Document:

Exhibit 10.9

                       EQI FINANCING PARTNERSHIP IV, L.P.

                                       and

                      EQI/WV FINANCING PARTNERSHIP II, L.P.
                            (collectively, Borrower)

                                       to

                      GENERAL ELECTRIC CAPITAL CORPORATION
                                    (Lender)

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

                                 LOAN AGREEMENT

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

                          Dated: As of November 7, 2000

                              DOCUMENT PREPARED BY:

                          Cadwalader, Wickersham & Taft
                                 100 Maiden Lane
                            New York, New York 10038
                      Attention: William P. McInerney, Esq.

<PAGE>

                               TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE I

                               CERTAIN DEFINITIONS

Section 1.1  Certain Definitions...............................................1

                                   ARTICLE II

                                   LOAN TERMS

Section 2.1  The Loan.........................................................14
Section 2.2  Interest Rate....................................................15
Section 2.3  Terms of Payment.................................................15
Section 2.4  Prepayment; Defeasance...........................................17
Section 2.5  Release of Property..............................................19
Section 2.6  Substitution of Properties.......................................21

                                   ARTICLE III

                     SECURITY; RESERVES AND CASH MANAGEMENT

Section 3.1  Security; Establishment of Funds.................................28
Section 3.2  Pledge and Grant of Security Interest............................30
Section 3.3  Disbursement of Funds............................................30
Section 3.4  Intentionally Omitted............................................31
Section 3.5  Cash Management Account..........................................31
Section 3.6  Payments Received Under the Cash Management Agreement............33

                                   ARTICLE IV

                              CONDITIONS PRECEDENT

Section 4.1  Closing Conditions...............................................33

                                    ARTICLE V

                      INSURANCE, CONDEMNATION, AND IMPOUNDS

Section 5.1  Insurance, Casualty and Condemnation.............................37
Section 5.2  Condemnation.....................................................41
Section 5.3  Restoration......................................................42
Section 5.4  Impounds.........................................................45
Section 5.5  Letters of Credit................................................47

                                       -i-

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                                   ARTICLE VI

                              ENVIRONMENTAL MATTERS

Section 6.1  Certain Definitions..............................................47
Section 6.2  Representations and Warranties on Environmental Matters..........48
Section 6.3.  Covenants on Environmental Matters..............................48
Section 6.4  Allocation of Risks and Indemnity................................49
Section 6.5  No Waiver........................................................50

                                   ARTICLE VII

                                 LEASING MATTERS

Section 7.1  Representations and Warranties on Leases.........................50
Section 7.2  Approval Rights..................................................51
Section 7.3  Covenants........................................................51
Section 7.4  Tenant Estoppels.................................................51

                                  ARTICLE VIII

                         REPRESENTATIONS AND WARRANTIES

Section 8.1  Organization, Power and Authority................................51
Section 8.2  Validity of Loan Documents.......................................52
Section 8.3  No Conflicts.....................................................52
Section 8.4  Liabilities; Litigation..........................................52
Section 8.5  Taxes and Assessments............................................53
Section 8.6  Other Agreements; Defaults.......................................53
Section 8.7  Title............................................................53
Section 8.8  Compliance with Law..............................................54
Section 8.9  Location of Borrower.............................................54
Section 8.10  Forfeiture......................................................54
Section 8.11  Tax Filings.....................................................55
Section 8.12  Solvency........................................................55
Section 8.13  Full and Accurate Disclosure....................................55
Section 8.14  Flood Zone......................................................56
Section 8.15  Federal Reserve Regulations.....................................56
Section 8.16  Not a Foreign Person............................................56
Section 8.17  Separate Lots...................................................56
Section 8.18 No Prior Assignment..............................................56
Section 8.19  Insurance.......................................................56
Section 8.20  Use of Properties...............................................57
Section 8.21  Certificate of Occupancy; Licenses..............................57
Section 8.22  Physical Condition..............................................57
Section 8.23  Boundaries......................................................57
Section 8.24 Survey...........................................................57
Section 8.25  Embargoed Person................................................58

                                      -ii-

<PAGE>

Section 8.26  Filing and Recording Taxes......................................58
Section 8.27  Single Purpose Entity/Separateness..............................58
Section 8.28  Franchise Agreement; Hotel Management...........................61
Section 8.29  Operating Lease.................................................63
Section 8.30  Investment Company Act..........................................64
Section 8.31  Ground Lease....................................................64

                                   ARTICLE IX

                               FINANCIAL REPORTING

Section 9.1  Financial Statements.............................................66
Section 9.2  Accounting Principles............................................68
Section 9.3  Other Information; Access........................................68
Section 9.4  Format of Delivery...............................................68

                                    ARTICLE X

                                    COVENANTS

Section 10.1  Due Sale and Encumbrance; Transfers of Interests................69
Section 10.2  Taxes; Utility Charges..........................................69
Section 10.3  Operating Lease.................................................70
Section 10.4  Operation; Maintenance; Inspection..............................70
Section 10.5  Taxes on Security...............................................70
Section 10.6  Legal Existence; Name, Etc......................................70
Section 10.7  Further Assurances..............................................71
Section 10.8  Estoppel Certificates...........................................71
Section 10.9  Notice of Certain Events........................................71
Section 10.10  Indemnification................................................71
Section 10.11  Payment For Labor and Materials................................72
Section 10.12  Alterations....................................................72
Section 10.13  Handicapped Access.............................................73
Section 10.14  Certain Hotel/Franchise Covenants..............................73
Section 10.15  Certain Operating Lease Covenants..............................74

                                   ARTICLE XI

                                EVENTS OF DEFAULT

Section 11.1  Payments........................................................75
Section 11.2  Insurance.......................................................75
Section 11.3  Single Purpose Entity...........................................75
Section 11.4  Insolvency Opinion..............................................76
Section 11.5  Taxes...........................................................76
Section 11.6  Sale, Encumbrance, Etc..........................................76
Section 11.7  Representations and Warranties..................................76
Section 11.8  Other Encumbrances..............................................76

                                      -iii-

<PAGE>

Section 11.9  Involuntary Bankruptcy or Other Proceeding......................76
Section 11.10  Voluntary Petitions, etc.......................................76
Section 11.11  Covenants......................................................77

                                   ARTICLE XII

                                    REMEDIES

Section 12.1  Remedies - Insolvency Events....................................78
Section 12.2  Remedies - Other Events.........................................78
Section 12.3  Lender's Right to Perform the Obligations.......................79
Section 12.4  Cross-Default; Cross-Collateralization; Waiver of
                Marshalling of Assets.........................................79

                                  ARTICLE XIII

                            LIMITATIONS ON LIABILITY

Section 13.1  Limitation on Liability.........................................80
Section 13.2  Limitation on Liability of Lender's Officers, Employees, etc....81

                                   ARTICLE XIV

                                 SECURITIZATION

Section 14.1  Securitization..................................................82
Section 14.2  Securitization Indemnification..................................83
Section 14.3  Servicer........................................................85

                                   ARTICLE XV

                                  MISCELLANEOUS

Section 15.1  Notices.........................................................86
Section 15.2  Amendments and Waivers..........................................87
Section 15.3  Limitation on Interest..........................................87
Section 15.4  Invalid Provisions..............................................88
Section 15.5  Reimbursement of Expenses.......................................88
Section 15.6  Approvals; Third Parties; Conditions............................88
Section 15.7  Lender Not in Control; No Partnership...........................89
Section 15.8  Time of the Essence.............................................89
Section 15.9  Successors and Assigns..........................................89
Section 15.10  Renewal, Extension or Rearrangement............................89
Section 15.11  Waivers........................................................89
Section 15.12  Cumulative Rights; Joint and Several Liability.................90
Section 15.13  Singular and Plural............................................90
Section 15.14  Phrases........................................................90
Section 15.15  Exhibits and Schedules.........................................90
Section 15.16  Titles of Articles, Sections and Subsections...................90
Section 15.17  Promotional Material...........................................90

                                      -iv-

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Section 15.18  Survival.......................................................91
Section 15.19  WAIVER OF JURY TRIAL...........................................91
Section 15.20  Waiver of Punitive or Consequential Damages....................91
Section 15.21  Governing Law..................................................91
Section 15.22  Entire Agreement...............................................93
Section 15.23  Counterparts...................................................93
Section 15.24  Brokers and Financial Advisors.  ..............................93

                                       -v-

<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

EXHIBIT A                      LEGAL DESCRIPTION OF PROPERTIES

EXHIBIT B                      FORM OF TRS LEASE

EXHIBIT C                      FORM OF MANAGEMENT AGREEMENT

EXHIBIT D                      FORM OF TRS SUBORDINATION AGREEMENT

EXHIBIT E                      FORMS OF FRANCHISE AGREEMENT

EXHIBIT F                      TRS LESSEE ORGANIZATIONAL DOCUMENTS

EXHIBIT G                      FORM OF TRS NON-CONSOLIDATION OPINION

EXHIBIT H                      FORM OF MANAGER'S CONSENT AND SUBORDINATION OF
                               MANAGEMENT AGREEMENT

EXHIBIT I                      FORM OF LETTER OF CREDIT

SCHEDULE I                     ALLOCATED LOAN AMOUNTS

SCHEDULE II                    REQUIRED REPAIRS

SCHEDULE III                   OPERATING LEASES

SCHEDULE IV                    FRANCHISE AGREEMENTS

SCHEDULE V                     GROUND LEASES

SCHEDULE VI                    MANAGEMENT AGREEMENTS

                                      -vi-

<PAGE>

                                 LOAN AGREEMENT

         This Loan Agreement  (this  "Agreement") is entered into as of November
7, 2000,  between GENERAL ELECTRIC CAPITAL  CORPORATION,  a New York corporation
("Lender"),  and  EQI  FINANCING  PARTNERSHIP  IV,  L.P.,  a  Tennessee  limited
partnership  and EQI/WV  FINANCING  PARTNERSHIP  II, L.P.,  a Tennessee  limited
partnership (collectively, "Borrower").

                                    ARTICLE I
                               CERTAIN DEFINITIONS

Section 1.1  Certain Definitions.

         As used herein, the following terms have the meanings indicated:

         "Access Laws" has the meaning assigned in Section 10.13.

         "Accrued Interest" has the meaning assigned in Section 2.3(b).

         "Adjusted Rate" has the meaning assigned in Section 2.2.F

         "Affiliate" means (a) any corporation in which Borrower or any partner,
shareholder,  director,  officer,  member,  or manager of  Borrower  directly or
indirectly  owns or  controls  more  than ten  percent  (10%) of the  beneficial
interest,  (b) any partnership,  joint venture or limited  liability  company in
which  Borrower or any  partner,  shareholder,  director,  officer,  member,  or
manager of Borrower  is a partner,  joint  venturer or member,  (c) any trust in
which Borrower or any partner, shareholder, director, officer, member or manager
of  Borrower  is a trustee or  beneficiary,  (d) any entity of any type which is
directly  or  indirectly  owned  or  controlled  by  Borrower  or  any  partner,
shareholder,  director, officer, member or manager of Borrower, (e) any partner,
shareholder, director, officer, member, manager or employee of Borrower, (f) any
Person  related by birth,  adoption  or marriage  to any  partner,  shareholder,
director, officer, member, manager, or employee of Borrower, or (g) any Borrower
Party.

         "Agreement" means this Loan Agreement, as amended from time to time.

         "Allocated Loan Amount" means, for an Individual  Property,  the amount
set forth on Schedule I attached hereto.

         "Annual  Budget"  means the  operating  budget,  including  all planned
capital  expenditures,  for each of the Properties prepared by Borrower,  any of
the Operating Lessees or any of the Managers for the applicable calendar year or
other period.

         "Anticipated Payment Date" means December 1, 2010.

                                       -1-

<PAGE>

         "Appraised Value" means with respect to any Individual  Property at any
time, the value of such Individual  Property,  as most recently determined by an
appraisal,  reasonably acceptable to Lender in form and substance,  and prepared
by an MAI appraiser  reasonably  acceptable to the Lender.  Such  appraisers and
appraisals   shall  satisfy  the   requirements  of  Title  XI  of  the  Federal
Institutional  Reform,  Recovery and Enforcement Act of 1989 and the regulations
promulgated thereunder and under FNMA and FHLMC.

         "Approved Annual Budget" has the meaning assigned in Section 2.3(h).

         "Assignment  of Leases and Rents"  means the  Assignment  of Leases and
Rents,  executed by Borrower for the benefit of Lender, and pertaining to leases
of  space  in  each  Individual  Property  and  any  amendments,  modifications,
renewals, substitutions or replacements thereof.

         "Award" has the meaning assigned in Section 5.2.

         "Bankruptcy Code" means 11 U.S.C.ss. 101 et seq., as amended from time
to time.

         "Bankruptcy Party" has the meaning assigned in Section 11.9.

         "Basic Carrying Costs" means,  with respect to an Individual  Property,
the sum of the  following  costs of  Borrower  associated  with such  Individual
Property  for the  relevant  calendar  year or  payment  period:  (i) Taxes with
respect to such Individual  Property,  and (ii) except as otherwise  provided in
Section 5.4 hereof, Insurance Premiums with respect to such Individual Property.

         "Borrower Account" has the meaning assigned in Section 3.5(d).

         "Borrower  Party" means any Joinder Party,  any guarantor,  any general
partner of Borrower if Borrower is a partnership or a limited  partnership,  any
general  partner in any  partnership  or limited  partnership  that is a general
partner of Borrower,  any  managing  member of Borrower if Borrower is a limited
liability company, and any managing member in any limited liability company that
is a managing member of Borrower, at any level.

         "Business Day" means a day other than a Saturday,  a Sunday, or a legal
holiday on which  national  banks  located in the State of New York are not open
for general banking business.

         "Cash Expenses" means, for any period,  the operating  expenses for the
operation of the Properties as set forth in an Approved  Annual  Budget,  to the
extent that such expenses are actually incurred by Borrower,  minus any payments
into the Tax and Insurance Escrow Fund.

         "Cash Management Account" has the meaning set forth in Section 3.5(a).

         "Cash  Management  Agreement"  has the  meaning  set  forth in  Section
2.3(i).

         "Casualty Consultant" has the meaning set forth in Section 5.3(b)(iii).

         "Casualty Retainage" has the meaning set forth in Section 5.3(b)(iv).

                                       -2-

<PAGE>

         "Closing Date" means the date the Loan is funded by Lender.

         "Code" means the Internal  Revenue Code of 1986, as amended,  and as it
may be further amended from time to time, any successor  statutes  thereto,  and
applicable U.S.  Department of Treasury  regulations  issued pursuant thereto in
temporary or final form.

         "Condemnation" has the meaning assigned in Section 5.2.

         "Condemnation Proceeds" has the meaning assigned in Section 5.3(b).

         "Contract Rate" has the meaning assigned in Section 2.2.

         "Debt"  means the  outstanding  principal  amount  set  forth  in,  and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums (including the Yield Maintenance  Premium) due
to Lender in respect of the Loan under the Note, this  Agreement,  the Mortgages
or any other Loan Document.

         "Debt Service" means the aggregate interest, fixed principal, and other
payments due under the Loan, and on any other outstanding permitted Indebtedness
approved by Lender for the period of time for which calculated.

         "Debt Service  Coverage Ratio" means a ratio for the applicable  period
in which:

the numerator is the Net Operating Income for such Properties; and

the  denominator  is the  aggregate  amount of  principal  and  interest due and
payable on the Note or, in the event that a Defeasance  Event has occurred,  the
Undefeased Note.

         "Debt Service Escrow Fund" has the meaning assigned in Section 3.1(c).

         "Debt  Service  Letter of Credit" has the  meaning  assigned in Section
3.1(c).

         "Default  Rate"  means the lesser of (a) the  maximum  rate of interest
allowed by applicable  law, and (b) five percent (5%) per annum in excess of the
Contract Rate or the Adjusted Rate, whichever is then in effect.

         "Defeasance  Deposit" means an amount equal to the remaining  principal
amount of the Note or the principal  amount of the Defeased Note, as applicable,
the Yield Maintenance Premium, any costs and expenses incurred or to be incurred
in the purchase of U.S.  Obligations  necessary to meet the Scheduled Defeasance
Payments and any revenue, documentary stamp or intangible taxes or any other tax
or charge due in connection  with the transfer of the Note or the Defeased Note,
as  applicable,  the creation of the Defeased Note and the  Undefeased  Note, if
applicable,  or otherwise  required to accomplish the agreements of Sections 2.4
and 2.5 hereof.

         "Defeasance Event" has the meaning assigned in Section 2.4(b).

                                       -3-

<PAGE>

         "Defeased Note" has the meaning assigned in Section 2.4(b)(v).

         "DSCR  Event"  means  in the  event  that,  as of the  last  day of any
calendar  quarter,  the Debt Service  Coverage  Ratio for the Properties for the
immediately preceding twelve (12) months shall be less than 1.45 to 1.0.

         "Eligible Account" shall mean a separate and identifiable  account from
all other funds held by the holding  institution  that is an account or accounts
maintained  with a federal or state  chartered  depository  institution or trust
company which  complies with the  definition  of Eligible  Institution  having a
combined  capital  and  surplus of at least  Fifty  Million  and No/100  Dollars
($50,000,000)  and subject to  supervision  or  examination by federal and state
authority. An Eligible Account may not be evidenced by a certificate of deposit,
passbook or other instrument.

         "Eligible  Institution"  shall mean a depository  institution  or trust
company that satisfies the Rating Criteria.

         "Environmental Laws" has the meaning assigned in Section 6.1(a).

         "ERISA" has the meaning assigned in Section 8.11(a).

         "Event of Default" has the meaning assigned in Article 9.

         "Extraordinary  Expenses" means an extraordinary  operating  expense or
capital expense not set forth in an Approved Annual Budget.

         "Franchise  Agreement" means, with respect to any Individual  Property,
that certain  franchise  agreement more  specifically  identified on Schedule IV
attached hereto.

         "Franchisor"  means,  with respect to any Individual  Property which is
subject to a Franchise  Agreement,  the franchisor with respect thereto, as same
is identified on Schedule IV attached hereto.

         "Funds" means the Required  Repair Fund, the  Replacement  Escrow Fund,
the Ground Lease Escrow  Fund,  the PIP Escrow Fund and the Debt Service  Escrow
Fund.

         "Governmental  Authority" means any court, board,  agency,  commission,
office or authority of any nature whatsoever for any governmental unit (federal,
state, county, district,  municipal, city or otherwise) whether now or hereafter
in existence.

         "Ground Lease" means, with respect to any Individual  Property which is
subject thereto, those certain leases more specifically identified on Schedule V
attached hereto.

         "Ground Lease Escrow Fund" has the meaning assigned in Section 3.1(d).

         "Ground  Lessor"  means,   with  respect  to  each  Ground  Lease,  the
applicable lessor thereunder as more particularly identified on Schedule V.

                                       -4-

<PAGE>

         "Ground Rent Deposit" has the meaning assigned in Section 3.1(d).

         "Ground  Rent  Letter of Credit"  has the  meaning  assigned in Section
3.1(d).

         "Hazardous Materials" has the meaning assigned in Section 6.1(b).

         "Hazardous  Materials  Indemnity  Agreement"  shall  mean that  certain
hazardous  materials  indemnity  agreement dated the date hereof by the Borrower
and Indemnitor in favor of Lender.

         "Improvements"  shall  have the  meaning  assigned  to such term in the
related Mortgage with respect to each Individual Property.

         "Indebtedness"  means,  for any Person,  without  duplication:  (a) all
indebtedness of such Person for borrowed money, for amounts drawn under a letter
of credit,  or for the deferred purchase price of property for which such Person
or its assets is liable, (b) all unfunded amounts under a loan agreement, letter
of credit,  or other credit  facility for which such Person would be liable,  if
such amounts were advanced under the credit  facility,  (c) all amounts required
to be paid by such Person as a guaranteed  payment to partners or a preferred or
special dividend, including any mandatory redemption of shares or interests, (d)
all indebtedness guaranteed by such Person,  directly or indirectly,  contingent
or otherwise,  (e) all obligations  under leases that constitute  capital leases
for which such Person is liable,  and (f) all  obligations  of such Person under
interest rate swaps, caps, floors,  collars and other interest hedge agreements,
in each case  whether  such  Person  is liable  contingently  or  otherwise,  as
obligor,  guarantor or otherwise, or in respect of which obligations such Person
otherwise assures a creditor against loss.

         "Indemnitor" means, collectively, Equity Inns Partnership, L.P., a
Tennessee limited partnership, Equity Inns Trust, a Maryland real estate
investment trust and the REIT.

         "Independent Director" has the meaning assigned in Section 8.28(p).

         "Individual Property" means all of the property,  rights, interests and
estates  now owned or  hereafter  acquired  by  Borrower  to each parcel of real
property and the improvements  thereon  encumbered by a Mortgage,  together with
all rights  pertaining to such property and  improvements,  as more particularly
described in the granting  clauses of each such Mortgage and referred to therein
as the "Mortgaged Property" or the "Trust Property", as the case may be.

         "Insolvency Opinion" has the meaning assigned in Section 8.28(r).

         "Insurance  Letter of  Credit"  has the  meaning  assigned  in  Section
5.4(b).

         "Insurance Premiums" has the meaning assigned in Section 5.1(b).

         "Insurance Proceeds" has the meaning assigned in Section 5.3(b).

         "Joinder  Party"  means the  Persons,  if any,  executing  the  Joinder
hereto.

                                       -5-

<PAGE>

         "Lease" means all leases,  subleases,  occupancy agreements,  licenses,
concessions,  rental  contracts  and other  agreements  (written or oral) now or
hereafter  existing  relating to the use or occupancy of the project  located on
the  Property,  including all Operating  Leases,  together with all  guarantees,
letters  of credit  and other  credit  support,  modifications,  extensions  and
renewals  thereof,  whether before or after the filing by or against Borrower of
any petition of relief under 11 U.S.C. ss. 101 et seq., and all related security
and other deposits.

         "Legal  Requirements"  means, with respect to each Individual Property,
federal, state, county,  municipal and other governmental statutes, laws, rules,
orders,  regulations,   ordinances,   judgments,   decrees  and  injunctions  of
Governmental  Authorities affecting such Individual Property or any part thereof
or the construction,  use, alteration or operation thereof, or any part thereof,
whether now or hereafter  enacted and in force,  and all  permits,  licenses and
authorizations and regulations relating thereto, and all covenants,  agreements,
restrictions and encumbrances contained in any instruments,  either of record or
known to Borrower,  at any time in force affecting such  Individual  Property or
any part  thereof,  including,  without  limitation,  any which may (i)  require
repairs,  modifications or alterations in or to such Individual  Property or any
part thereof, or (ii) any way limit the use and enjoyment thereof.

         "Letter of Credit" means an irrevocable,  unconditional,  transferable,
clean sight draft letter of credit in favor of Lender  substantially in the form
of Exhibit I attached  hereto and entitling  Lender to draw thereon in New York,
New York, issued or confirmed by a domestic Eligible  Institution with an office
in New York, New York;  provided,  that such  confirmation,  if any, shall be in
form and substance satisfactory to Lender.

         "Liabilities" has the meaning assigned in Section 14.2(b).

         "Lien" means, with respect to each Individual Property any interest, or
claim thereof,  in such Individual Property securing an obligation owed to, or a
claim by, any Person other than the owner of such Individual  Property,  whether
such interest is based on common law,  statute or contract,  including,  whether
voluntary or involuntary,  the lien or security  interest arising from a deed of
trust,   mortgage,   assignment,   encumbrance,   pledge,   security  agreement,
conditional  sale or trust  receipt  or a Lease,  consignment  or  bailment  for
security  purposes.  The term "Lien"  shall  include  reservations,  exceptions,
encroachments,  easements, rights of way, covenants,  conditions,  restrictions,
Leases and other title  exceptions and  encumbrances  affecting such  Individual
Property.

         "Loan" means the loan made by Lender to Borrower  under this  Agreement
and all other amounts secured by the Loan Documents.

         "Loan  Documents"  means:  (a) this  Agreement,  (b) the Note,  (c) the
Mortgages,  (d) the Assignments of Leases and Rents, (e) the Hazardous Materials
Indemnity Agreement,  (f) Uniform Commercial Code financing statements,  (g) the
Subordination,  Non-Disturbance  and  Attornment  Agreements,  (h) the Manager's
Consent and  Subordination  of Management  Agreements,  (i) such  assignments of
management agreements, contracts and other rights as may be requested by Lender,
(j) the Cash Management Agreement, (k) all other documents evidencing, securing,
governing  or  otherwise  pertaining  to  the  Loan,  and  (l)  all  amendments,
modifications, renewals, substitutions or replacements of any of the foregoing.

                                       -6-

<PAGE>

         "Lockbox Account" has the meaning assigned in Section 3.4(a).

         "Lockout  Yield  Maintenance  Premium"  means  an  amount  equal to the
greater of (a) one percent (1%) of the outstanding  principal amount of the Loan
to be prepaid or satisfied, as applicable,  or (b) the Yield Maintenance Premium
that would be  required  if a  Defeasance  Event had  occurred  (whether  or not
permitted under this Agreement) in an amount equal to the outstanding  principal
amount  of the Loan to be  satisfied  or  prepaid,  as  applicable;  plus if the
prepayment of which the Lockout Yield Maintenance  Premium is a part is not paid
on a Payment Date,  the interest that would have accrued on the Loan through the
next Payment Date.

         "LTV Ratio" means,  as of the date such  calculation is being made, the
ratio of the  outstanding  principal  balance of the Loan (less the  outstanding
principal balance of any Defeased Note) to the Appraised Value of the Properties
then remaining as collateral for the Loan.

         "Management  Agreement" means, with respect to any Individual Property,
the management  agreement  entered into by and between  Borrower or an Operating
Lessee,  as applicable,  and a Manager  pursuant to which such Manager is (a) to
provide  management and other services with respect to said Individual  Property
and (b) compensated in an amount no greater than the Management Fee. The initial
Management Agreements in effect as of the date hereof are identified on Schedule
VI attached hereto.

         "Management Fee" shall mean an amount,  including,  without limitation,
any incentive,  percentage or other fees,  equal to no greater than five percent
(5.0%) per annum of Operating  Revenues  for each  Individual  Property  (unless
otherwise expressly agreed to by Lender).

         "Manager"  means,  with  respect to any  Individual  Property  which is
subject to a Management Agreement, the property manager with respect thereto, as
the same is identified on Schedule VI attached hereto, or any Qualified Manager.

         "Maturity  Date" means with  respect to each  Individual  Property,  as
applicable,  the earliest of (a) December 1, 2025; (b) any earlier date on which
the entire Loan is required to be paid in full,  by  acceleration  or otherwise,
under this Agreement or any of the other Loan  Documents;  or (c) if the Loan is
not subject to a Securitization on the Anticipated Payment Date, the Anticipated
Payment Date.

         "Monthly  Debt  Service  Payment  Amount" has the  meaning  assigned in
Section 2.3(a).

         "Moody's" means Moody's Investors Services, Inc.

         "Mortgage"  means  with  respect  to  each  Individual   Property,   as
applicable, the Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture  Filing,  the Deed of Trust,  Assignment  of Leases and Rents,  Security
Agreement and Fixture Filing, the Leasehold Deed of Trust,  Assignment of Leases
and Rents,  Security  Agreement and Fixture  Filing or, with respect only to the
Individual Property located in Beckley, West Virginia, the Second Deed of Trust,
Assignment of Leases and Rents, Security Agreement  and Fixture Filing, executed

                                       -7-

<PAGE>

by Borrower  in favor of  Lender,  covering  such  Individual  Property  and any
amendments, modifications, renewals, substitutions or replacement thereof.

         "Net  Operating  Income"  means  the  amount  obtained  by  subtracting
Operating  Expenses  from  Operating  Revenues (as adjusted  and  determined  in
accordance with Lender's standard  underwriting  practice and procedures as used
in connection with the underwriting of the Loan).

         "Net Proceeds" has the meaning assigned in Section 5.3(b).

         "Net  Proceeds   Deficiency"  has  the  meaning   assigned  in  Section
5.3(b)(vi).

         "Note" means the Promissory Note of even date, in the stated  principal
amount of  $36,600,000.00,  executed  by  Borrower,  and payable to the order of
Lender in evidence of the Loan as the same may  hereafter be modified,  amended,
restated,  renewed or replaced and including  any Defeased  Note and  Undefeased
Note that may exist from time to time.

         "Offering Document" has the meaning assigned in Section 14.2(a).

         "Operating  Expenses"  means all reasonable  and necessary  expenses of
Borrower  and any TRS Lessee (not paid by any  Operating  Lessee  pursuant to an
Operating  Lease listed on Schedule III attached  hereto or any other  Operating
Lease with an Operating  Lessee that is not an Affiliate of Borrower for so long
as such  Operating  Lease remains in effect) for operating the Properties in the
ordinary  course of business  which are paid by Borrower  and any TRS Lessee and
which are directly  associated  with and fairly  allocable to the Properties for
the applicable  period,  including real estate taxes and assessments,  insurance
premiums,  maintenance  costs,  management  fees and costs  not to  exceed  five
percent  (5.0%) of Operating  Revenues,  ground rents  payable  under any Ground
Lease,  accounting,  legal,  and  other  professional  fees,  fees  relating  to
environmental  and net cash flow and  audits,  and other  expenses  incurred  by
Lender  and  reimbursed  by  Borrower  under this  Agreement  and the other Loan
Documents,  deposits  to the  Replacement  Escrow Fund or  expenditures  in lieu
thereof in an aggregate amount of not less than four percent (4.0%) of Operating
Revenues,  Tax and Insurance Fund, wages,  salaries, and personnel expenses, but
excluding  Debt Service,  capital  expenditures,  any of the foregoing  expenses
which are paid from deposits to cash reserves  previously  included as Operating
Expenses,  any payment or expense for which Borrower or any TRS Lessee was or is
to be  reimbursed  from proceeds of the Loan or insurance or by any third party,
and any non-cash charges such as depreciation and  amortization.  Any management
fee or other expense payable to Borrower or to an Affiliate of Borrower shall be
included as an Operating  Expense only with Lender's prior  approval.  Operating
Expenses shall not include any expenses (including, without limitation, federal,
state or local income taxes or legal and other  professional  fees) unrelated to
the operation of the Properties.

         "Operating Lease" means each lease agreement in effect between Borrower
and an Operating Lessee for the use and operation of an Individual  Property and
all amendments,  modifications,  renewals, substitutions or replacements of such
lease.  The  initial  Operating  Leases  in  effect  as of the date  hereof  are
identified on Schedule III attached hereto.

                                       -8-

<PAGE>

         "Operating  Lease Rent"  means all rents,  revenues,  issues,  profits,
income and proceeds due or to become due to Borrower under an Operating Lease.

         "Operating  Lessee"  means each lessee  under an Operating  Lease.  The
initial  Operating  Lessees under the Operating  Leases in effect as of the date
hereof are identified on Schedule III attached hereto.

         "Operating  Revenues"  means all gross revenues of Borrower and any TRS
Lessee  derived  from the  Properties  or  otherwise  arising  in respect of the
Properties  which are properly  allocable to the  Properties  for the applicable
period,  including  Operating  Lease  Rent and other  Rent,  interest  and other
receipts  from Leases and parking  agreements,  concession  fees and charges and
other  miscellaneous  operating  revenues,  but excluding  security deposits and
earnest  money  deposits  until they are  forfeited  by the  depositor,  advance
rentals until they are earned,  and proceeds  from a sale or other  disposition.
Operating Revenues shall not include (i) any condemnation or insurance proceeds,
other than the proceeds of any business interruption or loss of income insurance
received by Borrower or any TRS Lessee,  (ii) any  proceeds  resulting  from the
sale,  exchange,  transfer,  financing or  refinancing of all or any part of the
Properties,  (iii)  any rent  accrued  by  Borrower  or any TRS  Lessee  but not
received because of any free rent provisions or other rental  concessions in any
Lease, (iv) any repayments received from tenants of principal loaned or advanced
to tenants by Borrower or any TRS Lessee,  (v) any  payments due pursuant to the
terms of any Lease in  connection  with the  cancellation  or  termination  of a
Lease, (vi) investment income on any reserves or funds not related to the normal
operation of the Properties,  including,  without limitation, funds allocated to
pay for construction  expenses or (vii) any type of income, other than Operating
Lease Rent, that would otherwise be considered  Operating  Revenues  pursuant to
the  provisions  above but is paid  directly by any tenant to a Person or entity
other  than  Borrower,  any  TRS  Lessee  or  pursuant  to the  Cash  Management
Agreement.

         "Payment  Date"  shall  mean  the  first  day of  each  calendar  month
commencing on the first day of January, 2001.

         "Permitted    Encumbrances"   means   outstanding   liens,   easements,
restrictions,  security interests and other exceptions to title set forth in the
policies of title insurance insuring the liens of the Mortgages, as reviewed and
approved by Lender,  together with the liens and security  interests in favor of
Lender created by the Loan Documents.

         "Person" means any individual, corporation, partnership, joint venture,
association,  joint stock company,  trust,  trustee,  estate,  limited liability
company,  unincorporated organization,  real estate investment trust, government
or any agency or political subdivision thereof, or any other form of entity.

         "Personalty"  shall  have  the  meaning  assigned  to such  term in the
related Mortgage with respect to each Individual Property.

         "PIP Escrow Fund" has the meaning assigned in Section 3.1(e).

         "PIP Noncompliance" means if any PIP Requirements have not been
fulfilled, completed or otherwise satisfied by the date that occurs following

                                       -9-

<PAGE>

the passage of one-half of the time allotted for performance of such PIP
Requirements.

         "PIP  Noncompliance  Period"  means the period of time  during the Loan
following the  occurrence of a PIP  Noncompliance  until the occurrence of a PIP
Release Event.

         "PIP Release  Event"  means,  for each related PIP  Noncompliance,  the
balance in the PIP Escrow Fund is equal to the PIP Required Amount (whether such
balance is  achieved  by means of deposit by  Borrower  or  pursuant  to Section
3.5(e)).

         "PIP Required  Amount" means,  for each PIP  Noncompliance,  the amount
necessary to complete the applicable PIP Requirements.

         "PIP Requirements" mean,  collectively,  with respect to any Individual
Property,  the  obligation of Borrower or any Operating  Lessee to comply in all
material respects with any property  improvement program that may be mandated or
otherwise required under any Management Agreement,  Franchise Agreement or other
applicable licensing agreement.

         "Policies" has the meaning assigned in Section 5.1(b).

         "Policy" has the meaning assigned in Section 5.1(b).

         "Potential  Default"  means the  occurrence  of any event or  condition
which, with the giving of notice, the passage of time, or both, would constitute
an Event of Default.

         "Properties"  means,  collectively,  all of the  Individual  Properties
which are subject to the terms of this Agreement.

         "Qualified Manager" means either (i) any of the following  professional
management  entities,  provided that there shall have been no materially adverse
change in any such entity since the Closing Date: Interstate Hotels Corporation,
Prime Hospitality Corporation, Starwood Hotels and Resorts Worldwide, Inc., Bass
PLC, Crestline Hotels and Resorts, Inc., Marriott International,  Inc., Meristar
Hotels and Resorts, Inc., RFS, Inc. or Hilton Hotels Corporation; or (ii) in the
sole judgement of Lender, a management  organization  (which may be an Affiliate
of Borrower) possessing experience in managing properties similar in size, scope
and value of the applicable Individual Property or Properties, provided, Lender,
at its option,  may require that Borrower obtain written  confirmation  from the
applicable  Rating  Agencies that management of the Property by such Person will
not cause a downgrading,  withdrawal or qualification of the then current rating
of the Securities issued pursuant to the Securitization of any class thereof.

         "Rating Agencies" means each of Standard & Poor's, Moody's and Fitch,
Inc., or any other nationally-recognized statistical rating agency which has
been approved by Lender.

         "Rating  Criteria"  with  respect to any  Person,  means the short term
unsecured debt obligations or commercial paper which are rated at least "A-1" by
Standard & Poor's,  "P-1" by  Moody's  and  "F-1+" by Fitch,  Inc.  (if rated by
Fitch, Inc.) in  the  case  of accounts  in which funds are held for thirty (30)

                                      -10-

<PAGE>

days or less (or, in the case of accounts in which funds are held for more  than
thirty  (30)  days,  the  long  term  unsecured  debt obligations  of which are
rated at least  "AA-" by Fitch,  Inc.  and  Standard & Poor's and "Aa3" by
Moody's).

         "Registration Statement" has the meaning assigned in Section 14.2(b).

         "REIT" means Equity Inns, Inc., a Tennessee corporation.

         "Release Amount" means, for an Individual Property,  the product of (a)
the quotient  obtained by dividing the original  Allocated  Loan Amount for such
Individual  Property by the sum of the original  Allocated  Loan Amounts for all
Properties,  (b) the  outstanding  principal  balance  of the Loan,  and (c) one
hundred twenty-five percent (125%).

         "Release  Date" means the earlier of (i) the date that is two (2) years
from the "startup  day" within the meaning of Section  860G(a)(9) of the Code of
the REMIC Trust or (iii) four (4) years from the date hereof.

         "REMIC Trust" means a "real estate mortgage  investment conduit" within
the meaning of Section 860D of the Code that holds the Note.

         "Rent" means all rents, revenues,  issues, profits, income and proceeds
due or to become due with respect to the Properties,  including  rentals and all
other payments of any kind under the Operating  Leases and other Leases (if any)
for using, leasing, licensing, possessing, operating from, rendering in, selling
or otherwise enjoying the Properties,  including,  without limitation, all hotel
receipts,  revenues  and  credit  card  receipts  collected  from  guest  rooms,
restaurants, bars, meeting rooms, banquet rooms and recreational facilities, all
receivables,  customer  obligations,  installment  payment obligations and other
obligations now existing or hereafter arising or created out of the sale, lease,
sublease,  license,  concession  or  other  grant  of the  right  of the use and
occupancy of property or rendering of services by Borrower, any Operating Lessee
or any operator or manager of the hotel or the  commercial  space located in the
Improvements or acquired from others (including,  without  limitation,  from the
rental of any office  space,  retail space,  guest rooms or other space,  halls,
stores, and offices, and deposits securing reservations of such space), license,
lease,  sublease and concession fees and rentals,  health club membership  fees,
food and beverage wholesale and retail sales,  service charges,  vending machine
sales and proceeds,  if any, from business  interruption or other loss of income
insurance.

         "Replacement   Escrow  Fund"  has  the  meaning   assigned  in  Section
3.1(b)(ii).

         "Replacement  Escrow Fund Monthly  Deposit" has the meaning assigned in
Section 3.1(b)(ii).

         "Replacement  Management  Agreement"  means (a) either (i) a management
agreement with a Qualified Manager  substantially in the same form and substance
as Exhibit C attached  hereto,  or (ii) a management  agreement with a Qualified
Manager,  which  management  agreement shall be acceptable to Lender in form and
substance in Lender's sole  discretion,  provided,  Lender,  at its option,  may
require that Borrower obtain  confirmation  from the applicable  Rating Agencies

                                      -11-

<PAGE>

that  such  management  agreement  will  not cause a downgrading,  withdrawal or
qualification of the then current rating of  the  securities   issued   pursuant
to a Securitization; and (b) a manager's consent and subordination of management
agreement substantially in the form of Exhibit H attached hereto, provided, that
the  Qualified  Manager  is not an  Affiliate  of  Borrower  or TRS  Lessee,  or
otherwise  substantially in the form then used by Lender, executed and delivered
to Lender by Borrower and such Qualified Manager at Borrower's expense.

         "Replacements" has the meaning assigned in Section 3.1(b)(i).

         "Replacements Budget" has the meaning assigned in Section 3.1(b)(i).

         "Required Repair Fund" has the meaning assigned in Section 3.1(a).

         "Restoration"  means  the  repair  and  restoration  of  an  Individual
Property after a casualty or Condemnation as nearly as possible to the condition
the  Individual   Property  was  in  immediately   prior  to  such  casualty  or
Condemnation, with such alterations as may be reasonably approved by Lender.

         "Scheduled  Defeasance  Payments"  has the meaning  assigned in Section
2.4(c).

         "Securities" has the meaning assigned in Section 14.1.

         "Securities Act" has the meaning assigned in Section 14.2.

         "Securitization" has the meaning assigned in Section 14.1.

         "Securitization  Information"  has  the  meaning  assigned  in  Section
14.1(a)(iii).

         "Security Agreement" has the meaning assigned in Section 2.4(b)(v).

         "Servicer" has the meaning assigned in Section 14.3.

         "Servicing Agreement" has the meaning assigned in Section 14.3.

         "Severed Loan Documents" has the meaning assigned in Section 12.2(c).

         "Single  Purpose  Entity" means a Person (other than an  individual,  a
government or any agency or political subdivision thereof),  which exists solely
for the purpose of owning the Properties (or leasing the Properties  pursuant to
Section  8.30),  observes  corporate,  company or  partnership  formalities,  as
applicable,  independent of any other Person,  and which otherwise complies with
the covenants set forth in Section 8.28.

         "Site  Assessment" means an environmental  engineering  report for each
Individual  Property  prepared at Borrower's  expense by an engineer  engaged by
Borrower and approved by Lender, and in a manner  satisfactory to Lender,  based
upon an investigation  relating to and making appropriate  inquiries  concerning
the existence of Hazardous Materials on or about each such Individual  Property,
and the past or  present  discharge,  disposal,  release  or  escape of any such
substances, all consistent with  ASTM Standard E1527-93 or any successor thereto
published by ASTM and good customary and commercial practice.

                                      -12-

<PAGE>

         "SPC Party" has the meaning assigned in 8.28(o).

         "Standard & Poor's" means  Standard & Poor's  Ratings Group, a division
of The McGraw Hill Companies, Inc.

         "Static Cash Account" has the meaning assigned in Section 5.4(b).

         "Subordination,   Non-Disturbance  and  Attornment   Agreement"  means,
collectively,  each of those certain  Collateral Lease Estoppel,  Subordination,
Non-Disturbance  and  Attornment  Agreements  among  Lender,  Borrower  and each
Operating Lessee, dated as of November 7, 2000.

         "Substitute Property" has the meaning assigned in Section 2.6(a).

         "Substituted Property" has the meaning assigned in Section 2.6(a).

         "Substitute Release Amount" has the meaning assigned in Section 2.6(a).

         "Successor Borrower" has the meaning assigned in Section 2.5(c).

         "Tax and  Insurance  Escrow  Fund" has the meaning  assigned in Section
5.4(a).

         "Taxes" has the meaning assigned in Section 10.2.

         "Threshold Amount" has the meaning assigned in Section 10.12.

         "Treasury Rate" means,  as of the Anticipated  Payment Date, the yield,
calculated by linear interpolation (rounded to the nearest one-thousandth of one
percent  (i.e.,  0.001%)  of the yields of  noncallable  United  State  Treasury
obligations  with terms (one longer and one shorter)  most nearly  approximately
the period from such date of  determination  to the Maturity Date, as determined
by Lender on the basis of  Federal  Reserve  Statistical  Release  H.15-Selected
Interest Rates under the heading U.S.  Governmental  Security/Treasury  Constant
Maturities,  or other recognized source of financial market information selected
by Lender.

         "Trigger Event" means the first to occur, if any, of a DSCR Event,  the
occurrence of the PIP Noncompliance or the Anticipated Payment Date.

         "Trigger Period" means the period of time during the Loan following the
occurrence of (i) a DSCR Event,  (ii) the  Anticipated  Payment Date, or (iii) a
PIP Noncompliance  until the occurrence of a PIP Release Event,  provided,  that
neither a DSCR Event nor the Anticipated  Payment Date shall have occurred prior
to any such PIP Release Event.

         "TRS Lease"  means an  Operating  Lease,  substantially  in the form of
Exhibit B attached  hereto,  to be entered into between  Borrower and TRS Lessee
for the use and operation of any Individual Property.

                                      -13-

<PAGE>

         "TRS  Lessee"  means the lessee  under a TRS Lease,  which lessee is an
Affiliate of Borrower and satisfies the requirements of Section 8.30(c).

         "TRS  Lessee   Organizational   Documents"  means  the   organizational
documents of TRS Lessee substantially in the form of Exhibit F attached hereto.

         "TRS Non-Consolidation Opinion" means a legal non-consolidation opinion
substantially  in form and substance as Exhibit G attached  hereto,  as the same
may be further revised, as reasonably required by Lender, to reflect any changes
in the applicable law or the subject matter thereof as of the date of issuance.

         "TRS  Subordination  Agreement"  means a subordination  agreement among
Lender, Borrower and TRS Lessee, substantially in the form of Exhibit D attached
hereto.

         "Undefeased Note" has the meaning assigned in Section 2.4(b)(v).

         "Unrelated  Third-Party  Provider" has the meaning  ascribed in Section
14.2(b).

         "Unrelated  Third-Party  Report"  has the  meaning  assigned in Section
14.2(b).

         "USAH" means the Uniform  System of Accounts for Hotels,  Ninth Revised
Edition, 1996, as the same may be revised, amended or supplemented.

         "U.S.  Obligations" means direct non-callable obligations of the United
States of America.

         "Yield Maintenance Premium" means the amount (if any) which, when added
to the remaining  principal  amount of the Note or the  principal  amount of the
Defeased  Note, as applicable,  will be sufficient to purchase U.S.  Obligations
providing the required Scheduled Defeasance Payments.

                                   ARTICLE II
                                   LOAN TERMS

Section 2.1  The Loan.

         Lender agrees to make a Loan of THIRTY SIX MILLION SIX HUNDRED THOUSAND
AND NO/100 DOLLARS  ($36,600,000.00)  to the Borrower,  which shall be funded in
one advance and repaid in  accordance  with the terms of this  Agreement and the
Note.  Borrower hereby agrees to accept the Loan on the Closing Date, subject to
and upon the terms and conditions set forth herein.

Section 2.2  Interest Rate.

         From the date hereof  through but not including the Anticipated Payment
Date, the  outstanding  principal  balance of the  Loan shall bear interest at a

                                      -14-

<PAGE>

rate of interest equal to eight and twenty-five hundredths percent  (8.25%)  per
annum (the "Contract Rate"). From and after the Anticipated Payment Date through
and including the Maturity Date, the  outstanding  principal balance of the Loan
shall bear interest at a rate per annum equal to the greater of (i) the Contract
Rate  plus  two  percentage  points  (2%)  or  (ii) the  Treasury  Rate plus two
percentage   points (2%);   provided,  however, if after the Anticipated Payment
Date at any  time  the  Loan is not subject to a  Securitization,  such Adjusted
Rate shall  be  increased  three percentage points (3%) per annum for so long as
the Loan is not subject to a Securitization (the "Adjusted Rate").

Section 2.3  Terms of Payment.

                  2.3.1  Interest  and  Principal.  The Loan shall be payable as
follows: (i) payment of interest only on the date hereof for the period from the
date hereof  through the last day of the current  month (unless the Closing Date
is the first day of a calendar  month,  in which case no such  interest is due);
and (ii) thereafter a constant payment of $292,639.84 (the "Monthly Debt Service
Payment  Amount"),  on the first day of January,  2001 and on each  Payment Date
thereafter;  each of such payments, to be applied (A) to the payment of interest
computed at the Contract Rate and (B) the balance  applied  toward  reduction of
the  principal  sum. The  constant  payment  required  hereunder is based upon a
twenty-five (25) year  amortization  schedule for the Allocated Loan Amounts for
all of the Properties except as may otherwise be indicated on Schedule I.

                  2.3.2 To the  extent the Loan is  outstanding,  from and after
the  Anticipated  Payment Date  interest  shall  accrue on the unpaid  principal
balance from time to time outstanding on the Loan at the Adjusted Rate. Borrower
shall   continue  to  make   payments  of  principal  and  interest  in  monthly
installments  beginning on the Anticipated  Payment Date and on the first day of
each  calendar  month  thereafter  up to and  including  the Maturity Date in an
amount equal to the Monthly Debt Service Payment Amount and, notwithstanding the
following  provision with respect to Accrued  Interest,  the failure to make any
such payment as and when due shall constitute an Event of Default.  Each Monthly
Debt Service  Payment  Amount paid after the  Anticipated  Payment Date shall be
applied to the payment of interest  computed at the Contract Rate with remainder
applied to reduce the  outstanding  principal  balance of the Loan in accordance
with Section  2.3(a) above.  Interest  accrued at the Adjusted Rate and not paid
shall be deferred and added to the Debt and shall earn  interest at the Adjusted
Rate to the  extent  permitted  by  applicable  law (such  accrued  interest  is
hereinafter  defined as "Accrued  Interest").  In  addition to such  payments of
principal and interest,  from and after the Anticipated  Payment Date,  Borrower
shall make  payments in reduction of the  outstanding  principal  balance of the
Loan and accrued interest in monthly  installments  beginning on the Anticipated
Payment Date and on the first day of each  calendar  month  thereafter up to and
including  the Maturity  Date in  accordance  with the terms and  provisions  of
Section 3.5 below.

                  2.3.3  Maturity.  On the Maturity Date,  Borrower shall pay to
Lender all outstanding principal, accrued and unpaid interest (including Accrued
Interest, if any), default interest,  late charges and any and all other amounts
due under the Loan Documents.

                  2.3.4   Default Rate.   Upon  the  occurrence  of an  Event of
Default,  Lender shall be  entitled to  receive and Borrower shall pay to Lender
interest  on  the  entire unpaid  principal sum and any other amounts due at the

                                      -15-

<PAGE>

Default Rate. Interest at the Default Rate shall be computed from the occurrence
of the Event of Default  until  the actual  receipt and  collection  of the Debt
(or that portion  thereof that is then due or until such  time as  Lender  shall
have  accepted  a cure of the  Event of  Default). Interest at the Default  Rate
shall be added to the Debt and shall be secured by the Mortgages.  This section,
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 Lender by reason of the occurrence of any Event of Default.

                  2.3.5 Making of Payments.  Each payment by Borrower  hereunder
or under the Note shall be made in funds  settled  through the New York Clearing
House Interbank  Payments System or other funds immediately  available to Lender
by 11:00 a.m., New York City time, on the date such payment is due, to Lender by
deposit to such account as Lender may  designate by written  notice to Borrower.
Whenever any payment  hereunder or under the Note shall be stated to be due on a
day  which is not a  Business  Day,  such  payment  shall  be made on the  first
Business Day thereafter.

                  2.3.6  Computations.  Interest payable  hereunder or under the
Note by Borrower  shall be  computed  on the basis of the actual  number of days
elapsed and a 360-day year.

                  2.3.7 Late Payment Charge.  If any principal,  interest or any
other sums due under the Loan Documents is not paid by Borrower  within five (5)
days of (and  including)  the date it is due,  Borrower shall pay to Lender upon
demand an amount  equal to the lesser of five percent (5%) of such unpaid sum or
the maximum  amount  permitted by applicable  law in order to defray the expense
incurred by Lender in handling and  processing  such  delinquent  payment and to
compensate Lender for the loss of the use of such delinquent  payment.  Any such
amount shall be secured by the Mortgages and the other Loan Documents.

                  2.3.8 Annual Budget. For the partial year period commencing on
the date hereof,  and for each  calendar  year  thereafter,  the Borrower  shall
submit to Lender an Annual  Budget  not later  than sixty (60) days prior to the
commencement of such period or calendar year in form reasonably  satisfactory to
Lender,  or for so long as an Operating  Lease remains in effect,  no later than
five (5)  Business  Days after a budget is delivered to Borrower by an Operating
Lessee pursuant to the terms of an Operating  Lease. The Annual Budget submitted
for the calendar  year in which a Trigger  Event  occurs,  and for each calendar
year thereafter  during a Trigger Period,  shall be subject to Lender's  written
approval,  which approval shall not be  unreasonably  withheld (each such Annual
Budget as approved by Lender,  an "Approved Annual  Budget").  In the event that
Lender objects to a proposed Annual Budget submitted by Borrower or an Operating
Lessee,  Lender shall advise Borrower of such objections within thirty (30) days
after  receipt  thereof  (and  deliver  to  such  party  a  reasonably  detailed
description of such  objections)  and Borrower shall promptly  revise,  or cause
Operating Lessee to revise,  such Annual Budget and resubmit the same to Lender.
Lender shall advise  Borrower of any  objections  to such revised  Annual Budget
within ten (10) days after receipt thereof (and deliver to Borrower a reasonably
detailed  description of such objections) and Borrower shall promptly revise, or
cause  Operating  Lessee to  revise,  the same in  accordance  with the  process
described in this subsection until the Lender approves the Annual Budget.  Until
such time that  Lender  approves a proposed  Annual  Budget,  the most  recently
Approved  Annual Budget shall apply;  provided that, such Approved Annual Budget

                                      -16-

<PAGE>

shall  be adjusted  to reflect  actual increases in real estate taxes, insurance
premiums and utilities expenses.

Section 2.4  Prepayment; Defeasance.

                  2.4.1   Prepayment.   Borrower  shall  repay  any  outstanding
principal  indebtedness of the Loan in full on the Maturity Date,  together with
interest  thereon to (but  excluding)  the date of repayment.  Other than as set
forth in this  Section  2.4,  Borrower  shall have no right to prepay all or any
portion of the Loan prior to the  Anticipated  Payment  Date.  On any  scheduled
Payment Date occurring no earlier than ninety (90) days prior to the Anticipated
Payment  Date,  Borrower  may,  at its  option and upon  thirty  (30) days prior
written  notice  from  Borrower  to Lender,  prepay in whole or in part the Debt
without  payment of any premium.  Any such payment  shall be applied to the last
payments of principal and interest due under the Loan. Each voluntary prepayment
after ninety (90) days prior to the Anticipated  Payment Date shall be made on a
scheduled Payment Date and include all accrued and unpaid interest up to but not
including  such  scheduled  Payment Date or, if not paid on a scheduled  Payment
Date,  include  interest that would have accrued on such prepayment  through the
next regularly  scheduled Payment Date. If prior to the Anticipated Payment Date
and  following  the  occurrence  of any  Event of  Default  that is  continuing,
Borrower  shall  tender  payment of an amount  sufficient  to satisfy all or any
portion of the Debt, such tender by Borrower shall be deemed to be voluntary and
may be accepted or rejected by Lender in its sole discretion.  If Lender accepts
such  tender,  Borrower  shall pay, in addition to the Debt,  the Lockout  Yield
Maintenance Premium.

                  2.4.2 Voluntary  Defeasance of the Loan.  Provided no Event of
Default exists,  at any time after the Release Date and prior to the Anticipated
Payment Date Borrower may voluntarily  defease all or any portion of the Loan by
providing Lender with U.S. Obligations that produce payments which replicate the
Scheduled  Defeasance  Payments   (hereinafter,   a  "Defeasance  Event").  Each
Defeasance  Event by the Borrower  shall be subject to the  satisfaction  of the
following conditions precedent:

                           (a)  Borrower shall provide not less than thirty (30)
days prior written notice to Lender specifying the Payment Date (the "Defeasance
Date") on which the Defeasance Event is to occur. Such notice shall indicate the
principal amount of the Note to be defeased;

                           (b)  Borrower  shall  pay  to  Lender all accrued and
unpaid  interest on the principal  balance of the Note through but not including
the  Defeasance  Date.  If for any reason the  Defeasance  Date is not a Payment
Date, the Borrower shall also pay interest  that  would have accrued on the Note
through the next Payment Date;

                           (c)  Borrower shall pay to Lender all other sums, not
including  scheduled  interest  or  principal payments, due under the Note, this
Agreement, the Mortgage, and the other Loan Documents;

                           (d)   Borrower  shall  pay  to  Lender  the  required
Defeasance Deposit for the Defeasance Event;

                           (e)  In  the  event only a portion of the Loan is the
subject of the Defeasance Event,  Borrower shall prepare all necessary documents

                                      -17-

<PAGE>

to amend and restate the Note and issue two substitute  notes, one note having a
principal  balance  equal  to  the  defeased  portion of the  original Note (the
"Defeased  Note")  and  the other  note having a  principal balance equal to the
undefeased portion of the Note (the "Undefeased  Note").  The Defeased Note and
Undefeased Note shall have identical terms as the Note except for the  principal
balance.  A Defeased Note cannot be the subject of any further Defeasance Event;

                           (f)  Borrower  shall  execute  and deliver a security
agreement, in form  and substance  satisfactory  to  Lender,  creating  a  first
priority  lien  on the Defeasance  Deposit  and the U.S.  Obligations  purchased
with the Defeasance Deposit in  accordance with  this  provision of this Section
2.4 (the  "Security Agreement");

                           (g)  Borrower shall deliver an opinion of counsel for
Borrower  in  form  satisfactory to Lender in its reasonable discretion stating,
among other things, that  Borrower  has  legally  and  validly  transferred  and
assigned  the U.S. Obligations  and all  obligations,  rights and  duties  under
and to the Note or Defeased  Note (as  applicable)  to the  Successor  Borrower,
that Lender has a perfected  first priority security  interest in the Defeasance
Deposit and the U.S. Obligations delivered by Borrower, and that any REMIC Trust
formed pursuant to a  Securitization  will not fail to  maintain  its  status as
a "real  estate mortgage investment conduit"  within the meaning of Section 860D
of the Code as a result of such Defeasance Event;

                           (h)  Borrower shall deliver evidence in writing from
the applicable Rating Agencies to the effect that such  release will not  result
in a  downgrading,  withdrawal or  qualification  of the  respective  ratings in
effect  immediately prior to such Defeasance Event for the Securities  issued in
connection with the  Securitization  which are then outstanding.  If required by
the applicable Rating Agencies,  the  Borrower  shall  also  deliver or cause to
be delivered a non-consolidation opinion with respect to the  Successor Borrower
in form and substance satisfactory to Lender and the applicable Rating Agencies;

                           (i)   Borrower shall deliver an Officer's Certificate
certifying  that  the  requirements  set  forth in this Section 2.4(b) have been
satisfied;

                           (j)   Borrower shall  deliver a certificate of a "big
five"  or  other  nationally  recognized  public  accounting firm, acceptable to
Lender  certifying  that  the  U.S.  Obligations  purchased  with the Defeasance
Deposit generate monthly amounts equal to or greater than the required scheduled
Defeasance Payments;

                           (k)   Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request; and

                           (l)   Borrower  shall  pay all  reasonable  costs and
expenses of Lender incurred in  connection with the Defeasance Event, including,
without limitation, any costs and expenses associated with a release of the Lien
of  the  Mortgage  as  provided  in  Section  2.5  hereof as well as  reasonable
attorneys' fees and expenses.

                  2.4.3  In  connection  with  each  Defeasance  Event, Borrower
hereby  appoints  Lender as its  agent and  attorney-in-fact  for the purpose of

                                      -18-

<PAGE>

using the Defeasance Deposit to purchase U.S. Obligations which provide payments
on or prior to, but as close as possible to, all  successive  scheduled  payment
dates after the Defeasance Date upon which  interest and principal  payments are
required  under  the  Note,  in  the case  of a  Defeasance Event for the entire
outstanding principal balance of the Loan,  or the Defeased Note, in the case of
a Defeasance Event for only a  portion  of the outstanding  principal balance of
the Loan, as applicable, and in amounts equal to the  scheduled  payments due on
such  dates  under the  Note  or the  Defeased Note,  as applicable,  (including
without limitation scheduled payments of principal, interest, servicing fees (if
any),  the  Rating Surveillance  Charge and any other amounts due under the Loan
Documents on such dates) and assuming  such  Note or  Defeased  Note is  prepaid
in full on the Anticipated Payment Date (the "Scheduled  Defeasance  Payments").
Borrower, pursuant to  the  Security  Agreement or  other  appropriate document,
shall authorize and direct that the  payments received from the U.S. Obligations
may be made directly to the Cash Management Account (unless  otherwise  directed
by Lender) and applied to  satisfy the obligations of Borrower under the Note or
the  Defeased  Note, as  applicable.  Any portion of the  Defeasance  Deposit in
excess of the amount necessary to purchase the U.S. Obligations required by this
Section 2.4  and  satisfy  Borrower's  obligations  under  this  Section 2.4 and
Section 2.5 shall be remitted to Borrower.

Section 2.5  Release of Property.

         Except as set forth in this Section 2.5, no repayment,  . prepayment or
defeasance  of all or any portion of the Note shall cause,  give rise to a right
to require,  or otherwise result in, the release of the Lien of the Mortgages on
the Properties.

                  2.5.1  Release  of All the  Properties.  If the  Borrower  has
elected to defease the entire Note and the requirements of Section 2.4 have been
satisfied,  all of the  Properties  shall be  released  from the  Liens of their
respective Mortgages and the U.S. Obligations,  pledged pursuant to the Security
Agreement, shall be the sole source of collateral securing the Note.

                           (a)  In connection with the release of the Liens, the
Borrower shall submit to Lender,  not less than  thirty  (30) days  prior to the
Defeasance  Date,  a  release  of  Lien  (and  related Loan  Documents) for each
Individual Property for execution by Lender.  Such  release  shall  be in a form
appropriate  in each jurisdiction  in  which an  Individual  Property is located
and satisfactory to Lender in its reasonable discretion.  In addition,  Borrower
shall provide all other documentation Lender reasonably requires to be delivered
by  Borrower  in  connection  with  such  release,  together  with  an Officer's
Certificate  certifying  that  such  documentation (A) is in compliance with all
Legal  Requirements,  and  (B) will  effect such releases in accordance with the
terms of this Agreement.

                  2.5.2  Release of  Individual  Properties.  Borrower on one or
more occasions may obtain (i) the individual  release of an Individual  Property
from the Lien of the Mortgage  thereon (and related Loan Documents) and (ii) the
release of Borrower's  obligations under the Loan Documents with respect to such
Individual  Property  (other than those  expressly  stated to survive  including
those  set  forth  in  the  Hazardous  Materials  Indemnity   Agreement),   upon
satisfaction of each of the following conditions:

                                      -19-

<PAGE>

                           (a)  The principal balance of the Defeased Note shall
equal  or  exceed  the Release  Amount for the  applicable  Individual Property;
provided, however, if the outstanding  principal  balance of the Undefeased Note
is less than the  Release Amount for the Individual Property to be released, the
Defeased Note shall  be in an amount  equal to the outstanding principal balance
of the Undefeased Note.

                           (b)   The  requirements  of  Section  2.4  (including
Section 2.4(b)(viii)) have been satisfied.

                           (c)   The Individual Property is transferred from the
Borrower  to  another Person  and such  Person  is not the  general  partner  or
managing  member  of Borrower.

                           (d)   Borrower  shall submit to Lender, not less than
thirty  (30)  days  prior to the  date of such  release,  a release of Lien (and
related Loan Documents) for such  Individual  Property for  execution by Lender.
Such release shall be in a form  appropriate  in each jurisdiction  in which the
Individual  Property  is located and  satisfactory to  Lender  in its reasonable
discretion.  In addition, Borrower shall provide all other documentation  Lender
reasonably  requires  to  be delivered  by  Borrower  in  connection  with  such
release,    together  with   an   Officer's  Certificate  certifying  that  such
documentation (a) is in compliance with all  Legal Requirements, (b) will effect
such release in accordance with the terms of this Agreement,  and  (c) will  not
impair or otherwise adversely affect the  Liens,  security interests  and  other
rights  of  Lender  under the  Loan Documents  not being  released (or as to the
parties to the Loan  Documents  and Properties subject to the Loan Documents not
being released).

                           (e)  After  giving  effect  to such release, the Debt
Service Coverage Ratio for all of the Properties  then remaining  subject to the
Liens of the Mortgages shall be equal to or greater than the  greater of (a) the
Debt  Service Coverage Ratio for the twelve (12) full calendar  months as of the
Closing Date,  and (b) the  Debt  Service  Coverage  Ratio  for all of the  then
remaining  Properties (including  the  Individual  Property to be  released) for
the  twelve (12) full  calendar  months immediately preceding the release of the
Individual Property.

                           (f)   After  giving  effect to  such release, the LTV
Ratio  for  all of the Properties  then remaining  subject to  the  Liens of the
Mortgages shall be equal to or less than the  greater of (a) the LTV Ratio as of
the Closing Date, and (b) the LTV Ratio for all of the then remaining Properties
(including  the  Individual  Property  to be released)  for the twelve (12) full
calendar  months  immediately preceding the release of the Individual Property.

                  2.5.3 Successor Borrower.  In connection with any release of a
Lien under this Section 2.5,  Borrower  may, or at the request of Lender  shall,
establish or designate a successor entity (the "Successor Borrower") which shall
be a single purpose  bankruptcy  remote entity approved by Lender,  and Borrower
shall  transfer and assign all  obligations,  rights and duties under and to the
Note or the  Defeased  Note,  as  applicable,  together  with the  pledged  U.S.
Obligations to such Successor Borrower. Such Successor Borrower shall assume the
obligations under the Note or the Defeased Note, as applicable, and the Security
Agreement  and  Borrower  shall  be  relieved  of  its  obligations  under  such
documents.  The  Borrower  shall  pay  $1,000  to any such Successor Borrower as

                                      -20-

<PAGE>

consideration  for assuming the obligations under the Note or the Defeased Note,
as  applicable,  and the Security  Agreement.  Notwithstanding  anything in this
Agreement  to the  contrary,  no other  assumption  fee shall be payable  upon a
transfer of the Note or the Defeased  Note, as  applicable,  in accordance  with
this Section 2.5, but Borrower shall pay (i) to the Lender, all reasonable costs
and expenses incurred by Lender,  including Lender's reasonable  attorneys' fees
and  expenses,  incurred  in  connection  therewith  and  (ii) to the  Successor
Borrower as additional  consideration  for assuming the obligations of Borrower,
all  amounts  reasonably  estimated  by Lender to be  payable  by the  Successor
Borrower for taxes and other costs and expenses  (including,  without limitation
franchise  and  income  taxes,  if  any) of  maintaining  the  existence  of the
Successor Borrower through the final maturity date of the Note.

Section 2.6  Substitution of Properties.

         Subject to the terms and  conditions  set forth in . this  Section 2.6,
Borrower  may obtain a release of the Lien of a Mortgage  (and the related  Loan
Documents)  encumbering  an Individual  Property  (individually,  a "Substituted
Property"  and  collectively,  the  "Substituted  Properties")  by  substituting
therefor  another hotel  property of like kind and quality  acquired by Borrower
(individually,   a  "Substitute  Property"  and  collectively,  the  "Substitute
Properties"),  provided  that  unless  Lender  shall  have  otherwise  expressly
consented,  (i) the Allocated Loan Amounts of any and all Substituted Properties
in the  aggregate  comprise  no  more  than  twenty-five  percent  (25%)  of the
Allocated Loan Amounts for all of the Properties,  and (ii) no more than two (2)
Individual Properties shall be Substituted Properties, and provided further that
the following conditions precedent are satisfied:

                  2.6.1  the Anticipated Payment Date shall have not occurred.

                  2.6.2  Lender  shall have  received  at least  sixty (60) days
prior written notice  requesting the substitution and identifying the Substitute
Property and Substituted Property.

                  2.6.3  Lender shall have  received a copy of a deed  conveying
all of Borrower's right,  title and interest in and to the Substituted  Property
to an entity other than Borrower  pursuant to an arms length  transaction  and a
letter from Borrower  countersigned by a title insurance  company  acknowledging
receipt of such deed and agreeing to record such deed in the real estate records
for the county in which the Substituted Property is located.

                  2.6.4  Lender  shall  have  received  a fee in the  amount  of
one-quarter  of one  percent  (0.25%)  of the  Allocated  Loan  Amount  for  the
Substitute Property.

                  2.6.5 If the Loan is part of a  Securitization,  Lender  shall
have received an appraisal of the Substitute Property and Substituted  Property,
dated no more  than  sixty  (60)  days  prior to the  substitution  date,  by an
appraiser acceptable to the Rating Agencies.

                  2.6.6 The fair market value of the Substitute  Property is not
less than one hundred five percent  (105%) of the greater of (i) the fair market
value  of the  Substituted  Property  as of the  Closing  Date and (ii) the fair
market value of the Substituted  Property as of the date  immediately  preceding
the substitution,  which  determination  shall be made by (A) Lender in its sole

                                      -21-

<PAGE>

discretion if the Loan is  not part of a Securitization  and (B) Lender based on
the appraisals  delivered  pursuant to clause (e) above if the Loan is part of a
Securitization.

                  2.6.7  After  giving  effect  to the  substitution,  the  Debt
Service  Coverage  Ratio for the Loan for all of the  Properties  (excluding the
Substituted Property and including the Substitute Property) is not less than the
Debt Service  Coverage  Ratio for the Loan for all of the  Properties  as of the
Closing Date and as of the date immediately preceding the substitution.

                  2.6.8 The Net  Operating  Income for the  Substitute  Property
does not show a downward trend over the three (3) years immediately prior to the
date of substitution.

                  2.6.9 The Net Operating Income and Debt Service Coverage Ratio
(for the twelve (12) month period  immediately  preceding the  substitution) for
the  Substitute  Property is greater than one hundred five percent (105%) of the
Net Operating  Income and Debt Service Coverage Ratio (for the twelve (12) month
period immediately preceding the substitution) for the Substituted Property.

                  2.6.10 If the Loan is part of a  Securitization,  Lender shall
have  received  confirmation  in writing from the Rating  Agencies to the effect
that  such  substitution  will not  result  in a  withdrawal,  qualification  or
downgrade  of the  respective  ratings  in  effect  immediately  prior  to  such
substitution  for the Securities  issued in connection  with the  Securitization
that are then outstanding.  If the Loan is not part of a Securitization,  Lender
shall have  consented in writing to such  substitution,  which  consent shall be
given in Lender's sole discretion and not unreasonably withheld.

                  2.6.11 No  Potential  Default or Event of  Default  shall have
occurred and be continuing  and Borrower  shall be in compliance in all material
respects with all terms and  conditions  set forth in this Agreement and in each
Loan Document on Borrower's part to be observed or performed.  Lender shall have
received a certificate from Borrower confirming the foregoing,  stating that the
representations  and warranties of Borrower  contained in this Agreement and the
other Loan Documents are true and correct in all material  respects on and as of
the date of the  substitution  with respect to Borrower,  the Properties and the
Substitute Property and containing any other representations and warranties with
respect to Borrower, the Properties,  the Substitute Property or the Loan as the
Rating Agencies may require,  unless such certificate would be inaccurate,  such
certificate to be in form and substance satisfactory to the Rating Agencies.

                  2.6.12  Borrower  shall (i) have  executed,  acknowledged  and
delivered to Lender (A) a Mortgage,  an  Assignment  of Leases and Rents and two
UCC-1  Financing  Statements with respect to the Substitute  Property,  together
with  a  letter  from  Borrower  countersigned  by  a  title  insurance  company
acknowledging receipt of such Mortgage, Assignment of Leases and Rents and UCC-1
Financing  Statements  and  agreeing  to record  or file,  as  applicable,  such
Mortgage,  Assignment  of  Leases  and  Rents  and  one of the  UCC-1  Financing
Statements  in the real estate  records  for the county in which the  Substitute
Property is located  and to file one of the UCC-1  Financing  Statements  in the
office of the Secretary of State (or other central  filing  office) of the state
in which the Substitute  Property is located,  so as to effectively  create upon
such  recording  and filing  valid and  enforceable  Liens  upon the  Substitute
Property,  of the requisite priority,  in favor of Lender (or such other trustee
as may be desired under local law),  subject only to the Permitted  Encumbrances
and such other Liens as are permitted pursuant to the  Loan  Documents and (B) a

                                      -22-

<PAGE>

Hazardous  Materials Indemnity Agreement with respect to the Substitute Property
and  (ii)  have  caused  the Joinder  Parties to  acknowledge  and confirm their
respective  obligations  under the Loan Documents.  The Mortgage,  Assignment of
Leases and Rents, UCC-1 Financing Statements and Hazardous  Materials  Indemnity
Agreement shall be  the same in form and substance as the  counterparts  of such
documents  executed and delivered  with  respect  to  the  related   Substituted
Property subject to modifications reflecting only the Substitute Property as the
Individual Property that is the subject of such documents and such modifications
reflecting  the laws of the state in which the Substitute Property is located as
shall  be  recommended  for  similar  transactions  by  the counsel  admitted to
practice in such state and delivering  the opinion as to the  enforceability  of
such  documents  required pursuant to clause (r) below. The Mortgage encumbering
the Substitute Property shall secure all amounts evidenced by the Note, provide
that in the  event  that the  jurisdiction  in which the Substitute  Property is
located imposes a mortgage recording,  intangibles  or similar  tax and does not
permit the allocation  of indebtedness for the purpose of determining the amount
of such tax payable, the principal amount  secured  by such  Mortgage  shall  be
equal  to one hundred twenty-five percent (125%) of the fair market value of the
Substitute Property. The amount of the Loan allocated to the Substitute Property
(such amount being hereinafter  referred to as the "Substitute Release  Amount")
shall equal the Release Amount of the related Substituted Property.

                  2.6.13 Lender shall have received (i) to the extent  available
any "tie-in" or similar  endorsement to each title insurance policy insuring the
Lien of an existing  Mortgage as of the date of the substitution with respect to
the title insurance policy insuring the Lien of the Mortgage with respect to the
Substitute  Property and (ii) a title insurance policy (or a marked,  signed and
redated  commitment to issue such title insurance  policy)  insuring the Lien of
the Mortgage  encumbering the Substitute  Property,  issued by the title company
that  issued the title  insurance  policies  insuring  the Lien of the  existing
Mortgages and dated as of the date of the  substitution,  with  reinsurance  and
direct access  agreements that replace such agreements issued in connection with
the title  insurance  policy  insuring the Lien of the Mortgage  encumbering the
Substituted  Property.  The title  insurance  policy  issued with respect to the
Substitute  Property shall (A) provide  coverage in the amount of the Substitute
Release  Amount  if the  "tie-in"  or  similar  endorsement  described  above is
available or, if such  endorsement is not  available,  in an amount equal to one
hundred fifty percent (150%) of the Substitute Release Amount, (B) insure Lender
that the relevant Mortgage creates a valid first lien on the fee simple interest
in the Substitute Property encumbered thereby,  free and clear of all exceptions
from coverage  other than  Permitted  Encumbrances  and standard  exceptions and
exclusions  from  coverage (as modified by the terms of any  endorsements),  (C)
contain such  endorsements  and affirmative  coverages as are then available and
are contained in the title insurance policies insuring the Liens of the existing
Mortgages,  and (D) name Lender as the insured.  Lender also shall have received
copies of paid receipts or other  evidence  showing that all premiums in respect
of such endorsements and title insurance policies have been paid.

                  2.6.14  Lender shall have  received a current  survey for each
Substitute  Property,  certified  to the  title  company  and  Lender  and their
successors  and  assigns,  in the same form and having  the same  content as the
certification  of  the  survey  of  the  Substituted   Property  prepared  by  a
professional  land  surveyor  licensed  in the  state  in which  the  Substitute
Property is located and acceptable to the Rating Agencies in accordance with the
1992 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Survey.  Such

                                      -23-

<PAGE>

survey shall reflect the same legal description contained in the title insurance
policy  relating  to  such  Substitute  Property and shall include,  among other
things,  a metes and bounds description of the real property comprising  part of
such  Substitute  Property (unless  such  real property  has been satisfactorily
designated  by  lot number on a recorded  plat).  The  surveyor's  seal shall be
affixed to each survey and each survey shall certify that the surveyed  property
is  not  located  in  a "one-hundred-year flood hazard area."

                  2.6.15  Lender  shall  have  received  valid  certificates  of
insurance  indicating  that  the  requirements  for the  policies  of  insurance
required for an Individual  Property  hereunder have been satisfied with respect
to the Substitute  Property and evidence of the payment of all premiums  payable
for the existing policy period.

                  2.6.16  Lender  shall have  received  a Phase I  environmental
report  acceptable to Lender and, if recommended under the Phase I environmental
report, a Phase II  environmental  report  acceptable to Lender,  which conclude
that the Substitute Property does not contain any Hazardous Materials and is not
subject to any risk of contamination from any off-site Hazardous  Materials.  If
any such report discloses the presence of any Hazardous Materials or the risk of
contamination from any off-site Hazardous  Materials,  such report shall include
an estimate of the cost of any related  remediation  and Borrower  shall deposit
with Lender an amount equal to one hundred  twenty-five  percent  (125%) of such
estimated cost, which deposit shall constitute  additional security for the Loan
and shall be released to Borrower  upon the  delivery to Lender of (i) an update
to such report indicating that there is no longer any Hazardous Materials on the
Substitute  Property or any danger of contamination  from any off-site Hazardous
Materials that has not been fully  remediated and (ii) paid receipts  indicating
that the costs of all such remediation work have been paid.

                  2.6.17  Borrower  shall  deliver or cause to be  delivered  to
Lender (i) updates  certified  by Borrower of all  organizational  documentation
related to Borrower and/or the formation,  structure,  existence,  good standing
and/or  qualification  to do business  delivered to Lender on the Closing  Date;
(ii) good standing certificates, certificates of qualification to do business in
the  jurisdiction  in which the  Substitute  Property is located (if required in
such   jurisdiction);   and  (iii)  resolutions  of  Borrower   authorizing  the
substitution and any actions taken in connection with such substitution.

                  2.6.18 Lender shall have  received the  following  opinions of
Borrower's  counsel:  (i) an opinion or opinions of counsel admitted to practice
under the laws of the state in which the Substitute  Property is located stating
that the Loan  Documents  delivered  with  respect  to the  Substitute  Property
pursuant to clause (l) above are valid and  enforceable in accordance with their
terms,  subject  to the laws  applicable  to  creditors'  rights  and  equitable
principles,  and that  Borrower is qualified to do business and in good standing
under the laws of the jurisdiction  where the Substitute  Property is located or
that  Borrower is not  required by  applicable  law to qualify to do business in
such jurisdiction;  (ii) an opinion of counsel acceptable to the Rating Agencies
if the Loan is part of a  Securitization,  or the Lender if the Loan is not part
of a Securitization,  stating that the Loan Documents  delivered with respect to
the  Substitute  Property  pursuant  to clause (l) above  were duly  authorized,
executed and  delivered by Borrower and that the  execution and delivery of such
Loan  Documents and the  performance by Borrower of its  obligations  thereunder
will not cause a breach  of, or a default  under,  any  agreement,  document  or
instrument  to  which  Borrower  is a party or to which it or its properties are

                                      -24-

<PAGE>

bound; (iii) an  opinion  of  counsel acceptable to, the Rating  Agencies if the
Loan  is  part of a  Securitization,  or the Lender if the Loan is not part of a
Securitization, stating  that subjecting the  Substitute Property to the Lien of
the related  Mortgage  and  the  execution  and  delivery  of  the  related Loan
Documents  does  not  and  will  not affect or  impair the  ability of Lender to
enforce its remedies under all of the  Loan Documents or to realize the benefits
of the cross-collateralization  provided  for  thereunder; (iv) an update of the
Insolvency Opinion indicating that the substitution does not affect the opinions
set forth therein;  (v) an opinion of counsel acceptable to, the Rating Agencies
if the Loan is part of a  Securitization,  or the Lender if the Loan is not part
of a Securitization, stating that the substitution  and the related transactions
are arms length transactions and do not constitute a fraudulent conveyance under
applicable   bankruptcy  and  insolvency  laws and (vi) if the Loan is part of a
Securitization,  an opinion of  counsel  acceptable  to the Rating Agencies that
the substitution does not constitute a "significant  modification"  of the  Loan
under  Section  1001 of the  Code or  otherwise  cause a tax to be  imposed on a
"prohibited transaction" by any REMIC Trust.

                  2.6.19  Borrower  or  Operating  Lessee  shall have  paid,  or
escrowed  with  Lender,  all  Basic  Carrying  Costs  relating  to  each  of the
Properties  and the  Substitute  Property,  including  without  limitation,  (i)
accrued but unpaid insurance premiums relating to each of the Properties and the
Substitute Property,  and (ii) currently due and payable Taxes (including any in
arrears)  relating to each of the  Properties  and the  Substitute  Property and
(iii)  currently  due and  payable  maintenance  charges  and other  impositions
relating to each of the Properties and Substitute Property.

                  2.6.20  Borrower shall have paid or reimbursed  Lender for all
reasonable costs and expenses incurred by Lender (including, without limitation,
reasonable attorneys fees and disbursements) in connection with the substitution
and Borrower shall have paid all recording charges,  filing fees, taxes or other
expenses  (including,  without  limitation,  mortgage and intangibles  taxes and
documentary stamp taxes) payable in connection with the  substitution.  Borrower
shall  have paid all costs and  expenses  of the  Rating  Agencies  incurred  in
connection with the substitution.

                  2.6.21 Lender shall have received annual operating  statements
and  occupancy  statements  for the  Substitute  Property  for the most  current
completed  fiscal year and a current  operating  statement  for the  Substituted
Property,  each  certified to Lender as being true and correct and a certificate
from Borrower  certifying that there has been no adverse change in the financial
condition  of  the  Substitute   Property  since  the  date  of  such  operating
statements.

                  2.6.22  Borrower  shall  have  delivered  to  Lender  estoppel
certificates  from any existing tenants of the Substitute  Property  (including,
all tenants under operating  leases).  All such estoppel  certificates  shall be
substantially  in the form approved by Lender in connection with the origination
of the Loan and shall indicate that (i) the subject lease is a valid and binding
obligation of the tenant thereunder, (ii) there are no defaults under such lease
on the part of the landlord or tenant  thereunder,  (iii) the tenant  thereunder
has no defense or offset to the payment of rent under such leases,  (iv) no rent
under  such  lease has been paid  more  than one (1) month in  advance,  (v) the
tenant  thereunder has no option under such lease to purchase all or any portion
of the Substitute Property,  and (vi) all tenant improvement work required under
such  lease has been  completed  and the  tenant  under  such lease is in actual
occupancy of its leased premises.  If an estoppel certificate indicates that all

                                      -25-

<PAGE>

tenant  improvement  work  required  under  the  subject  lease has not yet been
completed, Borrower shall, if required by the Rating Agencies, deliver to Lender
financial  statements  indicating  that  Borrower  has adequate funds to pay all
costs related to such tenant improvement work as required under such lease.

                  2.6.23 Lender shall have received  copies of all tenant leases
(including any operating leases) affecting the Substitute  Property certified by
Borrower as being true and correct.

                  2.6.24  Lender  shall  have  received  (i)  TRS  Subordination
Agreements  with respect to any TRS Leases  affecting the  Substitute  Property,
(ii)  subordination  agreements  substantially in the form of TRS  Subordination
Agreements  with respect to any  Operating  Leases that are not TRS Leases,  and
(iii)  subordination  agreements  substantially  in the form then used by Lender
with respect to all other tenants at the Substitute Property.

                  2.6.25  Lender shall have received (i) an  endorsement  to the
title  insurance  policy  insuring  the  Lien of the  Mortgage  encumbering  the
Substitute Property insuring that the Substitute Property constitutes a separate
tax lot or, if such an  endorsement  is not  available in the state in which the
Substitute  Property  is  located,  a letter  from the title  insurance  company
issuing  such  Title  Insurance  Policy  stating  that  the  Substitute   Policy
constitutes  a separate  tax lot or (ii) a letter  from the  appropriate  taxing
authority stating that the Substitute Property constitutes a separate tax lot.

                  2.6.26 Lender shall have received a Physical Conditions Report
with respect to the Substitute Property stating that the Substitute Property and
its use comply in all material  respects with all applicable Legal  Requirements
(including,  without limitation, zoning, subdivision and building laws) and that
the  Substitute  Property is in good  condition and repair and free of damage or
waste.  If  compliance  with any Legal  Requirements  are not  addressed  by the
Physical  Conditions  Report,  such compliance shall be confirmed by delivery to
Lender  of a  certificate  of an  architect  licensed  in the state in which the
Substitute  Property is located,  a letter from the  municipality  in which such
Property is located,  a certificate  of a surveyor that is licensed in the state
in which the  Substitute  Property  is  located  (with  respect  to  zoning  and
subdivision  laws), an ALTA 3.1 zoning endorsement to the title insurance policy
delivered  pursuant  to clause  (m) above  (with  respect  to zoning  laws) or a
subdivision  endorsement to the title  insurance  policy  delivered  pursuant to
clause (m) above (with respect to subdivision laws). If the Physical  Conditions
Report  recommends  that any  repairs  be made with  respect  to the  Substitute
Property,  such Physical Conditions Report shall include an estimate of the cost
of such  recommended  repairs and Borrower  shall  deposit with Lender an amount
equal to one hundred  twenty-five  percent (125%) of such estimated cost,  which
deposit shall constitute  additional security for the Loan and shall be released
to  Borrower  upon the  delivery  to Lender  of (i) an  update to such  Physical
Conditions  Report or a letter from the engineer  that  prepared  such  Physical
Conditions Report indicating that the recommended repairs were completed in good
and workmanlike  manner and (ii) paid receipts  indicating that the costs of all
such repairs have been paid.

                  2.6.27 (i) Lender shall have  received a certified  copy of an
amendment to the Management Agreement reflecting the deletion of the Substituted
Property  and the  addition of the  Substitute  Property  as a property  managed
pursuant  thereto and Manager  shall have  executed  and  delivered to Lender an
amendment to the Assignment of Management Agreement reflecting such amendment to
the  Management  Agreement;  or  (ii)  Lender  shall have received a Replacement
Management Agreement.

                                      -26-

<PAGE>

                  2.6.28  Lender  shall have  received a  certified  copy of the
franchise agreement with respect to the Substitute Property and franchisor shall
have  executed  and  delivered  to  Lender an  estoppel  letter in the same form
delivered with respect to the other Properties in connection with the closing of
the Loan.

                  2.6.29  Lender  shall have  received  such  other and  further
approvals,   opinions,   documents  and   information  in  connection  with  the
substitution  as  requested  by the  Rating  Agencies  if the  Loan is part of a
Securitization, or the Lender if the Loan is not part of a Securitization.

                  2.6.30 Lender shall have received  copies of all contracts and
agreements  relating to the leasing and  operation  of the  Substitute  Property
(other than the Management  Agreement) together with a certification of Borrower
attached to each such contract or agreement certifying that the attached copy is
a true  and  correct  copy of such  contract  or  agreement  and all  amendments
thereto.

                  2.6.31  Borrower shall submit to Lender,  not less than thirty
(30) days prior to the date of such substitution, a release of Lien (and related
Loan  Documents)  for the  Substituted  Property for  execution by Lender.  Such
release  shall  be in a form  appropriate  for the  jurisdiction  in  which  the
Substituted Property is located. Borrower shall deliver an Officer's Certificate
certifying  that the  requirements  set  forth  in this  Section  2.6 have  been
satisfied.

Upon the satisfaction of the foregoing conditions precedent, Lender will release
its  Lien  from the  Substituted  Property  to be  released  and the  Substitute
Property  shall be deemed to be an  Individual  Property  for  purposes  of this
Agreement  and the  Substitute  Release  Amount with respect to such  Substitute
Property  shall  be  deemed  to be the  Release  Amount  with  respect  to  such
Substitute Property for all purposes hereunder.

                                   ARTICLE III
                     SECURITY; RESERVES AND CASH MANAGEMENT

Section 3.1  Security; Establishment of Funds.

         The Loan shall be evidenced by the . Note of Borrower,  in the original
principal amount of the Loan. The Loan shall be secured by the Mortgage creating
a first lien on the Properties, the Assignment of Leases and Rents and the other
Loan Documents.  As further security for the Loan,  Borrower agrees to establish
the  following  reserves  with Lender,  to be held by Lender as security for the
Loan:

                  3.1.1   Required Repairs Fund.

         On the date hereof,  Borrower shall deposit with . Lender the amount of
Eighty-Six  Thousand Four Hundred  Seven and No/100  Dollars  ($86,407.00)  (the
"Required Repair Fund") to perform the required repairs set forth on Schedule II

                                      -27-

<PAGE>

attached  hereto by no later than (i) six (6) months from the  Closing  Date for
those  items  on Schedule II marked with an asterisk  (*),  and (ii) one hundred
twenty  (120)  days from  the  Closing  Date  for the  remainder of the items on
Schedule II;

                  3.1.2  Replacement Escrow Fund.

                           (a)   For  the  partial year period commencing on the
date  hereof,  and for  each calendar year thereafter,  Borrower shall submit to
Lender,  as part of the  Annual Budget  required under this Agreement,  a budget
for  fixtures,  furniture  and  equipment  and  other  replacements  and repairs
required  to  be made to the Properties during the calendar year  (collectively,
the "Replacements").  Such Annual Budget  shall  provide for Replacements  equal
to  or  greater  than  four percent  (4%)  of  annual Operating  Revenues  on an
aggregate  basis  for all Properties (the "Replacements Budget").

                           (b)   Borrower  shall  deposit  with  Lender  on each
Payment Date an amount equal to one-twelfth of  the amount  of  the  Replacement
Budget for  the then-current calendar year (the "Replacement Escrow Fund Monthly
Deposit") as  security  for  completion  by  Borrower  of the  Replacements (the
"Replacement Escrow Fund"); provided, however, Borrower shall  not  be  required
to make such Replacement Escrow Fund Monthly Deposit so long as neither an Event
of  Default  nor a  Trigger  Event has  occurred  and  within  twenty (20)  days
following  the  end of  each  calendar  quarter,  Borrower  provides Lender with
reports,  in  form  and substance  reasonably  satisfactory  to  Lender,  of the
expenditures made by Borrower for the Replacements for each Property during such
calendar  quarter.   If  the  actual  expenditures  made  by  Borrower  for  the
Replacements for all of the Properties, in the aggregate, for the preceding four
(4) calendar  quarters  is  less  than  the  Replacements  Budget for all of the
Properties, in the aggregate, Borrower shall deposit an amount equal to any such
difference in the Replacement Escrow Fund for  disbursement  pursuant to Section
3.3.  Notwithstanding  the preceding  sentence to the contrary,  for purposes of
calculating  the  amount of  any  such deposit required  to be made by Borrower,
actual expenditures made by Borrower shall  not include  any  amounts  disbursed
to  Borrower  from  the Replacement  Escrow Fund.  In the event  Borrower  fails
to provide Lender with reasonably satisfactory evidence of the expenditures made
by Borrower for the Replacements during each calendar quarter within twenty (20)
days following the end of such  calendar  quarter,  Borrower  shall  deposit  an
amount  equal  to one-quarter  of the  Replacements  Budget  in the  Replacement
Escrow  Fund for disbursement pursuant to Section 3.3.

                  3.1.3 Debt Service  Escrow Fund. On the date hereof,  Borrower
shall  deposit  with  Lender  an  amount  equal to Eight  Hundred  Seventy-Seven
Thousand Nine Hundred and Nineteen and 51/100 Dollars ($877,919.51) (said amount
so  deposited  shall  hereinafter  be  referred to as the "Debt  Service  Escrow
Fund").  In lieu of making or in substitution of any deposit to the Debt Service
Escrow Fund required  pursuant to this Section  3.1(c),  Borrower may deliver to
Lender as additional security for the Debt an unconditional  Letter of Credit in
an amount  equal to the amount  required  to be  deposited  to the Debt  Service
Escrow Fund (the "Debt Service Letter of Credit").  Provided no Event of Default
shall have  occurred and be  continuing,  Lender shall  release the Debt Service
Escrow  Fund to  Borrower  on the date that is one  hundred  twenty  (120)  days
following the date on which each Operating Lessee is either (i) a TRS Lessee, or
(ii) a Single Purpose Entity.

                                      -28-

<PAGE>

                  3.1.4 Ground Lease Escrow Fund.  On the date hereof,  Borrower
shall deposit with Lender an amount equal to one-twelfth of the annual amount of
all rent and any and all other  charges  which may be due by Borrower  under the
Ground  Leases during the calendar  year (said  amount,  hereinafter  called the
"Ground Rent Deposit" and all such amounts  deposited  with Lender,  hereinafter
called, collectively,  the "Ground Lease Escrow Fund"). Such Ground Rent Deposit
may be  increased  by Lender in the  amount  Lender  deems is  necessary  in its
reasonable  discretion  based on any  increases in the rent due under any of the
Ground Leases.  In lieu of making or in  substitution of the Ground Rent Deposit
required  pursuant to this  Section  3.1(d),  Borrower  may deliver to Lender as
additional security for the Debt an unconditional  Letter of Credit in an amount
equal  to the  Ground  Rent  Deposit  (the  "Ground  Rent  Letter  of  Credit").
Notwithstanding the foregoing, upon the occurrence of a Trigger Event and during
the continuance of a Trigger Period,  in accordance with and pursuant to Section
3.5(e),  on each Payment Date Borrower shall deposit with Lender into the Ground
Lease  Escrow  Fund an  amount  equal to the  Ground  Rent  Deposit  in order to
accumulate with Lender sufficient funds to pay all sums payable under the Ground
Leases at least ten (10) Business Days prior to the date due. Lender shall apply
the Ground  Lease  Escrow Fund to  payments of rent due under the Ground  Leases
prior to the  delinquency  thereof,  provided,  however,  in no event  shall the
amount of the Ground Lease Escrow Fund be less that the Ground Rent Deposit.

                  3.1.5 PIP  Escrow  Fund.  On the date  hereof  Borrower  shall
deposit with Lender an amount equal to Five Hundred  Thousand and No/100 Dollars
($500,000.00)  and upon the occurrence of a PIP Noncompliance and prior to a PIP
Release  Event,  Borrower  shall deposit with Lender the PIP Required  Amount in
accordance  with and pursuant to Section 3.5(e) (such amounts so deposited shall
hereinafter  be referred to as the "PIP Escrow  Fund"),  which  amounts shall be
disbursed  to Borrower  from the PIP Escrow Fund for the  completion  of the PIP
Requirements and otherwise in accordance with Section 3.3.

Section 3.2  Pledge and Grant of Security Interest.

         Borrower hereby pledges to Lender,  and grants a security  interest in,
any and all  monies  now or  hereafter  deposited  in the  Funds  as  additional
security for the payment of the Loan.  Borrower shall not, without obtaining the
prior written consent of Lender,  further  pledge,  assign or grant any security
interest in the Funds or permit any lien or encumbrance to attached thereto,  or
any levy to be made thereon,  or any UCC-1  Financing  Statements  (except those
naming Lender as the secured party) to be filed with respect thereto.  The Funds
shall (a) be held in Lender's name and may be commingled with Lender's own funds
at financial institutions selected by Lender in its sole discretion and (b) bear
interest at available money market rates. Any interest earned on the Funds shall
be  disbursed  or applied in the same  manner and  subject to the same terms and
conditions as the Funds.  All earnings on the Funds shall be added to and become
part of the Funds and shall be for the benefit of Borrower,  subject to Lender's
rights  pursuant to this  Agreement.  Lender  shall not be  responsible  for any
losses  resulting from the investment of the Funds or for obtaining any specific
level or  percentage of earning on the Funds.  Borrower  shall be liable for any
income taxes due on the earnings from the Funds. Upon the occurrence of an Event
of Default,  Lender may apply any sums then  present in the Funds to the payment
of the Loan in any order in its sole  discretion.  Until  expended or applied as
above provided, the Funds shall constitute additional security for the Loan.

                                      -29-

<PAGE>

Section 3.3  Disbursement of Funds.

                  3.3.1 Lender may reassess its estimate of the amount necessary
for the Funds from time to time and may adjust the monthly  amounts  required to
be  deposited  into  the  Funds  upon  thirty  (30)  days  notice  to  Borrower.
Notwithstanding  the  foregoing,  in the  event  the  Lender  shall  at any time
increase the Replacement  Escrow Fund Monthly  Deposit then required,  Borrower,
may at its  election,  request  that Lender  obtain,  at the sole cost,  fee and
expense of  Borrower,  an  engineering  report  commissioned  by Lender  from an
engineer to be selected by Lender in its  reasonable  discretion,  in which case
the Replacement Escrow Fund Monthly Deposit shall be adjusted by Lender based on
such engineering report,  provided that in no event shall the Replacement Escrow
Fund Monthly Deposit be decreased below the applicable amount then required.

                  3.3.2  Lender  shall  make  disbursements  from  the  Funds as
requested  by  Borrower,  and  approved by Lender in its sole  discretion,  on a
monthly basis in increments of no less than  $5,000.00 upon delivery by Borrower
of Lender's standard form of draw request accompanied by copies of paid invoices
for the amounts requested and, if required by Lender,  lien waivers and releases
from all parties  furnishing  materials  and/or  services in connection with the
requested payment. To the extent Borrower has not provided satisfactory evidence
to  Lender  in its  reasonable  discretion  in  connection  with  the  requested
disbursement,  Lender may require an inspection of the  Properties at Borrower's
expense prior to making a monthly  disbursement in order to verify completion of
replacements and repairs for which reimbursement is sought. Lender shall have no
obligation  to release any of the Funds while any Event of Default or  Potential
Default then exists. All third party,  out-of-pocket costs and expenses incurred
by Lender in the  disbursement  of any of the  Funds  shall be paid by  Borrower
promptly upon demand.

Section 3.4  Intentionally Omitted.

Section 3.5  Cash Management Account.

                  3.5.1  Simultaneously  with the execution  hereof Borrower has
entered into a cash management account agreement among Borrower,  Lender and one
or more certain  financial  institutions  (together  with any  modifications  or
amendments  thereof,  are  hereinafter  collectively  referred  to as the  "Cash
Management  Agreement"),  which  provide,  among  other  things,  that  (i)  all
Operating  Lease Rent shall be deposited in accordance  with the Cash Management
Agreement, and (ii) if any TRS Lease is in effect, all other sums collected with
respect to the  Properties  and payable to a TRS Lessee  shall be  deposited  in
accordance  with the Cash  Management  Agreement  and that such amounts shall be
disbursed  in  accordance  with  Section  3.5  hereof.  Borrower  shall  pay all
reasonable costs and expenses required under the Cash Management Agreement. Upon
the  occurrence  of an Event of  Default,  Lender  may  apply any sums then held
pursuant  to the Cash  Management  Agreement  to the  payment of the Debt in any
order in its sole discretion.  Until expended or applied,  amounts held pursuant
to the Cash Management  Agreement shall constitute  additional  security for the
Debt.

                  3.5.2  Borrower  shall  establish  and  maintain a  segregated
Eligible Account (the "Cash  Management  Account") to be held by the Servicer in
trust  for  the  benefit of Lender, which Cash Management Account shall be under

                                      -30-

<PAGE>

the  sole  dominion  and  control  of Lender,  subject  to  the  Cash Management
Agreement.   The  Cash  Management Account shall be entitled  "General  Electric
Capital Corporation, as Lender, to EQI Financing Partnership IV, L.P. and EQI/WV
Financing  Partnership  II,  L.P.,  as  Borrower - Cash  Management  Agreement."
Borrower hereby grants to Lender a first priority security  interest in the Cash
Management  Account  and all  deposits at  any time  contained  therein  and the
proceeds  thereof  and will  take all actions  necessary to maintain in favor of
Lender  a  perfected  first  priority  security  interest in the Cash Management
Account,  including,  without  limitation,  executing and filing UCC-1 Financing
Statements  and  continuations  thereof.  Subject to this Agreement and the Cash
Management  Agreement,  Lender  and  Servicer  shall have the sole right to make
withdrawals  from  the  Cash  Management  Account  and all  reasonable costs and
expenses for  establishing and maintaining the Cash Management  Account shall be
paid by Borrower.

                  3.5.3  Borrower  shall deliver  written  instructions  to each
Operating  Lessee (that is not a TRS Lessee) to deliver all Operating Lease Rent
received by each such Operating Lessee directly to the Cash Management  Account.
Borrower shall deliver  written  instructions  to each Manager of any Individual
Property  that is subject to a TRS Lease to deliver all Rents payable to the TRS
Lessee  received by Manager  directly to the Cash Management  Account.  Borrower
shall,  and shall  cause each TRS Lessee to,  deposit  into the Cash  Management
Account promptly upon receipt all amounts received by Borrower or the TRS Lessee
constituting Rents.

                  3.5.4  Provided no Event of Default shall have occurred and be
continuing,  and provided no Trigger  Event has  occurred and no Trigger  Period
shall be continuing,  then all Funds on deposit on the Cash  Management  Account
shall be  disbursed  in  accordance  with the Cash  Management  Agreement to the
Borrower Account (as defined in the Cash Management Agreement).

                  3.5.5  Except as  otherwise  provided  herein,  following  the
occurrence of a Trigger Event and during the  continuance  of a Trigger  Period,
provided no Event of Default shall have occurred and be continuing, on the first
day of each  calendar  month  (or,  if such day is not a  Business  Day,  on the
immediately  preceding Business Day) all funds on deposit in the Cash Management
Account shall be applied by Lender to the payment of the following  items in the
order indicated:

                           (a)   First, payments to the Ground Lease Escrow Fund
in accordance with the terms and conditions hereof;

                           (b)  Second, payments to the Tax and Insurance Escrow
Fund in accordance with the terms and conditions of Section 5.4 hereof;

                           (c)   Third,  payment  of  the  Monthly  Debt Service
Payment Amount,  applied  first  to the  payment  of  interest  computed  at the
Contract  Rate  with  the remainder  applied to the reduction of the outstanding
principal balance of the Note;

                           (d)   Fourth, payments to the Replacement Escrow Fund
in accordance with the terms and conditions hereof;

                           (e)   Fifth,  payment  to  the  Lender  of any  other
amounts  then  due  and  payable  under  the Loan  Documents (other than Accrued
Interest);

                                      -31-

<PAGE>

                           (f)   Sixth, on or after the Anticipated Payment Date
or during the continuance of a PIP  Noncompliance  Period,  payments for monthly
Cash Expenses  incurred in accordance  with the related  Approved  Annual Budget
pursuant  to  a written  request  for payment  submitted  by  Borrower to Lender
specifying  the individual Cash Expenses in a form acceptable to Lender;

                           (g) Seventh, on or after the Anticipated Payment Date
or  during   the  continuance  of  a  PIP  Noncompliance  Period,  payments  for
Extraordinary Expenses approved by Lender, if any;

                           (h)   Eighth,   during  the  continuance  of  a   PIP
Noncompliance Period, payments  to the PIP Escrow  Fund in  accordance  with the
terms  and  conditions  hereof  until the  amount on deposit is equal to the PIP
Required Amount;

                           (i)  Ninth, on or after the Anticipated Payment Date,
payments  to  Lender  in reduction of  the outstanding  principal balance of the
Loan;

                           (j)  Tenth, on or after the Anticipated Payment Date,
payments to Lender for Accrued Interest; and

                           (k)   Lastly,   payment  of  any  excess  amounts  to
Borrower.

                  3.5.6  The  insufficiency  of  funds  on  deposit  in the Cash
Management  Account  shall not absolve  Borrower of the  obligation  to make any
payments,  as and  when  due  pursuant  to this  Agreement  and the  other  Loan
Documents,  and such  obligations  shall be separate  and  independent,  and not
conditioned on any event or circumstance whatsoever.

                  3.5.7  All funds on  deposit  in the Cash  Management  Account
following the occurrence of an Event of Default may be applied by Lender in such
order and  priority  as Lender  shall  determine;  provided,  however,  that any
amounts in excess of amounts necessary to pay the Debt in full shall be released
to Borrower.

Section 3.6  Payments Received Under the Cash Management Agreement.

         Notwithstanding anything to the contrary contained in this Agreement or
the other Loan  Documents,  and provided no Event of Default has occurred and is
continuing,  following the occurrence of a Trigger Event, Borrower's obligations
with respect to the monthly  payment of  principal  and interest and amounts due
for the Tax and Insurance Escrow Fund, Required Repair Fund,  Replacement Escrow
Fund and any other payment  reserves  established  pursuant to this Agreement or
any other Loan  Document  shall be deemed  satisfied  to the  extent  sufficient
amounts are deposited in the Cash Management Account established pursuant to the
Cash  Management  Agreement to satisfy such  obligations  on the dates each such
payment is required, regardless of whether any of such amounts are so applied by
Lender.

                                      -32-

<PAGE>

                                   ARTICLE IV
                              CONDITIONS PRECEDENT

Section 4.1  Closing Conditions.

         The obligation of Lender to make the Loan hereunder . is subject to the
fulfillment  by  Borrower  or  waiver  by  Lender  of the  following  conditions
precedent no later than the Closing Date:

                  4.1.1  Representations   and   Warranties;   Compliance   with
Conditions.

         The  representations  and  warranties  of  Borrower  contained  in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on and as
of such  date,  and no  Potential  Default  or an Event of  Default  shall  have
occurred and be continuing;  and Borrower shall be in compliance in all material
respects with all terms and  conditions  set forth in this Agreement and in each
other Loan Document on its part to be observed or performed.

                  4.1.2  Loan Agreement and Note.  Lender shall have received a
copy of this Agreement and the Note, in each case, duly executed and delivered
on behalf of Borrower.

                  4.1.3  Delivery  of Loan  Documents; Title Insurance; Reports;
Leases.

                           (a)  Mortgages, Assignments of Leases, Assignments of
Agreements.  Lender   shall have  received  from  Borrower  fully  executed  and
acknowledged  counterparts  of  the  Mortgages  and  the  Assignments  of Leases
relating  to  each of  the  Properties  and  evidence that  counterparts  of the
Mortgages and Assignments of Leases  have  been  delivered  to the title company
for  recording,  in  the reasonable  judgment  of  Lender,  so as to effectively
create upon such recording valid and enforceable Liens upon such Properties,  of
the  requisite  priority,  in  favor of  Lender (or such other trustee as may be
required or desired under local law), subject only to the Permitted Encumbrances
and such other Liens  as are permitted  pursuant to the Loan Documents.   Lender
shall have also  received from Borrower fully executed counterparts of the other
Loan Documents.

                           (b)  Title  Insurance.   Lender  shall  have received
title insurance policies  (or  marked title  commitments or pro forma  policies)
issued by a title company acceptable to Lender and dated as of the Closing Date,
with reinsurance  nd direct access agreements  acceptable to Lender.  Such title
insurance policies shall (A) provide coverage in amounts satisfactory to Lender,
(B) insure Lender that the relevant  Mortgage creates a valid lien on Borrower's
interest  in  the  Individual  Property  encumbered  thereby  of  the  requisite
priority,  free  and  clear of all exceptions from coverage other than Permitted
Encumbrances  and standard exceptions and exclusions from coverage (as  modified
by the terms of any endorsements), (C) contain such endorsements and affirmative
coverages as Lender may reasonably request,  and (D) name Lender as the insured.
The  title  insurance  policies  shall  be  assignable.  Lender also  shall have
received evidence that all premiums  in respect of such title insurance policies
have been paid.

                                      -33-

<PAGE>

                           (c)   Survey.   Lender  shall have received a current
title survey for each Individual Property, certified  to the title  company  and
Lender  and  their  successors and assigns, in form and content  satisfactory to
Lender  and  prepared  by  a  professional  and  properly licensed land surveyor
satisfactory  to  Lender  in  accordance  the  1992   Minimum  Standard   Detail
Requirements  for  ALTA/ACSM  Land  Title  Surveys.   The survey should meet the
classification of an "Urban Survey" and  the following  additional   items  from
the  list  of  "Optional  Survey Responsibilities  and Specifications" (Table A)
should be added to each survey: 2, 3, 4, 6, 7, 8, 9, 10, 11 and 13.  Such survey
shall  reflect the same legal description   contained  in  the  title  insurance
policies relating to such Individual  Property  referred to in clause (ii) above
and shall include,  among other things,  a metes and bounds  description  of the
real  property  comprising  part   of  such   Individual   Property   reasonably
satisfactory to Lender (unless  such real  property is  designated by lot number
pursuant  to  a  recorded   plat).  The surveyor's seal shall be affixed to each
survey and the  surveyor shall  provide a  certification for each survey in form
and substance acceptable to Lender.

                           (d)   Insurance.   Lender  shall  have received valid
certificates  of  insurance  for the  policies  of insurance required hereunder,
satisfactory to Lender in  its sole  discretion,  and evidence of the payment of
all  premiums  payable for the existing policy period.

                           (e)   Environmental  Reports.     Lender  shall  have
received an environmental report in  respect  of each  Individual  Property,  in
each case satisfactory to Lender.

                           (f)    Zoning.    With  respect  to  each  Individual
Property,  Lender  shall have received, at Lender's option, (i) letters or other
evidence  with  respect  to  each   Individual  Property  from  the  appropriate
municipal   authorities   (or  other  Persons)  concerning applicable zoning and
building  laws,  (ii)  an  ALTA  3.1 zoning endorsement for the applicable title
insurance  policy,  or  (iii)  a zoning  opinion letter, in substance reasonably
satisfactory to Lender.

                           (g)   Encumbrances.    Borrower  shall  have taken or
caused to be  taken such actions in such a manner so that Lender has a valid and
perfected  Lien  of the  requisite  priority as of the Closing Date with respect
to  each  Mortgage  in the  applicable  Individual  Property,  subject  only  to
applicable  Permitted  Encumbrances  and  such  other  Liens  as  are  permitted
pursuant  to  the  Loan Documents,  and  Lender shall have received satisfactory
evidence thereof.

                  4.1.4  Related   Documents.   Each  additional   document  not
specifically  referenced herein,  but relating to the transactions  contemplated
herein,  shall have been duly authorized,  executed and delivered by all parties
thereto and Lender shall have received and approved certified copies thereof.

                  4.1.5 Delivery of Organizational  Documents.  On or before the
Closing  Date,  Borrower  shall  deliver or cause to be  delivered to Lender (i)
copies  certified  by Borrower of all  organizational  documentation  related to
Borrower  and/or the  formation,  structure,  existence,  good  standing  and/or
qualification  to do  business,  as Lender may  request in its sole  discretion,
including, without limitation, good standing certificates,  qualifications to do
business in the appropriate jurisdictions,  resolutions authorizing the entering
into of the Loan and incumbency certificates as may be requested by Lender.

                                      -34-

<PAGE>

                  4.1.6  Opinions  of  Borrower's  Counsel.  Lender  shall  have
received opinions of Borrower's  counsel (i) with respect to  non-consolidation,
true sale or true  contribution,  and fraudulent  transfer issues, and (ii) with
respect to due execution,  authority,  enforceability  of the Loan Documents and
such other matters as Lender may require,  all such opinions in form,  scope and
substance  satisfactory  to Lender  and  Lender's  counsel  in their  reasonable
discretion.

                  4.1.7  Completion  of  Proceedings.  All  corporate  and other
proceedings   taken  or  to  be  taken  in  connection  with  the   transactions
contemplated  by this  Agreement  and other  Loan  Documents  and all  documents
incidental  thereto shall be satisfactory  in form and substance to Lender,  and
Lender shall have received all such counterpart originals or certified copies of
such documents as Lender may reasonably request.

                  4.1.8 Payments. All payments,  deposits or escrows required to
be made or established by Borrower under this Agreement,  the Note and the other
Loan Documents on or before the Closing Date shall have been paid.

                  4.1.9  Franchisor  Estoppel.  Lender  shall have  received  an
executed  franchisor  estoppel  letter  which  shall  be in form  and  substance
satisfactory  to  Lender  from  the  franchisor  under  each  of  the  franchise
agreements listed on Schedule IV annexed hereto.

                  4.1.10 Tenant Estoppels; Ground Lessor Estoppels. Lender shall
have received an executed estoppel letter,  which shall be in form and substance
satisfactory  to Lender,  from (i) each  Operating  Lessee and any other  tenant
requested by Lender and (ii) each Ground Lessor.

                  4.1.11  Budgets.  Borrower  shall have  delivered,  and Lender
shall have approved, the Annual Budget for the current calendar year.

                  4.1.12   Basic Carrying Costs.   Borrower  shall have paid all
Basic Carrying Costs relating to each of the Properties which are in arrears.

                  4.1.13   Transaction  Costs.   Borrower  shall  have  paid  or
reimbursed Lender for all title insurance premiums and recording and filing fees
incurred in connection with the origination of the Loan.

                  4.1.14  Material  Adverse  Change.  There  shall  have been no
material  adverse  change in the  financial  condition or business  condition of
Borrower, any Operating Lessee or the Property since the date of the most recent
financial  statements  delivered  to  Lender.  The income  and  expenses  of the
Property,   the  Operating  Leases  thereof,  and  all  other  features  of  the
transaction  shall be as represented to Lender without  material adverse change.
Neither  Borrower  nor  any  Operating  Lessee  shall  be  the  subject  of  any
bankruptcy, reorganization, or insolvency proceeding.

                  4.1.15 Leases. Lender shall have received copies of all tenant
Leases,  certified  copies of any  tenant  Leases  as  requested  by Lender  and
certified copies of all ground Leases affecting the Property.

                                      -35-

<PAGE>

                  4.1.16 Subordination,  Non-Disturbance and Attornment.  Lender
shall have received a Subordination,  Non-Disturbance  and Attornment  Agreement
with respect to each Operating Lease.

                  4.1.17 Tax Lot.  Lender shall have received  evidence that the
Property  constitutes  a separate tax lot,  which  evidence  shall be reasonably
satisfactory in form and substance to Lender.

                  4.1.18 Physical Conditions Reports. Lender shall have received
Physical Conditions Reports with respect to the Property, which reports shall be
reasonably satisfactory in form and substance to Lender.

                  4.1.19   Management  Agreement.   Lender shall have received a
certified copy  of the  Management  Agreement with respect to the Property which
shall be satisfactory in form and substance to Lender.

                  4.1.20  Appraisal.  Lender shall have received an appraisal of
the Property, which shall be satisfactory in form and substance to Lender.

                  4.1.21  Financial  Statements.  Lender  shall have  received a
balance  sheet with  respect to the  Property  for the two most recent  calendar
years and  statements of income and statements of cash flows with respect to the
Property for the three most recent calendar years.

                  4.1.22 Operating Lease. Lender shall have received a certified
copy of each Operating  Lease between  Borrower and each  Operating  Lessee with
respect to the  Properties,  which shall be reasonably  satisfactory in form and
substance to Lender.

                  4.1.23  Further  Documents.  Lender or its counsel  shall have
received such other and further approvals,  opinions,  documents and information
as Lender or its counsel may have reasonably  requested and the form and content
of all the Loan Documents.

                                    ARTICLE V
                      INSURANCE, CONDEMNATION, AND IMPOUNDS

Section 5.1  Insurance, Casualty and Condemnation.

                  5.1.1  Borrower  shall  obtain  and  maintain,  or cause to be
maintained,  insurance  for  Borrower  and  each  of the  Individual  Properties
providing at least the following coverages:

                           (a)      comprehensive  all  risk  insurance  on  the
Improvements and the Personalty, including contingent liability  from  Operation
of  Building  Laws,  Demolition   Costs  and  Increased  Cost  of   Construction
Endorsements, in each case (A) in an amount equal to one hundred  percent (100%)
of the "Full  Replacement Cost," which for purposes of this Agreement shall mean
actual  replacement  value  (exclusive  of  costs of  excavations,  foundations,
underground  utilities  and footings)  with  a waiver of  depreciation,  but the
amount  shall in no event be less than

                                      -36-

<PAGE>

the outstanding  principal  balance of the Loan; (B) containing an agreed amount
endorsement  with  respect  to  the  Improvements  and  Personalty  waiving  all
co-insurance  provisions;  (C)  providing  for no  deductible  in  excess of Ten
Thousand and No/100 Dollars ($10,000) for all such insurance  coverage;  and (D)
containing an "Ordinance or Law Coverage" or "Enforcement" endorsement if any of
the  Improvements  or the  use of the  Individual  Property  shall  at any  time
constitute legal non-conforming structures or uses. In addition,  Borrower shall
obtain:  (y) if any portion of the  Improvements  is currently or at any time in
the future located in a federally  designated "special flood hazard area", flood
hazard  insurance  in an  amount  equal  to the  lesser  of (1) the  outstanding
principal  balance  of the  Note or (2) the  maximum  amount  of such  insurance
available  under the National  Flood  Insurance Act of 1968,  the Flood Disaster
Protection  Act of 1973 or the National Flood  Insurance  Reform Act of 1994, as
each may be amended or such  greater  amount as Lender  shall  require;  and (z)
earthquake   insurance  in  amounts  and  in  form  and   substance   reasonably
satisfactory  to Lender in the event the  Individual  Property  is located in an
area  with a high  degree  of  seismic  activity,  provided  that the  insurance
pursuant to clauses  (y) and (z) hereof  shall be on terms  consistent  with the
comprehensive all risk insurance policy required under this subsection (i).

                           (b)   commercial  general liability insurance against
claims for  personal injury,   bodily injury, death or property damage occurring
upon, in or about the  Individual  Property, such insurance (A) to be on the so-
called "occurrence" form with a  combined  limit of  not less than  Two  Million
and  No/100  Dollars ($2,000,000)  in  the  aggregate and One Million and No/100
Dollars  ($1,000,000) per  occurrence  (and, if on a blanket  policy, containing
an "Aggregate Per Location"  endorsement);  (B) to continue at not less than the
aforesaid  limit until required to be changed by Lender  in writing by reason of
changed economic conditions making such protection inadequate;  and (C) to cover
at least the following  hazards: (1) premises  and  operations;  2) products and
completed operations  on an "if any"  basis;  (3) independent  contractors;  (4)
blanket  contractual  liability  for  all legal  contracts;  and (5) contractual
liability covering the indemnities contained in the  Mortgages to the extent the
same is available;

                           (c)   business income insurance (A) with loss payable
to  Lender;  (B) covering  all  risks  required  to  be covered by the insurance
provided  for in subsection  (i)  above; (C) containing  an  extended  period of
indemnity  endorsement  which  provides  that  after  the  physical  loss to the
Improvements  and  Personalty has been  repaired,  the continued  loss of income
will be  insured until (x)  the Individual  Property is repaired or replaced and
such income returns to the same level it was at prior to the loss,   (y) if such
income has not returned to the same  level it was at prior to the loss,  six (6)
months  following  the  date  on  which  the  Individual Property is repaired or
replaced,  or (z) or the expiration of twelve (12) months from the date that the
Individual  Property  is  repaired  or  replaced  and  operations  are  resumed,
whichever first occurs, and notwithstanding that the policy may expire  prior to
the end of such  period; (D) in an amount equal to one hundred percent (100%) of
the  projected  gross  operating  profit  plus  the  Management  Fees  from  the
Individual Property  for  a  period of twelve (12) months from the date that the
Individual  Property is  repaired or replaced  and operations  are resumed;  and
(E) providing for "extra  expense" coverage in an amount reasonably satisfactory
to Lender.   The  amount of such business income insurance  shall be  determined
prior  to  the  date  hereof  and  at  least  once each year thereafter based on
Borrower's  reasonable   estimate  of  the   projected  gross  operating  profit

                                      -37-

<PAGE>

plus the Management Fees from the Individual  Property for the succeeding twelve
(12) month period.  All proceeds  payable to Lender  pursuant to this subsection
shall be held by Lender and shall be applied to the  obligations  secured by the
Loan Documents  from time to time due and payable  hereunder and under the Note;
provided,  however,  that nothing  herein  contained  shall be deemed to relieve
Borrower of its obligations to pay the obligations secured by the Loan Documents
on the respective  dates of payment  provided for in the Note and the other Loan
Documents  except  to the  extent  such  amounts  are  actually  paid out of the
proceeds of such business income insurance;

                           (d)    at   all   times   during   which   structural
construction,  repairs  or  alterations  are  being  made  with  respect  to the
Improvements,  and  only  if  the  Individual  Property  coverage  form does not
otherwise  apply,  (A)  owner's  contingent  or  protective  liability insurance
covering  claims not  covered by  or under the terms  or provisions of the above
mentioned commercial general liability  insurance policy;  and (B) the insurance
provided  for  in  subsection  (i)  above  written in a so-called builder's risk
completed  value  form  (1)  on  a  non-reporting  basis, (2) against  all risks
insured  against  pursuant  to  subsection  (i)  above, (3) including permission
to  occupy the  Individual  Property,  and (4) with an agreed amount endorsement
waiving co-insurance provisions;

                           (e)   workers' compensation, subject to the statutory
limits of the state in which the Individual Property is located,  and employer's
liability  insurance with a limit of at  least  One Million  and  No/100 Dollars
($1,000,000)  per accident  and per disease  per  employee, and One  Million and
No/100  Dollars ($1,000,000)  for  disease  aggregate  in respect of any work or
operations  on  or  about  the  Individual  Property,  or in connection with the
Individual Property or its operation (if applicable);

                           (f)   comprehensive boiler and machinery insurance on
terms consistent  with  the commercial  property insurance policy required under
subsection (i) above in amounts equal to the lesser  of Two  Million and  No/100
Dollars  ($2,000,000)  per occurrence  or  one  hundred  percent  (100%) of  the
insurable  value  of the Improvements, against  loss or damage from: (a) leakage
of sprinkler  systems; and (b)  explosion  of steam  boilers,  air  conditioning
equipment,  high  pressure piping,  machinery and equipment, pressure vessels or
similar apparatus, now or hereafter installed in the Improvements;

                           (g)   umbrella  liability  insurance in an amount not
less than Fifty Million and No/100 Dollars ($50,000,000) per occurrence on terms
consistent  with  the commercial  general  liability  insurance  policy required
under subsection (ii) above;

                           (h)   motor  vehicle liability coverage for all owned
and non-owned vehicles, including  rented and leased vehicles containing minimum
limits per occurrence of One Million and No/100 Dollars ($1,000,000);

                           (i) so-called "dramshop" insurance or other liability
insurance required in connection with the sale of alcoholic beverages;

                           (j)  insurance  against  employee  dishonesty  in  an
amount  not  less  than  one  (1)  month  of gross  revenue from such Individual
Property with a  deductible  not  greater  than  Ten Thousand and No/100 Dollars
($10,000); and

                                      -38-

<PAGE>

                           (k)  upon sixty (60) days' written notice, such other
reasonable insurance and in such  reasonable  amounts  as  Lender  from  time to
time may  reasonably  request  against  such other  insurable  hazards  which at
the time  are  commonly  insured against for property  similar to the Individual
Property  located  in or around  the  region in which the Individual Property is
located.

                  5.1.2 All  insurance  provided for in Section  5.1(a) shall be
obtained under valid and enforceable policies  (collectively,  the "Policies" or
in the singular,  the "Policy"),  and shall be subject to the approval of Lender
as to insurance companies,  amounts,  deductibles, loss payees and insureds. The
Policies  shall  be  issued  by  financially  sound  and  responsible  insurance
companies  authorized  to do  business  in the  state in which the  Property  is
located with a rating of "A-X" or better as  established  by Best's Rating Guide
and having a claims paying  ability  rating of "A" or better by at least two (2)
of the Rating  Agencies (one of which shall be (i) Standard & Poor's if Standard
& Poor's is rating the  Securities  issued in the  Securitization  of which this
Loan is a part, and (ii) Moody's if Moody's is rating the  Securities  issued in
the  Securitization  of which this Loan is a part).  The  Policies  described in
Section 5.1(a) shall designate Lender as loss payee. Not less than ten (10) days
prior to the expiration dates of the Policies  theretofore  furnished to Lender,
certificates  of  insurance  evidencing  the  Policies  accompanied  by evidence
satisfactory to Lender of payment of the premiums due thereunder (the "Insurance
Premiums"), shall be delivered by Borrower to Lender.

                  5.1.3 Any blanket insurance Policy shall specifically allocate
to the  Individual  Property the amount of coverage  from time to time  required
hereunder and shall  otherwise  provide the same  protection as would a separate
Policy  insuring only the Individual  Property in compliance with the provisions
of  Section  5.1(a),  including  an  acknowledgement  that the  payment  of such
allocation   shall   continue  such  Policy  as  to  the   Individual   Property
notwithstanding any other payment of premiums.

                  5.1.4 All Policies of insurance  provided for or  contemplated
by Section 5.1(a), except for the Policy referenced in Section 5.1(a)(v),  shall
name  Borrower  as the  insured  and  Lender as an  additional  insured,  as its
interests may appear, and in the case of property damage,  boiler and machinery,
flood and earthquake insurance, shall contain a so-called New York standard non-
contributing  mortgagee  clause  in  favor  of  Lender  providing  that the loss
thereunder shall be payable to Lender.

                  5.1.5  All  Policies  of  insurance  provided  for in  Section
5.1(a)(v) shall contain clauses or endorsements to the effect that:

                           (a)   no  act  or  negligence  of Borrower, or anyone
acting for Borrower, or  of  any  tenant or other occupant, or failure to comply
with the provisions of any Policy,  which might otherwise result in a forfeiture
of the insurance or any part  thereof,  shall in any way affect the  validity or
enforceability  of the insurance insofar as Lender is concerned;

                           (b) the Policy shall not be materially changed (other
than to increase the coverage  provided  thereby) or  canceled  without at least
thirty  (30) days' written  notice to Lender and any other party  named  therein
as an  additional insured;

                                      -39-

<PAGE>

                           (c)   each  Policy  shall  provide  that  the issuers
thereof  shall  give written notice to Lender if the Policy has not been renewed
fifteen (15) days prior to its expiration; and

                           (d)   Lender  shall  not  be liable for any Insurance
Premiums thereon or subject to any assessments thereunder.

                  5.1.6 If at any  time  Lender  is not in  receipt  of  written
evidence  that all  insurance  required  hereunder  is in full force and effect,
Lender  shall  have the  right,  upon five (5)  days'  prior  written  notice to
Borrower,  to take such action as Lender deems necessary to protect its interest
in the Individual Property, including, without limitation, the obtaining of such
insurance  coverage as Lender in its sole discretion  deems  appropriate and all
premiums  incurred by Lender in connection with such action or in obtaining such
insurance  and  keeping it in effect  shall be paid by  Borrower  to Lender upon
demand and until paid shall be secured by the  Mortgages and shall bear interest
at the Default Rate.

                  5.1.7  If  the   Individual   Property  shall  be  damaged  or
destroyed,  in whole or in part, by fire or other casualty,  Borrower shall give
prompt  notice  of such  damage  to  Lender  and  shall  promptly  commence  and
diligently  prosecute  the  completion  of the  Restoration  of  the  Individual
Property and otherwise in accordance  with Section 5.1.  Borrower  shall pay all
costs of such  Restoration  whether or not such costs are covered by  insurance.
Lender  may,  but  shall  not be  obligated  to make  proof  of loss if not made
promptly by Borrower.

                  5.1.8 In the event of foreclosure of the Mortgage with respect
to the  Individual  Property,  or other  transfer  of  title  to the  Individual
Property in extinguishment in whole or in part of the Debt all right,  title and
interest of Borrower in and to the Policies  that are not blanket  Policies then
in force concerning the Individual  Property and all proceeds payable thereunder
shall  thereupon  vest in the purchaser at such  foreclosure  or Lender or other
transferee in the event of such other transfer of title.

Section 5.2  Condemnation.

         Borrower  shall promptly give Lender notice of the actual or threatened
commencement of any condemnation or eminent domain proceeding (a "Condemnation")
affecting any of the Individual Properties and shall deliver to Lender copies of
any and all  papers  served in  connection  with such  proceedings.  Lender  may
participate  in any such  proceedings  and Borrower  shall deliver to Lender all
instruments  required  to permit  participation  in such  proceedings.  Borrower
shall,  at its expense,  diligently  prosecute any such  proceedings,  and shall
consult with Lender,  its attorneys and experts,  and cooperate with them in the
carrying  on or defense of any such  proceedings.  Lender is hereby  irrevocably
appointed  as  Borrower's  attorney-in-fact,  coupled  with  an  interest,  with
exclusive  power to  collect,  receive  and  retain  any  Award  and to make any
compromise   or   settlement   in   connection   with  any  such   Condemnation.
Notwithstanding  any  taking by any  public or  quasi-public  authority  through
eminent  domain or otherwise  (including but not limited to any transfer made in
lieu of or in  anticipation  of the  exercise of such  taking),  Borrower  shall
continue to pay the Debt at the time and in the manner  provided for its payment
in the Note and in this  Agreement  and the Debt shall not be reduced  until any
award or  payment  therefor  (an "Award")  shall have been actually received and

                                      -40-

<PAGE>

applied by  Lender,  after the  deduction  of  expenses  of  collection,  to the
reduction or discharge of the Debt.  Lender shall not be limited to the interest
paid on the Award by the  condemning  authority but shall be entitled to receive
out of the award interest at the rate or rates  provided  herein or in the Note.
If an  Individual  Property  or any  portion  thereof  is taken by a  condemning
authority,  Borrower  shall  promptly  commence  and  diligently  prosecute  the
Restoration of the Property and otherwise  comply with the provisions of Section
5.3. If an Individual Property is sold, through foreclosure or otherwise,  prior
to the receipt by Lender of the Award,  Lender shall have the right,  whether or
not a  deficiency  judgment  on the Note shall have been  sought,  recovered  or
denied, to receive the Award, or a portion thereof sufficient to pay the Debt.

Section 5.3  Restoration.

         The  following   provisions  shall  apply  in  connection  with  the  .
Restoration of any Individual Property:

                  5.3.1 If the Net Proceeds for such  Individual  Property shall
be less than One Hundred Thousand and No/100 Dollars ($100,000) and the costs of
completing the Restoration  for such Individual  Property shall be less than One
Hundred  Thousand  and  No/100  Dollars  ($100,000),  the Net  Proceeds  will be
disbursed  by  Lender  to  Borrower  upon  receipt,  provided  that  all  of the
conditions  set forth in Section  5.3(b)(i)  are met and  Borrower  delivers  to
Lender a written  undertaking to  expeditiously  commence and to  satisfactorily
complete with due diligence the Restoration in accordance with the terms of this
Agreement.

                  5.3.2 If the Net  Proceeds  for such  Individual  Property are
equal to or greater than One Hundred  Thousand and No/100 Dollars  ($100,000) or
the costs of completing the Restoration for such Individual Property is equal to
or greater than One Hundred Thousand and No/100 Dollars  ($100,000) Lender shall
make the Net Proceeds  available  for the  Restoration  in  accordance  with the
provisions  of this Section 5.3.  The term "Net  Proceeds"  for purposes of this
Section 5.3 shall mean: (i) the net amount of all insurance proceeds received by
Lender pursuant to Section 5.1 (a)(i),  (iv), (vi) and (vii) as a result of such
damage or  destruction,  after  deduction of its  reasonable  costs and expenses
(including,  but not limited to, reasonable counsel fees), if any, in collecting
same  ("Insurance  Proceeds"),  or  (ii)  the net  amount  of the  Award,  after
deduction of its reasonable costs and expenses  (including,  but not limited to,
reasonable counsel fees), if any, in collecting same ("Condemnation  Proceeds"),
whichever the case may be.

                           (a)   The  Net  Proceeds  shall  be made available to
Borrower for  Restoration provided  that the Net Proceeds are received  prior to
the  Anticipated  Payment Date and each of the following conditions are met:

                           (b)   no  Event of Default shall have occurred and be
continuing;

                           (c)   (1) in the event the Net Proceeds are Insurance
Proceeds, less  than  thirty-five  percent  (35%) of the total floor area of the
Improvements  of  the Individual  Property  that has been damaged,  destroyed or
rendered unusable as a result of such fire or other casualty or (2) in the event
the Net  Proceeds are Condemnation Proceeds,  less than ten percent (10%) of the
land  constituting  the  Individual  Property  that  is  taken, and such land is
located  along the  perimeter  or  periphery  of the Individual Property, and no
portion of the Improvements is located in such land;

                                      -41-

<PAGE>

                           (d)   the Operating Leases shall remain in full force
and effect  during and after  the completion of the Restoration, notwithstanding
the occurrence  of any such fire or other casualty or taking, whichever the case
may be;

                           (e)   Borrower shall commence the Restoration as soon
as reasonably practicable (but in no event later than sixty (60) days after such
damage  or  destruction or taking,  whichever the case may be, occurs) and shall
diligently pursue the same to satisfactory completion;

                           (f)   Lender  shall  be  satisfied that any operating
deficits, including all scheduled  payments of principal and interest  under the
Note, which will be incurred with respect to the Individual Property as a result
of the  occurrence of  any such fire or  other casualty or taking, whichever the
case may be,  will  be  covered  out of (1) the Net Proceeds,  (2) the insurance
coverage  referred  to in Section 5.1(a)(iii), if applicable, or (3) other funds
of Borrower;

                           (g)  Lender shall be satisfied that the Restoration
will be completed on or before the earliest to occur of (1) six (6) months prior
to  the  Anticipated  Payment  Date,  (2)  the  earliest  date required for such
completion  under  the  terms  of  any  Operating Lease, (3) such time as may be
required under applicable zoning law,  ordinance, rule or regulation in order to
repair and restore the Property to the condition it was in immediately  prior to
such fire or other casualty or to as nearly as  possible  the  condition  it was
in  immediately prior to such taking, as applicable or (4) the expiration of the
insurance  coverage referred to in Section 5.1(a)(iii);

                           (h) the Individual Property and the use thereof after
the  Restoration  will be in  compliance with and permitted under all applicable
zoning  laws,  ordinances,  rules  and  regulations   (including  any  variances
applicable to the  Individual Property  prior to such fire or other casualty  or
prior to such  taking,  as applicable) and all necessary operating or reciprocal
easement  agreements  for the  operation and maintenance of the Property are, or
remain, in effect;

                           (i)   the Restoration shall be done and completed by
Borrower in an expeditious and  diligent  fashion and  in  compliance  with  all
applicable   governmental  laws,  rules  and  regulations   (including,  without
limitation,  all applicable environmental laws);

                           (j)   such  fire  or  other  casualty  or  taking, as
applicable,  does not result in the loss of access to the Individual Property or
the related Improvements;

                           (k) after giving effect to such Restoration, the Debt
Service Coverage Ratio  for all of the  Properties shall be equal  to or greater
than the Debt Service Coverage Ratio as of the Closing Date;

                           (l)  after giving effect to such Restoration, the LTV
Ratio for all of  the Properties shall be equal to or less than the LTV Ratio as
of the Closing Date;

                                      -42-

<PAGE>

                           (m)  Lender shall have determined that the applicable
hotel franchise or license agreement  shall not be  terminated  with  respect to
the  Individual Property as a result of  such fire or other  casualty or taking,
but will remain in full force and effect during and after the  completion of the
Restoration of such  Individual  Property  or  that  an  alternative   franchise
agreement  or  commitment  therefor  acceptable  to  Lender  from  a  nationally
recognized franchisor of comparable or better reputation will be secured for the
Individual  Property within thirty  (30)  days of such fire or other casualty or
taking.

                           (n)   The Net  Proceeds shall be held by Lender in an
interest-bearing account and, until disbursed in accordance  with the provisions
of this Section  5.3(b), shall  constitute  additional security for the Debt and
other obligations under the Loan  Documents. The Net Proceeds shall be disbursed
by Lender to, or as directed by, Borrower from time to time during the course of
the Restoration,  upon  receipt of  evidence satisfactory to Lender that (A) all
materials installed and work and labor performed (except to the extent that they
are to  be paid  for out  of the requested  disbursement) in connection with the
Restoration  have  been  paid  for in full,  and (B) there  exist no notices  of
pendency, stop orders, mechanic's or materialman's liens or notices of intention
to file same, or any other liens or encumbrances of any nature whatsoever on the
Individual  Property arising out of the  Restoration  which have not either been
fully  bonded to the satisfaction  of Lender and  discharged of record or in the
alternative  fully insured to the  satisfaction  of Lender by the title  company
issuing the title insurance policy.

                           (o)    All  plans   and  specifications  required  in
connection with the Restoration  shall be subject to prior review and acceptance
in all respects by Lender and by an independent consulting engineer  selected by
Lender (the  "Casualty Consultant").  Lender shall have the use of the plans and
specifications and all permits,  licenses and approvals  required or obtained in
connection with the Restoration. The identity of the contractors, subcontractors
and materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged,  shall be subject  to prior  review  and  acceptance  by
ender and the  Casualty  Consultant,  which acceptance shall not be unreasonably
withheld.   All costs and  expenses incurred by Lender in connection with making
the  Net  Proceeds  available for the Restoration including, without limitation,
reasonable counsel fees and  disbursements  and the Casualty Consultant's  fees,
shall be paid by Borrower.

                           (p)   In  no  event shall Lender be obligated to make
disbursements  of  the  Net  Proceeds  in excess of an amount equal to the costs
actually  incurred  from  time  to  time  for  work  in  place  as  part of  the
Restoration,   as  certified  by  the  Casualty C onsultant,  minus the Casualty
Retainage.  The  term  "Casualty Retainage"  shall  mean an  amount equal to ten
percent (10%) of the costs  actually  incurred for work in place  as part of the
Restoration,  as  certified  by the  Casualty Consultant,  until the Restoration
has   been   completed.   The   Casualty   Retainage  shall  in  no  event,  and
notwithstanding anything to the contrary set forth above in this Section 5.3(b),
be  less  than  the  amount  actually  held  back by  Borrower from contractors,
subcontractors  and  materialmen  engaged  in  the  Restoration.   The  Casualty
Retainage  shall  not  be  released  until  the Casualty Consultant certifies to
Lender that the Restoration has been completed in accordance with the provisions
of this  Section  5.3(b) and that all  approvals necessary  for the re-occupancy
and  use of  the  Individual  Property  have been  obtained from all appropriate
governmental and  quasi-governmental authorities,  and  Lender receives evidence
satisfactory to Lender that the costs of

                                      -43-

<PAGE>

the  Restoration  have  been  paid in  full  or will be paid in full  out of the
Casualty Retainage;  provided,  however, that Lender will release the portion of
the Casualty Retainage being held with respect to any contractor,  subcontractor
or materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has  satisfactorily  completed  all  work  and has  supplied  all  materials  in
accordance  with  the  provisions  of  the  contractor's,   subcontractor's   or
materialman's  contract,  the contractor,  subcontractor or materialman delivers
the  lien  waivers  and  evidence  of  payment  in full of all  sums  due to the
contractor,  subcontractor  or  materialman  as may be  reasonably  requested by
Lender or by the title company  issuing the title insurance  policy,  and Lender
receives an endorsement  to the title  insurance  policy  insuring the continued
priority  of the lien of the  related  Mortgage  and  evidence of payment of any
premium payable for such endorsement.  If required by Lender, the release of any
such portion of the Casualty  Retainage shall be approved by the surety company,
if any,  which has  issued a payment  or  performance  bond with  respect to the
contractor, subcontractor or materialman.

                           (q)       Lender  shall  not  be  obligated  to  make
disbursements  of  the  Net  Proceeds  more  frequently than once every calendar
month.

                           (r)    If  at  any  time  the  Net  Proceeds  or  the
undisbursed balance thereof shall not,  in the  reasonable  opinion of Lender in
consultation  with the  Casualty Consultant,  be  sufficient  to pay in full the
balance of the costs  which are estimated  by the  Casualty  Consultant  to be
incurred in  connection  with the completion of the  Restoration, Borrower shall
deposit the deficiency  (the "Net Proceeds  Deficiency")  with Lender before any
further  disbursement  of  the  Net  Proceeds  shall  be made.  The Net Proceeds
Deficiency deposited with Lender shall be held be  Lender and shall be disbursed
for costs actually incurred  in connection  with  the  Restoration  on the  same
conditions  applicable  to the disbursement  of the Net  Proceeds, and  until so
disbursed pursuant to this Section 5.3(b) shall constitute  additional  security
for the Debt and other obligations under the Loan Documents.

                           (s)   The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net  Proceeds  Deficiency  deposited  with
Lender after the Casualty Consultant  certifies  to Lender  that the Restoration
has been completed in accordance with the provisions of this Section 5.1(b), and
the receipt by Lender of evidence satisfactory to Lender that all costs incurred
in connection  with the Restoration have been paid in full, shall be remitted by
Lender to Borrower,  provided no Event of Default shall have  occurred and shall
be  continuing  under  the Note,  this  Loan  Agreement or any of the Other Loan
Documents.

                  5.3.3 All Net Proceeds  not required (i) to be made  available
for the  Restoration  or (ii) to be returned to Borrower as excess Net  Proceeds
pursuant to Section 5.1(b)(vii) may be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order,  priority
and proportions as Lender in its sole discretion  shall deem proper,  or, at the
discretion  of  Lender,  the same may be paid,  either  in whole or in part,  to
Borrower for such purposes as Lender shall designate, in its discretion.

                                      -44-

<PAGE>

Section 5.4  Impounds.

                  5.4.1  Borrower  shall  deposit  with  Lender,   monthly,  (i)
one-twelfth  (1/12th) of the Taxes that Lender  estimates will be payable during
the  next  ensuing  twelve  (12)  months  in  order to  accumulate  with  Lender
sufficient  funds to pay all such Taxes at least thirty (30) days prior to their
respective due dates, and (ii) one-twelfth of the Insurance Premiums that Lender
estimates  will be payable  for the  renewal  of the  coverage  afforded  by the
insurance  policies  required by Lender upon the expiration  thereof in order to
accumulate with Lender  sufficient  funds to pay all such Insurance  Premiums at
least thirty (30) days prior to  expiration  (said amounts in (i) and (ii) above
hereinafter  called  the "Tax and  Insurance  Escrow  Fund").  At or before  the
advance of the Loan,  Borrower  shall  deposit  with Lender a sum of money which
together with the monthly  installments  will be sufficient to make each of such
payments  thirty (30) days prior to the date any  delinquency or penalty becomes
due with  respect  to such  payments.  Deposits  shall  be made on the  basis of
Lender's  estimate  from time to time of the charges for the current year (after
giving effect to any reassessment or, at Lender's election,  on the basis of the
charges for the prior year, with  adjustments when the charges are fixed for the
then  current  year).  All funds so deposited  shall be held by Lender,  without
interest,  and may be commingled  with Lender's  general funds.  Borrower hereby
grants to Lender a security  interest in all funds so deposited  with Lender for
the purpose of securing the Loan.  While an Event of Default  exists,  the funds
deposited  may be applied in  payment of the  charges  for which such funds have
been deposited, or to the payment of the Loan or any other charges affecting the
security of Lender, as Lender may elect, but no such application shall be deemed
to have  been made by  operation  of law or  otherwise  until  actually  made by
Lender.  Borrower shall furnish Lender with bills for the charges for which such
deposits  are  required at least thirty (30) days prior to the date on which the
charges first become payable.  If at any time the amount on deposit with Lender,
together  with  amounts to be  deposited  by Borrower  before  such  charges are
payable,  is  insufficient  to pay such  charges,  Borrower  shall  deposit  any
deficiency with Lender  immediately  upon demand.  Lender shall pay such charges
when the amount on deposit  with Lender is  sufficient  to pay such  charges and
Lender has received a bill for such charges.

                  5.4.2 In lieu of making the  monthly  payments  to the Tax and
Insurance Escrow Fund required under Section 5.4(a)(ii) and provided no Event of
Default  exists and no Trigger  Event shall have  occurred and a Trigger  Period
continuing,  Borrower  shall have the option to deliver to Lender as  additional
security for the Debt either (i) a cash deposit (the "Static Cash Account"),  or
(ii) an unconditional Letter of Credit (the "Insurance Letter of Credit"),  each
in an amount equal to fifty percent (50%) of the annual Insurance  Premiums.  In
the event that Borrower,  after delivering a Static Cash Account or an Insurance
Letter of Credit in accordance with this Section 5.4(b), elects to resume making
monthly  payments to the Tax and Insurance  Escrow Fund  required  under Section
5.4(a)(ii),  Borrower shall make an initial  deposit into such Tax and Insurance
Escrow Fund equal to the amount reasonably  estimated by Lender to be the amount
that would have been on deposit  in such Tax and  Insurance  Escrow  Fund on the
date thereof if Borrower had not delivered such Static Cash Account or Insurance
Letter of Credit.  Borrower  shall give Lender  thirty  (30) days prior  written
notice  of such  election  and  Borrower  shall pay to  Lender  all of  Lender's
reasonable  out-of-pocket costs and expenses in connection  therewith.  Borrower
shall not be entitled to draw from such Static Cash Account or Insurance  Letter
of Credit. During the time the appropriate amount of funds are on deposit in the
Static Cash Account or the Insurance  Letter of Credit is outstanding,  Borrower
shall

                                      -45-

<PAGE>

pay,  or cause to be paid,  all  Insurance  Premiums  as the same become due and
payable and shall  furnish to Lender  evidence of payment of Insurance  Premiums
reasonably  satisfactory  to Lender at least fifteen (15) days prior to the date
when such Insurance Premiums are due. Borrower shall provide Lender with written
notice of any increases in the Insurance  Premiums thirty (30) days prior to the
effective date of any such increase and the Static Cash Account or the Insurance
Letter of Credit, as applicable,  shall be increased to an amount equal to fifty
percent (50%) of such increased annual Insurance Premiums at least ten (10) days
prior to such increase in the Insurance Premiums.

Section 5.5  Letters of Credit.

                  5.5.1 Each Letter of Credit  delivered under this Agreement or
any other Loan  Document  shall be  additional  security  for the payment of the
Debt.  Upon  the  occurrence  of an  Event of  Default,  Lender  in its sole and
absolute  discretion may, but shall not be obligated to, draw upon any Letter of
Credit  for  payments  of any  amounts  then  due and  payable  under  the  Loan
Documents.

                           (a)    In addition to any other right Lender may have
to draw upon  a Letter of Credit  pursuant  to the terms and  conditions of this
Agreement and the other Loan Documents,  Lender shall have the additional rights
to draw in full  upon any  Letter of Credit:  (A)  if Lender has not received at
least thirty (30) days prior to the date on which the then outstanding Letter of
Credit  is  scheduled  to  expire,  a  notice  from the issuing bank that it has
renewed the  applicable  Letter of Credit;   (B) upon receipt of notice from the
issuing bank that the applicable Letter of Credit will be  terminated;   and (C)
thirty  (30)  days  after  Lender  has received  notice and given  notice to the
Borrower  that the bank  issuing  the applicable Letter of Credit shall cease to
be an Eligible Institution.

                           (b)   In the event that Lender draws upon a Letter of
Credit in accordance with the provisions of subsection  5.5(b)(i) above, any and
all such amounts not otherwise  expended  by  Lender shall  be held by Lender as
cash  collateral  in an interest  bearing account  established and maintained by
Lender and Lender shall be entitled  to draw upon and apply such proceeds at the
time and in the manner provided in this Agreement  or the other  Loan  Documents
for draws upon the applicable Letter of Credit.

                           (c)      Notwithstanding  anything  to  the  contrary
contained above, Lender is not obligated to draw on a Letter of Credit  upon the
happening  of an event specified in this  subsection and shall not be liable for
any losses  sustained by  Borrower  due to the  insolvency of the bank issuing a
Letter of Credit if Lender has not drawn on the Letter of Credit.

                                   ARTICLE VI
                              ENVIRONMENTAL MATTERS

Section 6.1  Certain Definitions.

         As used herein, the following terms have the meanings indicated:

                                      -46-

<PAGE>

                  6.1.1  "Environmental Laws" Any local, state, federal or other
governmental authority,  statute,  ordinance,  code, order, decree, law, rule or
regulation   pertaining  to  or  imposing  liability  or  standards  of  conduct
concerning  environmental  regulation,   contamination  or  clean-up  including,
without limitation, the Comprehensive  Environmental Response,  Compensation and
Liability  Act, as amended,  the  Resource  Conservation  and  Recovery  Act, as
amended,  the  Emergency  Planning and Community  Right-to-Know  Act of 1986, as
amended,  the Hazardous  Substances  Transportation  Act, as amended,  the Solid
Waste Disposal Act, as amended,  the Clean Water Act, as amended,  the Clean Air
Act, as amended, the Toxic Substances Control Act, as amended, the Safe Drinking
Water Act, as amended,  the Occupational Safety and Health Act, as amended,  any
state superlien and environmental  clean-up statutes and all regulations adopted
in respect of the foregoing laws whether presently in force or coming into being
and/or effectiveness hereafter.

                  6.1.2  "Hazardous  Materials"  means (i) petroleum or chemical
products,  whether in  liquid,  solid,  or  gaseous  form,  or any  fraction  or
by-product  thereof,  (ii)  asbestos or asbestos-  containing  materials,  (iii)
polychlorinated biphenyls (pcbs), (iv) radon gas, (v) underground storage tanks,
(vi) any explosive or radioactive substances, (vii) lead or lead-based paint, or
(viii) any other  substance,  material,  waste or  mixture  which is or shall be
listed,  defined,  or otherwise  determined by any governmental  authority to be
hazardous, toxic, dangerous or otherwise regulated, controlled or giving rise to
liability under any Environmental Laws.

Section 6.2  Representations and Warranties on Environmental Matters.

         To  Borrower's  knowledge,  except as set forth in the Site  Assessment
delivered  in  connection  with the  origination  of the Loan,  (a) no Hazardous
Material  is  now  or  was  formerly  used,  stored,  generated,   manufactured,
installed, treated, discharged, disposed of or otherwise present at or about any
Individual  Property or any property adjacent to any Individual Property (except
for cleaning and other products  currently  used in connection  with the routine
maintenance  or  repair  of an  Individual  Property  in  full  compliance  with
Environmental  Laws) and no Hazardous  Material was removed or transported  from
any  Individual  Property,  (b) all  permits,  licenses,  approvals  and filings
required by Environmental  Laws have been obtained,  and the use,  operation and
condition of any Individual  Property does not, and did not previously,  violate
any Environmental Laws, (c) no civil,  criminal or administrative  action, suit,
claim, hearing, investigation or proceeding has been brought or been threatened,
nor have any  settlements  been  reached  by or with any  parties  or any  liens
imposed  in  connection  with  any  Individual  Property  concerning   Hazardous
Materials or Environmental  Laws; and (d) no underground  storage tanks exist on
any part of any Individual Property.

Section 6.3.  Covenants on Environmental Matters.

                  6.3.1 Borrower  shall (i) comply  strictly and in all respects
with  applicable   Environmental  Laws;  (ii)  notify  Lender  immediately  upon
Borrower's  discovery  of any  spill,  discharge,  release  or  presence  of any
Hazardous Material at, upon, under, within, contiguous to or otherwise affecting
any  Individual  Property;  (iii) promptly  remove such Hazardous  Materials and
remediate any Individual  Property in full compliance with Environmental Laws or
as   reasonably   required  by  Lender  based  upon  the   recommendations   and
specifications of an independent  environmental  consultant  approved by Lender;
and  (iv)  promptly  forward  to  Lender copies of all orders, notices, permits,

                                      -47-

<PAGE>

applications  or other  communications and reports in connection with any spill,
discharge,  release  or  the  presence  of  any Hazardous  Material or any other
matters  relating to the Environmental  Laws or any similar laws or regulations,
as they may affect any Individual Property or Borrower.

                  6.3.2  Borrower  shall not  cause,  shall  prohibit  any other
Person  within the  control of Borrower  from  causing,  and shall use  prudent,
commercially  reasonable efforts to prohibit other Persons  (including  tenants)
from  (i)  causing  any  spill,  discharge  or  release,  or the  use,  storage,
generation,  manufacture,  installation, or disposal, of any Hazardous Materials
at, upon, under,  within or about any Individual  Property or the transportation
of any  Hazardous  Materials  to or from any  Individual  Property  (except  for
cleaning and other  products  used in  connection  with routine  maintenance  or
repair of any Individual  Property in full compliance with Environmental  Laws),
(ii) installing any  underground  storage tanks at any Individual  Property,  or
(iii)  conducting  any activity  that  requires a permit or other  authorization
under Environmental Laws.

                  6.3.3  Borrower  shall  provide to Lender,  promptly  upon the
written  request of Lender from time to time, a Site  Assessment or, if required
by Lender, an update to any existing Site Assessment,  to assess the presence or
absence of any Hazardous  Materials and the potential  costs in connection  with
abatement,  cleanup or removal of any Hazardous Materials found on, under, at or
within any Individual Property. Borrower shall not pay the cost of any such Site
Assessment or update,  unless Lender's request for a Site Assessment is based on
information  provided under Section 6.3(a), a reasonable  suspicion of Hazardous
Materials at or near any Individual Property, a breach of representations  under
Section 6.2, or an Event of Default,  in which case any such Site  Assessment or
update shall be at Borrower's expense.

Section 6.4  Allocation of Risks and Indemnity.

         As between Borrower, Lender and Indemnitor, all risk of loss associated
with  non-compliance  with  Environmental  Laws,  or with  the  presence  of any
Hazardous Material at, . upon, within,  contiguous to or otherwise affecting any
Individual Property, shall lie solely with Borrower and Indemnitor. Accordingly,
Borrower and Indemnitor  shall bear all risks and costs associated with any loss
(including any loss in value  attributable  to Hazardous  Materials),  damage or
liability  therefrom,  including all costs of removal of Hazardous  Materials or
other remediation required by Lender or by law. Borrower shall indemnify, defend
and hold Lender and its shareholders,  directors, officers, employees and agents
harmless  from and against all loss,  liabilities,  damages,  claims,  costs and
expenses   (including   reasonable   costs  of  defense  and  consultant   fees,
investigation  and laboratory fees, court costs, and other litigation  expenses)
arising out of or  associated,  in any way,  with (a) the non-  compliance  with
Environmental Laws, or (b) the existence of Hazardous Materials in, on, or about
any Individual  Property,  (c) any personal injury (including wrongful death) or
property  damage  (real or  personal)  arising  out of or related  to  Hazardous
Materials;  (d) any  lawsuit  brought  or  threatened,  settlement  reached,  or
government  order  relating  to such  Hazardous  Materials,  (e) a breach of any
representation,  warranty or covenant contained in this Article 6, whether based
in contract,  tort, implied or express warranty,  strict liability,  criminal or
civil  statute or common law, or (f) the  imposition of any  environmental  lien
encumbering any Individual Property;  provided,  however,  Borrower shall not be
liable  under such  indemnification  to the extent such loss, liability, damage,

                                      -48-

<PAGE>

claim,  cost or expense results solely from Lender's gross negligence or willful
misconduct. Borrower's obligations under this Section 6.4 shall arise whether or
not any governmental  authority has taken or threatened any action in connection
with the presence of any Hazardous Material, and whether or not the existence of
any such  Hazardous  Material  or  potential  liability  on  account  thereof is
disclosed  in  the  Site  Assessment  and  shall  continue  notwithstanding  the
repayment of the Loan or any  transfer or sale of any right,  title and interest
in any  Individual  Property (by  foreclosure,  deed in lieu of  foreclosure  or
otherwise).  Additionally,  if any  Hazardous  Materials  affect or  threaten to
affect the  Properties,  Lender may (but  shall not be  obligated  to) give such
notices and take such actions as it deems  reasonably  necessary or advisable at
the expense of the  Borrower in order to abate the  discharge  of any  Hazardous
Materials or remove the Hazardous  Materials.  Any amounts  payable to Lender by
reason of the  application of this Section 6.4 shall become  immediately due and
payable and shall bear interest at the Default Rate from the date loss or damage
is sustained by Lender until paid. The  obligations  and liabilities of Borrower
under this Section 6.4 shall survive any termination,  satisfaction, assignment,
entry of a judgment of foreclosure or delivery of a deed in lieu of foreclosure.

Section 6.5  No Waiver.

         Notwithstanding  any  provision  in this  Article 6 or elsewhere in the
Loan Documents, or any rights or remedies granted by the Loan Documents,  Lender
does not waive and  expressly  reserves all rights and benefits now or hereafter
accruing to Lender under the "security interest" or "secured creditor" exception
under applicable Environmental Laws, as the same may be amended. No action taken
by Lender  pursuant to the Loan  Documents  shall be deemed or construed to be a
waiver or  relinquishment  of any such  rights or benefits  under the  "security
interest exception."

                                   ARTICLE VII
                                 LEASING MATTERS

Section 7.1  Representations and Warranties on Leases.

         Borrower  represents  and warrants to Lender with respect to the Leases
of each  Individual  Property under which Borrower is the landlord that: (a) the
Leases  are  valid and in full  force  and  effect;  (b) the  Leases  (including
amendments)  are in  writing,  and there  are no oral  agreements  with  respect
thereto; (c) the copies of the Leases delivered to Lender are true and complete;
(d) neither the landlord  nor any tenant is in default  under any of the Leases;
(e) with the  exception of those  Operating  Leases which shall be replaced with
TRS Leases,  Borrower has no knowledge of any notice of  termination  or default
with  respect to any Lease;  (f) landlord has not assigned or pledged any of the
Leases,  the rents or any interests  therein except to Lender;  (g) no tenant or
other party has an option or right of first refusal or offer, to purchase all or
any  portion  of the  Individual  Property;  (h)  with  the  exception  of those
Operating  Leases  which  shall be replaced  with TRS Leases,  no tenant has the
right to  terminate  its Lease  prior to  expiration  of the stated term of such
Lease;  (i) no tenant has prepaid more than one month's rent in advance  (except
for bona fide security  deposits not in excess of an amount equal to two month's
rent);  (j)  no  tenant  under  any Lease has any right or option for additional

                                      -49-

<PAGE>

space;  (k) all existing  Leases are subordinate to the Mortgage either pursuant
to their  terms or a  recorded  subordination  agreement; and (1) no termination
fees  are  required in  connection with the scheduled termination as of December
31, 2000 of those  Operating  Leases which are to be replaced  with TRS Leases.

Section 7.2  Approval Rights.

         Except as otherwise  provided in Section  8.30  hereof,  all Leases and
other rental arrangements shall in all respects be approved by Lender.

Section 7.3  Covenants.

         Borrower (a) shall perform the  obligations  which Borrower is required
to perform under the Leases;  (b) shall enforce the  obligations to be performed
by the tenants;  (c) shall  promptly  furnish to Lender any notice of default or
termination  received by Borrower from any tenant,  and any notice of default or
termination given by Borrower to any tenant; (d) shall not collect any rents for
more than  thirty  (30) days in advance  of the time when the same shall  become
due, except for bona fide security  deposits not in excess of an amount equal to
two months  rent;  (e) except  for the Ground  Leases,  shall not enter into any
ground  Lease or  master  Lease of any part of the  Properties;  (f)  except  as
otherwise provided in Section 8.30 hereof,  shall not further assign or encumber
any Lease; (g) except as otherwise  provided in Section 8.30 hereof,  shall not,
except with  Lender's  prior  written  consent,  cancel or accept  surrender  or
termination of any Lease; and (h) except as otherwise  provided in Section 8.30,
shall not modify or amend any Lease, except with Lender's prior written consent,
which consent  shall not be  unreasonably  withheld.  Any action in violation of
clauses (e), (f), (g), and (h) of this Section 7.3 shall be void at the election
of Lender.

Section 7.4  Tenant Estoppels.

         At  Lender's  request,  Borrower  shall  obtain and  furnish to Lender,
written  estoppels  in form and  substance  reasonably  satisfactory  to Lender,
executed by tenants  (including,  the  Operating  Lessees)  under  Leases in the
Properties  and  confirming  the term,  rent,  and other  provisions and matters
relating to the Leases.

                                  ARTICLE VIII
                         REPRESENTATIONS AND WARRANTIES

         Borrower represents, warrants and covenants to Lender that:

Section 8.1  Organization, Power and Authority.

         Borrower  and  each  Borrower  Party  (a) is  duly  organized,  validly
existing and in good  standing  under the laws of the state of its  formation or
existence,  (b) is in compliance with all legal requirements applicable to doing
business in the State, and (c) has the necessary  governmental  approvals to own
and operate the Properties and conduct the business now conducted or to be

                                      -50-

<PAGE>

conducted thereon.  Borrower has the full power, authority and right to execute,
deliver and  perform its  obligations  pursuant to this Loan  Agreement  and the
other Loan  Documents,  and to mortgage the Properties  pursuant to the terms of
the Mortgage and to keep and observe all of the terms of this Loan Agreement and
the other Loan Documents on Borrower's part to be performed.

Section 8.2  Validity of Loan Documents.

         The execution,  delivery and  performance by Borrower and each Borrower
Party of the Loan  Documents:  (a) are duly  authorized  and do not  require the
consent or approval of any other party or  governmental  authority which has not
been  obtained;  and (b) will not violate any law or result in the imposition of
any lien,  charge or  encumbrance  upon the assets of any such party,  except as
contemplated  by the Loan  Documents.  The Loan Documents  constitute the legal,
valid and binding  obligations of Borrower and each Borrower Party,  enforceable
in accordance with their  respective  terms,  subject to applicable  bankruptcy,
insolvency,  or similar laws generally  affecting the  enforcement of creditors'
rights and by general principles of equity (regardless of whether enforcement is
sought by proceedings in equity or at law).

Section 8.3  No Conflicts.

         The execution, delivery and performance of this Agreement and the other
Loan  Documents by Borrower  will not conflict with or result in a breach of any
of the terms or provisions of, or constitute a default  under,  or result in the
creation or imposition of any lien,  charge or encumbrance  (other than pursuant
to the Loan Documents)  upon any of the property or assets of Borrower  pursuant
to the  terms  of any  indenture,  mortgage,  deed  of  trust,  loan  agreement,
partnership  agreement or other  agreement or instrument to which  Borrower is a
party or by which any of Borrower's property or assets is subject, nor will such
action  result in any  violation of the  provisions of any statute or any order,
rule  or  regulation  of  any  court  or  governmental  agency  or  body  having
jurisdiction  over Borrower or any of Borrower's  properties or assets,  and any
consent,  approval,  authorization,  order,  registration or qualification of or
with any court or any such regulatory  authority or other governmental agency or
body required for the  execution,  delivery and  performance by Borrower of this
Agreement or any other Loan Documents has been obtained and is in full force and
effect.

Section 8.4  Liabilities; Litigation.

                  8.4.1 All financial data, including,  without limitation,  the
statements  of cash  flow and  income  and  operating  expense,  that  have been
delivered by Borrower  and each  Borrower  Party are (i) are true,  complete and
correct in all  material  respects,  (ii)  accurately  represent  the  financial
condition of the  Properties  as of the date of such  reports,  and (iii) to the
extent prepared or audited by an independent  certified public  accounting firm,
have been prepared in accordance with generally accepted  accounting  principals
throughout the periods covered,  except as disclosed therein.  Borrower does not
have any  contingent  liabilities,  liabilities  for taxes,  unusual  forward or
long-term  commitments or unrealized or anticipated  losses from any unfavorable
commitments  that  are  known  to  Borrower  and  reasonably  likely  to  have a
materially  adverse effect on the Properties or the operation thereof as hotels,
except as referred to or reflected in said financial statements.  Since the date
of the financial statements,  there has been no materially adverse change in the
financial  condition,  operations or business of Borrower from that set forth in

                                      -51-

<PAGE>

said  financial statements.  There is no litigation,  administrative proceeding,
investigation or other legal action (including any proceeding under any state or
federal bankruptcy or insolvency law) pending or, to the knowledge of  Borrower,
threatened,  against the  Properties,  Borrower or any  Borrower  Party which if
adversely  determined  could have a material  adverse effect on such party,  the
Properties or the Loan.

                  8.4.2 Neither Borrower nor any Borrower Party is contemplating
either the  filing of a petition  by it under  state or  federal  bankruptcy  or
insolvency  laws or the  liquidation  of all or a major portion of its assets or
property,  and neither  Borrower  nor any  Borrower  Party has  knowledge of any
Person contemplating the filing of any such petition against it.

Section 8.5  Taxes and Assessments.

         Each of the  Properties  is comprised of one or more  parcels,  each of
which  constitutes a separate tax lot and none of which constitutes a portion of
any other tax lot.  There are no  pending  or,  to  Borrower's  best  knowledge,
proposed,  special or other  assessments  for public  improvements  or otherwise
affecting the  Properties,  nor are there any  contemplated  improvements to the
Properties that may result in such special or other assessments.

Section 8.6  Other Agreements; Defaults.

         Neither  Borrower nor any Borrower Party is a party to any agreement or
instrument or subject to any court order,  injunction,  permit,  or  restriction
which might adversely affect any of the Properties or the business,  operations,
or condition (financial or otherwise) of Borrower or any Borrower Party. Neither
Borrower nor any Borrower Party is in violation of any agreement which violation
would have an adverse effect on any of the Properties, Borrower, or any Borrower
Party or Borrower's or any Borrower  Party's  business,  properties,  or assets,
operations or condition, financial or otherwise.

Section 8.7  Title.

         Borrower has good,  marketable and insurable  title to the  Properties,
free and clear of all Liens whatsoever except the Permitted  Encumbrances,  such
other  Liens as are  permitted  pursuant  to the Loan  Documents  and the  Liens
created by the Loan Documents. Each Mortgage creates (i) a valid, perfected lien
on Borrower's interest in the applicable  Individual  Property,  subject only to
Permitted  Encumbrances  and the Liens  created by the Loan  Documents  and (ii)
perfected security interests in and to, and perfected collateral assignments of,
all personalty (including the Leases), all in accordance with the terms thereof,
in each case subject only to any applicable Permitted  Encumbrances,  such other
Liens as are permitted  pursuant to the Loan  Documents and the Liens created by
the Loan Documents. There are no claims for payment for work, labor or materials
affecting any of Borrower's  Properties which are or may become a lien prior to,
or of equal priority with, the liens created by the Loan Documents.  To the best
of Borrower's knowledge, none of the Permitted Encumbrances,  individually or in
the aggregate,  materially  interfere with the benefits of the security intended
to be  provided  by the  Mortgages  and  this  Loan  Agreement,  materially  and
adversely  affect  the  value  of any  Individual  Property,  impair  the use or
operations of any Individual  Property or impair  Borrower's  ability to pay its
obligations in a timely manner.

                                      -52-

<PAGE>

Section 8.8  Compliance with Law.

                  8.8.1  Borrower has, or pursuant to the Operating  Lease,  has
caused  each  Operating  Lessee  to  have,  all  requisite  licenses,   permits,
franchises,  qualifications,  certificates  of occupancy  or other  governmental
authorizations to own, Lease and operate each of the Properties and carry on its
business,  and each of the Properties is in compliance with all applicable legal
requirements  and is free  of  structural  defects,  and  all  building  systems
contained therein are in good working order,  subject to ordinary wear and tear.
Each of the  Properties  does not  constitute,  in whole or in part,  a  legally
non-conforming use under applicable legal requirements;

                  8.8.2 No  condemnation  has been  commenced  or, to Borrower's
knowledge,  is contemplated with respect to all or any portion of the Properties
or for the relocation of roadways providing access to the Properties; and

                  8.8.3 Each of the Properties has adequate  rights of access to
public ways and is served by adequate  water,  sewer,  sanitary  sewer and storm
drain facilities.  All public utilities  necessary or convenient to the full use
and enjoyment of the Properties are located in the public right- of-way abutting
each of the Properties,  and all such utilities are connected so as to serve the
Properties without passing over other property,  except to the extent such other
property is subject to a perpetual  easement for such utility benefiting each of
the  Properties.  All roads  necessary for the full  utilization  of each of the
Properties  for its current  purpose have been completed and dedicated to public
use and accepted by all governmental authorities.

Section 8.9  Location of Borrower.

         Borrower's  principal place of business and chief executive offices are
located at the address stated in Section 15.1.

                  8.9.1  ERISA.

                           (a)  As of the date hereof and throughout the term of
the Loan, (i)  Borrower is not and will not be an  "employee  benefit  plan" as
defined in Section 3(3) of the Employee  Retirement Income Security Act of 1974,
as amended ("ERISA"), which is subject to Title I of ERISA, and (ii) the assets
of  Borrower  do not  and will not  constitute "plan assets" of one or more such
plans for purposes of Title I of ERISA; and

                           (b)  As of the date hereof and throughout the term of
the Loan  (i) Borrower is not and  will not be a "governmental  plan" within the
meaning of Section  3(32) of ERISA and  (ii)  transactions  by or with  Borrower
are not and will  not be  subject  to  state  statutes  applicable  to  Borrower
regulating investments of and fiduciary obligations with respect to governmental
plans.

Section 8.10  Forfeiture.

         There has not been and shall  never be  committed  by  Borrower  or any
other  person in  occupancy  of or  involved  with the  operation  or use of the
Properties any act or  omission affording the federal government or any state or

                                      -53-

<PAGE>

local government the right of forfeiture as  against the  Properties or any part
thereof or any monies paid in performance of  Borrower's  obligations  under any
of the Loan  Documents.  Borrower  hereby covenants  and  agrees  not to commit,
permit  or  suffer  to  exist  any  act  or  omission  affording  such  right of
forfeiture.

Section 8.11  Tax Filings.

         Borrower and each Borrower Party have filed (or have obtained effective
extensions for filing) all federal,  state and local tax returns  required to be
filed and have paid or made  adequate  provision for the payment of all federal,
state and local  taxes,  charges and  assessments  payable by Borrower  and each
Borrower  Party,  respectively.  Borrower and each  Borrower  Party believe that
their  respective tax returns  properly reflect the income and taxes of Borrower
and each Borrower Party, respectively,  for the periods covered thereby, subject
only to reasonable adjustments required by the Internal Revenue Service or other
applicable tax authority upon audit.

Section 8.12  Solvency.

         The  Borrower  (a) has not  entered  into the  transaction  or any Loan
Document  with the actual intent to hinder,  delay,  or defraud any creditor and
(b) received  reasonably  equivalent value in exchange for its obligations under
the Loan  Documents.  Giving  effect to the  Loan,  the fair  saleable  value of
Borrower's  assets  exceeds and will,  immediately  following  the making of the
Loan,  exceed  Borrower's  total  liabilities,  including,  without  limitation,
subordinated,  unliquidated,  disputed  and  contingent  liabilities.  The  fair
saleable  value of  Borrower's  assets is and will,  immediately  following  the
making of the Loan, be greater than Borrower's probable  liabilities,  including
the  maximum  amount of its  contingent  liabilities  on its debts as such debts
become absolute and matured, Borrower's assets do not and, immediately following
the making of the Loan will not, constitute  unreasonably small capital to carry
out its business as conducted or as proposed to be conducted.  Borrower does not
intend to, and does not believe that it will, incur Indebtedness and liabilities
(including  contingent  liabilities and other commitments) beyond its ability to
pay such Indebtedness as they mature (taking into account the timing and amounts
of cash to be  received  by  Borrower  and the  amounts  to be  payable on or in
respect of obligations of Borrower).  Except as expressly disclosed to Lender in
writing, no petition in bankruptcy has been filed against Borrower,  Indemnitor,
any  guarantor  or any Borrower  Party in the last seven (7) years,  and neither
Borrower,  Indemnitor, any guarantor or any Borrower Party in the last seven (7)
years  has  ever  made an  assignment  for the  benefit  of  creditors  or taken
advantage of any insolvency act for the benefit of debtors.

Section 8.13  Full and Accurate Disclosure.

         All  information  submitted by Borrower or any Borrower Party to Lender
in  connection  with the Loan or in  satisfaction  of the terms  thereof and all
statements of fact made by Borrower or any Borrower  Party in this  Agreement or
in any other Loan Document,  are accurate,  complete and correct in all material
respects.  No statement of fact made by or on behalf of Borrower or any Borrower
Party in this  Agreement  or in any of the other  Loan  Documents  contains  any
untrue  statement  of a  material  fact or  omits  to state  any  material  fact
necessary to make statements  contained herein or therein not misleading.  There
is no fact  presently  known to Borrower  which has not been disclosed to Lender
which  materially  and  adversely  affects,  nor as far as Borrower can foresee,

                                      -54-

<PAGE>

might  materially  and  adversely  affect,  the  Properties  or  the   business,
operations  or  condition  (financial or otherwise) of  Borrower or any Borrower
Party.

Section 8.14  Flood Zone.

         No portion of the  improvements  comprising  each of the  Properties is
located in an area identified by the Secretary of Housing and Urban  Development
or any successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968, the Flood Disaster  Protection Act of 1973
or the National Flood  Insurance Act of 1994, as amended,  or any successor law,
or, if located within any such area, Borrower has obtained and will maintain the
insurance prescribed in Section 5.1 hereof.

Section 8.15  Federal Reserve Regulations.

         No part of the  proceeds  of the Loan will be used for the  purpose  of
purchasing or acquiring any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal  Reserve  System or for any other  purpose
which would be inconsistent  with such Regulation U or any other  Regulations of
such Board of Governors, or for any purposes prohibited by Legal Requirements or
by the terms and conditions of this Agreement or the other Loan Documents.

Section 8.16  Not a Foreign Person.

         Borrower is not a "foreign person" within the meaning of ss. 1445(f)(3)
of the Code.

Section 8.17  Separate Lots.

         Each Individual  Property is comprised of one (1) or more parcels which
constitutes  a separate  tax lot and does not  constitute a portion of any other
tax lot not a part of such Individual Property.

Section 8.18 No Prior Assignment.

         There are no prior  assignments of the Leases  (including any Operating
Lease) or any  portion of the Rents  (including  Operating  Lease  Rent) due and
payable or to become due and payable which are presently outstanding.

Section 8.19  Insurance.

         Borrower has obtained and has delivered to Lender  certified  copies of
all insurance  policies  reflecting the insurance  coverages,  amounts and other
requirements  set forth in this  Agreement.  No claims  have been made under any
such Policy, and no Person,  including  Borrower,  has done, by act or omission,
anything which would impair the coverage of any such policy.

Section 8.20  Use of Properties.

         Each of the Individual  Properties is used  exclusively for hotel/motel
purposes and other  appurtenant and related uses including,  but not limited to,
restaurants and lounges.

                                      -55-

<PAGE>

Section 8.21  Certificate of Occupancy; Licenses.

         All certifications,  permits, licenses and approvals, including without
limitation,  certificates of completion and occupancy permits and any applicable
liquor  license  required for the legal use,  occupancy and operation of each of
the Individual Properties as a hotel (collectively,  the "Licenses"),  have been
obtained and are in full force and effect. The Borrower shall keep and maintain,
or cause to be kept or maintained,  all licenses  necessary for the operation of
each  of the  Individual  Properties  as a  hotel.  The use  being  made of each
Individual  Property is in conformity with the  certificate of occupancy  issued
for such Individual Property.

Section 8.22  Physical Condition.

         Each of the Individual Properties,  including,  without limitation, all
buildings,  improvements, parking facilities, sidewalks, storm drainage systems,
roofs,  plumbing  systems,  HVAC systems,  fire protection  systems,  electrical
systems,  equipment,   elevators,   exterior  sidings  and  doors,  landscaping,
irrigation systems and all structural components,  are in good condition,  order
and  repair  in all  material  respects;  there  exists no  structural  or other
material defects or damages in any of the Individual Properties,  whether latent
or otherwise, and Borrower has not received notice from any insurance company or
bonding  company  of any  defects  or  inadequacies  in  any  of the  Individual
Properties,  or any part thereof,  which would adversely affect the insurability
of the same or cause the imposition of extraordinary premiums or charges thereon
or of any  termination  or threatened  termination of any policy of insurance or
bond.

Section 8.23  Boundaries.

         All  of  the  improvements  which  were  included  in  determining  the
appraised value of each Individual Property lie wholly within the boundaries and
building  restriction  lines  of such  Individual  Property,  and to the best of
Borrower's knowledge, no improvements on adjoining properties encroach upon such
Individual Property,  and to the best of Borrower's  knowledge,  no easements or
other encumbrances upon the applicable  Individual Property encroach upon any of
the  improvements,  so as to affect the value or marketability of the applicable
Individual Property except those which are insured against by title insurance.

Section 8.24 Survey.

         The Survey for each of the Individual Properties delivered to Lender in
connection  with  this  Agreement  has  been  prepared  in  accordance  with the
provisions  of Section  4.1(c)(iii)  hereof,  and does not fail to  reflect  any
material matter affecting any of the Properties or the title thereto.

Section 8.25  Embargoed Person.

         To the actual  knowledge  of  Borrower as of the date hereof and at all
times  throughout  the term of the Loan,  including  after giving  effect to any
transfers of interests permitted pursuant to the Loan Documents, (i) none of the
funds or other  assets of Borrower,  Borrower  Party,  TRS Lessee or  Indemnitor
constitute  property of, or are beneficially owned,  directly or indirectly,  by
any person,  entity or government  subject to trade restrictions under U.S. law,
including but not limited to,  the  International Emergency Economic Powers Act,

                                      -56-

<PAGE>

50 U.S.C.ss.ss. 1701 et seq., The Trading with the Enemy Act, 50 U.S.C.  App.  1
et seq., and any Executive Orders or regulations promulgated thereunder with the
result  that  the  investment  in  Borrower  (whether directly or indirectly) is
prohibited by law or the Loan made by Lender is in  violation of law ("Embargoed
Person");  (ii) no Embargoed Person has any interest of any nature whatsoever in
Borrower,  Borrower Party,  TRS Lessee or  Indemnitor  with the  result that the
investment in Borrower  (whether directly or indirectly) is prohibited by law or
the Loan made by Lender is in violation of law;  and  (iii) none of the funds of
Borrower,  Borrower Party,  TRS Lessee or  Indemnitor have been derived from any
unlawful activity with the result that the investment in Borrower (whether
directly  or  indirectly)  is  prohibited  by  law or the Loan made Lender is in
violation of law.

Section 8.26  Filing and Recording Taxes.

         All transfer taxes,  deed stamps,  intangible taxes or other amounts in
the nature of transfer taxes required to be paid by any Person under  applicable
Legal  Requirements  currently in effect in connection  with the transfer of the
Properties to Borrower have been paid. All mortgage,  mortgage recording, stamp,
intangible  or  other  similar  tax  required  to be  paid by any  Person  under
applicable  Legal  Requirements  currently  in  effect  in  connection  with the
execution,   delivery,   recordation,   filing,   registration,   perfection  or
enforcement of any of the Loan Documents,  including,  without  limitation,  the
Mortgages  encumbering  the Properties  have been paid, and, under current Legal
Requirements,  the Mortgages  encumbering  the  Properties  are  enforceable  in
accordance  with  their  respective  terms by Lender (or any  subsequent  holder
thereof).

Section 8.27  Single Purpose Entity/Separateness.

         Borrower represents, warrants and covenants as follows:

                  8.27.1 The purpose for which  Borrower is  organized  shall be
limited  solely  to  (A)  owning,  holding,  selling,   leasing,   transferring,
exchanging,  operating and managing the  Properties,  (B) entering into the Loan
Agreement  with Lender,  (C)  refinancing  the  Properties in connection  with a
permitted  repayment of the Loan and (D) transacting any and all lawful business
for which Borrower may be organized under its constitutive law that is incident,
necessary and appropriate to accomplish the foregoing. Borrower does not own and
will not own any  asset or  property  other  than (i) the  Properties,  and (ii)
incidental  personal  property  necessary  for the ownership or operation of the
Properties.

                  8.27.2 Borrower will not engage in any business other than the
ownership,  management and operation of the Properties and Borrower will conduct
and operate its business as presently conducted and operated.

                  8.27.3  Borrower will not enter into any contract or agreement
with  any  Affiliate  of  Borrower,  any  constituent  party  of  Borrower,  the
guarantors or any Affiliate of any constituent  party or guarantor,  except upon
terms and conditions that are intrinsically  fair and  substantially  similar to
those that would be available on an  arms-length  basis with third parties other
than any such party.

                                      -57-

<PAGE>

                  8.27.4   Borrower  has  not  incurred  and  will not incur any
Indebtedness other than (i) the Loan, (ii) trade and  operational  debt which is
(A) incurred in the ordinary  course of  business, (B) not more than  sixty (60)
days past the date incurred,  (C) with trade creditors, (D) in the aggregate, in
an amount  less than one percent  (1%)  of the original  principal amount of the
Loan,  (E)  not  evidenced  by  a  note,  and  (F)  paid  when  due,  and  (iii)
Indebtedness  incurred  in  the ordinary  course of business  for the purpose of
financing  equipment  and  other  personal  property  used  on  the   Properties
(including  obligations  pursuant to equipment   leases)  in  amounts  that  are
normal  and  reasonable  under  the circumstances,  provided, that (1) such debt
shall be fully amortizing over a term not to exceed  five (5) years (or the term
of the related  equipment  lease shall not exceed five (5) years),  and (2) such
debt (which,  with  respect  to an equipment  lease,  shall be the annual  rents
payable  thereunder  for  the  then  current  calendar  year)  shall  not in the
aggregate  outstanding  at  any  one  time  exceed one percent (1%) of Operating
Revenues.   No  Indebtedness  other than the Loan may be secured (subordinate or
pari passu) by the Properties.

                  8.27.5  Borrower  has not made and will not make any  loans or
advances to any third party  (including any affiliate or constituent  party, any
guarantor or any affiliate of any constituent party or guarantor), and shall not
acquire obligations or securities of its affiliates or any constituent party.

                  8.27.6  Borrower is and will remain  solvent and Borrower will
pay its debts and liabilities  (including,  as applicable,  shared personnel and
overhead expenses) from its assets as the same shall become due.

                  8.27.7  Borrower has done or caused to be done and will do all
things  necessary  to  observe  organizational   formalities  and  preserve  its
existence, and Borrower will not, nor will Borrower permit any constituent party
or  any  guarantor  to  amend,   modify  or  otherwise  change  the  partnership
certificate,  partnership  agreement,  articles  of  incorporation  and  bylaws,
operating agreement, trust or other organizational documents of Borrower or such
constituent party or guarantor without the prior written consent of Lender.

                  8.27.8  Borrower  will  maintain  all of its  books,  records,
financial statements and bank accounts separate from those of its Affiliates and
any  constituent  party.  Borrower's  assets will not be listed as assets on the
financial statement of any other entity except as required by generally accepted
accounting principles;  provided,  however, that any such consolidated financial
statement  shall  contain  a  note  indicating  that  its  separate  assets  and
liabilities are neither  available to pay the debts of the  consolidated  entity
nor constitute  obligations of the consolidated  entity.  Borrower will file its
own tax returns,  except to the extent that it is required to file  consolidated
federal income tax returns by law.  Borrower shall maintain its books,  records,
resolutions and agreements as official records.

                  8.27.9 Borrower will be, and at all times will hold itself out
to the public as, a legal entity  separate  and  distinct  from any other entity
(including any Affiliate of Borrower,  any  constituent  party of Borrower,  any
guarantor or any Affiliate of any constituent party or guarantor), shall correct
any known  misunderstanding  regarding  its status as a separate  entity,  shall
conduct  business in its own name,  shall not  identify  itself as a division or
part of any other person or entity.

                                      -58-

<PAGE>

                  8.27.10 Borrower will maintain adequate capital for the normal
obligations  reasonably  foreseeable in a business of its size and character and
in light of its contemplated business operations.

                  8.27.11 Neither  Borrower nor any constituent  party will seek
the dissolution, winding up, liquidation, consolidation or merger in whole or in
part, of the Borrower.

                  8.27.12 Borrower will not commingle the funds and other assets
of Borrower with those of any Affiliate or constituent party, any guarantor,  or
any Affiliate of any constituent party or guarantor, or any other person.

                  8.27.13  Borrower  has and will  maintain its assets in such a
manner  that it will not be costly  or  difficult  to  segregate,  ascertain  or
identify its individual assets from those of any Affiliate or constituent party,
any guarantor,  or any Affiliate of any constituent  party or guarantor,  or any
other person.

                  8.27.14  Borrower will not  guarantee or become  obligated for
the debts of any other  entity or person  and does not and will not hold  itself
out as being responsible for the debts or obligations of any other person.

                  8.27.15  If  Borrower  is a limited  partnership  or a limited
liability  company,  each  general  partner or managing  member  (each,  an "SPC
Party") shall be a corporation  whose sole asset is its interest in Borrower and
each such SPC Party will at all times comply, and will cause Borrower to comply,
with each of the  representations,  warranties,  and covenants contained in this
Section 8.28 as if such  representation,  warranty or covenant was made directly
by such SPC Party.

                  8.27.16 Borrower shall at all times cause there to be at least
two (2) duly appointed  members of the board of directors  (each an "Independent
Director") of each SPC Party in Borrower  reasonably  satisfactory to Lender who
shall not have been at the time of such individual's  appointment or at any time
while  serving  as a director  of SPC  Party,  and may not have been at any time
during the preceding five years (i) a shareholder  of, or an officer,  director,
partner or employee of,  Borrower or any of its  shareholders,  subsidiaries  or
affiliates  (except  for  serving as an  independent  director of (A) any single
purpose  corporations  serving as general partners of other limited partnerships
financing hotel  properties with Lender or (B) any TRS Lessee),  (ii) a customer
of,  or  supplier  to,  Borrower  or any of its  shareholders,  subsidiaries  or
affiliates,  (iii) a person or other entity  controlling or under common control
with any such shareholder,  partner,  supplier or customer,  or (iv) a member of
the  immediate  family  of any such  shareholder,  officer,  director,  partner,
employee,  supplier or customer of Borrower.  As used herein, the term "control"
means the  possession,  directly or indirectly,  of the power to direct or cause
the  direction of the  management  and  policies of a person or entity,  whether
through ownership of voting securities, by contract or otherwise.

                  8.27.17  Borrower  shall  not  cause or  permit  the  board of
directors  of each SPC Party in  Borrower  to take any action  which,  under the
terms of any certificate of incorporation, by-laws or any voting trust agreement
with respect to any common stock, requires the vote of the board of directors of
Borrower  and/or  any SPC Party in  Borrower  unless at the time of such  action
there shall be at least two members who are Independent Directors.

                                      -59-

<PAGE>

                  8.27.18  All of the  facts and  assumptions  set forth in that
certain opinion letter dated as of the Closing Date (the  "Insolvency  Opinion")
delivered by Hunton & Williams in connection with the Loan are true and correct.
In connection with the foregoing,  Borrower hereby  covenants and agrees that it
will  comply  with,  or cause  the  compliance  with,  (i) all of the  facts and
assumptions  (whether  regarding the Borrower or any other person or entity) set
forth in the Insolvency Opinion, (ii) all the representations and warranties and
covenants in this Section 8.28,  and (iii) all the  organizational  documents of
the Borrower and any SPC Party.

                  8.27.19  Borrower  shall  allocate  fairly and  reasonably any
overhead expenses that are shared with an affiliate, including paying for office
space and services performed by any employee of an affiliate.

                  8.27.20  The  stationery,  invoices,  and checks  utilized  by
Borrower or utilized to collect its funds or pay its expenses shall bear its own
name and shall  not bear the name of any  other  entity  unless  such  entity is
clearly designated as being Borrower's agent.

                  8.27.21  Borrower  shall not pledge its assets for the benefit
of any other person or entity, other than with respect to the Loan.

                  8.27.22   Borrower shall pay the salaries of its own employees
from its own funds.

                  8.27.23  Borrower  shall  maintain  a  sufficient   number  of
employees in light of its contemplated business operations.

Section 8.28  Franchise Agreement; Hotel Management.

                  8.28.1  Each  Franchise   Agreement   pursuant  to  which  any
Operating  Lessee or Manager has the right to operate the hotel  located on each
applicable  Individual  Property under a name and/or hotel system  controlled by
the  applicable  franchisor,  is in full  force and  effect,  and to the best of
Borrower's  knowledge,  there  is  no  default,  breach  or  violation  existing
thereunder by any party  thereto and no event has occurred  (other than payments
due but not yet  delinquent)  that,  with the  passage  of time or the giving of
notice,  or both, would  constitute a default,  breach or violation by any party
thereunder.

                  8.28.2 All  certifications,  permits,  licenses and approvals,
including, without limitation,  certificates of completion and occupancy permits
required for the legal use, occupancy and operation of each Individual  Property
as a hotel  (collectively,  the "Licenses"),  have been obtained and are in full
force and effect (including, without limitation, any applicable liquor license).
Borrower  shall keep and  maintain,  or cause the  Operating  Lessee to keep and
maintain,  all licenses necessary for the operation of each Individual  Property
as a hotel.  Each Individual  Property is free of material damage and is in good
repair, and there is no proceeding pending for the total or partial condemnation
of, or affecting, any Individual Property.

                  8.28.3  Notwithstanding  any provision contained herein to the
contrary,  in connection  with the  execution of any Operating  Lease with a TRS
Lessee or an Affiliate of an Operating  Lessee which is a Single Purpose Entity,
Borrower  or  the related  Operating  Lessee may terminate or amend the existing

                                      -60-

<PAGE>

Franchise Agreement and enter into a new or amended Franchise Agreement with the
related existing  Franchisor,  which new or amended Franchise Agreement shall be
substantially  in the  related form attached hereto as Exhibit E,  or  otherwise
acceptable   to   Lender   in  form  and   substance   in   Lender's  reasonable
discretion.

                  8.28.4  Each  Management   Agreement  listed  on  Schedule  VI
attached  hereto is in full force and effect and there is no default,  breach or
violation  existing  thereunder  by any party  thereto and no event has occurred
(other than payments due but not yet delinquent)  that, with the passage of time
or the  giving  of  notice,  or both,  would  constitute  a  default,  breach or
violation  by  any  party  thereunder.  No  Management  Agreement  provides  for
compensation  of  Manager  thereunder  in  excess  of the  Management  Fee.  The
Management  Fees  (including  any  amounts  in excess  thereof)  due under  each
Management Agreement and the terms and provisions of each Management  Agreement,
are  subordinate  to this  Agreement  and  the  applicable  Mortgage;  provided,
however,  the  Management  Fees due under  each  Management  Agreement  prior to
termination of each such Management  Agreement shall not be subordinated to this
Agreement and the applicable Mortgage if (i) such Management Fees, including any
incentive  fees, are not in excess of five percent (5.0%) of Operating  Revenues
for the applicable  Individual Property and have not accrued for more than sixty
(60) days (except in the case of incentive fees which shall not have accrued for
any period of time greater than one (1) year),  (ii) the  applicable  Manager is
not an Affiliate of Borrower, (iii) neither Lender nor any affiliate nor nominee
nor other Person, which may acquire the applicable Individual Property by reason
of foreclosure,  deed in lieu of foreclosure or other proceeding  brought by it,
nor any subsequent  successors,  assignees or purchasers  thereof and thereafter
shall have any  obligation  regarding the payment of such  Management  Fees, and
(iv)  such  Management  Fees  shall not be a Lien on the  applicable  Individual
Property.  Each Manager shall attorn to Lender.  Except as otherwise provided in
this Section  8.29(d),  Borrower  shall not,  and shall not allow any  Operating
Lessee to, terminate,  cancel, modify, renew or extend any Management Agreement,
or enter into any  agreement  relating to the  management  or  operation  of any
Individual  Property with Manager or any other party without the express written
consent of Lender, which consent shall not be unreasonably  withheld;  provided,
however,  with  respect to a new manager such  consent may be  conditioned  upon
Borrower  delivering  evidence in writing from the applicable Rating Agencies to
the effect that such new manager will not result in a downgrade,  withdrawal  or
qualification of the respective ratings then in effect for any Securities issued
in  connection  with a  Securitization.  If at any time  Lender  consents to the
appointment  of a new  manager,  such  new  manager  and  Borrower  shall,  as a
condition of Lender's consent,  execute a Manager's Consent and Subordination of
Management   Agreement   substantially   in  the  form  then  used  by   Lender.
Notwithstanding  any provision  contained  herein to the  contrary,  Borrower or
Operating  Lessee  may  terminate  a  Management  Agreement  and  enter  into  a
Replacement  Management  Agreement with a Qualified  Manager with respect to any
Individual Property.

                  8.28.5  Borrower,  upon the request of Lender shall,  or shall
cause Operating Lessee to, terminate any Manager  designated by Lender,  without
penalty or fee, if at any time  during the Loan (i) such  Manager  shall  become
insolvent or a debtor in any bankruptcy or insolvency proceeding,  (ii) there is
a monetary  Event of Default or a material  non-monetary  Event of  Default,  or
(iii)  the  Anticipated  Payment  Date  has  occurred  and the Loan has not been
repaid. The Management  Agreement and/or the Manager's Consent and Subordination

                                      -61-

<PAGE>

of Management  Agreements  provide that such Manager may be terminated,  without
penalty or fee, upon the occurrence of any of the foregoing. At such time as the
Manager  may be  removed, a  Qualified  Manager  shall assume  management of the
Properties  pursuant to a Replacement  Management  Agreement and shall receive a
property  management fee not to exceed the then current market rates.

                  8.28.6   Neither  the  execution  and  delivery  of  the  Loan
Documents,  Borrower's performance thereunder,  nor the exercise of any remedies
by Lender,  will adversely affect  Borrower's  rights under any Operating Lease,
any Franchise Agreement, any Management Agreement, or any of the Licenses.

Section 8.29  Operating Lease.

                  8.29.1 The  Operating  Leases are in full force and effect and
there is no  material  default,  breach  or  violation  existing  thereunder  by
Borrower or to the best of Borrower's knowledge,  any other party thereto and no
event has occurred (other than payments due but not yet  delinquent)  that, with
the  passage  of time or the  giving of  notice,  or both,  would  constitute  a
default, breach or violation by any party thereunder.  The Operating Lease Rent,
and the terms and provisions of the Operating  Leases,  are  subordinate to this
Agreement and the Mortgages.

                  8.29.2   Neither  the  execution  and  delivery  of  the  Loan
Documents,  Borrower's performance thereunder,  nor the exercise of any remedies
by Lender,  will adversely affect Borrower's rights under the Operating Lease or
any of the Licenses.

                  8.29.3  Notwithstanding  anything  to the  contrary  contained
herein,  Borrower may enter into a new operating lease with or permit a transfer
of Operating Lessee's interest in the Operating Lease to TRS Lessee provided the
following criteria are satisfied in Lender's reasonable discretion:

                           (a)   TRS Lessee shall be a "Taxable REIT Subsidiary"
within the meaning of Section 856(l) of the Code;

                           (b)     Rent and other sums due and payable under the
Operating  Lease or any new  operating lease, as applicable, shall qualify under
Section 856(d)(8) of the Code;

                           (c)   TRS Lessee (A) has entered into a new operating
lease or assumed, amended  and restated the  Operating Lease, in either case, on
substantially  the same terms set forth in the TRS Lease; (B) has entered into a
TRS  Subordination Agreement;  and (C) has entered into a Replacement Management
Agreement  with  a  Qualified  Manager  that  (1)  meets the requirements for an
"eligible  independent contractor"  within  the  meaning  of  Section  856(d)(9)
of the Code, and (2) provides  that: (x) the Management Fees payable  thereunder
are  subordinate to this Agreement and to the Mortgages,  provided, however, the
Management  Fees  due  under  each  Replacement  Management  Agreement  prior to
termination  of  each  such   Replacement  Management  Agreement  shall  not  be
subordinated  to  this  Agreement and the Mortgages if (i) such Management Fees,
including  any  incentive  fees,  are not in excess  of five  percent  (5.0%) of
Operating Revenues for the applicable Individual  Property  and have not accrued
for more than sixty  (60) days (except in the case of incentive fees which shall
not  have  accrued  for  any  period of time greater than one (1) year, (ii) the

                                      -62-

<PAGE>

applicable Manager is not an Affiliate of  Borrower,  (iii)  neither  Lender nor
any affiliate  nor nominee nor other Person, which may  acquire  the  applicable
Individual  Property  by  reason of foreclosure, deed in lieu of foreclosure, or
other  proceeding  brought  by  it, nor any subsequent successors,  assignees or
purchasers  thereof  and  thereafter  shall have  any  obligation  regarding the
payment of  such  Management Fees, and  (iv) such Management Fees shall not be a
Lien on the  applicable  Individual Property,  and  (y) if there is a continuing
Event of Default or if the  Anticipated Payment Date has  occurred  and the Loan
has not been repaid, or, if at any time during the term of the Loan, the manager
thereunder shall become insolvent or a debtor in any  bankruptcy  or  insolvency
proceeding,  such  management  agreement  may  be  terminated  by Lender without
penalty or fee; and

                           (d)      TRS Lessee shall be, for so long as the Loan
shall remain outstanding, (A) organized pursuant to, and in accordance with, the
TRS Lessee Organizational Documents, and  (B) in all material respects, a Single
Purpose Entity; and

                          (e) Lender shall have received a TRS Non-Consolidation
Opinion.

Section 8.30  Investment Company Act.

         Borrower is not (a) an "investment  company" or a company  "controlled"
by an "investment  company," within the meaning of the Investment Company Act of
1940,  as  amended;  (b) a "holding  company"  or a  "subsidiary  company"  of a
"holding  company"  or  an  "affiliate"  of  either  a  "holding  company"  or a
"subsidiary  company"  within the mean of the Public Utility Holding Company Act
of 1935,  as  amended;  or (c)  subject  to any  other  federal  or state law or
regulation which purports to restrict or regulate its ability to borrow money.

Section 8.31  Ground Lease.

                  8.31.1  Recording;  Modification.  A memorandum of each Ground
Lease has been duly recorded,  the Ground Leases permit the interest of Borrower
to be  encumbered by a mortgage or each Ground Lessor has approved and consented
to the  encumbrance  of the  applicable  Individual  Property by the  applicable
Mortgages and there have not been  amendments or  modifications  to the terms of
the Ground Leases since recordation of the applicable memorandum of ground lease
pertaining thereto, with the exception of written instruments listed on Schedule
V. The Ground  Lease may not be  canceled,  terminated,  surrendered  or amended
without the prior written consent of Lender.

                  8.31.2  No  Liens.  Except  for  the  Permitted  Encumbrances,
Borrower's  interests  in the  Ground  Leases  are not  subject  to any liens or
encumbrances  superior to, or of equal priority  with, the applicable  Mortgages
other than Ground Lessors' related fee interests.

                  8.31.3 Ground Leases Assignable.  Borrower's  interests in the
Ground  Leases are  assignable to Lender upon notice to, but without the consent
of,  the Ground  Lessors  (or,  if any such  consent  is  required,  it has been
obtained prior to the Closing  Date).  With the exception of the Ground Lease of
the Individual Property located in Glen Burnie,  Maryland, the Ground Leases are
further assignable by Lender, its successors and assigns without Ground Lessors'
consent.

                                      -63-

<PAGE>

                  8.31.4 Default.  As of the date hereof,  the Ground Leases are
in full force and effect and no defaults have  occurred  under the Ground Leases
and there is no  existing  condition  which,  but for the passage of time or the
giving  of  notice,  could  result in a  default  under the terms of the  Ground
Leases.

                  8.31.5  Notice.  The Ground Leases  require  Ground Lessors to
give notice of any default by Borrower to Lender. The Ground Leases, or estoppel
letters received by Lender from Ground Lessors,  further provides that notice of
termination given under the Ground Leases is not effective against Lender unless
a copy of the notice has been delivered to Lender in the manner described in the
Ground Leases.

                  8.31.6 Cure.  Lender is permitted the opportunity  (including,
where necessary, sufficient time to gain possession of the interests of Borrower
under the Ground Leases) to cure any default under the Ground  Leases,  which is
curable  after the  receipt  of notice of any of the  default  before the Ground
Lessors thereunder may terminate the Ground Leases.

                  8.31.7  Term.  With the  exception  of the term of the  Ground
Lease of the Individual  Property located in Glen Burnie,  Maryland,  which term
shall expire on December 31, 2029,  the Ground  Leases have a term which extends
not less than twenty (20) years beyond the Anticipated Payment Date.

                  8.31.8 New Leases. The Ground Leases require Ground Lessors to
enter into new leases  upon  termination  of the Ground  Leases for any  reason,
including rejection of the Ground Leases in a bankruptcy proceeding.

                  8.31.9 Insurance Proceeds.  Under the terms of this Agreement,
the  Ground  Leases,  and the  applicable  Mortgages  and the  estoppel  letters
received by Lender from Ground Lessors,  taken together,  any related  insurance
and  condemnation   proceeds  allocable  to  Operating  Lessees'  or  Borrower's
leasehold  interest  in the  applicable  Individual  Properties  will be applied
either to the repair or restoration of all or part of the applicable  Individual
Properties,  with Lender having the right,  subject to the provisions  contained
herein,  to  hold  and  disburse  the  proceeds  as the  repair  or  restoration
progresses,  or to the payment of the outstanding  principal balance of the Loan
together with any accrued interest thereon.

                  8.31.10    Subleasing.   The  Ground  Leases do not impose any
commercially unreasonable restrictions on subleasing.

                                   ARTICLE IX
                               FINANCIAL REPORTING

Section 9.1  Financial Statements.

                  9.1.1    Obligations of Borrower.    Borrower  will  keep  and
maintain  or  will  cause  to be kept and maintained, in accordance with general
accepted  accounting  principles and USAH proper and accurate books, records and

                                      -64-

<PAGE>

accounts  reflecting all  of the  financial affairs of  Borrower  and  Operating
Lessee  and all items of  income  and  expense in connection  with the operation
on an individual basis of each of the Individual Properties.  Lender  shall have
the right from time to time at all times during normal business hours to examine
such books,  records and accounts at the office of Borrower, Operating Lessee or
other  Person  maintaining  such  books,  records  and accounts and to make such
copies  or  extracts thereof as Lender shall desire. After the  occurrence of an
Event of Default,  Borrower shall pay any costs and expenses incurred  by Lender
to  examine Borrower's  accounting  records  with respect to the  Properties, as
Lender  shall  determine  to  be  necessary  or appropriate in the protection of
Lender's interest.

                  9.1.2 Monthly Reports.  Within  forty-five (45) days after the
end of each  calendar  month  until  such time as a  Securitization  shall  have
occurred,  Borrower  shall furnish,  or cause  Operating  Lessee to furnish,  to
Lender a current (as of the calendar month just ended) balance sheet, a detailed
operating   statement  (showing  monthly  activity  and  year-to-date)   stating
Operating Revenues,  Operating Expenses, Net Operating Income, and net cash flow
for the calendar  month just ended,  a report of occupancy for the subject month
including an average  daily rate,  the  percentage of rooms rented and occupied,
and any and all franchise  inspection  reports received by Borrower or Operating
Lessee during the subject month, and, as reasonably  requested by Lender,  (i) a
written statement setting forth a comparison of budgeted income and expenses and
actual income and expenses for the subject month,  and (ii) other  documentation
supporting the information disclosed in the most recent financial statements. In
addition, such statement shall also be accompanied by a certificate of the chief
financial  officer of Borrower or the general  partner of Borrower  stating that
the  representations  and  warranties  of Borrower set forth in Section 8.28 are
true and correct as of the date of such  certificate and that there are no trade
payables outstanding for more than sixty (60) days.

                  9.1.3 Quarterly Reports.  Within sixty (60) days after the end
of the calendar quarter in which a Securitization shall have occurred and within
sixty  (60) days after the end of each  calendar  quarter  thereafter,  Borrower
shall furnish,  or cause Operating Lessee to furnish, to Lender a current (as of
the calendar  quarter just ended)  balance  sheet, a report of occupancy for the
subject quarter, including an average daily rate, the percentage of rooms rented
and occupied,  and any all franchise  inspection reports received by Borrower or
Operating Lessee during the subject quarter. In addition, within sixty (60) days
after the end of each  calendar  quarter  during  the  entire  term of the Loan,
Borrower  shall  furnish,  or cause  Operating  Lessee to  furnish,  to Lender a
detailed  operating  statement  (showing  quarterly  activity and  year-to-date)
stating  Operating  Revenues,  Operating  Expenses,  Net Operating  Income,  and
capital  expenditures for the calendar quarter just ended.  Borrower's quarterly
statements  shall be accompanied by (i) a comparison of the budgeted  income and
expenses and the actual income and expenses for the prior calendar quarter, (ii)
as reasonably  requested by Lender,  (A) a written  statement  setting forth any
variance from the Annual  Budget,  and (B) other  documentation  supporting  the
information  disclosed  in the most  recent  financial  statements,  and (iii) a
certificate  executed by the chief financial  officer of Borrower or the general
partner of Borrower  stating  that (A) each such  quarterly  statement  presents
fairly the financial condition and the results of operations of the Borrower and
the  Properties  being  reported upon and has been  prepared in accordance  with
generally  accepted  accounting  principles  and (B) to the extent not  provided
pursuant  to Section  9.1(b)  hereof,  the  representations  and  warranties  of

                                      -65-

<PAGE>

Borrower set forth in Section 8.28 are true and  correct  as of the date of such
certificate  and  there  are  no trade  payables outstanding for more than sixty
(60) days.

                  9.1.4 Annual Reports. Within ninety (90) days after the end of
each calendar year,  Borrower will furnish or direct to be furnished to Lender a
complete copy of the consolidated  annual  financial  statements of Borrower and
the REIT, and in the case of the REIT,  audited by a "big five"  accounting firm
or other  independent  certified  public  accountant  acceptable  to  Lender  in
accordance with generally  accepted  accounting  principles  (which audited REIT
financial  statements  shall contain a supplemental  schedule of Operating Lease
revenues  on a  property-by-property  basis;  provided  that  such  supplemental
schedule will not be audited separately).  Within ninety (90) days after the end
of each calendar year,  Borrower shall furnish or cause the Operating Lessees to
furnish to Lender detailed  property-level  operating statements (showing annual
activity) stating Operating Revenues,  Operating Expenses,  Operating Income and
net cash flow for each of the Properties.  Such property- level annual financial
statements  shall be accompanied by (i) a comparison of the budgeted  income and
expenses and the actual income and expenses for the prior calendar year and (ii)
a certificate executed by the chief financial officer of Borrower or the general
partner of Borrower stating that, to the best of such officer's knowledge,  each
such annual financial  statement presents fairly the financial condition and the
results  of  operations  of the  Properties;  provided  that,  with  respect  to
property-level  reports,  such annual  reports shall be prepared  using the same
accounting  method used at closing and Borrower  agrees to notify  Lender of any
material  changes in the method used for the preparation of such  property-level
reports  upon the receipt of notice of such change  from the  Operating  Lessee.
Annual  financial  statements of the REIT shall be accompanied by an unqualified
opinion of a "big five"  accounting firm or other  independent  certified public
accountant reasonably acceptable to Lender.

                  9.1.5  Certification;   Supporting  Documentation.  Each  such
financial  statement  shall be in scope and detail  reasonably  satisfactory  to
Lender and  certified  by the chief  financial  representative  of  Borrower  or
Operating Lessee, as applicable.

                  9.1.6  Additional  Reports.  Borrower shall deliver,  or cause
Operating Lessee to deliver, to Lender as soon as reasonably available but in no
event later than thirty (30) days after such items become  available to Borrower
or Operating Lessee in final form:

                           (a)  copies of any final engineering or environmental
reports  prepared  for  Borrower or any  Operating  Lessee  with  respect  to an
Individual Property;

                           (b)   a  copy  of any  notice received by Borrower or
Operating  Lessee from any  environmental  authority having jurisdiction over an
Individual Property with respect to a condition existing  or alleged to exist or
emanate  from or at an Individual Property;

                           (c)  copies  of  any  financial  statements, reports,
certificates, budgets, business  plans and  capital  expenditure  plans required
to be  delivered  to  Borrower by any  Operating Lessee pursuant to an Operating
Lease.

                                      -66-

<PAGE>

Section 9.2  Accounting Principles.

         All financial statements shall be prepared in accordance with generally
accepted  accounting  principles in the United States of America as in effect on
the date so indicated and  consistently  applied (or such other accounting basis
reasonably acceptable for Lender).

Section 9.3  Other Information; Access.

         Borrower shall deliver to Lender such additional  information regarding
Borrower,  its  subsidiaries,  its business,  any Borrower Party, and any of the
Properties within thirty (30) days after Lender's  reasonable  request therefor.
Borrower  shall  permit  Lender to  examine  such  records,  books and papers of
Borrower which reflect upon its financial  condition and the income and expenses
of each of the Properties.

Section 9.4  Format of Delivery.

         Any reports,  statements or other information  required to be delivered
under this  Agreement  shall be delivered (a) in paper form,  (b) on a diskette,
and (c) if  requested  by Lender and within the  then-existing  capabilities  of
Borrower's data systems without change or  modification  thereto,  in electronic
form and prepared using a Microsoft Word for Windows or WordPerfect  for Windows
files (which files may be prepared using a spreadsheet program and saved as word
processing files).

                                    ARTICLE X
                                    COVENANTS

         Borrower covenants and agrees with Lender as follows:

Section 10.1  Due Sale and Encumbrance; Transfers of Interests.

         Without the prior written consent of Lender,  neither  Borrower nor any
other Person having an ownership or beneficial  interest in Borrower shall sell,
transfer,  convey,  mortgage,  pledge,  or  assign  any  interest  in any of the
Properties or any part thereof or further  encumber,  alienate,  grant a Lien or
grant any other interest in any of the  Properties or any part thereof,  whether
voluntarily or  involuntarily,  in violation of the covenants and conditions set
forth in the Mortgage,  provided, however,  notwithstanding the foregoing or the
terms and  conditions of the Mortgages to the contrary,  if the Loan is not part
of a  Securitization,  the prior written consent of Lender shall be required and
shall be given in Lender's sole and absolute discretion.

Section 10.2  Taxes; Utility Charges.

         Borrower  shall pay before any fine,  penalty,  interest or cost may be
added thereto,  and shall not enter into any agreement to defer, any real estate
taxes and  assessments,  franchise  taxes and  charges,  and other  governmental
charges  (the  "Taxes")  that may  become a Lien upon any of the  Properties  or
become  payable  during the term of the Loan;  provided,  however;  Borrower may
contest

                                      -67-

<PAGE>

the validity of Taxes so long as (a) Borrower notifies Lender that it intends to
contest such Taxes,  (b) Borrower  provides  Lender with an  indemnity,  bond or
other  security  satisfactory  to Lender  assuring the  discharge of  Borrower's
obligations for such Taxes,  including  interest and penalties,  (c) Borrower is
diligently  contesting the same by appropriate  legal  proceedings in good faith
and at its own expense and concludes  such contest prior to the tenth (10th) day
preceding  the  earlier to occur of the  Maturity  Date or the date on which the
Individual  Property is  scheduled  to be sold for non-  payment,  (d)  Borrower
promptly  upon final  determination  thereof  pay the amount of any such  Taxes,
together  with all  costs,  interest  and  penalties  which  may be  payable  in
connection  therewith;  and (e)  notwithstanding  the foregoing,  Borrower shall
immediately  upon  request  of Lender pay any such  Taxes  notwithstanding  such
contest if, in the reasonable opinion of Lender, any Individual  Property or any
part  thereof or interest  therein  may be in danger of being  sold,  forfeited,
foreclosed,  terminated, cancelled or lost. Lender may pay over any cash deposit
or part  thereof to the  claimant  entitled  thereto  at any time  when,  in the
reasonable  judgment of Lender, the entitlement of such claimant is established.
Borrower's  compliance  with Section 5.4 of this Agreement  relating to impounds
for Taxes  shall,  with respect to payment of such Taxes,  be deemed  compliance
with this Section 10.2. Borrower shall not suffer or permit the joint assessment
of any of the  Properties  with any other real property  constituting a separate
tax lot or with any other real or personal property. Borrower shall promptly pay
for all utility services provided to each of the Properties.

Section 10.3  Operating Lease.

         Borrower shall hold and maintain, or cause Operating Lessee to hold and
maintain,  all necessary  licenses,  certifications and permits required by law.
Borrower  shall fully perform all of its covenants,  agreements and  obligations
under the Operating Lease.

Section 10.4  Operation; Maintenance; Inspection.

         Borrower  shall observe and comply,  or cause the  Operating  Lessee to
observe and comply, with all legal requirements applicable to the ownership, use
and operation of each of the Properties.  Borrower shall maintain,  or cause the
Operating  Lessee to maintain,  each of the  Properties  in good  condition  and
promptly  repair any damage or casualty.  Borrower  shall permit  Lender and its
agents, representatives and employees, upon reasonable prior notice to Borrower,
to inspect any of the Properties and conduct such  environmental and engineering
studies as Lender may  require,  provided  such  inspections  and studies do not
materially interfere with the use and operation of the Properties.

Section 10.5  Taxes on Security.

         Borrower  shall  pay  all  taxes,  charges,  filing,  registration  and
recording fees, excises and levies payable with respect to the Note or the Liens
created or secured by the Loan Documents, other than income, franchise and doing
business  taxes  imposed  on  Lender.  If  there  shall be  enacted  any law (a)
deducting  the Loan from the value of any of the  Properties  for the purpose of
taxation,  (b) affecting any Lien on the  Properties,  or (c) changing  existing
laws of taxation of mortgages,  deeds of trust, security deeds, or debts secured
by real property,  or changing the manner of collecting any such taxes, Borrower
shall promptly pay to Lender, on demand,  all taxes, costs and charges for which
Lender is or may be liable as a result thereof;  however,  if such payment would
be  prohibited  by law or  would  render  the Loan  usurious,  then  instead  of
collecting  such payment,  Lender may  declare all amounts owing under  the Loan
Documents to be immediately due and payable.

                                      -68-

<PAGE>

Section 10.6  Legal Existence; Name, Etc.

         Borrower  and each SPC Party shall  preserve and keep in full force and
effect its entity status,  franchises,  rights and privileges  under the laws of
the  state  of its  formation,  and all  qualifications,  licenses  and  permits
applicable  to the  ownership,  use and  operation  of the  Properties.  Neither
Borrower  nor any SPC Party  shall  wind up,  liquidate,  dissolve,  reorganize,
merge, or consolidate with or into, or convey, sell, assign, transfer, Lease, or
otherwise  dispose of all or substantially  all of its assets, or acquire all or
substantially  all of the assets of the  business of any  Person,  or permit any
subsidiary  or  Affiliate  of Borrower to do so.  Borrower  shall not change its
name,  identity,  or  organizational  structure,  or the  location  of its chief
executive  office or principal  place of business unless Borrower (a) shall have
obtained the prior written consent of Lender to such change,  and (b) shall have
taken  all  actions  necessary  or  requested  by  Lender  to file or amend  any
financing   statement  or  continuation   statement  to  assure  perfection  and
continuation of perfection of security interests under the Loan Documents.

Section 10.7  Further Assurances.

         Borrower shall promptly (a) cure any known defects in the execution and
delivery of the Loan  Documents,  and (b) execute  and  deliver,  or cause to be
executed and delivered, all such other documents,  agreements and instruments as
Lender may  reasonably  request to further  evidence and more fully describe the
collateral  for the Loan,  to correct any  omissions in the Loan  Documents,  to
perfect,  protect or preserve any liens created under any of the Loan Documents,
or to make any recordings,  file any notices, or obtain any consents,  as may be
necessary or  appropriate  in connection  therewith.  Borrower  grants Lender an
irrevocable  power of  attorney  coupled  with an  interest  for the  purpose of
exercising and  perfecting  any and all rights and remedies  available to Lender
under the Loan Documents,  at law and in equity,  including  without  limitation
such rights and remedies available to Lender pursuant to this Section 10.7.

Section 10.8  Estoppel Certificates.

         Borrower, within ten (10) days after request, shall furnish to Lender a
written statement, duly acknowledged,  setting forth the amount due on the Loan,
the terms of  payment  of the Loan,  the date to which  interest  has been paid,
whether any offsets or defenses  exist  against the Loan and, if any are alleged
to exist,  the  nature  thereof  in  detail,  and such  other  matters as Lender
reasonably may request.

Section 10.9  Notice of Certain Events.

         Borrower shall promptly  notify Lender of (a) any Potential  Default or
Event of Default  of which  Borrower  has  knowledge,  together  with a detailed
statement  of the steps being taken to cure such  Potential  Default or Event of
Default;  (b) any notice of default received by Borrower under other obligations
relating to any of the Properties or otherwise material to Borrower's  business;
and (c) any  threatened or pending  legal,  judicial or regulatory  proceedings,
including  any  dispute  between  Borrower  and  any   governmental   authority,
materially and adversely affecting Borrower or the Properties.

                                      -69-

<PAGE>

Section 10.10  Indemnification.

         Borrower shall protect,  defend, indemnify and save harmless Lender its
shareholders,  directors,  officers,  employees  and agents from and against all
liabilities,  obligations,  claims, damages,  penalties, causes of action, costs
and  expenses  (including  without  limitation  reasonable  attorneys'  fees and
expenses),  imposed upon or incurred by or asserted  against Lender by reason of
(a) ownership of the Mortgage, the Properties or any interest therein or receipt
of any  rents;  (b) any  accident,  injury to or death of  persons or loss of or
damage to property  occurring in, on or about any of the  Properties or any part
thereof or on the  adjoining  sidewalks,  curbs,  adjacent  property or adjacent
parking areas, streets or ways; (c) any use, nonuse or condition in, on or about
any of the Properties or any part thereof or on the adjoining sidewalks,  curbs,
adjacent property or adjacent parking areas, streets or ways; (d) performance of
any labor or services or the  furnishing of any  materials or other  property in
respect of any of the Properties or any part thereof; and (e) the failure of any
Person to file timely with the Internal Revenue Service an accurate Form 1099-B,
Statement  for  Recipients  of  Proceeds  from Real  Estate,  Broker  and Barter
Exchange Transactions,  which may be required in connection with this Agreement,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the  transaction in connection with which this Agreement is made. Any amounts
payable to Lender by reason of the  application  of this  section  shall  become
immediately due and payable and shall bear interest at the Default Rate from the
date loss or damage is sustained by Lender until paid.

Section 10.11  Payment For Labor and Materials.

         Borrower  will  promptly  pay when due all bills  and costs for  labor,
materials, and specifically fabricated materials incurred in connection with any
Individual  Property  and never  permit to exist  beyond the due date thereof in
respect of any  Individual  Property  or any part  thereof  any lien or security
interest,  even though inferior to the liens and the security  interest  hereof,
and in any  event  never  permit  to be  created  or  exist  in  respect  of any
Individual Property or any part thereof any other or additional lien or security
interest  other  than the liens or  security  interests  hereof,  except for the
Permitted Encumbrances.

Section 10.12  Alterations.

         Borrower  shall obtain  Lender's prior written  consent,  which consent
shall  not  be  unreasonably  withheld  or  delayed  to any  alterations  to any
Improvements on any Individual  Property that may have a material adverse effect
on Borrower's financial condition, the use, operation or value of any Individual
Property or the Net Operating  Income with respect to the  Individual  Property,
other than  alterations  performed in  connection  with the  Restoration  of the
Individual  Property  in  accordance  with  the  terms  and  provisions  of this
Agreement.  If the  total  unpaid  amounts  due  and  payable  with  respect  to
alterations  to the  Improvements  on any Individual  Property  (other than such
amounts to be paid or  reimbursed by tenants under the Leases) shall at any time
exceed  Two  Hundred  Fifty  Thousand  and No  00/100  Dollars  ($250,000)  (the
"Threshold  Amount"),  Borrower shall promptly deliver to Lender as security for
the  payment  of  such  amounts  and  as  additional   security  for  Borrower's
obligations  under the Loan Documents any of the  following:  (1) cash, (2) U.S.
Obligations,  (3) other securities having a rating acceptable to Lender and that
the  applicable  Rating  Agencies have  confirmed in writing will not, in and of
itself, result in a downgrade, withdrawal or

                                      -70-

<PAGE>

qualification  of the initial,  or, if higher,  then current ratings assigned in
connection  with any  Securitization,  or (4) a completion  bond or  irrevocable
letter of credit (payable on sight draft only) issued by a financial institution
having a rating by Standard & Poor's  Ratings Group of not less than A-1+ if the
term of such bond or letter of credit is no longer  than three (3) months or, if
such term is in excess of three (3) months,  issued by a  financial  institution
having a rating  that is  acceptable  to Lender and that the  applicable  Rating
Agencies  have  confirmed  in writing  will not,  in and of itself,  result in a
downgrade,  withdrawal  or  qualification  of the initial,  or, if higher,  then
current ratings  assigned in connection with any  Securitization.  Such security
shall be in an  amount  equal to the  excess of the total  unpaid  amounts  with
respect to alterations to the Improvements on the applicable Individual Property
(other than such amounts to be paid or  reimbursed  by tenants under the Leases)
over the  Threshold  Amount  and may be  reduced  from  time to time by the cost
estimated  by  Lender  to  terminate  any of the  alterations  and  restore  the
applicable  Individual  Property to the extent necessary to prevent any material
adverse  effect  on the use,  operation  or value of the  applicable  Individual
Property or the Net Operating Income with respect to the Individual Property.

Section 10.13  Handicapped Access.

                  10.13.1 Borrower agrees that the Properties shall at all times
strictly comply to the extent  applicable with the requirements of the Americans
with  Disabilities  Act of 1990,  the Fair Housing  Amendments  Act of 1988, all
state and local laws and ordinances related to handicapped access and all rules,
regulations,  and orders issued pursuant thereto including,  without limitation,
the Americans with Disabilities Act  Accessibility  Guidelines for Buildings and
Facilities (collectively, "Access Laws").

                  10.13.2  Notwithstanding any provisions set forth herein or in
any other document regarding Lender's approval of alterations of the Properties,
Borrower  shall not alter the  Properties  in any manner  which  would  increase
Borrower's  responsibilities  for  compliance  with the  applicable  Access Laws
without the prior  written  approval  of Lender.  The  foregoing  shall apply to
tenant improvements constructed by Borrower or by any of its tenants. Lender may
condition  any such  approval  upon  receipt  of a  certificate  of  Access  Law
compliance from an architect, engineer, or other person acceptable to Lender.

                  10.13.3 Borrower agrees to give prompt notice to Lender of the
receipt by Borrower of any  complaints  related to  violation of any Access Laws
and of the  commencement  of any proceedings or  investigations  which relate to
compliance with applicable Access Laws.

Section 10.14  Certain Hotel/Franchise Covenants.

         Borrower further covenants and agrees with Lender as follows:

                  10.14.1  Borrower  shall  cause  the  hotel  located  on  each
Individual  Property to be operated pursuant to the related Franchise  Agreement
and, if applicable, the related Management Agreement.

                  10.14.2   Borrower shall, or shall cause the related Operating
Lessee to:

                                      -71-

<PAGE>

                           (a)   promptly  perform  and/or  observe  all  of the
material  covenants  and  agreements,  including,  without  limitation,  any PIP
Requirements,  required  to  be performed and observed by Operating Lessee under
the  related  Franchise  Agreement and,  if applicable,  the related  Management
Agreement  and  do  all  things necessary to preserve and to keep unimpaired its
material rights thereunder;

                           (b)   promptly notify Lender of any default under the
related Franchise Agreement or, if applicable,  the related Management Agreement
of which Borrower or Operating Lessee (if a TRS Lessee) is aware;

                           (c)   promptly  deliver  to  Lender  a  copy  of each
financial statement, business plan, capital expenditures  plan,  notice,  report
and  estimate received  by Operating Lessee under the Franchise Agreement or the
Management Agreement; and

                           (d)   promptly enforce the performance and observance
of all of the material covenants and agreements  equired to be performed  and/or
observed  by  the  franchisor  under  the  related  Franchise  Agreement and, if
applicable, the Manager under the related Management Agreement.

                  10.14.3  Without  Lender's prior consent,  Borrower shall not,
and shall not permit any Operating Lessee, to:

                           (a)   except  as  otherwise provided in Section 8.29,
surrender, terminate or cancel any Franchise Agreement or Management Agreement;

                           (b) reduce or consent to the reduction of the term of
any Franchise Agreement or Management Agreement;

                           (c) increase or consent to the increase of the amount
of any charges under any Franchise Agreement or, except as otherwise provided in
Section 8.29, Management Agreement;

                           (d)  compensate any Manager in an amount greater than
the Management  Fee or allow any  Management  Fee to accrue unpaid for more than
sixty (60) days (or one (1) year for that  portion of such  Management  Fee that
is an incentive fee); or

                           (e)   except as otherwise provided in this Agreement,
otherwise modify, change,  supplement,  alter or amend,  or waive or release any
of the Operating Lessees' rights and remedies  under,  any  Franchise  Agreement
or  Management Agreement in any material respect.

Section 10.15  Certain Operating Lease Covenants.

         Borrower further covenants and agrees with Lender as follows:

                  10.15.1  Borrower shall enforce each  Operating  Lease and, if
the Operating Lessee is a TRS Lessee, cause the hotel located on each Individual
Property to be operated pursuant to the related Operating Lease.

                                      -72-

<PAGE>

                  10.15.2  Borrower shall:

                           (a)   promptly  perform  and/or  observe  all  of the
covenants and agreements required to be performed and observed by Borrower under
the Operating Leases, including without limitation,  that  certain  Master Lease
Termination and Conversion Agreement,  dated as of September 7, 2000, and do all
things  necessary  to  preserve  and  to  keep  unimpaired  its  material rights
thereunder;

                           (b)   promptly notify Lender of any default under any
Operating Lease of which Borrower is aware;

                           (c)   promptly  deliver  to  Lender  a  copy  of each
financial  statement,  business plan,  capital expenditures plan, notice, report
and estimate received by Borrower under any Operating Lease; and

                           (d)   promptly enforce the performance and observance
of all of the covenants and agreements required to be performed and/or  observed
by the Operating Lessee under any Operating Lease.

                  10.15.3  Without Lender's prior consent Borrower shall not:

                           (a)   except as otherwise provided in this Agreement,
surrender, terminate or cancel any Operating Lease;

                           (b)    reduce or consent to the reduction of the term
of any Operating Lease;

                           (c) increase or consent to the increase of the amount
of any charges under any Operating Lease; or

                           (d)   except as otherwise provided in this Agreement,
otherwise modify, change, supplement, alter or amend, or waive or release any of
Borrower's rights and remedies under, the Operating Leases in any respect.

                                   ARTICLE XI
                                EVENTS OF DEFAULT

         Each of the following  shall  constitute a default (each,  an "Event of
Default") under the Loan:

Section 11.1  Payments.

         Borrower's  failure  to pay  any  regularly  scheduled  installment  of
principal, interest or other amount due under the Loan Documents within five (5)
days of (and including) the day it is due, or Borrower's failure to pay the Loan
at the Maturity Date, whether by acceleration or otherwise.

                                      -73-

<PAGE>

Section 11.2  Insurance.

                  Borrower's  failure to maintain  insurance  as required  under
Section 5.1 of this Agreement.

Section 11.3  Single Purpose Entity.

         If Borrower  breaches  any of its  covenants  contained in Section 8.28
hereof.

Section 11.4  Insolvency Opinion.

         If any of the assumptions  contained in the insolvency  opinion,  or in
any other "non-  consolidation"  opinion  delivered to Lender in connection with
the Loan, or in any other "non-  consolidation"  opinion delivered subsequent to
the closing of the Loan, is or shall become untrue in any material respect.

Section 11.5  Taxes.

         If any of the Taxes are not paid when the same are due and payable.

Section 11.6  Sale, Encumbrance, Etc.

         The sale, transfer,  conveyance,  pledge, mortgage or assignment of any
part  or all of an  Individual  Property,  or any  interest  therein,  or of any
interest  in  Borrower,  in  violation  of the  terms  of the  Mortgage  or this
Agreement.

Section 11.7  Representations and Warranties.

         Any  representation  or warranty made in any Loan Document proves to be
untrue in any material respect when made or deemed made.

Section 11.8  Other Encumbrances.

         Any  default  under any  document  or  instrument,  other than the Loan
Documents,  evidencing or creating a Lien on an Individual  Property or any part
thereof.

Section 11.9  Involuntary Bankruptcy or Other Proceeding.

         Commencement  of  an  involuntary  case  or  other  proceeding  against
Borrower, any Borrower Party or any other Person having an ownership or security
interest in the Individual  Property  (each,  a "Bankruptcy  Party") which seeks
liquidation,  reorganization  or other relief with respect to it or its debts or
other liabilities  under any bankruptcy,  insolvency or other similar law now or
hereafter in effect or seeks the appointment of a trustee, receiver, liquidator,
custodian  or other  similar  official  of it or any of its  property,  and such
involuntary case or other proceeding shall remain  undismissed or unstayed for a
period of sixty (60) days;  or an order for relief  against a  Bankruptcy  Party
shall be entered in any such case under the Bankruptcy Code.

                                      -74-

<PAGE>

Section 11.10  Voluntary Petitions, etc.

         Commencement  by a  Bankruptcy  Party  of a  voluntary  case  or  other
proceeding seeking  liquidation,  reorganization or other relief with respect to
itself or its debts or other  liabilities  under any  bankruptcy,  insolvency or
other similar law or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official for it or any of its property, or consent by
a  Bankruptcy  Party to any  such  relief  or to the  appointment  of or  taking
possession  by any such  official  in an  involuntary  case or other  proceeding
commenced  against  it,  or  the  making  by a  Bankruptcy  Party  of a  general
assignment for the benefit of creditors,  or the failure by a Bankruptcy  Party,
or the admission by a Bankruptcy  Party in writing of its inability,  to pay its
debts  generally  as they  become due,  or any action by a  Bankruptcy  Party to
authorize or effect any of the foregoing;

Section 11.11  Covenants.

         Borrower's  failure to perform or  observe  any of the  agreements  and
covenants  contained in this Agreement or in any of the other Loan Documents and
not  specified  above in Sections 11.1 to 11.10,  or below in Sections  11.12 or
11.13 and the  continuance  of such  failure for thirty (30) days after  written
notice by Lender to Borrower;  however, subject to any shorter period for curing
any  failure  by  Borrower  as  specified  in any of the other  Loan  Documents,
Borrower  shall have an additional  thirty (30) days to cure such failure if (a)
such  failure  does not  involve  the  failure  to make  payments  on a monetary
obligation; (b) such failure cannot reasonably be cured within thirty (30) days;
(c) Borrower is diligently  undertaking  to cure such default;  and (d) Borrower
has provided Lender with security reasonably  satisfactory to Lender against any
interruption  of  payment  or  impairment  of  collateral  as a  result  of such
continuing failure.

                  11.11.1  Operating Lease. If there is a material default under
any  Operating  Lease  beyond  any  applicable  notice and cure  period;  if the
Operating Lease is amended,  modified or terminated in violation of the terms of
this  Agreement;  or if each  Operating  Lessee is not  either a TRS Lessee or a
Single Purpose Entity by a date no later than March 1, 2001.

                  11.11.2 Management Agreement and Franchise  Agreement.  (a) If
there is a material default by Borrower or Operating Lessee under any Management
Agreement or Franchise  Agreement (i) which is not cured by Borrower  within any
applicable  cure period or (ii) which Borrower is not enforcing its rights under
the Management  Agreement or the Operating Lease with respect thereto; or (b) if
any Management Agreement or Franchise Agreement is amended, modified, terminated
or entered into in violation of the terms of this Agreement.

                  11.11.3  Ground  Leases.  If Borrower shall fail to timely pay
any rent, additional rent or other charge payable under the Ground Leases as and
when such rent or other  charge is payable;  or if there shall occur any default
by Borrower, as tenant under the Ground Leases, in the observance or performance
of any term,  covenant or condition of the Ground Leases on the part of Borrower
to be  observed  or  performed,  and  said  default  is not  cured  prior to the
expiration of any applicable  grace or cure period therein  provided,  or if any
one or more of the events  referred  to in the Ground  Leases  shall occur which
would  cause the  Ground  Leases to  terminate  without  notice or action by the
Ground Lessors or if the leasehold estates created by the Ground Leases shall be
surrendered or the Ground Leases shall be terminated or cancelled for any reason

                                      -75-

<PAGE>

or  under  any  circumstances  whatsoever,  or if any of the terms, covenants or
conditions  of  the  Ground  Leases  shall  in any  manner be modified, changed,
supplemented,  altered or  amended  without the prior written consent of Lender,
which consent shall not be unreasonably withheld, conditioned or delayed.

                                   ARTICLE XII
                                    REMEDIES

Section 12.1  Remedies - Insolvency Events.

         Upon the  occurrence of any Event of Default  described in Section 11.9
or 11.10, all amounts due under the Loan Documents  immediately shall become due
and  payable,  all  without  written  notice and  without  presentment,  demand,
protest,  notice of  protest or  dishonor,  notice of intent to  accelerate  the
maturity thereof,  notice of acceleration of the maturity thereof,  or any other
notice of  default  of any kind,  all of which are  hereby  expressly  waived by
Borrower.

Section 12.2  Remedies - Other Events.

                  12.2.1  Except as set forth in Section  12.1 above,  while any
Event  of  Default  exists,  Lender  may  (i)  declare  the  entire  Loan  to be
immediately  due and payable without  presentment,  demand,  protest,  notice of
protest or dishonor, notice of intent to accelerate the maturity thereof, notice
of acceleration of the maturity thereof, or other notice of default of any kind,
all of which are hereby  expressly  waived by  Borrower,  and (ii)  exercise all
rights and remedies therefor under the Loan Documents and at law or in equity.

                  12.2.2 With  respect to Borrower and the  Properties,  nothing
contained  herein or in any other Loan Document  shall be construed as requiring
Lender to resort to any Individual  Property for the  satisfaction of any of the
Debt in preference or priority to any other Individual Property,  and Lender may
seek  satisfaction  out of all of the  Properties  or any part  thereof,  in its
absolute  discretion in respect of the Debt. In addition,  Lender shall have the
right from time to time to partially  foreclose  the Mortgages in any manner and
for any amounts  secured by the Mortgages  then due and payable as determined by
Lender in its sole  discretion  including,  without  limitation,  the  following
circumstances:  (i) in the event Borrower  defaults beyond any applicable  grace
period  in the  payment  of one or more  scheduled  payments  of  principal  and
interest,  Lender may  foreclose  one or more of the  Mortgages  to recover such
delinquent payments,  or (ii) in the event Lender elects to accelerate less than
the entire  outstanding  principal balance of the Loan, Lender may foreclose one
or more of the Mortgages to recover so much of the principal balance of the Loan
as Lender  may  accelerate  and such  other  sums  secured by one or more of the
Mortgages as Lender may elect. Notwithstanding one or more partial foreclosures,
the  Properties  shall remain subject to the Mortgages to secure payment of sums
secured by the Mortgages and not previously recovered.

                  12.2.3  Lender shall have the right from time to time to sever
the Note and the other Loan Documents into one or more separate notes, mortgages

                                      -76-

<PAGE>

and  other   security   documents  (the  "Severed   Loan   Documents")  in  such
denominations as Lender  shall determine  in its sole discretion for purposes of
evidencing and enforcing its rights and remedies  provided  hereunder.  Borrower
shall  execute  and  deliver  to  Lender  from  time to time, promptly after the
request  of  Lender,  a severance  agreement  and such other documents as Lender
shall  request  in  order to  effect  the  severance  described in the preceding
sentence, all in form and substance reasonably satisfactory to Lender.  Borrower
hereby  absolutely  and  irrevocably  appoints  Lender  as  its  true and lawful
attorney,  coupled with  an interest,  in its name and stead to make and execute
all documents necessary or desirable to effect the aforesaid severance, Borrower
ratifying  all that  its said  attorney  shall do by  virtue  thereof; provided,
however,  Lender shall not make or execute any such  documents  under such power
until  three  (3)  days after  notice  has been given to  Borrower  by Lender of
Lender's  intent  to  exercise  its  rights  under  such power. Except as may be
required in  connection with a  Securitization  pursuant to Section 14.1 hereof,
(i) Borrower  shall not be  obligated  to pay any costs or expenses  incurred in
connection with the preparation,  execution,  recording or filing of the Severed
Loan  Documents,  and (ii) the  Severed  Loan  Documents  shall not  contain any
representations, warranties or covenants not contained in the Loan Documents and
any such  representations and warranties contained in the Severed Loan Documents
will be given by Borrower only as of the Closing Date.

Section 12.3  Lender's Right to Perform the Obligations.

         If  Borrower  shall  fail,  refuse or  neglect  to make any  payment or
perform any act required by the Loan Documents,  then while any Event of Default
exists,  and without  notice to or demand upon  Borrower and without  waiving or
releasing  any other right,  remedy or recourse  Lender may have because of such
Event of Default,  Lender may (but shall not be obligated  to) make such payment
or perform such act for the account of and at the expense of Borrower, and shall
have the right to enter upon the applicable Individual Property for such purpose
and to  take  all  such  action  thereon  and  with  respect  to the  applicable
Individual  Property as it may deem  necessary or  appropriate.  If Lender shall
elect to pay any sum due with reference to the applicable  Individual  Property,
Lender may do so in reliance on any bill,  statement or assessment procured from
the appropriate governmental authority or other issuer thereof without inquiring
into the  accuracy or validity  thereof.  Similarly,  in making any  payments to
protect the security intended to be created by the Loan Documents,  Lender shall
not be bound to inquire into the validity of any apparent or threatened  adverse
title,  lien,  encumbrance,  claim or charge  before  making an advance  for the
purpose of preventing or removing the same.  Borrower shall indemnify Lender for
all losses, expenses, damages, claims and causes of action, including reasonable
attorneys' fees,  incurred or accruing by reason of any acts performed by Lender
pursuant  to the  provisions  of this  Section  12.3;  provided,  however,  that
Borrower  shall not be liable  under such  indemnification  to the  extent  such
losses, expenses,  damages, claims and causes of action result substantially and
materially from Lender's gross negligence or willful  misconduct.  All sums paid
by Lender  pursuant to this Section 12.3,  and all other sums expended by Lender
to which it shall be entitled to be indemnified,  together with interest thereon
at the Default  Rate from the date of such  payment or  expenditure  until paid,
shall  constitute  additions to the Loan, shall be secured by the Loan Documents
and shall be paid by Borrower to Lender upon demand.

Section 12.4  Cross-Default;  Cross-Collateralization;  Waiver of Marshalling of
Assets.

                                      -77-

<PAGE>

12.4.1   Borrower  acknowledges  that  Lender has made the Loan to Borrower upon
the security of its  collective  interest in the Properties and in reliance upon
the  aggregate  of the  Properties  taken  together  being of  greater  value as
collateral  security than the sum of the Properties taken  separately.  Borrower
agrees  that the  Mortgages  are and  will be  cross-collateralized  and  cross-
defaulted  with  each  other so that (i) an Event of  Default  under  any of the
Mortgages shall constitute an Event of Default under each of the other Mortgages
which  secure  the Note;  (ii) an Event of  Default  under the Note or this Loan
Agreement  shall  constitute an Event of Default under each Mortgage;  and (iii)
each Mortgage shall constitute security for the Note as if a single blanket lien
were placed on all of the Properties as security for the Note.

                  12.4.2 To the fullest extent permitted by law,  Borrower,  for
itself and its successors and assigns, waives all rights to a marshalling of the
assets of Borrower,  Borrower's  partners and others with interests in Borrower,
and of the Properties,  or to a sale in inverse order of alienation in the event
of  foreclosure  of all or any of the  Mortgages,  and  agrees not to assert any
right  under any laws  pertaining  to the  marshalling  of  assets,  the sale in
inverse order of alienation,  homestead exemption, the administration of estates
of decedents,  or any other matters  whatsoever to defeat,  reduce or affect the
right of Lender  under the Loan  Documents to a sale of the  Properties  for the
collection of the Debt without any prior or different  resort for  collection or
of the right of Lender to the payment of the Debt out of the net proceeds of the
Properties  in  preference  to every other  claimant  whatsoever.  In  addition,
Borrower,  for itself and its  successors  and  assigns,  waives in the event of
foreclosure  of  any or all of the  Mortgages,  any  equitable  right  otherwise
available to Borrower which would require the separate sale of the Properties or
require Lender to exhaust its remedies  against any  Individual  Property or any
combination of the Properties  before  proceeding  against any other  Individual
Property  or  combination  of  Properties;  and  further  in the  event  of such
foreclosure  Borrower does hereby expressly  consents to and authorizes,  at the
option of Lender,  the foreclosure and sale either separately or together of any
combination of the Properties.

                                  ARTICLE XIII
                            LIMITATIONS ON LIABILITY

Section 13.1  Limitation on Liability.

         Except as provided below,  Borrower shall not be personally  liable for
amounts due under the Loan  Documents.  Borrower  shall be personally  liable to
Lender for any  deficiency,  loss or damage  suffered by Lender  because of: (a)
Borrower's  commission  of a  criminal  act;  (b) the  failure  to  comply  with
provisions of the Loan Documents  prohibiting the sale,  transfer or encumbrance
of an  Individual  Property,  any other  collateral,  or any direct or  indirect
ownership  interest  in  Borrower;  (c) the  misapplication  by  Borrower or any
Borrower  Party of any funds  derived  from an  Individual  Property,  including
security deposits,  insurance proceeds and condemnation awards; (d) the fraud or
misrepresentation  by Borrower or any Borrower Party now or hereafter made in or
in connection  with the Loan  Documents or the Loan  including any statements or
certificates  delivered under the Loan Documents;  (e) Borrower's  collection of
rents more than one (1) month in advance or entering  into or modifying  Leases,
or receipt of monies by Borrower or any Borrower  Party in  connection  with the
modification  of any Leases,  in violation of this Agreement or any of the other
Loan Documents;

                                      -78-

<PAGE>

(f)  Borrower's  failure to apply  proceeds  of rents or any other  payments  in
respect of the Leases and other  income of an  Individual  Property or any other
collateral to the costs of maintenance  and operation of an Individual  Property
and to the payment of taxes, lien claims,  insurance premiums,  Debt Service and
other amounts due under the Loan  Documents;  (g) Borrower's  interference  with
Lender's  exercise  of rights  under the  Assignment  of Leases and  Rents;  (h)
Borrower's failure to maintain insurance as required by this Agreement or to pay
any  taxes or  assessments  affecting  an  Individual  Property;  (i)  damage or
destruction  to an  Individual  Property  caused  by  the  intentional  acts  or
omissions of Borrower,  its agents,  employees,  or contractors;  (j) Borrower's
failure to comply with its  obligations  with respect to  environmental  matters
under  Article  6; (k)  Borrower's  failure  to pay for any loss,  liability  or
expense (including  attorneys' fees) incurred by Lender arising out of any claim
or allegation  made by Borrower,  its successors or assigns,  or any creditor of
Borrower,  that this  Agreement  or the  transactions  contemplated  by the Loan
Documents establishes a joint venture,  partnership or other similar arrangement
between  Borrower and Lender;  (l) any  brokerage  commission  or finder's  fees
claimed in connection with the transactions  contemplated by the Loan Documents;
(m) Borrower's  indemnification  of Lender set forth in Section 14.2  hereafter;
(n) Borrower's or any TRS Lessee's failure to comply, or cause compliance,  with
any  PIP  Requirements;  or  (o)  any  claim,  allegation  or  challenge  to the
enforceability  or validity of this Agreement or the other Loan Documents or the
Lien  of  the  Mortgages  by any  Person  based  upon,  arising  from  or due to
fraudulent conveyance or transfer.

         Notwithstanding anything to the contrary in this Agreement, the Note or
any of the Loan  Documents,  (i) Lender  shall not be deemed to have  waived any
right which Lender may have under Section 506(a),  506(b),  1111(b) or any other
provisions  of the  Bankruptcy  Code to file a claim for the full  amount of the
Debt secured by the Mortgages or to require that all  collateral  shall continue
to secure all of the Debt owing to Lender in accordance with the Loan Documents,
and (ii) the Debt shall be fully  recourse to  Borrower  in the event that:  (A)
there is a default under  Sections 11.9 or 11.10 hereof;  (B) Borrower  fails to
obtain  Lender's  prior written  consent to any  subordinate  financing or other
voluntary lien encumbering any Individual  Property;  or (C) except as otherwise
permitted under this Agreement,  Borrower fails to obtain Lender's prior written
consent to any assignment, transfer, or conveyance of any Individual Property or
any interest therein as required by the Loan Documents.

Section 13.2  Limitation on Liability of Lender's Officers, Employees, etc.

         Any obligation or liability whatsoever of Lender which may arise at any
time under this Agreement or any other Loan Document  shall be satisfied,  if at
all,  out of Lender's  interest in the  Property  only.  No such  obligation  or
liability shall be personally binding upon, nor shall resort for the enforcement
thereof be had to, the  property  of any of  Lender's  shareholders,  directors,
officers,  employees  or  agents,  regardless  of  whether  such  obligation  or
liability is in the nature of contract, tort or otherwise.

                                      -79-

<PAGE>

                                   ARTICLE XIV
                                 SECURITIZATION

Section 14.1  Securitization.

         At the request of the holder of the Note and, to the extent not already
required to be provided by Borrower  under this  Agreement,  Borrower  shall use
reasonable  efforts to satisfy the market  standards  to which the holder of the
Note customarily  adheres or which may be reasonably required in the marketplace
or by  the  Rating  Agencies  in  connection  with  the  sale  of  the  Note  or
participation  therein or the first successful  securitization (such sale and/or
securitization,  the "Securitization") of rated single or multi-class securities
(the "Securities")  secured by or evidencing ownership interests in the Note and
the Mortgages, including, without limitation, to:

                           (a)   provide  such  financial  and other information
reasonably available with respect to the Properties, the Borrower, the Operating
Lessees and the Managers,

                           (b)   provide budgets relating to the Properties, and

                           (c)   perform  or  permit or cause to be performed or
permitted  such  site  inspection,  appraisals,  market  studies,  environmental
reviews and reports (Phase I's and,  if  appropriate,  Phase  II's), engineering
reports  and  other  due diligence  investigations of the Properties,  as may be
reasonably  requested by the  holder  of the  Note  or the  Rating  Agencies  or
as may be  necessary  or appropriate  in  connection  with  the   Securitization
(the   "Securitization Information"),  together,  if customary, with appropriate
verification  and/or consents of the  ecuritization  Information through letters
of  auditors or opinions of counsel of  independent attorneys  acceptable to the
Lender and the Rating Agencies;

                  14.1.1 cause counsel to render  opinions,  which may be relied
upon by the  holder of the  Note,  the  Rating  Agencies  and  their  respective
counsel,  agents  and  representatives,  as to  non-  consolidation,  fraudulent
conveyance,  and true  sale or any other  opinion  customary  in  securitization
transactions  with respect to the  Properties  and Borrower and its  Affiliates,
which counsel and opinions shall be reasonably satisfactory to the holder of the
Note and the Rating Agencies;

                  14.1.2  make such  representations  and  warranties  as of the
closing date of the Securitization with respect to the Properties, Borrower, and
the Loan Documents as are customarily  provided in  securitization  transactions
and as may be  reasonably  requested  by the  holder  of the Note or the  Rating
Agencies  and  consistent  with the facts  covered by such  representations  and
warranties as they exist on the date thereof,  including the representations and
warranties made in the Loan Documents,  to the extent such  representations  and
warranties are true as of the closing date of the Securitization; and

                  14.1.3  execute  such  amendments  to the Loan  Documents  and
organizational  documents,  enter  into a lockbox or  similar  arrangement  with
respect  to the Rents and  establish  and fund such  reserve  funds  (including,
without limitation, reserve funds for deferred maintenance and

                                      -80-

<PAGE>

capital  improvements)  as may be  requested  by the  holder  of the Note or the
Rating Agencies or otherwise to effect the  Securitization;  provided,  however,
that Borrower shall not be required to modify or amend any Loan Document if such
modification  or  amendment  would (i)  change  the  interest  rate,  the stated
maturity or the  amortization of principal set forth in the Note, or (ii) modify
or amend any other material economic term of the Loan.

         All  reasonable  third party costs and  expenses  incurred by Lender in
connection with Borrower's  complying with requests made under this Section 14.1
shall be paid by Lender;  provided,  that, Borrower shall be responsible for all
costs and  expenses  incurred  by  Borrower  in  complying  with such  requests,
including, without limitation, third party costs and attorney's fees.

Section 14.2  Securitization Indemnification.

                  14.2.1 Borrower understands that certain of the Securitization
Information and the financial reports relating to the Properties may be included
in  disclosure  documents  in  connection  with the  Securitization,  including,
without  limitation,  a prospectus,  prospectus  supplement or private placement
memorandum  (each,  an "Offering  Document") and may also be included in filings
with the  Securities and Exchange  Commission  pursuant to the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934,
as amended (the "Exchange  Act"),  or provided or made available to investors or
prospective  investors  in the  Securities,  the Rating  Agencies,  and  service
providers  relating  to the  Securitization.  In the  event  that  the  Offering
Document  is  required to be revised  prior to the sale of all  Securities,  the
Borrower  will  cooperate  with the holder of the Note in updating  the Offering
Document by  providing  all current  information  necessary to keep the Offering
Document accurate and complete in all material respects.

                  14.2.2  Borrower  agrees to provide in connection with each of
(i) a preliminary and a private  placement  memorandum or (ii) a preliminary and
final prospectus or prospectus  supplement,  as applicable,  an  indemnification
certificate (A) certifying that Borrower has carefully  examined such memorandum
or  prospectus,  as  applicable,  including  without  limitation,  the  sections
entitled "Special Considerations,"  "Description of the Mortgages," "Description
of the Mortgage Loans and Mortgaged  Properties,"  "The Manager," "The Borrower"
and "Certain  Legal  Aspects of the Mortgage  Loan," and such  sections (and any
other sections  reasonably  requested) do not contain any untrue  statement of a
material  fact or omit to state a material  fact  necessary in order to make the
statements made, in the light of the  circumstances  under which they were made,
not misleading,  (B) indemnifying Lender (and for purposes of this Section 14.2,
Lender  hereunder  shall include its officers and  directors),  any affiliate of
Lender  that has filed or may file the  registration  statement  relating to the
securitization (the "Registration  Statement"),  each of its directors,  each of
its  officers  who have  signed the  Registration  Statement  and each person or
entity who controls  Lender  within the meaning of Section 15 of the  Securities
Act or Section 20 of the Exchange Act,  (collectively,  the "Underwriter Group")
for any losses,  claims,  damages or liabilities  (the  "Liabilities")  to which
Lender,  or the Underwriter  Group may become subject insofar as the Liabilities
arise out of or are based upon any untrue  statement or alleged untrue statement
of any material  fact  contained  in such  sections or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated in such  sections or necessary in order to make the  statements  in
such sections or in light of the  circumstances  under which they were made, not
misleading and

                                      -81-

<PAGE>

(C)  agreeing to  reimburse  Lender and the  Underwriter  Group for any legal or
other expenses reasonably incurred by Lender in connection with investigating or
defending the Liabilities;  provided, however, that Borrower (1) shall be liable
in any such case under clauses (B) or (C) above only to the extent that any such
loss claim,  damage or liability  arises out of or is based upon any such untrue
statement  or omission  made  therein in reliance  upon and in  conformity  with
written  information  (subject to clause (2) below) furnished to Lender by or on
behalf of Borrower in  connection  with the  preparation  of the  memorandum  or
prospectus  or in  connection  with the  underwriting  of the  debt,  including,
without limitation, financial statements of Borrower, operating statements, rent
rolls, environmental site assessment reports and property condition reports with
respect  to the  Properties,  and (2) shall not be  liable  for any  information
contained in any report or other written information  delivered by a third party
not  Affiliated  with Borrower (an  "Unrelated  Third-Party  Provider," and such
report,  an "Unrelated  Third-Party  Report"),  unless,  (x) such information is
based on written information delivered by or at the direction of Borrower or its
officers, employees, affiliates or agents to the Unrelated Third-Party Provider,
or (y) at the time such Unrelated Third-Party Report was delivered,  Borrower or
any SPC Party knew that such report contained  statements of fact that give rise
to the Liabilities in question.  This indemnity agreement will be in addition to
any liability which Borrower may otherwise have.

                  14.2.3 In  connection  with filings  under the  Exchange  Act,
Borrower  agrees  to  indemnify  (i)  Lender,  and  the  Underwriter  Group  for
Liabilities to which Lender, or the Underwriter Group may become subject insofar
as the  Liabilities  arise  out of or are based  upon the  omission  or  alleged
omission  to  state  in the  Securitization  Information  or  financial  reports
relating  to the  Properties  a  material  fact  required  to be  stated  in the
Securitization  Information or financial  reports  relating to the Properties in
order to make the  statements  in the  Securitization  Information  or financial
reports relating to the Properties,  in light of the  circumstances  under which
they were made not misleading and (ii) reimburse Lender or the Underwriter Group
for any legal or other expenses reasonably incurred by Lender or the Underwriter
Group in connection with defending or investigating  the Liabilities,  provided,
however,  that  Borrower  shall be liable in any such case under  clauses (i) or
(ii) above only to the extent that any such loss,  claim,  damage,  liability or
expense  arises out of any such untrue  statement or omission made therein which
Borrower  identified  to Lender in  writing  at the time of  Borrower's  (or its
attorneys) examination of the Offering Document (or drafts thereof).

                  14.2.4  Promptly after receipt by an  indemnified  party under
this Section 14.2 of notice of the commencement of any action,  such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 14.2,  notify the indemnifying  party in writing of the
commencement  thereof, but the omission to so notify the indemnifying party will
not relieve the  indemnifying  party from any liability  which the  indemnifying
party may have to any  indemnified  party  hereunder  except to the extent  that
failure to notify causes prejudice to the indemnifying  party. In the event that
any action is brought  against  any  indemnified  party,  and its  notifies  the
indemnifying party of the commencement  thereof,  the indemnifying party will be
entitled, jointly with any other indemnifying party, to participate therein and,
to the extent  that it (or they) may elect by written  notice  delivered  to the
indemnified  party  promptly  after  receiving  the  aforesaid  notice from such
indemnified  party, to assume the defense  thereof with counsel  satisfactory to
such  indemnified  party.  After  notice  from  the  indemnifying  party to such
indemnified party under this Section 14.2 the

                                      -82-

<PAGE>

indemnifying  party  shall  be  responsible  for any  legal  or  other  expenses
subsequently  incurred by such indemnified  party in connection with the defense
thereof other than reasonable costs of investigation;  provided, however, if the
defendants  in any such  action  include  both  the  indemnified  party  and the
indemnifying  party and the indemnified  party shall have  reasonably  concluded
that  there are any legal  defenses  available  to it and/or  other  indemnified
parties  that  are  different  from or  additional  to  those  available  to the
indemnifying  party,  the  indemnified  party or parties shall have the right to
select  separate  counsel  to  assert  such  legal  defenses  and  to  otherwise
participate in the defense of such action on behalf of such indemnified party to
parties.  The  indemnifying  party shall not be liable for the  expenses of more
than one separate  counsel  unless an  indemnified  party shall have  reasonably
concluded  that there may be legal  defenses  available to it that are different
from or additional to those available to another  indemnified party. In no event
shall an indemnifying party be liable to an indemnified party under this Section
14.1 for any losses,  claims,  damages or liabilities to which such  indemnified
party may become  subject to the extent the same arises  solely by reason of the
gross negligence,  illegal acts, fraud of willful misconduct or such indemnified
party.

                  14.2.5 In order to provide for just and equitable contribution
in  circumstances  in which the  indemnity  agreement  provided  for in  Section
14.2(b)  or (c) is for any reason  held to be  unenforceable  by an  indemnified
party in respect of any losses,  claims,  damages or  liabilities  (or action in
respect  thereof)  referred to therein  which would  otherwise be  indemnifiable
under Section  14.2(b) or (c), the  indemnifying  party shall  contribute to the
amount  paid or payable  by the  indemnified  party as a result of such  losses,
claims,  damages  or  liabilities  (or  action in  respect  thereof);  provided,
however,  that no person  guilty of  fraudulent  misrepresentation  (within  the
meaning  of  Section  11(f)  of  the  Securities   Act)  shall  be  entitled  to
contribution   from  any  person   who  was  not   guilty  of  such   fraudulent
misrepresentation.  In  determining  the  amount  of  contribution  to which the
respective parties are entitled, the following factors shall be considered:  (i)
Lender's and Borrower's relative knowledge and access to information  concerning
the matter with respect to which claim was  asserted;  (ii) the  opportunity  to
correct and prevent any  statement  or omission;  and (iii) any other  equitable
considerations  appropriate  in the  circumstances.  Lender and Borrower  hereby
agree that it would not be  equitable  if the amount of such  contribution  were
determined by pro rata or per capita allocation.

                  14.2.6 The  liabilities  and  obligations of both Borrower and
Lender under this Section 14.2 shall survive the  termination  of this Agreement
and the satisfaction and discharge of the Debt.

Section 14.3  Servicer.

         At the option of Lender, the Loan may be serviced by a Servicer/Trustee
("Servicer")  selected by Lender.  Lender may delegate all or any portion of its
responsibilities  under  this  Agreement  and the other  Loan  Documents  to the
Servicer  pursuant  to a servicing  agreement  ("Servicing  Agreement")  between
Lender and Servicer.  Borrower shall not be  responsible  for any set-up fees or
any other initial costs relating to or arising under the Servicing  Agreement or
for payment of the monthly  servicing  fee due to Servicer  under the  Servicing
Agreement.

                                      -83-

<PAGE>

                                   ARTICLE XV
                                  MISCELLANEOUS

Section 15.1  Notices.

         Any notice required or permitted to be given under this Agreement shall
be in writing and either shall be mailed by  certified  mail,  postage  prepaid,
return  receipt  requested,  or  sent  by  overnight  air  courier  service,  or
personally  delivered to a  representative  of the receiving  party,  or sent by
telecopy  (provided an  identical  notice is also sent  simultaneously  by mail,
overnight  courier,  or personal delivery as otherwise  provided in this Section
15.1). All such communications shall be mailed, sent or delivered,  addressed to
the party for whom it is intended at its address set forth below.

          If to Borrower:        EQI Financing Partnership IV, L.P.  and
                                 EQI/WV Financing Partnership II, L.P.
                                 c/o Equity Inns, Inc.
                                 7700 Wolf River Boulevard
                                 Germantown, Tennessee  38138
                                 Attention:  President
                                 Telecopy:  (901) 754-2374

          If to Lender:          General Electric Capital Corporation
                                 c/o GE Capital Loan Servicing, Inc.
                                 363 North Sam Houston Parkway East, Suite 1200
                                 Houston, Texas  77060
                                 Attention:  Legal Department
                                 Telecopy:  (281) 405-7153

          With a copy to:        General Electric Capital Corporation
                                 292 Long Ridge Road
                                 Stamford, Connecticut  06927
                                 Attention:  Paul Mundinger, Esq.
                                 Telecopy:  (203) 357-6364

Any  communication  so  addressed  and mailed shall be deemed to be given on the
earliest of (a) when  actually  delivered,  (b) on the first  Business Day after
deposit with an overnight air courier service,  or (c) on the third Business Day
after deposit in the United States mail,  postage  prepaid,  in each case to the
address of the intended addressee,  and any communication so delivered in person
shall be deemed to be given  when  receipted  for by, or  actually  received  by
Lender or Borrower,  as the case may be. If given by telecopy, a notice shall be
deemed  given and  received  when the  telecopy  is  transmitted  to the party's
telecopy number specified above  confirmation of complete receipt is received by
the transmitting  party during normal business hours or on the next Business Day
if not confirmed  during  normal  business  hours.  Either party may designate a

                                      -84-

<PAGE>

change of  address  by written  notice to the other by giving  at least ten (10)
days  prior  written  notice of such change of address.

Section 15.2  Amendments and Waivers.

         No amendment or waiver of any provision of the Loan Documents  shall be
effective  unless in writing and signed by the party against whom enforcement is
sought.

Section 15.3  Limitation on Interest.

         It is the  intention  of the  parties  hereto to  conform  strictly  to
applicable usury laws.  Accordingly,  all agreements between Borrower and Lender
with  respect  to the Loan are  hereby  expressly  limited  so that in no event,
whether by reason of  acceleration  of maturity or  otherwise,  shall the amount
paid or  agreed  to be  paid  to  Lender  or  charged  by  Lender  for the  use,
forbearance or detention of the money to be lent hereunder or otherwise,  exceed
the  maximum  amount  allowed  by law.  If the  Loan  would  be  usurious  under
applicable  law  (including  the laws of the  State  and the laws of the  United
States of America),  then,  notwithstanding anything to the contrary in the Loan
Documents:  (a) the aggregate of all consideration  which  constitutes  interest
under  applicable  law that is  contracted  for,  taken,  reserved,  charged  or
received  under the Loan  Documents  shall  under no  circumstances  exceed  the
maximum  amount of interest  allowed by applicable  law, and any excess shall be
credited on the Note by the holder  thereof;  and (b) if maturity is accelerated
by reason of an election by Lender, or in the event of any prepayment,  then any
consideration which constitutes interest may never include more than the maximum
amount  allowed by  applicable  law.  In such  case,  excess  interest,  if any,
provided for in the Loan  Documents  or  otherwise,  to the extent  permitted by
applicable law, shall be amortized, prorated, allocated and spread from the date
of advance  until payment in full so that the actual rate of interest is uniform
through  the  term  hereof.  If such  amortization,  proration,  allocation  and
spreading is not permitted under applicable law, then such excess interest shall
be canceled automatically as of the date of such acceleration or prepayment and,
if theretofore  paid, shall be credited on the Note. The terms and provisions of
this Section 15.3 shall control and supersede  every other provision of the Loan
Documents. The Loan Documents are contracts made under and shall be construed in
accordance  with and governed by the laws of the State of New York,  except that
if at any time  the laws of the  United  States  of  America  permit  Lender  to
contract for, take, reserve, charge or receive a higher rate of interest than is
allowed by the laws of the State of New York (whether such federal laws directly
so provide or refer to the law of any state),  then such  federal  laws shall to
such extent  govern as to the rate of interest  which Lender may  contract  for,
take, reserve, charge or receive under the Loan Documents.

Section 15.4  Invalid Provisions.

         If any provision of any Loan Document is held to be illegal, invalid or
unenforceable, such provision shall be fully severable; the Loan Documents shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never  comprised a part  thereof;  the  remaining  provisions  thereof shall
remain in full  effect and shall not be  affected by the  illegal,  invalid,  or
unenforceable  provision  or by its  severance  therefrom;  and in  lieu of such
illegal,  invalid or unenforceable  provision there shall be added automatically
as a part of such Loan Document a provision as similar in terms to such illegal,
invalid or  unenforceable  provision  as may be possible to be legal,  valid and
enforceable.

                                      -85-

<PAGE>

Section 15.5  Reimbursement of Expenses.

         Borrower  shall  pay all  reasonable  expenses  incurred  by  Lender in
connection  with the Loan,  including  reasonable  fees and expenses of Lender's
attorneys,  environmental,  engineering and other consultants, and fees, charges
or taxes for the recording or filing of Loan  Documents.  Borrower shall pay all
reasonable expenses of Lender in connection with the administration of the Loan,
including audit costs,  inspection fees, settlement of condemnation and casualty
awards,  premiums  for title  insurance  and  endorsements  thereto  and  costs,
expenses and fees of the Rating  Agencies  for the  delivery of  recommendations
requested by Borrower in connection  with the Loan or otherwise  required  under
the Loan Documents.  Borrower shall, upon request, promptly reimburse Lender for
all amounts expended,  advanced or incurred by Lender to collect the Note, or to
enforce the rights of Lender under this Agreement or any other Loan Document, or
to defend or assert the rights and claims of Lender under the Loan  Documents or
with respect to the Individual  Property (by  litigation or other  proceedings),
which amounts will include all court costs,  attorneys' fees and expenses,  fees
of auditors and accountants,  and  investigation  expenses as may be incurred by
Lender  in  connection  with any such  matters  (whether  or not  litigation  is
instituted), together with interest at the Default Rate on each such amount from
the date of disbursement until the date of reimbursement to Lender, all of which
shall constitute part of the Loan and shall be secured by the Loan Documents.

Section 15.6  Approvals; Third Parties; Conditions.

         All  approval  rights  retained or  exercised by Lender with respect to
Leases,  contracts,  plans,  studies and other  matters are solely to facilitate
Lender's  credit  underwriting,  and  shall  not be  deemed  or  construed  as a
determination  that  Lender has  passed on the  adequacy  thereof  for any other
purpose  and may not be  relied  upon by  Borrower  or any  other  Person.  This
Agreement is for the sole and  exclusive  use of Lender and Borrower and may not
be enforced,  nor relied upon, by any Person other than Lender and Borrower. All
conditions of the obligations of Lender  hereunder,  including the obligation to
make advances, are imposed solely and exclusively for the benefit of Lender, its
successors  and  assigns,  and no other  Person  shall have  standing to require
satisfaction of such conditions or be entitled to assume that Lender will refuse
to make  advances  in the absence of strict  compliance  with any or all of such
conditions, and no other Person shall, under any circumstances,  be deemed to be
a beneficiary of such  conditions,  any and all of which may be freely waived in
whole or in part by Lender at any time in Lender's sole discretion.

Section 15.7  Lender Not in Control; No Partnership.

         None of the covenants or other  provisions  contained in this Agreement
shall, or shall be deemed to, give Lender the right or power to exercise control
over the affairs or management of Borrower, the power of Lender being limited to
the rights to  exercise  the  remedies  referred to in the Loan  Documents.  The
relationship  between  Borrower  and Lender is, and at all times  shall  remain,
solely  that of debtor  and  creditor.  No  covenant  or  provision  of the Loan
Documents  is  intended,  nor  shall it be  deemed  or  construed,  to  create a
partnership,  joint  venture,  agency or common  interest  in  profits or income
between Lender and Borrower or to create an equity in the Individual Property in
Lender.  Lender  neither  undertakes nor assumes any  responsibility  or duty to
Borrower or to any other person with respect to the  Individual  Property or the

                                      -86-

<PAGE>

Loan, except as expressly provided in the Loan  Documents;  and  notwithstanding
any other provision of the  Loan Documents:  (a) Lender is not, and shall not be
construed  as, a  partner,  joint  venturer, alter  ego,  manager,   controlling
person  or  other  business  associate  or  participant  of any kind of Borrower
or its  stockholders,  members,  or partners and Lender  does not intend to ever
assume  such  status;  (b) Lender  shall  in  no  event be liable for any debts,
expenses  or losses  incurred  or  sustained  by Borrower; and  (c) Lender shall
not  be  deemed  responsible  for  or  a  participant in any acts,  omissions or
decisions of Borrower  or its stockholders,  members,  or partners.   Lender and
Borrower disclaim any intention to create any partnership, joint venture, agency
or  common  interest  in  profits or  income between Lender and Borrower,  or to
create  an  equity  in  the  Individual  Property  in Lender,  or any sharing of
liabilities, losses, costs or expenses.

Section 15.8  Time of the Essence.

         Time is of the essence with respect to this Agreement.

Section 15.9  Successors and Assigns.

         This Agreement shall be binding upon and inure to the benefit of Lender
and Borrower and their respective successors and assigns of Lender and Borrower,
provided that neither  Borrower nor any other Borrower Party shall,  without the
prior  written  consent of  Lender,  assign any  rights,  duties or  obligations
hereunder.

Section 15.10  Renewal, Extension or Rearrangement.

         All provisions of the Loan  Documents  shall apply with equal effect to
each and all promissory notes and amendments thereof hereinafter  executed which
in whole or in part represent a renewal, extension, increase or rearrangement of
the Loan.

Section 15.11  Waivers.

         No course of dealing on the part of Lender,  its  officers,  employees,
consultants  or  agents,  nor any  failure  or delay by Lender  with  respect to
exercising  any  right,  power or  privilege  of  Lender  under  any of the Loan
Documents, shall operate as a waiver thereof.

Section 15.12  Cumulative Rights; Joint and Several Liability.

         Rights  and  remedies  of  Lender  under  the Loan  Documents  shall be
cumulative,  and the  exercise  or partial  exercise of any such right or remedy
shall not preclude  the exercise of any other right or remedy.  If more than one
person or entity has executed this Agreement as "Borrower,"  the  obligations of
all such persons or entities hereunder shall be joint and several.

Section 15.13  Singular and Plural.

         Words  used in this  Agreement  and the  other  Loan  Documents  in the
singular,  where the context so  permits,  shall be deemed to include the plural
and vice versa.  The  definitions of words in the singular in this Agreement and
the other Loan Documents shall apply to such words when used in the plural where
the context so permits and vice versa.

                                      -87-

<PAGE>

Section 15.14  Phrases.

         When used in this  Agreement and the other Loan  Documents,  the phrase
"including" shall mean "including, but not limited to," the phrase "satisfactory
to  Lender"  shall  mean "in form and  substance  satisfactory  to Lender in all
respects," the phrase "with Lender's consent" or "with Lender's  approval" shall
mean such consent or approval at Lender's discretion, and the phrase "acceptable
to Lender" shall mean "acceptable to Lender at Lender's sole discretion."

Section 15.15  Exhibits and Schedules.

         The exhibits and schedules  attached to this Agreement are incorporated
herein and shall be considered a part of this Agreement for the purposes  stated
herein.

Section 15.16  Titles of Articles, Sections and Subsections.

         All titles or  headings to  articles,  sections,  subsections  or other
divisions of this Agreement and the other Loan Documents or the exhibits  hereto
and  thereto  are only for the  convenience  of the  parties  and  shall  not be
construed  to have any effect or meaning  with  respect to the other  content of
such  articles,  sections,  subsections or other  divisions,  such other content
being controlling as to the agreement between the parties hereto.

Section 15.17  Promotional Material.

         Borrower authorizes Lender to issue press releases,  advertisements and
other  promotional  materials in connection  with Lender's own  promotional  and
marketing  activities,  including in connection with a Securitization,  and such
materials  may  describe  the Loan in general  terms or in detail  and  Lender's
participation  therein in the Loan.  All  references to Lender  contained in any
press release, advertisement or promotional material issued by Borrower shall be
approved in writing by Lender in advance of issuance.

Section 15.18  Survival.

         All of the  representations,  warranties,  covenants,  and  indemnities
hereunder  (including  environmental  matters  under  Article  6), and under the
indemnification  provisions  of the  other  Loan  Documents  shall  survive  the
repayment  in full of the  Loan  and the  release  of the  liens  evidencing  or
securing  the Loan,  and  shall  survive  the  transfer  (by sale,  foreclosure,
conveyance in lieu of foreclosure  or otherwise) of any or all right,  title and
interest  in and to the  Individual  Property  to any  party,  whether or not an
Affiliate of Borrower.

Section 15.19  WAIVER OF JURY TRIAL.

         BORROWER  HEREBY  AGREES  NOT TO  ELECT  A TRIAL  BY JURY OF ANY  ISSUE
TRIABLE  OF RIGHT BY JURY,  AND  WAIVES  ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH  RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN

                                      -88-

<PAGE>

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 BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO  WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
LENDER IS HEREBY  AUTHORIZED TO  FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.

Section 15.20  Waiver of Punitive or Consequential Damages.

         Neither Lender nor Borrower shall be responsible or liable to the other
or to any other  Person for any  punitive,  exemplary or  consequential  damages
which may be  alleged  as a result of the Loan or the  transaction  contemplated
hereby, including any breach or other default by any party hereto.

Section 15.21  Governing Law.

         (A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY
LENDER AND  ACCEPTED BY BORROWER IN THE STATE OF NEW YORK,  AND THE  PROCEEDS OF
THE NOTE  DELIVERED  PURSUANT  HERETO WERE DISBURSED FROM THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL  RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING  TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,  INCLUDING,
WITHOUT  LIMITING THE  GENERALITY  OF THE  FOREGOING,  MATTERS OF  CONSTRUCTION,
VALIDITY AND PERFORMANCE,  THIS AGREEMENT AND THE OBLIGATIONS  ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK  APPLICABLE  TO CONTRACTS  MADE AND  PERFORMED  IN SUCH STATE  (WITHOUT
REGARD TO  PRINCIPLES  OF CONFLICT  LAWS) AND ANY  APPLICABLE  LAW OF THE UNITED
STATES OF AMERICA,  EXCEPT THAT AT ALL TIMES THE  PROVISIONS  FOR THE  CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT
HERETO  AND  PURSUANT  TO THE OTHER  LOAN  DOCUMENTS  SHALL BE  GOVERNED  BY AND
CONSTRUED  ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE  INDIVIDUAL
PROPERTY IS LOCATED,  IT BEING  UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED
BY THE LAW OF SUCH  STATE,  THE LAW OF THE STATE OF NEW YORK  SHALL  GOVERN  THE
CONSTRUCTION,  VALIDITY AND  ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER.  TO THE FULLEST EXTENT PERMITTED BY
LAW, BORROWER HEREBY  UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT
THAT THE LAW OF ANY OTHER JURISDICTION  GOVERNS THIS AGREEMENT AND THE NOTE, AND
THIS  AGREEMENT  AND THE NOTE SHALL BE GOVERNED BY AND  CONSTRUED IN  ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK  PURSUANT  TO  SECTION  5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW.

                                      -89-

<PAGE>

         (B) ANY LEGAL SUIT,  ACTION OR  PROCEEDING  AGAINST  LENDER OR BORROWER
ARISING  OUT OF OR  RELATING  TO  THIS  AGREEMENT  MAY  AT  LENDER'S  OPTION  BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,  COUNTY OF NEW
YORK,  PURSUANT TO SECTION  5-1401 OF THE NEW YORK GENERAL  OBLIGATIONS  LAW AND
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE
AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER
HEREBY  IRREVOCABLY  SUBMITS TO THE  JURISDICTION OF ANY SUCH COURT IN ANY SUIT,
ACTION OR PROCEEDING.  BORROWER DOES HEREBY DESIGNATE AND APPOINT CT CORPORATION
SERVICE,  111 EIGHTH AVENUE, NEW YORK, NEW YORK 10011 AS ITS AUTHORIZED AGENT TO
ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE
SERVED IN ANY SUCH SUIT,  ACTION OR  PROCEEDING IN ANY FEDERAL OR STATE COURT IN
NEW YORK,  NEW YORK,  AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID
ADDRESS AND WRITTEN  NOTICE OF SAID  SERVICE  MAILED OR DELIVERED TO BORROWER IN
THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON  BORROWER,  IN ANY SUCH SUIT,  ACTION OR PROCEEDING IN THE STATE OF
NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS
OF ITS AUTHORIZED  AGENT  HEREUNDER,  (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A  SUBSTITUTE  AUTHORIZED  AGENT WITH AN OFFICE IN NEW YORK,  NEW YORK
(WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS
FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF
ITS  AUTHORIZED  AGENT  CEASES TO HAVE AN  OFFICE  IN NEW  YORK,  NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.

Section 15.22  Entire Agreement.

         This Agreement and the other Loan Documents embody the entire agreement
and understanding between Lender and Borrower and supersede all prior agreements
and  understandings  between such parties  relating to the subject matter hereof
and thereof. Accordingly, the Loan Documents may not be contradicted by evidence
of prior,  contemporaneous,  or subsequent oral agreements of the parties. There
are no unwritten oral agreements between the parties.

Section 15.23  Counterparts.

         This Agreement may be executed in multiple counterparts,  each of which
shall constitute an original, but all of which shall constitute one document.

Section 15.24  Brokers and Financial Advisors.

         Borrower  hereby  represents  that  it  has  dealt  with  no  financial
advisors,  brokers,  underwriters,   placement  agents,  agents  or  finders  in
connection with the transactions contemplated by this

                                      -90-

<PAGE>

Agreement.  Borrower hereby agrees to indemnify, defend and hold Lender harmless
from and against any and all claims, liabilities, costs and expenses of any kind
(including  Lender's  attorneys'  fees and  expenses)  in any way relating to or
arising  from a claim by any Person that such Person acted on behalf of Borrower
or  Lender  in  connection  with  the  transactions   contemplated  herein.  The
provisions of this Section 15.24 shall survive the expiration and termination of
this Agreement and the payment of the Debt.

                         [NO FURTHER TEXT ON THIS PAGE]

                                      -91-

<PAGE>

EXECUTED as of the date first written above.

                                  LENDER:

                                  GENERAL ELECTRIC CAPITAL CORPORATION,
                                  a New York corporation

                                  By:  /s/ Victor Diaso
                                       ----------------
                                       Name:  Victor Diaso
                                       Title: Authorized Signatory

                                  BORROWER:

                                  EQI FINANCING PARTNERSHIP IV, L.P.,
                                  a Tennessee limited partnership

                                  By:  EQI Financing Corporation IV, a Tennessee
                                       corporation, its general partner

                                       By:  /s/ Howard Silver
                                            -----------------
                                            Name:  Howard Silver
                                            Title: President

                                  EQI/WV FINANCING PARTNERSHIP II, L.P.,
                                  a Tennessee limited partnership

                                  By:  EQI/WV Financing Corporation, a Tennessee
                                       corporation, its general partner

                                       By:  /s/ Howard Silver
                                            -----------------
                                            Name:  Howard Silver
                                            Title: President

                                      -92-

<PAGE>

                                     JOINDER

         By executing this Joinder (the  "Joinder"),  the undersigned  ("Joinder
Parties")  jointly and  severally  guaranty the  performance  by Borrower of all
obligations  and  liabilities  for which  Borrower is  personally  liable  under
Section  13.1 of this  Agreement;  provided,  however,  with  respect  solely to
Borrower's  obligations and liabilities under Section 13.1(o),  such guaranty by
Joinder Parties shall be limited to any  deficiency,  loss or damage suffered by
Lender in an amount not to exceed  $3,660,000.00.  This Joinder is a guaranty of
full and complete payment and performance and not of collectability.

         1. Waivers.  To the fullest  extent  permitted by applicable  law, each
Joinder   Party  waives  all  rights  and  defenses  of  sureties,   guarantors,
accommodation  parties and/or  co-makers and agrees that its  obligations  under
this  Joinder  shall  be  primary,  absolute  and  unconditional,  and  that its
obligations  under this  Joinder  shall be  unaffected  by any of such rights or
defenses, including:

         (a)   the unenforceability of any Loan Document against Borrower and/or
any guarantor or other Joinder Party;

         (b) any  release  or other  action or  inaction  taken by  Lender  with
respect to the  collateral,  the Loan,  Borrower,  any  guarantor  and/or  other
Joinder  Party,  whether or not the same may impair or destroy  any  subrogation
rights of any Joinder Party, or constitute a legal or equitable discharge of any
surety or indemnitor;

         (c) the existence of any collateral or other security for the Loan, and
any requirement that Lender pursue any of such collateral or other security,  or
pursue any remedies it may have against Borrower, any guarantor and/or any other
Joinder Party;

         (d) any  requirement  that Lender provide notice to or obtain a Joinder
Party's consent to any modification,  increase,  extension or other amendment of
the Loan, including the guaranteed obligations;

         (e) any  right  of  subrogation  (until  payment  in full of the  Loan,
including the  guaranteed  obligations,  and the  expiration  of any  applicable
preference period and statute of limitations for fraudulent conveyance claims);

         (f)  any defense based on any statute of limitations;

         (g) any payment by  Borrower to Lender if such  payment is held to be a
preference or fraudulent conveyance under bankruptcy laws or Lender is otherwise
required to refund such payment to Borrower or any other party; and

         (h) any voluntary or involuntary bankruptcy, receivership,  insolvency,
reorganization or similar proceeding affecting Borrower or any of its assets.

                                  JOINDER - 93

<PAGE>

         2.  Agreements.   Each  Joinder  Party further represents, warrants and
agrees that:    (a)  The  obligations under this Joinder are enforceable against
each such party and are not subject to any defenses, offsets or counterclaims;

         (b)   The provisions of this  Joinder are for the benefit of Lender and
its successors and assigns;

         (c)  Lender  shall  have the  right to (i)  renew,  modify,  extend  or
accelerate the Loan, (ii) pursue some or all of its remedies  against  Borrower,
any  guarantor  or any  Joinder  Party,  (iii) add,  release or  substitute  any
collateral  for  the  Loan or  party  obligated  thereunder,  and  (iv)  release
Borrower, any guarantor or any Joinder Party from liability,  all without notice
to or  consent  of any  Joinder  Party  (or other  Joinder  Party)  and  without
affecting  the  obligations  of any  Joinder  Party  (or  other  Joinder  Party)
hereunder;

         (d) Each  Joinder  Party  covenants  and  agrees to  furnish to Lender,
within  ninety  (90) days after the end of each  calendar  year of such  Joinder
Party,  a current (as of the end of such  calendar  year)  balance sheet of such
Joinder  Party,  in scope and detail  satisfactory  to Lender,  certified by the
chief financial representative of such Joinder Party and, if required by Lender,
prepared on a review basis and  certified by an  independent  public  accountant
satisfactory to Lender; and

         (e) To the maximum  extent  permitted by law, each Joinder Party hereby
knowingly,  voluntarily and intentionally waives the right to a trial by jury in
respect of any litigation based hereon.  This waiver is a material inducement to
Lender to enter into this Agreement.

         This Joinder shall be governed by the laws of the State of New York.

                                  JOINDER - 94

<PAGE>

         Executed as of November 7, 2000.

JOINDER PARTIES:                  EQUITY INNS, INC., a Tennessee corporation

                                  By:  /s/ Howard Silver
                                       Name:  Howard Silver
                                       Title: President

                                  EQUITY INNS TRUST, a Maryland corporation

                                  By:  /s/ Howard Silver
                                       -----------------
                                       Name:  Howard Silver
                                       Title: President

                                  EQUITY INNS PARTNERSHIP, L.P., a Tennessee
                                  limited partnership

                                  By:  Equity Inns Trust, a Maryland Trust, its
                                       General Partner

                                       By:  /s/ Howard Silver
                                            -----------------
                                            Name:  Howard Silver
                                            Title: President<PAGE>

                                                                   Exhibit 10.10
                              MEDIA GENERAL, INC.
                              -------------------

                           SUPPLEMENTAL 401(K) PLAN
                           ------------------------

                   Amended and Restated as of January 1, 2001

                                   ARTICLE I

                                 INTRODUCTION
                                 ------------

     Purpose of the Plan. The purpose of the Media General, Inc. Supplemental
     -------------------
401(k) Plan (the "Plan") is to provide supplemental retirement savings to the
Eligible Employees under the Plan, through a program of compensation reduction
deferrals (that are matched, in part, by employer contributions, in accordance
with the terms of the Plan). This Plan is specifically designed to allow a
select group of key executives, whose pay exceeds the Internal Revenue Code
Section 401(a)(17) compensation limit and whose elective deferral contributions
to the MG Advantage 401(k) Plan (the "401(k) Plan") are thereby be limited under
the provisions of the Code, to defer compensation under this Plan by means of
compensation reductions (and otherwise receive the benefit of partial employer
matching provided under the Plan).

                                  ARTICLE II
                                  DEFINITIONS
                                  -----------

     Wherever used herein, the following terms have the following meanings
(unless a different meaning is clearly required by the context):

     2.01 "Administrator" means the Company or other person, entity or committee
appointed to administer the Plan, in accordance with Article III.

     2.02 "Affiliated Company" means (a) any corporation (other than the
Company) that is a member of a controlled group of corporations (as defined in
Code Section 414(b)) with the Company, (b) any trade or business (other than the
Company), whether or not incorporated, that is under common control (as defined
in Code Section 414(c)) with the Company, and (c) any trade or business (other
than the Company) that is a member of an affiliated service group (as defined in
Code Section 414(m)) of which the Company is also a member; provided that, the
term "Affiliated Company" shall not include any corporation or unincorporated
trade or business prior to the date on which such corporation, trade or business
satisfies the affiliation or control tests of (a), (b) or (c) above.

     2.03 "Beneficiary" means the person or persons entitled under Article VIII
to receive benefits under the Plan upon the death of the Participant.

     2.04 "Board of Directors" means the Board of Directors of the Company.

     2.05 "Code" means the Internal Revenue Code of 1986, as amended from time
to time. Reference to any section or subsection of the Code includes references
to any comparable or succeeding provisions of any legislation that amends,
supplements, or replaces such section or subsection.
<PAGE>

     2.06 "Company" means Media General, Inc., a Virginia corporation, and any
successor to all or a major portion of its assets or business that assumes the
obligations of the Company.

     2.07 "Compensation" means compensation as defined under the 401(k) Plan,
without regard to any reduction in compensation by reason of any compensation
reduction agreement in effect between a Participant and a Participating Employer
(and without any limitations otherwise imposed under the Internal Revenue Code).
Otherwise, as to compensation for Plan purposes, see "Plan Compensation" below.

     2.08 "Computation Period" means an Eligibility Computation Period or a
Vesting Computation Period, as the context requires herein.

     2.09 "Effective Date" means August 1, 1987. The Plan was amended and
restated, effective November 17, 1994; and then, most recently, was amended and
restated effective as of July 1, 2000. The "Effective Date" of this restatement
is January 1, 2001.

     2.10 "Eligible Employee" means:

          1) an Employee of the Company or a Participating Employer;

          2) who receives annual Compensation in excess of the compensation
     dollar limit imposed under Internal Revenue Code Section 401(a)(17) each
     year (for example, $170,000 for calendar year 2001); and

          3) who otherwise is selected by the Company to participate in this
     Plan in accordance with the provisions of the Plan (and who has not
     thereafter become ineligible to participate).

     "Eligible Employee" shall exclude any Employee hired on an occasional or
temporary basis. Also, "Eligible Employee" shall exclude any Employee covered
under a collective bargaining agreement entered into by an Employer. Further,
"Eligible Employee" shall exclude any independent contractor of any Employer.
Otherwise, "Eligible Employee" shall exclude any employee who is not reported on
an Employer's payroll records as a common law employee, even if later
reclassified by any court or administrative agency as a common law employee of
the Employer.

     2.11 "Employee" means any person who is employed by an Employer, but
excludes any person who is employed as an independent contractor.

     2.12 "Employer" means the Company and any Participating Employer that shall
adopt this Plan. When used in the Plan, the term "Employer" shall refer to the
specific Employer of the Employee(s) or Participant(s) under consideration,
rather than to all of the Employers in the aggregate, unless the context
requires otherwise.

     2.13 "401(k) Plan" means the MG Advantage 401(k) Plan (formerly the Thrift
Plan Plus for Employees of Media General, Inc.)

     2.14 "Matching Contribution" means, in the case of any Participant in the
Plan, any unfunded matching contribution allocation made for the benefit of the
Participant by a Participating Employer under Section 5.03.
<PAGE>

     2.15 "Matching Contribution Account" means, for any Participant, the
unfunded Plan recordkeeping account described in Section 7.01 to which Matching
Contributions for the Participant's benefit (and earnings attributable thereto)
are credited under the Plan.

     2.16 "Normal Retirement Date" means the date on which the Participant
attains age 65 (the "Normal Retirement Age").

     2.17 "Participant" means each Eligible Employee who participates in the
Plan, in accordance with Article IV hereof.

     2.18 "Participating Employer" means the Company and any Affiliated Company
that has adopted the Plan with the approval of the Company's Board of Directors.

     2.19 "Plan" means the Media General, Inc. Supplemental 401(k) Plan
(formerly the Media General, Inc. Supplemental Thrift Plan) as set forth herein,
together with any and all amendments and supplements hereto.

     2.20 "Plan Compensation" means the excess (if any) of:

          1) the Participant's Compensation for the Plan Year, as defined above
     and under the 401(k) Plan, without regard to any reduction in compensation
     by reason of any compensation reduction agreement in effect between a
     Participant and a Participating Employer (and without any limitation
     otherwise imposed under the Internal Revenue Code); over,

          2) the annual tax-qualified plan compensation limitation set forth
     under Internal Revenue Code Section 401(a)(17), as adjusted for that Plan
     Year.

     For example, Plan Compensation for the 2001 Plan Year for a Participant
with overall Compensation of $205,000 would be $35,000
($205,000-$170,000=$35,000).

     2.21 "Plan Year" means the calendar year.

     2.22 "Stock" means the Class A common stock of the Company.

     2.23 "Supplemental Contribution" means, in the case of any Participant,
that portion of a Participant's Plan Compensation that is deferred under the
Plan in accordance with Article V hereof.

     2.24 "Supplemental Contribution Account" means, for any Participant, the
unfunded Plan recordkeeping account described in Section 7.01 to which
Supplemental Contributions for the Participant's benefit (and earnings
attributable thereto) are credited under the Plan.

     2.25 "Trust" means the trust or trusts, if any, that may be established
between the Company and a Trustee for the convenience of the Company, in
connection with the Company's maintenance and operation of the Plan. All assets
of any such trust shall be held solely for the benefit of, the Company; or,
otherwise, shall be held in trust subject to the claims of the Company's
creditors. The Plan shall remain solely an unfunded promise of the Company to
pay benefits to Plan participants.

     2.26 "Trust Fund" means any property held in trust by the Trustee for the
benefit of the Company (or held in trust, subject to the claims of the Company's
creditors).
<PAGE>

     2.27 "Trustee" means any person or persons appointed as Trustee pursuant to
Section 6.02, any successor trustee or trustees, and any additional trustee or
trustees.

     2.28 "Valuation Date" means the last business day of March, June, September
and December within each Plan Year.

                                  ARTICLE III
                                ADMINISTRATION
                                --------------

     3.01 Administrator. The Plan will be administered by the Company or by any
          -------------
person, entity or committee appointed from time to time by the Board of
Directors to serve at its pleasure. A Participant may be appointed to serve as
Administrator at the discretion of the Board of Directors. Except as may be
directed by the Company, no person serving as Administrator will receive any
compensation for his services as Administrator. The Company shall provide the
Trustee with a written certification stating the name or names of the
Administrator (or the designated persons authorized to direct the Trustee on
behalf of the Administrator). The Trustee shall be entitled to rely upon such
certification as to the identity of the Administrator (and any designated
authorized persons) until the Company otherwise notifies the Trustee.

     3.02 Powers of Administrator. The Administrator will have full and
          -----------------------
exclusive power and discretion to administer the Plan, including as to all of
its details. For this purpose, the Administrator's power will include, but will
not be limited to, the following authority:

     (a)  to make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan or as required to comply
with applicable law;

     (b)  to interpret the Plan, its interpretation thereof in good faith to be
final and conclusive as to any Employee, former Employee, Participant, former
Participant and Beneficiary;

     (c)  to decide all questions concerning the Plan;

     (d)  to compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the provisions
of the Plan, and to determine the person or persons to whom such benefits will
be paid;

     (e)  to authorize the payment of Plan benefits;

     (f)  to keep such records and submit such filings, elections, applications,
returns or other documents or forms as may be required under the Code and
applicable regulations, or under state or local law and regulations; and

     (g)  to appoint such agents, counsel, accountants, consultants and
recordkeepers as may be required to assist in administering the Plan.

     3.03 Examination of Records. The Administrator will make available to each
          ----------------------
Participant such Plan records as pertain to the Participant, for examination at
reasonable times during normal business hours.

     3.04 Nondiscriminatory Exercise of Authority. Whenever, in the
          ---------------------------------------
administration of the Plan, any discretionary review or action by the
Administrator is required, the Administrator shall exercise such
<PAGE>

authority in a nondiscriminatory manner (so that all persons who are similarly
situated will receive substantially the same treatment).

     3.05 Reliance on Tables, etc. In administering the Plan, the Administrator
          ------------------
will be entitled, to the extent permitted by law, to rely conclusively on all
tables, valuations, certificates, opinions and reports that are furnished by any
trustee, counsel, accountant, consultant, recordkeeper or other professional who
is employed or engaged by the Administrator or the Company.

     3.06 Indemnification of Administrator and Trustee. The Company agrees to
          --------------------------------------------
indemnify and defend, to the fullest extent of the law, any Employee or former
Employee who in good faith serves or has served in the capacity of
Administrator, as a member of a committee designated as Administrator or as an
authorized person acting on behalf of the Administrator, against any
liabilities, damages, costs and expenses occasioned by having occupied any
fiduciary position in connection with the Plan.

     The Company agrees to indemnify and defend, to the fullest extent of the
law, any claims against the Trustee arising from actions taken by the Trustee
pursuant to instructions from the Company or the Administrator; or, if the
Trustee may not act in the absence of such instructions, its failure to act in
the absence of such instructions.

     3.07 Costs of Administration. All reasonable costs and expenses incurred by
          -----------------------
the Administrator and the Trustee in administering the Plan and Trust will be
paid by the Company.

                                  ARTICLE IV
                                 PARTICIPATION
                                 -------------

     4.01 Participation. An Eligible Employee, who has satisfied the criteria
          -------------
established by the Company and is selected for participation by the Company (in
its sole discretion), may become a Participant as of the first day of any
subsequent month, by delivering an executed compensation reduction agreement
(described in Section 5.02) to the Administrator (if such agreement is received
and accepted by the Administrator prior to the beginning of the month for which
such compensation reduction election is to be effective).

     4.02 Notice to Participants. The Administrator will inform each Employee
          ----------------------
who becomes eligible to participate in the Plan of his eligibility to
participate (and execute a compensation reduction agreement).

                                   ARTICLE V
                     DEFERRALS AND MATCHING CONTRIBUTIONS
                     ------------------------------------

     5.01 Supplemental (Deferral) Contributions. For each Participant, who has
          -------------------------------------
in effect for any pay period an effective compensation reduction agreement and
otherwise is receiving Plan Compensation from a Participating Employer during
such pay period, the Employer will reduce the Participant's Plan Compensation by
(and the Company will record as a Supplemental Contribution) the amount (or
percentage) of Plan Compensation specified in such Participant's compensation
reduction agreement. Each unfunded Supplemental Contribution will be credited to
the Participant's Supplemental Contribution Account, in accordance with Section
7.02.
<PAGE>

     5.02 Compensation Reduction Agreements. For purposes of Section 5.01, a
          ---------------------------------
"compensation reduction agreement" is a written agreement between a Participant
and his Participating Employer that satisfies the requirements of this Section
5.02. Each agreement will provide that the Participant's Plan Compensation will
be reduced by the amount specified in the agreement. The aggregate compensation
reduction for each Plan Year, however, shall not exceed the Internal Revenue
Code Section 415 "annual additions" dollar limit in force for that Plan Year
(for example, $35,000 for year 2001). Each agreement will be in a form
prescribed or approved by the Administrator. Further, each executed agreement
received and accepted by the Administrator in accordance with Section 4.01 will
be:

     (a) irrevocable while the agreement is in effect with respect to Plan
Compensation already earned; but

     (b) revocable as to future pay (in accordance with the terms of the Plan,
as provided below).

     Otherwise, a Participant may elect to increase or decrease the amount by
which his future Plan Compensation is to be reduced, by delivering a new
compensation reduction agreement prior to the beginning of the month for which
such new election is to be effective.

     5.03 Matching Contributions. The Participating Employer shall provide to
          ----------------------
the Company, with respect to each Participant's Matching Contribution Account
for each Plan Year, an amount equal to the lesser of:

     (a) one hundred percent (100%) of the amount of the Participant's
Supplemental Contribution for the Plan Year; or

     (b) four percent (4%) of the Participant's Plan Compensation for the Plan
Year.

     The Administrator shall estimate the unfunded Matching Contributions that
will need to be recorded by the Company for the Participant during the Plan Year
(based on the Participant's compensation reduction agreement and expected Plan
Compensation). The Administrator then shall divide the tentative Matching
Contribution for the Plan Year by the number of pay periods for the Participant
for the Plan Year. The appropriate portion of the tentative Matching
Contribution for the Plan Year, as determined above , will be credited to the
Participant's unfunded Matching Contribution Account at the same time that the
Participant's Supplemental Contributions are credited (after each pay period).
Otherwise, the Employer or the Company may forward funds equivalent to such
amount to the Trustee, as the Company elects.

     Following the end of each Plan Year, the Administrator shall adjust each
Participant's final Matching Contributions for the completed Plan Year (to the
final correct amount), by making a credit to, or deduction from, such
Participant's Matching Contribution Account (generally by January 31 of the
following year).

     If a Participant separates from employment prior to the end of the Plan
Year, however, the Administrator generally shall proceed with final adjustment
of the separated Participant's Matching Contributions (by making a final credit
to, or final deduction from, such Participant's Matching Contribution Account by
the last day of the month that next follows the Participant's separation).

                                  ARTICLE VI
                                  TRUST FUNDS
                                  -----------
<PAGE>

     6.01 "Unfunded Plan". The Plan shall be and remain "unfunded" for federal
          ---------------
income tax purposes and for purposes of Title I of ERISA. The Plan shall
constitute only an unfunded promise by the Company to make future Plan benefit
payments. Nevertheless, for the convenience of the Company, a trust fund (or
trust funds) may be established to invest certain Company assets for the purpose
of paying certain benefits. Any such trust shall be maintained for the benefit
of the Company (or, in any case, subject to the claims of the Company's
creditors). No Participant or Beneficiary shall have any right, title, or
interest in, or to, any trust asset (and all assets shall remain subject to the
claims of the Company's creditors).

     6.02 Appointment of Trustee. The Company may appoint, by written notice,
          ----------------------
one or more individuals or corporations to act as Trustee under the Plan; and,
may remove and appoint a successor to any such person or persons (at any time).
The Trustee, and any Successor Trustee, shall be entitled to written notice from
the Company, stating the date on which the removal is effective. Written notice
of removal, resignation or appointment shall be provided to all Trustees under
the Plan. The Company may enter into a separate trust agreement with the Trustee
and make such amendments to such trust agreement or such further agreements as
the Company, in its sole discretion, may deem necessary or desirable.

     6.03 Investment Funds Within the Trust Fund. All contributions to a Trust
          --------------------------------------
(and all investments thereunder) shall be held by the Trustee in the applicable
Trust Fund. The Trust Fund shall consist of Stock held by the Trustee, all cash
held by the Trustee resulting from the receipt of dividends or other
distributions on Stock held in the Trust, and all contributions paid in cash.
All cash held by the Trustee is to be invested in Stock as soon as reasonably
practicable.

     The Trustee, as directed by the Company, shall have the right to vote stock
held in the Trust Fund, personally or by proxy, and to delegate the Trustee's
powers and discretions with respect to stock to a proxy.

     6.04 Acquisition of Stock. The Trustee shall purchase the Stock required
          --------------------
for the Trust from such sources, and at such prices, as the Trustee shall
determine in its sole discretion.

     6.05 Investment of Contributions and Earnings. All amounts credited to a
          ----------------------------------------
Participant's Supplemental Account and his Matching Contribution Account
thereunder shall be hypothetically invested in Company Stock on the Plan's
records, as provided under the Plan's provisions. Otherwise, any cash
contributions otherwise delivered by the Company to a Trustee shall be invested
in Company Stock as soon as reasonably practicable.

     6.06 Protection of Trustee and Limitation of Liability. Each Trustee shall
          -------------------------------------------------
be fully protected in acting upon any instrument, certificate, or document
believed by it to be genuine. The Trustee agrees to hold in trust and administer
the Trust Fund subject to the terms and conditions of the Company, including as
set forth under the Plan. The Trustee's responsibility shall be limited to
holding and investing the assets of the Fund in its possession (including voting
Stock as provided in Section 6.03).

                                  ARTICLE VII
                             PARTICIPANT ACCOUNTS
                             --------------------

     7.01 Accounts. The Administrator shall maintain on its books for each
          --------
Participant a Supplemental Contribution Account and a Matching Contribution
Account. The Trustee may establish and maintain such sub-accounts as it deems
necessary or desirable to fulfill the provisions of the Plan.
<PAGE>

     7.02 Adjustments of Accounts. The Administrator shall, as of each Valuation
          -----------------------
Date:

     (a)  First, with respect to each Participant, reduce the balance of his
Supplemental Contribution Account (until exhausted) and then the balance of his
Matching Contribution Account, by the aggregate amount of all withdrawals and
distributions provided to the Participant (or his Beneficiary) since the
preceding Valuation Date;

     (b)  Second, credit each Participant's Supplemental Contribution Account
with the sum of the Supplemental Contributions made for his benefit for the
period ending on such Valuation Date;

     (c)  Third, credit each Participant's Matching Contribution Account with
the Matching Contributions made for his benefit for the period ending on such
Valuation Date; and

     (d)  Fourth, adjust the respective balances of each Participant's
Supplemental Contribution Account and Matching Contribution Account, to reflect
the hypothetical earnings, losses and current fair market value allocable to
such accounts, whether by reference to any Trust established by the Company for
its convenience or otherwise.

     In adjusting each unfunded account under subsection (d) above to track the
current value of assets in a Trust Fund, the Administrator will allocate to each
account (in proportion to the balances therein immediately prior to such
adjustment) an amount equal to the gain and loss (realized and unrealized) on
the assets of the Trust Fund, valued at fair market value (including any costs
of operating the Trust). In the case of each Participant (including any former
Participant or Beneficiary), the Plan shall continue to maintain the unfunded
accounts described herein, and adjust such accounts in the manner set forth
above, until such Participant's accounts are distributed in their entirety.

                                 ARTICLE VIII
                           DISTRIBUTION OF BENEFITS
                           ------------------------

     8.01 Separation from Employment. Upon the Participant's separation from
          --------------------------
employment for any reason, each Participant (or his designated Beneficiary) will
receive a Stock distribution in an amount equal to the final balance of his
Supplemental Contribution Account and Matching Contribution Account, determined
as of the Valuation Date coinciding with or next following the date his
employment ends. Any remaining amounts held for the Participant (Beneficiary)
under such Accounts that are equal only to a fractional share of Stock shall be
paid in cash. Any payment required under this Section shall be made no later
than 60 days from the Valuation Date coinciding with or next following the date
employment ends.

     8.02 Payments to Beneficiary. If the Participant dies prior to receiving
          -----------------------
all payments due him under the Plan, the Company (or the Trustee, at the
direction of the Company) shall distribute all payments then due the Participant
to the Participant's Beneficiary (at the time provided for in the Plan and in
the amount that would have been provided to the Participant had he survived).

     8.03 Beneficiary Designation. The Participant may from time to time, by
          -----------------------
signing a form approved by the Administrator, designate any legal or natural
person or persons (who may be designated contingently or successively) to whom
payments are to be made if the Participant dies before receiving payment of all
amounts due hereunder. A beneficiary designation form will be effective only
after the signed form is filed with the Administrator while the Participant is
alive (and such designation will cancel, immediately upon filing, all
beneficiary designations signed and filed previously). If the Participant fails
<PAGE>

to designate a Beneficiary as provided above, or if all designated Beneficiaries
of the Participant die before the Participant or before complete payment of all
amounts due hereunder, the Company shall pay any unpaid amounts to the
Participant's estate.

     8.04 Unsecured Contractual Obligation. The Company's (any Employer's)
          --------------------------------
obligation to make payments to any person under this Agreement is purely
contractual, and the parties do not intend that the amounts payable hereunder be
held by the Company "in trust" for the benefit of the Participant. Participants
(and Beneficiaries) shall have only the status of unsecured creditors of the
Company with respect to Plan benefits.

     8.05 Benefits Non-Assignable. Benefits payable to, or for the benefit of, a
          -----------------------
Participant or Beneficiary shall not be assignable and shall not be subject to
the claims of creditors of such Participant or Beneficiary.

     8.06 Claims Procedure. Any claim by a Participant or his Beneficiary
          ----------------
(hereafter "Claimant") for benefits shall be submitted to the Administrator. The
Administrator shall be responsible for deciding whether such claim properly
relates to benefits provided by the Plan (and thus is a "Covered Claim") and for
providing a final decision with respect to such claim. In addition, the
Administrator shall provide a full and fair review of the claim, in accordance
with the procedures described below.

     Each Claimant or other interested person shall file with the Administrator
such pertinent information as the Administrator may specify, in such manner and
form as the Administrator may specify and provide. Such person shall not have
any rights or be entitled to any benefits or further benefits hereunder, as the
case may be, unless such information is filed by the Claimant (or on behalf of
the Claimant). Each Claimant shall supply at such times and in such manner, as
may be required, written proof that the benefit is covered under the Plan.

     If it is determined that a Claimant has not incurred a Covered Claim or if
the Claimant fails to furnish such proof as is requested, no benefits or further
benefits hereunder, as the case may be, shall be payable to such Claimant.

     Notice of a decision by the Administrator with respect to any claim shall
be furnished to the Claimant within 90 days following the receipt of the claim
by the Administrator (or within 90 days following the expiration of the initial
90-day period, in a case where there are special circumstances requiring
extension of time for processing the claim). If special circumstances require an
extension of time for processing the claim, written notice of the extension
shall be furnished by the Administrator to the Claimant before the expiration of
the initial 90-day period. The notice of extension shall describe the special
circumstances requiring the extension and the date by which the notice of
decisions with respect to the claim shall be furnished.

     Commencement of benefit payments shall constitute notice of approval of a
claim to the extent of the amount of the approved benefit. If such claim is
wholly or partially denied, such notice shall be in writing and shall set forth
(i) the specific reason or reasons for the denial; (ii) specific references to
pertinent provisions of the Plan on which the denial is based; (iii) a
description of any additional material or information necessary for the Claimant
to perfect the claim and an explanation of why such material or information is
necessary; and (iv) an explanation of the Plan's claims review procedure. If the
Administrator fails to notify the Claimant of the decision regarding his or her
claim, the claim shall be deemed denied and the Claimant shall then be permitted
to proceed with the claims review procedure provided herein.
<PAGE>

     Within 60 days following receipt by the Claimant of notice of the claim
denial, or within 60 days following the close of the 90-day period referred to
herein if the Administrator fails to notify the Claimant of the decision within
such 90-day period, the Claimant may appeal denial of the claim by filing a
written application for review of the claim with the Administrator. Following
such request for review, the Administrator shall fully and fairly review the
decision denying the claim. Before the Administrator makes its decision, the
Claimant shall be given an opportunity to review pertinent documents and to
submit issues and comments to the Administrator in writing. The decision of the
Administrator shall be made within 60 days following receipt by the
Administrator of the request for review (or within 120 days after such receipt,
in a case where there are special circumstances requiring extension of time for
reviewing such denied claim). The Administrator shall deliver its decision to
the Claimant in writing. If the decision on review is not furnished within the
prescribed time, the claim shall be deemed denied on review.

     For all purposes under the Plan, the decision with respect to a claim (if
no review is requested) or the decision with respect to a claim review (if
review is requested) shall be final, binding and conclusive on all interested
parties.

                                  ARTICLE IX
                           AMENDMENT AND TERMINATION
                           -------------------------

     9.01 Amendment. The Company reserves the right to amend, modify or
          ---------
terminate the Plan, in whole or in part, at any time. Any such amendment,
modification or termination of the Plan shall be made by a resolution adopted by
the Board of Directors and communicated to Participants within a reasonable time
following the later of the date of adoption or the effective date of such
action. The Company shall not amend the Plan retroactively, however, in any
manner that reduces any benefit payable to the Participant or Beneficiary (to
the extent that such benefit was accrued and vested prior to the amendment,
modification or termination).

     9.02 Distributions Upon Termination of the Plan. Upon any termination of
          ------------------------------------------
the Plan, if and as directed by the Administrator in writing, the Trustee will
make distributions to each Participant in an amount equal to the entire balance
of the Participant's Supplemental Contribution Account and Matching Contribution
Account (determined as of the termination date, which shall serve as the final
Valuation Date unless the Administrator otherwise directs). Upon completion of
account distributions to all Participants (by the Company or any Trustee), the
Plan will terminate, the Company and the Administrator will be relieved from all
liability under the Plan, and no Participant or other person will have any
further claims rights or other rights thereunder.

                                   ARTICLE X
                                APPLICABLE LAW
                                --------------

     This Plan shall be construed in accordance with applicable federal law and,
to the extent otherwise applicable, the laws of the Commonwealth of Virginia.

     IN WITNESS WHEREOF, Media General, Inc. has caused this document to be
signed by its duly authorized officer this _________ day of ___________________,
2001.

                                             MEDIA GENERAL, INC.

                                             By: /s/ J. Stewart Bryan III
                                                ---------------------------

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