developed  or  created  during the term of this
Agreement which are proprietary to Employer and are highly sensitive in nature.

                  1.4.1  INFORMATION  MARKED  PROPRIETARY OR  CONFIDENTIAL.  All
data, documents, materials, drawings and information in tangible form and marked
"Proprietary" or "Confidential."

                  1.4.2  PRODUCTS.  Any  and  all  ideas,  designs,  inventions,
discoveries,   processes,   methods,  plans,  concepts,   methods,   techniques,
structures,  specifications,  design specifications,  design notes, flow charts,
documentation,  technical and engineering data, laboratory studies, test results
and any other  information  and  materials,  whether  or not in  tangible  form,
relating to Employer's operations.

                  1.4.3 TRADE SECRETS.  All Employer's trade secrets, as defined
in the  Washington  Trade Secrets Law, RCW 19.108 et seq. and including  without
limitation,  the specific terms of Employer's  relationships  or agreements with
significant  vendors  and  customers,   and  targeted

                                       1

<PAGE>

prospective  vendors and customers;  Employer's  customer list; and  information
concerning Employer's management, finance, marketing and business plans.

                  1.4.4  LEGAL  RIGHTS.  Patents,   copyrights,  trade  secrets,
trademarks, and service marks ("Intellectual Property"), including any documents
containing information concerning such Intellectual Property.

                  1.4.5 THIRD PARTY  INFORMATION.  Any and all  information  and
materials in Employer's possession or under its control from any other person or
entity  which  Employer is  obligated to treat as  confidential  or  proprietary
("Third Party Information").

                  1.4.6  NOT  GENERALLY  KNOWN.  Any  and  all  information  not
generally  known to the  public  or  within  the  industries  or trades in which
Employer competes.

         1.5  "Effective  Date" means the date stated in the first  paragraph of
the Agreement.

         1.6  "Employment  Period"  means the period  beginning on the Effective
Date and ending on termination of Executive's employment pursuant to Section 6.

         1.7 "Person" is any individual,  corporation  (including any non-profit
corporation),  general or limited partnership,  limited liability company, joint
venture, estate, trust, association, organization, or governmental body.

         1.8  "Post-Employment Period" is defined in Section 8.2.4.

         1.9  "Proprietary Items" is defined in Section 7.2.4.

         1.10  "Salary" is defined in Section 3.1.1.

         1.11 "Severance  Benefit" is defined as 50% of the  Executive's  annual
salary for the calendar  year in which this  Agreement is  terminated,  together
with  continuation of Benefits as defined in Sections 3.1.2 and 6.3.5 herein, at
the level the Executive is receiving at the time of  Termination  for six months
immediately following the Date of Termination.

                            2. EMPLOYMENT AND DUTIES

         2.1  EMPLOYMENT

         Employer  hereby  employs  Executive,   and  Executive  hereby  accepts
employment  by  Employer,  upon  the  terms  and  conditions  set  forth in this
Agreement.

         2.2  TERM

         Subject  to the  provision  of  Section  6,  the  term  of  Executive's
employment  under  this  Agreement  will be three (3)  years,  beginning  on the
effective date (May 22, 2007) and ending on May 31, 2010.

                                       2

<PAGE>

2.3  DUTIES

         Executive  will  have such  duties  as are  assigned  or  delegated  to
Executive by the Chairman of the Board and will serve as the President/  Interim
CEO.  Executive will devote his entire  business,  time,  attention,  skill, and
energy  exclusively  to the business of  Employer,  will use his best efforts to
promote the success of Employer's  business,  and will cooperate  fully with the
Chairman of the Board and the Board of Directors in the  advancement of the best
interests  of  Employer.  As a director  or officer of the Company or any of its
affiliates,  Executive  will  fulfill  his  duties as such  director  or officer
without additional compensation.

                                 3. COMPENSATION

         3.1  BASIC COMPENSATION

                  3.1.1  SALARY.  Executive  will be paid an  annual  salary  of
$162,700/year subject to adjustment as provided below (the "Salary"), which will
be payable in equal  periodic  installments  according to  Employer's  customary
payroll practices,  but no less frequently than monthly. The Salary and Benefits
(i.e.  Basic  Compensation)  will be reviewed by the Board of Directors not less
frequently than annually.

                  3.1.2 BENEFITS.  Executive will, during the Employment Period,
be permitted  to  participate  in such  pension,  profit  sharing,  bonus,  life
insurance,  hospitalization,  major medical, and other employee benefit plans of
Employer  that may be in effect from time to time,  to the extent  Executive  is
eligible under the terms of those plans (collectively, the "Benefits").

         3.2  BONUS COMPENSATION

         Annually the  Compensation  Committee will review and/or  determine any
bonus compensation plans or changes.

                           4.0 FACILITIES AND EXPENSES

         4.1  GENERAL

         Employer will furnish Executive office space, equipment,  supplies, and
such other  facilities and personnel as Employer deems  necessary or appropriate
for the performance of Executive's  duties under this  Agreement.  Employer will
pay on behalf of Executive  (or reimburse  Executive  for)  reasonable  expenses
incurred  by  Executive  at the  request  of, or on behalf of,  Employer  in the
performance of Executive's duties pursuant to this Agreement,  and in accordance
with  Employer's  policies.  Executive must file expense reports with respect to
such expenses in accordance with Employer's policies.

         4.2  BUSINESS EXPENSES

         Employer shall  reimburse  Executive for all  reasonable,  ordinary and
necessary  business  expenses  incurred by Executive in the  performance  of his
duties and the promotion of the Employer's business.

                                       3

<PAGE>

         4.3  CELLULAR PHONE

         Employer  will pay for and  provide  Executive  with a cellular  phone,
phone service and wireless  connectivity device for business use if so requested
by the Executive.

                            5. VACATIONS AND HOLIDAYS

         Executive will be entitled to vacation each calendar year in accordance
with the vacation  policies of Employer in effect for its employee officers from
time to time,  in any  event  not less  than  four (4)  weeks  vacation  a year.
Vacation  must be taken by  Executive  at such time or times as  approved by the
Chairman of the Board.  Executive will also be entitled to the paid holidays set
forth in Employer's  policies.  Vacation  days and holidays  during any calendar
year that are not used by Executive during such calendar year may not be used in
any subsequent calendar year without Employer's prior written consent.

                                 6. TERMINATION

         6.1  EVENTS OF TERMINATION

         The Employment Period,  Executive's Salary and Benefits and any and all
other  rights of Executive  under this  Agreement or otherwise as an employee of
Employer will terminate (except as otherwise  provided in this Section 6) on the
earliest of:

                  6.1.1 Upon the death of Executive;

                  6.1.2  Upon written notice by Executive;

                  6.1.3  Upon written notice by Employer;

                  6.1.4 For Cause (as defined in Section 6.2),  immediately upon
notice  from  Employer  to  Executive,  or at such later time as such notice may
specify.

         6.2  DEFINITION OF "FOR CAUSE"

         For purposes of Section 6.2, "Cause for Employer" shall mean any of the
following:  (i) Executive's  theft,  dishonesty,  or falsification of Employer's
documents  or  records;  (ii)  Executive's  participation  in a fraud  or act of
dishonesty  against  Employer;  (iii) any action taken in bad faith by Executive
which has a  detrimental  effect on  Employer's  reputation  or  business;  (iv)
Executive's  willful  failure or  inability to perform any  reasonable  assigned
duties that is not remedied by Executive  within forty five (45) days of written
notice of such failure or inability from Employer;  (v)  Executive's  unremedied
material breach of this Agreement after receipt of the written notice  discussed
above,  or any  violation of  Employer's  written  policies  constituting  gross
intentional  misconduct adversely and demonstrably affecting Employer's business
or reputation;  or (vi) Executive's  conviction (including any plea of guilty or
NOLO CONTENDERE) of any felony or crime involving dishonesty.

         For purposes of Section 6.2,  "Cause for Executive"  shall mean any one
of the  following  events  which occurs  without  Executive's  consent:  (i) any
reduction of Executive's then existing  compensation or benefits,  except to the
extent that such  compensation  of all other  senior  executives  of Employer is
equally   reduced;   (ii)  any  material   diminution  of  Executive's   duties,
responsibilities,  authority,  reporting  structure,  titles or offices provided
Executive  gives Employer

                                       4

<PAGE>

written  notice of such material  diminution  and it is not remedied by Employer
within  thirty  (30) days of  receipt of such  notice;  (iii) any  request  that
Executive  relocate  to a work  site that  would  increase  Executive's  one-way
commute  distance by more than fifty (50) miles from  Executive's then principal
residence;  (iv) any material breach by Employer of its  obligations  under this
Agreement  that is not  remedied by Company  within  thirty (30) days of written
notice of such breach from Executive;  (v) another entity or person becoming the
majority  owner  through  a hostile  takeover  of  Employer;  or (vi) a slate of
directors is elected,  a majority of which were not  recommended by the existing
directors and management prior to the vote.

         6.3  TERMINATION PAY

         Effective  upon the  termination  of this  Agreement,  Employer will be
obligated to pay Executive only such compensation as is provided in this Section
6.3, and in lieu of all other amounts and in settlement and complete  release of
all claims Executive may have against Employer.

                  6.3.1  TERMINATION  BY EMPLOYER  FOR CAUSE OR  TERMINATION  BY
EXECUTIVE  WITHOUT CAUSE.  If Employer  terminates  this Agreement for Cause, or
Executive terminates this Agreement without cause, Executive will be entitled to
receive his Salary only through the date such termination is effective.

                  6.3.2  TERMINATION UPON DEATH. If this Agreement is terminated
because of Executive's  death,  Executive will be entitled to receive his Salary
through  the end of the  calendar  month  in  which  his  death  occurs,  plus a
Severance Benefit.

                  6.3.3  TERMINATION  BY  EMPLOYER  WITHOUT  CAUSE.  If Employer
terminates this Agreement without Cause,  Employer will pay Executive his Salary
through the end of the calendar month in which such termination occurs. Employer
will also pay the Severance Benefit.

                  6.3.4  TERMINATION  BY EXECUTIVE  FOR CAUSE.  If the Executive
terminates  this  Agreement  "for cause",  the Employer  will pay  Executive his
Salary through the end of the calendar month in which such  termination  occurs.
Employer will also pay the Severance Benefit.

                  6.3.5 BENEFITS.  Executive's  accrual of, or  participation in
plans providing for benefits will cease at the effective date of the termination
of this Agreement,  and Executive will be entitled to accrued Benefits  pursuant
to such plans only as provided in such plans.  Following the  Termination  Date,
the Executive  has the right to continue  coverage  under the  Company's  health
insurance plans as provided by the  Consolidated  Omnibus Budget  Reconciliation
Act of  1985,  as  amended  ("COBRA"),  provided  the  Executive  makes a timely
election for such continued coverage.  However, if the Executive terminates "for
cause" or the Employer  terminates the Executive "without cause",  Employer will
provide, at no expense to the Executive during the 6 month Severance Period, any
health insurance benefits provided under the Employer's Plans.

                           7. NON-DISCLOSURE COVENANT

         7.1  ACKNOWLEDGMENTS BY THE EXECUTIVE

         Executive  acknowledges  that (a) during the Employment Period and as a
part of his  employment,  Executive  will be  afforded  access  to  Confidential
Information;  (b) public disclosure of such Confidential  Information could have
an adverse  effect on Employer and its business;  and

                                       5

<PAGE>

(c) the provisions of this Section 7 are reasonable and necessary to prevent the
improper use or disclosure of Confidential Information.

         7.2  AGREEMENTS OF THE EXECUTIVE

         In  consideration  of the  compensation  and  benefits  to be  paid  or
provided to Executive by Employer under this Agreement,  Executive  covenants as
follows:

                  7.2.1 During and following the  Employment  Period,  Executive
will hold in confidence the Confidential Information and will not disclose it to
any person except with the specific prior written  consent of Employer or except
as otherwise expressly permitted by the terms of this Agreement.

                  7.2.2 Any trade secrets of Employer will be entitled to all of
the  protections and benefits under  Washington  trade secret law, RCW 19.108 et
seq., and any other applicable law. If any information that Employer deems to be
a trade secret is found by a court of competent  jurisdiction  not to be a trade
secret for purposes of this Agreement,  such information will, nevertheless,  be
considered  Confidential  Information for purposes of this Agreement.  Executive
hereby waives any  requirement  that Employer submit proof of the economic value
of any trade secret or post a bond or other security.

                  7.2.3  None  of the  foregoing  obligations  and  restrictions
applies to any part of the Confidential  Information that Executive demonstrates
was or became  generally  available  to the  public  other than as a result of a
disclosure by Executive.

                  7.2.4  Executive  will not  remove  from  Employer's  premises
(except to the  extent  such  removal  is for  purposes  of the  performance  of
Executive's  duties  at  home  or  while  traveling,   or  except  as  otherwise
specifically  authorized  by Employer)  any document,  record,  notebook,  plan,
model,  component,  device, or computer software or code,  whether embodied in a
disk or in any other form  (collectively,  the "Proprietary  Items").  Executive
recognizes  that,  as between  Employer and  Executive,  all of the  Proprietary
Items,  whether or not  developed by Executive,  are the  exclusive  property of
Employer.  Upon  termination  of this  Agreement  by either  party,  or upon the
request of  Employer  during the  Employment  Period,  Executive  will return to
Employer all of the  Proprietary  Items in Executive's  possession or subject to
Executive's  control,  and  Executive  shall not retain any  copies,  abstracts,
sketches, or other physical embodiment of any of the Proprietary Items.

         7.3  DISPUTES OR CONTROVERSIES

         Executive  recognizes that should a dispute or controversy arising from
or  relating to this  Agreement  be  submitted  for  adjudication  to any court,
arbitration  panel,  or other third party,  the  preservation  of the secrecy of
Confidential   Information  may  be  jeopardized.   All  pleadings,   documents,
testimony,  and records relating to any such  adjudication will be maintained in
secrecy and will be available for inspection by Employer,  Executive,  and their
respective  attorneys and experts, who will agree, in advance and in writing, to
receive and maintain all such  information in secrecy,  except as may be limited
by them in writing.

                                       6

<PAGE>

                     8. NON-COMPETITION AND NON-INTERFERENCE

         8.1  ACKNOWLEDGMENTS BY THE EXECUTIVE

         Executive  acknowledges  that:  (a) the services to be performed by him
under this  Agreement  are of a special,  unique,  unusual,  extraordinary,  and
intellectual character;  (b) Employer competes with other businesses that are or
could  be  located  in any part of the  world;  and (c) the  provisions  of this
Section 8 are reasonable and necessary to protect Employer's business.

         Executive  acknowledges that the products or activities and services of
the  Employer  include,  but are not limited to, the  acquisition,  assemblence,
marketing and sales of Employer's products and services,  including industry web
site development and hosting,  rate and fee content information from lenders for
mortgage brokers,  and Internet-based  technology solutions for mortgage brokers
and lenders.  Executive further acknowledges that the products,  activities, and
services of the Employer may expand during  Executive's term of employment,  and
that the  provisions  of this Section 8 apply to all products,  activities,  and
services of Employer in effect at the time of Executive's termination.

         8.2  COVENANTS OF THE EXECUTIVE

         In  consideration  of  the   acknowledgments   by  Executive,   and  in
consideration  of the  compensation  and  benefits  to be  paid or  provided  to
Executive  by  Employer,  Executive  covenants  that he will  not,  directly  or
indirectly:

                  8.2.1 During the  Employment  Period,  except in the course of
his employment hereunder,  engage or invest in, own, manage,  operate,  finance,
control, or participate in the ownership,  management,  operation, financing, or
control of, be employed by,  associated  with, or in any manner  connected with,
lend  Executive's  name or any similar  name to, lend  Executive's  credit to or
render services or advice to, any business whose products or activities  compete
in whole or in part with the products or activities of Employer  anywhere within
the United States;  provided,  however, that Executive may purchase or otherwise
acquire up to (but not more than) one percent of any class of  securities of any
enterprise  (but  without  otherwise  participating  in the  activities  of such
enterprise) if such securities are listed on any national or regional securities
exchange or have been registered under Section 12(g) of the Securities  Exchange
Act of 1934;

                  8.2.2 Whether for  Executive's  own account or for the account
of any  other  person,  at  any  time  during  the  Employment  Period  and  the
Post-Employment  Period,  solicit  business  of the same or  similar  type being
carried on by  Employer,  from any person known by Executive to be a customer of
Employer,  whether or not Executive had personal contact with such person during
and by reason of Executive's employment with Employer;

                  8.2.3  Whether for  Executive's  own account or the account of
any  other  person  (a) at  any  time  during  the  Employment  Period  and  the
Post-Employment  Period,  solicit,  employ,  or otherwise engage as an employee,
independent contractor,  or otherwise, any person who is an employee of Employer
or in any  manner  induce or  attempt  to induce any  employee  of  Employer  to
terminate his employment with Employer; or (b) at any time during the Employment
Period and the Post Employment  Period,  interfere with Employer's  relationship
with any  person,  including  any person who at any time  during the  Employment
Period was an employee, contractor, supplier, or customer of Employer; or

                                       7

<PAGE>

         8.2.4 At any time  during or after  the  Employment  Period,  disparage
Employer or any of its shareholders, directors, officers, employees, or agents.

         For purposes of this Section  8.2,  the term  "Post-Employment  Period"
means the 1 year period  beginning  on the date of  termination  of  Executive's
employment with Employer.

         If any  covenant  in  this  Section  8.2 is  held  to be  unreasonable,
arbitrary,  or against  public  policy,  such  covenant will be considered to be
divisible  with respect to scope,  time,  and  geographic  area, and such lesser
scope,  time,  or  geographic  area,  or all of them,  as a court  of  competent
jurisdiction  may determine to be  reasonable,  not  arbitrary,  and not against
public policy, will be effective, binding, and enforceable against Executive.

         The period of time  applicable to any covenant in this Section 8.2 will
be extended by the duration of any violation by Executive of such covenant.

         Executive will, while the covenant under this Section 8.2 is in effect,
give notice to Employer,  within ten days after accepting any other  employment,
of the identity of Executive's employer.  Employer may notify such employer that
Executive is bound by this Agreement and, at Employer's  election,  furnish such
employer with a copy of this Agreement or relevant portions thereof.

                              9. GENERAL PROVISIONS

         9.1  INJUNCTIVE RELIEF AND ADDITIONAL REMEDY

         Executive  acknowledges  that the  injury  that  would be  suffered  by
Employer as a result of a breach of the provisions of this Agreement  (including
any  provision  of Sections 7 and 8) would be  irreparable  and that an award of
monetary  damages to Employer for such a breach would be an  inadequate  remedy.
Consequently,  Employer will have the right,  in addition to any other rights it
may have,  to obtain  injunctive  relief to  restrain  any breach or  threatened
breach or otherwise to  specifically  enforce any  provision of this  Agreement.
Without limiting Employer's rights under this Section 9 or any other remedies of
Employer,  if  Executive  breaches  any of the  provisions  of  Section  7 or 8,
Employer  will have the right to cease  making  any  payments  otherwise  due to
Executive under this Agreement.

         9.2  COVENANTS  OF  SECTIONS  7  AND 8 ARE  ESSENTIAL  AND  INDEPENDENT
COVENANTS

         The covenants by Executive in Sections 7 and 8 are  essential  elements
of this  Agreement,  and  without  Executive's  agreement  to  comply  with such
covenants,  Employer  would not have  entered  into this  Agreement  or employed
Executive.  Executive  has  independently  consulted  his  counsel  and has been
advised in all respects  concerning  the  reasonableness  and  propriety of such
covenants,  with  specific  regard to the nature of the  business  conducted  by
Employer.

         Executive's covenants in Sections 7 and 8 are independent covenants and
the existence of any claim by Executive against Employer under this Agreement or
otherwise, will not excuse Executive's breach of any covenant in Section 7 or 8.

         If Executive's  employment  hereunder  expires or is  terminated,  this
Agreement  will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of Executive in Sections 7 and 8.

                                       8

<PAGE>

         9.3  REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE

         Executive  represents  and warrants to Employer  that the execution and
delivery by Executive of this Agreement do not, and the performance by Executive
of  Executive's  obligations  hereunder  will not, with or without the giving of
notice  or the  passage  of time,  or both:  (a)  violate  any  judgment,  writ,
injunction, or order of any court, arbitrator, or governmental agency applicable
to Executive; or (b) conflict with, result in the breach of any provisions of or
the  termination  of, or  constitute  a default  under,  any  agreement to which
Executive is a party or by which Executive is or may be bound.

         9.4  OBLIGATIONS CONTINGENT ON PERFORMANCE

         The obligations of Employer hereunder,  including its obligation to pay
the   compensation   provided  for  herein,   are  contingent  upon  Executive's
performance of Executive's obligations hereunder.

         9.5  WAIVER

         The rights and remedies of the parties to this Agreement are cumulative
and not  alternative.  Neither  the  failure  nor any delay by  either  party in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege,  and no single or partial exercise of
any such right,  power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege.  To the maximum extent  permitted by applicable  law, (a) no claim or
right arising out of this Agreement can be discharged by one party,  in whole or
in part,  by a waiver or  renunciation  of the claim or right  unless in writing
signed by the other  party;  (b) no waiver  that may be given by a party will be
applicable  except in the specific  instance  for which it is given;  and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party  giving such notice or demand to take
further action without notice or demand as provided in this Agreement.

         9.6  BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED

         This  Agreement  shall  inure to the  benefit  of, and shall be binding
upon, the parties hereto and their respective  successors,  assigns,  heirs, and
legal  representatives,  including  any entity with which  Employer may merge or
consolidate  or to  which  all  or  substantially  all  of  its  assets  may  be
transferred.  The duties and covenants of Executive under this Agreement,  being
personal, may not be delegated.

         9.7  NOTICES

         All notices,  consents,  waivers,  and other  communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt),  (b) sent by facsimile
(with  written  confirmation  of  receipt),  provided  that a copy is  mailed by
registered  mail,  return  receipt  requested,  or  (c)  when  received  by  the
addressee,  if  sent  by a  nationally  recognized  overnight  delivery  service
(receipt  requested),  in each case to the  appropriate  addresses and facsimile
numbers set forth below (or to such other  addresses and facsimile  numbers as a
party may designate by notice to the other parties):

                                       9

<PAGE>

         If to Executive:

         David Stedman
         23602 SE Black Nugget Rd.
         Issaquah, WA 98029
         Telephone No.: (425) 392-5996

or to such  other  addresses  and  faxes as the  parties  may from  time to time
designate in writing.

         If to Employer:

         Chairman of the Board
         LION, Inc.
         4700-42nd Ave. SW, Suite 430
         Seattle, WA 98116
         Telephone No.: (206) 577-1440

or to such other  addresses and telephone  numbers as the Employer may from time
to time designate in writing.

         9.8  ENTIRE AGREEMENT; AMENDMENTS

         This Agreement  contains the entire agreement  between the parties with
respect to the subject  matter hereof and  supersedes  all prior  agreements and
understandings,  oral or written, between the parties hereto with respect to the
subject  matter hereof,  provided,  however,  that any prior or  contemporaneous
agreements   between  the  parties  concerning   confidentiality,   intellectual
property, inventions,  non-competition,  and/or non-solicitation shall remain in
full force and effect if and to the extent that they provide greater  protection
to Employer.  This Agreement may not be amended orally, but only by an agreement
in writing signed by the parties hereto.

         9.9  ARBITRATION

         Except when injunctive relief is sought by Employer pursuant to Section
9.1,  Employer  and  Executive  shall  settle any and all  claims,  disputes  or
controversies   arising  out  of  or  relating  to  Executive's   candidacy  for
employment, employment and/or cessation of employment with Employer, exclusively
by final and binding arbitration before a single neutral Arbitrator. Such claims
include claims under federal,  state and local statutory or common law; wrongful
termination;  claims for wages, including,  but not limited to, claims under the
Fair  Labor  Standards  Act,   Washington  Minimum  Wage  Act,  or  other  state
equivalent;  breach of public policy;  claims of  discrimination  or harassment,
including, but not limited to, claims under the Age Discrimination in Employment
Act,  Title VII of the Civil  Rights Act of 1964,  the Civil Rights Act of 1991,
the Americans with Disabilities Act, the Washington Law Against  Discrimination,
and any other  state or local  discrimination  laws.  The  arbitration  shall be
submitted to the American Arbitration Association,  and it shall be conducted in
Seattle,  Washington  in  accordance  with  the  Commercial  Dispute  Resolution
Procedures then in effect.  Judgment upon the award rendered may be entered only
in King County Superior Court.

         9.10  GOVERNING LAW

         This  Agreement will be governed by the laws of the State of Washington
without regard to conflicts of laws principles.

                                       10

<PAGE>

         9.11  JURISDICTION

         Any action or proceeding  seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against either of the
parties in the courts of the State of  Washington,  County of King,  and each of
the parties  consents to the jurisdiction of such courts (and of the appropriate
appellate  courts) in any such action or proceeding  and waives any objection to
venue  laid  therein.  Process in any action or  proceeding  referred  to in the
preceding sentence may be served on either party anywhere in the world.

         9.12  SECTION HEADINGS, CONSTRUCTION

         The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or  interpretation.  All references to
"Section" or "Sections" refer to the  corresponding  Section or Sections of this
Agreement unless otherwise  specified.  All words used in this Agreement will be
construed to be of such gender or number as the  circumstances  require.  Unless
otherwise expressly provided,  the word "including" does not limit the preceding
words or terms.

         9.13  SEVERABILITY

         If any provision of this Agreement is held invalid or  unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

         9.14  DRAFTSMANSHIP

         There shall be no presumption of  draftsmanship  in the  preparation or
execution of this Agreement.

         9.15  COUNTERPARTS

         This  Agreement  may be executed in one or more  counterparts,  each of
which will be deemed to be an original copy of this  Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.

         IN WITNESS  WHEREOF,  the parties  have  executed  and  delivered  this
Agreement as of the date above first written above.

EMPLOYER:                                    EXECUTIVE:

--------------------------------------       -----------------------------------
Griff Straw                                  David Stedman
Chairman of the Compensation Committee

                                       11

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